TaxTMI 
TaxTMI 
2017 (12) TMI 1001
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.... by invoking the provisions of section 14A of the Act read with rule 8D of the Income Tax Rules 1962 (hereinafter the Rules), i.e. under Rule 8D(2)(ii) at Rs. 27,76,374/- and under Rule 8D(2)(iii) on average value of investment at 0.5% at Rs. 16,65,521/-. The AO also made disallowance under this provisions while computing the book profit under section 115JB of the Act. For this Revenue has raised following two grounds: - "1. "On the fact and in the circumstances of the case and in (aw, the cfl14) has erred in restricting the addition mate by .91.0 u/s (read with rule 82) of income-tax 'Rules 1962 ofRs.42,66271/- to Rs. 175624/-" 2. On the facts and circumstances of the case. The Ld. CIT(A) has erred in restricting the addition made by the AO on account of adhoc disallowance u/s 14A read with rule 8D of income Tax Rules 1962 of Rs. 42,66,271/- to Rs. 1,75,624/- while computing the book profit u/s 115JB of the .Act." 3. Briefly stated facts are that the assessee is a domestic company engaged in the business of textiles. The AO during the course of assessment proceedings noted that the assessee has claimed exempt income i.e. dividend income of Rs. 44,41,505/- ....
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....ng section 14A of the Act In view of above discussion, the disallowance of interest expense under Rule 8D(2)(H) of Rs. 10,93,863/- is not found to be justified and the same is deleted." 4. Similarly, the CIT(A) also deleted the disallowance under Rule 8D (2)(iii) made by AO by noting the fact that there is no expenditure incurred by assessee except interest, depreciation and other expenses of Rs. 3,64,208/-. According to CIT(A), the assessee has suo moto disallowed a sum of Rs. 3,64,208/-, no further disallowance would be made and for this CIT(A) observing in Para 5.1.3 as under: - "5.1.3. Further, I find that the A.O. has computed the disallowance under Rule 8D(2)(iii) at Rs. 16,64898/- @ 5% of average value of investment. From the submission made by the appellant, it is noted that out of total expenses debited to profit and loss account of Rs. 2946, i28/-. an amount of Rs. 25,37260/- is on account of interest expense which is not covered under the quantum of disallowance and an amount of Rs. 44660/- is on account of depreciation which has been disallowed and added while computing business income. After excluding these expenses, the actual expense which can be said to ....
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....e addition made by AO of exempt income under section 14A of the Act read with Rule 8D of the Rules while computing book profit under section 115IB of the Act. 8. At the outset, the learned Counsel for the assessee stated that this issue is covered in favour of assessee and against Revenue by the decision of Special Bench of this Tribunal in the case of ACIT vs. Vireet Investments (P.) Ltd. [2017] 58 ITR (AT) 313 (Delhi - Trib.) (SB) wherein the Tribunal has clearly held that no disallowance under section 14A of the Act r.w.r 8D of the Rules can be made while computing book profit under section 115JB of the Act. The learned CIT Departmental Representative could not controvert the above proposition. Accordingly, we are of the view that this issue is covered by the special bench decision of this Tribunal in the case of Vireet Investments (P.) Ltd. (supra), respectfully following the same, we dismiss this issue of Revenue's appeal. 9. Similar is the issue in Revenue's appeal in ITA No.5814/Mum/2016 for AY 2014-15 and the grounds raised are as under: - "1. on the fact and the circumstances of the case in law, the CIT(A) has erred in restricting the addition male by AO u/s....
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....ordance with provisions of part-11 of Schedule VI to the companies Act, 1956, is to be further reduced by the amount of preference share redemption reserve appropriated from the surplus in the statement of profit and loss account to arrive at the book profit as per section 115JB of the I.T. Act. As already held in para 7.4.4 above, that the appellant has not credited the profit and loss account by the said amount of addition to reserves of Rs. 1373230/-, so any reduction from the net profit was not required as per Explanation (i). The appellant has not claimed the said amount in the statement of profit and loss account as an expense/liability, so its claim to reduce the net profit by the said amount could not be allowed. Further, as held in para 7.4.7 above, the amount of Rs. 13,73,230/- is in the nature of reserve and not provision/liability. Therefore, the said amount was not to be excluded from the net profit to arrive at the book profit u/s.1 15 JB of the Act. Accordingly, the addition of Rs. 13.73230/- is upheld and ground No.4 & 5 are dismissed." Aggrieved, now assessee is in appeal before tribunal. 13. At the outset, the learned Counsel for the assessee stated that thi....
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....s 115JB. 17. Accordingly, we hold that the reasons assigned by the authorities below for making addition for book profit of Rs. 39,82,190/- on account of preference share redemption reserve cannot be upheld and Assessing Officer is directed to allow the same and the amount should be reduced from the working of the book profit u/s 115JB. Accordingly, ground No.1 as raised by the assessee is allowed." 14. When this was put to the learned Senior Departmental Representative he fairly agreed that the issue is covered by Tribunal's decision. As the issue is squarely covered, and in the given facts and circumstances of the case, we respectfully following the co-ordinate Bench decision in assessee's sister concern case on principle, in the case of Well Know Synthetics Pvt. Ltd. (supra), we delete the disallowance made by AO on account of the reduction of provision made on the redemption of preference shares. Accordingly, the orders of the lower authorities are reversed and this issue of the assessee's appeal is allowed. 15. Coming to assessee's appeal in ITA No. 5853/Mum/2016 for AY 2014-15, the issue is exactly identical and same as in ITA No. 5852/Mum/2016 for the AY 2013-....
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...., without appreciating the fact that there was no likelihood of earning exempt income from the same and moreover the department has not accepted the order passed by the Hon'ble high Court in the case of All Cargo Logistics Ltd., and preferred to file Special Leave Petition before the Hon'ble Supreme Court." 4. On the facts and circumstances of the case, the Ld. CITA) has erred in deleting the adhoc disallowance of Rs. 5434217/- made u/ s. 14A read with rule 8D of Income Tax Rules 1962 while computing the book profit u/s. 115JB of the Act, without appreciating the fact that the department has riot accepted the order passed by the Hon'ble 111gb Court in the case of All Cargo Logistics Ltd., and preferred to file Special Leave Petition before the Hon'ble Supreme Court." 18. Briefly stated facts are that the AO while completing the original assessment under section 143(3) of the Act on the original return of income made disallowance under section 14A of the Act amounting to Rs. 43,82,390/-. Subsequently, a search under section 132 of the Act was carried out on 23-05-2013 on well-known group of companies. In response to this search under section 132(1) of the Act, the AO iss....
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....made while computing the book profit u/s.115J8 in the original assessment order passed on 15.3.2013, as modified by the appellate orders and restrict the disallowance u/s 14A while computing the book profit accordingly. If no such addition was made in the original assessment, then the entire disallowance will be deleted." Aggrieved, Revenue is in second appeal before Tribunal. 19. At the outset, the learned Counsel for the assessee stated that none of the disallowance is based on seized material. The learned Counsel for the assessee stated that these items are disallowed on the basis of the entries found recorded in regular books of account of the assessee. This fact is not denied by the learned CIT-DR during the course hearing before us. When a specific point was raised by the Bench whether any seized material relating to these disallowance are there or not? He fairly conceded the position that from the order of the AO or from the order of the CIT(A) or from the seized material it cannot be gathered whether any seized material relating to these disallowances are available on record. As there is a categorical fact recorded by the AO as well as CIT(A) that these disallowances ....