2016 (7) TMI 1548 - AT - Income Tax

Disallowance u/s 14A - HELD THAT - Departmental Representative has not contested the factual matrix brought out by the Ld. Representative for the assessee. Apart therefrom, in our view, the decision of the CIT(A) that in the absence of any dividend or any other exempt income received in the instant year, no disallowance under section 14A of the Act is merited, is very much apt, as it is in line with the judgment of the Hon ble Delhi High Court in the case of Cheminvest Ltd. Vs. CIT, 2015 (9) TMI 238 - DELHI HIGH COURT . Thus, we have no hesitation in approving the stand of the CIT(A) on this aspect. In any case, so far as the decision of the CIT(A) in retaining the suo-motu disallowance made by the assessee is concerned, the same is not an issue before us. Thus, we hereby affirm the order of the CIT(A) on the aspect agitated by the Revenue. As a consequence, Revenue fails in Ground of appeal No.1. Computation of book profit in terms of section 115JB - The Tribunal in assessee s own case 2015 (7) TMI 1217 - ITAT MUMBAI has considered a similar issue and upheld the stand of the assessee following an earlier decision of the Tribunal in the case of Essar Teleholdings Ltd. vs. DCIT 2013 (5) TMI 116 - ITAT MUMBAI . Secondly, the CIT(A) noticed that in this year, assessee has not earned any exempt income and, therefore, no such income was credited to the P L Account. As a consequence, no corresponding expenditure can be identified and, thus, the provisions were unworkable. In this manner, the addition made by the Assessing Officer has been deleted. - Decided against revenue

Summary

Issues:
1. Disallowance under section 14A of the Income Tax Act, 1961.
2. Computation of 'book profit' under section 115JB of the Act.

Issue 1: Disallowance under section 14A of the Income Tax Act, 1961

The appeal filed by the Revenue challenged the order passed by CIT(A) regarding the disallowance under section 14A r.w. Rule 8D of the Act. The Assessing Officer had initially determined a disallowance of ?105,83,54,495, but the CIT(A) directed a restructure to ?6,93,26,005. The respondent company, engaged in power generation, had made investments yielding exempt income. The Assessing Officer applied Rule 8D(2) to calculate the disallowance. The CIT(A) noted that in the relevant year, the company did not receive any exempt income, thus no disallowance was justified under section 14A. However, as the company had made a suo-motu disallowance of ?6,93,26,005, the CIT(A) directed the retention of this amount. The Revenue contended that the disallowance should not be reduced and should remain at the initial amount determined by the Assessing Officer. The Tribunal upheld the CIT(A)'s decision, citing the absence of exempt income in the relevant year and the company's actions.

Issue 2: Computation of 'book profit' under section 115JB of the Act

The second ground of appeal related to the computation of 'book profit' under section 115JB. The Assessing Officer added the disallowance under section 14A while computing the book profit, which the company contested. The CIT(A) disagreed with the Assessing Officer, referring to a previous Tribunal decision in the company's favor for assessment year 2006-07. The CIT(A) also noted that no exempt income was earned in the relevant year, leading to the deletion of the addition made by the Assessing Officer. The Tribunal found no error in the CIT(A)'s decision, as the precedent continued to hold, and the factual aspects supported the deletion of the addition. Consequently, the Tribunal affirmed the CIT(A)'s decision on this issue as well.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on both issues. The judgment provided detailed reasoning based on legal provisions, factual circumstances, and precedents to support the outcomes.