Essel Shyam Communication Ltd., New Delhi V. ACIT, New Delhi

ITA 1795/DEL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69559 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 27-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 18-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIDHI SRIVASTAVA
• Keywords: Business income; Earning of tax free income; Question of law; Commercial expediency
• Section: 14A

Judgement Text

ITA NOS. 1795 & 1938/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 1795/DEL/2012 A.Y. : 2008-09 ESSEL SHYAM COMMUNICATION LIMITED, C-138, NARAINA INDUSTRIAL AREA, PHASE-I, NEW DELHI 110 028 (PAN: AAACE2299Q) VS. ACIT, CENTRAL CIRCLE - 2, NEW DELHI AND I.T.A. NO. 1938/DEL/2012 A.Y. 2008-09 ACIT, CENTRAL CIRCLE-2, VS. M/S ESSEL SHYAM COMMUNIC ATION NEW DELHI LTD., C-138, NARAINA INDUSTRIAL AREA, PHASE-I, NEW DELHI (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. VED JAIN, CA DEPARTMENT BY : MS. NIDHI SRIVASTAVA, SR. D.R. ORDER ORDER ORDER ORDER PER PER PER PER SHAMIM YAHYA : AM SHAMIM YAHYA : AM SHAMIM YAHYA : AM SHAMIM YAHYA : AM THESE CROSS APPEALS BY THE ASSESSEE AND THE REVE NUE EMANATE OUT OF ORDER OF THE LD. CIT(A) DATED 21.2.2012 AND PERTAIN TO ASSESSMENT YEAR 2008-09. ITA NOS. 1795 & 1938/DEL/2012 2 REVENUES APPEAL REVENUES APPEAL REVENUES APPEAL REVENUES APPEAL (ITA NO. 1938) (ITA NO. 1938) (ITA NO. 1938) (ITA NO. 1938) THE ISSUE RAISED IS THAT LD. CIT(A) ERRED IN LAW AN D ON FACTS IN DELETING THE ADDITION OF RS. 20,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF REPAIR AND MAINTENANCE. 2. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING SATELLITE BASED TELECOMMUNICATION SOLUTIONS INCLUDI NG VSAT SERVICES; UNLINKING SERVICES; PLAYOUT SERVICES AND BROADBAND SERVICES THROUGH THE SATELLITE. DURING THE COURSE OF ASSESSMENT, A SSESSING OFFICER MADE THE ADHOC DISALLOWANCE OF RS. 20 LACS OUT OF RE PAIR AND MAINTENANCE OF PLANT AND MACHINERY WITHOUT ASSIGNING ANY COGENT REASONS. ASSESSING OFFICER HELD AS UNDER:- FROM THE DETAILS OF REPAIR AND MAINTENANCE (P&M) FILED IT IS NOTICED THAT THE ASSESSEE HAD CLAIMED RS.49.36 LACS AS COMPARE TO RS.17.77 LACS IN THE IMMEDIATE PREVIOUS YEAR SINCE THIS IS A SIGNIFICANT INCREASE WITH NO CORRESPONDING INCREASE ON THE RECEIPT EITHER ON SERVICE SECTOR OR TRADING SECTOR . THE ASSESSEE WAS ASKED TO EXPLAIN, WHY NOT RS. 20 LACS ON ADHOC BASIS OUT OF RS. 49.36 LACS SHOULD NOT DISALLOWED. THE ASSESSEE EXPLAINED THAT THE EXPENSE S ITA NOS. 1795 & 1938/DEL/2012 3 INCURRED ARE FOR THE PURPOSE OF BUSINESS AND ARE FU LLY SUPPORTED AND ARE THEREFORE CORRECT GENUINE EXPENSES. I HAVE CONSIDERED THE EXPLANATION GIVEN BY THE ASSESSEE HOWEVER I AM NOT SATISFIED WITH THE SAM E AS OUT FLOW OF FUNDS DOES NOT MEAN THAT THE SAME HAS BEEN INCURRED FOR BUSINESS PURPOSES IF THE EFFECT IS NOT THERE ON THE RECEIPT SIDE. IN VIEW OF THE ABOVE RS. 20 LACS CLAIMED AS REPAIR AND MAINTENANCE (P&M) IS DISALLOWED. 3. UPON ASSESSEES APPEAL LD. CIT(A) OBSERVED THAT THE CONTENTION OF THE ASSESSEE IS THAT ALL EXPENSES HAVE BEEN DULY VOUCHED AND VERIFIED AND AUDITED BY STATUTORY AUDITORS AS IS EV IDENT FROM AUDITED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT FILED WIT H THE RETURN OF INCOME. HENCE, THE LD. CIT(A) HELD THAT DISALLOWAN CE MADE WAS ENTIRELY PRESUMPTUOUS AND ADHOC. HENCE, THE LD. CI T(A) DIRECTED THAT THE ADHOC ADDITION MADE FOR RS. 20 LACS IS LIABLE TO BE DELETED. 4. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. LD. DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER. LD . COUNSEL OF THE ASSESSEE ON THE OTHER HAND SUBMITTED THAT ASSESSING OFFICER HAS ITA NOS. 1795 & 1938/DEL/2012 4 MADE AN ABSOLUTE ADHOC DISALLOWANCE WITHOUT ANY BAS IS WHATSOEVER. HENCE, HE SUBMITTED THAT LD. CIT(A)S ORDER ON THIS ISSUE BE SUSTAINED. LD. COUNSEL FURTHER IN THIS REGARD PLACED RELIANCE ON THE FOLLOWING CASE LAWS WHERE ADHOC DISALLOWANCE HAS BEEN DELETED. A) ACIT VS. AMTEK AUTO LTD. 112 TTJ 455 B) DCIT VS. YASH B. JOHAR, ITA NO. 2612/MUM/2008, A.Y. 2004-05 DATED 5.2.2010. C) DEVJI NENSHI PALANI VS. ITO, ITA NO. 6519/MUM/2009 A.Y. 2006-07 DATED 29.10.2010. D) NITIN SALES CORPN. 212 TAXATION 49 (DEL.) ITA NO. 1809/DEL/2005 DATED 11.7.2008. 6. WE HAVE CONSIDERED THE SUBMISSIONS AND PERUSED T HE RECORDS. WE FIND THAT ASSESSING OFFICER HAS MADE DISALLOWANC E OUT OF REPAIR AND MAINTENANCE EXPENSES WITHOUT ANY REASON WHATSOEVER. IT IS NOT THE CASE THAT ANY EXPENSE IS BOGUS OR HAS REMAINED UNV OUCHED. UNDER THE CIRCUMSTANCES, THERE IS NO INFIRMITY IN THE ORD ER OF THE LD. CIT(A). WE FIND THAT IT IS A SETTLED LAW THAT THE REVENUE CANNOT SIT INTO THE SHOE OF THE ASSESSEE AND DECIDE WHAT IS PRUDENT FOR THE BUSINESS. IN THIS REGARD, WE PLACE RELIANCE UPON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT, BOMBAY VS. WALCHAND AND C O. PRIVATE LTD. IN 65 ITR 381, WHEREIN IT WAS HELD THAT 'IN APPLYING THE TEST OF COMMERCIAL EXPEDIENCY FOR DETERMINING WHETHER AN E XPENDITURE WAS WHOLLY AND EXCLUSIVELY FOR BUSINESS, THE EXPENDIT URE HAS TO BE ITA NOS. 1795 & 1938/DEL/2012 5 ADJUDGED FROM THE POINT OF VIEW OF THE BUSINESSMAN A ND NOT OF REVENUE'. ACCORDINGLY, WE AFFIRM THE ORDER OF THE LD. CIT(A). 