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Income Tax Appellate Tribunal, “D” BENCH : KOLKATA
Before: Hon’ble Shri Aby. T. Varkey, JM & Shri M.Balaganesh, AM ]
This is an appeal of the assessee directed against the order passed by the Learned Commissioner of Income Tax (Appeals) – 17, Kolkata (in short the ld CITA) in Appeal No. 149/CIT(A)-17/Kol/14-15 dated 28.10.2016 against the order of assessment framed by the Learned DCIT, Circle-6, Kolkata (in short the ld AO) u/s 143(3) of the Act dated 31.12.2010 for the Asst Year 2008-09.
The first issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in confirming the disallowance u/s 14A of the Act, in the facts and circumstances of the case.
The Kilburn Engineering Ltd. A.Yr.2008-09
The brief facts of this issue is that the assessee is engaged in the business of manufacturing and designing of engineering goods. The assessee had earned dividend income of Rs. 66,666/-. The assessee has not disallowed any expenses u/s 14A of the Act. The ld. AO worked out the disallowance under third limb of Rule 8D(2) of the Rules at Rs. 51,833/-. However he proceeded to disallow the sum of Rs. 1,51,751/- u/s 14A of the Act while completing the assessment under both under normal provisions of the Act as well as under computation of book profits u/s 115JB of the Act. Before the Ld. CIT(A), the assessee pointed out that the ld. AO had erroneously made disallowance of Rs. 1,51,751/- in the assessment though as per the calculation the disallowance under third limb of Rule 8D(2) of the Rules works out only to Rs. 51,833/-. It was also pleaded that the assessee had earned dividend income from its group company namely Mcleod Russel India Ltd. and that the said dividend was credited in the bank account through ECS directly without incurring any expenditure thereon. The Ld. CIT(A) however did not agree to the contentions of the assessee and gave a finding that on verification of the assessment order it is seen that the disallowance u/s 14A of the Act was made only to the extent of Rs 51,833/- and not Rs 1,51,751/- under normal provisions of the Act.
3.1. With regard to disallowance u/s 14A of the Act made in the computation of book profits u/s 115JB of the Act, the Ld. CIT(A) by placing reliance on the Co-ordinate Bench decision of this Tribunal in the case of Integrated Coal Mining Ltd. in deleted the said disallowance.
Aggrieved the assessee is in appeal before us with regard to disallowance made u/s 14A under normal provisions of the Act. 2
The Kilburn Engineering Ltd. A.Yr.2008-09
We have heard the rival submissions. At the outset, we find that the ld. AO had sought to make disallowance u/s 14A of the Act by applying the third limb of Rule 8D(2) of the Rules, which works out to Rs. 51,833/- only. But we find that the ld. AO while making the computation of income had erroneously disallowed Rs. 1,51,751/- instead of 51,833/-. We find that the Ld. CIT(A) also had grossly erred by giving a wrong factual finding in this regard. Accordingly, we direct the ld. AO to rectify the same. We find that the assessee had received dividend income of Rs. 66,666/- only from Mcleod Russel India Ltd. and accordingly any disallowance of expenses u/s 14A of the Act towards administrative expenses could be made only with respect to such investments. Respectfully following the co-ordinate Bench decision of this Tribunal rendered in the case of REI Agro Ltd. reported in 144 ITD 141, we direct the ld. AO to make disallowance under third limb of Rule 8D(2) of the Rules by considering only dividend bearing investment subject to maximum of dividend income. Accordingly, ground nos. 1 & 2 raised by the assessee are partly allowed.
The next issue to be decided in this appeal is as to whether the reduction of least of cash loss or depreciation loss as per books of accounts while computing the book profits u/s 115JB of the Act has been properly made in the facts and circumstances of the case.
The brief facts of this issue is that the assessee reduced the sum of Rs. 6,31,53,460/- representing unabsorbed depreciation loss as per books of accounts and being the least when compared with cash loss as per books of accounts to the tune of Rs. 22,12,22,725/-. The ld. AO found from the fixed assets schedule of the assessee’s balance sheet that the total accumulated depreciation was only Rs. 5,94,38,000/- 3
The Kilburn Engineering Ltd. A.Yr.2008-09 accordingly he reduced the same while completing the book profits u/s 115JB as against the claim of the assessee to the tune of Rs. 6,31,53,460/-. This action was upheld by the Ld. CIT(A). Aggrieved the assessee is in appeal before us.
We have heard the rival submissions. It is not in dispute that the least of cash loss or depreciation loss as per books of accounts is to be reduced while computing the book profits u/s 115JB of the Act. The dispute is only on the figure of unabsorbed depreciation loss as per books of accounts. The assessee has reduced Rs. 6,31,53,460/- based on the the breakup of loss as under:
We hold that there is absolutely no logic in the ld. AO reducing Rs. 5,94,38,000/-taking figure of accumulated depreciation from the fixed assets schedule and reducing the same while completing the books profit u/s 115JB of the Act. From the above table, it may appear that the assessee has rightly deducted Rs. 6,31,53,460/- representing unabsorbed depreciation loss as per books of accounts. We hold that this figure requires factual verification by the ld AO. Hence in the interest of justice and fairplay, we deem it fit and appropriate, to remand this issue to the file of ld AO for factual verification of the aforesaid figures and determine the amount of unabsorbed depreciation loss as per 4
The Kilburn Engineering Ltd. A.Yr.2008-09 books of accounts to be reduced while computing the book profits u/s 115JB of the Act. Accordingly, ground nos. 3.a, b and c raised by the assessee are allowed for statistical purposes.
Ground no.4 is in general in nature and does not require any specific adjudication.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Court on 25.05.2018