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Direct the AO to examine the claim of the assessee and compute the addition to be made under clause (f) to Explanation 1 to sec.115JB of the Act independently without having regard to the provisions of sec.14A of the Act.

Shanti Prime Publication Pvt. Ltd.

Sec. 263 of Income Tax Act, 1961— Revision — Order passed by Pr. CIT was modified and it was directed to AO to examine the claim of the assessee and compute the addition to be made under clause (f) to Explanation 1 to sec.115JB independently without having regard to the provisions of sec.14A.

Facts: Principal CIT( by virtue of powers conferred on me u/s 263 was satisfied that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of revenue as the AO failed to add back to book profit u/s 115JB the amount of disallowance u/s 14A and also to disallow the claim of foreign exchange fluctuation loss of Rs. 22,93,48,566/- which is nothing but notional liability and claimed u/s 37(1) without debiting the same to the P&L account, therefore, the AO is directed to redo the assessment accordingly. Being aggrieved, assessee went on appeal before Tribunal.

Held, that AO has accepted the book profit declared by the assessee u/s 115J. It is pertinent to note that clause (f) of Explanation 1 to sec.115JB provides that the expenditure relatable to any income to which sec. 10 (other than the provisions contained in clause (38) thereof) or section 11 or section 12 apply, should be added to Net profit while computing the book profit. Even though the assessing officer has worked disallowance u/s 14A while computing total income under normal provisions, yet he has omitted to examine the applicability of clause (f) of Explanation 1 to sec.115JB. Hence omission to apply provisions of the Act would make the assessment order erroneous. The Ld A.R submitted that the assessee did not earn any exempt income and hence the question of making addition clause (f) does not arise. However, the fact remains that the AO did not examine this claim also while passing the assessment order. Accordingly, the order passed by Pr. CIT was modified and it was directed to AO to examine the claim of the assessee and compute the addition to be made under clause (f) to Explanation 1 to sec.115JB independently without having regard to the provisions of sec.14A. - TANGLIN DEVELOPMENTS LTD. V/s DEPUTY CIT - [2020] 207 TTJ 752 (ITAT-BANGALORE)