DCIT CIRCLE-13(1), NEW DELHI vs. JAMMU PIGMENTS LTD, NEW DELHI
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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’ NEW DELHI
Before: SHRI SAKTIJIT DEY & SHRI PRADIP KUMAR KEDIA
PER SAKTIJIT DEY, JM:
This is an appeal by the Revenue against order dated
30.05.2019 of learned Commissioner of Income Tax (Appeals)-5,
New Delhi pertaining to assessment year 2012-13.
The dispute in the present appeal is concerning deletion of
disallowance of Rs.20,63,500/- made under section 14A of the
Income-tax Act, 1961 (for short ‘the Act’) read with Rule 8D of the
ITA No.7080/Del/2019 AY: 2012-13
Income-tax Rules, 1962 while computing book profit under
section 115JB of the Act.
Briefly the facts are, the assessee is a resident company. In
course of assessment proceeding for the impugned assessment
year, the Assessing Officer noticed that the assessee had made
huge investment in shares, which is likely to yield exempt income.
Thus, he called upon the assessee to explain, why expenditure
attributable to exempt income, which is likely to be earned in
future, should not be disallowed in terms with section 14A read
with Rule 8D. In reply, it was submitted by the assessee that
since no exempt income was earned during the year, no
disallowance under section 14A can be made. The Assessing
Officer, however, did not accept the submissions of the assessee
and disallowed an amount of Rs.20,63,500/- while computing
income under the normal provisions. However, since the
assessee’s tax liability was computed under section 115JB of the
Act, the Assessing Officer did not make any disallowance under
section 14A read with Rule 8D. Post completion of assessment,
the Revenue Audit raised an objection regarding non-disallowance
of expenditure under section 14A read with Rule 8D while
computing book profit under section 115JB of the Act. 2 | P a g e
ITA No.7080/Del/2019 AY: 2012-13
Subsequently, the Assessing Officer initiated proceedings under
section 154 of the Act for rectification of the mistake arising due
to non-disallowance of expenditure under section 14A read with
Rule 8D while computing book profit under section 115JB of the
Act and ultimately passed an order disallowing expenditure of
Rs.20,63,500/- under section 14A read with Rule 8D while
computing book profit under section 115JB of the Act.
Against the order passed under section 154 of the Act,
assessee preferred an appeal before learned Commissioner
(Appeals). Being convinced with the submissions of the assessee,
learned Commissioner (Appeals) deleted the disallowance.
Before us, learned Departmental Representative, at the
outset, submitted, the appeal cannot be decided as a low tax
effect case, since, the addition is made based on Revenue Audit
objection. Hence, protected under the exception provided to CBDT
Circular No. 17 of 2019, dated 08.08.2019. As regards the merits
of the issue, learned Departmental Representative strongly relied
upon the observations of the Assessing Officer.
Strongly relying upon the observations of the learned
Commissioner (Appeals), the learned counsel for the assessee
submitted, during the year under consideration, the assessee did 3 | P a g e
ITA No.7080/Del/2019 AY: 2012-13
not earn any exempt income. Therefore, no disallowance under
section 14A read with Rule 8D can be made. Further, he
submitted, the disallowance of expenditure under section 14A
read with Rule 8D while computing book profit under section
115JB being highly debatable issue cannot be covered under the
provisions of section 154 of the Act.
We have considered rival submissions and perused the
materials on record. It is relevant to observe, while completing the
assessment under section 143(3) of the Act, the Assessing Officer
has computed disallowance under section 14A read with Rule 8D
for an amount of Rs.20,63,500/- while computing the income
under the normal provisions of the Act. However, he did not
disallow any disallowance under section 14A read with Rule 8D
while computing the books profit of the assessee under section
115JB of the Act. The observations of the Assessing Officer in this
regard are as under:
“As is evident from the above, the total disallowance u/s 14A works out to Rs.20,63,500/-, whereas as against this disallowance under routine working of income, the assessee has calculated its tax liability u/s 115JB on an income of Rs.5,19,71,979/-. Hence the disallowance u/s 14A is not taken in to consideration while working out the tax liability of the company.”
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ITA No.7080/Del/2019 AY: 2012-13
From the aforesaid observation of the Assessing Officer, it is
very much clear that being of the view that no disallowance under
section 14A read with Rule 8D can be made while computing
book profit under section 115JB of the Act, the Assessing Officer
took a conscious decision not to do so.
It is apparent, subsequently, based on Revenue audit
objection, the Assessing Officer initiated proceeding under section
154 of the Act to make the disputed disallowance while
computing the book profit and ultimately did so. Therefore, it is
evident, the 154 proceeding was at the behest of the Revenue
audit. Applicability of section 14A read with Rule 8D to the
provisions of section 115JB certainly is a highly debatable issue.
Hence, it will not fall within the category of mistake apparent on
the face of record as envisaged under section 154 of the Act.
In any case of the matter, in case of ACIT Vs. Vireet
Investment Pvt. Ltd. [2017] 82 taxmann.com 415 (Delhi-Trib.)
(SB) the Special Bench of the Tribunal has held that while
computing book profit under section 115JB of the Act, no
disallowance can be made with reference to section 14A read with
Rule 8D.
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ITA No.7080/Del/2019 AY: 2012-13
In view of the aforesaid, we do not find any infirmity in the
decision of learned Commissioner (Appeals). Grounds raised are
dismissed.
In the result, the appeal is dismissed.
Order pronounced in the open court on 31st May, 2022
Sd/- Sd/- (PRADIP KUMAR KEDIA) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 31st May, 2022. RK/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi
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