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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: SHRI MAHAVIR PRASAD & SHRI WASEEM AHMED
PER MAHAVIR PRASAD, JUDICIAL MEMBER
This appeal filed by the Assessee is directed against the order of the Ld. CIT(A)-8, Ahmedabad dated 18.10.2017 pertaining to A.Y. 2014-15 and following grounds have been taken:
ITA No. 2624/Ahd/2017 2 . A.Y. 2014-15 1. In law and in the facts and circumstances of the appellant's case, the Learned CIT (A) has erred in confirming the assessment order passed by the Deputy Commissioner of Income-tax, Circle - 4(1 )(2), Ahmedabad which is void and deserves to be quashed. 2. In law and in the facts and circumstances of the appellant's case, the Learned CIT (A) has erred in confirming the action of Assessing Officer while making addition of Rs. 21,46,7027- under Section 14A of the Act while computing book profit u/s 115JB of the Act. 3. In law, on the facts and circumstances of the case, the Learned CIT (A) has grossly erred in confirming the action of A.O in levying interest u/s.234A, 234B, 234C & 234D and when no such interest is chargeable. It may be deleted. 4. In law and in the facts and circumstances of the appellant's case, the Learned CIT(A) has grossly erred in dismissing Ground No. 4 of the appellant's appeal before him challenging initiation of penalty proceedings u/s.271(l)(c) on the ground that it was pre-mature. He ought to have appreciated, inter alia, that in the peculiar facts and circumstances of the appellant's case, there being absolutely no warrant/justification for initiating the penalty proceedings, he ought to have ordered for their being dropped, thereby saving both the appellant and the Department from long drawn unnecessary litigation.
Brief facts of the case are that the appellant company has filed its return of income for the year under consideration declaring the total income at Rs. 1,78,03,580/- and book profit at Rs.90,21,493/- on 29.11.2014. Thereafter, revised return of income was filed on 18.08.2015 declaring the total income at Rs.63,27,320/- and book profit at Rs.90,21,493/-. The case was selected for scrutiny and consequently Ld. Assessing Officer passed Assessment Order u/s 143(3) of the Act accepting the total income and making addition to the book profit as under:
Particulars Amount(Rs.)
Book Profit u/s 115JB of the Act 90,21,493
ITA No. 2624/Ahd/2017 3 . A.Y. 2014-15 Add: Disallowance u/s 14A of the Act 24,16,900 Assessed Book Profit 1,14,38,393
Aggrieved by the aforesaid assessment order the assessee company has preferred an appeal before the first appellate authority who vide his order dated 18.10.17 has given partial relief of Rs 2,70,198/- and confirmed the balance amount of Rs 21.46,702/- u/s 14A and added the same while computing the book profit u/s 115JB of the Act.
Thereafter, assessee preferred first statutory appeal before the ld. CIT(A) who confirmed the action of the A.O.
Now by way of second appeal, assessee has come before us.
We have gone through the relevant record and impugned order. Now question before us is whether addition u/s 14A of the Act while computing book profit u/s 115JB of the Act can be made or not?
As per explanation 1(f) referred to section 115JB, only those expenditure which are specifically relatable to income to which section 10 or section 11 or section 12 are applicable are to be disallowed. However, no notional disallowance can be made for the purpose of this section. Only those direct expenditure which are relatable to earning or income u/s 10 (other than section 10(38)).
In support of its contention, assessee cited an order of Co-ordinate Bench in similar facts and circumstances of the case wherein it is held:
ITA No. 2624/Ahd/2017 4 . A.Y. 2014-15 7.We have heard rival contentions and gone through the record. As the facts emerge, the Id.AO while calculating book profit under section 115JB has taken into consideration disallowance of Rs.l 1,03,014/- made with the aid of section 14A of the Act read with Rule 8D of the Income Tax Rules. This action of the AO was confirmed by the Id.CIT(A) but restricted to Rs.9,34,945/-. The Ld.counsel for the assessee submitted that in view of Special Bench decision in the case of ACIT Vs. Vireet Investments P.Ltd., 165 ITD 27 (Del)(BS) no increase or decrease can be effected in the book profit calculated under section 115JB on account of certain disallowance made under section 14A. 8. Considering the above facts, we are of the view that Special Bench of the IT AT in the case of Vireet Investment P.Ltd. (supra) has formulated following question for adjudication on this issue: "Whether the expenditure incurred to earn exempt income computed U/S.14A could not be added while computing book profit u/s.HSJB of the Act." 9. Special Bench answered this question in favour of the assessee and held that computation for the purpose of clause (f) of Explanation 1 to Section 115JB(2) is to be made without resorting to the computation as contemplated under section 14A r.w. rule 8D. Respectfully following the above decision of the Special Bench, we allow this ground of appeal and direct the AO not to make adjustments in book profit for the purpose of MAT liability on the basis of calculations made with Rule 8D of the Income Tax Rules. 10. In the result, appeal of the assessee is partly allowed.
In parity with the aforesaid Co-ordinate Bench order, we allow this ground f appeal of the assessee.
ITA No. 2624/Ahd/2017 5 . A.Y. 2014-15 9. Now we come to ground relating to interest and penalty u/s 271(1)(c). Since we have given relief to the assessee, therefore, we do not want to go into the merit of these two grounds as same are consequential.
In the result, appeal filed by the Assessee is allowed.
Order pronounced in Open Court on 30- 05- 2019
Sd/- Sd/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad: Dated 30/05/2019 Rajesh Copy of the Order forwarded to:- 1. The Appellant. 2. The Respondent. 3. The CIT (Appeals) – 4. The CIT concerned. 5. The DR., ITAT, Ahmedabad. 6. Guard File. By ORDER
Deputy/Asstt.Registrar ITAT,Ahmedabad