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2018 (5) TMI 1084 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - non recording of satisfaction by AO - Held that:- The issue of investments in group companies, subsidiary companies, strategic investments etc vis a vis the applicability of provisions of section 14A of the Act are now settled in favour of the revenue by the recent decision of the Hon’ble Supreme Court in the case of Maxopp Investment Ltd vs CIT reported in (2018 (3) TMI 805 - SUPREME COURT OF INDIA). Applicability of computation mechanism provided in Rule 8D of the Rules cannot be ruled out in the instant case. But we find that the total dividend earned by the assessee was only ₹ 88,75,687/- and hence the disallowance u/s 14A cannot exceed the dividend income. Reliance on the case of Joint Investments (P) Ltd vs CIT reported in (2015 (3) TMI 155 - DELHI HIGH COURT). Since the assessee itself had voluntarily disallowed a sum of ₹ 1,37,25,202/-, we direct the ld AO not to make further disallowance beyond that amount under normal provisions of the Act. Accordingly, the grounds 1 to 2 raised by the assessee on non-recording of satisfaction by the ld AO are dismissed. The Grounds 3 and 4 raised by the assessee are allowed. Disallowance u/s 14A while computing the book profits u/s 115JB - Held that:- As relying on ACIT vs Vireet Investment (P) Ltd [2017 (6) TMI 1124 - ITAT DELHI] the computation under clause (f) of Explanation 1 to section 115JB(2). is to be made without resorting to the computation as contemplated u/s 14A read with Rule 8D of the Income-tax Rules, 1962. We find that the assessee had worked out the disallowance u/s 14A based on the actual figures from its profit and loss account. By respectfully following the special bench decision supra, we direct the ld AO to make disallowance of ₹ 1,37,25,202/- while computing the book profits u/s 115JB of the Act. Accordingly, the grounds raised by the revenue are partly allowed. Addition towards liabilities written back - scheme of amalgamation seeked - Held that:- Though the deduction was claimed by the amalgamating company in the earlier years, now pursuant to the merger, the entire assets and liabilities of amalgamating company got merged at book values with the amalgamated company. This issue of claiming deduction in earlier years had already been duly factored in the scheme of amalgamation and the consideration fixed accordingly. The scheme of amalgamation has been approved by the Hon’ble Calcutta High Court. In these circumstances, if the assessee having written back the liabilities brought forward from amalgamating company as no longer payable and by crediting the same to its profit and loss account, cannot have any escape route from offering the same to tax in its hands. Authorities below had rightly brought the same to tax in the hands of the assessee company during the year under appeal. - Decided against assessee.
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