2021 (12) TMI 1204 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - CIT(A) deleted disallowance by stating that there was no exempt income and hence, there cannot be any disallowance - HELD THAT - Hon ble Supreme Court in the case of Maxopp Investment Ltd vs. CIT, 2018 (3) TMI 805 - SUPREME COURT has held that once there is no exempt income, no disallowance can be made by invoking the provisions of section 14A r.w.r 8D of the Rules. Hence, we find no infirmity in the order of CIT(A) and the same is affirmed. The appeal of Revenue on this issue is dismissed. MAT computation u/s 115JB - disallowance of expenses made invoking the provisions of section 14A r.w.rule 8D of the Rules, while computing book profit u/s.115JB - HELD THAT - This issue is squarely covered by the decision of Vireet Investment P. Ltd. 2017 (6) TMI 1124 - ITAT DELHI wherein held that no adjustment of disallowance can be made while making computation u/s.115JB of the Act. We noted that Special Bench of this Tribunal observed while holding that disallowance u/s.14A r.w.rule 8D cannot be added while computing book profits as per section 115JB of the Act, as Explanation to that section does not specifically mention the provisions of section 14A of the Act. Hence, we find no infirmity in the order of CIT(A) and the same is affirmed. This issue of Revenue s appeal is also dismissed.

Summary

Issues:
1. Disallowance of expenses under Section 14A of the Income Tax Act.
2. Disallowance of expenses while computing book profit under Section 115JB of the Act.

Issue 1: Disallowance of expenses under Section 14A of the Income Tax Act:
The appeal by the Revenue challenged the order of the Commissioner of Income Tax (Appeals) regarding the deletion of disallowance of expenses made by the Assessing Officer (AO) under Section 14A of the Act. The AO disallowed expenses related to exempt income under Rule 8D of the Income Tax Rules. The CIT(A) deleted the disallowance, stating that since the assessee had not earned any exempt income, no disallowance was applicable. The ITAT noted the AO's disallowance under Rule 8D and the CIT(A)'s decision. Citing the Hon’ble Supreme Court's ruling in the case of Maxopp Investment Ltd vs. CIT, the ITAT affirmed the CIT(A)'s decision, stating that no disallowance can be made under Section 14A if there is no exempt income. Consequently, the Revenue's appeal on this issue was dismissed.

Issue 2: Disallowance of expenses while computing book profit under Section 115JB of the Act:
The next issue in the appeal was the deletion of expenses disallowance by the CIT(A) under Section 14A of the Act while computing book profit under Section 115JB. The Revenue contended that the disallowance under Section 14A should be added to the income for computing book profit. The ITAT referred to a decision by the Special Bench of ITAT, Delhi, in the case of Vireet Investment P. Ltd., which held that no adjustment of disallowance can be made while computing under Section 115JB. The Special Bench ruled that disallowance under Section 14A cannot be added to book profits as the Explanation to Section 115JB does not specifically mention Section 14A. Consequently, the ITAT affirmed the CIT(A)'s decision on this issue as well, leading to the dismissal of the Revenue's appeal.

In conclusion, the ITAT Chennai dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on both issues related to the disallowance of expenses under Section 14A of the Income Tax Act and while computing book profit under Section 115JB. The judgments were based on the specific legal provisions and relevant case laws, ensuring a thorough analysis of the issues raised in the appeal.