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TMI Blog2017 (12) TMI 1001X X X X Extracts X X X X X X X X Extracts X X X X ..... relatable to exempt income in the profit and loss account of the assessee and other expense of ₹ 3,64,208/- have already been disallowed by the assessee suo moto. In view of these facts, we confirm the order of CIT(A) and this issue of Revenue’s appeal is dismissed. Disallowance under section 14A r.w.r 8D made while computing book profit under section 115JB - Held that:- This issue is covered in favour of assessee and against Revenue by the decision of Special Bench of this Tribunal in the case of ACIT vs. Vireet Investments (P.) Ltd. [2017 (6) TMI 1124 - ITAT DELHI] wherein the Tribunal has clearly held that no disallowance under section 14A of the Act r.w.r 8D of the Rules can be made while computing book profit under section 115JB of the Act. The learned CIT Departmental Representative could not controvert the above proposition. Disallowance of redemption of the provision made for reduction of preference shares while computing the book profit under section 115JB - Held that:- Delete the disallowance made by AO on account of the reduction of provision made on the redemption of preference shares. Accordingly, the orders of the lower authorities are reversed and this is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case. The Ld. CIT(A) has erred in restricting the addition made by the AO on account of adhoc disallowance u/s 14A read with rule 8D of income Tax Rules 1962 of ₹ 42,66,271/- to ₹ 1,75,624/- while computing the book profit u/s 115JB of the .Act. 3. Briefly stated facts are that the assessee is a domestic company engaged in the business of textiles. The AO during the course of assessment proceedings noted that the assessee has claimed exempt income i.e. dividend income of ₹ 44,41,505/- under section 10(38) of the Act. According to AO, the assessee has made investment of ₹ 33,32,28,676/- in the instruments yielding exempt income. The assessee has also made suo moto disallowance under section 14A of the Act at ₹ 1,75,624/-. The AO applying Rule 8D of the Rules read with section 14A of the Act simply applying the formula made disallowance under section 8D(2)(ii) at ₹ 27,76,374/- under the Rule 8D(2)(iii) at ₹ 16,65,521/-. Aggrieved assessee preferred the appeal before CIT(A), who after going through the facts that the assessee has interest free funds available to the tune of ₹ 85.39 crores as against the investment of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .O. has computed the disallowance under Rule 8D(2)(iii) at ₹ 16,64898/- @ 5% of average value of investment. From the submission made by the appellant, it is noted that out of total expenses debited to profit and loss account of ₹ 2946, i28/-. an amount of ₹ 25,37260/- is on account of interest expense which is not covered under the quantum of disallowance and an amount of ₹ 44660/- is on account of depreciation which has been disallowed and added while computing business income. After excluding these expenses, the actual expense which can be said to be in relation to exempt income would be only ₹ 364.208/-. Accordingly, the disallowance under Rule 8D(2)(iii) is to be restricted to the said amount i.e. ₹ 354205/- in view of the decision in the case of Gillette Group India Pvt Ltd of the ITAT, Delhi and the decision in the case of ACIT vs lqbal Chagala of the ITAT, Mumbai, as cited by the appellant. Since the appellant has computed and made a disallowance of ₹ 3642081- any further addition on this count is found to be not justified in view of above, the entire addition of ₹ 23,94,553/- made by the AO u/s 14A of the Act, is deleted an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 115JB of the Act. The learned CIT Departmental Representative could not controvert the above proposition. Accordingly, we are of the view that this issue is covered by the special bench decision of this Tribunal in the case of Vireet Investments (P.) Ltd. (supra), respectfully following the same, we dismiss this issue of Revenue s appeal. 9. Similar is the issue in Revenue s appeal in ITA No.5814/Mum/2016 for AY 2014-15 and the grounds raised are as under: - 1. on the fact and the circumstances of the case in law, the CIT(A) has erred in restricting the addition male by AO u/s 14A read-with rule 8D of income-tax Rules 1962 of ₹ 30,39,879/- to ₹ 57,180/- 2. On the facts and circumstances of the case restricting the addition made by the AO on account of the adhoc disallowance u/s 14A read with rule 8D of Income-Tax Rules 1962 of Its. 30,39879/- to ₹ 57,180/- while computing the book prof it under section 115JB of the Act. 10. During the course of hearing before us, both the parties agreed that the facts and circumstances are exactly identical as in the AY 2013-14 and there is no change in facts and circumstances in this year also. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt in the statement of profit and loss account as an expense/liability, so its claim to reduce the net profit by the said amount could not be allowed. Further, as held in para 7.4.7 above, the amount of ₹ 13,73,230/- is in the nature of reserve and not provision/liability. Therefore, the said amount was not to be excluded from the net profit to arrive at the book profit u/s.1 15 JB of the Act. Accordingly, the addition of ₹ 13.73230/- is upheld and ground No.4 5 are dismissed. Aggrieved, now assessee is in appeal before tribunal. 13. At the outset, the learned Counsel for the assessee stated that this issue is now squarely covered by ITAT decision in assessee s sister concern case in the case of well known Synthetics Pvt. Ltd vs ACIT in ITA No. 2691/Mum/2015 for AY 2010-11 order dated 22-11-2016, wherein it is held that the preferential share is akin to the debentures for the reason that both are repayable and are in the nature of debt. It was held that this amount debited to the P L Account is in the nature of charge on the profit and thus, cannot be said to be appropriation out of profits. The Tribunal considered this issue vide Para 15 to 17 as under: - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quarely covered, and in the given facts and circumstances of the case, we respectfully following the co-ordinate Bench decision in assessee s sister concern case on principle, in the case of Well Know Synthetics Pvt. Ltd. (supra), we delete the disallowance made by AO on account of the reduction of provision made on the redemption of preference shares. Accordingly, the orders of the lower authorities are reversed and this issue of the assessee s appeal is allowed. 15. Coming to assessee s appeal in ITA No. 5853/Mum/2016 for AY 2014-15, the issue is exactly identical and same as in ITA No. 5852/Mum/2016 for the AY 2013-14. The grounds raised are reads as under: - On the facts and circumstances if the case as well as in law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in making disallowance of reduction on account of the provision made for Premium on redemption of preference shares of ₹ 14,56,860/- while computing the book profits u/s. I15JB of the Act, without appreciating the fact that it is an ascertained liability and hence liable to be reduced white computing book profit u/s I15JB of the Act. 16. Both the parties agreed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact that the department has riot accepted the order passed by the Hon ble 111gb Court in the case of All Cargo Logistics Ltd., and preferred to file Special Leave Petition before the Hon ble Supreme Court. 18. Briefly stated facts are that the AO while completing the original assessment under section 143(3) of the Act on the original return of income made disallowance under section 14A of the Act amounting to ₹ 43,82,390/-. Subsequently, a search under section 132 of the Act was carried out on 23-05-2013 on well-known group of companies. In response to this search under section 132(1) of the Act, the AO issued notice under section 153A of the Act dated 15-03-2013. Subsequently, the AO framed the assessment under section 153A of the Act read with section 143(3) of the Act and also made disallowance under section 14A of the Act read with Rule 8D of the Rules at ₹ 54,95,517. The CIT(A) deleted the addition by following the decision of the Hon ble Bombay High Court in the case of CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bom) and by observing as under: - 8.3. I find that the assessment for A.Y.2010-11 was completed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee stated that these items are disallowed on the basis of the entries found recorded in regular books of account of the assessee. This fact is not denied by the learned CIT-DR during the course hearing before us. When a specific point was raised by the Bench whether any seized material relating to these disallowance are there or not? He fairly conceded the position that from the order of the AO or from the order of the CIT(A) or from the seized material it cannot be gathered whether any seized material relating to these disallowances are available on record. As there is a categorical fact recorded by the AO as well as CIT(A) that these disallowances are made by the Revenue on the basis of the return filed by the assessee originally. Once, the assessment was completed and has not abated for relevant AY, this issue is squarely covered by the decision of the Hon ble Bombay High Court in the case of CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bom). 20. We find that this issue now stands covered in favour of assessee and against the Revenue by the decision of Hon ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Shev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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