Tribunal Partially Allows Appeal: Upholds Section 14A Disallowance, Rules in Favor on Book Profit Adjustment Under 115JB.

The tribunal upheld the AO's disallowance under section 14A read with Rule 8D, affirming the CIT(A)'s decision. However, it ruled in favor of the assessee regarding the adjustment to book profit under section 115JB, citing a Special Bench ruling that such adjustments should not consider disallowance under section 14A. The appeal was partially allowed.

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Issues:
1. Disallowance under section 14A read with Rule 8D.
2. Adjustment to the provisions of book profit under section 115JB on account of disallowance u/s 14A r.w.r. 8D.

Issue 1: Disallowance under section 14A read with Rule 8D:
The assessee made an adhoc disallowance of &8377; 25,000 towards expenditure incurred to earn exempt income. The Assessing Officer (AO) invoked section 14A and disallowed &8377; 2,55,240 towards expenditure incurred to earn exempt income. The AO also made a similar adjustment to the book profit declared by the assessee under section 115JB. The CIT(A) upheld the AO's decision, stating that disallowance u/s 14A r.w.s. 8D should be in accordance with the specific provisions provided from AY 2008-09 onwards. The assessee contended that no specific expenditure was incurred to earn exempt income and challenged the disallowance. However, the tribunal found that the AO correctly computed the disallowance under section 14A r.w.r. 8D, as per the provisions, and upheld the CIT(A)'s decision, citing the jurisdictional High Court's ruling.

Issue 2: Adjustment to the provisions of book profit under section 115JB:
The assessee raised an additional ground challenging the adjustment made to the book profit computed under section 115JB due to disallowance u/s 14A r.w.r. 8D. The assessee argued that no adjustment should be made to the book profit under section 115JB for disallowance under section 14A. The tribunal agreed with the assessee, citing a Special Bench ruling that book profit computation under section 115JB should be made without considering the computation under section 14A r.w.r. 8D. Therefore, the tribunal partially allowed the appeal filed by the assessee, concluding that no adjustments can be made to the book profit computed under section 115JB due to disallowance made under section 14A.

In conclusion, the tribunal upheld the disallowance under section 14A read with Rule 8D and ruled in favor of the assessee regarding the adjustment to the provisions of book profit under section 115JB. The appeal was partially allowed based on the detailed analysis of both issues presented before the tribunal.

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