D.C.I.T.,CIRCLE-6(1), KOLKATA vs. M/S BIRLA CORPORATION LTD., KOLKATA

per rule 8D. In such circumstances, the disallowance offered by the assessee under section 14A of Rs. 6,40,792/- has to be accepted and no further disallowance can be made under the said provision. 15.11. Ld. Counsel for the assessee took an alternate plea submitting that assuming for the sake of argument that section 14A(2)/rule 8D(2)(iii) can be invoked, the finding of the ld. CIT(A) to the extent he held that only the investments which yielded dividend income should be considered for disallowance under section 14A read with rule 8D(2)(iii) cannot be faulted. Of course, in view of the judgment of the Hon’ble Supreme Court in Maxopp’s case (supra), investments in subsidiary companies would have to be considered if they yielded dividend income. To this extent finding of the ld. CIT(A) is contrary to law. It is necessary to add that the amendments made to section 14A by the Finance Act, 2022 have no relevance in the instant case. The said amendments will apply only where it is undisputed that expenditure has been incurred but the assessee does not want it disallowed on the ground that no exempt income was earned. That is not the controversy in the instant case. In the instant case, the dispute is whether any expenditure over and above the sum of Rs.6,40,792/- was actually incurred by the assessee. In any event, the said amendments are effective only from AY 2022-23 and have no application for the earlier years as held by the Hon’ble Delhi High Court in PCIT v. Era Infrastructure (India) Ltd, (2022) 141 taxmann.com 289 (Del). 15.12. Though the ld. Counsel for the assessee has pleaded that in lack of proper satisfaction recorded by ld. AO questioning the correctness of the claim of disallowance suo moto made by the assessee, the alleged disallowance is uncalled for and had also made an alternate plea that if the main plea is not accepted and at least the alternate plea that the disallowance under Rule 8D(3) of the I.T. Rules may be restricted only to the extent of 0.5% of the average investments yielding dividend income, we find that for the preceding AY 2010-11 also same issue under identical facts was there before this Tribunal and after considering the ratios laid down by the Hon'ble Court’s directions are given to ld. AO to consider only those investments which yielded dividend income for concluding the disallowance u/s 14A of the Act r.w. Rule 8D(3) of the I.T. Rules. Relevant finding of this Tribunal is reproduced below: “42 At the time of hearing both the parties agreed that identical issue was considered and decided by the tribunal in assessee’s own case in ITA No.971/Kol/2012, 942/Kol/2013, 298 & 329/Kol/2013 for A. Y.2008-08 and 2009-10 in its order

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dated 25.8.2017 and this Tribunal on the identical issue held as follows: “3.3. We have heard the rival submissions and perused the materials available on record. The Id DR vehemently relied on the order of the Id AO. The ld. AR prayed that the disallowance made by the assessee voluntarily at Rs 4,00,096/- which was later revised to Rs 4,43,903/- based on the devotion of certain executives of the organization for managing the investment portfolio and other indirect expenses connected thereon, should be accepted and the ld. AO had not given any proper finding as to why the said disallowance was not proper. He simply resorted to computation mechanism provided in Rule 8D of the Rules and made disallowance thereon under the third limb of Rule 8D(2)(iii). Alternatively he prayed that 0.5% of dividend bearing investments alone be considered (The investments from where dividends were actually received by the assessee alone excluding the dividends that were reinvested) and also prayed for exclusion of investments made in subsidiaries as they are apparently strategic investments. We find that the ld. AO had given a finding in the assessment order as to why the workings of disallowance u/s 14A of the Act need to be rejected. Hence it cannot be said that the ld. AO had mechanically applied Rule 8D(2) of the Rules for making disallowance u/s 14A of the Act. It was argued by the Id AR that 69.07% of the assessee's investments (including in non-equity oriented mutual funds growth schemes) did not provide for payment of any dividend Upon redemption/disposal of such investments, the assessee would be liable to capital gains tax and income from such investments is not exempt under the provisions of the Act. He argued that even in respect of the assessee's investments in other schemes of mutual funds providing for payment of dividend, the assessee is liable for capital gains tax upon disposal/redemption of the units since such schemes are also not equity oriented. We find that the ld. A R also made an alternative argument that only dividend bearing investments should be reckoned for disallowance under Rule 8D(2)(iii) of the Rules and that strategic investments should be excluded We find lot of force in the alternative argument of the Id AR that only dividend bearing investments are to be considered for making disallowance u/s 14 A of the Act. In this regard, the reliance placed by the Id A R on the decision of this tribunal in the case of REI Agro Ltd. reported in 144 ITD 141 (Kol) is very well founded wherein it was held that: 8.1 Thus, not all investments become the subject-matter of consideration when computing disallowance under section 14A read with Rule 8D. The disallowance under section 14A read with rule 8D is to be in relation to the income which does not

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form part of the total income and this can be done only by taking into consideration the investment which has given rise to this income which does not form part of the total income. Under the circumstances, the computation of the disallowance under section 14A read with rule 8D(2Riii), which is issue in the assessee's appeal, is restored to the file of the AO for recomputation in line with the direction given above. No disallowance under section 14A read with rule 8D(2)(i) and (ii) can be made in this case. We also find lot of force in the argument of the ld. AR that the investments made in subsidiaries would fall under the category of strategic investments as they are admittedly made only for the purpose of obtaining controlling interest in the said companies and not for the purpose of earning dividend income which is exempt. Hence they would stand differently from other regular investments. Reliance in this regard is placed on the decision of this tribunal in the case of Dy CIT vs Selvel Advertising (P) Ltd reported in (2015) 58 taxmann.com 196 (Kol Trib). We also find that the reliance placed in this regard by the Id A R on the decision of the Hon'ble Delhi High Court in the case of CIT vs Oriental Structural Engineers Pvt Ltd in ITA 605/2012 dated 15.1.2013 wherein it was held that It was the contention of the revenue that Rule 8D of the Income Tax Rules. 1962 had not been applied properly in respect of the assessment year 2008-09. This aspect has been considered by the Tribunal in detail and it has observed as under: It was the contention of the revenue that Rule 8D of the Income Tax Rules. 1962 had not been applied properly in respect of the assessment year 2008-09. This aspect has been considered by the Tribunal in detail and it has observed as under: 6.3. We have carefully considered the submissions and perused the records. We find that Ld. Commissioner of Income Tax (Appeals) has given a finding that only interest of Rs 2,96,731/- was paid on funds utilized for making investments on which exempted income was receivable. Further. Ld. Commissioner of Income Tax (Appeals) has observed that in respect of investment of Rs 6,07,75.000/- made in subsidiary companies as per documents produced before him, they are attributable to commercial expediency, because as per submission made by the assessee, it had to form Special Purpose Vehicle (SPV) in order to obtain contracts from the NHAI and the SPVs so formed engaged the assessee company as contract to execute the works awarded to them (i.e. SPVs) by the NHAI. In its profit and loss account for the year, the assessee has shown the turnover from execution of these

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contracts and therefore no expense and interest attributable to the investments made by the appellant in the PSVs can be disallowed u/s 14A r.w. Rule 8D because it cannot be termed as expense/interest incurred for earning exempted income. Under the circumstances, Ld. Commissioner of Income Tax (Appeals) is correct in holding that disallowance of a further sum of Rs 40,556/- calculated @ 2% of the dividend earned is sufficient. Under the circumstances, we do not find any infirmity in the order of the Ld. Commissioner of Income Tax (Appeals), hence we uphold the same. On going through the above observations we are of the view that this is merely a question of fact and does not involve any question of law much less a substantial question of law, as the Tribunal held that the expenses which have been claimed by the assessee were not towards the exempted income. The disallowance, therefore, was rightly limited to a sum of Rs 40,556/-. The question of interpreting Rule 8D is not in dispute and the only dispute is with regard to facts which have been settled by the Tribunal. In view of the aforesaid findings and respectfully following the judicial precedents relied upon, we deem it fit and appropriate to remand this issue to the file of the Id AO with the direction to consider all investments (excluding investments in subsidiary companies) which yielded dividend income to the assessee for computing disallowance u/s 14A of the Act r.w. Rule 8D of the Rules. Accordingly the grounds raised in this regard are partly allowed for statistical purposes.” 43. Respectfully following the aforesaid decision we partially uphold the order of CIT(A) and dismiss ground no.4 raised by the revenue and partly allow ground nos. 12 and 13 raised by the assessee and direct the AO to consider all investments (excluding investments in subsidiary companies) which yielded dividend income to the assessee for computing disallowance u/s 14A of the Act r.w. Rule 8D(2)(iii) of the Rules.” 15.13. Since the issues raised before us are squarely covered by the decision of this Tribunal in assessee’s own case for preceding assessment year i.e. AY 2010-11 and assessee fail to prove that there is change of facts in the years under appeal vis-à-vis preceding AY 2010-11 and also Revenue being unable to controvert by placing any other binding precedence in its favour, we fail to find any infirmity in the finding of ld. CIT(A). Thus, common ground no. 6 for AY 2011-12 & AY 2012-13 raised by the Revenue is dismissed.” 13.1. Since the issues raised before us are squarely covered by the decision of this Tribunal in assessee’s own case for preceding AYs 2011-

