2021 (8) TMI 372 - AT - Income Tax

Rectification u/s 254 - Addition of disallowance made u/s. 14A to book profits u/s. 115JB - HELD THAT - Tribunal has not adjudicated ground No. 2 of Revenue s appeal. Learned counsel of the assessee pleaded that this issue is covered in favour of the assessee by decision of RELIANCE UTILITIES POWER LTD. 2009 (1) TMI 4 - BOMBAY HIGH COURT and HDFC BANK LTD. 2014 (8) TMI 119 - BOMBAY HIGH COURT that disallowance under section 14A of the Act cannot be imported in section 115JB. We find that in the Miscellaneous Application it is not permissible to decide upon the merits of an issue which has not been adjudicated. Hence, we recall the ground No. 2 in Revenue s appeal to be decided afresh.

Summary

Issues:
Rectification of mistake under section 254(2) of the I.T. Act in the order of ITAT in ITA No. 4754/Mum/2014 for A.Y. 2009-10 regarding disallowance made u/s. 14A to book profits u/s. 115JB.

Analysis:
The Revenue filed a Miscellaneous Application seeking rectification of mistake under section 254(2) of the I.T. Act in the ITAT's order dated 20.12.2019 in relation to ITA No. 4754/Mum/2014 for A.Y. 2009-10. The issue raised was that ground No. 2 in the Revenue's appeal remained unadjudicated, specifically concerning the addition of disallowance made u/s. 14A to book profits u/s. 115JB. The Revenue contended that this ground was not addressed by the ITAT, which was a mistake apparent from the record. The authorized representative argued that the ITAT had indeed adjudicated the issue of disallowance under section 14A of the Act, indicating that the issue had been resolved.

The Tribunal examined the grounds raised by the Revenue in its appeal, which included the disallowance of interest expenditure and the direction to restrict the addition for computing book profit under section 115JB. The Tribunal had already adjudicated on these issues in a combined order where both the Assessing Officer's and the CIT(A)'s orders were considered. Regarding the disallowance on account of interest, the Tribunal upheld the CIT(A)'s decision based on the sufficiency of the assessee's own funds to cover investment earning interest-free income. The Tribunal also addressed the disallowance under Rule 8D(iii) of the Rules, remitting the issue back to the CIT(A) for a speaking order due to lack of adjudication on the aspect of satisfaction by the Assessing Officer.

However, it was noted that the Tribunal had not specifically adjudicated on ground No. 2 of the Revenue's appeal, which led to the conclusion that the issue remained unresolved. The counsel for the assessee argued that the issue was covered in favor of the assessee by a decision of the Hon'ble Bombay High Court stating that disallowance under section 14A of the Act cannot be imported in section 115JB. As a result, the Tribunal decided to recall ground No. 2 in the Revenue's appeal for fresh consideration, emphasizing that it was not permissible to decide on the merits of an issue that had not been adjudicated in the Miscellaneous Application. Consequently, the order in ITA No. 4754/Mum/2014 for A.Y. 2009-10 was recalled solely to address ground No. 2, which had not been adjudicated, and the Miscellaneous Application was allowed accordingly.