TMI Blog2011 (2) TMI 1519X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case and in law, the learned CIT(A) [hereinafter referred to as CIT(A)] erred in holding that the Book Profit u/s.115JB of the Act are to be computed by adding disallowance u/s.14A of the Act read with Rule 8D/Loss from investments of Rs. 21,44,563/-. 1.2 The learned CIT(A) failed to appreciate that the provisions of section 14A of the act are not applicable on the facts and in the circumstances of the case of the assessee as the assessee did not have any income which does not form part of total income. 1.3 The assessee prays that the learned Assessing Officer be directed to compute the Book Profits u/s.115JB of the Act without considering the disallowance computed by the ld CIT(A) in terms of Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000/- made by the learned Assessing Officer out of vehicle expenses. 3.2 The learned Assessing Officer and the CIT(A) failed to appreciate that the entire expenditure was incurred wholly and exclusively for the purposes of the business of the assessee and no part thereof deserves to be disallowed. 3.3. The assessee prays that the disallowance out of vehicle expense is unreasonable, excessive and unjustified and be deleted. 3. The issue in ground No.1 is with reference to the addition of an amount of ₹ 21,44,563/- disallowed invoking 14A and Rule 8D by the CIT(A) while deleting the provision of bad and doubtful debts made by the Assessing Officer. In the assessment the Assessing Officer disallowed only the provision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B also does not arise. The direction of CIT(A) on this issue is set aside. The grounds raised by the assessee are therefore, allowed. The Assessing Officer is directed to delete the addition so made. 5. The issue in ground No.2 is with reference to disallowance u/s.36(1)(iii) made by the Assessing Officer but considered and enhanced by the CIT(A) u/s.14A read with Rule 8D. The Assessing Officer following his order for Assessment Year 2003-04 made similar disallowance in this year as the facts are similar. The learned AR submitted that the issue was remitted back to the Assessing Officer in earlier year for examination of the facts vide para 9 of the order. However, it was further submitted that the reference to the decision of Daga Capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jurisdictional High Court or the Supreme Court on this issue and decide accordingly. The ground of appeal is therefore allowed for statistical purpose. 7. The issue in ground No.3 is disallowance of ₹ 1,00,000/- on ad-hoc basis of the vehicle expenses. 7.1 The Assessing Officer has discussed this issues in para 8 of the assessment order. The assessee has claimed deduction of ₹ 7.12 lakhs on account of vehicle maintenance expenses. According to the Assessing Officer the manufacturing activity of the assessee has ceased since June, 2003 and consequently all major expenses as is required for conducing the manufacturing activities of the assessee has substantially reduced. However, the vehicle maintenance expenses remain the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised the following grounds in this year. I. Computation of book profits u/s.115JB of the Act: 1.1 On the facts and in the circumstances of the case and in law, the ld CIT(A) [hereinafter referred to as CIT(A)] erred in holding that the Book Profits u/s.115JB of the Act are to be computed by deducting Dividend income after deducting disallowance u/s.14A of the Act. 1.2 The assessee prays that the learned Assessing Officer be directed to deduct Dividend Income credited to the Profits and Loss Account while computing the Book Profits u/s.115JB of the Act and reduce the chargeable Book Profits accordingly. II. Disallowance u/s.14A of the Act: 2.1 On the facts and in the circumstances of the case and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the jurisdictional High Court decision the AO has to decide the reasonable amount for disallowance u/s.14A. However, the issue of disallowance u/s.36(1)(iii)/14A was restored to the Assessing Officer in earlier years as considered in para 6.1 above. The Assessing Officer is directed to examine the facts and determine the disallowance u/s.36(1)(iii) and a reasonable amount on the exempt income as per the facts and law on these issues. (Godrej Boyce Mfg. Co. Ltd. 328 ITR 81 or decision of the Supreme court if any, at the time of reconsideration). Further, to the extent of disallowance u/s.14A, the same has to be reduced while considering the exclusion of amount of net dividend income while computing the book profits u/s.115JB, as per ground ..... X X X X Extracts X X X X X X X X Extracts X X X X
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