M/s. Ranbaxy Holding Company, New Delhi V. DCIT, New Delhi

ITA 1804/DEL/2009

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2893 (ITAT-DELHI)
• Duration Of Justice: 8 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 16-05-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 04-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Earning of tax free income; Proportionate interest
• Section: 143(3); 14A; 115JB; 263

Judgement Text

PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH - F NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI P. MAHARISHI, ACCOUNTANT MEMBER ITA NO.1804/DEL/200 9 ASSESSMENT YEAR : 2005-06 M/S. RANBAXY HOLDING COMPANY 55, HANUMAN ROAD, CONNAUGHT PLACE NEW DELHI 110 001. PAN AAKCS7686P VS. DCIT CIRCLE-15(1) NEW DELHI. (APPELLANT) (RESPONDENT) PER BHAVNESH SAINI, JUDICIAL MEMBER ORDER THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAI NST THE ORDER OF LD. CIT, V, NEW DELHI DATED 25 TH MARCH, 2009 FOR ASSESSMENT. YEAR 2005-06 CHALLENGING THE ORDER U/S 263 OF THE I.T. A CT. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE FILED RETURN OF INCOME ON 31 ST OCTOBER, 2005 DECLARING NIL INCOME UNDER NORMAL PROVISIONS AND RS. 1.22 CRORE U/S UNDER 15JB ALONG WITH AUDITED COPIES ASSESSEE BY : SHRI M.S. SYALI, SR. ADVOCATE, SHRI TARANDEEP SINGH, ADVOCATE DEPARTMENT BY: MRS. PARAMITA TRIPATHY, CIT(DR) DATE OF HEARING 16/05/2017 DATE OF PRONOUNCEMENT 06 /06/2017 ITA NO. 1804/DEL/2009 M/S. RANBAXY HOLDING CO. VS. DCIT PAGE 2 OF 11 OF THE BALANCE SHEET ETC. THE ASSESSMENT ORDER IN T HIS CASE WAS PASSED U/S 143(3) ON DATED 23 RD MAY, 2007. 3. LD. CIT ISSUED A SHOW CAUSE NOTICE U/S 263 OF TH E I.T. ACT ON MANY ISSUES ON 7 TH JULY, 2008 WHICH IS REPRODUCED IN THE IMPUGNED ORDER. IT IS STATED THAT ON OTHER ISSUES RAISED IN THE SHOW CAUSE NOTICE, LD. CIT ACCEPTED THE EXPLANATION OF THE ASSESSEE. H OWEVER AS REGARDS POINT NO. 5 OF THE NOTICE, THE ORDER U/S 263 WAS PA SSED AS REGARD THE DEDUCTION CLAIMED U/S 14A OF THE I.T. ACT ON ACCOUN T OF PROPORTIONATE DISALLOWANCE OF EXPENSES IN RELATION TO EXEMPT INCO ME. 4. LD. CIT NOTED IN THE NOTICE WITH REGARD TO DISAL LOWANCE U/S 14A OF THE I.T. ACT THAT PROPORTIONATE DISALLOWANCE OF EXP ENSES IN RELATION TO EXEMPT INCOME HAS NOT BEEN DONE BY THE ASSESSING OF FICER. IT IS STATED THAT ASSESSEE SUO MOTTO DISALLOWED RS. 15.93 CRORE ON ACCOUNT OF INTEREST MADE BY THE ASSESSEE IS ARBITRARY AND HAVE NO BASIS AND THAT PROPER DISALLOWANCE HAS NOT BEEN MADE PARTICULARLY CONSIDERING THAT FRESH INVESTMENT OF RS. 609.93 CRORE HAS BEEN MADE IN THE YEAR UNDER CONSIDERATION