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TMI Blog2014 (11) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... ce which can be considered to be on scientific and reasonable basis would be ₹ 3,33,187. Since the disallowance of ₹ 83.14 lakhs made by the AO u/s 14A of the Act was reduced to ₹ 3,46,741 - FAA held that the amount to be added to the net profit towards the disallowance made u/s 14A of the Act for computing the book profit u/s 115JB of the Act should also be restricted to the amount determined by him – the FAA is justified in directing the AO to adopt the same figure for computing the book profit u/s 115JB of the Act – the order of the CIT(A) is upheld – Decided against revenue. Carry forward off of the loss of the unit eligible for deduction u/s 10B of not – Held that:- The AO has recorded in the computation portion of the assessment order that the loss pertaining to 10B unit is not allowed to be carried forward as the same pertains to exempted income - the provisions relating to set off of loss and also carry forward of loss are provided in the Act in sections 70 to 75 of the Act – AO has not drawn support of any of the provisions of the Act or any other authority in support of his decision - the approach adopted by CIT(A) is not correct - the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er higher appellate authorities - if there is no loss to be carried forwarded in AY 2006-07, then the question of allowing set off of brought forward loss will not arise for the current year – the order of the CIT(A) is upheld – Decided against revenue. - ITA No. 6721/Mum/2011 - - - Dated:- 8-8-2014 - B. R. Baskaran, AM And Sanjay Garg, JM,JJ. For the Petitioner : Shri Sanjeev Jain For the Respondent : Shri Vijay Kothari ORDER Per B. R. Baskaran, Accountant Member The appeal filed by the Revenue is directed against the order dated 12.7.2011 passed by the ld. CIT(A)-20, Mumbai and it relates to the assessment year 2007-08. 2. In the grounds of appeal and additional grounds of appeal filed, the revenue is aggrieved by the decision of ld. CIT(A) in respect of following issues:- a) Restricting the disallowance made u/s 14 of the Income Tax Act, 1961 (the Act) to ₹ 3,33,187/- as against the disallowance of ₹ 83,14,059/-; b) Allowing set off of Loss pertaining to the unit eligible for deduction u/s 10B, even though it was rejected by the AO. c) While computing Book profit u/s 115JB of the Act, restricting the disallowance made u/s 14A of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso held that the disallowance to be made u/s 14A of the Act is required to be computed in a reasonable manner. Accordingly, the Ld CIT(A) determined the amount of disallowance to be made u/s 14A of the Act to ₹ 3,46,741/-. Since the Assessee had already disallowed a sum of ₹ 13,554/-, the ld. CIT(A) sustained the disallowance to the extent of ₹ 3,33,187/-. The Ld CIT(A) also held that the above said amount of ₹ 3,46,741/- should be added while computing book profit u/s 115JB of the Act. The revenue is aggrieved by the said decisions. 6. We have heard the rival contentions on these issues and carefully perused the record. The assessment year under consideration is assessment year 2007- 08. Hence, in view of the decision of the Hon ble jurisdictional High Court in the case of Godrej Boyce Mfg Co Ltd (supra), Rule 8D of the Rules cannot be applied for the instant year. However, the Hon ble jurisdictional High Court has held in the above stated case that the disallowance of reasonable amount is required to be made under the provisions of section 14A of the Act. For the sake of convenience, we extract below the observations made by Ld CIT(A) in this regard: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A), the first appellate authority held that the amount to be added to the net profit towards the disallowance made u/s 14A of the Act for computing the book profit u/s 115JB of the Act should also be restricted to the amount determined by him. Since, we have upheld the amount of disallowance computed by the ld. CIT(A), we are of the view that the first appellate authority is justified in directing the AO to adopt the same figure for computing the book profit u/s 115JB of the Act. Accordingly, we uphold the order of ld. CIT(A) on this issue. 9. The next issue pertains to the decision of the AO in not allowing carry forward off of the loss of the unit, which is eligible for deduction u/s 10B of the Act. (hereinafter 10B Unit ). The AO computed the loss incurred by 10B unit ₹ 3,49,38,911/-. However, while computing total income, the AO held that the above said loss is not allowed to be carried forward as the same pertains to exempted income. In the appellate proceedings, the ld. CIT(A) took the view that the deduction provided u/s 10B of the Act does not fall under the category of exemption , since the relevant section uses the word deduction only. Accordingly, the Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 115JB. For the purpose of claiming deduction u/s 10B of the Act under regular provisions of the Act, the Assessee is required to furnish report in Form No.56G obtained from a Chartered Accountant in accordance with Rule 16E of the Rules. In the said certificate, the Chartered Accountant had reported the amount of deduction u/s 10B at (-) ₹ 4,32,52,965/-, meaning thereby, the Assessee was not entitled for deduction/s 10B. In the profit and loss account, the assessee had shown an amount of ₹ 5.82 crores as the profit generated from the 10B unit. Hence, while computing Book Profit u/s 115JB of the Act, the assessee deducted the above said amount u/s 10B of the Act. However, the AO took view that the assessee is not eligible to claim deduction u/s 10B while computing Book Profit, since the amount of deduction was shown at NIL figure in Form No.56G and further the assessee became ineligible to claim the said deduction from the total income computed under regular provisions of the Act. In effect, the view of the AO appears to be that the assessee should become eligible for deduction u/s 10B under regular provisions of the Act and then only, he could claim deduction under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related to the 10B unit. Hence, we do not find any reason to interfere with the conclusion arrived at by ld. CIT(A) on this issue. 14. The last issue pertains to the set off of brought forward loss pertaining to the assessment year 2006-07. For the year under consideration, the Assessee filed its return of income declaring total income of ₹ 68.69 lakhs. Subsequently, it filed a revised return of income, wherein it claimed set off of business loss of ₹ 68.69 lakhs relating to the preceding year and accordingly declared total income at NIL. The AO noticed that the income of the assessee for AY 2006-07 was determined at a positive figure of ₹ 1.33 crores in the assessment order passed u/s 143(3) of the Act. Accordingly, the AO took the view that the Assessee did not have any brought forward loss eligible to be set off against the current years income and accordingly disallowed the said claim. The ld. CIT(A), however, directed the AO to allow the loss finally computed for assessment year 2006-07 while computing the total income for the current year. The revenue has challenged the said decision on the ground that the income assessed as per assessment order was at & ..... X X X X Extracts X X X X X X X X Extracts X X X X
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