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2017 (12) TMI 1841

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..... e assessee. In such a situation we are of the view that the disallowance u/s 14A viz a viz Rule 8D of the I.T Rules has been made without complying the provisions of law. Thus the addition cannot be sustained in the instant case. Thus, we direct the Assessing Officer to delete the impugned addition. Thus, first issue in grounds of appeal filed by the assessee is allowed. Addition u/s 115JB for disallowance u/s 14A r.w.r 8D - HELD THAT:- As in recent judgment of Special Bench of Hon ble Delhi Tribunal in the case of ACIT vs. Vireet Investment Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] that the disallowances made u/s 14A r.w.r. 8D cannot be the subject matter of disallowances while determining the net profit u/s 115JB - Thus it can be concluded that the disallowance made under section 14A r.w.r. 8D cannot be resorted while determining the expenses as mentioned under clause (f) to explanation 1 of section 115JB - However it is also clear that the disallowance needs to be made in terms of the provisions of clause (f) to section 115JB of the Act while determining the book profit. In holding so we draw our support from the judgment of Hon ble Calcutta High Court in the case of CIT Vs. J .....

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..... Act. However, the assessee did not make any disallowance of the expenses incurred in relation to such exempted income. Thus, the Assessing Officer invoked the provision of 14A r.w.r 8D and made the following disallowances: Sl. No. Rule Particulars Amounts(in Rs.) 1 8D(2)(i) Direct expenses 29,786/- 2 8D(2)(ii) Interest expenses NIL 3 8D(2)(iii) Disallowance 1923063/- Total 1952849/- The above expenses were disallowed as per Rule 8D and added to the total income of the assessee. 5. The assessee filed an appeal before the ld. CIT(A) where it submitted details of actual expenses claimed by the assessee in his profit & loss a/c for Rs. 51,699/- as detailed under: Rent & Rates Rs.5800/- Filing Fees Rs.3168/- Professional Fees Rs.10551.00 Miscellaneous Expenses Rs.15296/- Auditors remuneration Rs.16854/- Total Rs.51669/- Thus, the assessee submitted that the expenses under Rule 8D(2)(iii) of I.T Rules cannot exceed the expenses actually claimed by it in the P & L A/c. However, the ld. CIT(A) disregarded the contention of the assessee and confirmed the order of Assessing Officer by observing as under: "4.2 I am not in agreement with the views of the A .....

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..... A of the Act. On perusal of the facts of the present case, we note that the assessee has claimed indirect/administrative expenses during the year to the tune of Rs.51,669/- only. Thus, it is undoubtedly clear that actual expenses claimed by the assessee are much less then the expenses disallowed under Rule 8D(2)(iii) of the I.T. Rules by the AO. In the backdrop of the present case we are of the view that the expenses to be disallowed under Rule 8D(2)(iii) cannot exceed the actual expenses incurred by the assessee. However, the AO has made the disallowance of the expenses under rule 8D(iii) exceeding the actual expenses. 9. The act of making the disallowance by the AO under rule 8D(iii) shows that no reference has been made to the books of accounts of the assessee. In such a situation we are of the view that the disallowance u/s 14A viz a viz Rule 8D of the I.T Rules has been made without complying the provisions of law. Thus the addition cannot be sustained in the instant case. Thus, we direct the Assessing Officer to delete the impugned addition. Thus, first issue in grounds of appeal filed by the assessee is allowed. 10. The second issue raised by the assessee (in Ground Nos.2 .....

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..... r.w.r 8D of the Income Tax Rules while determining the income under normal computation of income. The disallowance of the same was also made while determining the profit u/s 115JB of the Act. However, we note that in recent judgment of Special Bench of Hon'ble Delhi Tribunal in the case of ACIT vs. Vireet Investment Pvt. Ltd. reported in 82 Taxmann.com 415 that the disallowances made u/s 14A r.w.r. 8D cannot be the subject matter of disallowances while determining the net profit u/s 115JB of the Act. Relevant portion of the said order is reproduced below: "In view of above discussion, 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, 1962." The ratio laid down by the Hon'ble Tribunal is squarely applicable to the facts of the case. Thus it can be concluded that the disallowance made under section 14A r.w.r. 8D cannot be resorted while determining the expenses as mentioned under clause (f) to explanation 1 of section 115JB of the Act. However it is also clear that the disallowance needs to be made in terms of the provisions of claus .....

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