No disallowance can be made u/s 14A of the IT Act for Computing Book Profit  u/s 115JB of Act: ITAT [Read Order]

The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has recently held that no disallowance could be made under Section 14A of the Income Tax Act, 1961 for computing book profit under Section 115JB of Income Tax Act, 1961.

Section 14A of the Income Tax Act states that, for computing total income no deduction should be allowed in respect of expenditure incurred by the assessee in relation to the income which was not part of total income.

Section 115JB of Income Tax Act  states that every company is liable to pay Minimum Alternate Tax or MAT if the income tax payable by the company on the income ,computed as per the Income Tax Act is less than 15% of book profit + surcharge + health and education cess.

M.Rajan, counsel appeared for the revenue. R.Vijayaraghavan, counsel appeared for the assessee.

The aforesaid case was filed by the revenue against the order of the Commissioner of Income Tax (Appeals).

The fact of the case was that, assessee Bannari Amman is a limited company engaged in the business of manufacturing of sugar, alcohol, granite and cogeneration of power. After filing the return assessee case was selected for scrutiny. The assessing officer while computing book profit has added disallowance under section 14A of the Income Tax Act.

Aggrieved assessee filed appeal before the CIT(A).  The CIT(A) allowed the appeal filed by the assessee.

Thereafter, the revenue, against the order of CIT (A), filed an appeal.

It was observed by the tribunal that “where the accounts have been prepared in accordance with Schedule –VI of the Companies Act, then the AO is permitted to make only such adjustments as prescribed under section 115JB of the Income Tax Act, while computing book profit under Minimum Alternate Tax (MAT) provisions, are inclined to hold that no interference is called for in the findings of the CIT(A).”

The two member bench of V. Durga Rao, (Judicial Member)  and Dr. Manish Borad, (Accountant Member) after considering the facts, dismissed the appeal filed by the revenue and  held that the AO had erred in considering disallowance under Section 14A of the Income Tax Act, for the purpose of computing book profit under Section 115JB.

To Read the full text of the Order CLICK HERE

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