DCIT, New Delhi V. M/s. DCM Ltd., New Delhi

ITA 1237/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6731 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 26-07-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 04-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Rule of consistency; Earning of tax free income; Initiation of penalty proceedings; Notional interest; Revised return
• Section: 14A; 115JB

Judgement Text

ITA NO. 1237 & 1511/D/14 DCM LTD. PAGE 1 OF 15 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER & SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO. 1237/DEL/2014 ( ASSESSMENT YEAR: 2010-11) DCIT CIRCLE 10(1) NEW DELHI. VS DCM LTD. 6 TH FLOOR, VIKRANT TOWER, RAJENDRA PLACE, NEW DELHI. AAACD1012E & ITA NO. 1511/DEL/2014 ( ASSESSMENT YEAR: 2010-11) DCM LTD. 6 TH FLOOR, VIKRANT TOWER, RAJENDRA PLACE, NEW DELHI. AAACD1012E VS DCIT CIRCLE 10(1) NEW DELHI. ASSESSEE BY SH. ANIL KUMAR SHARMA, SR. DR REVENUE BY SH. PRADEEP DINODIA, CA ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER : ITA NO. 1237/DEL/2014 HAS BEEN PREFERRED BY THE DE PARTMENT AGAINST THE ORDER DATED 11/12/2013 PASSED BY THE LD. CIT(A)-XII I, NEW DELHI FOR A.Y. 2010- 11, WHEREAS ITA NO. 1511/DEL/2014 IS THE CROSS APPE AL FILED BY THE ASSESSEE FOR ITA NO. 1237 & 1511/D/14 DCM LTD. PAGE 2 OF 15 THE SAME YEAR. SINCE, BOTH THESE APPEALS WERE HEAR D TOGETHER, THEY ARE BEING DISPOSED OF THROUGH THIS COMMON ORDER. 2. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF COTTON YARN, IT INFRASTRUCTURE SERVICES AND DEVELOPMENT OF REAL ESTATE PROJECTS. IN THIS CASE, ORIGINAL RETURN OF INCOME WAS FILED DECLARING NIL INCOME AFTER ADJUSTING BROUGHT FORWARD LOSSES AGAINST CURRENT BU SINESS PROFITS OF RS.897,15,493/-. SUBSEQUENT TO THE ISSUANCE OF NOTICE U/S 143(2) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) ON 27/08/2011, THE A SSESSEE FILED THE REVISED RETURN OF INCOME ON 26/03/2012 DECLARING NIL INCOME AFTER ADJ USTING BROUGHT FORWARD LOSSES AGAINST CURRENT YEAR BUSINESS PROFIT OF RS. 922,87, 570/-. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE COMPANY AGAIN FILED A REV ISED COMPUTATION OF INCOME ON 22/02/2013 DECLARING NIL INCOME AFTER SET OFF OF BR OUGHT FORWARD LOSS OF RS. 134,445,528/-. THE BUSINESS INCOME FOR THE YEAR WA S COMPUTED AT RS. 19,46,10,951/-. THE ASSESSMENT WAS FINALIZED AT NI L INCOME AFTER SETTING OFF FROM UNABSORBED LOSSES OF EARLIER YEAR. TOTAL INCOME U/ S 115JB WAS COMPUTED AT RS. 60,01,90,619/- AFTER MAKING AN ADDITION OF RS. 143, 39,000/- ON THE RETURNED BOOK PROFIT OF RS. 58,58,51,619/-. 3. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT DUR ING ASSESSMENT YEAR 2004- 05, THE ASSESSEE COMPANY HAD CLAIMED DEDUCTION FOR ALL THE BALANCE ACCRUED LIABILITY ITA NO. 1237 & 1511/D/14 DCM LTD. PAGE 3 OF 15 RELATING TO REAL ESTATE PROJECT, INCLUDING FLYOVER COST AND FLYOVER INTEREST PAYABLE TO MUNICIPAL CORPORATION OF DELHI (MCD). THE DEPARTME NT IN AY 2004-05 TO 2009- 10 HAD DISALLOWED THE CLAIM AND HAD GIVEN THE FINDI NG THAT SUCH EXPENSES WILL BE ALLOWABLE IN THE YEAR OF ACTUAL PAYMENT. DURING TH E YEAR UNDER APPEAL, THE ASSESSEE HAD CLAIMED EXPENSES OF RS. 3,02,50,000/- ON ACCOUN T OF FLYOVER COST/PRINCIPAL AND RS. 52,25,000/- AS FLYOVER INTEREST ON ACTUAL PAYME NT BASIS, IN THE ALTERNATE AND WITHOUT PREJUDICE TO ITS CLAIM ON ACCRUAL BASIS. SI NCE THE ASSESSEE HAD AGITATED THE MATTER OF ALLOWING THE EXPENSES ON ACTUAL PAYMENT B ASIS BEFORE THE CIT (A)/ITAT AND HAD PRAYED FOR ALLOWANCE OF EXPENSES ON ACCRUAL BASIS, THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF THESE EXPENSES WAS DISALLOWED IN A Y 2009-10 AND ON SIMILAR FOOTING THESE AMOUNTS WERE ALSO DISALLOWED IN AY 20 10-11 I.E. THE YEAR UNDER APPEAL. FURTHER, ON SIMILAR LINES, THE ASSESSEES CLAIM OF EXPENSES ON APPROVAL/PERMISSION WAS DISALLOWED ON ACTUAL PAYMEN T BASIS IN AY 2009-10 AND IN 2010-11 ALSO RS. 81,19,423/-, AS CLAIMED BY THE ASS ESSEE ON ACTUAL PAYMENT BASIS, WAS ADDED BACK TO THE INCOME OF THE ASSESSEE. FURT HER, DISALLOWANCE OF INTEREST ON ACCOUNT OF INTEREST RELATING TO OUTSTANDING BALANCE S OF ADVANCES/LOANS OF RS. 2.79 CRORES IN RESPECT OF DCM EMPLOYEES WELFARE TRUST HA S BEEN MADE, AS IN EARLIER ASSESSMENT YEARS, BY APPLYING AN INTEREST RATE OF 8 % AND A DISALLOWANCE OF RS. 22,32,000/- HAS BEEN MADE IN THIS RESPECT. DURING THE YEAR ASSESSEE COMPANY HAD SHOWN TAX FREE DIVIDEND INCOME OF RS. 70,088/- ON L ONG TERM TRADE INVESTMENT AND ITA NO. 1237 & 1511/D/14 DCM LTD. PAGE 4 OF 15 HAD ITSELF WORKED OUT A DISALLOWANCE OF RS. 21,87,0 00/- U/S 14A OF THE ACT AS PER THE REVISED COMPUTATION OF INCOME. THE AO, HOWEVER , BY APPLYING RULE 8D WORKED OUT THE DISALLOWANCE AT RS. 143,39,000/- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE FIRST APPELLATE AUTHORITY IN WHICH THE LD. CIT (A) REJECTED THE ASS ESSEES CLAIM REGARDING FLYOVER COST/FLYOVER INTEREST AND EXPENDITURE IN RESPECT OF APPROVALS AND PERMISSIONS. THE DISALLOWANCE U/S 14A OF THE ACT WAS RESTRICTED TO R S. 12.47 LACS BY THE LD. CIT (A). CONSEQUENTLY, THE AO WAS ALSO DIRECTED TO REWORK TH E DISALLOWANCE UNDER SECTION 115JB OF THE ACT. THE LD. CIT(A) ALLOWED THE ASSES SEES CLAIM FOR DELETION OF NOTIONAL INTEREST ON ADVANCES/LOANS TO DCM EMPLOYEE S WELFARE TRUST. 5. FURTHER AGGRIEVED, THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE ITAT AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE CIT(A) ERRED IN DISALLOWING ALTERNATE CLA IM MADE BY THE APPELLANT ON ACTUAL PAYMENT BASIS IN RESPECT OF FOL LOWING ITEMS OF EXPENSES INCURRED IN RELATION TO REAL ESTATE PROJEC T WITHOUT APPRECIATING THAT CLAIM HAD BEEN MADE BY THE APPELLANT FOR THE R EASON THAT DEPARTMENT HAS NOT ACCEPTED ALLOWABILITY OF EXPENSE S ON ACCRUAL BASIS AND APPEALS IN RESPECT THEREOF ARE PENDING FOR ADJU DICATION BEFORE DELHI HIGH COURT. A) FLYOVER COST PAID TO MCD RS. 3,02,50,000/- ITA NO. 1237 & 1511/D/14 DCM LTD. PAGE 5 OF 15 B) FLYOVER INTEREST PAID TO MCD RS. 52,25,500/- C) EXPENDITURE IN RESPECT OF APPROVALS AND PERMISSIONS RS. 81,19,423/- 2. THAT THE CIT(A) ERRED IN DISALLOWING AN AMOUNT OF R S. 12.47 LACS ON ACCOUNT OF ADMINISTRATIVE EXPENSES U/S 14A OF THE I NCOME TAX ACT AS AGAINST DISALLOWANCE MADE BY THE APPELLANT COMPANY OF RS. 2.50 LACS IN ITS RETURN OF INCOME. 3. THAT THE CIT(A) ERRED IN UPHOLDING ADDITION ON ACCO UNT OF DISALLOWANCE U/S 14A READ WITH RULE 8D OF RS. 9.97 LACS IN DETERMINATION OF BOOK PROFIT FOR THE PURPOSE OF SEC TION 115JB OF THE INCOME TAX ACT. 4. THAT THE CIT (A) ERRED IN UPHOLDING THE INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT IN THE FACTS A ND CIRCUMSTANCES OF THE APPELLANT. 5. THAT THE ORDER PASSED BY THE ASSESSING OFFICER AND UPHELD BY CIT (A) IS BAD IN LAW. 6. THAT THE APPELLANT COMPANY CRAVES LEAVE TO ALTER, A MEND, VARY AND/OR ADD ANY OF THE GROUNDS OF APPEAL AT ANY TIME HEREIN AFTER. 6. THE ASSESSEE HAS ALSO FILED AN APPLICATION FOR A DMISSION OF ADDITION GROUND. THE ADDITIONAL GROUND READS AS UNDER: THAT THE DISALLOWANCE IN THE FACTS AND CIRCUMSTANC ES OF THE CASE OF THE APPELLANT COMPANY AND IN ACCORDANCE WITH LEGAL POSITION ENUNCIATED BY DECISIONS OF JURISDICTIONAL HIGH COUR T IN THIS REGARD INCOME U/S 14A OF THE ACT IS TO BE RESTRICTED TO TH E AMOUNT OF EXEMPT INCOME CLAIMED U/S 10(34) OF THE ACT OF RS. 70,088/ - IN THE ITA NO. 1237 & 1511/D/14 DCM LTD. PAGE 6 OF 15 COMPUTATION OF TAXABLE INCOME AS PER NORMAL PROVISI ONS OF INCOME- TAX ACT AS WELL AS IN COMPUTATION OF BOOK PROFIT FO R THE PURPOSE OF SECTION 115JB OF THE ACT NOTWITHSTANDING THAT THE C OMPANY HAD MADE DISALLOWANCE OF RS. 21,87,000/- IN THE RETURN OF IN COME. 7. THE DEPARTMENT HAS ALSO PREFERRED AN APPEAL AND ITS GROUNDS OF APPEAL ARE AS UNDER: 1. WHETHER THE LD. CIT (A) ON THE FACTS AND CIRCUMSTA NCES OF THE CASE AND IN LAW IS CORRECT IN DELETING THE DISALLOWANCE OF R S. 22,32,000/- MADE BY THE AO ON ACCOUNT OF INTEREST ON INTEREST-FREE L OANS? 2. WHETHER THE LD.CIT (A) ON THE FACTS AND CIRCUMSTANC ES OF THE CASE AND IN LAW IS CORRECT IN RESTRICTING THE DISALLOWANCE T O RS. 12.47 LACS AS AGAINST RS. 1,43,39,000/- MADE BY THE AO U/S 14A OF THE I.T. ACT R.W.R. 8D OF THE INCOME TAX RULES, 1962? 3. WHETHER THE LD. CIT(A) ON THE FACTS AND CIRCUMSTANC ES OF THE CASE AND IN LAW IS CORRECT IN RESTRICTED THE ADJUSTMENT U/S 115JB OF THE I.T. ACT, 1961, TO RS. 12.47 LACS AS AGAINST THE ADJUSTMENT O F RS. 143.39 LACS MADE BY THE ASSESSING OFFICER? 4. THE APPELLANT CRAVES LEAVE, TO ADD, ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. IT IS PRAYED THAT THE ORDER OF THE CIT (A), BEING C ONTRARY TO THE FACTS ON RECORD AND THE SETTLED POSITION OF LAW, BE SET ASID E AND THAT OF THE ASSESSING OFFICER BE RESTORED. ITA NO. 1237 & 1511/D/14 DCM LTD. PAGE 7 OF 15 8. THE LD. AR SUBMITTED THAT AS FAR AS GROUND NO. 1 OF THE ASSESSEES APPEAL IS CONCERNED, THE CLAIM OF THE ASSESSEE HAS BEEN ALLOW ED ON ACCRUAL BASIS IN AY 2004- 05 AND THEREAFTER AND, THEREFORE, THE ALTERNATE GRO UND RAISED ON ACTUAL PAYMENT BASIS WAS DISALLOWED BY THE LD. CIT(A) AND ALSO UPHELD BY THE ITAT. HE DREW ATTENTION TO PAGES 51 TO 54 OF THE PAPER BOOK WHICH CONTAINS THE ORDER OF THE ITAT FOR AY 2005-06, PAGES 60 TO 61 FOR AY 2006-07, PAGES 66 TO 73 FOR AY 2007-08 AND PAGES 81 TO 86 FOR AY 2009-10. THE LD. AR SUBMITTED THAT THE ISSUE WAS NOW BEFORE THE HONBLE DELHI HIGH COURT PENDING ADJUDICATION BECAU SE THE DEPARTMENT HAS PREFERRED AN APPEAL AGAINST THE ORDER OF THE ITAT. ON GROUND NO. 2 OF THE ASESSEES APPEAL, THE LD. AR SUBMITTED THAT THE ASSESSEE HAD SUO MOTO MADE A TOTAL DISALLOWANCE OF RS. 21.87 LACS CONSISTING OF RS. 19 .37 LACS ON ACCOUNT OF INTEREST EXPENSES AND RS. 2.50 LACS ON ACCOUNT OF ADMINISTRA TIVE EXPENSES AS AGAINST EXEMPT INCOME OF RS. 70,088/-. THE LD. AR SUBMITTED THAT IN AY 2009-10 THE LD. CIT (A) HAD DELETED A SIMILAR DISALLOWANCE. THE LD. AR ALS O SUBMITTED THAT THE ASSESSEE COMPANY HAS RAISED AN ADDITIONAL GROUND TO THE AFFE CT THAT SINCE THE TOTAL EXEMPT INCOME WAS RS. 70,088/-, DISALLOWANCE IS TO BE REST RICTED TO THIS AMOUNT ONLY NOTWITHSTANDING THE FACT THAT THE COMPANY HAD MADE SUO MOTO DISALLOWANCE OF RS. 21.87 LACS. THE LD. AR RELIED ON THE DECISIONS OF THE HONBLE DELHI HIGH COURT IN CIT VS. HOLCIM INDIA P. LIMITED 272 CTR 282 (DEL.), JOINT INVESTMENT P. LTD. VS. CIT 372 ITR 694 AND CHEMINVEST LIMITED VS. CIT 378 ITR 33 FOR THE PROPOSITION. ITA NO. 1237 & 1511/D/14 DCM LTD. PAGE 8 OF 15 ON GROUND NO. 1 OF THE DEPARTMENTS APPEAL REGARDIN G DELETION OF DISALLOWANCE OF RS. 22.32 LACS ON ACCOUNT OF NOTIONAL INTEREST ON I NTEREST FREE ADVANCES TO DCM EMPLOYEES TRUST, THE LD. AR SUBMITTED THAT THE SAME IS COVERED IN FAVOUR OF THE ASSESSEE BY ORDERS FOR EARLIER ASSESSMENT YEARS 200 4-05, 2005-06, 2006-07, 2007-08 AND 2009-10 AND DREW OUR ATTENTION TO THE RELEVANT PAGES IN THE PAPER BOOK. ON GROUND NO. 2 OF THE DEPARTMENTS APPEAL CONTESTING THE RESTRICTION OF DISALLOWANCE U/S 14A TO RS. 12.47 LACS AS AGAINST 143.39 LACS, T HE LD. AR SUBMITTED THAT IN IDENTICAL CIRCUMSTANCES, IN APPEAL FOR AY 2009-10, SIMILAR GROUND OF THE DEPARTMENT WAS DISMISSED, WHEREIN EXEMPT INCOME WAS RS. 60,088/- AND THE COMPANY HAD MADE SUO MOTO DISALLOWANCE OF RS. 10.23 LACS. THE LD. AR FURTHER SUBMITTED THAT THIS GROUND IS SIMILAR TO THE ASSESS EES GROUND NOS. 2 AND 3. ON GROUND NO. 3 OF THE DEPARTMENTS APPEAL, THE LD. AR SUBMITTED THAT THE ARGUMENTS HAS IN GROUND NO. 2 ABOVE WOULD APPLY. 9. THE LD. CIT DR RELIED ON THE ORDERS OF THE AUTHO RITIES BELOW AND SUBMITTED THAT THEY WERE PASSED AFTER THOROUGHLY EXAMINED THE ISSUES AND WERE TO BE UPHELD. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE DEEM IT APPROPRIATE TO ADMIT ASSESSEES ADDITIONAL GROUND OF APPEAL. HENCE, THIS GROUND IS TREATED AS ADMITTED. ITA NO. 1237 & 1511/D/14 DCM LTD. PAGE 9 OF 15 11. AS FAR AS GROUND NO. 1 OF THE ASSESSEES APPEA L IS CONCERNED, IT IS SEEN THAT THE ASSESSEE HAD CLAIMED DEDUCTION FOR THE LIABILIT IES ON ACCOUNT OF FLYOVER COST AND INTEREST PAYABLE TO MCD ON ACCRUAL BASIS IN AY 2004 -05. THIS CLAIM OF THE ASSESSEE COMPANY WAS DISALLOWED BY THE AO BY OBSERV ING THAT THE DEDUCTION WOULD BE ALLOWABLE ON PAYMENT BASIS. THE CLAIM, HOWEVER, HAD BEEN ALLOWED IN APPEALS BY THE LD. CIT (A) AND THE ITAT. THE DEPARTMENT HO WEVER, DISPUTED THE ALLOWABILITY OF THE CLAIM BEFORE THE HONBLE HIGH C OURT IN AY 2004-05. SINCE, THE DEPARTMENT DISPUTED THE ALLOWABILITY OF CLAIM ON AC CRUAL BASIS, THE ASSESSEE IN ALTERNATIVE, RAISED CLAIMS IN SUBSEQUENT YEARS ON P AYMENT BASIS. THIS ALTERNATE CLAIM, HOWEVER, WAS DISALLOWED BY THE AO AS WELL AS CIT (A) AND ITAT FOR THE REASON THAT THIS CLAIM HAD ALREADY BEEN ALLOWED ON ACCRUAL BASIS IN AY 2004-05. SIMILARLY, THIS GROUND IS ALSO AN ALTERNATE CLAIM O N ACCOUNT OF EXPENDITURE ACTUALLY INCURRED FOR OBTAINING PERMISSIONS/APPROVALS IN RES PECT OF REAL ESTATE PROJECT. CLAIM ON ACCRUAL BASIS HAS ALREADY BEEN ALLOWED BY THE CI T (A) IN AY 2004-05. ON AN OVERALL VIEW OF THE FACTUAL MATRIX OF THE CASE IT I S OUR CONSIDERED OPINION THAT FOLLOWING THE PRINCIPLE OF CONSISTENCY, IT WOULD SE RVE THE ENDS OF JUSTICE IF THE ITATS ORDER IN AY 2004-05 IS AS WE ARE INFORMED TH AT THE ISSUE IN AY 2004-05 IS STILL PENDING ADJUDICATION. THE RELEVANT PARAGRAP H OF ITAT IN ASSESSEES OWN CASE FOR AY 2004-05 IN ITA NO. 2799/DEL/2008 READS AS UN DER: ITA NO. 1237 & 1511/D/14 DCM LTD. PAGE 10 OF 15 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN REGARD TO THE ISSUE OF DISALLOWANCE OF RS. 12.21 CRORES BEING THE EXPEN SES WHICH HAD BEEN DISALLOWED BY THE AO AS ALSO THE ISSUE OF DISA LLOWANCE OF FLYOVER COST OF RS. 13.50 CRORES AND THE ISSUE OF INTEREST PAYABLE TO MCD IN RESPECT OF OUTSTANDING FLYOVER COST, IT IS NOTICED THAT FOR THE AY 1993- 94 TO 1996-97 THE REVENUE HAS INCLUDED THE INCOME O N THE SALE OF PROPERTY RIGHTS ON THE ENTERING INTO THE AGREEMENT WITH THE BUYERS AND THE EXPENSES ON ACCOUNT OF LAND AND DEVELOPMENT INC URRED BY THE ASSESSEE HAS BEEN ALLOWED IN PROPORTION TO THE AREA SOLD BY APPLYING THE MATCHING PRINCIPLE. IT IS ALSO NOTICED THAT IN THE LATER YEARS, THE ASSESSEE HAS ACCEPTED THE STAND OF THE REVENUE AND HAS ALSO BEEN FOLLOWING THE SAME PRACTICE. FOR THE RELEVANT ASSE SSMENT YEAR, IT IS NOTICED THAT THE AO HAS CHANGED HIS STAND JUST BECA USE THE ASSESSEE HAS TRANSFERRED THE COMPLETE RIGHTS IN THE PROJECT AS A WHOLE OF M/S PUREARTH INFRASTRUCTURE LTD. WHEN A PARTICULAR MET HOD OF COMPUTATION OF INCOME OF THE ASSESSEE HAS BEEN FOLL OWED AND HAS BEEN ACCEPTED AND IS ALSO FOLLOWED BY THE REVENUE A ND THE ASSESSEE, JUST BECAUSE THE TOTAL RIGHTS IN THE PROJECT HAS BE EN TRANSFERRED, SUCH METHOD CANNOT BE CHANGED AS BY THE CHANGE OF THE ME THOD, THE EXPENSES OTHERWISE ALLOWABLE TO THE ASSESSEE, IS NO W BEING DENIED WHICH IS NOT A PERMISSIBLE ACT. IN THESE CIRCUMSTA NCES, WE ARE OF THE VIEW THAT THE ACTION OF THE LD. CIT(A) IN DIRECTING THE AO TO ALLOW THE DEDUCTION OF THE SAID EXPENSES IS ON RIGHT FOOTING AND DO NOT CALL FOR ANY INTERFERENCE. ITA NO. 1237 & 1511/D/14 DCM LTD. PAGE 11 OF 15 12. SIMILARLY, AS REGARD EXPENDITURE IN RESPECT OF APPROVALS AND PERMISSIONS, IT IS SEEN THAT THE ITAT IN ASSESSEES OWN CASE FOR AY 20 06-07 IN ITA NO. 314/DEL/2010 HAS ADJUDICATED THE MATTER AS UNDER: 3.1 IN REGARD TO THE EXPENDITURE INCURRED ON APPRO VALS AND PERMISSIONS, THE FINDING OF THE TRIBUNAL IS AS UNDE R: IN RESPECT OF THE CLAIM OF THE DEDUCTION OF EXPENSE S INCURRED FOR OBTAINING APPROVAL AND PERMISSION FOR REAL ESTA TE PROJECT AS ALSO THE EXPENSES CLAIMED AS DEDUCTION A S AN ESTIMATED EXPENDITURE FOR THE VACATION OF QUARTERS, REMOVAL OF SQUATTERS, IT IS NOTICED THAT THE LD. CIT(A) HAS RIGHTLY LOOKED INTO THE MATTER AND HAS AFTER CONSIDERING TH E EXPENSES WHICH HAVE BEEN INCURRED SUBSEQUENT TO THE CLAIM, HAS GRANTED THE PROPORTIONATE RELIEF TO THE ASSESSE E. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE PROPORTI ONATE EXPENSES AS ALLOWED TO THE ASSESSEE, IS ON A SCIENT IFIC AND AN ACCEPTABLE PRINCIPLE AFTER CONSIDERING THE EXPENSES CLAIMED AND THE POSSIBLE FUTURE LIABILITY AND CONSEQUENTLY NO INTERFERENCE IS CALLED FOR. IN THESE CIRCUMSTANCES , THE FINDINGS OF THE LD. CIT (A) ON THIS ISSUE ARE UPHEL D. 13. THE FACTS AND CIRCUMSTANCES OF THE ISSUE BEING IDENTICAL, WE ARE ALSO INCLINED TO FOLLOW THE ORDERS OF THE TRIBUNAL IN THE PRECEDI NG ASSESSMENT YEARS IN THE ASSESSEES OWN CASE. ACCORDINGLY, GROUND NO.1 OF T HE ASSESSEES APPEAL IS DISMISSED. ITA NO. 1237 & 1511/D/14 DCM LTD. PAGE 12 OF 15 14. GROUND NO. 1 OF THE DEPARTMENTS APPEAL RELATES TO NOTIONAL DISALLOWANCE MADE BY THE AO IN RESPECT OF LOAN GIVEN TO DCM EMPL OYEES WELFARE TRUST. SIMILAR DISALLOWANCE HAD BEEN MADE BY THE AO IN EAR LIER YEARS AND WAS SUBSEQUENTLY DELETED BY CIT (A) AND ITAT. ACCORDIN GLY, THIS GROUND IS COVERED IN FAVOUR OF THE ASSESSEE. WE FIND THAT ITAT IN AS SESSEES OWN CASE FOR AY 2006- 07 IN ITA NO. 314/DEL/2010 HAD ADJUDICATED THE MATT ER AS UNDER: 2.2 IN REGARD TO NOTIONAL INTEREST, THE FINDING O F THE TRIBUNAL HAS BEEN AS UNDER: IN REGARD TO THE ISSUE OF DISALLOWANCE OF INTEREST ON THE LOANS OUTSTANDING FROM MS/ DCM EMPLOYEES WELFARE TRUST, IT IS NOTICED THAT THE ISSUE IS SQUARELY COV ERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL I N THE ASSESSEES OWN CASE FOR THE AY 2003-04 REFERRED TO SUPRA AND CONSEQUENTLY RESPECTFULLY FOLLOWING THE DECISIO N OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE AY 2003-04, THE FINDINGS OF THE LD. CI T (A) ON THIS ISSUE STAND UPHELD. ACCORDINGLY, THIS GROUND OF THE DEPARTMENTS APPEAL IS DISMISSED. 15. AS FAR AS GROUND NO. 2 OF ASSESSEES APPEAL REG ARDING DISALLOWANCE U/S 14A OF THE ACT IS CONCERNED, IT IS SEEN THAT THIS GROUN D CORRESPOND TO GROUND NO. 2 OF DEPARTMENTS APPEAL. THE ASSESSEE COMPANY HAD RECE IVED DIVIDEND INCOME OF RS. 70,088/- DURING THE YEAR WHICH WAS CLAIMED AS EXEMP T U/S 10(34) OF THE ACT AND IT ITA NO. 1237 & 1511/D/14 DCM LTD. PAGE 13 OF 15 HAD SUO MOTO MADE A DISALLOWANCE OF RS. 21.87 LACS. IT IS ALSO SEEN THAT THE AO HAS NOT EXAMINED THE CALCULATION AS SUBMITTED BY TH E ASSESSEE COMPANY IN THIS REGARD AND HAS ALSO NOT RECORDED ANY SATISFACTION T O THE EFFECT THAT THE DISALLOWANCE OFFERED WAS NOT CORRECT. HE PROCEEDED TO MAKE A FU RTHER DISALLOWANCE OF 143.39 LACS BY APPLYING PROVISIONS OF RULE 8D. WE FIND FO RCE IN THE CONTENTION OF THE LD. AR THAT THE AO HAS NEITHER RECORDED HIS SATISFACTIO N NOR GIVING ANY REASON AS TO HOW THE CLAIM OF EXPENDITURE IN RELATION TO TAX FRE E INCOME HAS NOT BEEN CORRECTLY MADE BY THE ASSESSEE AS ENVISAGED U/S 14A AND THE A O HAS PROCEEDED TO MECHANICALLY INVOKE RULE 8D. WE ALSO FIND THAT THE AO HAS NOT ESTABLISHED ANY NEXUS BETWEEN THE INVESTMENT MADE AND THE EXPENDITU RE INCURRED UNDER INTEREST EXPENDITURE AND ADMINISTRATIVE EXPENSES BEFORE DISR EGARDING THE SUO MOTO DISALLOWANCE MADE BY THE ASSESSEE VIS--VIS THE DIV IDEND INCOME OF RS. 70,088/-. THE HONBLE DELHI HIGH COURT IN THE CASE OF JOINT I NVESTMENT P. LTD. VS. CIT (SUPRA) HAS HELD THAT DISALLOWANCE U/S 14A CANNOT E XCEED THE AMOUNT OF EXEMPT INCOME. THE HONBLE DELHI HIGH COURT IN THE CASE O F HOLCIM INDIA P. LTD. (SUPRA) HELD THAT IN ABSENCE OF ANY EXEMPT INCOME, THERE CA N BE NO DISALLOWANCE U/S 14A. WE ALSO FIND THAT THE ITAT IN ASSESSEES OWN CASE F OR AY 2009-10, ON IDENTICAL SET OF FACTS, HAD RESTRICTED THE DISALLOWANCE TO THE EX TENT OF DIVIDEND INCOME RECEIVED DURING THE YEAR. RESPECTFULLY FOLLOWING THE SAME, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE U/S 14A TO RS. ITA NO. 1237 & 1511/D/14 DCM LTD. PAGE 14 OF 15 70,088/-. IN THE RESULT, THE ADDITIONAL GROUND OF THE ASSESSEE IS ALLOWED AND GROUND NO. 2 OF THE DEPARTMENT IS DISMISSED. GROUND NO. 2 OF THE ASSESSEES APPEAL NEEDS NO FURTHER ADJUDICATION. 16. GROUND NO. 3 OF THE ASSESSEES APPEAL AND GROUN D NO. 3 OF THE DEPARTMENTS APPEAL ARE IDENTICAL AND IN VIEW OF OUR ADJUDICATIO N ON ADDITIONAL GROUND OF THE ASSESSEES APPEAL AND DISMISSAL OF GROUND NO. 2 OF THE DEPARTMENT AS ABOVE MENTIONED, WE DIRECT THE AO TO RECOMPUTE THE BOOK P ROFITS U/S 115JB. IN THE RESULT, GROUND NO. 3 OF THE ASSESSEES APPEAL IS AL LOWED AND GROUND NO. 3 OF DEPARTMENTS APPEAL IS DISMISSED. 17. GROUND NO. 4 OF THE ASSESSEES APPEAL IS PRE MA TURE AND IS DISMISSED AS SUCH. 18. GROUND NOS. 5 AND 6 OF THE ASSESSEES APPEAL DO NOT NEED ANY ADJUDICATION AND ARE DISMISSED. 19. IN THE FINAL RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED, WHEREAS THE APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.07.2016 SD/- SD/- (O.P. KANT) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29/07/2016 *KAVITA ARORA ITA NO. 1237 & 1511/D/14 DCM LTD. PAGE 15 OF 15 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI