ACIT, Circle, Panipat V. Paliwal Overseas P.Ltd, Panipat

ITA 1263/DEL/2018

AI Insights

The case involves multiple appeals by the Revenue and the assessee, Paliwal Overseas Pvt. Ltd., concerning disallowances made by the Assessing Officer (AO) and subsequent appeals to the Commissioner of Income-tax (Appeals) [CIT(A)]. The primary issues revolved around the disallowance of export promotion expenses, deductions under section 80IA(4), and various additions related to deemed rent and interest. The Tribunal examined the submissions, the legal provisions, and the precedents cited, leading to the decisions mentioned above.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 112710 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2023
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: F
• Next Hearing Date: 25-07-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 21-02-2018
• Other Referred Cases: Hero Cycles Pvt. Ltd. Vs. CIT(C), Ludhiana, Abhishek Industries Ltd. Vs. CIT-1, Ganesh Housing Corporation Ltd. Vs. Padam Singh Under Secretary, Primal Products Pvt. Ltd. Vs. DCIT (Central Circle) 14 Bangalore ITAT, ACIT, Circle 61 Hyderabad Vs. Annapurna Builders ITAT Hyderabad 'B' Bench
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Earning of tax free income; Proportionate interest; Assessment record; Rule 8D
• Section: 143(3); 14A; 115JB; 80IA; 13; 22

Judgement Text

1 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F”: NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ITA No. 5878/DEL/2017 Assessment Year: 2011-12 Paliwal Overseas Pvt. Ltd., G.T. Road, Panipat PAN- AABCP1067E Vs Dy. Commissioner of Income-tax, Circle, Panipat. APPELLANT RESPONDENT AND ITA No. 2082/DEL/2018 A.Y. 2010-11 ITA No. 644/DEL/2018 A.Y. 2012-13 ITA No. 1263/DEL/2018 A.Y. 2013-14 ITA No. 2083/DEL/2018 A.Y. 2014-15 Dy. Commissioner of Income-tax, Circle, Panipat. Vs Paliwal Overseas Pvt. Ltd., G.T. Road, Panipat. PAN- AABCP1067E APPELLANT RESPONDENT Assessee represented by Shri Satish Goel, CA & Shri S.P. Sharma CFO Department represented by Shri T. Kipgen, CIT (DR) Date of hearing 26.07.2023 Date of pronouncement 27.09.2023 2 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 O R D E R PER BENCH: This bunch of five appeals out of which four by the Revenue and one by the assessee are directed against different orders of the learned Commissioner of Income-tax (Appeals), Karnal. All these matters were heard together and are being disposed of by way of a consolidated order for the sake of brevity. ITA No. 5878/Del/2017 (Assessee’s appeal for A.Y. 2011-12) : 2. First we take up the assessee’s appeal in ITA no. 5878/Del/2017 pertaining to the assessment year 2011-12. The assessee has raised following grounds of appeal: “1. That the order of the learned Commissioner of Income Tax(Appeals) is against law and facts. 2. If That in the facts and circumstances of the case of the appellant company, the order of the learned Commissioner of Income Tax(Appeals) in confirming disallowance of Rs.l0,00,326/- out of export promotion expenses is altogether arbitrary, illegal, void and uncalled for. 3. That in the facts and circumstances of the case of the appellant company the order of the learned Commissioner of Income Tax(Appeals) in confirming disallowance of interest of Rs.71956/- as deemed interest in respect of building under construction u/s 36(l)(iii) is altogether arbitrary, illegal, void and uncalled for.” 3. Ground no. 1 is general in nature, needs no specific adjudication. 3 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 4. Ground no. 3 is not pressed at the time of hearing, hence stands rejected as not pressed. 5. The only effective ground in assessee’s appeal is against confirmation of disallowance of Rs. 10,00,326/- out of export promotion expenses. Facts giving rise to the present appeal are that learned Assessing Authority made disallowance of expenditure claimed by the assessee being export promotion expenses. The AO sought explanation regarding justification of such expenditure. It was submitted before the Assessing Authority that the expenditure was incurred for the study expenses of Mr. Abhayjeet Singh for MSc in International Business. The AO recorded that the expenditure was not incurred wholly and exclusively for business, since the person for whom the expenditure was incurred did not contribute in development of the assessee company, as admittedly he did not join or contribute in any manner in the business of the assessee. Aggrieved against this, the assessee preferred appeal before the learned CIT(A), who also sustained the addition. Aggrieved against this the assessee has come up in appeal before the Tribunal. 6. Before us, learned counsel for the assessee argued that the expenditure was incurred wholly and exclusively for the business of the assessee as Mr. Abhayjeet Singh was sponsored and he was to join services of the company. 4 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 7. Learned CIT(DR) opposed the submissions and submitted that there is no material suggesting that Mr. Abhayjeet Singh made any contribution in the development of the assessee company. 8. We have heard rival contentions and perused the material available on record. We find that the AO disallowed the claim of the assessee by observing as under: “4. On perusal of Profit and Loss Account, it is found that assessee has claimed Export Promotion Expense amounting to Rs. 10,00,326/-. Assessee was asked to produce export promotion ledger vide order sheet entry dated 23.12.2013. In response to assessee has furnished its submission vide letter dated 06.01.2014. The relevant part of reply of assessee is reproduced as under: "Justification of Export Promotion Expenses: The Company has sponsored Mr. Abhayjeet Singh for study at abroad in MSC International Business and paid for his fees and expenses trough banking channel as per the proof of payment attached. The sponsorship was on the basis that he will join the company for promotion of its business. Copy of affidavit by Mr. Abhayjeet Singh and director of the company are enclosed, in this regard.” Further assessee was asked to furnish the following details vide order sheet entry dated 27.01.2014: "appointment letter & form 16A for F.Y. 2010-11, 2012-13 and 2013- 14 of person whose education expense has been claimed under the head business promotion” In response to assessee has furnished its submission vide letter dated 18.02.2014 vide which he explained that Abhayjeet Singh is under training and yet to join the assessee company. As a conclusion, assessee was given a final show cause vide order sheet entry dated 18.02.2014. The extract of the same is as under: 5 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 “show cause why not export promotion expense of Rs. 10 lacs should be disallowed, as the person to whom you have made expenditure for his studies and have claimed the same as export promotion has yet(i.e. till the end of F.Y. 2013-14) not joined your company whereas as per affidavit filed F.Y. 2009-10 was last year of his education/ training. ” The Assessee did not file any reply in response to above. Hence in absence of reply of assessee, it is assumed that assessee agrees to the disallowance of such expenditure. In view of the above discussion, the export promotion expenditure amounting to Rs. 10,00,326/- is disallowed and added back to the income of assessee.” 8.1 From the assessment order it is clear that the assessee failed to justify the expenditure as the expenditure could not be linked with the business of the assessee. In our considered view there is no infirmity into the orders of the authorities below. Accordingly, order of learned CIT(Appeals) on the issue in question is hereby affirmed. Grounds of appeal are rejected. 9. Appeal of the assessee is dismissed. ITA No. 644/Del/2018 ( A.Y. 2012-13) : 10. Now coming to Revenue’s appeals, first we take up ITA No. 644/Del/2018 for A.Y. 2012-13: The Revenue has raised following grounds of appeal: “1. Whether on the facts and in law, the CIT (A) has erred in deleting the addition of Rs. 7,49,39,412/- on account of denial of deduction u/s 80IA (4) completely overlooking the facts discussed by the AO in his assessment order u/s 143 (3) of the Income Tax Act. 6 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 2. Whether on the facts and in law, the CIT (A) has erred in inter-alia invoking section 293C of the Act while deleting the addition of Rs. 7,49,39,412/- on account of denial of deduction u/s 80IA (4). 3. Whether on the facts and in law, the CIT (A) has erred in deleting the addition of Rs.72,06,527/- on account of proportionate interest u/s 36 (1) (iii) of the Act merely by relying upon the order of her predecessor, but by completely ignoring the detailed findings of the AO in respect of huge interest free advances given by the assessee for non-business purpose in the past as well as current year. 4. Whether on the facts and in law, the CIT (A) has erred in deleting the addition of Rs. 91,64,622/-on account of disallowance of expenditure u/s 14A r.w Rule 8D of the Income Tax Rules, by merely relying on the judgments in the case of Hero Cycles Pvt. Ltd. Vs. CIT (C), Ludhiana, and Abhishek Industries Ltd. Vs. CIT-1, and by completely overlooking the amendment brought about in section 14A of the Act by introduction of sub- section (2) & (3) and Rule 8D w.e.f. A. Y. 2008-09, and the subsequent court decisions based on the amended law. 5. Whether on the facts and in law, the CIT (A) has erred in deleting the addition of Rs. 8,40,000/- and Rs. 6,83,338/- of deemed rent as per section 22 read with 23 of the Income Tax and 50% of depreciation respectively by completely overlooking the reasons detailed by the AO in the assessment order. 6. The appellant craves leave to add or amend the grounds of appeal before the appeal is heard or disposed off.” 11. Ground nos. 1 & 2 of the Revenue’s appeal are against deletion of disallowance of deduction u/s 80-IA of the Act amounting to Rs. 7,49,39,412/-. Facts related to these grounds are that in this case the assessee filed its return of income through electronic mode on 19.09.2012 at Rs. 1,26,28,490/- after claiming deduction u/s 80IA of the Act. The case was taken up for scrutiny assessment. In response to statutory notices the learned Authorized Representative along with Shri 7 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 S.P. Sharma, Manager Accounts attended the proceedings before the AO. During the assessment proceedings the AO noticed that the assessee had claimed deduction u/s 80IA(4)(iii) of the Act amounting to Rs. 7,49,39,412/- from operating an industrial park at RMZ Titanium, Airport Road, Bangalore. The AO noticed that out of the total area of 199635 sq. ft. the assessee had allotted 119084 sq. ft. to M/s Thomson Reuters India Services Pvt. Ltd. which was more than 50% of the total allocable area. Therefore, the assessee was called upon to explain as to why the deduction claimed u/s 80IA should not be disallowed. The assessee filed detailed reply. However, the reply of the assessee was not found acceptable to the AO, who after considering the submissions disallowed the deduction claimed by the assessee. Aggrieved against this the assessee preferred appeal before the learned CIT(Appeals) who after considering the submissions allowed the claim of the assessee, inter alia, by observing as under: “After examination of the contentions of the AO and the documents filed by the appellant, I find that the AO has not correctly stated the facts. Details of the chart of the units total in seven including two units on the first floor, two in the second floor, one on the third floor and one each on the fourth and fifth floor, it has been shown that there is not single in the assesee's industrial park has occupied more than 50% of the allocable area. It was further reiterated by the appellant that the notification for grant of examination was filed by industrial units and not by tenants. The counsel referring to the issue of agreement with the Thomson Group as mentioned by the AO has submitted that continuance of the units independent to each other hardly made a difference in the renewal of agreement dates etc. The global merger of the Thomson Group did not reduce the number of units occupied by them nor could the appellant have changed the status of the 8 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 areas respectively occupied by those units. With regard to the number of units being more than five as also the allocable area not being more than 50% to just one unit, I have observed that three independent units of Thomson Group was as before and the total area of 119084 sq. feet was applicable to three units and not one. It has been stressed by the counsel with the three units was occupied by the Thomson Group were independent of each other and cannot be accounted as one. It was further stated that the allowable area as per notification of Ministry of Commerce and Industry was 30336 sq. mtr.(326537 sq. feet) and not 199635 sq, feet as adopted by AO in his assessment order. It was further argued that the rule of consistency in respect of the global merger of Thomson Group took place w.e.f. 01.04,2008 and the status of three units of Thomson Group continued without any change while occupying the respective areas in the industrial park. This fact had been accepted by the AO in the three years preceding this assessment year. I am also in agreement with the counsel's submissions that when the assessee was allowed exemption from the initial year to 2011- 12. The said exemption cannot be denied by the AO simply on the ground of a difference in interpretation w.r.t tenants/lessee/licensee - infact it is the industrial unit which is based for exemption and even if two units were there for part of the year no narrow view should be taken in this regard. The counsel had submitted a copy of the judgment of Hon'ble Gujrat High Court in the case of Ganesh Housing Corporation Ltd. Vs. Padam Singh Under Secretary which read as under: " Held that, on the part of the petitioner the requirement was to ensure that before claiming the tax benefit, units indicated in the application were located in the Industrial Park, it was not in dispute that the petitioner in addition to developing the entire park by providing infrastructure, subdivided the plots into smaller units, sold the plots to individual industries and such industries were allotted specific plots for specific purpose. The requirement of ensuring that the industries, as indicated in the application approved, by the Government were located before the last date prescribed, was thus, fulfilled. The duty and responsibility of the petitioner was to ensure that the industrial activity was facilitated on the Industrial Park so developed by it. it was thereafter responsible to ensure that the industries do in fact set-up their units and commence production activities on such units-that too before the last date envisaged in the scheme. Such responsibility fastened on the petitioner was not borne 9 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 out from the scheme. The duty and responsibility of the petitioner was to provide infrastructural facilities which would be a catalyst for industrial growth by enabling the intending units or the intending industries were in no way under the control of the petitioner. There could be variety of reasons why such industries might not be able to start their units, pending approval and clearances from the Government and other agencies and such similar reasons which could be attributed only the intending industries and not to the petitioner. Therefore, the impugned notice was quashed. ” Other cases submitted in support of his claim were Primal Products Pvt. Ltd. Vs. DCIT (Central Circle) 14 Bangalore ITAT and ACIT, Circle 61 Hyderabad Vs. Annapurna Builders ITAT Hyderabad 'B' Bench. In the case of the appellant there is no doubt that having fulfilled the conditions as per the notification of the Ministry of Commerce and further notified by the CBDT, the exemption allowed u/s 80IA from the initial year to A.Y. 2011-12 should have been granted continuously in term of Section 293C which reads as " whether Central Govt, or the Board or Income Tax authority which has been conferred upon the power under any provision of this Act to grant any approval to any assessee, the Central Govt, or the Board or such authority may, notwithstanding that a provision to withdraw such approval has not been specifically provided for in such provision, withdraw such approval at any time. Provided that the Central Govt. or Board or income tax authority shall after giving a reasonable opportunity of showing cause against the proposed withdrawal to the assessee concerned, at any time, withdraw the approval after recording the reasons for doing so.” It has been stated by the appellant that till date the approval granted by the Govt. was not withdrawn. Hence, the AO had erred in denying exemption to them. In view of the submissions made and discussed above, I am of the opinion that AO erred in rejecting the claim of the appellant u/s 80IA. Therefore, the disallowance made under this ground is deleted. This ground of appeal is allowed.” 11.1 Aggrieved against it, the Revenue is in appeal before this Tribunal. 10 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 12. Learned CIT(DR) relied on the assessment order and submitted that the learned CIT(A) was not justified in deleting the disallowance. 13. Learned counsel for the assessee reiterated the submissions as made in the written submissions. He submitted that the finding of the assessing authority is factually incorrect. The issue has been examined by the assessing authority in earlier year. He contended that deduction was allowed in F.Y. 2006-07 to 2009-10 and 2010-11. The reason for disallowing deduction was that the assessee did not fulfill the terms and conditions mentioned in the notification. Learned counsel drew our attention to the chart filed during the course of hearing to demonstrate that the requisite conditions were duly fulfilled. Learned counsel has also filed lease-deed dated 30.04.2004 executed between M/s Paliwal Overseas Pvt. Ltd. and M/s Reuters India Pvt. Ltd. He submitted that the assessing authority grossly erred in giving a finding that the assessee did not fulfill the conditions as laid down U/s 80IA of the Act. He contended that for availing deduction u/s 80IA there should be minimum five industrial units and no single unit should occupy more than 50% of the allocable area. The AO treated M/s Thomson Reuters India Services Pvt. Ltd. as single unit occupying the total area of 119084 sq. ft. out of the total allocable area of 199635 sq. ft. However, the fact remains that there were three different units by name Thomson Group. He contended that the learned CIT(Appeals) has 11 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 rightly come to a conclusion regarding eligibility of the assessee for availing deduction u/s 80IA. 14. There is no dispute that the provision of law speaks about unit but not the tenant. In our considered view, a single tenant can hire two distinct units from the same owner of the property. Only bar is that no single unit should occupy more than 50% of allocable area. The AO has not brought any material rebutting the finding on fact arrived at by the learned CIT(A) that there were more than five units. In the absence of such material we do not see any infirmity into the order of learned CIT(A) Moreover, it is undisputed that the claim was allowed by the AO himself for A.Y. 2006-07 to 2009-10. The AO failed to point out any change into facts and circumstances. Hence, the grounds raised by the Revenue lack merit. Accordingly, ground nos. 1 & 2 are hereby dismissed. 15. Ground no. 3 raised by the Revenue is against deletion of disallowance of Rs. 72,06,527/-, made on account of disallowance of proportionate interest u/s 36(1)(iii) of the Act. Facts related to this ground are that while framing the assessment the AO disallowed the interest as expenditure on the basis that interest bearing funds were utilized for non-business purpose. Aggrieved against this the assessee preferred appeal before the learned CIT(Appeals) who deleted the addition. Aggrieved against the Revenue is in appeal before this Tribunal. 12 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 16. Learned CIT(DR) supported the order the assessment order and submitted that the AO has given a finding that interest bearing fund was utilized for giving loan and advances without charging any interest. Therefore, the AO was justified in making the impugned disallowance. 17. On the other hand learned counsel for the assessee supported the order of the learned CIT(Appeals) and contended that the finding of the assessing authority is clearly incorrect. He submitted that during F.Y. 2011-12 the company was having surplus liquid profits of Rs. 9,58,85,058/-. It was also stated that all the advances are brought forward balances and no such disallowance was made even in A.Y. 2010-11. He strongly relied upon the finding of learned CIT(A) and prayed that the ground deserves to be dismissed. 18. We have heard rival submissions and perused the relevant material available on record. The learned CIT(Appeals) has given a finding of fact, inter alia, by observing as under: “Findings: The AO had calculated funds for non-business purposes as well as loans and advances as well as investment in agricultural land as well and after due calculation applied the rate of 17.35% for disallowance out of interest claimed. During appellate proceedings, the factual data of all loand and advances were filed and it is clearly borne out from the list that almost all of them were old advances including investment in agricultural land. 13 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 The appellant relied upon the order passed in A.Y. 2010-11 in his own case by my predecessor in Appeal No. 31/PPT/2013-14 dated 22.12.2015 where the disallowance on the same issue was deleted. Also relied upon was the appellate order in his own case for A.Y. 2011-12 in Appeal No. 03/PPT/2014-15 dated 03.08.2017. In addition the Hon'ble ITAT, Delhi has also in ITA Nos. 3490 to 3495/DEL/2011 dated 30.06.2016 decided in the appellant's favour on the same issue for A.Ys. 2000-01 to 2006-07. I, therefore, delete the addition of Rs. 72,06,527/-. This ground of appeal is allowed.” 18.1 The AO made the disallowance out of interest expenditure stating that the assessee had diverted its interest bearing funds for non-business purpose during the year. It is observed by the AO that interest bearing and non-interest bearings sources of funds were submerged into a single pool and the assessee had not been able to prove that non-interest bearing funds were used for non-business loans and advances. Therefore, he disallowed 17.35% of interest claimed by the assessee. 18.2 The learned CIT(Appeals) in the impugned order has given a categorical finding that as per the material available on record all loans and advances were old including investment in agricultural land. Moreover, the learned CIT(Appeals) in assessee’s own case for A.Y. 2011-12 had deleted the addition and the order of the CIT(A) was affirmed by the Tribunal. 18.3 Considering the fact that the advances are old and in A.Y. 2011-12 the facts were identical and coordinate Bench of this Tribunal has affirmed the view of the learned CIT(Appeals), we, therefore, do not find any reason to interfere in the finding of the learned CIT(A) as the assessee was having sufficient reserve funds 14 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 to give such advances. The AO failed to prove that the assessee was not having sufficient interest free funds to give loan and advances. Hence, the impugned disallowance cannot be sustained under the facts and circumstances of the case in hand. Moreover, law is well settled that if there is pool of mixed funds, it is presumed that advances were made out of interest free funds. Ground raised by the Revenue is dismissed. 19. Ground no. 4 is against deletion of addition of Rs. 91,64,622/- made by the AO by invoking the provisions of Section 14A of the Act. 20. Facts related to this ground are that during assessment proceedings the AO noticed that assessee had made investments in shares amounting to Rs. 30,39,99,580/- as on 31.03.2012 and Rs. 31,04,01,580/- as on 31.03.2011. The assessee also earned dividend of Rs. 386257/- during the year. The assessee also earned long term capital gain on sale of shares amounting to Rs. 1,08,82,732/- which was not chargeable to tax. The AO asked the assessee to explain as to why addition u/s 14A be not made for expenses relating to the investment. In response the assessee’s claim was that the investment in shares was made out of interest free funds. Rejecting the claim of the assessee the AO made the impugned disallowance u/s 14A of the Act for expenses relating to investment in shares as per the method prescribed in Rule 8D. Aggrieved against this the assessee preferred appeal before 15 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 the learned CIT(A) who after considering the submissions deleted the disallowance. Aggrieved against this the Revenue is in appeal before this Tribunal. 21. Learned CIT(DR) relied on the assessment order. 22. On the other hand learned counsel for the assessee supported the order of learned CIT(Appeals). 23. We have heard rival submissions and perused the material available on record. The learned CIT(Appeals) has deleted the impugned disallowance, inter alia, by observing as under: “Findings : The appellant in his submissions said that the facts are identical to that in A,Y, 2011-12 in his case and stated that:- 1) The investment in shares remain old. 2) Chart showing sources and investment in shares during the year under consideration was enclosed. 3) Details of investment: in shares as on 31.03.2012 and on 31,02.2011 with dates of purchase of shares were enclosed. 4) The company has not incurred any expenditure in earning dividend income. The investment in the share of the sister concern Paliwal Infrastructure Pvt. Ltd. has been made as both companies are in the same line of business viz. maintenance and development of Industrial Park, After considering the submissions and judgments filed in the case of Hero Cycles Pvt. Ltd. Vs. CIT(C) Ludhiana (SC,05.11.2015), Abhishek Industries Ltd. Vs. CIT-1(P&H High Court dated 27.01.2015, I am of the opinion that the facts are identical to the issue in the appellant's case in A.Y. 16 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 2011-12 which has been decided in his favour in Appeal No. 03/PPT/2014- 15 dated 03.08.2017. I, therefore, delete the disallowance of Rs. 91,64,622/- . This ground of appeal is allowed.” 23.1 The learned CIT(DR) has not rebutted the finding of the learned CIT(Appeals) that the investment made in shares were old. The assessee has not incurred any expenditure in earning dividend income. Undisputedly, the assessee has earned dividend income of Rs. 3,86,252/-. It is borne out from records that investment was made out of interest free fund. Hence, in our considered view learned CIT(A) has rightly deleted the disallowance qua interest so made under clause (ii) of Rule 8D(2) of the Rules. The learned CIT(A) failed to take note of the fact that the disallowance was also made under clause (iii) of Rule 8D(2) in respect of administrative expenses amounting to Rs. 15,36,029/- but during the year the assessee has earned exempt income of Rs. 3,86,257/-. Therefore, in the light of decision of Co-ordinate Bench rendered in the case of DCM Ltd. Vs. DCIT ITA No. 4567/Del/2022, the disallowance u/s 14A cannot exceed the exempt income. This view has been approved by the Hon’ble Madras High Court and followed by other Hon’ble High Courts. We, therefore, respectfully following the same diet the AO to restrict disallowance to the extent of exempt income. This ground is partly allowed. 24. Ground no. 5 is against deletion of addition made by the AO of Rs. 8,40,000/- and Rs. 6,83,338/- of deemed rent as per as per section 22 read with 23 17 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 of the Income Tax and 50% of depreciation respectively. Facts related to this ground are that in assessment proceedings the AO noticed that the assessee had claimed Rs. 45,58,703/- on renovation of office building at B-14, Greater Kailash, Part-I, New Delhi. The AO observed that group concerns were having their corporate office and registered office at the said building but no rental income was being shown by the assessee from such concerns. He estimated the annual rent of the let out portion of the property at Rs. 12,00,000/- and after allowing deduction u/s 24(a) at the rate of 30% added Rs. 8,40,000/- to the income of the assessee as deemed rent under the head ‘Income from house property’. 24.1 The AO also noticed that the assessee had claimed depreciation on entire property at B-14, Greater Kailash, Part-I, New Delhi at Rs. 12,16,677/-. Considering that the entire was not being used for the business of the assessee and at least half of it was in occupation of group concerns, the AO disallowed 50% out of depreciation claimed by the assessee, resulting in disallowance of Rs. 6,08,338/-. 24.2 Aggrieved against this the assessee preferred appeal to the learned CIT(Appeals), who after considering submissions, deleted both the additions. Aggrieved against this the assessee is in appeal before this Tribunal. 25. Learned CIT(DR) relied on the assessment order. 18 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 26. On the other hand learned counsel for the assessee supported the order of learned CIT(Appeals). 27. We have heard rival submissions and perused the material available on record. The learned CIT(Appeals) has deleted the impugned additions, inter alia, by observing as under: “Findings:- The facts on record do not show any merit in making the said disallowance. The building has been used for many years by the company and its sister concern as its own office. Therefore, taxing possible rental is not logical nor is the disallowance of depreciation warranted. I delete both the additions. These grounds of appeal are allowed.” 27.1. The aforesaid finding of fact given by the learned CIT(Appeals) in deleting the impugned additions, has not been rebutted by the Revenue. Therefore, we do not see any reason to interfere with the same. Ground no. 5 of Revenue’s appeal is hereby dismissed. 28. In the result, Revenue’s appeal for A.Y. 2012-13 in ITA No. 644/Del/2018 is partly allowed. ITA No. 2082/Del/2018 (A.Y. 2010-11) : 29. For A.Y. 2010-11, the Revenue has raised following grounds of appeal: “1. Whether on facts and in law, the CIT(A) has erred in holding that the reopening of assessment for non-submission of Form No. 10CCB is not maintainable, by giving a factually wrong finding that Form No.ioCCB was 19 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 submitted by the assessee during the original assessment proceedings alongwith its reply dated 23/08/2012, as the said fact is not borne out from the relevant assessment records. 2. Whether on facts and in law, the CIT(A) has erred in holding that the reassessment order is not valid merely because the claim U/s 80IA had been accepted by the CIT(A). 3. Whether on facts and in law, the CIT(A) has erred in deleting the addition of Rs.6,22,80,152/- on account of denial of deduction u/s 8oIA(4) by merely relying on her earlier order and by completely overlooking the fats discussed by the AO in the assessment order u/s 143(3) of the Income Tax Act. 4. Whether on facts and in law, the CIT(A) has erred in deleting the addition of Rs.6,22,80,152/- on account of denial of deduction u/s 8oIA(4) of the Act by ignoring that the fact that one of the units i.e. Thomson Corporation (International) Pvt. Ltd. had occupied more than 50% of total allocable area was clearly established by the AO in the assessment order. 5. Whether on facts and in law, the CIT(A) has erred in deleting the addition of Rs. 6,22,80,152/- on account of denial of deduction u/s 8oIA(4) of the Act by ignoring the fact that the condition stipulated as per section 8oIA(4) is that for any Industrial Park to avail deduction u/s 8oIA(4) there should be at least minimum 5 Industrial units functioning in that Industrial park and that in the case of the assessee there were less than 5 units operating from the said Industrial park. 6. Whether on facts and in law, the CIT(A) has erred in deleting the addition of Rs. 6,22,80,152/- on account of denial of deduction u/s 8oIA(4) of the Act by ignoring the fact that the AO had clearly established in his assessment order that there were less than 5 separate industrial units functioning in the industrial park as could be seen from the fact that the so called two separate industrial units as claimed by the assessee i.e. Thomson Corporation & Reuters India were not the distinct units, but were merged into one. 7. Whether on facts and in law, the CIT(A) has erred by allowing depreciation in accordance with the Company Act even for the purpose of computation of income under the normal provisions relating to depreciation 20 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 as per which depreciation under the Income Tax on building was allowable @ 10% instead of 5% claimed by the assessee, thus resulting in undue excessive deduction under section 80IA, and carry forward of excessive WDV in respect of building only with a view to claim in the future years higher depreciation allowance. 8. The appellant craves leave to add or amend the grounds of appeal before the appeal is heard or disposed off.” 30. Ground nos. 1 to 6 are against deletion of addition of Rs. 6,22,80,152/- made on account of denial of deduction u/s 80IA(4) of the Act. Identical issue has been dealt by us in Revenue’s appeal for A.Y. 2012-13 (ITA No. 644/Del/2018), wherein we have affirmed the finding of learned CIT(A), inter alia, observing as under: “14. There is no dispute that the provision of law speaks about unit but not the tenant. In our considered view, a single tenant can hire two distinct units from the same owner of the property. Only bar is that no single unit should occupy more than 50% of allocable area. The AO has not brought any material rebutting the finding on fact arrived at by the learned CIT(A) that there were more than five units. In the absence of such material we do not see any infirmity into the order of learned CIT(A) Moreover, it is undisputed that the claim was allowed by the AO himself for A.Y. 2006-07 to 2009-10. The AO failed to point out any change into facts and circumstances. Hence, the grounds raised by the Revenue lack merit. Accordingly, ground nos. 1 & 2 are hereby dismissed.” 31. Undisputedly, the facts are identical as were in A.Y. 2012-13. Therefore, taking consistent view of the matter and following our decision in ITA No. 644/Del/2018 for A.Y. 2012-13, we affirm the order of learned CIT(A) on the 21 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 issue in question. Accordingly, ground nos. 1 to 6 in Revenue’s appeal are hereby dismissed. 32. Ground no. 7 is against allowance of depreciation in accordance with the Company Act. 33. Learned CIT(DR) relied on the order of AO. 34. On the other hand, learned counsel for the assessee submitted that the allowance of depreciation was claimed in accordance with law, therefore, there is no infirmity in the order of learned CIT(A). 35. We have heard rival contentions. The learned CIT(A) allowed the claim of the assessee on the basis that the assessee had made payment under the provisions of MAT u/s 115JB of the Act. Thus, we do not see any infirmity into the order of learned CIT(A) on the issue in question and the same is hereby affirmed. Ground no. 7 in Revenue’s appeal is hereby dismissed. 36. Ground no. 8 is general and requires no separate adjudication. 37. In the result, Revenue’s appeal for A.Y. 2010-11 being ITA No. 2082/Del/2018 is dismissed. ITA No. 1263/Del/2018 (A.Y. 2013-14) : 38. For A.Y. 2013-14, the Revenue has raised following grounds of appeal: “1. Whether on facts and in law, the CIT(A) has erred in deleting the addition of Rs.9,74,37,453/- on account of denial of deduction u/s 80IA(4) by merely relying on her earlier order and by completely overlooking the 22 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 facts discussed by the AO in the assessment order u/s 143(3) of the Income Tax Act. 2. Whether on facts and in law, the CIT(A) has erred in inter-alia invoking section 293C of the Act in her earlier order relied upon while deleting the addition on account of denial of deduction u/s 80IA(4). 3. Whether on facts and in law, the CIT(A) has erred in deleting the addition of Rs.9,74,37,453/- on account of denial of deduction u/s 80IA(4) of the Act by ignoring the fact that the condition stipulated as per section 80IA(4) is that for any Industrial Park to avail deduction u/s 80IA(4) there should be at least minimum 5 industrial units functioning in that industrial park and that in the case of the assessee there were less than 5 units operating from the said industrial park. 4. Whether on facts and in law, the CIT(A) has erred in deleting the addition of Rs.9,74,37,453/- on account of denial of deduction u/s 80IA(4) of the Act by ignoring the fact that the AO had clearly established in his assessment order that there were less than 5 separate industrial units functioning in the industrial park as could be seen from the fact that the so called two separate industrial units as claimed by the assessee i.e. Thomson Corporation & Reuters India were never distinct units and were rather one and same only as both of them possessed same PAN i.e. AAACW1663L. 5. Whether on facts and in law, the CIT(A) has erred in deleting the addition of Rs.9,74,37,453/- on account of denial of deduction u/s 80IA(4) of the Act by ignoring the fact that PAN is such a number which gives distinctness to an entity under the Central Tax Laws which is Income Tax in this case and which is again stipulated as one of the criteria for judging the distinctness of a unit as per Ministry of Commerce notification No. S.0.461 dated 09.02.2007 which has laid down certain condition for approval of industrial parks u/s 80IA wherein it has been clearly mentioned at point No. 4 of the notification that “No single unit referred to in column (2) of the Table given in sub- paragraph (b) of paragraph 6 of S.O. 354(E), dated 1 st April 2002, shall occupy more than fifty per cent of the allocable industrial area of an industrial park. For this purpose, a unit means any separate and distinct entity for the purpose of one and more State or ‘Central Tax laws”. 6. Whether on facts and in law, the CIT(A) has erred in deleting the 23 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 addition of Rs.9,74,37,453/- on account of denial of deduction u/s 80IA(4) of the Act by ignoring the fact that one of the units i.e. Thomson Corporation (International) Pvt. Ltd. had occupied more than 50% of total allocable area was clearly established by the AO in the assessment order at Page No. 31 of the order that the assessee had given area measuring (built up space) 119048 square feet to Thomson Reuters, out of total allocable area 199635 square feet thus allowing one unit to occupy more that 50% of the allocable area. 7. Whether on facts and in law, the CIT(A) has erred in deleting the addition of Rs.9,74,37,453/- on account of denial of deduction u/s 80IA(4) of the Act by ignoring the fact that the total allocable area in the case of the assessee was 199635 square feet only and not 326537 square feet as claimed by the assessee as the assessee did not exclude the area pertaining to “common facilities” such as Air Conditioning, Approach Roads, Water supply, Sewerage, Telephone Network etc. which has been clearly mentioned in the Notification No. S.O. 461 dated 09.02.2007 and that the total area excluding the “common facilities” (as mentioned in the notification) should be considered for allocable area measurement and which in this case comes to 199635 square feet only. 8. Whether on facts and in law, the CIT(A) has erred in deleting the addition of Rs.9,74,37,453/- on account of denial of deduction u/s 80IA(4) of the Act by ignoring the fact that the AO had clearly mentioned in his assessment order at page No. 28 that though there was a global merger of the two entities, namely Thomson Corporation & Reuters India, yet the assessee had entered into fresh lease deeds with Thomson Corporation (International) Pvt. Ltd. on 30.12.2008 and 29.07.2010 i.e. well after the merger and well after the fact of the merger was known to the assessee, which clearly means that the assessee had the knowledge that by entering into a fresh lease deed with Thomson Corporation (International) Pvt. Ltd. it would be violating the condition of minimum 5 industrial units required to be operating from the Industrial Park. 9. Whether on facts and in law, the CIT(A) has erred in deleting the addition of Rs.9,74,37,453/- on account of denial of deduction u/s 80IA(4) of the Act by ignoring the fact that the assessee in its submission before the CIT(A) has referred only to the certificate given by the managing director of the assessee company and the half yearly reports submitted by the assessee 24 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 company before the Ministry of commerce without giving any cogent replies or arguments to any of the issues raised by the Assessing Officer in the assessment order especially with regard to the fact that a single PAN is possessed by Thomson Corporation & Reuters India which gives any entity a distinctness and uniqueness as per Central Tax Laws as required in the Notification No.S.O. 461 dated 09.02.2007, and to the fact that the 50% total allocable area i.e. 119048 square feet was allocated to one unit only i.e. Thomson Corporation (International) Pvt. Ltd. out of total allocable area of 199635 square feet. 10. Whether on facts and in law, the CIT(A) has erred in deleting the addition of Rs.81,14,709/- on account of proportionate interest u/s 36(l)(iii) of the Act merely by relying upon the order of her predecessor, but by completely ignoring the detailed findings of the AO in respect of huge interest free advances given by the assessee for non-business purpose in the past as well as current year. 11. Whether on facts and in law, the CIT(A) has erred in deleting the addition of Rs.81,14,709/- on account of proportionate interest u/s 36(l)(iii) of the Act by ignoring the fact that the major receipt of the assessee is rental income from letting out units in industrial park in Bangalore and the assessee has admittedly invested borrowed funds in this project from term loan from Bank which was outstanding to the extent of Rs. 32.07 Crore on 31.03.2012 and to the extent of Rs. 27.96 crore on 31.03.2013, and thus any receipt / income from these projects is relatable to the borrowed funds to that extent and cannot be treated as interest free fund. 12. Whether on the facts and in law, the CIT(A) has erred in deleting the addition of Rs.91,64,622/- on account of disallowance of expenditure u/s 14A r.w. Rule 8D of the Income Tax Rules, by merely relying on the judgments in the case of Hero Cycles Pvt. Ltd. Vs. CIT(C), Ludhiana and Abhishek Industries Ltd.Vs. CIT-I by completely overlooking the amendment brought about in section 14A of the Act by introduction of sub-section (2) & (3) and Rule 8D w.e.f. AY 2008-09, and the subsequent court decisions based on the amended law 13. Whether on the facts and in law, the CIT(A) has erred in deleting the addition of Rs.91,64,622/- on account of disallowance of expenditure u/s 14A r.w. Rule 8D of the Income Tax Rules by ignoring the fact that assessee had failed to provide any evidence during assessment as well as appellate 25 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 proceedings which could prove that interest free funds were utilized for investment resulting in tax free income to the assessee. 14. Whether on the facts and law, the CIT(A) has erred in deleting the addition of Rs.8,40,000/- and Rs. 6,27,528/- of deemed rent as per section 22 read with 23 of the Income tax Act and 50% of depreciation respectively by completely overlooking the reasons detailed by the AO in the assessment order. 15. Whether on the facts and law, the CIT(A) has erred in deleting the addition of Rs.8,40,000/- and Rs. 6,27,528/- of deemed rent as per section 22 read with 23 of the Income tax Act and 50% of depreciation respectively by ignoring the fact that the assessee had deliberately not furnished the desired information for obvious reasons. 16. Whether on the facts and in law, the CIT(A) has erred in deleting the addition of Rs.44,90,258/- on account of denial of deduction for delayed payment of property tax, overlooking the fact that the expenses were penal in nature for violation of rules / statutory provisions of law. 17. The appellant craves leave to add or amend the grounds of appeal before the appeal is heard or disposed off.” 39. Ground nos. 1 to 9 are against deletion of addition of Rs. 9,74,37,453/- made on account of denial of deduction u/s 80IA(4) of the Act. Identical issue has been dealt by us in Revenue’s appeal for A.Y. 2012-13 (ITA No. 644/Del/2018), wherein we have affirmed the finding of learned CIT(A), inter alia, observing as under: “14. There is no dispute that the provision of law speaks about unit but not the tenant. In our considered view, a single tenant can hire two distinct units from the same owner of the property. Only bar is that no single unit should occupy more than 50% of allocable area. The AO has not brought any material rebutting the finding on fact arrived at by the learned CIT(A) that there were more than five units. In the absence of such material we do not see any infirmity into the order of learned CIT(A) Moreover, it is undisputed that the claim was allowed by the AO himself for A.Y. 2006-07 to 2009-10. 26 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 The AO failed to point out any change into facts and circumstances. Hence, the grounds raised by the Revenue lack merit. Accordingly, ground nos. 1 & 2 are hereby dismissed.” 39.1 Facts for the year under consideration remaining the same as in A.Y. 2012- 13, we affirm the order of learned CIT(A), deleting the addition in question. Ground nos. 1 to 9 stand dismissed accordingly. 40. Ground nos. 10 & 11 are in respect of deletion of disallowance made on account of proportionate interest u/s 36(1)(iii) of the Act. Facts of the case in respect of these grounds are that during the course of assessment, the AO observed that the assessee had claimed interest expenditure of Rs. 4,41,51,594/- in its profit and loss account out of which Rs. 3,96,61,336/- was claimed as interest on term loan and Rs. 44,90,258/- was claimed as other interest. The AO noticed that the assessee had given loan and advances amounting to Rs. 28,09,52,151/-. The assessee was, therefore, show caused to explain and provide details regarding loans and advances amounting to more than Rs. 10 lakhs. The assessee duly replied to the AO. The AO observed that the advances were not related to the present business of the assessee. Therefore, by invoking the provisions of Section 36(1)(iii) of the Act the AO disallowed a sum of Rs. 81,14,709/- being 20.46% of the total interest i.e. sum of Rs. 3,96,61,336/-, claimed by the assessee. 40.1 Aggrieved against this the assessee preferred appeal before the learned CIT(A), who deleted the addition on the basis that under identical facts in 27 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 preceding assessment years i.e. A.Y. 2010-11 & 2011-12 it was observed by the learned CIT(A) that no borrowed funds were utilized for non-business advances. Aggrieved against this the Revenue is in appeal before this Tribunal. 41. Learned CIT(DR) relied on the order of AO. On the other hand learned counsel for the assessee supported the order of learned CIT(A). 42. We have heard learned Representatives of the parties and perused the material available on record. In the year under appeal the AO has noticed that the assessee had borrowed funds being term loan from Bank which was outstanding to the extent of Rs. 32.07 crore on 31.03.2012 and to the extent of Rs. 27.96 crore on 31.03.2013. It was further noticed by the AO that at the same time the assessee had paid up capital of Rs. 95.4 lakh and reserve and surplus of Rs. 111.30 crore and 118.61 crore as on 31.03.2012 and 31.03.2013 respectively. He concluded that part of the loans and advances was given from borrowed funds and part of the loans and advances was given from interest free funds. Since all the receipts of the assessee submerged in a common pool, it was not possible to specify which part related to the interest bearing funds and which part related to interest free funds. 42.1 As regards the fact that the assessee was having interest bearing funds and interest free funds, the AO has not given any finding that interest bearing funds were not sufficient to make interest free loans and advances. The Hon’ble Bombay High Court in the case of CIT v. Reliance Utilities & Power Ltd. (2009) 313 ITR 28 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 340 (Bom.) has categorically held that if there were funds available both interest- free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the company, if the interest-free funds were sufficient to meet the investments. The finding of AO, is therefore, contrary to the settled principles of law. The AO committed error in holding that the assessee could not co-relate the interest free funds with the interest free loans and advances. Thus, we do not find any infirmity in the order of learned CIT(A) and the same is hereby affirmed. Ground nos. 10 & 11 in Revenue’s appeal are hereby dismissed. 43. Ground nos. 12 and 13 are against deletion of addition made by the learned CIT(A) by invoking section 14A read with Rule 8D amounting to Rs. 91,64,622/-. Facts related to the grounds are that the AO noticed that the assessee had invested in shares a sum of Rs. 30,39,99,580/- as on 31.03.2013 and investment of Rs. 43,06,80,855/- as on 31.03.2012. The assessee also earned dividend of Rs. 2,53,960/- during the year which it claimed to be exempt. The AO, thereafter, proceeded to make disallowance by applying Rule 8D of the Income-tax Rules, 1962, hereinafter referred to as the “Rules”, amounting to Rs. 91,64,622/-. The aforesaid disallowance constituted disallowance under Rule 8D(2)(iii) of Rs. 15,36,029/- and rest of the disallowance was made under clause (ii) of Rule 8D(2). 29 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 43.1 On appeal, learned CIT(A) following the decision for A.Y. 2012-13 deleted the entire disallowance. Aggrieved, the Revenue is in appeal before this Tribunal. 44. Learned CIT(DR) relied on the order of AO. On the other hand learned counsel for the assessee supported the order of learned CIT(A). 45. We have heard rival submissions and perused the material available on record. We find that the learned CIT(A) deleted the impugned addition by following its order for A.Y. 2012-13. The AO in the assessment order made disallowance by invoking the provisions of Section 14A read with Rule 8D(2) of the Income-tax Rules. There is no dispute with regard to the fact that during the year the assessee had earned dividend income of Rs. 2,53,960/-. The addition made by the Assessing Authority is of Rs. 91,64,622/-. It is stated by the assessee that the investment was made out of its own funds. Therefore, disallowance of interest under clause (ii) of Rule 8D(2) is not justified. The AO further made disallowance under Rule 8D(2)(iii) of Rs. 15,36,029/-, but the exempt income during the year is stated to be Rs. 2,53,960/-. Therefore, in our considered view the AO should have restricted the addition to the extent of Rs. 2,53,960/-. We order accordingly. This ground of Revenue’s appeal is partly allowed. 46. Ground nos. 14 & 15 of Revenue’s appeal are against deletion of addition of Rs. 8,40,000/- and Rs. 6,27,528/- being deemed rent as per Section 22 read with section 23 of the Act and 50% depreciation respectively. 30 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 47. Learned CIT(DR) relied upon the order of AO and submitted that learned CIT(A) was not justified in deleting the addition. 48. On the other hand learned counsel for the assessee submitted that the learned CIT(A) in deleting the addition in question has relied its order in assessee’s own case for A.Y. 2012-13. 49. We have heard rival submissions and perused the material available on record. The learned CIT(A) has deleted the addition in question by following the order in A.Y. 2012-13. We find that in A.Y. 2012-13, against the order of learned CIT(A) the Revenue came up in appeal before the Tribunal in ITA No. 644/Del/2018, wherein we have affirmed the decision of learned CIT(A) on the issue in question. No change in facts for the assessment year in question have been pointed out by the learned CIT(DR). Therefore, taking consistent view of the matter and following our decision in ITA No. 644/Del/2018, we affirm the order of learned CIT(A) on the issue in question. Accordingly, ground nos. 14 & 15 in Revenue’s appeal are hereby dismissed. 50. Ground no. 16 is against deleting the addition of Rs. 44,90,258/- on account of denial of deduction of interest for payment of property tax. 51. Facts related to this ground are that the AO while framing the assessment noticed that as per P&L A/c the assessee had debited a sum of Rs. 44,90,258/- on 31 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 account of interest on property tax. The AO treating it to be as penal in nature disallowed and added the same to the income of the assessee. Aggrieved against this the assessee preferred appeal before the learned CIT(A) who deleted the disallowance by relying on the decision of the Tribunal rendered in the case of M/s Remfry & Sagar Consultants Pvt. Ltd. Vs. ACIT. Aggrieved, the Revenue is in appeal before this Tribunal. 52. Learned CIT(DR) relied on the order of AO. 53. On the other hand, learned counsel for the assessee submitted that the learned CIT(A) in deleting the addition in question has relied upon the order of the Tribunal. Therefore, there is no infirmity in the order of the learned CIT(A). 54. We have heard rival contentions and perused the material available on record. The AO made disallowance by treating the interest on delayed payment of property tax as penal in nature. However, the learned CIT(A) deleted the same by relying on the decision of the Coordinate Bench of the Tribunal in the case of M/s Remfry & Sagar Consultants Pvt. Ltd. (supra) that payment of interest on delayed payment of service tax was not penal in nature. In arriving at its conclusion the learned CIT(A) has also relied on the decision of Hon’ble Supreme Court in the case of Pratibha Processors & Others dated 11.10.1996. The learned CIT(DR) could not refute the aforesaid factual position. Therefore, we do not see any 32 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 infirmity in the order of learned CIT(A) on the issue in question. Ground raised by the Revenue is rejected. 54. In the result, Revenue’s appeal for A.Y. 2013-14 being ITA No. 1263/Del/2018 stands partly allowed. ITA No. 2083/Del/2018 (A.Y. 2014-15): 55. For A.Y. 2013-14, the Revenue has raised following grounds of appeal: “1. Whether on facts and in law, the CIT(A) has erred in deleting the addition of Rs. 4,65,90,175/- on account of denial of deduction u/s 8oIA(4) by merely relying on her earlier order and by completely overlooking the facts discussed by the AO in the assessment order u/s 143(3) of the Income Tax Act. 2. Whether on facts and in law, the CIT(A) has erred in inter-alia invoking section 239C of the act in her earlier order relied upon while deleting the addition on account of denial of deduction u/s 8oIA(4). 3. Whether on facts and in law, the CIT(A) has erred in deleting the addition of Rs. 4,65,90,175/- on account denial of deduction u/s 8oIA(4) of the Act by ignoring the fact the condition stipulated as per section 8oIA(4) is that for any Industrial Park to avail deduction 8oIA(4) there should be at least minimum 5 industrial units functioning in that industrial park and that in the case of the assessee there were less than 5 units operating from the said industrial park. 4. Whether on facts and in law, the CIT(A) has erred in deleting the addition of Rs. 4,65,90,175/- on account of denial of deduction u/s 8oIA(4) of the Act by ignoring the fact that the AO had clearly established in his assessment order that there were less than 5 separate industrial units functioning in the industrial park as could be seen from the fact that the so called two separate industrial units as claimed but the assessee i.e. Thomas unit -201 and Thomas unit- 202 India were never distinct units and were rather one and same only as both of them possessed same PAN i.e. AAACW1663L. 33 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 5. Whether on facts and in law, the CIT(A) has erred in deleting the addition of Rs. 4,65,90,175/- on account of denial of deduction u/s 8oIA(4) of the Act by ignoring the fact that PAN is such a number which gives distinctness to an entity under the Central Tax Laws which is Income Tax in this case and which is again stipulated as one of the criteria forjudging the distinctness of a unit as per Ministry of Commerce notification No. S.O. 461 dated 09.02.2007 which has laid down certain condition for approval of industrial parks u/s 80IA wherein it has been clearly mentioned at point No. 4 of the notification that “No single unit referred to in column (2) of the Table given in sub-paragraph (b) of paragraph 6 of S.O. 354 (E), dated 1 st April 2002, shall occupy more than fifty percent of the allocable industrial area of an industrial park. For this purpose, a unit means any separate and distinct entity for the purpose of one and more state or ‘Central Tax laws” 6. Whether on facts and in law, the CIT(A) has erred in deleting the addition of Rs. 4,65,90,175/- on account of denial of deduction u/s 8oIA(4) of the Act by ignoring the fact that one of the units had occupied more than 50% of total allocable area was clearly established by the AO in the assessment order at Page No. 14 and 16 of the order. 7. Whether on facts and in law, the CIT(A) has erred in deleting the addition of Rs. 4,65,90,175/- on account of denial of deduction u/s 8oIA(4) of the Act by ignoring the fact that the total allocable area in the case of the assessee wasi99635 square feet only and not 326537 square feet as claimed by the assessee as the assessee did not exclude the area pertaining to “common facilities” such as Air Conditioning, Approach Roads. Water supply, Sewerage, Telephone Network etc. which has been clearly mentioned in the Notification No. S.O. 461 dated 09.02.2007 and that the total area excluding the “common facilities” (as mentioned in the notification) should be considered for allocable area measurement and which in this case comes to 199635 square feet only. 8. Whether on the facts and law, the CIT (A) has erred in deleting the addition of Rs. 8,40,000/- and Rs. 2,98,076/- of deemed rent as per section 22 read with 23 of the Income Tax Act and 50% of depreciation respectively by ignoring the fact that the assessee had deliberately not furnished the desired information for obvious reasons. 34 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 9. Whether on facts and in law, the CIT (A) has erred in deleting the addition of Rs. 21,25,020/- on account of disallowance of expenditure u/s 14A r. w. Rule 8D of the Income Tax Rules, by merely relying on the judgments in the case of Hero Cycle Pvt. Ltd. Vs. CIT(C), Ludhiana and Abhishek Industries Ltd. Vs. CIT-1 by completely overlooking the amendment brought about in section 14A of the Act by introduction of sub- section (2) & (3) and Rule 8D w.e.f. A.Y. 2008-09 and the subsequent court decisions based on the amended law. 10. Whether on facts and in law, the CIT (A) has erred in deleting the addition of Rs. 21,25,020/- on account of disallowance of expenditure u/s 14A r. w. Rule 8D of the Income Tax Rules by ignoring the fact that assessee had failed to provide any evidence during assessment as well as appellate proceedings which could prove that interest free funds were utilized for investment resulting in tax free income to the assessee. 11. Whether on fact and in law, the CIT (A) has erred in deleting the addition of Rs. 3,07,850/- U/S 41(1) of the Income Tax Act by overlooking the fact that the assessee had failed during the course of assessment proceedings to submit any confirmation or any evidence from the creditor M/s Shingla Enterprises to justify the continuation of the outstanding balance for more than 3 years. 12. The appellant crave leave to add or amend the grounds of appeal before the appeal is heard or disposed off.” 56. Ground nos. 1 to 7 are against deletion of addition of Rs. 4,65,90,175/- made on account of denial of deduction u/s 80IA(4) of the Act. Identical issue has been dealt by us in Revenue’s appeal for A.Y. 2012-13 (ITA No. 644/Del/2018), wherein we have affirmed the finding of learned CIT(A), inter alia, observing as under: “14. There is no dispute that the provision of law speaks about unit but not the tenant. In our considered view, a single tenant can hire two distinct units from the same owner of the property. Only bar is that no single unit should 35 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 occupy more than 50% of allocable area. The AO has not brought any material rebutting the finding on fact arrived at by the learned CIT(A) that there were more than five units. In the absence of such material we do not see any infirmity into the order of learned CIT(A) Moreover, it is undisputed that the claim was allowed by the AO himself for A.Y. 2006-07 to 2009-10. The AO failed to point out any change into facts and circumstances. Hence, the grounds raised by the Revenue lack merit. Accordingly, ground nos. 1 & 2 are hereby dismissed.” 56.1 Facts for the year under consideration remaining the same as in A.Y. 2012- 13, we affirm the order of learned CIT(A), deleting the addition in question. Ground nos. 1 to 7 stand dismissed accordingly. 57. Ground no. 8 is against deletion of addition of Rs. 8,40,000/- and Rs. 2,98,076/- being deemed rent as per Section 22 read with section 23 of the Act and 50% depreciation respectively. 58. Learned CIT(DR) relied upon the order of AO and submitted that learned CIT(A) was not justified in deleting the addition. 59. On the other hand learned counsel for the assessee submitted that the learned CIT(A) in deleting the addition in question has relied on earlier orders in assessee’s own case for A.Y. 2012-13 & 2013-14. 60. We have heard rival submissions and perused the material available on record. The learned CIT(A) has deleted the addition in question by following the order in A.Y. 2012-13 and 2013-14. We find that in A.Y. 2012-13 and 2013-14, against the order of learned CIT(A) the Revenue came up in appeal before the 36 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 Tribunal in ITA No. 644/Del/2018 for A.Y. 2012-13; and ITA no. 1263/Del/2018 for A.Y. 2013-14, wherein we have affirmed the decision of learned CIT(A) on the issue in question. No change in facts for the assessment year in question have been pointed out by the learned CIT(DR). Therefore, taking consistent view of the matter and following our decision in ITA No. 644/Del/2018, we affirm the order of learned CIT(A) on the issue in question. Accordingly, ground no. 8 in Revenue’s appeal is hereby dismissed. 61. Ground nos. 9 & 10 are against deletion of addition of Rs. 21,25,020/- on account of disallowance of expenditure u/s 14A read with Rule 8D. Facts related to the grounds are that the AO noticed that the assessee had made investments in shares. The assessee also earned dividend of Rs. 3,36,274/- during the year which it claimed to be exempt. The AO, thereafter, proceeded to make disallowance by applying Rule 8D of the Income-tax Rules, 1962, hereinafter referred to as the “Rules”, amounting to Rs. 21,25,020/-. 61.1 On appeal, learned CIT(A) following the decision for A.Y. 2012-13 and 2013-13, in assessee’s own case, deleted the entire disallowance. Aggrieved, the Revenue is in appeal before this Tribunal. 62. Learned CIT(DR) relied on the order of AO. On the other hand learned counsel for the assessee supported the order of learned CIT(A). 37 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 63. We have heard rival submissions and perused the material available on record. We find that the learned CIT(A) deleted the impugned addition by following its order for A.Y. 2012-13 & 2013-14. The AO in the assessment order made disallowance by invoking the provisions of Section 14A read with Rule 8D(2) of the Income-tax Rules. There is no dispute with regard to the fact that during the year the assessee had earned dividend income of Rs. 3,36,274/-. The addition made by the Assessing Authority is of Rs. 21,25,020/- under clause (iii) of Rule 8D(2) of the Rules, but the exempt income during the year is stated to be Rs. 3,36,274/-. Therefore, in our considered view the AO should have restricted the addition to the extent of Rs. 3,36,274/-. We order accordingly. This ground of Revenue’s appeal is partly allowed. 64. Ground no. 11 is against deletion of addition of Rs. 3,07,850/- u/s 41(1) of the Act. 65. Facts related to this ground are that the AO noticed that creditor M/s Shingla Enterprises had outstanding sum of Rs. 3,07,850/-, which was outstanding for more than 3 years. According to AO the authorized representative of the assessee did not produce any confirmation from the party, therefore, he made addition on that account, treating same as cessation of liability. Aggrieved against it the assessee preferred appeal before learned CIT(A) who deleted the same by relying on the 38 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 various case laws as cited before the learned CIT(A). Aggrieved, against this the Revenue is in appeal before this Tribunal. 66. Learned CIT(DR) relied on the order of the AO. 67. On the other hand learned counsel for the assessee relied on the order of learned CIT(A). 68. We have heard rival submissions and perused the material available on record. We find that in appeal before the learned CIT(A) the assessee had relied on the decision of the Hon’ble Delhi High Court as well as the decision of Hon’ble Jurisdictional High Court of Punjab & Haryana in the case of CIT Vs. GP International Ltd. (2010) 325 ITR 25 (P&H). The learned CIT(A) deleted the addition in question, inter alia, by observing as under: “A perusal of the facts of the case reveal that the AO has added the said amount as it has been an outstanding balance for more than three years. If the appellant does not treat the liability to have ceased to exist or opt to write off the same, just because it has remained outstanding for three years cannot make it a ground for addition u/s 41(1) of the I.T. Act. The judgments cited by the appellant and squarely applicable to the assessee’s case. Hence, I delete the said additions.” 68.1 The learned CIT(DR) could not bring to our notice any flaw or infirmity in the order of the learned CIT(A) so as to take a different view in the matter. The learned CIT(A), in arriving at its conclusion, has relied on the decision of Hon’ble 39 ITA Nos. 5818/Del/2017 & ITA 644, 1263, 2082 & 2083/Del/2018 Jurisdictional High Court. Accordingly, we affirm the order of learned CIT(A) on the issue in question. Ground no. 11 in Revenue’s appeal stands dismissed. 69. Ground no. 12 is general in nature and requires no separate adjudication. 70. In the result, Revenue’s appeal being ITA No. 2083/Del/2018 is partly allowed. 71. In the net result, Assessee’s appeal in ITA no. 5878/Del/2017 is dismissed. Revenue’s appeal in ITA nos. 2082/Del/2018 stands dismissed. Revenue’s appeals in ITA no. 644/Del/2018, ITA No. 1263/Del/2018 and ITA no. 2083/Del/2018 are partly allowed. Order pronounced in open court on 27 th September, 2023. Sd/- Sd/- (PRADIP KUMAR KEDIA) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER *MP* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI