Ahmedabad bench of Income Tax Appellate Tribunal (ITAT) ruled that the section 115JB of Income Tax Act, 1961 does not provide a mechanism to make disallowance independently. The ITAT directed the Assessing Officer (AO) to disallow 1% of Exempted Income of Adani Properties.
The cross appeals ws filed at the instance of the Assessee & Revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], arised in the matter of assessment order passed under section 143(3) of the Income Tax Act relevant to the A.Y. 2016-17.
The assessee Adani Properties Pvt. Ltd, a private limited company engaged in the activity of letting out and/or, leasing of immovable properties and in wholesale trading of commodities.
The assessee in the year under consideration has declared exempted income of Rs. 33.52 crores only. However, the assessee has not made any disallowance of the expenses against such exempted income as mandated under the provisions of section 14A of the Act.
According to section 115 JB of the Income Tax Act, the AO took into account the contested amount of disallowance made while calculating the income under the usual head of income for estimating the income under the head Minimum Alternate Tax (MAT). As a result, the AO disallowed the disputed amount of Rs. 9,87,19,946 when determining the book profit pursuant to section 115JB of the Act.
The assessee has contended that the amount disallowed when calculating under normal income computation cannot be imported when calculating the book profit under the provisions of section 115 JB of the Income Tax Act. This aspect covers the disallowance made while computing the book profit under the provisions of section 115 JB of the Income Tax Act.
The bench of Suchitra Kamble (Judicial Member) and Waseem Ahmed (Accountant Member) observed that there is no mechanism given under the clause (f) to Explanation-1 of Section 115JB of the Income Tax Act to workout/ determine the expenses with respect to the exempted income.
Further, in the given facts or circumstances, adhoc disallowance will serve the justice to the Revenue and assessee to avoid the multiplicity of the proceedings and unnecessary litigation.
Thus the tribunal limited the disallowance on an ad-hoc basis @ 1% of the exempted income as per the clause (f) to Explanation-1 of Sec. 115JB of the Act.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
