M/s. Orbit Electricals Pvt. Ltd., Pune V. Addl. CIT, Range-9, Pune

ITA 1086/PUN/2013

• Counselvise Citation: 108624514 RSA 2013
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 15-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Business income; Depreciation; Rule of consistency; Earning of tax free income
• Section: 56(2); 14A; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1086/PN/2013 (ASSESSMENT YEAR : 2009-10) M/S. ORBIT ELECTRICALS PVT. LTD., HARMONY COMPLEX, 5, ICS COLONY, GANESHKHIND ROAD, PUNE 411 007 PAN NO.AAACF2636C .. APPELLANT VS. ADL.CIT, RANGE-9, PUNE .. RESPONDENT ASSESSEE BY : SHRI SUNIL PATHAK REVENUE BY : SHRI B.C. MALAKAR DATE OF HEARING : 11-12-2014 DATE OF PRONOUNCEMENT : 31-12-2014 ORDER PER R.K.PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 08-03-2013 OF THE CIT(A)-V, PUNE RELATING TO ASSESSMENT YEAR 2009-10. 2. GROUNDS OF APPEAL NO. 1 TO 1.5 BY THE ASSESSEE A RE AS UNDER ; THE FOLLOWING GROUNDS ARE TAKEN WITHOUT PREJUDICE T O EACH OTHER ON FACTS AND IN LAW, 1] THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISA LLOWANCE OF RS.8,41,774/-U/S 14A R.W.R. 8D OF THE INCOME TAX RULE S, 1962. 1.1] THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE A.O. HAD NOT PROVED THAT THE AMOUNT OF DISALLOWANCE U/S. 14A O FFERED BY THE ASSESSEE WAS INCORRECT AND HENCE, IN THE ABSENCE OF A PRO PER SATISFACTION ARRIVED AT BY THE LEARNED A.O., NO DISALL OWANCE U/S. 14A COULD BE MADE BY INVOKING THE PROVISIONS OF RULE 8D. 2 1.2] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESSEE HAD UTILIZED INTEREST BEARING BORROWED FUNDS FOR MAKING T AX FREE INVESTMENTS AND HENCE, AN AMOUNT OF RS.3,08,582/- WAS T O BE DISALLOWED AS PER THE PROVISIONS OF RULE 8D(2)(II) OF T HE INCOME TAX RULES, 1962 WITHOUT APPRECIATING THAT THE ASSESSEE HAD N OT UTILIZED ANY BORROWED FUNDS FOR MAKING INVESTMENTS IN EARNING T AX FREE INCOME. 1.3] THE LEARNED CIT(A) FURTHER ERRED IN HOLDING T HAT AN AMOUNT OF RS. 5,33,192/- COMPUTED IN ACCORDANCE WITH RULE 8D(2 )(III) WAS DISALLOWABLE UNDER THE PROVISIONS OF SECTION 14A OF THE ACT ON THE GROUND THAT THE SAME AMOUNTED TO INDIRECT EXPENDITUR E INCURRED IN RELATION TO EXEMPT INCOME AND HENCE, NOT ALLOWABLE AS A DEDUCTION. 1.4] THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE HAD ITSELF OFFERED AN AMOUNT OF RS. 5,000 IN RESP ECT OF DISALLOWANCE U/S 14A IN THE RETURN FILED FOR THIS YEAR AND HENCE, THE SAME SHOULD HAVE BEEN ACCEPTED ON THE FACTS OF THE CASE . 1.5] WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE ASSE SSEE SUBMITS THAT THE DISALLOWANCE MADE U/S 14A R.W.R. 8D IS VERY H IGH AND MAY BE REDUCED SUBSTANTIALLY. 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF SPECIAL PURPOSE MACHINE. THE ASSESSEE ALSO DERIVES INCOME FROM HIR ING OF PROPERTY. IT FILED ITS RETURN OF INCOME ON 29-09-2009 DECLARI NG TOTAL INCOME OF RS.15,82,552/-. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, THE AO NOTED THAT THE BALANCE SHEET OF THE ASSESSEE SHO WS LONG TERM INVESTMENT IN SHARES AND MUTUAL FUNDS AT RS.10.66 C RORES WHICH IS THE SAME AS IN THE IMMEDIATELY PRECEDING YEAR. HE NOTED THAT THE PRIMARY AND DIRECT SOURCE OF THE INVESTMENT IS OUT OF OD/CC ACCOUNT OF THE ASSESSEE WHICH ARE INTEREST BEARING ACCOUNT. ON BEING QUESTIONED BY THE AO, IT WAS EXPLAINED THAT P RACTICALLY NO EXPENSES ARE THERE FOR EARNING THESE INCOME AS THES E ARE INVESTMENT IN GROUP CONCERNS AND THE COMPANY HAS EARNED DIVIDE ND INCOME OF RS.2.96 CRORES. IT WAS EXPLAINED THAT THE INCREASE IN INVESTMENT OF RS.0.19 CRORES HAS BEEN FUNDED OUT OF DIVIDEND INCO ME. HOWEVER, THE AO DID NOT ACCEPT THE ABOVE CONTENTION. ACCORDI NG TO HIM DIRECT 3 NEXUS IS ESTABLISHED BETWEEN THE INVESTMENT IN THE SHARES MADE AND DIVIDEND EARNED. HE REFERRED TO THE DECISION OF TH E HONBLE PUNJAB & HIGH COURT IN THE CASE OF CIT VS. HERO CYCLES WHE RE IT HAS BEEN HELD THAT IF THE DIRECT NEXUS BETWEEN THE INVESTMEN T MADE IN SHARES AND MUTUAL FUNDS OUT OF OD/CC ACCOUNT IS ESTABLISHE D, THE PROVISIONS OF RULE 8D ARE ATTRACTED. HE THEREFORE CAME TO THE CONCLUSION THAT PROVISIONS OF SECTION 14A R.W. RULE 8D ARE CLEARLY ATTRACTED TO THE ASSESSEE AS THE CORRECTNESS OF THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE AND THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED IS N OT ESTABLISHED. REJECTING THE CLAIM OF DISALLOWANCE OF RS. 5,000/- MADE BY THE ASSESSEE UNDER RULE 8D IN THE COMPUTATION, THE AO D ISALLOWED AN AMOUNT OF RS.8,41,774/- BY APPLYING THE PROVISIONS OF SECTION 14A R.W. RULE 8D. 3. BEFORE CIT(A) THE ASSESSEE REITERATED THE SAME ARGUMENTS AS MADE BEFORE THE AO. IT WAS EXPLAINED THAT THE INVE STMENT IN SHARES AND MUTUAL FUNDS WERE MADE LONG BACK IN A.Y. 1994- 95 IN GROUP COMPANIES LIKE FINOLEX CABLES LTD. AND FINOLEX INDU STRIES LTD. IN ORDER TO KEEP PROMOTERS STAKE INTACT WHICH CONTINU ED IN THE RELEVANT ASSESSMENT YEAR. IT WAS ARGUED THAT INVES TMENT WAS MADE OUT OF PROCEEDS RECEIVED FROM ISSUE OF EQUITY SHARE S OF THE ASSESSEE COMPANY AND INTEREST ACCRUED WHILE CASH CREDIT FACI LITY HAS BEEN UTILIZED FOR ITS WORKING CAPITAL REQUIREMENT. RELY ING ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF REL IANCE UTILITIES AND POWER LTD. REPORTED IN 313 ITR 300 IT WAS SUBMI TTED THAT NO 4 DISALLOWANCE IS WARRANTED. THE ASSESSEE FURTHER AR GUED THAT DIVIDEND WAS CREDITED DIRECTLY IN THE BANK ACCOUNT AND THEREFORE NO EFFORTS/EXPENSES WERE INCURRED FOR EARNING SUCH INC OME. IN ANY CASE THE DISALLOWANCE MADE BY THE ASSESSEE SUOMOTO AMOUN TING TO RS.5,000/- IN THE COMPUTATION OF INCOME COVERS ANY EXPENDITURE WHICH SHOULD HAVE BEEN INCURRED FOR EARNING SUCH IN COME. 4. HOWEVER, THE LD.CIT(A) WAS ALSO NOT CONVINCED WI TH THE EXPLANATION GIVEN BY THE ASSESSEE. HE HELD THAT TH E CLAIM OF THE ASSESSEE THAT NO INTEREST BEARING FUNDS WERE UTILIZ ED FOR THE PURPOSE OF INVESTMENT IN SHARES AND UNITS IS CONTRARY TO TH E FINDINGS OF THE AO. HE NOTED THAT THE AO HAS GIVEN A CLEAR FINDING THAT INVESTMENT IS OUT OF OD/CC ACCOUNT. THE ASSESSEE HAS NOT BEEN ABLE TO REBUT THE FINDING WITH COGENT EVIDENCES. HE THEREFORE HE LD THAT THERE IS NO MERIT IN THE SUBMISSION OF THE ASSESSEE THAT INTERE ST BEARING FUNDS WERE NOT UTILIZED FOR THE PURPOSE OF INVESTMENT IN SHARES. SO FAR AS THE VARIOUS DECISIONS RELIED ON BY THE ASSESSEE BEF ORE HIM HE HELD THAT ALL THOSE DECISIONS ARE DISTINGUISHABLE AND NO T APPLICABLE TO THE FACTS OF THE PRESENT CASE. HE ACCORDINGLY UPHELD T HE ACTION OF THE AO. 4.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 5. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLE NGED THE ORDER OF THE CIT(A). REFERRING TO THE COMPUTATION OF INCOME FOR THE A.Y. 2009-10, A COPY OF WHICH IS PLACED AT PAPER BO OK PAGES 49 TO 5 51, HE SUBMITTED THAT THE ASSESSEE SUOMOTO HAS DISA LLOWED AN AMOUNT OF RS.5,000/- U/S.14A. REFERRING TO THE COP Y OF THE BALANCE SHEET PLACED AT PAPER BOOK PAGE 26 HE SUBMITTED THA T THE SHARE CAPITAL OF THE COMPANY STANDS AT RS.4.41 CRORES AND THE RESERVES AND SURPLUS OF THE COMPANY STANDS AT RS.33.21 CRORES. THUS, OWN CAPITAL AND FREE RESERVES OF THE COMPANY STANDS AT RS.37.62 CRORES. REFERRING TO THE PROFIT AND LOSS ACCOUNT OF THE COM PANY FOR THE YEAR ENDING 31-03-2009, A COPY OF WHICH IS PLACED AT PAG E 27 OF THE PAPER BOOK, HE SUBMITTED THAT THE INCOME FROM MANUF ACTURING ACTIVITY HAS BEEN SHOWN AT RS.2.51 CRORES AND SURPL US FROM SHARE TRADING ACTIVITY HAS BEEN SHOWN AT RS.69,09,987/-. REFERRING TO PAGE 39 OF THE PAPER BOOK, HE SUBMITTED THAT DURING THE YEAR ONLY 825 SHARES OF RELIANCE INDUSTRIES LTD. WERE PURCHAS ED @ 2000 EACH AMOUNTING TO RS.17,07,591/-. THE REMAINING SHARES ARE CARRIED FORWARD IN THE BALANCE SHEET FROM 1999 ONWARDS. AG AIN REFERRING TO THE SAID PAGE, HE SUBMITTED THAT THE MAJOR SHARES A RE OF FINOLEX CABLES LTD., TOTALING TO 42,53,500 SHARES. THE REM AINING HOLDINGS BY THE ASSESSEE COMPANY ARE VERY MEAGER, SUCH AS BA JAJ AUTO LTD., - 50 SHARES, BAJAJ FINSTER LTD.-50 SHARES BAJAJ HOLDI NG AND INVESTMENT LTD. -50 SHARES, TATA TEA LTD. -50 SHARE S AND TECH MAHINDRA 1000 SHARES. REFERRING TO PAGE 40 OF TH E PAPER BOOK, HE DREW THE ATTENTION OF THE BENCH TO THE PROFIT AND L OSS FROM TRADING OF MUTUAL FUNDS AND SUBMITTED THAT THE ENTIRE PURCHASE S DURING THE YEAR WERE SOLD DURING THE YEAR ITSELF AND THE DIVIDEND T HAT HAS BEEN RECEIVED HAS BEEN OFFERED TO TAX AS SHORT TERM CAPI TAL GAIN. HE SUBMITTED THAT NO SERVICES ARE REQUIRED FOR EARNING DIVIDEND ON 6 SHARES HELD AS INVESTMENT IN FINOLEX CABLES LTD. SI NCE IT HAS BEEN HELD LONG BACK AND THE DIVIDEND IS DIRECTLY CREDITE D TO THE BANK ACCOUNT OF THE ASSESSEE. THE INCOME FROM OTHER SHA RES WHICH IS EXEMPT IS VERY NOMINAL AND THE TOTAL DIVIDEND EARNE D ON THOSE SHARES ARE ONLY RS.6,175/-. AGAINST SUCH EXEMPT IN COME OF RS.6,175/- THE ASSESSEE HAS ALREADY DISALLOWED ON I TS OWN AN AMOUNT OF RS.5000/-. THEREFORE, THE DISALLOWANCE CLAIMED BY THE ASSESSEE IS JUSTIFIED. 5.1 AS REGARDS THE ALLEGATION OF THE AO THAT OD/CC ACCOUNT WAS USED FOR INVESTMENT IN SHARES, HE SUBMITTED THAT TH E SAME IS INCORRECT. THE INVESTMENTS WERE MADE OUT OF CURREN T ACCOUNT. HE SUBMITTED THAT THE PROFIT ON MUTUAL FUNDS WAS TAXAB LE. THERE WAS NEITHER ANY OPENING STOCK NOR ANY CLOSING STOCK AND THE ENTIRE PURCHASES WERE SOLD DURING THE YEAR. REFERRING TO PAGE 1 OF THE PAPER BOOK HE SUBMITTED THAT BEFORE CIT(A) THE ASSE SSEE HAS SUBMITTED THAT ENTIRE INVESTMENT IS MADE OUT OF PRO CEEDS RECEIVED ON ISSUE OF EQUITY SHARES OF THE ASSESSEE COMPANY AND INTERNAL ACCRUAL. REFERRING TO THE CURRENT ACCOUNT MAINTAINED WITH IC ICI BANK, HE SUBMITTED THAT ALL THE INVESTMENTS WERE THROUGH THE CURRENT ACCOUNT AND NOT FROM THE OD/CC ACCOUNT. FURTHER, HE FILED A CERTIFICATE FROM THE COMPANY DULY SINGED BY THE AUTHORIZED SIGN ATORY STATING THAT NO INVESTMENTS OR PURCHASE OF SHARES WERE MADE FROM OD/CC ACCOUNT OF THE ASSESSEE MAINTAINED WITH CENTRAL BAN K OF INDIA, PUNE BRANCH AND INVESTMENT AND PURCHASE OF SHARES AND MU TUAL FUNDS WERE DEBITED TO CURRENT ACCOUNT OF THE COMPANY WITH ICICI BANK. 7 HE SUBMITTED THAT DESPITE THE SUBMISSION MADE BEFOR E THE AO AS WELL AS THE CIT(A) THAT INVESTMENTS WERE MADE OUT O F OWN FUNDS AND INTERNAL ACCRUALS THEY HAVE ERRONEOUSLY HELD TH AT INVESTMENTS ARE OUT OF OD/CC ACCOUNT. 5.2 HE SUBMITTED THAT THE AO HAS NOT RECORDED ANY S ATISFACTION AND HIS OBSERVATIONS ARE BASED ON WRONG FACTS. THE AO HAS TO SHOW THAT AS TO HOW RS.5000 DISALLOWED BY THE ASSESSEE U /S.14A IS INCORRECT. REFERRING TO THE DECISION OF THE PUNE B ENCH OF THE TRIBUNAL IN THE CASE OF ADDL.CIT VS.M.D. INDUSTRIE S VIDE ITA NO.2454/PN/2012 ORDER DATED 31-01-2014 FOR THE A.Y. 2008-09 HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HA S DISMISSED THE APPEAL FILED BY THE REVENUE WHERE THE CIT(A) HAD DE LETED THE DISALLOWANCE MADE BY THE AO U/S.14A R.W. RULE 8D ON THE GROUND THAT THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUND S AND THERE WAS NO NEXUS BETWEEN THE BORROWED FUNDS AND INVESTMENT IN MUTUAL FUNDS. THE AO HAS FAILED TO ESTABLISH ANY NEXUS BETWEEN TH E BORROWED FUNDS AND THE INVESTMENT IN THE TAX FREE BONDS. 5.3 REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF DHARMVEER SAMBHAJI URBAN COOPERATIVE BA NK LTD. VS. ADDL.CIT VIDE ITA NO.1287/PN/2012 ORDER DATED 20-09 -2013 HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HA S ALLOWED THE APPEAL OF THE ASSESSEE BY HOLDING THAT THERE IS NO CATEGORICAL FINDING BY THE AO THAT THE ASSESSEE HAS UTILIZED THE INTERE ST BEARING FUNDS FOR MAKING THE INVESTMENT IN THE MUTUAL FUNDS. REF ERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE C ASE OF KALYANI 8 STEELS LTD. VS. ADDL.CIT VIDE ITA NO.1733/PN/2012 O RDER DATED 30-01-2014 HE SUBMITTED THAT THE TRIBUNAL IN THE SA ID DECISION HAS HELD THAT INVOKING OF RULE 8D OF THE I.T.RULES IN O RDER TO COMPUTE THE DISALLOWANCE U/S.14A OF THE ACT IS NEITHER AUTO MATIC AND NOR IS TRIGERRED MERELY BECAUSE ASSESSEE HAS EARNED AN EXE MPT INCOME. THE INVOKING OF RULE 8D OF THE RULES IS PERMISSIBLE ONLY WHEN THE AO RECORDS SATISFACTION IN REGARD TO THE CORRECTNES S OF THE CLAIM OF THE ASSESSEE HAVING REGARD TO THE ACCOUNTS OF THE A SSESSEE. SECTION 14A(2) OF THE ACT ENVISAGED A CONDITION PRECEDENT F OR INVOKING RULE 8D OF THE RULES AND COMPUTE DISALLOWANCE THERE OF ONLY IF THE AO RECORDS THAT HE IS NOT SATISFIED WITH THE CORREC TNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE, HAV ING REGARD TO THE ACCOUNT OF THE ASSESSEE. ACCORDINGLY, THE TRIBUNAL HAS ALLOWED THE APPEAL FILED BY THE ASSESSEE WHERE DISALLOWANCE MAD E BY THE ASSESSEE SUOMOTO AT RS.5 LAKHS WAS ENHANCED TO RS.1 ,05,46,918/- BY THE REVENUE AUTHORITIES. HE SUBMITTED THAT SINCE T HE AO IN THE INSTANT CASE HAS DISALLOWED AN AMOUNT OF RS.8,41,77 4/- ON WRONG APPRECIATION OF FACTS, THEREFORE, THIS DISALLOWANCE MADE BY THE AO AND UPHELD BY THE CIT(A) SHOULD BE DELETED. 6. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND STRONGLY SUPPORTED THE ORDER OF THE CIT(A). 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE 9 ASSESSEE IN THE INSTANT CASE HAS DISALLOWED AN AMOU NT OF RS. 5,000/- U/S.14A. THE AO REJECTING THE EXPLANATION OF THE A SSESSEE HAS DISALLOWED AN AMOUNT OF RS.8,41,774/- U/S.14A R.W. RULE 8D WHICH HAS BEEN UPHELD BY THE LD.CIT(A). FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE IN THE PAPER BOOK, WE FIN D THE ASSESSEE HAS PURCHASED THE SHARES OF RELIANCE INDUSTRIES LTD. TH ROUGH PRABHUDAS LILADHER PVT. LTD. AND THE PAYMENTS WERE MADE FROM CURRENT ACCOUNT MAINTAINED WITH ICICI BANK. AN AMOUNT OF RS .15,08,710.32 WAS PAID BY CHEQUE NO.880829 DATED 22-09-2008 OUT O F THE CURRENT ACCOUNT MAINTAINED WITH ICICI BANK. SIMILARLY, AN AMOUNT OF RS.2,01,007/- HAS BEEN PAID VIDE CHEQUE NO.380830 D ATED 24-09- 2008 FROM THE SAID CURRENT ACCOUNT MAINTAINED WITH ICICI BANK. FURTHER, THE DIVIDEND INCOME FROM SHARE TRADING ACC OUNT ARE ALL CREDITED TO THE CURRENT ACCOUNT MAINTAINED WITH ICI CI BANK. THEREFORE, THE VERY BASIS OF FINDING BY THE AO AS W ELL AS THE CIT(A) THAT SHARES WERE PURCHASED BY UTILISING THE BORROWE D FUNDS IS NEGATED. THE ASSESSEE HAS CONCLUSIVELY PROVED THAT NO BORROWED FUNDS FROM THE OD/CC ACCOUNT HAS BEEN UTILISED FOR PURCHASE OF SHARES OF RELIANCE INDUSTRIES LTD., THE DIVIDEND IN COME OF WHICH IS EXEMPT. 7.1 SO FAR AS THE OTHER SHARES ARE CONCERNED, WE FI ND THEY ARE APPEARING SINCE LONG BACK IN THE BALANCE SHEET OF T HE COMPANY AS HELD BY THE AO HIMSELF. SIMILARLY, WE FIND THE MAJ OR DIVIDEND OF RS.63,80,250/- IS FROM FINOLEX CABLES LTD. WHICH IS A GROUP COMPANY. THE BALANCE DIVIDEND OF RS.6175 RECEIVED F ROM OTHER 10 COMPANIES IS VERY NEGLIGIBLE AND THE ASSESSEE HAS A LREADY DISALLOWED SUOMOTO AN AMOUNT OF RS.5,000/- IN THE C OMPUTATION STATEMENT. SO FAR AS THE INCOME FROM MUTUAL FUNDS ARE CONCERNED, THEY WERE ALL PURCHASED AND SOLD DURING THE YEAR AN D THE ASSESSEE HAS OFFERED THE SAME TO TAX. 7.2 WE FIND THE AO IN THE ASSESSMENT ORDER HAS NOT RECORDED ANY SATISFACTION ABOUT THE INCORRECTNESS OF THE CLAIM O F EXPENDITURE MADE BY THE ASSESSEE IN RELATION TO THE EXEMPT INCOME. FURTHER, ACCORDING TO THE ASSESSEE THE DISALLOWANCE OF RS.5000/- SUOMO TO JUSTIFIES THE MEAGRE AMOUNT OF DIVIDEND INCOME RECEIVED THAT TOO WHICH HAS BEEN CREDITED TO THE BANK ACCOUNTS DIRECTLY AND NO EFFORTS ARE REQUIRED. 7.3 WE FIND AN IDENTICAL ISSUE HAD COME UP BEFORE T HE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF KALYANI STEELS LTD. (SUPRA) WHERE REVENUE AUTHORITIES DISREGARDING THE SUOMOTO DISALLOWANCE OF RS.5 LAKHS MADE BY THE ASSESSEE ENHANCED THE SAME T O RS.1,05,46,918/-. THE TRIBUNAL ALLOWED THE APPEAL FILED BY THE ASSESSEE BY OBSERVING AS UNDER : 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. SECTION 14A OF THE ACT CONTEMPLATES THAT FOR THE PURPOSES OF COMP UTING THE TOTAL INCOME, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF E XPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DO ES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. SUB-SECTION (2) OF SECTION 14A OF THE ACT PRESCRIBES THAT THE ASSESSING OFFICER SHALL DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SU CH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME IN ACCO RDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED, SUCH PRESCRIBED METHOD BEING CONTAINED IN RULE 8D OF THE RULES. HOWEVER, THE AFOR ESAID EMPOWERMENT OF THE ASSESSING OFFICER TO INVOKE APPLICAT ION OF RULE 8D OF THE RULES IS SUPERSCRIBED BY A CONDITION CONTAINE D IN SUB- SECTION (2) OF SECTION 14A OF THE ACT WHICH IS TO THE EFFECT THAT THE 11 ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO THE I NCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. THEREFORE, T HE INVOKING OF RULE 8D OF THE RULES IN ORDER TO COMPUTE THE DISALLOW ANCE U/S 14A OF THE ACT IS NEITHER AUTOMATIC AND NOR IS TRIGGERED MERELY BECAUSE ASSESSEE HAS EARNED AN EXEMPT INCOME. THE INVOKING OF RU LE 8D OF THE RULES IS PERMISSIBLE ONLY WHEN THE ASSESSING OFFICER RE CORDS THE SATISFACTION IN REGARD TO THE INCORRECTNESS OF THE CLAI M OF THE ASSESSEE, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. IN OTHER WORDS, SECTION 14A(2) OF THE ACT ENVISAGED A CONDITION PRECEDENT FOR INVOKING RULE 8D OF THE RULES AND COMPUTING DISAL LOWANCE THEREOF ONLY IF THE ASSESSING OFFICER RECORDS THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPE CT OF SUCH EXPENDITURE, HAVING REGARD TO THE ACCOUNT OF THE ASSE SSEE. IN THIS CONTEXT, IT WOULD BE APPROPRIATE TO REFER TO THE FO LLOWING OBSERVATIONS OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. (SUPRA) :- '70. NOW, IN DEALING WITH THE CHALLENGE IT IS NE CESSARY TO ADVERT TO THE POSITION THAT SUB-SECTION (2) OF SECTION 14A PRESCRIBES A UNIFORM METHOD FOR DETERMINING THE AMOUN T OF EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DO ES NOT FORM PART OF THE TOTAL INCOME ONLY IN A SITUATION WHERE T HE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE I S NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSE E IN RESPECT OF SUCH EXPENDITURE. IT, THEREFORE, MERITS EMP HASIS THAT SUB-SECTION (2) OF SECTION 14A DOES NOT AUTHORIZE OR EM POWER THE ASSESSING OFFICER TO APPLY THE PRESCRIBED METHOD IRRESPECTIVE OF THE NATURE OF THE CLAIM MADE BY THE ASSESSEE. THE ASSESSING OFFICER HAS TO FIRST CONSIDER THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE HAVING REGARD TO THE ACCOUNTS OF T HE ASSESSEE. THE SATISFACTION OF THE ASSESSING OFFICER HAS TO BE OBJECTIVELY ARRIVED AT ON THE BASIS OF THOSE ACCOUNTS A ND AFTER CONSIDERING ALL THE RELEVANT FACTS AND CIRCUMSTANCES. T HE APPLICATION OF THE PRESCRIBED METHOD ARISES IN A SITUAT ION WHERE THE CLAIM MADE BY THE ASSESSEE IN RESPECT OF EXPENDITUR E WHICH IS RELATABLE/E TO THE EARNING OF INCOME WHICH DOES NO T FORM PART OF THE TOTAL INCOME UNDER THE ACT IS FOUND TO BE INC ORRECT. IN SUCH A SITUATION A METHOD HAD TO BE DEVISED FOR APPORT IONING THE EXPENDITURE INCURRED BY THE ASSESSEE BETWEEN WHAT IS INC URRED IN RELATION TO THE EARNING OF TAXABLE INCOME AND TH AT WHICH IS INCURRED IN RELATION TO THE EARNING OF NON-TAXABLE INCOME. AS A MATTER OF FACT, THE MEMORANDUM EXPLAINING THE PROVI SIONS OF THE FINANCE BILL, 2006, AND THE CENTRAL BOARD OF DIRECT TAXES CIRCULAR DATED DECEMBER 28, 2006, STATE THAT SINCE THE EXISTIN G PROVISIONS OF SECTION 14A DID NOT PROVIDE A METHOD OF COMPUTING THE EXPENDITURE INCURRED IN RELATION TO I NCOME WHICH DID NOT FORM PART OF THE TOTAL INCOME, THERE WAS A C ONSIDERABLE DISPUTE BETWEEN TAXPAYERS AND THE DEPARTMENT ON THE M ETHOD OF DETERMINING SUCH EXPENDITURE. IT WAS IN THIS BACKGR OUND THAT SUBSECTION (2) WAS INSERTED SO AS TO PROVIDE A UNIFORM ME THOD APPLICABLE WHERE THE ASSESSING OFFICER IS NOT SATISFIED WI TH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. SUB-SECTION (3) CLARIFIES THAT THE APPLICATION OF THE METHOD WOULD BE ATTRACT ED EVEN TO A SITUATION WHERE THE ASSESSEE HAS CLAIMED THAT NO EXPENDIT URE AT 12 ALL WAS INCURRED IN RELATION TO THE EARNING OF NON-T AXABLE INCOME. 71. PARLIAMENT HAS PROVIDED AN ADEQUATE SAFEGUA RD TO THE INVOCATION OF THE POWER TO DETERMINE THE EXPENDITUR E INCURRED IN RELATION TO THE EARNING OF NON-TAXABLE INCOME BY ADOPTION OF THE PRESCRIBED METHOD. THE INVOCATION OF THE POWER I S MADE CONDITIONAL ON THE OBJECTIVE SATISFACTION OF THE ASSESSIN G OFFICER IN REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSES , HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. WHEN A STATUTE POSTULATES THE SATISFACTION OF THE ASSESSING OFFICER 'COUR TS WILL NOT READILY DEFER TO THE CONCLUSIVENESS OF AN EXECUTIV E AUTHORITY'S OPINION AS TO THE EXISTENCE OF A MATTER OF LAW OR FACT UPON WHICH THE VALIDITY OF THE EXERCISE OF THE POWER IS PREDICATED'. (M. A. RASHEED V. STATE OF KERALA [1974 ] AIR 1974 SC 2249'). A DECISION BY THE ASSESSING OFFICER HAS TO BE ARRIVED AT IN GOOD FAITH ON RELEVANT CONSIDERATIONS. THE ASSES SING OFFICER MUST FURNISH TO THE ASSESSEE A REASONABLE OPPORTUN ITY TO SHOW CAUSE ON THE CORRECTNESS OF THE CLAIM MADE BY HIM. IN THE EVENT THAT THE ASSESSING OFFICER IS NOT SATISFIED WITH T HE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE, HE MUST REC ORD REASONS FOR HIS CONCLUSION. THESE SAFEGUARDS WHICH ARE IMPLICIT IN THE REQUIREMENTS OF FAIRNESS AND FAIR PROCEDURE UND ER ARTICLE 14 MUST BE OBSERVED BY THE ASSESSING OFFICER WHEN HE ARRI VES AT HIS SATISFACTION UNDER SUB-SECTION (2) OF SECTION 14A. A S WE SHALL NOTE SHORTLY HEREAFTER, SUB-RULE (1) OF RULE 8D HAS AL SO INCORPORATED THE ESSENTIAL REQUIREMENTS OF SUB-SECTION (2) OF SECTION 14A BEFORE THE ASSESSING OFFICER PROCEEDS TO APPL Y THE METHOD PRESCRIBED UNDER SUB-RULE (2). [UNDERLINED FOR EMPHASIS BY US] 9. THE AFORESAID OBSERVATIONS OF THE HON'BLE HIGH COUR T CLEARLY SHOW THAT THE SATISFACTION OF THE ASSESSING OFFICER WITH R EGARD TO THE CORRECTNESS OR OTHERWISE OF THE CLAIM MADE BY T HE ASSESSEE MUST BE BASED ON REASONS AND ON RELEVANT CONSIDERATIONS. OSTENSIBLY, THE INVOKING OF RULE 8D OF THE RULES IN ORDER TO COMPUTE THE DISALLOWANCE U/S 14A OF THE A CT IS TO BE UNDERSTOOD AS BEING CONDITIONAL ON THE OBJECTIVE SATISF ACTION OF THE ASSESSING OFFICER WITH REGARD TO THE INCORRECTNESS OF THE CLAIM OF THE ASSESSEE, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. AT THIS STAGE, WE MAY ALSO TOUCH-UPON A SIMILAR V IEW EXPRESSED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD. & ORS. VS. CIT, (2012) 247 CTR 162 (DEL), WHEREIN REFERENCE HAS BEEN MADE TO THE JUDGME NT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BO YCE MANUFACTURING CO. LTD. (SUPRA). AS PER THE HON'BLE DE LHI HIGH COURT, THE REQUIREMENT OF THE ASSESSING OFFICER EMBARKI NG UPON A DETERMINATION OF THE AMOUNT OF EXPENDITURE INCURR ED IN RELATION TO EXEMPT INCOME IN TERM OF RULE 8D OF TH E RULES WOULD BE TRIGGERED ONLY IF THE ASSESSING OFFICER RECORDS A FIN DING THAT HE WAS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM O F THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. ACCORDING TO THE HON'BLE DELHI HIGH COURT, SUB-SECTION (2) OF SECTION 1 4A OF THE ACT DEALS WITH CASES WHERE THE ASSESSEE SPECIFIES A POSITIVE AMOUNT OF EXPENDITURE IN RELATION TO INCOME WHICH D OES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT AND SUB- SECTION (3) APPLIES TO CASES WHERE THE ASSESSEE ASSERTS THAT NO EXPENDITU RE HAS BEEN INCURRED IN RELATION TO SUCH EXEMPT INCOME. EXPLAINING FURTHER, AS PER THE HON'BLE HIGH COURT IN BOTH THE C ASES THE 13 RECOURSE TO RULE 8D OF THE RULES IS POSSIBLE ONLY IF THE ASSESSING OFFICER RECORDS A FINDING THAT HE WAS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUC H EXPENDITURE. 10. IN THE AFORESAID BACKGROUND, NOW, WE MAY EXAMINE THE FACTS OF THE PRESENT CASE. IN THIS CASE, ASSESSEE HAS EARNED BY WA Y OF DIVIDENDS A SUM OF RS.5,45,58,685/-, WHICH IS EXEMPT U/ S 10(38) OF THE ACT AND THUS THE SAME DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IN THE COMPUTATION OF I NCOME, ASSESSEE HAVING REGARD TO SECTION 14A OF THE ACT, DETERM INED THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SU CH INCOME AT RS.5,00,000/-. THE ASSESSING OFFICER HAS NOT FOUND IT ACCEPTABLE AND HAS INSTEAD DETERMINED THE AMOUNT OF EXPENDITURE IN RELATION TO SUCH INCOME BY APPLYING R ULE 8D OF THE RULES. OSTENSIBLY, THE ACTION OF THE ASSESSING OFFICER CANNOT BE UPHELD UNLESS HE HAS COMPLIED WITH THE PRE-REQUISITE OF INVOKING RULE 8D OF THE RULES, NAMELY, RECORDING OF AN OBJECTIVE SATISFACTION WITH REGARD TO THE CLAIM OF THE ASSESSEE THA T AN EXPENDITURE OF RS.5,00,000/- HAS BEEN INCURRED IN REL ATION TO THE EXEMPT INCOME, IS INCORRECT. IN ORDER TO EXAMINE THE AFORESAID COMPLIANCE WITH THE PRE-CONDITION, WE HAVE PERUSED THE PARA 4 TO 4.2 OF THE ASSESSMENT ORDER AND FIND THAT NO REASONS HAVE BEEN ADVANCED AS TO WHY THE DISALLOWANCE DETERMINED BY THE ASSESSEE WAS FOUND TO BE INCORRECT, H AVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. THE ONLY POINT M ADE BY THE ASSESSING OFFICER IS TO THE EFFECT THAT 'THE SAID DISALLOWANCE WAS NOT ACCEPTABLE'. IN-FACT, WE FIND THAT THE ASSESSEE MADE DETAILED SUBMISSIONS TO THE ASSESSING OFFICER, WHICH HAVE B EEN REPRODUCED BY THE CIT(A) IN PARA 3.2,1 OF HIS ORDER. AS PER THE ASSESSEE, THE DETERMINATION OF DISALLOWANCE U/S 14A OF TH E ACT OF RS.5,00,000/- WAS BASED ON THE EMPLOYEE COSTS AND OTH ER COSTS INVOLVED IN CARRYING OUT THIS ACTIVITY. FURTHER, ASSESSEE ALSO EXPLAINED THE. THE SHARES WHICH HAVE YIELDED EXEM PT INCOME WERE ACQUIRED LONG BACK OUT OF OWN FUNDS AND NO BORROWINGS WERE UTILIZED. THE MUTUAL FUND INVESTMENTS WERE CLAIMED TO BE ALSO MADE OUT OF SURPLUS FUNDS. IT WAS SPEC IFICALLY CLAIMED THAT NO FRESH INVESTMENTS HAVE BEEN MADE DURIN G THE YEAR UNDER CONSIDERATION IN SHARES YIELDING EXEMPT IN COME. ALL THE AFORESAID POINTS RAISED BY THE ASSESSEE HAVE NOT BEEN ADDRESSED BY THE ASSESSING OFFICER AND THE SAME HAVE BEEN BRUSHED ASIDE BY MAKING A BLAND STATEMENT THAT THE DISALLOWANCE IS 'NOT ACCEPTABLE'. THEREFORE, IN OUR VIEW, IN THE PRESENT CASE, THE ASSESSING OFFICER HAS NOT RECORDED ANY OBJECTIVE SATISFACTION IN REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, WHICH IS MANDATORILY REQUIRED IN TERMS OF SE CTION 14A(2) OF THE ACT AND THEREFORE HIS ACTION OF INVOKI NG RULE 8D OF THE RULES TO COMPUTE THE IMPUGNED DISALLOWANCE IS UNTE NABLE. ACCORDINGLY, THE ORDERS OF THE AUTHORITIES BELOW ARE SET-ASIDE ON THIS ASPECT AND THE ASSESSING OFFICER IS DIRECTED TO RETA IN THE DISALLOWANCE U/S 14A OF THE ACT TO THE EXTENT OF RS.5, 00,000/-, AS RETURNED BY THE ASSESSEE. 11. BEFORE PARTING, WE MAY REFER TO THE OBJECTION O F THE LEARNED DEPARTMENTAL REPRESENTATIVE, WHICH IS TO THE EFFECT T HAT SINCE ASSESSEE WAS NOT MAINTAINING SEPARATE ACCOUNTS WITH REGARD TO THE ACTIVITY OF EARNING EXEMPT INCOME, THE SATISFACTI ON 14 CONTEMPLATED U/S 14A OF THE ACT BE CONSIDERED AS IMPLI ED. IN OUR CONSIDERED OPINION, THE AFORESAID OBJECTION IS CON TRARY TO HOW THE IMPLICATIONS OF SUB-SECTION (2) OF SECTION 14A OF THE ACT HAVE BEEN UNDERSTOOD AND EXPLAINED BY THE HON'BLE BO MBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURI NG CO. LTD. (SUPRA) AND ALSO BY THE HON'BLE DELHI HIGH COURT IN T HE CASE OF MAXOPP INVESTMENT LTD. (SUPRA). 12. IN CONCLUSION ON THE BASIS OF THE AFORESAID DISCUSSION , WE HOLD THAT THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN ENHANCING THE DISALLOWANCE U/S 14A OF THE ACT TO RS.1,05,46918/- AGAINST RS.5,00,000/- DISALLOWED BY THE ASSESSEE COMPANY IN ITS RE TURN OF INCOME. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED, AS ABOVE. 7.4 SINCE THE FACTS OF THE IMPUGNED APPEAL ARE IDEN TICAL TO THE FACTS IN CASE DECIDED BY THE TRIBUNAL, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF T HE TRIBUNAL, WE HOLD THAT THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMIN G THE DISALLOWANCE OF RS.8,41,774/-. ACCORDINGLY, THE OR DER OF THE CIT(A) IS SET-ASIDE AND THE GROUNDS RAISED BY THE A SSESSEE ARE ALLOWED. 8. GROUNDS OF APPEAL NO. 2 TO 2.3 BY THE ASSESSEE A RE AS UNDER : 2] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE RENTAL INCOME OF RS. 24 LACS DERIVED BY THE ASSESSEE FROM LETTING OUT THE PROPERTY AT GOA WAS TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY AS AGA INST INCOME FROM BUSINESS DECLARED BY THE ASSESSEE. 2.1] THE LEARNED CIT(A) ERRED IN REJECTING THE C LAIM OF THE ASSESSEE BY RELYING ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SHAMBHU INVESTMENTS [263 ITR 143] WITHOUT APPRECIATIN G THAT THE SAID CASE WAS NOT APPLICABLE TO THE CASE OF THE ASSESSEE. 2.2] THE LEARNED CIT(A) FURTHER ERRED IN CONFIRM ING THE DISALLOWANCE OF RS. 31,04,874/- ON ACCOUNT OF DEPRECI ATION CLAIMED IN RESPECT OF THE FURNITURE AND BUILDING CONSTITUTING THE PROPERTY AT GOA ON THE GROUND THAT THE INCOME FROM THE SAME WAS A SSESSABLE AS INCOME FROM HOUSE PROPERTY AND HENCE, DEPRECIATION W AS NOT ALLOWABLE IN RESPECT OF THE SAME. 2.3] THE LEARNED CIT(A) FAILED TO APPRECIATE THA T THE SAID PROPERTY WAS LET OUT BY THE ASSESSEE TO ITS SISTER CONCERN M/S. FINOL EX CABLES LTD. AS A TRAINING CENTRE ALONG WITH THE VARIOUS UTIL ITIES NECESSARY TO 15 FUNCTION AS A BUSINESS TRAINING CENTRE AND HENCE, THE RENT RECEIVED FROM THE SAME WAS TO BE ASSESSED AS BUSINESS INCOME OF THE ASSESSEE AND THE DEPRECIATION ON THE BUILDING AND FURNI TURE SHOULD HAVE BEEN ALLOWED. 8.1 FACTS OF THE CASE, IN BRIEF ARE THAT THE AO DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE C OMPANY HAS LET OUT BUILDING IN GOA TO ITS CONNECTED GROUP CONCERN S FINOLEX CABLES LTD. THE MONTHLY RENT RECEIVED IS RS.2 LAKHS AND T HE ASSESSEE HAS RECEIVED AN AMOUNT OF RS.24 LAKHS DURING THE YEAR A S RENT FROM THE SAID COMPANY. THE ASSESSEE HAS ALSO RECEIVED INTERE ST FREE ADVANCE OF RS.25 LAKHS. THE ASSESSEE HAS DECLARED SUCH RE NTAL INCOME AS BUSINESS INCOME IN ITS PROFIT AND LOSS ACCOUNT. THE AO, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE INCOME FROM LET OUT OF THE PROPERTY SHOULD NOT BE TREATED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND WHY THE ANNUAL RENT OF THE PROP ERTY SHOULD NOT BE TAKEN AS PER MARKET RATE. IT WAS EXPLAINED BY T HE ASSESSEE THAT THE FACILITIES DEVELOPED BY THE COMPANY WERE LEASED TO FINOLEX CABLES LTD. FOR TRAINING CENTRE AND THEY HAVE LEAVE AND LICENCE AGREEMENT WITH THE SAID COMPANY AND ALL FACILITIES WITH BUILDING AND FURNITURE ARE LET OUT TO THEM. RELYING ON VARI OUS DECISIONS IT WAS SUBMITTED THAT THE INCOME SHOULD BE CHARGED AS INCOME FROM BUSINESS. 9. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLA NATION GIVEN BY THE ASSESSEE. RELYING ON THE DECISION OF THE HO NBLE SUPREME COURT IN THE CASE OF SHAMBHU INVESTMENT. (P) LTD. V . CIT REPORTED IN 263 ITR 143 (SC) THE AO TREATED THE RENTAL INCOM E AS INCOME 16 FROM THE HOUSE PROPERTY. THE AO FURTHER NOTICED T HAT THE LESSOR AND LESSEE ARE CONNECTED PARTIES AND THE LEASE REN T IS QUITE LOW. HE, THEREFORE, ADOPTED ANNUAL RENT AS PER CPWD GUIDELI NES BEING 8% ON RETURN OF INVESTMENT OF RS.4.85 CROES IN PROPERT Y AND ACCORDINGLY HE CALCULATED THE RENT TO BE AT RS.38.80 LAKHS. AF TER ALLOWING DEDUCTION @30% ON REPAIRS AND MAINTENANCE WHICH COM ES TO RS.11.64 LAKHS, THE AO DETERMINED THE INCOME FROM H OUSE PROPERTY AT RS.27.16 LAKHS. SINCE THE ASSESSEE HAS ALREADY OFFERED AN AMOUNT OF RS.24 LAKHS IN THE COMPUTATION, THE AO MADE ADDI TION OF RS.3,16,000/- UNDER THE HEAD INCOME FROM HOUSE PRO PERTY AND DISALLOWED THE DEPRECIATION CLAIMED AT RS.18,74,230 /- IN RESPECT OF BUILDING AND DEPRECIATION CLAIMED AT RS.12,30,644/- IN RESPECT OF FURNITURE. 10. IN APPEAL IT WAS SUBMITTED THAT THE COMPANY HAS CREATED FACILITIES FOR TRAINING CENTRE AT GOA. THE PREMISE S WITH ALL THE AMENITIES AND FURNITURE AND FIXTURES, THOUGH INITIA LLY DEVELOPED FOR ITS OWN USE, WERE GIVEN ON LEAVE AND LICENSE BASIS DURING THE RELEVANT PREVIOUS YEAR TO FINOLEX CABLES LTD. FOR U SING BY THEM AS A TRAINING CENTRE FACILITY AT GOA. THE SAID PREMISES WITH ALL THE AMENITIES/ FACILITIES IS NOT A MERE HOUSE OR A BUIL DING AND IT HAS UTILITIES NECESSARY TO FUNCTION AS BUSINESS TRAINI NG CENTRE. IT WAS EXPLAINED THAT CLAUSE 43 OF THE MEMORANDUM OF ASSOC IATION OF THE COMPANY INCLUDES BUSINESS OF LEASING AS ONE OF THE ACTIVITIES. IT WAS FURTHER SUBMITTED THAT FOR THE FIRST TIME THE AO AS SESSED SUCH INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY INSTEAD OF 17 UNDER THE HEAD INCOME FROM BUSINESS. RELYING ON VARIOUS DECISIONS IT WAS SUBMITTED THAT THE INCOME FROM LET OUT OF THE TRAINING CENTRE HAS TO BE TREATED AS INCOME FROM B USINESS. THE ASSESSEE ALSO CHALLENGED THE ADOPTION OF 8% OF THE INVESTMENT AS RETURN ON INVESTMENT FOR CALCULATING THE ANNUAL VAL UE OF THE PROPERTY. 11. HOWEVER, THE LD.CIT(A) WAS ALSO NOT SATISFIED W ITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE OBSERVED THA T ALTHOUGH THE TRAINING CENTRE ALONG WITH OTHER STRUCTURES WAS LET OUT, HOWEVER, THERE IS NO SPECIFIC MENTION OF FURNITURE IN THE SC HEDULE. HE HOWEVER OBSERVED THAT IT IS CLEAR FROM THE CLAIM OF DEPRECIATION OF FURNITURE AT RS.12,30,664/- THAT THERE WAS SUBSTANT IAL ELEMENT OF FURNITURE IN THE LEASED RENT COMPONENT THOUGH NOT S PECIFICALLY MENTIONED. 12. HOWEVER, RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SHAMBHU INVESTMENT. (P) LTD H E UPHELD THE ACTION OF THE AO. HE ALSO REJECTED THE CLAIM OF TH E ASSESSEE THAT IN CASE THE INCOME IS NOT CONSIDERED AS BUSINESS INCOM E THE SAME SHOULD BE CONSIDERED AS INCOME FROM OTHER SOURCES. HE DISTINGUISHED THE DECISION OF HONBLE DELHI HIGH CO URT IN THE CASE OF GARG DYEING & PROCESSING INDUSTRIES VS. ACIT REP ORTED IN 28 TAXMANN.COM 287 RELIED ON BY THE ASSESSEE BEFORE HI M AND RELIED HEAVILY ON THE DECISION IN THE CASE OF SHAMBHU INVE STMENT. (P) LTD (SUPRA). HE, HOWEVER, HELD THAT THE ACTION OF THE AO IS NOT JUSTIFIED IN INCREASING THE ANNUAL LET OUT VALUE AT RS.38.80 LAKHS BEING 8% 18 OF THE RETURN ON THE INVESTMENT OF RS.4.85 CRORES A S PER CPWD GUIDELINES. SINCE THE REVENUE IS NOT IN APPEAL BEF ORE US ON THIS ISSUE, THEREFORE, WE ARE NOT CONCERNED WITH THIS I SSUE. 12.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE AS SESSEE IS IN APPEAL BEFORE US. 13. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS LET OUT THE BUILDING WITH FURNITURE, GENERAT OR ETC. TO FINOLEX CABLES LTD. FOR THEIR TRAINING CENTRE. THE INCOME FROM SUCH LET OUT OF THE PROPERTY WAS ALWAYS SHOWN AS BUSINESS INCOM E AND IT WAS ACCEPTED BY THE DEPARTMENT. ONLY FOR THE IMPUGNED ASSESSMENT YEAR, THE AO HAS DISTURBED SUCH INCOME BY TREATING THE SAME AS INCOME FROM HOUSE PROPERTY. HE SUBMITTED THAT FO LLOWING THE RULE OF CONSISTENCY THE INCOME FROM LET OUT OF THE TRAINING CENTRE WITH FURNITURE ETC. SHOULD BE TREATED AS INCOME FR OM BUSINESS. ALTERNATIVELY, SUCH INCOME SHOULD BE TREATED AS IN COME FROM OTHER SOURCES IN VIEW OF THE LATEST DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF DUDHSAGAR INVESTMENTS PVT. LTD ., VS. ACIT REPORTED IN 110 DTR 225 WHEREIN IT HAS BEEN HELD TH AT INCOME RECEIVED BY THE ASSESSEE BY LETTING OUT FULLY FURNI SHED OFFICE PREMISES IS REQUIRED TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT AS INCOME FROM HOUSE PROPER TY. 14. THE LD. DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 19 15. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES. UNDISPUTEDLY, THE ASSESSEE HAS LET OUT THE BUILDING ALONG WITH FURNITURES ETC, TO FINOLEX CABLES LTD., FOR THEIR U SE AS A TRAINING CENTRE ON A MONTHLY RENT OF RS.2,00,000/-. THE INC OME FROM SUCH LET OUT OF THE PROPERTY WAS EARLIER CLAIMED AS BUS INESS INCOME AND WAS ALSO ACCEPTED BY THE DEPARTMENT. HOWEVER, FOR THE IMPUGNED ASSESSMENT YEAR, THE AO DEVIATED FROM SUCH PRACTICE AND TREATED THE INCOME FROM SUCH LET OUT OF THE PROPERTY AS INCOME FROM HOUSE PROPERTY WHICH HAS BEEN UPHELD BY THE CIT(A). IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT IN VIEW OF THE RULE OF CONSISTENCY SUCH INCOME SHOULD BE TREATED A S BUSINESS INCOME. IT IS THE ALTERNATE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SUCH INCOME SHOULD BE TREATED AS INC OME FROM OTHER SOURCES IN VIEW OF THE DECISION OF THE HONBLE BOM BAY HIGH COURT IN THE CASE OF DUDHSAGAR INVESTMENTS PVT. LTD. (SUP RA). WE FIND MERIT IN THE ALTERNATE CONTENTION OF THE LD. COUNSE L FOR THE ASSESSEE. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF DUDHSA GAR INVESTMENTS (P) LTD. VS. ACIT(SUPRA) WHILE DECIDING AN IDENTICAL ISSUE HAS HELD THAT INCOME RECEIVED BY THE ASSESSEE BY LETTING OUT FULLY FURNISHED OFFICE PREMISES AND FURNITURES IS R EQUIRED TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT AS INCOME FROM HOUSE PROPERTY. THE RELEVANT OBSERVA TION OF THE HONBLE HIGH COURT READS AS UNDER : 9. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND HAVING G ONE THROUGH THE IMPUGNED ORDER ALONG WITH THE RELEVANT DOCUMENTS AND RATIO OF THE DECISIONS OF THE JUDGMENTS CITED AT BAR, WE FIND MERIT IN THE APPEALS. 20 10. SEC. 14 OF THE ACT WHICH FALLS IN CHAPTER IV REG ARDING COMPUTATION OF TOTAL INCOME DEALS WITH THE HEADS OF I NCOME. UNDER THIS SECTION, FOR THE PURPOSE OF CHARGE OF INCOME-TAX AND COMPUTATION OF TOTAL INCOME, ALL INCOME IS CLASSIFIED UNDER THE FOLLOWING HEADS : (A) SALARIES; (C) INCOME FROM HOUSE PROPERTY; (D) PROFITS AND GAINS OF BUSINESS OR PROFESSION; (E) CAPITAL GAINS; (F) INCOME FROM OTHER SOURCES. 11. SEC. 22 DEALS WITH INCOME FROM HOUSE PROPERTY. SE C. 28 DEALS WITH PROFITS AND GAINS OF BUSINESS OR PROFESSION. SEC. 56 DEALS WITH INCOME FROM OTHER SOURCES. SINCE MR. DINIZ HAS RESTRIC TED THE RELIEFS TO INCOME FROM OTHER SOURCES, WE NEED NOT TO GO INTO THE OTHER HEADS OF INCOME. IN THE PRESENT CASE, WE ARE CONCERNED WITH CL. (III) OF S. 56(2) WHICH READS THUS : '56(2)IN PARTICULAR, AND WITHOUT PREJUDICE TO THE GENERALITY OF THE PROVISIONS OF SUB-S. (1). THE FOLLOWING INCOME SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'INCOME FRO M OTHER SOURCES', NAMELY : . . . . . . . . . . . . . (III) WHERE AN ASSESSEE LETS ON HIRE MACHINERY-, PLANT O R FURNITURE BELONGING TO HIM AND ALSO BUILDINGS, AND THE LETTING OF THE BUILDINGS IS INSEPARABLE FROM THE LETTING OF THE SAID MACHINERY, PLANT OR FURNITURE, THE INCOME FROM SUCH LETTING, IF IT IS NOT CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'PROFITS AND GAINS OF BUSINE SS OR PROFESSION:' 12. MR. DINIZ, RELYING UPON THE ABOVE PROVISION, ASSE RTED THAT THE RENT INCOME OUT OF THE OFFICE PREMISES AND FURNITURE RECEIVED BY THE APPELLANT SHOULD BE ASSESSED UNDER THE HEAD OF 'INCOME FROM OTHER SOURCES'. MS.DESSAI, ON THE CONTRARY, ASSERTED THAT THE AB OVE PROVISION HAS NO APPLICATION IN THE PRESENT FACTS AND C IRCUMSTANCES OF THE CASE AND INCOME RECEIVED BY THE APPELLANT BY WAY OF RENT FROM OFFICE PREMISES AND FURNITURE OUGHT TO BE REQUIR ED TO BE ASSESSED UNDER S. 22 OF THE ACT UNDER THE HEAD OF INCOME FROM HOUSE PROPERTY. MS. DESSAI SUBMITTED THAT THE PROVISION OF S. 22 OF THE ACT IS THE RULE AND CL. (III) OF S. 56(2) OF THE ACT IS AN EXCEPTION. SHE SUBMITTED THAT IF THE CASE FALLS UNDER S. 22 OF THE ACT, THEN, THERE IS NO QUESTION OF APPLICATION OF CL. (III) OF S. 56(2) OF THE ACT. 13. THE CONSTITUTION BENCH IN SULTAN BROTHERS (P) LTD . (SUPRA), HAD AN OCCASION TO CONSIDER THE PROVISIONS OF SS. 9, 10 AND 2 2 OF IT ACT, 1922 WHICH PROVISIONS ARE PART MATERIA WITH SS. 22, 28 AND 56 OF THE IT ACT, 1961. IN THE SAID CASE, THE APPELLANT THE REIN WAS A LIMITED COMPANY AND WAS THE OWNER OF A BUILDING FITTED WITH FURNITURE AND FIXTURES FOR BEING RUN AS A HOTEL. BY THE LEASE DT. 30 TH AUG., 1949, THE APPELLANT LET OUT THE BUILDING FULLY EQUIPPED AND F URNISHED TO VOYANTZIS FOR A TERM OF SIX YEARS FROM 1946 FOR RUNNIN G A HOTEL AND FOR CERTAIN OTHER ANCILLARY PURPOSES. THE AGREED MONT HLY RENT WAS RS. 5,950 FOR THE BUILDING AND RS. 5,000 FOR HIRE OF FURNITURE AND 21 FIXTURES. THE QUESTION WHICH FELL FOR CONSIDERATION BE FORE THE SUPREME COURT WAS HOW THE INCOME RECEIVED AS A RENT O N (OR) HIRE IS TO BE ASSESSED I.E. UNDER WHICH SECTION OF IT ACT, 19 22 IS IT ASSESSABLE. THE APPELLANT IN THAT CASE ALSO CONTENDED THA T THE ENTIRE INCOME SHOULD BE ASSESSED UNDER S. 10 AS AN INCOME FROM BU SINESS OR IN THE ALTERNATIVE INCOME SHOULD BE ASSESSED UNDER S. 12 AS INCOME FROM RESIDUARY SOURCES I.E., INCOME FROM OTHER SOURCES. THE CONSTITUTION BENCH OF APEX COURT HELD THAT INCOME UN DER THE LEASE CANNOT BE ASSESSED UNDER S. 10 OF THE IT ACT, 1922 AS THE INCOME FROM THE BUSINESS. REGARDING THE QUESTION WHETHER INCOM E CAN BE ASSESSED UNDER S. 12 AS AN INCOME FROM RESIDUARY SOURCES OR INCOME FROM OTHER SOURCES, THE OBSERVATIONS OF THE APEX COURT IN PARAS 13, 15 AND 16 ARE RELEVANT WHICH ARE REPRODUCE D AS UNDER : '13. THE NEXT QUESTION IS, DOES THE PRESENT LETTING COM E WITHIN THE TERMS OF SUB-S. (4) OF S. 12 ? THAT PROVISION REQUIRES TW O CONDITIONS, NAMELY, THAT THE FURNITURE SHOULD BE LET AND ALSO BUILDINGS AND THE LETTING OF THE BUILDINGS SHOULD BE I NSEPARABLE FROM THE LETTING OF THE FURNITURE. NOW HERE BOTH FU RNITURE AND BUILDING HAVE NO DOUBT BEEN LET. THE QUESTION IS: ARE THEY INSEPARABLY LET ? THE HIGH COURT DOES NOT AP PEAR TO HAVE ANSWERED THIS QUESTION FOR IT WAS OF THE VIEW THAT NOT ONLY MUST THE TWO BE INSEPARABLY LET PUT BUT ALSO THAT 'THE PRIMARY LETTING MUST BE OF THE MACHINERY, PLANT OR FURNITURE AND THAT TOGET HER WITH SUCH LETTING OR ALONG WITH SUCH LETTING, THERE IS A LETTI NG OF BUILDINGS'. THE HIGH COURT HELD THAT THE PRIMARY LETTING IN THE PRE SENT CASE WAS OF THE BUILDING AND, THEREFORE, DEPRIVED THE APPELLANT OF THE BENEFIT OF S. 12(4). WE MAY STATE HERE THAT THE TRIBUNAL HAD THO UGHT THAT BY REQUIRING THAT THE LETTING OF ONE SHOULD BE INSEPARAB LE FROM THE LETTING OF THE OTHER, THE SECTION REALLY MEANT THAT THE PRIMARY LETTING WAS OF THE MACHINERY AND THE LETTING OF THE BUILDING WAS ONLY INCIDENTAL TO THE LETTING OF THE MACHINERY. IT ALSO HELD THAT IN THE PRESENT CASE THE PRIMARY LETTING WAS OF THE BUILDING. 15. WHAT, THEN, IS INSEPARABLE LETTING ? IT WAS SUGGEST ED ON BEHALF OF THE RESPONDENT CIT THAT THE SUB-SECTION CONTEMPLATES A CASE WHERE THE MACHINERY, PLANT OR FURNITURE ARE BY THEIR NATU RE INSEPARABLE FROM A BUILDING SO THAT IF THE MACHINERY, PLANT OR F URNITURE ARE LET, THE BUILDING HAS ALSO NECESSARILY TO BE LET ALONG WITH IT. THERE ARE TWO OBJECTIONS TO THIS ARGUMENT. IN THE FIRST PLACE, I F THIS WAS THE INTENTION, THE SECTION MIGHT WELL HAVE PROVIDED THA T WHERE MACHINERY, PLANT OR FURNITURE ARE INSEPARABLE FROM A BUILDING AND BOTH ARE LET, ETC. THE LANGUAGE HOWEVER IS NOT THAT THE TWO MUST BE INSEPARABLY CONNECTED WHEN LET BUT THAT THE LETTING OF ONE IS TO BE INSEPARABLE FROM THE LETTING OF THE OTHER. THE NEXT OBJECTION IS THAT THERE CAN BE NO CASE IN WHICH ONE CANNOT BE SEPARATED FROM THE OTHER. IN EVERY CASE THAT WE CAN CONCEIVE OF, IT MAY BE POSSIBLE TO DISMANTLE THE MACHINERY OR PLANT OR FIXTURES FROM WH ERE IT WAS IMPLANTED OR FIXED AND SET IT UP IN A NEW BUILDING. AS REGARDS FURNITURE, OF COURSE, THEY SIMPLY REST ON THE FLOOR OF THE BUILDING IN WHICH IT LIES AND THE TWO INDEED ARE ALWAYS SEPARABLE. WE ARE UNABLE, THEREFORE, TO ACCEPT THE CONTENTION THAT IN SEPARABLE IN THE SUB-SECTION MEANS THAT THE PLANT, MACHINERY OR FURNITU RE ARE AFFIXED TO A BUILDING. 22 16. IT SEEMS TO US THAT THE INSEPARABILITY REFERRED TO IN SUB-S. (4) IS AN INSEPARABILITY ARISING FROM THE INTENTION OF THE P ARTIES. THAT INTENTION MAY BE ASCERTAINED BY FRAMING THE FOLLOWIN G QUESTIONS : WAS IT THE INTENTION IN MAKING THE LEASE AND IT MATTE RS NOT WHETHER THERE IS ONE LEASE OR TWO, THAT IS, SEPARATE LEASES IN RE SPECT OF THE FURNITURE AND THE BUILDING THAT THE TWO SHOULD BE EN JOYED TOGETHER ? WAS IT THE INTENTION TO MAKE THE LETTING OF THE TW O PRACTICALLY ONE LETTING ? WOULD ONE HAVE BEEN LET ALONE AND A LEASE OF IT ACCEPTED WITHOUT THE OTHER ? IF THE ANSWERS TO THE FIRST TWO QU ESTIONS ARE IN THE AFFIRMATIVE, AND THE LAST IN THE NEGATIVE THEN, IN OUR VIEW, IT HAS TO BE HELD THAT IT WAS INTENDED THAT THE LETTINGS WOU LD BE INSEPARABLE. THIS VIEW ALSO PROVIDES A JUSTIFICATION FOR TAKING THE CASE OF THE INCOME FROM THE LEASE OF A BUILDING OUT O F S. 9 AND PUTTING IT UNDER S. 12 AS A RESIDUARY HEAD OF INCOME. IT THEN BECOMES A NEW KIND OF INCOME, NOT COVERED BY S. 9, TH AT IS, INCOME NOT FROM THE OWNERSHIP OF THE BUILDING ALONE BUT AN INCOME WHICH THOUGH ARISING FROM A BUILDING WOULD NOT HAVE ARISEN IF THE PLANT, MACHINERY AND FURNITURE HAD NOT ALSO BEEN LET ALONG WITH IT.' 14. IT IS ABUNDANTLY CLEAR FROM THE ABOVE OBSERVATION S THAT THE APPELLANT'S INCOME IS REQUIRED TO BE ASSESSED UNDER S. 56 AS CONTENDED BY THE ASSESSEE. AS FAR AS THE ANSWERS TO THREE Q UESTIONS, WHICH ARE MENTIONED IN PARA 16 OF THE JUDGMENT IN S ULTAN BROTHERS (P) LTD. (SUPRA), QUOTED ABOVE, ARE CONCERNED, THERE IS NO DISPUTE AMONGST THE LEARNED COUNSEL APPEARING FOR THE RESPECTI VE PARTIES THAT ANSWERS TO FIRST TWO QUESTIONS WERE IN AFFIRMATIVE. IN THE PRESENT CASE, THE DISPUTE IS REGARDING ANSWER TO THE T HIRD QUESTION, NAMELY WOULD ONE HAVE BEEN LET ALONE AND A LEASE OF IT ACCEPTED WITHOUT THE OTHER ? IN OUR CONSIDERED OPINION, THE A NSWER TO THIS QUESTION WOULD BE IN THE NEGATIVE, CONSIDERING THE I NTENTION OF THE APPELLANT-ASSESSEE COUPLED WITH CLAUSES OF THE AGREEMENT . THE AGREEMENT, UNEQUIVOCALLY, MAKES THE INTENTION OF THE ASSESSEE CLEAR TO LET OUT THE OFFICE PREMISES ALONG WITH FURNITURE. IN OUR VIEW, LETTING OF THE OFFICE PREMISES WAS INTENDED TO BE INSEP ARABLE FROM THE LETTING OF THE FURNITURE. THE RATIO OF THE CONST ITUTION BENCH IS, THEREFORE, PERFECTLY APPLICABLE TO THE PRESENT CASE. 15. IN SMT. P. ANDAL AMMAL (SUPRA), THE DIVISION BENC H OF MADRAS HIGH COURT, IN SIMILAR FACTS, HELD THAT THE INTENTION OF THE PARTIES WAS THAT THOUGH THERE WERE TWO SEPARATE LEASES IN RESPECT O F FURNITURE AND THE BUILDING, BOTH THE SPECIES OF THE PROPERTIES W ERE ENJOYED BY PAYMENT OF ONE LUMP SUM WHICH ALSO GAVE INDICATION T HAT LETTING OF THE BUILDING AND LETTING OF THE FURNITURE WAS ONE LE TTING. THE DIVISION BENCH FOUND THAT THE ASSESSEE WOULD NOT HAVE LE T OUT THE BUILDING ALONE WITHOUT THE LEASE OF FURNITURE OR OTH ER AMENITIES AND ONE DID NOT EXIST WITHOUT THE OTHER. CONSEQUENTLY, TH E DIVISION BENCH HELD THAT THE PROPER HEAD OF INCOME WOULD BE INCOME FROM OTHER SOURCES. THE DECISION OF THE DIVISION BENCH OF TH E CALCUTTA HIGH COURT IN SHAMBHU INVESTMENT (P) LTD. (SUPRA), IS CONFIRMED BY THE APEX COURT IN CIVIL APPEAL NO. 6459 AND 6466 OF 2001 I.E. SHAMBHU INVESTMENT (P) LTD. VS. CIT (SUPRA). THE APEX COURT REFUSED TO INTERFERE IN THE CONCLUSION ARRIVED AT BY THE CALCUTTA HIGH COURT ON THE QUESTION FRAMED UNDER S. 256(2) OF THE A CT AND, THEREFORE, CIVIL APPEALS CAME TO BE DISMISSED. THE QUE STION FELL FOR CONSIDERATION BEFORE THE DIVISION BENCH OF CALCUTTA H IGH COURT WAS 'WHETHER THE INCOME DERIVED FROM THE PREMISES IN QUEST ION IS RENTAL INCOME OR BUSINESS INCOME ?' THE DIVISION BENCH, IN CALCUTTA 23 HIGH COURT, IN THE FACTS OF THAT CASE, HELD THAT THE INCOME DERIVED FROM THE PROPERTY IN QUESTION IS INCOME FROM THE PROP ERTY AND SHOULD BE ASSESSED AS SUCH. THE DECISION OF THIS CASE DOES N OT APPLY TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. 16. IN THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AN D ESPECIALLY, IN THE LIGHT OF THE DECISION OF THE CONSTITUTION BENC H IN SULTAN BROTHERS (P) LTD. (SUPRA), WE HOLD THAT THE INCOME R ECEIVED BY THE ASSESSEE BY LETTING OUT FULLY FURNISHED OFFICE PREMISES AN D FURNITURE IS REQUIRED TO BE ASSESSED UNDER THE HEAD 'INCOME FROM O THER SOURCES'. THE APPEALS ARE, ACCORDINGLY, ALLOWED. CONSEQ UENTLY, THE IMPUGNED ORDER IS SET ASIDE TO THAT EXTENT. THE AO IS D IRECTED TO ASSESS THE ASSESSEE'S INCOME ACCORDINGLY IN THE LIGHT OF THE ABOVE OBSERVATIONS. 15.1 RESPECTFULLY FOLLOWING THE DECISION CITED (SUP RA) WE HOLD THAT THE INCOME FROM LETTING OUT OF THE IMPUGNED PROPERT Y HAS TO BE TREATED AS INCOME FROM OTHER SOURCES UNDER THE FA CTS AND CIRCUMSTANCES OF THE CASE. WE HOLD AND DIRECT ACCO RDINGLY. GROUNDS OF APPEAL NO.2 TO 2.3 ARE ACCORDINGLY ALLOW ED. 16. GROUND OF APPEAL NO. 4 BEING GENERAL IN NATURE IS DISMISSED 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 31-12-2014. SD/- SD/- (SUSHMA CHOWLA) (R.K. P ANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: 31 ST DECEMBER, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-V, PUNE 4. THE CIT-V, PUNE 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE