Goldman Sachs Services Private Limited, Bangalore V. Deputy Commissioner of Income-Tax, Bangalore

CO 43/BANG/2016

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 2902 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 05-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 04-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G R REDDY
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER IT(TP)A NO. 66/BANG/2014 ASSESSMENT YEAR : 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(3), BANGALORE. VS. M/S. GOLDMAN SACHS SERVICES PVT. LTD., CRYSTAL DOWNS, EMBASSY GOLF LINKS BUSINESS PARK, OFF: INTERMEDIATE RING ROAD, BANGALORE 560 071. PAN: AACCG 2435N APPELLANT RESPONDENT CO NO. 43/BANG/2016 IN IT(TP)A NO. 66/BANG/2014 ASSESSMENT YEAR : 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 3(1)(2) [ERSTWHILE CIRCLE 11(3)], BANGALORE. VS. M/S. GOLDMAN SACHS SERVICES PVT. LTD., CRYSTAL DOWNS, EMBASSY GOLF LINKS BUSINESS PARK, OFF: INTERMEDIATE RING ROAD, BANGALORE 560 071. PAN: AACCG 2435N APPELLANT RESPONDENT APPELLANT BY : SHRI MUKESH BUTANI, ADVOCATE RESPONDENT BY : SHRI G. R. REDDY, CIT(DR) DATE OF HEARING : 08.02.2017 DATE OF PRONOUNCEMENT : 05.04.2017 IT (TP)A NO. 66/BANG/2014 & CO NO. 43/BANG/2016 PAGE 2 OF 22 O R D E R PER VIJAY PAL RAO, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ASSESSMENT ORDER DATED 30.12.2 013 PASSED U/S. 143(3) R.W.S. 144C OF THE IT ACT IN PURSUANT TO THE DIRECTIONS OF THE DRP DATED 18.11.2013 FOR THE ASSESSMENT YEAR 2009-10. THE REVENUE HAS R AISED THE FOLLOWING GROUNDS AS UNDER. IT (TP)A NO. 66/BANG/2014 & CO NO. 43/BANG/2016 PAGE 3 OF 22 2. GROUND NO. 1 IS GENERAL IN NATURE AND DOES NOT REQU IRE ANY SPECIFIC ADJUDICATION. 3. GROUND NO. 2 IS REGARDING WORKING CAPITAL ADJUSTMEN T RESTRICTED BY THE TPO BUT ALLOWED BY THE DRP. THE TPO HAS RESTRICTED THE WORKING CAPITAL ADJUSTMENT TO 0.91% INSTEAD OF ACTUAL WORKI NG CAPITAL COMPUTED. THE DRP DIRECTED THE TPO TO CARRY OUT THE WORKING C APITAL ADJUSTMENT AS PER THE ACTUAL FIGURES WITHOUT PUTTING ANY CAP. 4. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND CONS IDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010-11 VIDE ORDER DATED 06.01.2017 IN IT(TP) NOS. 267 & 222/BANG/2015 IN PARA 10 AS UNDER: IT (TP)A NO. 66/BANG/2014 & CO NO. 43/BANG/2016 PAGE 4 OF 22 IT (TP)A NO. 66/BANG/2014 & CO NO. 43/BANG/2016 PAGE 5 OF 22 5. IN VIEW OF THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10 WE DO NOT FIND ANY REASON TO INTERFERE WITH THE DIRECTIONS OF DRP OF T HIS ISSUE. CONSEQUENTLY THIS GROUND OF THE REVENUES APPEAL IS DISMISSED. 6. GROUND NOS. 3 TO 5 ARE REGARDING THE ALTERNATIVE CL AIM OF ASSESSEE THAT THE INCOME ENHANCED DUE TO DISALLOWANCE U/S. 40(A)(IA) OF THE ACT IS ELIGIBLE FOR DEDUCTION U/S. 10A. THE AO HAS MADE A DISALLOW ANCE U/S. 40(A)(IA) IN THE DRAFT ASSESSMENT FOR WANT OF DEDUCTION OF TAX S OURCE IN RESPECT OF THE EXPENSES WHICH ARE CLAIMED TO BE REIMBURSEMENT TOWA RDS POWER AND FUEL EXPENSES. THE AO HELD THAT THESE EXPENSES ARE INCU RRED AGAINST THE SERVICES RENDERED AND THEREFORE LIABLE FOR TDS. SI NCE THE ASSESSEE DID NOT IT (TP)A NO. 66/BANG/2014 & CO NO. 43/BANG/2016 PAGE 6 OF 22 DEDUCT THE TDS THEREFORE THE AO DISALLOWED THIS AMO UNT OF RS. 6,08,46,978/-. 