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. A AA ASSESSEES APPEAL (ITA SSESSEES APPEAL (ITA SSESSEES APPEAL (ITA SSESSEES APPEAL (ITA NO. 1795) NO. 1795) NO. 1795) NO. 1795) 8. THE FIRST ISSUE RAISED IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE LD. AO IN EXCLUDING INTEREST INCOME OF RS.9,04,630/- FOR THE PURPOSE OF DEDUCTION U/S. 80IA OF THE ACT. THIS ISSUE RELATES TO TREATMENT OF INTEREST INCOME IN COMPTUING DEDUCTION U/S 80IA. ON THIS ISSUE ASSESSING OFFICER OBSERVED THAT INTEREST INCOME CANNOT BE SAID TO HAVE BEEN DERIVED FROM THE BUSINESS OF ASSESSEE WHICH IS ENGAGED IN PROVIDING TELECOMM UNICATION SERVICES AND THIS INCOME DOES NOT HAVE NEXUS WITH THE ASSESS EES BUSINESS. THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS SHOWN UNDER THE HEAD OTHER INCOME INTEREST INCOME ON FDR RS. 28,09,3 92/-, OTHER INTEREST OF RS. 2,06,042/- TOTALING TO RS. 30,15,4 34/-. ASSESSING OFFICER OBSERVED THAT THE FACTS OF THE CASE ARE SAME AS IN THE EARLIER YEARS. ACCORDINGLY, ASSESSING OFFICER OPINED THAT THE INTE REST INCOME WAS NOT DERIVED FROM BUSINESS UNDERTAKING AND HENCE THE SAME WAS TREATED AS INCOME FROM OTHER SOURCES. ACCORDINGLY, THE SAME W AS NOT CONSIDERED AS DEDUCTION U/.S 80IA. ITA NOS. 1795 & 1938/DEL/2012 6 9. UPON ASSESSEES APPEAL LD. CIT(A) NOTED THAT IDE NTICAL ISSUE WAS DECIDED AGAINST THE ASSESSE BY THE ITAT, DELHI IN ASSESSES OWN CASE FOR THE ASSTT. YEAR 2005-06. ACCORDINGLY, LD. CIT( A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 10. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPE AL BEFORE US. 11. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE INTEREST INCOME BEING INEXTRICABLY LINKED TO THE BUSINESS OF THE ASSESSEE , THE SAME HAS TO BE ASSESSED AS BUSINESS INCOME. HE FURTHER SUBMITTED THAT ASSESSEE APPEALED BEFORE THE HONBLE HIGH COURT AGAINST THE ORDER OF THE ITAT IN ASSTT. YEAR 2005-06 WHEREBY THE HONBLE DELHI HIGH COURT RESTORED THE MATTER BACK TO THE ITAT TO EXAMINE THE FACTUAL MATRIX. AFTER THIS ORDER OF THE HONBLE DELHI HIGH COURT, THE ITAT IN A.Y. 20 06-07 REFERRED BACK THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE FACTUAL MATRIX. ACCORDINGLY, LD. COUNSEL OF THE ASSESSEE P LEADED THAT THE ISSUE MAY BE REMITTED TO THE FILE OF THE ASSESSING OFFICER. IN VIEW OF THE ABOVE, LEGAL PRECEDENT, LD. DR. ALSO AGREED THAT MATTER NEEDS TO BE REMITTED BACK TO THE FILE OF THE ASSESSING OFFICE R. 12. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AN D PERUSED THE RECORDS. WE FIND THAT THE SAME ISSUE IN EARLIER YEAR S HAS TRAVELLED TO ITA NOS. 1795 & 1938/DEL/2012 7 THE HONBLE HIGH COURT AND THE MATTER HAS BEEN REMITT ED TO THE FILE OF THE ITAT WHICH IN TURN REMITTED THE SAME TO THE FILE OF THE ASSESSING OFFICER. IN THIS REGARD, IN ASSESSEES OWN CASE IN ITA NO. 636/DEL/2012 FOR A.Y. 2006-07, THE TRIBUNAL VIDE ORDER DATED 26. 10.2012 HAS CONSIDERED THE ISSUE AS UNDER:- 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. BEFORE HON BLE DELHI HIGH COURT IN ASSESSEES OWN CASE FOR ASSESSME NT YEAR 2005-06, INTER-ALIA, THE FOLLOWING SUBSTANTIA L QUESTION OF LAW WAS THERE. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE TRIBUNAL ERRED IN LAW IN NOT DIRECTING EXCLUSION OF ONLY NET INTEREST INCOME, I.E., GROSS INTEREST INCOME LESS EXPENDITURE INCURRED FOR EARNI NG SUCH INTEREST INCOME, WHILE COMPUTING DEDUCTION U/S 80 1 (A) OF THE INCOME TAX AC T. 9. HONBLE DELHI HIGH COURT UPHELD THE CONTENTION OF REVENUE THAT IN VIEW OF THE DECISION OF HONBLE SUP REME COURT IN THE CASE OF LIBERTY INDIA VS. CIT (2009) 9 SCC 328, THE ASSESSEE WAS NOT ENTITLED FOR DEDUCTION U/S 80 1 A IN RESPECT OF NET INTEREST INCOME AND NOT ON GROSS INTE REST. HONBLE DELHI HIGH COURT OBSERVED AS UNDER: WE HAVE QUOTED SECTION 80 1A AND (2A) ABOVE. FOR DETERMINING THE INCOME DERIVED BY AN UNDERTAKING OR ITA NOS. 1795 & 1938/DEL/2012 8 ENTERPRISE, WE HAVE TO COMPUTE THE TOTAL INCOME OF THE ASSESSEE FROM THE BUSINESS REFERRED IN SUB-SECT ION (4) TO SECTION 80(1) (A) . THE WORDS USED IN SECTIO N 80 1 (A) (1) AND (2A) ARE PROFIT AND GAINS OF ELIGIB LE BUSINESS. ON THE BASIS OF SAME LOGIC AND REASONING , WE HAVE TO FIRST FIND OUT THE PROFIT AND GAINS OF BUSINESS FROM THE SPECIFIED ACTIVITIES. SECTION 80 1 (A) WAS INTERPRETED AND ELUCIDATED IN LIBERTY INDIA VS. COMMISSIONER OF INCOME TAX,(2009) 9 SCC 328. IT WAS HIGHLIGHTED SECTION 80 1 (A) IS A PROFIT LINKED INC ENTIVE AND ONLY PROFITS DERIVED FROM ELIGIBLE BUSINESS AR E ENTITLED TO DEDUCTION. THE EXPRESSION DERIVED FROM COVERS SOURCES NOT BEYOND THE FIRST DEGREE. DEVICES TO INFLATE OR REDUCE PROFITS FROM ELIGIBLE BUSINESS SH OULD BE REJECTED. ON DEPB UTILIZATION AND DUTY DRAWBACK I T WAS HELD:- 39. ANALYSING THE CONCEPT OF REMISSION OF DUTY DRAWBACK AND DEPB, WE ARE SATISFIED THAT THE REMISSION OF DUTY IS ON ACCOUNT OF THE STATUTORY/POLICY PROVISIONS IN THE CUSTOMS ACT/ SCHEME(S) FRAMED BY THE GOVERNMENT OF INDIA. IN THE CIRCUMSTANCES, WE HOLD THAT PROFITS DERIVED BY WAY OF SUCH INCENTIVES DO NOT FALL WITHIN THE EXPRESSION PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING IN SECTION 80 1 B. ITA NOS. 1795 & 1938/DEL/2012 9 10. HONBLE DELHI HIGH COURT REMANDED THE MATTER OBSERVING IN PARA 23 AS REPRODUCED EARLIER. RESPECT FULLY FOLLOWING THE DECISION OF HONBLE DELHI COURT, WE R ESTORE THE MATTER TO THE FILE OF ASSESSING OFFICER TO EXAMINE TH E NEXUS BETWEEN THE INTEREST PAID FOR EARNING THE INTEREST INCOME ON FDRS. TO THE EXTENT DIRECT NEXUS IS THERE, FOR EARNIN G THE INTEREST ON FDRS, THE DEDUCTION IS TO BE ALLOWED AND GROSS INTEREST, ACCORDINGLY, BE REDUCED BY THE SAID AMOUNT . WE MAY CLARIFY THAT TO THE EXTENT DEDUCTION IS ALLOWED, THE ASSESSEE WILL NOT BE ENTITLED TO CLAIM FURTHER DEDUC TION U/S 36 (I) (III). 13. RESPECTFULLY FOLLOWING THE ABOVE PRECEDENTS, W E SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH THE SAME DIRECTION AS ABOVE. 14. ANOTHER ISSUE RAISED IN ASSESSEES APPEAL IS TH AT LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 2,60,992/- MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF RULE 8D U/S. 14A OF THE ACT. 15. ON THIS ISSUE ASSESSING OFFICER NOTED THAT ASS ESSEE HAD MADE LONG TERM TRADE INVESTMENT OF RS. 80,00,000/- IN EQU ITY SHARES OF M/S ESSEL SHYAM TECHNOLOGIES LTD. AND RS. 5,00,000/- ES CL TECHNOLOGIES LTD. FOR EARNING EXEMPT INCOME. THE ASSESSEE WAS ASKE D TO FURNISH THE DETAILS OF ADMINISTRATIVE AND FINANCIAL EXPENSES FOR EARNING SUCH INCOME AND EXPLAIN WHY THE SAME SHOULD NOT BE DISALL OWED U/S. 14A OF ITA NOS. 1795 & 1938/DEL/2012 10 THE I.T. ACT. ASSESSEE SUBMITTED THAT THESE INVES TMENTS WERE MADE BY THE COMPANY IN EARLIER YEARS, THE SAME WAS MADE O UT OF ACCUMULATED PROFIT / GENERAL RESERVES. HENCE, IT WA S SUBMITTED THAT ASSESSEE HAD NOT INCURRED ANY EXPENDITURE ON INTE REST ETC. ON THIS ACCOUNT. HOWEVER, THE ASSESSING OFFICER WAS NOT C ONVINCED. HE PROCEEDED TO APPLY RULE 8D. ACCORDINGLY, HE MADE THE TOTAL DISALLOWANCE OF RS. 2,60,992/- IN THIS REGARD. 16. UPON ASSESSEES APPEAL LD. CIT(A) REJECTED THE ASSESSEES CONTENTION THAT EXISTENCE OF EXEMPT INCOME IS NECES SARY FOR MAKING DISALLOWANCE U/S. 14A. HE ALSO REJECTED THE ASSESSE ES CONTENTION THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO THE INCOME WHICH DOES NOT FORM TO THE TOTAL INCOME. ACCORDINGLY, LD CIT (A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 17. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APP EAL BEFORE US. 18. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY SPECIFIC FINDING NOR POINTED OUT ANY EXPE NDITURE WHICH IS TREATED AS INCURRED TO EARN THE EXEMPT INCOME. IN T HIS REGARD, HE REFERRED TO THE BALANCE SHEET OF THE ASSESSEE COMPA NY WHEREIN HE REFERRED TO THE RESERVES AND SURPLUS REFLECTED THER EIN. HE SUBMITTED ITA NOS. 1795 & 1938/DEL/2012 11 THAT THE ASSESSEE HAD RESERVES AND SURPLUS AMOUNTING TO RS. 32,29,72,688/- AS ON 31.3.2008. HE FURTHER POINTE D OUT THAT THE RESERVES AND SURPLUS AS ON 31.3.2007 WAS RS. 17,25, 12,493/-. AGAINST THE ABOVE HE POINTED OUT THAT ASSESSEES INVESTMEN T STOOD AT RS. 80,00,000/- AS ON 31.3.2007 AND THE SAME BECAME RS. 85,000/- AS ON 31.3.2008. FROM THE ABOVE, LD. COUNSEL OF THE ASSE SSEE CONTENDED THAT INCREASE IN INVESTMENTS AND THE FIGURE OF INVE STMENT ARE DULY COVERED BY THE ASSESSEES OWN FUNDS WHICH WERE AVAI LABLE IN THE FORM OF RESERVES AND SURPLUS. HENCE, HE SUBMITTED THAT T HERE IS NO EXPENDITURE WHICH HAS BEEN INCURRED TO EARN THE EX EMPT INCOME. SINCE THE INVESTMENT WAS OUT OF THE OWN RESERVES AND SURPLUS, NO DISALLOWANCE U/S. 14A IS WARRANTED. 