Tribunal rules on disallowance in book profit computation, limits to exempt income amount.

The Tribunal partly allowed the appeal, ruling that disallowance under Section 14A read with Rule 8D cannot be included in the computation of book profit under Section 115JB. It specified that expenses related to exempt income, excluding those under Section 10(38), must be added back to book profit. The Tribunal limited the disallowance to the amount of exempt income earned by the assessee, Rs. 43,150, thereby partially granting the appeal.

---

---

Issues Involved:
1. Validity of the Impugned Assessment Order.
2. Addition to Book Profit under Section 115JB.
3. Disallowance of Interest Expenditure under Section 14A read with Section 115JB.
4. Charging of Excessive Interest under Sections 234B and 234C.

Issue-wise Detailed Analysis:

1. Validity of the Impugned Assessment Order:
The assessee challenged the validity of the assessment order passed by the Assessing Officer (AO), arguing that it was void and deserved to be quashed. However, the judgment does not provide a detailed analysis of this issue, indicating that the primary focus was on the substantive issues related to additions and disallowances.

2. Addition to Book Profit under Section 115JB:
The key issue was whether the interest expenditure of Rs. 17.19 crores should be added back to the book profit under Section 115JB. The AO argued that the interest expenditure, being capital in nature, should be capitalized and not deducted from the book profit. The assessee contended that only specific adjustments are allowed under Section 115JB and that the interest expenditure should not be added back.

3. Disallowance of Interest Expenditure under Section 14A read with Section 115JB:
The AO disallowed the interest expenditure under Section 14A read with Rule 8D, arguing that the borrowed funds were used to invest in shares that generate exempt income. The CIT(A) upheld this disallowance, noting that the assessee earned Rs. 43,150 in exempt income and that the investments were made from borrowed funds. The Tribunal, however, referred to the Delhi Tribunal Special Bench decision in ACIT vs. Vireet Investment Pvt. Ltd., which held that disallowances under Section 14A read with Rule 8D cannot be applied while determining book profit under Section 115JB. The Tribunal concluded that the disallowance under Section 14A cannot be equated with clause (f) of Explanation 1 to Section 115JB.

4. Charging of Excessive Interest under Sections 234B and 234C:
The assessee argued against the excessive interest charged under Sections 234B and 234C. However, the judgment does not provide a detailed analysis of this issue, focusing instead on the primary issues of additions and disallowances.

Conclusion:
The Tribunal held that the disallowance under Section 14A read with Rule 8D cannot be imported into the computation of book profit under Section 115JB. It emphasized that the expenses related to exempt income, other than those specified under Section 10(38), should be added back to the book profit. However, it noted the absence of a mechanism to quantify such expenses under Section 115JB. The Tribunal limited the disallowance to Rs. 43,150, the amount of exempt income earned by the assessee, thereby partly allowing the appeal.

Order:
The appeal was partly allowed, with the disallowance under clause (f) to Section 115JB limited to Rs. 43,150. The order was pronounced on 03/10/2019 at Ahmedabad.

---