INFORMED TECHNOLOGIES INDIA LTD,MUMBAI vs. DCIT 3(2), MUMBAI

PER RAVISH SOOD, JUDICIAL MEMBER :

The present appeals filed by the assessee for assessment years 2010- 11 and 2011-12 involving certain common issues are directed against the respective orders passed by CIT(A)-4, Mumbai, each dated 12/09/2014, which in turn have arisen out of orders passed by the Assessing Officer (in short ‘A.O’) under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’).

(A). A.Y. 2010-11:

1.a) The learned C.I.T.-(A) has erred in not accepting ground number one of the grounds of appeal filed before him regarding enhancement of deduction allowable u/s. 10A of the Act by Rs. 3,10,869/- being the amount disallowed under Rule 8D of the Income Tax Rules. b) That the appellant company has business income from only one source i.e. software unit located in Software Technology Park and the income from the same is exempt u/s. 10A of the Act as mentioned in para 4 of the assessment order and in para 3.1 of the order passed by the C.I.T.-(A) but the assessing officer and the C.I.T.(A)have erred in not enhancing the deduction allowable u/s. 10A of the Act by the amount of disallowance made under Rule 8D of the Income Tax Rules.

c) That the ground number one of the grounds of appeal filed before the C.I.T.-(A) specifically pertains to enhancement of deduction allowable u/s. 10A of the Act and the appellant company had never disputed the disallowance made under Rule 8D of the Income Tax Rules. However, the C.I.T.-(A) in the order passed by him had not dealt with specific ground of appeal of the appellant company and has referred to various caselaws etc. for upholding the disallowance made under Rule 8D which was not the issue under consideration. 2.a) That the C.I.T.-(A) has erred in upholding the order of the assessing officer wherein he has assessed income from premises in Darshan Apartment, Malabar Hill, Mumbai, at Rs. 8,40,000/-. b) That the said property was let upto 4.12.2008 and thereafter remained vacant. As the said premises were vacant for the whole of the previous year, under the provisions of clause(c) of section 23(1) of the Act the income from the said property is to be assessed at Nil. c) That the C.I.T.-(A) has erred in completely ignoring the decision of the ITAT, Mumbai, in the case of Premsudha Exports Pvt. Ltd. vs. ACIT reported in 110 ITD 158 which was brought to his notice in the detailed facts of the case filed before him during the course of hearing along with copy of judgment. d) That in view of the said decision of the ITAT, Mumbai, income from the said property is to be assessed at Nil. e) That the C.I.T.-(A) has erred in referring to the judgment in the case of Vivek Jain vs. ACIT reported in 337 ITR 74. In the present case since as mentioned above, the premises were let upto 4.12.2008 and evidence was filed by the assessee company before C.I.T.-(A) that the appellant company had tried to let out the said premises, the said decision goes in favor of the assessee and the assessing officer had erred in not accepting the said ground of appeal. 3.a) That the C.I.T.-(A) has erred in not accepting ground number three of grounds of appeal filed before him regarding following

additions wrongly made by the assessing officer in computing book profits :- Dividend paid or proposed 41,69,100 Disallowance U/s. 14A 3,10,868 b) That in the assessment order the net profit as per Profit & Loss A/c of Rs. 2,95,37,027/- taken as starting point for computation by the assessing officer is the profit before provision for dividend and as such the dividend proposed in the Profit & Loss A/c. below line is not to be added. c) That the C.I.T.-(A) has erred in observing that the book profit means net profit as per Profit & Loss A/c, as increased by the amounts of dividend paid or proposed. d) That the C.I.T.-(A) has erred in not at all dealing with the ground of appeal raised by the appellant company before him that the profit taken by the assessing officer is before provision of dividend and as such the said amount is not to be added. e) That the C.I.T.-(A) has erred in upholding the addition of disallowance made u/s. 14A of Rs. 3,10,868/- for computing the book profit. f) That the C.I.T.-(A) has erred in not following the express provisions of Section 14A(1) which provides that the disallowance referred to therein should be made only in computing total income under this chapter and for not other provisions. In view of the same, the addition of disallowance u/s. 14A to the book profit is bad in law and may be cancelled. 4.a) That the C.I.T.-(A) has erred in not accepting the ground number 4 of the grounds of appeal filed before him regarding giving directions for carry forward of long term capital loss of Rs. 34,39,282/-. b) That the said carry forward loss was duly explained in para 3 of the appellant company‟s letter dated 28.11.2012 filed with the assessing officer during the course of assessment proceedings and the assessing officer had erred in not discussing at all the said carry

forward loss claimed by the assessee company and copy of the said letter was filed before the C.I.T.-(A). The said carry forward may be allowed. c) That the C.I.T.-(A) has erred in not deciding the said ground of appeal raised by the appellant company and has directed the assessing officer to decide on 154 application filed by the appellant company. d) That the C.I.T.-(A) is duty bound to decide on grounds of appeal raised before him and the said carry forward of long term capital loss of Rs. 34,39,284/- may be allowed. 5.a) That the C.I.T.-(A) has erred in not accepting Ground No. 5 of the grounds of appeal filed before him regarding charging of interest of Rs. 99,190/- for late payment of dividend distribution tax. b) That the dividend of Rs. 41,69,100/- was declared on 25.9.2009 and dividend distribution tax on the same of Rs. 7,08,539/- was paid within a period of 14 days on 16.10.2009 vide Challan No. 9 on Bank of Baroda, Nariman Point, BSR Code 0201290 and as such no interest for late payment is leviable. c) That the said facts were brought to the notice of the C.I.T.-(A) and the copy of the challan etc. was also filed before him but he has erred in not accepting the said ground of appeal filed by the appellant company. d) That the C.I.T.-(A) has erred in directing the assessing officer to pass order u/s. 154 before him by the appellant company. e) That the C.I.T.-(A) was duty bound to pass order on the ground raised before him and the said interest charged may please be cancelled.

of income for A.Y 2010-11 as on 18.09.2010, therein reflecting total income under the normal provisions at Rs. 1,93,67,026/- , and book profit u/s 115JB of the income tax Act, 1961 (for short ‘Act’) at Rs. 2,37,20,337/-, which was processed as such u/s 143(1) of the ‘Act’. The case of the assessee was taken up for scrutiny assessment, wherein the A.O after making the following additions/disallowances :-

Sr. No. Particulars Amount 1. Disallowance u/s 14A r.w. Rule 8D. Rs. 3,10,868/- 2. Addition pursuant to re-computation of the Rs. 8,40,000/- ‘Annual lettable value’ (‘ALV’) u/s 23 of the ‘Act’, pertaining to a Property owned by the assessee.

, and deliberating on certain other issues, therein determined the income of the assessee as per the normal provisions at Rs. 2,01,67,890/-, as well as recasted the income as per the MAT provisions, i.e. u/s 115JB at an amount of Rs. 3,37,20,864/-.

(i). Deduction u/s 10A vis-a-vis Disallowance u/s 14A :- That during the course of the assessment proceedings the A.O observed that though the assessee company had made investments of Rs. 6,12,64,076/- and had received exempt income u/s 10 of the ‘Act’ of Rs. 11,36,128/- on the same, but had not worked out and reflected the disallowance u/s 14A of the ‘Act’ in its ‘Return of income’. The assessee on being confronted though did not dispute the quantification of the disallowance of Rs. 3,10,869/- purported to be carried out by the A.O, but however submitted that pursuant to the carrying out of disallowance by the A.O u/s 14A, the consequential enhancement to its claim of deduction u/s 10A was required to be given effect to, as a result whereof the net business income would remain at Rs. Nil. The A.O however being of the view that the disallowance u/s 14A did not fall within the sweep of Sec. 28 to 44 of the ‘Act’, which regulated the computation of the income under the head ‘Business or Profession’, therefore the same thus would not go to increase the business profit eligible for deduction u/s 10A of the ‘Act’, for the said reason rejected

the contention of the assessee and worked out the disallowance u/s 14A at an amount of Rs. 3,10,868/-, without carrying out any enhancement to the amount of deduction u/s 10A of the ‘Act’, which was sustained as such by the CIT(A).

(ii) Addition under the Head ‘Income from House Property’ :

The assessee owned an apartment in Darshan Apartment, Malabar Hills, Mumbai, which though was let out till 04.12.2008, but thereafter remained vacant. That the assessee being of the considered view that as the aforesaid property was not let out during the year under consideration, thus the ‘Annual lettable Value’ (for short ‘ALV’) of the said property was to be taken at Nil u/s 23(1)(c) of the ‘Act’, therefore reflected the same as such in its ‘Return of income’. That during the course of the assessment proceedings the A.O observing that as the property of the assessee had not been let out during the year under consideration, nor there was any agreement for letting out of the same, therefore the ‘ALV’ adopted by the assessee by taking recourse to Sec. 23(1)(c) was misconceived, as the same to the understanding of the A.O was applicable in a case where the property was let out during the year, but however because of certain circumstances the same had remained vacant for part or whole of the previous year. Thus the A.O discarding the contention of the assessee therein computed the notional income from the aforesaid house property on the basis of a market enquiry carried out through his Inspector of Income Tax as regards the rent prevailing in the locality where the aforesaid

property was situated, took the ‘ALV’ of the property at Rs. 12 lac, and after allowing statutory deduction of 30% of the ‘ALV’ u/s 24 of the ‘Act’, computed the income of the assessee under the head ‘Income from house property’ at an amount of Rs. 8,40,000/-, and added the same to the income of the assessee. That on further appeal the CIT(A) confirmed the addition of Rs. 8,40,000/- (supra) so made by the A.O

(iii) Recasting by the A.O of the ‘Book profit’ u/s 115JB of the ‘Act’ :

That during the course of the assessment proceedings the A.O recomputed the income of the assessee as per MAT provisions, i.e. u/s 115JB of the ‘Act’ at Rs. 3,37,20,864/-, as against the same reflected by the assessee at Rs. 2,37,20,337/-, as under:-

