Dy Commissioner of income Tax, Panchkula V. M/s Haryana State Coooperative Supply & Marketing, Panchkula

ITA 1223/CHANDI/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5301 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 25-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAWAN KUMAR SHARMA
• Keywords: Earning of tax free income; Retrospective amendment
• Section: 14A; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH A, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.1269/CHD/2016 (ASSESSMENT YEAR : 2013-14) THE HARYANA STATE CO-OPERATIVE VS. THE A.C.I.T., SUPPLY & MARKETING FEDERATION LTD., PANCHKULA CIRCLE, CORPORATE OFFICE, SECTOR 5, PANCHKULA. PANCHKULA, HARYANA. PAN: AAAJH0022R & ITA NO.1223/CHD/2016 (ASSESSMENT YEAR : 2013-14) THE D.C.I.T., VS. THE HARYANA STATE CO-OPERATIVE PANCHKULA CIRCLE, SUPPLY & MARKETING FEDERATION LTD., PANCHKULA. CORPORATE OFFICE, SECTOR 5, PANCHKULA. PAN: AAAJH0022R (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AMAN PARTI DEPARTMENT BY : SHRI PAWAN KUMAR SHARMA, DR DATE OF HEARING : 24.10.2017 DATE OF PRONOUNCEMENT : 22.01.2018 ORDER PER ANNAPURNA GUPTA, A.M. : THE ABOVE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE HAVE BEEN PREFERRED AGAINST THE ORDER OF LE ARNED COMMISSIONER OF INCOME TAX (APPEALS), PANCHKULA DAT ED 30.9.2016 FOR ASSESSMENT YEAR 2013-14. 2. AT THE OUTSET WE MAY STATE THAT THE ISSUE RAISED IN THE ASSESSEES APPEAL IN ITA NO.1269/CHD/2016 & IN GROUN D NO.1 OF THE REVENUES APPEAL RELATE TO DISALLOWANCE MADE U/S 14A OF THE INCOME TAX ACT,1961,R.W.R 8D OF THE INCOME TAX RULES ,1962.SINCE THE ISSUE IS INTERLINKED WE S HALL BE 2 DEALING WITH THE SAME TOGETHER. BRIEF FACTS RELATIN G TO THE ISSUE IS THAT THE ASSESSEE HAD CLAIMED DEDUCTION U/ S 80P(2)(D) OF THE INCOME TAX ACT, 1961 (IN SHORT TH E ACT) ON ACCOUNT OF DIVIDEND AND INTEREST INCOME EARNED BY IT AMOUNTING TO RS.8,12,65,800/-ON THE DIVIDEND EARNED & RS.9,49,770/-ON THE INTEREST INCOME. THE ASSESSING OFFICER DISALLOWED THE CLAIM BY APPLYING THE PROVISIONS OF SECTION 14A R.W.R 8D OF THE INCOME TAX RULES,1962 AND THERE BY REDUCING THE EXPENSES INCURRED FOR EARNING THE SAME . 3. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD.CIT(APPEALS), WHO, FOLLOWING HIS ORDER PASSED IN ASSESSEES CASE FOR ASSESSMENT YEAR 2009-10, UPHELD THE APPLICABILITY OF SECTION 14A R.W.R. 8D FOR THE PURP OSE OF COMPUTING THE DISALLOWANCE OF EXPENSES TO BE MADE , BUT AT THE SAME TIME DIRECTED RESTRICTING THE DISALLOWANCE , COMPUTED AS PER RULE 8D(2)(II) & (III), BY TAKING I NTO ACCOUNT THE AVERAGE VALUE OF ONLY THOSE INVESTMENTS WHICH H AD YIELDED INTEREST AND DIVIDEND INCOME DURING THE YEA R. 4. AGGRIEVED BY THE SAME THE ASSESSEE HAS COME UP IN APPEAL BEFORE US IN ITA NO.1269/CHD CHALLENGING THE APPLICABILITY OF THE PROVISIONS OF SECTION 14A TO D EDUCTION CLAIMED U/S 80P(2)(D) AND IN UPHOLDING THE DISALLOW ANCE OF INTEREST EXPENSES COMPUTED AS PER RULE 8D(2)(II) OF THE INCOME TAX RULES,1962 RAISING THE FOLLOWING GROUNDS : 1. THAT THE ORDER OF THE WORTHY CIT(A) IS BEING CHALLE NGED ON THE GROUND OF IT BEING ILLEGAL, ARBITRARY AND HAVING B EEN PASSED IN HASTE WITHOUT CONSIDERING THE WRITTEN SUBMISSION S AS WELL AS THE DOCUMENTARY EVIDENCE FILED BY THE APPELLANT DUR ING THE APPELLATE PROCEEDINGS. 2. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN UPHOLD ING THE APPLICATION OF PROVISIONS OF SECTION 14A TO DEDUCTI ON CLAIMED 3 U/S 80P(2)(D) OF THE INCOME TAX ACT, 1961. EVEN OTH ERWISE, THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO RE-COMPUTE THE DISALLOWANCE U/S 14A BY APPLYING THE PROVISIONS OF RULE 8D(2)(II). 5. THE REVENUE IN ITS CROSS APPEAL IN ITA.NO.1223/CHD/2016 , HAS CHALLENGED THE DIRECTION OF THE CIT(A) TO RESTRICT THE DISALLOWANCE UNDER RULE 8D(2)(II) AND 8D(2)(III) BY TAKING INTO ACCOUNT THE AVERAGE V ALUE OF ONLY THOSE INVESTMENTS WHICH YIELD DIVIDEND AND INT EREST INCOME AND HAS RAISED THE FOLLOWING GROUNDS: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED TO ALLOWED THE APPEAL OF THE ASSES SEE WHICH IS NOT AS PER LAW BECAUSE THE SAME IS NOT ALLOWABLE TO THE ASSESSEE AS ASSESSEE HAS CLAIMED DEDUCTION ON DIVIDEND INCOME A ND INTEREST INCOME. 6. BEFORE US, VIS A VIS THE ISSUES RAISED IN ASSESS ES APPEAL, LD.AR MADE THE FOLLOWING ARGUMENTS AGAINST THE AFORESTATED ACTION OF THE LD.CIT(A) AS UNDER: 1) THAT DISALLOWANCE U/S 14A R.W.R. 8D WAS NOT APPL ICABLE SINCE THE ISSUE DID NOT PERTAIN TO EXEMPT INCOME, B UT TO INCOMES WHICH WERE ALLOWED DEDUCTION UNDER CHAPTER-VI-A. 2) THAT IN ANY CASE, EVEN IF THE SECTION 14A R.W.R. 8D WAS APPLICABLE, NO DISALLOWANCE OF ANY INTEREST EXPENDI TURE AS PER RULE 8D(2)(II) WAS TO BE MADE SINCE THE ASSESSEE HA D ENOUGH OWN FUNDS FOR THE PURPOSE OF MAKING THE SAID INVESTMENT S AND IN ANY CASE, ALL THE INVESTMENTS WERE OLD. 7. AS FOR THE RESTRICTION OF THE COMPUTATION OF DISALLOWANCE AS PER SECTION 14A ONLY ON THE AVERAGE VALUE OF INVESTMENTS WHICH HAVE EARNED INCOME AND WHICH DID NOT FORM PART OF THE TOTAL INCOME, THE ASSESSEE RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN ACB IND IA LTD. VS ACIT 62 TAXMANN.COM 71. 8. THE LD. DR, ON THE OTHER HAND, POINTED OUT THAT AS FAR AS THE APPLICABILITY OF SECTION 14A R.W.R. 8D, THE SAME HAS BEEN DEALT WITH BY THE LD.CIT(APPEALS) WHEREIN HE H AD 4 MENTIONED THAT THE ASSESSEE HAD ADMITTED TO THE APPLICABILITY OF THE SAME IN ASSESSMENT YEAR 2005-0 6 AND HAD BEEN UPHELD IN THE CASE OF THE ASSESSEE FOR SUB SEQUENT YEARS ALSO. IT WAS ALSO POINTED OUT BY THE LD. DR THAT THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF PU NJAB STATE COOPERATIVE MILK PRODUCERS FEDERATION LTD. VS COMMI SSIONER OF INCOME TAX & ANR. REPORTED IN 336 ITR 495 HAD UP HELD THE APPLICABILITY OF SECTION 14A WHILE CALCULATING THE ELIGIBLE DEDUCTION U/S 80P(2)(D) OF THE ACT. AS FAR THE ASS ESSEES CONTENTION OF NO DISALLOWANCE TO BE MADE AS PER RUL E 8D(2)(II) ON ACCOUNT OF INTEREST, THE LD. DR CONTEN DED THAT ON ACCOUNT OF THE MIXED FUNDS AVAILABLE WITH THE AS SESSEE THE PROVISIONS OF RULE 8D(2)(II) WERE CLEARLY APPLI CABLE. 9. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTIE S. ON THE FIRST CONTENTION RAISED BY THE ASSESSEE VIS--V IS THE APPLICABILITY OF SECTION 14A R.W.R. 8D, WE FIND THA T THIS ASPECT HAS ALREADY BEEN DEALT WITH BY THE TRIBUNAL IN THE CASE OF THE ASSESSEE IN ASSESSMENT YEAR 2012-13 VID E THEIR ORDER IN ITA NO.48/CHD/2016 DATED 30.10.2017 WHEREI N THE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE THAT THE PROVISIONS OF SECTION 14A R.W.R. 8D COULD NOT BE AP PLIED FOR THE PURPOSE OF COMPUTING THE EXPENSES RELATABLE TO EARNING OF INTEREST AND DIVIDEND INCOME WAS DISMISSED BY TH E I.T.A.T. FOLLOWING THE DECISION OF THE HON'BLE JURI SDICTIONAL HIGH COURT IN THE CASE OF PUNJAB STATE COOPERATIVE MILK PRODUCERS FEDERATION LTD. VS COMMISSIONER OF INCOME TAX & ANR. REPORTED IN 336 ITR 495 ON IDENTICAL ISSUE. T HE 5 RELEVANT FINDINGS OF THE I.T.A.T. AT PARAS 9 AND 10 OF THE ORDER ARE AS UNDER: 9. ON THE FIRST CONTENTION RAISED BY THE ASSESSEE T HAT SECTION 14A R.W.R. 8D IS NOT APPLICABLE WHILE WORKI NG OUT THE CLAIM OF DEDUCTION U/S 80P(2)(D), WE FIND THAT THE LD. DR HAS RIGHTLY POINTED OUT THAT THE ISSUE HAS ALREA DY BEEN DEALT WITH BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF PUNJAB STATE COOPERATIVE MILK PRODUCERS FED ERATION LTD. VS COMMISSIONER OF INCOME TAX & ANR. REPORTED IN 336 ITR 495 WHEREIN THE APPLICABILITY OF THE SAID SECT ION HAS BEEN UPHELD. THE RELEVANT FINDINGS OF THE HON'BLE HIGH COURT WITH REGARD TO THE SAME ARE AS UNDER: THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER S. 80P (2)(D) OF THE ACT AFTER EXCLUDING THE EXPENDITURE ATTRIBUTABLE TO THE EARNING OF SUCH INCOME. THE APEX COURT IN SABARKANTHA ZILLA KHARID VECHAN SANGH LTD.S CASE (SUPRA), WHERE THE HIGH COURT WHI LE REJECTING THE CLAIM OF THE ASSESSEE HAD HELD THAT THE ASSESSE E WHO WAS ENGAGED IN THE PURCHASE OF AGRICULTURAL IMPLEMENTS, SEEDS, LIVE- STOCKS ETC. WAS ENTITLED TO DEDUCTION UNDER S. 81 O F THE ACT FROM TAX ONLY IN RELATION TO NET PROFIT AND NOT GROSS PR OFITS. IT WAS HELD AS UNDER : 'THE SAID PROVISION, AS SEEN THEREFROM, UNDOUBTEDLY EXEMPTS AN ASSESSEE-CO-OPERATIVE SOCIETY, WHICH CARRIES ON THE BUSINESS ENVISAGED THEREIN, FROM PAYMENT OF INCOME-TAX ON PR OFITS AND GAINS OF SUCH BUSINESS. BUT THE CONTROVERSY WHICH R ELATES TO THE SAID PROVISION IS, WHETHER THE INCOME-TAX NOT PAYAB LE THEREUNDER, FALLS TO BE CALCULATED EITHER WITH REFERENCE TO THE FULL AMOUNT OF PROFITS AND GAINS OF THE CO-OPERATIVE SOCIETYS BUS INESS, AS CONTENDED ON BEHALF OF THE ASSESSEE OR WITH REFEREN CE TO THE NET AMOUNT OF PROFITS AND GAINS OF THE CO-OPERATIVE SOC IETYS BUSINESS, AS OTHERWISE COMPUTABLE UNDER THE PROVISIONS OF THE IT ACT FOR THE PURPOSE OF CHARGING INCOME-TAX THEREON, AS CONTENDE D ON BEHALF OF THE REVENUE. IF THE RELEVANT PROVISIONS OF THE I T ACT PROVIDING FOR CHARGING A PERSON INCLUDING A CO-OPERATIVE SOCI ETY WITH INCOME-TAX ON 'PROFIT AND GAINS' OF SUCH PERSONS B USINESS SHOW THAT IT IS THE NET PROFITS AND GAINS, I.E., INCOME OF SUCH BUSINESS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE I T ACT, WHICH IS INCLUDIBLE IN SUCH PERSONS TOTAL INCOME LIABLE TO CHARGE OF INCOME- TAX, IT MUST FLOW THEREFROM, AS A NECESSARY COROLLA RY THEREOF, THAT THE 'PROFITS AND GAINS' FOR WHICH EXEMPTION FROM IN COME-TAX IS ENVISAGED UNDER S. 81(I)(D) OF THE IT ACT, OUGHT TO BE NET PROFITS AND GAINS, I.E. INCOME OF BUSINESS COMPUTED IN ACCO RDANCE WITH THE PROVISIONS OF THE IT ACT WHICH IS INCLUDIBLE IN SUCH PERSONS TOTAL INCOME FOR CHARGING INCOME-TAX THEREON.' 13. IT MAY BE NOTICED THAT S. 80P WAS INSERTED IN PLACE OF S. 81 WHICH WAS SIMULTANEOUSLY DELETED BY FINANCE (NO. 2) ACT, 1967, W.E.F. 1ST APRIL, 1968. 14. FURTHER, S. 14A WAS INSERTED IN THE ACT BY FINANCE ACT, 2001 W.E.F. 1ST APRIL, 1962. THE SAID SECTION PROVIDES T HAT ANY EXPENSES INCURRED BY THE ASSESSEE FOR EARNING INCOM E WHICH DOES NOT FORM PART OF TOTAL INCOME UNDER THE ACT, SHALL NOT BE AN ALLOWABLE EXPENDITURE. THE APEX COURT IN WALFORT SH ARE & STOCK BROKERSS CASE (SUPRA), DEFINING THE SCOPE OF S. 14 A OF THE ACT, INCORPORATED RETROSPECTIVELY FROM 1ST APRIL, 1962, HAD LAID DOWN AS UNDER : 'THE INSERTION OF S. 14A WITH RETROSPECTIVE EFFECT IS THE SERIOUS ATTEMPT ON THE PART OF THE PARLIAMENT NOT TO ALLOW DEDUCTION IN 6 RESPECT OF ANY EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME, WHICH DOES NOT FORM PART OF THE TOTAL INCOM E UNDER THE ACT AGAINST THE TAXABLE INCOME (SEE CIRCULAR NO. 14 OF 2001 DT. 22ND NOV., 2001). IN OTHER WORDS, S. 14A CLARIFIES THAT EXPENSES INCURRED CAN BE ALLOWED ONLY TO THE EXTENT THEY ARE RELATABLE TO THE EARNING OF TAXABLE INCOME. IN MANY CASES THE NA TURE OF EXPENSES INCURRED BY THE ASSESSEE MAY BE RELATABLE PARTLY TO THE EXEMPT INCOME AND PARTLY TO THE TAXABLE INCOME. IN THE ABSENCE OF S. 14A, THE EXPENDITURE INCURRED IN RESPECT OF EXEM PT INCOME WAS BEING CLAIMED AGAINST TAXABLE INCOME. THE MANDATE O F S. 14A IS CLEAR. IT DESIRES TO CURB THE PRACTICE TO CLAIM DED UCTION OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME AGAI NST TAXABLE INCOME AND AT THE SAME TIME AVAIL THE TAX INCENTIVE BY WAY OF EXEMPTION OF EXEMPT INCOME WITHOUT MAKING ANY APPOR TIONMENT OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME. THE BASIC REASON FOR INSERTION OF S. 14A IS THAT CERTAIN INCO MES ARE NOT INCLUDIBLE WHILE COMPUTING TOTAL INCOME AS THESE AR E EXEMPT UNDER CERTAIN PROVISIONS OF THE ACT. IN THE PAST, T HERE HAVE BEEN CASES IN WHICH DEDUCTION HAS BEEN SOUGHT IN RESPECT OF SUCH INCOMES WHICH IN EFFECT WOULD MEAN THAT TAX INCENTI VES TO CERTAIN INCOMES WAS BEING USED TO REDUCE THE TAX PAYABLE ON THE NON- EXEMPT INCOME BY DEBITING THE EXPENSES, INCURRED TO EARN THE EXEMPT INCOME, AGAINST TAXABLE INCOME. THE BASIC PR INCIPLE OF TAXATION IS TO TAX THE NET INCOME, I.E., GROSS INCO ME MINUS THE EXPENDITURE. ON THE SAME ANALOGY THE EXEMPTION IS A LSO IN RESPECT OF NET INCOME. EXPENSES ALLOWED CAN ONLY BE IN RESPECT OF EARNING OF TAXABLE INCOME. THIS IS THE PURPORT OF S . 14A. IN S. 14A, THE FIRST PHRASE IS FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME UNDER THIS CHAPTER WHICH MAKES IT CLEAR THAT VARIO US HEADS OF INCOME AS PRESCRIBED UNDER CHAPTER IV WOULD FALL WI THIN S. 14A. THE NEXT PHRASE IS, IN RELATION TO INCOME WHICH DO ES NOT FORM PART OF TOTAL INCOME UNDER THE ACT. IT MEANS THAT IF AN INCOME DOES NOT FORM PART OF TOTAL INCOME, THEN THE RELATED EXPENDI TURE IS OUTSIDE THE AMBIT OF THE APPLICABILITY OF S. 14A. FURTHER, S. 14 SPECIFIES FIVE HEADS OF INCOME WHICH ARE CHARGEABLE TO TAX. I N ORDER TO BE CHARGEABLE, AN INCOME HAS TO BE BROUGHT UNDER ONE O F THE FIVE HEADS. SECS. 15 TO 59 LAY DOWN THE RULES FOR COMPUT ING INCOME FOR THE PURPOSE OF CHARGEABILITY TO TAX UNDER THOSE HEA DS. SECS. 15 TO 59 QUANTIFY THE TOTAL INCOME CHARGEABLE TO TAX. THE PERMISSIBLE DEDUCTIONS ENUMERATED IN SS. 15 TO 59 ARE NOW TO BE ALLOWED ONLY WITH REFERENCE TO INCOME WHICH IS BROUGHT UNDER ONE OF THE ABOVE HEADS AND IS CHARGEABLE TO TAX. IF AN INCOME LIKE D IVIDEND INCOME IS NOT A PART OF THE TOTAL INCOME, THE EXPENDITURE/ DEDUCTION THOUGH OF THE NATURE SPECIFIED IN SS. 15 TO 59 BUT RELATED TO THE INCOME NOT FORMING PART OF TOTAL INCOME COULD NOT B E ALLOWED AGAINST OTHER INCOME INCLUDIBLE IN THE TOTAL INCOME FOR THE PURPOSE OF CHARGEABILITY TO TAX. THE THEORY OF APPORTIONMEN T OF EXPENDITURES BETWEEN TAXABLE AND NON-TAXABLE HAS, I N PRINCIPLE, BEEN NOW WIDENED UNDER S. 14A. READING S. 14 IN JUX TAPOSITION WITH SS. 15 TO 59, IT IS CLEAR THAT THE WORDS 'EXPE NDITURE INCURRED' IN S. 14A REFERS TO EXPENDITURE ON RENT, TAXES, SAL ARIES, INTEREST, ETC. IN RESPECT OF WHICH ALLOWANCES ARE PROVIDED FO R (SEE SS. 30 TO 37).' 15. ADVERTING TO THE JUDGMENTS RELIED UPON BY THE LEARN ED COUNSEL FOR THE ASSESSEE, THE SAME DO NOT ADVANCE ITS CASE. SUFFICE IT TO NOTICE THAT THE DOABA CO-OPERATIVE SUGAR MILLS CASE (SUPRA) WAS A CASE PRIOR TO INSERTION OF S. 14A BY FINANCE ACT, 2 001 RETROSPECTIVELY FROM 1ST APRIL, 1962 AND WOULD, THU S, BE OF NO ASSISTANCE TO THE ASSESSEE. FURTHER, THIS COURT IN KING EXPORTS CASE (SUPRA), ON CONSIDERATION OF FACTS INVOLVED TH EREIN HAD CONCLUDED THAT THERE WAS NO EXPENDITURE WHICH HAD B EEN INCURRED BY THE ASSESSEE FOR EARNING THE INCOME AND THE SAME DID NOT FORM PART OF TOTAL INCOME. THAT IS NOT THE SITU ATION IN THE PRESENT CASE. 7 16. IN VIEW OF THE ABOVE, THE SUBSTANTIAL QUESTIONS OF LAW ARE ANSWERED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE. 10. MOREOVER, AS EMERGED DURING THE COURSE OF HEARI NG BEFORE US, THE APPLICABILITY OF RULE 8D R.W.S. 14A HAS BEEN UPHELD IN THE CASE OF THE ASSESSEE BY THE TRIBUNAL AND ACCEPTED BY THE ASSESS EE IN PRECEDING YEARS. THEREFORE, WE FIND NO MERIT IN THE CONTENTI ON OF THE ASSESSEE THAT SECTION 14A R.W.R. 8D IS NOT TO BE APPLIED FOR THE PURPOSE OF CALCULATING THE DEDUCTION ALLOWABLE U/S 80P(2)(D) OF THE ACT. 10. RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE APPLICABILITY OF THE PROVISIONS OF SECTION 14A R.W. R. 8D FOR THE PURPOSE OF DETERMINING THE QUANTUM OF EXPENSES RELATABLE TO EARNING OF INTEREST AND DIVIDEND INCOM E WHICH ARE ELIGIBLE FOR DEDUCTION U/S 80P(2)(D) OF THE ACT AND WHICH HAVE TO BE REDUCED FROM THE SAID INCOMES WHILE DETE RMINING THE QUANTUM ON WHICH DEDUCTION U/S 80P(2)(D) IS AVA ILABLE TO THE ASSESSEE. THE CONTENTION RAISED BY THE ASSE SSEE IN THIS REGARD IS, THEREFORE, DISMISSED. 11. AS FOR THE CONTENTION OF THE ASSESSEE THAT IN V IEW OF THE FACT THAT IT HAD ENOUGH SURPLUS FUNDS WHICH WERE IN TEREST FREE, WHICH RAISES THE PRESUMPTION THAT THE IMPUGNE D INVESTMENT HAS BEEN MADE OUT OF THE SAME, WE FIND T HAT EVEN THIS ASPECT WAS DEALT WITH BY THE I.T.A.T. IN ITS O RDER FOR ASSESSMENT YEAR 2012-13 AT PARAS 11 AND 12 AS UNDER : 11. AS FAR THE CONTENTION OF THE LD. COUNSEL FOR A SSESSEE THAT IN VIEW OF THE FACT THAT IT HAD ENOUGH SURPLUS FUNDS WHICH ARE INTEREST FREE AND WHICH IS DEMONSTRATED F ROM THE QUANTUM OF SHARE CAPITAL AND RESERVES AVAILABLE WIT H THE ASSESSEE OVER THE YEARS AS REFLECTED IN THE FINANCI AL STATEMENT OF THE ASSESSEE, THE PRESUMPTION OUGHT TO BE THAT THE INVESTMENTS HAD BEEN MADE OUT OF THESE INTEREST FREE FUNDS AVAILABLE, WE ARE IN AGREEMENT WITH THE LD. C OUNSEL FOR ASSESSEE. THE FACT THAT THE ASSESSEE HAD ENOUG H OWN FUNDS TO MAKE THE IMPUGNED INVESTMENT HAD NOT BEEN CONTROVERTED BY THE LD. DR AND THE SAME STANDS REFL ECTED IN THE BALANCE SHEET OF THE ASSESSEE RIGHT FROM FINANC IAL YEAR ENDING 31-03-91 TO THE IMPUGNED FINANCIAL YEAR END ING ON 31-03-12, WHICH HAVE BEEN FILED BEFORE US IN THE FO RM OF PAPER BOOK .MOREOVER, THE HON'BLE JURISDICTIONAL HI GH COURT HAS HELD IN THE CASE OF CIT VS. MAX INDIA LTD.ITA NO.210/CHD/2013 DT.08-03-2017 THAT IF AN ASSESSEE ESTABLISHES THAT ITS INTEREST FREE FUNDS WERE EQUAL TO OR MORE THAN THE INTEREST BEARING FUNDS IT WOULD BE OP EN TO IT 8 TO CONTEND THAT PRESUMPTION ARISES THAT THE EXPENDI TURE FOR EARNING INTEREST INCOME WAS INCURRED FROM OUT OF IT S INTEREST FREE FUNDS WARRANTING NO DISALLOWANCE OF I NTEREST EXPENDITURE U/S 14A R.W.R. 8D.. THE RELEVANT FINDIN GS OF THE HONBLE HIGH COURT ARE AS UNDER: 9. THIS PRESUMPTION IS UNFOUNDED. MERELY BECAUSE T HE INTEREST FREE FUNDS WITH THE ASSESSEE HAVE DECREASED DURING ANY P ERIOD, IT DOES NOT FOLLOW THAT THE FUNDS BORROWED ON INTEREST WERE UTILIZED FOR THE PURPOSE OF INVESTING IN ASSETS YIELDING EXEMPT INCO ME. IF EVEN AFTER THE DECREASE THE ASSESSEE HAS INTEREST FREE FUNDS S UFFICIENT TO MAKE THE INVESTMENT IN ASSETS YIELDING THE EXEMPT INCOME , THE PRESUMPTION THAT IT WAS SUCH FUNDS THAT WERE UTILIZ ED FOR THE SAID INVESTMENT REMAINS. THERE IS NO REASON FOR IT NOT T O. THE BASIS OF THE PRESUMPTION AS WE WILL ELABORATE LATER IS THAT AN A SSESSEE WOULD INVEST ITS FUNDS TO ITS ADVANTAGE. IT GAINS NOTHING BY INVESTING INTEREST FREE FUNDS TOWARDS OTHER ASSETS MERELY ON ACCOUNT OF THE INTEREST FREE FUNDS HAVING DECREASED. IN THAT EVENT SO LONG AS EVEN AFTER THE DECREASE THEREOF THERE ARE SUFFICIENT INT EREST FREE FUNDS THE PRESUMPTION THAT THEY WOULD BE FIRST USED TO INVEST IN ASSETS YIELDING EXEMPT INCOME APPLIES WITH EQUAL FORCE. 12. IN VIEW OF THE SAME, WE HOLD THAT THE DISALLOWA NCE MADE ON ACCOUNT OF INTEREST EXPENDITURE AS PER RULE 8D(2)(II) OF THE RULES BE DELETED. 12. WE FIND THAT THE I.T.A.T. HAD IN PRINCIPLE AGRE ED WITH THE RATIO THAT WHERE ENOUGH OWN FUNDS ARE AVAILABLE , THE PRESUMPTION IS THAT THE INVESTMENTS HAVE BEEN MADE OUT OF THE SAME, FOLLOWING THE DECISION OF THE HON'BLE JUR ISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MAX INDIA LTD. IN ITA NO.210/CHD/2013 DATED 8.3.2017. THE I.T.A.T. HAD F URTHER FOUND THAT THE ASSESSEE HAD DEMONSTRATED THE AVAILA BILITY OF ENOUGH OWN SURPLUS FUNDS FOR MAKING THE IMPUGNED INVESTMENT AND, THEREFORE, HELD THAT NO DISALLOWANC E OF INTEREST EXPENSES WAS WARRANTED AS PER RULE 8D(2)(I I) OF THE INCOME TAX RULES, 1962. THE PRESENT CASE, THEREFOR E, BEING ON IDENTICAL ISSUE, THE DECISION OF THE I.T.A.T. IN ASSESSEES CASE FOR ASSESSMENT YEAR 2012-13 WILL SQUARELY APPL Y IN THE PRESENT CASE ALSO, FOLLOWING WHICH WE HOLD THAT NO DISALLOWANCE OF INTEREST IS TO BE MADE IN THE FACT SITUATION OF AVAILABILITY OF ENOUGH OWN INTEREST FREE FUNDS OF T HE ASSESSEE. BUT SINCE THE FACT NEEDS TO BE VERIFIED IN THE 9 PRESENT CASE, WE RESTORE THE MATTER TO THE ASSESSIN G OFFICER TO VERIFY THE AVAILABILITY OF INTEREST FREE OWN FUN DS OF THE ASSESSEE FOR THE PURPOSE OF MAKING INVESTMENTS WHIC H HAVE EARNED DIVIDEND AND INTEREST DURING THE IMPUGNED YE AR AND FURTHER DIRECT THAT THE ISSUE THEREAFTER BE DECIDED IN ACCORDANCE WITH LAW. 13. THE GROUNDS OF APPEAL NO.1 & 2 RAISED BY THE AS SESSEE, IN ITS APPEAL IN ITA NO.1269/CHD/2016 THEREFORE, ST AND ALLOWED FOR STATISTICAL PURPOSES.SINCE NO OTHER GRO UNDS WERE RAISED IN THE ASSESSEES APPEAL ,THE APPEAL STANDS A LLOWED FOR STATISTICAL PURPOSES 14. AS FOR THE DIRECTION OF THE CIT(A) FOR CALCULA TING THE DISALLOWANCE COMPUTED AS PER SECTION 14A BY TAKING THE AVERAGE VALUE OF ONLY THOSE INVESTMENTS WHICH HAVE EARNED INCOME DURING THE YEAR, WE FIND THAT EVEN THIS ISSU E HAD BEEN DEALT BY THE ITAT IN ITS ORDER IN ITA NO.48/CH D/2016 DATED 30.10.2017 AND PERTAINING TO A.Y. 2012-13, IN WHICH THE SAID DIRECTION WAS HELD TO BE CORRECT IN VIEW O F THE DECISION OF THE SPECIAL BENCH OF THE ITAT IN THE CA SE OF ACIT VS VIREET INVESTMENTS PVT. LTD. IN ITA NO.502/DEL/2 012 DT.16.06.17 AND THE DECISION OF THE DELHI HIGH COUR T IN THE CASE OF ACB INDIA LTD.(SUPRA). THE RELEVANT FINDING S OF THE ITAT AT PARA 13 OF ITS ORDER IS AS UNDER: 13. AS FAR AS THE CONTENTION OF LD. COUNSEL FOR AS SESSEE THAT THE CALCULATION OF ADMINISTRATIVE EXPENSES TO BE DISALLOWED AS PER RULE 8D(2)(II) BE RESTRICTED TO I NVESTMENTS WHICH HAVE EARNED INCOME DURING THE YEAR, WE FIND MERIT IN THIS CONTENTION OF LD. COUNSEL FOR ASSESSEE. THE S PECIAL BENCH OF THE I.T.A.T. IN THE CASE OF ACIT VS. VIRE ET INVESTMENTS PVT. LTD. ITA NO.502/DEL/2012 DT.16/06/ 17 HAS LAID DOWN THE SAID PROPOSITION AND EVEN THE HON 'BLE DELHI HIGH COURT IN THE CASE OF ACB INDIA LTD. VS A CIT IN 10 ITA NO.615/2014 DT-24.03.2015 HAS HELD SO HOLDING A S UNDER: 4.THE AO, INSTEAD OF ADOPTING THE AVERAGE VALUE OF INVESTMENT OF WHICH INCOME IS NOT PART OF THE TOTAL INCOME I.E. T HE VALUE OF TAX EXEMPT INVESTMENT, CHOSE TO FACTOR IN THE TOTAL INV ESTMENT ITSELF. EVEN THOUGH THE CIT(APPEALS) NOTICED THE EXACT VALUE OF THE INVESTMENT WHICH YIELDED TAXABLE INCOME, HE DID NOT CORRECT TH E ERROR BUT CHOSE TO APPLY HIS OWN EQUITY. GIVEN THE RECORD THAT HAD TO BE DONE SO TO SUBSTITUTE THE FIGURE OF 38,61,09,287/- WITH THE FI GURE OF `3,53,26,800/- AND THEREAFTER ARRIVE AT THE EXACT D ISALLOWANCE OF 05%. 15. IN VIEW OF THE ABOVE WE HOLD THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. WE, THEREFORE, U PHOLD THE ORDER OF THE CIT(APPEALS) RESTRICTING THE CALCULATI ON OF DISALLOWANCE U/S 14A ONLY ON INVESTMENTS WHICH HAVE EARNED INTEREST AND DIVIDEND INCOME DURING THE YEAR . 16. GROUND OF APPEAL NO.1 RAISED BY THE REVENUE IN ITS APPEAL IN ITA NO.1223/CHD/2016 IS, THEREFORE, DISMI SSED 17. WE SHALL NOW BE DEALING WITH THE REMAINING GROU NDS RAISED BY THE REVENUE IN ITS APPEAL IN ITA NO.1223/CHD/2016 18. GROUND NO.2 RAISED BY THE REVENUE RELATES TO TH E CLAIM OF DEDUCTION U/S 80P(2)(E) OF THE ACT ON ACCOUNT OF RENTAL INCOME EARNED BY THE ASSESSEE AND READS AS UNDER: 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE A ND DELETE THE ADDITION OF RS.6,98,01,113/- U/S 80P(2)(E) WHICH IS NOT CORRECT B ECAUSE THE SAME IS NOT ALLOWABLE TO THE ASSESSEE IN THE A.Y. 2012-13. 19. THE ASSESSING OFFICER DISALLOWED THE SAID CLAIM ON ACCOUNT OF THE JUDGMENT OF THE HON'BLE PUNJAB & HAR YANA HIGH COURT IN ASSESSEES CASE IN ITA NO.157 OF 2005 DATED 8.9.2010 WHEREIN IT WAS HELD THAT SINCE THE ASSESSE E WAS INDULGING IN PURCHASE AND SALE OF GOODS TO FCI, STO RING THE SAME IN THE GODOWN WAS PART OF ITS BUSINESS AND INC OME EARNED ON ACCOUNT OF THE SAME COULD NOT BE TREATED AS 11 HIRING CHARGES. THE ASSESSING OFFICER FURTHER FOUN D THAT THE ASSESSEE HAD NOT SUBSTANTIATED THIS CLAIM OF TH E SAID INCOME BEING ON ACCOUNT OF HIRING CHARGES AND, THER EFORE, DISALLOWED THE CLAIM OF THE ASSESSEE. 20. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD.CIT(APPEALS) WHO ALLOWED THE CLAIM FOLLOWING HIS ORDER IN ASSESSEES CASE IN THE PRECEDING YEAR I.E. ASSESSME NT YEAR 2012-13. THE LD.CIT(APPEALS) HELD THAT IN VIEW OF THE JUDGMENT OF THE HON'BLE HIGH COURT IN THE CASE OF T HE ASSESSEE WHICH WAS FOLLOWED BY THE I.T.A.T. IN SUBS EQUENT YEARS IN THE CASE OF THE ASSESSEE, THE STORAGE CHAR GES COULD NOT BE TREATED AS RENTAL INCOME, BUT GODOWN OWNED B Y THE ASSESSEE AND HIRED TO OUTSIDE PARTIES AND NOT USED BY THE ASSESSEE, EARNED RENTAL INCOME WHICH WAS ELIGIBLE F OR DEDUCTION U/S 80P(2)(E) OF THE ACT. HE FURTHER FOU ND ON PERUSAL OF THE DETAILS OF RENTAL INCOME FILED BY TH E ASSESSEE THAT THE ASSESSEE HAD RIGHTLY CLAIMED DEDUCTION OF RS.6,98,01,113/- U/S 80P(2)(E) OF THE ACT AND, THER EFORE, ALLOWED THE SAME. 21. BEFORE US, THE LD. DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER WHILE THE LD.COUNSEL FOR THE ASSE SSEE RELIED UPON THE ORDER AND FINDINGS OF THE LD.CIT(AP PEALS) AND POINTED OUT THAT SINCE IT HAD BEEN ACCEPTED BY THE I.T.A.T. IN ASSESSEES OWN CASE FOR PRECEDING YEARS THAT THE RENTAL INCOME EARNED BY LETTING OUT GODOWN TO OUTSI DERS WAS ENTITLED TO DEDUCTION U/S 80P(2)(E) OF THE ACT AND THE ASSESSEE HAVING DEMONSTRATED THIS FACT TO THE LD.CIT(APPEALS) ON ACCOUNT OF RENTAL INCOME EARNED 12 AMOUNTING TO RS.6,98,01,113/- WHICH WAS VERIFIED AN D ACCEPTED BY THE LD.CIT(APPEALS) ALSO, THERE WAS NO INFIRMITY IN THE ORDER OF THE LD.CIT(APPEALS) AND THE SAME NE EDED TO BE UPHELD. 22. WE HAVE HEARD THE CONTENTIONS OF THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES. WE FIND NO IN FIRMITY IN THE ORDER OF THE LD.CIT(APPEALS). THE ASSESSING OF FICER HAD DENIED THE CLAIM OF THE ASSESSEE FOLLOWING THE JUDG MENT OF THE HON'BLE HIGH COURT IN THE CASE OF THE ASSESSEE IN THE PRECEDING YEAR IN WHICH IT WAS HELD THAT THE INCOME EARNED ON ACCOUNT OF STORAGE OF GOODS PURCHASED AND SOLD B Y THE ASSESSEE WOULD NOT TANTAMOUNT TO RENTAL INCOME ELIG IBLE FOR DEDUCTION U/S 80P(2)(E) OF THE ACT. THE LD.CIT(APP EALS), WE FIND HAS POINTED OUT THAT FOLLOWING THE SAID JUDGME NT THE I.T.A.T. IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2009-10 IN ITA NO.205/CHD/2013 DATED 21.6.2013 HAD AFTER ACCEPTING THIS FACT HELD THAT THOUGH THE ASSESSEE I S NOT ENTITLED TO DEDUCTION ON ACCOUNT OF INCOME EARNED F ROM STORAGE OF GOODS, IT IS ENTITLED TO THE SAME ON ACC OUNT OF HIRING CHARGES BY LETTING OUT ITS GODOWN TO OUTSIDE RS. THE LD.CIT(APPEALS) HAS FURTHER EXAMINED THE DETAILS OF THE RENTAL INCOME EARNED BY THE ASSESSEE AMOUNTING TO RS.6,98,01,113/- AND AFTER VERIFYING THE SAME FOUND TO BE CORRECT. NO INFIRMITY IN THE ABOVE OBSERVATIONS AN D FINDINGS OF THE LD.CIT(APPEALS) HAVE BEEN POINTED OUT TO US BY THE LD. DR. THEREFORE, WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE LD.CIT(APPEALS) WHO, WE HOLD, HAS RIGH TLY ALLOWED THE ASSESSEES CLAIM OF DEDUCTION U/S 80P(2 )(E) OF 13 THE ACT ON ACCOUNT OF RENTAL INCOME EARNED AMOUNTIN G TO RS.6,98,01,113/- FOLLOWING THE DECISION OF THE COOR DINATE BENCH IN THE CASE OF THE ASSESSEE AND AFTER DUE VER IFICATION OF THE CLAIM OF THE ASSESSEE. 23. IN VIEW OF THE ABOVE, GROUND OF APPEAL NO.2 RAI SED BY THE REVENUE STANDS DISMISSED. 24. THE REVENUE IN GROUND NO. 3 CHALLENGES THE RELI EF GRANTED TO THE ASSESSEE AMOUNTING TO RS.94,84,075/- ON ACCOUNT OF INTEREST EXPENSES WHICH THE ASSESSING OF FICER HAD CAPITALIZED AS PERTAINING TO CAPITAL WORK IN PR OGRESS OF THE ASSESSEE AND READS AS UNDER: 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSE SSEE AND GIVEN RELIEF TO THE ASSESSEE AMOUNTING TO RS.5,94,84,075/- WHICH IS NOT CORRECT BECAUSE THE SAME IS NOT ALLOWABLE TO THE ASSESSEE AS THE AS SESSEE HAS SHOWN RS.75,88,81,585/- ON ACCOUNT OF MACHINERY WORK IN P ROGRESS ON OTHER HAND THE ASSESSEE HAS INCURRED HUGE INTEREST ON VARIOUS LOANS OF RS.7,17,94,28,40//- DURING THE YEAR. 25. BRIEFLY STATED, THE ASSESSING OFFICER FOUND THA T THE ASSESSEE HAD SHOWN MACHINERY WORK IN PROGRESS AT TH E END OF THE YEAR AMOUNTING TO RS.75,88,81,585/- AND HAD INCURRED INTEREST EXPENSES OF RS.717,94,28,407/-. THE ASSESSING OFFICER, FOLLOWING THE DECISION OF THE HO N'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. AB HISHEK INDUSTRIES LTD., 286 ITR 1, TREATED ALL THE MONEYS OF THE ASSESSEE AS COMMON KITTY AND THEREAFTER PROCEEDED T O CAPITALIZE THE INTEREST EXPENSES @ 12% ON THE MACHI NERY WORK IN PROGRESS SHOWN BY THE ASSESSEE TREATING THE SAME AS PERTAINING TO THEM. 26. DURING APPELLATE PROCEEDINGS BEFORE THE LD.CIT(APPEALS) THE ASSESSEE FILED DETAILS OF INTER EST 14 EXPENSES REFLECTING THAT THEY WERE PAID BOTH FOR SH ORT TERM AND LONG TERM LOANS. THE ASSESSEE FURTHER DEMONSTR ATED THAT THE SHORT TERM LOANS WERE USED FOR THE WORKING CAPITAL NEEDS OF THE ASSESSEES BUSINESS WHILE THE LONG TER M LOANS HAD BEEN TAKEN FROM NATIONAL COOPERATIVE DEVELOPMEN T CORPORATION (HEREINAFTER REFERRED TO AS NCDC) AND USED BY THE ASSESSEE FOR THE PURPOSE OF CONSTRUCTION OF GOD OWNS. THE ASSESSEE FURTHER QUANTIFIED THE AMOUNT OF INTER EST PAID ON ACCOUNT OF LONG TERM LOANS AS AMOUNTING TO RS.3,15,81,085/- AND PLEADED THAT TO THIS EXTENT, I NTEREST WAS LIABLE TO BE CAPITALIZED. THE LD.CIT(APPEALS) FOUND THE CONTENTIONS OF THE ASSESSEE AS CORRECT AND, THEREFO RE RESTRICTED THE DISALLOWANCE OF INTEREST TO THE EXTE NT OF RS.3,15,81,085/-. 27. AGGRIEVED BY THE SAME, THE REVENUE HAS RAISED T HE FOLLOWING GROUND BEFORE US. DURING THE COURSE OF HE ARING BEFORE US, THE LD. DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER WHILE THE LD. COUNSEL FOR ASSESSEE RELIED U PON ON HIS SUBMISSIONS MADE BEFORE THE LD.CIT(APPEALS) AND THE FINDINGS OF THE LD.CIT(APPEALS) IN THIS REGARD. 28. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTI ES. THE ISSUE IN THE PRESENT GROUND PERTAIN TO DISALLOW ANCE OF INTEREST EXPENSES INCURRED IN RELATION TO CAPITAL W ORK IN PROGRESS OF THE ASSESSEE. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE HAD SHOWN RS.75,88,81,585/- ON ACCOUNT OF THE CAPITAL WORK IN PROGRESS PERTAINING TO GODOWN UNDER CONSTRUCTION AS REFLECTED IN THE BALANCE SHEET OF T HE ASSESSEE AT THE END OF THE YEAR. THE FACT THAT THE ASSESSEE 15 HAD INCURRED INTEREST EXPENSES AMOUNTING TO RS.717,94,28,407/- IS ALSO NOT DISPUTED. ON PERUS ING THE ASSESSMENT ORDER WE FIND THAT THE ASSESSING OFFICER HAS DISALLOWED INTEREST EXPENSES TO THE EXTENT OF RS.75,88,81,585/- COMPUTED @ 12% OF THE CAPITAL WOR K IN PROGRESS SHOWN BY THE ASSESSEE, HOLDING THE SAME TO HAVE BEEN INCURRED IN RELATION TO THE SAID CAPITAL WORK IN PROGRESS PRIMARILY FOR TWO REASONS; A) SINCE THE AS SESSEE HAD NOT BEEN ABLE TO BIFURCATE THE LOANS USED FOR C APITAL PURPOSES AND OTHER PURPOSES AND; B) FOLLOWING THE D ECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CAS E OF ABHISHEK INDUSTRIES LTD. (SUPRA) TREATING THE ENTIR E MONEY AS THE COMMON KITTY OF THE ASSESSEE. WE FIND THAT THE LD.CIT(APPEALS) HAS GIVEN A FINDING THAT THE ASSESS EE HAD PRODUCED ALL LOAN DOCUMENTS BEFORE IT AND POINTED O UT THAT WHILE SOME PERTAINED TO SHORT TERM LOAN, THE REST W ERE IN RELATION TO LONG TERM LOAN TAKEN BY THE ASSESSEE FR OM NCDC. THE LD.CIT(APPEALS) HAS ALSO POINTED OUT THA T THE PURPOSE OF TAKING THE SHORT TERM LOAN FOR WORKING C APITAL NEEDS OF THE ASSESSEE AND THE LONG TERM LOAN FOR TH E CONSTRUCTION OF GODOWNS WAS ALSO DEMONSTRATED BEFOR E IT THROUGH SANCTION LETTER OF THE SAID LOAN. THE AFOR ESAID FACTS HAVE NOT BEEN CONTROVERTED BY THE REVENUE . IN VIE W OF THE SAME, IT IS CLEAR THAT THE ASSESSEE HAD DEMONSTRATE D AND BIFURCATED THE USER OF LOANS AND, THEREFORE, THE LD.CIT(APPEALS), WE HOLD, WAS RIGHT IN HOLDING THAT THE INTEREST PERTAINING TO ONLY THOSE LOANS WHICH WERE TAKEN FOR THE PURPOSE OF CONSTRUCTION OF GODOWNS NEEDED TO BE 16 CAPITALIZED AS PER THE PROVISIONS OF SECTION 36(1)( III) OF THE ACT. EVEN OTHERWISE, THE LD. DR HAS NOT CONTROVERT ED THIS FINDING OF THE LD.CIT(APPEALS) THAT THE LOANS TAKEN BY THE ASSESSEE WERE DULY BIFURCATED. IN VIEW OF THE SAME , WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT (APPEALS) AND UPHOLD THE SAME IN RESTRICTING THE DISALLOWANCE OF INTEREST EXPENSES BY CAPITALIZED THE SAME TO THE EX TENT OF RS.3,15,81,084/-. THE GROUND OF APPEAL NO.3 RAISED BY THE REVENUE IS, THEREFORE, DISMISSED IN ABOVE TERMS. 29. IN EFFECT, THE APPEAL OF THE REVENUE IS DISMISS ED. 30. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 22 ND JANUARY, 2018 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)S 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH