2018 (9) TMI 1624 - AT - Income Tax

Addition u/s 14A - Held that - The decision of Hon ble High Court in PCIT Vs. Nirma Credit & Capital (P) Ltd. 2017 (9) TMI 485 - GUJARAT HIGH COURT is brought to our notice and it is so held in the said decision that for the purpose of applying factors contended in clause (ii) of sub-rule (2) of rule 8D, prior to its amendment w.e.f. 02.06.2016, amount of expenditure by way of interest would be the interest paid by the assessee on borrowings minus taxable interest earned during the financial year. As a matter of fact CIT (A) also placed on reliance on the decisions of the ITAT reported in the case of Income Tax Officer, Ahmedabad Vs. Karnavati Petrochem Pvt. Ltd. 2014 (1) TMI 920 - ITAT AHMEDABAD . No circumstances are brought to our notice to say as to why the decisions of the Tribunal stated above and also the decision of Hon ble Gujarat High Court shall not be made applicable facts of the present case. We are convinced with the reasoning adopted by the Ld. CIT(A). MAT computation - calculating the income u/s 115JB - assessee had debited income from SEZ which is to the tune of ₹ 46,04,41,180/- besides not claiming deduction u/s 80 IAB of the Income Tax Act, 1961 and thereby reduced the book profit from ₹ 47,00,02,273/- to nil - Held that - As decided in assessee s own case it is permissible under law for the assessee to claim deduction under sub section 1 of section 80 IAB of the Act for any 10 consecutive assessment years out of 15 years beginning from the year in which a special economic zone has been notified by the Central Government and it is not open for the AO to draw an inference that the assessee has to choose either the postponement of the benefits u/s 80 IAB of the Act or the deduction u/s 115 JB of the Act. Addition u/s 14 A of the Act while computing book of profit u/s 115 JB - Held that - Special Bench of this Tribunal in ACIT Vs. Vireet Investment (P) Ltd. 2017 (6) TMI 1124 - ITAT DELHI (Special Bench) held that computation under clause (f) of explanation 1 to section 115 JB (2) of the Act is to be made without resorting to computation as contemplated u/s 14A of the Act r/w Rule 8D of the Rules. - Decided against revenue

Summary

Issues:
1. Disallowance under section 14A of the Income Tax Act, 1961.
2. Calculation of income under section 115JB of the Act.
3. Addition made under section 14A while computing book profit under section 115JB.

Issue 1: Disallowance under section 14A of the Income Tax Act, 1961:
The appellant, engaged in leasing commercial properties under SEZs, contested disallowances made by the Assessing Officer under section 14A of the Act. The appellant argued that interest expenses net of interest income should be considered for disallowance. The Tribunal referred to relevant case laws and upheld the CIT(A)'s decision to delete the additions, citing the interest paid by the assessee on borrowings minus taxable interest earned during the financial year as the correct approach. The Tribunal found no reason to deviate from the CIT(A)'s reasoning and dismissed this ground of appeal.

Issue 2: Calculation of income under section 115JB of the Act:
The dispute arose regarding the debiting of SEZ income while not claiming deduction under section 80IAB, resulting in reducing the book profit to nil. The Assessing Officer contended that the appellant cannot reduce the deduction from book profit for postponing benefits under section 80IAB. The appellant argued that they can claim deduction under section 80IAB for 10 consecutive assessment years out of 15. The Tribunal, considering past decisions in the appellant's favor, upheld the CIT(A)'s order, stating that the facts remained unchanged, and dismissed the appeal, finding it devoid of merits.

Issue 3: Addition made under section 14A while computing book profit under section 115JB:
Regarding the addition made under section 14A while computing book profit under section 115JB, the Tribunal relied on the CIT(A)'s reasoning based on previous cases and a Special Bench decision. The Tribunal followed the Special Bench decision and upheld the CIT(A)'s findings, concluding that the addition under section 14A cannot be sustained. Therefore, the Tribunal dismissed this ground of appeal as well.

In conclusion, the Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decisions on all three issues. The Tribunal found no merit in the revenue's contentions and pronounced the order in open court on 24.09.2018.