2019 (1) TMI 32

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....d served upon the assessee. Though the assessee has no dividend income, but the ld.AO worked out disallowance at Rs. 89,19,604/- with help of formula provided in Rule 8D. On appeal, the ld.CIT(A) following decision of Hon'ble Gujarat High Court in the case of CIT Vs. Correctech Energy P.Ltd. deleted the additions. Hon'ble High Court in this case has held that if there is no tax free income resulted to the assessee, then there cannot be any question of estimating expenditure incurred by an assessee relatable to such income. 4. Before us, the ld.counsel for the assessee at the very outset contended that the assessee has not claimed any tax free income therefore, there cannot be any disallowance under section 14A of the Act. He made reference to the decision of Hon'ble Gujarat High Court in the case of CIT Vs. Corretech Energy P.Ltd., 372 ITR 97 (Guj). As far as exclusion of such amount from the computation of book profit is concerned, he submitted that this issue has been considered elaborately by the Special Bench in the case of CIT Vs. Vireet Investment P.Ltd., 165 ITD 27 (Del)(SB). This has been subsequently followed by the ITAT, Ahmedabad Bench in ITA No.805 & 2744/Ahd/2017 in t....

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.....3 In the case of Viraj Profiles Ltd. [2015] 64 taxmann.com 52 (Mum Trib), the Hon'ble Bench has elaborately discussed the issue and held that the disallowance is liable to be calculated as per Rule 8D of the Rules. After discussing the decisions which have also been relied on by the appellant, the Hon'ble Bench has concluded that; "In view of our foregoing discussion, we find no infirmity with the orders of the AO and we hold that the AO has rightly disallowed the expenditure of Rs. 73,07,018/- by invoking the provisions of Section 14a of the Act read with the Rule 8D of Income Tax Rules. 1962 for computing book profit u/s. 115JB(2) of the Act read with clause (f) to Explanation 1 to clause 115JB(2) of the Act. We, therefore, set aside the orders of the CIT(A) and restore the orders of the AO. We order accordingly. 10.4 In the case of CIT(Central-II) Vs Goetze (India) Limited, the Hon'ble Delhi High Court has in ITA No. 1179/2010 vide order dated 09.12.2013, held that the disallowance u/s 14A is to be taken into consideration for the purposes of calculating book profits u/s 115JA/115JB. The relevant Paras of the judgement are reproduced below:- "36. By order date....

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....Geotze India Ltd. (supra) and other in the case of Pr.CIT Vs. Bhushan Steel. ITAT, Special Bench has reproduced both these orders in Vireet Investment P.Ltd. (supra) and thereafter it considered as to which decision ought to be followed by a subordinate authority. The department advanced an argument that in the case Bhushan Steel, Hon'ble Delhi High Court failed to consider subsequent decision of CIT Vs. Geotze India Ltd. (supra). However, the Tribunal after placing reliance upon the decision of Hon'ble Supreme Court in the case of CIT Vs. Vegetable Products Ltd., 88 ITR 192 (SC) and other decisions has held that it is incumbent upon it follow the decision of Hon'ble Delhi High Court in the case of Bhushan Steel. In this case, Hon'ble Delhi High Court has held as under: "However. Ld. Senior Counsel has relied on the decision in the case of Bhushan Steel Ltd. (supra) wherein it has been held as under:- "ITA 593/2015 PR. CIT ..........Appellant Through: Mr. N.P. Sahni, Senior Standing counsel with Mr. Nitin Gulati, Advocate. versus BHUSHAN STEEL LTD Respondent Through: Ms. Kavita Jha, Advocate with Ms. Roopali Gupta, Advocate. ORDER 29.09.2015 **    &....

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....gh Court has replied this question as under: "7. So far as issue Nos. (iii) and (iv) are concerned, the learned counsel for the assessee has relied on the decision of this court in the case of Commissioner of Income-tax-I v. Gujarat State Fertilizers & Chemicals Ltd., reported in (2013) 358 ITR 323 (Gujarat) where this court has held in paragraph Nos. 6 to 6.5 this court has observed as under: "6. So far as the fourth question is concerned, it pertains to addition of Rs. 1,14,43,040/- under Section 115JB of the Act being the expenditure estimated on earning of dividend income under Section 14A of the Act. 6.1 The Assessing Officer on referring to the said provision of Section 115JB(2) of the Act added the said amount considering that any amount of expenditure relatable to the income exempted under Section 10 of the Act shall need to be added in the profit shown in the 'Profit and Loss Account'. 6.2 When the matter travelled to the CIT (Appeals), since it deleted the addition of Rs. 1,14,43,040/- while deciding the question No.1, it consequently deleted such addition under Section 115JB of the Act on the ground that this would not serve any purpose. 6.3 The Tribunal ....