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2021 (5) TMI 684 - AT - Income TaxDisallowance made u/s.14A of the Act r.w.r. 8D(2) - assessee had made suo-moto disallowance - HELD THAT:- As expenses should also be considered in the total expenditure considered by the assessee for working out the disallowance in the ratio of exempt income to total income. We hold that the computation mechanism provided in Rule 8D(2) of the Rules results in absurdity in the peculiar facts of the instant case. Accordingly, we direct the ld. AO to recompute the disallowance by taking suo-moto disallowance made by the assessee and include the aforesaid six expenses (Sr. Nos. A to F above) in the ratio of exempt income to total income and workout the disallowance u/s. 14A of the Act accordingly under normal provisions of the Act. Accordingly, the ground Nos. 1(a) to 1(e) raised by the assessee are partly allowed for statistical purposes. Chargeability of interest u/s. 234D - Refund was susdquently withdrawn after rectification u/s 154 - AR before us argued that interest u/s. 234D of the Act could be charged only when refund has been granted to the assessee u/s. 143(1) - HELD THAT:- We are unable to accept to this proposition made by the ld. AR for the reason that the section 154 order dated 11/12/2009 was only rectification of intimation u/s. 143(1) of the Act. Hence, effectively refund is granted to the assessee only u/s. 143(1). Hence, we hold that interest u/s. 234D of the Act is leviable. In our opinion, the order passed u/s. 143(1) and 154 of the Act are to be read together. Accordingly, the ground No. 2 raised by the assessee is dismissed. Disallowance u/s. 14A of the Act r.w.r. 8D(2) of the Rules while computing book profits u/s. 115JB of the Act - HELD THAT:- Since, we have tinkered with the identification of actual expenses incurred by the assessee for the purpose of earning exempt income by including few more expenses, while giving directions to ld. AO to recompute disallowance under normal provisions of the Act, the same disallowance so re-computed should be made under Clause(f) of Explanation 1 to Section 115JB(2) of the Act. Accordingly, the additional ground No. 1 raised by the assessee vide letter dated 09/08/2017 is partly allowed for statistical purposes. Claim of deduction u/s. 35DD - AR argued that demerger took in A.Y. 2008-09 but expenditure on demerger took place in A.Y. 2009-10 - HELD THAT:- Quantum of allowability of expenses u/s. 35DD need to be determined factually by the ld. AO. Infact, the ld. CIT(A) had also recorded the fact that assessee had incurred expenditure towards demerger and had disallowed the same voluntarily in the return of income. Hence, this goes to prove that facts are already in record. Hence, with the consent of both the parties, we deem it fit to remand this issue to the file of the ld. AO to determine the quantum of expenses eligible for deduction u/s. 35DD of the Act in the year under consideration. At the cost of repetition, we hold in principle that assessee is eligible for deduction u/s. 35DD of the Act commencing from the A.Y. 2008-09 for a total period of five assessment years. Accordingly, the additional ground No. 2 raised by the assessee vide letter dated 09/08/2017 is allowed for statistical purposes.
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