2018 (5) TMI 1546 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - administrative expenses towards exempted dividend income - Held that - The assessee had received dividend income only from Mcleod Russel India Ltd. and accordingly any disallowance of expenses u/s 14A of the Act towards administrative expenses could be made only with respect to such investments. Respectfully following the co-ordinate Bench decision of this Tribunal rendered in the case of REI Agro Ltd. 2013 (9) TMI 156 - ITAT KOLKATA , we direct the AO to make disallowance under third limb of Rule 8D(2) of the Rules by considering only dividend bearing investment subject to maximum of dividend income. MAT computation - reduction of least of cash loss or depreciation loss as per books of accounts while computing the book profits u/s 115JB - Held that - It is not in dispute that the least of cash loss or depreciation loss as per books of accounts is to be reduced while computing the book profits u/s 115JB - There is absolutely no logic in the ld. AO reducing ₹ 5,94,38,000/-taking figure of accumulated depreciation from the fixed assets schedule and reducing the same while completing the books profit u/s 115JB of the Act. The assessee has rightly deducted unabsorbed depreciation loss as per books of accounts. We hold that this figure requires factual verification by the AO. Hence remand this issue to the file of ld AO for factual verification of the aforesaid figures and determine the amount of unabsorbed depreciation loss as per books of accounts to be reduced while computing the book profits u/s 115JB

Summary

Issues:
1. Disallowance u/s 14A of the Act
2. Reduction of least of cash loss or depreciation loss while computing book profits u/s 115JB of the Act

Analysis:

Issue 1: Disallowance u/s 14A of the Act
The appeal was against the order passed by the Commissioner of Income Tax (Appeals) regarding the disallowance under section 14A of the Act. The Assessing Officer (AO) had disallowed an amount under Rule 8D(2) of the Rules, but erroneously disallowed a higher sum. The assessee argued that the disallowance should be lower based on the actual calculation. The Commissioner did not agree with the assessee. However, the Tribunal found that the disallowance should be based only on the dividend income received, following a precedent set by a Co-ordinate Bench decision. The Tribunal directed the AO to rectify the error and make the disallowance under Rule 8D(2) based on the actual dividend income, partially allowing the grounds raised by the assessee.

Issue 2: Reduction of least of cash loss or depreciation loss while computing book profits u/s 115JB of the Act
The dispute was regarding the reduction of unabsorbed depreciation loss as per books of accounts while computing book profits under section 115JB of the Act. The AO reduced the depreciation loss based on the fixed assets schedule, which was lower than the claim made by the assessee. The Tribunal found that the AO's reduction was not logical and required factual verification. Therefore, the issue was remanded back to the AO for verification of the figures and determination of the correct amount of unabsorbed depreciation loss to be reduced while computing book profits under section 115JB of the Act. Grounds raised by the assessee on this issue were allowed for statistical purposes.

In conclusion, the appeal was partly allowed by the Tribunal, with directions given to rectify the disallowance under section 14A and to verify the figures for the reduction of unabsorbed depreciation loss while computing book profits under section 115JB of the Act.