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Torrent Cable Ltd. (Formerly known as Torrent Gujart Biotech Ltd.) Versus The Asst. CIT Circle-8, Ahmedabad

2017 (1) TMI 564 - ITAT AHMEDABAD

Disallowance determined under section 14A r.w.Rule 8D while computing book profit under section 115JB - Held that:- We find merit contention on behalf of the assessee and direct the AO to delete the adjustment made on account of estimated disallowance determined under section 14A r.w.Rule 8 D of the I.T.Rules, 1962 while computing book profit under section 115JB of the Act. See Alembic Ltd [2017 (1) TMI 513 - GUJARAT HIGH COURT] - Denial of relief claimed under 115JB towards provisions to wr .....

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- being provision for diminution in the value of investment and ₹ 9,53,624/- being provision for diminution in the value of investment and ₹ 9,53,624/- being provision for doubtful debts. It is the case of the assessee that in view of the retrospective amendment book profit declared is required to be reworked. The assessee has relied upon the decision in the case of Kochi Refineries Ltd. vs. Dy.CIT reported in (2010 (1) TMI 980 - ITAT MUMBAI). We note that the AO appears to have not .....

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short] dated 05/10/2011 for the Assessment Year(AY) 2008-09. 2. As per the grounds of appeal filed, the assessee has raised mainly two-fold objections. The first objection is towards confirming disallowance of ₹ 5,68,828/- out of administrative expenses under section 14A of the Income Tax Act, 1961 (hereinafter referred to as "the Act") read with Rule-8 of the Income Tax Rules, 1962 while computing the book profit under section115JB of the Act. The second objection of the assess .....

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ofit of the company was declared at ₹ 45,06,92,683/- under section 115JB of the Act. In the course of scrutiny proceedings, it was noticed by the AO with the assessee had received exempt income during the year. He accordingly, proceeded to disallow expenditure incurred in relation to the exempt income in terms of section 14A of the Act. In terms of Rule 8D(2)(iii) of the IT Rules. The administrative expenses amounting to ₹ 5,68,828/- was computed for disallowance. The book profit und .....

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or the assessee submitted that the computation of book profit under section 115JB of the Act operates on a different footing vis-à-vis computation of income under the normal provisions of the Act. The Ld.AR relied upon the decision of the Hon ble Gujarat High Court in the case of CIT vs. Alembic Ltd. in Tax appeal No.1249 of 2014 dated 20/07/2016. 5. The Ld.DR relied upon the order of the CIT(A). 6. We have carefully considered the rival submissions on the issue involved. The assessee has .....

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and against the revenue. In that view of the matter, we answer questions (iii) and (iv) referred to us in favour of the assessee and against the revenue. The appeal of revenue is dismissed. 7. Seen on the anvil of the aforesaid decision of the Hon ble Gujarat High Court squarely on the issue, we find merit contention on behalf of the assessee and direct the AO to delete the adjustment made on account of estimated disallowance determined under section 14A r.w.Rule 8 D of the I.T.Rules, 1962 while .....

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ling at the time of filing the return of income. Subsequent to the filing of the return of income, the Finance (No.2) Act, 2009 as amended the Explanation-1 to section 115JB(1) whereby clause(i) has been added to Explanation-1 to the said section. As per the said clause, computing the book profit, the Net Profit as per Profit & Loss Account is to be increased by the amount or amounts set aside as provision for diminution in the value of any asset . The said amendment to section 115 JB is eff .....

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. 9. We have carefully considered the rival submissions. It is the case of the assessee that after the filing of the return of income the provisions of section 115JB was amended to include a new clause(i) in Explanation-1 after sub-section(2) of sub-section with retrospective effect from AY 2001-02 onwards. In view of the amendment, the assessee requested the AO to reduce the book profit by the amount of write backs of ₹ 4,50,000/- being provision for diminution in the value of investment .....

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h reads as under:- 31. It was the submission of the assessee-counsel that under Expln. (i) any amount withdrawn from the provisions or reserve is to be excluded from the book profit but with the further requirement as per proviso to this Explanation, that if provisions was made after first April, 1997 it should have been added back in computing the book profit in the year in which the provision was made. Therefore it has to be seen whether in the year in which provision was made, viz. asst. yr. .....

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JA, by the Finance Act, 2009, w.e.f. 1st April, 1998, the provision made for diminution in value of assets (which includes provision for bad and doubtful debts) has to be added back in computing book profit. Thus, after the amendment by the Finance Act, 2009, the provision made for bad and doubtful debts has to be added back to the book profit and therefore complies with the requirements of the proviso to Expln. (i) to s. 115JB that in the year of making the provision the same has to be added ba .....

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n the same was not originally offered to tax and accordingly the AO s orders are correct. He relied on the decision of the Hon ble Delhi High Court in the case of Indo Rama Synthetics (I) Ltd. vs. CIT (2009) 31 DTR (Del) 45 : (2010) 320 ITR 340 (Del) to submit that for the purpose of computing book profit under s. 115JB the amount withdrawn from revaluation reserve created after 1st April, 1997 and credited to the P&L a/c is not to be reduced from net profit as per P&L a/c unless book pr .....

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that year and then compare and decide to invoke the normal provisions of the Act or special provisions of book profit under s. 115JB. Once the AO invokes the normal provisions of tax, it indirectly means that he has compared the computation under s. 115JA and decided that the income under normal provisions was more. In that situation it is to be presumed that the provision was added back to the book profit of that year. Even by means of Expln. (g) introduced to s. 115JA by the Finance (No. 2) A .....

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