M/S. QA INFOTECH (P) LTD.,NEW DELHI vs. DCIT, NEW DELHI

Brief facts of the case are that for the AY 2011-12 the assessee filed the return of income on 19.09.2011 declaring the income of Rs. 2,85,72,193/- and book profits at Rs. 20,87,79,519/-. Ld. Assessing Officer concluded the assessment proceedings by order dated 17.06.2013 making disallowance of Rs. 6,92,003/- u/s 14A of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) under the normal provisions of the Act but while calculating the book profits under MAT provisions Ld. Assessing Officer has erred in enhancing the book profits on account of the disallowance u/s 14A of the Act. While placing reliance on the decision dated 09.10.2013 passed by the Tribunal reported in M/s Power Grid Corporation India Ltd. for the AY 2008-09. Ld. CIT (A) confirmed the addition of Rs. 6,92,003/- u/s 14A of the Act to the book profits. Hence, the appeal in this appeal before us.

It is the argument of the Ld. AR that the Special Bench of the Tribunal in ACIt vs. Vireet Investment (P) Ltd. (2017) 82 taxmann.com 415 (Del.) held that the computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A read with Rule 8D of the Income tax Rules, 1962. Basing on this, he submitted that the addition of Rs. 6,92,003/- u/s 14A of the Act to the book profits is not sustainable.

Per contra, Ld. DR submitted that the decision of Hon'ble Delhi High Court in the case of Pr. CIT V. Bhushan Steel Ltd.: was decided without noticing the earlier judgment, CIT Vs. Goetze (India) Ltd. 361 ITR 505, as such, Bhushan Steel does not carry any presidential value.

We have gone through the record in the light of the submissions submitted on either side. The arguments now advanced before us by the Ld. DR are similar to the arguments advanced before the Special Bench. Having considered the same the Special Bench reached a conclusion that the computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A of the Act read with Rule 8D of the Rules. In the circumstances, while respectfully following the decision of the Special Bench in the case of Vireet Investment (P) Ltd. (supra), we find it difficult to sustain the addition of Rs. 6,92,003/- u/s 14A of the Act to the book profits and accordingly direct the Ld. AO to delete such an addition made to the book profits.

In the result, the appeal of the assessee is allowed.