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2019 (12) TMI 139 - AT - Income TaxDisallowance of depreciation on fixed assets to the book profits computed under section 115JB - HELD THAT:- Since, the books of accounts of the assessee have been audited and also have been approved in AGM, the AO cannot alter book profit for any items other than as provided as in explanation (1) to section 115JB - AO has accepted the claim of the assessee in preceding financial years when the assessee has claimed depreciation on alleged bogus fixed assets without any adjustment to book profit. Once the claim of the assessee has been accepted in earlier financial years, then there is no reason for the AO to disturb the settled position unless otherwise there is a complete change in facts for the year under consideration. Although, resadjudicata is not strictly applicable to income tax proceedings, but rule of consistency is to be followed as held in the case of CIT vs. Radhasoami Sathsung vs CIT [1991 (11) TMI 2 - SUPREME COURT] wherein it was held that rule of consistency has to be followed in income tax proceedings even though resadjudicata is not strictly applicable. AO as well as CIT(A) were erred in making additions towards depreciation on alleged fixed assets to book profit computed u/s 115JB. We direct the AO to delete additions made to book profit under section 115JB towards depreciation claim on fixed assets. Disallowance of expenditure incurred in relation to exempt income u/s 14A read with rule 8D of Income Tax Rules, 1962 and consequent additions made to book profit computed under section 115JB - HELD THAT:- CIT(A) has directed the AO to exclude investments in mutual funds, because dividend from mutual funds and long term capital gains on redemption of units in respect of debt oriented funds is chargeable to tax. CIT(A) has set aside the issue to the file of the AO and directed him to consider working furnished by the assessee determining the disallowances under section 14A. Therefore, we are of the considered view that the issue needs to go back to the file of the AO to decide afresh in light of our discussions given hereinabove. We set aside the issue to the file of the AO and direct him to recompute disallowances contemplated under section 14A in accordance with law in terms of our observations given hereinabove. Coming to the recomputation of book profit under section 115JB in respect of disallowance of expenditure under section 14A - We find that this issue has been covered in favour of the assessee in the case of ACIT vs. Vireet Investments Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] wherein it was held that computation under clause (f) of explanation (1) to section 115JB(2) is to be made without resorting to computation as contemplated under section 14A read with rule 8D. AO was erred in making additions towards book profit u/s 115JB in respect of disallowances of expenditure under section 14A by invoking rule 8D. Hence, we direct the AO to delete the additions made towards book profit computed under section 115JB in respect of disallowance of expenditure under section 14A.
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