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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: HON’BLE SHRI MAHAVIR SINGH & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. By way of this appeal, the assessee assail the revisional jurisdiction as exercised by learned Pr. Commissioner of Income Tax , Chennai-3 (Pr.CIT) vide order dated 30.03.2022. The order under revision has been passed by Ld. Assessing Officer u/s 143(3) on 18.12.2019 reducing assessed loss to Rs.4.93 Lacs since interest was offered less. This order was rectified on 25.06.2020 at assessee’s request to grant credit of dividend distribution tax.
2 - 2. Subsequently, upon perusal of case records, Ld. Pr. CIT held the order to be erroneous and prejudicial since the disallowance u/s 14A for Rs.69.28 Lacs was added in the normal income. However, the same was not added back while computing the Book Profits u/s 115JB which resulted into excess MAT credit.
The assessee submitted that no expenditure was incurred to earn the exempt income but notional expenditure of 1% of average investments was disallowed. The same was not to be considered while computing Book Profits u/s 115JB as per the decision of Hon’ble Bombay High Court in CIT vs. Bengal Finance & Investment Pvt. Ltd. (ITA 337 of 2013 dated 10.02.2015) as well as the decision of Hon’ble Karnataka High Court in Sobha Developers Ltd. vs. DCIT (125 Taxmann.com 72) which held that disallowance u/s 14A is a notional disallowance and therefore, the same could not be added back while computing Book Profits u/s 115JB. However, rejecting the same, Ld. Pr. CIT directed Ld. AO to re-compute the income u/s 115JB. Aggrieved, the assessee is in further appeal before us.
Upon perusal of factual matrix, it could be seen that the assessee has made notional disallowance of 1% u/s 14A against tax free income earned by it. Unless it is shown that some expenditure was incurred to earn the exempt income and the same was debited in Profit & Loss Account, the same could not have been added under Clause (f) of Explanation-1 to Sec.115JB. The cited decisions of Hon’ble High Courts duly support this view. Therefore, the impugned order could not be sustained in law. We order so.
The appeal stand allowed in terms of our above order.
Order pronounced on 17th October, 2022.