The Jt.CIT.(OSD), Circle-4, Ahmedabad V. Gujarat State Financial Services Ltd., Ahmedabad

ITA 1288/AHD/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6057 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 29-05-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 02-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P L KUREEL
• Keywords: Depreciation; Opportunity of being heard; Earning of tax free income; Proportionate interest; Bad and doubtful debts
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (BEFORE SHRI D.K. TYAGI, J.M. & SHRI ANIL CHATURVE DI, A.M.) I.T. A. NOS. 1169 & 1288/AHD/2011 (ASSESSMENT Y EAR: 2007-08) GUJARAT STATE FINANCIAL SERVICES LTD. WING B 3 RD FLOOR, KHANIJ BHAVAN, 132 FT RING GOAD, NEAR UNIVERSITY GROUND, VASTRAPUR, AHMEDABAD V/S THE DCIT, CIRCLE-4, AHMEDABAD (APPELLANT) (RESPONDENT) THE DCIT, CIRCLE-4, AHMEDABAD V/S GUJARAT STATE FINANCIAL SERVICES LTD. WING B 3 RD FLOOR, KHANIJ BHAVAN, 132 FT RING GOAD, NEAR UNIVERSITY GROUND, VASTRAPUR, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAACG 5581 B APPELLANT BY : SHRI SANJAY R. SHAH RESPONDENT BY : SHRI P.L. KUREEL, SR. D.R. ( )/ ORDER DATE OF HEARING : 30.05.201 4 DATE OF PRONOUNCEMENT : 27-06-2014 ITA NOS. 116 9 & 1288/AHD/2011 . A.Y. 2007- 08 2 PER SHRI ANIL CHATURVEDI,A.M. 1. THESE 2 APPEALS, ONE FILED BY THE REVENUE AND THE O THER FILED BY THE ASSESSEE, ARE AGAINST THE ORDER OF CIT(A)-VIII, AHM EDABAD DATED 17.01.2011 FOR A.Y. 2007-08. 2. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE B USINESS OF FUND MANAGEMENT AND TREASURY FINANCE BUSINESS FOR GOVERN MENT OF GUJARAT ENTERPRISES. ASSESSEE ELECTRONICALLY FILED ITS RET URN OF INCOME FOR A.Y. 07-08 ON 29.10.2007 DECLARING TOTAL INCOME OF RS. 1 4,80,08,673/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE A SSESSMENT WAS FRAMED U/S. 143(3) VIDE ORDER DATED 24.12.2009 AND THE TOT AL INCOME WAS ASSESSED AT RS. 21,40,25,520/-. AGGRIEVED BY THE O RDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 17.01.2011 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED B Y THE ORDER OF CIT(A), REVENUE AND ASSESSEE BOTH ARE NOW IN APPEAL BEFORE US. 4. THE CONCISE GROUNDS OF APPEAL FILED BY THE ASSESSEE READS AS UNDER:- 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN UPHOLDI NG DISALLOWANCE OF RS. 6,13,27,758/- COMPRISING OF PROPORTIONATE INTEREST OF RS. 5,68,55 ,819/- AND PROPORTIONATE ADMINISTRATIVE EXPENSES OF RS. 44,71,939/- U/S. 14A OF THE ACT BY APPLYING RULE 8D OF THE INCOME TAX RULES 1962. 1.1 THE LD. CIT(A) ERRED IN APPLYING SECTION 14A TO THE APPELLANTS CASE EVEN THOUGH THE INVESTMENTS IN TAX FREE SECURITIES WERE LESS THAN APPELLANTS O WN FUNDS AND NO EXPENSES WERE INCURRED TO EARN EXEMPT INCOME. 1.2 THE LD CIT(A) ERRED IN APPLYING RULE 8D FOR A.Y. 07 -08 FOR WORKSING OUT ABOVE DISALLOWANCE WHICH IS AGAINST THE RATIO OF THE HONBLE HIGH COUR T DECISION IN THE CASE OF GODREJ AND BOYCE MANUFACTURING COMPANY LTD. 328 ITR 81. 2.0 THE LD. CIT(A) ERRED IN UPHOLDING THAT APPELLA NT WAS NOT ENTITLED TO DEPRECIATION @ 30% ON THE VEHICLES GIVEN ON LEASE BY THE APPELLANT. 2.1 THE LD. CIT(A) FAILED TO APPRECIATE THAT APPEL LANT WAS GRANTED DEPRECIATION @ 30% IN THE EARLIER YEARS AN IN THE CURRENT YEAR IT WAS CLAIMING DEPREC IATION @ 30% ON THE W.D.V . BROUGHT FORWARD FROM THE EARLIER ASSESSMENT YEARS. ITA NOS. 116 9 & 1288/AHD/2011 . A.Y. 2007- 08 3 5. ON THE OTHER HAND THE GROUNDS RAISED BY THE REVENUE READS AS UNDER:- 1. THE ID. CIT(A) VIII, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.9,00,350/- BEING BAD DEBTS RECOVERED DURING THE CURRENT YEAR, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON R ECORD BY THE ASSESSING OFFICER. 2. THE ID. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE DISALLOWANCE OF RS. 25,73,785/- BEING REVERSAL OF PROVISION FOR DIMINUTION IN VALUE OF IN VESTMENTS, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIALS BROUGHT ON RECO RD BY THE ASSESSING OFFICER. 3. THE ID. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE DISALLOWANCE OF RS. 21,15,299/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DEPRECIATION ON LEASED ASSETS, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL S BROUGHT ON RECORD BY THE ASSESSING OFFICER. WE FIRST TAKE UP ASSESSEES APPEAL IN ITA NO. 1169/ AHD/2011 6. GROUND NO. 1 AND ITS SUB GROUNDS ARE IN RELATION TO DISALLOWANCE OF EXPENSES UNDER SECTION 14A OF THE ACT. 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE HAD EARNED TOTAL EXEMPT INCOME OF RS. 8,36,85,739/- . THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY NO DISALLOWANCE UNDER SE CTION 14A OF THE ACT BE MADE TO WHICH ASSESSEE INTERALIA SUBMITTED THAT IT HAD NOT INCURRED ANY EXPENSE IN CONNECTION WITH THE EARNING OF INCOM E WHICH WAS EXEMPT FOR TAX. IT WAS ALSO SUBMITTED THAT THE INVESTMENT S WERE MADE OUT OF OWN FUNDS AND NOT BORROWED FUNDS. THE SUBMISSION OF TH E ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE A.O . A.O WAS OF THE VIEW T HAT IT CANNOT BE ACCEPTED THAT NO AMOUNT OF ADMINISTRATIVE AND MANAG ERIAL MACHINERY HAS BEEN DEVOTED TO HANDLE TAX FREE INVESTMENT WHEN THE NATURE OF BUSINESS ITSELF WAS OF INVESTMENT AND MOST OF THE INVESTMENT S WERE MADE IN TAX FREE INSTRUMENTS. ACCORDING TO A.O THERE ARE SOME H ANDLING AND PROCESSING CHARGES FOR MANAGEMENT OF INVESTMENT POR TFOLIO. HE ALSO NOTED THAT ASSESSEE HAD NOT PRODUCED DAY TO DAY MOV EMENT OF FUND AND THEREFORE NOT ESTABLISHED THAT ONLY TAX FREE FUNDS HAVE BEEN UTILIZED FOR ITA NOS. 116 9 & 1288/AHD/2011 . A.Y. 2007- 08 4 MAKING INVESTMENTS. HE THEREFORE PROCEEDED TO DISAL LOW THE EXPENSES UNDER SECTION 14A AS PER THE METHODLOGY PRESCRIBED UNDER RULE 8D OF THE INCOME TAX RULES AND ACCORDINGLY WORKED OUT THE DIS ALLOWANCE AT RS. 6,13,27,758/-. AGGRIEVED BY THE ORDER OF A.O, ASSE SSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) CONFIRMED THE ACTION O F A.O BY HOLDING AS UNDER:- 8.2 I HAVE CONSIDERED THE FACTS AND SUBMISSIONS OF THE ID. AR CAREFULLY. IT IS OBSERVED THAT THE A.O. HAS COMPUTED THE DISALLOWANCE U/S 14A IN ACCORDANCE WITH RULE 8D. THE APPELLANT HAS INVESTED HUGE AMOUNT IN TAX FREE INVESTMENTS FROM WHICH THE APPEL LANT IS DERIVING TAX FREE INCOME IN THE FORM OF DIVIDEND AND INCOME WHICH IS EXEMPT U/S U/S 10(15)( IV)/10(23G). THE IDENTICAL ISSUE HAS ALREADY BEEN DECIDED BY MY LD. PREDECESSOR IN A.Y. 2006-07 VIDE APPEAL NO. CIT(A)-VIII/AC-4/224/08-09 DATED 29.9.2009. THE FINDINGS OF MY PREDECESSOR ARE AS UN DER. I HAVE CONSIDERED THE FACTS AND SUBMISSIONS OF THE ID. AR CAREFULLY. THERE IS NO DISPUTE ABOUT THE FAC T THAT THE APPELLANT WAS IN RECEIPT OF EXEMPTED INCOM E TO THE TUNE OF RS.86402982/-FOR WHICH IT HAS NOT MADE ANY DISALLOWANCE IN TERMS OF THE PROVISIONS OF SEC. 14A OF THE ACT. THEREFORE, IN THE GIVEN CIRCUMSTANCES THE DISALLOWANCE IS CALLED FOR OF THE EXPENSES WHICH ARE ATTRIBUTABLE TO EARNING OF SUCH EXEMPT INCOME. THE DISALLOWANCE UNDER THE PROVISION S OF SEC. 14A IS REQUIRED TO BE WORKED OUT AS PER THE GUIDELINES LAID DOWN UNDER RULE 8D OF THE IT RU LES 1962. THE HON'BLE ITAT, SPECIAL BENCH,' MUMBAI IN THE CASE OF ITO V/S DAGA CAPITAL MANAGEME NT (PVT.) LTD. HAS LAID DOWN THAT PROVISIONS OF RULE 8D INSERTED IN THE IT RULE, 1962 ARE CLARIFICA TORY AS THE PROVISIONS OF SEC. 14A OF THE. THE RELEVANT EXTRACTS OF THE DECISION OF HON'BLE ITAT A RE AS UNDER: 'S. 14A HAS BEEN INSERTED TO CLARIFY THE INTENTION OF THE LEGISLATURE, AS IT ALWAYS WAS THAT NO DEDUCT ION IS ALLOWABLE, AGAINST THE INCOME FROM TAXABLE BUSIN ESS, IN RESPECT OF ANY EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME -CONTRARY VIEW EXPRESSED BY COURTS, IS THEREFORE, NO MORE RELEVANT AND BINDI NG- SEC. 14A APPLIES TO ALL HEADS OF INCOME AND AIMS AT DISALLOWING EXPENDITURE INCURRED IN RELATIO N TO INCOME NOT FORMING PART OF TOTAL INCOME EVEN THOUGH SUCH EXPENDITURE MAY BE ALLOWABLE UNDER ANY OTHER PROVISION, E.G., S. 36(1)(III) SEC. 14A BEING A SPECIAL PROVISION SHALL PREVAIL OVER GENERAL PROV ISIONS -PURPOSE OF SUB-SS: (2) AND (3) OF S. 14A IS TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN REL ATION TO EXEMPT INCOME AND NO SUBSTANTIVE LIABILITY IS IMPOSED BY 'THESE SUB-SECTIONS RULE 8D INSERTED IN THE IT RULES, 1962, PRESCRIBES THE METHOD BY WHICH AO HAS TO DETERMINE THE DISALLOWANCE IN TERMS OF SUB-SS. (2) AND (3)- SUB-S. (1) OF S. 14A ITSEL F BEING CLARIFICATORY AND RETROSPECTIVE, SUB-SS. (2) AND (3) PROVIDING FOR MECHANISM TO GIVE EFFECT TO S UB- S. (1) CANNOT BE CONSTRUED AS PROSPECTIVE. THE RELA TION HAS TO BE SEEN BETWEEN THE EXEMPT INCOME AND THE EXPENDITURE INCURRED IN RELATION TO IT AND NOT VICE VERSA-WHAT IS RELEVANT IS TO WORK OUT THE EXPENDITURE IN RELATION TO THE EXEMPT INCOME AND 'N OT TO EXAMINE WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE HAS RESULTED INTO EXEMPT INCOME OR TAX ABLE INCOME-EXPRESSION 'IN RELATION TO IN SUB-S(1) OF S. 14A HAS BEEN EXPLAINED-IN SUB-SO (2) ITSELF A S THE AMOUNT DETERMINED BY AO IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED. THE METHOD HAS BE EN, PRESCRIBED IN R. 8D TO MEAN BOTH DIRECT AND INDIRECT EXPENSES THERE IS NOT EVEN AN IOTA OF DO UBT THAT THE INTENTION BEHIND USING THE EXPRESSION 'IN RELATION TO' IN S. 14A IS TO ENCOMPASS NOT ONLY THE DIRECT BUT ALSO THE INDIRECT EXPENDITURE WHICH HAS ANY RELATION TO THE EXEMPT INCOME - INTEREST ON CAP ITAL BORROWED FOR INVESTMENT IN SHARES HAS DOMINANT AND IMMEDIATE CONNECTION WITH DIVIDEND INCOME-EVEN THOUGH THE SHARES MAY BE HELD AS STOCK-IN-TRADE, DIVIDEND AS ALSO PROFITS IF ANY ON SALE OF SHARES A RE THE 'DIRECT RESULT OF SUCH INVESTMENT-SAME IS THEREFORE, DISALLOWABLE AS PER PROVISIONS OF S. 14A . IN ORDER TO ESCAPE THE APPLICABILITY OF S, 14A, O NUS IS ON THE ASSESSEE TO PROVE THAT EXPENDITURE WAS IN CURRED FOR EARNING TAXABLE INCOME. HOWEVER, IN VIEW OF R. 8D , THE QUESTION OF ONUS AND APPORTIONM ENT OF EXPENDITURE FOR PURPOSES OF DISALLOWANCE UNDER S. 14A HAVE BECOME ACADEMIC. SEC. 14A DOES NO T MAKE ANY DISTINCTION BETWEEN INCIDENTAL AND MAIN INCOME AND IS ATTRACTED EVEN WHERE INCOME NOT FORMING PART OF TOTAL INCOME, LIKE DIVIDEND INCOME IN RESPECT OF SHARES HELD AS STOCK-IN-TRADE, IS INCIDENTAL TO THE MAIN INCOME OF PROFITS FROM ITA NOS. 116 9 & 1288/AHD/2011 . A.Y. 2007- 08 5 TRADING IN SHARES. PROVISIONS OFS. 14A ARE APPLICAB LE WITH RESPECT OF THE DIVIDEND INCOME EARNED BY TH E ASSESSEE ENGAGED IN THE 'BUSINESS OF DEALING IN SHA RES AND SECURITIES, ON THE SHARES HELD AS STOCK-IN- TRADE WHEN EARNING OF SUCH DIVIDEND INCOME IS INCID ENTAL TO THE TRADING IN SHARES '. 9.5 THEREFORE, IT WOULD BE MORE APPROPRIATE IF THE DISALLOWANCE U/S 14A IS WORKED OUT BY FOLLOWING THE PROCEDURE LAID DOWN IN RULE 8D OF IT RULES, 1962. I N VIEW OF THIS THE AO IS DIRECTED TO WORK OUT THE DISALLOWANCE AS PER THE RULE 8D OF IT RULES ACCORDI NGLY WHILE GIVING EFFECT TO THIS ORDER. FOLLOWING THE FINDINGS OF MY LD. PREDECESSOR, IT IS OBSERVE THAT THE A.O HAS DISALLOWED THE EXPENDITUR E U/S 14A AS LAID DOWN IN RULE 8D OF I.T RULES 1962. IN VIEW OF THESE FACTS, THE DISALLOWANCE MADE BY A. O U/S 14A IS CONFIRMED. THIS, GROUND OF APPEAL IS REJ ECTED. 8. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSES IS N OW IN APPEAL BEFORE US. 9. BEFORE US, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND CIT(A). HE FURTHER SUBMITTED THAT THE ASSESSEE HAS OWN FUNDS WHICH ARE FAR IN EXCESS OF THE INVESTMENTS THAT YIELD TAX FRE E INCOME AND ACCORDINGLY THE PRESUMPTION IS THAT THE ENTIRE INVE STMENTS HAVE BEEN MADE FROM OWN FUNDS AND NOT BORROWED FUNDS AND THER EFORE NO DISALLOWANCE OF ON ACCOUNT OF INTEREST IS JUSTIFIED IN THE PRESENT CASE. HE FURTHER SUBMITTED THAT THE PROVISIONS OF RULE 8D CA ME INTO FORCE ON 24.03.2008 AND ARE APPLICABLE FROM A.Y. 08-09 AND T HEREFORE ALSO THE PROVISIONS OF RULE 8D ARE NOT APPLICABLE FOR THE YE AR UNDER CONSIDERATION. HE PLACED RELIANCE ON THE DECISION OF HONBLE BOMBA Y HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD., RELIANCE UTILITIES AND POWER LTD. 313 ITR 340 BOMBAY, CIT VS. UTI BANK LIMITED 32 TAXMAN. COM (GUJ.) AND CIT VS. GUJARAT INDUSTRIAL I NVESTMENT CORPORATION LTD IN TAX APPEAL NO. 492/AHD/2012 (GUJ ARAT). HE FURTHER SUBMITTED THAT ON SIMILAR FACTS AND CIRCUMSTANCES F OR A.Y. 05-06 & 06-07 IN ASSESSEES OWN CASE THE HONBLE ITAT HAD SET ASI DE THE MATTER TO THE FILE OF A.O. WITH RESPECT TO DISALLOWANCE OF ADMIN ISTRATIVE EXPENSE HE PLACED RELIANCE ON THE DECISION OF HONBLE KERALA H IGH COURT IN THE CASE ITA NOS. 116 9 & 1288/AHD/2011 . A.Y. 2007- 08 6 OF CATHOLIC SYRIAN BANK LTD. 9 TAXMAN. COM. 148 WHE REIN IT HAS BEEN HELD THAT NO DISALLOWANCE ON ADMINISTRATIVE EXPENSE S SHOULD BE MADE IN THE ASSESSMENT YEAR PRIOR TO 08-09. HE ALSO SUBMIT TED THAT IN ASSESSEES OWN CASE FOR A.Y. 05-06 & 06-07, THE HONBLE ITAT C ONFIRMED DISALLOWANCE TO THE EXTENT OF 10% OF THE TOTAL ADMI NISTRATIVE EXPENSES. HE THEREFORE SUBMITTED THAT IN VIEW OF THE SUBMISSI ONS THE MATTER MAY BE RESTORED TO THE FILE OF A.O. THE LD. D.R. ON THE OT HER HAND RELIED ON THE ORDER OF A.O AND CIT(A). 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS UNDISPUTED FACT THAT ASSESSEE HAS EARNED TAX FREE INCOME OF RS 8.36 CRORES DURING THE YEAR AND THE A.O HAS WORKED OUT D ISALLOWANCE UNDER SECTION 14A FOLLOWING THE METHOD PRESCRIBED UNDER R ULE 8D OF THE RULES. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE LTD. (SUPRA) HAD HELD THAT RULE 8D IS APPLICABLE FROM A. Y. 08-09. IT HAS FURTHER STATED THAT PRIOR TO ASSESSMENT 08-09, THE A.O HAS TO WORK OUT THE DISALLOWANCE ON A REASONABLE BASIS. BEFORE US, LD. A.R. HAS SUBMITTED THAT THE OWN FUNDS OF ASSESSEE ARE FAR IN EXCESS OF THE INVESTMENT AND THEREFORE PRESUMPTION IS TO BE MADE THAT THE INVEST MENTS ARE OUT OF OWN FUNDS AND NOT BORROWED FUNDS. FROM THE COPY OF INVE STMENT SCHEDULE PLACED ON RECORD, IT IS SEEN THAT SOME OF THE INVES TMENTS HAVE BEEN ACQUIRED IN EARLIER YEARS. THE SUBMISSION OF THE AS SESSEE THAT IT WAS HAVING SUFFICIENT INTEREST FREE FUNDS IN THE YEAR O F INVESTMENTS NEEDS TO BE EXAMINED BECAUSE THERE IS NO FINDING EITHER OF THE A.O. OR CIT(A) ON THIS ISSUE. WE FURTHER FIND THAT IN ASSESSEES OWN CASE IN ITA NO. 1129/AHD/09 & 1157/AHD/10 (ORDER DATED 28.12.2012) THE ISSUE OF DISALLOWANCE U/S. 14A WAS BEFORE THE CO-ORDINATE BE NCH OF TRIBUNAL. ITA NOS. 116 9 & 1288/AHD/2011 . A.Y. 2007- 08 7 THE CO-ORDINATE BENCH OF TRIBUNAL DECIDED THE ISSUE BY HOLDING AS UNDER:- 5. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AP PELLANT CARRIED THE MATTER BEFORE CIT(A), WHO HAD PARTLY CONFIRMED THE ADDITION IN A.Y. 05-06, WHICH IS OBSERVED AS UNDER: '7.4 I HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSIONS OF THE LD. A.R. CAREFULLY. IT IS SEEN THA T THE A.O. HAS MADE THE PROPORTIONATE DISALLOWANCE OF INT EREST AMOUNTING TO RS.4,92,43,330/- BY CONSIDERING THE ENTIRE TAX FREE INVESTMENTS AMOUNTI NG TO RS.91.45 CRORES ON THE PRESUMPTION THAT SAME WERE MADE OUT OF INTEREST BEARING FUNDS. THE APPELL ANT DURING THE RELEVANT PERIOD WAS HAVING OWN FUNDS CONSISTING OF SHARE CAPITAL AND FREE RESERVES AMOUNTING TO RS.86.07 CRORES, DEPRECIATION FUND AT RS.66.77 LAKHS AND PROVISION FOR DIMINUTION AT 10.7 7 LAKHS. THEREFORE TREATING THE ENTIRE INVESTMENT A S OUT OF BORROWED FUNDS IGNORING THE AVAILABILITY OF OWN FUND IS NOT SUPPORTED BY FACTUAL LINKS. THEREFORE, IN THE GIVEN CIRCUMSTANCES WITHOUT ANY S UPPORTING MATERIAL IT CAN NOT BE HELD THAT THE ENTI RE INTEREST COST WORKED OUT BY THE A.O. IS ATTRIBUTABL E TO THE INTEREST FREE INCOME. IT WOULD BE LOGICAL TO ALLOW CREDIT OF THE FUNDS AVAILABLE TO THE APPELLAN T DURING RELEVANT PERIOD FOR WORKING OUT THE INTERE ST COST ON THE INVESTMENT IN TAX FREE SECURITIES. SINC E, THE INVESTMENT IN TAX FREE SECURITIES HAS BEEN S HOWN AT RS.91.45 CRORES AS AGAINST OWN FUNDS TO THE TUNE OF RS.86.98 CRORE, THE INTEREST ON EXCESS INVESTME NT IS REQUIRED TO BE DISALLOWED U/S. 14A OF THE ACT AC CORDINGLY. THE A.O. IS DIRECTED TO WORK OUT SUCH INTEREST ON RS.91.45 CRORE - RS.86.98 CRORE (AFTER TAKING INTO ACCOUNT INVESTMENT IN GROSS BLOCK) ACCORDINGLY. THE DISALLOWANCE TO THAT EXTENT IS, TH EREFORE CONFIRMED.' FOR A.Y. 06-07, HE RELIED UPON THE ORDER OF SPECIAL BENCH ITO VS. DAGA CAPITAL MANAGEMENT PVT. LTD. 312 ITR (AT) 01 AND A.O. WAS DIRECTED TO APPLY RULE 8D FOR DISALLOWANCE U/S.14A. 6. NOW THE ASSESSEE IS BEFORE US. LD. COUNSEL FOR T HE APPELLANT CONTENDED THAT THERE WAS NO DIRECT NEXUS BETWEEN BORROWINGS AND INVESTMENTS IN TAX FRE E SECURITIES. AS PER ASSESSEE, THE SECTION 14A IS NOT APPLICABLE. HE ALSO PLACED RELIANCE ON FOLLOWIN G DECISIONS: (I) GUJARAT INDUSTRIAL INVESTMENT CORPOR ATION LIMITED IN ITA NO. 4378/AHD/2007 (IT AT AHMADABAD) (II) CIT V. HERO CYCLES LTD. (2010) 323 ITR 51 8 (P & H) (III) METALMAN AUTO (P.) LTD. (2011) 11 TAXMANN.COM 51 (P & H) (IV) GUJARAT POWER CORPORATION LIMITED IN TAX APPEAL NO. 1587 OF 2009. HE FURTHER ARGUED THAT OWN FUNDS SHOULD HAVE BEEN C OMPARED DIRECTLY WITH THE INVESTMENTS WITHOUT REDUCING THE VALUE OF GROSS BLOCK OF FIXED ASSETS F ROM THE SAME. IF THERE ARE SUFFICIENT OWN FUNDS THE N NO DISALLOWANCE U/S. 14A IS CALLED FOR. HE ALSO P LACED RELIANCE ON BOMBAY HIGH COURT DECISION, IN CASE OF RELIANCE UTILITIES & POWER LTD. 313 ITR 034 0 (BOM). THE ID. COUNSEL ARGUED THAT DISALLOWANCE MADE BY THE A.O. OUT OF ADMINISTRATIVE EXPENSES WERE NOT CALLED FOR AS THERE WAS NO NEXUS, HAD BEEN ESTABLISHED BY THE A.O. BETWEEN THE M. FROM THE SIDE OF THE REVENUE, ID. CIT DR VEHEMENTLY RELIED UPON THE ORDERS OF LOWER AUTHORIT IES AND REQUESTED TO CONFIRM THE ADDITION MADE BY A.O, AT THE OUTSET, ID. COUNSEL FOR THE ASSESSEE AS WELL AS ID. CIT DR FAIRLY AGREED THAT THE ISSUE IS SQUARELY COVERED BY THE ASSESSEE'S OWN CASE IN ITA NO. 403/AHD/2005 FOR A.Y. 01-02, ITA NO. 865/AHD/ 2006 FOR A.Y. 02-03, ITA NO. 2158/AHD/2006 FOR A.Y. 2003-04 & 2176/AHD/2007 FOR A.Y. 04- 05, WHEREIN THE TRIBUNAL HAS SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER BY OBSERVING AS UNDER; 7. ASSESSEE'S GROUND NO. 3.2 FOR A.Y. 05-06 & GROUN D NO. 3.1 & 3.3 FOR A.Y. 06-07 WERE AGAINST CONFIRMING THE ADDITION U/S. 14A ON ACCOUNT OF ADMI NISTRATIVE EXPENSES AND APPLICABILITY OF RULE 8D. AT THE OUTSET, ID. COUNSEL FOR THE ASSESSEE AS WELL AS ID. CIT DR ARE AGREED WITH IN VIEW OF THE DECIS ION BY THIS TRIBUNAL IN ASSESSEE'S OWN CASE (SUPRA). TH E ISSUE IS SQUARELY COVERED IN ITA NO. 403/AHD/2005 FOR A.Y. 2001-02, WHEREIN THE TRIBUNAL HAS DISALLOWED THE PROPORTIONATE ADMINISTRATIVE EXPENSE AT 1% BY GIVING FOLLOWING FINDING IN PARA 1 0 AS UNDER: '10. WE HAVE HEARD LEARNED DR AND LEARNED AR. THIS IS UNDISPUTED FACT THAT THE ADMINISTRATIVE EXPENSES HAVE BEEN INCURRED ON TAX FREE SECURITIES. THE AO DISALLOWED PRO RATA EXPENSES AT RS.92,97 LAKHS AS PER THE WORKING GIVEN BY HIM AND REFERRED ABOVE. THE CLAIM OF ADMINISTRATIVE EXPENSES AND OTHER EXPENSES AMOUNTED TO RS.9,91,10,622/- AND NOT RS. 92,97,2507-. IF IT IS CONSIDERED THAT 10% DISALLOWANCE IS TO BE MADE OUT OF ADMINISTRATIVE AN D OTHER EXPENSES, THEN TOTAL DISALLOWANCE WOULD AMOUNT TO RS.99,11,062/-. SINCE LEARNED CIT(A) HAS RESTRICTED THE DISALLOWANCE TO RS.9.91 LAKHS, WHICH IS ONLY ABOUT 1% OF THE TOTAL CLAIM AND NOT 1 0% AND REVENUE HAS NOT FILED ANY APPEAL AGAINST ITA NOS. 116 9 & 1288/AHD/2011 . A.Y. 2007- 08 8 THIS WORKING, THE DISALLOWANCE IS TO BE TREATED AS MOST REASONABLE, AND NO INTERFERENCE IS CALLED FOR IN THE IMPUGNED ORDER ON THIS ISSUE. THIS GROUND OF TH E ASSESSEE IS REJECTED.' RULE 8D IS APPLICABLE FROM THE A.Y. 08-09 AS HELD B Y HON'BLE BOMBAY HIGH COURT IN CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. V. CIT (2010) 234 CTR0 01. 8. WE FIND THAT IN THE PRESENT YEAR, THE FACTS ARE NOT AVAILABLE, ACCORDINGLY, THIS ISSUE IS BEING SET ASIDE TO THE FILE OF THE ASSESSING OFFICER TO FOLLOW THE DECISION TAKEN IN ASSESSEE'S OWN CASE IN ITAT NO. 403/AHD/2Q05 FOR ASSESSMENT YEAR 2001-02 DATED 10.0 7.2009 AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS ISSUE OF THE A SSESSEE'S, APPEAL IN BOTH ASSESSMENT YEARS, IS ALLO WED FOR STATISTICAL PURPOSES. 11. IN VIEW OF THE AFORESAID FACTS AND SINCE THE FACTS OF THE CASE ARE IDENTICAL TO THAT OF EARLIER YEAR, FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF TRIBUNAL CITED HEREINABOVE, WE REMIT THE ISSUE TO T HE FILE OF A.O TO VERIFY THE SUBMISSIONS OF THE ASSESSEE MORE SO ABOUT THE A VAILABILITY OF THE TAX FREE FUNDS IN THE YEAR OF INVESTMENTS AND IN THE LI GHT OF THE DECISIONS CITED BEFORE US AND THEREAFTER DECIDE THE ISSUE AS PER LAW. IN THE RESULT, THIS GROUND OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . GROUND NO. 2 IS WITH RESPECT TO DEPRECIATION ON VEH ICLES GIVEN ON LEASE. 12. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE HAD CLAIMED DEPRECIATION AT HIGHER RATE ON LEASE AS SETS (MOTOR BUSES) A.O NOTED THAT IDENTICAL ISSUE WAS BEFORE HIS PREDE CESSOR IN EARLIER YEAR. HE THEREFORE FOLLOWING THE ORDER OF HIS PREDECESSOR , DENIED THE CLAIM OF DEPRECIATION. AGGRIEVED BY THE ORDER OF A.O, ASSESS EE CARRIED THE MATTER BEFORE CIT(A). CIT(A) DECIDED THE ISSUE AGAINST THE ASSESSEE BY HOLDING AS UNDER:- 9.2 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE LD. AR CAREFULLY. THERE IS NO DISPUTE ABOUT THE FACT THAT VEHICLES ON WHICH HIGHE R RATE OF DEPRECIATION HAS BEEN CLAIMED WERE LEASED OUT BY THE APPELLANT. THERE IS NOTHING ON RECORD TO ESTABLISH THAT THE APPELLANT WAS RUNNING THEM ON HIRE. AS PER ENTRY-III(3)(II) OF APPENDIX-I TO THE INCOME TAX RULES AS APPLICABLE TO A.Y. 2005-06, DEPRECIATION @ 40 % IS ALLOWABLE ON THE VEHICLES WH ICH HAVE BEEN USED IN A BUSINESS BY AN ASSESSEE ON RUNNING THEM ON HIRE. SINCE THE APPELLANT IS NOT RUNNING ITS VEHICLES ON HIRE DURING THE RELEVANT PERIOD IT CANNOT BE ALLOWED HIGHER ON RECORD TO EST ABLISH THAT THE APPELLANT WAS RUNNING THEM ON HIRE. AS PER ENTRY-III(3)(II) OF APPENDIX-I TO THE INCOME TAX RULES AS APPLICABLE TO A.Y. 2005-06, DEPRECIATION @ 40 % IS ALLOWABLE ON THE VEHICLES WH ICH HAVE BEEN USED IN A BUSINESS BY AN ASSESSEE ITA NOS. 116 9 & 1288/AHD/2011 . A.Y. 2007- 08 9 ON RUNNING THEM ON HIRE. SINCE THE APPELLANT IS NOT RUNNING ITS VEHICLES ON HIRE DURING THE RELEVANT PERIOD IT CANNOT BE ALLOWED HIGHER RATE OF DEPRECIA TION. IN THIS REGARD RELIANCE IS PLACED ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE O F KOTAK MAHINDRA FINANCE LTD. V/S DCIT 265 ITR 114 WHEREIN THE HON'BLE COURT HELD THAT 'WE DO NOT FIND ANY MERIT IN THIS APPEAL. THERE IS A BASIC DIFFERENCE BETWEEN 'LEASE' AND 'HIRE'. THIS DIFFERE NCE IS BORNE OUT BY THE BASIC DIFFERENCE IN THE MEANING OF THE EXPRESSION 'PROPERTY' AND THE EXPRES SION 'POSSESSION'. A TRANSACTION OF HIRE IS ESSENTIALLY A CONTRACT OF BAILMENT OF A VEHICLE. IN THE CASE OF A HIRE, ONLY A LICENCE IS GIVEN TO THE HIRE TO USE THE VEHICLE FOR A TEMPORARY PERIOD THE VEHIC LE SO HIRED (SEE MELLUISH (INSPECTOR TAXES) V. B.M. I. (NO.9) LTD. (1996) 218 ITR 547 (HL). IN THE CASE OF HIRE, THE HIRER HAS AN OPTION TO BUY THE EQUIPMENT WHICH IS ONE OF THE MAIN DISTINGUISHING FEATURES BE TWEEN THE WORDS 'HIRE' AND 'LEASE'. HOWEVER, IT IS ARGUED ON BEHALF OF THE ASSESSEE THAT FOR THE PURPO SES OF THE ABOVE ENTRY, THE WORD 'HIRE' AND THE WOR D 'LEASE' SHOULD BE READ AS EQUIVALENT. WE DO NOT FIN D ANY MERIT IN THIS ARGUMENT. THE ENTRY, READ AS A WHOLE, STATES THAT THE ASSESSEE MUST RUN THE VEHICL E ON HIRE OR THAT THE ASSESSEE MUST CARRY ON THE BUSINESS OF RUNNING THE VEHICLES ON HIRE. IN THIS C ASE, THE ASSESSEE IS A LEASING AND FINANCING COMPAN Y. ITS INCOME IS FROM LEASE RENT, BILL DISCOUNTING AND SERVICE CHARGES. THEREFORE, MERELY BECAUSE THE ASSESSEE LETS OUT MOTOR BUSES, MOTOR TRUCKS AND MOT OR CANS TO ITS CUSTOMERS, IT CANNOT BE STATED THAT THE ASSESSEE IS USING THE SAID VEHICLES IN THE BUSINESS OF RUNNING THEM ON HIRE. IN THE CIRCUMSTANCES, WE SEE NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE TRIBUNAL. BEFORE CONCLUDING, WE MAY CLARIFY THAT IN THIS CASE , THE ASSESSEE IS GIVEN THE BENEFIT OF NORMAL DEPRECIATION. THAT, IN THIS CASE NORMAL DEPRECIATIO N HAS NOT BEEN DENIED BY THE DEPARTMENT. THAT, THE DEPARTMENT HAS NOT IMPUGNED THE GENUINENESS OF THE LEASE. THAT, THE ONLY ARGUMENT ADVANCED BEFORE THE DEPARTMENT WAS THAT THE WORD 'HIRE' IN THE ABOV E ENTRY WAS EQUIVALENT TO THE WORD 'LEASE'. THEREFORE, WE ARE CONFINING THE JUDGMENT ONLY TO TH E FACTS OF THIS CASE. THERE IS NO MERIT IN THE ARGUMENT THAT BECAUSE HIGHER DEPRECIATION WAS GRANT ED BY THE DEPARTMENT FOR THE EARLIER YEARS, THE DEPARTMENT WAS BOUND TO GRANT HIGHER DEPRECIATION F OR THE ASSESSMENT YEAR IN QUESTION. UNDER THE INCOME-TAX ACT, EACH YEAR IS A SEPARATE EVENT OF AS SESSMENT. THAT THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE. IN THE CIRCUMSTANCES, WE DO NOT FIND ME RIT IN THIS ARGUMENT OF THE ASSESSEE. FO THE REASONS STATED HEREINABOVE, WE AN SWER THE ABOVE QUESTION IN AFFIRMATIVE, I.E. IN FAVOUR OF THE DEPARTMENT AND AGAINST THE ASSESSEE' 13. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS NOW I N APPEAL BEFORE US. 14. BEFORE US, AT THE OUTSET LD. A.R. SUBMITTED THAT TH E ISSUE WITH RESPECT TO LEASED ASSET IS COVERED IN FAVOUR OF THE ASSESSEE B Y THE DECISION OF HONBLE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 05 -06 & 06-07 (ITA NO. 1129/AHD/09, 1153/AHD/2010 ORDER DATED 28.12.20 12). HE PLACED ON RECORD, THE COPY OF THE AFORESAID ORDER AND POIN TED TO THE RELEVANT PARAS OF THE ORDER. HE THEREFORE SUBMITTED THAT SI NCE THE ISSUE HAS BEEN SETTLED IN FAVOUR OF THE ASSESSEE, FOLLOWING THE DE CISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE, THE MATTER BE DECIDED I N FAVOUR OF ASSESSEE. LD. D.R. ON THE OTHER HAND RELIED ON THE ORDER OF A .O AND CIT(A). ITA NOS. 116 9 & 1288/AHD/2011 . A.Y. 2007- 08 10 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT ON IDENTICAL ISSUE OF DISALLOWANCE OF DEPRECIATION WAS BEFORE THE HONBLE CO-ORDINATE BENCH OF TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 293/AHD/2010 ORDER DATED 28.12. THE CO-O RDINATE BENCH DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLD ING AS UNDER:- 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE HAD NOT SOLD AND LEASED BACK THE NEW ASSETS DURING THE YEAR, THE DEPRECIATION CLAIMED BY THE APPELLANT ON WRITTEN DOWN VALUE OF SALE AND LEASE B ACK ASSETS. THE IDENTICAL ISSUE IN ASSESSEE'S OWN CASE IN ITA NO. 2763/AHD/2007, WHERE IN REVENUE'S APPEAL HAD BEEN DISMISSED BY THE CO-ORDINATE 'C' BENCH, AHMEDABAD F OR A.Y. 04-05. THE SIMILAR ISSUE WAS CONSIDERED BY 'C' BENCH, AHMEDABAD IN ASSESSEE'S OW N CASE IN ITA NO. 865/AHD/2006 & ITA NO.1927/AHD/2007 FOR A.Y. 02-03 AND HELD THAT S ALE AND LEASE BACK IS A CONTINUING TRANSACTION ADDITION ADMITTED BY BOTH THE SIDES. RE SPECTFULLY, FOLLOWING THE TRIBUNAL'S DECISION, WE DISMISS THIS ISSUE OF REVENUE'S APPEAL . THE REVENUE HAD NOT DISTINGUISHED THE FINDINGS OF COORDINATE BENCH GIVEN FOR EARLIER YEAR WHEN TRANSACTIONS ARE SAME AND DEPRECIATION CLAIMED ON WRITTEN DOWN THE VALUE OF T HE SAME ASSETS ON SALE AND LEASE BACK TRANSACTION, THEN, WE HAVE TO FOLLOW THE EARLIER DE CISION OTHERWISE MATERIAL FACTS ARE DIFFERENT. THUS, WE ARE OF CONSIDERED VIEW THAT BY FOLLOWING T HE CO-ORDINATE BENCH DECISION IN EARLIER YEAR, WE ALLOW THE APPEAL OF THE ASSESSEE IN HIS FA VOUR AND DISMISS THE REVENUE'S APPEAL ON THESE GROUNDS. 16. BEFORE US THE LD. A.R. HAS SUBMITTED THAT THE FACTS OF THE CASE IN THE YEAR UNDER APPEAL ARE IDENTICAL TO THAT OF EARLIER YEAR TO WHICH THE LD. D.R. COULD NOT CONTROVERT. WE THEREFORE FOLLOWING THE D ECISION OF THE CO- ORDINATE BENCH IN THE ASSESSEES OWN CASE AND FOR S IMILAR REASONS DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. THUS THIS GROU ND OF ASSESSEE IS ALLOWED. 17. IN THE RESULT THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES WE NOW TAKE UP REVENUES APPEAL IN ITA NO. 1288A HD/2011 1 ST GROUND IS WITH RESPECT TO DELETING THE DISALLOWANC E OF RS. 9,00,350/- BEING BAD DEBTS RECOVERED DURING THE CUR RENT YEAR. ITA NOS. 116 9 & 1288/AHD/2011 . A.Y. 2007- 08 11 18. ON PERUSING THE TAX AUDIT REPORT, A.O NOTICED THAT AUDITOR HAS REPORTED AN AMOUNT OF RS. 9,00,350/- CHARGEABLE U/S. 41(4) OF T HE ACT. BEFORE A.O, IT WAS SUBMITTED THAT THE AMOUNT WAS WRITTEN OFF IN A. Y. 05-06 WHICH WAS DISALLOWED BY THE A.O AND THEREFORE THE RECOVERY WH ICH HAS BEEN MADE DURING THE YEAR UNDER REVIEW SHOULD NOT BE TAXED UN DER CONSIDERATION. THE SUBMISSION OF THE ASSESSEE WAS NOT FOUND ACCEPT ABLE TO THE A.O IN VIEW OF THE FACT THAT AGAINST THE DISALLOWANCE OF B AD DEBTS WRITTEN OFF, ASSESSEE HAD FILED AN APPEAL AND THE MATTER HAD NOT REACHED FINALITY. HE ACCORDINGLY MADE ADDITION OF THE SAME. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) A FTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DECIDED THE ISSUE BY HO LDING AS UNDER:- 5.2 I HAVE CONSIDERED THE FACTS AND SUBMISSION OF T HE ID. A.R. CAREFULLY. IT IS SEEN THAT THE APPELLAN T HAD WRITTEN OFF BAD DEBTS AMOUNTING TO RS.13.5 CRORES I N A.Y. 2005-06 IN ITS BOOKS OF ACCOUNTS AND HAD CLAIMED THE DEDUCTION OF THE SAME IN THAT YEAR WHIL E FILING THE RETURN OF INCOME. THE APPELLANT'S CLAI M WAS NOT ALLOWED BY THE A.O. WHILE PASSING THE ASSES SMENT FOR THE A.Y. 2005-06. THE DISALLOWANCE SO MADE BY THE A.O. WAS CONFIRMED BY THE CIT(A) ALSO. SINCE THE PROVISION FOR BAD AND DOUBTFUL DEBT TO THE EXTENT OF RS. 9,00,350/- WAS NOT ALLOWED IN THE EARLIER YEAR, ON REVERSAL OF SAID PROVISION IN THI S YEAR IT CANNOT BE TREATED AS INCOME. THEREFORE, THE A.O. IS DIRECTED TO EXCLUDE THE SAID AMOUNT FROM T HE INCOME OF THE YEAR UNDER REFERENCE ACCORDINGLY. HOW EVER, IN CASE THE PROVISION FOR BAD AND DOUBTFUL DEBT AS CLAIMED BY THE APPELLANT IN A.Y. 2005-06 IS ALLOWED TO IT IN FUTURE AT ANY STAGE, THEN THE IMPUGNED AMOUNT SHALL BE TAXED IN THE YEAR UNDER RE FERENCE ACCORDINGLY. 19. AGGRIEVED BY THE ORDER CIT(A), REVENUE IS NOW APPEA L BEFORE US. 20. BEFORE US AT THE OUTSET, THE LD. A.R. SUBMITTED THA T THE GROUND NEEDS TO BE DECIDED AGAINST THE ASSESSEE FOR THE REASON THAT TH E ASSESSEE HAS ALREADY BEEN ALLOWED RELIEF IN A.Y. 05-06. HE POINTED TO T HE RELEVANT FINDING OF THE TRIBUNAL WHICH WAS PLACED AT PAGE 77 OF THE PAP ER BOOK. THE LD. D.R. ON THE OTHER HAND DID NOT OBJECT TO THE SUBMISSION OF THE ASSESSEE. 21. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. BEFORE US SINCE LD. A.R. HAS FAIRLY CONCEDED THAT T HE ISSUE NEEDS TO BE ITA NOS. 116 9 & 1288/AHD/2011 . A.Y. 2007- 08 12 DECIDED AGAINST THE ASSESSEE SINCE IT HAS ALREADY G OT RELIEF IN EARLIER YEARS, WE THEREFORE UPHOLD THE ADDITION MADE BY A.O . IN THE RESULT THIS GROUND OF REVENUE IS ALLOWED. GROUND NO. 2 IS WITH RESPECT TO DELETING THE DISALL OWANCE MADE ON REVERSAL OF PROVISION FOR DIMINUTION IN THE VALUE O F INVESTMENT. 22. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT THE ASSESSEE HAD REVERSED PROVISION FOR DIMINUTION IN T HE VALUE OF INVESTMENT OF RS. 25,73,785/- AND THE SAME WAS EXCL UDED FROM THE TOTAL INCOME. THE ASSESSEES JUSTIFICATION FOR EXCLUDING IT FROM THE TOTAL INCOME WAS THAT THE SAME WAS NOT CLAIMED/ALLOWED AS DEDUCTION IN THE YEAR IN WHICH THE PROVISION WAS MADE AND THEREFORE THE REVERSAL OF THE SAME WAS RIGHTLY EXCLUDED FROM THE TOTAL INCOME. TH E SUBMISSION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE A.O FOR TH E REASON THAT AGAINST THE DISALLOWANCE MADE IN EARLIER YEARS ASSESSEE HAD PREFERRED APPEALS AND THE SAME WAS PENDING. A.O FURTHER NOTED THAT IN A.Y. 06-07, HIS PREDECESSOR HAD ALSO ADDED THE AMOUNT REPRESENTING THE REVERSAL OF PROVISION OF DIMINUTION AS INCOME. HE ACCORDINGLY M ADE ADDITION OF RS. 25,73,785/-. AGGRIEVED BY THE ORDER OF A.O, ASSESSE E CARRIED THE MATTER BEFORE CIT(A). CIT(A) DECIDED THE ISSUE IN FAVOUR O F THE ASSESSEE BY HOLDING AS UNDER:- 6.3 I HAVE CONSIDERED THE FACTS AND SUBMISSIONS OF THE ID. A.R. CAREFULLY. THERE IS NO DISPUTE ABOUT T HE FACT THAT THIS AMOUNT PERTAINS TO A.Y. 2003-04. THE PROVISION SO MADE FOR DIMINUTION IN VALUE OF INVESTMENTS IN A.Y. 2003-04 WAS NOT CLAIMED AS DEDU CTION IN THAT YEAR. THEREFORE, UNDER THESE CIRCUMSTANCES, THE REVERSAL OF AMOUNT WHICH HAS ALR EADY BEEN TAXED IN EARLIER YEARS WOULD AMOUNT TO DOUBLE TAXATION AND THE SAME IS NOT TENABLE IN LAW. IN VIEW OF THIS THE A.O. IS DIRECTED TO EXCLUDE TH E AMOUNT FROM THE INCOME OF THE APPELLANT ACCORDINGLY . THE GROUND TAKEN BY THE APPELLANT IS HEREBY ALLOWED. ITA NOS. 116 9 & 1288/AHD/2011 . A.Y. 2007- 08 13 23. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 24. BEFORE US LD. D.R. RELIED ON THE ORDER OF A.O. ON T HE OTHER HAND LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE CIT(A) AND F URTHER SUBMITTED A CHART SHOWING THE PROVISIONS MADE IN DIFFERENT YEAR S AND THE YEAR OF REVERSAL. THE LD. A.R. FURTHER SUBMITTED THAT IDENT ICAL GROUND WAS RAISED BY THE ASSESSEE IN EARLIER YEARS AND THE HONBLE TR IBUNAL HAD SET ASIDE THE ISSUE TO THE FILE OF A.O FOR VERIFICATION OF TH E SUBMISSIONS OF THE ASSESSEE. HE THEREFORE FAIRLY SUBMITTED THAT THE MA TTER MAY BE SENT BACK FOR VERIFICATION BEFORE A.O. 25. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. BEFORE A.O, THE ASSESSEES SUBMISSION WAS THAT THE PROVISIONS FOR DIMINUTION IN THE VALUE OF INVESTMENT WAS NOT CLAIM ED AS DEDUCTION IN EARLIER YEARS AND THEREFORE ITS REVERSAL NEED NOT B E TAXED IN THE YEAR UNDER REVIEW. BEFORE US LD. A.R. HAS ALSO SUBMITTED A CHA RT SHOWING THE PROVISIONS MADE IN DIFFERENT YEARS AND THE REVERSAL S OF THE SAME. WE FIND THAT THIS CHART WAS NOT BEFORE A.O AND CIT(A). WE A RE THEREFORE OF THE VIEW THAT THE FACTUAL ASPECT OF THE CHART NEEDS VER IFICATION. WE THEREFORE REMIT THE ISSUE TO THE FILE OF A.O TO VERIFY THE SU BMISSIONS OF THE ASSESSEE AND THEREAFTER DECIDED THE ISSUE AS PER LA W. NEEDLESS TO STATE THAT A.O SHALL GRANT ADEQUATE OPPORTUNITY OF HEARIN G TO THE ASSESSEE. IN THE RESULT THIS GROUND OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO. 3 IS WITH RESPECT TO DELETING THE DISALL OWANCE ON LEASE ASSETS. ITA NOS. 116 9 & 1288/AHD/2011 . A.Y. 2007- 08 14 26. BEFORE US BOTH THE PARTIES SUBMITTED THAT THIS GROU ND IS INTERCONNECTED WITH GROUND NO. 2 OF ASSESSEES APPEAL. 27. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. SINCE THE ISSUE IN THE PRESENT GROUND IS INTERCONNE CTED WITH GROUND NO. 2 OF ASSESSEES APPEAL AND SINCE GROUND NO. 2 IN ASSE SSEES APPEAL HEREINABOVE HAS BEEN DECIDED IN FAVOUR OF THE ASSES SEE THIS GROUND OF REVENUE IS DISMISSED. 28. IN THE RESULT THE APPEAL OF REVENUE IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES. 29. IN THE RESULT BOTH THE APPEALS OF ASSESSEE AND REVE NUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 27 - 06 - 2014. SD/- SD/- (D.K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,A HMEDABAD