Case Number: ITA 1580/DEL/2020
Appellant: Avonmore Capital & Management Services Ltd, New Delhi
Respondent: ACIT Circle-3(2), New Delhi
Assessment Year: 2015-16
Case Filed On: 2020-09-10
Order Type: Final Tribunal Order
Date of Order: 2022-12-02
Date of Pronouncement: 2022-12-02
This appeal by the assessee, Avonmore Capital & Management Services Ltd, is directed against the order dated 31.01.2020 of the Ld. CIT (Appeals)-I, New Delhi, for the assessment year 2015-16. The primary issue in this case is the disallowance of expenses under Section 14A of the Income Tax Act, 1961, and its impact on the computation of book profit under Section 115JB (MAT provisions).
Avonmore Capital & Management Services Ltd, the appellant, filed its return of income on 28.09.2015, declaring a total income of nil under normal provisions and Rs. 16,88,892/- under MAT provisions under Section 115JB of the Income Tax Act, 1961 (the Act). The assessment order was passed on 28.04.2017 at the returned income. Subsequently, the case was selected for audit scrutiny, and it was noticed that the assessee had added Rs. 88,63,248/- on account of disallowance under Section 14A while computing taxable income under normal provisions, but this amount was not added during the computation of taxable income under Section 115JB. This omission led to under-assessment of income under Section 115JB by Rs. 29,66,587/- with a tax effect of Rs. 7,06,605/-.
The AO passed an order under Section 154 of the Act, holding that the disallowance under Section 14A should also be made with respect to Section 115JB. The CIT(A) upheld the AO’s order, finding it correct.
The assessee appealed to the ITAT, arguing that the issue was covered in their favor by the decision of the ITAT in the assessee’s own case for the AY 2008-09 (ITA No. 4820/Del/2012), where it was held that disallowance under Section 14A cannot be considered for computation of book profit under Section 115JB. The ITAT also referred to the Special Bench decision in the case of Vireet Investment Pvt. Ltd. (ITA No. 502/Del/2012), which held that disallowance under Section 14A cannot be imported into the computation under Section 115JB.
The ITAT, comprising Shri Shamim Yahya, Accountant Member, and Shri Anubhav Sharma, Judicial Member, heard the case on 22.11.2022 and pronounced the order on 02.12.2022. The Tribunal observed the following:
In conclusion, the ITAT allowed the appeal by Avonmore Capital & Management Services Ltd, holding that the disallowance under Section 14A cannot be considered for computation of book profit under Section 115JB. The appeal for the assessment year 2015-16 was allowed.
Order signed by:
[SHAMIM YAHYA] – ACCOUNTANT MEMBER
[ANUBHAV SHARMA] – JUDICIAL MEMBER
Date: 02.12.2022
Location: New Delhi
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