Modi Shelters Private Limited, Hyderabad V. ITO, Ward 16(1), Hyderabad

ITA 1567/HYD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6068 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 22-11-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KONDA RAMESH
• Assessee Lawyers: S RAMA RAO
• Keywords: Earning of tax free income
• Section: 14A; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI D.MANMOHAN, VICE PRESIDENT AND SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. ASSESS - MENT YEAR APPELLANT RESPONDENT 1566/HYD/2013 2009-10 M/S. MODI SHELTERS PVT. LTD., HYDERABAD (PAN AADCM 8355 N) DY. COMMISSIONER OF INCOME-TAX, CIRCLE 16(2), HYDERABAD 1567/HYD/2013 2010-11 M/S. MODI SHELTERS PVT. LTD., HYDERABAD (PAN AADCM 8355 N) INCOME TAX OFFICER, WARD 16(1), HYDERABAD 1784/HYD/2013 1785/HYD/2013 2009-10 2010-11 INCOME TAX OFFICER, WARD 16(1), HYDERABAD M/S. MODI SHELTERS PVT. LTD., HYDERABAD (PAN AADCM 8355 ) 1565/HYD/2013 2009-10 M/S. MODI BUILDERS AND REALTORS PRIVATE LIMITED, HYDERABAD (PAN AACCM 2490 D) DY. COMMISSIONER OF INCOME-TAX, CIRCLE 16(2), HYDERABAD 1786/HYD/2013 2009-10 INCOME TAX OFFICER WARD 16(1), HYDERABAD M/S. MODI BUILDERS AND REALTORS PRIVATE LIMITED, HYDERABAD (PAN AACCM 2490 D) ASSESSEES BY : S HRI S.RAMA RAO DEPARTMENT BY : SHRI K ONDA RAMES H DATE OF HEARING 1 . 1 2 .201 5 DATE OF PRONOUNCEMENT 29.1.2016 O R D E R PER BENCH : THERE ARE FIVE APPEALS CONCERNING TWO ASSESSEES IN THIS BUNCH. THREE OF THEM ARE FILED BY THE ASSESSEES AND TWO OF THEM ARE FILED BY THE REVENUE. THE APPEALS FOR THE ASSESSMENT YEARS 2009 -10 AND 2010-11 IN RESPECT OF M/S. MODI SHELTERS PVT. LTD., AS WELL AS THE APPEALS FOR THE ASSESSMENT YEAR 2009-10 IN RESPECT OF M/S. MODI BUI LDERS AND REALTORS ITA NO.1566/HYD/2013 & OTHERS M/S. MODI SHELTERS PVT. LTD., HYDERABAD A ND ANR. 2 PRIVATE LIMITED, HYDERABAD, ARE CROSS APPEALS, WHIC H ARE DIRECTED AGAINST THREE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME -TAX(APPEALS) V, HYDERABAD ALL DATED 10.9.2009. SINCE COMMON ISSUES ARE INVOLVED, THESE APPEALS ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ASSESSEES APPEALS: ITA NOS.1565,1566 & 1567/HYD/2013 2. THE ONLY EFFECTIVE GRIEVANCE OF THE ASSESSEES I N THESE APPEALS IS WITH REGARD TO DENIAL OF THE CLAIMS FOR RELIEF U NDER S.80IB(10) OF THE INCOME TAX ACT, 1961, ON THE GROUND THAT THE BUILT UP AREA OF EACH RESIDENTIAL UNIT EXCEEDED 1,500 SQ. FT. 3. FACTS OF THE CASE IN BRIEF, AS TAKEN FROM THE A PPEAL FOLDER FOR ASSESSMENT YEAR 2009-10 IN RESPECT OF ITA NO.1566/H YD/2013( M/S. MODI SHELTERS PRIVATE LIMITED), ARE THAT THE ASSESSEE CO MPANY ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT HAS FILED ITS R ETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 26.9.2009 ADMITTING AN I NCOME OF RS.1,23,038. IN THE COURSE OF ASSESSMENT PROCEED INGS, IT WAS NOTICED THAT THE ASSESSEE ADMITTED INCOME FROM BUSINESS TO THE EXTENT OF RS.1,99,06,201 AND CLAIMED DEDUCTION OF RS.1,97,83, 163 UNDER S.80IB(10) OF THE ACT, THEREBY SHOWING TAXABLE INCO ME AT RS.1,23,038. SINCE THE AVAILABLE GROSS TOTAL INCOME WAS HIGHER T HAN THE ADMISSIBLE DEDUCTION, THE ENTIRE DEDUCTION WORKED OUT HAS BEEN CLAIMED UNDER S.80IB(10). ON GOING THROUGH THE COMPUTATION OF E LIGIBLE PROFITS FOR THE 80IB PROJECTS, AS ALSO FORM NO.10CCB FURNISHED BY T HE ASSESSEE, IT WAS NOTICED THAT THE ASSESSEE HAD EXECUTED THE FOLLOWIN G PROJECTS DURING THE YEAR- SL.NO. NAME OF THE PROJECT AREA NO. 1. EMERALD PARK ANNOJIGUDA 148 2. EMERALD PARK ANNEXE ANNOJIGUDA 104 3. PALM SPRINGS PHASE II KOMPALLY 63 ITA NO.1566/HYD/2013 & OTHERS M/S. MODI SHELTERS PVT. LTD., HYDERABAD A ND ANR. 3 THE RESIDENTIAL UNITS IN THE ABOVE PROJECTS ARE IND EPENDENT RESIDENTIAL UNITS/BUNGALOWS, WHICH ARE DUPLEXES SURROUNDED BY A COMPOUND WALL AND EACH RESIDENTIAL UNIT, INTER ALIA, CONSISTED OF A P ORTICO AND AN OPEN TERRACE, AND THE OPEN TERRACE IS ACCESSIBLE TO THE LIVING RO OMS IN THE FIRST FLOOR. THE ASSESSEE CLAIMED THE ABOVE PROJECTS AS ELIGIBLE FOR DEDUCTION UNDER S.80IB(10) OF THE ACT, AND ACCORDINGLY CLAIMED DEDU CTION BY OFFERING PROFITS UNDER PERCENTAGE COMPLETION METHOD. 4. FROM THE INFORMATION FURNISHED BY THE ASSESSEE DURING THE COURSE OF SCRUTINY PROCEEDINGS, IT WAS NOTICED BY T HE ASSESSING OFFICER THAT THE BUILT UP AREA OF EACH RESIDENTIAL UNIT IN THREE PROJECTS IS IN EXCESS OF 1,500 SQ. FT, AS AGAINST THE CONDITION STIPULATED U NDER S.80IB(10) THAT THE RESIDENTIAL UNIT HAS A BUILT UP AREA NOT EXCEEDING 1000 SQ. FT, WHERE A SUCH UNIT IS SITUATED WITHIN THE CITIES OF DELHI OR MUMB AI OR WITHIN 25 KMS OF THE MUNICIPAL LIMITS OF THESE CITIES AND 1,500 SQ. FT. AT ANY OTHER PLACE. IN THIS VIEW OF THE MATTER AND CONSIDERING THE DETAILED EXA MINATION OF THIS ASPECT DONE DURING THE COURSE OF SCRUTINY ASSESSMENT PROC EEDINGS FOR THE ASSESSMENT YEAR 2008-09, THE ASSESSING OFFICER CAL LED FOR A NOTE FROM THE ASSESSEE IN SUPPORT OF ITS CLAIM FOR DEDUCTION UNDE R S.80IB(10) FOR ASSESSMENT YEAR 2009-10. AFTER CONSIDERING THE LET TER OF THE ASSESSEE DATED 4.11.2011 IN RESPONSE THERETO, THE ASSESSING OFFICER NOTED THAT THE ISSUE IN QUESTION FOR THE ASSESSMENT YEAR 2009-10 I S WHETHER THE AREA OF PORTICO AND OPEN TERRACE AS EXCLUDED BY THE ASSESS EE IN COMPUTING THE BUILT UP AREA WAS COVERED UNDER THE DEFINITION OF BUILT UP AREA AS PROVIDED IN THE ACT. AFTER ELABORATE CONSIDERATION OF THE ASSESSEES DETAILED EXPLANATION, IN THE LIGHT OF THE CASE-LAWS ON THIS ASPECT, INCLUDING THE DECISIONS OF THE TRIBUNAL IN SIMILAR MATTERS AS WELL AS IN THE CASE OF ONE OF THE TWO APPELLANT-ASSESSEES BEFORE US, VIZ. M/S. MODI BUILDERS & REALTORS PVT. LTD., THE ASSESSING OFFICER CONCLUDED THAT THE THREE PROJECTS NOTED ABOVE DO NOT QUALIFY FOR DEDUCTION UNDER S.80 IB(10) OF THE ACT, AND ACCORDINGLY, DISALLOWED THE CLAIM OF THE ASSESSEE F OR DEDUCTION OF RS.1,97,83,163 UNDER S.80IB(10). ITA NO.1566/HYD/2013 & OTHERS M/S. MODI SHELTERS PVT. LTD., HYDERABAD A ND ANR. 4 5. ON APPEAL, THE CIT(A) ALSO, FOLLOWING THE APPE LLATE ORDERS ON THIS ISSUE, INCLUDING THE DECISIONS OF THIS TRIBUNA L, UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 6. IN RESPECT OF THE OTHER TWO APPEALS IN THIS BU NCH AS WELL, FACTS RELATING TO THE ISSUE IN DISPUTE ARE IDENTICAL EXCE PT FOR THE AMOUNTS INVOLVED AND HENCE, THE SAME NEED NOT BE NARRATED O VER AGAIN. 7. AGGRIEVED BY THE ORDERS OF THE CIT(A), CONFIRM ING THE DISALLOWANCE OF THE ASSESSEES CLAIMS FOR DEDUCTION UNDER S.80IB(10), ASSESSEES HAVE PREFERRED THESE APPEALS BEFORE US. 8. WE HAVE HEARD THE PARTIES AND PERUSED THE MATE RIAL ON RECORD, INCLUDING THE PAPER-BOOKS FILED BY THE ASSESSEE. WE HAVE ALSO GONE THROUGH THE WRITTEN SUBMISSIONS FILED BY THE ASSESS EE. THE CONDITION STIPULATED IN THE ACT SO AS TO MAKE AN ASSESSEE ELI GIBLE FOR RELIEF UNDER S.80IB(10), IS THAT IN THE RESIDENTIAL PROJECTS CO NSTRUCTED, THE RESIDENTIAL UNIT HAS A BUILT UP AREA NOT EXCEEDING 1000 SQ. FT, WHERE SUCH UNIT IS SITUATED WITHIN THE CITIES OF DELHI OR MUMBAI OR WI THIN 25 KMS OF THE MUNICIPAL LIMITS OF THESE CITIES AND 1,500 SQ. FT. AT ANY OTHER PLACE. IT IS THE METHOD OF COMPUTATION OF EACH RESIDENTIAL UNITS WHICH IS UNDER DISPUTE IN THESE CASES. HOWEVER, THIS ISSUE IS SQUARELY CO VERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE BY THE SUCCESSIVE DECISIONS OF THE TRIBUNAL IN SIMILAR MATTERS, INCLUDING IN ASSESSEES OWN CASES FOR ASSESSMENT YEAR 2008-09, WHEREBY THE TRIBUNAL VIDE ORDER DATED 22.3.2012 IN ITA NOS.1457 AND 1458/HYD/2011, FOLLOW ING THE EARLIER DECISION OF THE TRIBUNAL IN THE CASE OF MODI BUILDE RS & REALTORS PVT. LTD. IN ITA NO.1541/HYD/2010 FOR ASSESSMENT YEAR 2007-08 VI DE ORDER DATED 31.3.2011, CONFIRMED THE DISALLOWANCE MADE FOR THE ASSESSMENT YEAR 2008-09. RELEVANT PORTION OF THE ORDER OF THIS TRI BUNAL IN THE CASES OF THESE VERY ASSESSEES DATED 22.3.2012 IS EXTRACTED B ELOW- ITA NO.1566/HYD/2013 & OTHERS M/S. MODI SHELTERS PVT. LTD., HYDERABAD A ND ANR. 5 2. THE FIRST COMMON GROUND IN THESE APPEALS IS WIT H REGARD TO ALLOWABILITY OF DEDUCTION U/S. 80IB(10) OF THE INCO ME-TAX ACT, 1961. 3. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OP INION THAT SIMILAR ISSUE CAME FOR CONSIDERATION BEFORE THIS TRIBUNAL I N THE CASE OF MODI BUILDERS & REALTORS PVT. LTD., IN I.T.A. NO.15 41/HYD/2010. THE TRIBUNAL VIDE ORDER DATED 31ST MARCH, 2011 HELD AS FOLLOWS: '11. WE HAVE HEARD BOTH THE PARTIES AND ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. THE MAIN CONTENTION HEREIN IS WITH REGARD TO INCLUSION OF PORTICO AND BALCONY FOR THE PURPOSE OF DETERMINING THE BUILT-UP AREA AS PER CLAUSE (A) OF SUBSECTION (14) OF SECTION 80IB OF THE INCOME-TAX ACT, 1961. AS PER THIS CLAUSE THE DE FINITION OF BUILT- UP AREA IS AS FOLLOWS: 80IB(14)[(A) BUILT-UP AREA MEANS THE INNER MEASUREMENTS OF THE RESIDENTIAL UNIT AT THE FLOOR L EVEL, INCLUDING THE PROJECTIONS AND BALCONIES, AS INCREAS ED BY THE THICKNESS OF THE WALLS BUT DOES NOT INCLUDE THE COM MON AREAS SHARED WITH OTHER RESIDENTIAL UNITS;] 12. THE ABOVE DEFINITION WAS INTRODUCED BY FINANCE (NO. 2) ACT, 2004. THIS AMENDMENT STARTS WITH INNER MEASUREMENT OF RESIDENTIAL UNIT. EVEN AS PER COMMON PARLANCE BUIL T-UP AREA IS THE CARPET AREA COVERED BY THICKNESS OF WALL + BALCONY + PORTICO (PROJECTION). THUS, WHETHER IT IS THE INNER MEASUR EMENT OR OUTER MEASUREMENT ONE THING IS AMPLY CLEAR THAT, IT SHOUL D BE ACTUAL MEASUREMENT NOT ANY ESTIMATE. THE DISPUTE HEREIN IS WITH REGARD INCLUSION OF PORTICO AND BALCONY FOR MEASURING THE BUILT-UP AREA OF EACH RESIDENTIAL UNIT. IF THE PORTICO AND BALCONY A REA IS ADDED, THE BUILT-UP AREA WOULD EXCEED 1500 SQ. FT. PER UNIT. A S