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TMI Blog2017 (9) TMI 653X X X X Extracts X X X X X X X X Extracts X X X X ..... cided in favor of assessee. Disallowance u/s 14A while computing the book profits u/s 115JB - Held That:- Computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A r.w Rule 8D of the Act. Therefore we direct the AO to compute the book profits u/s 115 JB in accordance with the directions of the Hon’ble Special Bench in the case of ACIT v. Vireet Investments Private Limited (2017 (6) TMI 1124 - ITAT DELHI) - Appeal is allowed for statistical purposes. - I.TA.No.8575/MUM/2011 AND ITA.No.290/MUM/2012 - - - Dated:- 31-8-2017 - SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI C.N. PRASAD, JUDICIAL MEMBER For The Assessee : Shri Yogesh A. Thar For The Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer required the assessee to furnish details of expenses incurred in relation to the said exempt income. Assessee was also required to explain as to why disallowance u/s 14A r.w. Rule 8D should not be made. In response the assessee submitted its reply stating that no expenses were incurred for earning exempt income except interest on loan of ₹.22.82 Crores and this has been disallowed u/s 14A in the computation of income. Not satisfied with the explanation of the assessee the Assessing Officer invoked the provisions of section 14A r.w. Rule 8D of the Act and computed the net disallowance u/s 14A of the Act at ₹.4,61,42,672/- as the assessee has already considered interest on loan of ₹.22.83 crores for disallowance u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elfare and Rent in respect of EPC division and directed the Assessing Officer to disallow the amount of ₹.44,41,825/-. Ld.CIT(A) also observed that it is an admitted fact that 99.98% investments were mostly in mutual funds units to Group companies only. 6. The Learned Counsel for the assessee submits that estimation made by the Ld.CIT(A) being 5% of the salary cost of EPC division as expenses attributable for earning dividend income is not at all justified. The salary income of the EPC division is nothing to do with the investments made by the management in group concerns. The Learned Counsel for the assessee submits that there is no live nexus to the salary cost of EPC division for earning exempt income. Therefore, the estimation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made by the Ld.CIT(A) taking the employees cost of EPC division is not proper and justifiable. The Ld.CIT(A) also observed that 99.98% of the investments were in shares and mutual funds units of group companies in such circumstances it cannot be said that there is much involvement of employees at large and on a daily basis to monitoring the investments. It is the decision taken at higher level in the Corporate Office by the Directors and at best it can be said that the salary cost of the Directors and the Employees who are directly involved in the investment division in the Corporate Office has direct link for earning the exempt income from these investments. In any case the assessee received exempt income of ₹.7.91 crores and it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as book profits u/s 115JB of the Act. 10. In so far as the computation of disallowance u/s 14A while computing book profits the issue is squarely covered in favour of the assessee by the Special Bench of Delhi in the case of ACIT v. Vireet Investments Private Limited (supra). Following the said decision, we direct the Assessing Officer to compute the book profits in accordance with the directions of the Special Bench. 11. Coming to the disallowance under normal provisions of the Act we have already held that there is no justification in making any disallowance u/s 14A r.w. Rule 8D while disposing off ground No.1 of the grounds of appeal of the assessee, hence this ground is dismissed for the reasons explained therein. 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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