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TMI Blog2021 (5) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Rs. 78,73,864/- made for 14A of the Income tax Act when the computation made by the assessee for suo moto disallowance is not as per the prevailing law. 2. Whether on the facts and circumstances of the case and in law the CIT(A) was justified in deleting the addition disallowance of reduction on account of provision made for redemption of preference shares of Rs. 24,38,38,437/- while computing the book profit u/s 115JB of the Act, as the assessee never credited the amount of reserves to the profit and loss account and thereafter reduce the reserve for Rs. 24,38,38,437/- used for redemption of preference shares from net profit." 3. The brief facts of the case are that the search and seizure action u/s 132(1) of the I. T. Act, 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the self-disallowance amount in sum of Rs. 2,03,136/-, the amounts in sum of Rs. 78,73,864/- was added to the income of the assessee. The assessee also created the provision for Redemption of Preference Shares in sum of Rs. 24,38,38,437/- and same was disallowance and added to the income of the assessee. The assessee has claimed the deduction u/s 80IB(3) in sum of Rs. 20,58,33,236/- and after the reply of assessee, the claim was reduced to the extent of Rs. 2,31,92,100/- and added to the income of the assessee. The total income of the assessee was assessed in sum of Rs. 68,81,29,640/-. The book profit was assessed in sum of Rs. 1,47,17,80,010/- u/s 115JB of the Act. Feeling aggrieved, the assessee filed an appeal before the CIT(Appeals) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. Therefore, to turn around at the appellate stage and say that the disallowance should not exceed exempt income is not correct. What the Act envisages is that any expenditure incurred in relation to income which does not form part of total income should be disallowed. It is the assessee who is in the best position to know how much is the expenditure incurred by the assessee to earn such exempt income. In this case, as per the assessee‟s own admission, such expenditure is Rs. 2,03,136/-. No reason or evidence has been given by the assessee to show that this working of disallowance of Rs. 2,03,136/is wrong. Therefore, even though some Courts have said that disallowance should not exceed exempt income, as the assessee itself admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance of expenses confirmed by the CIT(A) while computing book profit under sec. 115JB of the Act" 6.4. Respectfully following the above decisions, the AO is directed to delete the addition being disallowance u/s 14A from the book profit computed in accordance with section 115JB of the IT Act. These grounds of appeal are PARTLY ALLOWED." 5. On appraisal of the above mentioned finding, we find that the exempt income of the assessee was of Rs. 6,300/-. The assessee has suo-moto disallowed the expenses to earn the exempt income in sum of Rs. 2,03,136/-. There are number of decisions of the higher authorities in which it has been specified that the expenses to earn the exempt income should not be more than exempt income. In the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was in relation to the transfer of an amount to Debt Redemption Reserve for which also it negated the stand of the assessee and held it to be a Reserve falling within the scope of clause (b) of Explanation-1 to Sec. 11JB of the Act. In coming to such a decision, in paras 22 and 23, the Hon'ble High Court specifically noted that the assessee therein had failed to explain the nature and character of the debt and went on to hold that in the absence of such explanation, the said sum would not be liable to be accepted as .an "ascertained liability in terms of clause (c) of Explanation-1 to Sec. 115JB of the Act. In fact, in the case before us, and which has also been noted in detail by our co-ordinate Bench in the earlier year, the Provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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