Expenses on Account of Interest Payment on Loans could not be added while Computing Book Profit: ITAT [Read Order]

Interest Payment Loans - Account - Expenses - ITAT - Taxscan

The Income Tax Appellate Tribunal (ITAT), Ahmedabad held that expenses on account of interest payment on loans could not be added while computing book profit.

On verification of the balance sheet, it was found that the assessee company has made an investment in shares and having some exempt income. The assessee has claimed expenditure on account of interest payment on loans as also reflecting from the Profit and Loss Account of the assessee as observed in the order passed by the Learned AO.

The assessee since not identified any expense in relation to the exempt income not included in the total income of the assessee a notice was issued by the revenue asking the assessee to explain as to why the provision of Section 14A of the I.T. Act read with Rule 8D of the I.T Rules are not be applicable in the instant case.

The assessee replied that when there is no exempt income earned by the assessee, the question of application of Section 14A read with rule 8D of the I.T. Rule does not arise. However, the explanation of the assessee was not found acceptable by the AO.

The AO, therefore, made an addition of Rs.2,00,390/- against the assessee which was deleted by the Learned CIT(A). Hence the instant appeal filed before the Tribunal.

The Tribunal comprising of Judicial Member, Madhumita Roy, and Accountant Member, Waseem Ahmed pronounced the judgment on an appeal filed against M/s. Adani Logistics Ltd.

Relying upon the judgment of the relevant materials available on records including the order passed by the Special Bench of the Tribunal in the case of ACIT Vs. Vireet Investments P.Ltd. held that computation for the purpose of clause (f) of Explanation 1 to Section 115JB(2) is to be made without resorting to the computation as contemplated under section 14A r.w. rule 8D.

While allowing the appeal the tribunal directs the AO not to make adjustments in book profit for the purpose of MAT liability on the basis of calculations made with Rule 8D of the Income Tax Rules.

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