TMI Blog2019 (10) TMI 249X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is partly allowed. - ITA No. 1928/AHD/2015 - - - Dated:- 3-10-2019 - Shri Kul Bharat, Judicial Member And Shri Waseem Ahmed, Accountant Member For the Assessee : Shri Vartik Chokshi, A.R For the Revenue : Smt. Aparma Agarwal, CIT. D.R ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-1, Ahmedabad dated 10/04/2015 (in short Ld.CIT(A) ) arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (herein- after referred to as the Act ) dt.15/03/2013 relevant to the Assessment Year 2010-2011. The assessee has raised the following grounds of appeal. 1. In law and in the facts and circumstances of the appellant's case, the Impugned assessment order passed by Assessing Officer is void and deserves to be quashed. 2. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in upholding addition of ₹ 17.19 cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause (f) to explanation 1 of section 115JB of the Act. 2. The facts in brief are that the assessee in the present case is a private limited company and engaged in the business of trading in shares, clothes and garments. The assessee has also earned rental income during the year. The assessee in the year under consideration has debited interest expenditure in its profit and loss account amounting to ₹ 17,31,87,000/- only. But the assessee under the normal computation of income has added back an amount of ₹ 17,19,25,856/- out of total interest expenses on the ground that such interest expenses are in the nature of capital expenditure and therefore the same is required to be added to the investments. However, the assessee did not make such adjustment in the book profit computed under section 115JB of the Act on account of such interest expenditure. 2.1 As a result of such adjustment under the normal computation of income, the AO noticed that the book profit computed under section 115JB of the Act has been reduced by the amount of such interest expenses debited in the profit and loss account though requires to be capitalized. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection with the investment in shares which will give rise to the exempted income. Therefore, the right course of action is to make the disallowance of impugned expenses under section 14A read with rule 8D of Income Tax Rule under normal computation of income and similarly under clause (f) to the explanation 1 of section 115JB of the Act while determining the books profit. 2.5 Based on the above reasoning, the AO increased the book profit by the amount of impugned interest expenses as per clause (f) of explanation to section 115JB of the Act. Aggrieved assessee preferred an appeal to the learned CIT (A). 3. The assessee before the learned CIT (A) submitted that the tax auditor in his tax audit report in the form 3CD under the clause 17(a) has submitted that the impugned interest expenditure is capital in nature and therefore the same needs to be added with the cost of investments. 3.1 The assessee also submitted that it has prepared its financial statements in accordance with the provisions of part II and part III of schedule VI of the companies Act and in compliance to the applicable accounting standards/generally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade out of the borrowed fund which will give rise to the exempted income. Therefore, he was of the view that the disallowances of the expenditure incurred to earn such income requires to be disallowed under normal computation of income and MAT computation of income by virtue of the provisions of section 14A read with rule 8D and 115JB of the Act respectively. Accordingly the learned CIT (A) confirmed the order of the AO. Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us. 5. The learned AR before us filed a paper book running from pages 1 to 82 and submitted that the disallowance under section 14A r.w.r. 8D cannot be imported while determining the book profit under MAT. The ld. AR also submitted that disallowance if any needs to be made, then it should not exceed the amount of dividend income. 6. On the other hand, the learned DR vehemently supported the order of the authorities below. 7. We have heard the rival contentions of both the parties and perused the materials available on record. Before dealing with the issue involved in the impugned appeal, it is pertinent to note th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment can earn certain kinds of income as detailed under: i. short-term capital gain ii. long-term capital gain iii. dividend income 7.5 We do not foresee any other income out of such investment other than the income as specified above. 7.6 Now, if the assessee earns income under the head capital gain (long term) from such investments, then such income might be exempted under section 10(38) of the Act under normal computation of income but such immunity is not available to the assessee while computing the income under the provisions of MAT. Thus, it is transpired that any expenditure incurred by the assessee from such investment which is resulting income under the head capital gain, then such expenditure will not be added back under clause (f) of explanation 1 to section 115JB of the Act while determining the book profit. 7.7 However, we note that the assessee has not treated such interest expenses as revenue expenditure which has also been admitted by the authorities below and this fact has reached to the finality. 7.8 Thus from the treatment of such interest expen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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