M/S. HPL ADDITIVE LTD.,NEW DELHI vs. DCIT(OSD), NEW DELHI

Briefly stated facts of the case are that the assessee is engaged in manufacturing of chemical blowing agent, anti oxidant etc. During the course of assessment proceedings, it was observed that certain investments were made in shares for which no disallowance was offered under section 14A of the Act. Invoking the provision of section 14A read with Rule 8D, the Assessing Officer made an addition of Rs. 4,29,756/-. The learned CIT(A), noticing in para 4 of the impugned order that the company did not earn any exempt income, sustained the addition. The assessee is aggrieved against the action of the learned CIT(A) in this regard.

Having heard both the sides and perused the relevant material on record, it is observed as an admitted position that no exempt income was earned by the assessee during the year. The Hon’ble jurisdictional High Court in Cheminvest Ltd. vs. CIT (2015) 378 ITR 33 (Del) and CIT vs. Holcim India P. Ltd. (2014) 90CCH 081-Del-HC has held that if there is no exempt income, there can be no question of making any disallowance u/s 2 14A. In view of these precedents, which are squarely applicable to the facts of the instant case, we hold that the ld. CIT(A) was not justified in sustaining the disallowance. We order to delete the same. This ground is allowed.

The other issue raised in this appeal is against the computation of `Book profit’ under section 115JB of the Act. The Assessing Officer added a sum of Rs.25,00,000/- to the net profit towards `Provision for fringe benefit tax’ apart from an another addition of Rs.4,29,756/- on account of disallowance under section 14A. The learned CIT(A) sustained the same.

Having heard both the sides and gone through the relevant material on record, we find that the decision taken by the authorities in adding back a sum of Rs.25,00,000/- as `Provision for fringe benefit tax’ in the computation of `Book profit’ is not in accordance with the view taken by the Hon'ble Delhi High Court in CIT vs. Bhushan Steel Limited (ITA No. 324 of 2012). The Hon'ble High Court, vide its judgment dated 24.8.2012, a copy of which has been placed on record, has held that the provision for fringe benefit tax cannot be added in the computation of `book profit’ under section 115JB of the Act. Respectfully following the binding decision of the Hon'ble jurisdictional High Court, we overturn the impugned on this score. 3

The other disallowance of Rs. 4,29,756/-, being the addition made under section 14A, cannot be added in the computation of ‘Books profit’ as the said addition has itself been deleted by us in an earlier para. We, therefore, reverse the view taken by the learned CIT(A) and direct that both the additions made to ‘Book profit’ for the purposes of section 115JB of the Act, be deleted.

In the result, the appeal is allowed.

The other appeal, bearing was not pressed by the learned AR. The same is dismissed as not pressed.

In the result, the appeal is not allowed.