Gopalan Enterprises (P) Ltd., V. Addl C.I.T.,

ITA 158/BANG/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5446 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 27-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K R PRADEEP
• Keywords: Earning of tax free income; Capital expenditure
• Section: 43B; 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO.158/ (BANG) 2014 (ASSESSMENT YEAR : 2010-11) M/S GOPALAN ENTERPRISES (INDIA) PVT. LTD. C/O SHRI K. R. PRADEEP, 20, FLAT NO. 101, EDEN PARK, VITTAL MALYA ROAD, BANGALORE -560 001 PAN: AABCG3197L APPELLANT VS THE ADDL. CIT, RANGE - 11, BANGALORE RESPONDENT AND ITA NO.241/(BANG) 2014 (ASSESSMENT YEAR : 2010-11) THE DCIT, CIRCLE 11(3), BANGALORE APPELLANT VS M/S GOPALAN ENTERPRISES (INDIA) PVT. LTD. C/O SHRI K. R. PRADEEP, 20, FLAT NO. 101, EDEN PARK, VITTAL MALYA ROAD, BANGALORE -560 001 PAN: AABCG3197L RESPONDENT ASSESSEE BY : SHRI K. R. PRADEEP , C. A. REVENUE BY : SMT. NEERA MALHOTRA, CIT DR DATE OF HEARING : 03-05-2017 DATE OF PRONOUNCEMENT : 05-05-2 017 O R D E R PER SHRI A.K.GARODIA, AM THERE ARE TWO CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE FOR A. Y. 2010 11 AND THESE ARE DIRECTED AGAINST THE ORDER OF CIT (A) I BANGALORE DATED 31.10.2013. 2. FIRST, WE TAKE UP THE APPEAL OF THE ASSESSEE:- IT(TP)A NOS.49 & 97/B/2014 2 3. IN THIS APPEAL, GROUND NO. 1 & 2 ARE GENERAL WHI CH DO NOT CALL FOR ANY SEPARATE ADJUDICATION. AS PER GROUND NO. 3, THE GRI EVANCE OF THE ASSESSEE IS ABOUT CONFIRMING OF THE DISALLOWANCE OF RS. 41,23,482/- U /S 14A OUT OF TOTAL DISALLOWANCE OF RS. 41,93,414/- UNDER THIS SECTION. 4. LEARNED AR OF THE ASSESSEE THAT THE EXEMPT INCOM E IN THE PRESENT CASE IS ON ACCOUNT OF SHARE OF PROFIT IN TWO PARTNERSHIP FIRMS . HE SUBMITTED THAT TOTAL ADMINISTRATIVE AND SELLING EXPENSES AS PER P/L ACCO UNT IS RS. 178,37,727/- BUT OUT OF IT, EXPENSES OF RS. 167,28,643/- IS HAVING D IRECT NEXUS WITH EARNING OF TAXABLE INCOME AND THEREFORE, ONLY THE BALANCE EXPE NSES OF RS. 11,09,084/- SHOULD BE CONSIDERED FOR DISALLOWANCE U/S 14A IN AD DITION TO DISALLOWANCE OF INTEREST U/S 14A IF ANY. HE SUBMITTED A CHART CONTA INING DETAIL OF THESE EXPENSES OF RS. 178,37,727/-. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS ALREADY MADE DISALLOWANCE U/S 14A TO THE EXTENT OF RS. 23,10,988 /- AND THEREFORE, NO FURTHER DISALLOWANCE IS CALLED FOR. IN REPLY, IT WAS SUBMIT TED BY THE LEARNED DR OF THE REVENUE THAT AS PER THE FINDING OF THE LEARNED CIT (A) ON PAGE 12 OF HIS ORDER, THIS DISALLOWANCE MADE BY THE ASSESSEE OF RS. 23,10,988/ - IS FOR OTHER REASONS AND IT IS NOT A DISALLOWANCE U/S 14A AND NOTHING HAS BEEN BRO UGHT ON RECORD BY THE LEARNED AR OF THE ASSESSEE TO CONTROVERT THIS FINDI NG OF CIT (A). SHE ALSO SUBMITTED THAT ON THIS ASPECT THAT EXPENSES OF RS. 167,28,643 /- IS HAVING DIRECT NEXUS WITH EARNING OF TAXABLE INCOME, THERE IS NO FINDING OF A NY OF THE AUTHORITIES BELOW BECAUSE NO SUCH CLAIM WAS MADE BEFORE THEM AND BEFO RE THE TRIBUNAL ALSO, IN ADDITION TO MAKING THIS SUBMISSION, NO EVIDENCE IS BROUGHT ON RECORD TO ESTABLISH THIS CONTENTION. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIN D THAT THE ASSESSEE HAS ADDED AN AMOUNT OF RS. 23,10,988/- U/S 14A AS PER T HE COMPUTATION OF INCOME IT(TP)A NOS.49 & 97/B/2014 3 AND LEARNED CIT (A) HAS STATED THAT THIS DISALLOWAN CE IS NOT U/S 14A BUT THERE IS NO FINDING ON THIS ASPECT THAT THIS DISALLOWANCE IS UNDER WHICH SECTION. MOREOVER, THE CLAIM OF THE ASSESSEE HAS TO BE EXAMINED THAT O UT OF RS. 178,37,727/-, EXPENSES OF RS. 167,28,643/- IS HAVING DIRECT NEXUS WITH EARNING OF TAXABLE INCOME. UNDER THESE FACTS, WE FEEL IT PROPER TO RES TORE THIS MATTER TO CIT (A) FOR A FRESH DECISION. AT THE SAME TIME, THE ASSESSEE SHOU LD ALSO SHOW THAT UNDER WHICH SECTION THE VARIOUS EXPENSES INCURRED FOR BIOTECH P ARK, KUNDANHALLI AND OTHER PROPERTIES AND DONATION TO SPASTIC SOCIETY ETC. BEC AUSE IF THESE EXPENSES ARE NOT OTHERWISE ALLOWABLE THEN IT CANNOT BE SAID THAT THI S IS A DISALLOWANCE U/S 14A. THE ASSESSEE HAS TO BRING EVIDENCE ON RECORD TO ESTABLI SH THE CONTENTION THAT RS. 167,28,643/- IS HAVING DIRECT NEXUS WITH EARNING OF TAXABLE INCOME. LEARNED CIT (A) SHOULD PROVIDE ADEQUATE OPPORTUNITY OF BEING HE ARD TO BOTH SIDES AND THEN HE SHOULD PASS REASONED AND SPEAKING ORDER AS PER LAW WITH CLEAR FINDING ON THESE ASPECTS AS TO UNDER WHICH SECTION THE AMOUNT OF RS. 23,10,988/- IS TO BE DISALLOWED IF NOT U/S 14A AND AFTER CONSIDERING THE VARIOUS ASPECTS OF THE MATTER AS PER ABOVE DISCUSSION. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 6. AS PER GROUND NO. 4, THE GRIEVANCE IS ABOUT ADDI TION OF RS. 11,86,990/- BEING NOTIONAL INCOME FROM PROPERTIES SITUATED IN D UBAI. IN THIS REGARD, THE LEARNED AR OF THE ASSESSEE PLACED RELIANCE ON THE T RIBUNAL ORDER RENDERED IN THE CASE OF SHAKUNTALA DEVI VS. DDIT AS REPORTED IN 31 CCH 32 (BANGALORE TRIB.), COPY ON PAGES 27 TO 31 OF THE PAPER BOOK. HE POINTED OUT THAT IT WAS HELD BY THE TRIBUNAL IN THIS CASE THAT U/S 23 (1) (C), ONLY ACT UAL RENT RECEIVED OR RECEIVABLE SHOULD BE TAKEN AS ANNUAL VALUE AND IN THE PRESENT CASE, NO ACTUAL RENT IS RECEIVED OR RECEIVABLE. AS AGAINST THIS, LEARNED D R OF THE REVENUE PLACED RELIANCE ON THE JUDGMENT OF HONBLE ANDHRA PRADESH HIGH COUR T RENDERED IN THE CASE OF IT(TP)A NOS.49 & 97/B/2014 4 VIVEK JAIN VS. ACIT AS REPORTED IN 337 ITR 74 (A. P .). SHE POINTED OUT THAT AS PER THIS JUDGMENT, IF THE PROPERTY WAS NOT LET OUT AT A LL DURING THE PREVIOUS YEAR UNDER CONSIDERATION THAN THERE IS NO QUESTION OF ANY VACA NCY ALLOWANCE US 23 (1) (C). IN REJOINDER, LEARNED AR OF THE ASSESSEE SUBMITTED THA T THE PROPERTIES IN QUESTION WERE USED FOR BUSINESS PURPOSE AND HENCE NOT LIABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY BUT SINCE ON THIS ASPECT, THERE IS NO FINDING OF THE LOWER AUTHORITIES, THE MATTER MAY BE RESTORED TO CIT (A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN OUR CONSIDERED OPINION, IF THE PROPERTY IS NOT USED FOR BUSINESS PURPOSE AS BEING CLAIMED THEN AS PER THE JUDGMENT OF HONBLE ANDHRA PRADESH HIGH COURT RENDE RED IN THE CASE OF VIVEK JAIN VS. ACIT (SUPRA), NO VACANCY ALLOWANCE U/S 23 (1) (C) IS ALLOWABLE BECAUSE THERE IS NO DISPUTE ON THIS ASPECT THAT THE PROPERT IES IN QUESTION WERE NOT LET OUT AT ALL DURING THE PREVIOUS YEAR UNDER. BUT IN OUR CONSIDERED OPINION, THIS CLAIM OF THE ASSESSEE THAT THE PROPERTIES IN QUESTION WERE U SED FOR BUSINESS PURPOSE NEEDS TO BE EXAMINED. THEREFORE, WE RESTORE THE MATTER BA CK TO CIT (A) FOR A FRESH DECISION AFTER EXAMINING THIS ASPECT. THIS GROUND I S ALSO ALLOWED FOR STATISTICAL PURPOSES. 8. AS PER GROUND NO. 5, THE GRIEVANCE IS ABOUT REDU CING THE AMOUNT OF DEDUCTION U/S 80IA (4) (III) TO RS. 393,23,602/- AS AGAINST THE CLAIM OF THE ASSESSEE OF RS. 393,66,506/-. LEARNED AR OF THE AS SESSEE SUBMITTED THAT THIS GROUND IS NOT PRESSED AND ACCORDINGLY, THIS GROUND IS REJECTED AS NOT PRESSED. 9. AS PER GROUND NO. 6, THE GRIEVANCE IS ABOUT DISA LLOWANCE OF RS. 15,22,337/- OUT OF SALES TAX AND AS PER GROUND NO. 7, THE GRIEV ANCE IS ABOUT DISALLOWANCE OF RS. 538,907/- OUT OF CUSTOM DUTY. IN THIS REGARD, I T WAS SUBMITTED BY THE LEARNED AR OF THE ASSESSEE THAT THE BASIS OF THE ORDER OF C IT (A) REGARDING SALES TAX IS THIS IT(TP)A NOS.49 & 97/B/2014 5 THAT THE DEMAND OF SALES TAX OF RS. 15,22,337/- FOR F. Y. 2002 03 WAS ADJUSTED AGAINST EXCESS PAYMENT OF ADVANCE TAX FOR THE SAME YEAR RS. 21.50 LACS PAID ON 31.03.2007 AND THE ENTIRE AMOUNT OF RS. 21.50 LACS WAS CLAIMED AND ALLOWED IN THAT YEAR. HE SUBMITTED THAT IF IT IS CORRECT THAN THERE WILL BE NO PAYMENT IN THE PRESENT YEAR AGAINST THIS DEMAND FOR A. Y. 2002 0 3 AND THEREFORE, THIS MATTER MAY ALSO BE RESTORED BACK TO THE A. O. FOR A DECISI ON U/S 43B ALONG WITH THE CLAIM OF RS. 85,97,303/- FOR F. Y. 2003 04 & 2004 05 ALREADY RESTORED TO A. O. REGARDING THE DISPUTE IN RESPECT OF CUSTOM DUTY, HE SUBMITTED THAT THE ORDER OF BOTH LOWER AUTHORITIES ON THIS ISSUE IS ON THIS BAS IS THAT THIS PAYMENT IS FOR IMPORT OF TILES FROM PAKISTAN USED IN CONSTRUCTION OF ASSE SSEES PROPERTY AND HENCE IT IS CAPITAL EXPENDITURE. HE SUBMITTED THAT THE TILES WE RE USED IN CONSTRUCTION OF PROPERTY TO BE SOLD BY THE ASSESSEE AND IT IS INCLU DED IN VALUE OF CLOSING STOCK. HE SUBMITTED THAT THIS ASPECT MAY ALSO BE RESTORED BAC K FOR VERIFICATION OF THESE FACTS. LEARNED DR OF THE REVENUE SUPPORTED THE ORDER OF CI T (A). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN OU R CONSIDERED OPINION, IN VIEW OF THE FACTS NOTED ABOVE, VARIOUS CONTENTIONS RAISED BY THE LEARNED AR OF THE ASSESSEE REQUIRES VERIFICATION AND ON BOTH THESE AS PECTS, WE SET ASIDE THE ORDER OF CIT (A) AND RESTORE THESE TWO MATTERS TO THE A.O. F OR A FRESH DECISION. THE A.O. IS DIRECTED TO EXAMINE AS TO WHETHER ANY PAYMENT WAS M ADE BY THE ASSESSEE IN THE PRESENT YEAR AGAINST THE DEMAND OF SALES TAX FOR F. Y. 2002 03. IF ANY SUCH PAYMENT IS ACTUALLY MADE IN THE PRESENT YEAR, THEN IT SHOULD BE ALLOWED U/S 43B BUT IF NO SUCH PAYMENT IS MADE IN THE PRESENT YEAR, NO ALLOWANCE CAN BE MADE. SIMILARLY, ABOUT CLAIM OF CUSTOM DUTY, THE A. O. SH OULD EXAMINE THE VERACITY OF THIS CLAIM THAT THE TILES IN QUESTION WERE USED FOR THE BUILDING CONSTRUCTED FOR SALE PURPOSE AND THE AMOUNT OF CUSTOM DUTY IS ADDED IN V ALUE OF CLOSING STOCK. WE IT(TP)A NOS.49 & 97/B/2014 6 MAKE IT CLEAR THAT BURDEN IS ON THE ASSESSEE TO BRI NG EVIDENCE ON RECORD ON THIS ASPECT. IF THE ASSESSEE IS ABLE TO ESTABLISH, THERE SHOULD BE NO DISALLOWANCE. BOTH THESE GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES . 11. REGARDING GROUND NO. 8 IN RESPECT OF ADDITION O F RS. 41,93,414/- U/S 14A FOR COMPUTING BOOK PROFIT U/S 15JB, IT WAS SUBMITTE D BY THE LEARNED AR OF THE ASSESSEE THAT ON MERIT OF SUCH ADDITION, THE ASSESS EE HAS NO CASE AND THE ARGUMENT IN THIS REGARD IS RESTRICTED TO THIS EXTEN T THAT IF THE AMOUNT OF DISALLOWANCE U/S 14A IS REDUCED WHILE DECIDING GROU ND NO. 3, THAN FOR SECTION 115JB PURPOSE ALSO, SUCH REDUCED AMOUNT ONLY SHOULD BE CONSIDERED. LEARNED DR OF THE REVENUE SUPPORTED THE ORDER OF CIT (A). 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN OU R CONSIDERED OPINION, THE ASSESSEE DESERVES THE CONSEQUENTIAL BENEFIT. WHILE DECIDING GROUND NO. 3, WE HAVE RESTORED THE MATTER BACK TO CIT (A) FOR A FRESH DEC ISION. WE DIRECT THE CIT (A) THAT FOR BOOK PROFIT U/S 115JB ALSO, ONLY THAT AMOUNT OF DISALLOWANCE U/S 14A SHOULD BE CONSIDERED FOR WHICH THE SAID DISALLOWANCE IS UP HELD FOR COMPUTATION OF NORMAL INCOME. THIS GROUND IS ALSO ALLOWED FOR STATISTICA L PURPOSES. 13. REMAINING GROUNDS BEING GROUND NO. 9 AND 10 ARE IN RESPECT OF INTEREST AND GROUND NO. 11 IS GENERAL. INTEREST ISSUE IS CON SEQUENTIAL AND NO SEPARATE ADJUDICATION IS CALLED FOR THE GENERAL GROUND. WE H OLD ACCORDINGLY. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. 15. NOW, WE TAKE UP THE APPEAL OF THE REVENUE. 16. GROUND NO. 1 IS GENERAL. AS PER GROUND NO. 2, T HE REVENUE IS DISPUTING THE RELIEF OF RS. 69,932/- ALLOWED BY CIT (A) BY DELETI NG THE DISALLOWANCE OUT OF INTEREST EXPENDITURE U/S 14A. LEARNED DR OF THE REVENUE PLAC ED RELIANCE ON THE TRIBUNAL IT(TP)A NOS.49 & 97/B/2014 7 ORDER RENDERED IN THE CASE OF ITO VS. RBK SHARE BRO KING (P) LTD. AS REPORTED IN 37 TAXMAN .COM 1238( TM, MUMBAI TRIB.). SHE SUBMITTED A COPY OF THIS TRIBUNAL ORDER. AS AGAINST THIS, IT WAS SUBMITTED BY THE LEA RNED AR OF THE ASSESSEE THAT TOTAL INVESTMENT FOR EARNING EXEMPT INCOME BY OF IN VESTMENT IN SHARES AND TWO PARTNERSHIP FIRMS IS RS. 8523.51 LACS AS ON 31.03.2 009 AND RS. 7970.42 LACS AS ON 31.03.2010 AND INTEREST FREE FUNDS AVAILABLE WIT H THE ASSESSEE IS RS. 13,515.25 LACS AS ON 31.03.2009 AND RS. 14,426.48 LACS AS ON 31.03.2010. HE SUBMITTED THAT IN VIEW OF THIS FACT THAT INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE IS MORE THAN INVESTMENT IN SHARES AND TWO PARTNERSHIP FIRMS , NO DISALLOWANCE U/S 14A IS JUSTIFIED OUT OF INTEREST EXPENDITURE. ON THIS ASPE CT, HE SUPPORTED THE ORDER OF CIT (A) AND HE ALSO PLACED RELIANCE ON THE FOLLOWING JU DGMENTS:- A) DCIT VS. SUBRAMANYA CONSTRUCTIONS & DEVELOPMENT CO. LTD., ITA NO. 404 & CO NO. 89/B/2013 DATED 20.02.2015,COPY FILED. B) M/S JOHN DISTILLERIES LTD. VS. DCIT, ITA NO. 142 9 & 1565/B/2014 DATED 24.02.2016,COPY FILED. 17. LEARNED DR OF THE REVENUE SUPPORTED THE ORDER O F CIT (A). SHE ALSO SUBMITTED THAT THESE TWO TRIBUNAL ORDERS ARE NOT AP PLICABLE IN THE FACTS OF THE PRESENT CASE. 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN OU R CONSIDERED OPINION, AS PER RULE 8D R.W.S. 14A, IF THE ASSESSEE IS ABLE TO ESTA BLISH THAT THE INTEREST EXPENDITURE IS HAVING DIRECT NEXUS WITH EARNING OF TAXABLE INCOME OR THE ENTIRE INVESTMENT FOR EARNING TAX FREE INCOME IS OUT OF IN TEREST FREE FUNDS THAN NO DISALLOWANCE OUT OF INTEREST EXPENDITURE IS CALLED FOR. SIMILARLY, IF THE REVENUE IS ABLE TO ESTABLISH DIRECT NEXUS BETWEEN INTEREST BEA RING BORROWED FUNDS AND THE INVESTMENT FOR EARNING TAX FREE INCOME THAN WHOLE O F INTEREST PAID ON SUCH INTEREST IT(TP)A NOS.49 & 97/B/2014 8 BEARING BORROWED FUNDS IS TO BE DISALLOWED BUT IF N EITHER PARTY IS ABLE TO ESTABLISH SUCH NEXUS THAN IT HAS TO BE ACCEPTED THAT MIXED FU NDS ARE USED FOR EARNING TAXABLE AND TAX FREE INCOME AND PROPORTIONATE DISAL LOWANCE OUT OF INTEREST EXPENDITURE IS TO BE MADE AS PER RULE 8D. 19. NOW, WE EXAMINE THE APPLICABILITY OF THESE TWO TRIBUNAL ORDERS CITED BY THE LEARNED AR OF THE ASSESSEE. WE FIND THAT IN THE FIR ST CASE, THE TRIBUNAL HAS SIMPLY FOLLOWED THE JUDGMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. GUJARAT INDUSTRIAL DEVELOPMENT CORPORATION LTD. AS REPORTED IN 218 TAXMAN 142. WHEN WE GO THROUGH THIS JUDGMENT OF HONBLE GU JARAT HIGH COURT, WE FIND THAT THE ASSESSMENT YEAR IN THAT CASE WAS 2004 05 AND AT THAT POINT OF TIME, RULE 8D WAS NOT ON THE STATUTE BOOK WHICH IS APPLIC ABLE FROM A. Y. 2008 09. THE TRIBUNAL FOLLOWED THIS JUDGMENT WITHOUT NOTICING TH IS VITAL DIFFERENCE AND THEREFORE, THIS TRIBUNAL ORDER DOES NOT LAY DOWN A BINDING PRE CEDENCE. THE SECOND JUDGMENT REFERRED TO BY THE TRIBUNAL IS A JUDGMENT OF RENDER ED IN THE CASE OF CIT VS. RAGHUVIR SYNTHETICS LTD. IN APPEAL NO. 829 OF 2007. ALTHOUGH THIS IS STATED TO BE A JUDGMENT OF HONBLE DELHI HIGH COURT BUT WE FIND TH AT THIS IS ALSO A JUDGMENT OF HONBLE GUJARAT HIGH COURT AND IT IS REPORTED IN 35 4 ITR 222 AND THE ASSESSMENT YEAR IN THAT CASE WAS 2001 02. THEREFORE, FOR THE SAME REASONS, THE RELIANCE OF THE TRIBUNAL ON THIS JUDGMENT IS ALSO WITHOUT NOTIC ING THIS VITAL DIFFERENCE AND THEREFORE, THIS TRIBUNAL ORDER DOES NOT LAY DOWN A BINDING PRECEDENCE FOR THIS REASON ALSO. THE THIRD JUDGMENT FOLLOWED BY THE TRI BUNAL IN THIS CASE IS THE JUDGMENT OF HONBLE DELHI HIGH COURT RENDERED IN TH E CASE OF CIT VS. KRIBHCO AS REPORTED IN 349 ITR 618. WHEN WE GO THROUGH THIS JU DGMENT OF HONBLE DELHI HIGH COURT, WE FIND THAT THE ASSESSMENT YEAR IN THAT CAS E IS A. Y. 2006 07 AND THE SAME IS ALSO PRIOR TO RULE 8D WAS MADE APPLICABLE. THE NEXT TRIBUNAL ORDER ON IT(TP)A NOS.49 & 97/B/2014 9 WHICH RELIANCE HAS BEEN PLACED IS RENDERED IN THE C ASE OF M/S JOHN DISTILLERIES LTD. VS. DCIT (SUPRA). IN THIS CASE ALSO, THE TRIBU NAL AND LEARNED CIT (A) HAD DECIDED THE ISSUE BY FOLLOWING THE FOLLOWING THREE JUDGMENTS:- A) CIT VS. GUJARAT INDUSTRIAL DEVELOPMENT CORPORATI ON LTD. AS REPORTED IN 218 TAXMAN 142. B) CIT VS. HERO CYCLES LTD., 323 ITR 518 (P & H). C) CIT VS. KRIBHCO AS REPORTED IN 349 ITR 618. 20. WHILE DEALING WITH THE FIRST TRIBUNAL ORDER, WE HAVE ALREADY CONSIDERED TWO JUDGMENTS NOTED ABOVE AT S. NO. A) AND C). THE REMA INING ONE JUDGMENT IS OF HONBLE P & H HIGH COURT RENDERED IN THE CASE OF CI T VS. HERO CYCLES LTD. (SUPRA). IN THIS CASE, THE A. Y. INVOLVED IS 2004 05 I.E. BEFORE RULE 8D BECAME OPERATIVE. THEREFORE, FOR THE SAME REASONS, THE RELIANCE ON TH IS TRIBUNAL ORDER IS ALSO MISPLACED BECAUSE IN THIS TRIBUNAL ORDER ALSO, THE ISSUE WAS DECIDED WITHOUT NOTICING THIS VITAL DIFFERENCE THAT RULE 8D IS NOW OPERATIVE AND THEREFORE, THIS TRIBUNAL ORDER ALSO DOES NOT LAY DOWN A BINDING PRE CEDENCE. RELIANCE BEFORE US IS PLACED ON THE FOLLOWING FOUR JUDGMENTS :- A) CIT VS. GUJARAT INDUSTRIAL DEVELOPMENT CORPORATI ON LTD. AS REPORTED IN 218 TAXMAN 142. B) CIT VS. HERO CYCLES LTD., 323 ITR 518 (P & H). C) CIT VS. KRIBHCO AS REPORTED IN 349 ITR 618. D) CIT VS. RELIANCE UTILITY AND POWER LTD., 313 ITR 340. 20. WE HAVE ALREADY SEEN THAT IN THE FIRST THREE JU DGMENTS, THE A. Y. INVOLVED IS PRIOR TO 2008 09 I.E. BEFORE RULE 8D BECAME OPERA TIVE AND THEREFORE, WE HOLD THAT THESE JUDGMENTS ARE NOT APPLICABLE AFTER RULE 8D HA S BECOME OPERATIVE. IN THE FOURTH CASE I.E. RELIANCE UTILITY AND POWER LTD. (S UPRA) ALSO, THE A. Y. INVOLVED WAS IT(TP)A NOS.49 & 97/B/2014 10 2000 01 I.E. PRIOR TO 2008 09 I.E. BEFORE RULE 8D BECAME OPERATIVE AND MOREOVER, IN THAT CASE, THE DISPUTE WAS ABOUT DISAL LOWANCE U/S 36 (1) (III) AND NOT U/S 14A. HENCE, WE HOLD THAT THIS JUDGMENT IS ALSO NOT RENDERING ANY HELP TO THE ASSESSEE IN THE PRESENT CASE. IN VIEW OF THE DISCUS SION IN PARA 18 ABOVE, WE FIND THAT THE ORDER OF CIT (A) IS NOT SUSTAINABLE BECAUS E THE ASSESSEE HAS NOT ESTABLISHED THAT THE INTEREST EXPENDITURE IS HAVING DIRECT NEXUS WITH EARNING OF TAXABLE INCOME OR THE ENTIRE INVESTMENT FOR EARNING TAX FREE INCOME IS OUT OF INTEREST FREE FUNDS. THEREFORE, WE REVERSE THE ORDE R OF CIT (A) ON THIS ISSUE AND RESTORE THAT OF THE A.O. GROUND NO. 2 OF THE APPEAL OF REVENUE IS ALLOWED. 21. THE ISSUE INVOLVED IN GROUNDS 3 TO 7 IS REGARDI NG DELETION OF DISALLOWANCE U/S 80IA (4) (III). LEARNED DR OF THE REVENUE SUPPO RTED THE ASSESSMENT ORDER AND LEARNED AR OF THE ASSESSEE SUPPORTED THE ORDER OF C IT (A). HE ALSO SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER RENDERED IN ASSESSEES OWN CASE FOR 2004 05, 2005 06, 2008 09 AND 2009 10 IN ITA NOS. 921 TO 924/BANG/2013 DATED 18.07.2014, COPY AVAILAB LE ON PAGES 1 TO 5 OF THE PAPER BOOK. A QUERY WAS RAISED BY THE BENCH ASKING THE LEARNED DR OF THE REVENUE THAT WHETHER THERE IS ANY DIFFERENCE IN FACTS IN TH E PRESENT YEAR AND IN REPLY, SHE COULD NOT POINT OUT ANY DIFFERENCE IN FACTS. 22. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT THE ISSUE IN DISPUTE BEFORE US ABOUT ALLOWABILITY OF DEDUCTION U/S 80IA (4) (III) IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND SINCE, NO DIFFERENCE IN FACTS COULD BE POINTED OUT BY THE LEARNED DR OF THE REVENUE, WE FIND NO REASON TO INT ERFERE IN THE ORDER OF CIT (A) ON THIS ISSUE. THESE GROUNDS ARE REJECTED. 23. REGARDING GROUNDS NO. 8 & 9 INVOLVING THE ISSUE BEING DELETION OF DISALLOWANCE OF RS. 15,33,462/- BEING THE PAYMENT O F PROPERTY TAX ON THIS BASIS IT(TP)A NOS.49 & 97/B/2014 11 THAT THE SAME IS ALREADY DISALLOWED BY THE ASSESSEE U/S 14A, BOTH SIDES AGREED THAT THIS IS INTERCONNECTED WITH THE ISSUE RAISED B Y THE ASSESSEE IN ITS APPEAL AS PER GROUND NO. 3 AND SHOULD BE DECIDED TOGETHER. ON THE ISSUE OF DISALLOWANCE U/S 14A RAISED BY THE ASSESSEE AS PER GROUND NO. 3, WE HAVE RESTORED THE MATTER BACK TO CIT (A) FOR FRESH DECISION AS PER PARA 5 ABOVE. HENCE, THIS ISSUE IS ALSO RESTORED BACK TO CIT (A) FOR FRESH DECISION SIMULTANEOUSLY W ITH THE DECISION ON 14A DISALLOWANCE. THESE GROUNDS OF THE REVENUE ARE ALLO WED FOR STATISTICAL PURPOSES. 