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Income Tax Appellate Tribunal, KOLKATA BENCH (D
Before: Shri P.M. Jagtap, AM & Shri S.S. Viswanethra Ravi, JM]
order : April 12, 2018 ORDER PER P.M. JAGTAP, AM These two appeals preferred by the revenue against two separate orders passed by the Ld. CIT(A) – 2, Kolkata both dated 02.01.2017 for A.Y. 2012-13 and 2014-15 involve a common issue and the same, therefore, have been heard together and are being disposed of by a single consolidated order for the sake of convenience.
The solitary common issue involved in these two appeals of revenue relates to the deletion by the Ld. CIT(A) of the addition made by the A.O. on account of disallowance under section 14A read with rule 8D while computing the book profit of the assessee company under section 115JB of the Income Tax Act, 1961.
2 & 672/Kol/2017 Assessment Years 2012-13 & 2014-15 M/s. TMT Viniyogan Ltd.
The assessee in the present case is a non-banking finance company. The returns of income for both the years under consideration were filed by it on 26.09.2012 and 22.09.2014 declaring a total income of Rs. 2,71,96,780/- and Nil respectively. In the return of income filed for A.Y. 2012-13, a disallowance of Rs. 2,91,96,944/- was made by the assessee company suo moto under section 14A read with rule 8D while computing its total income under the normal provisions of the Act. While computing the book profit under section 115JB, the addition on account of expenses incurred for earning exempt income however was made by the assessee company only to the extent of Rs. 39,055/-. In the assessment completed under section 143(3) vide an order dated 30.03.2015, the total income as per the normal provisions of the Act and book profit under section 115JB as declared by the assessee company were accepted by the A.O. He however subsequently rectified the said assessment order and made an addition of Rs. 2,91,96,944/- instead of Rs. 39,055/- on account of disallowance of expenses incurred for earning exempt income while computing the book profit of the assessee company for A.Y. 2012-13 under section 115JB of the Act. Similarly in the assessment made under section 143(3) vide an order dated 31.03.2016 for A.Y. 2013-14 addition of Rs. 2,98,88,081/- was made by the A.O. on account of disallowance under section 14A read with rule 8D while computing the book profit of the assessee company under section 115JB of the Act.
The additions made by the A.O. to its book profit on account of disallowance of expenses incurred in relation to the earning of exempt income as worked out under section 14A rule 8D were 3 & 672/Kol/2017 Assessment Years 2012-13 & 2014-15 M/s. TMT Viniyogan Ltd. challenged by the assessee in the appeals filed before the Ld. CIT(A) and following the various decisions of the Tribunal, the Ld. CIT(A) deleted the addition made by the A.O. on account of disallowance under section 14A read with rule 8D while computing the book profit of the assessee company for both the years under consideration under section 115JB of the Act observing that the artificial disallowance made under section 14A read with rule 8D could not be imported into Clause (f) of Explanation 1 to Section 115JB of the Act. Aggrieved by the orders of the Ld. CIT(A), the revenue has preferred this appeal before the Tribunal.
We have heard the arguments of both the sides and also perused the relevant material available on record. As agreed by the learned representatives of both the sides, the solitary common issue involved in the appeals of the revenue is squarely covered by the latest decision of the Tribunal rendered in assessee’s own case for A.Y. 2008-09 vide its order dated 15.12.2017 passed in wherein a similar issue has been decided by the Tribunal in paragraph no 14 of its order as under: “14. We have heard the rival submissions and perused the materials available on record. The issue in the instant case relates to the disallowances made by Assessing Officer u/s 14A r.w.r 8D of the Income Tax Rules while determining the income under normal computation of income. The disallowance of the same was also made while determining the profit u/s 115JB of the Act. However, we note that in recent judgment of Special Bench of Hon’ble Delhi Tribunal in the case of ACIT vs. Vireet Investment Pvt. Ltd. reported in 82 Taxmann.com 415 that the disallowances made u/s 14A r.w.r. 8D cannot be the subject matter of disallowances while determining the net profit u/s 115JB of the Act. Relevant portion of the said order is reproduced below: ‘In view of above discussion, the computation under clause (f) of Explanation 1 to section 115JB(2), is to be made without resorting
The ratio laid down by the Hon’ble Tribunal is squarely applicable to the facts of the case. Thus it can be concluded that the disallowance made under section 14A r.w.r. 8D cannot be resorted while determining the expenses as mentioned under clause (f) to explanation 1 of section 115JB of the Act.
However it is also clear that the disallowance needs to be made in terms of the provisions of clause (f) to section 115JB of the Act while determining the book profit. In holding so we draw our support from the judgment of Hon’ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. in GO No.1501 of 2014 (ITAT No.47 of 2014) dated 19.11.14 wherein it was held that the disallowance in relation to exempted income needs to be made as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. The relevant extract of the judgment is reproduced below:- ‘we find computation of the amount of expenditure relatable to exempted income of the assessee must be made since the assessee has not claimed such expenditure to be Nil. Such computation must be made by applying clause (f) of Explanation 1 under section 115JB of the Act. We remand the matter for such computation to be made by the learned Tribunal. We accept the submission of Mr. Khaitan, learned Senior Advocate that the provision of section 115JB in the matter of computation is a complete code in itself and resort need not and cannot be made to section 14A of the Act.”
In view of above we hold that the disallowances made under the provisions of Sec. 14A r.w.s 8D of the IT Rules, cannot be applied to the provision of Sec. 115JB of the Act as per the direction of the Hon'ble jurisdictional High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. (Supra). Therefore, the AO shall work out the disallowances in terms of the clause (f) to Explanation-1 of Sec. 115JB of the Act independently after considering the expenses debited in the profit & loss account as mandated under the provisions of law. Therefore we are inclined to restore this issue to the file of AO for fresh adjudication in accordance to law and in the light of above discussion. Thus this ground of appeal of the assessee is allowed for statistical purposes.”
5 & 672/Kol/2017 Assessment Years 2012-13 & 2014-15 M/s. TMT Viniyogan Ltd.
As the issue involved in the years under consideration as well all the material facts relevant thereto are similar to that of A.Y. 2008- 09, we respectfully follow the order of this Tribunal for A.Y. 2008-09 and restore the issue relating to the addition to be made while computing the book profit as per Clause (f) of Explanation to Section 115JB to the file of the A.O. for deciding the same afresh as per the same directions as given by the Tribunal for A.Y. 2008-09
In the result, both the appeals of the revenue are treated as allowed for statistical purpose. Order Pronounced in the Open Court on 12th April, 2018.