19. LD. COUNSEL OF THE ASSESSEE FURTHER MADE ALTERNA TIVE SUBMISSIONS THAT ASSESSING OFFICER HAS ERRED IN ALLOCATING THE AMOUNT OF INTEREST ATTRIBUTABLE TO THE INVESTMENTS. HE SUBMITTED THAT ASSESSEE HAD INTEREST OF TERM LOANS; INTEREST TO BANKS; AND INTER EST ON OTHERS. HE SUBMITTED THAT INTEREST EXPENSES DIRECTLY ATTRIBUTA BLE TO TAX EXEMPT INCOME AS ALSO DIRECTLY ATTRIBUTABLE TO THE TAXABLE INCOME ARE REQUIRED TO BE EXCLUDED FROM THE COMPUTATION OF CO MMON INTEREST EXPENSES TO BE ALLOCATED UNDER RULE 8D. HE REFERRED TO THE DECISION OF THE ITAT, KOLKATA BENCH IN THE CASE OF ACIT VS. CHA MPION COMMERCIAL ITA NOS. 1795 & 1938/DEL/2012 12 COMPANY LTD. 139 ITD 108 WHEREIN ON SIMILAR PROPOSI TION THE MATTER WAS REMITTED FOR EXAMINATION OF THE FACTUAL MATRIX. 20. LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND SUBMITTED THAT THE MATTER CAN BE REFERRED BACK TO THE FILE O F THE ASSESSING OFFICER TO EXAMINE THE VERACITY OF THE CONTENTION OF THE ASSESSEE. 21. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT IT IS THE SUBMISSION OF THE LD. COUNSEL OF THE ASSESSEE THAT ASSESSEE HAD SUFFICIENT INTEREST FRE E FUNDS BEING RESERVES AND SURPLUSES TO MAKE INVESTMENTS IN THE I MPUGNED INVESTMENTS. WE FIND THAT THIS ASPECT HAS NOT BEEN COMMENTED UPON BY THE AUTHORITIES BELOW. ALTHOUGH, THE ISSUE WAS PLACED BEFORE THE AUTHORITIES BELOW. SIMILARLY, WE FIND THAT ASSESSEE S CONTENTION IS THAT INTEREST EXPENSES DIRECTLY ATTRIBUTABLE TO TAX EXE MPT INCOME AS ALSO DIRECTLY ATTRIBUTABLE TO THE TAXABLE INCOME ARE REQ UIRED TO BE EXCLUDED FROM THE COMPUTATION OF COMMON INTEREST EXPENSES TO B E ALLOCATED UNDER RULE 8D. THIS HAS BEEN CLAIMED TO HAVE NOT BE EN DONE BY THE ASSESSING OFFICER. IN OUR OPINION, THIS ASPECT ALSO NEEDS FACTUAL EXAMINATION. ACCORDINGLY, WE SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL EXA MINE THE ISSUE ON THE BASIS OF CONTENTIONS OF THE ASSESSEE AND DECIDE THE ISSUE AFRESH. ITA NOS. 1795 & 1938/DEL/2012 13 22. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED AND APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR ST ATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29/11/2013. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - [ [[ [I.C. SUDHIR I.C. SUDHIR I.C. SUDHIR I.C. SUDHIR] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE:- 29/11/2013 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES