Tribunal directs reassessment on Section 14A, permits adjustment in Section 115JB book profits

The Tribunal directed the matter back to the Assessing Officer for re-adjudication based on statutory provisions and Supreme Court's ruling, emphasizing that the objective of holding investments was immaterial for disallowance under section 14A. Regarding the adjustment of disallowance under section 14A in the computation of book profit under section 115JB, the Tribunal held that such adjustment was not necessary for computing book profits under section 115JB, allowing the ground of the assessee's appeal.

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Issues:
1. Disallowance under section 14A r.w.r. 8D
2. Disallowance under section 14A to book profit under section 115JB

Analysis:

Issue 1: Disallowance under section 14A r.w.r. 8D
The appeal by the revenue contested the order of the Ld. Commissioner of Income-Tax (Appeals) regarding the disallowance of Rs. 1,47,00,000 under section 14A r.w.r. 8D for Assessment Year 2013-14. The assessee, a resident corporate entity engaged in trading, investment, and financing, earned exempt income of Rs. 37.55 crores during the impugned assessment year. The Assessing Officer (AO) disallowed expenses of Rs. 159.44 Lacs using Rule 8D, which was higher than the assessee's suo-moto disallowance of Rs. 12.44 Lacs. The Ld. CIT(A) deleted the addition of Rs. 147 Lacs, relying on previous decisions. The revenue appealed, arguing that computations should strictly follow Rule 8D. The Tribunal, after considering previous years' decisions and the recent Supreme Court judgment in Maxopp Investment Ltd. Vs. CIT, directed the matter back to the AO for re-adjudication based on statutory provisions and the Supreme Court's ruling, emphasizing that the objective of holding investments was immaterial for disallowance under section 14A.

Issue 2: Disallowance under section 14A to book profit under section 115JB
Regarding the adjustment of disallowance under section 14A in the computation of book profit under section 115JB, the Tribunal referred to the judgment of the Delhi Tribunal (Special Bench) in ACIT Vs. Vireet Investment (P.) Ltd. The Tribunal held that adjustment of disallowance under section 14A was not necessary for computing book profits under section 115JB, citing various judgments in favor of the assessee. The Tribunal allowed the ground of the assessee's appeal in this regard. The order was pronounced on 27th July 2018, partially allowing the appeal for statistical purposes.

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