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The DCIT 8 (2) , (OSD) , Mumbai Versus M/s. Khanna Hotels Pvt. Ltd.

2016 (3) TMI 211 - ITAT MUMBAI

Addition u/s 14A - MAT computation - Held that:- In the present case, the finally assessed income of the assessee has been computed in terms of section 115JB of the Act. The disallowance under section 14A of the Act under the normal provisions of the Act was determined at ₹ 65,76,251/-, wherein income by way of long term and short term capital gains and dividend was exempt. On the contrary, in the context of computing income under section 115JB of the Act, the income on account of long ter .....

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income. Therefore, in our view though the action of the CIT(A) is accepted in principle, the entire amount disallowed by the Assessing Officer could not have been deleted. As a consequence, it is directed that the total disallowance be fixed at ₹ 7,58,633/- (inclusive of suomoto disallowance of ₹ 6,07,845/- made by the assessee). - Decided partly in favour of revenue - ITA No 6488/MUM/2013 - Dated:- 29-1-2016 - SHRI G.S.PANNU (AM) AND SHRI RAM LAL NEGI (JM) For The Appellant : Shri. .....

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member apart from the business of export of precious stones, filed its return of income for the assessment year 2010-2011 declaring the total income of ₹ 4,33,37,260/-. The return was processed and assessment order was accordingly passed. The assessee had suo moto made disallowance of ₹ 6,07,845/- u/s 14A of the Income Tax Act, 1961( in short the Act) read with Rule 8D of the Income Tax Rules, instead of ₹ 65,76,251/- as expenditure disallowable under section 10 of the Act (pr .....

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r the assessee challenged the order before the Ld. CIT(A). The CIT(A) relying upon the ratio laid down by the Hon ble Delhi Court in Maxopp Investment Ltd. Vs CIT(2012)247CTR(Del) and other cases relied upon by the appellant/assessee allowed the appeal of the assessee holding as under:- Now in the light of the forgoing, I find that Ld. AO has mechanically applied the provisions of section 14A. The appellant clearly brought out the facts that both the STCG of ₹ 56,62,674 and LTCG of ₹ .....

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has applied Rule 8D to the entire income ignoring the fact that the income from capital gain is not exempt for the purposes of book profit . 3. Dissatisfied with the impugned order passed by the Ld. CIT(A), the revenue has preferred the present appeal on the following defective grounds:-. 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of ₹ 65,76,251/- u/s 14A of the Act by the Assessing Officer to the Assessing Officer to the .....

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14A of the Act by the Assessing Officer to the assessee's book profit and consequently upholding the assessee's claim of different computations of disallowance u/s 14A of the Act for the purpose of computation of book profit u/s 115JB and for the purpose of computation of total income under the regular provisions of the Act, without appreciating that such different computations of disallowance u/s 14A have not been provided in Section 14A or in Section 115JB of the Act" 4. Before us .....

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llant/assessee has submitted that income computed as per normal provisions of the Act was ₹ 4,33,37,260/- however, the appellant being a company, computed Book Profit as per Section 115JB of the Act which worked out to ₹ 9,53,78,463/-. The tax as per normal provisions of the Act was worked out at ₹ 1,22,18,362/- whereas the tax on the book profit computed at 15% of the Book Profit was worked out at ₹ 1,43,06,769/-. Since the tax so computed on the Book Profit u/s 115JB wa .....

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PMS) fees and ₹ 3,95,101/- incurred as depository charges as the entire investment transaction had been carried out through PMS for earning Short term Capital gain of ₹ 56,62,674/- and Long term capital gain of ₹ 6,52,06,426/-. The Ld. AR further relied on the decision of Chandigarh Bench of ITAT in the case of Spray Engineering Pvt. Ltd. (53 SOT 70). 7. We have heard the rival submissions and perused the documents on record in the light of the respective submissions of the par .....

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n book profit was more than the tax calculated under general provisions of the Act, the assessee was required to pay tax on book profit. It is due to this reason that the assessee has calculated the disallowance proportionate to the aggregate expenses incurred on earning exempt income. As per the facts emanating from the record the major component of investment income is Long Term Capital Gain, which is 81.40% that has been included in book profit. Dividend constitutes 11.53% which is not requir .....

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Rule 8D. 9. The aforesaid facts give rise to a question that whether in the present case addition of disallowance calculated by the AO is justified or the proportionate amount calculated by the assessee needs to be added to the book profit? 10. Section 14A of the Act bars allowance of any expenditure for earning income which does not constitute total income of the assessee and the expenses incurred can be allowed only to the extent the same are relatable to earning of taxable income. Hence, only .....

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