2019 (3) TMI 1398 - AT - Income Tax

Disallowance u/s 14A while computing book profit u/s 115JB - MAT computation - HELD THAT - This question in favour of the assessee and held that computation for the purpose of clause (f) of Explanation 1 to Section 115JB(2) is to be made without resorting to the computation as contemplated under section 14A r.w. rule 8D. Respectfully following the decision of ACIT Vs. Vireet Investments P.Ltd. 2017 (6) TMI 1124 - ITAT DELHI we allow this ground of appeal and direct the AO not to make adjustments in book profit for the purpose of MAT liability on the basis of calculations made with Rule 8D of the Income Tax Rules. Depreciation @ 25% on leasehold right acquired in respect of land at Dahej SEZ - HELD THAT - Since there is no independent finding recorded by the ld.CIT(A) in this year except putting reliance on the order of the ld.CIT(A) in the Asstt.Year 2011-12 and that order has already been set aside by the ITAT and the issue has been remitted to the file of AO for adjudication afresh. Similar procedure be followed in this year also. Respectfully following the order of the Co-ordinate Bench, we allow this ground of appeal for statistical purpose and restore the issue to the file of the AO who will follow directions given by the ITAT in the Asstt.Year 2011-12.

Summary

Issues Involved:
1. Deduction under Section 35D.
2. Disallowance under Section 14A and its impact on book profit under Section 115JB.
3. Depreciation on leasehold rights acquired in respect of land at Dahej SEZ.

Issue-wise Detailed Analysis:

1. Deduction under Section 35D:
The assessee initially contested the deduction of ?41,84,012/- under Section 35D, which was 1/5th of ?2,09,20,060/-. However, this ground of appeal was not pressed by the assessee during the hearing and was subsequently rejected by the Tribunal.

2. Disallowance under Section 14A and its Impact on Book Profit under Section 115JB:

Ground No. 2:
The assessee declared a total loss of ?6,66,96,895/- for the assessment year 2012-13. The Assessing Officer (AO) noted that the assessee had a dividend income of ?85,06,365/-, which was exempt. The AO disallowed ?33,65,433/- under Section 14A read with Rule 8D, which was further added back for computing book profit under Section 115JB. On appeal, the CIT(A) restricted the disallowance to ?7,32,288/- based on the assessee's calculations, which were accepted by the CIT(A). The Tribunal found no error in the CIT(A)'s order as the calculations were made by the assessee itself.

Ground No. 2.1:
The Tribunal addressed whether the disallowance under Section 14A could be added back to the book profit under Section 115JB. The assessee relied on the Special Bench decision in ACIT Vs. Vireet Investments P. Ltd., which held that no adjustments could be made in the book profit calculated under Section 115JB based on disallowances under Section 14A. The Tribunal followed this decision and directed the AO not to make adjustments in the book profit for the purpose of MAT liability based on Rule 8D calculations.

3. Depreciation on Leasehold Rights Acquired in Respect of Land at Dahej SEZ:

The issue was whether the depreciation at the rate of 25% on leasehold rights acquired in respect of land at Dahej SEZ was admissible. The CIT(A) had followed the findings of her predecessor for the assessment year 2011-12 without recording any independent findings. The Tribunal referred to its decision in the assessment year 2011-12, where it was held that the premium paid for the leasehold land should be treated as revenue expenditure based on the Gujarat High Court decision in DCIT Vs. Sun Pharmaceuticals Industries Ltd. The Tribunal restored the issue to the AO for fresh adjudication, directing the AO to follow the Tribunal's directions given in the assessment year 2011-12.

Conclusion:
The appeal of the assessee was partly allowed for statistical purposes, and the issues were remitted to the file of the AO for fresh adjudication following the Tribunal's directions. The order was pronounced on 26th March 2019.