TaxTMI 
TaxTMI 
2022 (1) TMI 823
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....s that as per clause (f) of explanation 1 of section 115JB(2) " the book profit means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2), as increased by the amount or amounts of expenditure relatable to any income to which ( section 10 ( other than the provisions contained in clause (38) thereof for section 1 1 or section 12 apply and all the relevant expenditure bias to be added back to income for MAT con-mutation." 3. As could be seen from the grounds raised, the dispute is with regard to the disallowance made under section 14A of the Income Tax Act, 1961 r.w.r. 8D(2), both, under the normal provisions as well as under section 115JB of the Act. 4. Briefly the facts are, as stated by the assessing officer, assessee is a non banking financial company (NBFC). For the assessment year under dispute, assessee filed its return of income on 22-03-2016 declaring nil income. In course of assessment proceedings, the assessing office noticed that the assessee had earned exempt income by way of dividend amounting to Rs. 41,56,53,446/-. Whereas, the assessee has disallowed an amount of Rs. 5,82,35,000/- under rule 8D(2)(iii).....
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....cribe to the view expressed by the learned Commissioner (Appeals), as, it is in consonance with the ratio laid down by the Special Bench of ITAT in case of ACIT vs Vireet Investments Pvt Ltd (2017) 165 ITD 27 (Del)(SB). In any case of the matter, learned Commissioner (Appeals) has held that expenses directly relatable to earning of exempt income can be disallowed under Explanation 1(f) to section 115JB(2) of the Act. In view of the aforesaid, we uphold the decision of the learned Commissioner (Appeals) by dismissing the ground raised. 7. In the result, appeal is dismissed. ITA 4500/Mum/2019 (Appeal by assessee) 8. At the outset, Smt. Aarti Vissanji, learned counsel appearing for the assessee, on instruction, did not press ground 3. Accordingly, ground 3 is dismissed as not pressed. 9. In ground 1, assessee has challenged disallowance of legal and professional fees of Rs. 68,79,915/-. 10. Briefly the facts are, in course of assessment proceedings the assessing officer noticed that the assessee had claimed deduction of Rs. 68,79,915/- on account of legal and professional fees. After calling for necessary details and examining them, he found that the payments were made to Nielson....
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.... the details of expenditure incurred placed at page 9 of the paper book, assessee's submission appears to be correct. In case of Jai Engineering Works Ltd vs CIT (supra), the Hon'ble Delhi High Court while considering allowability of expenses in the nature of pre-operative expenses under section 37(1) of the Act has observed that a particular assessee may be having a number of business activities. Therefore, the nature of new business is not a decisive test for determining whether or not there is an expansion of an existing business. What is important is that the control of all business, the existing one as well as the new venture, must be in the hands of one establishment or management or administration. The funds utilized for such business activities must have come from the common source as reflected in the balance-sheet of the company. Therefore, if separate business activities are under common management and funds utilized have come from the common management, the pre-operative expenditure is allowable. In case of CIT vs Euro India Ltd (supra), the Hon'ble Delhi High Court has observed, where the feasibility report is procured for expansion of existing business and where there ....
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....the Act. While deciding the issue in appeal, learned Commissioner (Appeals) also upheld the decision of the assessing officer. 16. Reiterating the stand taken before the departmental authorities, learned counsel for the assessee submitted, the assessee had invested in the equity shares of the subsidiary. However, due to continuous loss suffered by the subsidiary, there was total erosion of net worth. Therefore, as against totally paid up equity capital of Rs. 43,83,07,410 there is a debit balance of Rs. 50,75,66,746/. Drawing our attention to the profit and loss account of the subsidiary as on 31-03- 2015, she submitted, there is no revenue from operation, whereas, total loss for the year stood at Rs. 12,61,27,268/-. She submitted, even the Board of Directors at their meeting held on 03-09-2014 have taken a decision to discontinue the business activity of rendering customized and focused solutions in areas of contractual project management, supply chain solutions and offset solutions in the field of aerospace, defense and home land security. She submitted, for this reason, out of the total investment made in equity capital of the subsidiary, the assessee has written off Rs. 39,70,....
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....f the Act on the plea that it does not come within the purview of any of the adjustment as provided under Explanation 1 to section 115JB(2). However, the departmental authorities have rejected the claim of the assessee on the reasoning that the so called write off, in reality, is a provision for diminution in the value of shares as provided under Explanation 1(i) to section 115JB(2). 19. At this stage it is necessary to look into the provision contained under Explanation 1(i) to section 115JB(2) of the Act, which reads as under:- "The amount or amounts set aside as provision for diminution in the value of asset." 20. Thus, the language of the provision is very clear and it speaks of an amount set aside as provision for diminution in the value of asset. Whereas, it is the specific contention of the assessee that the amount written off has not been set aside as a provision in the books. The entries in assessee's books and as reflected in the profit and loss account, of course, show the amount as having been written off. However, it is a fairly well settled principle that accounting entries are not conclusive. At this stage, we may observe that in case of PCIT vs Torrent Private L....