DCIT 4(1)(1), MUMBAI vs. ENAM SHARES AND SECURITES P.LTD, MUMBAI
In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that disallowances made under Section 14A cannot be considered while computing book profit under Section 115JB. The CIT(A) had rightly deleted the additions made by the AO.
What were the facts?
The Assessing Officer (AO) made disallowances under Section 14A of the Income Tax Act, 1961, and adjusted the book profit computed under Section 115JB. The assessee contended that such adjustments to book profit were incorrect.
What were the issues?
Whether disallowances under Section 14A can be adjusted while computing book profit under Section 115JB.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cases cited in this judgment(1)Show listHide list
Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.
- Goetze (India) Ltd. v. CIT59 citing32 SOT 101 · 2009 · ITAT
Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: Shri Mahavir Singh & Shri G Manjunatha
O R D E R Per G Manjunatha, AM : This appeal filed by the revenue is directed against the order of CIT(A)-9, Mumbai dated 07-10-2015 and it pertains to AY 2011-12. 2. The brief facts of the case are that the assessee filed return of income for the assessment year 2011-12 on 29-09-2011 declaring total income of Rs.1,10,63,023. The assessment was completed u/s 143(3) on 19-02-2014 determining the total income at Rs.11,79,90,675 after making certain disallowances including disallowance u/s 14A of the I.T. Act, 1961. The AO also MAT provisions of Income-tax Act, 1961. Aggrieved by the assessment order, the assessee preferred appeal before the CIT(A).
Before the CIT(A), assessee contended that the AO was erred in making adjustments towards book profit computed under the provisions of section 115JB of the Income-tax Act, 1961 in respect of disallowance made u/s 14A of the Income-tax Act, 1961. The CIT(A), after considering relevant submissions of the assessee and also by relying upon the decision of ITAT in assessee’s own case for the assessment year 2008-09 in deleted addition made by the AO towards disallowance u/s 14A and also directed the AO to compute the book profit u/s 115JB as per the direction of ITAT. The relevant portion of the order of CIT(A) is extracted below :-
“5.4. Decision: H I have considered the stand of the AO as well as submissions of the appellant. I have also considered the judicial pronouncements relied upon by the assessee. All the grounds of appeal taken together is of only one issue i.e. regarding disallowance u/s 14A and further re- computation of income u/s 115JB of I.T. Act, 1961. I find that the issue of disallowance to be made u/s. 14A of the Act and its impact on Section 115JB has been deliberated upon by the various benches of the Tribunal in the cases relied upon by the AR. In the matter of Radha Madhav Investment Ltd. (supra) the issue has been decided as under: "2.3. We have heard the rival submissions and perused the material before us. We find that issue of disallowance uls.14A of the Act while calculating book profits uls. 1151B of the Act has been decided in favour of the assessee by the Tribunal in the cases referred above by the AR. We find that following decisions of the Goetze India Ltd. (supra) 'K Bench of Mumbai Tribunal in the case of Reliance Industries Ltd. (supra) has held that principal of apportionment as provided uls. J 4A should not be applied while computing the book profit uls. 1151B of the Act. "In so far as disallowance of administrative expenses U/S 14A of the Act is concerned for earning exempt income ofRs. 345,69,24,6961-, we are of the considered view that by following the order of Ed. CIT(A) for the preceding assessment year i.e. Assessment Year 2002-03, it will be fair and reasonable to restrict the disallowance to 1 % of the exempt income which works out to Rs. 3,45,69,2501-, However, in regard to disallowance U/S 14A for computing book profit U/S 1 15JB of the Act, we observe that similar issue had come up before the Tribunal, Mumbai Bench in the case of Reliance Industrial Infrastructure Ltd Vis Add!. CIT in [TA Nos. 69 and 701Mum12009 (AY- 2005-06 and 2006-07) and Tribunal vide order dated 5.4.2013 after following the decision of Delhi Bench of Tribunal in Goetze (India) Ltd (32 SOT 101) (Del) and the decision of Mumbai Bench of the Tribunal in Mis Bengal Finance and Investment P. Ltd. in [TA No. 56201/Mum/2010, dated 31.07.2012 has held that while computing book profit U/S 1151B of the Act, provisions of section 14A cannot be imported. Therefore, amount disallowed WS 14A of the Act cannot be considered while computing book profit U/S 1151B of the Act. Accordingly, the issue was decided in favour of the assessee. In view of above Ground No.4 of the appeal taken by the assessee is allowed in part by restricting the disallowance to Rs. 3295590- towards administrative and general expenses U/S 14A of the Act towards earning of exempt income U/S 10(34) & u/s 10(38) of the Act while computing total taxable income under the normal provisions of Act. However, no disallowance under Section 14A be considered while computing book profit U/S 115JB of the Act. Consequently, Ground No.4 taken by the department is rejected. Following the above ground no-3 is decided in favour of the assessee.
The above issue has also been decided in favour of the Appellant Company in its own case in A.Y 2008-09 by the Tribunal vide where the Hon’ble Mumbai has relied on the judgements referred above and has held as under: "Respectfully, following the above mentioned decisions at paragraph 4 of the order, we reverse the order of the FAA and decide effective ground of appeal in favour of the assessee." The substantial ground of appeal regarding disallowance u/s 14A and its impact on Section 115JB is decided in favour of the assessee for the reason that the issue is covered in favour of the assessee in its own case by Hon'ble ITAT. Accordingly, the AO is directed to re-compute the income u/s.115JB as per the direction of Hon'ble ITAT in the case in earlier assessment, as referred.” Aggrieved by the order of CIT(A), the revenue is in appeal before us.
We have heard both the parties, perused the material available on record and gone through the orders of authorities below. The only issue that came up for our consideration is whether on the facts and in the circumstances of the case disallowance u/s 14A can be adjusted to recompute book profit under the provisions of section 115JB of the Act. The issue is no longer res integra. The ITAT, in assessee’s own case for the assessment year 2008-09 has considered similar issue in the light of provisions of section 115JB of the Act.
The ITAT, by following the decision of Radha Madhav Investment Ltd vs DCIT cannot be considered while computing book profit u/s 115JB of the Act. We further notice that a similar issue has been considered by the ITAT, Delhi Special Bench in the case of ACIT vs Vireet Investments Pvt Ltd (2017) 82
Taxman.com 415 (Delhi Trib) (SB) wherein the special bench has observed that computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to computation as contemplated u/s 14A r.w.r.8D(2) of I.T.
Rules, 1962. Therefore, we are of the considered view that the AO was incorrect in making adjustments towards disallowance u/s 14A in computing book profit under the provisions of section 115JB of the Income-tax Act, 1961.
The CIT(A), after considering relevant provisions has rightly deleted additions made by the AO. We do not find any error or infirmity in the order of the CIT(A). Hence, we are inclined to uphold the order of the CIT(A) and dismiss the appeal filed by the revenue.
In the result, appeal filed by the revenue is dismissed. Order pronounced in the open court on 27th October, 2017.
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