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TMI Blog2022 (4) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... he Revenue is dismissed. Disallowance made u/s.14A r.w.r. 8D - HELD THAT:- AO directly applied the computation mechanism provided in second and third limb of Rule 8D(2) of the Income Tax Rules and made disallowance - CIT(A) placed reliance on the decisions of various High Courts including decision of Oil Industry Development Board [ 2019 (3) TMI 1571 - SC ORDER ] wherein it was held that the disallowance u/s.14A of the Act could not be made in the absence of exempt income. The law is very much settled in view of the decision of the Hon ble Supreme Court in the case of Maxopp Investments [ 2018 (3) TMI 805 - SUPREME COURT ] wherein it had been held that disallowance u/s 14A of he Act cannot be invoked in the absence of exempt income and there cannot be any quarrel on this issue. Hence, we do not find any infirmity in the order of the ld. CIT(A). Accordingly, the ground Nos.2 3 raised by the Revenue are dismissed. MAT computation u/s 115JB - Disallowance of loan processing fees debited in the profit and loss account as an exceptional item while computing the book profit u/s.115JB - whether the action of the ld. CIT(A) in confirming the action of the ld. AO for disallowing the loan pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fall within the item of adjustments provided in Explanation-1 to Section 115JB(2). Thus wherein a particular expenditure which is not allowable as deduction from its inception, will not be allowed as deduction while computing book profits u/s.115JB of the Act and the same would have to be added back while computing book profits u/s.115JB of the Act. Hence, we confirm the action of the ld. CIT(A) in this regard. Accordingly, the ground Nos. 2.1 and 2.2 raised by the assessee are dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... nce on the decision of the Hon"ble Jurisdictional High Court in the case of Otis Elevator Company (India) Ltd., vs. CIT reported in 195 ITR 682 (Bom) wherein it was held that the club fees paid by the company on behalf of its executives is in the interest of its business and the membership of such clubs would provide its Officers and Executives better contact and appreciation with persons with good positions. Accordingly, incurrence of such expenditure should be considered to have been made for promoting the business of the company. 3.2. We find that the ld. CIT(A) had granted relief by placing reliance on the aforesaid decision of the Hon"ble Jurisdictional High Court and also placing reliance on the decision of the Hon"ble Madras High Court in the case of CIT vs. Sundaram Industries Ltd., reported in 240 ITR 335 (Mad). Since, the issue is covered in favour of the assessee by various High Courts including the Hon"ble Jurisdictional High Court and the decision of the Hon"ble Supreme Court referred to supra, the reliance placed by the ld. AO on various Tribunal decisions would be of no relevance and accordingly, we hold that the order of the ld. CIT(A) granting relief in this regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee on 28/11/2015 declaring "Nil" income under normal provisions of the Act after setting off brought forward loss of ₹ 304,22,67,818/- against the current year"s income and book profit of ₹ 312,78,44,415/- u/s.115JB of the Act. This return of income was selected for "limited scrutiny" under Computer Assisted Selection of Cases for Scrutiny (CASS) for "verification of large expenses debited to profit and loss account" and claimed as Revenue deduction. The ld. AO observed that assessee had debited a sum of ₹ 34.58 Crores as fees paid to IFC. This sum represents one time syndicate fees, structuring fees, commitment fees, legal and administrative fees paid to IFC. The assessee submitted that in the year 2012, it was sanctioned External Commercial Borrowing (ECB) of USD 152 million by IFC for port expansion, however, subsequently the Board on 31/03/2015 cancelled the loan agreement and the fees paid to IFC have been fully written off as an exceptional item. This amount of 34.58 Crores was added back voluntarily by the assessee while computing its income under normal provisions of the Act in the return. However, the assessee did not add back the same whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits u/s.115JB of the Act. The ld. AO also placed reliance on the decision of Mumbai Tribunal in the case of JSW Steel vs. ACIT in ITA No.923 & 930/BANG/2009 for A.Y.2004-05 dated 13/01/2017 wherein the question of a capital receipt (waiver of principal amount of loan) which was credited to profit and loss account which was reduced from the book profit u/s.115JB of the Act was subject matter of adjudication by this Tribunal u/s.115JB of the Act. The ld. AO observed that in the said case, the Mumbai Tribunal held that a capital receipt is one which is not liable to tax as per the provisions of the Act and hence, a receipt which remains exempt from its inception would not fall within the ambit of income u/s. 2(24) of the Act and hence, the same would be outside the scope of taxability even u/s. 115JB of the Act. The ld. DR before us drew the same analogy for stating that when a capital receipt is kept outside the ambit of taxability u/s.115JB of the Act, similarly, the capital expenditure would become an item of adjustment required to be added back to the book profit u/s.115JB of the Act. Hence the ld DR argued that the ld. AO was justified in adding the sum of ₹ 34.58 Crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eyond the jurisdiction provided under the limited scrutiny by disturbing the computation of book profit u/s.115JB of the Act and which is also relevant for the purpose of determination of total income. Accordingly, the ground Nos.1.1 to 1.2 raised by the assessee are dismissed. 7. Now coming to the issue on merits, admittedly, fee paid to IFC in the sum of ₹ 34.58 Crores was for the purpose of expansion of business of the assessee. Hence, there is no doubt that such expenditure is clearly a capital expenditure. When this capital expenditure is debited in the profit and loss account as an exceptional item, then the ld. AO would be entitled to tinker with the audited financial statements, in view of the fact that Part-II and Part-III of Schedule-6 of the Companies Act, 1956 does not permit any capital expenditure to get debited in the profit and loss account. So, once it is undisputedly proved that a capital expenditure is debited to profit and loss account and claimed as deduction while computing book profits u/s.115JB of the Act, the ld. AO would be entitled to tinker with the said approved audited accounts even though it does not fall within the item of adjustments provided ..... X X X X Extracts X X X X X X X X Extracts X X X X
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