Brief of the case:
In the case of M/s. Kailash Vahan Udyog Ltd. Vs. DCIT Pune Bench of ITAT have held that according to the provisions of section 115JB Explanation 1 Clause (iii) while computing book profit, the amount of loss brought forward (before depreciation) or unabsorbed depreciation, whichever is less (as per books of account), shall be reduced from net profit. ITAT while deciding another issue have held that burden lies on revenue to prove the nexus between the expenditure to be disallowed and non-taxable income. The AO cannot simply brush aside the claim of assessee, in respect of disallowance u/s. 14A of the Act.
Facts of the case:
- The assessee company is engaged in manufacturing and sale of Tippers and other Load bodies.
- Assessee filed its return of income computing taxable income under normal provisions as well as under MAT provisions (i.e. u/s. 115JB).
- Assessee claimed set off of carried forward loss and unabsorbed depreciation of previous years under MAT provisions in both AYs 2007-08 & 2008-09.
- AO in scrutiny assessment disallowed the same by following the decision of the Authority for Advance Rulings (AAR) in the case of Rashtriya Ispat Nigam Ltd. reported as 285 ITR 1 (AAR).
- In AY 2008-09 AO further included the book profits amounting to Rs.4,24,21,240/- of Bangalore and Pune units of M/s. Kailash Auto Builders Ltd. (KABL) that were merged with the assessee company in pursuance of order from BIFR.
- Assessee has earned exempt dividend income of Rs.1,94,493/- and capital gain of Rs.1,61,815/- on sale of mutual funds exempt from tax, during the period relevant to the assessment year in appeal.
- The Assessing Officer applied Rule 8D(2)(ii)&(iii) and made disallowance of Rs.1,40,820/-.
- During AY 2008-09 assessee had paid interest on borrowing Rs.1,00,81,717/-.
- The borrowed funds were entirely used for business purposes and thus, interest paid thereon is allowable u/s. 36(1)(iii).
- The dividend during the relevant period was directly credited in the bank account of the assessee through ECS, therefore, the assessee had not incurred any expenditure on managing and deposit of dividend income.
- Before CIT (A) assessee had offered an amount of Rs.3,000/- as expenditure on earning interest free income, however, the same was rejected and the order of Assessing Officer was confirmed.
Contention of the assessee:
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