The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has recently deleted and Addition of disallowance under Section 14A of Income Tax Act 1961 while computing book profit under Section 115JB of Income Tax Act.
Assessee-Strides Arcolab Limitedis engaged in the business of manufacturing pharmaceutical formulations. For the assessment year 2010-11, the assessee filed the return of income declaring a loss of Rs.2,03,83,86,890/-. The case was selected for scrutiny and statutory notices were duly served on the assessee.
Since the assessee had international transactions with its Associated Enterprises (AEs), reference was made to the Transfer Pricing Officer for determination of arm’s length price (ALP) of the international transactions.
The Assessing Officer also made adjustments to the book profit under Section 115JB towards the amount disallowed under Section 14A of the Income Tax Act and also towards the provision for leave encashment and doubtful debts.
Aggrieved by the order, assessee filed objections before the DRP. The DRP confirmed the disallowance under Section 14A of the Income Tax Act with regard to the adjustment made by the Assessing Officer to the book profits under Section 115JB of the Income Tax Act.
Thereafter, assessee is in appeal before the Tribunal against the final order of assessment passed by the Assessing Officer pursuant to the directions of the DRP.
Nitesh Joshi, counsel for the assessee submitted that the issue is covered by the decision of the coordinate bench in assessee’s own case for assessment year 2008-09.
Manoj Kumar, counsel for revenue, supported the order of lower authorities.
It was observed that while considering the issue of disallowance under Section 14A of Income Tax Act had extracted the relevant observations of the coordinate bench in the earlier part of this order and said observations of also address the issue of section 14A Income Tax Act disallowance being considered for the purpose of Section 115JB Income Tax Act.
Therefore the two member bench of Amit Shukla (Judicial Member) and Padmavathy S (Accountant Member) allowed the appeal filed by the assessee and directed the AO to delete the addition of disallowance under Section 14A Income Tax Act while computing book profit under Section 115JB of the Income Tax Act.
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