Adani Logistics Ltd., Ahmedabad V. The JCIT(OSD), Circle-1(1)(2), Ahmedabad

CO 93/AHD/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7381 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-01-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 27-06-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BIREN V SHAH; VARTHIK CHOKSHI
• Keywords: Earning of tax free income; Question of law; Revenue expenditure; Capital expenditure; Rule 8D; CHAPTER IV
• Section: 143(3); 14A; 115JB; 195; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. NO.1608/AHD/2018 (ASSESSMENT YEAR: 2015-16) JCIT(OSD), CRICLE-1(1)(2), AHMEDABAD VS. M/S. ADANI LOGISTICS LTD. 9 TH FLOOR, SHIKHAR BUILDING NR. MITHAKHALI SIX ROAD, NAVRANGPURA, AHMEDABAD-380009 AND CO NO. 93/AHD/2019 (IN I.T.A. NO. 1608/AHD/2018) (ASSESSMENT YEAR : 2015-16) M/S. ADANI LOGISTICS LTD. 9 TH FLOOR, SHIKHAR BUILDING NR. MITHAKHALI SIX ROAD, NAVRANGPURA, AHMEDABAD-380009 VS. JCIT(OSD), CRICLE-1(1)(2), AHMEDABAD [PAN NO. AAB CI4 157 J] ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI SATISH SOLANKI , SR. D.R. RESPONDENT BY : SHRI VARTHIK CHOKSHI & BIREN V. SHAH, A.R. DATE OF HEARING 2 2 . 01 .20 20 DATE OF PRONOUNCEMENT 31.01.2020 O R D E R PER MS. MADHUMITA ROY JUDICIAL MEMBER: PRESENT APPEAL IS AT THE INSTANCE OF THE REVENUE AG AINST THE ORDER OF LD.CIT(A)- 1, AHMEDABAD DATED 27.4.2018 PASSED FOR THE ASSESSM ENT YEAR 2015-16, WHICH AROSE OUT OF THE ORDER DCIT, CIR.1(1)(2), AHMEDABAD DATED 20.12.2017 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED AS TO THE ACT) FOR THE - 2 - ITA NO.1608/AHD/2018 AND CO NO.93/AHD/2019 JCIT VS. ADANI LOGISTICS LTD. ASSESSMENT YEAR (A.Y.) 2015-16. ON RECEIPT OF NOTI CE ON REVENUES APPEAL, ASSESSEE ALSO FILED THE ABOVE CROSS OBJECTION. BOTH ARE DIS POSED OF BY THIS COMMON ORDER. 2. FIRST WE TAKE REVENUES APPEAL IN ITA NO.1608/AH D/2018. THE GRIEVANCES OF THE REVENUE ARE GIVEN IN THE FOLLOWING GROUNDS ATTA CHED TO THE APPEAL MEMO. (1) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FA CTS IN DELETING THE ADDITION OF RS. 4,80,00,000/- MADE U/S. 35D OF THE I.T. ACT, 1961. (2) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN DELETING THE ADDITION OF RS. 2,00,390/- MADE U/S. 14A R.W. RULE 8D. (3) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN DELETING THE ADDITION OF RS. 2,00,390/- MADE U/S. 14A R.W. RULE 8D WHILE COMPUTI NG BOOK PROFIT U/S. 115JB OF THE I.T. ACT. (4) THE APPELLANT CRAVES, TO LEAVE, TO AMEND AND/OR TO ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. FIRST GROUND:- DELETION OF ADDITION OF RS. 4,80,00,000/- MADE U/S . 35D OF THE ACT:- 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT THE APPELLANT HAS INCURRED AN AMOUNT OF RS. 6,00,00,000 /- ON ACCOUNT OF LEGAL AND PROFESSIONAL FEES PAID TO ONE M/S. EMERGING INDIA I NVESTMENT ADVISORS PVT. LTD. IT WAS FURTHER FOUND BY THE LD. AO THAT SUCH EXPENDITU RE HAS BEEN INCURRED FOR PREPARATION OF FEASIBILITY STUDY FOR IMPROVEMENT AN D SET UP OF COAL LOGISTIC BUSINESS IN TERMS OF AGREEMENT BY AND BETWEEN THE APPELLANT AND THE SERVICE PROVIDER. IT WAS OBSERVED THAT SUCH FEASIBILITY STUDY WOULD PRIMARIL Y INVOLVE A FEASIBILITY STUDY FOR SET UP OF NEW FACILITIES OR SERVICES. SUCH EXPENDITURE , ACCORDING TO THE LD. AO IS COVERED UNDER THE PROVISION OF SEC. 35D AND THE SAME SHOULD BE AMORTIZED TO THE EXTENT OF 1/5 TH OF THE EXPENDITURE DURING THAT YEAR. ON THAT BASI S 1/5 TH OF THE SAID EXPENDITURE TO THE TUNE OF RS. 6,00,00,000/- TO RS. 1,20,00,000/- WAS ALLOWED AS A DEDUCTION AND BALANCE OF RS. 4,80,00,000/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE TO BE - 3 - ITA NO.1608/AHD/2018 AND CO NO.93/AHD/2019 JCIT VS. ADANI LOGISTICS LTD. AMORTIZED IN SUBSEQUENT YEARS. IN APPEAL THE ADDIT ION WAS DELETED BY THE LD. CIT(A), HENCE, REVENUE IS BEFORE THE TRIBUNAL. 4. AT THE TIME OF THE HEARING OF THE INSTANT APPEAL THE LD. ADVOCATE APPEARING FOR THE ASSESSEE WHILE SUPPORTING THE ORDER OF THE LD.C IT(A) SUBMITTED BEFORE US THAT THE LD. AO PRECEDED ON WRONG PREMISE THAT THE FEASIBILI TY AND ADVISORY SERVICES ARE SET UP FOR NEW LOGISTIC BUSINESS AND THE APPELLANT SINC E IS ALREADY IN THE BUSINESS OF LOGISTIC, THE SAID EXPENDITURE HAS BEEN INCURRED FO R EXTENSION OF THE SAID BUSINESS AND THUS ALLOWED RS. 1,20,00,000/- UNDER SECTION 35D OF THE ACT FOR THE CURRENT YEAR AND THE BALANCE AMOUNT TO BE ALLOWED IN SUBSEQUENT YEAR S. BUT THE CASE OF THE ASSESSEE IS THIS THAT SUCH EXPENDITURE WAS FOR IMPROVEMENT OF C OAL LOGISTIC BUSINESS AND SINCE THE APPELLANT IS ALREADY IN SUCH BUSINESS, PROFESSIONAL FEES PAID CANNOT BE CONSIDERED AS EXPENDITURE FOR EXTENSION OF EXISTING BUSINESS AND HENCE PROVISION OF SEC. 35D IS NOT APPLICABLE. HE FURTHER RELIED UPON THE JUDGMENT PA SSED BY THE HONBLE APEX COURT IN THE CASE OF TAPARIA TOOLS LTD. REPORTED IN 55 TAXMA NN.COM 361. 5. ON THE OTHER HAND, THE LD. DR RELIED UPON THE OR DER PASSED BY THE LD. AO. 6. HEARD THE PARTIES, PERUSED THE ORDERS WE FIND TH AT WHILE ALLOWING THE CLAIM OF THE ASSESSEE THE LD. CIT(A) OBSERVED AS FOLLOWS:- ON CAREFUL CONSIDERATION OF ENTIRE FACTS IT IS OB SERVED THAT APPELLANT COMPANY IS IN THE BUSINESS OF LOGISTICS SINCE 2005, WHICH INCL UDED COAL LOGISTIC BUSINESS. THE APPELLANT HAS ENTERED INTO CONSULTANCY AGREEMENT WI TH EMERGING INDIA INVESTMENT ADVISORS PRIVATE LIMITED ON 8 TH MAY, 2014 AND SCOPE OF CONSULTANCY SERVICES CLEARL Y PROVIDES THE CONSULTANT UNDERTAKES TO PROVIDE THE COMPANY CONSULTANCY SERVICES TOWARD FEASIBILITY STUDY FOR IMPROVEMENT/SET UP OF COAL LOGISTICS BUSINESS. FURTHER, SCOPE OF CONSULTANCY BUSINESS INCLUDES EVALUATION O F EXISTING LOGISTIC BUSINESS AND PROVIDING IMPROVEMENT IN SUCH BUSINESS AND ADVISING ON SET-UP OF ANY NEW FACILITIES/SERVICES TO INCREASE CUSTOMER STAKE. TH US, THERE IS NO EXPANSION OF ANY EXISTING UNIT AS APPELLANT IS ENGAGED IN LOGISTIC BUSINESS W HICH INCLUDES COAL LOGISTICS BUSINESS AND SERVICES ARE OBTAINED FOR IMPROVEMENT IN SUCH B USINESS. IT IS NOT THE CASE OF APPELLANT THAT IT IS IN THE BUSINESS OF EXPORT OF G OODS AND IT WAS IN PROCESS OF STARTING LOGISTICS BUSINESS WHICH CAN BE HELD AS SETTING UP OF NEW UNIT. THE IMPROVEMENT IN COAL LOGISTICS BUSINESS CANNOT BE TERMED AS EXTENSION OF UNDERTAKING AS ENVISAGED IN SECTION - 4 - ITA NO.1608/AHD/2018 AND CO NO.93/AHD/2019 JCIT VS. ADANI LOGISTICS LTD. 35D OF THE ACT. THE APPELLANT HAS INCURRED ENTIRE EXPENDITURE FOR IMPROVING ITS COAL LOGISTICS BUSINESS AND GENUINENESS OF SUCH EXPENDIT URE IS NOT DOUBTED BY THE ASSESSING OFFICER. EVEN HE HAS NOT TREATED SUCH EXPENDITURE AS CAPITAL EXPENDITURE AND THERE IS NO CONCEPT OF DIFFERING THE EXPENDITURE OVER A PERIOD OF 5 YEARS OR TEN YEARS UNDER THE INCOME TAX ACT. IF THE EXPENDITURE IS ALLOWABLE RE VENUE EXPENDITURE IN ONE YEAR, ENTIRE EXPENDITURE IS REQUIRED TO BE ALLOWED AS REVENUE EX PENDITURE IN VIEW OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF TAPARIA TOOLS LIMITED 55 TAXMAN.COM 361. THE HONBLE MUMBAI ITAT IN THE CASE OF PAN INDIA FOOD S OLUTIONS (P) LTD. REPORTED IN 53 TAXMANN.COM 520 WHEREIN IT IS HELD AS UNDER: THE EXPENDITURE INCURRED ON THE FEASIBILITY REPOR T PAID CONSTITUTES LEGAL EXPENSES INCURRED BY THE ASSESSEE TO ENSURE THE PR OPER ACQUISITION OF THE BRAND. THIS IS IN THE NATURE OF CONSULTANCY. T HE ASSESSEE IS ALREADY IN THE LINE OF CHAIN OF RESTAURANTS AND FOOD JOINTS. THE ACQU ISITION RELATING TO BRAND OF BLUE FOODS P. LTD. IS ALSO WITH RESPECT TO A FOOD CHAIN, THEREFORE, EXPENDITURE IS INCURRED BY THE ASSESSEE IN THE EXISTING LINE OF I TS BUSINESS. THE EXPENDITURE INCURRED ON CONSULTANCY HAS BEEN HELD BY THE DELHI HIGH COURT IN THE CASE OF CIT V. SHELL BITUMEN INDIA (P) LTD. [IT APPEAL NO. 815 OF 2010, DATED 11-8-2010] TO BE ON ACCOUNT OF REVENUE EXPENDITURE. THEREFORE, THERE IS NO INFIRMITY IN THE ORDER OF THE COMMISSIONER (APPEALS) VIDE WHICH IT HAS BEEN HELD THAT THE EXPENDITURE WERE IN THE NATURE OF REVENUE AND COUL D NOT BE DISALLOWED AS CAPITAL EXPENDITURE. [PARA 6]. CONSIDERING THE FACTS DISCUSSED HEREIN ABOVE AND IN VIEW OF DECISIONS REFERRED TO ABOVE, THE ENTIRE DISALLOWANCE OF RS. 4,80,00,000/- IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 7. QUESTION BEFORE US IS, WHETHER THE IMPUGNED EXPE NDITURE IS ALLOWABLE UNDER SECTION 35D OR UNDER SECTION 37 OF THE INCOME TAX A CT. WE FIND THAT THE APPELLANT HAS INCURRED THE EXPENDITURE FOR IMPROVING ITS COAL LOG ISTIC AND THE GENUINENESS WHEREOF HAS NOT BEEN DOUBTED BY THE AO WHEN THE SAID EXPEND ITURE IS ALLOWABLE AS REVENUE EXPENDITURE IN ONE YEAR WITHOUT DIFFERING THE SAME FOR A FURTHER PERIOD OF 5 YEARS OR SO ON. THE NATURE OF EXPENDITURE WAS FOR THE IMPROVEM ENT OF REGULAR DAY-TO-DAY WORKING OF THE ASSESSEE-COMPANY AND WHOLLY AND EXCL USIVELY FOR THE BUSINESS PURPOSE. THEREFORE, THE ENTIRE EXPENDITURE OUGHT TO HAVE BEEN ALLOWED BY THE AO AS REVENUE EXPENDITURE TAKING INTO CONSIDERATION THE R ATIO LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF TAPARIA TOOLS LTD. (SUPRA ) AS ALSO DECISION OF ITAT IN THE CASE OF PAN INDIA FOOD SOLUTIONS P.LTD., AS RELIED UPON BY THE LD.CIT(A) IN THE IMPUGNED ORDER. THEREFORE, DELETION OF DISALLOWANC E BY THE LD. CITT(A) IS, - 5 - ITA NO.1608/AHD/2018 AND CO NO.93/AHD/2019 JCIT VS. ADANI LOGISTICS LTD. THEREFORE, IN OUR CONSIDERED VIEW IS JUST AND PROPE R WITHOUT ANY AMBIGUITY SO AS TO WARRANT OUR INTERFERENCE. HENCE, THE ORDER IS IN T HE AFFIRMATIVE I.E. IN FAVOUR OF THE ASSESSEE, AND AGAINST THE REVENUE. THIS GROUND OF REVENUE IS DISMISSED. GROUND NO. 2:- THIS GROUND OF APPEAL RELATES TO DELETION OF ADDITI ON OF 2,00,390 MADE UNDER SECTION 14A READ WITH RULE 8D OF THE ACT. 8. UPON VERIFICATION OF THE BALANCE SHEET IT IS FOU ND THAT THE ASSESSEE COMPANY HAS MADE INVESTMENT IN SHARES AND HAVING SOME EXEMPT IN COME. THE ASSESSEE HAS CLAIMED EXPENDITURE ON ACCOUNT OF INTEREST PAYMENT ON LOANS AS ALSO REFLECTING FROM THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE AS OBSERVED IN THE ORDER PASSED BY THE LEARNED AO. THE ASSESSEE SINCE NOT IDENTIFIED ANY EXPENSE IN RE LATION TO THE EXEMPT INCOME NOT INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE A NOTI CE DATED 20.11.2017 WAS ISSUED BY THE REVENUE ASKING THE ASSESSEE TO EXPLAIN AS TO WH Y THE PROVISION OF SECTION 14A OF THE I.T. ACT READ WITH RULE 8D OF THE I.T RULES ARE NOT BE APPLICABLE IN THE INSTANT CASE. 9. THE ASSESSEE REPLIED THAT WHEN THERE IS NO EXEMP T INCOME EARNED BY THE ASSESSEE, THE QUESTION OF APPLICATION OF SECTION 14 A READ WITH RULE 8D OF THE I.T. RULE DOES NOT ARISE. HOWEVER, THE EXPLANATION OF THE AS SESSEE WAS NOT FOUND ACCEPTABLE BY THE LEARNED AO. HE, THEREFORE, MADE AND ADDITION OF RS.2,00,390/- AGAINST THE ASSESSEE WHICH WAS DELETED BY THE LEARNED CIT(A). H ENCE THE INSTANT APPEAL FILED BEFORE THE TRIBUNAL. 10. AT THE TIME OF HEARING, THE LEARNED ADVOCATE AP PEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT IT IS AN ADMITTED POSITION THAT THE ASSESSEE HAS NOT HAVING ANY EXEMPT INCOME IN THE YEAR UNDER CONSIDERATION WHICH IS ALSO AVAILABLE FROM THE AUDITED FINANCIAL STATEMENTS AND THE RETURN OF INCO ME. IN THAT VIEW OF THE MATTER HE RELIES UPON THE ORDER PASSED BY THE LEARNED CIT(A) IN DELETING SUCH DISALLOWANCE. HE - 6 - ITA NO.1608/AHD/2018 AND CO NO.93/AHD/2019 JCIT VS. ADANI LOGISTICS LTD. ALSO RELIED UPON THE JUDGMENT PASSED BY THE JURISDI CTIONAL HIGH COURT IN THE CASE OF CIT VS. CORRTECH ENERGY PRIVATE LTD. REPORTED IN [4 5 TAXMANN.COM 116] (2014). APART FROM THAT IN SUPPORT OF HIS CASE, IT WAS ALSO CONTENDED BY THE LEARNED ADVOCATE APPEARING FOR THE ASSESSEE THAT EVEN OTHERWISE NO D ISALLOWANCE UNDER 14A OF THE ACT CAN BE MADE, IF THE ASSESSEE HAS SUFFICIENT INTERES T FREE FUNDS TO COVER THE INVESTMENT OUT OF WHICH EXEMPT INCOME IS GENERATED. THE LD.CIT (A) HAS NOTICED BREAK UP OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE IN HIS IMPUGNED ORDER. IT IS DEMONSTRATED IN THE FOLLOWING TABLE: S. NO. PARTICULARS AMOUNT (RS. LAKHS) AS ON 31.03.2014 AS ON 31.03.2013 1 SHARE CAPITAL & RESERVES AND SURPLUS 34809.20 29,859.54 TOTAL INTEREST FREE FUNDS 34809.20 29,859.54 2 INVESTMENT IN EQUITY SHARES 26.54 26.54 3 INVESTMENT IN PREFERENCE SHARES -. - TOTAL INVESTMENTS 26.54 26.54 11. ON THE OTHER HAND THE LEARNED DR RELIED UPON TH E ORDER PASSED BY THE LEARNED AO. 12. HEARD THE PARTIES, PERUSED THE RELEVANT MATERIA LS AVAILABLE ON RECORD INCLUDING THE ORDER PASSED BY THE FIRST APPELLATE OF AUTHORIT Y. AS THE FACTS EMERGE FROM THE RECORD, WE FIND NO EXEMPT INCOME WAS CLAIMED BY THE ASSESSEE. A FINDING TO THAT EFFECT ALSO RECORDED BY THE LD.CIT(A) IN THE IMPUGN ED ORDER WHICH IS ALSO EVIDENT FROM THE AUDITED FINANCIAL STATEMENTS SUBMITTED DUR ING THE ASSESSMENT PROCEEDINGS. THE LD.CIT(A) ALSO ANALYSISED BREAK UP OF FUNDS AVA ILABLE WITH THE ASSESSEE AND FOUND THAT ASSESSEE WAS HAVING SUFFICIENT INTEREST FUNDS, AND A PROPORTIONATE DISALLOWANCE OF - 7 - ITA NO.1608/AHD/2018 AND CO NO.93/AHD/2019 JCIT VS. ADANI LOGISTICS LTD. INTEREST EXPENDITURE WAS NOT JUSTIFIED. IT WAS FUR THER THE CASE OF THE ASSESSEE THAT IT HAS SUFFICIENT INTEREST FREE FUNDS SO AS TO COVER THE I NVESTMENT AND IT IS A WELL ESTABLISHED FACT THAT NO DISALLOWANCE UNDER SECTION 14A IS WARR ANTED IN CASE THE ASSESSEE IS HAVING OWN FUNDS TO COVER THE INVESTMENT OUT OF WHI CH EXEMPT INCOME IS EARNED. THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. CORRETECH ENERGY P.LTD., (SUPRA) RELIED UPON THE LD.COUNSEL F OR THE ASSESSEE SUPPORT THE CASE OF THE ASSESSEE. THE RELEVANT PORTION OF THE JUDGMENT READS AS UNDER: 5.4 ON CAREFUL CONSIDERATION OF OBSERVATION OF ASS ESSING OFFICER AND CONTENTION OF APPELLANT, IT IS OBSERVED THAT DURING THE YEAR UNDE R CONSIDERATION APPELLANT HAS NOT EARNED ANY EXEMPT INCOME FROM INVESTMENTS MADE BY I T WHICH IS APPARENT FROM AUDITED ANNUAL ACCOUNTS AS WELL AS COMPUTATION OF TOTAL INC OME AS SUBMITTED BEFORE AS WELL AS IN APPELLATE PROCEEDINGS. THE HONBLE GUJARAT HIGH CO URT IN THE CASE OF CORRTECH ENERGY PVT. LTD. 45 TAXMANN.COM 116, ON IDENTICAL DISALLOW ANCE UNDER SECTION 14A WHEN NO DIVIDEND INCOME IS EARNED BY ASSESSEE, THE COURT HA S HELD AS UNDER: 4. COUNSEL FOR THE REVENUE SUBMITTED THAT THE ASSE SSING OFFICER AS WELL AS CIT(APPEALS) HAD APPLIED FORMULA OF RULE 8D OF THE INCOME TAX RULES, SINCE THIS CASE AROSE AFTER THE ASSESSMENT YEAR 2009-2010. SIN CE IN THE PRESENT CASE, WE ARE CONCERNED WITH THE ASSESSMENT YEAR 2009-2010, SUCH FORMULA WAS CORRECTLY APPLIED BY THE REVENUE. WE HOWEVER, NOTICE THAT SUB -SECTION(1) OF SECTION 14A PROVIDES THAT FOR THE PURPOSE OF COMPUTING TOTAL IN COME UNDER CHAPTER IV OF THE ACT, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EX PENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IN THE PRESENT CASE, THE TRIBUNAL HAS RECO RDED THE FINDING OF FACT THAT THE ASSESSEE DID NOT MAKE ANY CLAIM FOR EXEMPTION OF AN Y INCOME FROM PAYMENT OF TAX. IT WAS ON THIS BASIS THAT THE TRIBUNAL HELD TH AT DISALLOWANCE UNDER SECTION 14A OF THE ACT COULD NOT BE MADE. IN THE PROCESS TRIBUN AL RELIED ON THE DECISION OF DIVISION BENCH OF PUNJAB AND HARYANA HIGH COURT IN CASE OF CIT V WINSOME TEXTILE INDUSTRIES LTD. [2009] 319 ITR 204 IN WHICH ALSO THE COURT HAD OBSERVED AS UNDER: 7. WE DO NOT FIND ANY MERIT IN THIS SUBMISSION. TH E JUDGEMENT OF THIS COURT IN ABHISHEK INDUSTRIES LTD (2006) 286 ITR 1 W AS ON THE ISSUE OF ALLOWABLY OF INTEREST PAID ON LOANS GIVEN TO SISTER CONCERNS, WITHOUT INTEREST. IT WAS HELD THAT DEDUCTION FOR INTEREST W AS PERMISSIBLE WHEN LOAN WAS TAKEN FOR BUSINESS PURPOSE AND NOT FOR DIVERTIN G THE SAME TO SISTER CONCERN WITHOUT HAVING NEXUS WITH THE BUSINESS. THE OBSERVATIONS MADE THEREIN HAVE TO BE READ IN THAT CONTEXT. IN THE PRE SENT CASE, ADMITTEDLY THE ASSESSEE DID NOT MAKE ANY CLAIM FOR EXEMPTION. IN S UCH A SITUATION SECTION 14A COULD HAVE NO APPLICATION. - 8 - ITA NO.1608/AHD/2018 AND CO NO.93/AHD/2019 JCIT VS. ADANI LOGISTICS LTD. 5. WE DO NOT FIND ANY QUESTION OF LAW ARISING, TAX APPEAL IS THEREFORE DISMISSED. FURTHER, HON'BLE AHMEDABAD ITAT IN CASE OF SHAH ALL OYS LTD [2315/AHD/2010], DATED 27/03/2015 FOLLOWING THE DECISION OF CORRTECH ENERGY PRIVATE LTD (REFERRED SUPRA), HELD AS UNDER: THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS RELIED ON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. CORRTECH ENERGY (P) LTD, REPORTED IN (2014) 272 CTR 262 (GUJ.)(HC), WHEREIN IT HAS BEEN HELD TH AT WHERE THE ASSESSEE HAS NOT MADE ANY CLAIM FOR EXEMPTION OF ANY INCOME FROM PAYMENT OF TAX, NO DISALLOWANCE COULD BE MADE U/S 14A OF THE ACT. THE DEPARTMENTAL REPRESENT ATIVE HAS NOT DISPUTED THE SUBMISSION OF THE ASSESSEE THAT DURING THE ASSESSME NT YEARS UNDER CONSIDERATION THE ASSESSEE HAS NOT CLAIMED ANY INCOME AS EXEMPT FROM TAX IN ITS RETURN OF INCOME FILED. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF H ON'BLE GUJARAT HIGH COURT IN THE CASE OF CORRTECH ENERGY (P) LTD (SUPRA), WE DELETE THE D ISALLOWANCE OF EXPENDITURE MADE U/S 14A READ WITH RULE 8D OF RS. 1,60,45,77 5/- IN THE ASSESSMENT YEAR 2007-08 AND RS. 2,04,30,860/- IN THE ASSESSMENT YEAR 2008-09. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED IN BOTH THE YEARS UNDER APPEAL. FURTHER, HONBLE DELHI HIGH COURT IN CASE OF HOLCIM INDIA PRIVATE LTD. (ITA NO. 486/2014 & ITA NO. 299/2014), HONBLE ALLAHABAD HIG H COURT IN THE CASE OF CIT VS. SIVAM MOTORS PRIVATE LTD. IN I.T. APPEAL NO. 88 OF 2014 DATED 5.5.2014 ON IDENTICAL FACTS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. CONSIDERIN G, THE FACTS OF APPELLATNS CASE AS DISCUSSED HEREIN ABOVE ALONG WITH DECISIONS REFERRE D SUPRA, IT IS HELD THAT DISALLOWANCE U/S. 14A R.W. RULE 8D CANNOT BE MADE AS APPELLANT H AS NOT EARNED ANY EXEMPT INCOME. IN THE NUTSHELL, DISALLOWANCE U/S. 14A MADE BY ASSESSI NG OFFICER FOR RS. 2,00,390/- IS DELETED. IN THE RESULT, THIS GROUND OF APPEAL IS ALLOWED. 13. HONBLE GUJARAT HIGH COURT HAS HELD THAT IN THE ABSENCE OF ANY EXEMPT INCOME BEING CLAIMED BY THE ASSESSEE PROVISIONS OF SECTION 14A R.W.R 8D COULD NOT BE INVOKED AND NO EXPENSES COULD BE CONSIDERED FOR DISALLOWANC E. IN THE PRESENT CASE, THE LD.CIT(A) HAS HELD THAT THE ASSESSEE HAS NO EXEMPT INCOME IN THIS YEAR. IN VIEW OF THE ABOVE SITUATION, WE FIND THAT NO MERIT IN THIS GROUND RAI SED BY THE REVENUE. IT IS REJECTED. 14. THIS GROUND OF APPEAL RELATES TO DELETION OF AD DITION OF RS.2,00,390/- MADE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D OF THE I.T RULES WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE INCOME TAX ACT. THE LEARNED ASSESSING OFFICER HAS IN ADDITION TO THE DI SALLOWANCE HAS ENHANCED THE BOOK PROFIT UNDER SECTION 115 JB OF THE ACT BY THE AMOUN T OF DISALLOWANCE UNDER SECTION - 9 - ITA NO.1608/AHD/2018 AND CO NO.93/AHD/2019 JCIT VS. ADANI LOGISTICS LTD. 14A READ WITH RULE 8D OF THE ACT THE CASE OF THE AS SESSEE IS THIS THAT MERELY BECAUSE DISALLOWANCE HAS BEEN MADE UNDER SECTION 14A OF THE ACT IT CANNOT SUO MOTTO RESULT IN AN ADDITION WHILE COMPUTING THE BOOK PROFIT. HOWEVE R, SUCH PLEA OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE LEARNED AO AND HE, THER EFORE, ENHANCED THE BOOK PROFIT UNDER SECTION 115 JB OF THE ACT OF RS.2,00,390/- WH ICH WAS IN TURN DELETED BY THE LD. CIT(A). AGAINST THIS DELETION, REVENUE IS BEFORE T HE TRIBUNAL. 15. AT THE TIME OF HEARING OF THE INSTANT APPEAL TH E LEARNED ADVOCATE APPEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT IT IS A SETTL ED POSITION OF LAW THAT IS THAT IF THE BALANCE SHEET AND THE PROFIT AND LOSS HAVE BEEN PRE PARED IN ACCORDANCE WITH THE PARTS II AND III OF SCHEDULE-VI OF THE COMPANIES ACT, 195 6 NO ADJUSTMENTS CAN BE MADE BY THE ASSESSING OFFICER WHILE COMPUTING BOOK PROFIT E XCEPT SUCH WHICH MAY BE PERMISSIBLE UNDER THE EXPLANATION OF SECTION 115JB. IN SUPPORT OF HIS CONTENTIONS, HE RELIED UPON THE DECISION OF SPECIAL BENCH IN THE CA SE OF ACIT VS. VIREET INVESTMENTS P.LTD., 165 ITD 27 (SB). HE THEREFORE SUPPORTED TH E ORDER PASSED BY THE FIRST APPELLATE AUTHORITY. 16. ON THE OTHER HAND, THE LEARNED DR RELIED UPON T HE ORDER PASSED BY THE LEARNED AO. 17. HEARD THE PARTIES, PERUSED THE RELEVANT MATERIA LS AVAILABLE ON RECORDS INCLUDING THE ORDER PASSED BY THE SPECIAL BENCH OF THE TRIBUN AL IN THE CASE OF ACIT VS. VIREET INVESTMENTS P.LTD. (SUPRA). WE ARE OF THE VIEW THAT SPECIAL BENCH OF THE ITAT IN THE CASE OF VIREET INVESTMENT P.LTD. (SUPRA) HAS FORMUL ATED FOLLOWING QUESTION FOR ADJUDICATION ON THIS ISSUE: WHETHER THE EXPENDITURE INCURRED TO EARN EXEMPT IN COME COMPUTED U/S.14A COULD NOT BE ADDED WHILE COMPUTING BOOK PRO FIT U/S.115JB OF THE ACT. - 10 - ITA NO.1608/AHD/2018 AND CO NO.93/AHD/2019 JCIT VS. ADANI LOGISTICS LTD. 18. SPECIAL BENCH ANSWERED THIS QUESTION IN FAVOUR OF THE ASSESSEE AND HELD THAT COMPUTATION FOR THE PURPOSE OF CLAUSE (F) OF EXPLAN ATION 1 TO SECTION 115JB(2) IS TO BE MADE WITHOUT RESORTING TO THE COMPUTATION AS CON TEMPLATED UNDER SECTION 14A R.W. RULE 8D. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE SPECIAL BENCH, WE ALLOW THIS GROUND OF APPEAL AND DIRECT THE AO NOT TO MAKE ADJUSTMENTS IN BOOK PROFIT FOR THE PURPOSE OF MAT LIABILITY ON THE BASIS OF CALCULATIO NS MADE WITH RULE 8D OF THE INCOME TAX RULES. 19. WE FIND NO JUSTIFICATION IN REVERSING THE ORDER PASSED BY THE LEARNED CIT(A) IN DELETING THE ENHANCEMENT OF BOOK PROFIT MADE BY THE LEARNED AO TO THE EXTENT OF EXEMPT, HENCE THE REVENUES APPEAL IS FOUND TO BE D EVOID OF ANY MERIT, AND THEREFORE GROUND NO.3 IS DISMISSED. 20. IN THE RESULT, REVENUES APPEAL IS DISMISSED. 21. NOW WE TAKE CROSS OBJECTION FILED BY THE ASSESS EE. 22. AT THE TIME OF HEARING OF THE MATTER, THE LEARN ED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT HE IS NOT PRESSING THE CO. IN VIEW OF THIS SUBMISSION OF THE ASSESSEE, CO FILED BY THE ASSESSEE STANDS DISMISSED FOR WANT OF PROSECUTION. 23. IN THE COMBINED RESULT, BOTH REVENUES APPEAL A ND ASSESSEES CO ARE DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 31/01/2020 SD/- SD/- ( WASEEM AHMED ) ( MS. MADHUMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 31/01/2020 TANMAY, SR.PS