DCIT CIRCLE-13(1), NEW DELHI vs. JAMMU PIGMENTS LTD, NEW DELHI

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 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.

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 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:

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.

In any case of the matter, in case of ACIT Vs. Vireet Investment Pvt. Ltd. [2017] 82 taxmann.com 415 (Delhi-Trib.)

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.