2013 (3) TMI 813 - AT - Income Tax

Summary

Issues involved:
The issues involved in this judgment are adjustment to book profit u/s 115-JB and computation of disallowance u/s 14A.

Adjustment to book profit u/s 115-JB:
The appellant challenged the adjustment to 'book profit' u/s 115-JB, contending that no adjustment can be made by importing section 14A(2) and 14A(3) into the said clause. The appellant argued that the computation of 'expense relatable to exempt income' under clause (f) of the Explanation to section 115-JB by adopting methodology laid down in Rule 8D is bad-in-law and needs to be cancelled.

Computation of disallowance u/s 14A:
The appellant also disputed the disallowance of &8377; 12,12,655/- under Section 14A, contending that the expenses debited to the profit and loss account and claimed as business expense are incurred for the purpose of the business income. The appellant argued that such disallowance is bad-in-law and needs to be deleted.

The Assessing Officer made disallowance under Section 14A of &8377; 12,12,655/-, and further made adjustment on account of disallowance of expenses under Section 14A while computing the book profit under Section 115JB. The CIT(A) confirmed the disallowance based on the application of Rule 8D for the assessment year 2008-09.

The appellant argued that adjustment on account of disallowance under Section 14A cannot be made while computing the book profit under Section 115JB, as no such expenditure was debited in the profit and loss account. The Departmental Representative contended that such an adjustment can be made under Clause (f) of Explanation-1 to Section 115JB.

The Tribunal held that no disallowance under Section 14A can be imported while computing the book profit under Section 115JB if the assessee has not debited any expenses for earning exempt income in the profit and loss account. The Tribunal emphasized that the Assessing Officer cannot tinker with accounts approved by the Board of Directors and filed before the Registrar of Companies. Consequently, the appeal was treated as partly allowed, with ground no. 2 being allowed and ground no. 1 dismissed as it had become purely academic.

In conclusion, the Tribunal partly allowed the assessee's appeal, emphasizing that no disallowance under Section 14A can be made while computing the book profit under Section 115JB if no such expenses were debited in the profit and loss account.