Karnataka HC: Section 14A disallowance cannot be added to net profit for computing book profits under MAT
Fact and Issue of the case
Facts leading to filing of this appeal briefly stated are that assessee is a company and is an undertaking of the Government of Karnataka engaged in financing industrial units in the State of Karnataka. The assessee filed its return of income for the Assessment Year 2008-09 on 30.09.2008. Thereafter, the assessee filed revised return on 09.03.2010. The return was selected for scrutiny. However, it is the claim of the assessee that no notice under Section 143(2) of the Act has been issued for the Assessment Year 2008-09. The assessment was completed under Section 143(3) of the Act.
The assessee thereupon filed an appeal before the Commissioner of Income Tax (Appeals), who by an order dated 17.09.2013, deleted the additions made under normal provisions of the Act and in respect of additions made in computation under Section 115JB of the Act, the Assessing Officer did not grant relief with respect of disallowance of provision for bad and doubtful debts written back, disallowance of estimated expenses under Section 14A of the Act and indexation benefit of long term capital gains under Section 10(38) of the Act, under Section 115JB of the Act. The assessee as well as the revenue filed an appeal before the Tribunal. The Tribunal by an order dated 09.12.2016 inter alia upheld the disallowance of deletion of write back of provision for bad and doubtful debts for the determination of book profits under Section 115JB, disallowance of estimated expenses under Section 14A of the Act is to be added back for the determination of book profits under Section 115JB and deleted the addition with respect to disallowance of indexation benefit in respect of long term capital gains under Section 10(38) for the determination of book profits under Section 115JB of the Act.
Observation of the Tribunal
The Court has considered the submissions made on both sides. Admittedly, the first three issues involved in this appeal are covered by decisions of this Court in the case of the assessee as well as in GOKALDAS IMAGES P. LTD., supra. Therefore, substantial question of law Nos.2 to 5 are answered against the revenue and in favour of the assessee. However, since the issue with regard to validity of the proceedings on account of absence of notice under Section 143(2) of the Act has not been examined by the Tribunal, therefore, we set aside the order of the Tribunal and remit the matter to the Tribunal to consider the effect of the assumption of jurisdiction by the Assessing Officer on account of non-issuance of notice under Section 143(2) of the Act. Since the matter is being remitted to the Tribunal therefore, it is not necessary for us to deal with the first substantial question of law.
Accordingly, the appeal is disposed of.
The court disposed off the appeal and ruled in favour of the assessee