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2022 (2) TMI 685 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - HELD THAT - As decided in M/S. R.E.I. AGRO LTD. 2013 (12) TMI 1517 - CALCUTTA HIGH COURT only the value of investment on which exempt income was actually earned by the assessee during the year under consideration should be taken into consideration while computing the disallowance under Clause (ii) of Rule 8D(2). Keeping in view the said decision of the Hon ble Jurisdictional High Court, we direct the Assessing Officer to recompute the disallowance to be made u/s 14A of the Act as per Clause (ii) of Rule 8D(2). Ground No. 2 of the assessee s appeal thus is partly allowed. Belated payment of employees contribution to Provident Fund beyond the due date specified in the relevant Act but within the period of filing of the return of income - HELD THAT - As decided in LUMINO INDUSTRIES LTD. 2021 (11) TMI 926 - ITAT KOLKATA delete the addition made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of delayed payment of employees contribution towards Provident Fund. Disallowance u/s 14A while computing the book profit of the assessee company u/s 115JB - HELD THAT - Special Bench of the Tribunal at Delhi in the case of ACIT v Vireet Investments Pvt Ltd 2017 (6) TMI 1124 - ITAT DELHI wherein it is held that no disallowance u/s 14A r.w.r. 8D can be made while computing book profit of the assessee company u/s 115JB - However, Clause (f) of Explanation 1 to Section 115JB of the Act provides that the amount or amounts of expenditure relatable to any income to which Section 10 other than the provisions contained in Clause (38) thereof is required to be added while computing the book profit u/s 115JB and this amount has to be worked out by the Assessing Officer independently without reference to Section 14A or Rule 8D. Accordingly restore this issue to the file of the Assessing Officer for recomputing the amount to be added on account of expenditure relatable to any income exempt u/s 10 other than u/s 10(38) as per Clause (f) of Explanation 1 to Section 115JB.
Issues Involved:
1. Addition under Section 14A of the Income Tax Act read with Rule 8D of the Income Tax Rules. 2. Addition on account of belated payment of employees’ contribution to Provident Fund. 3. Addition under Section 14A while computing book profit under Section 115JB of the Income Tax Act. Issue-wise Analysis: 1. Addition under Section 14A of the Income Tax Act read with Rule 8D of the Income Tax Rules: The issue in Ground No. 2 pertains to the addition of ?2,61,647/- made by the Assessing Officer (AO) and confirmed by the CIT(A) under Section 14A of the Income Tax Act read with Rule 8D of the Income Tax Rules. The assessee, a company engaged in trading chemicals, had declared exempt income from dividends and long-term capital gains in its return and offered a disallowance of ?42,110/- for direct expenses related to this exempt income. The AO found additional direct expenses in the form of STT paid amounting to ?24,174/- and made a further disallowance of ?2,37,473/- by applying Clause (ii) of Rule 8D(2). The Tribunal upheld the disallowance of ?24,174/- but directed the AO to recompute the disallowance of ?2,37,473/- based on the decision of the Hon’ble Calcutta High Court in the case of CIT vs. R.E.I. Agro Ltd., which mandates considering only the value of investments that actually earned exempt income during the year. 2. Addition on account of belated payment of employees’ contribution to Provident Fund: Ground No. 3 involves the addition of ?1,56,410/- for the belated payment of employees’ contribution to Provident Fund. The Tribunal referred to a common order in ITA No. 365/KOL/2021, where it was held that contributions made before the due date of filing the return under Section 139(1) of the Act are allowable as deductions. The Tribunal noted that the Finance Act, 2021 amendment, which disallows such deductions if not made within the due date prescribed by the respective statutes, is prospective and applicable from AY 2021-22 onwards. Therefore, the Tribunal allowed the assessee’s claim for the deduction as the payments were made before the due date of filing the return for AY 2017-18. 3. Addition under Section 14A while computing book profit under Section 115JB of the Income Tax Act: Ground No. 4 addresses the addition of ?2,61,647/- under Section 14A while computing the book profit under Section 115JB. The Tribunal referred to the Special Bench decision in ACIT v. Vireet Investments Pvt Ltd, which held that no disallowance under Section 14A read with Rule 8D can be made while computing book profit under Section 115JB. However, the Tribunal noted that Clause (f) of Explanation 1 to Section 115JB requires adding the expenditure relatable to any exempt income under Section 10 (other than Section 10(38)) while computing book profit. The Tribunal restored this issue to the AO for recomputation as per Clause (f) of Explanation 1 to Section 115JB. Conclusion: The appeal of the assessee is treated as partly allowed, with Ground No. 2 partly allowed, Ground No. 3 allowed, and Ground No. 4 partly allowed for statistical purposes. The Tribunal directed the AO to recompute the disallowance under Section 14A and the addition under Section 115JB as per the specified guidelines.
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