High Court of Delhi

Principal Commissioner of Income Tax (CENTRAL) - 1 Vs. Moon Star Securities Trading & Finance Co. Pvt. Ltd. (Neutral Citation: 2024:DHC:2007-DB)

MANU/DE/1857/2024

11.03.2024

Direct Taxation

Assessing Officer is not vested with an authority to travel beyond the net profit shown in the profit and loss account

The present appeal under Section 260A of the Income Tax Act, 1961 [ IT Act], at the instance of the Revenue, impugns the order passed by the Income Tax Appellate Tribunal ["ITAT"] for the assessment year ["AY"] 2011-12.

The limited controversy involved in the instant appeal which requires consideration pertains to whether the disallowance under Section 14A of the Act can be imported to Section 115JB of the Act, particularly in light of Clause (f) of Explanation 1 to Section 115JB of the Act, for computation of MAT.

A bare perusal of the provisions would signify that, sub-Section (1) prescribes the mode and manner for computing the total income of the assessee under Section 115JB of the Act. However, Clause (f) of Explanation 1 only alludes to the amounts of expenditure relatable to any income to which Section 10 (excluding provisions contained in Clause 38 thereof) or Section 11 or Section 12 apply. Thus, the said explanation nowhere mentions or denotes any mandate to import the disallowance as per Section 14A of the Act for computing MAT under Section 115JB of the Act.

Further, in the case of Apollo Tyres Ltd. v. CIT, the Hon'ble Supreme Court was of the opinion that, the AO is not vested with an authority to travel beyond the net profit shown in the profit and loss account and the said jurisdiction is confined to the extent provided in the Explanation to Section 115J of the Act.

The scheme of Section 115JB, particularly in relation to Clause (f) of Explanation 1 therein, does not envisage any addition of disallowance computed under Section 14A of the Act to calculate MAT as per Section 115JB of the Act. Rather, both the provisions stand separately as no correlation exists between them for the purpose of determining the taxable income. The addition of the concerned disallowance made by the AO while computing MAT is dehors the provisions of the Act and hence, cannot be sustained.

The arguments raised by the Revenue are bereft of any merit and thus, the question of law which arose in the instant appeal is answered against the Revenue. Consequently, there is no reason to interfere with the decision rendered by the ITAT. Appeal dismissed.

Tags : Assessment Provision Applicability

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