Rajeev Lila, SRIGANGANAGAR V. ITO, SRIGANGANAGAR

ITA 135/JODH/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1953 (ITAT-JODHPUR)
• Duration Of Justice: 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 04-05-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 09-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MEENA
• Keywords: Business income; Earning of tax free income
• Section: 14A; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, JODHPUR BENCH , JODHPUR BEFORE: SHRI BHAGCHAND, AM & SHRI PARTHA SARTHI CHA UDHARY, JM ITA NO. 135/JODH/2017 ASSESSMENT YEAR : 2013-14 RAJEEV LILA, PROP.- M/S SURYA JYOT, 11-E, BLOCK, SRI GANGANAGAR. VS. I.T.O., WARD-2, SRI GANGANAGAR. PAN /TAN NO.: ABXPL 9462 F APPELLANT RESPONDENT ITA NO. 133/JODH/2017 ASSESSMENT YEAR : 2013-14 RATAN KUMAR LILA, PROP.- M/S ASHWARYA TRADERS, 11-E, BLOCK, SRI GANGANAGAR. VS. I.T.O., WARD-2, SRI GANGANAGAR. PAN /TAN NO.: AALPL 9436 G APPELLANT RESPONDENT ASSESSEE BY : SHRI RAJENDRA JAIN (ADV) REVENUE BY: SHRI S.K. MEENA (JCIT D.R.) DATE OF HEARING : 04/05/2017 DATE OF PRONOUNCEMENT : 05/05/2017 ORDER PER: PARTHA SARTHI CHAUDHARY, J.M. THESE ARE THE APPEALS FILED BY THE TWO DIFFERENT AS SESSEES ARISE AGAINST THE TWO SEPARATE ORDERS DATED 30/11/2016 PASSED BY THE LD. CIT(A), BIKANER FOR THE A.Y. 2013-14. 2. BOTH THE APPEALS OF THE ASSESSEES ARE BEING HEAR D TOGETHER AND FOR THE SAKE OF CONVENIENCE AND BREVITY, A COMMON ORDER IS BEING. ITA 135 & 133/JODH/2017_ RAJIV LILA & RATAN KUMAR LILA VS. ITO 2 3. FIRSTLY WE TAKE ITA NO. 135/JODH/2017. IN THIS APPEAL, THE ASSESSEE HAS TAKEN FOLLOWING G ROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLD ING APPLICABILITY OF SECTION 14(2) R.W.S. 8D ON THE FACTS AND CIRCUMSTANCES OF THE CAS E. 2. THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN TREATIN G THE INVESTMENTS IN BUSINESS PARTNERSHIP FIRMS TO HAVE INCOME OF TWO TYPES ONE I S TAXABLE AND THE OTHER WHICH IS EXEMPT EVEN AFTER ACCEPTING THAT INVESTMEN T IN PARTNERSHIP FIRM WAS FOR THE PURPOSE OF CARRYING ON BUSINESS BY THE PART NER HOWEVER ASSESSEE HAD CLAIMED THAT ALL INCOME WHETHER INTEREST, REMUNERAT ION AND SHARE OF PROFIT DERIVED BY THE PARTNER/S WERE BY VIRTUE OF THE INVE STMENTS MADE THEREIN. 3. THAT THE CIT(A) FAILED IN GIVING CLEAR DIRECTION FOR EXCLUDING INVESTMENT OF RS. 3,75,00,000/- MADE IN SHARES YIELDING NO TAXABLE IN COME OUT OF TOTAL INVESTMENT OF RS. 4,42,52,726/- WHILE WORKING OUT T HE DISALLOWANCE AS PER RULE 8D(2). 4. THE BRIEF FACTS ARISING IN THIS CASE ARE THAT TH E ASSESSEE DERIVED INCOME FROM PROPRIETORY CONCERN M/S SURYA JOT, SRI GANGANA GAR CARRYING ON BUSINESS IN GRAINS, ARHAT ETC. AND ALSO A PARTNER IN THREE P ARTNERSHIP FIRMS. INCOME FROM THOSE FIRMS WERE DECLARED AS UNDER:- NAME OF THE FIRM SHARE OF PROFIT INTEREST REMUNE RATION TOTAL INCOME M/S BEHIARI LAL LILA & SONS NIL (-) RS. 149243 RS. 66796 (-) RS. 82447 M/S VENTESHWARA NIL 378590 RS. 370423 RS. 74 9013 M/S RUDRAKASH ART & CRAFT NIL NIL 0 0 0 TOTAL INCOME FROM THESE FIRMS RS. 666566 EXPENSES FOR INTEREST PAID (-) RS. 889805 DEFICIT INCOME FROM FIRMS (-) RS. 223239 4.1 OUT OF THE CLAIM OF RS. 889805, THE ASSESSING O FFICER DISALLOWED RS.660548 U/S 14A OF THE INCOME TAX ACT, 1961 (IN S HORT THE ACT) R. W. R. 8D ITA 135 & 133/JODH/2017_ RAJIV LILA & RATAN KUMAR LILA VS. ITO 3 OF THE INCOME TAX RULES, 1962 (IN SHORT THE RULES) ON THE REASONS THAT PROFIT RECEIVED FROM PARTNERSHIP FIRMS WAS EXEMPTED U/S 10 (34) AND ASSESSEES CLAIM THAT REMUNERATION FROM THE FIRMS WAS AGAINST CAPITAL INVESTMENT THEREIN WAS NOT ACCEPTABLE. 4.2 IN APPEAL THE LD. CIT (A) OBSERVED THAT THERE W AS DIRECT NEXUS BETWEEN THE BORROWED FUNDS AND THE INVESTMENT MADE IN THE FIRMS WHICH WAS FOR THE PURPOSE OF CARRYING ON BUSINESS OF THE FIRMS BY THE PARTNERS. ASSESSEE RECEIVED INTEREST AS WELL AS SHARE OF PROF IT FROM THE FIRMS THEREFORE PAYMENT OF INTEREST ON BORROWED FUNDS RESULTED IN T WO TYPES OF INCOME, ONE IS TAXABLE AND OTHER WHICH IS EXEMPT, THEREFORE SEC TION 14A WAS SQUARELY APPLICABLE REFERRING TO THE FACT THAT SHARE OF PROF IT BEING NOT DEPENDENT ON INVESTMENT AFFECTS THE APPLICABILITY OF SECTION 14A , HOWEVER THE LD. CIT (A) MADE NO COMMENTS WITH REGARD TO JUDGMENTS CITED BY THE ASSESSEE AND WERE REPRODUCED IN THE APPELLATE ORDER. AFTER LOOKI NG INTO THE FACTS THAT INTEREST-FREE INVESTMENTS OF RS.3,75,00000/- IN SHA RES OUT OF TOTAL INVESTMENTS OF RS.4,42,52726/-WERE FROM INTEREST-FR EE FUNDS LOANS/DEPOSITS OF SIMILAR AMOUNTS IN ADDITION TO ASSESSEES OWN CA PITAL OF RS.5135397. THE LD. CIT(A) HAD FOUND AOS CALCULATION OF DISALLOWAN CE TO BE NOT CORRECT AND DIRECTED THE AO TO WORK OUT AS PER RULE 8D OF THE R ULES. ITA 135 & 133/JODH/2017_ RAJIV LILA & RATAN KUMAR LILA VS. ITO 4 5. THE MAIN GRIEVANCE OF THE ASSESSEE IS UPHOLDING OF APPLICABILITY OF SECTION 14(2) R.W.R. 8D BY THE LD. CIT(A). 6. BEFORE THE LD. CIT(A) HAS CONTESTED THE DISALLOW ANCE OF RS. 6,60,458/- U/S 14A R.W.R. 8D. THE ASSESSEES WRITTEN SUBMISSIO NS BEFORE THE LD. CIT(A) IS AS UNDER:- 'IN REBUTTAL APPELLANT CONTENDS THAT DEDUCTION FOR INTEREST PAYM ENT OF889805 AGAINST INCOME DERIVED FROM PARTNERSHIP FIRMS WAS R IGHTLY CLAIMED BECAUSE INCOME FROM THE FIRM PER SE IS NOT EXEMPT U/S 10(2A ) BUT SHARE OF PROFIT FROM THE FIRM ALONE IS MADE EXEMPT U/S 10(2A). PRIOR TO THE AMENDMENT, WHOLE INCOME OF THE FIRM - DIVISIBLE PROFIT, REMUNERATION & INTEREST TO PARTNERS WAS TAXED IN THE HANDS OF TH E FIRM BUT AFTER NEW PROVISIONS SHARE OF PROFIT WAS MADE EXEMPT U/S 10(2A) AND INTE REST A REMUNERATION OF PARTNER WAS MADE LIABLE TO TAX AS INCOME FROM BUSIN ESS IN HANDS OF THE PARTNERS WHICH INDICATES THAT INTEREST & REMUNERATION WAS NO THING BUT WAS PART OF THE DIVISIBLE PROFIT. CASE LAWS ENTAILING DIFFERENT SET OF FACTS & CONTEXT WOULD NOT SUPPORT HIM. CONTRARILY APPELLANT REFERS TO ( 2016) 70 ITCL 425 -UDHAVDAS MOHANDAS RUPCHANDANI VS ACJT - MUMBAI TRIBUNAL HAD HELD THAT INTEREST BEARINGS FUNDS WERE INVESTED AS PARTNER IN PARTNERS HIP FIRMS FROM WHICH ALONG WITH SHARE OF PROFIT HE WAS RECEIVING REMUNERATION AND INTEREST WHICH WAS TAXABLE IN HIS HANDS. REMUNERATION AND INTEREST REC EIVED BY THE PARTNER WAS ASSESSABLE AS INCOME FROM BUSINESS THEREFORE DEDUCT ION OF INTEREST PAID WAS ALLOWABLE. SIMILAR JUDGMENTS WERE GIVEN IN DELITE ENTERPRISES (P) LTD VSACRR(2011) 134 TTJ663 (MUMBAI TRIBUNAL) & SUDHIR DATTARAM PATIL VS DCIT (2005) 2 SOT 678 (MUMBAI). APPELLANT ALSO SUBMITS THAT INTEREST PAYMENTS OF RS .889805 WERE RELATING TO INTEREST OF RS.446415 PAID TO M/S AISHWARYA TRADERS + RS.253590 TO VIMLU DEVI A RS. 189800 TO KARUNI LILA CLAIMED AGAINST INCOME OF RS. 666566 FROM THE SAID ITA 135 & 133/JODH/2017_ RAJIV LILA & RATAN KUMAR LILA VS. ITO 5 PARTNERSHIP FIRMS WHICH LEFT DEFICIT OF RS.223239 T HE SAME WAS ADJUSTED AGAINST NET PROFIT OF RS.522494 FROM THE SOLE PROPRIETARY C ONCERN M/S SURYA JOT THEREAFTER DISALLOWANCE OF RS. 660458 ON THE BASIS OF WORKING AS PER RULE 8D OF SECTION 14(2) WAS NOT JUSTIFIED. WITH REGARD TO AO'S OBSERVATIONS THAT IN ADDITION T O INVESTMENTS IN SAID PARTNERSHIP FIRMS THERE WERE OTHER INVESTMENTS LIKE SHARES. AGRI. LANDS A EQUIPMENTS MADE OUT OF INTEREST BEARING LOANS/DEPOS ITS BECAUSE APPELLANT'S OWN CAPITAL WAS NOT SUFFICIENT TO MEET THEM ALL, IT IS SUBMITTED THAT IN REGARD TO INVESTMENT IN SHARES FOR RS.37500000 OUT OF TOTAL I NVESTMENTS OF RS.44252 7 26 POINTED OUT IN ASSESSMENT-ORDER THERE WERE INTEREST FREE LOANS/DEPOSITS OF RS.29500000 FROM HISSARIA ART & CRAFT AND RS.8000000 FROM SUNITA MINE CHEMAND ALSO THEREFORE REMAINING INVESTMENTS AS GIV EN BELOW WERE LEFT TO BE CONSIDERED FOR DEDUCTIBILITY OF INTEREST PAYMENTS: 1. RS.4172338 M/S VENKTESHWARA WHERE APPELLANT IS PARTNER 2. RS.3830372 M/S SOURYAGARH PALACE WHERE APPELLAN T IS PARTNER 3. RS. 1371855 AGRI. LANDS & EQUIPMENT DETAILS OF INVESTMENT REVEAL THAT INSTEAD OF INVEST MENT THERE WERE EXCESS WITHDRAWALS OF RS.2157101 & RS.464738 FROM M/S BEHA RI LAI LILA & SONS & M/S RUDRAKSH ART & CRAFT (WHERE APPELLANT IS PARTNER) T HEREFORE EXCESS WITHDRAWALS WERE AVAILABLE TO BE USED IN OTHER INVESTMENTS IN M /S VENKTESHWERA AND/OR M/S SOURYAGARH PALACE. APART FROM THIS, THERE WAS APPEL LANT'S OWN CAPITAL OF RS. 5135397 ALSO. IN THE LIGHT OF THESE FACTS THERE WAS NO JUSTIFICATION FOR HOLDING INTEREST PAYMENTS TO EXEMPT INCOME INVESTMENTS. REFERENCE IS MADE TO CIT VS WALFORT SHARE & STOCK BROKERS (P) LTD. (2010 ) 192 TAXMAN 211 (SC) THOUGH GIVEN IN CONTEXT OF SECTION 14A, IT WAS HELD THAT THERE SHOULD BE PROXIMATE CAUSE FOR DISALLOWANCE BY PROVI NG ITS RELATIONSHIP WITH EXEMPT INCOME TAX. REFERENCE IS ALSO MADE TO SOME CASE LAWS: CIT VS RADICO KHAITAN LTD. (AIL)- (2005) 142 TAXMAN 681- WHERE TRIBUNAL HAD RECORDED A FINDING THAT THERE WA S ITA 135 & 133/JODH/2017_ RAJIV LILA & RATAN KUMAR LILA VS. ITO 6 SUFFICIENT FUNDS OTHER THAN BORROWED FUNDS AVAILABL E WITH THE ASSESSEE IN THE FORM OF SHARE CAPITAL, SHARE .IMPLICATION MONEY, RE SERVES & SURPLUSES FOR DIVERTING A PARTICULAR SUM TO ITS SISTER CONCERN, IT WOULD NO T BE SAID THAT THE LOAN ADVANCED TO SISTER CONCERN CAME OUT OF BORROWED MONEYS. CONTENDING FIRMLY THAT APPLICATION OF SECTION 14(2) RULE 8D(2) WOULD HAVE NO APPLICATION BY ASSUMING EXEMPT INCOME INVESTMENTS I N PARTNERSHIP FIRMS WHERE APPELLANT HAD SHARE, APPELLANT, WITHOUT PREJUDICE T O IT, STATES THAT AO'S CALCULATION OF DISALLOW ABLE INTEREST AS PER RULE 8 D(2) WAS NOT CORRECT IN VIEW OF FOLLOWING CALCULATION MADE: (I) WHOLE AMOUNT OF EXPENDITURE IF IT IS DIRECTLY R ELATING TO EXEMPT INCOME WHICH IS NOT APPLICABLE IN PRESENT CASE): (II) IN CASE OF EXPENDITURE OF INTEREST WHICH IS NO T DIRECTLY RELATABLE TO AN) PARTICULAR INCOME THEN IT IS TO BE COMPUTED IN A SP ECIFIED MANNER: AXB/C = 889805 X 6182096 / 18484778 = RS.297559 AMOUNT OF EXPENDITURE OF INTEREST - RS.889805 AVERAGE OF INVESTMENT YIELDING EXEMPT INCOME - RS. 6182096 AVERAGE OF TOTAL ASSETS - RS.18484778 (III) 0.5% OF AVERAGED INVESTMENT YIELDING EXEMPT I NCOME 0.50% X 6182096 RS.30410 ACCORDINGLY DISALLOWANCE IF HELD TO BE SUSTAINED TH EN IT WOULD BE RS.327959 (RS.297559 + RS.30410) INSTEAD OF RS.660458 THEREFORE REMAINING IS TO BE REMOVED. ' 6.1 THE LD. CIT(A) HAS HELD AS UNDER:- A. THERE IS NO DISPUTE REGARDING THE FACT THAT THE ASSESSEE HAS INVESTED LOANS IN HIS PARTNERSHIP FIRM AND IMMOVABLE PROPERTIES AND C LAIMED INTEREST AGAINST THE BUSINESS INCOME INVESTED IN PROPERTIES. AS MUCH AS THAT THERE IS A DIRECT NEXUS BETWEEN THE BORROWED FUNDS AND THE INVESTMENT MADE IN THE FIRM. B. THE INVESTMENT IN THE PARTNERSHIP FIRM M/S. SURY AJOT WAS FOR THE PURPOSE OF CARRYING ON BUSINESS OF THE FIRM BY THE PARTNERS. T HUS, THE INVESTMENT MADE ITA 135 & 133/JODH/2017_ RAJIV LILA & RATAN KUMAR LILA VS. ITO 7 WAS TO EARN SHARE OF PROFIT FROM THE PARTNERSHIP FI RM AND NOT TO EARN INTEREST WHICH IS ASSESSABLE UNDER THE HEAD INCOME FROM OTH ER SOURCES. C. FROM THE FIRM, THE ASSESSEE IS IN RECEIPT OF INT EREST AS WELL AS SHARE OF PROFIT. THE SHARE OF PROFIT RECEIVED IS EXEMPT IN THE HANDS OF THE ASSESSEE U/S 10(2A) OF THE ACT. CONSEQUENTLY, THE PAYMENT OF INTEREST O N BORROWED FUNDS RESULTS IN TWO TYPES INCOME, ONE WHICH IS TAXABLE AND OTHER WHICH IS EXEMPT. THUS, IT IS CLEAR THAT A PART OF THE INTEREST PAYMENT IS ATT RIBUTABLE TO EARNING OF EXEMPT INCOME. UNDER SUCH CIRCUMSTANCES, THE PROVIS IONS OF SEC. 14A ARE SQUARELY APPLICABLE BECAUSE THE PROVISIONS OF SEC. 14A CLEARLY HOLD THAT THE EXPENDITURE ATTRIBUTABLE TO EARNING OF EXEMPT INCOM E SHALL NOT BE ALLOWED AS DEDUCTION. THE FACT THAT THE SHARE OF PROFIT IS NOT DEPENDANT ON INVESTMENT AFFECTS THE APPLICABILITY OF SEC. 14A BECAUSE AS ME NTIONED ABOVE, THE PAYMENT OF INTEREST HAS BROUGHT TWO INCOMES TO THE ASSESSEE ONE OF WHICH IS EXEMPT. SO, PART OF THE INTEREST EXPENDITURE IS ATT RIBUTABLE TO EARNING OF EXEMPT INCOME AND THE PROVISION OF SEC. 14A REQUIRE S THE ASSESSING OFFICER TO MAKE A DISALLOWANCE OF THE EXPENDITURE WHICH IS ATT RIBUTABLE TO EARNING OF EXEMPT INCOME. IN VIEW OF THESE, I HOLD THAT THE ASSESSING OFFICE R WAS JUSTIFIED IN INVOKING THE PROVISION OF SEC. 14A WHICH OVERRIDES ALL OTHER PRO VISIONS RELATING TO DEDUCTIONS. HOWEVER, FOR THE REASONS GIVEN BELOW, I FIND THAT THE CALCULATION OF DISALLOWANCE DONE BY THE ASSESSING OFFICER ON TH IS ACCOUNT IS NOT CORRECT AND DISALLOWANCE NEEDS TO BE RECALCULATED. ALTERNATIVELY, IT WAS ALSO CONTENDED THAT THE ENTI RE CALCULATION IS MADE WITHOUT ANY BASIS AND WITHOUT CONSIDERING THE PROVI SION OF ACT. IN THE WRITTEN SUBMISSION ALSO, THE APPELLANT SUBMITTED THAT THE A SSESSING OFFICER HAD TO ADOPT FOLLOWING METHOD TO CALCULATE THE AMOUNT OF D ISALLOWANCE:- ITA 135 & 133/JODH/2017_ RAJIV LILA & RATAN KUMAR LILA VS. ITO 8 I) WHOLE AMOUNT OF EXPENDITURE IF IT IS DIRECTLY R ELATING TO EXEMPT INCOME WHICH IS NOT APPLICABLE IN PRESENT CASE); II) IN CASE OF EXPENDITURE OF INTEREST WHICH IS NO T DIRECTLY RELATABLE TO ANY PARTICULAR INCOME THEN IT IS TO BE COMPUTED IN A SP ECIFIED MANNER; AXB/C = 889805 X 6182096 / 18484778 = RS.297559 AMOUNT OF EXPENDITURE OF INTEREST - RS.889805 AVERAGE OF INVESTMENT YIELDING EXEMPT INCOME - RS. 6182096 AVERAGE OF TOTAL ASSETS - RS. 18484778 III) 0.5% OF AVERAGED INVESTMENT YIELDING EXEMPT I NCOME = 0.50%X 6182096 RS.30410 HAVING HELD THAT SEC. 14A IS APPLICABLE IN THIS CAS E, I AM OF THE VIEW THAT DISALLOWANCE HAS NOT BEEN CORRECTLY WORKED OUT BY T HE ASSESSING OFFICER AS HE HAS OVERLOOKED RULE 8D OF I. T. RULES. 1962 WHIC H PROVIDES FOR METHOD OF CALCULATION OF SUCH DISALLOWANCE U/S 14A. I AM OF T HE CONSIDERED VIEW THAT RULE 8D OF INCOME TAX RULE SHOULD BE APPLIED IN THI S CASE TO WORK OUT THE CORRECT DISALLOWANCE AS THIS RULE PROVIDES FOR METH OD FOR DETERMINING AMOUNT OF EXPENDITURE IN RELATION TO INCOME NOT INC LUDIBLE IN THE TOTAL INCOME. THE AFORESAID RULE 8D HAS BEEN INSERTED BY THE I.T (FIFTH AMDT.), RULE, 2008 WITH EFFECT FROM 24- 3-2008. AS DISCUSSED ABOVE, I HAVE ALREADY HELD THAT DISAL LOWANCE U/S 14A OF THE IT ACT, 1961 IS ATTRACTED IN THIS CASE AND SINCE AT TH E TIME OF MAKING THE DISALLOWANCE U/S 14A AND CALCULATING THE SAME RULE 8D WAS IN EXISTENCE, THE ASSESSING OFFICER IS DIRECTED TO WORK OUT THE DISAL LOWANCE AS PER THE PROVISION OF RULE 8D. WITH THESE DIRECTIONS, THE GR OUNDS OF APPEAL ARE DISPOSED OF THE SAME ARE TREATED AS PARTLY ALLOWED. 7. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD AR OF THE ASSESSEE HAS REITERATED THE ARGUMENTS AS MADE BEFORE THE LD. CIT (A). ON THE CONTRARY, THE LD D.R. HAS VEHEMENTLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. ITA 135 & 133/JODH/2017_ RAJIV LILA & RATAN KUMAR LILA VS. ITO 9 8. WE HAVE PERUSED THE CASE RECORDS, ANALYSED THE F ACTS AND CIRCUMSTANCES OF THE CASE AND HEARD THE RIVAL CONTE NTIONS. WE ARRIVE AT OUR CONSIDERED VIEW THAT WE ARE MORE INCLINED TO AGREE WITH THE CONTENTIONS OF THE ASSESSEE IN THE GIVEN SITUATION WHERE THE ASSES SEE HAS SUBMITTED THAT THE INTEREST PAYMENT OF RS. 889805 WERE RELATING TO INTEREST OF RS. 446415 PAID TO M/S AISHWARYA TRADERS + RS. 253590 TO VIMLA DEVI AND RS. 189800 TO KARUNI LILA CLAIMED AGAINST INCOME OF RS. 666566 FR OM THE SAID PARTNERSHIP FIRMS WHICH LEFT DEFICIT OF RS. 223239, THE SAME WA S ADJUSTED AGAINST NET PROFIT OF RS. 522494 FROM THE SOLE PROPRIETORY CONC ERN M/S SURYA JOT THEREAFTER DISALLOWANCE OF RS. 660458/- ON THE BASI S OF WORKING AS PER RULE 8D OF SECTION 14(2) WAS NOT JUSTIFIED. IT WAS ALSO BROUGHT ON RECORD THAT IN ADDITION TO INVESTMENTS IN SAID PARTNERSHIP FIRMS T HERE WERE OTHER INVESTMENTS LIKE SHARES, AGRICULTURAL LANDS AND EQU IPMENTS MADE OUT OF INTEREST BEARING LOANS/DEPOSITS BECAUSE THE ASSESSE ES OWN CAPITAL WAS NOT SUFFICIENT TO MEET THEM ALL. IN REGARD TO INVESTMEN T IN SHARES FOR RS. 3,75,00,000/- OUT OF TOTAL INVESTMENTS OF RS. 44252 726 POINTED OUT IN ASSESSMENT ORDER THERE WERE INTEREST FREE LOANS/DEP OSITS OF RS. 29500000 FROM HISSARIA ART & CRAFT AND RS. 8000000 FROM SUNI TA MINE CHEMAND ALSO THEREFORE REMAINING INVESTMENTS AS GIVEN BELOW WERE LEFT TO BE CONSIDERED FOR DEDUCTIBILITY OF INTEREST PAYMENTS. 1. RS.4172338 M/S VENKTESHWARA WHERE ASSESSEE IS A PARTNER ITA 135 & 133/JODH/2017_ RAJIV LILA & RATAN KUMAR LILA VS. ITO 10 2. RS. 3830372 M/S SOURYAGARH PALACE WHERE ASSESSE E IS PARTNER 3. RS. 1371855 AGRICULTURAL LANDS & EQUIPMENT DETAILS OF INVESTMENT REVEAL THAT THERE WERE EXCESS WITHDRAWALS OF RS.2157101 AND RS.464738 FROM M/S BEHARI LAI LILA & SONS & M/S RUDRAKSH ART & CRAFT, THEREFORE EXCESS WITHDRAWALS WERE AVAI LABLE TO BE USED IN OTHER INVESTMENTS IN M/S VENKTESHWERA AND/OR M/S SOURYAGA RH PALACE. APART FROM THIS, THERE WAS ASSESSEES OWN CAPITAL OF RS. 51353 97 ALSO. THAT ON BASIS OF THE REASONS AND THE CONTENTIONS SUBMITTED BY THE AS SESSEE AND AS PER THE REASONS HEREINABOVE STATED BY US, WE HOLD THAT IN T HE CASE OF ASSESSEE, THE APPLICABILITY OF SECTION 14(2) READ WITH RULE 8D WI LL NOT BE VALID. WE REVERSE THE FINDINGS OF THE LD. CIT(A) BY ALLOWING THE APPE AL OF THE ASSESSEE. 9. NOW WE TAKE ITA NO.133/JODH/2017. IN THIS APPEAL, THE ASSESSEE HAS TAKEN FOLLOWING GR OUNDS OF APPEAL: 1. THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLD ING APPLICABILITY OF SECTION 14(2) R.W.S. 8D ON THE FACTS AND CIRCUMSTANCES OF THE CAS E. 2. THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN TREATIN G THE INVESTMENTS IN BUSINESS PARTNERSHIP FIRMS TO HAVE INCOME OF TWO TYPES ONE I S TAXABLE AND THE OTHER WHICH IS EXEMPT EVEN AFTER ACCEPTING THAT INVESTMEN T IN PARTNERSHIP FIRM WAS FOR THE PURPOSE OF CARRYING ON BUSINESS BY THE PART NER HOWEVER ASSESSEE HAD CLAIMED THAT ALL INCOME WHETHER INTEREST, REMUNERAT ION AND SHARE OF PROFIT DERIVED BY THE PARTNER/S WERE BY VIRTUE OF THE INVE STMENTS MADE THEREIN. 3. THAT THE CIT(A) FAILED IN GIVING CLEAR DIRECTION FOR CONSIDERING ASSESSEES OWN CAPITAL, WHICH WAS ADEQUATE FOR MAKING INVESTMENT I N PARTNERSHIP FIRMS WHILE WORKING OUT THE DISALLOWANCE AS PER RULE 8D(2 ). ITA 135 & 133/JODH/2017_ RAJIV LILA & RATAN KUMAR LILA VS. ITO 11 10. SINCE IN THIS CASE, THERE IS NO CHANGE INTO THE FACTS AND CIRCUMSTANCES, THE GROUNDS TAKEN IN THIS APPEAL ARE ALSO IDENTICAL TO THE GROUNDS IN ITA NO. 135/JODH/2017. THE LD. AR OF THE ASSESSEE HAS ALSO SUBMITTED THE SAME ARGUMENTS AS MADE IN ITA NO. 135/JODH/2017. THEREFO RE, THE FINDINGS GIVEN BY US IN ITA NO. 135/JODH/2017 ARE ALSO APPLICABLE IN THIS CASE. ACCORDINGLY, THIS APPEAL OF THE ASSESSEE IS ALSO ALLOWED. 11. IN THE RESULT, BOTH THE APPEALS FILED BY THE A SSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/05/2017. SD/- SD/- (BHAGCHAND) (PARTHA SARTHI CHAUDHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER JODHPUR DATED:- 05 TH MAY, 2017. *RANJAN COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- 1. SHRI RAJEEV LILA, SRI GANGANAGAR. 2. SHRI RATAN KUMAR LILA, SRI GANGANAGAR 2. THE RESPONDENT- THE ITO, WARD-2, SRI GANGANAGAR. 3. CIT 4. THE CIT(A) 5. DR, ITAT, JODHPUR 6. GUARD FILE (ITA NO. 135 & 133/JODH/2017) BY ORDER, ASST. REGISTRAR