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January 2025

Company — Computation of Book Profits — Scope of section 115JB — Disallowance u/s. 14A — Amount disallowed cannot be taken into consideration when computing book profits

By Keshav Bhujle | Ritu Punjabi, Advocates
Reading Time 2 mins

70 Pr. CIT vs. Moon Star Securities Trading and Finance Co. Pvt. Ltd. [2024] 469 ITR 15 (Del.) A. Y. 2011-12 Date of order: 11th March, 2024 Ss. 14A and 115JB of ITA 1961

Company — Computation of Book Profits — Scope of section 115JB — Disallowance u/s. 14A — Amount disallowed cannot be taken into consideration when computing book profits

The assessee earned dividend income of ₹58,09,619. In respect of the dividend income, the Assessee made disallowance u/s. 14A of the Income-tax Act, 1961. However, in the scrutiny assessment, the AO enhanced the disallowance u/s. 14A to ₹12,65,71,862 computed as per section 14A r.w.r. 8D and made addition under the normal provisions as well as to the book profits computed under the provisions of section 115JB of the Act.

The CIT(A) partly allowed the appeal of the Assessee and restricted the disallowance to ₹2,08,72,836 as against the disallowance of ₹12,65,71,862 determined by the Assessing Officer. The Tribunal deleted the disallowance on the ground that there was no satisfaction recorded by the Assessing Officer. Further, the Tribunal held that the disallowance u/s. 14A of the Act could not be made while computing book profits u/s. 115JB of the Act.

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