Tax Tribunal Approves Assessee's Computation Method, Dismisses Revenue's Appeal for Exempt Income on Investment.

The ITAT upheld the assessee's method of computing disallowance under Section 14A for book profits under Section 115JB, referencing a prior decision for A.Y. 2012-13. It directed the AO to accept the assessee's computation for the relevant years. Additionally, the Tribunal sustained the CIT(A)'s directive to exclude investments not yielding exempt income, dismissing the Revenue's appeal. Consequently, the assessee's appeals were allowed, and the Revenue's appeals were dismissed. The judgment was pronounced in July 2020, delayed due to the COVID-19 pandemic, following rules and extensions from the Bombay HC.

---

---

Issues:
1. Disallowance under Section 14A r.w. Rule 8D of I.T. Rules while computing book profits u/s. 115JB of the Act.
2. Exclusion of investments not yielding exempt income for the year under consideration.

Issue 1: Disallowance under Section 14A r.w. Rule 8D of I.T. Rules while computing book profits u/s. 115JB of the Act:
The appeals were filed against the orders of the Ld. Commissioner of Income Tax (Appeals) for the A.Ys. 2013-14 and 2014-15. The Assessee raised grounds related to the computation of addition under Clause (f) of Explanation 1 to Section 115JB(2), emphasizing the need to consider only Long Term Capital Gains computed under specific sections for book profit calculation. The Tribunal accepted the disallowance as computed by the assessee for the purpose of computation u/s. 115JB of the Act, citing a consistent method of allocation of expenses followed by the assessee. The Tribunal referred to a previous decision in the assessee's case for A.Y. 2012-13 and held that the disallowance under Section 14A of the Act need not be made applicable for computing book profits under Section 115JB of the Act. The Tribunal directed the Assessing Officer to accept the computation of disallowance u/s. 14A of the Act as worked out by the assessee for the relevant assessment years.

Issue 2: Exclusion of investments not yielding exempt income for the year under consideration:
The Revenue challenged the Ld.CIT(A)'s direction to exclude investments not yielding exempt income during the year, arguing that administrative resources deployed for such investments required disallowance for earning exempt expenses. The Ld.CIT(A) had directed the Assessing Officer to exclude such investments. The Tribunal held that this issue was covered by the decision of the Special Bench of the Delhi Tribunal in a specific case. The Tribunal sustained the Ld.CIT(A)'s order and rejected the grounds raised by the Revenue. Consequently, the appeals of the assessee were allowed, and those of the Revenue were dismissed.

In conclusion, the Tribunal upheld the decisions related to the disallowance under Section 14A and the exclusion of investments not yielding exempt income, based on previous rulings and legal interpretations. The pronouncement of the judgment was delayed due to the COVID-19 pandemic, with the order being pronounced in July 2020 in accordance with the applicable rules and extensions granted by the Bombay High Court.

---