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Income Tax Appellate Tribunal, DELHI BENCHES: ‘B’, NEW DELHI
Before: SHRI P.K. BANSAL & SHRI AMIT SHUKLA
PER P.K. BANSAL, VICE PRESIDENT
This appeal has been filed by the Revenue against the order of Ld. CIT(A)-VI, New Delhi dated 23.09.2014 by taking the following effective ground of appeal.
“The Assessing Officer DCIT, Circle 6(2), New Delhi is hereby directed to file appeal in the above mentioned case before the ITAT, New Delhi on the following ground of appeal: The Ld. CIT(A) has erred in law in not upholding the action of the A.O. in adding the amount of disallowance u/s 14A as per the normal computation
Consolidated Finvest & Holding Ltd. provisions of the Act as done by assessee company itself, in computing the profit as per the provisions of S.115JB of the Income Tax Act, 1961.”
The brief facts of the case are that in computation of the book profit the company had made addition of Rs.15,34,506/- in terms of Clause (f) of Explanation 1 to Section 115JB of the Income Tax Act, 1961 (the Act) in relation to dividend income of Rs.3,86,63,506/- which was also excluded from the book profit being the exempt income, u/s 10(34) of the Act. While computing the normal taxable income the company made disallowance of Rs.72,83,694/- under section 14A read with Rule 8D of Income Tax Rules with reference to dividend income as well as capital gain which had been claimed exempt under section 10(34) and 10(38) of the Act respectively. The Assessing Officer did not agree with the claim of the assessee but he made addition of Rs.72,83,694/- + Rs.98,619/- in terms of Clause (f) of Explanation 1 to Section 115JB of the Act as against the amount of Rs.15,34,506/- added by the company. The assessee went in appeal before the Ld. CIT(A). The Ld. CIT(A) allowed the appeal of the assessee.
None appeared on behalf of the assessee. We therefore heard the Ld.D.R.
After hearing the Ld.D.R. and going through the orders of the authorities below, we noted that S.115JB of the Act does not provide for the method of determination of the amount to be added with reference to exempt income, while for the purpose of normal computation of income disallowance has to be made in accordance with S.14A read with rule 8D. In view of this Consolidated Finvest & Holding Ltd. fact Rule 8D of the Income Tax Rules has no relevance to the computation of book profits u/s 115 JB. A similar view has been taken in the following decisions.
i. Goetze (India) Ltd. vs. CIT (2009) 32 SOT 101 (Del.) ii. Quippo Telecom Infrastructure Ltd. vs. ACIT, Delhi dated 18.02.2011. iii. Pretoria Enclave Ltd. vs. DCIT, ITA no.108/Kol/2012, ITAT Kolkata decided on 21.6.2012. iv. ACIT vs. Spray Engineering Devices Ltd. (2012) 53 SOT 760 (Chandigarh).
4.1. Even otherwise also S.14A(1) of the Act specifically states that the aforesaid Section is “for the purpose of computing the total income under this Chapter”. Accordingly the provisions of S.14A are relevant to the computation of total income under Chapter IV of the Income Tax Act which means S.15 to 59 of the Act and it cannot be applied in computation of the book profit u/s 115 JB. We do not find any illegality or infirmity in the order of Ld. CIT(A) wherein he confirmed assessee’s action of disallowing an amount of Rs.72,83,694/- in terms of Rule 8D of Income Tax Rules but the addition of Rs.15,34,506/- for the purpose of computation of book profit on proportionate basis with reference to the income on dividend excluded in the book profit being exempt u/s 10(34) of the Act.
4.2. The Ld.DR even though relied on the order of the Assessing Officer but could not bring to our knowledge any decision which has taken the view contrary to the decision as has been referred to herein above.
Consolidated Finvest & Holding Ltd. 5. In the result the appeal of the Revenue stands dismissed. Pronounced in the Open Court on 22.09.2017.