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2018 (6) TMI 1283 - HC - Income TaxDisallowance under Section 14A - Expenditure incurred to earn exempted income - Held that:- Disallowance under Section 14A cannot be a wild guesswork bereft of ground realities. It has to have a reasonable and close nexus with the factually incurred expenses. It is not deemed disallowance under Section 14A of the Act but an enabling provision for assessing authority to compute the same on the given facts and figures in the regularly maintained Books of Accounts. The assessing authority also could not have called upon the Assessee himself to undertake the exercise of computing the disallowance under Section 8D of the Rules. Such abdication of duty in not permissible in law. Since no such exercise has been undertaken by the assessing authority, the case calls for a remand - matter is remanded back to the Assessing Authority for re-computing the disallowance of expenditure, if any, under Section 14A of the Act, in accordance with law. Disallowance under Section 36(1)(viii) - profits and gains of business or profession for the purpose of claiming deduction of 20% thereof under Section 36(1)(viii) - Held that:- Section 36(1)(viii) of the Act talks of "profits and gains of business or profession" before making any deduction under this Clause and therefore, the amortization and depreciation in SLR investments already deducted from the profit earned by the assessee for the said year cannot be added back for the limited purpose of computing profits and gains of business or profession for the purpose of Section 36(1)(viii) so as to claim a higher deduction of 20% under the said provisions. The artificial increase of the profits by adding back amortization and depreciation in SLR investments by the assessee as done by it before the assessing authority was not justified and therefore, the authorities below appear to be justified in reducing the said deduction, ignoring the said adding back of the amortization and depreciation in SLR investments. The said deduction has to be restricted to 20% of profits of banking business as computed by the assessing authority. Therefore, the contention raised by the assessee in this regard in the present appeals before us is not sustainable.
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