Appeal partly allowed, disallowance recalculated without Rule 8D. Interest and depreciation disallowance dismissed.

The appeal filed by the Revenue was partly allowed for statistical purposes. The Tribunal upheld the Ld. CIT(A)'s decision to recompute the disallowance u/s. 14A without applying Rule 8D, following a Bombay High Court decision. The Tribunal also dismissed the disallowance of interest expenses and depreciation on investment in shares and securities, citing previous Tribunal orders. The disallowance made u/s. 36(1)(vii) was deleted based on a recent Supreme Court judgment. Additionally, the issue of additional disallowance in the computation of book profit was remitted back to the AO for further consideration.

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Issues involved:
1. Challenge to the correctness of the order of the Ld. CIT(A)-5, Mumbai pertaining to A.Y. 2007-08.
2. Disallowance u/s. 14A r.w.r. 8D of the Act.
3. Disallowance of interest expenses of Rs. 20.20 crores.
4. Disallowance of depreciation of investment in shares and securities.
5. Disallowance made u/s. 36(1)(vii) of the Act.
6. Additional disallowance in computation of book profit.

Issue 1:
The Revenue challenged the correctness of the order of the Ld. CIT(A)-5, Mumbai for A.Y. 2007-08. The Revenue raised 5 substantive grounds of appeal. The Ld. Counsel for the assessee contended that 3 grounds were covered by a previous Tribunal decision. The Ld. Departmental Representative acknowledged that three grounds were indeed covered. Ground No. 2 involved the disallowance u/s. 14A r.w.r. 8D of the Act. The AO computed the disallowance using Rule 8D, but the Ld. CIT(A) directed the AO to recompute the disallowance without applying Rule 8D, following the decision of the Bombay High Court. The Tribunal upheld the Ld. CIT(A)'s decision, directing the AO to recompute the disallowance without Rule 8D.

Issue 2:
Ground No. 3 related to the disallowance of interest expenses of Rs. 20.20 crores. The AO had disallowed proportionate interest on borrowed funds in problem securities transactions. However, the Ld. CIT(A) deleted the additions, citing a previous ITAT order. The Tribunal dismissed Ground No. 3, following the decision in the assessee's own case for previous assessment years.

Issue 3:
Ground No. 4 concerned the disallowance of depreciation on investment in shares and securities. The AO disallowed the claim of depreciation made by the assessee. The Ld. CIT(A) deleted the additions, following a previous Tribunal order for other assessment years. The Tribunal confirmed the Ld. CIT(A)'s findings, dismissing Ground No. 4.

Issue 4:
Ground No. 5 involved the disallowance made u/s. 36(1)(vii) of the Act. The Ld. CIT(A) deleted the entire disallowance made by the AO, citing a recent Supreme Court judgment. The Tribunal dismissed Ground No. 5, following its previous decision in the assessee's own case for other assessment years.

Issue 5:
Ground No. 6 related to additional disallowance in the computation of book profit. The Ld. CIT(A) remitted this issue back to the AO, considering it consequential to the disallowance u/s. 14A. The Tribunal restored this issue back to the AO along with the disallowance u/s. 14A, directing the AO to recompute the disallowance after deciding the issue related to u/s. 14A. Ground No. 6 was allowed for statistical purposes.

In conclusion, the appeal filed by the Revenue was partly allowed for statistical purposes, with various grounds being dismissed or remitted back for further consideration based on the Tribunal's analysis and previous decisions in the assessee's own case.

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