TMI Blog2022 (2) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... d is in the nature of write off. Therefore, de hors the observation of the CIT, the AO is directed to complete the assessment in the light of the dictum laid down in the above cited judicial pronouncements. It is ordered accordingly. Hence, ground 3 is allowed for statistical purposes Disallowance u/s 14A for computation of book profit u/s 115JB - As per AO assessee had voluntarily disallowed expenses relatable to exempt income u/s 14A of the I.T.Act to the extent of 5% of income on adhoc basis - HELD THAT:- As relying on GUJARAT FLUOROCHEMICALS LTD [ 2019 (7) TMI 541 - GUJARAT HIGH COURT] ,VIREET INVESTMENT (P.) LTD. [ 2017 (6) TMI 1124 - ITAT DELHI] and TATA SONS LIMITED [ 2018 (12) TMI 916 - ITAT MUMBAI] disallowance u/s 14A of the I.T.Act cannot be incorporated in the computation of book profits u/s 115JB of the I.T.Act, we hold that the assessment order is neither erroneous nor prejudicial to the interest of the revenue on this point. It is ordered accordingly. Therefore, ground 4 is allowed. Provision created in Non Performing Assets - as submitted before the CIT that provision for NPA as per RBI Prudential norms is not covered by item (i) to Explanation to sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f book profits u/s 115JB of the I.T.Act. 4. Aggrieved by the order passed u/s 263 of the I.T.Act, the assessee has filed this appeal before the Tribunal. The grounds raised by the assessee reads as follow:- 1. The order of the learned Pro Commissioner of Income Tax is against law and facts of the case. 2. The learned Pro Commissioner of Income Tax erred in revising the assessment u/s 263. 2.1. The learned Pr. Commissioner of Income Tax failed to appreciate the fact that there was no error in the order of the learned Assessing Officer. 2.2. The learned Pr. Commissioner of Income Tax failed to appreciate the fact that the learned Assessing Officer had adopted one of the possible views. 3. The learned Pr. Commissioner of Income Tax erred in directing the learned Assessing Officer to re do the Assessment with regard to Investment depreciation. 3.1. The learned Pro Commissioner of Income Tax failed to appreciate the fact that the Investment depreciation is a loss and as such not covered by any of the items of the Explanation to Section 115JB(2). 4. The learned Pr. Commissioner of Income Tax erred in directing the learned Assessing Officer to re do t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment Portfolio (₹ 3028.32 crore) (ground 3) 7.1.1 The assessee-bank before the CIT contended that depreciation of ₹ 3028.32 crore was not debited to Profit and Loss account and accordingly, no adjustment to the book profit is required to be made as the amount is not recognized in the regular books of account. Without prejudice to the above contention, it was submitted that this amount cannot be added back on account of the fact that it is valuation loss. It was stated that it is not provision towards diminution in the value of assets. It was contended that as per item (i) of the Explanation to section 115JB(2) of the I.T.Act, it is only provision towards diminution of value of assets is to be added and not valuation loss as such. Therefore, it was submitted that for these reasons also this item cannot be added back to the book profits. 7.1.2 The CIT, however, rejected the objections of the assessee. The CIT after discussing the valuation of various securities held by the assessee, observed that the assessee has infact debited net depreciation to the profit and loss account amounting to ₹ 537.32 crore and accordingly, necessarily adjustment ought to ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the current asset. Therefore, we are of the considered view that debit of ₹ 46,94,62,365/- appearing in Profit Loss Account is not a provision of set aside for diminution in value of investment but the actual charged for the loss in the diminution in value of investment. Therefore, we are of the view that for the book profit purpose of section 115JB is not required to be increased by ₹ 46,94,62,365/- as the same is not in the nature of provision. 9. We find that recently Hon'ble Gujarat High Court in the case of Commissioner of Income Tax Vs. Vodaphone Essar Gujarat Ltd. wherein the Hon'ble High Court in tax appeal no.749 of 2012 has discussed the issue in detail by discussing decision Hon'ble Supreme Court in case of M/s.Vijaya Bank Vs. Commissioner of Income Tax (323 ITR 0166) and Southern Technologies Limited Vs. Jt. Commissioner of Income Tax (320 ITR 577) held as under:- 11. Further, recently the Hon'ble High Court of Gujarat in case of Commissioner of Income Tax Vs. Vodaphone Essar Gujarat Ltd. decided after reference was made to the larger Bench for consideration of the following question: Whether in view of decision of the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scussion available in the judgment it appears that case of Indian Petrochemicals Corporation Ltd. (Supra) fell in the later category. 7.1.6 In the light of the above judicial pronouncements, the A.O. is directed to verify whether depreciation / diminution of value of investment to the extent of ₹ 3028.32 crore is concerned, the same has actually been reduced from the assets side of the balance sheet, and is in the nature of write off. Therefore, de hors the observation of the CIT, the AO is directed to complete the assessment in the light of the dictum laid down in the above cited judicial pronouncements. It is ordered accordingly. Hence, ground 3 is allowed for statistical purposes. Disallowance u/s 14A of the I.T.Act (₹ 58.58 crore) (ground 4) 7.2 The Assessing Officer noted during the course of assessment that the assessee had voluntarily disallowed expenses relatable to exempt income u/s 14A of the I.T.Act to the extent of 5% of income on adhoc basis. The said disallowance of ₹ 1,46,88,255 being amount relatable to exempt income was reckoned while computing the book profits u/s 115JB of the I.T.Act. Since the basis of such disallowance was not s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollows (page 576 of 1 ITR (Trib)-OL : We have considered the rival submissions and we find that a similar issue was raised by the Revenue as per ground No. 3 above in respect of regular assessment of income and while deciding that ground, we have already upheld that disallowance of ₹ 5 lakhs in respect of administrative expenses will meet the ends of justice and no disallowance is called for in respect of interest expenditure. Hence, for the purpose of computing the book profit under section 115JB of the Act also, we hold accordingly and confirm the addition of ₹ 5 lakhs. This ground of the Revenue's appeal is partly allowed. 6.4 As rightly held by both, the Commissioner of Income-tax (Appeals) and the Tribunal, this issue has a direct correlation with the first question. It was argued by the Revenue that while computing the book profit under section 115JB of the Act, the disallowance of interest expenditure on exempt income was wrongly negatived by both the authorities on the ground that it was not the liability for expenses, but a liability relating to assets. 6.5 We find no fault in the approach adopted by both the authorities. The addition under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth the years and delete the additions. 23. We take notice of the fact that in context with the third proposed question, the ITAT placed reliance on the following decisions:- (i) CIT v. Alembic Ltd. (Tax appeal No.1249/2014) (ii) CIT v. Gujarat State Fertilizers Chemicals Ltd. (2013) 358 ITR 323 24. The issue is squarely covered and in our opinion, no error could be said to have been committed by the ITAT in taking the view that no addition in the book profit can be made on the basis of the calculations worked out under section 14A of the Act. 7.2.3 Similar view has been held by the Mumbai Bench of the Tribunal in the case of Tata Sons Limited v. ACIT (supra).The Mumbai Bench of the Tribunal by following the Special Bench order of the Tribunal in the case of ACIT v. Vireet Investment (P) Ltd. (supra) had held as follows:- 10. We have noted that the Special bench in the case of Vireet Investments (P.) Ltd. (supra) has finally taken the view that the view beneficial to the assessee is to be taken while deciding the issue in term of the decision of Hon'ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. [1973] 88 ITR 192. In view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank has on its own has added the provision for NPAs while computing Book profit under MAT which has also been duly accepted by the AO. In the above context, the AO ought to have examined the issue and made appropriate changes in the computation of book profits ii] s 115JB of the Income tax Act, 1961 after due verification of facts relating to the accounting entries made by the assessee in its books and the legal position As the Assessing Officer has not examined the factual as well as legal issues in the relevant perspective, the assessment order is considered to be erroneous and prejudicial to the interest of revenue. 7.3.2 The Hon ble High Court in the case of CIT v. Yokogawa India Limited (supra) had held as follows:- 2. The Apex Court in the case of Vijaya Bank v. CIT[2010l3231TR 166/190 Taxman 257 (SC) has held that the assessee is entitled to the benefit of rejection under Section 36(1)(vii) of the Income Tax Act, 1961 (for short 'the Act) when there is an actual write off by the assessee in its book. This Court in the case of CIT v. Yokogawa India Ltd. [2012] 204 Taxman 305/17 taxmann.com 15 (Kar.) has held adjustment of provision for bad and doubtful debts i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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