DCIT, CHENNAI V. M/s. Adayar Gate Hotels Ltd., CHENNAI

ITA 1620/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64639 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-11-2012
• Assessment Year: 2009-2010
• Appeal Filed On: 21-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SURESH VIRMANI
• Keywords: Business expenditure; Earning of tax free income
• Section: 14A; 56; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.1502/MDS/2012 (ASSESSMENT YEAR: 2009-10) M/S. ADYAR GATE HOTELS LTD. 132, TTK ROAD, CHENNAI-600 018. PAN: AAACA9041L VS. DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-I(1) CHENNAI-600 034. (APPELLANT) (RESPONDENT) & ITA NO.1620/MDS/2012 (ASSESSMENT YEAR: 2009-10) DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-I(1) 121, M.G.ROAD, CHENNAI-600 034. VS. M/S. ADYAR GATE HOTELS LTD. 132, TTK ROAD, CHENNAI-600 018. PAN: AAACA9041L (APPELLANT) (RESPONDENT) ASSESSEE BY : MR. SURESH VIRMANI, CA REVENUE BY : MR. GURU BASHYAM, JCIT DATE OF HEARING : 20 TH NOVEMBER, 2012 DATE OF PRONOUNCEMENT : 14 TH DECEMBER, 2012 O R D E R PER VIKAS AWASTHY, JM: THE PRESENT APPEALS HAVE BEEN FILED BY THE ASSESS EE AND THE REVENUE IMPUGNING THE ORDER OF THE CIT(A)I II, CHENNAI DATED 17.05.2012 RELEVANT TO THE ASSESSMENT YEAR 2009-10. ITA NO.1502 & 1620/MDS/2012 2 2. ITA NO.1502/MDS/2012 HAS BEEN FILED BY THE ASSES SEE IMPUGNING THE ORDER OF THE CIT(A) ON THE FOLLOWING GROUNDS:- A) THE CIT(A) HAS ERRED IN FACT AND LAW IN HOLDING INTEREST OF ` 53,05,229/- AS DISALLOWABLE ON PROPORTIONATE BASIS UNDER SECTION 14A OF THE INCOME TAX ACT READ WITH RULE 8D OF THE INCOME TAX RULES. B) THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF ` 4,34,392/- UNDER SECTION 14A OF THE ACT READ WITH R ULE 8D OF THE INCOME TAX RULES. C) THE CIT(A) HAS ERRED IN HOLDING THAT INCOME FRO M LETTING OF BUILDING AND HIRE CHARGES FOR PLANT AND MACHINERY AND OTHER FACILITIES FROM INFORMATION TECHNOLOGY PARK KNOWN AS SAI REAL TECH PARK UNDER TWO SEPARATE AGREEMENTS BUT INSEPARABLY LET WAS ASSESSABLE AS INCOME FROM OTHER SOURCES AND NOT INCOME FROM BUSINESS. 3. THE REVENUE IN ITA NO.1620/MDS/2012 HAS ASSAILE D THE ORDER OF THE CIT(A) PRIMARILY ON THE FOLLOWING TWO GROUNDS:- ITA NO.1502 & 1620/MDS/2012 3 A) THE CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ASSESS THE RENTAL INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES UNDER SECTION 56 AND ALLOW THE PERMISSIBLE DEDUCTION UNDER SECTION 57 OF THE ACT, WHEREAS, THE INCOME SHOULD HAVE BEEN ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. B) THE CIT(A) HAS ERRED IN EXCLUDING INTEREST ON BANK LOAN TO DETERMINE THE DISALLOWANCE UNDER RULE 8D. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 28.9.2009 ADMITTING TOTAL INCOME OF ` 35,85,53,283/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) WAS SERVED TO THE ASSESSEE ON 18.8.2010. DURING THE COURSE OF ASSESSMENT, THE ASS ESSING OFFICER DISALLOWED AN AMOUNT OF ` 19,46,733/- UNDER SECTION 14A OF THE ACT. THE ASSESSEE HAD ADMITTED AN AMO UNT OF ` 18,73,537/- AS DIVIDEND RECEIVED DURING THE RELEVAN T PERIOD AND CLAIMED THE SAME AS EXEMPTION UNDER SECTION 10( 34) OF THE ACT. THE ASSESSEE SUO MOTO DISALLOWED 10% OF TH E SAID ITA NO.1502 & 1620/MDS/2012 4 AMOUNT I.E. ` 1,87,354/- UNDER SECTION 14A TOWARDS EXPENDITURE FOR EARNING THE EXEMPT INCOME. THE ASSE SSING OFFICER HELD THE ASSESSEE HAD PAID INTEREST TO THE TUNE OF ` 3,76,42,848/- ON THE BORROWED CAPITAL. THE ASSESSEE HAS NOT BEEN ABLE TO SHOW THAT BORROWED FUNDS WERE NOT UTIL IZED FOR MAKING INVESTMENT. THE ASSESSING OFFICER FURTHER HE LD THAT THE ASSESSEE MUST HAVE INCURRED SOME EXPENDITURE TO MAINTAIN ITS PORTFOLIO TO EARN DIVIDEND. THE ASSESS ING OFFICER RELYING ON THE JUDGEMENT OF GODREJ & BOYCE VS. DCIT APPLIED THE PROVISIONS OF RULE 8D READ WITH SECTION 14A(2) AND WORKED OUT DISALLOWANCE AS ` 19,46,733/-. THE ASSESSING OFFICER ALSO DISALLOWED A SUM OF ` 8,34,26,214/- WHICH THE ASSESSEE HAD EARNED FROM L ETTING OUT OF BUILDING KNOWN AS SAI REAL TECH PARK AT INFORM ATION TECHNOLOGY PARK. THE ASSESSEE HAD OFFERED THE SAID INCOME FOR TAX UNDER THE HEAD INCOME FROM BUSINESS. THE ASSESSING OFFICER TREATED THE SAME AS INCOME FROM HOUSE PROPERTY' AND ASSESSED THE SAME AFTER ALLOWING PERM ISSIBLE DEDUCTION UNDER THE HEAD INCOME FROM HOUSE PROPERT Y. ITA NO.1502 & 1620/MDS/2012 5 5. AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASSE SSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A), PARTLY ALLOWED THE ISSUE OF DISALLOWANCE UNDER SECTION 14 A. THE CIT(A) HELD THAT THE INTEREST AMOUNTING TO ` 3,23,37,619/- WAS PAID ON ACCOUNT OF LOAN SANCTIONED FOR SPECIFIC PRO JECT AND HAS BEEN UTILIZED TOWARDS THE SAME I.E. SAI REAL T ECH PARK. THEREFORE, THE SAID INTEREST PAID TO THE BANK CANNO T BE TAKEN INTO ACCOUNT FOR COMPUTING DISALLOWANCE UNDER RULE 8D(2)(II). THE CIT(A) DIRECTED THE ASSESSING OFFICER TO TAKE I NTO CONSIDERATION THE REMAINING INTEREST OF ` 53,05,229/- ON OTHER LOANS FOR COMPUTING THE PROPORTIONATE DISALLOWANCE UNDER RULE 8D (2)(II). THE CIT(A) FURTHER HELD THAT THE I NVESTMENT INVOLVES CERTAIN ADMINISTRATIVE AND ESTABLISHMENT C OST. SINCE THE DECISION TO MAKE INVESTMENTS, TRACK INVESTMENTS , SALE OF SUCH INVESTMENTS ETC. HAVE BEEN UNDERTAKEN BY THE ASSESSEE, THE EXPENDITURE INCURRED FOR THE SAME AM OUNTING TO ` 4,34,392/- WAS CONFIRMED BY THE CIT(A). 