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TMI Blog2014 (1) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... rial activity, hence deduction is given on income from industrial activity not on interest income from mere depositing the amount with bank or any other institution - interest income from fixed deposits being not the income from industrial activity is not eligible for deduction under section 80IB of the Act. The assessee has claimed set off of the interest expenditure against the interest income pleading that the said expenditure has direct nexus with the interest income - The said contention of the assessee has not been adjudicated by the authorities below - The issue has been restored for fresh adjudication. Whether disallowances made u/s 14A be added to compute book profits u/s 115JB - Held that:- Following Godrej Consumer Products Ltd [2013 (11) TMI 1245 - ITAT MUMBAI] - On combined reading of section 14A with clause (f) of the explanation to section 115JA or clause (f) of the explanation (1) to section 115JB - It can be observed that they do not have any type of conflict with each other. What has been provided under sub section (1) of section 14A is that the expenditure incurred for exempt income is not allowable as a deduction whereas under sub section (2) a method of computa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with each other, without considering the facts and circumstances of the case." Ground No 1: 3. The AO noticed that depreciation u/s.32 was not claimed by the assessee on units Daman-II and Baddi-I which were eligible for 80IB deduction. The depreciation was not claimed with intention to maximize the deduction u/s.80IB in earlier years and to claim depreciation in later years. The AO as per detailed working given in his assessment order, compulsorily allowed the depreciation on Daman-II and Baddi-I unit for assessment years 2002-03 to 2006-07. As per the revised computation of depreciation, the depreciation to be allowed for assessment year 2007-08 worked out to Rs.5,62,62,182/- against the claim of Rs.7,87,59,003/-. Therefore, excess depreciation of Rs.2,24,96,821/- was disallowed. The ld. CIT(A) confirmed the action of the AO observing that the issue was squarely covered against the assessee by the decision of the Hon'ble Mumbai High Court in the case of Plastblends India Limited Vs. CIT in appeal No.1282 of 2007. 4. The ld. Representative of the assessee has been fair enough to admit that the issue, so far the legal position as on today is concerned, is squarely covered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from fixed deposits being not the income from industrial activity is not eligible for deduction under section 80IB of the Act. However the assessee, vide additional ground, has claimed set off of the interest expenditure against the interest income pleading that the said expenditure has direct nexus with the interest income. The said contention of the assessee has not been adjudicated by the authorities below. Under such circumstances the issue taken vide additional ground regarding the set off of interest expenditure against the interest income is restored back to the file of the AO with a direction to adjudicate the same after giving proper opportunity to the assessee to present its case if the interest expenditure claimed by the assessee would have direct nexus with the interest income then the same will be allowed by the AO. This issue is thus allowed for statistical purposes. 7. In the result, this appeal of the assessee is partly allowed for statistical purposes. ITA No.7576/M/2011 for A.Y. 2008-09 8. Assessee has taken following grounds of appeal: "1. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14A of the Income Tax Act. While confirming the said disallowance, the ld. CIT(A) directed the AO to remove the interest amount of Rs.5,65,83,913/-, being interest on term loans, while working disallowance under section 14 A read with rule 8D of the I.T. Rules. However, the plea of the assessee that disallowance under section 14A could not be made was rejected. A perusal of the assessment order reveals that due opportunity was granted by the AO to the assessee to submit its case as to why the disallowance under section 14 A read with rule 8D be made. After considering the submissions of the representative of the assessee and after due application of mind, the AO recorded well reasoned dissatisfaction regarding the claim of the assessee that no disallowance be made or some disallowance on adhoc basis be made under this head. After rejecting the contention of the assessee, he worked the disallowance under rule 8D of the I.T. Rules. We do not find any infirmity in the order of the CIT(A) in partly confirming the disallowance agreeing with the well reasoned order of the AO on the issue. 10. The CIT(A) has further confirmed the action of the AO in treating the interest income of Rs.6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect nexus with each other as directed in the preceding paras of the order. 15. It may be further observed that co-ordinate bench of the Tribunal, incidentally consisting of both of us (Members), in the case of "M/s. Godrej Consumer Products Limited" ITA No.4963/M/11 (A.Y. 2007-08), decided on 20.11.13 while dealing with the identical issue, has held that the amount of expenditure disallowable under section 14A is to be added back while computing book profit under clause (f) of the explanation (1) to section 115 JB observing as under: "24. Vide ground No.5 of its appeal, the assessee has agitated the action of the ld. CIT(A) in relying upon the provisions of section 14A of the Act while computing the amount of expenditure for earning exempt income which is liable for being added back to the book profits as per the provisions of section 115JB of the Income Tax Act. The submissions of the ld. A.R. has been that section 115JB of the Act is a separate code by itself and the provisions of section 14A cannot be applied for computing the book profit under section 115JB of the Act. In support of his submissions he has relied upon an authority of the Delhi Bench of the ITAT styled as 'Goet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace in the clause (f). Therefore, insofar as computation of adjusted book profit is concerned, provisions of sub-section (2) and sub-section (3) of section 14A cannot be imported into clause (f)." 28. From the perusal of the above reproduced observations of the Delhi bench of the ITAT, it can be gathered that the Delhi bench of the Tribunal has categorically held that the provisions of sub-section (1) of section 14A and clause (f) of the explanation to section 115JA are similar in nature and have the same meaning. However, it has been observed that the other two sub sections of 14A i.e. sub section (2) and sub section (3) do not find a place in clause (f) of the explanation to section 115JA, hence it was held that so far the computation of adjusted book profit is concerned, provisions of sub section (2) and sub section (3) of section 14A cannot be imported into clause (f). With due respect to the finding given by the Delhi bench of the ITAT, we may observe that the case before the Delhi Bench of the Tribunal in Goetze (India) Ltd. (Supra) was related to assessment year 2000-01 whereas sub section (2) and sub section (3) to section 14A have been inserted by the Finance Act, 2006 w. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14A can be added while computing the book profit u/s 115JB of the Act. The learned AR relied on certain decisions to bring home the point that the amount disallowed u/s 14A cannot be added to net profit for computing `book profit' u/s 115JB. On the other hand, the learned Departmental Representative took us through the language of clause (f) of Explanation (1) to section 115JB, as per which the amount of expenditure relatable to any exempt income is to be added back to the net profit shown in the profit and loss account. At this juncture, it would be relevant to note that `Book profit' u/s 115JB is computed as per Explanation (1) to sub-section (2) of section 115JB. This Explanation provides that "book profit" means net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2) as increased by certain amounts specified under clauses (a) to (i) if debited to the profit and loss account and clause (j) if not credited to the profit and loss account. The amount so determined is further adjusted by reducing the amounts specified in clauses (i) to (vii). The amount which eventually results is the amount of `book profit' on which tax liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, the amount disallowable u/s 14A is always part of the expenses specifically debited to the profit and loss account. It is axiomatic that unless any expenditure is incurred and claimed as deduction, there can be no question of any hypothetical disallowance u/s 14A. It, therefore, follows that the amount disallowable u/s 14A is covered under clause(f) of Explanation (1) to section 115JB(2). Our view is fortified by another order dated 29 August, 2012 passed by the Mumbai Bench of the tribunal in the case of Esquire P. Ltd, Mumbai (ITA No.5688/Mum/2011). As the assessment year under consideration is assessment year 2008-2009 in which disallowance u/s 14A is required to be computed as per Rule 8D and further it is this amount which has been disallowed and also added to the amount of net profit for computing `book profit' u/s 115JB, we see no reason to disturb the impugned order on this issue. This ground fails." 29. The view taken by the Mumbai bench of the Tribunal is the latest view which has been taken after duly considering the previous decisions as has been mentioned in the opening lines of Para 6 of the order as reproduced above. We are in agreement with the latest view of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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