DPSC Limited, Kolkata V. D.C.I.T Cir - 6,kolkata, Kolkata

ITA 1656/KOL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4664 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 25-07-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 30-05-2013
• Court: TRIBUNAL
• Assessee Lawyers: SUMEN ADAK
• Keywords: Depreciation; Earning of tax free income; Retrospective amendment; Valuation report; Unabsorbed depreciation
• Section: 143(3); 234B; 14A; 115JB; 15

Judgement Text

1 ITA NOS. 1656 & 891/KOL/2013 DPSC LIMITED, AYS 2009-09 & 2009-10 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA [BEFORE SHRI M. BALAGANESH, AM & SHRI K. NARASIMHA CHARY, JM] I.T.A. NO.1656/KOL/2013 ASSESSMENT YEAR: 2008-09 & I.T.A NO. 891/KOL/2013 ASSESSMENT YEAR: 2009-10 DPSC LIMITED (PAN: AABCD0340G) VS. JOINT CO MMISSIONER OF INCOME-TAX, CIRCLE-VI, KOLKATA. (APPELLANT) (RESPONDENT) DATE OF HEARING: 25.07.2016 DATE OF PRONOUNCEMENT: 10.08.2016 FOR THE APPELLANT: SHRI SUMEN ADAK, FCA FOR THE RESPONDENT: SHRI SALLONG YADEN, ADDL. CIT ORDER PER SHRI K. NARASIMHA CHARY, JM: THESE APPEALS BY ASSESSEE ARE ARISING OUT OF SEPARA TE ORDERS OF CIT(A)-VI, KOLKATA VIDE APPEAL NOS.82/CIT(A)-VI/CIRCLE-6/KOL/2011-12 A ND 221/CIT(A)-VI/CIR6/10-11/KOL DATED 21.02.2013 AND 28.03.2014 RESPECTIVELY. ASSES SMENTS WERE FRAMED BY JCIT, RANGE-6 & DCIT, CIRCLE-6, KOLKATA U/S. 143(3)/115WE(3) OF T HE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR AYS 2008-09 AND 2009- 10 VIDE THEIR ORDERS DATED 01.10.2011 AND 29.12.2010 RESPECTIVELY. SINCE THE APPELLANT IS ONE AND THE SAME IN BOTH THE APPEALS, AND ALSO THE QUESTIONS OF FACT AND LAW FACTS GIVING RISE TO THESE TWO APPEALS ARE SAME, WE FEEL IT CONVENIENT TO DISPOSE OF THESE APPEALS BY W AY OF THIS COMMON ORDER. I.T.A. NO.1656/KOL/2013 2. BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE I S A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF GENERATION OF POWER AND ENERGY. IN RESPECT OF THE AY 2008-09, THE ASSESSEE COMPANY FILED THE RETURN OF INCOME ON 30.9.2008 DE CLARING INCOME OF RS. 2,99,89,226/- UNDER SECTION 115 JB OF THE ACT. SUBSEQUENTLY, THE ASSESSEE REVISED THE SAME ON 17.9.2009 SHOWING INCOME OF RS.2,88,46,900/- UNDER SECTION 1 15 JB OF THE ACT AS BOOK PROFIT. AGAIN THEY REVISED IT ON 30.3.2010 SHOWING INCOME OF RS. 2,85,99,729/- UNDER SECTION 115 JB OF THE ACT AS BOOK PROFIT. THE AO BY WAY OF ORDER DA TED 29.12.2010 ASSESSED THE INCOME OF 2 ITA NOS. 1656 & 891/KOL/2013 DPSC LIMITED, AYS 2009-09 & 2009-10 THE ASSESSEE AT RS. 3,30,41,943/- AND AFTER SET OFF OF AT NIL INCOME AND ON BOOK PROFIT INCOME OF RS. 4,22,67,189/- UNDER SECTION 115 JB OF THE ACT. 3. AGAINST THE SAID ORDER OF AO THE ASSESSEE PREFER RED APPEAL BEFORE THE CIT(A), WHO BY WAY OF IMPUGNED ORDER DATED 21.02.2013 SUSTAINED TO SOME EXTENT THE ADDITIONS MADE BY AO, INTER ALIA, DISALLOWING THE EXPENDITURE U/S. 1 4A READ WITH RULE 8D OF THE I. T. RULES THE CLAIM FOR RS.12,53,776/-, AND CALCULATION OF THE T AX LIABILITY OF THE ASSESSEE UNDER SECTION 115JB OF THE ACT, ADDING RS. 13,63,105/- DEBITED BY THE ASSESSEE AS DIMINUTION IN VALUE OF INVESTMENTS IN THE P&L ACCOUNT WITH CORRESPONDING R EDUCTION IN INVESTMENTS IN THE BALANCE SHEET, RS.9,66,000/- AMOUNT PROVIDED FOR PAYMENT ON RETIREMENT OF WORKERS AND ALSO LEVIED INTEREST UNDER SECTION 234-B ON THE ADDITIONS DUE T O RETROSPECTIVE AMENDMENT. 4. AGGRIEVED BY THE IMPUGNED ORDER, THE ASSESSEE AP PROACHED BEFORE THE TRIBUNAL ON THE FOLLOWING GROUNDS:- 1.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) [HERE-IN-AFTER REFERRED TO AS LD. CIT (APPEALS)] WAS NOT JUSTIFIED AND GROSSLY ERRED IN CONFIRMING THE DISALLOWANCE U/ S 1 4A OF THE ACT R.W. RULE 8D OF INCOME TAX RULES, 1962 AT RS. RS.9,70,627/- IN SPITE OF THE FA CT THAT NO SUCH EXPENDITURE WAS INCURRED FOR EARNING THE EXEMPT INCOME. 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, AND WITHOUT PREJUDICE TO GROUND 1.0 TAKEN HERE-IN-ABOVE, LD. CIT (APPEALS) W AS NOT JUSTIFIED AND GROSSLY ERRED IN CONSIDERING ENTIRE INTEREST DEBITED TO PROFIT & LOS S ACCOUNT WHILE COMPUTING DISALLOWANCE U/S 14A R.W. RULE 8D, WITHOUT CONSIDERING THE FACT THAT THE BORROWINGS WERE MADE FOR SPECIFIC PURPOSES. 2.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT (APPEALS) WAS NOT JUSTIFIED AND GROSSLY ERRED IN CONFIRMING THE D ISALLOWANCE OF AN AMOUNT OF RS. 20,000/ - ON ACCOUNT OF DONATION PAID IN COMPUTING TOTAL INCOME UNDER NORMAL PROVISIONS OF THE ACT. 3.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT (APPEALS) WAS NOT JUSTIFIED AND GROSSLY ERRED IN CONFIRMING THE D ISALLOWANCE OF AN AMOUNT OF RS. 4,234/ - CLAIMED AS ADVANCES WRITTEN OFF IN COMPUTING TOTAL INCOME UNDER NORMAL PROVISIONS OF THE ACT. 4.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(APPEALS) WAS NOT JUSTIFIED & ERRED IN CONFIRMING THAT PROVISIONS OF SEC. 115JB OF THE ACT ARE APPLICABLE ON THE APPELLANT WITHOUT CONSIDERING THE FACT THAT, TH E APPELLANT, BEING A ELECTRICITY GENERATING COMPANY, IS EXEMPT FROM MAINTAINING ITS BOOKS OF AC COUNTS IN TERMS OF SEC 211(1) OF THE COMPANIES ACT, 1956 READ WITH SCHEDULE-VI AND HENCE PROVISION OF SEC. 115JB IS NOT APPLICABLE IN ITS CASE. 5.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, AND WITHOUT PREJUDICE TO GROUND 3.0 ABOVE, THE LD. CIT(APPEALS) WAS NOT JUST IFIED AND GROSSLY ERRED IN CONFIRMING THE ADDITION OF DIMINUTION IN THE VALUE OF INVESTMENT A MOUNTING TO RS. 13,63,105/ - IN COMPUTING BOOK PROFIT U/ S 115JB, WITHOUT APPRECIATING THE FA CT THAT THE AMOUNT DEBITED TO THE PROFIT & LOSS A/ C REPRESENTS ACTUAL WRITE OFF IN THE VALUE OF INVESTMENTS. 3 ITA NOS. 1656 & 891/KOL/2013 DPSC LIMITED, AYS 2009-09 & 2009-10 6.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, AND WITHOUT PREJUDICE TO GROUND 3.0 ABOVE, THE LD. CIT(APPEALS) WAS NOT JUST IFIED AND GROSSLY ERRED IN CONFIRMING THE ADDITION OF PROVISION FOR PAYMENT ON RETIREMENT OF WORKERS AMOUNTING TO RS. 9,66,000/- IN COMPUTING BOOK PROFIT U/S 115JB, WITHOUT APPRECIATI NG THE FACT THAT THE PROVISION WAS CREATED ON THE BASIS OF ACTUARIAL VALUATION REPORT AND HENC E IS NOT AN UNASCERTAINED LIABILITY. 7.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, LD. CIT(APPEALS) WAS NOT JUSTIFIED AND GROSSLY ERRED IN CONFIRMING THE LEVY OF INTEREST U/ S 234B AFTER 01-04-2009 ON THE INCREMENTAL AMOUNT OF TAX WHICH AROSE DUE TO RETROS PECTIVE AMENDMENT IN SEC. 115JB OF THE ACT. ADDITIONAL GROUND 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) WAS NOT JUSTIFIED & ERRED IN NOT ADMITTING ADDITIONAL GROUN DS FILED BEFORE IT, WITHOUT CONSIDERING THAT FACT THAT, THE ADDITIONAL GROUNDS WERE MERELY QUEST IONS OF LAW ON THE FACTS AVAILABLE ON RECORD AND ESSENTIAL IN ORDER TO CORRECTLY ASSESS THE TAX LIABILITY OF AN APPELLANT. I.T.A NO. 891/KOL/2013 5. FOR THE AY 2009-10, THE ASSESSEE COMPANY FILED I TS RETURN OF INCOME ON 29.9.2009 DECLARING INCOME OF RS. 23,98,647/- UNDER SECTION 1 15 JB OF THE ACT. SUBSEQUENTLY THEY REVISED THE SAME TWICE ON 19.10.2010 AND 31.03.2011 SHOWING THE NIL INCOME UNDER NORMAL PROVISIONS OF COMPUTATION AFTER ADJUSTING TH E UNABSORBED DEPRECIATION. RETURNS DATED 29.9.2009 AND 19.10.2010 WERE FILED UNDER SEC TION 115 JB OF THE ACT WHEREAS IN THE RETURN DATED 31.3.2011 IT IS ALLEGED THAT THE PROVI SIONS UNDER SECTION 115JB HAVE NO APPLICATION TO THE ASSESSEE BEING A POWER GENERATIN G COMPANY. THE AO BY WAY OF ORDER DATED 01.10.2011 ASSESSED THE INCOME OF THE ASSESSE E AT RS. 11,71,31,845/- UNDER SECTION 115 JB OF THE ACT. 6. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A), WHO BY WAY OF IMPUGNED ORDER DATED 28.03.2013 SUSTAINED TO SOME EXTENT THE ORDER OF AO, INTER ALIA, DISALLOWING U/S. 14A OF THE ACT READ WITH RULE 8D OF THE I. T. RULES THE CLAIM FOR RS.15,18,912/- DEDUCTION TOWARDS EXPENDITURE, CALCULATION OF THE TAX LIABIL ITY OF THE ASSESSEE UNDER SECTION 115JB OF THE ACT, ADDING RS. 39,19,000/- CLAIM OF THE ASSESS EE OF LEAVE ENCASHMENT, RS.15,18,912/- DISALLOWING EXPENDITURE AND ALSO LEVIED INTEREST UN DER SECTION 234-B ON THE ADDITIONS. 7. CHALLENGING THE IMPUGNED ORDER, THE ASSESSEE APP ROACHED THIS TRIBUNAL IN ITA 891/KOL/2013 ON THE FOLLOWING GROUNDS:- 1.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) [HERE-IN-AFTER REFERRED TO AS LD. CIT (APPEALS)] WAS NOT JUSTIFIED AND GROSSLY ERRED IN CONFIRMING THE DISALLOWANCE U/S 14 A OF THE ACT R.W. RULE 8D OF INCOME TAX RULES, 1962 AT RS. 15,18,912/- IN SPITE OF THE FACT THAT NO SUCH EXPENDITURE WAS INCURRED FOR EARNING THE EXEMPT INCOME. 4 ITA NOS. 1656 & 891/KOL/2013 DPSC LIMITED, AYS 2009-09 & 2009-10 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, AND WITHOUT PREJUDICE TO GROUND 1.0 TAKEN HERE-IN-ABOVE, LD. CIT (APPEALS) W AS NOT JUSTIFIED AND GROSSLY ERRED IN CONSIDERING ENTIRE INTEREST DEBITED TO PROFIT & LOS S ACCOUNT WHILE COMPUTING DISALLOWANCE U/S 14A R.W. RULE 8D, WITHOUT CONSIDERING THE FACT THAT THE BORROWINGS WERE MADE FOR SPECIFIC PURPOSES. 1.2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, AND WITHOUT PREJUDICE TO GROUND 1.0 & 1.1 TAKEN HERE-IN-ABOVE, LD. CIT (APPE ALS) WAS NOT JUSTIFIED AND GROSSLY ERRED IN CONSIDERING ENTIRE INVESTMENT WHILE COMPUTING DI SALLOWANCE U/S 14A R.W. RULE 8D INSTEAD ON ONLY THOSE INVESTMENTS HAVE GENERATED AND/OR ARE CAPABLE OF GENERATING EXEMPT INCOME. 1.3 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, AND WITHOUT PREJUDICE TO GROUND 1.0, 1.1 & 1.2 TAKEN HERE-IN-ABOVE, LD. CIT (APPEALS) WAS NOT JUSTIFIED AND GROSSLY ERRED IN INCREASING THE AVERAGE VALUE OF INVESTMENT S WHILE COMPUTING DISALLOWANCE U/S 14A R.W. RULE 8D, MORE THAN THE AVERAGE OF THE CARRY IN INVESTMENT AS APPEARING IN THE BALANCE SHEET OF THE APPELLANT. 2.0 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(APPEALS) WAS NOT JUSTIFIED & ERRED IN CONFIRMING THE DISALLOWANCE OF LEAVE ENCASHMENT CLAIMED ON PROVISION BASIS IN COMPUTING TOTAL INCOME UNDER NORMAL PROVIS IONS OF THE ACT. 3.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(APPEALS) WAS NOT JUSTIFIED & ERRED IN CONFIRMING THAT PROVISIONS OF SEC. 115JB OF THE ACT ARE APPLICABLE ON THE APPELLANT WITHOUT CONSIDERING THE FACT THAT, TH E APPELLANT, BEING A ELECTRICITY GENERATING COMPANY, IS EXEMPT FROM MAINTAINING ITS BOOKS OF AC COUNTS IN TERMS OF SEC 211(1) OF THE COMPANIES ACT, 1956 READ WITH SCHEDULE-VI AND HENCE PROVISION OF SEC. 115JB IS NOT APPLICABLE IN ITS CASE. 4.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, AND WITHOUT PREJUDICE TO GROUND 3.0 ABOVE, THE LD. CIT(APPEALS) WAS NOT JUST IFIED AND GROSSLY ERRED IN CONFIRMING THE ADDITION OF EXPENDITURE INCURRED IN RELATION TO EAR NING EXEMPT INCOME IN COMPUTING BOOK PROFITS U/S 115JB WITHOUT APPRECIATING THE FACT THA T NO SUCH EXPENDITURE WAS DEBITED IN THE PROFIT & LOSS A/C IN THE RELEVANT ASSESSMENT YEAR. 5.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(APPEALS) WAS NOT JUSTIFIED RATHER GROSSLY ERRED IN CONFIRMING IM POSITION OF INTEREST OF U/S 234B. 8. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSES SEE DID NOT PRESS GROUND NOS. 2 AND 3 OF AY 2008-09. HENCE, THE SAME ARE DISMISSED BEING NOT PRESSED. 9. THE ISSUE INVOLVED IN BOTH THE APPEALS OF ASSESS EE IS THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE ON ACCOUNT OF EXPENDITURE U/S. 14A OF THE ACT R.W. RULE 8D OF THE I. T. RULES, 1962 (HEREINAFTER REFER RED TO AS THE RULES) FOR EARNING DIVIDEND AND INTEREST INCOME, LEAVE ENCASHMENT CLAIMED ON PR OVISION BASIS AND INTEREST U/S. 234B OF THE ACT FOR COMPUTING BOOK PROFIT U/S. 115JB OF THE ACT. IT IS THE ARGUMENT OF LEARNED AR THAT THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN DIS ALLOWING UNDER SECTION 14A OF THE ACT R/W 8D OF THE RULES THE EXPENDITURE CLAIMED BY THE ASSE SSEE AS DEDUCTION HOLDING IT AS EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME, THA T THE AUTHORITIES BELOW IGNORED THE FACT THAT THE PROVISIONS UNDER SECTION 115JB ARE NOT AT ALL APPLICABLE TO THE ASSESSEE COMPANY 5 ITA NOS. 1656 & 891/KOL/2013 DPSC LIMITED, AYS 2009-09 & 2009-10 SINCE IT IS A POWER GENERATING COMPANY BOUND BY THE WEST BENGAL ELECTRICITY REGULATORY COMMISSION (TERMS AND CONDITIONS OF TRAFFIC) REGULA TIONS, 2007 ISSUED PURSUANT TO ELECTRICITY ACT, 2003 WHEREUNDER IT IS MAINTAINING ACCOUNTS, BUT NOT UNDER PART II AND III OF SCHEDULE VI OF THE COMPANIES ACT FOR COMPUTING BOOK PROFIT, THAT THE AUTHORITIES ARE NOT JUSTIFIED IN ADDING THE AMOUNTS WHILE CALCULATING T HE BOOK PROFIT UNDER SECTION 115JB OF THE ACT, AND THAT THERE IS NO JUSTIFICATION IN IMPOSING INTEREST UNDER SECTION 234B ON THE ADDITIONS MADE. LEARNED DR, ON THE OTHER SIDE, VER Y VEHEMENTLY RELIED ON THE ORDER OF ASSESSMENT AS WELL AS THAT OF THE FIRST APPELLATE A UTHORITY. 10. IT IS, THEREFORE, EVIDENT THAT THE ENTIRE DISPU TE IN BOTH THE APPEALS REVOLVES AROUND THE DISALLOWANCE OF EXPENDITURE U/S 14A R/W RULE 8D, AP PLICABILITY OF 115JB OF THE ACT TO THE ASSESSEE COMPANY AND ADDING CERTAIN AMOUNTS LIKE DI MINUTION IN VALUE OF INVESTMENT, PROVISION FOR PAYMENT TO THE RETIRED WORKERS, LEAVE ENCASHMENT PROVISION AND DEDUCTION CLAIMED U/S. 14A R/W R 8D BASING ON SECTION 115JB O F THE ACT AND LEVYING INTEREST U/S 234B OF THE ACT. BASING ON THE ABOVE FACTS AND CONTENTI ONS, THE FOLLOWING ISSUES ARISE FOR OUR CONSIDERATION:- 1. WHETHER THE AUTHORITIES BELOW ARE JUSTIFIED IN DISA LLOWING THE CLAIM FOR DEDUCTION OF EXPENDITURE BY INVOKING THE PROVISIONS UNDER SECTION 14A R/W 8D IN RESPECT OF THE AY 2008-09 AND 2009-10? 2. IS THE CIT (APPEAL) JUSTIFIED IN NOT ADMITTING ADDI TIONAL GROUNDS FILED BEFORE HIM IN RESPECT OF AY 2008-09? 3. ARE THE PROVISIONS UNDER SECTION 115JB APPLICABLE T O THE ASSESSEE COMPANY INCOME IN RESPECT OF THE AY 2008-09 AND 2009-10? 4. ARE THE AUTHORITIES BELOW JUSTIFIED IN DISALLOWING THE CLAIM OF LEAVE ENCASHMENT TO A TUNE OF RS.39,19,000/- IN RESPECT O F AY 2009-10? 5. ARE THE AUTHORITIES BELOW JUSTIFIED IN ADDING RS. 1 3,63,105/- DEBITED BY THE ASSESSEE AS DIMINUTION IN VALUE OF INVESTMENTS IN T HE P&L ACCOUNT WITH CORRESPONDING REDUCTION IN INVESTMENTS IN THE BALAN CE SHEET, WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT IN RESPECT OF AY 2 008-09? 6. ARE THE AUTHORITIES BELOW JUSTIFIED IN ADDING RS.9, 66,000/- AMOUNT PROVIDED FOR PAYMENT ON RETIREMENT OF WORKERS IN COMPUTING B OOK PROFIT UNDER SECTION 115JB OF THE ACT IN RESPECT OF AY 2008-09? 7. ARE THE AUTHORITIES BELOW JUSTIFIED IN DISALLOWING THE CLAIM OF RS.15,18,912/- UNDER SECTION 14A R/W 8D IN COMPUTING BOOK PROFITS UNDER SECTION 115JB 8. ARE THE AUTHORITIES BELOW JUSTIFIED IN IMPOSING INT EREST UNDER SECTION 234B ON ADDITIONS AY 2008-09 AND 2009-10? ISSUE NO 1 6 ITA NOS. 1656 & 891/KOL/2013 DPSC LIMITED, AYS 2009-09 & 2009-10 11. THIS ISSUE RELATES TO GROUND NOS. 1.0 TO 1.3 IN ITA NO. 891/KOL/2013 AND GROUND NOS. 1.0 AND 1.1 IN ITA NO.1656/KOL/2013. 12. ARGUMENT OF THE LEARNED AR ON MERITS IS THREE F OLD ON THIS ISSUE. FIRSTLY, HE SUBMITTED THAT THE BORROWINGS WERE MADE FOR A SPECI FIC PURPOSE OF EARNING TAXABLE INCOME, AS SUCH, IT CANNOT BE SAID THAT THE AMOUNT BORROWED COULD HAVE BEEN INVESTED TO EARN EXEMPT INCOME FOR APPLYING RULE 8D OF THE RULES. TO SUBST ANTIATE HIS SUBMISSION, LEARNED AR PLACED BEFORE US THE DOCUMENTS RELATING TO THE TERM LOAN OF STATE BANK OF INDIA AND YES BANK AND CASH CREDITS WITH ORIENTAL BANK, IDBI, AN D STATE BANK OF PATIALA WHICH WERE OBTAINED FOR THE PURPOSE OF CONSTRUCTION OF SUB STA TIONS AND WORKING CAPITAL. ON THIS ASPECT, RELIANCE IS PLACED ON A DECISION RENDERED BY A COOR DINATE BENCH OF THIS TRIBUNAL IN ACIT VS. CHAMPION COMMERCIAL CO LTD. ITA NO 644/KOL/2012 FO R THE PRINCIPLE THAT ONCE IT IS FOUND THAT AN EXPENSE IS SPECIFICALLY RELATABLE TO A TAXA BLE INCOME, NO PORTION OF SUCH AN EXPENSE CAN BE DISALLOWED UNDER SECTION 14A OF THE ACT. 13. SECONDLY, HE SUBMITTED THAT SUFFICIENT OWN FUN DS TO THE TUNE OF RS. 84.04 CR AS ON 31.3.2007 RS.84.3 CR AS ON 31.3.2008 AND CR. 91.37 AS ON 31.3.2009 WERE AVAILABLE WITH ASSESSEE WHEREAS THE INVESTMENTS GENERATING THE EXE MPT INCOME CORRESPONDING TO SUCH PERIOD ARE RS. 19.5 CR, RS. 1.80 CR. AND R. 1.78 C R RESPECTIVELY. BASING ON THIS, HE ARGUED THAT WHEN THE OWN FUNDS OF THE ASSESSEE ARE IN EX CESS OF THE INVESTMENTS MADE IN THE SECURITIES, THE PRESUMPTION WITH REGARD TO INVEST MENT IN TAX - FREE SECURITIES COMING OUT OF THE TAXPAYER'S OWN FUNDS ARISES EVEN FOR APPLICATI ON OF SEC 14A OF THE ACT. 14. LASTLY, HE ARGUED THAT IN ORDER TO APPLY RULE 8 D, RECORDING OF SATISFACTION BY THE AO IS SINE QUA NON, AND THE ABSENCE OF SUCH RECORDING OF SATISFACTION VITIATES THE APPLICATION OF RULE 8D. FOR THIS PURPOSE, HE RELIED ON DECISIONS O F COORDINATE BENCHES OF TRIBUNAL IN M/S BALARAMPUR CHINI MILLS LTD VS. DCIT (2011) 140 TTJ 73, HINDUSTAN PAPER CORPORATION LTD VS. DCIT (2012) ITA NO. 47/KOL/2012. HE ALSO PLACE D RELIANCE ON A DECISION REPORTED IN MAXOPP INVESTMENT LTD. & ORS. VS. CIT (2012) 247 CT R 0162 (DEL) FOR THE PRINCIPLE THAT EVEN PRIOR TO THE INTRODUCTION OF SUB-SS. (2) AND ( 3), SECTION 14A WOULD REQUIRE THE AO TO FIRST REJECT THE CLAIM OF THE ASS ESSEE WITH REGARD TO THE EXTENT OF SUCH EXPENDITURE, SUCH REJECTION MUST BE FOR DISCLOSED C OGENT REASONS AND IT IS ONLY THEN THAT THE QUESTION OF DETERMINATION OF SUCH EXPENDITURE BY TH E AO WOULD ARISE. 7 ITA NOS. 1656 & 891/KOL/2013 DPSC LIMITED, AYS 2009-09 & 2009-10 15. FURTHER RELIANCE IS PLACED ON A DECISION IN THE CASE OF CIT VS. ASHISH JHUNJHUNWALA G.A. NO. 2990 OF 2013, WHEREIN THE HON BLE JURISDICTIONAL HIGH COURT OF CALCUTTA CONFIRMED THE FOLLOWING OBSERVATIONS OF THIS TRIBUNAL IN ITA NO 1809/KOL/2012: WHILE REJECTING THE CLAIM OF THE ASSESSEE WITH REG ARD TO EXPENDITURE OR NO EXPENDITURE, AS THE CASE MAY BE, IN RELATION TO EXEMPTED INCOME, THE AO HAS TO INDICATE COGENT REASONS FOR THE SAME. FROM THE FACTS OF THE PRESENT CASE, IT IS NOTICED T HAT THE AO HAS NOT CONSIDERED THE CLAIM OF THE ASSESSEE AND STRAIGHT AWAY EMBARKED UPON COMPUTING DISALLOWANCE UNDER RULE 8D OF THE RULES ON PRESUMING THE AVERAGE VALUE OF INVESTMENT AT % OF THE TOTAL VALUE. IN VIEW OF THE ABOVE AND RESPECTFULLY FOLLOWING THE COORDINATE BENCH DECISIO N IN THE CASE OF J.K. INVESTORS (BOMBAY) LTD., SUPRA, WE UPHOLD THE ORDER OF CIT (A) 16. WE HAVE CAREFULLY GONE THROUGH THE SUBMISSIONS OF BOTH THE SIDE, PERUSED THE MATERIAL AVAILABLE IN THE PAPER BOOK SUBMITTED BY T HE ASSESSEE AND THE ORDERS OF THE LOWER AUTHORITIES. WE FIND THAT THE COPY OF THE TERM LOAN SANCTION LETTERS DATED 10.5.2006 AND 7.12.2006 ISSUED BY THE STATE BANK OF INDIA CLEARL Y MENTION IN THE TERMS AND CONDITIONS THAT THE PURPOSE OF THE LOAN WAS TO CONSTRUCT THREE FLOO RS AND A CONFERENCE HALL AT THE COMPANYS REGISTERED OFFICE AND 33/1 1KV SUB-STATION RESPECTI VELY. SO ALSO OTHER LOAN SANCTION LETTER DT 2-12-2009 ISSUED BY STATE BANK OF PATIALA, LETT ER DATED 30-9-2008 ISSUED BY IDBI, LETTER DATED 2.3.2005 ISSUED BY ORIENTAL BANK, LETTER DATE D 27.9.2007 ISSUED BY YES BANK CLEARLY SHOW THAT THE LOANS WERE ADVANCED OR OVERDRAFT FACI LITY WAS EXTENDED FOR THE PURPOSE OF MEETING WORKING CAPITAL OF THE ASSESSEE. ALL THESE DOCUMENTS SUPPORT THE CONTENTION OF THE ASSESSEE THAT THE BORROWINGS WERE MADE WITH A SPECI FIC PURPOSE AND NOT UTILIZED TO BE INVESTED TO GENERATE EXEMPT INCOME. 17. WE HAVE ALSO GONE THROUGH THE BALANCE SHEETS OF THE ASSESSEE COMPANY FOR THE YEARS ENDED 31.3.2008 AND 31.3.2009. WE FIND THAT THE SHARE CAPITAL AND RESERVES AND SURPLUS FOR THE YEARS ENDED 31.3.2007, 31.3.2008 AN D 31.3.2009 ARE RS. 8,408.48 LACS, RS. 8,430.50 LACS AND 9,137.90 LACS RESPECTIVELY, AND T HE BORROWED FUNDS WERE RS. 2890 LACS, RS. 5034.18 LACS AND RS. 2640.45 LACS RESPECTIVELY, WHEREAS THE INVESTMENTS, AS SUBMITTED BY THE LEARNED AR, ARE ONLY TO THE TUNE OF RS. 194. 67 LACS, RS.180.44 LACS AND RS 178.53 LACS RESPECTIVELY. IN THIS FACTUAL SCENARIO, WE FI ND THAT THE DECISION REPORTED IN CIT VS. HDFC BANK LTD. (2014) 366 ITR 0505 (BOM) APPLIES ON ALL FOURS. IN THAT DECISION IT WAS HELD THAT WHEN ASSESSEE'S CAPITAL, PROFIT RESERVES, SURPLUS AND CURRENT ACCOUNT DEPOSITS WERE HIGHER THAN THE INVESTMENT IN TAX-FREE SECURITIES, IT WOULD HAVE TO BE PRESUMED THAT 8 ITA NOS. 1656 & 891/KOL/2013 DPSC LIMITED, AYS 2009-09 & 2009-10 INVESTMENT MADE BY THE ASSESSEE WOULD BE OUT OF THE INTEREST-FREE FUNDS AVAILABLE WITH ASSESSEE, AND THE ADDITIONS MADE BY THE AO UNDER SE CTION 14A OF THE ACT BY DISALLOWING THE EXPENDITURE, HAVE TO BE DELETED. 18. FROM THE ABOVE DISCUSSION, WE CONCLUDE THAT OWN FUNDS OF THE ASSESSEE ARE SUFFICIENTLY IN EXCESS OF BOTH THE BORROWINGS AND I NVESTMENTS, BORROWINGS ARE PROVED TO BE FOR A SPECIFIC PURPOSE AND THERE IS NO POSSIBILITY OF INVESTING THEM FOR GENERATING THE EXEMPTED INCOME, INVESTMENTS THAT ARE GENERATING TH E EXEMPTED INCOME WERE MADE PRIOR TO THE RELEVANT PREVIOUS YEARS, AND ABOVE ALL THE LEGA L REQUIREMENT OF THE AO RECORDING THE REASONS FOR RESORTING TO SECTION 14A R/W 8D IN THIS MATTER ARE CONSPICUOUSLY ABSENT. VIEWING FROM ANY ANGLE, WE ARE CONVINCED THAT THERE IS NO JUSTIFICATION FOR THE AUTHORITIES BELOW TO SUSTAIN THE DISALLOWANCE MADE U/S. 14A OF THE ACT IN AYS 2008-09 AND 2009-10. 19. FOR THESE REASONS, WHILE ANSWERING THIS ISSUE I N THE NEGATIVE, WE HOLD THAT THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF EXPENDITURE OF AN AMOUNT OF RS.14,08,874/- IN RESPE CT OF THE AY 2008-09, AND RS.10,39,339/- IN RESPECT OF THE AY 2009-10 BY APPL YING SECTION 14A R/W 8D, AND ANY ADDITION ON SUCH SCORE HAS TO BE DELETED. 20. IN VIEW OF OUR FINDING IN THE PRECEDING PARAGRA PH, WE DO NOT THINK IT NECESSARY TO CONSIDER THE ALTERNATIVE SUBMISSION OF THE LEARNED AR THAT FOR THE PURPOSE OF DISALLOWANCE, THE CIT SHOULD HAVE CONSIDERED ONLY THE INVESTMENT GENERATING EXEMPT INCOME, INSTEAD OF TOTAL INVESTMENTS. HENCE, GROUND NOS. 1.0 TO 1.2 I N ITA NO. 891/KOL/2013 AND GROUND NOS. 1.0 AND 1.1 IN ITA NO.1656/KOL/2013 ARE ALLOWED IN FAVOUR OF ASSESSEE. ISSUE NO 2 AND 3. 21. ISSUE NO. 2 RELATES TO THE ADDITIONAL GROUND IN ITA NO.1656/K/2013. ISSUE NO. 3 RELATES TO GROUND NO. 3 IN ITA NO.891/K/2013 AND GR OUND NO. 4 IN ITA NO.1656/K/2013. 22. IT IS THE SUBMISSION OF THE LEARNED AR THAT THE ASSESSEE SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE PROVISIONS OF SEC 115 JB OF THE ACT HAVE NO APPLICATION TO THE ASSESSEE COMPANY SINCE BEING A POWER GENERATING COMPANY THEY ARE GOVERNED BY THE PROVISIONS OF WEST BENGAL ELECTRICITY REGULATORY COMMISSION (TERM S AND CONDITIONS OF TRAFFIC) REGULATIONS, 2007 ISSUED PURSUANT TO ELECTRICITY AC T, 2003, AND THEY ARE NOT MAINTAINING THEIR ACCOUNTS UNDER PART II AND III OF SCHEDULE VI OF THE COMPANIES. GRIEVANCE OF THE 9 ITA NOS. 1656 & 891/KOL/2013 DPSC LIMITED, AYS 2009-09 & 2009-10 ASSESSEE IS THAT SUCH ARGUMENT WAS TURNED DOWN BY T HE LEARNED CIT(A) ON THE GROUND THAT SUCH A CONTENTION DOES NOT EMANATE FROM THE ORDER P ASSED BY AO UNDER SECTION 143(3) OF THE ACT. 23. IT IS THE SETTLED PRINCIPLE OF LAW VIDE DECISIO NS IN NATIONAL THERMAL POWER CO. LTD. VS. CIT (1998) 229 ITR 383 SC AND JUTE CORPORATION OF INDIA LTD VS. CIT [1991] 187 ITR 688 (SC) THAT WHEN A NEW GROUND WHICH DOES NOT REQU IRE ANY FURTHER INVESTIGATION OF FACTS AND PURELY LEGAL IN NATURE, IS RAISED IT MAY BE ADM ITTED. REJECTION OF THE GROUNDS BASED ON LAW IS NOT IN COMPLIANCE WITH THE PRINCIPLE LAID D OWN IN JUTE CORPORATION OF INDIA LTD VS. CIT [1991] 187 ITR 688 (SC). THE LD. CIT(A) SHOULD HAVE ENTERTAINED THE GROUNDS URGED BEFORE HIM BASING ON THE APPLICABILITY OF SECTION 1 15JB OF THE ACT. 24. NOW COMING TO THE MERITS OF APPLICABILITY OF SECTIO N 115JB OF THE ACT, THERE IS NO DISPUTE THAT THE ASSESSEE IS A PUBLIC LIMITED COMPA NY ENGAGED IN THE BUSINESS OF GENERATION/DISTRIBUTION OF POWER AND ENERGY AND IS GOVERNED BY THE PROVISIONS OF ELECTRICITY ACT, 2003. UNDER WEST BENGAL ELECTRICITY REGULATOR Y COMMISSION (TERMS AND CONDITIONS OF TRAFFIC) REGULATIONS, 2007 ISSUED PURSUANT TO EL ECTRICITY ACT, 2003, ASSESSEE IS UNDER AN OBLIGATION TO PREPARE ITS ACCOUNTS AS PER THE SAID REGULATIONS AND NOT UNDER PART II AND III OF SCHEDULE VI OF THE COMPANIES FOR COMPUTING BOOK PRO FIT. IN VIEW OF THE STATUTORY STIPULATION TO MAINTAIN ITS ACCOUNTS AS PER THE WES T BENGAL ELECTRICITY REGULATORY COMMISSION (TERMS AND CONDITIONS OF TRAFFIC) REGULA TIONS, 2007 ISSUED PURSUANT TO ELECTRICITY ACT, 2003 AND NOT UNDER PART II AND III OF SCHEDULE VI OF THE COMPANIES, THE ASSESSEE PLEADS THAT THE PROVISIONS OF SECTION 115J B OF THE ACT HAVE NO APPLICATION TO THEM. AS A MATTER OF FACT, A COORDINATE BENCH OF THIS TRI BUNAL IN THE ASSESSEES OWN CASE FOR THE AY 2007-08 IN DPSC LTD, KOLKATA VS. DCIT CIRCLE-VI, KOLKATA ITA 890/KOL/2013 CONSIDERED THIS ISSUE IN EXTENSO AND HOLD THAT TH E PROVISIONS OF SECTION 115JB HAVE NO APPLICATION TO THE ASSESSEE COMPANY. IN THE SAID C ASE, THIS TRIBUNAL, AFTER GOING THROUGH THE BASIC INTENTION BEHIND THE INTRODUCTION OF SEC. 115 JB OF THE ACT, DEPARTMENT CIRCULAR NO. 762 DATED 18.02.1998, MEMORANDUM EXPLAINING THE PRO VISIONS IN THE FINANCE BILL, 1996, UNDER THE CAPTION RATIONALISATION AND SIMPLIFICATI ON, HYDEN RULES, DECISIONS OF VARIOUS HIGH COURTS AND TRIBUNAL VIZ. KERALA STATE ELECTRIC ITY BOARD VS. DCIT REPORTED IN (2010) 329 ITR 91 (KER), MAHARASHTRA STATE ELECTRICITY BOA RD VS. JCIT REPORTED IN (2002) 82 ITD 422 (MUM TRIB.), STATE BANK OF HYDERABAD VS. DCIT R EPORTED IN (2013) 33 TAXMANN.COM 10 ITA NOS. 1656 & 891/KOL/2013 DPSC LIMITED, AYS 2009-09 & 2009-10 312 (HYD. TRIB.) VIDE ORDER DATED 7.9.2012, ICICI L OMBARD GENERAL INSURANCE CO. LTD. VS. ACIT REPORTED IN 2012-TOIL-690 (ITAT, MUM), BANK OF INDIA VS. ADDL. CIT REPORTED IN (2014) 5 TMI 929 AND