Case Law Details
Manali Petrochemical Ltd. Vs DCIT (ITAT Chennai)
ITAT Chennai held that additions made towards disallowance u/s. 14A r.w.r. 8D of the I.T. Rules, 1962 to book profit computed u/s. 115JB(2) of the Income Tax Act is unsustainable.
Facts- The case was selected for scrutiny and draft assessment has been completed u/s. 143(3) r.w.s. 144C of the Act, on 05.10.2017 and determined total income of Rs. 19,72,45,117/-, by making additions towards disallowance u/s. 14A r.w.r. 8D of the I.T. Rules, 1962 for Rs. 4,07,267/- and disallowance of capital subsidy received from Government of India for Rs. 84 lakhs. The assessee has filed objection against draft assessment order passed by the AO before the DRP and the DRP vide their directions dated 22.09.2017 issued u/s. 144C(5) of the Act, upheld additions made by the AO towards disallowance of capital subsidy received from Government of India through Tamilnadu Energy Development Agency. Thereafter, the AO passed final assessment order and made additions towards capital subsidy received from Government of India and also disallowance u/s. 14A r.w.r. 8D of the I.T. Rules, 1962. Aggrieved by the assessment order, the assessee is in appeal before us.
Conclusion- Held that subsidy received by the assessee from Government of India through Tamilnadu Energy Development Agency, is capital subsidy given by the Government to enable the assessee to set up new power plant in line with program on biomass co-generation system in industry and thus, the assessee ought to have reduced amount of subsidy received from actual cost of plant and machinery installed in the plant for claiming depreciation. Therefore, we direct the Assessing Officer to treat subsidy received from Government of India as capital receipts and also reduce from cost of asset acquired out of said subsidy and allow depreciation as per law.
Also, held that the issue of addition towards disallowance u/s. 14A r.w.r. 8D of the I.T. Rules, 1962, to book profit computed u/s. 115JB(2) of the Act, is covered in favour of the assessee by the decision of the ITAT Special Bench in the case of ACIT vs Vireet Investments Pvt Ltd (supra), where it has been clearly held that the computation of clause (f) to Explanation (1) of section 115JB(2) of the Act, is to be made without resorting to the computation as contemplated u/s. 14A r.w.r. 8D of the I.T. Rules, 1962. Thus, by following the decision of ITAT Special Bench, we direct the Assessing Officer to delete additions made towards disallowance u/s. 14A r.w.r. 8D of the I.T. Rules, 1962 to book profit computed u/s. 115JB(2) of the Act.
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