PER THE DEFINITION AS STATED IN SECTION 80IB(14)(A) BUILT-U P AREA INCLUDES PROJECTION AND BALCONY. ACCEPTED RULES OF INTERPRET ATION FOR AND INCLUSIVE DEFINITION AS ELUCIDATED BY THE HONBLE S UPREME COURT IN THE CASE OF CIT VS. TAJMAHAL HOTEL (1973) CTR (SC) 480; AIR 1972 (SC) 168 IS THAT IF THE WORD INCLUDE IS USED IN A N INTERPRETATIVE CLAUSE, IT MUST BE CONSTRUED AS APPREHENDING NOT ON LY SUCH AS IT SIGNIFIES TO ITS NATURE AND MERIT, BUT ALSO THINGS WHICH THE INTERPRETATIVE CLAUSE DECLARES WHAT THEY SHALL INCL UDE. SO NORMAL MEANING OF BUILT-UP AREA, BUT FOR THE DEFINITION IN CLUDE PROJECTION AND BALCONY, WOULD DEFINITELY EXCLUDE THE LATER. TH EREFORE, THERE CAN BE NO DOUBT THAT PRIOR TO THE INTRODUCTION OF T HE DEFINITION AFORESAID CLAUSE BUILT-UP AREA WOULD NOT INCLUDE PR OJECTIONS AND BALCONY AS NORMALLY UNDERSTOOD. HOWEVER, AFTER THE ENACTMENT ITSELF CLEARLY SPECIFIES THAT BUILT-UP AREA INCLUDE S BOTH PROJECTIONS AND BALCONIES AS INCREASED BY THE THICKNESS OF WAL LS AND DOES NOT INCLUDE COMMON AREA SHARED WITH OTHERS. THIS DEFINI TION GIVES THE ENLARGED MEANING OF BUILT-UP AREA WHICH INCLUDES BA LCONY AND PROJECTION. AFTER INCLUSION OF BALCONY AND PROJECTI ON IF THE TOTAL AREA OF BUILT-UP AREA EXCEEDS 1500 SQ, FT. IN THIS CASE THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S. 80IB OF THE ACT. THE LE ARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE JUDGEMENT OF SU PREME COURT IN THE CASE OF BAJAJ TEMPO, 196 ITR 188 WHEREIN IT WAS HELD THAT A PROVISION IN A TAXING STATUTE GRANTING INCENTIVES F OR PROMOTING ITA NO.1566/HYD/2013 & OTHERS M/S. MODI SHELTERS PVT. LTD., HYDERABAD A ND ANR. 6 GROWTH AND DEVELOPMENT SHOULD BE CONSTRUED LIBERALL Y; AND SINCE A PROVISION FOR PROMOTING ECONOMIC GROWTH HAS TO BE I NTERPRETED LIBERALLY, THE RESTRICTION ON IT TOO HAS TO BE CONS TRUED SO AS TO ADVANCE THE OBJECTIVE OF THE PROVISION AND NOT TO FRUSTRATE IT. IN OUR OPINION THIS CASE LAW HAS NO APPLICATION TO THE FACTS OF THE ASSESSEES CASE. THE ARGUMENT OF THE LEARNED COUNSE L FOR THE ASSESSEE IS GOOD IN PART BUT THE INFERENCE DOES NO T LOGICALLY FOLLOW. IN OUR OPINION, THE LEGISLATIVE EXPEDIENCE ADOPTED TO ACHIEVE THAT OBJECTIVE IN THE PROVISION REQUIRES TO BE GIVEN EFF ECT ON IT IS OWN LANGUAGE. THERE IS NO AMBIGUITY IN CLAUSE (A) OF SU BSECTION (14) OF SECTION 80IB OF THE ACT. AS THERE IS NO AMBIGUITY I N THE STATUTORY LANGUAGE, RESORT TO INTERPRETATION PROCESS TO UNFOL D THE LEGISLATIVE INTENT BECOMES IMPERMISSIBLE. THE SUPPOSED INTENTI ON OF THE LEGISLATURE CANNOT THEN BE APPEALED TO WHITTLE DOWN STATUTORY LANGUAGE WHICH IS OTHERWISE UNAMBIGUOUS. IF THE INT ENDMENT IS NOT IN THE WORDS USED, IT IS NOWHERE ELSE. THE NEED FOR INTERPRETATION ARISES WHEN THE WORDS USED IN THE STATUTE ARE ON TH EIR OWN TERMS AMBIVALENT AND DO NOT MANIFEST THE INTENTION OF THE LEGISLATURE. THE WORDS IN THE STATUTE MUST, PRIMA FACIE, BE GIVEN TH EIR ORDINARY MEANINGS. WHERE THE GRAMMATICAL CONSTRUCTION IS CLE AR, MANIFEST AND WITHOUT DOUBT, THAT CONSTRUCTION OUGHT TO PREVA IL UNLESS THERE ARE SOME STRONG AND OBVIOUS REASONS TO THE CONTRARY . IT HAS TO BE REITERATED THAT THE OBJECT OF INTERPRETATION OF A S TATUTE IS TO DISCOVER THE INTENTION OF PARLIAMENT AS EXPRESSED I N THE ACT. THE DOMINANT PURPOSE IN CONSTRUING A STATUTE IS TO ASCE RTAIN THE INTENTION OF THE LEGISLATURE AS EXPRESSED IN THE ST ATUTE, CONSIDERING IT AS A WHOLE AND IN ITS CONTEXT. THAT INTENTION, A ND, THEREFORE, THE MEANING OF THE STATUTE, IS PRIMARILY TO BE SOUGHT I N THE WORDS USED IN THE STATUTE ITSELF, WHICH MUST, IF THEY ARE PLAI N AND UNAMBIGUOUS, BE APPLIED AS THEY STAND. 13. BEING SO, WE CANNOT ADOPT MEANING AS CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE. IN OUR OPINION, B UILT-UP AREA INCLUDES PORTICO AND BALCONY ALSO AND IN THIS CASE IT EXCEEDS 1500 SQ. FT. PER RESIDENTIAL UNIT. ACCORDINGLY THE ASSES SEE IS DISEN- TITLED FOR THE BENEFIT U/S. 80IB OF THE ACT. THE ORDER OF THE CIT(A) IS UPHELD ON THIS ISSUE. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED.' 4. BEING SO, IN VIEW OF THE ABOVE ORDER OF THE TRI BUNAL, WE ARE INCLINED TO DISMISS THE GROUND RELATING TO 80IB(10) OF THE ACT. . IN THE ABSENCE OF ANY DECISION TO THE CONTRARY BROU GHT TO OUR NOTICE BY THE REVENUE, CONSISTENT WITH THE VIEW TAKEN BY THE COOR DINATE BENCHES OF THIS TRIBUNAL IN SIMILAR MATTERS, INCLUDING IN THE CASES OF THE ASSESSEES HEREIN AS WELL, WE FIND NO INFIRMITY IN THE IMPUGNED ORDER S OF THE REVENUE AUTHORITIES ON THIS ISSUE. EVEN THOUGH LEARNED COU NSEL FOR THE ASSESSEE REITERATED THE STAND OF THE ASSESSEE AND PLEADED TH AT CAR PARKING AREA AND FIRST FLOOR TERRACE, WHICH IS OPEN TO SKY SHOULD BE EXCLUDED IN COMPUTING ITA NO.1566/HYD/2013 & OTHERS M/S. MODI SHELTERS PVT. LTD., HYDERABAD A ND ANR. 7 THE AREA OF THE RESIDENTIAL UNIT, AS IS EVIDENT FRO M THE ORDERS OF THE TRIBUNAL, SUCH ARGUMENTS HAVE BEEN SPECIFICALLY CON SIDERED AND REJECTED BY THE TRIBUNAL, WHILE CONFIRMING DISALLOWANCE OF S IMILAR CLAIMS OF THE ASSESSEES UNDER S.80IB(10) IN EARLIER YEARS ON SIMI LAR/SAME PROJECTS. WE ACCORDINGLY UPHOLD THE ORDERS OF THE CIT(A) ON THIS ISSUE AND REJECT THE GROUNDS FOR THE ASSESSEE IN THESE APPEALS. 9. IN THE RESULT, ALL THE THREE APPEALS OF THE AS SESSEES ARE DISMISSED. REVENUES APPEALS: 10. IN THE APPEALS OF THE REVENUE, THE ONLY COMMON EFFECTIVE GRIEVANCE IS AGAINST THE ACTION OF THE CIT(A) IN DE LETING THE DISALLOWANCES IN TERMS OF S.14A OF THE ACT MADE BY THE ASSESSING OFFICER. 11. FACTS IN BRIEF RELATING TO THIS ISSUE, IN SO FAR AS ITA NO.1784/HYD/2013(M/S. MODI SHELTERS PVT. LTD.) IS C ONCERNED, ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEES INVESTMENTS IN PARTNERSHIP FIRM AND INVESTMENTS IN ASSOCIATE COMPANY, M/S. MODI BUILDERS & REALTORS PV T. LTD HAVE GONE UP BY RS.35,00,250 DURING THE PREVIOUS YEAR 2008-09. T HE INCOME FROM THE SAID INVESTMENT IS NOT INCLUDIBLE IN THE TOTAL INCO ME OF THE ASSESSEE. IT WAS ALSO SEEN FROM THE INFORMATION FURNISHED THAT T HE ASSESSEE COMPANY HAS PAID INTEREST ON TERM LOANS TO THE EXTENT OF RS .45.36 LAKHS DURING THE YEAR AND ALSO ON OD ACCOUNTS TO THE EXTENT OF RS.8. 52 LAKHS. IT WAS FURTHER NOTICED THAT THE ASSESSEE HAS EARNED INTERE ST OF RS.14.73 LAKHS DURING THE PREVIOUS YEAR 2008-09, AND THE NET INTER EST EXPENDITURE INCURRED BY THE ASSESSEE WAS TO THE EXTENT OF RS.39 .14 LAKHS. THE ASSESSING OFFICER NOTED IN THIS CONTEXT THAT WHILE COMPUTING THE TOTAL INCOME UNDER CHAPTER IV OF THE ACT, NO DEDUCTION SH ALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME ITA NO.1566/HYD/2013 & OTHERS M/S. MODI SHELTERS PVT. LTD., HYDERABAD A ND ANR. 8 WHICH DOES NOT FORM PART OF THE TOTAL INCOME. IN THIS VIEW OF THE MATTER, THE ASSESSING OFFICER CALLED UPON TO THE ASSESSEE T O JUSTIFY AS TO WHY THE INTEREST EXPENDITURE SHOULD NOT BE DISALLOWED UNDER S.14A. AFTER CONSIDERING THE DETAILED EXPLANATION FURNISHED BY T HE ASSESSEE IN RESPONSE, VIDE ITS LETTER DATED 4.11.2011, THE ASSE SSING OFFICER MADE A DISALLOWANCE OF RS.46,42,343 FOR THE REASONS DISCUS SED IN PARAS 4.3 AND 4.4 OF THE IMPUGNED ASSESSMENT ORDER, WHICH READ A S UNDER- 4.3 THE SUBMISSION OF THE ASSESSEE HAS BEEN CAREFU LLY CONSIDERED. THE ASSESSEE HAS CONTENDED THAT THERE S HOULD BE INCOME AND SUCH INCOME SHOULD NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IF EITHER OF THOSE CONDITIONS IS AB SENT, THE SECTION 14A WILL HAVE NO APPLICABILITY. IN THIS CONNECTION IT IS PERTINENT TO NOTE THAT THERE ARE INVESTMENTS MADE BY THE ASSESSE E DURING THE YEAR. FURTHER, THE ASSESSEE HAS TAKEN LOANS TOWARDS WHICH INTEREST EXPENDITURE HAS BEEN INCURRED. THE INVESTMENTS MADE ARE OF SUCH A NATURE THAT THE INCOME THERE FROM WOULD NOT HAVE FO RMED PART OF TOTAL INCOME TAXABLE IN THE HANDS OF THE ASSESSEE I N THE NORMAL COURSE. THEREFORE, THE INVESTMENTS NOT RESULTING I N INCOME FOR A PARTICULAR YEAR WOULD NOT IMPLY THAT EXPENDITURE ON ACCOUNT OF SUCH INVESTMENTS CANNOT BE QUANTIFIED AS LAID DOWN UNDER RULE 8D AND BE NOT DISALLOWED. 4.4 AS PER SCITON14A OF THE ACT, WHERE THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS, THE ASSESSING OFFICER SHALL DETERMINE THE AMOUNT OF EXP ENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED. RULE 8D OF THE INCOME-TAX RULES, 196 2 (HEREINAFTER REFERRED TO AS THE RULES) LAYS DOWN THE METHOD OF CALCULATING THE EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DO ES NOT FORM PART OF TOTAL INCOME. FURTHER, AS IT CAN BE SEEN FROM RU LE 8D OF THE RULES, NO EVIDENCE IS REQUIRED TO BE EXAMINED TO SEE THAT THE EXPENDITURE HAS BEEN ACTUALLY INCURRED IN RELATION TO INCOME NO T INCLUDIBLE IN TOTAL INCOME. IN CASE WHERE NO EXPENDITURE IS SAID TO HAVE BEEN INCURRED OR WHERE THE ASSESSING OFFICER IS NOT SA TISFIED WITH THE CORRECTNESS OF THE CLAIM OF EXPENDITURE, THE EXPEND ITURE IS REQUIRED TO BE DETERMINED FOLLOWING THE METHOD LAID DOWN UND ER RULE 8D. .. 12. AGGRIEVED BY THE ABOVE DISALLOWANCE, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CIT(A), AFTER CONSID ERATION OF THE DETAILED EXPLANATIONS AND ARGUMENTS OF THE ASSESSEE NOTED IN THE FIRST PLACE THAT ALL INVESTMENTS IN EQUITY SHARES OF ASSOCIATE COMPA NY, MODI BUILDERS & REALTORS P. LTD. ARE NOT MADE DURING THE CURRENT FI NANCIAL YEAR AND MOST OF ITA NO.1566/HYD/2013 & OTHERS M/S. MODI SHELTERS PVT. LTD., HYDERABAD A ND ANR. 9 THE INVESTMENTS ARE ACCUMULATED OVER A PERIOD OF TI ME FROM FINANCIAL YEAR 2006-07 TO 2008-09, WITH THE TOTAL AMOUNTING TO RS .27,95,00,250 INCLUDING THE INVESTMENT OF RS.2.35 CRORES MADE DUR ING THE FINANCIAL YEAR 2008-09 RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERA TION. AS AGAINST THIS, IT WAS NOTED THAT THE NET SURPLUS FUNDS AVAIL ABLE WITH THE ASSESSEE IN THE FINANCIAL YEAR 2008-09 RELEVANT TO THE ASSESSME NT YEAR UNDER CONSIDERATION WAS RS.11,11,38,273, WHICH IS HIGHER THAN THE INVESTMENTS MADE OF RS.2.35 CRORES BY THE ASSESSEE COMPANY. REFERRING TO A LETTER FROM AXIS BANK PERTAINING TO LOAN TAKEN OF RS.3.5 C RORES, HE NOTED THAT THE LOAN FROM AXIS BANK HAS BEEN TAKEN FOR BUSINESS PUR POSE, VIZ. TO MEET ITS WORKING CAPITAL REQUIREMENTS FOR THE DEVELOPMENT OF HOUSING PROJECTS. HE ALSO NOTED THE PLEA OF THE ASSESSEE THAT THERE WAS NO INCOME WHATSOEVER CLAIMED AS EXEMPT AND WHATEVER INTEREST INCOME WAS EARNED BY THE ASSESSEE, THE SAME WAS OFFERED TO TAX UNDER BUSINES S INCOME, AND CONSEQUENTLY, THERE IS NO SCOPE FOR MAKING ANY DISA LLOWANCE IN TERMS OF S.14A OF THE ACT. SIMILARLY, FROM A COMPARATIVE S TATEMENT OF FUNDS BORROWED FOR PAST TWO YEARS FURNISHED BY THE ASSESS EE, THE CIT(A) NOTED THAT THERE ARE NO NEW BORROWALS DURING FINANCIAL YE AR 2008-09 AND IN FACT LOANS TAKEN FROM AXIS BANK OF RS.3,50,00,00 IN THE IMMEDIATELY PRECEDING YEAR, I.E. FINANCIAL YEAR 2007-08, HAVE BEEN REPAID TO THE EXTENT OF RS.52,00,522 IN FINANCIAL YEAR 2008-09. CONSIDERING THESE FACTUAL ASPECTS IN THE LIGHT OF THE PROVISIONS OF S.14A AND THE CAS E-LAW ON THE POINT, THE CIT(A) HELD THAT IN THE ABSENCE OF ANY NEXUS BETWEE N THE INVESTMENTS MADE AND THE BORROWED FUNDS, NO AMOUNT OF INTEREST EXPENDITURE CAN BE RELATED TO THE INVESTMENTS MADE, AND CONSEQUENTLY N O DISALLOWANCE CAN BE MADE AS EXPENDITURE INCURRED FOR EARNING EXEMPT INC OME. THE RELEVANT OBSERVATIONS OF THE CIT(A) IN PARA 7.1 OF THE IMPUG NED ORDER READ AS FOLLOWS- 7.1 FROM THE ABOVE, IT IS CLEAR THAT THE APPELLAN T DOES NOT HAVE ANY INCOME WHICH DOES NOT FORM PART OF THE TOT AL INCOME NOR HAS THE APPELLANT MADE SUCH A CLAIM AND ALSO THE IN VESTMENTS HAD BEEN MADE BY APPELLANT FROM ITS OWN FUNDS AND NO PA RT OF ITA NO.1566/HYD/2013 & OTHERS M/S. MODI SHELTERS PVT. LTD., HYDERABAD A ND ANR. 10 BORROWED FUNDS HAD BEEN USED FOR PURPOSE OF MAKING INVESTMENT ANY TIME DURING THE PREVIOUS YEAR. IN VIEW OF THE ABOVE AND ALSO RELYING ON THE DECISIONS CITED ABOVE, I HOLD THAT N O DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D CAN BE MADE FOR THE RELEVANT ASSESSMENT YEAR, AND ACCORDINGLY, I DIRECT THE ASSE SSING OFFICER TO DELETE THE ADDITION. THE CIT(A) ACCORDINGLY, FINDING NO NEXUS BETWEEN TH E BORROWALS MADE RESULTING IN INTEREST EXPENDITURE INCURRED AND THE INVESTMENTS MADE BY THE ASSESSEE RESULTING IN THE INTEREST INCOME, AND ALSO TAKING NOTE OF THE FACT THAT THERE IS NO INCOME DISCLOSED BY THE ASSES SEE, WHICH DOES NOT FORM PART OF THE TOTAL INCOME, DELETED THE DISALLOW ANCE MADE BY THE ASSESSING OFFICER IN TERMS OF S.14A OF THE ACT. 13. IN THE OTHER TWO REVENUE APPEALS ALSO, EXCEPT FOR THE AMOUNTS INVOLVED FACTS ARE IDENTICAL, AND THE CIT(A), AFTER DETAILED EXAMINATION OF THE RELEVANT FACTUAL ASPECTS OF THE MATTER, HELD IN THE FIRST PLACE THAT THE ASSESSEE DID NOT HAVE ANY INCOME WHICH DID NOT FORM PART OF THE TOTAL INCOME, NOR HAS THE ASSESSEE MADE SUCH A CLAIM AND THE INVESTMENTS HAD BEEN MADE BY THE ASSESSEE FORM OUT OF ITS OWN FUNDS AND NO PART OF BORROWED FUNDS HAD BEEN USED FOR PURPOSE OF MAKING INVESTMENT ANY TIME DURING THE RELEVANT PREVIOUS YEAR. WITH THESE OBSER VATIONS, THE CIT(A) HELD THAT NO DISALLOWANCE UNDER S.14A READ WITH RUL E 8D CAN BE MADE AND ACCORDINGLY DELETED THE ADDITIONS MADE BY THE ASSES SING OFFICER FOR THE RELEVANT YEARS. 14. AGGRIEVED BY THE ORDERS OF THE CIT(A), REVENUE HAS PREFERRED THE PRESENT APPEALS BEFORE US. 15. WE HEARD THE PARTIES AND PERUSED THE MATERIAL ON RECORD, INCLUDING THE WRITTEN SUBMISSIONS FILED BY THE ASSE SSEE. IT IS THE CLAIM OF THE ASSESSEES THAT THERE IS NO INCOME EARNED BY THE ASSESSEE WHICH DID NOT FORM PART OF THE TOTAL INCOME RETURNED AND NO I NVESTMENT HAS BEEN MADE FROM OUT OF THE BORROWED FUNDS. THE CIT(A) AL SO TAKEN NOTE OF THE ITA NO.1566/HYD/2013 & OTHERS M/S. MODI SHELTERS PVT. LTD., HYDERABAD A ND ANR. 11 BORROWALS MADE BY THE ASSESSEE AND FOUND THAT BORRO WALS HAVE BEEN MADE BY THE ASSESSEE FOR SPECIFIC PURPOSES, SUCH AS WORKING CAPITAL REQUIREMENTS, SPECIFIC PROJECTS ETC., AND UTILISED FOR THOSE SPECIFIC PURPOSES. IN THE ABSENCE OF ANY MATERIAL BROUGHT O N RECORD, TO CONTROVERT THE FINDINGS OF THE CIT(A) ON FACTUAL ASPECTS, AS R IGHTLY HELD BY THE CIT(A) INTEREST RELATABLE TO SUCH LOANS CANNOT BE ATTRIBUT ED TO THE INVESTMENTS YIELDING INTEREST-FREE INCOME. THE OBSERVATION OF THE CIT(A) THAT UNLESS NEXUS BETWEEN THE BORROWALS MADE BY AN ASSESSEE AND THE INVESTMENTS YIELDING EXEMPT INCOME MADE BY THE ASSESSEE IS ESTA BLISHED, NO DISALLOWANCE UNDER S.14A READ WITH RULE 8D CAN BE M ADE IS IN CONSONANCE WITH THE SETTLED POSITION OF LAW LAID DOWN INTER-A LIA BY THE BOMBAY HIGH COURT IN CIT V/S. SBI DHFL LTD. (376 ITR 296) AND P UNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT V/S. HERO CYCLES LTD. (323 ITR 518) RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEES IN TH E WRITTEN SUBMISSIONS FIELD BEFORE US AND OTHER CASE-LAW DISCUSSED BY THE CIT(A) IN THE IMPUGNED ORDERS, BESIDES CONSISTENT WITH THE VIEW T AKEN BY THE COORDINATE BENCHES OF THE TRIBUNAL IN SIMILAR MATTERS. IN TH IS VIEW OF THE MATTER, WE FIND NO INFIRMITY IN THE IMPUGNED ORDERS OF THE CIT (A) ON THIS ISSUE. WE ACCORDINGLY UPHOLD THE SAME AND REJECT THE GROUNDS OF THE REVENUE IN ITS APPEALS. 16. IN THE RESULT, ALL THE THREE APPEALS OF THE REVENUE ARE DISMISSED. 17. TO SUM UP, APPEALS OF THE ASSESSEES AS WELL AS THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 29TH JANUARY 2 016. SD/- SD/- ( D.MANMOHAN ) ( B.RAMAKOTAIAH ) VICE PRESIDENT ACCOUNTANT MEMBER DT/- 29 TH JANUARY, 2016 ITA NO.1566/HYD/2013 & OTHERS M/S. MODI SHELTERS PVT. LTD., HYDERABAD A ND ANR. 12 COPY FORWARDED TO: 1. 2. M/S. MODI SHELTERS PVT. LTD., 4 TH FLOOR, ASHOKA HI-TECH CHAMBERS, 8-02-120/76/1/B/16,17,18, ROAD NO.2, BANJARA HILLS, HYDERABAD 500 034 M/S. MODI BUILDERS AND REALTORS PRIVATE LIMITED, 4 TH FLOOR, ASHOKA HI-TECH CHAMBERS, 8-02-120/76/1/B/16,17,18, ROAD NO .2, BANJARA HILLS, HYDERABAD 500 034 3 . 4 5 DY. COMMISSIONER OF INCOME - TAX CIRCLE 16(2), HYDERABAD INCOME TAX OFFICER WAD 16(1), HYDERABAD COMMISSIONER OF INCOME-TAX(APPEALS) V, HYDERABAD 6 . COMMISSIONER OF INCOME - TAX I V, HYDERABAD 7 . DEPARTMENTAL REPRESENTATIVE, ITAT, HYDE RABAD. B.V.S