I.T.A. No.1964/Kol/2019 & C.O. 39/Kol/2019 M/s Birla Corporation Ltd 12 & 2012-13 and assessee fail to prove that there is any change of facts in the years under appeal vis-à-vis preceding AY 2011-12 & 2012-13 and also Revenue being unable to controvert by placing any other binding precedence in its favour, we fail to find any infirmity in the finding of ld. CIT(A). Thus, common ground no. 6 for AY 2013-14 & 2014-15 raised by the Revenue and the additional ground raised by the assessee for both the years under appeal are dismissed. 24. It has to be noted that the Hon’ble Supreme Court as pointed out by the ld. DR in the case of Maxopp Investment Ltd. (supra) has held that the exempt income earned by the assessee from the strategic investments made in the sister concern/subsidiaries are also subjected to disallowance u/s 14A of the Act. In view of this, the impugned order of the CIT(A) is modified and it is directed that the Assessing Officer would recompute the disallowance u/s 14A r.w.r 8D(2)(iii) by considering all investments including investments in subsidiary companies which yielded dividend income. This Ground of the revenue’s appeal is partly allowed, whereas, the cross-objection of the assessee on this issue is hereby dismissed. Ground Nos.11 & 12 – The revenue vide Ground Nos.11 and 12 25. has assailed the order of the CIT(A) contending that the CIT(A) has erred to exclude the subsidy from the books profits assessable u/s 115JB of the Act. 26. The ld. counsel for the assessee, in this respect, has submitted that the issue is squarely covered by the decision of the Tribunal in the assessee’s own case in the latest decision of the Tribunal 07.02.2023 passed in ITA Nos.2142&2143/Kol/2018 in relation to Assessment Years 2013-14 & 2014-15, wherein, the identical ground raised by the department has been dismissed by the Tribunal relying upon the earlier decision of the Tribunal in the own case of the assessee. The relevant part of the order of the Tribunal dated 07.02.2023 (supra) is reproduced as under:

I.T.A. No.1964/Kol/2019 & C.O. 39/Kol/2019 M/s Birla Corporation Ltd Revenue’s Ground no. 7 for AY 2013-14 and ground nos. 7 & 8 for 2014-15 relating to the issue that whether subsidy/incentives being capital receipts needs to be excluded from the book profit u/s 115JB of the Act: 14. We have heard rival contentions and perused the records placed before us. We find that this Tribunal in assessee’s own case for AY 2011- 12 & 2012-13 dealt with this issue and decided in assessee’s favour observing as follows: “16. The seventh common ground of the Department’s appeal is against the decision of the ld. CIT(A) directing the ld. AO to exclude the subsidy/incentive from book profit under section 115JB of the Act. The ld. AO rejected the assessee’s claim to exclude the following incentives in computing Book Profit u/s 115JB of the Act: Particulars Amount (in Rs.) Interest Subsidy received from Govt. of Rs. Rajasthan under Rajasthan Investment 3,04,22,210 Promotion Scheme, 2003 Incentive from Govt. of West Bengal in the form Rs. of Industrial Promotion Allowance 16,94,84,638 Total Rs. 19,99,06,848 The ld. AO held that the accounts were prepared in accordance with the provisions of Companies Act and these incentives were credited to Profit & Loss Account. Besides, the claim was not made through IT Return or Revised IT return and therefore fresh claim raised during the course of assessment proceedings was not accepted in view of decision of Hon’ble Supreme Court in case of Goetze (India) Ltd, [2006] 284 ITR 323 (SC). On appeal, the ld. CIT(A) granted relief to the assessee relying upon various decisions including the decision of the Hon’ble Tribunal in DCIT v. South Asian Petrochem in ITA Nos. 1222 to 1241/Kol/2014 decided on May 3, 2017. 16.1. We observe that it is settled law that subsidy granted for the purpose/object of encouraging setting up of new industrial units or expansion of existing industrial units is a capital receipt. It has already been held by this Hon’ble Tribunal in the assessee’s own case for the earlier years that interest subsidy received under the 2003 Scheme and industrial promotion assistance received under the 2000 Scheme are capital receipts. Submissions have been made hereinbefore in support of the assessee’s contention that the same view should be taken in this year. Subsidy was included in the definition of income in section 2(24) of the Act for the first time by insertion

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of sub-clause (xviii) by the Finance Act, 2015 with effect from April 1, 2016 i.e. assessment year 2016-17. In paragraph 5.3 of Circular No. 19 dated November 27, 2015 containing explanatory notes to the provisions of the Finance Act, 2015, it is stated that the said amendment takes effect from April 1, 2016 and would accordingly apply to assessment year 2016- 17 and subsequent assessment years [(2015) 379 ITR (St.) 19 at 35, 36]. The assessment year involved herein is 2011-12 before the amendment of section 2(24). Having regard to the decisions holding the field, subsidy received on capital account was not income within the meaning of the Act at least till the assessment year 2015-16. It is submitted by ld. Counsel for the assessee that since the said subsidies are not income within the meaning of section 2(24) of the Act, the same cannot also form part of the total income or be subjected to tax under section 115JB of the Act. The subject matter of taxation under the Act is “income”. The charging section 4 of the Act provides for levy of tax in respect of “total income”. “Total income” is defined in section 2(45) of the Act to mean “the total amount of income referred to in section 5, computed in the manner laid down in this Act”. The material portion of section 5 reads as under: “5. (1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which –” (emphasis added) The “total income” consists of all items of “income” as defined in clause (24) of section 2 of the Act. 16.2. What can be taxed u/s 115JB of the Act is the “total income” which is income as defined in section 2(24) of the Act chargeable under section 4 and computed in the manner laid down in section 115JB. What is not “income” within the meaning of section 2(24) is outside the purview of the Act; cannot form subject matter of the charge of tax under section 4; cannot form part of “total income” and cannot be subjected to tax either under the normal computation provisions or under section 115JB of the Act. The absence of provision in section 115JB of the Act for exclusion of such capital receipt credited to the profit and loss account cannot result in its taxation. 16.3. It is submitted by ld. Counsel for the assessee that this issue is now squarely covered in favour of the assessee by the judgment of the Hon’ble Calcutta High Court in PCIT vs. Ankit Metal & Power Ltd., [2019] 416 ITR 591 (Cal) [Page 76 of the Compilation of Case Laws]. The said decision also deals with the aspect relating to claim made otherwise than by filing a

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return/revised return. Particular reference is invited to Paragraphs 30-33 of the judgment [Pages 87-88 of the Compilation of the Case Laws], which are extracted hereinbelow: “Now the second issue which requires adjudication is as to whether the aforesaid incentive subsidies received by the assessee from the Government of West Bengal under the schemes in question are to be included for the purpose of computation of book profit u/s 115JB of the Income Tax Act, 1961 as contended by the revenue by relying on the decision in the case of Appollo Tyres Ltd. (supra). In this case since we have already held that in relevant assessment year 2010-11 the incentives 'Interest subsidy' and 'Power subsidy' is a 'capital receipt' and does not fall within the definition of 'Income' under Section 2(24) of Income Tax Act, 1961 and when a receipt is not on in the character of income it cannot form part of the book profit under Section 115JB of the Act, 1961. In the case of Appollo Tyres Ltd. (supra) the income in question was taxable but was exempt under a specific provision of the Act as such it was to be included as a part of the book profit. But where a receipt is not in the nature of income at all it cannot be included in book profit for the purpose of computation under Section 115JB of the Income Tax Act, 1961. For the aforesaid reason, we hold that the interest and power subsidy under the schemes in question would have to be excluded while computing book profit under Section 115 JB of the Income Tax Act, 1961. The third issue involve in the instant appeal which requires adjudication is whether the action of Tribunal entertaining / allowing the claim which was made by the assessee before the Assessing Officer by filing a revised computation instead of filing a revised return since the time to file the revised return was lapsed, for claiming to treat the incentive subsidies in question as capital receipts instead of revenue receipts as claimed in original return. The Assessing Officer had denied this claim. Revenue has attacked the order of the tribunal by relying on the decision in the case of Goetze (India) Ltd. (supra). This case does not help the revenue/appellant. In this case Supreme Court has made it clear that its decision was restricted to the power of the Assessing authority to entertain a claim for deduction otherwise than by a revised return, and did not impinge on the power of the Appellate Tribunal under Section 254 of the Income Tax Act, 1961. The Hon'ble Supreme Court in the said decision held as follows:

I.T.A. No.1964/Kol/2019 & C.O. 39/Kol/2019 M/s Birla Corporation Ltd "……….In the circumstances of the case, we dismiss the Civil Appeal. However, we make it clear that the issue in this case is limited to the power of the Assessing Authority and does not impinge on the power of the Income Tax Appellate Tribunal under Section 254 of the Income Tax Act, 1961." This judgment was followed by our Court in the case of Britannia Industries Ltd. (supra) holding that Tribunal has the power to entertain the claim of deduction not claimed before the Assessing Officer by filing revised return. Respectfully following the aforesaid decision as well as the view already taken by us in this case that the aforesaid subsidies are capital receipt and not an 'income' and not liable to Tax Tribunal in exercise of its power under Section 254 of the Income Tax Act justified this claim though no revised return under Section 139 (5) of the Act was filed before the Assessing Officer. We answer both the question Nos. 1 and 2 in negative and in favour of assessee.” (emphasis added) 16.4. Since the issue stands squarely covered by the Hon'ble Jurisdictional High Court in the case of Ankit Metal and Power Limited (supra), we fail to find any infirmity in the finding of ld. CIT(A) holding that the subsidy/incentive received by the assessee which have been held to be capital receipts are to be excluded from the book profit u/s 115JB of the Act. Thus, common ground no. 7 raised by the Revenue for AY 2011-12 & AY 2012-13 are dismissed.” 14.1. Since the issue stands squarely covered by the Hon'ble Jurisdictional High Court in the case of Ankit Metal and Power Limited (supra), we fail to find any infirmity in the finding of ld. CIT(A) holding that the subsidy/incentive received by the assessee which have been held to be capital receipts are to be excluded from the book profit u/s 115JB of the Act. Thus, common ground no. 7 for AY 2013-14 and 7 & 8 for 2014-15 raised by the Revenue are dismissed.” 27. Both the ld. representatives have submitted that the issue is squarely covered in favour of the assessee by the above decision of the Tribunal in the own case of the assessee for earlier assessment years. Therefore, respectfully following the same, for the sake of consistency, this issue is decided in favour of the assessee and against the revenue. Ground Nos.11 & 12 of Revenue’s appeal are hereby dismissed.

Ground No.13 – Vide Ground No.13, the revenue has agitated the 28. action of the CIT(A) in deleting the upward adjustment made to book

I.T.A. No.1964/Kol/2019 & C.O. 39/Kol/2019 M/s Birla Corporation Ltd profit on account of disallowance of expenditure computed u/s 14A of the Act r.w.r. 8D of the Income Tax Rules.

