LODHA BUILDERS PRIVATE LIMITED, MUMBAI V. ACIT, CIR- 6(3), MUMBAI

ITA 1572/MUM/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5468 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 16-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N S JANG
• Assessee Lawyers: VIJAY MEHTAAR
• Keywords: Earning of tax free income; Retrospective amendment; Additional evidence; Non-deduction of tax
• Section: 14A; 201(1); 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENC H, MUMBAI BEFORE SHRI PAWAN SINGH, JM AND SHRI N.K. PRADHAN, AM I.T.A. NO.1572/MUM/2015 ASSESSMENT YEAR: 2008-09 LODHA BUILDERS PRIVATE LIMITED 412, FLOOR-4, 17G VARDHMAN CHAMBER, CAWASJI PATEL ROAD, HORNIMAN CIRCLE, FORT, MUMBAI-400 001. / VS. ACIT-CIRCLE-6(3),ROOM NO.522; AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400 020. ./ PAN : AAACL 1722 F ( /APPELLANT ) .. ( / RESPONDENT ) I.T.A. NO.1748/MUM/2015 ASSESSMENT YEAR: 2008-09 DCIT -CC-7(3),ROOM NO.655;6 TH FLOOR; AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400 020 / VS. LODHA BUILDERS PRIVATE LIMITED FORT, MUMBAI-400 001. ( /APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VIJAY MEHTA-AR / RESPONDENT BY : SH. N.S. JANGPANGI CIT-DR & MS. POOJA SWAROOP -DR /DATE OF HEARING : 17/07/2018 / DATE OF PRONOUNCEMENT : 23/07/2018 / O R D E R PER PAWAN SINGH , JUDICIAL MEMBER : I.T.A. NO.1572/MUM/2015 ASSESSMENT YEAR: 2008-09 ; I.T.A. NO.1748/MUM/2015 ASSESSMENT YEAR: LODHA BUILDERS PRIVATE LIMITED 2 THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER OF CIT(A)-48, MUMBAI DATED 21/01/2015 FOR ASSESSMENT YEAR 2008-09. THE ASSE SSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. DISALLOWANCE UNDER SECTION 14A OF THE INCOME-TAX ACT, 1961 ('THE ACT') 1.1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CITFA) ERRED IN UPHOLDING ACTION OF THE LEARNED AO I N DISALLOWING EXPENDITURE OF RS.1,04,58,823 UNDER SECTION 14A OF THE ACT READ W ITH RULE 8D OF THE INCOME-TAX RULES, 1962 ('THE RULES'] WITHOUT APPRECI ATING THE FACT THAT THE APPELLANT HAD MADE INVESTMENT IN THE SHARES OF THE I NVESTEE COMPANY FOR OBTAINING CONTROL OVER THE INVESTEE COMPANY AND THEREB Y COMMERCIALLY EXPLOIT THE LAND HELD BY THE INVESTEE COMPANY AND NOT WITH T HE INTENTION OF EARNING EXEMPT DIVIDEND INCOME. 1.2. WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN UPHOLDI NG THE ACTION OF THE LEARNED AO THAT THE PROVISIONS FOR DIMINISH IN THE VAL UE OF THE INVESTMENT OF RS. 1,47,00,000 SHOULD HAVE BEEN REDUCED WHILE CALC ULATING AVERAGE OF TOTAL INVESTMENTS FOR COMPUTING DISALLOWANCE UNDER SECTION 1 4A OF THE ACT READ WITH RULE 80 OF THE RULES. 2. DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE AC T 2.1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY LEARNED AO OF RS 9,95,62,263 UNDER SECTION 40(A)(IA) OF ACT WITHOUT APPRECIATING THE FACT THAT THE APPELLANT CANNOT BE REGARDED AS 'ASSESSEE IN DEF AULT' UNDER SECTION 201(1AJ OF THE ACT TO INVOKE PROVISIONS OF SECTION 40(A)(I A) GIVEN THE FACT THAT THE RECIPIENT HAS INCLUDED THE SAID INCOME IN ITS RE TURN OF INCOME FILED UNDER SECTION 139 OF THE ACT AND PAID THE TAX ON SUCH INCOME AND HAVING REGARD TO THE AMENDMENT INTRODUCED IN SECTION 40(A)(IA) AS WEL L AS SECTION 201(1A) OF THE ACT VIDE FINANCE ACT, 2012. 2.2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT(A) ERRED IN UPHOLDING ACTION OF THE LEARNED AO I N NOT ACCEPTING ARGUMENT OF THE APPELLANT THAT THE AMENDMENT TO THE PROVISIONS OF SECTION 40(A)(IA) CLARIFICATION IN NATURE HAVING RETROSPECTIVE OPERATI ON AND HENCE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT SHOULD NOT BE APPLICABLE. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, DELETE, RE CTIFY, SUBSTITUTE AND MODIFY ANY OF THE AFORESAID GROUNDS OF APPEAL OR ADD A NEW GROUND OR GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING THE APPEAL. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE ID. CIT(A), ERRED IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE THE INTEREST I.T.A. NO.1572/MUM/2015 ASSESSMENT YEAR: 2008-09 ; I.T.A. NO.1748/MUM/2015 ASSESSMENT YEAR: LODHA BUILDERS PRIVATE LIMITED 3 EXPENSES DISALLOWED U/S 40(A)(IA) OF THE I.T. ACT, WH ILE COMPUTING DISALLOWANCE U/S 14A R.W.R. 8D. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. ., _ : . THE APPELLANT CRAVES LEAVE TO AMEND 01; ALTER ANY GR OUND AND/OR ADD NEW GROUNDS WHICH MAY BE NECESSARY. 2. ITA NO.1572/MUM/2015 (ASSESSEE S APPEAL):- 2.1. AT THE OUTSET OF HEARING, THE LD. AUTHORISED REPRE SENTATIVE SUBMITS THAT THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE COVERE D IN FAVOUR OF THE ASSESSEE BY A SERIES OF DECISIONS OF VARIOUS HIGH COURTS AND TRIBUNAL. THE LD. AR FURTHER SUBMITS THAT DURING THE YEAR THE ASSESSEE H AS NOT EARNED EXEMPT INCOME, THEREFORE, NO DISALLOWANCE UNDER SECTION 14A IS WAR RANTED. THE LD. REPRESENTATIVE FOR THE ASSESSEE ALSO SUBMITS THAT O NCE IT IS HELD THAT NO DISALLOWANCE UNDER SECTION 14A IS WARRANTED, THE GR OUND OF APPEAL RAISED BY THE REVENUE IN ITS CROSS APPEAL WOULD BECOME INFRUCTUOU S. IN SUPPORT OF HIS SUBMISSION, THE LD. REPRESENTATIVE FOR THE ASSESSEE RELIED UPON THE FOLLOWING :- 1. PR.CIT VS. BALLARPUR INDUSTRIES LTD.(ITA NO.51 OF 2 016 DATED 13/10/1016 (BHC); 2. REDINGTON INDIA LTD. VS. ADDL.CIT(329 ITR 633)(MAD. ); 3. CHEMINVEST LTD. VS. CIT (378 ITR 33)(DEL.); 281 CTR 447 (DEL.); 4. CIT VS. SHIVAM MOTORS (P.) LTD. (272 CTR 277)(ALL.) ; 5. CIT VS. CORTECH ENERGY (P) LTD. (272 CTR 265)( GUJ. ); 6. CIT VS. LAKHANI MARKETING INCL. (271 CTR 265)(P&H); 7. CIT VS. HOLCIM INDIA (P) LTD. (272 CTR 282) (DEL.); 8. CIT VS. WINSOME TEXTILE INDUSTRIES LTD. (319 ITR 20 4)(P&H); 9. CIT VS. DELITE ENTERPRISES (ITA NO.110 OF 2009 BOM) AND 10.VAKRANGEE LTD. VS. ACIT BEING ITA NO.6988/MUM/2 014 DATED 10/08/2016 I.T.A. NO.1572/MUM/2015 ASSESSMENT YEAR: 2008-09 ; I.T.A. NO.1748/MUM/2015 ASSESSMENT YEAR: LODHA BUILDERS PRIVATE LIMITED 4 2.2. ON THE OTHER HAND THE CIT-DR AFTER GOING THROUGH T HE ORDER OF AUTHORITIES BELOW AND VARIOUS CASE LAWS RELIED UPON LD. REPRESE NTATIVE FOR THE ASSESSEE HAS CONCEDED THAT GROUND OF APPEAL NO.1 IS COVERED IN F AVOUR OF THE ASSESSEE. 2.3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE ALSO GONE THRO UGH THE PROFIT AND LOSS ACCOUNT FURNISHED BY THE ASSESSEE ON RECORD. WE HAV E NOTED THAT DURING THE YEAR UNDER THE ASSESSEE HAS NOT SHOWN ANY EXEMPT INCOME. THE HON'BLE BOMBAY HIGH COURT IN CASE OF DCIT VS. BALLARPUR INDUSTRIES LTD. (SUPRA) HELD THAT SECTION 14A WOULD NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. SIMILAR VIEW WAS TAKEN BY THE HONBLE DELHI HIGH COURT IN CASE OF CHEMINVEST LTD. VS. ITO (121 ITD 318)(DEL.)(SB) (SUPRA). CONSIDERING THE FACTUAL AND LEGAL POSITION , WE FIND THAT GROUND NO.1 IS COVERED IN FAVOUR OF THE ASSESSEE. IN THE RESULT TH IS GROUND OF APPEAL IS ALLOWED. 3. GROUND NO.2 RAISED BY THE ASSESSEE RELATES TO DISA LLOWANCE OF INTEREST EXPENSES UNDER SECTION 40(A)(IA). LD. REPRESENTATIV E FOR THE ASSESSEE SUBMITTED THAT GROUND NO.2 OF THE APPEAL IS ALSO CO VERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. IN SUPPORT OF HIS SUBMISSION LD. REPRESENTATIVE FOR THE ASSESSEE RELIED UPON THE CAS E OF ANSAL LANDMARK TOWNSHIP P. LTD.(377 ITR 635) (DEL.) DECISION OF MU MBAI TRIBUNAL IN THE I.T.A. NO.1572/MUM/2015 ASSESSMENT YEAR: 2008-09 ; I.T.A. NO.1748/MUM/2015 ASSESSMENT YEAR: LODHA BUILDERS PRIVATE LIMITED 5 CASE OF ACIT VS. M/S. CITY GOLD INVESTMENTS P.LTD. (IN THIS APPEAL, NO.4160/MUM/2016 DATED 27/06/2018 DTD. 27/06/2018) AND THE CASE OF ACIT VS. M/S. HULE CONSTRUCTION PVT. LTD. (ITA NO.14/PUN /2015 DATED 21/4/2017). LD. REPRESENTATIVE FOR THE ASSESSEE FURTHER SUBMITT ED THAT SECOND PROVISO INSERTED TO SECTION 40(A)(IA) W.E.F. 01/04/2013, WA S DECLARED AS RETROSPECTIVE IN NATURE. THEREFORE, NO DISALLOWANCE UNDER SECTION 40 (A)(IA) FOR NON DEDUCTION OF TDS IS WARRANTED AGAINST THE ASSESSEE. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENT ATIVE SUBMITS THAT THE ASSESSEE HAS NOT FURNISHED THE DETAILS OF PARTIES A GAINST WHOM PAYMENTS WERE MADE AND TDS DEDUCTED. IN SOME OF THE CASES DEDUCTE E IS THE SISTER CONCERN. 3.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CONSI DERED THE ORDERS OF AUTHORITIES BELOW. DURING THE ASSESSMENT THE ASS ESSING OFFICER NOTED THAT THE ASSESSEE HAS PAID INTEREST OF RS.9,95,62,2 63/-. THE ASSESSEE WAS SHOW CAUSED AS TO WHY INTEREST AMOUNTING TO RS.9,95 ,62,263/- DEBITED TO P&L ACCOUNT BE DISALLOWED AS NO TDS HAS BEEN PAID. THE ASSESSEE FURNISHED ITS REPLY. IN THE REPLY THE ASSESSEE CONT ENDED THAT THE PARTY TO WHOM INTEREST WAS PAID HAS ALREADY PAID TAXES ON SU CH INTEREST INCOME. THEREFORE, THE ASSESSEE HAS NOT DEDUCTED TAX AT SOU RCE ON SUCH AMOUNT. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY ASSESSING OFFICER I.T.A. NO.1572/MUM/2015 ASSESSMENT YEAR: 2008-09 ; I.T.A. NO.1748/MUM/2015 ASSESSMENT YEAR: LODHA BUILDERS PRIVATE LIMITED 6 HOLDING THAT PERSON TO WHOM INTEREST WAS PAID DOES NOT QUALIFY IN ANY OF THE EXCEPTIONS PROVIDED UNDER SECTION 194A. THE ASSESSE E MADE DEFAULT BY NOT DEDUCTING TAX AT SOURCE. THUS, INTEREST PAID OF RS. 9,95,62,263/- WAS DISALLOWED BY CIT(A). 3.2. BEFORE THE CIT(A) THE ASSESSEE FILED ITS WRITTEN SUBMISSIONS. THE ASSESSEE ALSO CONTENDED THAT WHEN THE TAX HAS BEEN PAID BY D EDUCTEE BY FILING RETURN OF INCOME, THE DEDUCTOR IS DISCHARGED FROM PAYING ANY FURTHER AMOUNT AND THERE CANNOT BE ANY DEMAND RAISED BY TAX AUTHORITIES TO D EDUCTOR IN CASE DEDUCTEE HAS PAID TAXES DUE ON ITS INCOME. THE ASSESSEE ALSO FUR NISHED EVIDENCE WHICH CONTAINED CERTIFICATE FROM CHARTERED ACCOUNTANT (CA ) AND OTHER EVIDENCES REGARDING FILING OF RETURN IN RESPECT OF PAYMENT OF INTEREST TO WHOM TDS WAS NOT MADE. ON THE SUBMISSION OF ADDITIONAL EVIDENCE REMAND REPORT WAS CALLED FROM ASSESSING OFFICER. THE ASSESSING OFFICER FURNI SHED HIS REMAND REPORT DATED 26/11/2014. IN THE REMAND REPORT THE ASSESSIN G OFFICER OBJECTED ABOUT THE ADMISSION OF ADDITIONAL EVIDENCE ON THE GROUND THAT SAME WAS NOT FURNISHED DURING THE ASSESSMENT. FOR THE SUBMISSIONS OF THE A SSESSEE THAT THE PARTY TO WHOM INTEREST WAS PAID, HAS ALREADY PAID TAX ON SUC H INCOME, WHICH ENVISAGED THAT THE ISSUE WAS EXAMINED BY THE ASSESSING OFFICE R THE THEN. I.T.A. NO.1572/MUM/2015 ASSESSMENT YEAR: 2008-09 ; I.T.A. NO.1748/MUM/2015 ASSESSMENT YEAR: LODHA BUILDERS PRIVATE LIMITED 7 3.2.1. IN THE REJOINDER, THE ASSESSEE CONTENTED THAT ASSE SSMENT ORDER WAS PASSED ON 31/12/2010. THE ASSESSEE HAD CONTENDED THAT IT W AS SPECIFICALLY BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THAT THE RECIPI ENT OF THE INTEREST HAS FILED THEIR RETURN OF INCOME AFTER CONSIDERING THE INTEREST PAI D BY THE ASSESSEE AND PAID THE TAXES THEREON. THEREFORE, NO AMOUNT CAN BE RECOVERE D FROM THE DEDUCTOR AND NOR DISALLOWANCE U/S. 40(A)(IA) CAN BE MADE. THE ASSES SEE ALSO CONTENDED THAT AS PER FINANCE ACT, WHEN THE ASSESSEE FAILED TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER-XVII- B, IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO OF SUB SECTION (1) OF SECTION 201, THEN, FOR THE PURPOSE OF THIS SUB-CLAUSE, IT WAS TO BE D EEMED THAT THE ASSESSEE HAD DEDUCTED AND PAID THE TAX ON THE SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME AND NO DISALLOWANCE BE MADE. SIMILARLY, AMEN DMENT HAS BEEN MADE TO SECTION 201(1) OF THE ACT, VIDE FINANCE ACT, 2012 A S PER WHICH THE ASSESSEE SHALL NOT BE DEEMED TO BE ASSESSEE IN DEFAULT IN RESPECT OF FAILURE TO DEDUCT TAX IF THE RESIDENT RECIPIENT HAS FURNISHED HIS RETURN OF INCO ME U/S. 139 AND TAKEN INTO ACCOUNT SUCH SUM OF COMPUTING INCOME IN RETURN OF I NCOME AND PAID TAX THEREON. THE ASSESSEE ALSO CONTENDED THAT THE AMEND MENT BROUGHT BY THE FINANCE ACT, 2012 IS CLARIFICATORY IN NATURE, THERE FORE, WILL HAVE RETROSPECTIVE EFFECT. BEFORE US, THE LD. AR HAS FURNISHED THE COP Y OF DETAILS OF TDS PAID DURING THE RELEVANT PERIOD (PAGE-10-11 OF THE PAPER BOOK) ALONGWITH RECEIPT OF I.T.A. NO.1572/MUM/2015 ASSESSMENT YEAR: 2008-09 ; I.T.A. NO.1748/MUM/2015 ASSESSMENT YEAR: LODHA BUILDERS PRIVATE LIMITED 8 TDS AND COPIES OF RETURN OF INCOME OF THE RECIPIENT S (PAGE 22-39 OF THE PAPER BOOK). ON THE OTHER HAND THE LD. CIT-DR SUBMITS TH AT THE SECOND PROVISO TO SECTION 40(A)(IA) HAS BEEN INSERTED BY FINANCE ACT 2012, W.E.F. 1/04/2013. TO READ IT OTHERWISE AS SUBMITTED BY THE ASSESSEE WILL GO AGAINST THE STATUTORY PROVISIONS. LD. CIT-DR FURTHER SUBMITTED THAT THERE IS NO BASIS TO READ THE PROVISIONS AS RETROSPECTIVE AND CLARIFICATORY IN AB SENCE OF EXPLICIT ENACTMENT OF THE PARLIAMENT. WE HAVE NOTED THAT LD. CIT-DR HAS N OT DISPUTED IF THE RECIPIENT HAS INCLUDED TAX IN THEIR RETURN OF INTEREST WHILE FILING RETURNS. 3.3. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PAR TIES AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAV E NOTED THE ASSESSEE THE ASSESSEE HAS SPECIFICALLY CONTENDED BEFORE THE LO WER AUTHORITIES THAT THE TAX HAS BEEN PAID BY DEDUCTEE BY FILING RETURN OF INCOME, T HE DEDUCTOR IS DISCHARGED FROM PAYING ANY FURTHER AMOUNT AND THERE CANNOT BE ANY DEMAND RAISED BY TAX AUTHORITIES TO DEDUCTOR IN CASE DEDUCTEE HAS PAID TAXES DUE ON ITS INCOME. THE ASSESSEE ALSO FURNISHED EVIDENCE WHICH CONTAINED CE RTIFICATE FROM CHARTERED ACCOUNTANT (CA) AND OTHER EVIDENCES REGARDING FILIN G OF RETURN IN RESPECT OF PAYMENT OF INTEREST TO WHOM TDS WAS NOT MADE. THE A SSESSING OFFICER FURNISHED HIS REMAND REPORT DATED 26/11/2014. IN TH E REMAND REPORT THE ASSESSING OFFICER OBJECTED ABOUT THE ADMISSION OF ADDITIONAL EVIDENCE ON THE GROUND THAT I.T.A. NO.1572/MUM/2015 ASSESSMENT YEAR: 2008-09 ; I.T.A. NO.1748/MUM/2015 ASSESSMENT YEAR: LODHA BUILDERS PRIVATE LIMITED 9 SAME WAS NOT FURNISHED DURING THE ASSESSMENT. WE H AVE NOTED THAT IN THE REMAND REPORT THE ASSESSING OFFICER HAS NOT DISPUTE D, IF THE INTEREST INCOME WAS NOT OFFERED BY THE RECIPIENT. IN OUR VIEW THERE CAN NOT BE DOUBLE TAXATION OF THE SAME INCOME I.E. AT THE HAND OF THE DEDUCTEE AND TH E DEDUCTOR. ONCE IT IS BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THAT THE REC IPIENT HAS ALREADY SHOWN SUCH INTEREST INCOME IN THEIR RETURN OF INCOME, THE ASSE SSING OFFICER, SHOULD NOT DISALLOW THE SAME WITHOUT VERIFYING THE CLAIM. THE HON'BLE DELHI HIGH COURT IN THE CASE OF ANSAL LANDMARK TOWNSHIP P. LTD. (SUPRA) , HELD THAT INSERTION OF SECOND PROVISO TO SECTION 40(A)(IA) IS DECLARATORY AND CURATIVE IN NATURE AND HAS RETROSPECTIVE EFFECT FROM 01/04/2005 BEING THE DATE FROM WHICH SUB- CLAUSE (IA) OF SECTION 40(A) WAS INSERTED. FURTHER, THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF CITY GOLD INVESTMENTS P. LT D., BY FOLLOWING THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF ANSAL LANDMARK TOWNSHIP P. LTD. (SUPRA), HELD THAT SECOND PROVISO TO SECTION 40(A)(IA) IS RETROSPECTIVE AND IS APPLICABLE FROM 01/04/2005. 3.3.1 CONSIDERING THE FACTUAL AND LEGAL DISCUSSIONS AS R EFERRED ABOVE NO DISALLOWANCE UNDER SECTION 40(A)(IA) IS SUSTAINABLE WHEN THE RECIPIENT OF INTEREST HAS ALREADY OFFERED BY INCLUDING THE INTER EST INCOME IN THEIR RETURN OF INCOME AND PAID TAX THEREON. THEREFORE, IN OUR V IEW THE SECOND PROVISO OF SECTION 40(A)(IA) SQUARELY APPLIES ON THE FACTS OF THE PRESENT CASE. I.T.A. NO.1572/MUM/2015 ASSESSMENT YEAR: 2008-09 ; I.T.A. NO.1748/MUM/2015 ASSESSMENT YEAR: LODHA BUILDERS PRIVATE LIMITED 10 THEREFORE, WE DIRECT THE AO TO DELETE THE DISALLOWA NCE AFTER EXAMINING WHETHER THE RECIPIENTS HAVE INCLUDED THE INTEREST IN THEIR RETURN OF INCOME AND PAID TAX THEREON. THE ASSESSEE IS DIRECTED TO FILE THE RELEV ANT DOCUMENTS/EVIDENCE BEFORE THE AO. GROUND NO.2 IS ALLOWED FOR STATISTICAL PURP OSES. 4. APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 5. ITA NO.1748/MUM/2015 (REVENUES APPEAL): 5.1. THE SOLE GROUND OF APPEAL RAISED BY THE REVENUE RE LATES TO INTEREST EXPENSES DISALLOWED U/S. 40(A)(IA), WHILE COMPUTING DISALLOW ANCE U/S. 14A. 5.2. WE HAVE NOTED THAT WHILE DECIDING GROUND NO.1 OF T HE APPEAL FILED BY THE ASSESSEE, WE HAVE HELD THAT ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURING THE RELEVANT PERIOD; THEREFORE, NO DISALLOWANCE U/S. 14 A IS WARRANTED. CONSIDERING OUR FINDING ON GROUND NO.1 IN ASSESSEES APPEAL, WHICH WE HAVE ALREADY ALLOWED, THE GROUND OF APPEAL RAISED BY REVENUE HAS BECOME INFRU CTUOUS. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED AND APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COU RT ON 23 RD JULY, 2018. /- SD/- SD/- (N.K. PRADHAN) (PAWAN SINGH) ACCOUNTANT MEMBER JU DICIAL MEMBER MUMBAI; DATED: 23/07/2018 JV.SR.PS. I.T.A. NO.1572/MUM/2015 ASSESSMENT YEAR: 2008-09 ; I.T.A. NO.1748/MUM/2015 ASSESSMENT YEAR: LODHA BUILDERS PRIVATE LIMITED 11 / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR D BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.