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TMI Blog2019 (4) TMI 618X X X X Extracts X X X X X X X X Extracts X X X X ..... putting reliance upon the judgment of CIT Vs. Suzlon Energy Ltd.[2013 (7) TMI 697 - GUJARAT HIGH COURT] and CIT Vs. Torrent Power Ltd. [2014 (6) TMI 185 - GUJARAT HIGH COURT] has held that when the assessee has more interest free funds, then it is to be construed that investment was made out of interest free funds and no disallowance is to be made on account of interest expenditure. Administrative expenses are required to be calculated for disallowance under section 14A of the Act. However, the ld.AO shall take into consideration the average of investment, which has yielded tax free income during the year. This exercise be carried out after providing due opportunity of hearing to the assessee. In view of the above, ground no.2 raised by the Revenue is rejected MAT computation u/s 115JB including disallowance under section 14A - HELD THAT:- As relying on VIREET INVESTMENT (P.) LTD. [2017 (6) TMI 1124 - ITAT DELHI] question answered in favour of the assessee and held that computation for the purpose of clause (f) of Explanation 1 to Section 115JB(2) is to be made without resorting to the computation as contemplated under section 14A r.w. rule 8D. Respectfully following the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the case and submissions placed by the appellant. Appellant for the year under consideration has claimed expenses amounting to ₹ 1,81,06,240/- pertaining to previous years. The appellant has further offered income of ₹ 2,52,37,240/- pertaining to previous years. There are three broad issues involved in the said dispute; first being crystallization of liabilities of prior period expenses in the year under consideration. The second issue is with regards to giving netting off benefit of prior period income against prior period expenses. Third issue is with regards to revenue implication to the dispute. The first issue is with regard to crystallization of liabilities on account of prior period expenses in the year under consideration. The Hon'ble Tribunal vide para 11 (Page No. 12 of the order) directed the assesse to substantiate the crystallization of liabilities in the year under consideration and further directed AO to examine the exact nature of liabilities with regards to prior period expenses. AO disallowed the claim after holding that the appellant was not able to substantiate the claim. The appellant before me has argued that the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue in dispute is squarely covered by the decision of Hon ble Gujarat High Court in the case of Pr.CIT Vs. Adani Enterprises Ltd. Tax Appeal No.566 of 2016. Copy of this judgment has been placed on page no.55 of the paper book. He further contended that order of the ITAT in the case of Adani Enterprises Ltd., this issue has also been considered. A copy of which is placed at page no.61 of the paper book. The Tribunal has adjudicated this issue in the ITA No.1859/Ahd/2011 and others. This order of the Tribunal on the issue, whether prior period expenses can be allowed to the assessee, has been upheld by the Hon ble Gujarat High Court in Tax Appeal No.566/2016 (supra). 5. With the assistance of the ld.representatives, we have gone through the record carefully. We find that the ld.CIT(A) has rightly formulated three propositions in the impugned order. The ld.CIT(A) has rightly observed that prior period expenses claimed by the assessee are of revenue in nature, and they have been crystallized during the accounting period relevant to this assessment year. Considering this aspect, the ld.CIT(A) has rightly deleted the disallowance. A reference to the decision of Hon ble ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rning of exempt income at ₹ 3,00,000/-. However, AO reworked the disallowance by applying the method prescribed under Rule 8D of The Income Tax Rules, 1962 at ₹ 36,35,685/- 4.5 There are broadly three issues involved in the dispute first being the applicability of Rule 80 mechanically, second, being the quantum of disallowance and third being 14A adjustment to the book profit calculated u/s 115JB of the Act. With regards to the first issue, in my opinion the AO has correctly applied Rule 8D of The Income Tax Rules, 1962 as the appellant has not disallowed anything u/s 14A. From the perusal of the balance sheet it can be seen that appellant had interest free funds of ₹ 433.12 crores as against investments of ₹ 9.14 crores. As held by the series of decisions of jurisdictional High Court in the cases of Suzlon (supra) and Torrent (supra) and other, I am inclined to agree with the arguments of the appellant that it possessed sufficient interest free funds to support such investments and thus interest disallowance of ₹ 31,65,175/- stands deleted. As far as disallowance of administrative expense is concerned, the AO has applied method as prescribed unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd no.1 and 2 raised by the assessee are partly allowed. 12. In the next ground of appeal, the assessee has pleaded that the ld.CIT(A) has erred in upholding inclusion of ₹ 4,70,510/- worked out for disallowance under section 14A in the book profit computed under section 115JB of the Act. In this behalf, the ld.counsel for the assessee relied upon the decision of Special Bench in the case of ACIT Vs. Vireet Investments P.Ltd., 165 ITD 27 (SB) wherein it is held that no increase or decrease can be effected in the book profit calculated under section 115JB on account of certain disallowance made under section 14A. 13. Considering the above facts, we are of the view that Special Bench of the ITAT in the case of Vireet Investment P.Ltd. (supra) has formulated following question for adjudication on this issue: Whether the expenditure incurred to earn exempt income computed u/s.14A could not be added while computing book profit u/s.115JB of the Act. 14. Special Bench answered this question in favour of the assessee and held that computation for the purpose of clause (f) of Explanation 1 to Section 115JB(2) is to be made without resorting to the computation as contem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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