2022 (8) TMI 952 - AT - Income Tax

Reduction into book loss owing to disallowance made u/s 14A - Whether the provisions of section 115JB are attracted only when there are book profits? - HELD THAT - We are of the considered view that the assessee seeks to agitate the reduction into book loss owing to disallowance made u/s 14A - However, the reduction to book loss has no potential to cause any prejudice to the assessee at present or in future as per scheme of the act. Hence, the litigation by the assessee is a futile exercise. Therefore, we are not inclined to engage in disposal of such litigation on merit. Hence, the grounds raised by the assessee are rejected.

Issues:
1. Reduction of book loss by disallowance under section 14A
2. Reduction of book loss under section 115JB for premium on convertible debentures
3. Failure to direct increase in book loss for expenditure on conversion of debentures
4. Appellant's request for permission to amend grounds of appeal
5. Assessment details and appeal before CIT(Appeals)
6. Appellant's contentions on reduction of book loss and premium surrender
7. CIT(Appeals) findings and appellant's contentions on premium surrender
8. Appellant's contention on increase in book loss
9. Appellant's claim restriction before ITAT
10. Arguments by learned counsel and CIT(DR)
11. ITAT's decision to reject the appeal

Reduction of Book Loss by Disallowance under Section 14A:
The appellant contested the reduction of book loss by the Assessing Officer (AO) under Section 14A, arguing that Section 115JB applies only in the presence of book profits. The appellant emphasized that the AO's act of reducing book loss was beyond legislative mandate and should be struck down. The appellant also highlighted that the CIT(A) reduced the disallowance under Section 14A significantly, rendering the adjustment inconsequential. However, the ITAT found that the reduction in book loss did not prejudice the appellant presently or in the future, deeming the litigation futile and rejecting the grounds raised by the appellant.

Reduction of Book Loss under Section 115JB for Premium on Convertible Debentures:
The appellant challenged the reduction of book loss by the AO under Section 115JB concerning the premium on convertible debentures. The appellant argued that the premium amount was never debited in the audited Profit & Loss account, and thus, the reduction of book loss was unwarranted. Despite the CIT(A) upholding the addition of the surrendered premium to book profit, the appellant contended that the premium was claimed as a deduction and not debited to the Profit & Loss account. The ITAT, however, concluded that the appellant's grounds had become academic, as no relief was sought against the CIT(A) findings, and dismissed the appeal.

Failure to Direct Increase in Book Loss for Expenditure on Conversion of Debentures:
The appellant also raised the issue of the failure to direct an increase in book loss for the expenditure on the conversion of debentures. The appellant argued that the share premium amount allowed as deductible expenditure by the AO was not debited to the Profit & Loss account, warranting an increase in book loss. However, the ITAT rejected the appellant's contentions, deeming the grounds raised as futile and dismissing the appeal.

The judgment by the ITAT Delhi addressed the appellant's challenges regarding the reduction of book loss by disallowances under Section 14A and Section 115JB, as well as the failure to direct an increase in book loss for certain expenditures. Despite the appellant's contentions, the ITAT found the grounds raised to be academic and futile, ultimately dismissing the appeal.

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