ACIT-6(1)(1),MUMBAI, MUMBAI vs. M/S SEMPLICE CORPORATE SOLUTIONS PRIVATE LIMITED (PREVIOUSLY KNOWN AS M/S. AASAN CORPORATE SOLUTIONS, LOWER PAREL, MUMBAI

The respondent-assessee is a company engaged in real estate development, leasing and licensing of premises, service centre, commodities trading, etc. The assessee filed its Return of Income (RoI) for the relevant year declaring NIL income after claiming carry forward of current year’s loss of Rs.30,58,35,626/-. The case was

It is necessary to note that the respondent-assessee had suo moto disallowed an amount of Rs.10,250/- towards expenditure for earning exempt income, viz. investment in certain equity shares and mutual funds, etc. The AO made two disallowances. The first disallowance was made under Section 14A of the Income Tax Act, 1961 (‘Act’ for short) of Rs. 6,51,77,331/- @ 1% of the average investment as computed under Section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 (‘Rules’ for short). The AO, in this regard, had found that as per the CBDT Circular No. 5 of 2014 dated 11.02.2014, earning of exempt income is not a pre-condition for making disallowance under Section 14A of the Act.

The second disallowance was of Rs.5,00,00,000/-, which was claimed as deduction by the assessee (being 1/5th of the stamp duty paid to the Registrar of Companies (RoC) for demerger). This deduction was claimed by the assessee under Section 35DD of the Act, which was disallowed on the ground that the deduction is available only in respect of income earned under the head ‘profits and gains of business or profession’. The AO noticed that the assessee had offered rental income arising out of property under the head ‘income from house property’ and had also claimed the applicable standard deduction under Section 24(a) of the Act. The AO found that the expenses incurred on stamp duty to RoC was of capital nature and ought to have been capitalized towards the fixed assets. It was found that the claim of the assessee under Section 35DD of the Act amounted to a double deduction as standard deduction under Section 24(a) of the Act has already been claimed and allowed. The AO, therefore, made the twin disallowance of Rs.6,51,77,331/- under Section 14A and Rs. 5,00,00,000/- under Section 35DD of the Act. The total income was assessed at (-) Rs.18,17,75,889/-. The learned AO thereafter computed the book

In appeal, it was contended on behalf of the assessee that the amendment brought about by the introduction of Explanation to Section 14A of the Finance Act, 2022 was prospective in nature. Reliance was placed on the decision of this Tribunal in assessee’s own case for assessment year 2017-18 in which this Tribunal placing reliance on the decision of the Delhi High Court in Era Infrastructure (India) Ltd., 448 ITR 674 (Delhi) had deleted the disallowance made under Section 14A of the Act. Even so far as the other disallowance made towards the expenditure under Section 35DD of the Act is concerned, it was pointed out that this Tribunal in assessee’s own case for assessment year 2017-18 had held that the disallowance cannot be made.

The learned CIT(A), however, did not accept the contentions on the merits of the disallowance made under Section 14A after noticing the decision of the Supreme Court in Maxopp Investment Ltd., 402 ITR 640 (SC). Even so far as the disallowance under Section 35DD of the Act is concerned, the learned CIT(A) found that the reliance on the decision of this Tribunal in assessee’s own case for assessment year 2017-18 was misplaced as according to the learned CIT(A) that decision was rendered “sub silentio”. The learned CIT(A) found that the AO had made the disallowance for twin reasons. Firstly, that Section 35DD deduction is not available in relation to any income from house property and particularly when the standard deduction was claimed in relation to income from house property under Section 24(a) of the Act, which amounted to double deduction. The learned CIT(A) observed that this aspect was not before this Tribunal in assessee’s own case for assessment year 2017-18. Thus, after negating ground nos. 1 and 3, the learned CIT(A), however, allowed the appeal on ground nos. 2 and 4 before it, viz. that the disallowance under Section 14A and 35DD cannot be added back to the book profits under Section 115JB of the Act. The learned CIT(A) has found in para 4.3.7 that these provisions do not find place in the exhaustive

The assessee had not pressed ground nos. 5, 6 and 7 before the learned CIT(A), which were essentially computational in nature and which were decided in favour of the assessee in the rectification order dated 12.06.2025 passed by the AO under Section 154 of the Act. Thus, we are not concerned with these grounds in the present appeal.

The Revenue has challenged the order passed by the learned CIT(A) on the following grounds :-

It is submitted by the learned DR that the disallowance under Section 14A of the Act could be added back while computing the book profits under Section 115JB of the Act in view of clause (f) of Explanation 1 to Section 115JB(2) of the Act. It is submitted that the impugned order passed by the learned CIT(A) ignores the fact that such adjustments are necessary to bring out the legislative intent for MAT provisions which aim to tax the real economic profit of a company. Insofar as the deletion of disallowance under Section 35DD of the Act is concerned, it is submitted that the learned CIT(A) after having held that the disallowance was properly made, could not have directed its deletion on the ground that the same could not be added back while computing the book profits under Section 115JB of the Act.

The learned AR for the respondent-assessee supported the impugned order. It is submitted that the learned CIT(A) has rightly found that the disallowance under both sections cannot be added back while computing the book profits under Section 115JB of the Act. Reliance is placed on the decision of Special Bench of this Tribunal in Vireet Investment (P.) Ltd., [2017] 165 ITD 27 (Delhi - Trib.) (SB) and decision of Bombay High Court in Bengal Finance & Investments Pvt. Ltd., ITA No. 337 of 2013 dated 10.02.2015 insofar as the deletion of disallowance under Section 14A of the Act is concerned. As regards the deletion of disallowance under Section 35DD of the Act, reliance is placed on the decision of Supreme Court in Apollo Tyres Ltd., 255 ITR 273 (SC) and decision of Bombay High Court in Varun Corporation Ltd., [2023] 154 taxmann.com 548 (Bombay) and Adbhut Trading Co. Pvt. Ltd., 338 ITR 94 (Bombay) and certain decisions of this Tribunal which are based on the aforesaid decisions of the constitutional courts.

We have carefully considered the rival circumstances and the submissions made. We find that the decision of Special Bench of three learned Members of this Tribunal in Vireet Investment (P.) Ltd. (supra) covers the issue insofar as Section 14A

We find that the learned CIT(A) has rightly found that the exhaustive add back list provided under Explanation 1 to Section 115JB(2) of the Act does not speak about the deduction or its disallowance under Section 35DD of the Act. Thus, no case for interference is made out. The appeal stands dismissed.