Is the issue of making the addition under clause (f) of section 115 JB debatable?

This Income Tax Appellate Tribunal ruling addresses whether the addition of disallowed amounts under clause (f) of section 115JB is a debatable issue, meaning it cannot be rectified under section 154. The tribunal found that disallowances for calculating book profit under section 115JB must be made independently as per clause (f) of Explanation-1. Therefore, the appeal filed by Cadila Healthcare Ltd. was allowed.

IN THE INCOME TAX APPELLATE TRIBUNAL,
‘’ D’’ BENCH, AHMEDABAD
(CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD)
BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT
And
SHRI WASEEM AHMED, ACCOUNTANT MEMBER

ITA No. 1660/AHD/2019

Asstt. Year: 2011-12

Cadila Healthcare Ltd.,
Zydus Corporate Park,
Plot No.103,
Nr. Nirma University,
Mouje-Khoraj,
S.G. Highway,
Ahmedabad.
PAN: AAACC6253G

VS

D.C.I.T.,
Circle-1(1)(2),
Ahmedabad

Assessee by : Shri Mukesh Patel, A.R
Revenue by : Shri Mohd. Usman, C.I.T..D.R

Date of Hearing : 09/12/2021

Date of Pronouncement: 20/12/2021

O R D E R

The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax(Appeals)-1, Ahmedabad, dated 10/09/2021 arising in the matter of assessment order passed under s.154 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2011-12.

2. The facts in brief are that the assessee in the present case is a limited company and filed its return of income dated 28-11-2011 for the year under consideration after making Suo-Moto disallowance of Rs. 6,27,24,263.00 under the provisions of section 14-A read with rule 8D of Income Tax Rule. However, the AO in the assessment framed under section 143(3) r.w.s. 144C(3) of the Act, inter-alia,
has made the disallowance of Rs. 10,25,89,555.00 under the provisions of section 14A read with rule 8D under the normal computation of income. Thus, there was less disallowance made by the assessee while determining the income under normal computation of income by Rs. 3,98,65,292.00 (Rs. 10,25,89,555.00 minus 6,27,24,263.00). Accordingly, the AO enhanced the disallowance by Rs. 3,98,65,392.00 while determining the income under normal computation of income in the assessment framed under section 143(3) r.w.s. 144C(3) of the Act.

3. The learned AR before us contended that the issue of making the addition under clause (f) of section 115 JB of the Act taking the amount disallowed under the provisions of section 14A read with rule 8D of Income Tax Rule is a debatable issue which cannot be rectified under the provisions of section 154 the Act.

4. It is also pertinent to note that if the disallowance needs to be made while calculating the book profit, the same needs to be made in the manner as provided under clause (f) to Explanation-1 of Sec. 115JB of the Act independently. In holding so, we draw support from the judgment of Hon’ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. in GO No.1501 of 2014 (ITAT No.47 of 2014) dated 19.11.14 wherein it was held that the disallowance regarding the exempted income needs to be made as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently.

5. In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 20/12/2021 at Ahmedabad.

Please find attached the enclosed file for the full judgement