Disallowance u/s. 14A while computing book profit u/s. 115JB not justifiable: ITAT Mumbai

Arkis Enterprises Pvt. Ltd. Vs ITO (ITAT Mumbai)

ITAT Mumbai held that there is no relation of disallowance u/s. 14A while computing the book profit u/s. 115JB. Thus, lower authorities were not correct in adding notional expenditure as computed u/s. 14A and increasing the book profit by that sum u/s. 115JB.

Facts- AO noted that the assessee made investment in shares/mutual funds, and earned dividend of Rs.1,81,244/-claimed to be exempt. The Ld.AR noted that, the assessee claimed interest expenses in the P&L account of Rs.22, 62, 510/-. AO after considering the submissions of the assessee disallowed under Rule 8D(2)(ii) all finance cost claimed amounting to Rs.22,62,510/-, debited to the profit and loss account. In respect of the disallowance under section Rule 8D(2)(iii) of Income tax Rules, AO disallowed 0.5% of the average value of investments amounting to ₹ 60,636/-. AO further included the disallowance made u/s. 14 A read with Rule 8D, while computing book profits of the assessee under section 115JB of the act.

AO noted that, the assessee had loan creditors amounting to Rs.39,62,546/-. The assessee was called upon to furnish details of creditors like KYC details and confirmation. In response, the assessee furnish details however, according to the Ld.AO, in respect of certain creditors the payment was long overdue, and the assessee neither furnished any confirmation or the addresses. Accordingly, addition of Rs.39,60,564/- was made u/s. 41(1) of the act.