United Breweries Limited Vs DCIT (ITAT Bangalore)
ITAT Bangalore held that disallowance under section 14A of the Income Tax Act is restricted to the amount of exempt income earned by the assessee.
Facts- The assessment of the assessee was completed u/s 143(3) r.w.s 92CA and AO made various additions/ disallowance like depreciation on goodwill, disallowance u/s. 14A, 40(a)(ia), 43B, foreign royalty, brand promotion expense. AO also made addition of Rs. 140.49 crore and treated the amount transferred UBL Trust to the assessee as ‘long term capital gain’ and assessed the same to tax.
Aggrieved, the assessee filed an appeal before the first appellate authority. The CIT(A) vide the impugned order dated 20.12.2017, disposed of the appeal of the assessee. The CIT(A) partly allowed the appeal of the assessee.
Aggrieved by the order of the CIT(A), the assessee has filed the present appeal before the Tribunal.
Conclusion- We hold that the disallowance should be restricted to the amount of exempt income earned by the assessee. The amendment to section 14A of the I.T.Act, which states that disallowance u/s 14A of the I.T.Act is to be resorted, whether the assessee earns exempt income or not is only prospective and does apply to the relevant assessment year.
The Hon’ble jurisdictional High Court in the case of CIT v. Gokaldas Images had held that disallowance u/s 14A of the I.T.Act cannot be added to the book profits for the purpose of section 115JB of the I.T.Act. In the light of the dictum laid down by the Hon’ble jurisdictional High Court judgment in the case of Gokaldas Images, we delete 14A disallowance added to the book profit.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal at the instance of the assessee is directed against CIT(A)’s order dated 20.12.2017. The relevant assessment year is 2012-2013.
2. The brief facts of the case are as follows:
The assessee is a limited company engaged in the business of manufacture and sale of beer under different brands like “Kingfisher” and “UB”. For the assessment year 2012-2013, the return of income was filed on 30.11.2012 declaring total income at `Nil’ under the regular provisions of the Income-tax Act and book profit of Rs.245,93,47,150 u/s 115JB of the I.T.Act. The return was subsequently revised on 07.02.2014 and the total income of Rs.132,92,94,900 was declared after set off of losses of Rs.84,49,20,104 (the assessee had declared book profit as declared in the original return). The assessment was selected for scrutiny and notice u/s 143(2) of the I.T.Act was issued on 16.08.2013. The assessment was completed u/s 143(3) r.w.s. 92CA of the I.T.Act vide order dated 31.03.2016. The Assessing Officer made following disallowances / additions to the returned income of the assessee:-
