2019 (10) TMI 1376 - AT - Income Tax

Revision u/s 263 - disallowance made U/s. 14A of the Act was not added back to the book profit while computing the MAT U/s. 115JB - HELD THAT - Since it is already decided by the Chennai and Mumbai Bench of the Tribunal that disallowance made U/s. 14A of the Act while computing the profit under the normal provisions of the Act need not be added back to the book profit while computing MAT U/s. 115JB of the Act we do not find the order of the Ld. AO to be prejudicial to the interest of the Revenue. Therefore we are of the considered view that the powers invoked by the Ld. Pr. CIT U/s. 263 of the Act is erroneous. Hence we hereby quash the order passed by the Ld.Pr. CIT U/s.263 - Decided in favour of assessee.

Summary

Issues:
- Invocation of powers under Section 263 of the Act by Ld. CIT (A) regarding the disallowance made under Section 14A of the Act not being added back to the book profit while computing MAT under Section 115JB of the Act.

Analysis:
1. The appeal was filed by the assessee against the order of the Ld. Pr. CIT-4, Hyderabad, invoking powers under Section 263 of the Act for the Assessment Year 2012-13. The primary issue raised was the alleged error by the Ld. CIT (A) in invoking these powers based on the disallowance made under Section 14A of the Act not being added back to the book profit while computing MAT under Section 115JB of the Act.

2. The assessee, a Private Limited Company engaged in pharmaceuticals, filed its return of income for AY 2012-13, admitting NIL income under normal provisions and a certain amount under MAT provisions. The Ld. AO, during scrutiny, made additions towards disallowance under Section 14A and another section. Subsequently, the Ld. Pr. CIT observed that the disallowance under Section 14A was not added back to the income while computing profit under MAT provisions, leading to the invocation of powers under Section 263 of the Act.

3. The Ld. AR argued that a provision with fiction cannot be superimposed on another provision with fiction while computing profit under MAT provisions. Citing a decision by a co-ordinate bench, it was contended that adding back the disallowance under Section 14A to the book profit for MAT purposes was not warranted. The Tribunal found merit in this argument, emphasizing that a provision with fiction cannot be overlaid on another such provision.

4. Referring to decisions by the Chennai and Mumbai Tribunals, the Tribunal highlighted that disallowance under Section 14A for normal provisions need not be added back to the book profit for MAT computation. Citing relevant provisions and legal principles, the Tribunal concluded that the invocation of powers under Section 263 by the Ld. Pr. CIT was erroneous. Consequently, the order passed by the Ld. Pr. CIT under Section 263 was quashed, and the appeal by the assessee was allowed.

5. The Tribunal's decision, pronounced on 30th October 2019, clarified the interpretation of fiscal statutes concerning the computation of profit under MAT provisions and the treatment of disallowances under Section 14A of the Act. By aligning with precedent decisions and legal principles, the Tribunal upheld the assessee's contentions and ruled in favor of quashing the order passed under Section 263 of the Act.