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TMI Blog2022 (8) TMI 952X X X X Extracts X X X X X X X X Extracts X X X X ..... Del/2018 - - - Dated:- 29-7-2022 - SHRI KUL BHARAT , JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA , ACCOUNTANT MEMBER Appellant by : Sh. Anil Jain , CA Respondent by : Sh. Rajesh Kumar , CIT - DR ORDER PER KUL BHARAT , JM : This appeal, by the assessee, is directed against the order of learned CIT(Appeals)-5, Delhi dated 16.08.2018 pertaining to the assessment year 2015- 16. The assessee has raised following grounds of appeal: 1. On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in upholding AO s act of reducing appellant book loss by the amount of disallowance made by him u/s 14A without appreciating that the provisions of section 115JB are attracted only when there are book prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,547/-. The case was selected for scrutiny assessment and the assessment u/s 143(3) of the income-tax Act, 1961 (in short the Act ) was framed vide order dated 26.12.2017. The Assessing officer while framing the assessment made addition by invoking the provisions of Section 14A of the Act amounting to Rs. 21,15,14,527/- and also made addition in respect of excess claim of premium on redemption of compulsorily convertible debentures (CCDs) amounting to Rs. 5,26,23,522/-. Thus, assessed loss at Rs. 183,92,07,084/- under normal provision and at book loss of Rs. 124,23,37,498/-. 3. Aggrieved against this the assessee preferred appeal before the learned CIT(Appeals). The learned CIT(Appeals) partly allowed the appeal. Thereby he restricted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue to computational error. AO did not realize that amount pertaining to premium was not debited in the appellant audited P L account; consequently, question of reducing the same from book loss does not arise. On the other hand, premium amount of Rs 33,56,68,161/- allowed as expenditure by AO would go on to increase the book loss. The learned CIT(A) has reduced disallowance u/s 14A from 21,15,14,527/- to RS 382/- i.e., to the extent of dividend received by the appellant on the basis of jurisdictional High Court decision both under normal provision and under section 115JB computation. AO S FINDING Page no 12 of AO s order. Ao did not give any finding as to why he is reducing book loss by the amount disallowed in the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n does not provide any methodology for computing book loss. This act of AO was beyond legislative mandate. Therefore, AO s act of reducing book loss is illegal and as such act should be struck down. Heading of the section also makes it very clear that it would apply only in case of book profits. Heading read as under: Special provisions for payment of tax by certain companies. Section 115JB Bare perusal of the above would make it clear that it has been introduced to collect taxes and consequently it would not apply to loss situation. Further a question may arise that income would include loss this principle is not applicable in this case since sub section (1) of section 115B states that in case of assessees income comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as deductible expenditure at the time of redemption of these debentures, consequently the premium amount was not debited to P L a/c nor the same was claimed as expenditure in the computation of assessable income. In between section 145 of the IT act was amended by Finance (No 2) Act 2014 w.e.f. AY 2015-16, pursuant to the powers conferred to it Central Government notified Income Computation Disclosure Standards (ICDS). In ICDS no. 9 (relating to Borrowing Cost ) it was prescribed that borrowing cost would include amortised value of discounts/premium in connection with borrowings, meaning thereby that deduction of such expenditure would be allowed on the basis of spreading such expenditure over the tenure of the borrowing. Consequently, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. CIT FINDINGS- page 18, para 4.4 Ld. CIT held that as under: - The book profit also has to be consistent with the accounting standards. Moreover, it is not disputed that the expense is not relatable to the income being charged to tax in the present year therefore the amount originally debited to the books was more in the nature of a required to be set aside for future liability covered in clause c of the Explanation 1 to section 115JB. This is required to be added to book profit and therefore has been correctly added by the assessing officer and the addition of RS 5,26,23,522/- to the book profit is upheld. APPELLANTS CONTENTIONS Kindly note the above finding of the ld. CIT(A) is erroneous as amount of pre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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