TMI Blog2019 (1) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Shri Pradip Kumar Kedia, Accountant Member For the Assessee : Shri Tushar H. Hemani, AR For the Revenue : Shri S.K. Dev, Sr.DR ORDER PER RAJPAL YADAV, JUDICIAL MEMBER : Revenue is in appeal against order of the ld.CIT(A)-2, Ahmedabad dated 26.4.2016 passed for the assessment year 2013-14. 2. Though Revenue has taken four grounds of appeal, but in brief its grievance revolves around a single issue viz. the ld.CIT(A) has erred in law and on facts in deleting disallowance of ₹ 89,19,604/- made under section 14A of the Act resulting an impact on the book profit under section 115JB of the Income Tax Act, 1961. 3. Brief facts of the case are that the assessee is engaged in the business of manufacturing different kinds of bearing cages. It has filed its return of income on 31.8.2013 declaring total income at ₹ 27,37,55,058/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. Though the assessee has no dividend income, but the ld.AO worked out disallowance at ₹ 89,19,604/- with help of formula provided in Rule 8D. On appeal, the ld.CIT(A) following decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Vireet Investment P.Ltd. 165 ITD 27. On the other hand, ld.CIT-DR relied upon the order of DRP. 18. We have duly considered rival contentions and gone through the record carefully. We find that ld.DRP has relied upon the order of the ITAT, Mumbai in the case of DCIT Vs. Viraj Profiles Ltd., (2016) 46 ITR (Trib) 0626 (Mum) and held that addition required to be made in the book profit could be calculated as per Rule 8D of the Income Tax Rules. The ld.DRP thereafter made reference to decision of Hon ble Delhi High Court in the case of CIT Vs. Geotze India Ltd., 361 ITR 505. According to the ld.DRP, this decision has been considered by the Special Bench in the case of Vireet Investment P.Ltd. (supra) but placed reliance upon Hon ble Bombay High Court in the case of Vodafone India Services P.Ltd. ACIT, 361 ITR 0531 (Bom) and held that DRP is not bound by the ratio laid down by the Special Bench. The discussion made by the DRP on this issue in the assessment year 2013-14 reads as under: 10.3 In the case of Viraj Profiles Ltd. [2015] 64 taxmann.com 52 (Mum Trib), the Hon'ble Bench has elaborately discussed the issue and held that the disallowance is liable to be calculat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; has held that the proceedings before DRP are extension of assessment proceedings. Therefore they are not bound by the decision of Tribunals unlike CIT(A) as long as the issue is not acceptable on merit and/or the issue is being contested by the department. In this case, the decision of Hon'ble Delhi High Court in the case of Goetze (India) Ltd cited above is also in favour to the department on this issue which also shows that the view of AO confirmed by the Panel is a plausible view. 19. There were contradictory orders at the end of the Tribunal. Therefore, Special Bench was constituted to consider the following question: Whether expenditure incurred to earn exempt income computed under section 14A could not be added while computing book profit under section 115JB of the Act. 20. When the Special Bench has considered this question, it was confronted with two decisions of the Hon ble Delhi High Court diagonally opposite to each other. One referred by the ld.DRP also in the present case, rendered in the case of CIT Vs. Geotze India Ltd. (supra) and other in the case of Pr.CIT Vs. Bhushan Steel. ITAT, Special Bench has reproduced both these orders in Vireet Inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... embic Ltd. (supra) is as under: Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in holding that adjustment made on account of disallowance u/s 14A of the Act in computation of book profit u/s 115JB of the Act is not as per law without appreciating that the amount disallowable under section 14A is covered under clause (f) of Explanation to section 115JB(2) and, thus, said amount has to be added back while computing amount of book profits? 22. The Hon ble Gujarat High Court has replied this question as under: 7. So far as issue Nos. (iii) and (iv) are concerned, the learned counsel for the assessee has relied on the decision of this court in the case of Commissioner of Income-tax-I v. Gujarat State Fertilizers Chemicals Ltd., reported in (2013) 358 ITR 323 (Gujarat) where this court has held in paragraph Nos. 6 to 6.5 this court has observed as under: 6. So far as the fourth question is concerned, it pertains to addition of ₹ 1,14,43,040/- under Section 115JB of the Act being the expenditure estimated on earning of dividend income under Section 14A of the Act. 6.1 The Assessing Officer on referring to the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nswer questions (iii) and (iv) referred to us in favour of the assessee and against the revenue. The appeal of revenue is dismissed. 23. Similarly, Hon ble Bombay High Court has formulated following question in the case of Bengal Finance Investments P.Ltd. (supra) and replied as under: (b) Whether on the facts and in the circumstances of the case, and in law, the ITAT is justified in deleting the addition of ₹ 78,84,387/ under clause (f) of Explanation 1 to Section 115JB relying upon the decision in the case of Goetze (India) Ltd. v/s. CIT (2009) 32 SOT 101 (Del.), which has been followed by ITAT, Mumbai in the cases referred to in para 5 of the impugned order without appreciating that the above decision in the case of Goetze (India) Ltd. was rendered by the ITAT, Delhi Bench on completely distinguishable set of facts, peculiar to the said case? . 4 So far as Question (b) is concerned, the impugned order of the Tribunal followed its decision in M/s. Essar Teleholdings Ltd. v/s. DCIT in ITA No. 3850/Mum/2010 to held that an amount disallowed under Section 14A of the Act cannot be added to arrive at book profit for purposes of Section 115JB of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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