Particulars Amount Profit as per ‘P & Loss A/c’ Rs. 2,95,37,024/-

ADD : 1. Disallowance u/s 14A Rs. 3,10,868/- 2. Income computed by the A.O under Rs. 8,40,000/- the head ‘House property’ 3. Dividend paid or proposed Rs. 41,69,100/- LESS : 1. Amount of income to which provisions (-) Rs. 11,36,128/- of Chapter III applies (Dividend u/s 10(34) Total income as per MAT Rs. 3,37,20,864/-

The assessee being aggrieved with the aforesaid recasting of the ‘Book profit’ u/s 115JB of the ‘Act’, assailed the modifications carried out by the A.O before the CIT(A), who though agreed with the contention of the assessee to the extent addition of the income from house property was made by the A.O for computing the ‘Book profit’ u/s 115JB, but however upheld the disallowance u/s 14A considered by the A.O while recasting of the aforesaid ‘Book profit’.

as such by the CIT(A). It was thus submitted by the Ld. D.R. that the order of the CIT(A) may be upheld.

6.1 We have considered the rival submissions of either side and perused the relevant material on record, including the orders of the authorities below. The core issue before us is as to whether pursuant to disallowance of expenses u/s 14A, a consequential enhancement of deduction allowable u/s 10A is liable to be made, or not. We find that the assessee company which had made an investment of Rs. 6,12,64,076/-, on which it had received income of Rs. 11,36,128/- which was exempt u/s 10 of the ‘Act’, had however not worked out the expenditure incurred in relation to such exempt income which would be inadmissible as per the provisions of Sec. 14A of the ‘Act’, in its ‘Return of income’. That during the course of the assessment proceedings the assessee on being confronted by the A.O as to why the disallowance u/s 14A may not be carried out, therein vide its letter dated 01.10.2012 agreed to the disallowance of Rs. 3,10,868/-, but therein submitted that consequent to carrying out of such disallowance, the quantum of deduction u/s 10A would stand enhanced, as a result whereof the net business income would remain at Rs. Nil only. The A.O pursuant to the aforesaid contention raised by the assessee, therein dealt with the same, but however not finding himself as being in agreement with the same, therein rejected the claim of the assessee and carried out a disallowance of Rs. 3,10,868/- u/s 14A, without enhancing the claim of the assessee towards deduction u/s 10A of the ‘Act’. The assessee being aggrieved with the refusal on the part of the A.O to enhance the deduction allowable u/s 10A of the ‘Act’, consequent to disallowance of Rs. 3,10,868/- u/s 14A, therein specifically challenged the same by way of ‘Ground of Appeal No. 1(d)’ before the CIT(A), which we find had been

reproduced by the CIT(A) at Page 2 of his order, who also took due cognizance of the written submissions filed by the assessee on the said issue and reproduced the same at Page 3 – 4 – Para 4.1 of his order. However, we find that the CIT(A) thereafter while adjudicating the ‘Ground of Appeal No. 1’ so raised by the assessee before him, therein digressed from the issue which was assailed by the assessee before him, and though adjudicated the correctness of the disallowance carried out by the A.O u/s 14A r.w. Rule 8D, but however omitted to deal with and adjudicate the specific challenge by the assessee to the refusal on the part of the A.O to carry out an enhancement of deduction u/s 10A of the ‘Act’, pursuant to the disallowance made u/s 14A. We find that the assessee aggrieved with the order of the CIT(A), had assailed both the refusal on the part of the A.O, who pursuant to disallowing of an amount of Rs. 3,10,868/- u/s 14A in the hands of the assessee, had however declined to carry out a consequential enhancement of the deduction u/s 10A so claimed by the assessee, as well as challenged the failure on the part of the CIT(A) to adjudicate the specific ground of appeal as was raised before him as regards the issue under consideration. That on the other hand the Ld. D.R relied on the orders of the lower authorities.

6.2 We have given a thoughtful consideration to the factual position so averred by the Ld. A.R. before us and find that the CIT(A) had absolutely failed to deal with and adjudicate the aforesaid specific ground of appeal raised by the assessee before him. The Ld. A.R had submitted before us that the assessee company had business income only from one source, i.e software unit located in Softare Technology Park (for short ‘STP’) , which pursuant to its corresponding entitlement towards claim of deduction u/s 10A, therein reduced the taxable income to Rs. Nil. It was

thus submitted by the Ld. A.R that now when any part of the expenditure claimed by the assessee was disallowed u/s 14A, then as a consequence thereto the profits of the assessee eligible for deduction u/s 10A would witness a corresponding increase, leading to a consequent increase in the claim of deduction of the assessee u/s 10A of the ‘Act’, pursuant whereto the net effect would remain at Rs. Nil. We find substantial force in the contention of the Ld. A.R and are persuaded to be in agreement with him that pursuant to disallowance u/s 14A, the business profits eligible for deduction u/s 10A, to the said extent would stand enhanced. We find that the issue involved is covered by the judgment of the Hon’ble High Court of Bombay in the case of :

Commissioner of Income-tax Vs. Gem Plus Jewellery India Ltd. (2011) 330 ITR 175 (Bom)

, wherein the Hon’ble High Court held as under:-

“The disallowance of the PF/ESIC payments has been made because of the statutory provisions – s. 43B in the case of the employer‟s contribution and s. 36(v) r/w s. 2(24)(x) in the case of the employees contribution which has been deemed to be the income of the assessee. The plain consequence of the disallowance and the add back that has been made by the A.O is an increase in the business profits of the assessee. The contention of the Revenue that in computing the deduction under s. 10A the addition made on account of the disallowance of the PF/ESIC payments ought to be ignored cannot be accepted. No statutory provision to that effect having been made, the plain consequence of the disallowance made by the AO must follow.”

