ACIT, Pune V. Lap Finance & Consultancy P.Ltd, Pune

ITA 1524/PUN/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0902 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 01-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Depreciation; Earning of tax free income; Source of fund; Assessment record; Notional interest
• Section: 143(3); 14A; 37(1); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , AM . / ITA NO S . 1 522 & 1 523 /PN/20 1 3 / ASSESSMENT YEAR S : 200 9 - 1 0 & 20 1 0 - 11 LAP FINANCE & CONSULTANCY PVT. LTD., OFFICE NO.9 & 10, FIFTH FLOOR, AKSHAY COMPLEX, ITI ROAD, AUNDH, PUNE 411007 . / APPELLANT PAN: AA ACL3209M VS. THE ASST. COMMISSIONER OF INCOME TAX , CIRCLE 11(2), PUNE / CIRCLE 11(2), PUNE . / RESPONDENT . / ITA NOS.1 52 4 & 1 52 5 /PN/2013 / ASSESSMENT YEARS: 200 9 - 1 0 & 20 1 0 - 11 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 11( 2), PUNE . / APPELLANT VS. LAP FINANCE & CONSULTANCY PVT. LTD., OFFICE NO.9 & 10, FIFTH FLOOR, AKSHAY COMPLEX, ITI ROAD, AUNDH, PUNE 411007 . / RESPONDENT PAN: AAACL3209M ITA NO S. 1 522 TO 1 525 /PN/2013 LAP FINANCE & CONSULTANCY PVT. LTD. ITA NO.1527 & 1528/PN/2013 M/ S. A.P. HOLDINGS P. LTD. 2 . / ITA NOS.1 527 & 1528 /PN/2013 / ASSESSMENT YEARS: 200 8 - 0 9 & 20 1 0 - 11 / ASSESSMENT YEARS: 200 8 - 0 9 & 20 1 0 - 11 M/S. A.P. HOLDINGS PVT. LTD., 9 & 10, AKSHAY COMPLEX PUSHPAK PARK, AUNDH, PUNE 411007 . / APPELLANT PAN: AABCA5801H VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(1), PUNE . / RESPONDENT CIRCLE 1(1), PUNE . / RESPONDENT ASSESSEE BY : SHRI SUNIL GANOO REVENUE BY : SHRI B.C. MALAKAR / DATE OF HEARING : 2 0 .0 8 .2015 / DATE OF PRONOUNCEMENT: 06 . 11 .2015 / ORDER / ORDER PER SUSHMA CHOWLA, JM: OUT OF THIS B U NC H OF APPEAL S , TWO CROSS APPEALS RELATE TO THE ASSESSEE LAP FINANCE & CONSULTANCY PVT. LTD. , ARE AGAINST THE CONSOLIDATED ORDER OF CIT (A) - I , PUNE , DATED 0 2 . 0 5 .2013 RELATING TO ASSESSMENT YEAR S 200 9 - 1 0 AND 20 1 0 - 11 AGAINST RESPECTIVE ORDER S PASSED UNDER SECTI ON 1 4 3 (3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) . THE BALANCE TWO APPEAL S FILED BY THE ASSESSEE M/S. A.P. HOLDINGS PVT. LTD. , ARE AGAINST THE CONSOLIDATED ORDER OF CIT (A) - I, PUNE , DATED 02 . 05 .2013 RELATING TO ASSESSMENT YEAR S 200 8 - 0 9 AND 2010 - 11 AGAINST RESPECTIVE ORDER S PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) . 2. TWO CROSS APPEALS RELATING TO LAP FINANCE & CONSULTANCY PVT. LTD. ON IDENTICAL ISSUE BOTH IN THE ASSESSEES APPEAL AND THE REVENUES APPEAL WERE HE ARD TOGETHER AND ITA NO S. 1 522 TO 1 525 /PN/2013 LAP FINANCE & CONSULTANCY PVT. LTD. ITA NO.1527 & 1528/PN/2013 M/ S. A.P. HOLDINGS P. LTD. 3 ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. HOWEVER, REFERENCE IS BEING MADE TO THE FACTS AND ISSUES IN ITA NO S . 1 522 /PN/201 3 & 1524/PN/2013 TO ADJUDICATE THE ISSUES RAISED IN THE CROSS APPEALS . 3. FURTHE R, THE ISSUE RAISED IN THE CASE OF THE OTHER ASSESSEE M/S. A.P. HOLDINGS PVT. LTD. , RELATING TO ASSESSMENT YEAR S 2008 - 09 AND 2010 - 11 ARE ON SIMILAR ISSUE , WHICH IS ALSO RAISED IN THE CASE OF ASSESSEES APPEAL I.E. OF LAP FINANCE & CONSULTANCY PVT. LTD. , HE NCE, THE SAME IS BEING DISPOSED OFF BY WAY OF THIS CONSOLIDATED ORDER. 4 . WE SHALL TAKE UP THE APPEAL S IN ITA NOS.1522/PN/2013 AND 1524/PN/2013 . 5. THE ASSESSEE IN ITA NO. 1 522 /PN/201 3 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. IN THE FACTS AND CI RCUMSTANCES OF THE CASE AND IN LAW , THE LEARNED C . I. T . [A] HAS GROSSLY ERRED I N CONFIRMING THE DISALLOWANCE OF RS.18 , 83,404 . 00 MADE BY THE LEARNED ASSESSING OFFICER U / S 14 A OF THE I. T. ACT 1961 R . W . RULE 8 OF I. T. RULES 1962 . THE SAID DISALLOWANCE BEING PATENTLY ILLEGAL, BAD IN LAW , ARBITRARY, PERVERSE AND DEVOID OF MERITS AND BEING LEGALLY UNSUSTAINABLE THE SAME MAY PERVERSE AND DEVOID OF MERITS AND BEING LEGALLY UNSUSTAINABLE THE SAME MAY PLEASE BE DELETED . 2. THE LEARNED C . I. T . [A] HAS MISERABLY FAILED TO APPRECIATE THAT THE INVESTMENT IN SHARES / MUTUAL FUNDS WAS MADE BY TH E APPELLANT OUT OF OWN FUNDS AND HENCE NO DISALLOWANCE FOR ALLEGED NOTION INTEREST ON BORROWED FUNDS WAS WARRANTED EVEN U/S 14 A OF THE I. T. ACT 1961 R.W . RULE 8 OF I. T. RULES 1962. THE DISALLOWANCE MADE U/S 14 A OF THE I. T. ACT 1961 MAY PLEASE BE DELETED. 3. THE LEARNED C. I. T.[A] HAS MISERABLY FAILED TO APPRECIATE THAT THE APPELLANT HAD NOT INCURRED AN ADMINISTRATIVE E XPENSES FOR EARNING THE TAX FREE DIVIDEND INCOME, WHICH WAS BEING DIRECTLY CREDITED IN BANK ACCOUNTS AND FURTHERMORE THERE WAS NO ADDITIONA L INVESTMENT MADE DURING THE YEAR WARRANTING ANY ADMINISTRATIVE EXPENDITURE . THE DISALLOWANCE MADE U/S 14A OF THE I. T. ACT 1961 MAY PLEASE BE DELETED . MAY PLEASE BE DELETED . 4. THE LEARNED ASSESSING OFFICER HAVING FAILED TO DISCHARGE THE INITIAL BURDEN CAST UPON HIM U / S 14 A OF THE I. T. ACT 1961, THE DISALLOWANCE MADE BY HIM U/ S 14 A OF THE I. T . ACT 1961 BEING LEGAL L Y UNSUSTAINABLE, THE LEARNED C . I. T.[A] OUGHT TO HAVE DELETED THE SAID DISALLOWANCE . 5. WITHOUT PREJUDICE TO ABOVE AND B Y W A Y OF AN ALTERNATE SUBMISSION, THE APP ELLANT SUBMITS THAT IT MA Y PLEASE BE HELD THAT NO DISALLOWANCE U/S 14A OF THE I. T . ACT 1961 IS WARRANTED IN RESPECT OF DIVIDEND RECEIVED ON SHARES HELD AS STOCK I N TRADE AND THEREFORE THE DISALLOWANCE MADE B Y THE LEARNED ASSESSING OFFICER AND AS CONFIRMED BY THE LEARNED C . I.T.[A ] MAY PLEASE BE PROPORTIONATELY REDUCED. 6. THE DISALLOWANCE OF RS . 10 , 09,253 . 00 OUT O F FOREIGN TRAVEL EXPENSES , AS MADE B Y THE LEARNED ASSESSING OFFICER AND AS CONF I RME D BY THE LEARNED C. I. T . [A] B Y THE LEARNED ASSESSING OFFICER AND AS CONF I RME D BY THE LEARNED C. I. T . [A] BE I NG ARBITRARY , PERVERSE, BASED ON N O EVIDENCE AND BEING DEVOID OF MERITS, THE SAME MAY PLEASE BE DELETED . ITA NO S. 1 522 TO 1 525 /PN/2013 LAP FINANCE & CONSULTANCY PVT. LTD. ITA NO.1527 & 1528/PN/2013 M/ S. A.P. HOLDINGS P. LTD. 4 W I THOUT PREJUDICE TO ABOVE AND BY WAY OF AN ALTERNATE SUBMISSION THE APPELLANT SUBMITS THAT THE SAID DISALLOWANCE MAY BE RESTRICTED TO REASONABLE AMOUNT THAT MAY BE DEEMED FIT AND PROP ER BY THE HON.BENCH . 7. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , THE LEARNED C . I. T . [A] HAS 7. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , THE LEARNED C . I. T . [A] HAS ERRED IN HOLDING THAT CERTAIN AMOUNT OF EXPENDITURE SUCH AS REMUNERATION TO DIRECTORS, SALARY . TRAVELING, LEGAL FEES, AUDIT FEES IS REQUIRED TO BE APP ORTIONED AGAINST THE PROFITS OF WIND MILL AND HAS FURTHER ERRED IN CONFIRMING THE QUANTIFICATION OF SAID EXPENDITURE MADE BY THE LEARNED ASSESSING OFFICER AT RS . 6, 00 ,333 . 00. THE SAID F I NDING BEING ARBITRARY, PERVERSE AND DEVOID OF MERITS THE SAME MA Y PLEAS E BE VACATED . 8. THE APPELLANT SUBMITS THAT DURING THE APPELLATE PROCEEDINGS THE APPELLANT NEVER CONCEDED THAT CERTAIN AMOUNT OF EXPENDITURE SUCH AS REMUNERATION TO DIRECTORS, SALARY . TRAVELING, LEGAL FEES, AUDIT FEES IS REQUIRED TO BE APPORTIONED AGAINST THE PROFITS OF WIND MILL AND ALL THE STATEMENTS, AVERMENTS AND CONTENTIONS OF THE LEARNED C. I. T.[A] IN THIS REGARD IN PARA 4.3 OF HIS IMPUGNED ORDER BEING FALSE AND FACTUALL Y INCORRECT THE SAME MAY PLEASE BE DELETED . FACTUALL Y INCORRECT THE SAME MAY PLEASE BE DELETED . 9. THE APPELLANT CRAVES THE PERMISSIO N TO ADD, AMEND, MODIFY, ALTER, REVISE, SUBSTITUTE, DELETE ANY OR ALL GROUNDS OF APPEAL, IF DEEMED NECESSARY AT THE TIME OF HEARING OF THE APPEAL. 6 . THE REVENUE IN ITA NO.152 4 /PN/2013 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. THE ORDER OF THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE . 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN ALLOWING TO THE ASSESSEE DEDUCTION OF RS.8,75,979 / - UNDER SECTION 80IA(4) OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF PROFIT EARNED FROM THE BUSINESS OF WIND - POWER GENERATION, INSTEAD OF CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN FAILING TO APPRECI ATE THAT BY VIRTUE OF THE OVERRIDING PROVISION OF SECTION 80IA(5), AS PER WHICH THE ELIGIBLE BUSINESS HAS TO BE CONSIDERED AS THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR, THE ASSESSEE DID NOT HAVE ANY ACTUAL PROFIT FROM ITS BUSINESS OF WIND POWER GENERATION, AS HAD BEEN CLEARLY DEMONSTRATED BY THE ASSESSING OFFICER IN HIS ORDER, AND THUS THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION UJS.80IA(4). NOT ENTITLED TO DEDUCTION UJS.80IA(4). 4. THE LEARN ED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN ROUTINELY FOLLOWING THE DECISION OF THE HON ' BLE ITAT PUNE IN THE CASE OF KHINVASARA INVESTMENT (P) LTD. (110 ITD 198) IN DISREGARD OF SEVERAL OTHER DECISIONS INCLUDING THE DECISION OF THE HON'BLE MU MBAI ITAT IN THE CASE OF HERCULES HOISTS LTD. VS. ACIT IN ITA NOS.7944,7946, 2255 & 7943 / MUM / 2011 DATED 23.02.2013, WHEREIN IT WAS CATEGORICALLY HELD THAT INITIAL ASSESSMENT YEAR FOR THE PURPOSE OF SECTION 80IA(5) R.W.S. 80IA(2) IS THE YEAR IN WHICH THE EN TERPRISE COMMENCES COMMERCIAL PRODUCTION. 5. FOR THOSE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF THE HEARING, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 6. THE A PPELLANT CRAVES LEAVE TO ADD, ALTER AMEND ANY OF THE GROUNDS OF APPEAL DURING THE COURSE OF THE APPELLATE PROCEEDINGS BEFORE THE HON'BLE TRIBUNAL . ITA NO S. 1 522 TO 1 525 /PN/2013 LAP FINANCE & CONSULTANCY PVT. LTD. ITA NO.1527 & 1528/PN/2013 M/ S. A.P. HOLDINGS P. LTD. 5 7 . THE ASSESSEE IN ITA NO.1527/PN/2013 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. IN THE FACTS AND C IRCUMSTANCES O F THE CASE AND I N LAW, THE LEARNED C.I.T. [ A] HAS GROSSLY ERRED I N CONFIRMING T HE DISALLOWANCE O F RS . 12,77 , 661 . 00 MADE BY THE LEARNED ASSESSING OFFICER U/S 14 A OF THE I.T . ACT 1961 R.W . RULE 8 OF I.T . RULES 1962 . THE SAID DISALLOWANCE BEING PATENTLY ILLEGAL, BAD IN LAW, ARBITRARY, PERVERSE AND DEVOID OF MERITS AND BEING LEGALLY UNSUSTAINABLE THE SAME MA Y PLEASE BE DELETED . 2. THE LEARNED C .I. T . [A] HAS MISERABLY FAILED TO APPRECIATE THAT THE INVESTMENT IN SHARES WAS MADE BY THE APPELLANT OUT OF OWN FUNDS AND HENCE NO DISALLOWANCE FOR ALLEGED NOTIONAL INTEREST ON BORROWED FUNDS WAS WARRANTED EVEN U/S 14 A OF THE I.T. ACT 1961 R.W. RULE 8 OF I.T . RULES 1962 . THE DISALLOWANCE MADE U/S 14A OF THE I.T. ACT 1961 MAY PLEASE BE DELETED . 3. THE LEAR NED C.I.T . [A] HAS MISERABLY FAILED T O APPRECIATE THAT THE APPELLANT HAD 3. THE LEAR NED C.I.T . [A] HAS MISERABLY FAILED T O APPRECIATE THAT THE APPELLANT HAD NOT INCURRED ANY ADMINISTRATIVE EXPENSES FOR EARNING THE TAX FREE DIVIDEND INCOME, WHICH WAS BEING DIRECTLY CREDITED IN BANK ACCOUNTS AND FURTHERMORE THERE WAS NO ADDITIONAL INVESTMENT MADE DURING THE YEAR WARRANTING ANY ADMINISTRATIVE EXPENDITURE. THE DISALLOWANCE MADE U/S 14A OF THE I.T . ACT 1961 MAY PLEASE BE DELETED. 4. THE LEARNED ASSESSING OFFICER HAVING FAILED TO DISCHARGE THE INITIAL BURDEN CAST UPON HIM U/S 14A OF THE I.T. AC T 1961, THE DISALLOWANCE MADE BY HIM U/S 14 A OF THE I.T. ACT 1961 BEING LEGALLY UNSUSTAINABLE, THE LEARNED C.IT.[A] OUGHT TO HAVE DELETED THE SAID DISALLOWANCE. 5. THE APPELLANT CRAVES THE PERMISSION TO ADD, AMEND, MODIFY, ALTER, REVISE, SUBSTITUTE, DELE TE ANY OR ALL GROUNDS OF APPEAL, IF DEEMED NECESSARY AT THE TIME OF HEARING OF THE APPEAL. OF HEARING OF THE APPEAL. ITA NO.1522/PN/2013 8. THE ISSUE IN THE GROUND OF APPEAL NOS.1 TO 5 RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE UNDER SECTION 14A OF THE ACT. 9. BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE WAS ENGAGED IN THE 9. BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF FINANCE AND INVESTMENTS, POWER GENERATION AND SUPPLY OF POWER. FOR THE ASSESSMENT YEAR 2009 - 10 , THE ASSESSEE FURNISHED RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 75,94,013/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT IN THE COMPUTATION OF INCOME, THE ASSESSEE HAD DECLARED EXEMPT INCOME OF RS.15,47,936/ - ON ACCOUNT OF DIVIDEND ON MUTUAL FUNDS AND AMOUNT OF NIL ON ACCOUNT OF PROFIT ON SALE O F MUTUAL FUNDS. THE ASSESSING OFFICER FURTHER NOTED OF NIL ON ACCOUNT OF PROFIT ON SALE O F MUTUAL FUNDS. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE HAD NOT DEBITED ANY EXPENSES IN THE BOOKS OF ACCOUNT AGAINST THE ITA NO S. 1 522 TO 1 525 /PN/2013 LAP FINANCE & CONSULTANCY PVT. LTD. ITA NO.1527 & 1528/PN/2013 M/ S. A.P. HOLDINGS P. LTD. 6 SAID EXEMPT INCOME. THE ASSESSEE WAS THUS, REQUESTED TO EXPLAIN THE REASONS FOR THE SAME AS TO WHY THE PROVISIONS OF SE CTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME - TAX RULES, 1962 (RULES) SHOULD NOT BE APPLIED. IN REPLY, THE ASSESSEE FILED WRITTEN SUBMISSIONS WHICH ARE INCORPORATED UNDER PARA 3.1.2 AND IN THE SAID REPLY, THE ASSESSEE CLAIMED THAT THERE WERE EVEN TUALLY, NO EXPENDITURE WAS DEBITED TO THE PROFIT & LOSS ACCOUNT DURING THE YEAR UNDER CONSIDERATION FOR EARNING THE ABOVE SAID INCOME, THEREFORE, THE PROVISIONS OF SECTION 14A OF THE ACT WERE NOT APPLICABLE. THE ASSESSING OFFICER FURTHER NOTED THAT IT WAS AN ADMITTED FACT THAT INVESTMENTS IN THE EXEMPT ASSETS HAD BEEN MADE WITH CLOSING BALANCE OF RS.7.50 CRORES AS ON 31.03.2008 AND RS.7.50 CRORES AS ON 31.03.2009 . SIMULTANEOUSLY, THE ASSESSEE HAD PAID INTEREST ON LOANS TAKEN AND DEBITED THE SAME IN THE BO OKS OF ACCOUNT. IN VIEW THEREOF, THE CLAIM OF THE ASSESSEE THAT BORROWED FUNDS HAD NOT BEEN UTILIZED FOR MAKING THE SAID INVESTMENTS WAS FOUND TO BE FACTUALLY INCORRECT AS THE OPENING INVESTMENT WAS ALSO RS.7. 