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2021 (3) TMI 466 - AT - Income TaxDisallowance of expenses u/s 14A read with Rule 8D - HELD THAT:- Interest disallowance u/s 14A r.w.r. 8D(2)(ii) would not be sustainable subject to verification by Ld. AO that assessee’s own funds far exceed the investments made by the assessee. The issue of expense disallowance in terms of Rule 8D(2)(iii) would stand restored back to the file of Ld. AO with similar directions. The ground, thus raised before us, stands allowed for statistical purposes. Since this is the only issue in assessee’s appeal, the appeal stand allowed for statistical purposes. Broken period interest - Accounting policy to be followed - HELD THAT:- We find that this issue is contained in paras-115 to 119 of Tribunal’s order in assessee’s own case for AY 2008-09,[2020 (2) TMI 1350 - ITAT MUMBAI] wherein a finding was rendered that similar issue stood covered in assessee’s own case for AYs 1991-92 to 1994-95 which was followed by Tribunal in subsequent years. Further, Hon’ble Bombay High Court upheld decision of Tribunal by dismissing revenue’s appeal for AY 1996-97 [2016 (8) TMI 963 - BOMBAY HIGH COURT]. Another fact as noted by Ld. CIT(A) is that the assessee was following same accounting policy, in this regard, for last more than 20 years. Therefore, we find no infirmity in the impugned order in deleting this disallowance. The ground raised by revenue stand dismissed. Interest on Govt. & Other Securities on accrual basis instead of due basis - HELD THAT:- Tribunal’s order in assessee’s own case for AY 2008-09,[2020 (2) TMI 1350 - ITAT MUMBAI] held this ground of appeal is covered in favour of the assessee vide the aforementioned orders of the Tribunal and Bombay High Court. The right to receive interest on securities arises on due date only, which falls after the accounting year and, accordingly, it cannot be taxed in the accounting year itself. Hence, in view of the above discussion, we decided this issue in favor of assessee. Amortization on securities held under HTM category - HELD THAT:- Deduction for amortization of premium paid on purchase of securities under HTM category would be an allowable deduction in assessee own case for AY 2008-09,[2020 (2) TMI 1350 - ITAT MUMBAI] . Depreciation on securities under ‘Available for sale (AFS)’ and ‘Held for Trading (HFT) category - HELD THAT:- Assessee did not account for in the financial statement the anticipated/contingent profits from the contracts to the extent not settled as on the last day of the accounting year whereas any loss on such contracts was provided for by a charge in the profit and loss account on the best estimates. The Department brought to tax the profit on such forward exchange contracts and stated that one method for valuation of the entire stock of securities should be followed. This resulted in a situation of taxing appreciation of stock, which goes against the general and settled principle of non-taxation of notional income, as laid by the Supreme Court in the case of Sanjeev Wollen Mills [2005 (11) TMI 26 - SUPREME COURT]. Hence, we are of the view that this disallowance of depreciation/ reducing of depreciation on appreciation in the value of securities held as available for sale and held for trading category are allowable. - Decided against revenue.
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