ACIT Vs Triton Trading Company Private Limited (ITAT Mumbai)
Summary: The Mumbai ITAT dismissed the Revenue’s appeals for AYs 2017-18 and 2018-19 concerning disallowance under section 14A read with Rule 8D(2)(ii) and adjustment of such disallowance while computing book profit under section 115JB. Taking AY 2017-18 as the lead case, the Tribunal noted that the assessee had earned exempt dividend income of Rs.1,19,963/-. The Assessing Officer applied Rule 8D(2)(ii), computed disallowance of Rs.2,71,56,617/- and also added the amount while computing book profit under section 115JB. The CIT(A), however, restricted the section 14A disallowance to the exempt dividend income of Rs.1,19,963/- and deleted the adjustment made to book profit under section 115JB.
Before the CIT(A), the assessee relied upon the Special Bench decision in ACIT vs. Vireet Investment (P) Ltd. The CIT(A), after considering the facts and judicial precedents, held that the disallowance under section 14A could not exceed the exempt income earned during the relevant year. Accordingly, against the Assessing Officer’s disallowance of Rs.2,71,56,617/-, the disallowance was restricted to Rs.1,19,963/-, being the dividend income earned by the assessee. On the separate issue of computation of book profit under section 115JB, the CIT(A), following Vireet Investment (P) Ltd. and the Karnataka High Court decision in Sobha Developers Ltd. vs. DCIT, held that no adjustment to book profit could be made on account of the section 14A disallowance and consequently deleted the addition.
