Atlanta Electricals Private Limited, Anand V. Income Tax Officer ,Ward1(1)(1),Vadodara (Now Circle 1(1)(1), Vadodara), Vadodara

ITA 730/AHD/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 8245 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Next Hearing Date: 04-03-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 20-09-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIPRATEEKSHARMA
• Assessee Lawyers: MSAMRINPATHAN

Judgement Text

आयकरअपीलीयअधिकरण , अहमदाबादनयायपीी INTHEINCOMETAXAPPELLATETRIBUNAL, ‘’D’’BENCH,AHMEDABAD BEFOREMsSUCHITRAKAMBLE,JUDICIALMEMBER And SHRIWASEEMAHMED,ACCOUNTANTMEMBER आयकरअपीलसं./ITANo.730/AHD/2023 धििाधरणवरध / Asstt.Year:2014-2015 AtlantaElectricalsPvt.Ltd., PlotNo.1503-04PhaseIV, AnandVithalUdyognagar, Anand-388121. PAN:AABCA6647B Vs. IncomeTaxOfficer, Ward(1)(1)(1), Vadodara. (NowCircle1(1)(1), Vadodara. (Applicant)(Respondent) Assesseeby:MsAmrinPathan,AR Revenueby:ShriPrateekSharma,Sr.DR सुिवाईकीतारीख/DateofHearing:05/03/2024 घोरणाकीतारीख /DateofPronouncement:15/03/2024 आदेश/ORDER PERWASEEMAHMED,ACCOUNTANTMEMBER: ThecaptionedappealhasbeenfiledattheinstanceoftheAssesseeagainst theorderoftheLearnedCommissionerofIncomeTax(Appeals),Vadodara, arisinginthematterofassessmentorderpassedunders.143(3)oftheIncome TaxAct,1961(here-in-afterreferredtoas"theAct")relevanttotheAssessment Year2014-15. 2.Theinterconnectedissueraisedbytheassesseeingroundnumbers1to6 isthattheLd.CIT(A)erredinconfirmingtheorderoftheAObysustainingthe ITAno.730/AHD/2023 A.Y.2014-15 2 additionofRs.99,34,511/-undertheprovisionsofsection14Ar.w.Rule8Dof IncomeTaxRules. 3.TheAOduringtheassessmentproceedingsfoundthattheassesseehas shownexemptedincomeofRs.1,08,650/-onlybutnodisallowanceagainstsuch exemptedincomewasmadeundertheprovisionofsection14Ar.w.Rule8Dof IncometaxRules.Therefore,theAOmadethedisallowanceu/s14Ar.w.rule8D ofIncomeTaxRulesforRs.88,01,957/-andRs.11,32,554/-onaccountof interestandadministrativeexpensesaggregatingtoRs.99,34,511/-onlyand addedtothetotalincomeoftheassessee. 4AggrievedassesseepreferredanappealtotheLd.CIT(A)whoconfirmed theorderoftheAO. 5.BeingaggrievedbytheorderoftheLd.CIT(A),theassesseeisinappeal beforeus. 6.TheLd.ARbeforeusfiledapaperbookrunningfrompages1to74and inter-aliacontendedthatthedisallowanceu/s14Ar.w.Rule8DofIncomeTax Rulescannotexceedtheexemptedincomei.e.Rs.1,08,650/-only. 7.Ontheotherhand,theLd.DRvehementlysupportedtheorderofthe authoritiesbelow. 8.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.TheHon’bleGujaratHighCourtinthecaseof PrincipalCommissionerofIncome-taxv.GujaratFlurochemicalsLtd reportedin155taxmann.com135hasheldthatthedisallowanceu/s14Ar.w. Rule8DofIncomeTaxRulescannotexceedtheamountofexemptedincome.The relevantextract/head-noteisreproducedasunder: ITAno.730/AHD/2023 A.Y.2014-15 3 Section14AoftheIncome-taxAct,1961readwithrule8DoftheIncome- taxrules,1961-Expenditureincurredinrelationtoincomenotincludiblein totalincome(Illustrations)-Assessmentyear2014-15-AssessingOfficer madedisallowanceundersection14Areadwithrule8D-Tribunalheldthat disallowancemadeundersection14Areadwithrule8Dcouldnotexceed exemptincome-WhetherorderofTribunalwasjustified-Held,yes[Para 4.2][Infavourofassessee] 8.1Likewise,theHon’bleSCinthecaseofCraftBuilderConstructionprivate limitedreportedin112taxmann.com322hasheldasunder: SLPdismissedagainstHighCourtrulingthatdisallowanceundersection 14Acannotexceedexemptincomeofrelevantyear. 8.2Nowcomingtothefactsofthecaseonhand,admittedlytheexempted incomeisofRs.1,08,650/-onlyandtherefore,respectfullyfollowingthe judgmentsasdiscussedabove,thedisallowancecannotexceedtheamountof exemptedincome.Hence,thegroundofappealoftheassesseeispartlyallowed. 9.ThenextissuebytheassesseeingroundNo.7isthattheLd.CIT(A)erred inconfirmingtheorderoftheAObymakingadditiontothebookprofitu/s115JB oftheActfortheamountdisallowedu/s14Ar.w.Rule8DofIncometaxRules. 10.TheAOundernormalcomputationofincomehasmadedisallowanceunder section14Ar.w.rule8DoftheITruleforRs.99,34,511/-only.However,no disallowancewasmadebytheassesseewhilecomputingthebookprofitasper theprovisionsofclause(f)ofexplanationtosection115JB(2)oftheAct. Accordingly,theAOmadeadditionofRs.99,34,511/-tothebookprofit.On appealbytheassessee,thelearnedCIT(A)confirmedthesame. 11.BeingaggrievedbytheorderofthelearnedCIT(A),theassesseeisin appealbeforeus. ITAno.730/AHD/2023 A.Y.2014-15 4 12.ThelearnedARbeforeussubmittedthattheamountdisallowedunder section14Ar.w.rule8DoftheITruleforRs.99,34,511/-onlycannotbemade subjecttotheadjustmentwhilecomputingthebookprofitaspertheprovisionsof clause(f)ofexplanationtosection115JB(2)oftheAct. 13.Ontheotherhand,thelearnedDRsupportedtheorderoftheauthorities below. 14.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Thefactsoftheissueonhandareelaboratedin precedingparagraphwhicharenotindispute.Therefore,wearenotinclinedto repeatthesame.Attheoutset,wenotethattheSpecialBenchofHon’bleDelhi TribunalinthecaseofACITvs.VireetInvestmentPvt.Ltd.reportedin82 Taxmann.com415hasheldthatthedisallowancemadeu/s14Ar.w.r.8Dcannot bethesubjectmatterofdisallowancewhiledeterminingthenetprofitu/s115JB oftheAct.Therelevantportionofthesaidorderisreproducedbelow: “Inviewofabovediscussion,thecomputationunderclause(f)ofExplanation1to section115JB(2),istobemadewithoutresortingtothecomputationas contemplatedundersection14A,readwithrule8DoftheIncome-taxRules,1962.” 14.1TheratiolaiddownbytheHon’bleTribunalissquarelyapplicabletothe factsofthecaseonhand.Thus,itcanbeconcludedthatthedisallowancemade undersection14Ar.w.r.8Dcannotberesortedwhiledeterminingtheexpenseas mentionedunderclause(f)toexplanation1tosection115JBoftheAct. 14.2However,itispertinenttonotethatthedisallowanceneedstobemade withrespecttotheexemptedincomeintermsoftheprovisionsofclause(f)to section115JBoftheActwhiledeterminingthebookprofit.Inholdingso,wedraw supportfromthejudgmentofHon’bleCalcuttaHighCourtinthecaseofCITVs. JayshreeTeaIndustriesLtd.inGONo.1501of2014(ITATNo.47of2014)dated 19.11.14whereinitwasheldthatthedisallowanceregardingtheexempted ITAno.730/AHD/2023 A.Y.2014-15 5 incomeneedstobemadeaspertheclause(f)toExplanation-1ofSec.115JBof theActindependently.Therelevantextractofthejudgmentisreproducedbelow:- “Wefindcomputationoftheamountofexpenditurerelatabletoexemptedincome oftheassesseemustbemadesincetheassesseehasnotclaimedsuch expendituretobeNil.Suchcomputationmustbemadebyapplyingclause(f)of Explanation1undersection115JBoftheAct.Weremandthematterforsuch computationtobemadebythelearnedTribunal. WeacceptthesubmissionofMr.Khaitan,learnedSeniorAdvocatethatthe provisionofsection115JBinthematterofcomputationisacompletecodeinitself andresortneednotandcannotbemadetosection14AoftheAct.” 14.3Givenabove,weholdthatthedisallowancesmadeundertheprovisionsof Sec.14Ar.w.r.8DoftheITRules,cannotbeappliedtotheprovisionofSec. 115JBoftheActasperthedirectionoftheHon'bleCalcuttaHighCourtinthe caseofCITVs.JayshreeTeaIndustriesLtd.(Supra). 14.4Nowthequestionarisestodeterminethedisallowanceaspertheclause(f) toExplanation-1ofSec.115JBoftheActindependently.Inthisregard,wenote thatthereisnomechanism/mannergivenunderclause(f)toExplanation-1of Sec.115JBoftheActtoworkout/determinetheexpenseswithrespecttothe exemptedincome.Therefore,inthegivenfacts&circumstances,wefeelthatan ad-hocdisallowancewillservethejusticetotheRevenueandassesseetoavoid themultiplicityoftheproceedingsandunnecessarylitigation.Thus,wedirectthe AOtomakethedisallowanceof1%oftheexemptedincomeasdiscussedabove underclause(f)toExplanation-1ofSec.115JBoftheAct.Wealsofeeltobring thisfactonrecordthatwehaverestoredothercasesinvolvingidenticalissuesto thefileofAOformakingthedisallowanceaspertheclause(f)toExplanation-1of Sec.115JBoftheActindependently.Butnowwenotethatthereisnomechanism providedunderclause(f)toExplanation-1ofSec.115JBoftheActtomakethe disallowanceindependently.Therefore,ouractionforrestoringbacktheissueto thefileofAOwouldunnecessarilycausefurtherlitigation.Thus,welimitthe disallowanceonanad-hocbasis@1%oftheexemptedincomeasperclause(f) ITAno.730/AHD/2023 A.Y.2014-15 6 toExplanation-1ofSec.115JBoftheAct.Thus,thegroundofappealofthe Revenueispartlyallowed. 15.Intheresult,theappealoftheassesseeispartlyallowed. OrderpronouncedintheCourton15/03/2024atAhmedabad. Sd/-Sd/- (SUCHITRAKAMBLE)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER (TrueCopy) Ahmedabad;Dated15/03/2024 Manish