Gujarat State Financial Services Ltd., Ahmedabad V. The ACIT, Circle-4, Ahmedabad

ITA 1478/AHD/2013

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8525 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 25-09-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 17-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Keywords: Business income; Depreciation; Earning of tax free income; Source of fund; Commercial expediency; Revenue expenditure
• Section: 14A; 80G; 37; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER) ITA. NOS: 1478 & 1550/AHD/2013 (ASSESSMENT YEAR: 2009-10) GUJARAT STATE FINANCIAL SERVICES LTD. WING B, 3 RD FLOOR, KHANIJ BHAVAN, 132 FT RING ROAD, NEAR UNIVERSITY GROUND, VASTRAPUR, AHMEDABAD- 380052 THE DCIT, CIRCLE-4 AHMEDABAD V/S V/S THE ACIT, CIRCLE-4 AHMEDABAD GUJARAT STATE FINANCIAL SERVICES LTD. WING B, 3 RD FLOOR, KHANIJ BHAVAN, 132 FT RING ROAD, NEAR UNIVERSITY GROUND, VASTRAPUR, AHMEDABAD- 380052 (APPELLANT) (RESPONDENT) ITA. NOS: 2456 & 1023/AHD/2014 (ASSESSMENT YEAR: 2008-09) GUJARAT STATE FINANCIAL SERVICES LTD. WING B, 3 RD FLOOR, KHANIJ BHAVAN, 132 FT RING ROAD, NEAR UNIVERSITY GROUND, VASTRAPUR, AHMEDABAD- 380052 THE DCIT, CIRCLE-4 V/S V/S THE ACIT, CIRCLE-4 AHMEDABAD GUJARAT STATE FINANCIAL SERVICES LTD. WING B, 3 RD ITA NOS. 1478 & 1550/AHD/2013 AND ORS. . A.YS. 2008-0 9, 2009-10 & 2010-11 2 AHMEDABAD FLOOR, KHANIJ BHAVAN, 132 FT RING ROAD, NEAR UNIVERSITY GROUND, VASTRAPUR, AHMEDABAD- 380052 (APPELLANT) (RESPONDENT) ITA. NO: 2360/AHD/2013 (ASSESSMENT YEAR: 2010-11) GUJARAT STATE FINANCIAL SERVICES LTD. WING B, 3 RD FLOOR, KHANIJ BHAVAN, 132 FT RING ROAD, NEAR UNIVERSITY GROUND, VASTRAPUR, AHMEDABAD- 380052 V/S THE ACIT, CIRCLE-4 AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAACG5581B APPELLANT BY : SHRI SANJAY R. SHAH, AR RESPONDENT BY : SHRI SURENDRA KUMAR, CIT/DR & SHRI MUDIT NAGP AL, SR. D.R. ( )/ ORDER DATE OF HEARING : 04 -04-201 8 DATE OF PRONOUNCEMENT : 06 -04-2018 PER N.K. BILLAIYA, ACCOUNTANT MEMBER 1. ITA NOS. 1478 & 1550/AHD/2013 ARE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE FOR A.Y. 2009-10, ITA NOS. 2456 & 1023/AHD/ 2014 ARE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE FOR A.Y. 20 08-09 AND ITA NO. 2360/AHD/2013 IS THE APPEAL BY THE ASSESSEE FOR A.Y . 2010-11. ITA NOS. 1478 & 1550/AHD/2013 AND ORS. . A.YS. 2008-0 9, 2009-10 & 2010-11 3 2. SINCE THE COMMON ISSUES ARE INVOLVED IN ALL THESE A PPEALS, THEY WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER F OR THE SAKE OF CONVENIENCE AND BREVITY. 3. REPRESENTATIVES OF BOTH SIDES AGREED THAT FACTS OF A.Y. 2009-10 MAY BE CONSIDERED FOR THE DISPOSAL OF THE IMPUGNED APPEALS . ON SUCH CONCESSION, WE FIRST TAKE UP ITA NO. 1478/AHD/2013 ASSESSEES APPE AL FOR A.Y. 2009-10. 4. THE FIRST GRIEVANCE OF THE ASSESSEE RELATES TO THE DISALLOWANCE MADE U/S. 14A OF THE ACT READ WITH RULE 8D AMOUNTING TO RS. 17.54 CR ORES . 5. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS EARNED INTEREST ON BONDS AND DEBENTURES AMOUNTING TO RS. 3.99 CRORES AND DIVIDEND OF RS. 60.72 LACS WHIC H WERE CLAIMED AS EXEMPT U/S. 10(15)(IV)/10(23G) OF THE ACT. THE A.O. FOUND THAT THE ASSESSEE HAS MADE DISALLOWANCE OF RS. 3,49,242/- U/S. 14A OF THE ACT WHICH WAS 1% OF THE TOTAL ADMINISTRATIVE EXPENSES. THE A.O. WAS OF THE FIRM B ELIEF THAT THE DISALLOWANCE MADE BY THE ASSESSEE IS NOT IN LINE WITH THE PROVIS IONS OF SECTION 14A READ WITH RULE 8D OF THE ACT. THEREFORE, THE ASSESSEE WAS ASK ED TO EXPLAIN WHY DISALLOWANCE SHOULD NOT BE MADE AS PER THE PROVISIO NS OF SECTION 14A READ WITH RULE 8D OF THE ACT. 6. THE ASSESSEE EXPLAINED THAT THE INVESTMENT IN TAX F REE SECURITIES HAS BEEN MADE FROM OWN FUNDS AND THAT NO BORROWED FUNDS HAVE BEEN UTILIZED FOR THE PURPOSE OF MAKING OF SUCH INVESTMENT. IT WAS FURTHE R EXPLAINED THAT THE INTEREST INFLOW WAS RS. 672.98 CRORES AND WHEREAS I NTEREST OUTFLOW WAS RS. 542.80 CRORES. IT WAS STRONGLY CONTENDED THAT SINCE THERE IS A NET POSITIVE ITA NOS. 1478 & 1550/AHD/2013 AND ORS. . A.YS. 2008-0 9, 2009-10 & 2010-11 4 INFLOW, THEREFORE, THERE IS NO REASON WHY DISALLOWA NCE SHOULD BE MADE U/S. 14A OF THE ACT. IT WAS FURTHER EXPLAINED THAT THE A SSESSEE HAS NOT INCURRED ANY INTEREST EXPENDITURE FOR THE PURPOSE OF EARNING TAX EXEMPT INCOME. THE ENTIRE BORROWINGS WERE TOWARDS THE BUSINESS OF FINANCING A ND THE NET INCOME FROM WHICH HAS BEEN OFFERED TO TAX AS BUSINESS INCOME. 7. THE CONTENTIONS OF THE ASSESSEE DID NOT FIND ANY FA VOUR WITH THE A.O. WHO PROCEEDED BY COMPUTING THE DISALLOWANCE U/S. 14A AS PER THE FORMULA GIVEN IN RULE 8D AND COMPUTED THE DISALLOWANCE AT RS. 17.54 CRORES. 8. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. 9. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REITERA TED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. PER CONTRA, THE LD. D .R. STRONGLY SUPPORTED THE FINDINGS OF THE REVENUE AUTHORITIES AND PLACED STRO NG RELIANCE ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD. 91 TAXMANN.COM 154. 10. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW AND WITH THE ASSISTANCE OF THE LD. COUNSEL, WE HAVE CONSIDERED THE RELEVANT DOCUMENTARY EVIDENCES BROUGHT ON RECORD IN THE FORM OF A PAPER BOOK IN THE LIGHT OF RULE 18(6) OF THE ITAT RULES. THERE IS NO DISPUTE THAT THE INVESTMENTS HAVE BEEN MADE IN EARLIER YEARS AND NOT DURING THE YEAR UNDER CONSIDERATION AS CAN BE SEEN FROM THE EXHIBITS 20 & 21 OF THE PAPER BOOK. IT IS ALSO TRUE THAT THE ASSESSEE IS HAVING SUFFICIENT INTEREST FREE FUNDS T O COVER UP THE INVESTMENTS. IT IS EQUALLY TRUE