TMI Blog2017 (10) TMI 1652X X X X Extracts X X X X X X X X Extracts X X X X ..... der no help to the Revenue in the instant case. MAT - Addition of the disallowance to the book profit of assessee for the purpose of computation of MAT liability - As we find no justification to discard the findings reached by the ld. CIT(A) reached on the basis of interpretation of section 115JB. We also support the deletion of this addition laying our hands on the decision of Vireet Investment (P) Ltd [ 2017 (6) TMI 1124 - ITAT DELHI] Assessee appeal allowed. - Shri Bhavnesh Saini, Judicial Member And Shri L.P. Sahu, Accountant Member For the Assessee : Sh. Ashwani Kumar, Advocate Sh. Aditya Kumar, C.A. For the Revenue : Ms. Renu Amitabh CIT-DR. ORDER PER L.P. SAHU, A.M.: These are two cross appeals filed by the assessee and the Revenue against the order dated 05.06.2014 of ld. CIT(A)-I, New Delhi for the assessment year 2011-12 on the following grounds : Grounds raised by assessee : That the order dated 05.06.2014 passed u/s. 250 of the Income Tax Act, 1961 by the Learned Commissioner of Income-tax (Appeals) I, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the learned ACIT, Central Circle 13, New Delhi by restricting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order and the submissions made. Minimum Alternate Tax (MAT) is leviable u/s 115JB on 'book profit' as computed in terms of the Companies Act, 1956 and as increased / decreased by the amounts specified in Explanation 1 to Section 115JB. There is no provision to travel beyond Section 115JB. Disallowances made under various provisions of the Act in the regular assessment cannot be imported into section 115JB. MAT is a contributory tax and credit is given for the same to be adjusted against and reduced from regular tax payable by the assessee in future. Thus, additions to income u/s 115JB made, of disallowances made under the regular provisions, has no legal basis. This is not justified in view of the strict provisions u/s 115JB. No addition to the book profit can be made on the basis of disallowance made in the regular assessment. I hold accordingly. The addition made u/s 115JB is deleted. 5. Both the parties were not satisfied with the deletion and sustenance of additions, as noted above, hence, these cross appeals. 6. During the course of hearing, the ld. AR of the assessee submitted that once the assessee itself disallowed the expenditure suo moto u/s. 14A, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Delhi High Court in Maxopp Investment Ltd. v. CIT [2012] 347 ITR 272 (Delhi), has observed (page 290) : Scope of sub-sections (2) and (3) of section 14A Sub-section (2) of section 14A of the said Act provides the manner in which the Assessing Officer is to determine the amount of expenditure incurred in relation to income which does not form part of the total income. However, if we examine the provision relation to income which does not form part of the total income under the said carefully, we would find that the Assessing Officer is required to determine the amount of such expenditure only if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in Act. In other words, the requirement of the Assessing Officer embarking upon a determination of the amount of expenditure incurred in relation to exempt income would be triggered only if the Assessing Officer returns a finding that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Therefore, the condition precedent for the Assessing Officer entering upon a determinati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of expenditure made by the assessee ; or (b) the claim made by the assessee that no expenditure has been incurred in relation to income which does not form part of the total income under the said Act for such previous year, the Assessing Officer shall determine the amount of the expenditure in relation to such income in accordance with the provisions of sub-rule (2) of rule 8D. We may observe that rule 8D(1) places the provisions of section 14A(2) and (3) in the correct perspective. As we have already seen, while discussing the provisions of sub-sections (2) and (3) of section 14A, the condition precedent for the Assessing Officer to himself determine the amount of expenditure is that he must record his dissatisfaction with the correctness of the claim of expenditure made by the assessee or that no expenditure has been incurred. It is only when this condition precedent is satisfied that the Assessing Officer is required to determine the amount of expenditure in relation to income not includable in the total income in the manner indicated in sub-rule (2) of rule 8D of the said Rules. It is, therefore, clear that determination of the amount of expenditure in relation to exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to such income which does not form part of the total income under the Act in accordance with such method as may be prescribed. The method, having regard to the meaning of the expression 'prescribed' in section 2(33), must be prescribed by rules made under the Act. What merits emphasis is that the jurisdiction of the Assessing Officer to determine the expenditure incurred in relation to such income which does not form part of the total income, in accordance with the prescribed method, arises if the Assessing Officer is not satisfied with the correctness of the claim of the assessee in respect of the expenditure which the assessee claims to have incurred in relation to income which does not part of the total income. Moreover, the satisfaction of the Assessing Officer has to be arrived at, having regard to the accounts of the assessee. Hence, subsection (2) does not ipso facto enable the Assessing Officer to apply the method prescribed by the rules straightaway without considering whether the claim made by the assessee in respect of the expenditure incurred in relation to income which does not form part of the total income is correct. The Assessing Officer must, in the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age 120 of 328 ITR) : Parliament has provided an adequate safeguard to the invocation of the power to determine the expenditure incurred in relation to the earning of non-taxable income by adoption of the prescribed method. The invocation of the power is made conditional on the objective satisfaction of the Assessing Officer in regard to the correctness of the claim of the assessee, having regard to the accounts of the assessee. When a statute postulates the satisfaction of the Assessing Officer 'Courts will not readily defer to the conclusiveness of an executive authority's opinion as to the existence of a matter of law or fact upon which the validity of the exercise of the power is predicated'. (M. A. Rasheed v. State of Kerala [1974] AIR 1974 SC 2249). A decision by the Assessing Officer has to be arrived at in good faith on relevant considerations. The Assessing Officer must furnish to the assessee a reasonable opportunity to show cause on the correctness of the claim made by him. In the event that the Assessing Officer is not satisfied with the correctness of the claim made by the assessee, he must record reasons for his conclusion. These safeguards which are impli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a particular income or receipt. In case the interest paid was directly attributable to any particular income or receipt, then the interest on loan amount to this extent or in entirety, as the case may be, has to be excluded for making computation as per the formula prescribed. Pertinently, the amount to be disallowed as expenditure relatable to exempt income, under sub rule (2) is the aggregate of the amount under clause (i), clause (ii) and clause (iii). Clause (i) relates to direct expenditure relating to income forming part of the total income and under clause (iii) an amount equal to 0.5 per cent. of the average amount of value of investment, appearing in the balance-sheet on the first day and the last day of the assessee has to be disallowed. 20. However, in the present case, we need not refer to sub-rule (2) of rule 8D of the Rules as conditions mentioned in sub-section (2) of section 14A of the Act read with sub-rule (1) of rule 8D of the Rules were not satisfied and the Assessing Officer erred in invoking sub-rule (2), without elucidating and explaining why the voluntary disallowance made by the assessee was unreasonable and unsatisfactory. We do not find any such satis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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