2022 (4) TMI 1187 - HC - Income Tax

Rectification u/s 154 - book profit in terms of Explanation 1(f) to Section 115JB (2) is not being done with regard to the provisions of Section 14A - HELD THAT - Section 115JB of the Act is a complete code in itself. The controversy relating to disallowance u/s 14A of the Act for determining book profit under Section 115JB was dealt with, in extenso in the case of Vireet Investment Private Ltd. 2017 (6) TMI 1124 - ITAT DELHI As in the case of Karnataka State Industrial and Infrastructure Development Corporation Ltd. 2021 (1) TMI 413 - KARNATAKA HIGH COURT wherein the computation of book profit with reference to Sections 14A and 115JB has been considered and it is held that Explanation 1 in Section 115JB(2) has been inserted so as to provide that if any provision for diminution in the value of any asset has been debited to the profit and loss account, it shall be added to the net profit as shown in the profit and loss account for the purpose of computation of book profit. Any disallowance computed under Section 14A pertains to computation of income under the normal provisions of the Act and cannot be read into the provisions of Section 115JB of the Act pertaining to computation of book profits for levy of minimum alternate tax. Amounts disallowed under section 14A cannot be added to the book profits computed under Section 115JB. Thus the finding given by the Tribunal on the points inasmuch as invoking of Section 154 and Explanation 1 (f) to Section 115JB being squarely covered, the same cannot be found fault with. We are of the considered view that the Miscellaneous Petition filed by the revenue under Section 254(2) of the Act was wholly misconstrued. - Decided in favour of assessee.

Summary

Issues:
1. Dismissal of miscellaneous petition by Tribunal under Section 260A of the Income Tax Act, 1961
2. Disallowance under Section 14A while computing book profit under Section 115JB of the Act
3. Acceptance of decision by Delhi Special Bench of the Tribunal in a previous case
4. Rejection of appeal by Tribunal without considering Explanation 1[f] to Section 115JB[2]

Issue 1:
The appeal was filed by the revenue under Section 260A of the Income Tax Act, 1961, challenging the dismissal of a miscellaneous petition by the Tribunal. The Tribunal had dismissed the petition despite the conditions set out in Section 254[2] being satisfied. The revenue contended that the Tribunal's decision was erroneous and sought a favorable ruling in their favor.

Issue 2:
The controversy revolved around the disallowance under Section 14A while computing book profit under Section 115JB of the Act. The revenue argued that the Tribunal failed to consider Explanation 1(f) to Section 115JB(2) correctly, leading to an incorrect decision. The Tribunal's order was disputed based on a previous judgment by the Delhi ITAT Bench and the interpretation of relevant provisions.

Issue 3:
The Tribunal's reliance on a decision by the Delhi Special Bench in a previous case was questioned by the revenue. They argued that the decision was accepted by the Department based on low tax effect and not on merits. This issue highlighted the importance of the Tribunal's reasoning and the impact of precedent on subsequent cases.

Issue 4:
The rejection of the revenue's appeal by the Tribunal without proper consideration of Explanation 1[f] to Section 115JB[2] was another key point of contention. The revenue emphasized the significance of this provision in computing book profit under Section 115JB of the Act. The Tribunal's decision was challenged based on the interpretation and application of relevant legal provisions.

In the detailed analysis, the judgment delves into the arguments presented by both parties regarding the interpretation of statutory provisions, previous judicial decisions, and the application of relevant legal principles. The court considered the provisions of Section 154 of the Act, the significance of Explanation 1(f) to Section 115JB(2), and the implications of disallowance under Section 14A on computing book profit under Section 115JB. The court referenced various judicial precedents to support its reasoning and ultimately ruled in favor of the assessee, dismissing the revenue's appeal based on the findings and interpretations presented in the judgment.