Appeals partly allowed for expenditure, disallowances, and book profit recalculations.

The Tribunal partly allowed the appeals, setting aside the matters for the AO to recompute in line with its directions and relevant judicial precedents. The expenditure was treated as pre-operative pending capitalization, disallowances under Section 14A were to be recalculated, and book profit under Section 115JB was to be recomputed without reliance on Section 14A read with Rule 8D, following the ITAT Special Bench decision. The order was pronounced on 09/08/2019.

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Issues Involved:
1. Disallowance of expenditure as capital expenditure.
2. Disallowance under Section 14A read with Rule 8D.
3. Computation of book profit under Section 115JB.

Detailed Analysis:

1. Disallowance of Expenditure as Capital Expenditure:
The primary issue was whether the expenditure incurred by the assessee should be treated as capital expenditure. The assessee argued that its business had been set up, even though it had not commenced operations. The assessee contended that expenses incurred should be allowed as deductions. The Tribunal examined the facts and found that the projects were still under construction and the business had not been set up. The Tribunal upheld the findings of the AO and CIT(A) that the expenses should be treated as pre-operative expenses pending capitalization. The Tribunal cited various judicial precedents, including the Hon'ble Bombay High Court in Western India Vegetable Products Ltd. vs CIT, to support its conclusion.

2. Disallowance under Section 14A read with Rule 8D:
The second issue involved the disallowance of expenditure incurred in relation to exempt income under Section 14A read with Rule 8D. The AO made disallowances, which were partly upheld by the CIT(A). The Tribunal noted that the Hon'ble Supreme Court in Maxopp Investments Ltd vs CIT and other High Courts had clarified that disallowance under Section 14A is applicable even if investments are made for strategic purposes. The Tribunal also referred to the Hon'ble Bombay High Court's rulings in CIT vs HDFC Bank Ltd. and CIT vs Reliance Utilities and Power Ltd., which held that if own funds exceed investments, no disallowance of interest expenses should be made. The Tribunal set aside the issue to the AO to recompute disallowances, restricting them to the extent of exempt income earned, following the decisions in Cheminvest Ltd. vs CIT and other relevant cases.

3. Computation of Book Profit under Section 115JB:
The third issue was the computation of book profit under Section 115JB. The assessee raised additional grounds, arguing that computation under clause (f) of Explanation 1 to Section 115JB(2) should be made without resorting to Section 14A read with Rule 8D. The Tribunal referred to the ITAT Special Bench decision in ACIT vs Vireet Investments Pvt. Ltd., which supported the assessee's contention. The Tribunal directed the AO to recompute book profit under Section 115JB after determining disallowances under Section 14A read with Rule 8D, in light of the Special Bench decision.

Conclusion:
The appeals were partly allowed for statistical purposes, and the matters were set aside to the AO for recomputation in light of the Tribunal's directions and relevant judicial precedents. The order was pronounced in the open court on 09/08/2019.

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