FOR PURCHASE OF SHARES OF M/S. RANBAX Y LABORATORIES LTD. THE ASSESSEE SUBMITTED BEFORE LD. CIT THAT ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF INVESTMENT AND TRADING IN SHARE AND SECURITIES AS WELL AS IN THE BUSINESS OF GRANTING L OANS AND ADVANCES. THE ASSESSEE HAS BEEN MAINLY MAKING INVESTMENTS IN THE SHARES OF M/S. RANBAXY LABORATORY LTD. EVER SINCE ITS INCEPTION P RIMARILY WITH A VIEW TO ITA NO. 1804/DEL/2009 M/S. RANBAXY HOLDING CO. VS. DCIT PAGE 3 OF 11 HAVE CONTROLLING STAKE IN THE PARENT COMPANY. THE S AID INVESTMENTS IN THE SHARES OF RANBAXY WERE INITIALLY MADE OUT OF ITS SHARE CAPITAL AND THEREAFTER OUT OF ITS AVAILABLE RESERVES AND SURPLU S AS ALSO OUT OF BORROWINGS MADE FROM TIME TO TIME. THE ASSESSEE EXP LAINED THAT IT HAS SUO MOTTO MADE DISALLOWANCE U/S 14A WHILE COMPUTING TAXABLE INCOME . THIS PRACTICE IS CONSISTENTLY FOLLOWED EVEN IN EARL IER YEARS IN WHICH ASSESSMENT ORDER U/S 142(3) HAVE BEEN PASSED AND TH E PRACTICE ADOPTED BY THE ASSESSEE HAVE NOT BEEN DOUBTED. IN THE ASSES SMENT YEAR UNDER APPEAL I.E. 2005-06, ASSESSEE DECLARED INCOME OF RS . 1.22 CRORE U/S UNDER 115JB OF THE ACT AFTER CONSIDERING THE AMOUNT OF DISALLOWANCE U/S 14A ON THE BASIS AS FOLLOWED IN EARLIER YEARS. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT U/S 143 (3) ON 23 RD MAY, 2007 HAS GONE THROUGH THE COMPLETE DETAILS/INFORMATION, MATERIAL ON RECORD, CONSIDER THE BASIS OF DISALLOWANCE U/S 14A AND AFTER DETAILE D EXAMINATION AND VERIFICATION OF FACTS AND MATERIAL ON RECORD DETERM INED THE INCOME OF ASSESSEE BY MAKING DISALLOWANCE U/S 14A OF THE I.T. ACT OF RS. 17,07,39,306/-. IN EARLIER YEAR ASSESSEE MADE SIMIL AR DISALLOWANCE U/S 14A . ASSESSEE EXPLAINED THE SHARE CAPITAL, RESERVE S AND SURPLUS AVAILABLE TO THE ASSESSEE FROM EARLIER YEAR AS WELL AS IN ASSESSMENT YEAR UNDER APPEAL AND DISALLOWANCE UNDER EARLIER YEAR AS DECLARED BY ASSESSEE HAS BEEN ACCEPTED. IT WAS FURTHER SUBMITTE D THAT SECTION 14A SEEKS TO DISALLOW EXPENDITURE INCURRED IN RELATION TO EARNING OF TAX FREE INCOME. THE SECTION DOES NOT ENVISAGE DISALLOWANCE OF EXPENDITURE ON ESTIMATE AND REQUIRES NEXUS BETWEEN EXPENDITURE INC URRED AND EARNING ITA NO. 1804/DEL/2009 M/S. RANBAXY HOLDING CO. VS. DCIT PAGE 4 OF 11 OF EXEMPT INCOME TO BE ESTABLISHED BY THE REVENUE. THE ASSESSEE MADE FRESH INVESTMENTS IN SHARES TO THE TUNE OF RS. 609. 