2013 (10) TMI 1001 - AT - Income Tax

Adjustment to be made u/s 14A for computation of book profit u/s 115JB of the Income Tax Act Held that - Following the decision of the Hon ble Apex Court in the case of Apollo Tyres Ltd.vs. CIT reported at 2002 (5) TMI 5 - SUPREME Court , directed the Assessing Officer not to make any adjustment in respect of disallowance made u/s.14A of the I.T.Act while computing the book profit u/s.115JB of the I.T.Act Decided in favor of Assessee.

Summary

Issues:
1. Recomputation of book profit under section 115JB by adding disallowed interest expenditure under section 14A.

Analysis:
The appeal before the Appellate Tribunal ITAT Ahmedabad stemmed from the order of the Learned CIT(Appeals)-XI, Ahmedabad, concerning the recomputation of book profit under section 115JB by adding a sum of Rs.28,77,242/- being interest expenditure disallowed in regular assessment under section 14A. The Assessee contested the decision, which was initially rejected by the Assessing Officer. The income was determined to be Rs.2,22,690/-, with the book profit under section 115JB calculated at Rs.66,11,130/- after the disallowance of interest expenditure. The CIT(A) upheld the Assessing Officer's decision, emphasizing that adjustments for computing book profit are limited by the Explanation to section 115JB and cannot include all allowances or disallowances from the regular assessment. The Assessee, dissatisfied with this ruling, appealed the decision.

The Appellate Tribunal considered various legal precedents, including the decision of ITAT Delhi Bench in the case of Goetze (India) Ltd., which highlighted the similarity between the provisions of Explanation to section 115JA and section 14A. The Tribunal noted that while both provisions relate to expenditure linked to specific income, the specific sub-sections of section 14A cannot be imported into the Explanation to section 115JA for computing adjusted book profit. Additionally, the Assessee's representative cited several unreported decisions, such as M/s. Essar Teleholdings Ltd. vs. DCIT, Quippo Telecom Infrastructure Ltd. vs. Asst.CIT, and ACIT vs. JK Paper Ltd., to support their argument.

Relying on the cited precedents and the judgment of the Hon'ble Apex Court in Apollo Tyres Ltd. vs. CIT, the Appellate Tribunal directed the Assessing Officer not to adjust the disallowance under section 14A while computing the book profit under section 115JB of the I.T. Act. Consequently, the substantial ground of the Assessee was allowed, leading to the successful appeal of the Assessee.