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2018 (7) TMI 64 - AT - Income TaxDisallowance made u/s 14A - Held that:- Disallowance under Rule 8D(2)(iii) by considering only those scrips which has yielded dividend. Hence considering the fact that major portion dividend income has been received from shares held as stock in trade, that too out of a single scrip, we are of the view that it may not be appropriate to apply the provisions of Rule 8D in the instant case. Accordingly we are of the view that the requirements of provisions of sec. 14A shall be met, if the disallowance is made at 5% of the dividend income earned by the assessee. Order passed by Ld CIT(A) on this issue and direct the AO to restrict the disallowance u/s 14A to 5% of the exempt income earned by the assessee. Disallowance of expenses claimed u/s 35(1)(iii) - cancellation of registration granted u/s 12AA - Held that:- Genuineness of payment of donations cannot be doubted in the instant case, particular in the absence of any material to support the view taken by the AO. Hence we agree with the contentions of Ld A.R that the AO was not justified in rejecting the claim of weighted deduction. CIT(A) has placed reliance on the cancellation of registration granted u/s 12AA to M/s Bioved Research Society with retrospective effect. The registration granted u/s 12AA and the approval granted u/s 35(1)(ii) operates on different field. CIT(A) was not justified in placing reliance on the order of cancellation of registration u/s 12AA of the Act. In the instant case, it is the contention of Ld A.R that the approval was not cancelled till date. Before us, the revenue did not furnish any material to refute the contentions of Ld A.R. There is no justification in rejecting the claim of weighted deduction claimed u/s 35(1)(ii) of the Act. Addition made u/s 56(2)(viia) - Held that:- Provisions of sec. 56(2)(viia) should be applicable only in cases where the receipt of shares become property in the hands of recipient and the shares shall become property of the recipient only if it is “shares of any other company”. In the instant case, the assessee herein has purchased its own shares under buyback scheme and the same has been extinguished by reducing the capital and hence the tests of “becoming property” and also “shares of any other company” fail in this case. The tax authorities are not justified in invoking the provisions of sec. 56(2)(viia) for buyback of own shares. Set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition made u/s 56(2)(viia) of the Act. - Decided in favour of assessee.
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