PCIT Vs Gujarat Urja Vikas Nigam Limited (Gujarat High Court)
The Gujarat High Court considered a tax appeal filed by the Revenue under Section 260A of the Income Tax Act, 1961, against the ITAT Ahmedabad order dated 08.08.2024 for AY 2017-18. The assessee, Gujarat Urja Vikas Nigam Limited, is a Public Sector Undertaking engaged, inter alia, in the purchase, sale and distribution of electricity.
The assessee filed its return for AY 2017-18 declaring total income of Rs.90,92,02,810 after setting off brought-forward losses of Rs.75,45,22,135 and showing book profit under Section 115JB of Rs.165,54,21,963. Following scrutiny, the Assessing Officer passed an assessment order under Section 143(3) on 23.12.2019 determining total income at Rs.319,47,55,443 and book profit at Rs.308,27,86,868. Among other adjustments, the AO made a disallowance of Rs.6,97,664 towards interest capitalization of capital work in progress and an adjustment under Section 115JB including the disallowance under Section 14A.
The CIT(A) partly allowed the assessee’s appeal. Thereafter, both the assessee and Revenue preferred appeals before the Tribunal. The ITAT partly allowed both appeals by its order dated 08.08.2024. The Revenue then approached the High Court raising two substantial questions of law.
The first concerned the deletion of the Rs.6,97,664 disallowance of interest expenditure allegedly attributable to capital work in progress and liable to be capitalized. The second concerned whether a disallowance under Section 14A read with Rule 8D was required to be added while computing book profit under Section 115JB.
Regarding the first issue, the High Court noted that it was covered by its decision in Commissioner of Income Tax-I vs. Amod Stamping (P) Ltd., [2014] 45 taxmann.com 427 (Gujarat). The Court also noted the Tribunal’s categorical finding that the assessee had interest-free funds in excess of its investments. Further, the Tribunal had found that the Rs.6,97,664 addition related to interest expenditure concerning an existing building that had already been put to use in earlier years, and therefore there was no question of capitalizing interest on that account. The High Court held that the first issue was answered against the Revenue in view of the Tribunal’s factual findings and the decision in Amod Stamping.
On the second issue, concerning Section 14A read with Rule 8D and computation of book profit under Section 115JB, the High Court noted that the issue was already covered by its decision in The Principal Commissioner of Income Tax, Vadodara-I vs. Gujarat Flurochemicals Ltd., Tax Appeal No. 28 of 2019, decided on 17.06.2019. The Court also referred to the subsequent decision in The Principal Commissioner of Income Tax, Vadodara-1 Vs. Gujarat Urja Vikas Nigam Ltd., Tax Appeal No. 63 of 2020, decided on 17.02.2020.
The High Court referred to the earlier decisions concerning whether an amount disallowed under Section 14A could be added to book profit under Section 115JB. It noted the decision in Commissioner of Income-tax-I v. Gujarat State Fertilizers & Chemicals Ltd., reported in (2013) 358 ITR 323 (Gujarat), and the decision concerning Bengal Finance & Investments P. Ltd., under which the Revenue’s appeal did not raise a substantial question of law on the issue.
The Court further noted the Tribunal’s reliance on CIT V. Alembic Ltd (Tax Appeal No 1249/2014) and CITI vs. Gujarat State Fertilizers & Chemicals Ltd (2013) 358 ITR 323. It also referred to the decisions concerning Goetze (India) Ltd., Vireet Investment P. Ltd., Bhushan Steel Ltd., Vodafone India Services P. Ltd., and Apollo Tyres Ltd. in considering the legal position discussed in the earlier judgments.
In view of the factual findings recorded by the Tribunal and the existing decisions of the Gujarat High Court covering both issues, the High Court held that neither proposed question gave rise to a question of law, much less a substantial question of law. The tax appeal filed by the Revenue was accordingly dismissed. No order as to costs was made.
Cases Discussed
- The Principal Commissioner of Income Tax, Vadodara-1 Vs. Gujarat Urja Vikas Nigam Ltd. (Gujarat High Court), Tax Appeal No. 63 of 2020 decided on 17.02.2020
- The Principal Commissioner of Income Tax, Vadodara-I vs. Gujarat Flurochemicals Ltd. (Gujarat High Court), Tax Appeal No. 28 of 2019 decided on 17.06.2019
- Commissioner of Income Tax-I vs. Amod Stamping (P) Ltd. (Gujarat High Court), [2014] 45 taxmann.com 427 (Gujarat)
- Commissioner of Income Tax-I v. Gujarat State Fertilizers & Chemicals Ltd. (Gujarat High Court), [2013] 358 ITR 323 (Guj)
- CIT Vs. Alembic Ltd, (Gujarat High Court), Tax Appeal No. 1249/2014
- CIT Vs Bengal Finance & Investment P Ltd (Bombay High Court), Tax Appeal No 337 of 2013
- M/s. Essar Teleholdings Ltd. Vs. DCIT (ITAT Mumbai), ITA No.3850/Mum/2010
- CIT Vs. Geotze India Ltd. (Delhi High Court), 361 ITR 505
- Pr CIT Vs. Bhushan Steel (Delhi High Court), ITA 593/2015, Order 29.09.2015
- CIT Vs. Vireet Investment P. Ltd., 165 ITD 27
- Vodafone India Services P. Ltd. Vs. Additional Commissioner of Income Tax & Ors. (Bombay High Court), (2014) 264 CTR 0030 (Bom) (2013) 96 DTR 0193 (Bom) (2014) 361 ITR 0531 (Bom) (2014) 221 Taxman 0166 (Bom)
- Reliance Utilities and Power Ltd. (Bombay High Court), citation not provided
- Apollo Tyres Ltd. V. Commissioner of Income Tax (Supreme Court), 255 ITR 273 (SC)
- CIT Vs. Vegetable Products Ltd. (Supreme Court), 88 ITR 192 (SC)
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Heard learned Senior Standing Counsel Mr.Rutvij Patel appearing for the appellant – Revenue and learned advocate Mr.Manish Shah appearing for the assessee – respondent.
2. This tax appeal filed under Section 260A of the Income Tax Act, 1961 (for short “the Act”) is directed against the order dated 08.08.2024, passed by the Income Tax Appellate Tribunal, Ahmedabad ‘A’ Bench (for short “the Tribunal”), in ITA No. 223/Ahd/2022 for the Assessment Year 2017-18.
3. The revenue has proposed the following questions of law as substantial questions of law:
“i “Whether the Ld. Tribunal was justified in deleting the addition of Rs.6,97,664/ made on account of disallowance of interest expenditure which was attributable to capital work in progress and was liable to be capitalized?”
ü. “Whether the Ld. ITAT was justified in relying on the decision of the Hon’ble High Court of Gujarat in assessee’s own case in Tax appeal No.63 of 2020, and holding that the adjustment made on account of disallowance u/s 14A read with rule 8D of the Income Tax Act, in computation of book profit u/s 115JB of the Income Tax Act, is not as per law without appreciating that the amount disallowable u/s 14A read with rule 8D of the Act is covered under clause (f) of Explanation 1 to Section 115JB(2) and thus, the said amount has to be added back while computing the book profits?”
4. The brief facts leading to the filing of the present tax appeal are that the respondent – assessee is a Public Sector Undertaking, inter alia engaged in the business of purchase, sale and distribution of electricity.
4.1 The assessee filed its Return of Income for the Assessment Year 2017-18 on 18.10.2017, declaring total income of Rs.90,92,02,810/- after setting off brought forward losses to the extent of Rs.75,45,22,135/-. The assessee had also shown book profit under Section 115JB of the Act at Rs.165,54,21,963/-.
4.2 The return filed by the assessee was taken up for scrutiny assessment and after issuing various notices, the Assessing Officer passed Assessment Order under Section 143(3) of the Act on 23.12.2019 determining the total income at Rs.319,47,55,443/- and book profit at Rs.308,27,86,868/-.
4.3 The Assessing Officer, while passing the aforesaid Assessment Order, made the following disallowances:
(i) Disallowance under section 14A of the Act of Rs.154,61,81,000/-
(ii) Interest capitalization of CWIP of Rs.6,97,664/-
(iii) Interest income on IT refund of Rs.10,49,47,929/-
(iv) Interest income treated as “other sources” of Rs.13,36,99,000/-
(v) Dividend Income exempt under section 10(34/35) of Rs.12,07,96,095/-
(vi) Adjustment in Book Profit under 115JB including the disallowance u/s. 14A.
4.4 Being aggrieved by the Assessment Order passed under Section 143(3) of the Act, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals), partly allowed the appeal of the assessee. Being aggrieved, appeals were preferred before the Tribunal by both, i.e. the assessee as well as the Revenue. The Appellate Tribunal, by way of common order dated 08.08.2024, partly allowed both the appeals preferred by the revenue and the assessee. Being aggrieved by the order of the Tribunal, the revenue has preferred the present tax appeal proposing the substantial questions of law.
5 At the outset, learned Senior Standing Counsel Mr.Rutvij Patel appearing for the appellant – revenue and learned advocate Mr.Manish Shah appearing for the assessee, have submitted that both the issues raised in this appeal are covered by various pronouncements of this Court. It was submitted that the first issue regarding addition of Rs.6,97,664/- made on account of disallowance of interest expenditure, is squarely covered by the decision of this Court in the case of Commissioner of Income Tax-I vs. Amod Stamping (P) Ltd., rendered in Tax Appeal Nos. 1058 to 1060 of 2013, reported in [2014] 45 taxmann.com 427 (Gujarat), wherein, this Court has observed as under:
“3.1 At the outset it is required to be noted that in each assessment year the AO directed to make disallowance under section 36(1)(iii) of the IT Act which has been deleted by the learned ITAT by impugned judgement and order. At the outset it is required to be noted that while deleting the disallowance made by the AO under under section 36(1)(iii) of the IT Act, the learned ITAT has relied upon the decision of the Bombay High Court in the case of Reliance Utilities and Power Ltd. (Supra) and has specifically observed that the interest free funds as on the date of balancesheet were far in excess of investments as on 31.03.2004. In para 23 [AY 200405] and while deleting the disallowance made by the AO under section 36(1)(iii) of the IT Act, the learned ITAT has observed as under.
“23. From the audited Balance Sheet as on 31.03.2004 placed on record it is seen that as on 31.03.2004 the investments of the Assessee are to the tune of Rs.5.82 crore as compared to Rs.46,000/ in the immediately preceding financial year meaning thereby that the investments to the extent of Rs.5,82,28,953/ have been made during the year. It is also seen from the Balance Sheet that the interest free funds in the form of share capital, reserves and surplus and unsecured loans as on 31.03.2004 was to the extent of Rs.22.92 crore as against Rs.2.79 crore as on 31.03.2004 meaning thereby that there was an increase of Rs.20.13 crore in interest free funds. Thus it is seen that the interest free funds as on the date of Balance Sheet were far in excess of investments as on 31st March, 2004. In the case of Reliance Utilities (Supra) the Hon. Bombay H.C. has held as under:
“Held that if there were funds available both interest free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest free funds generated or available with the company, if the interestfree funds were sufficient to meet the investments”.
Considering the facts of the case and seen in the light of the decision of Hon. Bombay H.C. (supra) and respectfully following it, we are of the view that in the present case a presumption can be made that investment are out of interest free funds and, therefore, the Assessing Officer was not justified in making addition. We, therefore, direct the deletion of addition, made by A.O. Thus this ground Assessee is allowed.”
[3.2] Similar observations are made by the learned ITAT with respect to the assessment years 200506 and 200607. In the case of Reliance Utilities and Power Ltd. (Supra), the Bombay High Court has held that if there are funds available both interest free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest free funds generated or available with the company, if the interest free funds were sufficient to meet the investments and therefore, interest was deductible. Similar view has been taken by the Division Bench of this Court in the case of Commissioner of Income Tax vs. Gujarat State Fertilizers and Chemicals Ltd. reported in [2013] 358 ITR 323 [Guj]. Applying the ratio/law laid down by the Bombay High Court in the case of Reliance Utilities and Power Ltd. (Supra) as well as Division Bench of this Court in the case of Gujarat State Fertilizers and Chemicals Ltd. (Supra) to the facts of the case on hand and when it has been found that the assessee was having interestfree funds far in excess of investments and therefore, it can be said that the investments are made out of interest free funds and therefore, the AO was not justified in making additions and/or making disallowance under section 36(1)(iii) of the IT Act. Under the circumstances, no error and/or illegality has been committed by the learned ITAT in deleting the disallowance made by the AO under section 36(1)(iii) of the IT Act. No question of law much less substantial question of law arise with respect to deletion of the disallowance made by the AO under section 36(1)(iii) of the IT Act.”
5.1 The first question of law raised in this appeal, therefore, being of the same nature, is now answered by this Court. Further, in the present case, the Tribunal has given a categorical finding of fact that assessee was having interest free funds in excess of the investments and therefore, it can be said that the investments were made out of interest free funds. It was further observed that addition of Rs.6,97,664/-was made by the Assessing Officer out of the interest expenditure without appreciating the fact that the expenditure was in respect of existing building which was already put in use in earlier years and hence there was no question of capitalization of any interest on account of the same. The interest is added to cost of long term asset and is included in depreciation of long term asset. Therefore, issue No.1 is categorically answered against the revenue in view of the findings of fact by the Tribunal and decision of this Court in Amod Stamping (supra).
5.2 The second issue is regarding adjustment made on account of disallowance under Section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 in computation of book profit u/s 115JB of the Act. This issue is also now answered by this Court and is no more res integra. This Court in the case of The Principal Commissioner of Income Tax, Vadodara-I vs. Gujarat Flurochemicals Ltd., in Tax Appeal No. 28 of 2019 decided on 17.06.2019 has dismissed the appeal filed by the revenue by holding as under:
“22 The third question proposed by the revenue is in context with the adjustment made on account of the disallowance under section14A in computing the book profit. In this context, the findings recorded by the ITAT are as follows
17. Next common issue involved in both years is, whether the amount disallowed under section 14A read with rule 8D deserves to be added back in the book profit for the purpose of section 115JB. In other words, whether the additions which have been confirmed by the Tribunal at Rs. 1.55 crores in the assessment year 201213 and Rs.75 lakhs in the assessment year 201314, deserves to be added back in the book profit computed for the purpose of section 115JB.
17.1 The ld. Counsel for the assessee at the very outset contended that this issue is covered in favour of the assessee by the judgment of Hon’ble Gujarat High Court in the case of CIT Vs. Alembic Ltd in Tax Appeal No. 1249 of 2014 as well as decision of Hon’ble Bombay High Court in the case of CIT Vs Bengal Finance & Investment P Ltd in Tax Appeal No 337 of 2013. He placed on record copies both these decisions. Apart from the above, he placed upon reliance Special Bench decision of the ITAT in the case of CIT Vs. Vireet Investment P. Ltd. 165 ITD 27 On the other hand, Id. CITDR relied upon the order of DRP.
18. We have duly considered rival contentions and gone through the record carefully. We find that ld DRP has relied upon the order of the ITAT, Mumbai in the case of DCIT Vs. Viraj Profiles Ltd., (2016) 46 ITR (Trib) 0626 (Mum) and held that addition required to be made in the book profit could be calculated as per Rule 8D of the Income Tax Rules. The ld. DRP thereafter made reference to decision of Hon’ble Delhi High Court in the case of CIT Vs. Geotze India Ltd., 361 ITR 505. According to the ld. DRP, this decision has been considered by the Special Bench in the case of Vireet Investment P. Ltd. (supra) but placed reliance upon Hon’ble Bombay High Court in the case of Vodafone India Services P. Ltd. ACIT, 361 ITR 0531 (Bom) and held that DRP is not bound by the ratio laid down by the Special Bench. The discussion made by the DRP on this issue in the assessment year 2013-14 reads as under:
“10.3 In the case of Viraj Profiles Ltd. [2015] 64 taxmann.com 52 (Mum Trib), the Hon’ble Bench has elaborately discussed the issue and held that the disallowance is liable to be calculated as per Rule 8 D of the Rules. After discussing the decisions which have also been relied on by the appellant, the Hon’ble Bench has concluded that, “In view of our foregoing discussion, we find no infirmity with the orders of the AO and we hold that the AO has rightly disallowed the expenditure of Rs.73,07,018/by invoking the provisions of Section 14a of the Act read with the Rule 8D of Income Tax Rules, 1962 for computing book profit u/s.115JB(2) of the Act read with clause (f) to Explanation 1 to clause 115JB(2) of the Act. We, therefore, set aside the orders of the CIT(A) and restore the orders of the AO We order accordingly. In the case of CIT (Central-II) Vs. Goetze (India) Limited, the Hon’ble Delhi High Court has in ITA No.1179/2010 vide order dated 09.12.2013, held that the disallowance u/s 14A is to be taken into consideration for the purposes of calculating book profits u/s 115JB. The relevant paras of the judgment are reproduced below.
“36. By order dated 16 May, 2012, the following substantial questions of law were framed in the present appeals.”
(i) Whether the Income Tax Appellate Tribunal was right in holding that while computing book profit under Section 115JA (sic. Section 115JB) of the Income Tax Act, 1961, no disallowance under Section 14A was required to be made? Learned counsel for the respondents-assessee, during the course of hearing, has fairly conceded that the first question has to be answered in favour of the Revenue and against the assessee in view of specific provisions in the Explanation 1 below Section 115JB(2) clause (f).
The Assessing Officer it is stated had made an addition of Rs 88,292/ to the book profits towards expenditure incurred having nexus with dividend income, which were exempt under Section 10(33) Recording the said statement, the first question is answered in favour of the appellant-Revenue and against the respondent-assessee.”
The assessee has relied upon the judgment of ITAT special bench in the case of Vireet Investment Pvt. Ltd. In this regard, it is pertinent to mention that Hon’ble Bombay High Court in the case of Vodafone India Services Pvt. Ltd. Vs. Additional Commissioner of Income Tax & Ors. (2014) 264 CTR 0030 (Bom) (2013) 96 DTR 0193 (Bom) (2014) 361 ITR 0531 (Bom) (2014) 221 Taxman 0166 (Bom), has held that the proceedings before DRP are extension of assessment proceedings. Therefore, they are not bound by the decision of Tribunals unlike CIT(A) as long as the issue is not acceptable on merit and/or the issue is being contested by the department. In this case, the decision of Hon’ble Delhi High Court in the case of Goetze (India) Ltd cited above is also in favour to the department on this issue which also shows that the view of AO confirmed by the Panel is a plausible view.
19. There were contradictory orders at the end of the Tribunal Therefore, Special Bench was constituted to consider the following question:
“Whether expenditure incurred to earn exempt income computed under section 14A could not be added while computing book profit under section 115JB of the Act.”
20. When the Special Bench has considered this question, it was confronted with two decisions of the Hon’ble Delhi High Court diagonally opposite to each other. One referred by the Id. DRP also in the present case, rendered in the case of CIR Vs. Goetze India Ltd. (Supra) and other in the case of Pr CIT Vs. Bhushan Steel ITAT, Special Bench has reproduced both these orders in Vireet Investment P. Ltd. (supra) and thereafter it considered as to which decision ought to be followed by a subordinate authority. The department advanced an argument that in the case of Bhushan Steel, Hon’ble Delhi High Court failed to consider subsequent decision of CIT Vs. Goetze India Ltd. (supra). However, the Tribunal after placing reliance upon the decision of Hon’ble Supreme Court in the case of CIT Vs. Vegetable Products Ltd., 88 ITR 192 (SC) and other decisions has held that it is incumbent upon it follow the decision of Hon’ble Delhi High Court in the case of Bhushan Steel. In this case, Hon’ble Delhi High Court has held as under.
“However, Ld. Senior Counsel has relied on the decision in the case of Bhushan Steel Ltd. (supra) wherein it has been held as under
“ΙΤΑ 593/2015
PR. CIT
Appellant
Through. Mr. N.P. Sahni, Senior Standing Counsel with Mr. Nitin Gulati, Advocate Versus
BHUSHAN STEEL LTD.
Respondent
Through: Ms. Kavita Jha, Advocate with Ms. Roopali Gupta, Advocate.
ORDER 29.09.2015
*** **** ****
*** **** ****
7. Question No.6 concerns deletion of addition of Rs.89,00,000 made by the AO for computation of the income fore the purposes of Minimum Alternate Tax (MAT) under section 115JB of the Act. This pertained to the expenditure incurred for earning exempt income under section 14A read with Rule SD. The ITAT has rightly held that this being in the nature of disallowance, and with Explanation 115JB not specifically mentioning Section 14A of the Act, the addition of Rs.89,00,000 was not justified. The view taken by the ITAT cannot be faulted with. It is consistent with the decision in Apollo Tyres Ltd. V. Commissioner of Income Tax 255 ITR 273 (SC) which held that “the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to Section 115J.” The Court declines to frame a question on the above issue.”
21. Apart from the above, we have a binding precedent before us – one from Hon’ble jurisdictional High Court and other from the Hon’ble Bombay High Court. The question considered by the Hon’ble Gujarat High Court in the case of Alembic Ltd. (supra) is as under:
“Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in holding that adjustment made on account of disallowance u/1.14A of the Act in computation of book profit u/s 115JB of the Act is not as per law without appreciating that the amount disallwable under section 144 is covered under clause (f) of Explanation to section 115JB(2) and, thus, said amount has to be added back while computing amount of book profit?
22 The Hon’ble Gujarat High Court has replied this question as under:
7. So far as issue Nos. (iii) and (iv) are concerned, the learned counsel for the assessee has relied on the decision of this court in the case of Commissioner of Incometax-1 v. Gujarat State Fertilizers & Chemicals Ltd., reported in (2013) 358 ITR 323 (Gujarat) Where this court has held in paragraph Nos 6 to 6.5 this court has observed as under:
6. So far as the fourth question is concerned, it pertains to addition of Rs. 1,14,43,040/under Section 115JB of the Act being the expenditure estimated on earning of dividend income under Section 14A of the Act.
6.1 The Assessing Officer on referring to the said provision of Section 115JB(2) of the Act added the said amount considering that any amount of expenditure relatable to the income exempted under Section 10 of the Act shall need to be added in the profit shown in the Profit and Loss Account.
When the matter travelled to the CIT (Appeals), since it deleted the addition of Rs. 1,14,43,040/while deciding the question No. 1, it consequently deleted such addition under Section 115JB of the Act on the ground that this would not serve any purpose.
The Tribunal decided the said issue as follows:
“94. We have considered the rival submissions and we find that similar issue was raised by Revenue as per ground No.3 above in respect of regular assessment of income and while deciding that ground, we have already upheld that disallowance of Rs.5 lakh in respect of administrative expenses will meet the ends of justice and no disallowance is called for in respect of interest expenditure.
Hence, for the purpose of computing book profit u/s.115JB of the Act also, we hold accordingly and confirm the addition of Rs.5 lakh.
This ground of Revenue’s appeal is partly allowed.”
As rightly held by both, the CIT (Appeals) and the Tribunal, this issue has a direct correlation with the first question. It was argurd by the Revenue that while computing the book profit under Section 115JB of the Act, the disallowance of interest expenditure on exempt income was wrongly negatived by both the authorities on the ground that it was not the liability for expenses, but a liability relating to assets.
We find no fault in the approach adopted by both the authorities. The addition under section 115JB of the Act of a sum of Rs. 1,14,43,040/-when was made as an expenditure estimated on earning of dividend income under Section 14A of the Act, without reiterating the rationale of confirming deletion of such amount as has been elaborately done at the time of deciding question No.1, this deletion requires to be confirmed.”
8. Taking into consideration the evidence on record and considering the decision of this court in the case of Commissioner of Incometax-I vs. Gujarat State Fertilisers & Chemicals Ltd. (supra), we are of the opinion that issue Nos. (iii) and (iv) required to be answered in favour of the assessee and against the revenue. In that view of the matter, we answer questions (iii) and (iv) referred to us in favour of the assessee and against the revenue. The appeal of revenue is dismissed.
23. Similarly, Hon’ble Bombay High Court has formulated following question in the case of Bengal Finance & Investments P. Ltd. (supra) and replied as under:
(b) Whether on the facts and in the circumstances of the case, and in law, the ITAT is justified in deleting the addition of Rs.78,84,387/ under clause (f) of Explanation 1 to Section 115JB relying upon the decision in the case of Goetze (India) Ltd. Vs. CIT (2009) 32 SOT 101 (Del.), which has been followed by ITAT, Mumbai in the cases referred to in para 5 of the impugned order without appreciating that the above decision in the case of Goetze (India) Ltd. was rendered by the ITAT, Delhi Bench on completely distinguishable set of facts, peculiar to the said case?”
…. ….. …..
4. So far as question (b) is concerned, the impugned order of the Tribunal followed its decision in M/s. Essar Teleholdings Ltd. Vs. DCIT in ITA No.3850/Mum/2010 to held that an amount disallowed under section 14A of the Act cannot be added to arrive at book profit for purposes of Section 115JB of the Act. The Revenue’s Appeal against the order of the Tribunal in M/s. Essar Teleholdings (supra) was dismissed by this Court in Income Tax Appeal No. 438 of 2012 rendered on 7th August, 2014. In view of the above, question (b) does not raise any substantial question of law.
24. Respectfully following the above decision, we hold that no addition in the book profit would be made on the basis of calculations worked out under section 144 of the Act. We allow this ground of appeal in both the years and delete the additions.”
23. We take note of the fact that in context with the third propound question, the ITAT placed reliance on the following decisions:
(1) CIT V. Alembic Ltd (Tax Appeal No 1249/2014)
(2) CITI vs. Gujarat State Fertilizers & Chemicals Ltd (2013) 358 ITR 323
24. The issue is squarely covered and in our opinion, no error could be said to have been committed by the ITAT in taking the view that no addition in the book profit can be made on the basis of the calculation worked out under Section 14A of the Act.”
5.3 In view of the above, the second proposed substantial question of law raised in this appeal is squarely covered by the decision of this Court in the case of Gujarat Fluorochemicals Ltd (supra) as well as by the subsequent decision of this Court in the case of The Principal Commissioner of Income Tax, Vadodara-1 Vs. Gujarat Urja Vikas Nigam Ltd., in Tax Appeal No. 63 of 2020 decided on 17.02.2020. Further, there is concurrent finding of the Tribunal and CIT (Appeals) to the effect that to include disallowance under Section 14A of the Act, computation of book profit under Section 115JB of the Act is required to be deleted.
6. In view of the above findings of fact arrived at by the Tribunal and both the substantial questions raised in this appeal, being answered against the revenue by various pronouncements of this Court as mentioned herein above, no question of law, much less substantial question of law arises.
7. The appeal stands dismissed accordingly. No order as to costs.
