M/s. Redington (India) Limited, CHENNAI V. AdditionalCIT, CHENNAI

ITA 1743/CHNY/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9861 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2015
• Appeal Filed By: Assessee
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 02-11-2011
• Court: TRIBUNAL
• Department Lawyers: JOE SEBASTIN
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Depreciation; Transfer pricing; Business expenditure; International transaction; Earning of tax free income; Bad and doubtful debts; Revenue expenditure
• Section: 92B; 14A; 37(1); 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . , . !' , # $ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.1743/MDS/2011 / ASSESSMENT YEAR : 2007-08 M/S REDINGTON(INDIA) LTD. SPL GUINDY HOUSE 95, MOUNT ROAD, GUINDY CHENNAI 600 032 VS. THE ADDL. COMMISSIONER OF INCOME-TAX COMPANY RANGE-V CHENNAI [PAN AABCR 0347 P] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE /RESPONDENT BY : SHRI JOE SEBASTIN, CIT / DATE OF HEARING : 21-05-2015 ! / DATE OF PRONOUNCEMENT : 26-06-2015 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE ASST. COMMISSIONER OF INCOME-TAX, COMPANY CIRC LE V(3), CHENNAI, 30.9.2011 AND PERTAINS TO ASSESSMENT YEAR 2007-08. 2. SHRI R.VIJAYARAGHAVAN, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE FIRST ISSUE ARISES FOR CONSIDERA TION IS ADJUSTMENT OF ` 1,84,17,371/- BEING THE CORPORATE GUARANTEE PROVIDE D TO ASSOCIATE ITA NO.1743/11 :- 2 -: ENTERPRISES NAMELY, M/S REDINGTON DISTRIBUTION PTE. LTD., SINGAPORE AND M/S REDINGTON GULF FZE DUBAI. THE LD. COUNSEL SUBMITTED THAT THE VERY SAME ISSUE CAME UP BEFORE THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10. THIS TRIBUNAL BY AN ORDER DATED 7.7.2014 BY PLACING RELIANCE ON THE DECISION OF THE DELHI BENCH OF THIS TRIBUNAL IN BHARTI AIRTEL LTD VS ADDL. CIT, 43 TAXM ANN.COM 150, FOUND THAT THE CORPORATE AND BANK GUARANTEE GIVEN BY THE ASSESSEE DO NOT INVOLVE ANY COST TO THE ASSESSEE THEREFORE, IT IS NOT AN INTERNATIONAL TRANSACTION. THIS TRIBUNAL HAS ALSO OBSERVED THAT GUARANTEE PROVIDED BY THE ASSESSEE DOES NOT HAVE ANY BEARING ON PROFI TS, INCOME, LOSS OR ASSETS OF THE ASSESSEE. ACCORDINGLY, THIS TRIBUNA L ALLOWED THE CLAIM OF THE ASSESSEE. THE LD. COUNSEL HAS ALSO PLACED REL IANCE ON THE DECISION OF THE DELHI BENCH OF THIS TRIBUNAL IN BHARTI AIRTE L LTD VS ADDL. CIT IN I.T.A.NO. 5816/MDS/2012 DATED 11.3.2014. 3. SHRI JOE SEBASTIN, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT HE IS PLACING RELIANCE ON THE ORDERS OF THE DR P AND TPO. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE PROVIDED CORPORATE GUARANTEE TO ITS OVERSEAS SUBSIDIARIES. THE TPO BENCHMARKED THE CORPORATE GUARANTEE AT 1.5% BY RELY ING ON THE MATERIALS AVAILABLE ON RECORD. THE DRP HAS ALSO FO UND THAT ITA NO.1743/11 :- 3 -: JUSTIFICATION OF THE TRANSACTION ON THE GROUND OF C LOSE RELATIONSHIP IS SELF DEFEATING THE CONCEPT OF ARMS LENGTH PRICE(AL P). ACCORDINGLY, THE DRP CONFIRMED THE VIEW TAKEN BY THE TPO. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE H AVE CAREFULLY GONE THROUGH THE DECISION OF THE DELHI BENCH OF THIS TRI BUNAL IN BHARTI AIRTEL LTD VS ADDL. CIT(SUPRA). THIS TRIBUNAL FOUND THAT THE CORPORATE GUARANTEE ISSUED FOR THE BENEFIT OF ASSOCIATE ENTER PRISE DOES NOT INVOLVE ANY COST TO THE ASSESSEE AND DOES NOT HAV E ANY BEARING ON PROFIT, INCOME OR LOSS OF ASSETS OF THE ASSESSEE, THEREFORE, IT WAS OUTSIDE THE AMBIT OF INTERNATIONAL TRANSACTION TO W HICH ARMS LENGTH PRICE ADJUSTMENT CAN BE MADE. THE DRP HAS ALSO PLA CED ITS RELIANCE ON EXPLANATION TO SEC 92B OF THE ACT. THE DECISION OF THE DELHI BENCH OF THIS TRIBUNAL IN BHARTI AIRTEL LTD. (SUPRA) WAS FOLLOWED BY THE CHENNAI BENCH OF THIS TRIBUNAL IN THE ASSESSEES O WN CASE FOR ASSESSMENT YEAR 2009-10. 6. IN VIEW OF THE ABOVE, BY FOLLOWING THE ORDER OF THE DELHI BENCH OF THIS TRIBUNAL IN BHARTI AIRTEL LTD (SUPRA) AND THE ORDER OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10 AND FOR THE REASONS STATED THEREIN, WE HOLD THAT THE CO RPORATE GUARANTEE GIVEN BY THE ASSESSEE TO ITS AES DOES NOT INVOLVE ANY COST TO THE ITA NO.1743/11 :- 4 -: ASSESSEE, THEREFORE, IT HAS NO BEARING ON THE PROFI TS, INCOME, LOSS OR ASSETS OF THE ASSESSEE AND OUTSIDE THE AMBIT OF IN TERNATIONAL TRANSACTION TO WHICH ALP ADJUSTMENT HAS TO BE MADE. ACCORDING, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND T HE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF ` 1,84,17,371/-. 7. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DISALLOW ANCE OF TRADE MARK LICENCE FEE. 8. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED A SUM OF ` 1,80,98,708/-. THE LD. COUNSEL FURTHER SUBMITTED THAT THE VERY SAME ISSUE CAME BE FORE THIS TRIBUNAL IN THE ASSESSMENT YEAR 2009-10 IN ASSESSEES OWN C ASE AND THIS TRIBUNAL FOUND THAT THE ASSESSEE WAS EXPLOITING TH E TRADE MARK REDINGTON FOR THE PURPOSE OF CARRYING ON ITS BUSI NESS. THIS TRIBUNAL FURTHER FOUND THAT IT IS COMMON TO MAKE PA YMENT FOR USE OF THE TRADEMARK. REFERRING TO THE JUDGMENT OF THE AP EX COURT IN S.A BUILDERS VS CIT , 288 ITR 1, THIS TRIBUNAL FOUND TH AT THE EXPENDITURE INCURRED BY THE ASSESSEE IS AN ALLOWABLE EXPENDITU RE FOR THE PURPOSE OF BUSINESS. ACCORDINGLY, THE ADDITION MADE BY THE ASSESSING OFFICER WAS DELETED. 9. ON THE CONTRARY, THE LD. DR PLACED HIS RELIANCE ON THE OBSERVATIONS MADE BY THE TPO AND DRP. ITA NO.1743/11 :- 5 -: 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. FOR THE ASSESSMENT YEAR 2009-10, AN IDENTICAL ISSUE CAME UP BEFORE THIS TRI BUNAL WITH REGARD TO ADJUSTMENT OF ALP TOWARDS PAYMENT OF TRADEMARK LIC ENCEE FEE. THIS TRIBUNAL FOUND THAT THERE IS NOTHING UNCOMMON IN A SSESSEES MAKING PAYMENT TO THE USE OF THE TRADEMARK TO M/S REDINGTO N DISTRIBUTION PTE. LTD, SINGAPORE. REFERRING TO THE JUDGMENT OF THE APEX COURT IN S.A.BUILDERS (SUPRA), THIS TRIBUNAL FOUND THAT THE EXPENDITURE IS AN ALLOWABLE BUSINESS EXPENDITURE. IN VIEW OF THE ORD ER OF THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2009-10, THIS TRIBUNAL DO N OT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRMED. 11. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DISALLOW ANCE OF DEPRECIATION ON TEMPORARY STRUCTURE. 12. SHRI R. VIJAYARAGHAVAN, LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT THE ASSESSEE CLAIMED DEDUCTION OF ` 1,18,69,510/- ON TEMPORARY STRUCTURE LIKE OFFICE CABINS, WOODEN PART ITIONS, PLASTERING, WATER PROOFING TREATMENT, INSTALLATION CHARGES, FLO ORING CHARGES ETC. HOWEVER, THE DRP FOUND THAT THESE EXPENDITURE ARE I N THE NATURE OF ENDURING BENEFIT, THEREFORE, IT CANNOT BE ALLOWED A S REVENUE EXPENDITURE. THE LD. COUNSEL SUBMITTED THAT THE EX PENDITURE INCURRED ITA NO.1743/11 :- 6 -: BY THE ASSESSEE ARE ONLY FOR THE PURPOSE OF MAKING THE BUILDING SUITABLE FOR BUSINESS, THEREFORE, IT HAS TO BE ALLO WED AS REVENUE EXPENDITURE. ON A QUERY FROM THE BENCH WHETHER THE EXPENDITURE WAS INCURRED ON THE BUILDING OWNED BY THE ASSESSEE OR IT WAS ON LEASE/RENTED BUILDING, THE LD. COUNSEL SUBMITTED TH AT FROM THE MATERIAL AVAILABLE ON RECORD IT APPEARS THAT THE BUILDING WA S TAKEN ON RENT. 13. WE HEARD SHRI JOE SEBASTIN, LD. DR ALSO. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. TH E ASSESSEE CLAIMS THAT EXPENDITURE WAS INCURRED IN WOODEN PARTITIONS, PLASTERING, WATER PROOFING TREATMENT, INSTALLATION CHARGES AD FLOORIN G CHARGES ETC. THOUGH THE LD. COUNSEL SAYS THAT THE EXPENDITURE WA S INCURRED IN THE BUILDING TAKEN ON RENT, NO MATERIAL IS AVAILABLE ON RECORD TO SUGGEST THAT THE ABOVESAID EXPENDITURE WAS INCURRED ON THE BUILDING TAKEN ON LEASE/RENT. WHATEVER MAY THE NATURE OF THE BUILDIN G, THE ASSESSEE INCURRED THE EXPENDITURE ON THE TEMPORARY STRUCTURE LIKE OFFICE CABINS, WOODEN PARTITIONS, PLASTERING, WATER PROOFING TREAT MENT, INSTALLATION CHARGES, FLOORING CHARGES ETC. THESE EXPENDITURE A RE FOR THE PURPOSE OF MAKING THE BUILDING FIT FOR USE OF THE BUSINESS. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THESE EX PENSES ARE TO BE ALLOWED AS REVENUE EXPENDITURE. ACCORDINGLY, THE O RDERS OF THE LOWER ITA NO.1743/11 :- 7 -: AUTHORITIES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW DEDUCTION OF ` 1,18,69,510/- AS REVENUE EXPENDITURE. 15. THE NEXT ISSUE ARISES FOR CONSIDERATION OF DISALLOW ANCE OF PAYMENT MADE TO MICROSOFT CORPORATION U/S 40(A)(I) OF THE ACT OF THE ACT. 16. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASS ESSING OFFICER DISALLOWED A SUM OF ` 40,60,298/- ON THE GROUND THAT THE ASSESSEE FAILED TO DEDUCT TAX. ACCORDINGLY, THE AM OUNT PAID TO M/S MICROSOFT CORPORATION IS NET OF THE CREDIT GIVEN BY THE SELLER FOR REBATE AND PURCHASES RETURN. THEREFORE, THE ASSESSEE HAS NOT DEDUCTED TAX IN RESPECT OF THE RETURN MADE BY THE ASSESSEE. AC CORDING TO THE LD. COUNSEL, THE ASSESSEE IS LIABLE TO DEDUCT TAX ONLY IN RESPECT OF THE PROFIT AROSE TO THE RECIPIENT COMPANY. IN RESPECT OF THE AMOUNT WHICH WAS NOT GIVEN CREDIT AND THE ASSESSEE CLAIMED REBA TE, IT IS NOT NECESSARY FOR DEDUCTION OF TAX. IN RESPECT OF OTHE R ITEMS WHICH WAS GIVEN CREDIT, ACCORDING TO THE LD. COUNSEL, THE AS SESSEE HAS DEDUCTED TAX. 17. THE LD. DR PLACED HIS RELIANCE ON THE OBSERVATIONS MADE BY THE TPO AND DRP. ITA NO.1743/11 :- 8 -: 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. TH OUGH THE ASSESSEE CLAIMS THAT IN RESPECT OF THE CREDIT GIVEN TO M/S M ICROSOFT CORPORATION, TAX WAS DEDUCTED, IT IS NOT CLEAR FROM THE ORDER O F THE LOWER AUTHORITY THAT TAX WAS DEDUCTED. IT IS ALSO NOT CLEAR THE RE TURNS MADE BY THE ASSESSEE TO M/S MICROSOFT CORPORATION. THE DRP HAS SIMPLY PLACED ITS RELIANCE ON THEIR EARLIER ORDER DATED 30.9.2010. T HEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT IN THE A BSENCE OF ANY DETAILS WITH REGARD TO THE CREDIT GIVEN BY THE ASSESSEE AN D THE SO CALLED RETURNS MADE BY THE ASSESSEE TO M/S MICROSOFT CORP ORATION, THE LIABILITY OF THE ASSESSEE TO DEDUCT TAX CANNOT BE DECIDED. MOREOVER, THE COPY OF THE ORDER OF THE DRP DATED 30.9.2010 ON WHICH THE DRP PLACED ITS RELIANCE IS NOT AVAILABLE ON RECORD, THE REFORE, THIS TRIBUNAL IS NOT IN A POSITION TO DECIDE ON WHAT REASONS THE DIS ALLOWANCE WAS MADE BY THE DRP. ACCORDINGLY, THE ORDERS OF THE LOWER A UTHORITIES ARE SET ASIDE AND THE ISSUE OF DISALLOWANCE U/S 40(A)(I) O F THE ACT IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASS ESSING OFFICER SHALL RE-EXAMINE THE MATTER AFRESH AFTER CONSIDERING THE DETAILS OF CREDIT AND THE SO CALLED RETURN MADE BY THE ASSESSEE TO M/S M ICROSOFT CORPORATION AND THEREAFTER DECIDE THE ISSUE IN ACCO RDANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. ITA NO.1743/11 :- 9 -: 19. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DISALLOW ANCE OF BAD DEBTS WRITTEN OFF. 20. SHRI R. VIJAYARAGHAVAN, LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT THE ASSESSEE HAS WRITTEN OFF A SUM OF 2,06,03,544/- AS BAD DEBT IN THE BOOKS OF ACCOUNT. HOWEVER, THE TPO AND DRP FOUND THAT THE ASSESSEE HAS NOT ESTABLISHED THAT THE DEB T HAS BECOME BAD. ACCORDING TO THE LD. COUNSEL, IT IS NOT NECESSARY F OR THE ASSESSEE TO ESTABLISH THAT THE DEBT BECAME BAD ONCE IT IS WRITT EN OFF IN THE BOOKS OF ACCOUNT. ACCORDING TO THE LD. COUNSEL, THE SAME HAS TO BE ALLOWED AS DEDUCTION. 21. SHRI JOE SEBASTIN SUBMITTED THAT WHAT IS CLAIMED IS A MERE DEBT AND NOT A BAD DEBT. ACCORDING TO THE LD. DR, ALL DEBTS CANNOT BE ALLOWED AS A BAD DEBT. THE ASSESSEE HAS TO ESTABL ISH THAT THE DEBT HAS BECOME BAD. 22. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE PROVISIONS OF SEC.36(1)(VII) OF THE ACT WHICH READS AS FOLLOWS: SUBJECT TO THE PROVISIONS OF SUB-SECTION(2), THE A MOUNT OF [ANY BAD DEBT OR PART THEREOF WHICH IS WRITTEN-O FF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR]: ITA NO.1743/11 :- 10 -: 23. SEC.36(1)(VII) WAS AMENDED BY DIRECT TAX LAWS (AMENDMENT) ACT, 1987, WITH EFFECT FROM 1.4.1989. IN FACT, THE PARLIAMENT DELETED THE FOLLOWING FROM SECTION 36(1) (VII): ANY DEBT, OR PART THEREOF, WHICH IS ESTABLISHED TO HAVE BECOME A BAD DEBT IN THE PREVIOUS YEAR SINCE THE REQUIREMENT FOR ESTABLISHING THAT THE DEB T HAS BECOME BAD WAS DELETED AND WHAT WAS REQUIRED U/S 36(1)(VII) A S IT EXIST FOR THE YEAR CONSIDERATION IS THAT THE BAD DEBT HAS TO BE W RITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE IN T HE PREVIOUS YEAR AND SUBJECT TO CONDITIONS OF SECTION 36(2), THE SAME HA S TO BE ALLOWED. IN THE CASE BEFORE US, THE LOWER AUTHORITIES FOUND THA T THE ASSESSEE HAS NOT ESTABLISHED THAT THE DEBT HAS BECOME BAD. SINC E THE PARLIAMENT HAS MADE A CHANGE IN THE ENACTMENT WITH EFFECT FROM 1.4.1989, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT IT IS NO T NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT HAS BECOME BAD. WHAT IS REQUIRED IS THAT THE DEBT HAS TO BE WRITTEN OFF IN THE BOOKS OF ACCOUNT OF THE ASSESSEE FOR THE PREVIOUS YEAR AS IRRECOVERABLE AND SUBJECT TO FULFILLING THE CONDITIONS U/S 36(2)OF THE ACT, THE SAME HAS T O BE ALLOWED. IT IS NOBODYS CASE THAT THE DEBT WHICH WAS CLAIMED AS WR ITTEN OFF WAS NOT INCLUDED AS INCOME IN THE PREVIOUS YEAR. THEREFORE , THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE LOWER AUTHORITIES A RE NOT JUSTIFIED IN ITA NO.1743/11 :- 11 -: DISALLOWING THE CLAIM OF THE ASSESSEE. ACCORDINGL Y, THE ORDER OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ASSESSING O FFICER IS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE. 24. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DISALLO WANCE OF EXPENDITURE FOR EARNING EXEMPT INCOME. 25. SHRI R. VIJAYARAGHAVAN, LD. COUNSEL FOR THE ASSESS EE SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE U/S 14A TO THE EXTENT OF ` 1,88,245/-. REFERRING TO THE ORDER OF THE DRP, THE LD. COUNSEL SUBMITTED THAT THE ASS ESSEE HAS NOT EARNED ANY INCOME FROM THE INVESTMENT, THEREFORE, N O PART OF THE EXPENDITURE COULD BE DISALLOWED. 26. ON THE CONTRARY, THE LD. DR SUBMITTED THAT THE ASS ESSEE MADE INVESTMENT FOR THE PURPOSE OF EARNING INCOME W HICH DO NOT FORM PART OF THE TOTAL INCOME OF THE ASSESSEE, THE ES TIMATED DISALLOWANCE HAS TO BE MADE U/S 14A. THE ASSESSING OFFICER, AC CORDING TO THE LD. DR, HAS RIGHTLY DISALLOWED A SUM OF ` 1,88,245/-. 27. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. SE C. 10(34) OF THE ACT CLEARLY SAYS THAT ANY INCOME BY WAY OF DIVIDENDS R EFERRED TO IN SEC. 115-O DO NOT FORM PART OF THE TOTAL INCOME. SIMILA RLY, SEC.10(2A) OF ITA NO.1743/11 :- 12 -: THE ACT ALSO SAYS THAT INCOME OF A PERSON BEING A P ARTNER IN A PARTNERSHIP FIRM ALSO DO NOT FORM PART OF THE TOTAL INCOME. SEC. 10(1) OF THE ACT ALSO PROVIDES FOR EXCLUSION OF AGRICULTU RAL INCOME. TOTAL INCOME IS DEFINED IN SEC. 2(45) OF THE ACT. TOTA L INCOME MEANS THE TOTAL AMOUNT OF INCOME REFERRED TO IN SEC. 5, COMPU TED IN THE MANNER LAID DOWN IN THIS ACT. THEREFORE, IT IS OBVIOUS TH AT ANY INCOME FOR EARNING AGRICULTURAL INCOME, OR EARNING A PROFIT IN THE PARTNERSHIP FIRM OR DIVIDEND FROM THE SHARES OF THE COMPANIES CANNOT FORM PART OF THE TOTAL INCOME. THE TOTAL INCOME IS NOTHING BUT AN I NCOME ASSESSED UNDER THE INCOME-TAX ACT, 1961, FOR THE PURPOSE OF LEVY OF TAX. SEC. 37(1) OF THE ACT PROVIDES FOR ALLOWING THE EXPENDIT URE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROFESSION IN COMPUTING THE INCOME CHARGEABLE FOR T AXATION. THE EXPENDITURE INCURRED BY THE ASSESSEE FOR THE PURPO SE OF EARNING THE DIVIDEND INCOME OR FOR THE PURPOSE OF EARNING PROFI T FROM THE BUSINESS OF THE PARTNERSHIP FIRM OR FROM AGRICULTURAL INCOME CANNOT BE TREATED AS LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THEREFORE, EVEN BEFORE INTRODUCTION OF SEC. 14A, THE EXPENDITURE RELATABLE TO ANY INCOMES WHICH DO NOT FORM PART OF THE TOTAL INCOME CANNOT BE ALLOWED WHILE COMPUTI NG THE TAXABLE INCOME UNDER THE INCOME-TAX ACT, 1961. THEREFORE, IRRESPECTIVE OF THE PROVISIONS OF SEC. 14A R.W. RULE 8D, THE EXPENDITUR E CLAIMED BY THE ITA NO.1743/11 :- 13 -: ASSESSEE FOR EARNING THE EXEMPTED INCOME CANNOT BE ALLOWED AS DEDUCTION FOR THE PURPOSE OF COMPUTING TAXABLE INCO ME. HENCE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH T HE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRMED. 28. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH OF JUNE, 2015, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 26 TH JUNE, 2015 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF