Sum disallowed u/s 14A can’t be added to net profit while computing book profit for MAT purposes: ITAT

Case Details: ACIT v. Geometric Software Solutions Co. Ltd. - [2022] 140 taxmann.com 647 (Mumbai-Trib.)

Judiciary and Counsel Details

• • Sandeep Singh Karhail, Judicial Member & Prashant Maharishi, Accountant Member
  • Porus F. Kaka & Manish Kanth, AR’s for the Appellant.
  • Sumit Kumar, DR for the Respondent.

Facts of the Case

Assessee was providing Solutions in the domain of engineering and technology services. It provides software technology and development services in the area of CAD CAM CAE and PDM.

During the assessment, the Assessing Officer (AO) while computing the disallowance under Section 14A as per Rule 8D in the normal computation of income had also, while working out the book profit, added an identical amount to the book profit.

On appeal, the CIT(A) upheld the action of AO. Aggrieved-AO filed the instant appeal before the Tribunal.

ITAT Held

The Tribunal held that there is no relation of disallowance under Section 14A while computing the book profit under section 115JB.

The reason is that explanation (1) of Section 115JB adjustment is to be worked out as clause (f) where the amount of expenditure in relation to any exempt income other than specified income is required to be added to the book profit.

Therefore, there is a separate mechanism provided for adjustment to the book profit of this kind of expenditure. Accordingly, lower authorities were not correct in adding notional expenditure as computed under section 14A and increasing the book profit by that sum under Section 115JB.