PCIT Vs J.J.Glastronics Pvt. Ltd. (Karnataka High Court)
The Karnataka High Court dismissed an appeal filed by the Revenue under Section 260A of the Income-tax Act, 1961, challenging the orders of the Income Tax Appellate Tribunal relating to Assessment Year 2013–14. The Revenue questioned the Tribunal’s decision allowing the assessee’s appeal, dismissing the Revenue’s miscellaneous petition, and holding that disallowance under Section 14A of the Act could not be added while computing book profits under Section 115JB.
The assessee, engaged in manufacturing electron gun parts, glass-to-metal seals, and machined components, filed its return declaring nil income and book profits of ₹36,84,680. The Assessing Officer completed assessment under Section 143(3) and made a disallowance of ₹6,73,101 under Section 14A. The assessee’s appeal before the Commissioner (Appeals) failed, but the Tribunal allowed the further appeal and held that Section 14A disallowance could not be imported into the computation of book profits under Section 115JB. A miscellaneous petition filed by the Revenue under Section 254(2) was also dismissed, leading to the present appeal.
The Revenue argued that the Tribunal failed to properly apply Explanation 1(f) to Section 115JB(2), contending that expenditure relatable to exempt income must be added back to book profits and that rectification under Section 154 was justified. Reliance was placed on an earlier Tribunal decision in Shobha Developers. The assessee countered that Section 115JB is a complete code and that the issue was covered by the Special Bench decision of the Delhi Tribunal in Vireet Investment Private Ltd., which held that Section 14A disallowance under normal provisions cannot be added to book profits under MAT.
