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2017 (8) TMI 405 - AT - Income TaxDisallowance of interest made u/s 14A applying Rule 8D(2)(ii) - Held that:- it is quite evident that the Share Capital and Reserve & Surplus available with the assessee company at the beginning of the year as well as at the close of the year under consideration are enough to cover the investments in question and, therefore, following the ratio of the judgment of the Hon'ble Bombay High Court in the case of CIT vs. Reliance Utilities and Power Ltd.(2009 (1) TMI 4 - BOMBAY HIGH COURT) it gives rise to a presumption that such investments have come out of interest free-funds. The said proposition is equally applicable in the context of section 14A of the Act, therefore, in the above background, we have no hesitation to delete the disallowance of interest made by the Assessing Officer under section 14A of the Act. Disallowance of administrative expenses - recorded satisfaction about incorrectness of assessee’s claim - Held that:- In the absence of the recording of the necessary satisfaction, in our view, it was wrong on the part of the Assessing Officer to determine the disallowance under section 14A by applying Rule 8D(2)(iii) of the Rules. Adoption being the expenditure relatable to the earning of the impugned dividend income - Held that:- The assessee explained that the dividend receipt from Mutual Funds was merely by way of dividend reinvestment plan in terms of which dividend is reinvested automatically and no effort is required for collecting such dividend. The assessee has also explained the basis of arriving at the aforesaid expenditure, being a percentage of remuneration paid to the employees looking after the activity of the Mutual Fund investments. Considering the entirety of facts and circumstances, especially the fact that the explanation furnished by the assessee has been completely brushedaside, we find no reason to uphold the action of the Assessing Officer in applying Rule 8D(2)(iii) of the Rules in order to compute the disallowance envisaged under section 14A of the Act. Therefore, we set-aside the order of the CIT(A) on this aspect also and direct the Assessing Officer to retain the suo-motu disallowance of ₹ 70,276/- made by the assessee and delete the balance. Depreciation in respect of Badminton court - Held that:- It was a common point between the parties that in the earlier years, similar issue has been decided by the Tribunal in favour of the assessee and such decisions continue to hold the field as the same have not been altered by any higher authority. Addition u/s 40A - payment made by the assessee to cover the deficit of a school run at village Mankahari, Satna - Held that:- It was a common point between the parties that similar payment has been held to be an allowable deduction in the earlier year for assessment year 2005-06. Following the aforesaid precedent, and since the facts and circumstances remain the same, we direct the Assessing Officer to allow the claim of the assessee. Depreciation on UPS - @15% treating it as a part of Plant & Machinery OR @60% as part of computer - Hel that:- In assessment year 2005-06, the upheld the claim of the assessee for depreciation @60%. Following such precedent, which continues to hold the field, we uphold the claim of the assessee for depreciation on UPS @ 60%. Thus, assessee succeeds on this aspect. Exchange fluctuation loss - claim disallowed on the ground that loss on account of restatement of foreign currency could not be allowed as revenue expenditure - Held that:- The issue has been decided in favour of the assessee following the decision of the Hon'ble Supreme Court in the case of Woodward Governor India P. Ltd.(2009 (4) TMI 4 - SUPREME COURT) as held the loss on account of exchange rate fluctuation was allowable as a revenue expenditure. In view of the aforesaid precedent, the decision of the CIT(A) is affirmed and Revenue fails on this aspect. Claim of depreciation restricted - Held that:- Assessing Officer reworked the written down value of the assets assuming that the depreciation for assessment years 2000-01 and 2001-02 stood allowed, though in actuality such a claim was neither made and nor allowed by the Assessing Officer in those years. As a result, the depreciation claimed by the assessee stood reduced. The CIT(A) has since negated the action of the Assessing Officer and restored the claim of the assessee for depreciation. The decision of the CIT(A) is based on the decision of his predecessor CIT(A) in the case of the assessee for 2006-07. The decision of the CIT(A) for assessment year 2006-07 wherein the decision for assessment year 2005-06 has been followed. The precedents so noted continue to hold the field and, therefore, we find no reason to interfere with the decision of the CIT(A) on this aspect. Thus, on this aspect also Revenue fails.
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