We thus in light of the aforesaid facts of the case r.w the settled position of law, herein direct the A.O that pursuant to the disallowance of Rs. 3,10,868/- so made by him u/s 14A, a consequent enhancement of the entitlement of the assessee towards claim of deduction u/s 10A of the ‘Act’ be carried out. The Ground of appeal No. 1 is thus allowed.

consequential addition of Rs. 8,40,000/- in the hands of the assessee. The Ld. A.R in order to fortify his aforesaid contention that the actual letting out of the property during the year under consideration was not essential, therein relied on the order of the coordinate bench of the Tribunal in the case of : Premsudha Exports (P) Ltd. Vs. ACIT (2008) 110 ITD 158 (Mum), and submitted that the issue involved was squarely covered by the aforesaid order of the Tribunal, which fact was though brought to the notice of the CIT(A), but had not been considered by him. The Ld. D.R. further adverting to the judgment of the Hon’ble High Court of Andhra Pradesh in the case of : Vivek Jain Vs. ACIT (2011) 337 ITR 74 (AP), as had been relied upon by the CIT(A), therein averred that the latter had misconceived the judgment of the Hon’ble High Court, and to fortify his aforesaid contention drew our attention to the note furnished by him before us. The Ld. A.R taking us through the observations of the Hon’ble High Court in the concluding Para 14 & 15 of the said judgment, therein submitted that the Hon’ble High Court had though concluded that the benefit of computing the ‘ALV’ u/s 23(1)(c) could not be extended to a case where the property was not let out at all, however the same would duly encompass and take within its sweep cases where the property had remained let out for two or more years, but thereafter had remained vacant for the whole of the previous year. It was thus submitted by the Ld. A.R. that now when in the case of the present assessee the property under consideration had remained let out upto 04.12.2008, and thereafter despite best of the efforts of the assessee, though could not be let out, but the same during the said period had however never remained under the self occupation of the assessee, therefore the assessee in light of the aforesaid judgment of the Hon’ble High Court had rightly computed the ‘ALV’ u/s 23(1)(c) of the ‘Act’. It was thus submitted by the assessee that

the aforesaid judgment of the Hon’ble High Court rather came to the rescue of the assessee and had wrongly been construed by the CIT(A). It was thus averred by the Ld. A.R. that the addition of Rs. 8,40,000/- made by the A.O and sustained as such by the CIT(A) may therein be deleted. That on the other hand the Ld. D.R. heavily relied of the orders of the lower authorities and therein submitted that as the sine qua non for bringing the case of an assessee u/s 23(1)(c) of the ‘Act’ mandatorily requires the letting out of the property during any part of the year, therefore, as the property of the assessee had not been let out during any part of the year under consideration, the lower authorities had thus rightly computed the ‘ALV’ u/s 23(1)(a) of the ‘Act’. It was thus submitted by the Ld. D.R. that the orders of the lower authorities may be upheld and the appeal of the assessee on the issue under consideration be thus dismissed.

7.1 We have considered the rival submissions of either side and perused the relevant material on record, including the orders of the authorities below. The issue under consideration for adjudication before us is as to whether the ‘ALV’ of the property owned by the assessee in Darshan Aparments, Malabar Hills, Mumbai, had rightly been determined by the assessee by taking recourse to Sec. 23(1)(c) of the ‘Act’, or the same was liable to be determined u/s 23(1)(a) as so held by the lower authorities. We find that it is matter of undisputed fact that the property of the assessee remained let out upto 04.12.2008, and thereafter the same remained vacant. We further find from the perusal of the records before us that it is not the case of the department that after the property was vacated as on 04.12.2008, the same thereafter remained under the self occupation of the assessee. That in light of the aforesaid factual position

in the case of the present assessee, we find ourselves to be in agreement with the submissions of the Ld. A.R. that the issue raised before us for adjudication is squarely covered by the order of the coordinate bench of the Tribunal in the case of : Premsudha Exports (P) Ltd. Vs. ACIT (2008) 110 ITD 158 (Mum), wherein the Tribunal had therein held :

“If the property is held by the owner for letting out and efforts were made to let it out , that property is covered by this clause and this requirement has to be satisfied in each year that the property was being held to let out but remained vacant for whole or part of the year. We feel that the words „property is let‟ are used in this clause to take out those properties from the ambit of the clause in which properties are held by the owner for self-occupation i.e self occupied property (i.e SOP) because even income on account of SOP, excluding one such SOP of which annual value is to be adopted at nil, is also to be computed under this head as per Clause (a) of Section 23(1) if we see the combined reading of Sub-section (2) and (4) of Section 23. One thing is more important because we find that where the legislature have considered that actual letting out is required, they have used the words „house is actually let‟. This can be seen in Sub-section (3) of same Section 23. But in Clause (c) above, „actually let‟ words are not used and this also shows that meaning and interpretation of the words „property is let‟ cannot be „property actually let out‟. In our opinion, it talks of properties which are held to letting out having intention to let out in the relevant year coupled with efforts made for

letting it out. If these conditions are satisfied, it has to be held that property is let and the same will fall within the purview of this clause.”

We find ourselves to be in agreement with the aforesaid observations of the coordinate bench of the Tribunal, which analyzing the scope and gamut of Sec. 23(1)(c) of the ‘Act’, had therein concluded that in light of the words ‘Property is let’ used in clause (c) of Sec. 23(1) of the ‘Act’, unlike the term ‘house is actually let’ as stands gathered from a conjoint reading of sub-section (2) to (4) of Sec. 23, it can safely and inescapably be gathered that the conscious, purposive and intentional usage of the aforesaid term ‘Property is let’ in Sec. 23(1)(c) of the ‘Act’, cannot be substituted by the term ‘house is actually let’ as used by the legislature in all its wisdom in sub-section (3) of Sec. 23. Thus it can safely be concluded that the requirement ‘house is actually let’ during the year is not a prerequisite for bringing the case of an assessee within the sweep of Sec. 23(1)(c) of the ‘Act’, as long as the property is let in the earlier period and is found vacant for the whole year under consideration, subject to the condition that such vacancy of the property is not for self occupation of the same by the assessee, who continues to hold the said property for the purpose of letting out. We are in agreement with the aforesaid observations of the coordinate bench that the usage of the term ‘Property is let’ in Sec. 23(1)(c) had purposively been used to exclude those properties from the ambit of the clause which are held by the owner for self occupation purposes, because even though the ‘ALV’ of one self occupied property so chosen by the assessee is taken at Nil, however the ‘ALV’ of all the remaining self occupied properties are to be determined in terms of Sec. 23(1)(a) of the ‘Act’. Thus to our

understanding the term ‘Property is let’ used in Sec. 23(1)(c) is solely with the intent to avoid misuse of determination of the ‘ALV’ of self occupied properties by the assesses by taking recourse to Sec. 23(1)(c), however the same cannot be stretched beyond that and the ‘ALV’ of a property which is let, but thereafter remains vacant for the whole year under consideration, though subject to the condition that the same is not put under self occupation of the assessee and is held for the purpose of letting out of the same, would continue to be determined u/s 23(1)(c) of the ‘Act’. Thus in light of the aforesaid order of the coordinate bench of the Tribunal and the reasonings flowing there from, we are of the considered view that the assessee in the present case had rightly determined the ‘ALV’ of the property at Rs. Nil by taking recourse to Sec. 23(1)(c) of the ‘Act’. In this regard we are further of the view that the CIT(A) had misconceived the judgment of the Hon’ble High Court of Andhra Pradesh in the case of Vikas Jain (supra), and on a perusal of the said judgment therein find that the Hon’ble High Court in the concluding Para 14 & 15 had though concluded that the benefit of computing the ‘ALV’ u/s 23(1)(c) could not be extended to a case where the property was not let out at all, would however duly encompass and take within its sweep cases where the property had remained let out for two or more years, but had remained vacant for the whole of the previous year. Thus we are of the view that now when in the case of the present assessee the property under consideration had remained let out upto 04.12.2008, and thereafter though could not be let out and had remained vacant during whole of the year under consideration, but also had never remained under the self occupation of the assessee, the computation of the ‘ALV’ u/s 23(1)(c) of the ‘Act’, had rightly been carried out in light of the aforesaid judgment of the Hon’ble High Court.

7.2 That in light of our aforesaid observations the Ground of appeal No. 2 of the assessee is allowed and the addition of Rs. 8,40,000/- made by the A.O and as such sustained by the CIT(A) is herein vacated.

Sr. No. Particulars Amount 1. Dividend paid or proposed Rs. 41,69,100/- 2. Disallowance u/s 14A Rs. 3,10,868/-

It was submitted by the Ld. A.R. that the A.O while computing the ‘Book profit’ had erred in making a separate addition of ‘Dividend paid or proposed’ of Rs. 41,69,100/-, after taking the ‘Profit before provisions for dividend’ of Rs. 2,95,37,027/- as the starting point for computation of the ‘Book profit’. That on the other hand the Ld. D.R. relied on the orders of the lower authorities and therein submitted that the computation of the ‘Book profit’ had rightly been carried out by the A.O by adopting the ‘Net profit’ as shown in the ‘Profit & Loss A/c’ of the assessee company prepared in accordance with the provisions of Part II of Schedule VI of the

Companies Act, 1956, therefore no infirmity as regards such computation did emerge from the orders of the lower authorities. It was further averred by the Ld. A.R. that the A.O while recasting the ‘Book profit’ u/s 115JB of the ‘Act’, had erred in making an addition of the disallowance of Rs. 3,10,868/- made by him during the course of the assessment proceedings under Sec. 14A, which thereafter had wrongly been sustained by the CIT(A). That on the other hand the Ld. D.R. relied on the orders of the lower authorities and submitted that the aforesaid addition of Rs. 3,10,868/- (supra) had rightly been made by the A.O and sustained as such by the CIT(A).

8.1 We have considered the rival submissions of either side and perused the relevant material on record, including the orders of the authorities below. The issue under consideration for adjudication before us is as to whether the computation of the ‘Book profit’ for MAT purposes u/s 115JB had rightly been carried out by the A.O and sustained as such by the CIT(A), to the extent the same had been assailed before us by the assessee company. The contention of the assessee as regards the issue under consideration is two fold, which is dealt with by us as under :-

(i) Bearing of disallowance u/s 14A on computation of ‘Book profit’ :

The contention of the Ld. A.R is that the A.O had gravely erred in law in making an addition of Rs. 3,10,868/-, being the amount of disallowance u/s 14A, while computing the ‘Book profit’ u/s 115JB of the ‘Act’, and the CIT(A) had further erred in upholding the order of the A.O. The Ld. D.R on the other hand relied on the orders of the lower authorities and submitted that the disallowance was made by the A.O as per the clear provisions of Sec. 115JB, and had rightly

been sustained as such by the CIT(A). We have given thoughtful consideration to the issue under consideration, and are of the considered view that in light of Sec. 115JB(2) – Explanation 1(f), which clearly provides that if any amount of expenditure relatable to any income to which section 10(other than the provisions contained in clause (38) thereof) or section 11 or section 12 apply, if is found debited to the ‘Profit & loss a/c’, the same shall be added to the ‘Net profit’ for the purposes of computing the ‘Book profit’ u/s 115JB of the ‘Act’. That in light of the aforesaid clear mandate of law, we find that though the assessee company while computing the ‘Book profit’ had excluded the ‘Dividend income’ of Rs. 11,36,128/- credited in its ‘Profit & loss a/c’, being exempt u/s 10(34) of the ‘Act’, which is found to be in conformity with Sec. 115JB(2) – Explanation 1(ii), but however had objected to the addition of the expenditure of Rs. 3,10,868/- (supra) relatable to earning of such exempt income. We have given a thoughtful consideration to the issue before us, and are not persuaded to be in agreement with the contention of the Ld. A.R that the A.O while computing the ‘Book profit’ u/s 115JB, had erred in making an addition of the expenditure of Rs. 3,10,868/- (supra) relatable to exempt income so determined u/s 14A. We find that the A.O while computing the ‘Book profit’ u/s 115JB of the ‘Act’, being guided by the clear provision so contemplated in Sec. 115JB(2) – Explanation 1(f), had rightly made an addition of Rs. 3,10,868/- (supra), being the amount of expenditure relatable to the dividend income of Rs. 11,36,128/- (supra), which being exempt u/s 10(34) of the ‘Act’, had duly been excluded by the assessee while computing the ‘Book profit’, and accepted as such by the A.O. We thus finding no infirmity in the

making of the addition of Rs. 3,10,868/- (supra) by the A.O, which thereafter had rightly been sustained by the CIT(A), therein uphold the order of the CIT(A) to the said extent.

(ii) Bearing of ‘Dividend paid or proposed’ on computation of ‘Book profit’ :-

The contention of the assessee is that as the net profit of Rs. 2,95,37,027/- adopted by the A.O as the starting point for computing the ‘Book profit’ u/s 115JB, is the profit before provision for dividend in the ‘Profit & loss a/c’, therefore the A.O while computing the ‘Book profit’ u/s 115JB, had erred in making a separate addition of the provision for dividend of Rs. 41,69,100/-. We have given a thoughtful consideration to the issue under consideration before us, and at the threshold find substantial force in the contention of the Ld. A.R that once the ‘Profit’ adopted by the A.O as the starting point for computing the ‘Book profit’ u/s 115JB of the ‘Act’, is the amount before provision for dividend, then there remains no occasion to make a separate addition of the provision for dividend. Though the working of ‘Book profit’ as per MAT provisions by the assessee company itself, as is found reproduced by the A.O in the body of the assessment order, therein prima facie reveals that the assessee company had adopted the same amount of Rs. 2,95,37,024/- (supra) as the starting point for computing the ‘Book profit’, followed by a separate addition of Rs. 41,69,100/- towards ‘dividend paid or proposed’, which if that be so, is in self contradiction of the claim raised by the assessee in appeal, however, as the said working is neither found to be in conformity

with the settled position of law, nor free from doubts and mistakes, the same thus does not inspire much confidence. Thus in all fairness we herein restore the issue to the file of the A.O, who is directed to look into the mistake which appears to had crept in as regards the making of a separate addition of Rs. 41,69,100/- (supra), after adoption of the ‘Net profit’ of Rs. 2,95,37,024/- (supra) as the starting point for computing the ‘Book profit’, and therein rework out the ‘Book profit’ u/s 115JB of the ‘Act’, as per law. That needless to say, the A.O while adjudicating the aforesaid issue shall afford sufficient opportunity of being heard to the assessee.

