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TMI Blog2018 (6) TMI 1225X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of assessee. Disallowance u/s.14A while computing book profit u/s.115JB - Held that:- This issue is covered in favour of assessee by the decision of M/s. Vireet Investment Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] wherein it has been held that the computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated under section 14A read with Rule 8D of the Income Tax Rules. Thus respectfully following the said decision we restore this ground to the AO who shall decide the issue X X X X Extracts X X X X X X X X Extracts X X X X ..... ategic investments made by an assessee. 5. Without Prejudice to 1,2, 3 & 4 above, if Rule 8D were to apply, "average investments" for the purpose of calculation under Part 2(u) and (iii) of Rule 8D will include only those investments from which exempt income has been earned during the year. GROUND II: ADJUSTMENT OF SECTION 14A DISALLOWANCE WITH BOOK PROFIT U/S 115JB OF THE ACT: 1. On the facts and in the circumstances of the case and in law, the CIT (A) erred in upholding the action of the Ld. AO of adding the disallowance u/s 14A of ₹ 2,27,18,529/- to the book profit computed u/s 115 JB of the Act. 2. The Appellant prays that the Ld. AO be directed to delete the addition made to book profits computed u/s 115JB o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by the Tribunal in assessee's own case in earlier years. The Ld. D.R. submitted that all the expenses have to be seen on year to year basis and the disallowance has to be made by applying the provision of section 14A read with rule 8D and thus prayed the Bench that the order of the Ld. CIT(A) be affirmed. 6. We have heard the rival submissions and perused the material available on record. The undisputed facts are that during the year, the assessee earned exempt income of ₹ 8,27,30,037/- and made a suo motto disallowance under section 14A read with rule 8D of ₹ 52,05,005/- as detailed in para 8 of the assessment order comprising the direct expenses on account of Demat and Depository charges ₹ 38,00,098/-, salary of em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. Name Employee Designation Emoluments [Cost to Company] (Amount in Rs.) % Attributable to investments activity Attributed amount (In Rs.) 1 Mr. Ketan Mazumdar VP - Finance 19,63,140 20% 3,92,628 2 Mr. S K Shenoy Sr. Manager - Finance 5,42,836 20% 1,08,567 3 Mr. Vithoba Patil Sr. Executive - Accounts 3,72,817 18% 67,107 4 Mr. Laxman Addagatla Executive - Accounts 3,61,740 18% 65,113 Total 6,33,415/- 4. Apart from the emoluments that are incurred for such personnel, other expenses that can be directly or indirectly attributable to such personnel are also identified based on the total expenses of HO, which are duly allocated in relation to such personnel. There are total Ninety Six (96) employees i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rving that the suo motto disallowance made by the assessee is sufficient to cover the expenses relatable to earning the exempt income. We would like to mention that assessee's own funds in the form of share capital, reserves and surplus were ₹ 434.47 crore whereas the investments were only to the tune of ₹ 282.75 cr. which included the investments in subsidiary companies from strategic point of view. Thus, the interest free funds available with the assessee and therefore, the presumption has to be made that investments in the shares and securities were made out of interest free funds available with them. The co-ordinate bench of the Tribunal has decided the identical issue in favour of the assessee by observing and holding as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he earlier year's decision, set aside the order of the Ld. CIT(A) and direct the AO to delete the additions of ₹ 1,75,13,524/- made under section 14A read with rule 8D. 9. The issue raised in ground Nos.3, 4 & 5 were without prejudice and therefore require no adjudication. 10. The issue raised in ground No.II is against the decision of the Ld. CIT(A) upholding the action of AO in adding the disallowance under section 14A to the extent of ₹ 2,27,18,529/- to the book profit under section 115 JB of the Act. The issue is decided by the Special Bench Delhi in the case of ACIT Vs Vireet Investment Pvt. Ltd. (165 ITD 27) wherein it has been held that the computation under clause (f) of Explanation 1 to section 115JB(2) is to be made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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