“Revenue’s common Ground no. 9 for AY 2013-14 & 2014-15 relating to the upward adjustment made to book profit for disallowance computed u/s 14A r.w. Rule 8D of the Rules: 16. We have heard rival contentions and perused the records placed before us. We find that this Tribunal in assessee’s own case for AY 2011- 12 & 2012-13 dealt with this issue and decided in assessee’s favour observing as follows: “17. The eighth common ground of the Department’s appeal is against the deletion of upward adjustment made to book profit on account of the disallowance computed under section 14A read with rule 8D. The assessee had disallowed a sum of Rs. 6,40,792/- in the computation of its book profit in terms of clause (f) of Explanation 1 to section 115JB of the Act on account of expenditure relatable to exempt dividend income. Whilst working out the disallowance under section 14A of the Act read with rule 8D of the Rules under the normal computation provisions, ld. CIT(A) made a further disallowance of Rs. 5,71,31,208/-. The same disallowance of Rs. 5,71,31,208/- was made in the computation of book profit under section 115JB of the Act. On appeal, ld. CIT(A) held that the provisions of section 14A and rule 8D cannot be applied in the computation of book profit under section 115JB of the Act. He placed reliance on the judgment of the Hon’ble Calcutta High Court in CIT v. Jayshree Tea and Industries Limited in ITAT 47 of 2014 and G.A. 1501 of 2014 decided on November 19, 2014. 17.1. It is submitted that this question is decided in favour of the assessee by the judgment of the Hon’ble Calcutta High

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Court in Jayshree Tea’s case (supra) (page 152 of the Compilation of Case Laws). Question No. 2 in Jayshree Tea’s case is relevant in this behalf. The material extracts from the said judgment are as below: QUESTION 2 in Jayshree Tea’s case “2. Whether on the facts and in the circumstances of the case the Ld. Tribunal has erred in law in upholding the order of CIT (Appeals) that disallowance under Section 14A of the I.T. Act, 1961, amounting to Rs.2,20,15,787/- is not to be considered for book profit for calculation of book profit under Section 115JB of the I.T. Act, 1961?” DECISION OF THE HON’BLE COURT “We admit the question no.2 for adjudication in this appeal. By consent of the parties, the appeal is treated as ready for hearing and taken up as such. 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.” (emphasis added) 17.2. The same view was taken by the Hon’ble Karnataka High Court in CIT v. Gokal Das Images Private Limited, (2020) 429 ITR 526 (Karn) – paragraph 10 at page 533 of the Reports (Page 156 at page 163 of the Compilation of the Case Laws). Relevant portion of the decision of the Karnataka High Court in Gokaldas Images’ case (supra) is extracted hereinbelow: “10. The Commissioner of Income-tax (Appeals) has held that as per section 115JB of the Act, the assessee being a company is liable to tax on book profits in accordance with the aforesaid provision and there is no exemption granted to the non-dividend company in this regard. However, the tribunal by placing reliance on decision of the Supreme Court in Apollo Tyres v. CIT [2002] 122 Taxman 562/255 ITR 273 has held that Assessing Officer while determining book profits under section 115JB of the Act cannot tamper with the profits as per profit and loss

I.T.A. No.1964/Kol/2019 & C.O. 39/Kol/2019 M/s Birla Corporation Ltd account prepared in accordance with the Companies Act except in the manner provided in Explanation 1 to section 115JB of the Act. Thus, it has been held that the additions made by the Assessing Officer while determining the book profits under section 115JB of the Act cannot be sustained. Any disallowance computed under section 14A of the Act pertain to computation of income under normal provisions of the Act and cannot be read into the provisions of section 115JB of the Act pertaining to computation of book profits by levy of Minimum Alternate Tax (MAT) and there is no express provision in clause (f) of Explanation 1 to section 115JB of the Act to that extent. For the aforementioned reasons, the third substantial question of law is answered against the revenue and in favour of the assessee.” (emphasis added) 17.3. Respectfully following the judgments/decisions referred herein above, we fail to find any infirmity in the finding of ld. CIT(A) in deleting upward adjustment made to book profit for disallowance computed u/s 14A r.w. Rule 8D of the Rules. Thus, common ground no. 8 raised by the Revenue for AY 2011- 12 & AY 2012-13 are dismissed.” 16.1. Respectfully following the judgments/decisions referred herein above, we fail to find any infirmity in the finding of ld. CIT(A) in deleting upward adjustment made to book profit for disallowance computed u/s 14A r.w. Rule 8D of the Rules. Thus, common ground no. 9 raised by the Revenue for AY 2013-14 & 2014-15 are dismissed.” 30. However, the ld. DR, in this respect, has made the following submissions:

“2. As regards the issue of inclusion of the disallowance u/s 14A for the purpose of computation of book profit u/s115JB, reliance is placed on the decision of Hon’ble ITAT, Kolkata bench in A.C.I.T. Vs M/s. Ridhi Portfolio (P) Ltd, vide order dated 16.02.2018 in IT (SS) Nos. 106 to 109/Kol/2016. It was held as under: In the case of CIT vs Jayshree Tea Industries Ltd. (ITAT No. 47 of 2014 dated 19.11.20 14), Hon’ble Kolkata High Court has also expressed a similar view by holding 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. Hon’ble Kolkata High Court has further held that the computation of the amount of expenditure relatable to exempt income of the assessee must be made independently by applying clause (f) of Explanation (1) under section 115JB of the Act where the assessee has not claimed such expenditure to be nil. Respectfully following the said decision of the Hon’ble Jurisdictional High

I.T.A. No.1964/Kol/2019 & C.O. 39/Kol/2019 M/s Birla Corporation Ltd Court in the case of Jayshree Tea Industries Ltd. (supra), we set aside the impugned orders of the Ld. CIT(A) on this issue and restore the matter to the file of the A.O. for computing the amount of expenditure relatable to the exempted income of the assessee independently for all the four years under consideration by applying clause (f) of Explanation (1) under section 115JB of the Act without resorting to section 14A or Rule 8D.” (Emphasis provided) 31. We have considered the rival submissions and gone through the record. The ld. DR has placed reliance on Explanation 1 Clause (f) to section 115JB of the Act, which reads as under:

“Explanation [1] – For the purposes of this section, “book profit” means the [profit] as shown in the [statement of profit and loss] for the relevant previous year prepared under sub-section (2), as increased by – (f) the amount or amount of expenditure relatable to income to which [section 10 (other than the provisions contained in clause (3*) thereof) or [***] section 11 or section 12 apply; or]” 32. The ld. counsel for the assessee, in this respect, has submitted that the provisions of section 115JB are complete code in itself and therefore, the Assessing Officer cannot tinker with the book profits. However, we do not find force in the aforesaid contention of the ld. counsel for the assessee in this respect. It is to be pointed out that as per Explanation 1(f), the book profit means the profit shown in the statement of profit and loss account as increased by the amount of expenditure relatable to the exempt income. The said amount of expenditure has already been ordered to be determined as per our observations made above while adjudicating the issue relating to the disallowance u/s 14A vide Ground No.10 of the revenue’s appeal. It has to be further noted that section 115JB in itself does not prescribe any procedure to calculate the expenditure relatable to exempt income earned by the assessee. The said provision has been separately and specifically placed in the Act u/s 14A of the Act. Therefore, the book profits of the assessee are liable to be increased by the expenditure as calculated u/s 14A of the Act as provided under Explanation 1 to

I.T.A. No.1964/Kol/2019 & C.O. 39/Kol/2019 M/s Birla Corporation Ltd Clause (f) of section 115JB of the Act. In view of this, it is directed that the book profits will be increased u/s 115JB of the Act by the disallowance calculated as per our directions given while adjudicating Ground No.10 of the revenue’s appeal. This ground of the revenue’s appeal is hereby allowed. C.O No.39/Kol/2019 - Now, coming to cross-objections filed by 33. the assessee.

“21. Ground no. 2 & 3 for AY 2013-14 and ground no. 1 & 2 for AY 2014-15 raised by the assessee relates to deduction of provision made for leave encashment and the allowability of the deduction u/s 43B(f) of the Act for the amount actually paid. 21.1. The assessee had claimed deduction on account of provision made for leave encashment relying upon the decision of the Hon’ble Calcutta High Court in Exide Industries Limited v. Union of India, (2007) 292 ITR 470 (Cal) whereby clause (f) of Section 43B of the Act was held unconstitutional. Ld. AO disallowed the claim by observing that the matter is sub judice before the Hon’ble Supreme Court. On appeal, ld. CIT(A) directed ld. AO to allow deduction in respect of the provision only if

I.T.A. No.1964/Kol/2019 & C.O. 39/Kol/2019 M/s Birla Corporation Ltd

the Hon’ble Supreme Court upheld the decision of the Hon’ble Calcutta High Court by rectifying the assessment once the judgment was rendered by the Hon’ble Supreme Court. The assessee’s ground of appeal was dismissed subject to the said observation. 21.2. The Hon’ble Supreme Court in Union of India v. Exide Industries Limited, (2020) 425 ITR 1 (SC) upheld clause (f) of Section 43B of the Act as constitutionally valid (pages 220 – 249 of the Compilation of Case Laws). Therefore, in view of the judgment of the Hon’ble Supreme Court, deduction in respect of leave encashment is available only in the year of actual payment. It is then submitted by ld. Counsel for the assessee that ld. AO may be directed to allow deduction in respect of the amount actually paid on account of leave encashment during the previous year relevant to the AY 2013-14 & 2014-15. 21.3. We also find that this issue came for adjudication before this Tribunal in assessee’s own case for AY 2011-12 & 2012-13 and the following was held by this Tribunal: “22.3. We also find that this issue came for adjudication before this Tribunal in assessee’s own case for AY 2010-11 and the following was held by this Tribunal: “67. We have considered his submissions and are of the view that this liability is purely notional and cannot be allowed as deduction. It is an admitted position that there is no out flow on this account in any assessment year and the liability is notional and is based purely on entries in the books of account on the basis of notional figures. This may be relevant for the purpose of showing the true and fair view of the state of affairs of the assessee as is required for reporting to shareholders and other public authorities. When it comes to computing total income under the Act, such notional liability cannot be allowed as deduction. We concur with the view of CIT(A) in this regard. We are of the view that application of the provision of section 43B(f) of the Act would not be relevant because the liability in question is not otherwise allowable under the Act and Sec.43B of the Act will come into operation only when a expenditure is otherwise allowable under the Act. With this observation we dismiss ground no.9 raised by the assessee.” 22.4. We, therefore, respectfully following the finding of the Tribunal applying the ratios laid down by Hon'ble Supreme Court of India in the case of Exide Industries Limited (supra) are of the considered view that the issue needs to be remitted back to the file of ld. AO who shall allow the claim of leave encashment actually paid by the assessee during the AY 2011- 12 & AY 2012-13.”

I.T.A. No.1964/Kol/2019 & C.O. 39/Kol/2019 M/s Birla Corporation Ltd 21.4. We, therefore, respectfully following the finding of the Tribunal applying the ratios laid down by Hon'ble Supreme Court of India in the case of Exide Industries Limited (supra) are of the considered view that the issue needs to be remitted back to the file of ld. AO who shall allow the claim of leave encashment actually paid by the assessee during the AY 2013-14 & 2014-15.” 36. Respectfully, following the decision of the Tribunal, this issue is restored to the file of the Assessing Officer with a direction to allow the claim of leave encashment actually paid by the assessee during the previous year relevant to A.Y 2015-16. The cross-objections of the assessee are partly allowed. 37. In the result, the appeal of the revenue as well as cross-objection of the assessee are partly allowed. Kolkata, the 16th January, 2024. Sd/- Sd/- [�गर�श अ�वाल /Girish Agrawal] [संजय गग� /Sanjay Garg] लेखा सद�य/Accountant Member �या�यक सद�य/Judicial Member Dated: 16.01.2024. RS Copy of the order forwarded to: 1. DCIT, Circle-6(1), Kolkata 2. M/s Birla Corporation Ltd 3.CIT (A)- 4. CIT- , 5. CIT(DR),

//True copy// By order Assistant Registrar, Kolkata Benches