That in light of our aforesaid observations, the Ground of Appeal No. 3 is partly allowed for statistical purposes.

the A.O during the course of the assessment proceedings along with supporting documents, for which the assessee had drawn our attention to Page 1-5 of its ‘Paper book’ (for short ‘APB’), which is a letter dated 28.11.2012 alngwith enclosures, i.e statement of account of the assessee received from SBI Mutual fund, along with statement of computation of ‘LTCL’ on redemption of the aforesaid units. It is averred by the Ld. A.R. that despite the fact the aforesaid computation of ‘LTCL’ along with the supporting documents were furnished during the course of the assessment proceedings, but the A.O failed in not making a mention of the C/forward of the said ‘LTCL’ in the body of the assessment order. It was further submitted by the Ld. A.R. that aggrieved with the aforesaid omission on the part of the A.O, the assessee carried the matter in appeal before the CIT(A). It was further submitted that prior to filing of the appeal as on 17.01.2013, the assessee had moved a rectification application u/s 154 of the ‘Act’ on 04.01.2013, which fact was brought to the notice of the CIT(A) during the course of the appellate proceedings. It was averred by the Ld. A.R. that the CIT(A) instead of disposing of the aforesaid issue on merits, rather directed the A.O to pass an appropriate order u/s 154 of the ‘Act’ in light of CBDT Instruction No. 03/2013, dated 05.07.2013, issued vide F.No. 225/76/2013/ITA.II, after proper verification of the facts as per record. The assessee being aggrieved with the failure on the part of the CIT(A) to dispose of the issue after considering the merits, and rather merely directing the A.O to dispose of the said application, had therein carried the matter in appeal before us.

9.1 We have given a thoughtful consideration to the facts of the case and are pained to find that an A.O who as per Sec. 154(8) of the ‘Act’ was under a statutory obligation to have suo motto disposed of the

application within a period of six months from the end of the month in which the application was received by him, had however in the present case, despite lapse of a period of about 1½ year (04.01.2013, i.e. date of filing the application u/s 154 till 12.09.2014), had however failed to dispose of the said application of the assessee. That still further we are informed by the Ld. A.R. that despite a specific direction by the CIT(A) to the A.O on the basis of a circular issued by the CBDT, the A.O had not cared to dispose of the said application even till date. We are deeply anguished on coming across such a callous and irresponsible conduct of the A.O, which failure on his part to carry out the disposal of the application within the stipulated time period is not only found to be in contravention of Sec. 154(8) of the ‘Act’, but rather it is strange to find that even a specific direction by the CIT(A) with reference to a circular issued by the CBDT, had also not weighed on him.

9.2 We are also not impressed by the order of the CIT(A), who while disposing of the specific ‘Ground of appeal No. ‘4’ so raised by the assessee before him, instead of disposing of the same on merits, had rather bypassed the same by merely directing the A.O to pass an appropriate order u/s 154 of the ‘Act’. We are afraid that such a recourse adopted by the CIT(A) could lead to serious ramifications and go to jeopardize the interest of the assessee. That say for instance, if the application of the assessee filed u/s 154 fails on some technical ground, say being found to be beyond the scope of jurisdiction u/s 154 or for any other reason, then the assesssee would be left without any remedy as regards adjudication of the issue under consideration on merits, and that too for no fault on his part.

9.3 We have given a thoughtful consideration to the issue before us, and being of the view that as per the material placed on our record by the assessee vide Page 1-5 of the ‘APB’, which is stated to have also been filed with the A.O, the latter is entitled towards the claim of ‘Long term Capital Loss’, though subject to verification of the facts and figures furnished by the assessee. We thus in all fairness restore this matter to the file of the A.O, who after making necessary verifications shall determine the entitlement of the assessee towards C/forward of the ‘LTCL’ so claimed by it, as per law. That needless to say, the A.O while adjudicating the aforesaid issue shall afford sufficient opportunity of being heard to the assessee. Thus the Ground of Appeal No. 4 of the assessee is allowed for statistical purposes.

issue on merits, but rather directed the A.O to dispose of the rectification application of the assessee in the same terms as was so done by him w.r.t. the issue of disposal of a similar application u/s 154 pertaining to C/forward of ‘LTCL’, which had been discussed by us in Para 9 hereinabove. We have been informed by the Ld. A.R that the aforesaid application filed by the assessee u/s 154 of the ‘Act’ had met the same fate and is pending disposal even as on date. That before adverting to the merits of the issue under consideration, we herein once again strongly deprecate such irresponsible and callous conduct of the A.O, who despite lapse of substantial time had failed to dispose of the application filed by the assessee u/s 154 of the ‘Act’.

