2016 (4) TMI 1207 - AT - Income Tax

MAT computation - Assessee submitted that the net profit as per the P & L account was computed which is the profit before tax and for computing the income under section 115JB the A.O. ought to have taken the same as the book profit before making the adjustments thereto - whether AO erroneously computed the income under section 115JB by taking the figure of Rs. 4, 72, 06, 235 before deduction of R & D expenditure - Held that - We find that assessee s contention is correct. In view of the same we deem it fit and proper to remit the issue to the file of the A.O. to re-consider and re-compute the income of the assessee under section 115JB of the Act after verifying the claim of the assessee. Disallowance under section 14A - Held that - We find that section 14A clearly stipulates that the expenditure incurred for earning of any income which does not form part of the total income alone can be disallowed. In the case before us when the assessee has not earned any exempt income there can be Prathista Industries Ltd. Secunderabad. no disallowance under section 14A of the Act. The Hon ble Delhi High Court in the case of Cheminvest Ltd. reported in (2015 (9) TMI 238 - DELHI HIGH COURT ) has held that section 14A will not apply where no exempt income is received or receivable during the relevant assessment year. In view of the same assessee s appeal on this ground is allowed.

Summary

Issues:
1. Disallowance under section 14A of the Act
2. Calculation of tax under section 115JB of the Act

Issue 1: Disallowance under section 14A of the Act:
The appeal pertained to the assessment year 2011-2012 where the assessee contested the disallowance of &8377;4,37,222 under section 14A of the Act. The assessee argued that no exempt income was earned, thus challenging the disallowance. The Tribunal examined the provisions of section 14A, emphasizing that expenses can only be disallowed if incurred for earning income not forming part of the total income. Citing the decision of the Hon'ble Delhi High Court in Cheminvest Ltd. case, it was held that when no exempt income is received or receivable, disallowance under section 14A is unwarranted. Consequently, the Tribunal allowed the appeal on this ground, ruling in favor of the assessee.

Issue 2: Calculation of tax under section 115JB of the Act:
The additional ground raised by the assessee pertained to the calculation of tax under section 115JB of the Act. The assessee contended that the Assessing Officer (A.O.) incorrectly computed the income under section 115JB by not considering the profit before tax as per the Profit & Loss account. The Tribunal noted that the A.O. had erred in his computation by not deducting the R&D expenditure under section 35(2)AB of the I.T. Act. Acknowledging the correctness of the assessee's contention, the Tribunal decided to remit the issue back to the A.O. for reevaluation and recalculation of the income under section 115JB after verifying the assessee's claim. Consequently, the Tribunal allowed the appeal partially for statistical purposes.

In conclusion, the Appellate Tribunal ITAT Hyderabad, comprising P. Madhavi Devi (Judicial Member) and B. Ramakotaiah (Accountant Member), delivered a detailed judgment addressing the issues of disallowance under section 14A of the Act and the calculation of tax under section 115JB of the Act for the assessment year 2011-2012. The Tribunal ruled in favor of the assessee regarding the disallowance under section 14A, emphasizing the absence of exempt income. Additionally, the Tribunal directed a reassessment of the income under section 115JB due to errors in the initial computation.