TATA INVESTMENT CORPORATION LTD,MUMBAI vs. DY. C.I.T. - 2(3)(1), MUMBAI

O R D E R PER C.N. PRASAD (JM) 1. These appeals are filed by the assessee and Revenue against different orders of the Ld. Commissioner of Income Tax (Appeals)–6, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 23.10.2017 for the A.Ys.2013-14 and 2014-15.

4. Briefly stated the facts are, the Assessing Officer while completing the assessments for these two assessment years computed the disallowance u/s. 14A r.w. Rule 8D of I.T. Rules and the same was disallowed while computing even the book profits u/s. 115JB of the Act.

5. At the outset, Ld. Counsel for the assessee submitted that this issue has been decided in favour of the assessee by the Tribunal for the A.Y.2012-13 in ITA.No. 2332/Mum/2016 dated 28.06.2018 wherein the Tribunal accepted the disallowance as computed by the assessee for the purpose of computation u/s. 115JB of the Act. The method of allocation of expenses has been consistently followed by the assessee and therefore the disallowance as computed as per Rule 8D shall not be made applicable for computing the book profits u/s. 115JB of the Act. The Ld. Counsel for the assessee submitted that the Special Bench of the Delhi Tribunal in the case of ACIT v. Vireet Investments Private Limited [165 ITD 27] held that 4 & 7405/MUM/2017 ITA. NOs. 57 & 58/MUM/2018 M/s. Tata Investment Corporation Ltd., computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to provisions of Rule 8D of I.T Rules.

6. We have heard the rival submissions, perused the orders of the authorities below. We find that the issue is squarely covered by the decision of Tribunal in assessee’s own case for the A.Y. 2012-13 in ITA.No.2332/Mum/2016 dated 28.06.2018 wherein it has been held as under: - “3. We have heard the parties and perused the record. The assessee is an investor company and it earned exempt income of `665150 lakhs by way of dividend and `5172 lakhs by way of interest on tax free bonds and `4696.06 lakhs by way of long term capital gain. The assessee computed the disallowance under Section 14A of the Act at `745.46 lakhs. for computing total income under normal provisions of the Act. The assessee also worked the expenses relating to exempt income for the purpose of computation of book profit under Section 115JB of the Act at `552.93 lakhs. The AO noticed that the amount disallowable as per Rule 8D of the I.T. Rules actually worked out to `587.78 lakhs. Since the assessee himself has disallowed a sum of `745.46 lakhs under Section 14A, the AO did not disturb the working made by the assessee. The AO also accepted the working of expenses relating to exempt income made by the assessee for computing books profit under Section 115JB of the Act. 4. In appellate proceedings the learned CIT(A) held that the amount worked out for disallowance under Section 14A of the Act has to be adopted while computing the book profit under Section 115JB of the Act. In this regard the learned CIT(A) placed reliance on the decision rendered by the Mumbai Bench of the Tribunal in the case of Godrej Consumer Products Ltd. vs. Addl. CIT 48 taxmann.com 293. Accordingly he directed the AO to add the amount computed under Section 14A of the Act for the purpose of Section 115JB of the Act.

5 & 7405/MUM/2017 ITA. NOs. 57 & 58/MUM/2018 M/s. Tata Investment Corporation Ltd., 5. It is pertinent to note that the income computed under Section 115JB of the Act was assessed as total income in the hands of the assessee for the year under consideration, since the total income computed under the normal provisions of the Act was lower than the book profit. Hence the issue that requires adjudication is whether the learned CIT(A) was justified in directing the AO to adopt the disallowance computed under Section 14A of the Act for the purpose of computing book profit under Section 115JB of the Act.

7. We have heard the learned D.R. on this issue and perused the record. In view of the decision rendered by the Special Bench in the case of Vireet Investment P. Ltd., the direction of the learned CIT(A) to adopt the disallowance made under Section 14A of the Act for the purpose of computing book profit under Section 115JB is liable to be set aside. The assessee also took us to the working made by it for ascertaining the expenses relating to exempt income for the purpose of computation of book profit under Section 115JB of the Act. We noticed that the assessee has allocated expenses in the ratio of taxable income and exempt income and the said method was determined by the Department in A.Y. 2000-01. It is stated that the same method is being followed for A.Y. 2000-01 onwards by the assessee. Since a consistent method is being followed by the assessee for more than 10 years and since the allocation of expenses is on the basis of exempt income and taxable income, we are of the view that the computation made by the assessee for determining expenses relating to exempt income for the requirement of provisions of Section 115JB of the Act does not require disturbance. Accordingly we set aside the order of the learned CIT(A) on this issue

6 & 7405/MUM/2017 ITA. NOs. 57 & 58/MUM/2018 M/s. Tata Investment Corporation Ltd., and direct the AO to accept the computation made by the assessee for the purpose of sec. 115JB of the Act.

Order pronounced on 20.07.2020 as per Rule 34(4) of ITAT Rules by placing the pronouncement list in the notice board.