2021 (10) TMI 556 - AT - Income Tax

Computation of book profit u/s 115JB for Disallowance u/s 14A r.w.r. 8D - HELD THAT - We agree with the contention of the Ld. AR that the case of the Revenue is not tenable for the reason that ITAT Delhi Special Bench in the case of ACIT vs. Vireet Investments 2017 (6) TMI 1124 - ITAT DELHI has categorically held that computation under clause (f) of Explanation-1 to Section 115JB (2) of the Act is to be made without resorting to the computation as contemplated u/s. 14A read with Rule 8D of the Income Tax Rules, 1962. Also decided in favour of own case in IFCI LIMITED AND VICE-VERSA 2020 (10) TMI 528 - ITAT DELHI . Also in BHUSHAN STEEL LTD. 2015 (9) TMI 1424 - DELHI HIGH COURT held that addition cannot be made u/s. 14A to the book-profits in absence of any specific reference in section 115JB - Decided in favour of assessee.

Summary

Issues:
- Challenge to deletion of disallowance u/s. 14A of the Income Tax Act in computing book profits under section 115JB.

Detailed Analysis:
1. The appeal was filed by the Department against the order passed by the Commissioner of Income Tax (Appeals) for Assessment Year 2012-13. The assessee, a company engaged in leasing and finance, initially declared an income of &8377; 1,67,58,68,134/- after set off against business loss and unabsorbed depreciation. Subsequently, the return was revised to show a total income of &8377; 1,42,97,88,723/-. The assessment was completed at an income of &8377; 1,52,19,72,150/- after certain disallowances, including disallowance u/s. 14A of the Act.

2. The assessee challenged the addition to book profits made by the Assessing Officer in the Ld. First Appellate Authority. The Authority deleted the addition following the decision of the Special Bench of ITAT Delhi in a specific case. The Department then approached the Tribunal to challenge the deletion of disallowance u/s. 14A.

3. The Department raised grounds of appeal questioning the application of Section 14A read with Rule 8D in computing book profits under Section 115JB of the IT Act. The Authorized Representative of the assessee argued that the Department's appeal should be dismissed based on previous decisions by the Tribunal and the Special Bench, favoring the assessee on the same issue for earlier assessment years.

4. The Senior DR supported the Assessing Officer's order but acknowledged that the issue was decided against the Revenue in previous cases.

5. The Tribunal examined the submissions and relevant judgments. It noted that the Special Bench had held that the computation under Explanation-1 to Section 115JB should be done without resorting to the computation under Section 14A read with Rule 8D. The Tribunal also referred to previous decisions in favor of the assessee and a High Court ruling supporting the view that addition u/s. 14A cannot be made to book profits without specific reference in Section 115JB.

6. Based on the settled judicial position and precedents, the Tribunal dismissed the Department's grounds of appeal and ultimately dismissed the appeal. The order was pronounced on 30th September 2021.