Rikhab Chand Jain, Kolkata V. A.C.I.T Cir - 36,kolkata, Kolkata

CO 62/KOL/2013

• Counselvise Citation: [2016] 112 COUNSELVISE.COM (IT) 4145 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 1 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 22-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 22-05-2013
• Court: TRIBUNAL
• Department Lawyers: RAJAT KUMAR KUREEL
• Assessee Lawyers: N C
• Keywords: Gift; Business income; Depreciation; Earning of tax free income; Question of law; Notional interest; Commercial expediency; TDS; Rule 8D; Set aside
• Section: 143(3); 14A; 40(a)(ia); 194C; 250; 208; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA [BEFORE SHRI M. BALAGANESH, AM & SHRI S. S. VISWAN ETHRA RAVI, JM] I.T.A NO.907/KOL/2013 ASSESSMENT YEAR: 2009-10 ASSISTANT COMMISSIONER OF INCOME-TAX, VS. SHRI RI KHAB CHAND JAIN CIRCLE-36, KOLKATA. (PAN: AEYPJ0493A) ( APPELLANT ) ( RESPONDENT ) & C. O. NO.62/KOL/2013 IN I.T.A NO.907/KOL/2013 ASSESSMENT YEAR: 2009-10 SHRI RIKHAB CHAND JAIN VS. ASSISTANT COMMISSIONE R OF INCOME-TAX CIRCLE-36, KOLKATA. (CROSS OBJECTOR) (RESPONDENT) DATE OF HEARING: 22.06.2016 DATE OF PRONOUNCEMENT: 08 .07.2016 FOR THE REVENUE: SHRI RAJAT KUMAR KUREEL, JCIT, SR . DR FOR THE ASSESSEE/CROSS OBJECTOR: S/SHRI S. M. SURANA & N. C. KUMBHAT, ARS ORDER PER SHRI M. BALAGANESH, AM: THIS APPEAL BY REVENUE AND CROSS OBJECTION BY ASSES SEE ARE ARISING OUT OF ORDER OF CIT(A)-XX, KOLKATA VIDE APPEAL NO. 298/CIT(A)-XX /CIR-36/2011-12/KOL DATED 10.01.2013. ASSESSMENT WAS FRAMED BY ACIT, CIRCLE-3 6, KOLKATA U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT) FOR AY 2009-10 VIDE HIS ORDER DATED 29.12.2011. BOTH THE APPEAL AND THE CRO SS OBJECTION ARE TAKEN UP TOGETHER AND DISPOSED OF BY A COMMON ORDER FOR THE SAKE OF C ONVENIENCE. 2. THE FIRST ISSUE TO BE DECIDED IN THE APPEAL OF THE REVENUE IS AS TO WHETHER THE LD CITA IS JUSTIFIED IN DELETING THE DISALLOWANCE MADE U/S 14A OF THE ACT IN THE SUM OF RS. 1,19,10,124/- IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE IS AN INDIVIDUAL AND IS MANAGING DIRECTOR OF M/S. TT LTD. A LEADING KNITWEAR MANUFAC TURING CONCERN. THE ASSESSEE HAS CONTROLLING INTEREST AND IS HOLDING SHARES WORTH RS .15.89 CRORES THEREIN AND HAS INCOME FROM THE SAID COMPANY IN THE FORM OF MANAGERIAL REM UNERATION AMOUNTING TO RS.35.20 LACS, ROYALTY & ADVERTISEMENT POOL A/C. AMOUNTING T O RS.1.49 CRORES BOTH ASSESSED 2 ITA NO.907/K/2013 & CO NO.62/K/2013 RIKHANB CHAND JAIN AY 2009-10 AS BUSINESS 'INCOME. THE ASSESSEE IS RUNNING WIND MILL A PRIORITY INDUSTRY PROJECT AS ITS PROPRIETOR AND GENERATES ELECTRICAL ENERGY WHIC H IS SOLD WHOLLY TO TAMIL NADU ELECTRICITY BOARD WHICH ALSO IS ASSESSED AS BUSINES S INCOME. THE ASSESSEE HAS DIVIDEND INCOME RS.51.68 LACS ON SHARES IN TT LTD. ABOVE WHICH HAS BEEN CLAIMED AS EXEMPT U/S 10(34) OF THE ACT. THE ASSESSEE BORROWE D SECURED LOANS RS.10.63 CRORES & UNSECURED LOANS RS.5.57 CRORES ON WHICH HE PAID INT EREST RS1.87 CRORES (INCLUDING RS.42.04 LACS ON WIND MILL) DURING THIS YEAR. TH E ASSESSEE PAID INTEREST ON UNSECURED LOAN OF RS. 46.76 LACS AND ON SECURED LOA NS RS. 93.81 LACS AND FINANCE CHARGES OF RS. 4.38 LACS AGAINST THE SAID LOANS. T HE ASSESSEE STATED THAT LOAN HAS BEEN UTILIZED FOR THE PURPOSE OF CARRYING ON BUSINESS / PROFESSION OF ROYALTY FROM TRADE BRANCH T.T. , TRADING IN SHARES AND BUSINESS OF M ANUFACTURING ELECTRICITY THROUGH WINDMILL AND FUNDS BORROWED HAVE BEEN UTILIZED FOR THE PURPOSES OF THE SAID BUSINESSES. ACCORDINGLY THE INTEREST ON BORROWED CAPITAL USED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS IS ALLOWABLE AS DEDUCTI ON U/S 36(1)(III) OF THE ACT. THE ASSESSEE CLAIMED THAT THE BORROWED FUNDS WERE NOT U TILIZED FOR THE PURPOSE OF MAKING THE INVESTMENTS. HE CLAIMED THAT NO EXPENDITURE HA S BEEN INCURRED FOR THE PURPOSE OF EARNING ANY EXEMPT INCOME AND HENCE NO DISALLOWANCE U/S 14A OF THE ACT COULD BE MADE. IT WAS ALSO SUBMITTED BEFORE THE LD AO THAT ASSESSEES BUSINESS ACTIVITY CONSISTED OF ACQUIRING SHARES FOR MANAGING, CONTROL LING, ADMINISTRATING, FINANCING THE CONTROLLED COMPANY M/S. TT. LTD. IT WAS FURTHER SUB MITTED THAT HOLDING THE ABOVE MAJOR SHARES IN MANAGED COMPANY IS FOR EARNING ROYA LTY INCOME, MANAGERIAL REMUNERATION & DIVIDEND INCOME IS INTEGRAL PART OF BUSINESS. IT WAS FURTHER STATED THAT HOLDING CHAIRMAN CUM MANAGING DIRECTORSHIP IN MANAG ED & CONTROLLED COMPANY IS VOCATIONAL ACTIVITY AND THAT BUSINESSMEN LIKE ASSES SEE DID NOT PURCHASE SHARES OF ITS CONTROLLED COMPANY FOR ACQUIRING CONTROLLING INTERE ST FOR ONLY EARNING DIVIDEND. IT WAS ALSO FURTHER SUBMITTED THAT ACQUIRING CONTROLLING I NTEREST IN MANAGED COMPANY IS FOR PURPOSE OF BUSINESS AND/OR VOCATION & FOR CONTROLLI NG MANAGING THE COMPANY & THUS INTEREST EXPENSES ARE ALLOWABLE AS BUSINESS EXPENSE S U/S. 36(1)(III) OF I.T. ACT. THE LD. CIT WHILE RAISING THE POINT OF SECTION 14A DURING T HE COURSE OF PROCEEDINGS U/S 263 VIDE HIS ORDER DATED 27.12.2007 HAS ACCEPTED THE EX PLANATION OF ASSESSEE & ALLOWED THE INTEREST CLAIMED AGAINST BORROWED FUNDS TO ACQUIRE CONTROLLING STAKE IN THE COMPANY BY RELYING ON CIT VS RAJEEVA LOCHAN KANORIA (CAL) 208 ITR 616 AT PAGE 622. THE LD AO 3 ITA NO.907/K/2013 & CO NO.62/K/2013 RIKHANB CHAND JAIN AY 2009-10 HOWEVER, PROCEEDED TO MAKE DISALLOWANCE U/S 14A OF THE ACT BY INVOKING RULE 8D(2)(II) AND RULE 8D(2)(III) OF THE RULES AND MADE ADDITION OF RS. 1,19,10,124/- IN THE ASSESSMENT. THIS ADDITION WAS DELETED BY THE LD CI TA. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- 1. ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-XX, KOLKATA HAS ERRED IN DELETING THE ADDITION OF RS.1,19,10,124/- ON ACCOUN T OF ADDITION U/S. 14A WHEREAS THE AO WAS RIGHTLY DISALLOWED EXPENSE IN RELATION TO DI VIDEND INCOME EARNED BY THE ASSESSEE WHICH HE CLAIMED AS EXEMPT. 2.2. THE LD DR STATED THAT THE BORROWED FUNDS AS ON 31.3.2009 AS PER THE BOOKS WERE OUTSTANDING AT RS. 16.19 CRORES AND WHEREAS TH E OWN FUNDS AVAILABLE WITH THE ASSESSEE WERE ONLY RS. 15.467 CRORES. HENCE IT COU LD BE PRESUMED THAT THE INVESTMENTS WERE MADE OUT OF BORROWED FUNDS AND ACCORDINGLY DIS ALLOWANCE U/S 14A OF THE ACT HAS BEEN RIGHTLY MADE BY THE LD AO. IN RESPONSE TO THI S, THE LD AR ARGUED THAT INVESTMENTS MADE IN TT LTD ARE STRATEGIC INVESTMENTS AND BUSIN ESS EXPEDIENCY INVESTMENTS AND THE SAME WERE MADE IN THE EARLIER YEARS OUT OF OWN FUND S. HE STATED THAT THE INCREASE IN BORROWED FUNDS WERE DUE TO LOANS AVAILED BY THE ASS ESSEE FOR PURPOSE OF ACQUISITION OF WINDMILL WHICH WAS MADE IN FINANCIAL YEAR 2006-07 ( RS 6.20 CRORES) ; VEHICLE LOANS AVAILED DURING FINANCIAL YEARS 2007-08 & 2008-09 (R S 0.06 CRORES) ; LOAN AVAILED FOR ACQUISITION OF KAROL BAGH OFFICE BUILDING (RS 2.15 CRORES) AND WORKING CAPITAL FOR BUSINESS DURING FINANCIAL YEARS 2007-08 & 2008-09 A MOUNTING TO AVERAGE OF RS. 2.22 CRORES, WHEREAS, THE INVESTMENTS IN TT LTD WERE MAD E IN THE EARLIER YEARS PRIOR TO FINANCIAL YEAR 2006-07 WHICH IS QUITE EVIDENT FROM THE FACT THAT THE LD CIT HAD PASSED AN ORDER U/S 263 OF THE ACT FOR THE ASST YEAR 2004- 05 WHEREIN THE INVESTMENTS IN TT LIMITED MADE BY THE ASSESSEE WERE THOROUGHLY EXAMIN ED BY THE LD CIT TOGETHER WITH ITS RESPECTIVE SOURCES AND LD CIT HAD DROPPED THE P ROCEEDINGS U/S 263 OF THE ACT. THE NATURE OF COMMERCIAL EXPEDIENCY INVOLVED IN MAKING SUCH INVESTMENTS ARE PROVED BEYOND DOUBT FOR PROTECTING THE VARIOUS NATURE OF I NCOME RECEIVED BY THE ASSESSEE SUCH AS MANAGERIAL REMUNERATION OF RS. 35.20 LACS, ROYAL TY INCOME OF RS. 118.35 LACS, ADVERTISEMENT POOL REVENUE OF RS. 130.86 LACS AND I NCIDENTAL DIVIDEND INCOME OF RS. 51.68 LACS. HE ARGUED THAT THE EARNING OF DIVIDEND INCOME IS ONLY INCIDENTAL TO THE MAIN BUSINESS INCOME DERIVED OUT OF MAKING THIS BUS INESS EXPEDIENCY INVESTMENTS IN TT LTD. ACCORDINGLY HE PRAYED THAT NO INTERFERENC E IS CALLED FOR IN THE ORDER OF THE LD CITA WITH REGARD TO THE IMPUGNED ISSUE. 4 ITA NO.907/K/2013 & CO NO.62/K/2013 RIKHANB CHAND JAIN AY 2009-10 2.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE HAD FURNISHED AS AN ABUNDANT CAUTION THE STATEMENT OF SECURED AND UNSECURED LOANS AS ON 31.3.2009, PURPOS E OF UTILIZATIONS OF THE SAID LOANS VIDE ANNEXURE 1A TO HIS SUBMISSIONS MADE BEFORE THE LD CITA. THE SAID STATEMENT PROVES THAT NO PART OF LOANS WERE UTILIZED FOR INVE STMENT IN SHARES OF TT LTD. SIMILARLY HE HAS FURTHER FURNISHED STATEMENT OF SOURCES OF FU NDS FOR INVESTMENTS IN SHARES OF TT LTD VIDE ANNEXURE II TO HIS WRITTEN SUBMISSIONS FIL ED BEFORE THE LD CITA. THE STATEMENT CORROBORATED BY ACCOUNTS AND ASSESSMENT R ECORDS ESTABLISHES THAT THE SHARES OF TT LTD HAVE BEEN ACQUIRED OUT OF OWN CAPITAL, AC TUAL PROFITS MADE IN THE EARLIER YEARS. NO PART OF THE INVESTMENTS WERE MADE OUT OF LOAN FUNDS. HENCE WE FIND THAT THE RATIO LAID DOWN BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF DHANUKA & SONS LTD VS CIT REPORTED IN 339 TIR 319 (CAL) WHICH WAS HEAV ILY RELIED UPON BY THE LD DR ACTUALLY SUPPORTS THE CASE OF THE ASSESSEE. HENCE IT COULD BE SAFELY CONCLUDED THAT NO INTEREST EXPENDITURE HAS BEEN INCURRED FOR THE PURP OSE OF MAKING INVESTMENTS. 2.3.1. WE ALSO FIND THAT THE INVESTMENTS WERE MADE BY THE ASSESSEE FOR THE PURPOSE OF OBTAINING CONTROLLING INTEREST IN TT LTD . WE FIND THAT THE ASSESSEE HAD STATED THAT HIS BUSINESS ACTIVITY CONSISTED OF ACQUIRING SHARES FOR MANAGING, CONTROLLING, ADMINISTRATING, FINANCING THE CONTROLLED COMPANY I/ E M/S TT LIMITED AND THAT HOLDING THE MAJORITY SHARES IN THE SAID MANAGED COMPANY IS FOR EARNING ROYALTY INCOME, MANAGERIAL REMUNERATION AND DIVIDEND INCOME WHICH I S EARNED INCIDENTALLY IS AN INTEGRAL PART OF THE BUSINESS. THESE SUBMISSIONS WERE NOT CONTROVERTED BY THE REVENUE BEFORE US. ACCORDINGLY WE HOLD THAT THE INVESTMENT S MADE IN SHARES OF TT LIMITED OUT OF OWN FUNDS OF THE ASSESSEE TAKE THE CHARACTER OF STRATEGIC INVESTMENTS IN ORDER TO PROTECT THE BUSINESS INTEREST AND WAS NOT MADE WITH A VIEW TO EARN DIVIDEND INCOME. THE RELIANCE PLACED BY THE LD AR ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS RAJEEVA LACHAN KONARIA REPORTED IN 208 ITR 616 (CAL) IS WELL FOUNDED. THOUGH THIS DECISION WAS RENDERED IN THE CONTEXT OF ALLOWABILITY OF INTEREST EXPENDITURE U/S 36(1)(III) OF THE ACT, THE PRINCIPLES LAID DOWN THEREON WOULD APPLY WITH EQUAL FORCE TO THE FACTS OF THE INSTANT CASE FOR THE PURPOSE OF DISALLOWANCE U/S 14A OF THE ACT. 5 ITA NO.907/K/2013 & CO NO.62/K/2013 RIKHANB CHAND JAIN AY 2009-10 2.3.2. WE ALSO FIND THAT THE ASSESSEE IN THE COURS E OF PROCEEDINGS U/S 263 OF THE ACT FOR THE ASST YEAR 2004-05 VIDE ORDER U/S 263 DATED 27.1 2.2007 (VIDE PAGES 6 & 7 OF THE PAPER BOOK) HAD CLAIMED THAT THE ASSESSEE BEING THE CHAIRMAN & MANAGING DIRECTOR OF TT LIMITED HAD TO ACQUIRE ITS SHARES SO AS TO HAVE CONTROLLING POWER OVER IT AND THAT HIS ACT OF CONTROLLING AND MANAGING THE COMPANY IS NOTH ING BUT HIS PROFESSION OR VOCATION WHICH IS NOTHING BUT HIS BUSINESS AND IS, THEREFORE , INTEREST CLAIMED AGAINST BORROWED FUND TO ACQUIRE CONTROLLING STAKE IN A COMPANY IS A LLOWABLE RELYING ON THE DECISION OF CIT VS RAJEEVA LACHAN KONARIA (208 ITR 616) OF HON BLE CALCUTTA HIGH COURT. WE FIND THAT THE LD CIT AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE AND THE MATERIALS AVAILABLE ON RECORD AND FOLLOWING THE RATIO OF THE ABOVEMENTIONED DECISION, DROPPED THE PROCEEDINGS INITIATED U/S 263 OF THE ACT FOR TH E ASST YEAR 2004-05 FOR DISALLOWANCE OF INTEREST ON BORROWED FUNDS. WE FIND THAT THE L D AR ALSO PLACED ON RECORD THE COPY OF THE ASSESSMENT ORDERS U/S 143(3) OF THE ACT DATE D 31.12.2008 AND 20.12.2010 FOR THE ASST YEARS 2006-07 AND 2008-09 RESPECTIVELY, WHEREI N THE RETURNED INCOME WAS ACCEPTED BY THE LD AO VIDE PAGES 10 TO 15 OF THE PA PER BOOK). 2.3.3. WE ALSO PLACE RELIANCE ON THE DECISION OF T HE HONBLE APEX COURT IN THE CASE OF S A BUILDERS LTD VS CIT REPORTED IN 288 ITR 1 (SC) WHICH HAS BEEN FURTHER AFFIRMED BY SUBSEQUENT DECISION OF THE APEX COURT IN THE CASE OF HERO CYCLES (P) LTD VS CI T REPORTED IN (2015) 63 TAXMANN.COM 308 (SC) DATED 5 .11.2015. HENCE THE PROPOSITION THE LD AR WAS TRYING TO ADVOCATE THAT THE BUSINESS EXPEDIENCY INVESTMENT MADE BY THE ASSESSEE IN TT LIMITED HAD BEEN ACCEPTED BY THE REV ENUE IN SECTION 263 PROCEEDINGS OF LD CIT AND SCRUTINY ASSESSMENT PROCEEDINGS OF EARLI ER ASST YEARS, DESERVES TO BE APPRECIATED. WE HOLD THAT THE INVESTMENT IN TT LIM ITED MADE BY THE ASSESSEE IS NOT WITH AN INTENTION TO EARN DIVIDEND INCOME. WHEN THAT IS SO, THERE CANNOT BE ANY DISALLOWANCE U/S 14A OF THE ACT. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CCI LTD VS JCIT REPORTED IN (2012) 250 CTR 0291 (KAR) DATED 28.2.2012 , WHEREIN IT WAS HELD THAT :- 5. WHEN NO EXPENDITURE IS INCURRED BY THE ASSESSE E IN EARNING THE DIVIDEND INCOME, NO NOTIONAL EXPENDITURE COULD BE DEDUCTED FROM THE SAI D INCOME. IT IS NOT THE CASE OF THE ASSESSEE RETAINING ANY SHARES SO AS TO HAVE THE BEN EFIT OF DIVIDEND. 63% OF THE SHARES, WHICH WERE PURCHASED, ARE SOLD AND THE INCOME DERIV ED THEREFROM IS OFFERED TO TAX AS BUSINESS INCOME. THE REMAINING 37% OF THE SHARES AR E RETAINED. IT HAS REMAINED UNSOLD WITH THE ASSESSEE. IT IS THOSE UNSOLD SHARES HAVE Y IELDED DIVIDEND, FOR WHICH, THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE AT ALL. T HOUGH THE DIVIDEND INCOME IS 6 ITA NO.907/K/2013 & CO NO.62/K/2013 RIKHANB CHAND JAIN AY 2009-10 EXEMPTED FROM PAYMENT OF TAX, IF ANY EXPENDITURE IS INCURRED IN EARNING THE SAID INCOME, THE SAID EXPENDITURE ALSO CANNOT BE DEDUCTE D. BUT IN THIS CASE, WHEN THE ASSESSEE HAS NOT RETAINED SHARES WITH THE INTENTION OF EARNING DIVIDEND INCOME AND THE DIVIDEND INCOME IS INCIDENTAL TO HIS BUSINESS OF SA LE OF SHARES, WHICH REMAINED UNSOLD BY THE ASSESSEE, IT CANNOT BE SAID THAT THE EXPENDI TURE INCURRED IN ACQUIRING THE SHARES HAS TO BE APPORTIONED TO THE EXTENT OF DIVIDEND INC OME AND THAT SHOULD BE DISALLOWED FROM DEDUCTIONS. IN THAT VIEW OF THE MATTER, THE AP PROACH OF THE AUTHORITIES IS NOT IN CONFORMITY WITH THE STATUTORY PROVISIONS CONTAINED UNDER THE ACT. THEREFORE, THE IMPUGNED ORDERS ARE NOT SUSTAINABLE AND REQUIRE TO BE SET ASIDE. ACCORDINGLY, WE PASS THE FOLLOWING: ORDER (I) APPEAL IS ALLOWED. (II) IMPUGNED ORDERS ARE HEREBY SET ASIDE. (III) THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED I N FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 2.3.4. HENCE, IN VIEW OF THE AFORESAID DECISIONS, WE HOLD THAT NO DISALLOWANCE U/S 14 A OF THE ACT NEED TO BE MADE BY INVOKING THE PROVIS IONS OF RULE 8D(2) OF THE RULES AS THE INVESTMENTS ADMITTEDLY ARE BUSINESS EXPEDIENCY INVESTMENTS AND STRATEGIC INVESTMENTS. SINCE THE INVESTMENTS WERE HELD TO BE BUSINESS EXPEDIENCY INVESTMENTS, THERE IS NO CASE FOR MAKING ANY DISALLOWANCE BY ADO PTING RULE 8D(2)(III) OF THE RULES ALSO. ACCORDINGLY THE GROUND NO. 1 RAISED BY THE R EVENUE IS DISMISSED. 3. THE NEXT ISSUE TO BE DECIDED IN THE APPEAL OF TH E REVENUE IS AS TO WHETHER THE LD CITA IS JUSTIFIED IN DELETING THE DISALLOWANCE ON A CCOUNT OF DEPRECIATION IN THE SUM OF RS. 4,54,080/- IN THE FACTS AND CIRCUMSTANCES OF TH E CASE. 3.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE LD AO OBSERVED THAT THE ASSESSEE HAS ACQUIRED A WINDMILL DURING THE SECOND HALF OF FINAN CIAL YEAR 2006-07 WHICH ADMITTEDLY INCLUDED THE FOLLOWING TOWARDS ACQUISITI ON OF LAND :- PURCHASE OF LAND AS PER SALE DEED RS. 2,20,00 0 STAMP DUTY, REGISTRATION ETC RS. 45,030 CONSIDERATION FOR PROVIDING EASY AND FREE ACCESS AN D KEEPING THE AREA VACANT SURROUNDING THE LAND RS. 12,34,9 70 PROCESSING AND SUPERVISION CHARGES RS. 32,30,000 ------------------- TOTAL EXPENSES RELATING TO LAND RS. 47,30,000 ------------------- 7 ITA NO.907/K/2013 & CO NO.62/K/2013 RIKHANB CHAND JAIN AY 2009-10 THE LD AO OBSERVED THAT THE ASSESSEE HAD CLAIMED HI GHER RATE OF DEPRECIATION I.E 80% ON THE ENTIRE INVESTMENT TOWARDS WINDMILL. HE OBSER VED THAT AS PER IT ACT, NO DEPRECIATION IS ALLOWABLE ON LAND, RATHER IT HAS AP PRECIATION VALUE. ACCORDINGLY, THE DEPRECIATION ON THE LAND PORTION INCLUDED IN THE EN TIRE COST OF WINDMILL WAS DISALLOWED IN THE SUM OF RS. 4,54,080/- IN THE ASSESSMENT. THE ASSESSEE STATED THAT ALL THE EXPENSES CONSTITUTED EXPENSES ESSENTIALLY REQUIRED FOR CONST RUCTING SPECIALIZED FOUNDATION FIT FOR HIGH SPEED ROTATION OF WINDMILL BLADES, TURBINES, G ENERATION, INSULATION AND DISTRIBUTION OF ELECTRICAL ENERGY GENERATED. IT WAS ARGUED THAT THE LAND AND FOUNDATION ARE INTEGRAL CONSTITUENTS OF THE WINDMILL PLANT AND IS ELIGIBL E FOR ALLOWANCE OF DEPRECIATION. THE ASSESSEE ALSO PLACED RELIANCE ON THE CO-ORDINATE BE NCH DECISIONS OF CHENNAI TRIBUNAL IN THE CASE OF ASIAN HANDLOOMS VS DCIT IN ITA NO. 176/ MAD/2010 DATED 6.7.2012 AND AHMEDABAD TRIBUNAL IN THE CASE OF ACIT VS PARRY ENG INEERING & ELECTRONICS PVT. LTD IN ITA NO. 3317/AHM/2011 & CO NO. 44/AHM/2012 DATED 2.3.2012 IN SUPPORT OF HIS CONTENTIONS. THE LD CITA APPRECIATING THE CONTENT IONS OF THE ASSESSEE DELETED THE DISALLOWANCE. AGGRIEVED, THE REVENUE IS IN APPEAL B EFORE US ON THE FOLLOWING GROUND:- 2. ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-XX, KOLKATA HAS ERRED IN DELETING THE ADDITION OF RS.4,54,080/- ON ACCOUNT O F DEPRECIATION CLAIMED ON LAND. 3.2. THE LD DR VEHEMENTLY RELIED ON THE ORDER OF T HE LD AO. IN RESPONSE TO THIS, THE LD AR VEHEMENTLY RELIED ON THE ORDER OF THE LD CITA . 3.3. WE HAVE HEARD THE RIVAL SUBMISSIONS. AT THE OUTSET, WE FIND THAT THE ACTION OF THE LD AO IN TRYING TO DISTURB THE OPENING WRITTEN DOWN VALUE (WDV) ATTRIBUTABLE TO THE COST OF LAND AND THEREBY TRYING THE DISALLOW TH E DEPRECIATION COMPONENT THEREON IS NOT APPRECIATED , AS, IF AT ALL, THE LD AO HAS GOT ANY GRIEVANCE ON THE IMPUGNED ISSUE, THEN HE SHOULD HAVE REOPENED THE ASSESSMENT FOR THE ASST YEAR 2007-08 ( I.E. THE YEAR IN WHICH LAND ON WHICH WINDMILL WAS INSTALLED WAS P URCHASED) AND DISALLOWED THE DEPRECIATION THEREON IN THAT YEAR. HE CANNOT UNILA TERALLY DISALLOW THE DEPRECIATION BASED ON THE OPENING WRITTEN DOWN VALUE. THIS ACTI ON WOULD ONLY RESULT IN THE LD AO ALLOWING THE DEPRECIATION ON THE COST OF LAND IN AS ST YEARS 2007-08 AND 2008-09 BUT WOULD DISALLOW ONLY IN ASST YEAR 2009-10. IN ANY CASE, WE FIND THAT THE CO-ORDINATE BENCH DECISION OF CHENNAI TRIBUNAL IN THE CASE OF ASIAN HANDLOOMS VS DCIT IN ITA NO. 176/MAD/2010 DATED 6.7.2012 HAD HELD AS BELOW:- 8 ITA NO.907/K/2013 & CO NO.62/K/2013 RIKHANB CHAND JAIN AY 2009-10 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE PART IES AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE ORDE R DATED 20TH NOVEMBER, 2009 PASSED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CAS E OF THE ASSESSEE IN ITA NO.2291/MDS/2008 RELEVANT TO THE ASSESSMENT YEAR 20 05-06. GROUNDS NO.2 TO 6 AND 11 TO 13 IN THE PRESENT APPEAL RELATES TO DEPRECIATION . IN PARA NO.12 OF THE ORDER IN ITA NO.2291/MDS/2008, THE TRIBUNAL HAS HELD AS UNDER:- 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE ORDER. THERE CAN BE NO DISPUTE THAT A WIND MILL IS AN APPARATUS THAT HARNESSES WIND POWER, FOR A VARIETY OF USES LIKE PUMPING WATER, DRIVING OF SA W MILL, GRINDING CONE AND/OR DRIVING ELECTRICAL TURBINES. A TYPICAL WIND MILL, A S INSTALLED BY THE ASSESSEE, WHICH IS OF SUZLON CORPORATION, WOULD CONSIST OF A SPECIALIZED FOUNDATION, ON WHICH THE WIND BLADES ARE ATTACHED THROUGH A POST. THE BLADES CONNECTED IN THE TOP IS A REVOLVING APPARATUS TO WHICH DIFFERENT NUMBERS OF ARMS ARE ATTACHED. WHEN IT IS USED FOR PRODUCING ELECTRICITY , THESE ARE CALLED WIND ITA NO.176/MDS/2010 TURBINES AND SERVES AS A SIGNIFICA NT SOURCE OF ELECTRICAL ENERGY. BEING A NON-CONVENTIONAL SOURCE OF ENERGY W ITH RENEWABLE INPUTS AND WHICH IS NATURE FRIENDLY, WORLD OVER, WINDMILLS HAV E BEEN GIVEN SPECIAL STATUS, IMPORTANCE AND ENCOURAGEMENT. THERE IS NO DOUBT THA T FOR A WINDMILL TO BE SUSTAINABLE IT HAS TO BE ERECTED IN A PLACE WHERE S USTAINABLE WIND FLOW IS AVAILABLE WITH A LAND SUITABLE TO A FOUNDATION ON W HICH, A STRUCTURE STRONG ENOUGH TO WITHSTAND A POWERFUL THRUST OF AIR AT ANY POINT OF TIME. SPECIALIZED FOUNDATION AND SPECIALIZED AREA SPECIFICALLY EARMAR KED TO FACILITATE A FLOW OF WIND WITHOUT HINDRANCE, AND SPECIALIZED ELECTRICAL FITTINGS AND HIGH TENSION LINES ARE ALL BASIC REQUIREMENTS FOR A WIND MILL PL ANT. NONE OF THESE REQUIREMENTS INCLUDING THE PREMISES CAN BE SEEN DET ACHED FROM WHAT IS CALLED A WIND MILL SINCE A WIND MILL TO WORK THESE ARE E SSENTIAL. ALL THESE ARE NECESSARY INPUTS GOING INTO ULTIMATE COST OF SUCH W IND MILL. THE FOUNDATION STRUCTURE OR THE SPECIALLY DEMARCATED APPURTENANT T HERETO CANNOT BE CONSIDERED AS EQUIVALENT TO A HOTEL OR A CINEMA BUI LDING WHICH IS ADJUNCT TO CARRYING ON A HOTEL BUSINESS OR THEATRE BUSINESS. O N THE OTHER HAND THESE CAN BE DEEMED ONLY A PART OF A WINDMILL FOR HARNESSING WIND ENERGY. IN COMING TO THIS CONCLUSION WE ARE FORTIFIED BY DECISION OF HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. KARNATAKA POWER CORPORATION ( 247 ITR 268) WHERE IT WAS HELD THAT WHETHER A THE BUILDING CAN BE TREATED AS A PLANT WAS A QUESTION OF FACT AND WHEN IT IS FOUND AS A FACT THAT THE BUI LDING HAS BEEN SO PLANNED AND CONSTRUCTED AS TO SERVE THE ASSESSEES ITA NO.176/M DS/2010 6 SPECIAL TECHNICAL REQUIREMENT, IT WOULD QUALIFY TO BE TREAT ED AS A PLANT. IN OUR OPINION, THE EXPENSES RELATING TO THE LAND AND FOUN DATION SPECIALLY INCURRED WITH A VIEW TO SERVE THE TECHNICAL REQUIREMENTS WOU LD ALSO BECOME A PART OF THE PLANT IN A CASE THAT OF A WIND MILL. IF WE LOOK AT APPENDIX I TO THE INCOME- TAX RULES, PRESCRIBING THE RATES OF DEPRECIATION, I T CAN BE SEEN THAT LEGISLATURE HAS GIVEN HIGHER DEPRECIATION RATE OF 80% ON ANTI-P OLLUTION DEVICES, ENERGY SAVING AND RENEWABLE ENERGY DEVICES. APPARENTLY, TH ESE HIGHER RATE HAVE BEEN GIVEN NOT SOLELY FOR OFFSETTING THE IMPAIRMENT IN V ALUE OF SUCH ASSETS ON ACCOUNT OF USE BUT ALSO TO ENCOURAGE SUCH ENTREPREN EURIAL VENTURES WHICH RESULTS IN ENERGY SAVINGS OR UTILIZATION OF RENEWAB LE ENERGY SOURCES, OR PREVENTION OF POLLUTION. IF A VERY LIMITED MEANING IS GIVEN TO THESE TERMS USED IN APPENDIX I OF THE I.T. RULES, IT WOULD DEFEAT TH E VERY PURPOSE FOR WHICH SUCH ENHANCED DEPRECIATION WAS PROVIDED FOR. THEREFORE, IN OUR OPINION, ASSESSEES CLAIM FOR DEPRECIATION SHOULD NOT BE RESTRICTED IN THE MANNER MADE BY THE ASSESSING OFFICER. THEREFORE, DISALLOWANCE OF RS. 1 ,17,00,000/-, 13 LAKHS, 23,51,576/- AND RS. 5,73,824/- ON ACCOUNT OF DEPREC IATION CLAIM STANDS CANCELLED. GROUND NOS. 5 TO 19 OF THE ASSESSEE STAN D ALLOWED. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE C O-ORDINATE BENCH OF THE TRIBUNAL, WE ALLOW THESE GROUNDS OF THE APPEAL. THE ASSESSEE IS ENTITLED TO ENTIRE AMOUNT CLAIMED AS 9 ITA NO.907/K/2013 & CO NO.62/K/2013 RIKHANB CHAND JAIN AY 2009-10 ITA NO.176/MDS/2010 7 DEPRECIATION ON WINDMILL. THE ORDER OF THE CIT(A) ON THE ISSUE IS SET ASIDE. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN THE A FORESAID DECISION, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD CITA IN THI S REGARD. ACCORDINGLY, THE GROUND NO. 2 RAISED BY THE REVENUE IS DISMISSED. 4. THE NEXT ISSUE TO BE DECIDED IN THE APPEAL OF THE REVENUE IS AS TO WHETHER THE LD CITA IS JUSTIFIED IN DELETING THE DISALLOWANCE MADE IN THE SUM OF RS. 7,93,379/- ON ACCOUNT OF ADVERTISEMENT EXPENSES IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE LD AO OBSERVED THAT THE ADVERTISEMENT EXPENDITURE HAD INCREASED FROM RS. 1,27,900/- TO RS . 16,89,313/- WHEREAS THE INCOME EARNED UNDER THE HEAD ADVERTISEMENT POOL ACCOUNT HA D DECREASED FROM RS. 3,36,34,356/- TO RS. 1,30,85,924/-. ACCORDINGLY, T HE LD AO DIRECTED THE ASSESSEE TO PRODUCE THE BILLS OF ADVERTISEMENT EXPENSES INCURRE D BY THE ASSESSEE. THE ASSESSEE SUBMITTED THE BILLS OF ADVERTISEMENT EXPENSES EXCEP T BILL IN RESPECT OF M/S ADSUN ADVERTISING AGENCY ON THE GROUND THAT SAID FILE WAS MISPLACED SOMEWHERE AND NOT TRACEABLE. HOWEVER, THE ASSESSEE FILED A COPY OF C ONFIRMATION FROM M/S ADSUN ADVERTISING AGENCY BY OBTAINING AN ACKNOWLEDGEMENT IN THE LEDGER ACCOUNT OF THE ASSESSEE WHICH WAS DISBELIEVED BY THE LD AO. THE LD AO OBSERVED FROM THE LEDGER OF ADVERTISEMENT EXPENSES THAT THE ASSESSEE HAS SHOWN AN AMOUNT OF RS. 7,93,379/- PAID TO M/S ADSUN ADVERTISING AGENCY WHICH WAS DISALLOWE D BY HIM IN THE ASSESSMENT. BEFORE THE LD CITA, THE ASSESSEE PRODUCED THE COPY OF THE BILL OF M/S ADSUN ADVERTISING AGENCY. THE LD CITA OBSERVED THAT ALL THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES AND ACCORDINGLY DELETED THE D ISALLOWANCE. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GRO UND:- 3. ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-XX, KOLKATA HAS ERRED IN DELETING THE ADDITION OF RS.7,93,379/- ON ACCOUNT O F ADVERTISEMENT EXPENSES WITHOUT BILLS. 4.2. THE LD DR ARGUED THAT THE BILL OF M/S ADSUN ADVERTISING AGENCY WAS NEVER SUBJECTED TO VERIFICATION BY THE LD AO AND ACCORDIN GLY PRAYED FOR SETTING ASIDE OF THIS ISSUE TO THE FILE OF THE LD AO WHICH WAS FAIRLY ACC EPTED BY THE LD AR. 4.3. WE HAVE HEARD THE RIVAL SUBMISSIONS. IN THE FACTS AND CIRCUMSTANCES, WE DEEM IT FIT AND APPROPRIATE, TO SET ASIDE THIS ISSUE TO THE FILE OF THE LD AO , TO DECIDE THE SAME 10 ITA NO.907/K/2013 & CO NO.62/K/2013 RIKHANB CHAND JAIN AY 2009-10 IN THE LIGHT OF EVIDENCES SUBMITTED BY THE ASSESSEE IN THIS REGARD. ACCORDINGLY, THE GROUND NO 3 RAISED BY THE REVENUE IS ALLOWED FOR ST ATISTICAL PURPOSES. 5. THE LAST ISSUE TO BE DECIDED IN THE APPEAL OF T HE REVENUE IS AS TO WHETHER THE LD CITA IS JUSTIFIED IN DELETING THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT IN THE SUM OF RS. 11,18,698/- FOR VIOLATION OF SECTION 194C O F THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 5.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE LD AO OBSERVED THAT THE ASSESSEE HAS DEBITED A SUM OF RS. 11,18,698/- AS ADVERTISEMENT M ATERIAL EXPENSES AS BELOW:- NAME OF THE PARTY AMOUNT NATURE OF WORK CRAY DATA SERVICES P. LTD. TAMANNA TRADERS P. LTD. J.S.B. BUSINESS PVT. LTD. CRAY DATA SERVICES PVT. LTD. ARYA VAJRA SWADHAY SANGH TOTAL : RS. 1,20,980/- RS. 2,83,768/- RS. 4,42,900/- RS. 2,20,050/- RS. 51,000/- RS.11,18,698/- T. T. PAD & DAIRY T T PRINTED PEND, POSTER, AIR BAGS ETC. T T PRINTED BANNERS T T CALENDER NOT SPECIFIED THE LD AO OBSERVED THAT THE ASSESSEE HAS FAILED TO DEDUCT TDS AGAINST THE PAYMENTS MADE TOWARDS SUCH ADVERTISEMENT MATERIALS. IT HAS A LREADY BEEN DISCUSSED THAT THE ASSESSEE IS EARNING ROYALTY INCOME FOR HIS T.T. BRA ND. WHATEVER BE THE ARTICLES OR THINGS MADE BY THE PARTIES I.E. THE BANNER, DIARY, PAD, POSTER, CALENDER ETC. ARE MEANT FOR THE 'TT. BRAND'. THE ASSESSEE IS THE OWNER OF T .T. BRAND AND FOR PROTECTION OF HIS BRAND HE HAS CLAIMED VARIOUS EXPENSES WHICH IS EVID ENT FROM THE P&L A/C. THE LD AO OBSERVED THAT NO ONE OTHER THAN THE ASSESSEE CAN US E THE SPECIFIED LOGO OF 'T.T.' HENCE, THE WORKS EXECUTED BY THE PARTIES FOR PRINTI NG OF ADVERTISEMENT MATERIALS ARE SPECIFIED CONTRACT AND THE ASSESSEE IS LIABLE TO DE DUCT TDS AGAINST SUCH PAYMENT U/S 194C OF THE I.T . ACT, 1961 BUT THE ASSESSEE HAS FA ILED TO DO SO. THE LD AO ACCORDINGLY PROCEEDED TO MAKE DISALLOWANCE U/S 40(A)(IA) READ W ITH SECTION 194C OF THE ACT IN THE SUM OF RS. 11,18,698/- AND ADDED BACK THE SAME TO T HE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE SUBMITTED THAT THE LD AO HAS TREATED T HE COST OF PRINTED MATERIALS PURCHASED FOR ADVERTISEMENT PURPOSES FOR SALE OF PR ODUCTS UNDER BRAND NAME T.T. KNITWEAR AS PAYMENTS FOR CONTRACT OF PRINTING WAR RANTING DEDUCTION OF TAX AT SOURCE U/S 194C OF THE ACT. THE ASSESSEE CLAIMED THAT PAY MENT WAS MADE FOR OUTRIGHT PURCHASE OF MATERIALS AND NOT FOR EXECUTION OF ANY CONTRACT. THE LD CITA HELD ON PERUSAL OF THE DETAILS AND DOCUMENTS THAT THERE WAS NO CONTRACT EXISTING BETWEEN THE 11 ITA NO.907/K/2013 & CO NO.62/K/2013 RIKHANB CHAND JAIN AY 2009-10 PARTIES AND THE ASSESSEE U/S 194C OF THE ACT AS THE TRANSACTION WAS PURELY IN THE NATURE OF PURCHASE / SALE OF MATERIALS AND ACCORDINGLY THE PROVISIONS OF SECTION 194C OF THE ACT CANNOT BE MADE APPLICABLE TO THE FACTS OF THE I NSTANT CASE. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- 4. ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-XX, KOLKATA HAS ERRED IN DELETING THE ADDITION OF RS.11,18,698/- ON ACCOUNT OF DISALLOWANCE U/S. 40(A)(IA) READ WITH SECTION 194C ON ADVERTISEMENT MATERIALS. 5.2. THE LD DR VEHEMENTLY RELIED ON THE ORDER OF THE LD AO. IN RESPONSE TO THIS, THE LD AR STATED THAT THE ASSESSEE HAS NOT SUPPLIED MAT ERIALS TO THE JOB WORKER AND HENCE DOES NOT FALL WITHIN THE DEFINITION OF WORK AS PE R SECTION 194C OF THE ACT. THE ASSESSEE HAS PURCHASED ONLY DIARIES, CALENDERS ETC FOR WHICH THE BILLS ARE AVAILABLE IN PAGES 36 TO 40 OF THE PAPER BOOK FILED BY THE ASSES SEE. 5.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK FILED BY THE ASSESS EE. WE FIND FROM THE DETAILS AND THE BILLS SUBMITTED IN PAGES 36 TO 40 OF THE PAPER BOOK , THE ASSESSEE HAD ONLY MADE PAYMENTS FOR PURCHASE OF MATERIALS AND HAD ADMITTED LY NOT SUPPLIED THE MATERIALS TO THE JOB WORKER AND HENCE THE SAME WOULD NOT FALL UNDER THE DEFINITION OF WORK AS PER SECTION 194C OF THE ACT. IT WOULD BE PERTINENT TO REPRODUCE THE DEFINITION OF WORK IN SECTION 194C OF THE ACT FOR THE SAKE OF CONVENIENCE :- WORK SHALL ALSO INCLUDE (A) ADVERTISING; (B) BROADCASTING AND TELECASTING INCLUDING PRODUCT ION OF PROGRAMMES FOR SUCH BROADCASTING OR TELECASTING; (C) CARRIAGE OF GOODS AND PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN BY RAILWAYS; (D) CATERING. (E) MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCH ASED FROM SUCH CUSTOMER, BUT DOES NOT INCLUDE MANUFACTURING OR SUPPLYING A P RODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCH ASED FROM A PERSON, OTHER THAN SUCH CUSTOMER] HENCE THERE IS NO VIOLATION OF SECTION 194C WARRANT ING ANY DISALLOWANCE U/S 40(A)(IA) OF THE ACT. ACCORDINGLY, THE GROUND NO. 4 RAISED B Y THE REVENUE IS DISMISSED. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 12 ITA NO.907/K/2013 & CO NO.62/K/2013 RIKHANB CHAND JAIN AY 2009-10 CO NO. 62/KOL/2013 6. THE FIRST ISSUE TO BE DECIDED IN THE CROSS OBJE CTION OF THE ASSESSEE IS AS TO WHETHER THE LD CITA IS JUSTIFIED IN SUSTAINING AN A DDITION OF RS. 39,375/- BEING NOTIONAL INTEREST @ 13.5% ON TRADE ADVANCE OF RS. 7,00,000/- IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 6.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE AS SESSEE ADVANCED A SUM OF RS. 7,00,000/- TO HIS WIFE SMT. KALA DEVI JAIN TOWARDS REPAIRS, RE NOVATION AND AMENITIES TO BUSINESS PREMISES WHICH COULD NOT BE MATERIALIZED. THE ASSE SSEE ARGUED THAT NO INTEREST COULD BE ASSUMED TO HAVE BEEN EARNED IN AS MUCH AS THE RE PAIRS COULD BE EXECUTED FOR NO FAULT OF THE ADVANCEE. THE LD AO FOUND THAT THIS AD VANCE WAS MADE OUT OF BORROWED FUNDS AND HENCE THE NOTIONAL INTEREST @ 13.5% FOR P ROPORTIONATE NUMBER OF DAYS NEEDS TO BE ADDED AS NOTIONAL INCOME OF THE ASSESSEE AMOU NTING TO RS. 39,375/- WHICH WAS UPHELD BY THE LD CITA. AGGRIEVED , THE ASSESSEE HA S PREFERRED CROSS OBJECTION BEFORE US ON THE FOLLOWING GROUND :- 1. THAT THE LD. CIT(A) ERRED IN SUSTAINING ADDITI ON OF RS.39,375/- BEING NOTIONAL INTEREST @ 13.5% ON TRADE ADVANCE RS.7,00,000/- ALT HOUGH NO INTEREST WHATSOEVER WAS RECEIVABLE OR RECEIVED THEREON. 6.2. THE LD AR ARGUED THAT THIS ADVANCE WAS MADE WITH A BONA FIDE BELIEF TO CARRY OUT CERTAIN REPAIR WORKS IN THE BUSINESS PREMISES. IN ANY CASE, HE ARGUED THAT THERE CANNOT BE ANY ADDITION TOWARDS NOTIONAL INTEREST IN COME. HE FURTHER ARGUED THAT THE LD CITA HAD HELD WHILE DEALING WITH THE ISSUE OF DISAL LOWANCE U/S 14A OF THE ACT THAT THE ASSESSEE HAD ENOUGH OWN FUNDS AT ITS DISPOSAL AND H AVING HELD SO, IT HAS TO BE PRESUMED THAT THE ADVANCE TO WIFE SMT. KALA DEVI JA IN ALSO SHOULD HAVE BEEN MADE OUT OF OWN FUNDS AND HENCE THERE IS NO QUESTION OF MAKI NG ANY ADDITION TOWARDS NOTIONAL INTEREST INCOME THEREON. IN RESPONSE TO THIS, THE LD DR VEHEMENTLY RELIED ON THE ORDER OF THE LD AO. 6.3. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIN D THAT WE HAVE ALREADY HELD WHILE DEALING WITH THE ISSUE OF DISALLOWANCE U/S 14A OF T HE ACT THAT THE ASSESSEE IS HAVING SUFFICIENT OWN FUNDS AT ITS DISPOSAL WHICH WOULD EA SILY COVER THE ADVANCE GIVEN TO THE WIFE SMT KALA DEVI JAIN IN THE SUM OF RS. 7,00,000/ - ALSO. HENCE THERE IS NO QUESTION OF CHARGING ANY NOTIONAL INTEREST THEREON ON THE SA ID ADVANCE PRESUMED TO HAVE BEEN 13 ITA NO.907/K/2013 & CO NO.62/K/2013 RIKHANB CHAND JAIN AY 2009-10 GIVEN OUT OF OWN FUNDS. HENCE THE ADDITION MADE IN THE SUM OF RS. 39,375/- IS DIRECTED TO BE DELETED. ACCORDINGLY, THE GROUND NO.1 RAISED BY THE ASSESSEE IN HIS CROSS OBJECTION IS ALLOWED. 7. THE NEXT GROUND TO BE DECIDED IN THE CROSS OB JECTION OF THE ASSESSEE IS AS TO WHETHER THE LD CITA IS JUSTIFIED IN UPHOLDING THE D ISALLOWANCE OF RS. 10,200/- TOWARDS STAFF WELFARE EXPENSES IN THE FACTS AND CIRCUMSTANC ES OF THE CASE. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND WE FIND THAT THE ASSESSEE HAS MADE GIFTS OF RS. 5,100/- EACH TO TWO OF ITS EMPLOYEES O N THE OCCASION OF THE MARRIAGE IN THEIR FAMILIES IN ORDER TO MAINTAIN HARMONIOUS RELA TION WITH THE STAFF MEMBERS. WE HOLD THAT THERE IS NO PERSONAL ELEMENT INVOLVED THE REIN AND HAS BEEN INCURRED IN THE ORDINARY COURSE OF HIS BUSINESS. WE HOLD THAT THE SAID EXPENDITURE IS ONLY IN THE NATURE OF STAFF WELFARE AND IS SQUARELY ALLOWABLE AS A DED UCTION. ACCORDINGLY, WE HAVE NO HESITATION IN DIRECTING THE LD AO TO DELETE THIS AD DITION IN THE SUM OF RS. 10,200/-. ACCORDINGLY, THE GROUND NO. 2 RAISED BY THE ASSESSE E IN HIS CROSS OBJECTION IS ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. 10. ORDER IS PRONOUNCED IN THE OPEN COURT ON 08.07. 2016 SD/- SD/- (S.S.VISWANETHRA RAVI) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED : 8 TH JULY, 2016 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT ACIT, CIRCLE-36, KOLKATA 2 RESPONDENT SHRI RIKHAB CHAND JAIN, C/O, M/S. T. T. INDUSTRIES, 10, POLLOCK STREET, 2 ND FLOOR, KOLKATA-700 001. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .