TaxTMI 
TaxTMI 
2024 (3) TMI 667
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.... with Rule 8D of the Income Tax Rules, 1962 ["Rules"]? B. Whether on facts and in the circumstances of the case the ITAT was correct in law in deleting the increase made by the AO in the book profits by adding the disallowance under Section 14A of the Act read with Rule 8D of the Rules for the purpose of calculating Minimum Alternate Tax ["MAT"] under Section 115JB of the Act? 3. The facts of the case exhibit that on 01.09.2012, the respondent-assessee filed its Income Tax Return ["ITR"] declaring nil income, which was selected for scrutiny assessment and a notice under Section 143(2) of the Act was duly issued by the Revenue. During the concerned AY, the respondent-assessee had earned an exempt income by way of dividend amounting to Rs. 58,09,619/- and consequently, it disallowed the same in accordance with Section 14A of the Act. 4. However, on 10.01.2014, the assessment order was passed by the AO, whereby, the aforesaid disallowance was enhanced to a sum of Rs. 12,65,71,862/- as per Section 14A of the Act read with Rule 8D of the Rules, under normal provisions and to Rs. 12,65,71,862/-, under special provision of the Act i.e., Section 115JB. 5. Aggrieved with t....
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....consideration, which is as follows:- "Did the ITAT fall into error in overlooking the Explanation (f) to Section 115J of the Act, in the circumstances of the case?" Issue notice of the appeal to the assessee, returnable on 27th July, 2018." 9. Learned counsel appearing on behalf of the Revenue submitted that the ITAT has erred in deleting the addition of Rs. 12,65,71,862/- as the book profit ought to have been increased for the purpose of computation of MAT under Section 115JB, particularly when the said amount was calculated as per Section 14A of the Act read with Rule 8D of the Rules. He specifically drew our attention to Clause (f) of Explanation 1 to Section 115JB of the Act to submit that the ITAT should have appreciated adding the said income in order to correctly compute the book profit. 10. Per contra, learned counsel appearing on behalf of the respondent-assessee vehemently opposed the submissions advanced by the learned counsel for the Revenue. 11. She submitted that the amounts which are disallowed as per Section 14A of the Act could not be added to net profit while computing book profit under Section 115JB of the Act. According to her, Section....
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.... being a company, the income tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after [the 1st day of April, 2012], is less than [eighteen and one-half per cent] of its book profit, [such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income tax at the rate of [eighteen per cent]: [Provided that for the previous year relevant to the assessment year commencing on or after the 1st day of April, 2020, the provisions of this sub-section shall have effect as if for the words "eighteen and one-half per cent." occurring at both the places, the words "fifteen per cent." had been substituted.] (2) [Every assessee,- (a) being a company, other than a company referred to in clause (b), shall, for the purposes of this section, prepare its [statement of profit and loss] for the relevant previous year in accordance with the provisions of [Schedule III] to [the Companies Act, 2013 (18 of 2013)]; or (b) being a company, to which the [second proviso to sub-section (1) of Sectio....
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....ome to which [Section 10 [other than the provisions contained in clause (38) thereof] or [* * *] Section 11 or Section 12 apply; or] ***" 18. A bare perusal of the abovementioned provisions would signify that sub-Section (1) prescribes the mode and manner for computing the total income of the assessee under Section 115JB of the Act. However, Clause (f) of Explanation 1 only alludes to the amounts of expenditure relatable to any income to which Section 10 (excluding provisions contained in Clause 38 thereof) or Section 11 or Section 12 apply. Thus, the said explanation nowhere mentions or denotes any mandate to import the disallowance as per Section 14A of the Act for computing MAT under Section 115JB of the Act. 19. It is also apposite to refer to the decision of the Hon'ble Supreme Court in the case of Indo Rama Synthetics (I) Ltd. (supra) to understand the nature and scope encompassed in Section 115JB of the Act. Paragraph no. 14 of the said decision succinctly encapsulates the position of Section 115JB in the following words:- "14. It is, thus, clear that what is "book profit" has been defined and explained in the above explanation. Section 115-JB is a se....
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.... and is added back to book profit under clause (f) of Explanation 1 to section 115JB of the Act, the same would amount to doing violence with the statutory provision, viz., subsections (1) and (5) of section 115JB of the Act. It is also pertinent to mention here that the amounts mentioned in clauses (a) to (i) of Explanation 1 to section 115JB(2) are debited to the statement of profit and loss account, then only the provisions of section 115JB would apply. The disallowance under section 14A of the Act is a notional disallowance and therefore, by taking recourse to section 14A of the Act, the amount cannot be added back to book profit under clause (f) of Explanation 1 to section 115JB of the Act. It is also pertinent to mention here that similar view, which has been taken by this court in Gokaldas Images (P.) Ltd. (supra) was also taken by the High Court of Bombay in CIT v. Bengal Finance and Investments Pvt. Ltd. I. T. A. No. 337 of 2013, dated February 10, 2015]. It is pertinent to note that in Rolta India Ltd., the Supreme Court was dealing with the issue of chargeability of interest under sections 234B and 234C of the Act on failure to pay advance tax in respect of tax payable u....