THE PRINCIPAL COMMISSIONER OF INCOME TAX-1 vs. ADANI WILMAR LTD.

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TAXAP/305/2020HC GujaratGJHC24043997202025 January 2021Author: HONOURABLE MR. JUSTICE J.B.PARDIWALA,HONOURABLE MR. JUSTICE ILESH J. VORA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that both questions of law proposed by the Revenue were no longer res integra. The first question, concerning the deletion of the disallowance under Section 14A read with Rule 8D, was covered by this Court's decision in CIT vs. Corrtech Energy Pvt. Ltd. [45 Taxxmann.com 116]. The principle established in that case is that if the assessee has not made a claim for exemption of income, then no disallowance can be made under Section 14A of the Act. Consequently, the second question regarding the computation of book profit under Section 115JB would also not survive, as there could not have been any disallowance under Section 14A read with Rule 8D. The Court reasoned that expenses incurred to earn exempt income cannot be added back for computing book profit under Section 115JB. Therefore, the appeal was dismissed.

What were the facts?

The Revenue has filed this Tax Appeal under Section 260A of the Income Tax Act, 1961, challenging an order dated February 20, 2020, passed by the Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench 'B'. The appeal pertains to Assessment Year 2015-16 and concerns the deletion of an addition of Rs. 13,55,80,000. This addition was made on account of a disallowance under Section 14A of the Act read with Rule 8D. The appeal also questions the deletion of this amount when computing the book profit under Section 115JB of the Act.

What were the issues?

1. Whether the Appellate Tribunal has erred in law and on facts in deleting the addition of Rs. 13,55,80,000 made on account of disallowance under Section 14A of the Act read with Rule 8D? 2. Whether the Appellate Tribunal has erred in law and on facts in deleting the addition of Rs. 13,55,80,000 made on account of disallowance under Section 14A read with Rule 8D of the Act while computing Book Profit under Section 115JB of the Act? Assessee's Contentions: The judgment does not record specific contentions made by the assessee. However, the Tribunal's deletion of the disallowance implies that the assessee likely argued against the applicability of Section 14A and Rule 8D, particularly in the absence of any claim for exemption on income. Revenue's Contentions: The Revenue argued that the disallowance under Section 14A read with Rule 8D was justified and that the deletion by the Tribunal was erroneous. They also contended that the deletion of this amount was incorrect when computing the book profit under Section 115JB.

Which sections of the Income-tax Act were involved?

Section 14A,Section 115JB,Section 260A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
C/TAXAP/305/2020 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO.  305 of 2020 ========================================================= = THE PRINCIPAL COMMISSIONER OF INCOME TAX­1  Versus ADANI WILMAR LTD.  ========================================================== Appearance: MRS MAUNA M BHATT(174) for the Appellant(s) No. 1 MR B S SOPARKAR(6851) for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE ILESH J. VORA  Date : 25/01/2021

ORAL ORDER (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA)

1.

This Tax Appeal under Section 260A of the Income Tax Act, 1961 is at the instance of the Revenue and   is   directed   against   the   order   dated 20.02.2020   passed   by   the   Income   Tax   Appellate Tribunal,   Ahmedabad   Bench   “B”,   in   the   ITA No.2044/Ahd/2018 for the A.Y. 2015­16. 2. The   Revenue   has   proposed   the   following substantial  questions  of   law  for   consideration of this Court : “[A] Whether   the   Appellate   Tribunal   has erred   in   law   and   on   facts   in   deleting   the addition of Rs.13,55,80,000/­ made on account of disallowance u/s. 14A of the Act r.w. Rule 8D? [B] Whether   the   Appellate   Tribunal   has erred   in   law   and   on   facts   in   deleting   the addition of Rs.13,55,80,000/­ made on account of disallowance u/s. 14A r.w Rule 8D of the Act while computing Book Profit u/s. 115JB of the Act ?”

3.

We have heard Mr. Manish Bhatt, the learned Sr. C/TAXAP/305/2020 ORDER Counsel   appearing   for   the   Revenue   and   Mr. B.S.Soparkar, the learned counsel appearing for the respondent – Assessee on caveat.

4.

Both   the  questions   as  proposed   by  the   Revenue are no longer res integra. The first question is covered by a decision of this Court in the case of  CIT   Vs.   Corrtech   Energy   Pvt.   Ltd.  [45 Taxxmann.com   116].   The   view   taken   therein   is that, when the assessee has not made claim for exemption in the income from payment of tax in disallowance could be made under Section 14A of the   Act.   The   second   question   would   also   not survive once the view is taken that there could not have been any disallowance under Section 14A read   with   Rule   8D   of   the   Act.   In   such circumstances, there is no question of computing the Book Profit under Section 115JB of the Act. In other words, the expenses incurred to exempt the   income   cannot   be   added   for   computing   the Book Profit under Section 115JB of the Act.

5.

In view of the aforesaid, this appeal fails and is hereby dismissed. We may clarify that since the   disallowance   under   Section   14A   itself   has been deleted, therefore, there is no question of adding back under Section 11JB of the Act. (J. B. PARDIWALA, J) (ILESH J. VORA,J) SUCHIT

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