The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench ruled that the disallowance made for Exempted Income not to be added for computing of Computation of book profit.
The assessee, M/s. Sun Pharmaceutical Industries Ltd. filed the return of income declaring taxable income under normal computation at nil and carried forward on loss of Rs. 3,02,66,75,211/-. The profit under section 115JB of the Act was declared at Rs. 7,18,44,50,980/-.
The case was selected for scrutiny through CASS and notice under section 143(2) of the Act was issued. The assessee was having international transactions with the associated enterprises as perform 3CEB report. Therefore, the case was referred to the transfer pricing officer and the TPO had passed an order under section 92CA(3) of the Act.
The assessee company was engaged in the business of manufacturing and sale of pharmaceutical products. The assessee company has also carried out R&D activities for developing new drugs and involved in quality control process etc. The company was also engaged in trading activity. In the case of the assessee, draft assessment order u/s. 143(3) r.w.s.144C of the Income Tax Act, 1961 was passed and computed the total income at Rs. 9,16,04,08,572/-. Against the draft assessment order, the assessee has filed objections before the DRP.
The DRP has issued directions via their order u/s. 144C(5) of the Act. Thereafter, taking into consideration the direction issued by the DRP, the Assessing Officer has passed assessment order u/s. 143(3) r.w.s. 92CA r.w.s. 144C(3) of the Act on 26th Jan 2016, and total income was determined at Rs. 9,38,19,42,897/- against the order passed by the Assessing Officer.
The revenue raised the issue that the AO has erred in directing to exclude difference under section 14A of the Act for computing the big profit under section 115JB of the Act.
The coram of Mahavir Prasad and Amarjit Singh in the light of the ITAT Special Bench Delhi in the case of the Vinit Investment held that disallowance made under section 14A is not to be added for computing the income under section 115JB of the Act.
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