TMI Blog2014 (10) TMI 891X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 8D. Therefore we are inclined to affirm the order of the ld CIT(A) - Decide against assessee Disallowance u/s 14A while computing the income u/s 115JB - Held that:- As per the Explanation to section 115JB of the Act, book profit is defined to be the net profit shown in the Profit & Loss Account for the relevant previous years as increased/reduced by the amounts specified in the clauses mentioned thereunder. The disallowance worked in the hands of the assessee under the provisions of section 14A of the Act is not covered by the aforesaid clauses. See ACIT Vs. Spray Engineering devices [2012 (7) TMI 587 - ITAT CHANDIGARH]. We respectfully concur and therefore delete the Disallowance u/s 14A to the Book Profits, while computing the income u/s 115JB of the Act - Decide against revenue - ITA No. 607/Del/2013 & ITA No. 816/Del/2013 - - - Dated:- 31-10-2014 - SHRI G. D. AGARWAL, VICE PRESIDENT AND SHRI A. T. VARKEY, JUDICIAL MEMBER For the Appellant : Ashwani Kumar, CA For the Respondent : Smt. A. Mishra, CIT DR ORDER PER A. T. VARKEY, JUDICIAL MEMBER These are cross-appeals preferred by the Revenue and the assessee against the order of the ld CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y entitled to exemption under the provisions of the UP Sales Tax Act. The quantum and period of the subsidy dependant on the point of time at which the plant commenced production and is determinable as a percentage of the fixed capital investment. In the computation of income filed along with the return of income, the amount of subsidy availed by the company during the year under consideration has been treated as capital subsidy and consequently reduced from the taxable income . The stand of the assessee before the Assessing Officer was that on similar facts, assessee's claim for A. Y. 1994-95 to 2001-02, has been allowed by the ITAT. The Assessing Officer, however, disallowed the claim of the assessee on the ground that the assessee on the ground that the matter was subjudice before the High Court. In appeal, the CIT(A)allowed the claim of the assessee by placing reliance on earlier orders of the ITAT in assessee's own case as also the orders of CIT(A) in assessee's own case for A. Y. 2002-03 to 2005-06. Aggrieved, the revenue is in appeal before the Tribunal. 2.2 After having both sides we find that the issue stands already concluded against the department by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion charges that: were levied by the U.P. Power Corporation were not crystallized and consequently the accrual of liability has taken place during the relevant previous year. Although the assessee has not debited the same to the P L A/c the Assessing Officer is duty bound to reduce the said sum from the profits of the eligible unit for proper computation of deduction u/s BO-IA of the Act. The payability of these liabilities may depend upon the decision of the High Court but the liability itself has crystalised during the year in question. In our view the learned CIT (A) was right in rejecting the main contention of the assessee. We see no reason to interfere. 6.5 As regards the alternative contention of the assessee on the aforementioned issue, it was claimed that the Assessing Officer was not correct in reducing the amount of synchronization charges from the profits of the eligible units for the purpose of computing deduction u/s 80IA of the Act without appreciating the fact that the assessee has not debited synchronization charges to the P L A/c on the ground that it was not ascertained liability. It was submitted that in case synchronization charges were to be reduced fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee company. 13. The ld CIT(A) has deleted the addition by holding as under:- 6.2 I have gone through the observations of the Assessing Officer and the submissions of the appellant. In my opinion, the matter has not been understood in proper perspective. In the private corporate sector, there is a practice of offering the remuneration to employees in a package consisting of taxable cash salary and a non-taxable component of reimbursable perquisites. Together, the two elements constitute the package which is termed as cost to company or CTC. In such cases, the payment is undisputedly incurred by the employer company while for the reimbursements the employee escapes taxation. Keeping this in view, various rules are prescribed under the Income-tax Rules, 1962 to tax perquisites. In fact, to curb the practice, Fringe Benefit Tax (FBT) was introduced in the I.T. Act, 1961 vide Finance Act, 2005 w.e.f 0.1.04.2005. However, due to complications of administration and compliance of the tax, it was withdrawn by the Finance Act, 2009. 6.3 From the above, it would be apparent that such perquisites, if at all, are taxable in the hand of the employee and not of the employer, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he statement which has, subsequently, been handed over to me on 15-06- 2010, I find that certain statements have been attributed to me and conclusions drawn which do not convey the factual state of affairs and as such were never conveyed by me and do not reflect any part of what I intended to convey during the recording of the statement. (4) I do not receive any perquisites in cash from M/s Bhushan Steels Limited of which I am the President and the statement attributed to me vide question Nos. 12, 13 and 14 are not true. The noting of non-taxable perquisites do not carry any iota of significance thereto. (5) I hereby completely deny the fact that any perquisites/ salary have been received by me in cash. All payments have been made to me by cheque and stand duly accounted for in my bank account. (6) I hereby retract from the statement allegedly made by me under a disturbed state of mind and under extreme mental tension whereby it was sought to be concluded that certain sums had been received by me in cash from my employer and consequently not offered to tax which is contrary to and at complete variance with the factual position. It is again reiterated that my entir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had made investments in equity shares and was earning dividend income, which was claimed as exempt. In the aforesaid back-drop, the appellant disallowed suo-motto sum of ₹ 2 lakh as expenditure incurred for earning exempt income, in the computation of income. However during the assessment proceeding, the assessee claimed that no expenditure has been incurred for earning exempt income. The AO rejected such a stand of the assessee and computed the disallowance u/s 14A of the Act read with Rule 8D at ₹ 91 lakhs. But restricted the disallowance to ₹ 89 lakhs because the assessee itself has disallowed ₹ 2 lakhs in the computation of income. The ld CIT(A) has affirmed the disallowance by concluding as under:- 5.2. I have gone through the assessment order and the submissions on behalf of the appellant. Rule 80 is applicable in cases where the assessee claims that no expenditure has been incurred in relation to income which does not form part of total income or when the Assessing Officer is not satisfied with the correctness of the claim of expenditure made by the assessee. It was held by the Assessing Officer that As per the provisions of section 14A, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , thus once section 14A comes into operation, then disallowance as mandated u/s 14A read with Rule 8D comes into force. No specific challenge has been made against the computation made by the AO applying Rule 8D. Therefore we are inclined to affirm the order of the ld CIT(A) and therefore appeal of the assessee fails. 22. Ground No.2 pertains to disallowance of ₹ 89 lakhs u/s 14A while computing the income u/s 115JB of the Act. 23. The ld CIT(A) has held that clause (f) of the explanation I to section 115JB of the Act, postulates that any expenditure relatable to any income to section 10 of the Act warrants adjustment to the books profits. In other words, the Book-profits will be increased by any expenditure allocable to exempt income. The ld counsel had invited our attention to decision in the case of ACIT Vs. Spray Engineering devices Ltd. 53 SOT 70 (Chandigarh Bench of ITAT) wherein it was held that disallowance u/s 14A is not covered by any of the clauses of explanation (1) to Section 115JB of the Act. Wherein it was held as under:- The Hon ble Supreme Court had laid down the principle that the Assessing officer while computing income under section 115J had pow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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