92 CRORES OUT OF WHICH RS. 597.34 CRORES WERE INVESTED IN THE SHARES OF RA NBAXY LABORATORIES PVT. LTD. IT WAS EXPLAINED THAT ASSESSEE HAS EXHAU STED THE SHARE CAPITAL AND RESERVES IN INVESTMENTS AND FRESH INVESTMENTS WERE MADE ENTIRELY OUT OF BORROWED FUNDS AND ASSESSEE MADE DISALLOWANC E OUT OF INTEREST ON THE SAME BASIS AMOUNTING TO RS. 15.36 CRORE AND FURTHER DETAILS WERE ALSO SUBMITTED TO SHOW THAT TOTAL DISALLOWANCES WER E MADE BY ASSESSEE SUO MOTTO IN A SUM OF RS. 17.07 CRORES WHICH INCLUD ES DISALLOWANCE OUT OF PERSONNEL, OFFICE AND ADMINISTRATIVE EXPENSES AN D DEPRECIATION IN A SUM OF RS. 25,24,665/-. THE CHART IS REPRODUCED A T PAGE 6 OF THE IMPUGNED ORDER. LD. CIT AFTER CONSIDERING THE SUBMI SSIONS OF THE ASSESSEE NOTED THAT THE METHOD OF CALCULATING THE D ISALLOWANCE TO BE MADE U/S 14A HAS BEEN PROVIDED IN RULE 8D OF I.T. R ULES W.E.F. 24 TH MARCH,. 2008. HOWEVER ASSESSMENT IN THIS CASE IS MA DE ON 23 RD MAY, 2007 WHEN SUCH METHOD WAS NOT PROVIDED. THE LD. CIT DISCUSSED THE ISSUE OF DISALLOWANCE OF INTEREST SUO MOTTO BY ASSE SSEE IN A SUM OF RS. 15.36 CRORES AND REPRODUCED THE DETAILS IN THE IMPU GNED ORDER AND ACCEPTED THE EXPLANATION OF ASSESSEE THAT THE DISAL LOWANCE OF RS. 15.36 CRORE SUO MOTTO MADE BY THE ASSESSEE ON ACCOUNT OF INTEREST IN RELATION TO EARNING INCOME (DIVIDEND) NOT FORMING PART OF TO TAL INCOME AND ACCEPTED BY THE ASSESSING OFFICER HAS BEEN REASONAB LY CALCULATED AND DOES NOT REQUIRE INTERVENTION. ITA NO. 1804/DEL/2009 M/S. RANBAXY HOLDING CO. VS. DCIT PAGE 5 OF 11 5. LD. CIT THEREAFTER DISCUSSED THE DISALLOWANCE MA DE BY ASSESSEE IN A SUM OF RS. 25,24,665/- ON ACCOUNT OF PERSONNEL EXPENSES, OFFICE AND ADMINISTRATIVE EXPENSES ETC. MADE AND NOTED THA T THE ASSESSEE MADE DISALLOWANCE ONLY FOR RS. 25,24,665/- AS AGAIN ST TOTAL EXPENDITURE OF RS. 1,33,04,315/- UNDER THIS HEAD. HOWEVER ASSES SEE HAS NOT BEEN ABLE TO FURNISH ANY REASONABLE / JUSTIFIED BASIS FO R ARRIVING AT SUCH CALCULATION. LD. CIT CONSIDERING INVESTMENT IN SHAR ES IN ASSESSMENT. YEAR UNDER APPEAL IN A SUM OF RS. 609.93 CRORE FOUN D THAT THE DISALLOWANCE AS MADE IS LESSER. THEREFORE FURTHER DISALLOWANCE ON THIS HEAD SHOULD HAVE BEEN MADE IN THE SUM OF RS. 72,07, 020/- THE ASSESSING OFFICER WAS DIRECTED TO MODIFY THE ASSESS MENT ORDER ACCORDINGLY. 6. WE HAVE HEARD LD. REPRESENTATIVE OF BOTH THE PAR TIES AND PERUSED THE MATERIAL ON RECORD. LD. COUNSEL FOR ASS ESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND SUBMI TTED THAT LD. CIT PARTLY SET ASIDE THE ASSESSMENT ORDER WITH REGARD T O DISALLOWANCE U/S 14A AS REGARDS ADMINISTRATIVE AND PERSONNEL EXPENS ES ETC. WHICH ASSESSEE HAS REASONABLY ESTIMATED BECAUSE RULE 8D I S NOT APPLICABLE TO ASSESSMENT YEAR UNDER APPEAL. THE CALCULATION WAS M ADE ON THE BASIS OF THE EARLIER YEARS IN WHICH ASSESSING OFFICER ACCEPT ED THE CLAIM OF ASSESSEE U/S 143 (3). THE DETAILS OF ADMINISTRATIVE AND PERSONNEL EXPENSES IS FILED AT PAGE 22A OF THE PAPER BOOK TO SHOW THAT IN RESPECT OF MR C.S. JHA, SHRI RAJENDER SHARMA AND SHRI DALE R SINGH THEY WERE ITA NO. 1804/DEL/2009 M/S. RANBAXY HOLDING CO. VS. DCIT PAGE 6 OF 11 DIRECTLY CONNECTED WITH THE EARNING OF THE INCOME T HEREFORE IN THEIR CASES DIRECT EXPENSES WERE DISALLOWED IN 50% AND IN THE CASES OF OTHER INDIRECT EXPENSES 10% DISALLOWANCE HAS BEEN MADE. H E HAS SUBMITTED THAT TOTAL EXPENSES CLAIMED WERE ONLY RS. 47,66,616 /-. THEREFORE FURTHER DISALLOWANCE OF RS. 72,07,020/- IS WHOLLY INAPPROPR IATE. IN PRECEDING ASSESSMENT YEAR 2004-05, THE ASSESSING OFFICER ONLY DISALLOWED EXPENSES UNDER THE SAME HEAD IN A SUM OF RS. 2 LAC, COPY OF THE ASSESSMENT ORDER U/S 143(3) DATED 29.11.2005 IS FIL ED AT PAGE 36 OF THE PAPER BOOK. HE HAS SUBMITTED THAT MAJORITY OF THE F RESH INVESTMENTS HAVE BEEN MADE IN THE GROUP COMPANY M/S. RANBAXY LA BORATORY P. LTD. FOR CONTROLLING THE MANAGEMENT. THEREFORE ASSESSEE NEED NOT TO MAKE THE EXPENSES AS CLAIMED BY THE LD. CIT. THE ASSESSE E HAS GIVEN COMPLETE DETAILS BEFORE THE ASSESSING OFFICER WHICH HAVE BEEN EXAMINED AND VERIFIED BY THE ASSESSING OFFICER, THE BASIS OF THE ASSESSEE HAS BEEN ACCEPTED. HE HAS THEREFORE SUBMITTED THAT VIEW OF T HE AO IS AS PER LAW. THE LD. CIT SHOULD NOT EXERCISE THE POWER U/S 263 O F THE I.T. ACT. HE HAS RELIED UPON DECISION OF THE SUPREME COURT IN TH E CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT 243 ITR 83. HE HAS REL IED UPON DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS. DLF LTD. 35 0 ITR 555 (DELHI) AND DECISION OF KERALA HIGH COURT IN THE CASE OF CIT VS . CATHOLIC SYRIAN BANK LTD. 237 ITR 164. HE HAS SUBMITTED THAT THE AO EXAM INED THE DETAILS AS PER LAW AND DISALLOWED EXPENSES U/S 14A OF THE I.T. ACT WHICH WAS BASED ON PAST HISTORY OF THE ASSESSEE. THEREFORE IF AO ACCEPTED ONE OF ITA NO. 1804/DEL/2009 M/S. RANBAXY HOLDING CO. VS. DCIT PAGE 7 OF 11 THE POSSIBLE VIEW IN THE MATTER TO WHICH THE LD. CI T(A) DOES NOT AGREE WOULD NOT GIVE RISE TO INITIATE THE JURISDICTION U/ S 263 OF THE I.T. ACT. 7. ON THE OTHER HAND LD. DR RELIED UPON IMPUGNED OR DER AND SUBMITTED THAT AO DID NOT DO ANYTHING AND ACCEPTED THE CLAIM OF ASSESSEE FOR DISALLOWING U/S 14A. RULE 8D OF THE I. T. RULES DO NOT APPLY ASSESSMENT YEAR 2005-06. THEREFORE LD. CIT DIRECTED TO ESTIMATE THE DISALLOWANCE U/S 14A ON REASONABLE BASIS. LD. DR AL SO RELIED UPON DECISION OF SUPREME COURT IN THE CASE OF MALABAR IN DUSTRIAL COMPANY LTD. (SUPRA), DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF RAJMANDIR ESTATES(P.) LTD. VS. PCIT 386 ITR 162 AS CONFIRMED BY THE SUPREME COURT IN THE CASE OF RAJMANDIR ESTATES (P.) LTD. VS. PCIT 77 TAXMANN.COM 285 (SUPREME COURT) AND DECISION OF HON 'BLE SUPREME COURT IN THE CASE OF SOUTH INDIA STEEL ROLLING MILL S VS. CIT 224 ITR 654. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IT IS NOT IN DISPUTE THAT AO DE TERMINED THE INCOME IN REGULAR ASSESSMENT U/S 143 (3) OF THE I.T. ACT AND HAS EXAMINED THE ISSUE OF DEDUCTION CLAIMED U/S 14A OF THE I.T. ACT. THE AO EXAMINED THE DETAILS MINUTELY AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE. THE ASSESSEE FILED THE COMPLETE DETAILS ON ACCOUNT OF I NCOME EARNED ON DIVIDEND AND EXPENDITURE THEREON. THE ASSESSEE PL EADED THAT NO EXPENSES HAVE BEEN INCURRED IN CONNECTION WITH THE EARNING OF EXEMPT INCOME. HOWEVER AS A MATTER OF ABUNDANT PRECAUTION , A SUM OF RS. ITA NO. 1804/DEL/2009 M/S. RANBAXY HOLDING CO. VS. DCIT PAGE 8 OF 11 17.07 CRORE HAS BEEN ADDED BACK BY ASSESSEE SUO MOT TO ON ACCOUNT OF PROPORTIONATE INTEREST COST AND ALSO ADDED OTHER EX PENDITURE. THE AO ACCEPTS THE EXPLANATION OF ASSESSEE WITH REGARD TO DISALLOWANCE OF INTEREST AND MADE TOTAL DISALLOWANCE OF RS. 17,07,3 9,306/-. THE AO NOTED THAT IT IS DIFFICULT TO ACCEPT THAT ONE CAN E ARN SUBSTANTIAL DIVIDEND INCOME WITHOUT INCURRING THE EXPENDITURE. THE ASSES SEE HAS HOWEVER PLEADED BEFORE AUTHORITIES BELOW THAT ASSESSEE IS F OLLOWING THE SAME PRACTICE IN MAKING DISALLOWANCE SUO MOTTO WHILE COM PUTING INCOME U/S 14A OF THE I.T. ACT AND IN ASSESSMENT YEAR 2004-05 THE AO IN THE ORDER U/S 143(3) (PB 36) MADE DISALLOWANCE U/S 14A IN A S UM OF RS. 2 LACS ONLY. LD. CIT ALSO WHILE EXERCISING JURISDICTION U/ S 263 OF THE I.T. ACT ACCEPTED THE CLAIM OF ASSESSEE OF DISALLOWANCE OF R S. 15.36 CRORES SUO MOTTO MADE BY ASSESSEE ON ACCOUNT OF INTEREST IN RE LATION TO EARNING DIVIDEND INCOME NOT FORMING PART OF TOTAL INCOME AS ACCEPTED BY THE AO HOLDING THAT IT WAS REASONABLY CALCULATED AND DOES NOT REQUIRE ANY INTERVENTION. THUS THE LD. CIT ACCEPTED THE SUBSTAN TIAL PORTION OF THE ASSESSMENT ORDER EVEN IN THE PROCEEDING U/S 263 OF THE I.T. ACT. THE AO AS WELL AS LD. CIT HAVE THUS ACCEPTED AN ESTIMATION MADE BY ASSESSEE FOR DISALLOWING EXPENSES U/S 14A OF THE I.T. ACT BA SED ON PAST PRACTICE ADOPTED BY THE ASSESSEE. THE ASSESSEE AT PAGE 22A O F PAPER BOOK FILED THE DETAILS OF ADMINISTRATIVE AND PERSONNEL EXPENSE S ETC. LD. COUNSEL FOR ASSESSEE SUBMITTED THAT TOTAL EXPENDITURE INCURRED BY ASSESSEE WERE RS. 47,66,616/- OUT OF WHICH THE DIRECT EXPENSES WE RE INCURRED ON THE SALARY OF SHRI C.S. JHA, SHRI RAJINDER SHARMA AND S HRI DALER SINGH ON ITA NO. 1804/DEL/2009 M/S. RANBAXY HOLDING CO. VS. DCIT PAGE 9 OF 11 WHICH ASSESSEE SUO MOTTO DISALLOWED 50% OF THE EXPE NDITURE, HOWEVER, FOR THE REST ASSESSEE HAS DISALLOWED 10% OF THE EXP ENDITURE. THE ASSESSEE ALSO EXPLAINED THAT SINCE SUBSTANTIAL INVE STMENTS HAVE BEEN MADE IN PURCHASE OF SHARES OF M/S. RANBAXY LABORATO RIES PVT. LTD. WHICH IS A GROUP CONCERN OF THE ASSESSEE IN ORDER TO CONT ROL THE PARENT COMPANY THEREFORE NO SUCH EXPENDITURE WERE REQUIRED . THE AO AFTER EXAMINING THE ISSUE IN DETAIL ACCEPTED THE EXPLANAT ION OF THE ASSESSEE THAT ASSESSEE RIGHTLY DISALLOWED ADMINISTRATIVE AND PERSONNEL EXPENSES IN A SUM OF RS. 25,24,665/-. THEREFORE THE VIEW OF THE AO IS BASED UPON THE PAST HISTORY OF THE ASSESSEE AND AS PER MATERIA L ON RECORD. IT IS ADMITTED FACT THAT RULE 8D OF THE I.T. RULE IS NOT APPLICABLE TO ASSESSMENT YEAR UNDER APPEAL. THEREFORE SO FAR THE DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE IS CONCERNED, WE FIND TH AT THERE WAS NO PRECISE FORMULA PRESCRIBED FOR PROPORTIONATE DISALL OWANCE, THEREFORE, NO DISALLOWANCE WAS CALLED FOR. THE ASSESSEE PLEADED B EFORE AO THAT ASSESSEE DID NOT INCUR ANY EXPENDITURE IN CONNECTIO N WITH THE EARNING OF THE DIVIDEND INCOME AND ASSESSEE DISALLOWED SUO MOT TO EXPENSES FOR ABUNDANT PRECAUTION. THEREFORE PROPORTIONATE DISALL OWANCE OF ADMINISTRATIVE EXPENSES [UNTIL RULE 8D CAME INTO FO RCE] SUO MOTTO MADE BY THE ASSESSEE WAS RIGHTLY ACCEPTED BY THE AO. THE VIEW OF THE AO WAS THUS SUSTAINABLE IN LAW. IF THE LD. CIT DOES NOT AG REE WITH THE VIEW OF THE AO WHICH IS AS PER LAW, THE SAME WOULD NOT GIVE RISE TO INVOKING OF JURISDICTION U/S 262 OF I.T. ACT. HON'BLE SUPREME C OURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. 243 ITR 83 HELD AS UNDE R :- ITA NO. 1804/DEL/2009 M/S. RANBAXY HOLDING CO. VS. DCIT PAGE 10 OF 11 9. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER P ASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSE QUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, FOR EXAMPLE, WHEN AN ITO ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RE SULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE IT O HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE , IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTA INABLE IN LAW. IT HAS BEEN HELD BY THIS COURT THAT WHERE A SUM NOT EARNED BY A PERSON IS ASSESSED AS INCOME IN HIS HANDS ON HIS SO OFFERING, THE ORDER PASSED BY THE ASSESSING OFFICER ACCEPTING THE SAME AS SUCH WILL BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE- RAMPYARI DEVI SARAOGI V. CIT[1968] 67 ITR 84 (SUPRE ME COURT) AND IN SMT. TARA DEVI AGGARWAL V. CIT[1973] 88 ITR 323 (SUPREME COURT). 9. HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. DLF LTD. 350 ITR 555 HELD AS UNDER :- IT : WHERE DISALLOWANCE OF EXPENDITURE FOR EXEMPTE D INCOME WAS DEBATABLE AND ORDER OF ASSESSING OFFICER COULD NOT BE HELD AS UNSUSTAINABLE, REVISIONARY POWERS CO ULD NOT BE EXERCISED. 10. HON'BLE KERALA HIGH COURT IN THE CASE OF CIT VS . CATHOLIC SYRIAN BANK LTD. 237 CTR (KER) 164 HELD AS UNDER :- CONCLUSION : ASSESSEE BANKS HAVING MADE SUBSTANTIA L INVESTMENTS IN BONDS, SECURITIES AND SHARES WHICH Y IELDED TAX FREE INCOME, DISALLOWANCE UNDER S. 14A IS TO BE MADE DES PITE THE FACT THAT THE ASSESSEE BANKS HAVE NOT MAINTAINED SEPARAT E ACCOUNTS FOR THE EXPENDITURE INCURRED TOWARDS INTEREST PAID ON FUNDS BORROWED FOR INVESTMENT IN SUCH SECURITIES, BONDS A ND SHARES AS WELL AS OVERHEADS AND ADMINISTRATIVE EXPENDITURE, M ATTER IS RESTORED TO THE AO FOR MAKING DISALLOWANCE UNDER S. 14A BY REASONABLY ESTIMATING THE INTEREST EXPENDITURE INCU RRED FOR EARNING THE TAX FREE INCOME FOR THE PERIOD PRIOR TO INSERTION OF R.8D AND THEREAFTER BY FOLLOWING THE PROVISIONS OF S. 14A (2) R/W R. 8D IN THE ABSENCE OF ANY PRECISE FORMULA FOR PROPOR TIONATE DISALLOWANCE, NO DISALLOWANCE IS CALLED FOR IN RESP ECT OF ITA NO. 1804/DEL/2009 M/S. RANBAXY HOLDING CO. VS. DCIT PAGE 11 OF 11 ADMINISTRATIVE COST ATTRIBUTABLE TO EARNING OF TAX FREE INCOME UNTIL R. 8D CAME INTO FORCE. 11. HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V S. AMIT CORPORATION 21 TAXMANN.COM 64 HELD THAT WHERE AO AF TER DETAILED VERIFICATION OF RECORD AND MAKING INQUIRY HAD FRAME D ASSESSMENT, THE CIT COULD NOT REVISE U/S 263 OF THE I.T. ACT. 12. THESE DECISIONS CLEARLY SUPPORT THE CASE OF THE ASSESSEE THAT LD. CIT WRONGLY EXERCISED JURISDICTION U/S 263 OF THE I .T. ACT. DECISIONS CITED BY LD. DR THUS WOULD NOT SUPPORT THE CASE OF THE RE VENUE. IN VIEW OF THE ABOVE DISCUSSIONS, WE ARE OF THE VIEW IT IS NOT A FIT CASE FOR INVOKING JURISDICTION U/S 263 OF THE I.T. ACT. WE, ACCORDING LY, SET ASIDE THE IMPUGNED ORDER U/S 263 OF THE I.T. ACT AND QUASH TH E SAME. RESULTANTLY THE ASSESSMENT ORDER U/S 143(3) DATED 23 RD MAY, 2007 IS RESTORED. 12. IN THE RESULT APPEAL OF ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT. SD/- SD/- (PRASHANT MAHARISHI) ( BHAVNESH SAINI ) ACCOUNTANT MEMEBR JUDICIAL MEMBER DATED: 06/06/2017 *VEENA* COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. PRINCIPAL CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR