DEUTSCHE INVESTMENT INDIA P. LTD, MUMBAI V. DCIT 6(2), MUMBAI

CO 161/MUM/2014

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2560 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 07-11-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 10-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 06-08-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SIVAJI GODE
• Keywords: Business income; Depreciation; Earning of tax free income
• Section: 143(3); 14A; 37(1); 145; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH , MUMBAI BEFORE SRI MAHAVIR SINGH, J M AND SRI RAJESH KUM AR , AM ITA NO . 3724 /MUM/2013 (A.Y: 2008 - 09 ) THE DY. COM MISSIONER OF INCOME TAX, CIRCLE - 6(2) , ROOM NO.563 , AAYAKAR BHAVAN, M. K. ROAD, CHURCHGATE, MUMBAI 400 021 VS. M/S. DEUTSCHE INVESTMENTS INDIA PVT. LTD.,NICHOLAS PIRAMAL TOWER, PENINSULA CORPORATE PARK, GANPATRAO KADAMMARG, LOWER PAREL, MUMBAI 400013 PAN: AACCD 1705 E APPELLANT .. RESPONDENT C. O. NO.161/MUM/2014 (IN ITA NO. 3724/MUM/2013 - A.Y: 2008 - 09 ) & ITA NO.127 6 /MUM/2015 (AY: 2009 - 10) M/S. DEUTSCHE INVESTMENTS INDIA PVT. LTD.,NICHOLAS PIRAMAL TOWER, PENINSULA CORPORATE PARK, GANPATRAO KADAMMARG, LOWER PAREL, MUMBAI 400013 PAN: AACCD 1705 E VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE - 6(2), RO OM NO.563, AAYAKAR BHAVAN, M. K. ROAD, CHURCHGATE, MUMBAI 400 021 CROSS OBJECTOR/ APPELLANT .. RESPONDENT REVENUE BY .. SHRI SIVAJI GODE, SR. DR ASSESSEE BY .. SHRI PERCY PARDIWALA, AR DATE OF HEARING .. 07 - 11 - 2016 DATE OF PRONOUNCEMENT .. 07 - 11 - 2016 O R D E R PER MAHAVIR SINGH , JM : ONE A PPEAL (ITA NO. 3724/MUM/ 2013) BY THE REVENUE AND CO (161/MUM/2014) BY ASSESSEE IS ARISING OU T OF THE ORDER OF THE CIT (A) - 12, MUMBAI IN APPEAL NO. CIT (A) - 12 / ACIT - 6(2)22/11 - 12 DATE D 26 - 02 - 2013 . OTHER APPEAL BY ASSESSEE ( ITA NO.1276/MUM/2015 ) IS AGAINST THE ORDER OF THE CIT(A) - 12, MUMBAI IN APPEAL NO.CIT(A) - 12/DCIT.6(2)/IT - 2/2013 - 14 DATED 08 - 12 - 2014 . A SSESSMENT S W ERE FRAMED BY THE A C IT , RANGE - 6(2) , MUMBAI FOR THE ASSESSMENT ITA NO. 3724 /MUM/20 1 3 CO NO.161/MUM/2014 ITA NO.127 6 /MUM/2015 2 YEAR 20 08 - 09 VIDE HIS ORDER DATED 1 5 - 12 - 2011 AND FOR ASSESSMENT YEAR 2009 - 10 BY THE DCIT - 6(2), MUMBAI VIDE HIS ORDER DATED 15 - 03 - 2013 , BOTH U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) . 2. THE FIRST COMMON ISSUE IN THE SE APPEAL S , OF THE REVENUE AND ASSESSEE , IS AGAINS T THE ORDER OF THE CIT (A) DELETING OR CONFIRMING THE ADDITION MADE BY THE AO ON ACCOUNT OF CLAIM OF REDUCTION IN VALUE OF INVESTMENT AS BUSINESS LOSS WHICH WAS STOCK - IN - TRADE. THIS COMMON ISSUE IS IN BOTH THE APPEALS AND THE FACTS AND CIRCUMSTANCES ARE ID ENTICAL AND HENCE, FOR THE SAKE OF CONVENIENCE AND BREVITY, WE WILL DISCUSS THE FACTS OF REVENUES APPEAL AND DECIDE THE ISSUE. FOR THIS, THE REVENUE HAS RAISED THE FOLLOWING 5 GROUNDS: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AD IN LAW, THE LD. C IT(A) ERRED IN DELETING THE ADDITION OF RS.62,00,000/ - AND TREATING THE REDUCTION IN VALUE OF INVESTMENT AS BUSINESS LOSS WHEN THE ENTIRE INVESTMENT COULD NOT BE TREATED AS STOCK - IN - TRADE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)(A) ERRED IN FAILING TO APPRECIATE THAT THE ASSESSEE COMPANY IS A NBFC WHICH IS REGULATED BY THE RBI AND IS BOUND TO FOLLOW THE GUIDELINES PRESCRIBED BY THE RBI AND HAS TO MAINTAIN ITS BOOKS OF ACCOUNTS AS PER GUIDELINES OF RBI. 3 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE AD IN LAW, THE LD. CIT(A) ERRED IN ACCEPTING THE TREATMENT GIVEN TO THE INVESTMENT BY THE ASSESSEE COMPANY AND TREATING THE ENTIRE INVESTMENT IN SECURITIES AS CURRENT INVESTMENTS AND RESULTANTLY ENTIRE INVESTMENTS AS STOCK - IN - TRA DE AND ACCEPTING THE ACCOUNTING TREATMENT GIVEN BY THE ASSESSEE I SHOWING THE CLOSING STOCK OF THESE SECURITIES AT MARKED TO MARKET VALUE AS THE END OF THE FINANCIAL YEAR, EVEN WHEN SUCH ACCOUNTING WAS NOT IN CONSONANCE WITH THE RBI GUIDELINES. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AD IN LAW, THE LD. CIT(A) ERRED IN FAILING TO APPRECIATE THAT THE ASSESSEE COMPANY BEING A NBFC AND REGULATED BY THE RBI IS BOUND TO DIVIDE INVESTMENT AS CURRENT INVESTMENTS AND LONG TERM INVESTMENT ON THE LINES OF INVE STMENT BY THE BANKS AS HELD FOR MATURITY. AVAILABLE FOR SALE, HELD FOR TRADING AND TREAT ONLY CURRENT INVESTMENT AS STOCK - IN - TRADE AND SHOW AT MARKED TO MARKET VALUE AT THE END OF THE FINANCIAL YEAR WHILE SHOWING THE LONG TERM ITA NO. 3724 /MUM/20 1 3 CO NO.161/MUM/2014 ITA NO.127 6 /MUM/2015 3 INVESTMENT AT BOOK VALUE AT T HE END OF THE FINANCIAL YEAR AT PAR WITH THE TREATMENT GIVEN BY THE BANKS FOR SIMILAR SECURITIES (HELD FOR MATURITY. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)(A) ERRED IN FAILING TO RESTRICT THE RELIEF ON ACCOUNT OF REDUCTIO N IN VALUE OF INVESTMENT AS BUSINESS LOSS TO THE CURRENT INVESTMENT AND ALLOWING THE REDUCTION IN VALUE OF INVESTMENT FOR THE LONG TERM INVESTMENT TO BE SHOWN ONLY AT BOOK VALUE AT THE END OF THE FINANCIAL YEAR AS BUSINESS LOSS WHICH ACTUALLY BEING ONLY A NOTIONAL LOSS IS NOT A DEDUCTIBLE EXPENDITURE. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A NON BANKING FINANCIAL COMPANY (NBFC) FOLLOWING MERCANT ILE SYSTEM OF ACCOUNTING. THE A O ON GOING THROUGH THE PROFIT & LOSS ACCOUNT NOTICED THAT THE ASSESSE E HAS DEBITED PROVISIONS FOR DEP RECIATION ON INVESTMENTS. THE A O REQUIRED THE ASSESSEE TO EXPLAIN HOW THIS IS ALLOWABLE. IT WAS EXPLAINED BY THE ASSESSEE BEFORE THE AO THAT THE STOCK - IN - TRADE HAS TO BE VALUED AS PER THE NORMAL PRINCIPLE OF ACCOUNTING I.E. COST OR MARKET VALUE WHICHEVER IS LOWER AND THE PROVISIONS FOR DEPRECIATION IN VALUE OF INVESTMENTS I S ALLOWABLE AS DEDUCTION. THE A O WAS NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE FOR THE REASON THAT THE ASSESSEE HAD DEBITED PROVISIONS FOR DEPRECI ATION IN THE PROFIT & LOSS ACCOUNT AND THUS, THE EXPENSES ARE NOT ACTUALLY INCURRED OR CRYSTALLIZED BY THE ASSESSEE AND THE ONLY PROVISIONS HAS BEEN MADE FOR SUCH EXPENSES. ACCORDINGLY, HE DISALLOWED THE PROVISIONS FOR DEPRECIATION ON INVESTMENTS AMOUNTING TO RS.62 LACS. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A), WHO ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING IN PARA 4.4 AND 4.5 OF HIS ORDER AS UNDER: - 4.4 I HAVE CAREFULL Y CONSIDERED THE ORDER OF THE A O AND THE SUBMISSION OF THE APP ELLANT. A READING OF THE ASSESSMENT ORDER SHOWS THAT THE A O HAS ACCEPTED THE FACT THAT THE APPELLANT IS ENGAGED IN THE BUSINESS OF NON - BANKING FINANCIAL SERVICES FOR WHICH IT HAS OBTAINED REGISTRATION FROM THE RBI. THAT THE STOCK IN TRADE OF THE APPELLAN T CONSISTS OF GOVERNMENT EQUITY SHARES ETC. HAS ALSO NOT BEEN DISPUTED. THE BUSINESS INCOME OFFERED FROM SUCH A STOCK I T RADE HAS BEEN ACCEPTED BY THE A O. THEIR VALUATION AS DONE BY THE APPELLANT AND DISCLOSED IN THE CLOSING STOCK HAS ALSO NOT BEEN HELD AS INCORRECT BY THE A O. THE ONLY ISSUE DISPUTED AS THE CLAIM OF THE APPELLANT AS MADE IN THE P & L A/C. REGARDING PROVISION FOR DEPRECIATION ON INVESTMENT. THIS HAS BEEN DONE AS THE APPELLANT VALUES ITA NO. 3724 /MUM/20 1 3 CO NO.161/MUM/2014 ITA NO.127 6 /MUM/2015 4 CURRENT INVESTMENT AT COST OR MARKET VALUE WHICHEVER IS LOW ER AND EITHER CREDIT OR DEBITED THE GAIN OR LOSS. THE LOSS IS DEBITED UNDER THE NOMENCLATURE PROVISION, BUT IT IS ACTUAL VALUATION LOSS. THE A O HAS REJECTED THIS CLAIM OF THE APPELLANT FOR THE REASONS AS REPRODUCED EARLIER ON IN THIS ORDER. HOWEVER, IT I S SEEN THAT THE ACTION OF THE A O IS NOT BASED ON THE ANALYSIS OF THE FACTS OF TH E CASE AS WAS BEFORE HIM. THE A O HAS NOT TAKEN INTO CONSIDERATION THE NATURE OF THE BUSINESS OF THE APPELLANT EVEN THOUGH HE HAS ACCEPTED IT AND THAT THE STOCK IN TRADE OF THE AP PELLANT ARE SECURITIES WHICH THE APPELLANT HAS TERMED AS CURRENT INVESTMENTS IN ITS BOOKS OF ACCOUNTS. THESE ARE THE STOCK IN TRADE OF THE APPELLANT IN WHICH THE APPELLANT HAS REGULARLY CARRIED OUT THE BUSINESS IN THE YEAR. THE A O HAS ALSO NOT CONSIDERED T HE FACT THAT THE VALUATION OF CLOSING STOCK OF SECURITIES HAS BEEN CARRIED ON AS PER THE MERCANTILE / ACTUAL SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE APPELLANT AND THE METHOD SO EMPLOYED BY THE APPELLANT IS DULY SUPPORTED BY THE RBI NORMS READ WITH A S - 13 OF THE INSTITUTE OF CHARTERED ACCOUNTANTS. IT IS ALSO SEEN THAT THE APPELLANT HAS TAKEN INTO CONSIDERATION PROVISIONS OF SECTION 145 AND 145A OF THE IT ACT IN VALUING THE CLOSING STOCK OF SECURITIES. THE DEDUCTION CLAIMED UNDER THE HEAD PROVISIONS FOR DEPRECIATION BY THE APPELLANT IS NOTHING ELSE BUT ACTUAL DEPRECIATION IN THE VALUE OF INVESTMENT HELD BY THE APPELLANT AS STOCK IN TRADE, TRANSACTION FROM WHICH HAS BEEN OFFERED AS BUSINESS INCOME OF THE APPELLANT. IT IS IN FACT A LOSS SUFFERED BY THE APP ELLANT DUE TO THE FALL IN THE MARKET PRICE OF THE INVESTMENT IN THE NORMAL COURSE OF BUSINESS OF THE APPELLANT. AT THE END OF ANY PREVIOUS YEAR SECURITIES HELD AS STOCK IN TRADE ARE TO BE VALUED AT ACTUAL COST INITIALLY RECOGNIZED OR NET REALIZABLE VALUE A T THE END OF THE PREVIOUS YEAR, WHICHEVER IS LOWER. IF THERE IS A NEGATIVE DIFFERENCE THAT RESULTS ON ACCOUNT OF SUCH VALUATION THE SAME IS TO BE TREATED AS A LOSS IN THE ACCOUNTING DONE. IT WOULD BE IMMATERIAL AS TO THE NOMENCLATURE THAT IS GIVEN TO SUCH QUANTUM THAT IS ARRIVED AT. ALL THAT WOULD NEED TO BE SEEN THAT IT IS NOT A PROVISION BUT THE ACTUAL LOSS THAT IS DEBITED TO THE P & L ACCOUNT. IN THIS CASE, IT IS SEEN THAT THE APPELLANT HAS DEBITED THE ACTUAL LOSS THAT HAS ACCRUED TO IT REGARDING THE VAL UATION OF CLOSING STOCK ACTUALLY DONE. THE WORKING OF THE PROVISION FOR DEPRECIATION SUBMITTED CLEARLY INDICATES THIS. BESIDES THIS ONE NEEDS TO CONSIDER THE QUANTITATIVE DETAILS OF THESE INVESTMENTS AS AVAILABLE IN THE FINANCIALS FOR THE YEAR ENDED 31/3/2 008 WHEREIN IT HAS CATEGORICALLY BEEN STATED THAT THE SAID INVESTMENTS ARE ACTUALLY STOCK IN HAND. IT IS ALSO EVIDENCED THAT THE APPELLANT IS NOT DEALIN G IN SHARES. THE ORDER OF THE A O, IT IS SEEN, IS SILENT ON THE FACT AS TO WHY HE HAS CONSIDERED THAT THE CLAIM HAS NOT ACTUALLY CRYSTALLIZING AND THAT IT IS ONLY PROVISIONS MADE THAT STAN DS DEBITED. THE ACTION OF THE A O IN REJECTING A C LAIM MADE BY THE APPELLANT ON T HE BASIS OF A SUSPICION WITHOUT SPECIFICALLY ESTABLISHING THE FACT AS TO WHY THE SAME WAS NOT ACCEPTABLE ITA NO. 3724 /MUM/20 1 3 CO NO.161/MUM/2014 ITA NO.127 6 /MUM/2015 5 CANNOT BE UPHELD. THIS ESPECIALLY SO IF THE APPELLANT HAS BEEN ABLE TO ESTABLISH THAT IT HAS FOLLOWED THE PROVISIONS OF INCOME TAX ACT TOTALLY. 4.5 REJECTION OF THE DEPRECIATION / LOSS CLAIMED BY THE APPELLANT WOULD MEAN REJECTION OF THE REGUL AR BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT. IT IS OPEN TO THE A O TO REJECT THE ASSESSEES BOOKS OF ACCOUNTS BUT FOR DOING SO PROPER ANALYSIS OF THE BOOKS OF ACCOUNTS AND THE DEFECTS NOTICED SHOULD BE DETAILED. THE REJECTION CANNOT BE BASED SIMPLE ON THE NOMENCLATURES USED BY THE APPELLANT TO DESCRIBE A CLAIM. THIS ENQUIRY / EXAMINA TION HAS NOT BEEN DONE BY THE A O. IT IS SEEN THAT THE APPELLANT HAS MAINTAINED DETAILS OF STOCK IN TRADE AND HAS MADE AVAILABLE ITS VALUATION TO THE AO. THE A O HAS NOT POINT ED OUT ANY DEFECT NOTICED THAT WOULD SHOW THAT THE STOCK IN TRADE HAS NOT BEEN VALUED PROPERLY TO DISCLOSE THE CORRECT INCOME. FROM THE DETAILS AVAILABLE, IT IS CLEAR THAT THE APPELLANT WAS MAINTAINING ITS ACCOUNT ON THE MERCANTILE SYSTEM. IT IS SEEN THE V ALUATION OF STOCK IN TRADE HAS BEEN DONE BY THE APPELLANT ON THE BASIS OF COST PRICE OR MARKET PRICE WHICHEVER IS LESS. THE VALUATION HAS BEEN DONE AS BY THE METHOD REGULARLY FOLLOWED BY THE APPELLANT. THE FALL IN VALUE OF INVESTMENT IN THE CASE OF 11.3% I NDIA GOVERNMENT BOND AMOUNTING TO RS.62 LAKHS HAS BEEN EVIDENCED BY THE APPELLANT BY WAY OF THE PREVAILING RATES. IT IS ALSO SEEN THAT THE DIFFERENCE OR THE INTEREST ACCRUED ON THE DISCOUNTED BONDS HAVE BEEN CREDITED TO THE PROFIT & LOSS A/C. AND OFFERED F OR TAXATION. THE A O HAS MADE NO REMARKS ON THE SAME IN THE ASSESSMENT ORDER. THE CASE OF GUJARAT STATE INVESTMENT LTD. V/S. DCIT (2002) 74 TTJ (AHD - TRIBUNAL) SUPPORTS STAND TAKEN BY THE APPELLANT. IT IS ALSO SEEN THAT THE APPELLANTS CASE IS DIRECTLY COVER ED BY THE JUDGMENT OF THE HONBLE KOLKATA TRIBUNAL IN THE CASE OF ACIT V/S. DALHOUSIE INVESTMENT TRUST CO. LTD. (2002) 80 ITD 210, WHEREIN THE HONBLE TRIBUNAL HAS HELD THAT THE METHOD OF VALUATION OF CLOSING STOCK ON THE BASIS OF COST OR MARKET VALUE WHIC HEVER IS LOWER IS A WELL ESTABLISHED RULE OF COMMERCIAL PRACTICE AND ACCOUNTANCY AND HAS BEEN RECOGNIZED TIME THE TIME AGAIN BY VARIOUS JUDICIAL DECISIONS. IN VIEW OF THE ABOVE DISCUSSION AS IT IS SEEN THAT THE APPELLANT HAS FOLLOWED THE METHOD OF ACCOUNTI NG, IT IS REQUIRED TO FOLLOW REGARDING THE VALUATION OF ITS CLOSING STOCK THAT CONSISTS OF SECURITIES AND THE ASSESSING OFFICER HA S NOTICED NO DISCREPANCY. THE A OS ACTION OF REJECTING THE CLAIM OF LOSS CANNOT BE UPHELD SIMPLY ON THE BASIS OF THE FACT THAT THE SAME HAS BEEN PUT UNDER THE NOMENCLATURE PROVISION FOR DEPRECIATION. THE ADDITION MADE IS, THEREFORE, DELETED AND THE GROUND OF APPEAL ALLOWED . AGGRIEVED, NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND G ONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE FACTS OF THE CASE THAT THE ASSESSEE IS A ITA NO. 3724 /MUM/20 1 3 CO NO.161/MUM/2014 ITA NO.127 6 /MUM/2015 6 REGISTERED NBFC UNDER THE RESERVE BANK OF INDIA ACT, 1934. THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. DURING THE PREVIOUS YEAR 20 07 - 08 RELEVANT TO THIS ASSESSMENT YEAR 2008 - 09, THE ASSESSEE OBTAINED AUDITORS REPORT AS REQUIRED U/S 227 OF THE COMPANIES ACT, 1956 AND NON - BANKING FINANCIAL COMPANIES AUDITORS REPORT PURSUANT TO THE DIRECTIONS OF THE RESERVE BANK OF INDIA DATED 02 - 01 - 19 98. THE ASSESSEE PREPARED FINANCIAL STATEMENTS ON ACCRUAL BASIS OF ACCOUNTING IN ACCORDANCE WITH THE PROVISIONS OF THE COMPANIES ACT AND THE RBI GUIDELINES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE WAS HAVING CURRENT INVESTMENTS (QUOTED) COMPRISIN G OF GOVERNMENT SECURITIES, CERTIFICATE OF DEPOSITS AND COMMERCIAL PAPERS AND CORPORATE BONDS. THE ASSESSEE VALUED THESE INVESTMENTS AT COST OR MARKET VALUE WHICHEVER IS LOWER AND THE SAME IS PROVIDED DEPRECIATION AMOUNTING TO RS.62 LACS ON ACCOUNT OF FALL IN MARKET VALUE OF THE INVESTMENTS. THIS VALUATION IS DONE IN ACCORDANCE WITH THE PRUDENTIAL NORMS PRESCRIBED UNDER THE RBI ACT. THE ASSESSEE BEFORE US SUBMITTED THE DETAILS OF SECURITIES HELD BY THEM AND CONSTITUTED STOCK - IN - TRADE. THE LEARNED COUNSEL FO R THE ASSESSEE REFERRED TO SCHEDULE 7 OF THE FINAL ACCOUNTS AND THE FOLLOWING QUOTED SECURITIES WERE HELD AS CURRENT INVESTMENTS AS ON 31 - 03 - 2008: - SECURITIES QUANTITY BOOK VALUE (RS. IN THOUSANDS) YEAR OF SALE GOVERNMENT SECURITIES 11.30% GOI BONDS 2010 100,00,000 10,83,400 2010 CERTIFICATE OF DEPOSITS & COMMERCIAL PAPERS VIJAYA BANK STATE BANK OF INDORE 50,00,000 80,00,000 4,57,706 7,66,852 2009 2009 IDBI HDFC 50,00,000 80,00,000 4,63,638 7,56,343 2009 2009 CORPORATE BONDS 9.32% HDFC 9,85,0 00 9,91,120 2009 IT WAS CLAIMED BY THE ASSESSEE THAT THESE SECURITIES WERE SOLD IN THE NEXT YEAR OR IN THE YEAR THEREAFTER AND HAVE NOT BEEN HELD AS LONG TERM. 5. WE FIND FROM THE ABOVE FACTS THAT THE ASSESSEE HELD THESE SECURITIES AS CURRENT INVESTMENT S AS STOCK - IN - TRADE AND, THEREFORE, PROVISIONS MADE FOR DEPRECIATION IN THE VALUE OF SECURITIES AS ALLOWABLE AS DEDUCTION AND THIS SUPPORTS BY THE FOLLOWING FACTS: - ITA NO. 3724 /MUM/20 1 3 CO NO.161/MUM/2014 ITA NO.127 6 /MUM/2015 7 I) SECURITIES ARE PURCHASED AND SOLD IN THE COURSE OF CARRYING ON BUSINESS OF THE A SSESSEE . SECURITIES ARE HELD FOR TRADING AS IS EVIDENT FROM THE SALE MADE IN THE SUBSEQUENT YEAR AS EXPLAINED. II) THE TREATMENT OF SECURITIES IS SAME IN THE SUBSEQUENT YEARS. THE APPELLANTS HAVE PREPARED THE ACCOUNTS ON AN ACCRUAL BASIS OF ACCOUNTING COMPLYING WITH THE PRESCRIBED ACCOUNTING STANDARDS AS CERTIFIED BY THE AUDITORS. III) AS PER THE RBI PRUDENTIAL NORMS READ WITH AS 13, CURRENT INVESTMENTS ARE STATED AT CARRYING VALUE AS AT THE YEAR AND AT LOWER OF THE COST AND MARKET VALUE. IV) SUCH VALUATION OF CLOSING STOCK OF SECURITIES IS AS PER SECTION 145 AND 145A OF THE ACT. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ALLOWABILITY OF DEDUCTION U/S 37(1) OF THE ACT AND DEDUCTION FOR THE PROVISIONS FOR DEPRECIATION THE ASSES SEE IS ENTITLED TO. THIS VIEW OF OURS IS SUPPORTED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF UNITED COMMERCIAL BANK LTD. VS CIT (1999) 241 ITR 355 (SC) AND THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS BANK OF BARODA (2003) 262 ITR 334 (BOM.) WHEREIN IT HAS BEEN HELD AS UNDER: - WE DO NOT FIND ANY MERIT IN THIS ARGUMENT. IN THE CASE OF UNITED COMMERCIAL BANK V. CIT [1999] 240 ITR 355 (SC), THE ASSESSEE - BANK HAD SUBMITTED A RETURN FOR THE ASSESSMENT YEAR 1982 - 83 CONTENDING THAT THERE WAS A NOTIONAL LOSS OF RS. 7.45 CRORES ON ACCOUNT OF CLOSING STOCK OF SECURITIES VALUED AT MARKET PRICE WHICH FELL BELOW THE COST. THE INCOME - TAX OFFICER ACCEPTED THE SAID LOSS VIDE ASSESSMENT ORDER DATED MARCH 19, 1985. HOWEVER, THE COMMISSIONER OF INCOME - TAX INTERVENED BY ORDER DATED MARCH 9, 1987, UNDER SECTION 263 OF THE INCOME - TAX ACT. BY THE SAID ORDER, THE COMMISSIONER SET A SIDE THE ORDER OF ASSESSMENT HOLDING THAT THE ASSESSEE - BANK HAD NO RIGHT TO CALCULATE PROFIT OR LOSS ARISING OUT OF THE INVESTMENT TRADING ACCOUNT AS THE SAID ACCOUNT DID NOT FORM PART OF THE FINAL ACCOUNT OF THE ASSESSEE - BANK. THAT, SINCE THE INVESTMENT T RADING ACCOUNT WAS NOT INCORPORATED IN THE FINAL ACCOUNT, THE ASSESSEE - BANK HAD NO RIGHT TO CALCULATE PROFIT OR LOSS ARISING OUT OF THE INVESTMENT TRADING ACCOUNT. IN THAT MATTER, THE ASSESSEE - BANK WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AND THE LOSS CLAIMED BY THE ASSESSEE WAS NOT DEBITED IN THE PROFIT AND LOSS ACCOUNT. AGAINST THE ORDER OF THE COMMISSIONER UNDER SECTION 263 OF THE ACT, THE ASSESSEE - ITA NO. 3724 /MUM/20 1 3 CO NO.161/MUM/2014 ITA NO.127 6 /MUM/2015 8 BANK PREFERRED AN APPEAL TO THE TRIBUNAL WHI CH TOOK THE VIEW THAT THE ASSESSEE HAD CLAIMED THE LOSS BY FOLLOWING THE SAME METHOD WHICH IT WAS FOLLOWING FOR THE LAST 30 YEARS. CONSEQUENTLY, THE ORDER PASSED BY THE COMMISSIONER UNDER SECTION 263 WA S SET ASIDE. AGAINST THE SAID ORDER OF THE TRIBUNAL, TWO QUESTIONS WERE REFERRED FOR OPINION TO THE HIGH COURT. ANSWERING THE SAID QUESTIONS, THE HIGH COURT OBSERVED THAT THE ASSESSEE - BANK HAD NOT VALUED THE STOCK OF SHARES AND SECURITIES IN ITS BOOKS OF A CCOUNT IN ACCORDANCE WITH THE METHOD OF 'COST OR MARKET PRICE WHICHEVER IS LOWER ; IF THIS METHOD WAS NOT FOLLOWED IN PREPARING THE INVESTMENT TRADING ACCOUNT, THEN THE ASSESSEE - BANK CANNOT CLAIM NOTIONAL LOSS/NOTIONAL METHOD OF STOCK VALUATION FOR COMPUTI NG INCOME. THE HIGH COURT TOOK THE VIEW THAT THE BOOK RESULTS COULD BE REJECTED BY THE INCOME - TAX OFFICER UNDER SECTION 145(1) OF THE INCOME - TAX ACT IF THE METHOD ADOPTED BY THE ASSESSEE - BANK DID NOT DI SCLOSE A PROPER AND TRUE INCOME. THAT, MERELY BECAUSE IN THE PAST THE SYSTEM FOLLOWED BY THE ASSESSEE - BANK WAS NOT QUESTIONED WAS NO GROUND TO SAY THAT IT SHOULD BE ACCEPTED FOR ALL TIMES. CONSEQUENTLY, THE MATTER CAME BEFORE THE SUPREME COURT. THE APEX CO URT CAME TO THE CONCLUSION THAT PREPARATION OF BALANCE - SHEET BY THE ASSESSEE - BANK WAS GOVERNED BY THE BANKING REGULATION ACT , 1949. THAT, UNDER THE THIRD SCHEDULE TO THAT ACT, THE BALANCE - SHEET AND PROF IT AND LOSS ACCOUNT HAVE BEEN PRESCRIBED. THAT, IN THE PRESCRIBED FORM, THERE IS A COLUMN 'PROPERTY AND ASSETS'. ITEM 4 PROVIDES FOR INVESTMENTS (MODE OF VALUATION, I.E., COST OR MARKET VALUE). NOTE (F) IN COLUMN 4 STATES THAT WHERE THE VALUE OF THE INVEST MENTS WAS HIGHER THAN THE MARKET VALUE, THE MARKET VALUE SHALL BE SHOWN SEPARATELY. FURTHER, UNDER SECTION 53 OF THE BANKING REGULATION ACT, 1949, THE CENTRAL GOVERNMENT ON THE RECOMMENDATION OF THE RES ERVE BANK OF INDIA HAD ISSUED A NOTIFICATION FOR BANKS IN RESPECT OF THE ASSESSMENTS TO THE EFFECT THAT NOTE (F) SHALL NOT APPLY TO THE UNITED COMMERCIAL BANK IN RESPECT OF ITS BALANCE - SHEET. ON THE BASIS OF THE SAID NOTIFICATION, THE UNITED COMMERCIAL BAN K DID NOT MENTION THE MARKET VALUE OF THE INVESTMENTS. IN THE CIRCUMSTANCES, THE SUPREME COURT CAME TO THE CONCLUSION THAT FROM THE FORM OF THE PRESCRIBED BALANCE - SHEET, IT WAS EVIDENT THAT THE NATIONALIZED BANKS WERE DIRECTED TO PUT THE VALUE OF SHARES AN D SECURITIES AT COST AND IF THE MARKET VALUE WAS LOWER THAN THE COST THEN, IT WAS TO BE SHOWN SEPARATELY IN BRACKETS. BEFORE THE SUPREME COURT, HOWEVER, IT WAS ARGUED ON BEHALF OF THE DEPARTMENT THAT THE BALANCE - SHEET/AUDITED ACCOUNTS MAINTAINED ON THE BAS IS OF THE INVESTMENT IN SHARES AT COST WOULD NOT DISCLOSE THE REAL PROFIT/LOSS OF THE BANK IN VIEW OF THE FACT THAT DEPRECIATION IN THE VALUE OF THE SHARES OR FALL IN THE MARKET PRICE OF THE SHARES AND SECURITIES WAS NOT PROVIDED FOR IN THE AUDITED ACCOUNT S. ON THE OTHER HAND, IT WAS ARGUED ON BEHALF OF THE ITA NO. 3724 /MUM/20 1 3 CO NO.161/MUM/2014 ITA NO.127 6 /MUM/2015 9 ASSESSEE - BANK THAT EVEN THOUGH IN THE BALANCE - SHEET THE MARKET PRICE OF THE SHARES AND SECURITIES WAS NOT MENTIONED YET, FOR DETERMINING THE REAL INCOME OF THE ASSESSEE, THE SAID PRICE WAS REQUIRED TO BE TAKEN INTO ACCOUNT. THAT, FOR THE LAST 30 YEARS, THE ASSESSEE - BANK WAS SUBMITTING INCOME - TAX RETURNS AFTER TAKING INTO ACCOUNT THE MARKET PRICE OF SUCH SHARES AND SECURITIES WHICH WAS ACCEPTED BY THE DEPARTMENT. IT WAS SUBMITTED THAT NOT MAKING PROPER ENT RIES IN THE BALANCE - SHEET COULD HARDLY BE A GROUND FOR NOT ASSESSING THE REAL INCOME. THE SUPREME COURT CAME TO THE CONCLUSION ON THE ABOVE ARGUMENTS THAT WHERE THE MARKET VALUE OF SHARES AND SECURITIES HAD FALLEN BELOW THE COST BEFORE THE DATE OF VALUATIO N AND WHERE ON THE DATE OF VALUATION, THE MARKET VALUE IS LESS THAN THE ACTUAL COST THEN THE ASSESSEE WAS ENTITLED TO VALUE THE ARTICLES AT MARKET PRICE AND THE ASSESSEE WAS ENTITLED TO CLAIM THE LOSS WHICH THE ASSESSEE WOULD PROBABLY INCUR AT THE TIME OF THE SALE OF SHARES AND SECURITIES. THAT, WHICHEVER METHOD THE ASSESSEE ADOPTS, IT SHOULD DISCLOSE THE TRUE PICTURE OF PROFITS AND GAINS. THAT, FOR DETERMINING THE REAL INCOME, THE ENTRIES IN THE BALANCE - SHEET WERE REQUIRED TO BE MAINTAINED IN THE STATUTORY FORM. HOWEVER, SUCH ENTRIES IN THE BALANCE - SHEET WERE NOT DECISIVE OR CONCLUSIVE. IN SUCH CASES, IT WAS OPEN TO THE INCOME - TAX OFFICER AND THE ASSESSEE TO ASCERTAIN THE TRUE AND PROPER INCOME WHILE SUBMITTING THE INCOME - TAX RETURNS. THAT, FOR VALUING THE CLOSING STOCK, IT WAS OPEN TO THE ASSESSEE TO VALUE THE STOCK AT COST OR MARKET PRICE WHICHEVER IS LOWER. THAT, THE ASSESSEE WAS VALUING THE STOCK - IN - TRADE AT COST FOR THE PURPOSES OF STATUTORY BALANCE - SHEET BUT, FOR THE PURPOSES OF THE INCOME - TAX RETURN, THE ASSESSEE WAS VALUING THE STOCK - IN - TRADE AT COST OR MARKET VALUE WHICHEVER WAS LOWER AND THAT PRACTICE WAS ACCEPTED BY THE DEPARTMENT FOR 30 YEARS. CONSEQUENTLY, THE SUPREME COURT ALLOWED THE APPEAL FILED BY THE UNITED COMMERCIAL BANK. IN OUR VIEW, THE JUDGMENT OF THE SUPREME COURT IN UNITED COMMERCIAL BANK'S CASE [1999] 240 ITR 355 SQUARELY APPLIES TO THE FACTS OF THIS CASE. IN FACT, THE PRESENT CASE BEFORE US IS ON A STRONGER FOOTING BECAUSE IN THE CASE OF UNITED COMMERCIAL BANK, THE LOSS WAS NOT DEBIT ED TO THE PROFIT AND LOSS ACCOUNT WHEREAS IN THIS CASE, AS CAN BE SEEN FROM THE WORKING AT PAGES 25 AND 26 OF THE PAPER - BOOK, THE LOSS OF RS. 11,82,35,007 HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT WHICH IS REFLECTED AS A PROVISION FOR LIABILITY IN TH E BALANCE - SHEET AND THE SHARES AND SECURITIES WERE VALUED AT COST ON THE ASSETS SIDE . 6. FURTHER, AS RELIANCE PLACED BY LD. COUNSEL FOR THE ASSESSEE ON THE ORDER OF COMMISSIONER OF INCOME TAX - 6, MUMBAI NO. CIT - 6/263/2013 - 14/683 DATED 26 - 03 - 2014, WHEREI N THE COMMISSIONER HAS ACCEPTED THE POSITION THAT THE ITA NO. 3724 /MUM/20 1 3 CO NO.161/MUM/2014 ITA NO.127 6 /MUM/2015 10 ASSESSEE IS ENTITLED FOR REDUCTION OF INVESTMENT WHICH IS NOTHING BUT A DIFFERENCE IN COST AND MARKET VALUE AT THE END OF THE FINANCIAL YEAR. FOR THIS FINDING THE CIT IN PARA 4 OF HIS ORDER OBSERVED AS UNDER: - 4. I HAVE PERUSED THE DETAILS SUBMITTED BY THE ASSESSEE. I DO NOT AGREE WITH THE CONTENTION OF THE ASSESSEE THAT ASSESSMENT ORDER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. THE REASONS FOR COMING TO THIS CONCLUSION AREA AS UN DER: (I) AS REGARDS, THE CONTENTION IN THE SHOW CAUSE NOTICE THAT RBI BEING REGULATOR OF NBFCS (FOR ASSESSEE ALSO RBI IS THE REGULATOR, AS IT IS A BBFC) FOR THE ASSESSEE AND AO DID NOT VERIFY WHETHER THE ASSESSEE HAS COMPILED WITH THE GUIDELINES ISSUED BY RBI OR NOT. THE ISSUE IS NOT WHETHER VIOLATION OF GUIDELINES WAS OBSERVED BY THE UNDERSIGNED OR NOT BUT THE BASIC FACT REMAINS THAT A.O. DID NOT CALL FOR ANY DETAILS AS TO WHAT ARE THE GUIDELINES ISSUE BY RBI WHICH ARE APPLICABLE TO THE NBFC AND FAILED TO VERI FY WHETHER ALL THE CONDITIONS STIPULATED THEREIN HAVE BEEN MADE. THE A.O. HAS NOT DONE THE ASSESSMENT IN A PROPER MANNER AND THAT WAS THE SHORT POINT WHICH WAS BEING EMPHASIZED IN THE SHOW CAUSE NOTICE. I ACCEPT THE ARGUMENT OF THE ASSESSEE THAT INTEREST H AS BEEN SHOWN ON ACCRUAL BASIS EVEN AFTER THE DUE DATE OF COUPON PERIOD TILL 31.03.2008. THE ORDER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE ON THIS POINT. I ALSO ACCEPT THE ARGUMENT OF THE ASSESSEE THAT IT WAS GRANTED LICENSE/REGULAT OR OF NBFC WITHOUT ANY PERMISSION TO INVITE PUBLIC DEPOSITS. THE ASSESSEE COMPANY WAS THEREFORE NOT REQUIRED TO MAINTAIN CERTAIN SECURITIES IN THE FORM OF SLR AND HAS THEREFORE CORRECTLY CONSIDERED ALL THE INVESTMENTS AS CURRENT INVESTMENT AND TREATED TH EM AS STOCK IN TRADE. THE ASSESSEES CONTENTION IN THIS REGARD HAS ALSO BEEN FOUND CORRECT. (II) AS REGARDS BROKEN PERIOD INTEREST, THE CASE LAWS CITED BY THE ASSESSEE [CITIBANK N.A. (CIVIL APPEAL NO. 1549 OF 2006 DATED 12 TH AUGUST, 2008), AMERICAN EXPRESS INT ERNATIONAL BANKING CORPORATION (258 ITR 601) (BOMBAY), DEUTSCHE BANK AG (INCOME TAX REFERENCE NO. 500 OF 1997)] ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THE PRESENT CASE, IT IS NOT THE CASE THAT BROKEN PERIOD INTEREST REALIZED ON SALE HAVE ITA NO. 3724 /MUM/20 1 3 CO NO.161/MUM/2014 ITA NO.127 6 /MUM/2015 11 B EEN BROUGHT TO TAX AS INCOME, WHILE DEDUCTION ON ACCOUNT OF BROKEN PERIOD INTEREST FOR PURCHASE IS BEING DISALLOWED IN ENTIRETY. IN THE FACTS OF THE PRESENT CASE, WHAT OUGHT TO HAVE BEEN CONSIDERED FOR DISALLOWANCE BY THE AO IS BROKEN PERIOD INTEREST ON SE CURITIES LYING UNSOLD ON 31 ST MARCH AND IS REFLECTED IN CLOSING STOCK, SUCH SECURITY HAS TO BE VALUED AFTER INCLUDING THE BROKEN PERIOD INTEREST. BROKEN PERIOD INTEREST ON SUCH SECURITY WILL BE ALLOWED AS A DEDUCTION ONLY AT THE TIME OF SALE OF THESE SECU RITIES. THESE FACTS ARE TOTALLY AT VARIANCE WITH CASES CITED BY THE ASSESSEE. IN THE PRESENT CASE, ASSESSEE HAS PAID RS. 9.41,67/ - AS BROKEN PERIOD INTEREST FOR 11.3% GOI BONDS 2010. LIKEWISE, RS. 1,58,01,984/ - HAS BEEN PAID AS BROKEN PERIOD INTEREST AT T HE TIME OF PURCHASE OF BONDS OF HOUSING DEV. FINANCE CORPN. BOTH THE ABOVE BONDS WERE LYING UNSOLD AS ON 31.03.2008. THEREFORE, THIS INTEREST BEING PART OF PURCHASE CONSIDERATION WAS REQUIRED TO BE CONSIDERED AT THE TIME OF VALUING CLOSING STOCK AND THEN W ORK OUT THE LOSS/PROFIT FROM THE BUSINESS INCOME ACCORDINGLY. (III) AS REGARDS DISALLOWANCE ON ACCOUNT OF PROVISION FOR DEPRECIATION ON THE INVESTMENT IS CONCERNED, THIS ASPECT WAS REFERRED ONLY TO POINT OUT THAT AO ACTED IN A MECHANICAL AND PERFUNCTORY M ANNER. IF THE SECURITIES ARE HELD AS STOCK - IN - TRADE WHICH IS THE PRESENT CASE, THERE IS NO DOUBT IN MY MIND THAT ASSESSEE IS ENTITLED FOR DEPRECIATION OF INVESTMENT WHICH IS NOTHING BUT DIFFERENCE IN COST AND MARKET VALUE AT THE END OF FINANCIAL YEAR. TH E ASSESSEE IS ENTITLE TO VALUE STOCK - IN - TRADE AT COST OR MARKET PRICE WHOEVER IS LOWER. THERE IS NO DOUBT IN MY MIND REGARDING ALLOWABILITY OF CLAIM ON DEPRECIATION OF INVESTMENT. THE CIT (A) HAS CORRECTLY ALLOWED THE APPEAL OF THE