24. AS PER GROUND NO. 10, THE GRIEVANCE OF THE REVE NUE IS REGARDING RESTRICTION OF ADDITION IN BOOK PROFIT U/S 115JB ON ACCOUNT OF DIS ALLOWANCE U/S 14A TO RS. 414,23,482/- AS AGAINST RS. 41,93,414/- MADE BY THE A.O. LEARNED DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. LEARNED AR OF THE ASSESSEE SUPPORTED THE ORDER OF CIT (A). HE ALSO SUBMITTED THAT THE GR OUND NO. 8 IN THE APPEAL OF THE ASSESSEE IS INTER CONNECTED. 25. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT THE ISSUE IN DISPUTE BEFORE US IS DECIDED BY THE LEARNED CIT (A) BY FOLL OWING VARIOUS TRIBUNAL ORDERS INCLUDING THE ORDER RENDERED IN THE CASE OF DABUR I NDIA LTD. VS. ACIT AS REPORTED IN 145 ITD 175 (MUMBAI). THE TRIBUNAL HELD IN THIS CASE THAT THE AY UNDER CONSIDERATION IN THAT CASE WAS 2008-2009 IN WHICH D ISALLOWANCE U/S 14A WAS REQUIRED TO BE COMPUTED AS PER RULE 8D AND IT WAS A LSO NOTED THAT IT WAS IN THIS FASHION THAT THE AMOUNT HAD BEEN DISALLOWED AND ALS O ADDED TO THE AMOUNT OF NET PROFIT FOR COMPUTING BOOK-PROFIT U/S 115JB. IT WAS HELD THAT THERE WAS NO REASON SEEN TO DISTURB THE ORDER ON THIS ISSUE. HENCE, IT IS SEEN THAT AS PER THIS TRIBUNAL ORDER, ACTUAL DISALLOWANCE U/S 14A HAS TO BE ADDED BACK U/S 115JB. HENCE, WE FIND NO REASON TO INTERFERE IN THE ORDER OF CIT (A) ON THIS ISSUE. THIS GROUND IS REJECTED. IT(TP)A NOS.49 & 97/B/2014 12 26. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 27. IN THE COMBINED RESULT, THE APPEAL OF THE ASSESSEE AND REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (VIJAY PAL RAO) SD/- (A.K. GARODIA) JU DICAL MEMBER ACCOUNTANT MEMBER PLACE: BANGALORE: D A T E D : 05.05.2017 AM * COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER, AR, ITAT, BANGALORE IT(TP)A NOS.49 & 97/B/2014 13 1. DATE OF DICTATION 2. , , DATE ON WHICH TYPED DRAFT IS PLACED BEFORE THE DICT ATING MEMBER .. 3. !' # . $ %# / $ %# # & DATE ON WHICH THE APPROVED DRAFT COMES TO THE PS/SR .PS. 4. ''() & * + DATE ON WHICH THE ORDER IS PLACED BEFORE THE DICTAT ING MEMBER FOR PRONOUNCEMENT 5. * . %# / # . . %# # + DATE ON WHICH THE ORDER COMES BACK TO THE PS/SR.PS .. 6 * !', + DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. ! !', ' , - ) IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO . 8. .% / 0 + DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. * 1'2 / 34 & 5 + DATE ON WHICH ORDER GOES FOR XEROX &ENDORSEMENT 10. 0 6 / + DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 11. * 7 & 0 8 + THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 12. !) * 9() & 0 9() /#5 . + THE DATE ON WHICH THE FILE GOES TO DESPATCH SECTION FOR DESPATCH OF THE TRIBUNAL ORDER 13. * 9() + DATE OF DESPATCH OF ORDER .