TaxTMI 
TaxTMI 
2018 (9) TMI 1743
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.... of the Revenue and Cross Objection of the assessee thereon concerning AY 2009-10 for adjudication purposes. ITA No. 1623/Ahd/2013-AY 2009-10-Revenue's appeal 3. The grounds of appeal raised by the Revenue in the captioned appeal concerning AY 2009-10 reads as under:- "1. The CIT(A) has erred in law and on facts in deleting the disallowance made on account that the assessee followed exclusive method for accounting CENVAT as against inclusive method mandated u/s 145A of the Act. 2. The CIT(A) has erred in law and on facts in deleting the interest disallowed u/s14A as per method prescribed under Rule 8D(2)." 4. Ground No.1 relates to addition under s.145A of the Act on account of adjustment of closing stock of the assessee by duty and taxes etc. in the form of CENVAT. 5. When the matter was called for hearing, the learned AR for the assessee submitted that the assessee consistently follows exclusive method of accounting. In this process, the duties and taxes in purchase as well as in sales and closing stocks are excluded and kept in the separate account. Thus, owing to exclusive method of accounting, the action of the assessee is revenue neutral and does....
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....dend income to the tune of Rs. 30,42,833/- which is exempt from tax. The AO accordingly invoked the provisions of Section 14A of the Act and computed disallowance of expenditure attributable to such exempt income by resorting to formula provided in the Rule 8D of the Income Tax Rules, 1962. The disallowance under Rule 8D also included disallowance of interest amounting to Rs. 28,38,647/- in terms of Rule 8D(2)(ii) of the IT Rules which is subject matter of controversy. 11. In first appeal, the CIT(A) granted relief to the assessee against the aforesaid action of proportionate disallowance of interest of the AO and deleted such disallowance. 12. Aggrieved, the Revenue preferred appeal before the Tribunal. 13. We have carefully considered the rival submissions on the issue. We notice the plea on behalf of the assessee on gross outgo of interest is Rs. 126.49 Crores whereas the assessee has also earned interest income simultaneously of a bigger sum of Rs. 130.02 Crores. Thus, essentially, there is excess of interest earned over interest expenditure. It is the contention on behalf of the assessee that in view of these facts it cannot be said that the assessee has claimed an....
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....y requires the assessee to include the taxes etc. u/s.145A. (2) On the facts and circumstances of the case and in law, the CIT(A) ought to have upheld the addition made since the assessee had contravened the provisions of section 145A by following exclusive method of accounting instead of inclusive method mandated u/s.145A. (3) The CIT(A) has erred in law and on facts in deleting the interest of Rs. 2,37,61,930/- disallowed u/s 14A as per method prescribed under Rule 8D(2). (4) That the CIT(A) has erred in law and on facts in deleting the addition of Rs. 2,37,61,830/- to the Book Profit u/s 115JB despite the fact that disallowance u/s 14A is to be added to the Book Profit as per Clause (f) to Explanation 1 to section 115JB(1) of the Act." 20. Ground No.1 & 2 concern adjustment of taxes for the purpose of valuation of inventory under s.145A of the Act. The facts in issue are identical to the facts concerning AY 2009-10. The assessee follows exclusive method of accounting and thus, the action of the assessee in not making adjustments towards taxes etc. at the time of valuation of inventory is revenue neutral. In parity with the view taken in AY 2009-10 a....
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....rned with the limited controversy as to whether, for the purposes of computation of 'book profit' under s.115JB, the AO is entitled to increase 'book profit' by the equivalent amount of disallowances as found attributable to exempt income under normal provisions or not. While it is the case of the assessee that in view of long line of judicial precedents, such adjustment in 'book profit' is not permissible, it is the case of revenue that in view of codified law in this regard, the 'book profit' under 115JB has been rightly increased by the revenue. 6. We notice that issue is evolved and developed by certain judicial precedents. We find at the first instance that the identical issue came up for consideration before the Hon'ble Gujarat High Court in the case of Alembic Ltd. (supra) where the substantial question of law on the point as to whether adjustment made on account of disallowance under s.14A of the can be similarly made for the purposes of computation of 'book profit' under s.115JB of the Act was answered against the Revenue and in favour of the assessee. We also take note of decision of the Special Bench rendered in ACIT vs. Vireet Investment Pvt.Ltd. & Anr. 165 ITD....