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2016 (7) TMI 1051 - ITAT CHENNAIDisallowance u/s 14A r.w.r.8d - plea of the assessee is that Rule-8D(ii) & (iii) is not applicable to the assessee’s case as the assessee is having own funds - Held that:- The assessee is not able to demonstrate what is the own funds available to the assessee to make investments which yielded exempt income. The fund flow filed by the assessee does not show date on which the assessee made investments out of own funds. Being so, the argument of assessee cannot be the good explanation to hold that the assessee is not incurred interest expenditure on funds used for investments, which yield exempt income.Regarding computation of total asset, the CIT(A) wrongly observed that total assets to be taken before the current liabilities are reduced as per the balance sheet. There is o reason for not reducing the current liabilities. However, we make it clear that total fixed assets after depreciation plus net current assets to be considered as the total asset, when the balance sheet is prepared in Straight Line method while applying the formula in Rule -8D(ii). -Decided partly in favour of revenue Treatment of unabsorbed depreciation - priority for deduction u/s.10B of the Act over set off of brought forward unabsorbed depreciation allowance - Held that:- It is held by the Hon’ble Karnataka High Court in the case of CIT Vs. Himatsingka Seide reported in [2006 (8) TMI 125 - KARNATAKA High Court] held that unabsorbed depreciation has to be adjusted against the income for the purpose of exemption u/s.10B of the Act; exemption u/s.10B cannot be allowed by adjusting only a portion of unabsorbed depreciation of an earlier year against the income of the export unit and adjusted the balance of unabsorbed depreciation against other business income once again to show ‘Nil’ tax liability. Against this judgement, the assessee carried the matter to Supreme Court by way of SLP, which was dismissed by the Supreme Court. Hence, we are of the opinion that lower authorities have taken the correct view of the facts of the case - Decided against assessee MTM losses on forward contracts - whether are contingent in nature and a provision created on such notional loss cannot be allowed? - Held that:- The MTM loss on forward contracts is not contingent loss and it is a business loss to set off against the business income of assessee. However, the AO has to consider the transaction equivalent to the export turnover to determine the MTM loss and also if there is any premature cancellation of forward contract of foreign exchange, it shall be excluded to consider the business loss and these transactions are speculative transaction. With this observation, we remit the issue to the file of AO for fresh consideration.
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