THAT THE INTEREST INCOME OF THE ASS ESSEE IS MORE THAN THE INTEREST EXPENDITURE. THE RATIO LAID DOWN BY THE HONBLE BOM BAY HIGH COURT IN THE ITA NOS. 1478 & 1550/AHD/2013 AND ORS. . A.YS. 2008-0 9, 2009-10 & 2010-11 5 CASE OF RELIANCE UTILITIES AND POWER LTD. 313 ITR 3 40 SQUARELY APPLY ON THE FACTS OF THE CASE IN HAND. THE A.O. HAS NOT DEMONS TRATED ANY NEXUS BETWEEN THE BORROWED FUNDS AND THE INVESTMENTS MADE BY THE ASSESSEE AND AS MENTIONED ELSEWHERE, ALL THE INVESTMENTS ARE BROUGH T FORWARD BALANCES FROM EARLIER YEARS. 11. THE ASSESSEE IS A NON BANKING FINANCIAL COMPANY RE GISTERED WITH RESERVE BANK OF INDIA AND IS 100% A GOVERNMENT OF GUJARAT COMPAN Y AND IS ENGAGED IN THE BUSINESS OF PROVIDING FINANCIAL ASSISTANCE TO GOVER NMENT OF GUJARAT ENTERPRISES. COMPANYS MAIN SOURCE OF FUNDS ARE IN THE FORM OF INTER CORPORATE DEPOSITS FROM GOVERNMENT OF GUJARAT CONTR OLLED ENTERPRISES. THE COMPANY ALSO PERFORMS TREASURY MANAGEMENT OF SURPLU S FUNDS OF GOVERNMENT BOARD/CORPORATIONS AND OTHER INSTITUTION S. 12. AS PER THE DIRECTIONS OF THE GOVERNMENT OF GUJARAT, THE ASSESSEE HAS PARKED ITS SURPLUS FUNDS IN GOVERNMENT SECURITIES AND BONDS IN EARLIER YEARS. WE FIND THAT THE A.O. HAS MECHANICALLY COMPUTED THE DISALLOWANCE U/S. 14A AS PER RULE 8D WITHOUT ESTABLISHING ANY NEXUS BETWEEN THE BORROWED FUNDS AND UTILIZATION THEREOF IN MAKING TAX EXEMPT INVESTMENT. IN OUR CON SIDERED OPINION, COMMON EXPENSES WHICH ARE TO THE ALLOCATED IN TERMS OF THE FORMULA UNDER RULE 8D WILL BE ONLY SUCH INTEREST EXPENSES WHICH ARE DIRECTLY A TTRIBUTABLE TO BORROWINGS SPECIFICALLY USED FOR TAX FREE INCOMES. MOREOVER, T HE INTEREST INCOME EARNED BY THE ASSESSEE IS FAR MORE IN EXCESS OF THE INTEREST EXPENDITURE AND THE INTEREST FREE FUNDS ARE SUFFICIENT TO COVER UP INVESTMENTS A ND THE INVESTMENTS ARE BROUGHT FORWARD FROM EARLIER FINANCIAL YEARS. IN OU R CONSIDERED OPINION, FACTS OF THE CASE DO NOT WARRANT FOR ANY DISALLOWANCE ON ACCOUNT OF INTEREST EXPENDITURE. ITA NOS. 1478 & 1550/AHD/2013 AND ORS. . A.YS. 2008-0 9, 2009-10 & 2010-11 6 13. INSOFAR AS THE ADMINISTRATIVE EXPENSES ARE CONCERNE D, THERE IS NO DISPUTE THAT CERTAIN ADMINISTRATIVE EXPENSES HAVE TO BE APPORTIO NED TOWARDS EARNING OF TAX FREE INCOME. THE DISALLOWANCE OF RS. 349242/- MADE BY THE ASSESSEE WILL NOT SUFFICE. WE FIND THAT THE TOTAL ADMINISTRATIVE EXPE NSES CLAIMED IN THE STATEMENT OF TOTAL INCOME ARE AT RS. 3.50 CRORES. IN OUR CONS IDERED OPINION, AT LEAST 10% OF SUCH EXPENDITURE SHOULD BE APPORTIONED TOWARDS E ARNING OF EXEMPT INCOME. THEREFORE, A DISALLOWANCE OF RS. 35 LACS SHOULD MEE T THE ENDS OF JUSTICE. WE ACCORDINGLY DIRECT THE A.O. TO RESTRICT THE DISALLO WANCE AT RS. 35 LACS. THIS GROUND ALONGWITH ALL ITS SUB GROUND AND THE ADDITIO NAL GROUND ARE TREATED AS PARTLY ALLOWED. 14. THE NEXT GROUND RELATES TO THE NON GRANTING OF DEDU CTION OF RS. 30 CRORES CONTRIBUTED BY THE ASSESSEE TO GUJARAT SOCIO ECONOM IC DEVELOPMENT SOCIETY (GSEDS) U/S. 37 R.W.S. 28 OF THE ACT. 15. BRIEFLY STATED THE UNDERLYING FACTS IN THIS ISSUE A RE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS GIVEN CONTRIBUTION OF RS. 30 CRORES TO GSEDS. THE ASSESSEE DISALLOWED THE AMOUNT IN THE COMPUTATI ON OF INCOME BUT BY WAY OF A NOTE, THE ASSESSEE HAS CLAIMED DEDUCTION OF RS . 30 CRORES U/S. 37 ON THE GROUND OF COMMERCIAL EXPEDIENCY. IT WAS STRONGLY CO NTENDED THAT THE CONTRIBUTION HAS BEEN MADE IN PURSUANCE OF THE G.R. OF THE GOVERNMENT OF GUJARAT REQUESTING EACH STATE PUBLIC SECTOR ENTERPR ISE TO CONTRIBUTE 30% OF ITS PROFIT FOR SUCH UPLIFTMENT OF WEAKER SECTION OF THE SOCIETY. 16. THE CLAIM OF THE ASSESSEE WAS DENIED BY THE A.O. ON THE GROUND THAT THE ASSESSEE IS A SEPARATE ENTITY FROM THE FINANCE DEPA RTMENT OF GOVERNMENT OF ITA NOS. 1478 & 1550/AHD/2013 AND ORS. . A.YS. 2008-0 9, 2009-10 & 2010-11 7 GUJARAT AND THE SCOPE OF BUSINESS CANNOT BE ENLARGE D TO AN EXTENT WHERE THE EXPENDITURE IS INCURRED WITHOUT COMMENSURATE BENEFI T TO ITS BUSINESS. 17. THE ASSESSEE STRONGLY AGITATED THE MATTER BEFORE TH E LD. CIT(A) BUT WITHOUT ANY SUCCESS. 18. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEHEMEN TLY STATED THAT THE ASSESSEE RECEIVED ITS ENTIRE BUSINESS FROM THE STATE PSUS WH O ARE BOUND TO FOLLOW THEIR DIRECTIVE OF THE FINANCE DEPARTMENT WHILE DEPUTING SURPLUS FUNDS AND ARE BOUND TO DEPOSIT SUCH FUNDS WITH THE ASSESSEE COMPA NY. 19. IT WAS BROUGHT TO OUR NOTICE THAT THE ASSESSEE IS B OUND TO FOLLOW THE DIRECTIONS OF THE GOVERNMENT OF GUJARAT AND ON SUCH DIRECTIONS , THE ASSESSEE HAD MADE THE CONTRIBUTION OF RS. 30 CRORES AND THEREFORE THE CLAIM SHOULD BE ALLOWED ON THE GROUNDS OF COMMERCIAL EXPEDIENCY. THE LD. COUNS EL DREW OUR ATTENTION TO THE VARIOUS INSTRUCTIONS ISSUED BY THE GOVERNMENT O F GUJARAT. PER CONTRA, THE LD. D.R. STRONGLY SUPPORTED THE FINDINGS OF THE LOW ER AUTHORITIES. 20. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTH ORITIES BELOW. IT IS TRUE THAT AS PER DIRECTIONS OF THE GOVERNMENT OF GUJARAT, THE ASSESSEE HAD MADE THE CONTRIBUTION OF RS. 30 CRORES. HOWEVER, IN OUR CONS IDERED OPINION, THE DIRECTIONS OF GUJARAT CANNOT OVERRIDE THE PROVISION S OF THE INCOME TAX ACT. WE FIND THAT THE ASSESSEE HAS CONTRIBUTED 30% OF IT S PROFIT WHICH IS AKIN TO APPROPRIATION OF PROFIT AND THIS 30% CANNOT BE CONS TRUED AS CHARGE AGAINST PROFIT. 21. THE CONTRIBUTION MADE BY THE ASSESSEE TO GSEDS IS E LIGIBLE FOR DEDUCTION U/S. 80G OF THE ACT AND THAT HAS BEEN ALLOWED BY THE A.O . BY MAKING THE ITA NOS. 1478 & 1550/AHD/2013 AND ORS. . A.YS. 2008-0 9, 2009-10 & 2010-11 8 CONTRIBUTION, THE ASSESSEE HAS ONLY FOLLOWED THE DI CTAT OF THE GOVERNMENT OF GUJARAT BUT NOWHERE HAS DEMONSTRATED THE NEXUS BETW EEN THE CONTRIBUTION AND THE COMMERCIAL EXPEDIENCY VIS--VIS BENEFITS TO THE ASSESSEE. THE CONTRIBUTION SO MADE IS ELIGIBLE FOR DEDUCTION U/S. 80G AND THER EFORE IN OUR UNDERSTANDING OF THE FACTS, THE CLAIM OF ENTIRE CONTRIBUTION AS D EDUCTION U/S. 37 OF THE ACT IS NOT TENABLE. 22. THE ASSESSEE HAS RELIED UPON VARIOUS JUDICIAL DECIS IONS. WE HAVE CONSIDERED THOSE JUDICIAL DECISIONS CAREFULLY. IN NONE OF THE DECISIONS RELIED UPON BY THE ASSESSEE, THE PAYMENT WAS ELIGIBLE FOR DEDUCTION U/ S. 80G OF THE ACT. THEREFORE, THE RELIANCE PLACED BY THE ASSESSEE IS M ISPLACED. 23. CONSIDERING THE FACTS IN TOTALITY, THIS GROUND IS D ISMISSED. 24. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. COMING TO THE APPEAL OF THE REVENUE IN ITA NO. 1550 /AHD/2013 FOR A.Y. 2009-10 25. THE FIRST GROUND RELATES TO THE DELETION OF THE DIS ALLOWANCE OF RS. 82.74 LACS BEING EXPENSES INCURRED TOWARDS RENOVATION AND MODE RNIZATION OF FINANCE DEPARTMENT, GOVERNMENT OF GUJARAT. 26. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCE EDINGS, THE A.O. FOUND THAT THE ASSESSEE HAS CLAIMED EXPENDITURE OF RS. 82,74,4 52/- TOWARDS MODERNIZATION ON BEHALF OF GOVERNMENT OF GUJARAT. IT WAS EXPLAINE D THAT THE ASSESSEE IS ITA NOS. 1478 & 1550/AHD/2013 AND ORS. . A.YS. 2008-0 9, 2009-10 & 2010-11 9 100% GOVERNMENT OF GUJARAT COMPANY AND HAVE TO WORK UNDER SUPERVISION AND CONTROL OF FINANCE DEPARTMENT OF GOVT. OF GUJAR AT. IT WAS EXPLAINED THAT THE FINANCE DEPARTMENT HAS DIRECTED ALL THE STATE G OVT. CORPORATIONS TO PART THEIR SURPLUS WITH THE ASSESSEE. IT WAS FURTHER EXP LAINED THAT THE MANAGING DIRECTOR, JT. MANAGING DIRECTOR AND SR. VICE PRESID ENT OF THE ASSESSEE OCCUPY AND OPERATE FROM THE FINANCE DEPARTMENT OF GOVT. OF GUJARAT. THE ASSESSEE HAS INCURRED THE EXPENDITURE ON THE MODERNIZATION O F THE OFFICE OF THE FINANCE DEPARTMENT OF GOVERNMENT OF GUJARAT AND THEREFORE S UCH EXPENDITURE SHOULD BE ALLOWED. THE CONTENTIONS OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE A.O. WHO DISALLOWED THE ENTIRE EXPENDITURE INCURRED ON THE MODERNIZATION/RENOVATION OF FINANCE DEPARTMENT. 27. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND REITERATED ITS CLAIM OF EXPENDITURE ON THE GROUND OF COMMERCIAL EXPEDIENCY. THE LD. CIT(A) WAS CONVINCED WITH THE CLAIM OF EXPENDITURE AND DIRECT ED THE A.O. TO DELETE THE ADDITION. THE RELEVANT FINDINGS OF THE LD. CIT(A) R EAD AS UNDER:- 7.4 I HAVE CONSIDERED THE FACTS OF THE CASE, THE ORDER OF THE ASSESSING OFFICER AND THE SUBMISSIONS OF THE APPELLANT. THE CLAIM OF THE APPELLANT IS THAT OF ALLOWABILITY OF DEDUCTION UNDER SECTION 37 OF THE IT ACT BEING R EVENUE EXPENDITURE INCURRED OUT OF COMMERCIAL EXPEDIENCY. THE APPELLANT HAS DEM ONSTRATED THAT THERE IS AN ELEMENT OF COMMERCIAL EXPEDIENCY IN VIEW OF THE FAC T THAT HE ENTIRE BUSINESS OF THE APPELLANT, FROM WHICH SUBSTANTIAL TAXABLE INCOM E IS GENERATED IS DUE TO THE MANDATE ISSUED BY - THE FINANCE DEPARTMENT OF THE G OVERNMENT OF GUJARAT REQUIRING THE PUBLIC SECTOR ENTERPRISES (PSE) OWNED AND CONTROLLED BY IT TO DEPOSIT SURPLUS MONEYS WITH THE APPELLANT. ACCORDINGLY, THE EXPENDITURE INCURRED ON RENOVATION AND MODERNIZATION OF FINANCE DEPARTMENT BUILDING WAS FOR THE BENEFIT OF THE BUSINESS SINCE IT ENSURED CONTINUED CORDIAL RELATIONS WITH THE FINANCE DEPARTMENT AT WHOSE INSTANCE APPELLANT WAS ABLE TO GET DEPOSITS FROM THE STATE PSES AND AT WHOSE INSTANCE THE EXPENDITUR E WAS INCURRED BY THE APPELLANT FOR RENOVATION AND MODERNIZATION OF FINAN CE DEPARTMENT BUILDING. FURTHER, THE APPELLANT HAS ALSO DEMONSTRATED THAT R ENOVATION AND MODERNIZATION ITA NOS. 1478 & 1550/AHD/2013 AND ORS. . A.YS. 2008-0 9, 2009-10 & 2010-11 10 OF FINANCE DEPARTMENT BUILDING WOULD ENHANCE IMAGE OF FINANCE DEPARTMENT WHICH WOULD BENEFIT THE APPELLANT'S BUSINESS WHICH IS POSITIVELY BENEFITED FROM THE IMAGE OF THE FINANCE DEPARTMENT AND ITS DECISIO NS. FURTHER, THE PROPERTY IN THE FURNITURE AND FITTINGS, ETC. VESTS IN THE FINAN CE DEPARTMENT AS PER CORRESPONDENCE FROM THE FINANCE DEPARTMENT DATED 25 /01/2007 (PAGE NO. 65 OF THE PAPER BOOK). ACCORDINGLY, NO NEW ASSET OWNED BY THE APPELLANT HAS COME INTO EXISTENCE NOR HAS THE APPELLANT RECEIVED ANY E NDURING ADVANTAGE DUE TO INCURRING OF AFORESAID EXPENDITURE. IN VIEW OF THE ABOVE, I AM IN AGREEMENT WITH THE SUBMISSIONS OF THE APPELLANT THAT THE EXPENDITU RE ON ACCOUNT OF RENOVATION AND MODERNIZATION OF FINANCE DEPARTMENT BUILDING, W HICH WAS NOT OWNED BY THE APPELLANT, WAS INCURRED BY THE APPELLANT ON ACCOUNT OF COMMERCIAL EXPEDIENCY AND WAS ALLOWABLE UNDER SECTION 37 OF THE IT ACT AS REVENUE EXPENDITURE. ACCORDINGLY, THE DISALLOWANCE OF RS. 82,74,451 MADE BY THE ASSESSING OFFICER IN THIS REGARD IS DIRECTED TO BE DELETED. 28. BEFORE US, THE LD. D.R. STRONGLY SUPPORTED THE FIND INGS OF THE A.O. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HA S BEEN STATED BEFORE THE LOWER AUTHORITIES. 29. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE OR DERS OF THE AUTHORITIES BELOW. THERE IS NO DISPUTE THAT THE ENTIRE BUSINESS OF THE ASSESSEE COMES FROM THE FINANCE DEPARTMENT OF THE GOVERNMENT OF GUJARAT . IT IS ALSO NOT IN DISPUTE THAT THE M.D. JT. M.D. AND THE VICE PRESIDE NT OF THE ASSESSEE OCCUPY OFFICE IN THE PREMISES OF THE FINANCE DEPARTMENT OF GOVT. OF GUJARAT. IN OUR CONSIDERED OPINION, THE EXPENDITURE ON ACCOUNT OF R ENOVATION AND MODERNIZATION OF FINANCE DEPARTMENT BUILDING WAS IN CURRED BY THE ASSESSEE ON ACCOUNT OF COMMERCIAL EXPEDIENCY AND IS THEREFORE A LLOWABLE U/S. 37 OF THE ACT WHICH HAS BEEN RIGHTLY DIRECTED TO BE ALLOWED BY TH E FIRST APPELLATE AUTHORITY. THEREFORE NO INTERFERENCE IS CALLED FOR. GROUND NO. 1 IS DISMISSED. ITA NOS. 1478 & 1550/AHD/2013 AND ORS. . A.YS. 2008-0 9, 2009-10 & 2010-11 11 30. GROUND NO. 2 RELATES TO THE DELETION OF THE DISALLO WANCE OF DEPRECIATION ON ASSETS PURCHASED AND LEASE BACK. 31. AN IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBUNAL I N ASSESSEES OWN CASE IN A.Y. 2005-06 WHEREIN THE TRIBUNAL FOLLOWED THE DECI SION OF THE CO-ORDINATE BENCH IN ITA NO. 2763/AHD/2007 FOR A.Y. 2004-05. WE FIND THAT THE FIRST APPELLATE AUTHORITY WHILE GIVING RELIEF TO THE ASSE SSEE ON THIS ISSUE HAS FOLLOWED THE DECISION OF THE CO-ORDINATE BENCH IN EARLIER AS SESSMENT YEAR. THEREFORE, NO INTERFERENCE IS CALLED FOR. GROUND NO. 2 IS ALSO DI SMISSED. 32. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ITA NO. 2456/AHD/2014 ASSESSEES APPEAL FOR A.Y. 20 08-09 33. THE ONLY GRIEVANCE RELATES TO THE DISALLOWANCE MADE U/S. 14A READ WITH RULE 8D OF THE ACT. 34. A SIMILAR ISSUE HAS BEEN CONSIDERED BY US IN ITA NO . 1478/AHD/2013 QUA GROUND NO.2 WITH ITS SUB GROUND AND ADDITIONAL GROU ND OF THAT APPEAL. FOR OUR DETAILED DISCUSSION THEREIN, WE DIRECT THE A.O. TO RESTRICT THE DISALLOWANCE TO 10% OF THE ADMINISTRATIVE EXPENSES. THE ASSESSEE WI LL GET PART RELIEF. ITA NO. 1023/AHD/2014 REVENUES APPEAL FOR A.Y. 200 8-09 35. GROUND NO. 1 RELATES TO THE DELETION OF THE DISALLO WANCE MADE ON EXPENSES OF RS. 1.40 CRORES TOWARDS RENOVATION AND MODERNIZATIO N. ITA NOS. 1478 & 1550/AHD/2013 AND ORS. . A.YS. 2008-0 9, 2009-10 & 2010-11 12 36. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US IN ITA NO. 1550/AHD/2013 QUA GROUND NO. 1 OF THAT APPEAL. FOR OUR DETAILED DISCU SSION THEREIN, THIS GROUND IS DISMISSED. 37. GROUND NO. 2 RELATES TO THE DELETION OF THE DISALLO WANCE OF DEPRECIATION ON ASSETS PURCHASE AND LEASE BACK. 38. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US IN ITA NO. 1550/AHD/2013 QUA GROUND NO. 2 OF THAT APPEAL. FOR OUR DETAILED DISCU SSION THEREIN, GROUND NO. 2 IS DISMISSED. ITA NO. 2360/AHD/2013 ASSESSEES APPEAL FOR A.Y. 20 10-11 39. THE ONLY GRIEVANCE OF THE ASSESSEE RELATES TO THE D ISALLOWANCE MADE U/S. 14A READ WITH RULE 8D OF THE ACT. 40. A SIMILAR ISSUE HAS BEEN CONSIDERED BY US IN ITA NO . 1478/AHD/2013 VIDE GROUND NO. 2 WITH ITS SUB GROUND AND ADDITIONAL GRO UND. FOR OUR DETAILED DISCUSSION THEREIN, WE DIRECT THE A.O. TO RESTRICT THE DISALLOWANCE TO 10% OF THE ADMINISTRATIVE EXPENSES. THE ASSESSEE WILL GET PART RELIEF. ORDER PRONOUNCED IN OPEN COURT ON 06- 04- 20 18 SD/- SD/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 06/04/2018 RAJESH COPY OF THE ORDER FORWARDED TO: -