5 0 CRORES. THE ASSESSING OFFICER FURTHER OBSE RVED THAT NO SPECIFIC DETAILS OF USE OF FUNDS HAD BEEN PROVIDED WHICH CONCLUSIVELY PROVE THAT THE BORROWED FUNDS WERE NOT UTILIZED FOR MAKING SUCH EXEMPTED INVESTMENT EITHER IN THE EARLIER YEARS AS THE OPENING BALANCE OF SUCH INVESTMENT AS ON 01.04.2008 AS WELL AS DURING THE YEAR WHERE THE CLOSING BALANCE OF THE INVESTMENT WAS RS.7.50 CRORES AS ON 31.03.2009. THE CLAIM OF THE ASSESSEE WAS THUS REJECTED AND APPLYING THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN GODREJ & BOYCE VS. DCIT (2010) 234 C TR 1 (BOM) , THE ASSESSING OFFICER WORKED OUT THE DISALLOWANCE AS PER RULES 8D OF THE RULES AT RS.18,83,404/ - AS PER THE CALCULATION AT PAGE 4 OF THE ASSESSMENT ORDER. 10. IN APPEAL BEFORE THE CIT(A), THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE PUNE BENCH OF TRIBUNAL IN MAHAVIR STEEL INDUSTRIES VS. ACIT (ITA NOS.1512/PN/2008 AND 1222/PN/2010 ) AND THE HONBLE BOMBAY HIGH COURT IN K. RAHEJA CORPORATION PVT. LTD. (ITA NO.1260/2009) FO R THE PROPOSI TION TH AT WHERE BOTH INTEREST FREE AS WELL AS BORROWED FUNDS WERE AVAILABLE ITA NO S. 1 522 TO 1 525 /PN/2013 LAP FINANCE & CONSULTANCY PVT. LTD. ITA NO.1527 & 1528/PN/2013 M/ S. A.P. HOLDINGS P. LTD. 7 FOR INVESTMENT, UNLESS THE ASSESSING OFFICER BRING OUT SOME EVIDENCES ON RECORD THAT THE BORROWED FUNDS WERE UTILIZED FOR MAKING INVESTMENT, NO DISALLOWANCE UNDER SECTION 14A OF THE ACT C OULD BE MADE. THE ASSESSEE FURTHER POINTED OUT THAT THE PERCENTAGE OF INTEREST FREE FUNDS AVAILABLE WAS TO THE EXTENT OF 90% OF THE TOTAL FUNDS AVAILABLE AND ONLY 10% OF THE FUNDS WERE BORROWED FUNDS. THE CIT(A) NOTED THAT THE ENTIRE ARGUMENTS OF THE ASS ESSEE WERE BASED ON ATTRIBUTION OF INTEREST EXPENDITURE TO THE EARNING OF EXEMPT INCOME. HOWEVER, THE APPROACH OF THE ASSESSEE WAS FOUND TO BE NOT ACCEPTABLE, IN TURN RELYING ON THE OBSERVATIONS OF THE HONBLE BOMBAY HIGH COURT IN GODREJ & BOYCE VS. DCIT REPORTED IN 328 ITR 81 (BOM) . THE CIT(A) FURTHER NOTED THAT THE HONBLE HIGH COURTS DECISION IN K . RA HEJA CORPORATION PVT. LTD. (SUPRA) ON THE CONTRARY THOUGH PASSED SUBSEQUENTLY WAS FOR ASSESSMENT YEAR 2000 - 01 I.E. PRIOR TO THE INTRODUCTION OF RULE 8D O F THE RULES AND WAS NOT APPLICABLE. THE CIT(A) FURTHER NOTED THAT EVEN OTHERWISE, AS DISCUSSED IN THE ASSESSMENT ORDER, THERE ARE NO FRESH INVESTMENTS MADE DURING THE YEAR AND THEREFORE, THE ISSUE, IS SEEN TO HAVE NO RELEVANCE TO THE CASE LAWS CITED BY T HE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE. FURTHER, REFERRING TO THE PROVISIONS OF SECTION 14A OF THE ACT , THE VIDE PARA 5.4, THE FINDING OF THE CIT(A) WAS THAT SECTION 14A(3) OF THE ACT SAYS THAT SUB - SECTION 2 TO SECTION 14A COULD BE APPLIED WHERE THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAD BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. THE CIT(A) HELD THAT THE CASE OF THE ASSESSEE WAS SQUARELY COVERED BY SUB - SECTION (3) OF SECTION 14A OF THE ACT. FURTHER, REFERRING TO THE PROVISIONS OF SECTION 14A(2) OF THE ACT, WHICH EMPOWERS THE ASSESSING OFFICER TO DETERMINE THE AMOUNT OF EXPENDITURE RELATABLE TO EXEMPT INCOME IN ACCORDANCE WITH RULE 8D OF THE RULES, WHERE HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, T HE ASSESSING OFFICER IS NOT SATISFIED WITH CORRECTNESS OF THE CLAIM OF NO EXPENSES MADE BY THE ASSESSEE, THE CIT(A) OBSERVED THAT FROM THE FACTS AVAILABLE ON RECORD THE ASSESSING OFFICER HAD DERIVED HIS SATISFACTION PROPERLY ABOUT THE INCORRECTN ESS OF THE CLAIM OF NO EXPENSES. THE CIT(A) FURTHER OBSERVED THAT THE APPELLANT ALSO NOT OBJECTED THE SAID FACT. THE NEXT CONTENTION ITA NO S. 1 522 TO 1 525 /PN/2013 LAP FINANCE & CONSULTANCY PVT. LTD. ITA NO.1527 & 1528/PN/2013 M/ S. A.P. HOLDINGS P. LTD. 8 OF THE ASSESSEE THAT OUT OF THE TOTAL DIVIDEND RECEIPT OF RS.13,62,721/ - , WHICH WAS RECEIVED FROM CITY CORPORATION LTD., THE SHARES OF WHICH WERE CATEGORIZED AS INVESTMENT IN THE BALANCE SHEET . THE CIT(A) OBSERVED THAT IRRESPECTIVE OF THE FACT WHETHER THE SHARES WERE HELD AS INVE STMENT AND NOT AS STOCK IN TRADE, DIVIDEND WAS EXEMPT AND HENCE, THE COMPUTATION MADE BY THE ASSESSING OFFI CER IN COMPUTING DISALLOWANCE IN THE HANDS OF THE ASSESSEE WAS UPHELD BY THE CIT(A). 11. THE ASSESSEE BEFORE US IS AGGRIEVED BY THE SAID DISALLOWANCE AND THE MAIN PLANK OF ARGUMENT OF THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE BEFORE US WAS TH AT THE NON - INTEREST BEARING CAPITAL AND RESERVES AVAILABLE WITH THE ASSESSEE W ERE MUCH HIGHER THAN THE INVESTMENT MADE BY THE ASSESSEE AT RS.7.50 CRORES. IN VIEW THEREOF, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE STRESSED THAT THE PRESUMPTION WAS THAT THE INVESTMENT WAS MADE OUT OF OWN FUNDS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE STRESSED THAT THE COMPUTATION OF ASSESSING OFFICER AS FAR AS INTEREST COMPUTATION WAS CONCERNED, WAS INCORRECT. ASSESSING OFFICER AS FAR AS INTEREST COMPUTATION WAS CONCERNED, WAS INCORRECT. RELIANCE WAS PLACED ON THE RATIO LA ID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. HDFC BANK LTD. IN INCOME TAX APPEAL NO.330 OF 2012, ORDER DATED 23.07.2014 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OUT THAT ON SHARES HELD AS STOCK IN TRADE, NO DISALLOWAN CE UNDER SECTION 14A OF THE ACT IS WARRANTED OUT OF INTEREST EXPENDITURE, IN TURN RELYING ON THE DECISION OF PUNE BENCH OF TRIBUNAL IN KASAT SECURITIES PVT. LTD. VS. ACIT IN ITA NO.922/PN/2011 , RELATING TO ASSESSMENT YEAR 2006 - 07, ORDER DATED 25.06.2013 . THE THIRD OBJECTION OF THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS THAT WHERE THE ASSESSING OFFICER IS NOT RECORDED HIS SATISFACTION THAT THE BOOKS OF ACCOUNT WERE INCORRECT, THERE WAS NO MERIT IN THE SAID DISALLOWANCE. RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT IN MAXOPP INVESTMENT LTD. VS. CIT (2012) 347 ITR 272 (DEL), WHICH DEALT WITH THE AMENDED PROVISIONS OF THE ACT AND ALSO IN CIT VS. TAIKISHA ENGINEERING INDIA LTD. (2015) 370 ITR 338 (D EL) . THE LAST CO NTENTION OF THE ASSESSEE ITA NO S. 1 522 TO 1 525 /PN/2013 LAP FINANCE & CONSULTANCY PVT. LTD. ITA NO.1527 & 1528/PN/2013 M/ S. A.P. HOLDINGS P. LTD. 9 IN THIS REGARD WAS THAT SINCE THE INVESTMENT IN THE OLD SHARES WAS OLD AND IN THE ABSENCE OF ANY DECISION MAKING, NO PART OF THE ADMINISTRATIVE EXPENSES COULD BE DISALLOWED. OUR ATTENTION WAS DRAWN TO THE LIST OF INVESTMENTS PLACE D AT PAGE 58 OF THE PAPER BOOK. 12. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE IN TURN, POINTED OUT THAT THE PROVISIONS OF SECTION 14A OF THE ACT ARE ATTRACTED SINCE THE ASSESSEE HAS MIXED FUNDS, WHERE THE INVESTMENT IS OUT OF BOTH BORROWED FUNDS AND OWN FUNDS. FURTHER, THE INVESTMENT MADE BY THE ASSESSEE WAS BOTH TAXABLE AND NON - TAXABLE INCOME AND HENCE, THE DISALLOWANCE IS WARRANTED. FURTHER, IT WAS POINTED OUT THAT THE ASSESSEE HAD NOT ALLOCATED ANY EXPENDITURE, SO THE SOURCE OF EXPENDI TURE WAS NOT KNOWN. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE FURTHER STRESSED THAT IN THE ABSENCE OF ANY DETAILS FILED BY THE ASSESSEE THAT THE NATURE OF BUSINESS OF ASSESSEE WAS BOTH THE FINANCE AND INVESTMENT, THE DISTINCTION BETWEEN THE SHARES HELD AS INVESTMENT AND STOCK IN TRADE CANNOT BE FOUND. FURTHER, WITH REGARD TO THE AS INVESTMENT AND STOCK IN TRADE CANNOT BE FOUND. FURTHER, WITH REGARD TO THE SATISFACTION NOT BEING RECORDED BY THE ASSESSING OFFICER, THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE FIRST POINTED OUT THAT WHERE THE ASSESSEE HAD SHOWN EXPENDITURE OF EVEN R S .1/ - , THEN THE SATISFACTION IS TO BE RECORDED. FURTHER, RELIANCE WAS PLACED ON THE ORDER OF ASSESSING OFFICER IN THIS REGARD AND THE RATIO LAID DOWN BY THE KOLKATA BENCH OF TRIBUNAL IN ACIT VS. CHAMPION COMMERCIAL CO. LTD. (2012) 1 39 ITD 10 8 (KOL) . 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE VIDE PRESENT GROUNDS OF APPEAL IS AGGRIEVED BY THE DISALLOWANCE WORKED OUT UNDER SECTION 14A OF THE ACT. UNDER THE SAID SECTION, IT IS PROVIDED THAT THE EXPEN DITURE WHICH IS INCURRED IN RELATION TO INCOME, WHICH IN TURN, IS NOT INCLUDED IN THE TOTAL INCOME, THEN THE SAME IS TO BE DISALLOWED BY FOLLOWING THE PROCEDURE LAID DOWN UNDER RULE 8D OF THE RULES. FURTHER, SECTION 14A(2) OF THE ACT EMPOWERS THE ASSESSIN G OFFICER TO DETERMINE THE AMOUNT OF EXPENDITURE IN RELATION TO SUCH EXEMPT INCOME, WHEREIN HE ITA NO S. 1 522 TO 1 525 /PN/2013 LAP FINANCE & CONSULTANCY PVT. LTD. ITA NO.1527 & 1528/PN/2013 M/ S. A.P. HOLDINGS P. LTD. 10 HAS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE, IN RELATION TO INCOME, WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. UNDER SECTION 14A(3) OF THE ACT , IT IS PROVIDED THAT THE PROVISIONS OF SUB - SECTION (2) SHALL ALSO APPLY IN RELATION TO A CASE WHEREIN, THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED BY HIM IN RELATION TO THE INCOME WHICH D OES NOT FORM PART OF THE TOTAL INCOME. IN VIEW OF THE ABOVE PROVISIONS OF THE ACT, IT IS INCUMBENT UPON THE ASSESSING OFFICER FIRST TO BE SATISFIED THAT THE CLAIM MADE BY THE ASSESSEE AS TO WHETHER ANY EXPENDITURE HAS BEEN INCURRED OR NOT, IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT, IS CORRECT. THE PERUSAL OF THE ASSESSMENT ORDER IN THE CASE OF ASSESSEE, VERY CLEARLY REFLECTS THAT THE ASSESSING OFFICER VIDE PARA 3.1 HAD NOTED THE FACT THAT THE ASSESSEE HAD DECLARE D THE EXEMPT INCOME, BUT HAD NOT DEBITED ANY EXPENSES IN THE BOOKS OF ACCOUNT AGAINST THE SAID EXEMPTED INCOME. IN VIEW THEREOF, THE ASSESSEE WAS REQUESTED TO EXPLAIN THE REASONS FOR THE SAME AND AS TO WHY THE PROVISIONS OF SECTION 14A OF THE ACT READ WIT H RULE 8D OF THE RULES SHOULD NOT BE INVOKED. IN VIEW OF THE SAME, WE FIND NO MERIT IN THE PLEA OF THE ASSESSEE IN THIS REGARD. THE SATISFACTION IS DEEMED TO HAVE BEEN RECORDED AND WE PROCEED TO DECIDE THE ISSUE ON MERITS. 14. THE SECOND ASPECT OF THE I SSUE IS WHETHER ANY DISALLOWANCE IS WARRANTED OUT OF DIVIDEND INCOME OF RS. 15 ,47,936/ - RECEIVED ON ACCOUNT OF DIVIDEND ON MUTUAL FUNDS. THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD DECLARED AN INVESTMENT OF RS.7.50 CRORES AS ON 31.03.2009 AND THE CLO SING STOCK BALANCE OF THE SAID INVESTMENT AS ON 31.03.2008 WAS RS.7.50 CRORES. THE ASSESSEE HAS PLACED THE LIST OF INVESTMENTS AT PAGE 58 OF THE PAPER BOOK, PERUSAL OF WHICH REFLECTS THAT THE INVESTMENT IN SHARES AND MUTUAL FUNDS I S BROUGHT FORWARD FROM T HE PRECEDING YEAR AND THERE IS NO VARIATION IN THE SAME. THE CIT(A) HAD VIDE PARA 5.5 NOTED THAT OUT OF THE TOTAL DIVIDEND RECEIPT OF RS. 13,62,721/ - , THE DIVIDEND WAS RECEIVED FROM CITY CORPORATION LTD., WHICH IS HELD AS AN INVESTMENT AND NOT AS STOCK IN TRADE. THE PLEA OF THE ASSESSEE THAT THE DIVIDEND ITA NO S. 1 522 TO 1 525 /PN/2013 LAP FINANCE & CONSULTANCY PVT. LTD. ITA NO.1527 & 1528/PN/2013 M/ S. A.P. HOLDINGS P. LTD. 11 INCOME IS RECEIVED FROM THE INVESTMENTS AND THE STOCK IN TRADE IS NOT VERIFIABLE IN THE ABSENCE OF ANY DETAILS BEING FILED BY THE ASSESSEE AND HENCE, THE SAME IS DISMISSED. AS NOTED BY THE AUTHORITIES BEL OW, THE ASSESSEE IS AN INVESTMENT COMPANY AND WA S HOLDING SHARES AS BOTH INVESTMENT AND STOCK IN TRADE AND IN THE ABSENCE OF DETAILS AVAILABLE, WE FIND NO MERIT IN THE CLAIM OF THE ASSESSEE. THE SECOND ASPECT OF THE ISSUE IS THE NEXT CLAIM OF THE ASSESSEE THAT NO DISALLOWANCE WARRANTED IN THE HANDS OF THE ASSESSEE, SINCE IT IS HAVING OWN FUNDS I.E. INTEREST FREE FUNDS IN THE FORM OF CAPITAL OF RS.20.50 LAKHS AND RESERVES OF RS.195.93 LAKHS TOTALING RS.19.79 CRORES AS AGAINST THE INVESTMENT OF RS.7.50 CRORE S IN THE SHARES IN MUTUAL FUNDS AND HENCE, APPLYING THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. HDFC BANK LTD. (SUPRA) , THE PRESUMPTION IS THAT INVESTMENT IS MADE OUT OF OWN FUNDS . W E AGREE TO THE PROPOSITION RAISED BY THE ASSESSEE, IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. HDFC BANK LTD. (SUPRA). HOWEVER, IN THE FACTS OF THE PRESENT CASE, THE SAID PROPOSITION CANNOT BE APPLIED SIMPLICITOR AS THE INVESTMENT SHOWN BY THE ASSESSEE IS BROUGHT FORWARD FROM THE PRECEDING YEAR, WHEREIN THE TRIBUNAL HAD ALREADY CONSIDERED THE ISSUE OF DISALLOWANCE OF INTEREST EXPENDITURE RELATABLE TO THE DIVIDEND INCOME EARNED BY THE ASSESSEE IN ASSESSMENT YEAR 2008 - 09 . THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS.1716 TO 17 18/PN/2012 RELATING TO ASSESSMENT YEARS 2004 - 05, 2005 - 06 AND 2008 - 09 , VIDE ORDER DATED 30.12.2013 HAD FIRST ADJUDICATED THE APPEAL RELATING TO ASSESSMENT YEAR 2008 - 09 AND HAD DECIDED THE ISSUE OF DISALLOWANCE OF RS.9,91,140/ - UNDER SECTION 14A OF THE ACT. THE CLAIM OF THE ASSESSEE IN THAT YEAR WAS THAT NO EXPENDITURE WAS DEBITED TO PROFIT & LOSS ACCOUNT IN RELATION TO THE SAID INCOME AND EVEN THE INTEREST EXPENDITURE OF RS. 31,56,718/ - DEBITED TO THE PROFIT & LOSS ACCOUNT WAS NOT FOR FUNDS UTILIZED FOR THE IMPUGNED INVESTMENTS. THE TRIBUNAL AFTER CONSIDERING THE FACTUAL ASPECTS OF THE CASE, HELD AS UNDER: - 17. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IN THE PRESENT CASE, ONLY ONE LIMB OF THE DISALLOWANCE PERTAINING TO THE INTEREST EXPENDITURE I S SOUGHT TO BE ASSAILED BY THE ASSESSEE. THE DEFENCE OF THE ASSESSEE IS THAT THE INTEREST EXPENDITURE DEBITED TO THE P&L ACCOUNT IS NOT RELATABLE TO THE FUNDS UTILIZED TO ACQUIRE SHARES/MUTUAL FUNDS, WHICH HAVE YIELDED THE IMPUGNED EXEMPT INCOME. FACTUAL LY, THE AFORESAID WAS ASSERTED BEFORE THE ASSESSING OFFICER, AS IS EVIDENT FROM THE ITA NO S. 1 522 TO 1 525 /PN/2013 LAP FINANCE & CONSULTANCY PVT. LTD. ITA NO.1527 & 1528/PN/2013 M/ S. A.P. HOLDINGS P. LTD. 12 SUBMISSIONS OF THE ASSESSEE DATED 09.12.2010 WHICH HAVE BEEN REPRODUCED IN THE ASSESSMENT ORDER. THE ASSERTION OF THE ASSESSEE WAS THAT THE INTEREST WAS PAID ON DEPOSITS W HICH WERE EITHER NOT RAISED DURING THE YEAR UNDER CONSIDERATION OR FOR A DEPOSIT WHICH WAS SPECIFICALLY USED FOR THE PURPOSES OTHER THAN THE ACQUISITION OF SHARES/MUTUAL FUNDS IN QUESTION. IT HAS ALSO BEEN POINTED OUT BY THE LEARNED COUNSEL AT THE TIME OF HEARING THAT IN THE PAST YEARS THERE HAS BEEN NO DISALLOWANCE BY INVOKING SECTION 14A OF THE ACT. IN OUR CONSIDERED OPINION, THE PLEA OF THE ASSESSEE INVOLVES FACTUAL APPRECIATION, WHICH HAS BEEN GLOSSED - OVER BY THE AUTHORITIES BELOW AND THE DISALLOWANCE HAS BEEN SUSTAINED WITHOUT DUE APPLICATION OF MIND. IF THE ASSESSEE IS ABLE TO ESTABLISH THAT THE INTEREST EXPENDITURE DEBITED IN THE P&L ACCOUNT IS NOT CONNECTED WITH THE FUNDS USED FOR INVESTMENTS IN ACQUIRING SHARES/MUTUAL FUNDS, WHICH HAVE YIELDED EX EMPT INCOME, THEN NO DISALLOWANCE U/S 14A OF THE ACT OUT OF THE INTEREST EXPENDITURE IS CALLED FOR. THEREFORE, FOR THE AFORESAID PURPOSE, WE REMAND THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WHO SHALL DETERMINE THE ISSUE AFRESH ON THE LIMITED AS PECT OF ASSESSEES PLEA THAT THE INTEREST EXPENDITURE IS NOT RELATABLE TO THE FUNDS USED FOR ACQUISITION OF SHARES/MUTUAL FUNDS, WHICH HAVE YIELDED EXEMPT INCOME. IF THE ASSESSING OFFICER IS SATISFIED WITH THE REPLIES/MATERIAL FURNISHED BY THE ASSESSEE, T HEN NO DISALLOWANCE SHALL BE CALLED FOR OUT OF INTEREST EXPENDITURE AND IF THE ASSESSING OFFICER IS NOT SO SATISFIED, HE MAY RECORD HIS REASONS AND THEREAFTER PROCEED AS PER LAW. NEEDLESS TO SAY, THE ASSESSING OFFICER SHALL ALLOW A REASONABLE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD BEFORE PASSING AN ORDER AFRESH ON THIS ASPECT. THUS, ON THIS ASPECT, ASSESSEE PARTLY SUCCEEDS. 15. THE ISSUE WAS REMANDED BACK TO THE FILE OF ASSESSING OFFICER TO DETERMINE THE LIMITED ASPECT OF THE ASSESSEES PLEA THAT T HE INTEREST EXPENDITURE WAS NOT RELATABLE TO THE FUNDS USED FOR ACQUISITION OF SHARES / MUTUAL FUNDS, WHICH HAD YIELDED EXEMPT INCOME AND DECIDE THE SAME. THE INVESTMENTS ON WHICH THE EXEMPT INCOME HAS BEEN EARNED BY THE ASSESSEE FOR THE INSTANT ASSESSMEN T YEAR ARE THE INVESTMENT MADE IN THE EARLIER YEARS AND IN LINE WITH THE RATIO LAID DOWN BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2008 - 09 , WE ARE OF THE VIEW THAT THE FINDINGS OF THE ASSESSING OFFICER IN THIS REGARD IN ASSESSMENT YEAR 2008 - 09 I.E. WHETHER ANY INTEREST BEARING FUNDS WERE UTILIZED FOR MAKING THE AFORESAID INVESTMENTS IN THE PRECEDING YEAR ARE TO BE APPLIED SIMPLICITOR. IN VIEW OF THE BINDING PRECEDING BEING AVAILABLE IN ASSESSEES OWN CASE WITH REGARD TO THE INVESTMENTS , WHI CH ADMITTEDLY WERE NOT MADE IN THE INSTANT ASSESSMENT YEAR, BUT WERE BROUGHT FORWARD FROM THE EARLIER YEARS, THEN DISALLOWANCE IF ANY WORKED OUT IN THE PRECEDING YEAR IS TO BE APPLIED FOR THE YEAR UNDER CONSIDERATION ALSO SINCE THE FUNDS HAVE BEEN DEPLOYED IN THE EARLIER YEARS AND NOT IN THE CURRENT YEAR. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE DISALLOWANCE, IF ANY, IN THE HANDS OF THE ASSESSEE IN LINE WITH WORKING OF THE DISALLOWANCE UNDER SECTION 14A(2) OF THE ACT READ WITH RULE 8D(II ) OF THE RULES IN THE ITA NO S. 1 522 TO 1 525 /PN/2013 LAP FINANCE & CONSULTANCY PVT. LTD. ITA NO.1527 & 1528/PN/2013 M/ S. A.P. HOLDINGS P. LTD. 13 PRECEDING YEAR. FURTHER, NO BIFURCATION OF INVESTMENTS AND STOCK IN TRADE WAS RAISED IN EARLIER YEAR, HENCE THIS PLEA IS DISMISSED AS INVESTMENTS ARE OLD. 16. NOW, COMING TO THE NEXT ASPECT OF DISALLOWANCE UNDER SECTION 14A OF THE A CT I.E. THE ADMINISTRATIVE EXPENSES RELATABLE TO EARNING OF EXEMPT INCOME. THE ASSESSEE IN THE PRECEDING YEAR WAS NOT AGGRIEVED BY THE SAID DISALLOWANCE MADE IN THE HANDS OF ASSESSEE UNDER RULE 8D(III) OF THE RULES. THE TRIBUNAL HAS NOTED THAT THE ASSESS EE HAD ONLY AGITATED THE DISALLOWANCE OF INTEREST EXPENSES UNDER RULE 8D(II) OF THE RULES. FOR THE YEAR UNDER APPEAL, THE ASSESSEE IS AGGRIEVED BY THE SAID DISALLOWANCE . F ROM THE DETAILS, IT IS NOT CLEAR THAT AS TO WHETHER ANY DISALLOWANCE WAS MADE UNDER RULE 8D(III) OF THE RULES IN THE HANDS OF ASSESSEE IN THE PRECEDING YEAR. IN VIEW THEREOF, IN CASE NO SUCH DISALLOWANCE IS MADE IN THE HANDS OF ASSESSEE IN THE EARLIER YEARS, THEN WE HOLD THAT NO DISALLOWANCE WAS WARRANTED IN THE YEAR UNDER CONSIDERATION . HOWEVER, IN CASE THE ASSESSEE HAS ACCEPTED THE DISALLOWANCE MADE UNDER RULE 8D(III) OF THE RULES IN THE PRECEDING YEAR, THEN TH E FACTS OF THE CASE BEING IDENTICAL, WE FIND NO OF THE RULES IN THE PRECEDING YEAR, THEN TH E FACTS OF THE CASE BEING IDENTICAL, WE FIND NO MERIT IN THE CLAIM OF THE ASSESSEE IN THIS REGARD. THE ASSESSING OFFICER SHAL L VERIFY THIS ASPECT FROM THE ASSESSMENT RECORDS FOR ASSESSMENT YEAR 2008 - 09 AND DECIDE THE ISSUE ACCORDINGLY . T HE ASSESSING OFFICER SHALL AFFORD REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE WHILE DECIDING THE ISSU E OF DISALLOWANCE UNDER SECTION 14A OF THE ACT. THE GROUNDS OF APPEAL NOS.1 TO 5 ARE THUS, DECIDED AS INDICATED ABOVE. 17. THE NEXT ISSUE RAISED BY THE ASSESSEE VIDE GROUND OF APPEAL NO.6 IS AGAINST THE DISALLOWANCE OF RS.10,09,253/ - OUT OF FOREIGN TRAVEL EXPENSES. 