National Cooperative Development Corporation, New Delhi V. DCIT, New Delhi

ITA 117/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4205 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 29-03-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 08-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H L DIHANA
• Keywords: Reopening of assessment; Opportunity of being heard; Rule of consistency; Period of limitation; Source of fund; Difference of opinion; Time period of passing order; Change of opinion
• Section: 11A; 14A; 80IB; 147; 148; 263; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER I.T.A NO. 117/DEL/10 ASSTT. YEAR 2002-03 M/S. NATIONAL COOPERATIVE DEVELOPMENT CORPORATION, 4, SIRI INSTITUTIONAL AREA, HAUZ KHAS, NEW DELHI 110 016. VS. DCIT CIRCLE 13 (1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI K.V.S.R. KRISHNA, CA RESPONDENT BY: SHRI H.L. DIHANA, CIT(DR) ORDER PER RAJPAL YADAV, JM: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LD. CIT(A) DATED 16.11.2009 PASSED FOR ASSTT. YEAR 20 02-03. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE NOT IN CONSONAN CE WITH RULE 8 OF ITAT RULES. THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NATURE. IN BRIEF, THE ASSESSEE HAS RAISED THREE FOLD OF GRIEVANCES. I N THE FIRST FOLD OF GRIEVANCE IT HAS CHALLENGED REOPENING OF ASSESSMENT BY ISSUANCE OF A NOTICE U/S 148. IN THE SECOND FOLD, IT HAS CHALLENG ED DISALLOWANCE OF DEDUCTION ADMISSIBLE U/S 36 (1)(VIII) OF THE INCOME TAX ACT AND IN THE ITA NO. 117/DEL/10 ASSTT. YEAR 2002-03 2 THIRD FOLD, IT HAS CHALLENGED DISALLOWANCE OF EXPEN SES I.E. INTEREST, ADMINISTRATIVE ETC. U/S 14A OF THE INCOME TAX ACT. 2. IN GROUND NOS. 1 TO 3, ASSESSEE HAS PLEADED THAT LD. CIT(A) HAS ERRED IN UPHOLDING THE REOPENING OF ASSTT. PROCEEDI NG. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS AN UNDERTAKING OF GOVT. OF INDIA WHICH HAS BEEN ESTABLISHED UNDER A S PECIAL ACT OF PARLIAMENT CALLED NCDC ACT 1962 (26 OF 1962). ITS A DMINISTRATIVE CONTROL IS MAINLY UNDER THE MINISTRY OF AGRICULTURE, DEPART MENT OF AGRICULTURE AND COOPERATION., CENTRAL GOVT. OF INDIA. IT HAS FILED ITS RETURN OF INCOME ON 28 TH OCTOBER, 2002 DECLARING AN INCOME OF RS. 36,47,32, 240/- . THE RETURN WAS PROCESSED U/S 143(1) ON 28 TH FEBRUARY, 2003. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE U/S 143 (2) WAS ISSUED ON 17.10.2003. THE AO HAS PASSED AN ASSTT. ORDER U/S 1 43(3) ON 17 TH MARCH, 2005. THE ASSESSMENT HAS BEEN REOPENED BY IS SUANCE OF A NOTICE U/S 148 ON 21 ST MARCH, 2007. THE ASSESSEE CHALLENGED THE REOPENING OF ASSESSMENT BEFORE LD. CIT(A). HOWEVER, ON EXAMINATION OF THE FACTS AND CIRCUMSTANCES, LD. CIT(A) DID NOT ACC EPT THE CONTENTION OF THE ASSESSEE AND UPHOLD THE REOPENING OF ASSESSMENT . 4. LD. COUNSEL FOR THE ASSESSEE WHILE IMPUGNING THE ORDER OF LD. CIT(A) TOOK THROUGH PAGE NO. 31 OF THE PAPER BOOK W HERE REASONS FOR REOPENING OF THE ASSTT. ARE AVAILABLE. HE POINTED O UT THAT AO HAS ITA NO. 117/DEL/10 ASSTT. YEAR 2002-03 3 REOPENED THE ASSESSMENT ON THE GROUND THAT SECTION 36 (1)(VIII) PROVIDE DEDUCTION IN RESPECT OF ANY SPECIAL RESERVE CREATED AND MAINTAINED BY A FINANCIAL CORPORATION WHICH IS ENGAGED IN PROVIDING LONG TERM FINANCE FOR INDUSTRIAL, AGRICULTURAL DEVELOPMENT OR DEVELOPMENT OF INFRASTRUCTURE FACILITIES IN INDIA OR BY A PUBLIC LIMITED COMPANY FORMED AND REGISTERED IN INDIA WITH THE MAIN OBJECT OF CARRYING ON THE BU SINESS OF PROVIDING LONG TERM FINANCE FOR CONSTRUCTION OR FOR PURCHASE OF HO USES IN INDIA FOR RESIDENTIAL PURPOSE, THEN AN AMOUNT NOT EXCEEDING 4 0% OF THE PROFIT DERIVED FROM SUCH BUSINESS OF PROVIDING LONG TERM FINANCE COMPUTED UNDER THE HEAD PROFIT AND GAINS OF THE FINANCE (B EFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE) CARRIED TO SUCH RESERV E ACCOUNT. IN THE UNDERSTANDING OF THE AO, ASSESSEE HAS INCLUDED CERT AIN ITEMS OF INCOME WHICH CANNOT BE HELD AS THE PROFITS DERIVED FROM SU CH BUSINESS OF PROVIDING LONG TERM FINANCE. THE ISSUE, WHETHER ASS ESSEE HAS INCLUDED CERTAIN ITEMS OF INCOME WHICH CANNOT BE HELD AS THE PROFIT DERIVED FROM SUCH BUSINESS OF PROVIDING LONG TERM FINANCE, HAS B EEN INCLUDED IN CALCULATING THE AMOUNT OF SPECIAL RESERVE U/S 36 (1 )(VIII), HAS NOT BEEN GONE INTO BY THE AO IN THE SCRUTINY ASSESSMENT. LD. COUNSEL FOR THE ASSESSEE REFERRED THE ASSTT. ORDER DATED 17 TH MARCH, 2005 AND SUBMITTED THAT THIS ISSUE HAS BEEN CONSIDERED IN A SCRUTINY A SSESSMENT. THEREFORE, REOPENING IS JUST ON THE BASIS OF CHANGE OF OPINIO N. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, LD. CIT(A) OUGHT TO HAVE NOT UPHELD THIS ITA NO. 117/DEL/10 ASSTT. YEAR 2002-03 4 REOPENING. IN SUPPORT OF HIS CONTENTION, HE RELIED UPON THE JUDGMENT OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CI T VS. KELVINATOR INDIA LTD. 256 ITR 1 WHICH HAS BEEN AFFIRMED BY THE HONBLE SUPREME COURT. HE ALSO RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. EICHER LTD. 294 ITR PAGE 310. LD. DR ON THE OTHER HAND SUBMITTED THAT LD. FIRST APPELLATE AUTHORITY H AS EXAMINED THIS ISSUE AND ARRIVED AT A CONCLUSION THAT EXCESS RELIE F WAS GRANTED TO THE ASSESSEE. THIS CASE FALLS WITHIN THE AMBIT OF EXPLA NATION 2 OF SECTION 147. THE AO IN THE ORIGINAL ASSTT. ORDER HAS NOT SP ECIFICALLY GONE INTO THE COMPUTATION OF THE RESERVE CREATED BY THE ASSESSEE FOR THE PURPOSE OF SECTION 36 (1)(VIII) OF THE INCOME TAX ACT. THUS LD . CIT(A) HAS RIGHTLY HELD THAT THERE IS NO CHANGE OF OPINION IN THE PRES ENT CASE. 5. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. WE FIND THAT ORIGINAL ASSESSM ENT ORDER IS RUNNING INTO JUST ONE AND A HALF PAGE. NO DISCUSSION IS DIS CERNABLE ON THIS ISSUE. THE OBSERVATIONS MADE BY THE AO READ AS UNDER:- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IN AD DITION TO THE QUESTIONNAIRE, THE ASSESSEE WAS ASKED TO FURNISH DE TAILS REGARDING JUSTIFICATION OF CLAIM OF DEDUCTION U/S 36(1)(VIII) AND ALSO GIVING A NOTE ON WHETHER THE PROVISO TO THE SECTION HAS BEEN OBSE RVED. THE ASSESSEE WAS ALSO ASKED TO FURNISH DETAILS OF TREAT MENT OF GRANTS AND LOANS RECEIVED, TRAVELLING ALLOWANCE AND SALARIES E TC. THE ASSESSEE VIDE ITS LETTER DATED 3.12.2004 FURNISH DETAILS REG ARDING CLAIM OF DEDUCTION U/S 36(1)(VIII) OF THE I.T. ACT 1961 AND TREATMENT OF LOANS ETC. THE ASSESSEE FILED DETAILS REGARDING CLAIM OF TRAVE LLING EXPENSES AND EXPENSES ON SALARY AND ALLOWANCES PAID TO STAFF ON 20.12.2004. ALL THE DETAILS HAVE BEEN PERUSED AND PLACED ON RECORD. ITA NO. 117/DEL/10 ASSTT. YEAR 2002-03 5 6. WE CONFRONTED THE LD. COUNSEL FOR THE ASSESSEE T O SHOW US THE LETTER DATED 3 RD DECEMBER, 2004 WHICH WAS SUBMITTED TO THE AO AND WHICH CAN THROW SOME LIGHT ABOUT THE WORKING MADE U /S 36 (1)(VIII). LD. COUNSEL DREW OUR ATTENTION TOWARDS PAGES 27 TO 29 O F THE PAPER BOOK WHEREIN COPY OF THE LETTER DATED 3 RD DECEMBER, 2004 IS AVAILABLE. WITH HIS ASSISTANCE, WE HAVE GONE THROUGH THIS LETTER AN D FIND THAT IT IS JUST A GENERAL LETTER AS NOTICED BY THE LD. CIT(A) ON PAGE 13 OF THE IMPUGNED ORDER. IT DOES NOT CONTAIN ANY WORKING FOR THE PURP OSE OF SECTION 36(1)(VIII). THE ALLEGATION OF THE AO FOR REOPENING OF THE ASSTT. IS THAT ASSESSEE HAS INCLUDED CERTAIN ITEMS OF INCOME WHICH CANNOT BE TERMED AS DERIVED FROM SUCH BUSINESS OF PROVIDING LONG TER M FINANCE. THERE IS NO APPLICATION OF MIND AT THE END OF AO IN THE ORIG INAL ROUND OF ASSTT. ORDER ON THIS ISSUE. THE ASSESSMENT HAS BEEN REOPEN ED WITHIN FOUR YEARS AND THEREFORE, BENEFIT OF PROVISO APPENDED TO SECTION 147 IS NOT AVAILABLE TO THE ASSESSEE. WE FIND THAT LD. CIT(A) HAS CONSIDERED THIS ASPECT ELABORATELY IN THE IMPUGNED ORDER AND ARRIVE D AT A CONCLUSION THAT THE CASE OF THE ASSESSEE COMES WITHIN THE AMBI T OF EXPLANATION 2 APPENDED TO SECTION 147. THERE IS NO CHANGE OF OPIN ION. CONSIDERING THE DETAILED FINDING OF LD. CIT(A), WE DO NOT FIND ANY MERIT IN THE CONTENTION OF LD. COUNSEL FOR THE ASSESSEE AND GROU ND NO. 1 TO 3 ARE REJECTED. ITA NO. 117/DEL/10 ASSTT. YEAR 2002-03 6 7. WITH REGARD TO THE REST OF ISSUES, IT WAS CONTEN DED BY THE ASSESSEE THAT THEY ARE FULLY COVERED BY THE EARLIER ORDER OF THE TRIBUNAL PASSED IN ASST. YEAR 2001-02 AND 1999-2000. IN ITA NO. 444/D/2010 FOR ASSTT. YEAR 2001-02, WE HAVE REPRODUCED THE ORDER OF THE TRIBUNAL IN ASSTT. YEAR 1999-2000 AND 2007-08 WHILE DECIDING TH E TWO ISSUES I.E. DISALLOWANCE OF DEDUCTION OF 40% OF INCOME U/S 36(1 )(III) AS WELL AS WITH REGARD TO DISALLOWANCE OF EXPENSES U/S 14A OF THE A CT. THE FINDING OF THE TRIBUNAL IN ASSTT. YEAR 2007-08 READ AS UNDER :- THE PRESENT APPEAL IS FILED BY THE ASSESSEE AGAIN ST THE ORDER DATED 16.10.2009 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FOR THE A.Y. 2007-08. 2. IN THIS CASE, THE COMMITTEE ON DISPUTES HAS GRAN TED PERMISSION TO THE ASSESSEE TO PURSUE THIS APPEAL WITH REGARD TO T HE FOLLOWING TWO ITEMS: - (1) DISALLOWANCE OF DEDUCTION OF 40% OF INCOME U/S 36(1)(VIII). (2) DISALLOWANCE OF EXPENSES U/S 14A OF THE ACT. 3. GROUND NOS. 1 TO 9 RAISED BY THE ASSESSEE ARE WI TH REGARD TO THE FIRST ISSUE RELATING TO THE DISALLOWANCE OF DEDUCTI ON OF 40% OF INCOME U/S 36(1)(VIII) OF THE ACT. 4. IN THE RETURN OF INCOME, THE ASSESSEE HAS CLAIME D DEDUCTION U/S 36(1)(VIII) OF THE ACT AMOUNTING TO RS. 31,89,54,26 2/- BEING 40% OF RS. 79,73,85,656/- TRANSFERRED TO SPECIAL RESERVE AFTER EXCLUDING RECEIPT OF INTEREST OF RS. 27,10,66,248/- ON LOANS GRANTED FOR LESS THAN FIVE YEARS. IN THE ASSESSMENT, THE AO DISALLOWED THE DEDUCTION U/S 36(1)(VIII) TO THE EXTENT OF RS. 28,75,86,725/- BEING 40% OF NET AMOUN T OF RS. 71,89,66,812/-. THE DETAILS OF THE AMOUNT ON WHICH DEDUCTION U/S 36 (1)(VIII) HAS BEEN DENIED BY THE AO ARE AS UNDER: - ITA NO. 117/DEL/10 ASSTT. YEAR 2002-03 7 PARTICULARS AMOUNT (RS.) LESS: EXPENSES DEDUCTED BY AO (APPORTIONED) (RS.) AMOUNT ON WHICH DEDUCTION U/S 36(1)(VIII) NOT ALLOWED (RS.) A. INTEREST ON BANK DEPOSITS 75,44,47,439 7,54,44,744 67,90,02,695 B. INCOME ON INVESTMENTS 52,50,000 2,62,500 49,87,500 C. SERVICE CHARGES ON SDF LOANS 2,66,11,476 12,72,085 2,53,39,391 D. INTEREST ON ADVANCES/DEPOSITS 13,40,393 NIL 13,40,393 E. MISC. RECEIPTS 82,96,833 NIL 82,96,833 TOTAL 79,59,46,141 7,69,79,329 71,89,66, 812 5. ON AN APPEAL, THE LD. CIT(A) CONFIRMED THE AOS ORDER ON THE GROUND THAT THE AFORESAID PROFITS HAVE NOT DERIVED FROM LO NG TERM FINANCING. 6. HENCE, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 7. IN THE COURSE OF HEARING OF THIS APPEAL, IT HAS BEEN POINTED OUT BY BOTH THE PARTIES THAT IDENTICAL ISSUE HAD COME FOR CONSIDERATION BEFORE THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH F, NEW DELHI, IN THE ASSESSEES OWN CASE PERTAINING TO THE ASSESSMENT YE ARS 1999-2000 AND 2004-05 WHERE THE TRIBUNAL VIDE ITS ORDER DATED 20. 11.2009 IN ITA NOS. 167 & 168/DEL/2008, HAS DECIDED THIS ISSUE AGAINST THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER: - 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT ONLY DISPUTE TO BE DECIDED BY US AS TO WHETHER THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 36(1)(VIII) WITH REGA RD TO THREE TYPE OF INCOMES I.E. DIVIDEND RECEIVED BY THE ASSES SEE ON LONG TERM INVESTMENT, INTEREST FROM BANK ACCOUNTS F ROM SHORT TERM DEPOSITS AND SERVICE CHARGES ON SDF LOANS. WE FEEL THAT FOR THIS PURPOSE, WE SHOULD REPRODUCE THE PROV ISIONS OF SEC. 36(1)(VIII) AS IT WAS ON THE STATUTE BOOK DURI NG THE RELEVANT PERIOD. THE SAME HAS BEEN PRODUCED BY THE LD.CIT(A) ON PAGE NO.20 OF HIS ORDER AND FROM THERE , WE REPRODUCE IT HEREIN BELOW: - ITA NO. 117/DEL/10 ASSTT. YEAR 2002-03 8 (I) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CLAUSES SHALL BE ALLOWED IN RESPECT OF MATTER DEALT WITH THEREIN COMPUTING THE INCOME REFERRED TOP IN SEC. 28 - (I).. (VIII) IN RESPECT OF ANY SPECIAL RESERVE CREATED AND MAINTAINED BY A FINANCIAL CORPORATION WHICH IS ENGAGED IN PROVIDING LONG TERM FINANCE FOR INDUSTRIAL OR AGRICULTURAL DEVELOPMENT OR DEVELOPMENT OF INFRASTRUCTURE FACILITY IN INDIA., AN AMOUNT NOT EXCEEDING FORTY PER CENT OF THE PROFITS DERIVED FROM SUCH BUSINESS OF PROVIDING LONG TERM FINANCE (COMPUTED UNDER THE HEAD PROFITS AND GAINS OF PROFESSION BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE EXPLANATION IN THIS CLAUSE (A). (E)LONG TERM FINANCE MEANS ANY LOAN OR ADVANCE WHERE THE TERMS UNDER WHICH MONEY ARE LOANED OR ADVANCED PROVIDE FOR REPAYMENT ALONG WITH INTEREST THEREOF DURING A PERIOD OF NOT LESS THAN FIVE YEARS. 12. AFTER REPRODUCING THE PROVISIONS OF SEC. 36(1) (VIII), IT HAS BEEN NOTED BY THE CIT(A)THAT THE DEDUCTION WILL BE AVAILABLE TO THE ASSESSEE TO THE EXTENT OF 40% OF PROFITS DER IVED FROM BUSINESS OF PROVIDING LONG TERM FINANCE. IT HAS BE EN HELD BY THE CIT(A) THAT THESE THREE INCOMES ARE NOT PROFITS DERIVED FROM BUSINESS OF PROVIDING LONG TERM FINANCE. THE CONTENTION OF THE ASSESSEE IS THAT EVEN FINANCING BY WAY OF IN VESTING IN SHARES IS ALSO AKIN TO PROVIDING LONG TERM FINANCE AND HENCE DIVIDEND ON SUCH INVESTMENT IS ALSO PROFIT FROM THE BUSINESS OF PROVIDING LONG TERM FINANCE. REGARDING INTEREST FROM BANKS ON SHORT TERM DEPOSIT, IT IS THE CLAIM OF THE ASSESSEE ITA NO. 117/DEL/10 ASSTT. YEAR 2002-03 9 THAT SINCE THE SOURCE OF DEPOSIT, IT IS THE CLAIM O F THE ASSESSEE THAT SINCE THE SOURCE OF FUND WITH THE ASS ESSEE IS LONG TERM FUNDING FROM GOVERNMENT OF INDIA LOANS, B ONDS AND TERM LOANS AND IN THE COURSE OF PROVIDING FUNDS , THESE FUNDS WERE SURPLUS WITH THE ASSESSEE FOR THE A SHOR T PERIOD AND IN ORDER TO MITIGATE INTEREST EXPENDITURE, THES E FUNDS WERE GIVEN TO BANKS ON SHORT TERM DEPOSITS AND HENC E THIS INTEREST INCOME IS ALSO PROFIT FROM BUSINESS OF PRO VIDING LONG TERM FINANCE. REGARDING SERVICE CHARGES ON SDF LOA NS, IT IS THE SUBMISSION THAT SINCE SDF LOANS ARE LONG TERM, THIS INCOME IS ALSO PROFIT DERIVED FROM BUSINESS OF PROV IDING LONG TERM FINANCE. WE ARE NOT IN AGREEMENT WITH LD. AR OF THE ASSESSEE WITH REGARD TO ALL THESE THREE ITEMS BECAU SE WE FEEL THAT THIS ASPECT IS NOW COVERED AGAINST THE AS SESSEE BY THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF LIBERTY INDIA V. CIT(SUPRA). IN THIS CASE, HONBLE APEX COURT WAS CONSIDERING THE DISPUTE AS TO WHETHER DUTY DRAW BACK RECEIPTS OF DEPB BENEFITS FROM PART OF THE NET PROF ITS OF ELIGIBLE INDUSTRIAL UNDERTAKINGS FOR THE PURPOSE OF DEDUCTION U/S 80I/80IA/80IB OF THE I.T. ACT, 1961. IN THESE SECTIONS ALSO, DEDUCTION IS ALLOWABLE ON PROFITS AND GAINS D ERIVED FROM ELIGIBLE BUSINESS. ELIGIBLE BUSINESS HAS BEEN DEFI NED IN SUB SECTIONS 3 TO 11 AND 11A OF SEC.80IB. SUB SECTION 1 OF SEC. 80IB IS RELEVANT WHICH CONTAINS SIMILAR PROVISIONS AS CONTAINED IN SEC. 36(1)(VIII) REPRODUCED AS ABOVE. WE, THEREFORE, REPRODUCE THE PROVISIONS OF SUB SECTION 1 OF SEC. 80IB, WHICH IS AS UNDER: - 80IB. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED FROM ANY BUSINESS REFERRED TO IN SUB-SECTIONS (3) TO [911), (11A) & (11B)] (SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH THE SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFITS AND GAINS OF AN ITA NO. 117/DEL/10 ASSTT. YEAR 2002-03 10 AMOUNT EQUAL TO SUCH PERCENTAGE AND FOR SUCH NUMBER OF ASSESSMENT YEARS AS SPECIFIED IN THIS SECTION. 13. WHEN WE COMPARE THE PROVISIONS OF SEC. 36(1)(V III) AND SEC. 80IB(1), WE FIND THAT IN BOTH CASES, DEDUCTION IS ALLOWABLE IN RESPECT OF PROFITS DERIVED FROM RELEVA NT BUSINESS. IN THAT CASE ALSO, THE DUTY DRAWBACK RECEIPT AND DE PB BENEFITS ARE RECEIVED BY THE ASSESSEE IN CONNECTION WITH SALE PROCEEDS OF GOODS PRODUCED BY THE INDUSTRIAL UNDERT AKING IN THE COURSE OF EXPORT. BUT STILL IT WAS HELD BY HON BLE APEX COURT THAT DUTY DRAWBACK RECEIPTS/DEPB BENEFITS DO NOT FORM PART OF THE NET PROFITS OF ELIGIBLE INDUSTRIAL UNDE RTAKING FOR THE PURPOSE OF SEC. 80I/80IA/80IB OF I.T. ACT. HONBLE APEX COURT HAS DRAWN DIFFERENCE BETWEEN INCOME DERIVED F ROM INDUSTRIAL UNDERTAKING AND PROFITS ATTRIBUTABLE TO INDUSTRIAL UNDERTAKINGS. IT WAS HELD BY HONBLE APEX COURT TH AT THE WORDS DERIVED FROM ARE NARROWER IN CONNOTATION AS COMPARED TO THE WORDS ATTRIBUTABLE TO. IT WAS FU RTHER HELD THAT BY USING THE EXPRESSION DERIVED FROM, PARLIAME NT INTENDED TO COVER SOURCE NOT BEYOND THE FIRST DEGRE E. BY APPLYING THE SAME LOGIC, WE ARE OF THE CONSIDERED O PINION THAT THESE THREE RECEIPTS CAN BE SAID TO BE PAR OF PROFIT/INCOME ATTRIBUTABLE TO BUSINESS OF PROVIDING LONG TERM FINANCE BUT THESE RECEIPTS CANNOT BE SAID TO BE PRO FITS DERIVED FROM SUCH BUSINESS OF PROVIDING LONG TERM F INANCE AND HENCE, THESE RECEIPTS ARE NOT ELIGIBLE FOR DEDU CTION U/S 36(1)(VIII). WE HOLD SO BECAUSE WE ARE OF THE CONS IDERED OPINION THAT INVESTMENT IN SHARES IS FOR EARNING DI VIDEND INCOME AND THE DIVIDEND CANNOT BE SAID TO BE PROFIT DERIVED FROM PROVIDING OF LONG TERM FINANCE. NOTHING WAS SHOWN TO US THAT INVESTMENT IN SHARES WERE MADE AS A MEANS O F PROVIDING LONG TERM FINANCE AND THAT IT IS NOT AN I NVESTMENT DECISION OF THE ASSESSEE. REGARDING BANK INTEREST, IT IS ADMITTED POSITION THAT THESE FDS/DEPOSITS WERE FOR SHORT PERIOD AND EVEN IF IT IS FOR A LONG PERIOD, IT IS D EPOSIT WITH BANK AND NOT PROVIDING OF LONG TERM FINANCE TO BANK S AND ITA NO. 117/DEL/10 ASSTT. YEAR 2002-03 11 HENCE NOT ELIGIBLE FOR DEDUCTION U/S 36(1)(VIII). REGARDING SERVICE CHARGES ON SDF LOANS, WE FIND THAT ADMITTED LY, THERE IS NO FINANCE GIVEN BY THE ASSESSEE AS THE ENTIRE F INANCING IN SDF LOANS IS BY THE GOVT. AND NOT BY THE ASSESSEE A ND THE ASSESSEE IS GETTING ONLY SOME SERVICE CHARGES FOR R ENDERING CERTAIN SERVICES IN THAT CONNECTION. HENCE, THIS R ECEIPT CAN BE SAID TO BE ATTRIBUTABLE TO THE BUSINESS OF PROVI NG LONG TERM FINANCE BUT CANNOT BE SAID TO BE DERIVED FROM THE B USINESS OF PROVIDING LONG TERM FINANCE. 14. REGARDING THE CONTENTION OF LD. AR OF THE ASSES SEE THAT IN EARLIER YEARS AND IN SUBSEQUENT YEARS, DEDU CTION WAS ALLOWED TO THE ASSESSEE U/S 36(1)(VIII) WITH REGARD TO THESE RECEIPTS, WE FIND THAT RELEVANT ASSESSMENT ORDERS F OR THOSE YEARS ARE AVAILABLE ON PAGES 162 TO 185 OF THE PAPE R BOOK. IN THIS REGARD, WE FIND THAT SIMILAR DEDUCTION IS S AID TO BE ALLOWED BY THE DEPARTMENT WITH REGARD TO THESE THRE E RECEIPTS IN ASSESSMENT YEARS 2002-03 AND 2003-04 BUT ACTION HAS BEEN TAKEN BY THE DEPARTMENT SUBSEQUENTLY U/S 148 A ND U/S 263 AND HENCE THE ASSESSMENT ORDERS OF THESE TWO YE ARS ARE NOT RELEVANT. REGARDING EARLIER YEARS, WE ALSO FIN D THAT UPTO A.Y. 1995-96, THE PROVISIONS OF SEC. 36(1)(VIII) WE RE DIFFERENT AND AS PER THOSE PROVISIONS, DEDUCTION WAS ALLOWABL E TO AN ELIGIBLE ASSESSEE TO THE EXTENT TO 40% OF TOTAL INC OME COMPUTED BEFORE MAKING ANY DEDUCTION U/S 36(1)(VIII ) AND CHAPTER VIA. HENCE, UPTO A.Y.1995-96, DEDUCTION WA S TO BE ALLOWED TO THE ASSESSEE WITHOUT EXCLUDING ANY PART OF THESE THREE RECEIPTS. AS PER AMENDMENT BY THE FINANCE AC T, 1995 WITH EFFECT FROM 1.4.1996, THE PROVISIONS HAVE BEEN CHANGED AND AS PER THE CHANGED PROVISIONS, DEDUCTION WAS AL LOWABLE TO THE EXTENT OF 40% OF THE PROFITS DERIVED FROM SU CH BUSINESS OF PROVIDING LONG TERM FINANCE. EVEN AFTER THIS AM ENDMENT IN SEC. 36(1)(VIII), THE DEPARTMENT HAS ALLOWED DEDUCT ION U/S 36(1)(VIII) WITH REGARD TO THESE THREE RECEIPTS ALS O IN A.Y. 1996-97, 1997-98 AND 1998-99 AND FOR THIS REASON IT IS THE CLAIM OF THE ASSESSEE THAT BY APPLYING THE RULE OF CONSISTENCY, SUCH DEDUCTION SHOULD BE ALLOWED IN TH E PRESENT ITA NO. 117/DEL/10 ASSTT. YEAR 2002-03 12 YEARS ALSO. IN THIS REGARD, WE FIND THAT IN THE PR ESENT YEAR I.E. A.Y.1999-2000, THE ASSESSMENT WAS REOPENED BY THE A O U/S 147/148 AND SUCH NOTICE U/S 148 WAS ISSUED ON 30.3. 06. BY THAT TIME, TIME LIMIT HAD EXPIRED FOR ISSUING SUCH NOTICES U/S 148 FOR EARLIER YEARS BECAUSE MORE THAN SIX YEARS H AVE ALREADY ELAPSED BY THAT TIME. AS PER THE PROVISION S OF SEC. 149, NO NOTICE U/S 148 CAN BE ISSUED AFTER EXPIRY O F SIX YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND HE NCE THE DEPARTMENT WAS DEBARRED FROM REOPENING THESE OLD ASSESSMENTS AND HENCE UNDER THESE FACTS, IT CANNOT BE SAID THAT DEPARTMENT CANNOT REOPEN THE ASSESSMENTS FOR T HOSE YEARS ALSO, FOR WHICH TIME LIMIT HAS NOT EXPIRED ON LY BECAUSE THE DEPARTMENT CANNOT REOPEN SOME EARLIER ASSESSMEN T YEARS FOR WHICH THE TIME LIMIT HAS EXPIRED. IN SUC H A CASE, IT WILL ALWAYS BE A SITUATION, THAT ON SAME ISSUE, DEP ARTMENT HAS WRONGLY ALLOWED SOME BENEFITS TO THE ASSESSEE W HICH WAS NOT ALLOWABLE AS PER LAW AND SINCE THE DEPARTME NT HAD NOTICED THE MISTAKE LATE AND CANNOT REOPEN THE CASE S OF SOME OF THE EARLIER YEARS, IT CANNOT BE SAID THAT T HE DEPARTMENT CANNOT RECTIFY THE MISTAKE IN SUBSEQUENT YEARS ALSO BECAUSE THE DEPARTMENT HAS MADE A MISTAKE IN E ARLIER YEARS WHICH CANNOT BE RECTIFIED BY THE DEPARTMENT B ECAUSE OF EXPIRY OF LIMITATION PERIOD. UNDER THIS FACTUAL POSITION, WE FEEL THAT THIS CLAIM OF THE ASSESSEE ALSO DESERVES TO BE REJECTED IN VIEW OF THESE PECULIAR FACTS OF THE PRE SENT CASE. THE JUDGMENTS CITED BY LD. AR OF THE ASSESSEE IN TH IS REGARD ARE NOT RELEVANT IN VIEW OF THESE PECULIAR FACTS OF THE PRESENT CASE. 15. ONE MORE CONTENTION WAS RAISED BY THE ASSESSEE WITH REGARD TO THE JUDGMENT OF HONBLE APEX COURT I N CONNECTION WITH SEC. 80I/80IA/80IB. IT HAS BEEN SU BMITTED THAT THE JUDGMENTS OF HONBLE APEX COURT ARE NOT AP PLICABLE. IT WAS SUBMITTED THAT THE JUDGMENT OF APEX COURT AR E NOT APPLICABLE. IT WAS SUBMITTED THAT THE JUDGMENT OF APEX COURT RENDERED IN THE CASE OF LIBERTY INDIA LIMITED (SUPR A) IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE THE JUDGMENT IS IN ITA NO. 117/DEL/10 ASSTT. YEAR 2002-03 13 CONNECTION WITH SEC. 80IA/80IB AND THE DISPUTE IN T HE PRESENT CASE IS WITH REGARD TO SEC. 36(1)(VIII). IN THIS R EGARD, THE RELIANCE HAVE BEEN PLACED ON THE JUDGMENT OF HONBL E APEX COURT RENDERED IN THE CASE OF PADMA SUNDARA RAO (SU PRA). IT HAS BEEN HELD BY HONBLE APEX COURT IN THIS CASE TH AT COURTS SHOULD NOT PLACE RELIANCE ON DECISIONS WITHOUT DISC USSING AS TO HOW THE FACTUAL SITUATION FITS IN WITH THE FACTS SITUATION, OF THE DECISION ON WHICH RELIANCE IS PLACED. WE FEEL THAT AS PER THIS JUDGMENT OF HONBLE APEX COURT, BEFORE PLACING RELIANCE ON A PARTICULAR JUDGMENT, IT HAS TO BE SEEN THAT TH E FACTUAL SITUATION OF THE PRESENT CASE FITS IN WITH THE FACT SITUATION OF SUCH DECISION. IN THE PRESENT CASE, WE HAVE ALREAD Y NOTED THAT IN THE PRESENT CASE AS WELL AS IN THE CASE OF LIBERTY INDIA (SUPRA),THE DISPUTE IS REGARDING THE WORDS DERIVED FROM. IN BOTH THESE CASES, WE HAVE NOTED THAT ITEMS OF PROFI T IN DISPUTE ARE ELIGIBLE TO BE REGARDED AT INCOME ATTRI BUTABLE TO THE ELIGIBLE BUSINESS BUT THE SAME CANNOT BE REGARD ED AS PROFIT DERIVED FROM ELIGIBLE BUSINESS. HENCE, WE F IND THAT DUE CARE HAS BEEN TAKEN BY US TO FIND OUT THAT THE FACT SITUATION, IN THE PRESENT CASE AND IN THE CASE OF LIBERTY INDI A (SUPRA) ARE IDENTICAL ALTHOUGH THE SECTION INVOLVED IN BOTH THE CASES ARE DIFFERENT AND HENCE, WE FEEL THAT THE OBJECTION RAISED BY THE ASSESSEE IN THIS REGARD IS WITHOUT MERIT AND DE SERVES TO BE REJECTED. WE REJECT THE SAME. 16. ONE ALTERNATIVE ARGUMENT WAS RAISED BY THE ASSE SSEE THAT EVEN IF INTEREST INCOME FROM BANK HAS TO BE EX CLUDED FROM THE PROFIT OF THE ASSESSEE FOR THE PURPOSE OF CALCULATION OF DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 36(1)(VI II), THE GROSS RECEIPT CANNOT BE EXCLUDED AND ONLY AFTER DED UCTING INTEREST EXPENDITURE FROM PROFIT OF BUSINESS BECAUS E THE ASSESSEE IS CLAIMING DEDUCTION U/S 36(1)(VIII) FROM NET PROFIT AND NOT FROM GROSS RECEIPT. AGAINST THIS, IT WAS T HE OBJECTION OF LD. DR OF THE REVENUE THAT COD HAS PERMITTED THE ASSESSEE TO PURSUE THE ISSUE IN CONNECTION WITH ALL OWABILITY OF DEDUCTION U/S 36(1)(VIII) WITH REGARD TO THESE T HREE RECEIPTS AND COD HAS NOT PERMITTED THE ASSESSEE TO RAISE THE DISPUTE ITA NO. 117/DEL/10 ASSTT. YEAR 2002-03 14 REGARDING THE QUANTUM OF EXCLUSION MADE BY THE AO F ROM PROFIT OF BUSINESS FOR THE PURPOSE OF COMPUTING DED UCTION ALLOWABLE TO THE ASSESSEE U/S 36(1)(VIII). IN THIS REGARD, WE ARE NOT IN AGREEMENT WITH LD. DR OF THE REVENUE THA T COD HAS NOT GRANTED PERMISSION TO THE ASSESSE TO RAISE THIS ASPECT OF THE MATTER. WHEN COD HAS PERMITTED THE ASSESSEE TO CONTEST THE ISSUE REGARDING ALLOWABILIT Y OF DEDUCTION U/S 36(1)(VIII),THE ALTERNATIVE CLAIM OF THE ASSESSEE IS PART OF THE BROADER PERMISSION GRANTED BY COD AN D HENCE WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO RAISE THIS DISPUTE ALSO. 17. NOW, WE EXAMINE THIS ALTERNATIVE CONTENTION OF THE ASSESSEE THAT ENTIRE RECEIPT ON ACCOUNT OF BANK INT EREST CANNOT BE REDUCED FROM BUSINESS PROFIT FOR THE PURP OSE OF CALCULATING DEDUCTION U/S 36(1)(VIII) ALLOWABLE TO ASSESSEE. THE CLAIM OF THE ASSESSEE IS THAT EVEN IF IT IS HEL D THAT BANK INTEREST ON TEMPORARY DEPOSITS IS NOT ELIGIBLE FOR DEDUCTION U/S 36(1)(VIII), THEN ALSO, ONLY THE NET INTEREST I NCOME AFTER DEDUCTING CORRESPONDING INTEREST EXPENDITURE SHOULD BE REDUCED FROM BUSINESS PROFIT. WE ARE IN AGREEMENT WITH LD. AR OF THE ASSESSEE ON THIS ASPECT AND ACCORDINGLY, WE HOLD THAT IF THE ASSESSEE CAN SHOW AND ESTABLISH THAT AN Y PART OF INTEREST EXPENDITURE HAS A DIRECT NEXUS WITH EARNIN G OF INTEREST FROM BANK, SUCH INTEREST EXPENDITURE TO TH E EXTENT NEXUS IS ESTABLISHED BY THE ASSESSEE SHOULD BE REDU CED FROM INTEREST INCOME FROM BANK AND ONLY SUCH NET IN TEREST INCOME SHOULD BE EXCLUDED FROM BUSINESS PROFIT FOR THE PURPOSE OF CALCULATING DEDUCTION ALLOWABLE TO THE A SSESSEE U/S 36(1)(VIII). WITH THESE OBSERVATIONS, WE SET A SIDE THE ORDER OF THE CIT(A) ON THIS ISSUE IN BOTH THE YEARS AND RESTORE THIS MATTER BACK TO THE FILE OF AO FOR A FR ESH DECISION AS PER ABOVE DISCUSSION. IN THIS REGARD, WE FEEL T HAT THE JUDGMENT OF HONBLE DELHI HIGH COURT RENDERED IN TH E CASE OF CIT V. SH. RAM HONDA POWER EQUIPMENT AS REPORTED IN 289 ITR 475 (DEL.) IS DIRECTLY APPLICABLE BECAUSE IN TH IS JUDGMENT, NECESSARY GUIDE LINES HAVE BEEN LAID DOWN BY HONBL E DELHI ITA NO. 117/DEL/10 ASSTT. YEAR 2002-03 15 HIGH COURT WITH REGARD TO GRANTING OF NETTING OF TH E INTEREST. THE AO SHOULD DECIDE THIS ASPECT IN THE LIGHT OF TH IS JUDGMENT OF HONBLE DELHI HIGH COURT AFTER PROVIDING ADEQUAT E OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS A SPECT IS DECIDED IN FAVOUR OF THE ASSESSEE IN BOTH YEARS FOR STATISTICAL PURPOSES BECAUSE NETTING IS TO BE ALLOWED BY THE AO ONLY TO THE EXTENT NEXUS IS ESTABLISHED BY THE ASSESSEE AND IN THE LIGHT OF THE ABOVE SAID JUDGMENT OF HONBLE DELHI H IGH COURT. 8. SINCE THE ISSUE HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF THE TRIBUNAL AND THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE IDENTICAL TO THE FACTS IN THE ASSESSMENT YEARS 1999 -2000 AND 2004-05 AS DECIDED BY THE TRIBUNAL, WE UPHOLD THE ORDER OR THE CIT(A) IN HOLDING THAT THE ASSESSEE IS NOT ENTITLED TO GET DEDUCTION U/S 3 6(1)(VIII) ON THE ITEMS INVOLVED IN THIS GROUND OF APPEAL. WE, THEREFORE, UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE. 9. HOWEVER, IN THE COURSE OF HEARING OF THIS APPEAL , THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT EVEN IF DISALLOWANCE U/S 36(1)(VIII) IS CALLED FOR IN RESPECT OF INTEREST INCOME, DIVIDEND, INTEREST O N ADVANCES OAR DEPOSITS, MISCELLANEOUS RECEIPTS AND SERVICE CHARGES OF SDF L OANS, ONLY THE NET PROFIT IS TO BE CONSIDERED FOR THE PURPOSE OF DISALLOWANCE U/S 36(1)(VIII) OF THE ACT. THIS ALTERNATIVE CONTENTION WAS ALSO RAISED BY THE ASSESSEE BEFORE THE TRIBUNAL IN EARLIER YEARS I.E. ASSESSMENT YEARS 199 9-2000 AND 2004-05 AND THIS ALTERNATIVE CONTENTION HAS BEEN DECIDED BY THE TRIBUNAL VIDE PARA 16 & 17 OF THE ORDER WHICH HAS ALREADY BEEN REPRODUCED H EREINABOVE. IN ADDITION TO THE ABOVE, THE ASSESSEE HAS PRODUCED BE FORE US A WORKING OF DISALLOWANCE FOR OUR CONSIDERATION. HOWEVER, THIS WORKING WAS NOT BEFORE THE AO. WE, THEREFORE, DIRECT THE AO TO WORK OUT T HE NET PROFIT WHICH IS LIABLE TO BE DISALLOWED AS DEDUCTION U/S 36(1)(VIII ) AFTER CONSIDERING THE ASSESSEES CONTENTIONS. THE ASSESSEE SHALL APPEAR BEFORE THE AO AND FILE ITS WORKING FOR THE PURPOSE OF DISALLOWANCE OF INCO ME U/S 36(1)(VIII) OF THE ACT. WE ORDER ACCORDINGLY. 10. NEXT ISSUE IS WITH REGARD TO THE DISALLOWANCE O F EXPENSES U/S 14A OF THE ACT. 11. IN THE ASSESSMENT THE AO HAS DISALLOWED SUM OF RS. 1,61,44,459/- BY APPLYING RULE 8D OF THE INCOME TAX RULES, U/S 14 A OF THE ACT. HOWEVER, ITA NO. 117/DEL/10 ASSTT. YEAR 2002-03 16 ON AN APPEAL, THE CIT(A) MADE CERTAIN MODIFICATIONS AND RESTRICTED THE DISALLOWANCE TO RS. 2,04,810/- BY APPLYING RULE 8D OF INCOME TAX RULES. 12. IN THE COURSE OF HEARING, IT HAS BEEN POINTED O UT THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG . CO. LTD. V. DCIT (2010) 234 CTR (BOM.) 1, WHERE IT IS HELD THAT RULE 8D SHALL BE APPLICABLE ONLY FROM THE A.Y. 2008-09 AND IS NOT TO BE APPLIED RETROSPECTIVELY. RESPECTFULLY FOLLOWING THE DECISION OF HONBLE BOMB AY HIGH COURT AS REFERRED TO ABOVE, WE HOLD THAT THE DISALLOWANCE U/ S 14A IN THE PRESENT CASE SHALL NOT BE MADE BY APPLYING RULE 8D OF THE INCOME TAX RULES. THEREFORE, THE ORDERS OF THE AUTHORITIES BELOW WHERE DISALLOWA NCE HAS BEEN MADE UNDER RULE 8D ARE SET ASIDE. 13. NOW, WE COME TO THE QUESTION AS TO WHETHER ANY DISALLOWANCE U/S 14A IS CALLED FOR IN THE PRESENT CASE. IN THE PRES ENT CASE, THE ASSESSEE HAS RECEIVED DIVIDEND OF RS. 4,59,000/- WHICH HAS BEEN CLAIMED TO BE EXEMPTED UNDER THE ACT. DIVIDEND HAS BEEN RECEIVED IN RESPE CT OF THE INVESTMENT MADE IN THE SHARES OF INDIAN POTASH LTD. THE ASSES SEE PURCHASED 17,000/- SHARES OF RS. 10/- EACH AGGREGATING TO RS. 1,70,000 /-IN 1976. SUBSEQUENTLY, THERE WAS RIGHT ISSUE IN 1985 OF EQUA L NUMBER OF SHARES. THE LAST RIGHT ISSUE WAS IN 1996 AND THE OTHER ISSU ES ARE THE BONUS ISSUES. THE ASSESSEE HAS RECEIVED DIVIDEND ON THE SHARES PU RCHASED IN EARLIER YEAR. NO ACTUAL EXPENDITURE HAS BEEN POINTED OUT T O HAVE BEEN INCURRED BY THE ASSESSEE IN EARNING THE DIVIDEND INCOME. HOWEV ER, SOME ADMINISTRATIVE EXPENSES MIGHT HAVE BEEN INCURRED BY THE ASSESSEE. WE, THEREFORE, ESTIMATE 10% OF DIVIDEND INCOME AS EXPEN SES INCURRED FOR EARNING DIVIDEND INCOME WHICH IS EXEMPTED. WE, THE REFORE, RESTRICT THE DISALLOWANCE TO RS. 4,590/-. THE ASSESSING OFFICER SHALL MODIFY THE ASSESSMENT ORDER ACCORDINGLY. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED IN THE MANNER AS INDICATED ABOVE. 15. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 31.12.2010. 8. THERE IS NO DISPARITY ON FACTS IN THE PRESENT AS STT. YEAR 2001-02 OR 1999-2000. WITH REGARD TO THE DISALLOWANCE MADE U/S 14A, LD. COUNSEL ITA NO. 117/DEL/10 ASSTT. YEAR 2002-03 17 FOR THE ASSESSEE POINTED OUT THAT ASSTT. HAS NOT BE EN REOPENED BY THE AO FOR MAKING THIS DISALLOWANCE. HE SUBMITTED THAT NO DISALLOWANCE OUGHT TO HAVE BEEN MADE BY THE LD. CIT(A). WE HAVE CONSIDERED THIS CONTENTION OF THE ASSESSEE AND DO NOT FIND ANY MERI T IN IT. SECTION 147 PROVIDES THAT AFTER REOPENING OF ASSTT., IF ANY OTH ER ITEM CAME TO THE NOTICE OF THE AO WHICH HAS ESCAPED ASSTT. THAT CAN ALSO BE EXAMINED. LD. CIT(A) ON THE BASIS OF FINDING RECORDED BY HIS PREDECESSOR IN THE EARLIER YEAR CAME TO THE NOTICE THAT ASSESSEE HAS D IVIDEND INCOME AND HAS NOT ADDED EXPENSES ATTRIBUTABLE TO EARNING OF SUCH INCOME FOR THE PURPOSE OF SECTION 14A IN ITS COMPUTATION. THEREFOR E, HE ISSUED A NOTICE FOR ENHANCEMENT OF INCOME AND WORKED OUT THE DISALL OWANCE. CONSIDERING OUR FINDING IN ASSTT. YEAR 2001-02 AND 1999-2000, WE DIRECT THE AO TO GIVE SAME EFFECT IN THIS ASSTT. YEAR ON T HESE TWO ISSUES. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 21.4.2011. SD/- SD/- [B.C. MEENA] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21.4.2011 VEENA ITA NO. 117/DEL/10 ASSTT. YEAR 2002-03 18 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT