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2018 (11) TMI 1716 - AT - Income TaxDisallowance u/s.14A made in computing the book profit u/s.115 JB - HELD THAT:- We find that this issue has already been dealt with by the Special Bench of the Tribunal in the case of Vireet Investment Pvt. Ltd. and ANR. [2017 (6) TMI 1124 - ITAT DELHI] as held that disallowance u/s.14A cannot be made in computing book profit u/s.115 JB. However, the Special Bench has the remitted the matter to the file of the assessing officer to make the disallowance for earning the exempt income in accordance with Explanation to section 115JB. In accordance with the above ruling of the special bench we remit this issue the file of the assessing officer. The assessing officer shall consider the issue Disallowance u/s.14A r.w.r 8D - HELD THAT:- Disallowance under Rule 8D(2)(iii) is concerned, the Special Bench in the case of Vireet Investment Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] has held that for calculation of the average value of investment only those investment should be considered which have yielded exempt income. As regards the limit to the disallowance to the extent of expenditure debited is concerned, the same is also covered by the decision of the Iqbal M Chagala [2014 (7) TMI 1111 - ITAT MUMBAI] . Accordingly, we modify the order of the ld. CIT(A) in this regard and direct the A.O. to give effect to the case laws as mentioned above in the computation. Accrual of income - Addition being interest on non-performing asset received from - HELD THAT:- Assessee has claimed that it is an NBFC (Non Banking Finance Company). It has not accounted for interest on loan given to Portfolio Fashions Pvt Ltd as it has become a NPA (Non Performing asset) and the assessee following the RBI guidelines on prudential norms for income recognition on NPA has not accounted for the interest as the loan has become the NPA. A.O. has rejected the same by doubting the assessee’s claim of being an NBFC and further holding that in view of the mercantile system of accounting and the loan appearing in the balance sheet of the assessee it was incumbent upon the assessee to account for the interest on accrual basis. We find that as against the above the ld. CIT(A) has given a finding that the assessee is duly registered with RBI as an NBFC. Furthermore, it has now been accepted by the higher courts that RBI guidelines on prudential norms of income recognition on NPA have to be accepted. This view is supported by the observation of the Hon’ble Apex Court in the case of Southern Technologies Limited [2010 (1) TMI 5 - SUPREME COURT] quoted by the ld. CIT(A). Once this view is accepted, the assessee being an NBFC was not required to account for interest on accrual basis on loans which have became NPA. This view also gets supported in the case of Vashisht Chay Vyapar Limited [2010 (11) TMI 88 - DELHI HIGH COURT] . Hence, we do not find any infirmity in the order of the CIT(A). Accordingly, we uphold the same.
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