18. BRIEFLY, THE FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAD CLAIMED TRAVELLING EXPENSES OF RS.10,09,253/ - TOWARDS FOREIGN TRAVELLING EXPENSES. THE ASSESSEE WAS REQUESTED TO FURNISH THE DETAILS OF FOREIGN TRAVELLING EXPENSES ALONG WITH TOUR REPORTS OF THE PERSON CONCE RNED AND ALSO FURNISH THE EVIDENCE AS TO HOW BUSINESS PURPOSE WAS SERVED BY THE SAID TRAVEL. IN RESPONSE, THE ASSESSEE FILED WRITTEN ITA NO S. 1 522 TO 1 525 /PN/2013 LAP FINANCE & CONSULTANCY PVT. LTD. ITA NO.1527 & 1528/PN/2013 M/ S. A.P. HOLDINGS P. LTD. 14 SUBMISSIONS THAT THE EXPENSES INCLUDE THE FOREIGN TRAVEL ING OF THE DIRECTION MRS. P.S. PAWAR. IT WAS FURTHER STATED THAT THE COMPANY WAS A FINANCE AND INVESTMENT COMPANY AND PREVIOUSLY ALSO CARRIED OUT THE ACTIVITY OF BUILDERS AND PROMOTERS, SO IN ORDER TO TAP FOREIGN MARKET AND LOOKING FOR FINANCE OF THE BUSINESS AND INVESTMENT, THE SAID DIRECTOR HAD UNDERTAKEN THE FOREIGN TOUR. HOWEVER, IT WAS ADMITTED THAT NO PROPOSAL IN ANY OF THE FIELDS I.E. PROCUREMENT OF FUNDS OF INVESTMENT OF FUNDS IN THE FOREIGN MARKET COULD MATERIALIZE. THE ASSESSING OFFICER NOTED THAT THE EXPLANATION GIVEN BY THE ASSESSEE WAS WITHOUT ANY SPECIFIC DETAILS, O R SUPPORTED BY ANY EVIDENCE, EVEN THE DETAILS OF VARIOUS DESTINATIONS TRAVELLED BY HER WERE NOT FURNISHED AND IN THE ABSENCE OF ANY EVIDENCE THAT FOREIGN TRAVEL EXPENSES WERE INCURRED FOR THE BUSINESS, THE EXPENDITURE CLAIMED BY THE ASSESSEE WAS DISALLOWED AS BEING NOT INCURRED FOR THE BUSINESS. 19. BEFORE THE CIT(A), THE ASSESSEE FURNISHED THE BREAK - UP OF THE EXPENSES AND POINTED OUT THAT THE COMPANY WAS A FINANCE AND INVESTMENT COMPANY, AND MADE SIMILAR EXPLANATION AS BEFORE THE ASSESSING OF FICER. IT WAS ALSO POINTED OUT BY THE SIMILAR EXPLANATION AS BEFORE THE ASSESSING OF FICER. IT WAS ALSO POINTED OUT BY THE ASSESSEE THAT THE COMPANY HAD ALSO INCURRED THE AIR TICKET EXPENSES OF MRS.S.P. PAWAR AND NO OTHER EXPENSES SUCH AS BOARDING, LOCAL TRAVELLING AND ACCOMMODATION EXPENSES WERE INCURRED AND CLAIMED BY THE ASSESSEE. THE CIT(A) NOTED THAT NO DETAILS WERE FILED BEFORE THE ASSESSING OFFICER. THE CIT(A) FURTHER NOTED THAT SIMILAR EXPENDITURE WAS DISALLOWED IN THE EARLIER YEARS BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A) . HOWEVER, THE TRIBUNAL HAD ALLOWED THE APPEAL O F THE ASSESSEE TO THE EXTENT OF 50% OF THE EXPENSES CLAIMED TO HAVE BEEN INCURRED ON FOREIGN TRAVEL FOR ASSESSMENT YEAR 2006 - 07 IN ASSESSEES OWN CASE IN ITA NO.1292/PN/2010 , ORDER DATED 28.02.2012. THE CIT(A) FURTHER NOTED THAT THE TRIBUNAL HAD NOT DISPU TED THE PROPOSITION THAT PRIMARY ONUS WAS UPON THE ASSESSEE TO JUSTIFY THE REQUISITE EVIDENCE THAT THE EXPENDITURE INCURRED WAS RELATED TO CARRYING ON THE BUSINESS ACTIVITY. HOWEVER, THE TRIBUNAL FURTHER HELD THAT THE EXPENDITURE ON FOREIGN TRAVEL IS NOT EXPENDITURE, WHICH IS ALIEN TO THE CARRYING ON OF THE BUSINESS BY ANY BUSINESS ENTITY ITA NO S. 1 522 TO 1 525 /PN/2013 LAP FINANCE & CONSULTANCY PVT. LTD. ITA NO.1527 & 1528/PN/2013 M/ S. A.P. HOLDINGS P. LTD. 15 AND THE BONAFIDES OF THE CLAIM COULD NOT BE FAULTED . THE CIT(A) VIDE PARA 8.4 NOTED THAT DURING THE APPELLATE PROCEEDINGS, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE REITERATED THE CLAIM MADE BEFORE THE ASSESSING OFFICER THAT THE EXPENDITURE WAS INCURRED TO TAP THE FOREIGN MARKET FOR EXPANSION OF BUSINESS AND ALSO THE POSSIBILITY OF FOREIGN INVESTMENTS. IT WAS FURTHER STATED THAT NO PROPOSAL IN ANY OF THE FIE LDS COULD MATERIALIZE, BUT THE TOUR HAVING BEEN UNDERTAKEN FOR THE PRESENT BUSINESS ACTIVITIES WAS AN ALLOWABLE EXPENDITURE. THE CIT(A) DISALLOWED THE CLAIM OF THE ASSESSEE AS NO EVIDENCE WAS FURNISHED AS TO WHAT ACTUAL ACTIVITIES WERE CARRIED ON BY THE S AID DIRECTOR ON HER FOREIGN TOUR. THE ASSESSEE HAD ALSO NOT SUBMITTED ANY DIRECTORS REPORT IN RESPECT OF THE SAID TOUR TO SHOW THE BUSINESS PURPOSES ACHIEVED OR CARRIED OUT BY THE VISIT. THE CIT(A) WAS OF THE VIEW THAT THE PURPOSE FOR WHICH THE FOREIGN TRAVEL WAS UNDERTAKEN MAY NOT ACTUALLY BE ACHIEVED. BUT ATLEAST THE RELEVANT EVIDENCE SHOULD BE PLACED ON RECORD TO PROVE THAT THE TOUR WAS UNDERTAKEN FOR BUSINESS PURPOSES. IN THE ABSENCE OF RELEVANT DETAILS LIKE VENUE OF THE BUSINESS MEETINGS, DETAILS OF NRIS OR BUSINESS CONSTITUENTS WITH WHOM DISCUSSIONS WERE MADE, OUTCOME OF SUCH M EETINGS, ETC., BEING NOT BEEN FURNISHED, THEN THERE IS NO MERIT IN THE CLAIM OF THE ASSESSEE. IN THE ABSENCE OF ASSESSEE HAVING ESTABLISHED THE REQUISITE NEXUS NECESSARY FO R INCURRING OF EXPENDITURE BEING WHOLLY AND EXCLUSIV ELY FOR THE PURPOSE OF BUSINESS, THE CIT(A) WAS ALSO OF THE VIEW THAT THE ASSESSEE HAD FAILED TO PROVE THE REQUIREMENT OF SE CTION 37(1) OF THE ACT. THE CIT(A) FURTHER NOTED THAT FOREIGN TOUR EXPENDITURE WAS INCURRED ON BEHALF OF THE SAID DIRECTOR FROM ASSESSMENT YEARS 2005 - 06 TO 2010 - 11 , BUT NO BUSINESS PURPOSES HAVE BEEN MET WITH , IN ORDER TO JUSTIFY TH E ALLOWABILITY OF EXPENDITURE . I N TURN RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HONBLE BOMBA Y HIGH COURT IN COOPER ENGINEERING LTD., REPORTED IN 135 ITR 597 (BOM) . 20. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN THIS REGARD. ITA NO S. 1 522 TO 1 525 /PN/2013 LAP FINANCE & CONSULTANCY PVT. LTD. ITA NO.1527 & 1528/PN/2013 M/ S. A.P. HOLDINGS P. LTD. 16 21. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT ADMITTEDLY, THERE WAS NO EVIDEN CE AVAILABLE WITH THE ASSESSEE OF MEETING ANY PERSONS IN THE FOREIGN COUNTRY, BUT THE ASSESSEE HAD ONLY DEBITED TRAVELLING EXPENSES OF THE DIRECTOR AND NO OTHER EXPENSES. FURTHER, RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE TRIBUNAL IN ASSESSEE S OW N CASE IN ASSESSMENT YEAR S 2006 - 07 AND 2008 - 09 . 22. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF CIT(A). 23. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE CLAIM OF THE ASSESSEE BEFORE US IS TWO - FOLDS THAT THE FOREIGN TRAVEL EXPENSES INCURRED BY THE ASSESSEE ON THE FOREIGN TOUR TRIP UNDERTAKEN BY THE DIRECTOR MRS. P.S. PAWAR CLAIMED AT RS.10,09,253/ - SHOULD BE ALLOWED IN THE ENTIRETY AS THE EXPENDITURE WAS INCURRED IN ORDER TO TAP THE FOREIGN MARKET OR TO ATTRACT FOREIGN INVESTMENT, WHICH WAS FOR THE PURPOSE OF BUSINESS AND HENCE, ALLOWABLE UNDER SECTION 37(1) OF THE ACT. THE SECOND PURPOSE OF BUSINESS AND HENCE, ALLOWABLE UNDER SECTION 37(1) OF THE ACT. THE SECOND PLEA RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS THAT THE TRIBUNAL ON SIMILAR CIRCUMSTA NCES HAD RESTRICTED DISALLOWANCE TO 50% OF THE EXPENDITURE CLAIMED AND THE SAME SHOULD BE UPHELD. 24. UNDER THE PROVISIONS OF SECTION 37(1) OF THE ACT, THE ASSESSEE IS ENTITLED TO THE CLAIM OF EXPENDITURE, WHICH IS INCURRED IN RELATION TO CARRYING ON OF THE BUSINESS. HOWEVER, THE ONUS IS UPON THE ASSESSEE TO ESTABLISH THAT THE EXPENDITURE, IF ANY, INCURRED IS FOR BUSINESS PURPOSES. IN THE FACTS OF THE PRESENT CASE BEFORE US, THE ASSESSEE CLAIMS THAT IT HAD INCURRED AN EXPENDITURE OF RS. 10,09,253/ - ON F OREIGN TRAVEL OF MRS. P.S. PAWAR, THE DIRECTOR OF THE ASSESSEE COMPANY. THE BIFURCATION OF EXPENDITURE WAS FILED FOR THE FIRST TIME BEFORE THE CIT(A), AS PER WHICH RS. 6,87,587/ - WAS THE COST OF AIR TICKET TO VISIT LONDON, NEW YORK AND DETROIT . FURTHER, S UM OF RS.3,21,666/ - WAS INCURRED ON A TRIP TRAVEL TO MUNICH. THE ASSESSEE HAD TIME AND AGAIN STRESSED THAT IT HAD ONLY INCURRED EXPENSES IN RESPECT OF AIR TRAVEL OF THE DIRECTOR ITA NO S. 1 522 TO 1 525 /PN/2013 LAP FINANCE & CONSULTANCY PVT. LTD. ITA NO.1527 & 1528/PN/2013 M/ S. A.P. HOLDINGS P. LTD. 17 AND NO OTHER EXPENSES SUCH AS BOARDING, LOCAL TRAVELLING , ACCOMMODATION, ETC. WAS INCURRED OR CLAIMED BY THE ASSESSEE COMPANY. WE FIND NO MERIT IN THE SAID PLEA OF THE ASSESSEE. IT IS NOT RELEVANT WHETHER THE EXPENDITURE HAS BEEN INCURRED ON AIR TICKETS OR ON ANY OTHER ACCOUNT, THE ONUS IS UPON THE ASSESSEE TO ESTABLISH THAT THE EXPENDITURE IS INCURRED FOR THE PURPOSE OF BUSINESS. THE ASSESSEE BEFORE US OR EVEN BEFORE THE AUTHORITIES BELOW STRESSED AGAIN AND AGAIN THAT THE EXPENDITURE WAS INCURRED FOR TAPPING THE FOREIGN MARKET FOR EXPANSION OF BUSINESS AND ALSO TO EXPLORE THE PO SSIBILITY OF FOREIGN INVESTMENTS . THE ASSESSEE ADMITS THAT NO PROPOSAL IN ANY OF THE FIELDS COULD MATERIALIZE, BUT STRESSED THAT THE TOUR WAS UNDERTAKEN IN CONNECTION WITH THE BUSINESS ACTIVITIES OF THE ASSESSEE. SIMILAR PLEA IS BEING RAISED BY THE ASSES SEE FROM ASSESSMENT YEAR 2006 - 07 I.E. THE YEAR IN WHICH THE CLAIM WAS FOR AN EXPENDITURE OF RS. 2,18,712/ - . THE PERUSAL OF THE ORDER OF TRIBUNAL DATED 28.02.2012 (SUPRA) REVEALS THAT THE EXPLANATION OF THE ASSESSEE WAS THAT IT WAS AN INVESTMENT COMPANY AND ALSO CARRIED OUT THE BUSINESS OF PROMOTERS AND BUILDERS. THE DIRECTOR HAD UNDERTAKEN THE TOUR TO USA TO EXPLORE THE POSSIBILITY IN FOREIGN MARKET FOR ACQUISITION OF PROPERTIES IN INDIA OWNED BY NRIS AND ALSO TO FIND BUYERS FOR THE PROPOSED OWNERSHIP SCHE ME. IN VIEW OF ABOVE SAID FACTS, THE TRIBUNAL HELD THAT WHERE PURPOSE OF THE TOUR HAS BEEN EXPLAINED BY THE ASSESSEE, THE OBJECTION TAKEN OUT BY THE REVENUE THAT IN SUPPORT THEREOF, THE ASSESSEE HAD NOT FURNISHED ANY EVIDENCE TO SUBSTANTIATE ITS CLAIM, TH OUGH COULD NOT BE FAULTED, BUT AT THE SAME TIME, THE NATURE AND LEVEL OF EXPENDITURE CLAIMED BY THE ASSESSEE IS ALSO REQUIRED TO BE APPRECIATED AND HENCE, 50% OF THE EXPENDITURE WAS ALLOWED IN THE HANDS OF THE ASSESSEE. FURTHER, IN ASSESSMENT YEAR 2008 - 09 , THE EXPENSES CLAIMED BY THE ASSESSEE W ERE RS.7,20,650/ - AND THE TRIBUNAL VIDE ORDER DATED 30.12.2013 ALLOWED 50% OF THE CLAIM OF THE SAID EXPENSES, IN TURN FOLLOWING THE EARLIER RATIO. 25. THE FACTS OF THE PRESENT CASE BEFORE US ARE AT A VARIANCE. FI RST OF ALL, AS MENTIONED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, THE ASSESSEE IS ENGAGED ITA NO S. 1 522 TO 1 525 /PN/2013 LAP FINANCE & CONSULTANCY PVT. LTD. ITA NO.1527 & 1528/PN/2013 M/ S. A.P. HOLDINGS P. LTD. 18 ONLY IN THE BUSINESS OF FINANCE AND INVESTMENT , POWER GENERATION AND SUPPLY OF POWER . APPARENTLY , THERE IS NO BUSINESS OF PROMOTERS AND BUILDERS CARRIED ON BY THE ASSESSEE DURING THE YEAR. IN THE INITIAL YEAR I.E. 2006 - 07 , THE ASSESSEE HAD EXPLORED THE MARKET FOR ACQUISITION OF PROPERTIES AND TO FIND BUYERS FOR THE PROPOSED OWNERSHIP SCHEME, WHEREAS DURING THE YEAR UNDER CONSIDERATION, THERE IS NO SUCH BUSIN ESS CARRIED ON BY THE ASSESSEE. THE ASSESSEE ON THE OTHER HAND, CLAIMS THAT THE DIRECTOR OF THE COMPANY HAD VISITED FOREIGN COUNTRIES FOR TAPPING THE MARKETS FOR FOREIGN INVESTMENTS, POSSIBILITY OF FOREIGN INVESTMENT AND / OR FOR EXPANSION OF BUSINESS. T HE ASSESSEE IS MAKING THIS PLEA FROM ASSESSMENT YEAR 2006 - 07 ONWARDS, BUT TILL THE INSTANT ASSESSMENT YEAR I.E. 2009 - 10, NO SUCH INVESTMENT HAS BEEN MADE BY THE ASSESSEE. THE STATEMENT BY THE ASSESSEE IS WITHOUT SUPPORT OF ANY IOTA OF EVIDENCE AND HENCE, CANNOT BE ACCEPTED. EVEN DURING THE COURSE OF HEARING, THE ASSESSEE WAS ASKED TO PRODUCE EVIDENCE OF BUSINESS MEETINGS UNDERTAKING BY THE ASSESSEE OR THE PROPOSED INVESTORS M ET BY THE DIRECTOR OF THE ASSESSEE COMPANY ON HER FOREIGN VISIT. THE LEARNED AUT HORIZED REPRESENTATIVE FOR THE ASSESSEE ADMITTED THAT NO SUCH D ETAILS WERE AVAILABLE. IN THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE FIND NO MERIT IN THE CLAIM OF THE ASSESSEE WHATSOEVER. HOWEVER, FOLLOWING THE EARLIER ORDER OF THE TRIBUNAL , WE RESTRICT T HE DISALLOWANCE TO 75% OF EXPENDITURE AND DIRECT THE ASSESSING OFFICER TO ALLOW 25% OF EXPENDITURE. THE GROUND OF APPEAL NO.6 RAISED BY THE ASSESSEE IS THUS, PARTLY ALLOWED. 2 6 . THE LAST ISSUE RAISED BY THE ASSESSEE VIDE GROUND OF APPEAL NOS.7 AND 8 IS A GAINST THE QUANTIFICATION OF EXPENDITURE AND ITS APPORTIONMENT AGAINST THE PROFITS OF WINDMILL. 2 7 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FAIRLY POINTED OUT THAT THE ISSUE RAISED VIDE GROUND OF APPEAL NOS.7 AND 8 IS DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 2008 - 09 VIDE PARA 13 OF THE ORDER DATED 30.12.2013. ITA NO S. 1 522 TO 1 525 /PN/2013 LAP FINANCE & CONSULTANCY PVT. LTD. ITA NO.1527 & 1528/PN/2013 M/ S. A.P. HOLDINGS P. LTD. 19 2 8 . THE ISSUE VIDE THE PRESENT GROUNDS OF APPEAL RELATES TO THE COMPUTATION OF PROFITS OF THE WINDMILL POWER GENERATION UNIT. THE ASSESSEE HAD DECLARED THE NET INCOME FROM THE WINDMILL BUSINESS BY DEDUCTING THE DIRECT EXPENSES, BUT HAD NOT CONSIDERED THE INDIRECT EXPENSES I.E. THE REMUNERATION PAID TO DIRECTORS, SALARY, TRAVELING, LEGAL FEES, AUDITED EXPENSES, ETC. WHILE COMPUTI NG THE INCOME FROM WINDMILL BUSINESS. THE CONTENTION OF THE ASSESSEE IN THIS REGARD WAS THAT NO DIRECT EXPENSES WERE INCURRED FOR EARNING THE SAID INCOME. HOWEVER, THE ASSESSING OFFICER HELD THAT THE EXPENSES CLAIMED BY THE ASSESSEE IN RUNNING VARIOUS BU SINESS ES ARE TO BE APPORTIONED AS BEING RELATABLE TO THE BUSINESS OF WINDMILL . SIMILAR DISALLOWANCE WAS MADE IN THE EARLIER YEARS . I N THE CASE OF THE ASSESSEE , THE MATTER IN ASSESSMENT YEAR 2008 - 09 TRAVELLED TO THE TRIBUNAL AND THE TRIBUNAL UPHELD THE OR DER OF ASSESSING OFFICER IN COMPUTING DISALLOWANCE BY ALLOCATING THE INDIRECT EXPENSES ON THE BASIS OF TURNOVER OF RESPECTIVE BUSINESSES. THE TRIBUNAL UPHELD THE ORDER OF LOWER AUTHORITIES. HOWEVER, DIRECTIONS WERE GIVEN TO THE ASSESSING OFFICER TO RE - CA LCULATE THE COMPUTATION OF DISALLOWANCE ON THE BASIS OF WORKING THAT MAY BE FURNISHED BY THE ASSESSEE. THE SAID DIRECTIONS WERE GIVEN BY THE CIT(A) AND WERE UPHELD BY THE TRIBUNAL. FOLLOWING THE SAME PARITY OF REASONING, WE UPHOLD THE ORDER OF CIT(A) IN THIS REGARD. HOWEVER, IN LINE WITH EARLIER DIRECTIONS, WE DIRECT THE ASSESSING OFFICER TO RE - COMPUTE THE DISALLOWANCE IN LINE WITH DIRECTIONS OF THE TRIBUNAL IN ASSESSMENT YEAR 2008 - 09 . THE GROUND OF APPEAL NOS.7 AND 8 RAISED BY THE ASSESSEE ARE DECIDED AS INDICATED ABOVE. 