| The Tax Publishers2019 TaxPub(DT) 6799 (Ahd-Trib) INCOME TAX ACT, 1961
Section 115JB Section 14A Rule 8D
The expenses incurred in connection with exempted income cannot exceed the amount of such exempted income under the provisions of section 115JB, D]disallowabce disallowance under clause(f) to section 115JB would, therefore, be limited to the extent.
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MAT - Computation of book profit - Treatment of disallowance under section 14A read with rule 8D - Limitation of disallowance
AO concluded that amount of interest expenses cannot be added to the total income of the assessee under normal computation of income, based on the reasoning that these were capital expenditure. As such, the impugned interest expenditure was purely in connection with the investment in shares which will give rise to the exempted income. Therefore, the right course of action is to make the disallowance of impugned expenses under section 14A read with rule 8D of IT Rules under normal computation of income and similarly under clause (f) to the Expl. 1 of section 115JB while determining the books profit. Based on the above reasoning, the AO increased the book profit by the amount of impugned interest expenses. CIT(A) upheld the finding of the AO.Held: Admittedly, the assessee had made investment in shares out of the borrowed fund and this fact had not been disputed. From details, Tribunal noted that all the investments shown had not resulted dividend income in the year under consideration. As such the assessee had earned dividend income against the investment made in the companies, namely, Prism Cement Ltd. and Amol Decalite Ltd. amounting to Rs. 43,150.00 only as evident from the ledger of dividend income. The provisions of section 115JB requires to make the disallowance of the expenditure related to any income to which section 10 applies other than section 10(38). Accordingly the expenses incurred in connection with the exempted income cannot exceed the amount of such exempted income under the provisions of section 115JB. The disallowance was, therefore, limited to the extent of rupees 43,150.00 under the clause (f) to section 115JB.
Applied:CIT v. Vision Finstock Ltd. of Gujarat High Court in Tax Appeal No. 486 of 2017 : 2018 TaxPub(DT) 4820 (Guj-HC). Relied:Asstt. CIT v. Vireet Investment Pvt. Ltd. (2017) 82 Taxmann.com 415 (Del) : 2017 TaxPub(DT) 1760 (Del-Trib).
REFERRED :
FAVOUR : In assessee's favour (Partly).
A.Y. : 2010-2011
IN THE ITAT, AHMEDABAD BENCH
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