2011 (3) TMI 1332 - HC - Income Tax

Validity of addition of proportionate expenditure attributable to exempted income in the course of completion of book profit assessment under Section 115JA of the I.T. Act - Held that - While hearing another appeal filed against similar assessment of another bank, considering the issue and in that judgment the matter was remanded to AO to specifically consider the disallowance with reference to sub-clause (f) of Explanation to Section 115JA which was not considered by the assessing officer in that case. However, in this case, disallowance is specifically made with reference to the above provision, which is only Rs. 1 crore. Therefore following the judgment we allow the appeal filed by the revenue by reversing the order of the Tribunal and restoring the order of the first appellate authority confirming the disallowance to the above extent.

Summary

Issues: Validity of addition of proportionate expenditure attributable to exempted income in book profit assessment under Section 115JA of the I.T. Act.

In this judgment by the High Court of Kerala, the primary issue revolved around the validity of the addition of proportionate expenditure attributable to exempted income in the book profit assessment under Section 115JA of the Income Tax Act. The respondent bank argued that the revenue did not obtain approval from the Committee on Disputes (CoD) to file the appeal against the assessee, a public sector undertaking. However, the standing counsel for the revenue presented a Constitution Bench judgment of the Supreme Court declaring the requirement of CoD approval as unnecessary. The court noted that in a previous case involving a similar assessment, they had remanded the matter to the assessing officer to consider the disallowance with reference to a specific provision which was not previously considered. In the present case, the disallowance was made with reference to the same provision, amounting to Rs. 1 crore. Therefore, following the precedent set in previous judgments, the court allowed the appeal filed by the revenue, reversing the Tribunal's order and reinstating the first appellate authority's decision confirming the disallowance to the specified extent.

The judgment also addressed the question of whether the Supreme Court's ruling on the requirement of CoD approval for filing appeals applied prospectively or not. However, the court found that in the case at hand, the revenue had already obtained CoD approval for filing the appeal, rendering the prospective application of the Supreme Court's judgment irrelevant to the current proceedings. Consequently, the court proceeded to hear the appeal on its merits, focusing on the specific issue of the validity of the addition of proportionate expenditure attributable to exempted income in the book profit assessment under Section 115JA of the Income Tax Act. The court's decision was guided by previous judgments and the specific provisions of the law, ultimately leading to the allowance of the revenue's appeal and the confirmation of the disallowance to the prescribed extent.