2 9 . THE REVENUE IS AGGRIEVED BY THE ORDER OF CIT(A) IN ALLOWING DEDUCTION UNDER SECTION 80IA(4) OF THE ACT ON ACCOUNT OF PROFIT EARNED FROM THE BUSINESS OF WINDMILL POWER BUSINESS AT RS.8,75,979/ - . 30 . BRIEFLY, IN THE FACTS RELATING T O THE ISSUE RAISED BY THE REVENUE, THE ASSESSEE WAS ENGAGED IN POWER GENERATION BUSINESS THROUGH WIN DMILLS ALONG WITH ITS OBJECT OF DEALING IN BUSINESS AND THE PROFITS DERIVED FROM THE WINDMILL BUSINESS WERE CLAIMED AS ITA NO S. 1 522 TO 1 525 /PN/2013 LAP FINANCE & CONSULTANCY PVT. LTD. ITA NO.1527 & 1528/PN/2013 M/ S. A.P. HOLDINGS P. LTD. 20 DEDUCTABLE UNDER SECTION 80IA(4) OF T HE ACT. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CLAIMED DEDUCTION TO THE EXTENT OF RS.8,75,979/ - . THE ASSESSING OFFICER HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, CALLED FOR A SEPARATE TRADING ACCOUNT FOR WINDMILL PROJECT AND THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAD ACTUALLY NOT EARNED ANY REAL PROFITS FROM THE WINDMILL AND HENCE, NIL DEDUCTION WAS AVAILABLE TO THE ASSESSEE. THE ASSESSING OFFICER IN TURN, REL IED ON THE PROVISIONS OF SECTION 80IA(5) OF THE ACT F OR HOLDING THAT THE ASSESSEE HAD NOT EARNED ANY REAL PROFITS IN THE ASSESSMENT YEAR. AS PER PROVISIONS OF SECTION 80IA (5) OF THE ACT, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE PROFIT OF ELIGIBLE BUSINESS WAS TO BE COMPUTED AS IF THE SAID BUSINESS WAS ONLY THE SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT YEARS UP TO AND INCLUDE THE ASSESSMENT YEAR FOR WHICH THE DEDUCTION IS TO BE MADE. ACCORDING TO HIM, THIS MEANT THAT THE LO SSES AND DEPRECIATION OF THE ELIGIBLE UNITS WERE TO BE KEPT SEPARATELY FROM THE YEAR OF SETTING UP THE OPERATION AND EVEN IF THEY WERE SET OFF AGAINST THE PROFITS DERIVED BY THE ASSESSEE FROM ITS OTHER BUSINESSES, IF ANY, THE SAME HAD TO BE CARRIED FORWARD AND ADJUSTED AGAINST THE ELIGIBLE PROFITS OF THE BUSINESS. THE ASSESSING OFFICER IN VIEW THEREOF, ANALYZED THE ACTUAL PROFITS EARNED BY THE ASSESSEE FROM ORIGINAL BUSINESS FROM THE FIRST YEAR I.E. ASSESSMENT YEAR 2002 - 03 AND RE - COMPUTED THE INCOME / LOSS OF THE ASSESSEE FOR EACH OF THE YEARS. IN VIEW THEREOF, IN THE ABSENCE OF ANY PROFITS EARNED BY THE ASSESSEE FROM THE WINDMILL PROJECT, WHICH COULD BE HELD TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT, THE DEDUCTION CLAIMED BY THE ASSESSEE WAS DENIED. 3 1 . THE CIT(A) IN TURN, RELYING ON THE RATIO LAID DOWN BY PUNE BENCH OF TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 2006 - 07 (SUPRA) ALLOWED THE CLAIM OF THE ASSESSEE. 3 2 . AT THE TIME OF HEARING, IT WAS A COMMON POINT BETWEEN BOTH THE AUTHORIZED REPRESENTATIVES THAT THE IDENTICAL ISSUE HAS BEEN DECIDED BY PUNE BENCH OF TRIBUNAL ITA NO S. 1 522 TO 1 525 /PN/2013 LAP FINANCE & CONSULTANCY PVT. LTD. ITA NO.1527 & 1528/PN/2013 M/ S. A.P. HOLDINGS P. LTD. 21 IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR S 2006 - 07 AND 2008 - 09 . IT IS ALSO NOT IN DISPUTE THAT THE SAID DECISION OF THE TRIBUNAL CONTINUES TO HOLD THE FIELD AS THE SAME HAS NOT BEEN ALTERED BY ANY AUTHORITIES. THE TRIBUNAL HAD ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE EARLIER DECISION OF PUNE BENCH OF TRIBUNAL IN SERUM INTERNATIONAL LTD. VS. ADDL.CIT IN ITA NOS.290 TO 292/PN/2010, DAT ED 28.09.2011 , WHEREIN THE ISSUE HAD BEEN DECIDED FOLLOWING THE RATIO LAID DOWN BY THE HONBLE MADRAS HIGH COURT IN VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT, (2010) 38 DTR 57 (MAD) . BEFORE US ALSO, NO OTHER CONTRARY DECISION HAS BEEN BROUGHT TO OUR NOTICE, THEREFORE, IN THE ABOVE SAID BACKGROUND AND IN VIEW OF THE IDENTICAL ISSUE HAVING BEEN DECIDED IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2006 - 07 AND 2008 - 09 (SUPRA), WE FIND NO MERIT IN THE GROUND S OF APPEAL RAISED BY THE REVENUE AND THE SAME AR E DISMISSED. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE THUS, DISMISSED. 3 3 . THE FACTS AND ISSUES IN ITA NO S . 1 523 /PN/201 3 AND 1 525 /PN/201 3 ARE IDENTICAL 3 3 . THE FACTS AND ISSUES IN ITA NO S . 1 523 /PN/201 3 AND 1 525 /PN/201 3 ARE IDENTICAL TO THE FACTS AND ISSUES IN ITA NO S . 1 522 /PN/201 3 AND 1524/PN/2013 AND OUR DECISION IN ITA NO S .1 52 2 /PN/2013 AND 1524/PN/2013 SHALL APPLY MUTATIS MUTANDIS TO ITA NOS.1 523 /PN/2013 AND 1 525 /PN/2013 . 3 4 . IN ITA NOS.1127 AND 1128/PN/2013 , THE ONLY ISSUED RAISED BY THE ASSESSEE IS AGAINST INVOKING OF PROVISIONS OF SECTION 14A OF THE ACT. 3 5 . THE LEARNED AU THORIZED REPRESENTATIVE FOR THE ASSESSEE HAD SQUARELY ADMITTED THAT THE ISSUE RAISED IN THE PRESENT APPEAL WAS IDENTICAL TO THE ISSUE RAISED BEFORE THE TRIBUNAL IN LAP FINANCE & CONSULTANCY PVT. LTD. (SUPRA). THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE BEFORE US HAD RELIED ON THE THEORY OF OWN FUNDS AND INVESTMENTS BEING MADE, BUT HAD POINTED OUT THAT THE RE MAY BE NO STOCK IN TRADE OF SHARES HELD BY THE ASSESSEE. IN VIEW OF THE ADMISSION OF THE ASSESSEE THAT THE RATIO LAID DOWN BY THE TRIBUNAL IN LAP FINANCE & CONSULTANCY PVT. LTD. (SUPRA) IS SQUARELY ITA NO S. 1 522 TO 1 525 /PN/2013 LAP FINANCE & CONSULTANCY PVT. LTD. ITA NO.1527 & 1528/PN/2013 M/ S. A.P. HOLDINGS P. LTD. 22 APPLICABLE TO THE FACTS OF THE PRESENT CASE AND IN LINE WITH OUR FINDING , WE REMIT THIS ISSUE ALSO BACK TO THE FILE OF ASSESSING OFFICER TO DETERMINE THE SOURCE OF FUNDS IN THE HANDS OF ASSESSEE IN LINE WITH THE RATIO LAID DOWN BY THE TRIBUNAL IN LAP FINANCE & CONSULTANCY PVT. LTD. (SUPRA) IN ASSESSMENT YEAR 2008 - 09. THE MATTER IS REMITTED BACK TO THE FILE OF ASSESSING OFFICER WITH SAME DIRECTIONS AS A BOVE. THE ASSESSING OFFICER SHALL AFFORD REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE WHILE DECIDING THE MATTER. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, DECIDED AS INDICATED ABOVE. 3 6 . IN THE RESULT, ALL THE APPEAL S OF THE ASSESSEE A RE DECIDED AS INDICATED ABOVE AND THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THIS 6 TH DAY NOVEMBER , 201 5 . SD/ - SD/ - (PRADIP KUMAR KEDIA ) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; D ATED : 6 TH NOVEMBER , 2015. GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - I , PUNE ; 4. / THE CIT - I , PUNE ; 5. , , / DR B , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE