2017 (9) TMI 1882 - AT - Income Tax

Disallowance u/s 14A r.w. Rule 8D2(iii) in the normal computation of income - assessee before us contends that only those investments which yielded dividend income during the year should be considered for computing the disallowance Rule 8D2(iii) r.w.s 14A - HELD THAT - As decided in own case 2017 (9) TMI 655 - ITAT MUMBAI relying on VIREET INVESTMENT (P.) LTD. 2017 (6) TMI 1124 - ITAT DELHI we restore this issue to the file of the Assessing Officer with a direction to recompute the disallowance under Rule 8D2(iii) by considering only those investments which yielded dividend income during the Assessment Year 2008-09. This ground of appeal is allowed for statistical purpose. Disallowance made u/s 14A while computing the book profits u/s 115 JB - HELD THAT - We direct the Assessing Officer to compute the book profits in accordance with directions of the Hon'ble Special Bench in the case of ACIT v. Vireet Investments Private Limited (supra). Disallowance under 115JB for working out book profits as adopted by the Assessing Officer u/s 14A of the Act - HELD THAT - Ground of appeal is restored to the file of the Assessing Officer to compute the book profits u/s 115JB in view of the decision of the Delhi Special Bench in the case of ACIT v. Vireet Investments Private Limited (supra) wherein it has been held that computation under Clause(f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A r.w. Rule 8D of I.T. Rules.

Summary

Issues Involved:
1. Disallowance made under section 14A r.w. Rule 8D2(iii) in the normal computation of income.
2. Disallowance under section 14A while computing the book profits under section 115JB of the Act.

Analysis:

1. Disallowance under section 14A r.w. Rule 8D2(iii) in the normal computation of income:
The appeal involved cross appeals by the Assessee and Revenue against the order of the Commissioner of Income Tax (Appeals) for the Assessment Year 2008-09. The primary issue was the disallowance made under section 14A r.w. Rule 8D2(iii) in the normal computation of income. The Assessee contended that only investments yielding dividend income during the year should be considered for computing the disallowance. This argument was supported by a recent decision of the Delhi Bench. The Tribunal noted a similar issue in the Assessee's case for other assessment years, where it was directed to recompute the disallowance under Rule 8D2(iii) considering only investments yielding dividend income. Following this precedent, the Tribunal directed the Assessing Officer to recompute the disallowance for the current assessment year accordingly.

2. Disallowance under section 14A while computing the book profits under section 115JB of the Act:
Another issue raised was the disallowance under section 14A while computing the book profits under section 115JB of the Act. The Coordinate Bench had already addressed this issue, citing a decision of the Special Bench in a different case. The Tribunal, following the same precedent, directed the Assessing Officer to compute the book profits under section 115JB in accordance with the directions of the Special Bench. The Revenue's appeal also raised concerns regarding the computation of book profits under section 115JB, which was restored to the Assessing Officer for reevaluation based on the decision of the Special Bench.

In conclusion, the Tribunal partly allowed the appeals of both the Assessee and Revenue for statistical purposes, directing the Assessing Officer to recompute the disallowances under section 14A r.w. Rule 8D2(iii) and the book profits under section 115JB in line with the decisions of the Special Bench. The judgments provided clarity on the methodology for computing disallowances and book profits, ensuring consistency with legal precedents and principles.