Book profit u/s. 115JB cannot be computed by including disallowance u/s 14A

DCIT Vs Adani Wilmar Ltd (ITAT Ahmedabad)

ITAT Ahmedabad held that book profit under section 115JB of the Income Tax Act cannot be computed by including disallowances made under section 14A of the Income Tax Act.

Facts- The assessee had earned exempt income of Rs. 15 crores from investment made in KOG KTV Food Products for Rs. 16.12 crores. AO made proportionate disallowance under Rule 8D(2)(iii) of Rs. 8.25 crores. AO also made disallowance under Rule 8D(2)(iii) for Rs. 75.62 lakhs and the aggregate disallowance worked out at Rs. 9.01 crores.

The assessee filed appeal before CIT(A). CIT(A) held that interest expenditure of Rs. 253.50 crores cannot be considered for making disallowance u/s. 14A. Being aggrieved, revenue has preferred the present appeal.

Conclusion- Held that CIT(A) in our view correctly observed that out of total expenditure of Rs. 314 crores, a sum of Rs. 253.50 crores was incurred for specified purpose and the same had to be excluded for the purpose of disallowance of interest expenditure u/s. 14A of the Act. Further, the ld. CIT(A) also correctly observed that since the assessee had offered an amount of Rs. 59.58 crores as interest income, such interest income was also required to be reduced from the remaining interest expenditure of Rs. 60.99 crores. Accordingly, only the net expenditure of Rs. 1.41 crores was considered for the purpose of making disallowance u/s. 14A of the Act.

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