Disallowance under section 14A not to be considered while computing Book Profit: ITAT [Read Order]

The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) has held that the disallowance under section 14A of the Income Tax Act, 1961 cannot be considered while computing book profit under section 115JB of the Act.

The assessee, Tega Industries Limited is a Limited Company and earned exempt dividend income of Rs.1.95 crores during the year. The assessee approached the Tribunal challenging the order of the Assessing Officer adding the disallowance under section 14A of the Act for determining the book profit under section 115JB of the Act.

A division bench of the Tribunal comprising Shri Rajpal Yadav, Vice-President (KZ) & Shri Manish Borad, Accountant Member held that through which the assessee has contended that disallowance under section 14A ought not to have been considered for computing the book profit under section 115JB of the Act, we find merit in the assessee’s contention.

Allowing the appeal filed by the assessee, the Tribunal held that “Special Bench of Delhi Tribunal in the case of ACIT –vs.- Vireet Investment Pvt. Limited (165 ITD 27) as well as the judgment of the Hon’ble Karnataka High Court in the case of Sobha Developers Ltd. –vs.- DCIT (ITA No. 203/2015 dated 04.01.2021), wherein it has been held that adjustment of disallowance under section 14A could not be made while computing book profit under section 115JB of the Act. Therefore, under the given facts and settled judicial precedence as referred above, we direct the Assessing Officer to compute the book profit without considering disallowance under section 14A of the Act.”

Shri S.P. Chidambaram, Advocate, appeared on behalf of the assessee.

To Read the full text of the Order CLICK HERE

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