7. BEFORE THE DRP THE ASSESSEE CONTENTED THAT THESE EX PENSES ARE NOT INCURRED TOWARDS ANY SERVICE RENDERED BY M/S. GOLFL INKS SOFTWARE PARK PVT. LTD. BUT THESE WERE ONLY REIMBURSEMENT OF THE EXPENSES TOWARDS POWER AND FUEL. THE DRP WHILE ADJUDICATING THE OBJ ECTION ON THIS ISSUE DIRECTED THE AO TO VERIFY WHETHER ANY SERVICE HAS B EEN RENDERED BY M/S. GOLFLINKS SOFTWARE PARK PVT. LTD. OR THE EXPENDITUR E IS PURELY IN THE NATURE OF REIMBURSEMENT ON ACCOUNT OF POWER AND FUE L. SINCE THE ASSESSEE ALSO RAISED AN ALTERNATIVE PLEA THAT EVEN IN THE CASE OF DISALLOWANCE U/S. 40(A)(IA) THE ENHANCED INCOME OF THE UNDERTAKING OF THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 10A. THE D RP HAS ACCEPTED THIS ALTERNATIVE PLEA OF THE ASSESSEE BY HOLDING THAT SU CH ENHANCED PROFIT OF BUSINESS UNDERTAKING WOULD QUALIFY FOR DEDUCTION U/ S. 10A. 8. BEFORE US, THE LD. DR HAS SUBMITTED THAT THE AHMEDA BAD BENCH OF THE TRIBUNAL IN CASE OF DCIT VS RAMESHBHAI C. PRAJAPATI 29 TAXMANN.COM 64 HAS HELD THAT THE AMOUNT DISALLOWED U/S. 40(A)(IA) CANNOT BE TAKEN INTO ACCOUNT TO DETERMINE THE PROFIT OF BUSINESS FOR THE PURPOSE OF COMPUTING DEDUCTION U/S. 80-IB. THUS, THE LD. DR HAS SUBMITT ED THAT THE IT (TP)A NO. 66/BANG/2014 & CO NO. 43/BANG/2016 PAGE 7 OF 22 DISALLOWANCE MADE U/S. 40(A)(IA) IS NOT ELIGIBLE FO R DEDUCTION U/S. 10A OF THE IT ACT. 9. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE HAS S UBMITTED THAT THE SAID DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL REL IED UPON BY THE REVENUE HAS BEEN REVERSED BY THE HONBLE GUJARAT HI GH COURT IN CASE OF ITO VS KEVAL CONSTRUCTION. THEREFORE THIS ISSUE IS COVERED BY THE DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF I TO VS KEVAL CONSTRUCTION 354 ITR 13 AND SUBMITTED THAT THE HON BLE HIGH COURT HAS HELD THAT EVEN IF CERTAIN EXPENDITURE WHICH WERE IN CURRED BY THE ASSESSEE FOR THE PURPOSE OF DEVELOPING HOUSE PROJECT WAS NOT ALLOWABLE BY VIRTUE OF SECTION 40(A)(IA) OF THE ACT FOR WANT OF TDS IT CANNOT BE DENIED THAT SUCH DISALLOWANCE WOULD ULTIMATELY GO TO INCREASE T HE ASSESSEES PROFIT FROM THE BUSINESS OF DEVELOPING HOUSE PROJECT AND W OULD QUALIFY FOR DEDUCTION AS PROVIDED UNDER THE LAW. 10. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD, AT THE OUTSET WE NOTE THAT THIS ISSUE OF DI SALLOWANCE MADE U/S. 40(A)(IA) ELIGIBLE FOR DEDUCTION OF TAX HOLIDAY UND ER LAW IS COVERED BY THE DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF I TO VS KEVAL IT (TP)A NO. 66/BANG/2014 & CO NO. 43/BANG/2016 PAGE 8 OF 22 CONSTRUCTION (SUPRA) WHEREIN THE HONBLE HIGH COURT HAS HELD IN PARA 5 AS UNDER: 5. HAVING HEARD COUNSEL ON BOTH THE QUESTION TODAY IN THIS APPEAL, WE FIND NO ERROR IN THE TRIBUNAL'S ULTIMATE CONCLUSION. EVEN IF A CERTAIN EXPENDITURE WHICH WAS INCURRED BY THE ASSESSEE FOR THE PURPOSE OF DEVELOPING HOUSING PROJECT WAS NOT ALLOWABLE BY VIRTUE OF SECTION 40(A)(IA) OF THE ACT, SINCE THE ASSESSEE HAD NOT DEDUCTED THE TAX AT SOURCE AS REQUIRED UNDER LAW, IT CANNOT BE DENIED THAT SUCH DISALLOWANCE WOULD ULTIMATELY GO TO I INCREASE THE ASSESSEE'S PROFIT FROM THE BUSINESS OF DEVELOPING HOUSING PROJECT. WHATEVER BE THE ULTIMATE PROFIT OF ASSESSEE AS COMPUTED EVEN AFTER MAKING DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT, WOULD QUALIFY FOR DEDUCTION A S PROVIDED UNDER THE LAW. 11. FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COUR T WE UPHELD THE DIRECTIONS OF THE DRP ON THIS ISSUE. SINCE THE ALT ERNATIVE CLAIM OF THE ASSESSEE IS ALLOWED THEREFORE WE DO NOT PROPOSE TO GO INTO THE ISSUE OF NATURE OF PAYMENT IN QUESTION. THE SAME BECOMES IN FRUCTUOUS. 12. GROUND NOS. 6 & 7 REGARDING THE ISSUE OF EXCLUSION OF COMMUNICATION EXPENSES FROM THE EXPORT TURNOVER AS WELL AS TOTAL TURNOVER WHILE COMPUTING THE DEDUCTION U/S. 10A. 13. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND CONS IDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE THAT THI S ISSUE IS COVERED BY THE IT (TP)A NO. 66/BANG/2014 & CO NO. 43/BANG/2016 PAGE 9 OF 22 DECISION OF JURISDICTION HIGH COURT IN CASE OF CIT VS TATA ELXSI LTD (349 ITR 98). THE DRP HAS DIRECTED THE AO TO EXCLUDE TH E COMMUNICATION EXPENSES BOTH FROM EXPORT TURNOVER AS WELL AS TOTAL TURNOVER WHILE COMPUTING THE DEDUCTION U/S. 10A BY FOLLOWING THE D ECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CASE OF TATA ELXSI LTD (SUPRA). THUS WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE DIRECTIONS OF THE DRP QUA THIS ISSUE. CROSS OBJECTION NO. 43/BANG/2016: 1. IN THE CROSS OBJECTION THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS. IT (TP)A NO. 66/BANG/2014 & CO NO. 43/BANG/2016 PAGE 10 OF 22 IT (TP)A NO. 66/BANG/2014 & CO NO. 43/BANG/2016 PAGE 11 OF 22 IT (TP)A NO. 66/BANG/2014 & CO NO. 43/BANG/2016 PAGE 12 OF 22 2. GROUND NO. 1 IS GENERAL IN NATURE AND DOES NOT REQU IRE ANY SPECIFIC ADJUDICATION. 3. GROUND NOS. 2 TO 4 REGARDING THE REJECTION OF TP ST UDY DOCUMENTS. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESSEE HAS STA TED THAT THE ASSESSEE DOES NOT PRESS THESE GROUNDS AND THE SAME MAY BE DI SMISSED AS NOT PRESSED. ACCORDINGLY, WHEN THE ASSESSEE HAS NOT PR ESSED THESE GROUNDS AND ALSO NOT ADVANCED ANY ARGUMENTS THEN THESE GROU ND NOS. 2 TO 4 ARE DISMISSED BEING NOT PRESSED. IT (TP)A NO. 66/BANG/2014 & CO NO. 43/BANG/2016 PAGE 13 OF 22 4. GROUND NOS. 5 TO 7 REGARDING COMPARABILITY OF THE C OMPANIES SELECTED BY THE TPO. THE ONLY GRIEVANCE OF THE ASSESSEE IS REG ARDING TWO COMPANIES NAMELY ACCENTIA TECHNOLOGIES LIMITED AND ECLERX SERVICES LIMITED SELECTED BY THE TPO. THE LD. AR OF THE ASSESSEE HA S SUBMITTED THAT THESE TWO COMPANIES ARE FUNCTIONALLY NOT COMPARABLE TO TH E ASSESSEE AND THEREFORE HAS TO BE EXCLUDED FROM THE SET OF COMPAR ABLES. HE HAS SUBMITTED THAT THE FUNCTIONAL COMPARABILITY OF THES E TWO COMPANIES HAVE BEEN EXAMINED BY THE COORDINATE BENCH OF THIS TRIBU NAL IN CASE OF UNISYS INDIA PRIVATE LTD. VS. DCIT IN IT(TP)A NOS. 67 AND 70/BANG/2015 VIDE ORDER DATED 30.09.2015. HE HAS ALSO RELIED UPON TH E DECISION OF HONBLE DELHI HIGH COURT IN CASE OF RAMPGREEN SOLUTIONS (P. ) LTD. VS CIT 377 ITR 533. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE FUNCTIONAL COMPARABILITY HAS BEEN EXAMINED BY TPO AS WELL AS DRP AND THEREFORE T HESE TWO COMPANIES ARE FOUND AS FUNCTIONALLY COMPARABLE TO T HE ASSESSEE. 5. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD, AT THE OUTSET WE NOTE THAT THE FUNCTIONAL C OMPARABILITY OF THESE TWO COMPANIES HAVE BEEN EXAMINED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF UNISYS INDIA PRIVATE LTD. VS. D CIT (SUPRA) IN PARA 49 TO 51 AND 53 TO 54 AS UNDER: IT (TP)A NO. 66/BANG/2014 & CO NO. 43/BANG/2016 PAGE 14 OF 22 IT (TP)A NO. 66/BANG/2014 & CO NO. 43/BANG/2016 PAGE 15 OF 22 IT (TP)A NO. 66/BANG/2014 & CO NO. 43/BANG/2016 PAGE 16 OF 22 IT (TP)A NO. 66/BANG/2014 & CO NO. 43/BANG/2016 PAGE 17 OF 22 6. THUS IT IS CLEAR THAT THE TRIBUNAL FOR THE SAME ASS ESSMENT YEAR 2009-10 AFTER EXAMINING THE FUNCTIONAL PROFILES OF THESE TW O COMPANIES AS WELL AS THE ASSESSEE WHO WAS CAPTIVE SERVICE PROVIDER OF IT ES FOUND THAT THESE TWO COMPANIES ARE NOT GOOD COMPARABLES OF ITES SEGM ENT OF THE ASSESSEE. THE HONBLE DELHI HIGH COURT IN CASE OF RAMPGREEN SOLUTIONS (P.) LTD. VS CIT (SUPRA) WHILE DEALING WITH THE ISS UE OF COMPARABILITY OF ECLERX SERVICES LTD. HAS UPHELD THE EXCLUSION OF ECLERX SERVICES LTD. FROM THE SET OF COMPARABLES. ACCORDINGLY, IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AS WELL AS THE DECISION OF THE COORDI NATE BENCHES OF THIS TRIBUNAL WE DIRECT THE AO / TPO TO EXCLUDE THESE TW O COMPANIES NAMELY ACCENTIA TECHNOLOGIES LIMITED AND ECLERX SERVICES LIMITED FROM THE SET OF COMPARABLES. 7. GROUND NOS. 8 AND 9 REGARDING THE FOREIGN EXCHANGE GAIN / LOSS WAS TREATED AS NON-OPERATING IN NATURE. 8. WE HAVE HEARD THE LD. AR AS WELL AS THE LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THERE IS NO QUARREL O N THIS ASPECT THAT IF THE FOREIGN EXCHANGE GAIN / LOSS ARISING ON ACCOUNT OF FLUCTUATION OF FOREIGN EXCHANGE RATE IN RESPECT OF EXPORT REALIZATION THEN THE SAME WOULD BE PART OF OPERATING PROFIT OR COST AS CASE MAY BE. HOWEVE R, FOR THE PURPOSE OF COMPUTING THE MARGINS FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ONLY IT (TP)A NO. 66/BANG/2014 & CO NO. 43/BANG/2016 PAGE 18 OF 22 THE GAIN OR LOSS WHICH PERTAINS TO THE EXPORT MADE DURING THE YEAR UNDER CONSIDERATION HAS TO BE TAKEN INTO ACCOUNT AS OPERA TING REVENUE OR COST. ACCORDINGLY, WE DIRECT THE AO / TPO TO COMPUTE THE OPERATING MARGINS OF THE ASSESSEE AS WELL AS COMPARABLE COMPANIES BY CONSIDERING THE GAIN OR LOSS ARISING FROM FOREX FLUCTUATION ON ACCOUNT O F THE EXPORTS MADE DURING THE YEAR. 9. GROUND NO. 10 IS REGARDING RISK ADJUSTMENT. WE HAV E HEARD THE LD. AR AS WELL AS THE DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THOUGH THE ASSESSEE HAS CLAIMED RISK ADJUSTMENT ON THE GRO UND THAT ASSESSEE BEING A CAPTIVE SERVICE PROVIDER OPERATES AT LOW RI SK LEVEL IN COMPARISON TO COMPARABLE COMPANIES HOWEVER, THE ASSESSEE HAS N OT FURNISHED THE RELEVANT DETAILS AND COMPUTATION OF RISK LEVEL OF T HE ASSESSEE AS WELL AS THE COMPARABLE COMPANIES. THEREFORE IN THE ABSENCE OF THE RELEVANT DETAILS AND WORKING IT IS NOT POSSIBLE TO WORK OUT THE ADJUSTMENT ON ACCOUNT OF DIFFERENCE IN RISK LEVEL OF ASSESSEE AND COMPARABLE. ACCORDINGLY, THIS GROUND OF THE ASSESSEES CROSS OB JECTION IS DISMISSED. 10. GROUND NOS. 11 AND 12 ARE REGARDING EXCLUSION OF TE LECOMMUNICATION EXPENSES FROM EXPORT TURNOVER AS WELL AS TOTAL TURN OVER WHILE COMPUTING THE DEDUCTION U/S. 10A. THE ISSUE IN THIS GROUND I S COMMON AS IN THE APPEAL OF THE REVENUE THEREFORE, IN VIEW OF OUR FIN DING OF THIS ISSUE WHILE IT (TP)A NO. 66/BANG/2014 & CO NO. 43/BANG/2016 PAGE 19 OF 22 DEALING WITH THE REVENUES APPEAL THESE TWO GROUNDS OF THE ASSESSEES CROSS OBJECTION STANDS DISMISSED. 11. GROUND NOS. 13 TO 16 ARE REGARDING DISALLOWANCE U/S . 40(A)(IA). THE ISSUE RAISED IN THESE GROUNDS OF THE CROSS OBJECTION OF T HE ASSESSEE IS COMMON TO THE ISSUE RAISED BY THE REVENUE IN GROUND NOS. 3 TO 5. IN VIEW OF THE FINDING OF THIS ISSUE WHILE DEALING WITH THE REVENU ES APPEAL GROUND NOS. 13 TO 16 OF THE CROSS OBJECTIONS OF THE ASSESSEE ST ANDS DISMISSED. 12. GROUND NOS. 17 TO 21 ARE REGARDING DISALLOWANCE U/S . 14A R.W. RULE 8D OF IT RULES. WE HAVE HEARD THE LD. AR AS WELL AS THE LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010-11 VIDE ORDER DATED 06.01.2017. HE HAS RELIED UPON THE DECISION OF HON BLE DELHI HIGH COURT IN CASE OF CHEMINVEST LTD. VS CIT (378 ITR 33 ) AND SUBMITTED THAT THE HONBLE HIGH COURT HAS REVERSED THE DECISION OF THE TRIBUNAL AND HELD THAT WHEN NO EXEMPT IS RECEIVED OR RECEIVABLE IN THE YEAR UNDER CONSIDERATION NO DISALLOWANCE IS CALLED FOR U/S. 14 A. THUS, THE LD. AR HAS SUBMITTED THAT WHEN THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME THEN THE PROVISIONS OF SECTION 14A WILL NOT APPLY. IT (TP)A NO. 66/BANG/2014 & CO NO. 43/BANG/2016 PAGE 20 OF 22 13. ON THE OTHER HAND, THE LD. AR HAS SUBMITTED THAT TH E HONBLE HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS CIT (SUPRA) WAS D EALING WITH THE QUESTION OF DISALLOWANCE U/S. 14A ON ACCOUNT OF INT EREST EXPENDITURE ATTRIBUTABLE TO LONG TERM INVESTMENT. WHEREAS IN T HE CASE OF THE ASSESSEE THE DISALLOWANCE HAS BEEN MADE BY THE AO ON ACCOUNT OF ADMINISTRATIVE EXPENSES WHICH IS ONLY 0.5% OF THE AVERAGE INVESTME NT AS PER RULE 8D(2)(III) OF IT RULES. THUS HE HAS SUBMITTED THAT THE DECISION RELIED UPON BY LD. AR IS NOT APPLICABLE. 14. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD, WE NOTE THAT FOR THE YEAR UNDER CONSIDERATI ON, THE ASSESSEE HAS MADE FRESH INVESTMENT IN THE SHARES AND THEREFORE T HE EARLIER ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE IS NOT APPLICABLE F OR THE YEAR UNDER CONSIDERATION. AS REGARDS THE DECISION OF THE HON BLE DELHI HIGH COURT IN CASE OF CHEMINVEST LTD. VS CIT (SUPRA) THE ISSUE INVOLVED IN THE SAID CASE WAS DISALLOWANCE U/S. 14A ON ACCOUNT OF INTERE ST HOWEVER, THE HONBLE HIGH COURT WHILE DECIDING THE ISSUE HAS HEL D IN PARA 21 TO 23 AS UNDER. 21. THERE IS MERIT IN THE CONTENTION OF MR. VOHRA THAT THE DECISION OF THE SUPREME COURT IN RAJENDRA PRASAD MO ODY'S CASE (SUPRA) WAS RENDERED IN THE CONTEXT OF ALLOWAB ILITY OF DEDUCTION UNDER SECTION 57(III) OF THE ACT, WHERE T HE EXPRESSION USED IS 'FOR THE PURPOSE OF MAKING OR EA RNING SUCH INCOME'. SECTION 14A OF THE ACT ON THE OTHER HAND C ONTAINS IT (TP)A NO. 66/BANG/2014 & CO NO. 43/BANG/2016 PAGE 21 OF 22 THE EXPRESSION 'IN RELATION TO INCOME WHICH DOES NO T FORM PART OF THE TOTAL INCOME.' THE DECISION IN RAJENDRA PRAS AD MOODY'S CASE (SUPRA) CANNOT BE USED IN THE REVERSE TO CONTEND THAT EVEN IF NO INCOME HAS BEEN RECEIVED, T HE EXPENDITURE INCURRED CAN BE DISALLOWED UNDER SECTIO N 14A OF THE ACT. 22. IN THE IMPUGNED ORDER, THE ITAT HAS REFERRED TO TH E DECISION IN MAXOPP INVESTMENT LTD'S. CASE (SUPRA) A ND REMANDED THE MATTER TO THE AO FOR RECONSIDERATION O F THE ISSUE AFRESH. THE ISSUE IN MAXOPP INVESTMENT LTD'S. CASE (SUPRA) WAS WHETHER THE EXPENDITURE (INCLUDING INTE REST ON BORROWED FUNDS) IN RESPECT OF INVESTMENT IN SHARES OF OPERATING COMPANIES FOR ACQUIRING AND RETAINING A C ONTROLLING INTEREST THEREIN WAS DISALLOWABLE UNDER SECTION 14A OF THE ACT. IN THE SAID CASE ADMITTEDLY THERE WAS DIVIDEND EARNED ON SUCH INVESTMENT. IN OTHER WORDS, IT WAS NOT A CASE, AS THE PRESENT, WHERE NO EXEMPT INCOME WAS EARNED IN THE Y EAR IN QUESTION. CONSEQUENTLY, THE SAID DECISION WAS NOT R ELEVANT AND DID NOT APPLY IN THE CONTEXT OF THE ISSUE PROJE CTED IN THE PRESENT CASE. 23. IN THE CONTEXT OF THE FACTS ENUMERATED HEREINBEFOR E THE COURT ANSWERS THE QUESTION FRAMED BY HOLDING THAT T HE EXPRESSION 'DOES NOT FORM PART OF THE TOTAL INCOME' IN SECTION 14A OF THE 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 DISALLOWI NG ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME . IN OTHER WORDS, SECTION 14A WILL NOT APPLY IF NO EXEMPT INCO ME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. 15. ACCORDINGLY, FOLLOWING THE DECISIONS OF HONBLE DEL HI HIGH COURT IN CASE OF CHEMINVEST LTD. VS CIT (SUPRA) WE DELETE TH E DISALLOWANCE MADE BY THE AO U/S. 14A. IT (TP)A NO. 66/BANG/2014 & CO NO. 43/BANG/2016 PAGE 22 OF 22 16. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED AND CROSS OBJECTIONS OF THE ASSESSEE ARE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 05 TH DAY OF APRIL, 2017 SD/- SD/- (S. JAYARAMAN) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 05 TH APRIL, 2017. / MS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.