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TMI Blog2021 (10) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment in the hands of the assessee for AY 2014-15 was completed by the AO on 1.3.2016 u/s 143(3) of the Act. On examination of assessment record, the Ld Pr CIT noticed that the assessing officer has made addition u/s 14A of the Act to the tune of Rs. 51.44 crores, but he did not make the addition of same amount while computing book profit u/s 115JB of the Act. The Ld Pr. CIT noticed that the AO has accepted the book profit computed by the assessee, wherein the assessee has not made any addition for expenses relating to exempt income as required under clause (f) of Explanation 1 to sec.115JB of the Act. Hence, the Ld PCIT took the view that the assessment order is erroneous in so far as it is prejudicial to the interests of revenue. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "36. ......... what cannot be denied is that the requirement for attracting the provisions of Section 14-A (1) of the Act is proof of the fact that the expenditure sought to be disallowed/deducted had actually been incurred in earning the dividend income............." 25. Proceeding now to another aspect, it is seen that the Central Board of Direct Taxes (CBDT) had issued the Circular no. 18 of 2015 dated 02.11.2015, which had analyzed and then explained that all shares and securities held by a bank which are not bought to maintain Statutory Liquidity Ratio (SLR) are its stock-in-trade and not investments and income arising out of those is attributable, to business of banking. This Circular came to be issued in the aftermath of Page 18 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5)(SB) that the disallowance computed u/s 14A cannot be adopted for making addition under clause (f) to Explanation 1 to sec.115JB of the Act. Accordingly he submitted that the direction given by Ld PCIT to make addition of Rs. 51.44 crores, being the amount computed u/s 14A of the Act, under clause (f) while computing book profit is contrary to the decision rendered by the Special bench. 4. On the contrary, the Ld D.R supported the order passed by Ld Pr. CIT and submitted that the assessing officer has failed to apply law properly and hence the assessment order was rendered erroneous and prejudicial to the interests of revenue. 5. We heard the parties and perused the record. In Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83, the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Officer is unsustainable in law." 6. A perusal of the impugned assessment order would show that the assessing officer has accepted the book profit declared by the assessee u/s 115JB of the Act without examining the same. It is pertinent to note that clause (f) of Explanation 1 to sec.115JB of the Act provides that the expenditure relatable to any income to which sec. 10 (other than the provisions contained in clause (38) thereof) or section 11 or section 12 apply, should be added to Net profit while computing the book profit. Even though the assessing officer has worked disallowance u/s 14A of the Act while computing total income under normal provisions of the Act, yet he has omitted to examine the applicability of clause ..... X X X X Extracts X X X X X X X X Extracts X X X X
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