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2019 (7) TMI 33 - HC - Income TaxAddition u/s 14A - determining the book profit under Section 115JB - HELD THAT - We are of the view that no error, not to speak of any error of law, could be said to have been committed by the Tribunal in dismissing the appeal filed by the Revenue. The Tribunal in our opinion is justified in applying the ratio of the decision of this court in the case of UTI Bank Ltd. 2013 (8) TMI 238 - GUJARAT HIGH COURT where in we hold that the disallowances made under the provisions of Sec. 14A r.w.r. 8D of the IT Rules, cannot be applied to the provision of Sec. 115JB as per the direction of the Hon'ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd 2014 (11) TMI 1169 - CALCUTTA HIGH COURT We also note that there is no mechanism given under the clause (f) to Explanation-1 of Sec. 115JB of the Act to workout/determine the disallowance. Therefore in the given facts circumstances, we feel that adhoc disallowance will service the justice to the Revenue and assessee. - Decided against revenue
Issues:
1. Disallowance under Section 14A of the Income Tax Act, 1961 while computing income under normal provisions and book profit. 2. Interpretation of provisions of clause (f) to Explanation-1 of Section 115JB of the Act independently for disallowance. 3. Application of relevant case laws in determining disallowances under Section 14A r.w.r. 8D and Section 115JB of the Act. Issue 1: Disallowance under Section 14A: The appellant, a Revenue, challenged the order passed by the Appellate Tribunal regarding disallowances made under Section 14A r.w.r 8D while computing income under normal provisions and book profit. The Tribunal dismissed the appeal by the Revenue, citing that the disallowance under Section 14A of the Act cannot be imported while determining the book profit under Section 115JB. The Tribunal relied on various judgments, including a case involving Alembic Ltd. where it was held that adjustments for disallowance under Section 14A in computing book profit under Section 115JB must be made independently. The Tribunal also referred to a Special Bench judgment of the Delhi Tribunal, emphasizing that disallowances under Section 14A r.w.r. 8D cannot be considered while determining book profit under Section 115JB. Issue 2: Interpretation of Clause (f) to Explanation-1 of Section 115JB: The Tribunal determined that disallowances need to be made independently under the provisions of clause (f) to Explanation-1 of Section 115JB of the Act. While there was no mechanism provided to determine the disallowance under this clause, the Tribunal decided to make an ad-hoc disallowance of ?5 lakhs to avoid further litigation. The Tribunal highlighted the importance of applying the provisions of clause (f) independently for disallowances related to dividend income, drawing support from a judgment of the Calcutta High Court in a similar matter. Issue 3: Application of Case Laws: The Tribunal extensively referred to various judgments, including those of the Gujarat High Court and the Delhi Tribunal, to support its decision on disallowances under Section 14A r.w.r 8D and Section 115JB of the Act. The Tribunal emphasized the need to follow the rulings of higher courts and Special Benches in similar matters to ensure consistency in interpreting and applying the relevant provisions of the Income Tax Act. The Tribunal concluded that the appeal by the Revenue lacked merit, and the decision of the Tribunal was in line with established legal principles and precedents. In conclusion, the High Court upheld the Tribunal's decision, dismissing the appeal by the Revenue. The Court found no error in the Tribunal's application of relevant legal principles and case laws in determining the disallowances under Section 14A and Section 115JB of the Income Tax Act. The judgment highlighted the importance of following established legal precedents and rulings of higher courts in interpreting and applying tax laws.
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