ASSESSEE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. I AGREE THE ASSESSEE WAS ENTITLED FOR DEPRECIATION OF INVESTMENTS FULLY TO THE EXTENT OF CLAIM. I AGREE WITH THE ASSESSEE THAT NO ERROR IN THE ASSESSMENTS ORDER PREJUDICE TO THE REVENUE HAS BEEN CAUSED ON ACCOUNT OF THIS ISSU E. IN VIEW OF THE ABOVE DISCUSSIONS AND FACTS IN THE PRESENT CASE, WE CONFIRM THE ORDER OF THE CIT (A) DELETING THE ADDITION MADE BY THE AO AND DISMISS THE APPEAL OF THE REVENUE . CONSEQUENTLY, THE APPEAL OF ASSESSEE ON THIS ISSUE FOR A.Y. 2009 - 10 IN IT A NO. 1276/MUM/2015 IS ALLOWED. ITA NO. 3724 /MUM/20 1 3 CO NO.161/MUM/2014 ITA NO.127 6 /MUM/2015 12 7 . SINCE, THE ASSESSEES CROSS OBJECTION IS SUPPORTIVE OF THE ORDER OF THE CIT ( A) ON THIS ISSUE FOR A.Y. 2008 - 09 AND WE HAVE DISMISSED THE REVENUES APPEAL BY CONFIRMING THE ORDER OF THE CIT ( A), THE SAME HAS BECOME INFRUC TUOUS AND THE SAME IS DISMISSED AS SUCH. 8 . NOW, COMING TO THE ASSESSEES APPEAL IN ITA NO.1276/MUM/2015 FOR THE ASSESS MENT YEAR 2009 - 10, THE SECOND ISSUE IN THIS APPEAL OF ASSESSEE IS AS REGARDS TO THE ORDER OF CIT (A) CONFIRMING THE ACTION OF THE AO IN MAKING DISALLOWANCE OF EXPENSES RELATABLE TO EXEMPT INCOME BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 (HEREINAFTER THE RULES). 9. AT THE OUTSET , LD. COUNSEL FOR THE ASSESSEE STATED THE FACT THAT THERE IS NO EXEMPTED INCOME IN THE HANDS OF THE ASSESSEE. FOR THIS HE REFERRED TO THE COMPUTATION OF INCOME WHEREIN, HE HAS NOT MAKE ANY CLAIM OF EXEMPTED INCOME. HE STATED THAT ONCE THERE IS NO EXEMPTED INCOME U/S 10 (34) OF THE ACT, REVENUE CANNOT INVOK E THE PROVISIONS OF SECTION 14A OF THE ACT. FOR THIS HE RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CHEMINVEST LTD. VS CIT 378 ITR 33 (DELHI) WHEREIN IT IS HELD AS UNDER: - 23. IN THE CONTEXT OF THE FACTS ENUMERATED HEREI NBEFORE THE COURT ANSWERS THE QUESTION FRAMED BY HOLDING THAT THE EXPRESSION DOES NOT FORM PART OF THE TOTAL INCOME IN SECTION 14A OF THE ACT ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME. IN OTHER WORDS, SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. 10 . WE FIND THAT ASSESSEE HAS NOT CLAIMED ANY EXEMPT INCOME AND HENCE THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. (SUPRA), WHEREIN IT IS HELD THAT IF THERE IS NO EXEMPTED INCOME CLAIMED BY THE ASSE SSEE, NO DISALLOWANCE CAN BE MADE BY INVOKING THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF THE RULES. ACCORDINGLY, THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED. ITA NO. 3724 /MUM/20 1 3 CO NO.161/MUM/2014 ITA NO.127 6 /MUM/2015 13 11. THE NEXT ISSUE IN THE APPEAL OF ASSESSEE AGAINST THE ORDER OF CIT (A) NOT ALLOWING CRE DIT FOR TDS AMOUNTING TO RS.75,49,506/ - . AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE FAIRLY STATED THAT HE IS READY TO PRODUCE EVIDENCES BEFORE AO AND AO MAY BE DIRECTED TO VERIFY THE SAME AND ALLOW CREDIT FOR TDS. WE FIND NO REASON NOT TO DIRECT THE AO ACC ORDINGLY. HENCE, WE DIRECT THE AO TO VERIFY THE EVIDENCES REGARDING CREDIT FOR TDS AND ACCORDINGLY ALLOW THE SAME. 12. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF CIT (A) IN DIRECTING THE AO TO CHARGE INTEREST U/S 234C OF THE ACT AMOU NTING TO RS.57,93,934/ - ON RETURNED INCOME AS AGAINST INTEREST CHARGED ON THE ASSESSED INCOME OF RS.61,43,304/ - . WE FIND THAT THE PROVISIONS OF SECTION 234C OF THE ACT IS VERY CLEAR ON THIS ISSUE THAT INTEREST U/S 234C OF THE ACT IS TO BE CHARGED ON RETUR NED INCOME ONLY. WE DIRECT THE AO ACCORDINGLY. 13. IN THE RESULT, THE APPEAL OF THE R EVENUE IN ITA NO. 3724/MUM/2013 AS WELL AS THE CROSS OBJECTION NO. 161/MUM/2014 OF THE ASSESSEE BOTH ARE DISMISSED AND THE ASSESSEES APPEAL IN ITA NO. 1276/MUM/2015 IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07 - 11 - 2016 . BY ORDER , ASSISTANT REGISTRAR ITAT, MUMBAI SD/ (RAJESH KUM AR ) ACCONTANT MEMBER MUMBAI, DATED: 07 - 11 - 2016 LAKSHMIKANTA DE KA/SR.PS SD/ ( MAHAVIR SINGH ) JUDICIAL MEMBER COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT (A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//