10.1 That adverting to the issue under consideration, we are unable to persuade ourselves to be in agreement with the manner of disposal of the ground of appeal pertaining to the issue under consideration on the part of the CIT(A), for the same reasoning as had been given by us as regards a similar recourse which was adopted by the CIT(A) while disposing of the ground of appeal of the assessee pertaining to the issue of C/forward of ‘LTCL’, which is recorded at Para 9.2 hereinabove. The Ld. A.R adverting to the issue under consideration, had drawn our attention to Page 7 & 8 of ‘APB’, which are copy of the schedule ‘DDT’ of the Income Tax Return regarding dividend declared and ‘DDT’ paid during the year under consideration, as well as copy of challan for payment of ‘DDT’ of Rs. 7,08,538/- on 06.10.2009. That on the other hand the Ld. D.R had failed to place on record any material which could go to rebut the aforesaid factual position so averred by the Ld. A.R.

10.2 We have considered the rival submissions of either side and perused the relevant material on record, including the orders of the authorities below. We find that as per Sec.115-O(3) a statutory obligation is cast upon the principal officer of the domestic company to pay the tax on distributed profits to the credit of the Central Government within 14 days from the date of : (a) declaration of any dividend; or (b) distribution of any dividend; or (c) payment of any dividend, whichever is earliest. That failing such compliance within the stipulated time period, the assessee as per Sec. 115P is liable to be saddled with interest @ 1% for every month or part thereof, on the amount of such tax, for the period beginning on the date immediately after the last date on which tax was payable and ending with the date on which the tax is actually paid. We find that to the extent the facts had been brought to our notice by the Ld. A.R, and it remains as a matter of fact as claimed by the assessee, that the dividend was declared as on 25.09.2009, and the dividend distribution tax on the same was paid within the stipulated time period of 14 days, i.e. as on 06.10.2009, then if that be so, though subject to the verification of the said averments of the Ld. A.R before us, the assessee cannot be held to have defaulted as regards making of the payment within the stipulated time period of 14 days as required u/s 115-O(3) of the ‘Act’, as a result whereof no interest u/s 115P is liable to be imposed. We thus in light of and subject to our aforesaid observations, delete the interest of Rs. 99,190/- levied on the assessee. The Ground of Appeal No. 5 is thus allowed.

(B). A.Y. 2011-12

1.a) The learned C.I.T.-(A) has erred in upholding the order of the assessing officer wherein he has assessed income from premises in Darshan Apartment, Malabar Hill, Mumbai, at 9,24,000/- as against Nil shown by the appellant company. b) That the said property was let upto 4.12.2008 and thereafter remained vacant. As the said premises were vacant for the whole of the previous year, under the provisions of clause(c) of section 23(1) of the Act the income from the said property is to be assessed at Nil. c) That the C.I.T.-(A) has erred in completely ignoring the decision of the ITAT, Mumbai, in the case of Premsudha Exports Pvt. Ltd. vs. ACIT reported in 110 ITD 158 which was brought to his notice in the detailed facts of the case filed before him during the course of hearing along with copy of judgment. d) That in view of the said decision of the ITAT, Mumbai, income from the said property is to be assessed at Nil. e) That the C.I.T.-(A) has erred in referring to the judgment in the case of Vivek Jain vs. ACIT reported in 337 ITR 74. In the present case since as mentioned above, the premises were let upto 4.12.2008 and evidence was filed by the assessee company before C.I.T.-(A) that the appellant company had tried to let out the said premises, the said decision goes in favor of the assessee and the assessing officer had erred in not accepting the said ground of appeal. 2.a) That the C.I.T.-(A) has erred in not accepting the contention of the appellant company that the disallowance of Rs 4,03,483/- u/s. 14A is not to be added in computing the book profits u/s. 115JB. b) That the C.I.T.-(A) has erred in not following the express provisions of Section 14A(1) which provides that the disallowance referred to therein should be made only in computing total income under this chapter and

for not other provisions. In view of the same, the addition of disallowance u/s. 14A to the book profit is bad in law and may be cancelled 13. The Ld. A.R. adverting to the addition of Rs.9,24,000/- made by the A.O under the head ‘Income from House Property’, therein submitted that the issue involved in the present appeal is identical as that involved in the appeal of the assessee for A.Y. 2010-11, marked as ITA No. 6466/Mum/2014, except for the difference in the amount of the ‘ALV’, which factual position was fairly admitted by the Ld. D.R. Thus in light of the aforesaid facts, we adjudicate the present issue in terms of our order passed in context of the said issue, while disposing of the ‘Ground of appeal No.2’ in the appeal of the assessee for A.Y. 2010-11, marked as ITA No. 6466/Mum/2014, as a result whereof, on the basis of the same very reasoning adopted by us while adjudicating the said issue in the case of the assessee for A.Y. 2010-11, we herein delete the addition of Rs. 9,24,000/- so made by the A.O and sustained as such by the CIT(A). Thus the Ground of appeal No. 1 of the assessee is allowed in terms of our aforesaid observations.

6466/Mum/2014, and thus are persuaded to accept the order of the CIT(A), who had rightly sustained the addition of Rs. 4,03,383/- made by the A.O, while computing the ‘Book profits’ u/s 115JB of the ‘Act’ in the hands of the assessee company. We thus in light of our aforesaid observations uphold the order of the CIT(A),to the said extent.

Order pronounced in the open court on 28/10/2016.

Sd/- Sd/- (G.S. PANNU) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai; Dated: 28/10 /2016 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai