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2017 (5) TMI 972 - AT - Income TaxDisallowance u/s.14A - Held that:- As per the decision of Reliance Utilities And Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] and HDFC Bank Ltd.[2014 (8) TMI 119 - BOMBAY HIGH COURT], no disallowance of interest is warranted where own funds are sufficient to cover the value of investment. As per the judicial pronouncements by Delhi High Court in case of Cheminvest. Ltd. [2015 (9) TMI 238 - DELHI HIGH COURT], disallowance u/s. 14A should be restricted to exempt income. Recently Bombay High Court in the case of Ballarpur Industries Ltd.[2016 (10) TMI 1039 - BOMBAY HIGH COURT] approved the propositions that has disallowance u/s.14A should not exceed the exempt income. Thus we direct the AO to restrict the disallowance u/s.14A to the extent of exempt dividend income earned by the assessee. Disallowing setting off business loss which pertains to foreign currency Forward Action Contracts by treating the same as ‘Speculation Loss’ - Held that:- Foreign currency transactions are incidental to the assessee’s diamond business. Thus, foreign currency transactions were entered by the assessee for the purpose of meeting the requirement and for nothing else or for no other purpose. Thus, assessee’s business and sources of borrowings are effectively in foreign currency and thus the assessee is exposed to adverse movements in foreign exchange which it receives and pays as part of its business. All these transactions entered by the assessee are incidental to its business activity of import and export and to protect against adverse movements in foreign exchange in a highly volatile global market. Thus, foreign exchange fluctuation is a risk which assessee has to face and therefore, it is prudent for it to mitigate it. No merit for not allowing the setting off loss arising out of cancellation of foreign exchange / forward contract. Disallowance of interest for IPO funding, to reiterate the shares allotted in such IPOs - Held that:- The incurring of interest expenditure is not in doubt, it may be allowed in the year of incurring or can be capitalised to the cost of acquisition of shares. The assessee has asked for allocation on this interest expenditure for allowing the same against the respective shares for which it was incurred, therefore, re-working the short term capital gain on sale of shares, we do not find anything wrong for such a claim of assessee. Accordingly, we restore this issue back to the file of the AO for working out revised short term capital gain by allocating the respective interest expenditure to the shares for which it was actually incurred. After re-working, the AO should allow the respective interest against the short term capital gain so offered by the assessee.
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