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Income Tax Appellate Tribunal, “A”, BENCH KOLKATA
Before: SHRI A.T. VARKEY, JM &DR. A.L.SAINI, AM
आदेश / O R D E R
Per Dr. A. L. Saini, AM:
The captioned appeal filed by the Revenue, pertaining to assessment year 2010-11, is directed against the order passed by the Commissioner of Income Tax (Appeal)-17, Kolkata, in appeal no. 431/CIT(A)-17/Kol/17-18, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (in short the ‘Act’) dated 28/02/2013.
The grounds of appeal raised by the Revenue are as follows:
2 M/s Suvarna Commercial Pvt. Ltd. Assessment Year:2010-11 1. That in the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in quashing the rectification order passed by the A.O. u/s 154 / 143(3) of the Act wherein disallowance of expenses u/ s14A read with Rule 8D of Rs. 58,29,976/- was added to the income of the assessee company while computing the book profit as well as MAT under section 115JB of the Act.
2. That the appellant craves for the permission to add, delete or amend the grounds of appeal
before or at the time of hearing of appeal.
3. Facts of the case which can be stated quite shortly are as follows: The assessee filed its return of income u/s 139 on 16.09.2010 declaring a total income of Rs. 55,08,184/-. Subsequently, statutory notices u/s 143(2) & 142(1) were issued and assessment was completed u/s 143(3) of the Act on 28.02.2013 determining total income at Rs. 55,08,180/- under normal provisions of the Act.In the assessment order, the AO worked out the expenses of Rs. 58,29,976/- to be disallowed u/s 14A read with Rule-8D of the Rules and accordingly he passed the order. However, he has not made any discussion in the assessment order about making addition/disallowance of expenses u/s 14A read with Rule-8D to determine book profit u/s 115JB of the Act.
Thereafter the AO issued a notice to the assessee u/s 154/155 with a proposal to rectify the calculation of tax payable u/s 115JB of the IT Act, by considering the disallowance u/s 14A of Rs. 58,29,976/-.The Assessing Officer passed an order u/s 154 of the I.T. Act wherein he considered disallowance u/s 14A of Rs. 58,29,976/- for re-computing book profit u/s 115JB of the Act. Therefore, Assessing Officer increased book profit to Rs. 97,92,268/- from Rs. 39,62,292/-.
Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has deleted the addition made by the Assessing Officer.
Aggrieved the order of the ld. CIT(A), the revenue is in appeal before us.
3 M/s Suvarna Commercial Pvt. Ltd. Assessment Year:2010-11 6. The ld. DR for the revenue has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity and on the other hand the ld. Counsel for the assessee has defended the order of the ld. CIT(A).
We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. We note that the issue raised by the Revenue in this appeal is no longer res integra. The Co-ordinate Bench of ITAT, Kolkata in the case of M/s Philips Electronics India Ltd. vs. DCIT in held that,computation of disallowance under Rule 8D can be used only for computation of income under normal provisions of the Act and not for books profits u/s 115JB of the Act. Unless an item is debited in the profit and loss account, the same cannot be the subject matter of addition to book profits under clause (f) of Explanation to section 115JB of the Act. The disallowance made u/s 14A of the Act read with Rule 8D is only artificial disallowance and obviously the same is not debited in the profit and loss account and the same cannot be imported into clause (f) of Explanation to Section 115JB of the Act. Further we note that on a similar issue relating to addition on account of expenditure disallowed u/s 14A read with Rule 8D whether it is subject matter of computing book profit u/s 115JB of the Act has been decided by the Special Bench of ITAT at Delhi in the case of ACIT vs Vireet Investment Pvt. Ltd. (ITA No. 502/Del/2012 dated 16.06.2017) wherein it was held that the expenditure incurred to earn exempt income computed u/s 14A of the Act could not be added while computing book profit u/s 115JB of the Act.
We note that ld. CIT(A) allowed the appeal of the assessee observing the following:
4 M/s Suvarna Commercial Pvt. Ltd. Assessment Year:2010-11 Decision: “I have gone through assessment order, rectification order and submissions made by the appellant. The only issue is with regard to rectification order passed relating disallowance of expenses u/s 14A read with Rule 8D to determine book profit u/s 115JB of the Act. The appellant has submitted that the A.O. has not made any discussion in the assessment order about making addition / disallowance of expenses u/s 14A read with Rule 8D to determine book profit u/s 115JB of the Act and he passed an order u/s 154 of the IT Act, thereby re-computing book profit u/s 115JB of the I T Act. It has further been submitted as held in various case laws as per submissions including M/s Surya Alloys Industries Ltd. vs. DCIT, Circle-3, Kolkata that disallowance made u/s 14A of the Act is not covered by the exceptions provided in Explanations to Section 115JB.”
Having gone through the order of the ld. CIT(A), we note that the ld. CIT(A) has rightly pointed out that disallowance made u/s 14A of the Act is not covered by the exceptions provided in Explanation to section 115JB of the Act. That being so, we decline to interfere in the order passed by ld. CIT(A), his order on this issue, is hereby upheld and grounds of appeal raised by the Revenue is dismissed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the Court on 22.11.2019