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of <h1>Tribunal upholds deletion of disallowance under Section 14A & addition under Section 115JB</h1> <h3>DCIT Circle-1 (1) (1), Vadodara Versus Base Metal Chlorinations Pvt. Ltd.</h3> DCIT Circle-1 (1) (1), Vadodara Versus Base Metal Chlorinations Pvt. Ltd. - TMI Issues Involved:1. Deletion of addition made on account of disallowance under Section 14A of the Income Tax Act.2. Deletion of addition in computing the Book Profit under Section 115JB of the Income Tax Act.Summary:Issue 1: Deletion of Addition on Account of Disallowance under Section 14AThe Revenue's appeal challenges the deletion of an addition of Rs. 11,09,333/- made under Section 14A of the Income Tax Act. The assessee had filed its return of income declaring a total income of Rs. Nil, which was initially accepted. The case was reopened, and the assessment was finalized, leading to the Ld. PCIT directing the Ld. AO to reassess under Section 263. The Ld. AO found a short disallowance under Rule 8D, resulting in an additional disallowance of Rs. 11,09,333/-. The Ld. CIT(A) deleted this disallowance, justifying that the appellant had not used any interest-bearing funds for investments generating exempt income. The assessee demonstrated sufficient own funds and no utilization of interest-bearing funds for such investments. The Ld. CIT(A) concluded that further disallowance was unwarranted, and this view was supported by the Co-ordinate Bench's order for A.Y. 2013-14, which found no justification for disallowance when interest-free funds exceeded investments.Issue 2: Deletion of Addition in Computing Book Profit under Section 115JBThe Revenue also contested the deletion of an addition of Rs. 11,09,333/- in computing the Book Profit under Section 115JB, arguing that the addition under Section 14A should be included. The Tribunal noted that this issue was settled in the assessee's favor in previous years, supported by the Hon'ble Supreme Court's judgment in Atria Power Corporation Ltd., which held that disallowance under Section 14A could not be added for computing income under Section 115JB. Consequently, the deletion made by the Ld. CIT(A) was upheld as just and proper.Conclusion:The Tribunal dismissed the Revenue's appeal, affirming the deletion of the disallowance under Section 14A and the related addition in computing Book Profit under Section 115JB. The decision was pronounced on 05/07/2023.
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