6. AS REGARDS THE TREATMENT OF INCOME FROM THE RENT ING OF BUILDING SAI REAL TECH PARKAT INFORMATION TECHNOL OGY PARK ITA NO.1502 & 1620/MDS/2012 6 IS CONCERNED, THE CIT(A) HELD THE SAME TO BE ASSESS ABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. 7. NOW, BOTH THE ASSESSEE AS WELL AS REVENUE HAS CO ME IN APPEAL ASSAILING THE ORDER OF THE CIT(A). SHRI S URESH VIRMANI APPEARING ON BEHALF OF THE ASSESSEE SUBMITT ED THAT THE ASSESSEE HAD SUO-MOTU ESTIMATED THE DISALLOWANC E TO THE TUNE OF 10% OF THE INCOME EARNED THROUGH DIVIDED AN D THUS CLAIMED THE BENEFIT ON THE REMAINING AMOUNT ONLY. N O AMOUNT FROM THE BORROWED FUNDS HAVE BEEN DIVERTED FOR MAKI NG INVESTMENTS. THE FINDINGS OF THE CIT(A) IS AGAINST THE FACTS OF THE CASE. THE LEARNED AR FURTHER CONTENDED THAT T HE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF ` 4,34,392/- I.E. % OF AVERAGE VALUE OF INVESTMENTS UNDER RULE 8D. THE A.R . SUBMITTED THAT THE ASSESSING OFFICER DID NOT REJECT THE COMPUTATION OF THE ASSESSEE WHILE APPLYING THE PROV ISIONS OF RULE 8D WHICH IS A PRE-CONDITION. SINCE THE ASSESSE ES COMPUTATION WAS NOT REJECTED BY THE ASSESSING OFFIC ER, THE PROVISIONS OF RULE 8D WILL NOT APPLY. THE A.R., HA S RELIED ON THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN T HE CASE OF GODREJ & BOYCE MANUFACTURING CO.LTD., VS. DCIT., 328 ITR ITA NO.1502 & 1620/MDS/2012 7 81 AND MAXOPP INVESTMENT LTD. VS. CIT REPORTED AS 3 47 ITR 272(DEL) ON THIS ISSUE. 8. AS REGARDS THE ISSUE OF TREATMENT OF INCOME FROM BUILDING I.E. SAI REAL TECH PARK AT INFORMATION TECHNOLOGY PARK IS CONCERNED, THE A.R. CONTENDED THAT THE EN TIRE BUILT UP AREA HAS BEEN GIVEN TO TATA CONSULTANCY SERVICES FOR A PERIOD OF FOUR YEARS AND AS PER THE TERMS AND CONDI TIONS OF THE AGREEMENT, THE AGREEMENT IS RENEWABLE. THE ASSE SSEE IS RESPONSIBLE FOR THE MAINTENANCE OF THE BUILDING AND THE INFRASTRUCTURE THEREIN. TWO SEPARATE AGREEMENTS HAV E BEEN EXECUTED BY THE ASSESSEE WITH THE LESSEE. ONE AGREE MENT PERTAINS TO LETTING OF THE BUILDING AND THE OTHER A GREEMENT IS FOR PROVIDING VARIOUS FACILITIES VIZ., PARKING AREA , GENERATORS, MAINTENANCE OF LIFTS ETC. THEREFORE, THE ASSESSEE I S CONSIDERING THE INCOME FROM THE LETTING OUT OF THE BUILDING AS INCOME FROM BUSINESS. IN ORDER TO SUPPORT HIS CON TENTIONS, THE A.R FOR THE ASSESSEE RELIED ON THE ORDER OF TH E BANGALORE BENCH OF THE TRIBUNAL IN THE CASE ITO VS. INFORMATI ON TECHNOLOGY PARK LTD., REPORTED AS 70 TAXMANN.COM 20 8 (BANG) AND GLOBALTECH PARK PVT. LTD. VS. ACIT 28 SO T ITA NO.1502 & 1620/MDS/2012 8 45(BANG) (URO). THE A.R. FURTHER SUBMITTED THAT TH E ASSESSEE IS TAKING ALTERNATIVE PLEA TO ASSESS THE I NCOME FROM BUILDING UNDER THE HEAD INCOME FROM OTHER SOURCES . THE LEARNED AR CONTENDED THAT SIMILAR ISSUE HAD COME UP BEFORE THE TRIBUNAL IN THE ASSESSMENT YEAR 2007-08 IN ITA NO.2618/MDS/2010. THE TRIBUNAL VIDE ORDER DATED 15. 12.2011 HELD THAT THE INCOME FROM LETTING OUT OF THE BUILDI NG IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCE S. 9. ON THE OTHER HAND, SHRI GURU BASHYAM APPEARING ON BEHALF OF THE REVENUE SUBMITTED THAT THE PROVISIONS OF SECTION 14A SUPERSEDES THE PRINCIPLE OF LAW THAT IN THE CAS E OF COMPOSITE BUSINESS EXPENDITURE INCURRED TOWARDS TAX FREE INCOME, THE SAME COULD NOT BE DISALLOWED AND INCORP ORATES AN IMPLICIT THEORY OF APPORTIONMENT OF EXPENDITURE BETWEEN TAXABLE AND NON-TAXABLE INCOME. THE D.R FURTHER SUB MITTED THAT THE CIT(A) SHOULD HAVE APPRECIATED THE FACT TH AT RULE 8D UNDERTAKES DISALLOWANCE ON PROPORTIONATE BASIS IN T HE RATIO OF AVERAGE VALUE OF TOTAL ASSETS. WITH REGARD TO INCO ME FROM LETTING OF BUILDING IS CONCERNED, THE DR STRONGLY S UPPORTED THE ITA NO.1502 & 1620/MDS/2012 9 ORDER OF THE ASSESSING OFFICER. THE DR SUBMITTED TH AT THERE ARE TWO TYPES OF AGREEMENT. THE FIRST AGREEMENT IS FOR PROVIDING FACILITIES INCLUDING CAFETERIA, CAR PARK ING ETC. THE SECOND AGREEMENT IS FOR LETTING OUT OF PROPERTY ON RENT. THE PRIME OBJECT OF THE ASSESSEE IS TO LET OUT THE PROP ERTY ON RENT AND GIVE ADDITIONAL RIGHT OF USING FACILITIES. THE LETTING OF THE BUILDING AND THE SERVICES IS INSEPARABLE , THEREFOR E, THE INCOME FROM THE BUILDING SHOULD BE ASSESSED AS INC OME FROM HOUSE PROPERTY. 10. WE HAVE HEARD THE SUBMISSIONS MADE BY BOTH THE PARTIES. WE HAVE ALSO PERUSED THE JUDGEMENTS/ORDER S REFERRED TO BY THE RESPECTIVE PARTIES. THE PRESENT APPEALS INVOLVE TWO ISSUES. THE FIRST ISSUE RELATES TO HEAD UNDER WHICH RENTAL INCOME FROM THE BUILDING AT INFORMATION TEC HNOLOGY PARK IS TAXABLE. THE ASSESSEE HAS LET OUT A BUILDI NG KNOWN AS SAI REAL TECH PARK TO M/S.TATA CONSULTANCY SER VICES. THE ASSESSEE IS CLAIMING THAT THE INCOME FROM THE S AID BUILDING IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS WHEREAS, THE STAND OF THE REVENUE IS THAT INCOME FROM THE AFORESAID BUILDING IS TO BE TREATED AS IN COME FROM ITA NO.1502 & 1620/MDS/2012 10 HOUSE PROPERTY. THE AR HAS TAKEN AN ALTERNATIVE PLEA, SUPPORTING THE ORDER OF THE CIT(A). THE CIT(A) FOLL OWING THE EARLIER DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE RELEVANT TO THE ASSESSMENT YEAR 2007-08 IN ITA NO.2168/MDS/2010 HAS HELD THAT RENTAL INCOME FROM T HE BUILDING IS TO BE TREATED AS INCOME FROM OTHER SOU RCES. THE SECOND ISSUE RELATES TO DISALLOWANCE MADE BY T HE ASSESSING OFFICER UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES. THE ASSESSING OFFICER HAS MADE DISALLOWANCE TO THE TUNE OF ` 19,46,733/-. THE CIT(A) HAS REDUCED THE AFORESAID AMOUNT BY GIVING BENEFIT OF INTEREST PAID TO HDFC BANK ON A TERM LOAN OF ` 3,23,36,619/- FOR SAI REAL TECH PARK. THE ASSESSEE IS CLAIMING T HAT ENTIRE ADDITION MADE BY THE ASSESSING OFFICER IS LIABLE TO BE DELETED, WHEREAS THE REVENUE IS IMPUGNING REDUCTION OF THE A MOUNT MADE BY THE CIT(A). 11. A PERUSAL OF THE EARLIER ORDERS OF THE TRIBUNA L ON RECORD (PAGE 112 TO 178 OF THE PAPER BOOK) SHOWS THAT IDE NTICAL ISSUE RELATING TO TAXABILITY OF THE INCOME FROM THE BUILDING SAI REAL TECH PARK HAS BEEN ADJUDICATED BY THE TRIBUNA L FOR THE ITA NO.1502 & 1620/MDS/2012 11 ASSESSMENT YEAR 2007-08 IN ITA NO.2168/MDS/2010 ON 15 TH DECEMBER, 2011 AND FOR THE ASSESSMENT YEARS 2006-0 7 AND 2008-09 IN ITA NO.1572 & 1573/MDS/2011 RESPECTIVELY DECIDED ON 31.07.2012. THE TRIBUNAL VIDE ORDER DAT ED 15 TH DECEMBER, 2011 HAS HELD AS UNDER:- 35. THUS, THE ASSESSEE-COMPANY HAS GIVEN ON RENT ( BY STEPPING INTO THE FOOTING OF THE EARLIER COMPANY RE AL VALUE PROMOTERS PVT. LTD) THE BUILDING NAMELY SAI REAL T ECH PARK TO M/S TCS, BOTH THE AGREEMENTS ARE WITH THE SAME ENTITY. THE ONLY INFERENCE WHICH CAN BE DRAWN FROM THE FACTS OF THIS CASE ARE THAT THE PARTIES INTENTION TO EXECUTE THESE TWO AGREEMENTS ON THE SAME DATE WERE THAT BOT H THE AGREEMENT HAD TO BE ENJOYED TOGETHER. FURTHERMORE, M/S TCS IS ENGAGED IN SOFTWARE/INFORMATION TECHNOLOGY BUSINESS FOR WHICH A BUILDING SIMPLICITOR WITHOUT F ACILITIES IN QUESTION WOULD BE USELESS. MOREOVER, BOTH THESE ITE MS I.E BUILDING AND THE FACILITIES CANNOT BE SEPARATELY US ED FOR ANY PURPOSE AND THEY HAVE TO BE JOINTLY USED. IN CASE T HE BUILDING ALONE IS GIVEN ON LEASE, IT WILL BECOME US ELESS WITHOUT THE FACILITIES IN QUESTION. MOREOVER, IF TH E FACILITIES ARE GIVEN ON RENT ALONE THESE CANNOT BE UTILIZED WI THOUT THE BUILDING. THE ARGUMENT OF THE LD.DR THAT MOST OF TH E FACILITIES ARE SUCH FACILITIES WHICH ARE USUALLY GO WITH A BUILDING TO GIVE THE SAME ON RENT WOULD NOT APPLY I N THE GIVEN CASE WHERE THE PROPERTY ITSELF IS MEANT FOR A SPECIFIED UTILITY I.E SOFTWARE AND INFORMATION TECHNOLOGY. SO , THE INTENTION OF BOTH THE PARTIES WAS TO USE BOTH BUILD ING AND FACILITIES ALTHOUGH SEPARATE AGREEMENTS WERE DRAWN, MAY BE FOR QUANTIFYING THE AMOUNT OF LEASE/HIRE CHARGES . THEREFORE, IT IS A CASE WHERE THE BUILDING AND FAC ILITIES CANNOT BE SEPARATELY LET OUT, THE TOTAL BUILT-UP AR EA IS 2,50,260 SQ FT CONSISTING OF FOUR LEVELS. THE ENTIR E SPACE HAS BEEN LET OUT TO M/S TCS. WHEN THE ASSESSEE-COMP ANY HAS INCURRED SUCH HUGE COSTS IT CANNOT AFFORD TO E ITHER KEEP THE BUILDING OR THE FACILITIES IDLE. M/S TCS BEING THE LARGEST SOFTWARE COMPANY OF INDIA, IT CANNOT AFFORD TO ALLO W ANY OTHER COMPETITOR IN THE SAME BUILDING OR TO ENJOY T HE FACILITIES FOR THAT MATTER. THUS, FOR M/S TCS IT WO ULD NOT BE POSSIBLE TO CONDUCT ITS BUSINESS IN THE BUILDING WI THOUT ALL THE FACILITIES REQUIRED IN CASE OF A SOFTWARE COMPA NY. THUS, ITA NO.1502 & 1620/MDS/2012 12 THE FACT THAT BOTH THE BUILDING AS WELL AS THE FACI LITIES WERE LET OUT TOGETHER AND NOT SEPARATELY IS ESTABLISHED FROM THE FACTS OF THE CASE. THEREFORE, WE CAN SAFELY HOLD TH AT LETTING OUT OF THE BUILDING IS INSEPARABLE FROM LETTING OUT OF THE FACILITIES. THE DECISION OF HON'BLE SUPREME COURT R ENDERED IN THE CASE OF SULTAN BROTHERS PVT. LTD (SUPRA) APP LIES ON ALL FOURS TO THE FACTS OF THE GIVEN CASE. THEREFORE, TH E ALTERNATE PLEA OF THE ASSESSEE HAS TO BE ALLOWED AND CONFIRME D AS THE LD. CIT(A) HAS ALREADY TAKEN SIMILAR VIEW. WITH OUR ABOVE OBSERVATIONS, THE GROUNDS RAISED BY THE REVE NUE AND THE ASSESSEE IN THIS REGARD IN THEIR RESPECTIVE APPEALS, STAND DISMISSED. 12. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE PRESENT CONTROVERSY WITH REGARD TO TAXABIL ITY OF THE INCOME FROM LETTING OUT OF BUILDING HAS ALREADY BEE N LAID TO REST BY THE TRIBUNAL. WE RESPECTFULLY FOLLOW THE E ARLIER ORDER OF THE TRIBUNAL ON THE ISSUE. WE, THEREFORE, ACCEPT TH E ALTERNATIVE PLEA OF THE ASSESSEE AND DIRECT THE AS SESSING OFFICER TO ASSESS THE INCOME FROM BUILDING UNDER TH E HEAD INCOME FROM OTHER SOURCES. THE MAIN PLEA OF THE A SSESSEE THAT THE INCOME FROM BUILDING IS TO BE TREATED AS INCOME FROM BUSINESS IS REJECTED AND SIMILARLY THE GROUNDS R AISED BY THE REVENUE IN ITS APPEAL FOR TREATING THE INCOME FRO M BUILDING IN QUESTION AS INCOME FROM HOUSE PROPERTY IS ALSO RE JECTED. 13. THE SECOND ISSUE RELATES TO DISALLOWANCE MADE B Y THE ASSESSING OFFICER UNDER SECTION 14A READ WITH RULE 8D OF THE ITA NO.1502 & 1620/MDS/2012 13 INCOME TAX RULES. THE ASSESSING OFFICER HAS PRESUM ED THAT THE BORROWED CAPITAL HAS BEEN UTILIZED FOR MAKING INVESTMENTS AND THUS DISALLOWED THE ENTIRE AMOUNT U NDER SECTION 14A. THE ASSESSING OFFICER HAS MADE SEPARA TE WORKING AND HAD DISALLOWED A SUM OF ` 19,46,733/-. THE A.R. FOR THE ASSESSEE PUT FORTH AN ARGUMENT THAT THE ASS ESSING OFFICER HAS NOT REJECTED THE CLAIM OF THE ASSESSEE. IN ORDER TO SUPPORT HIS CONTENTIONS, THE A.R. HAS RELIED ON THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF MAXO PP INVESTMENTS (SUPRA) AND THE JUDGEMENT OF THE HONB LE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO.LTD., (SUPRA). ON AN APPEAL, THE C IT(A) HAS COME TO THE CONCLUSION THAT OUT OF THE TOTAL AMOUNT OF INTEREST, ` 3,76,42,848/- THE ASSESSEE HAS PAID INTEREST TO THE TUNE OF ` 3,23,37,619/- TO THE HDFC BANK FOR TERM LOAN TAKEN ON ACCOUNT OF SAI REAL TECH PARK. AS FAR AS THE REM AINING AMOUNT OF INTEREST ` 53,05,229/-, THE ASSESSEE WAS NOT ABLE TO ESTABLISH DIRECT NEXUS WITH THE INCOME WHICH IS TAXABLE. THEREFORE, THE CIT(A) UPHELD THE DISALLOWANCE OF I NTEREST TO THE TUNE OF ` 53,05,229/- ONLY UNDER RULE 8D(2)(II) AS ALSO ITA NO.1502 & 1620/MDS/2012 14 EXPENDITURE ON ACCOUNT OF ADMINISTRATIVE COST OF I NVESTMENT TO THE TUNE OF ` 4,34,392/-. WE HAVE CAREFULLY GONE THROUGH THE JUDGEMENT RELIED BY THE A.R. IN THE CASE OF MAXOPP INVESTMENTS (SUPRA). THE RATIO OF THE SAID JUDGEMEN T DOES NOT APPLY IN THE PRESENT FACTS AND CIRCUMSTANCE OF THE CASE. THE ASSESSING OFFICER MAY NOT IN STRAIGHT WORDS HAVE E XPRESSED DISSATISFACTION OVER THE CORRECTNESS OF THE CLAIM O F THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE, HOWEVER IN PARA 2 OF HIS ORDER, THE ASSESSING OFFICER HAS GIVEN REASO NS FOR NOT ACCEPTING THE CONTENTIONS OF THE ASSESSEE AND THERE AFTER HAS WORKED OUT DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D. FROM THE REASONS GIVEN BY THE ASSESSING OFFICER , IT CAN BE SAFELY CONSTRUED THAT THE ASSESSING OFFICER HAS REJECTED THE CLAIM OF THE ASSESSEE GIVING COGENT REASONS. TH E CIT(A) HAS ALSO GONE INTO THE SAME AND HAS THEREAFTER REST RICTED THE ADDITION TO ` 57,39,621 ( ` 53,05,229 + ` 4,34,392). WE ARE IN CONSONANCE WITH THE FINDINGS OF THE CIT(A) ON THIS ISSUE AND UPHOLD THE SAME. THEREFORE, THE GROUND OF APPEAL OF THE ASSESSEE AS WELL AS THE REVENUE WITH REGARD TO ITA NO.1502 & 1620/MDS/2012 15 DISALLOWANCE UNDER RULE 8D READ WITH SECTION 14A OF THE ACT ARE DISMISSED. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 1 4 TH DAY OF DECEMBER, 2012 AT CHENNAI. SD/- SD/- ( DR. O.K.NARAYANAN ) (VIKAS AWASTHY) VICE-PRESIDENT JUDICIAL MEMBER CHENNAI, DATED THE 14 TH DECEMBER, 2012. SOMU COPY TO: (1) APPELLANT (4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F.