2023 (7) TMI 1209 - AT - Income Tax

Book profit u/s 115JB resorting to computation u/s 14A r.w.r. 8D - HELD THAT - We find that the Special Bench of Tribunal in Vireet Investment (P) Ltd. 2017 (6) TMI 1124 - ITAT DELHI held that computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated under section 14A read with Rule 8D of the Income-tax Rules, 1962. Thus, we direct the AO to compute the book profit under section 115JB of the Act, without resorting to computation under section 14A read with Rule 8D.

Summary

Issues Involved:
The appeal challenges the order passed u/s 250 of the Income Tax Act, 1961 by the Commissioner of Income Tax (Appeals) for the assessment year 2015-16.

Grounds Raised by Assessee:
1. Challenge to order u/s 154 for lack of proper opportunity.
2. Void order u/s 154 on debatable issue.
3. Disallowance under Section 14A for computing Total Income under MAT provisions.
4. Disallowance u/s 14A is notional without evidence of proximate relationship.
5. Right to add, alter, or amend grounds of appeal.

Facts of the Case:
- Assessee is a manufacturer and exporter of pharmaceutical products.
- Return filed showed total income of Rs. 3,95,99,830.
- Investments made in instruments yielding exempt income of Rs. 160,48,90,158.
- Borrowed funds used for investments with interest expenditure debited.
- Disallowance under section 14A not made initially.
- AO found interest cost directly attributable to investments and made disallowance of Rs. 9,02,01,085 under section 14A.
- Subsequently, disallowance added to book profit under section 115JB.
- CIT(A) upheld AO's decision based on previous Tribunal decision.
- Assessee cited a subsequent Special Bench decision in favor.

Judgment:
- Special Bench decision directs computation of book profit under section 115JB without using section 14A and Rule 8D.
- Grounds 3 and 4 of appeal allowed in favor of assessee.
- Grounds 1 and 2 not pressed during hearing and dismissed.
- Appeal partly allowed.

Conclusion:
The appeal challenges the assessment order under section 250 of the Income Tax Act, 1961 for the assessment year 2015-16, focusing on disallowance under section 14A for computing book profit under section 115JB. The Tribunal's decision favored the assessee based on a subsequent Special Bench ruling, directing computation of book profit without resorting to section 14A.