M/S. RELIANCE ENERGY LTD. VS. ACIT REPORTED IN ITA NO. 218/MUM/05 DATED 24.01.2008 DECIDED THAT THE PROVIS IONS OF SECTION 115JB OF THE ACT ARE NOT APPLICABLE TO THE ASSESSEE COMPANY. WE DO NOT SEE ANY REASON TO ENTERTAIN A DIFFERENT VIEW. WHILE RESPECTFULLY FOLLOWING THE ABOVE DECISI ON OF THE COORDINATE BENCH OF THIS TRIBUNAL, WE HOLD THESE TWO ISSUES IN FAVOUR OF THE ASSESSEE. HENCE, THE ADDITIONAL GROUND IN ITA NO.1656/K/2013 AND GROUND NO. 3 IN ITA NO.8 91/K/2013 AND GROUND NO. 4 IN ITA NO.1656/K/2013 ARE ALLOWED IN FAVOUR OF ASSESSEE. ISSUE NO 4: 25. THIS ISSUE RELATES TO GROUND NO.2 IN ITA NO.891/K/ 2013. 26. THE ASSESSEE CLAIMED DEDUCTION TOWARDS PROVISION FO R LEAVE ENCASHMENT IN THE RETURN OF INCOME TO THE TUNE OF RS. 39,19,000/- WHICH WAS DISALLOWED BY THE LEARNED AO BY INVOKING THE PROVISIONS OF SECTION 43B(F) OF THE AC T. 27. WE HAVE HEARD THE BOTH THE SIDES. FROM THE IMPUGNED ORDER IN ITA NO. 891/K/2013, WE FIND THAT THE CIT(A) CONFIRMED THE DISALLOWANCE AS MADE BY THE LD. AO ON ACCOUNT OF CLAIM FOR PROVISION FOR LEAVE ENCASHMENT. LD. COUNS EL FOR THE ASSESSEE STATED THAT THE DEDUCTION ON ACCOUNT OF PROVISION FOR LEAVE ENCASHM ENT WAS MADE ON THE BASIS OF THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN TH E CASE OF EXIDE INDUSTRIES LTD. VS. UNION OF INDIA (2007) 292 ITR 470 (CAL). HOWEVER, I T HAS COME TO OUR NOTICE THAT SUBSEQUENTLY HON'BLE SUPREME COURT HAS STAYED THIS JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT VIDE ORDER 08-05-2009 BY FOLLOWING OBSER VATIONS:- PENDING HEARING AND FINAL DISPOSAL OF THE CIVIL AP PEALS, DEPARTMENT IS RESTRAINED FROM RECOVERING PENALTY AND INTEREST WHICH HAS ACCRUED T ILL DATE. IT IS MADE CLEAR THAT AS FAR AS THE OUTSTANDING INTEREST DEMAND AS OF DATE IS CONCERNED , IT WOULD BE OPEN TO THE DEPARTMENT TO RECOVER THAT AMOUNT IN CASE CIVIL APPEAL OF THE DEP ARTMENT IS ALLOWED. WE FURTHER MAKE IT CLEAR THAT THE ASSESSEE WOULD, D URING THE PENDENCY OF THIS CIVIL APPEAL, PAY TAX AS IF SECTION 43B(F) IS ON THE STATUE BOOK BUT AT THE SAME TIME IT WOULD BE ENTITLED TO MAKE A CLAIM IN ITS RETURNS. IN VIEW OF THE ABOVE, WE FIND IT FIT AND PROPER THA T THE DECISION IN THIS ISSUE SHALL AWAIT THE DECISION OF HONBLE SUPREME COURT , AS SUCH, THE MA TTER HAS TO BE REMITTED BACK TO THE FILE OF LD AO FOR FRESH ADJUDICATION IN TERMS OF THE DECISI ON OF HON'BLE SUPREME COURT. HENCE, WE 11 ITA NOS. 1656 & 891/KOL/2013 DPSC LIMITED, AYS 2009-09 & 2009-10 SET ASIDE THIS ISSUE TO THE FILE OF THE AO TO AWAIT THE DECISION OF HON'BLE SUPREME COURT AND DECIDE THE ISSUE ACCORDINGLY. HENCE, GROUND NO.2 IN ITA NO.891/K/2013 IS ALLOWED IN FAVOUR OF ASSESSEE. ISSUE NOS 5 TO 8: 28. THESE ISSUES RELATE TO GROUND NOS. 5, 6 AND 7 IN IT A NO. 1656/K/2013 AND GROUND NOS. 4 AND 5 IN ITA NO. 891/K/2013. 29. IN VIEW OF OUR FINDING ON ISSUE NO 3, IT FOLLOWS TH AT ANSWER TO THESE ISSUES WOULD BE SUPERFLUOUS AND DOES NOT REQUIRE ANY ADJUDICATION. HENCE, GROUND NO. 5, 6 AND 7 IN ITA NO. 1656/K/2013 AND GROUND NO. 4 AND 5 IN ITA NO. 891/K /2013 ARE ALLOWED IN FAVOUR OF ASSESSEE. 30. IN THE RESULT, ASSESSEES APPEAL IN ITA NO. 1656/K/ 2013 IS ALLOWED AND ASSESSEES APPEAL IN ITA 891/K/2013 IS PARTLY ALLOWED FOR STAT ISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 10.08.2016 SD/- SD/- (M. BALAGANESH) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBE R DATED : 10TH AUGUST, 2016 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT DPSC LTD., PLOT NO. X-1,2&3, BLOCK E P, SECTOR-V, SALT LAKE, KOLKATA-91. 2 RESPONDENT JCIT, CIRCLE-VI, KOLKATA. 3. THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA /TRUE COPY, BY ORDER, ASSTT. REGISTRAR .