Avonmore Capital & Management Services Ltd, New Delhi V. ACIT Circle-3(2), New Delhi

ITA 1580/DEL/2020

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The case involves Avonmore Capital & Management Services Ltd., the appellant, contesting an order by the Assessing Officer (AO) under section 154 of the Income Tax Act, which added a disallowance of Rs. 29,66,587 to the book profit under MAT provisions. This disallowance was initially made under section 14A for expenses related to exempt income but was not included in the computation of book profit under MAT. The CIT (Appeals) upheld the AO's decision, leading to the appeal before the ITAT. The ITAT, referencing a similar case and the Special Bench's decision, ruled that such disallowances should not affect the MAT computation, thus favoring the appellant.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 113656 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-11-2022
• Assessment Year: misc
• Appeal Filed On: 09-09-2020
• Other Referred Cases: Vireet Investment Pvt. Ltd. in ITA No.502/Del/2012 for AY 2008-09
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 154; 143(3); 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH ‘A’ : NEW DELHI) SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER and SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No.1580/Del./2020 (ASSESSMENT YEAR : 2015-16) Avonmore Capital & Management Services Ltd., vs. ACIT, Circle 3 (2), 3, Scindia House, 2 nd Floor, New Delhi. Connaught Place, Janpath, New Delhi – 110 001. (PAN : AABCA0478N) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Mohan Gupta, CA REVENUE BY : Shri Kanav Bali, Sr. DR Date of Hearing : 22.11.2022 Date of Order : 02.12.2022 ORDER PER SHAMIM YAHYA, ACCOUNTANT MEMBER : This appeal by the assessee is directed against the order of the ld. CIT (Appeals)-I, New Delhi dated 31.01.2020 for the assessment year 2015-16. 2. The grounds of appeal taken by the assessee read as under :- ““1. That on facts and in the circumstances of the case and in law, the CIT(Appeal) has erred in confirming an addition made by the assessing officer by passing an order u/s 154 of the Income Tax Act amounting to Rs. 29,66,587 j- on account of disallowance of expenses relating to exempt income u/s 14A of the I.T. Act made in regular assessment against exempted ITA No.1580/Del./2020 2 income of dividend while computing tax u/s 115J6 (MAT Provisions) of the Income Tax Act also. 2. That on facts and circumstances 'of the case, the Ld. CIT(A) erred in law and on facts in not giving reasonable opportunity of being heard.” 3. In this case, assessee company filed return of income on 28.09.2015 declaring total income at nil under normal provisions and Rs.16,88,892/- under MAT provisions under section 115JB of the Income-tax Act, 1961 (for short 'the Act'). Assessment order was passed on 28.04.2017 at returned income. Thereafter, case was selected for audit scrutiny. The same was briefly reproduced by the ld. CIT (A) in his order as under :- “Particulars of Mistake proposed to be rectified "The assessment of M/s Avonmore Capital & Management Services Ltd. for the assessment year 2015-16 was completed u/s 143(3) of the income tax Act, 1961 in April 2017 at an income of Rs. Nil under normal provision and Rs. 88,63,248/- under MAT provisions. Later it was noticed that the assessee in the computation of taxable income under normal provision added Rs.88,63,248/- on account of disallowance u/s 14A but the same was not added during computation of taxable income u/s 115JB. The omission resulted in under assessment of income u/s 115JB. The omission resulted in under assessment of income u/s 115JB by Rs.29,66,587/- having tax effect of Rs.7,06,605/-.” 4. On the basis of this, AO passed an order u/s 154 of the Act wherein he held that the disallowance was also to be made with respect to section ITA No.1580/Del./2020 3 115JB of the Act. Ld. CIT (A) found the order of AO passed u/s 154 of the Act as correct. 5. Against this order, assessee is in appeal before us. We have heard both the parties and perused the records. 6. Ld. Counsel for the assessee submitted that this issue is covered in favour of the assessee by the decision of ITAT in assessee’s own case in ITA No.4820/Del/2012 for AY 2008-09 vide order dated 15.09.2021. In this, ITAT vide order dated 15.09.2021 had considered the same issue and has decided as under :- “2. The sum and substance of the grievance of the assessee is that the ld CIT(A) erred in confirming the addition made by the Assessing Officer on account of disallowance made u/s 14A of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'] for computing the book profit under section 115JB of the Act. 3. Briefly stated the facts of the case are that by way of an order dated 14.09.2017, the Assessing Officer invoked the provisions of section 154 of the Act. Reasons, which prompted the Assessing Officer to rectify the mistake apparent from record is that in its computation of income, the assessee had added a sum of Rs. 22,48,459/– u/s 14A under normal provisions of the Act. Since the same was not offered for calculation of book profit under MAT provision, the Assessing Officer was of the opinion that this mistake resulted in under assessment of book profit under MAT provision and, accordingly, made addition of Rs. 22,48,459/– for computing book profit under MAT provision. 4. The assessee agitated the matter before the ld. CIT(A) and strongly contended that any disallowance made u/s 14A of the Act is not to be considered for computation of book profit and MAT provision. ITA No.1580/Del./2020 4 5. The claim of the assessee did not find any favour with the ld. CIT(A) who confirmed the action of the Assessing Officer. 6. Before me, the ld. counsel for the assessee placed strong reliance on the decision of the Special Bench of the Tribunal in the case of Vireet Investment 82 taxmann.com 415. 7. Per contra, the ld. DR strongly relied upon the findings of the lower authorities and stated that the facts of the case are distinguishable. 8. I have given thoughtful consideration to the orders below. I find that suo moto disallowance made by the assessee in its computation of income was not considered by it while computing book profit under MAT provision. I find that the Assessing Officer has invoked the provisions of Section 154 of the Act claiming that not considering the disallowance made u/s 14A of the Act has resulted into a mistake apparent from record which is rectifiable. 9. At the very outset, I do not agree with this action of the Assessing Officer, as in my considered opinion, a debatable issue cannot be a rectifiable mistake apparent from record. Be that as it may, this issue has now been settled by the Special Bench of the Tribunal in the case of Vireet Investment [supra] wherein it has been held that computation under clause (f) of Explanation 1 to Section 115JB(2) of the Act is to be made without resorting to computation as contemplated under section 14A r.w.r 8D of the Act. On both counts, the assessee succeeds. The Assessing Officer is directed to delete the disallowance made u/s 14A of the Act from computation of book profit under MAT provision. 10. In the result the appeal of the assessee in ITA No. 4820/DEL/2019 is allowed.” 7. We find that the issue is same as dealt with by the ITAT as above. Moreover, ITAT Special Bench in the case of Vireet Investment Pvt. Ltd. in ITA No.502/Del/2012 for AY 2008-09 vide order dated 16.06.2017 ITA No.1580/Del./2020 5 has also held that disallowance u/s 14A of the Act cannot be imported into computation u/s 115JB. In this view of the matter, following the coordinate Bench decision aforesaid, we set aside the orders of the authorities below and decide the issue in favour of the assessee. 8. In the result, assessee’s appeal stands allowed. Order pronounced in the open court on this 2 nd day of December, 2022. Sd/- sd/- (ANUBHAV SHARMA) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated the 2 nd day of December, 2022 TS Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT(A)-1, New Delhi. 5.CIT(ITAT), New Delhi. AR, ITAT NEW DELHI.