Kohinoor Development Corporation, Pune V. Additional Commissioner of Income-tax,

ITA 1861/PUN/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9216 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 13-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Keywords: Earning of tax free income; Proportionate interest; Question of law
• Section: 143(3); 14A

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.1861/PUN/2014 / ASSESSMENT YEAR : 2009-10 KOHINOOR DEVELOPMENT CORPORATION, A-102, ICC TRADE TOWERS, S.B. ROAD, GOKHALENAGAR, PUNE 411016. PAN : AAJFK3569J. . / APPELLANT V/S ADDL.COMMISSIONER OF INCOME TAX, RANGE 3, PUNE. . / RESPONDENT / APPELLANT BY : SHRI S.N. PURANIK / RESPONDENT BY : SHRI MUKESH JHA / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF TH E ORDER OF COMMISSIONER OF INCOME TAX (A) II, PUNE DT.30.06.2014 FOR THE ASSESSMENT YEAR 2009-10. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- 2.1 ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN T HE BUSINESS OF PURCHASING AND SELLING OF PLOTS/LAND DEVELOPMENT. / DATE OF HEARING : 15.06.2017 / DATE OF PRONOUNCEMENT: 30.06.2017 2 ASSESSEE F I LED THE RETURN OF INCOME FOR A . Y . 2009 - 10 ON 1 . 10 . 2009 DECLAR I NG TOTAL INCOME OF RS . 20,64,24,050/ - THE CASE WAS SE L ECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FR AMED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 28.12.20 11 AND THE TOTAL INCOME WAS DETERMINED AT RS. 20 , 73 , 10,270/ - . AGGRIEVED BY THE ORDER OF AO, ASSESSEE CA R RIED THE MATTER BEFORE CIT(A) WHO VIDE ORDER DATED 30.06.2014 (IN APPEAL NO.PN/CIT(A)-II/AD DL.CIT R-3/346/2011-12) DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A) , A SSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS : LOWER AUTHORITIES HAVE ERRED, BOTH ON FACTS AND LA W IN DISALLOWING RS.8,86,215.00 U/S 14A OF THE INCOME TA X ACT, 1961. APPELLANT PRAYS FOR DELETION OF THE SAME. 3. AO NOTICED THAT ASSESSEE HAD EARNED INCOME OF RS 21,97 , 45,6 4 1/- WHICH WAS CLAIMED AS BEING EXEMPT FROM TAX . THE ASSESSEE WAS ASKED TO PRODUCE DETAILS OF EXPEND I TURE INCURRED FOR EARNING EXEMPT INCOME IN VIEW OF SEC.14A OF THE ACT . A SSESSEE SUBMITTED THE WORK I NG OF DISALLOWANCE OF RS.3 1, 068/ - AND SUBM I TTED THAT ASSESSEE HAD I NCURRED ONLY NET INTEREST EXPENDITURE OF RS.9,02,453/ - AND IT IS ATTRIBUTABLE TO TAXABLE INCOME AND THEREFORE NO INTEREST DISALLOWANCE IS CALLED FOR . AO NOTED THAT WHILE WORKING OUT THE DISALLOWANCE, ASSESSEE HA D ONLY CONSIDERED THE DIVIDEND INCOME FROM MUTUAL FUNDS OF RS.66,60,794/- AND HAD NOT CONSIDERED THE INCOME FROM SH ARE OF PROFIT FROM THE FIRMS IN WHICH IT WAS PARTNER. HE WAS ALSO O F THE VIEW THAT FOR THE PURPOSE OF FORMULA PRESCRIBED UNDER RULE 8D, THE GROSS INTEREST HAS TO BE CONS I DERED AND NOT THE NET INTEREST. 3 HE THEREAFTER, BY APPLY I NG THE FORMULA PRESCRIBED UNDER RULE 8D , WORKED OUT THE DISALLOWANCE U/S 14A OF THE ACT AT RS. 8,86,215/ - . AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATT ER BEFORE LD.CIT(A), WHO UPHELD THE ORDER OF AO BY HOLDING AS UNDE R : 3 .2 THE APPEL L AN T H AS R A I SED THR E E GROU N DS OF APPEAL AND I N G ROU N D NO . 1 HAS C O NT ES TED THE DI SAL L OWAN C E OF I NTEREST EXPENDITU R E CLAIMED B Y T HE APPELLA NT A M O U NT I NG TO RS. 8 , 8 6 , 21 5 / - B Y I NVOKING THE PROVIS I ONS OF SECTION 14A R . W . RU L E 8D (II) & ( II I ). D URING T H E ASSESSMENT PROCEEDINGS THE ASSESSING OFF I CE R N OTICED THAT THE ASSESSEE HAD CLA I MED EXEMPT I NCOME OF RS . 21 , 97 , 45,64 1 / - WH I C H COMPRISED OF DIVIDEND INCOME AND SHARE OF PROFIT FROM PARTNERSH I P FIRM. THE ASSESSING OFFICER SOUGHT THE EXPLANAT I ON OF THE ASSESSEE IN THIS REGARD WITH RESPECT TO T HE EXPENDITURE INCURRED FOR EARNING THE EXEMPT INCOME IN VIEW OF THE P R OVISIONS OF SEC 14A . THE ASSESSEE I N ITS REPLY FURNISHED THE WORKING OF EX PENDITURE I N C URRED FOR EARNING THE EXEMPT INCOME OF RS . 31,068/- WHEREIN ONLY THE DIVIDEND I N C OM E HAD BEEN TAKEN INTO ACCOUNT ON THE INVESTMENT IN RESPECT OF M U T UAL FUNDS O F RS . 66 , 60 , 7 94/ - AND THE I NVESTMENT MADE IN THE F I R M FROM WH I CH SHA R E OF PROFIT WAS BEING RECEIVED BY THE ASSESSEE WAS IGNORED . THE ASSESSING OFFICER, HOWEVER , HELD THE SHARE OF PROFIT WAS ALSO COVERED BY THE PROVISION OF SEC 14A AND , THEREFORE , THE SAME WAS CONS I DERED WHILE WORKING OU T THE D I SALLOWANCE U/R 8D . THE ASSESSING OFFICER ALSO FOUND THE DETAILS WITH RESPE CT TO INTEREST EXPENDITURE FURN I SHED BY THE APPELLANT TO BE NOT ACCEPTABLE WITH RESPECT TO THE NETTING OFF OF INTEREST BECAUSE OF T HE FACT THAT THE INTEREST INCOME EARNED UNDER THE HEAD OF FIXED DEPO SITS, LOAN ADVANCES COULD NOT BE SET OFF AGAINST THE INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE AND HENCE THE INTEREST EXPE NDITURE ACTUALLY CLAIMED WAS CONSIDERED FOR THE PURPOSES OF WORKING OUT THE ALLOWANCE U/R 8D. THE ASSESSING OFFICER THUS W ORKED OUT THE DISALLOWANCE U/S 14A R.W RULE 8D(II) & (III) OF RS. 4,26,621/- AND RS.4,59,594/- RESPECTIVELY MAKING A TOTAL DISALLOWA NCE OF RS.8,86,215/-. 3.3 DURING THE APPELLATE PROCEEDINGS THE LD COUNSEL OF THE APPELLA NT HAS SUBMITTED THAT THE FIRM HAS RECEIVED DIVIDEND O N MUTUAL FUND OF RS . 66,60,794/- DURING THE YEAR WHICH IS EXEMPT AND THERE IS NO EXPENDITURE DIRECTLY OR INDIRECTLY RELATING TO EXEMPT INCOME EXCEPT FOR INTEREST OF RS. 31,068/- . THE LD COUNSEL HAS CONTENDED THAT THE ASSESSEE FIRM BORROWED RS . 1 CRORE FROM PRARDHANA CONSTRUCTION CO. ON 21-2-2009 @ 9% AND OUT OF THE SAME AN AMOUNT OF RS . 20 LACS WAS INVESTED IN IDFC FUND AND RS . 50 LACS IN ICICI PRUDENTIAL FLEXI INCOME FUND FOR A PERIOD OF 17 DAYS AND PROPORTIONATE INTEREST EXPENDITURE WORKS O UT TO RS. 31,068/-- TO THE EARNING OF DIVIDEND INCOME . THE APPELLANT HAS THUS REITERATED THE SUBMISSION MADE BEFORE THE ASSE SSING OFFICER DURING THE APPELLATE PROCEEDINGS AND SUBMITTED THAT ALL THE INVESTMENTS IN THE PARTNERSHIP FIRM AND INVESTMENTS IN MUTUAL FUND ARE OUT OF OWN FUND AND INTERNAL ACCRUAL AND HAS FILED COPIES OF THE ABRIDGED COPY OF BALANCE SHEET AND PROFIT & LOSS ACCOUNT AND A SUMMAR I ZED CASH FLOW STATEMENT FOR F.Y . 2008-09 . THE LD COUNSEL HAS EXPLAINED THAT INVESTMENT IS RS. 7 , 47,30 , 069/- WHILE 4 INCREASE IN PARTNERS CAPITAL IS RS. 15,83,02,752/- AND THAT UNSECURED LOANS TO THE TUNE OF RS . 3 , 03,63,535/- HAS BEEN REPAID DURING THE YEAR AND THE FIRM HAS EARNED INTEREST OF RS . 9 , 02 , 453/- ON THE SURPLUS FUND. IT HAS ALSO BEEN STATED THAT B ORROWED FUND HAVE BEEN UTILIZED FOR THE BUSINESS AND ATTRIBUTABL E TO THE INCOME WHICH IS TAXABLE . THE APPELLANT HAS STATED THAT THE SATISFACTION OF THE ASSESSING OFFICER HAS TO BE ARRIVED AT HAVING R EGARD TO THE ACCOUNTS BEFORE MAKING THE DISALLOWANCE . THE APPELLANT RELYING UPON THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG . CO . LTD VS OCIT , 328 ITR 81 HAS CONTENDED THAT THE APPLICATION OF THE PROVISIONS OF SUB-SECTIONS (2) A ND (3) OF SEC 14A AND RULE 8D IS NOT AUTOMATIC IN EACH AND EVERY CASE . THE APPELLANT HAS POINTED OUT THAT THE ASSESSING OFFICE R HAS ERRED IN STATING THAT THE ASSESSEE HAS CLAIMED EXEMPT INCOME OF RS. 21,97 , 45,641/- AS AGAINST RS . 66,97 , 429/- ACTUALLY CLAIMED BY THE ASSESSEE. IT HAS ALSO BEEN CONTENDED THAT THE ASSES SING OFFICER ALSO , ERRED IN CONCLUDING THAT INTEREST INCOME EARNED ON ADVANCES CANNOT BE SET OFF AGAINST INTEREST PAID BY THE ASSE SSEE ON BORROWED FUNDS. THE LD. COUNSEL HAS PLEADED THAT T HE ADDITION BE RESTRICTED TO ONLY RS.31,068/-. 3 . 4 I HAVE CONSIDERED THE SUBMISS I ON MADE BY THE . APPEL L ANT AND PE R USED MATERIA L O N R ECORD . THE ONLY I SSUE CONTESTED BY THE APPELLANT RELATES TO T H E DISALLOWANCE OF RS . 8 , 86 , 215/- . THE APPELLANT A PARTNERSHIP FIRM HAS EARNED E X E M PT I NCOME IN T H E FO R M OF DIVIDEND I N COME AMOUNTI N G TO RS . 66 , 60 , 794 /- AND RS . 36 , 635/- BY WAY OF SHA R E OF PR OF I T FROM R I SING VE N TU R E . THE APPELLANT HAS NO T C L A I MED ANY EXPEN D ITU R E I N EARNING THE SAID IN COME I N ITS ACCOUNT . THE COPY O F T H E BALANCE SH E ET AND P R OFI T & L OSS ACCO UNT ALON G WITH THE CASH FLOW STATEME NT F I LE D BY TH E APP E L LAN T CLE A RLY I N DI CATES THE I NVESTMENT IN T HE FIRM GO I NG UP FRO M RS. 5 . 42 CRORES T O RS. 12. 84 CRO R ES AND I N MUTUAL FUND OF RS. 3 LACS TO RS . 8 .2 3 LA C S. F U RTHE R, T H E A PPELLA N T ' S CONTE N TION THAT THE AFO R ESAID INVESTMEN T H AVING BEEN MA D E OUT O F OWN FUNDS AN D I NTERNA L ACCOUNTS ARE APPA R ENTLY NO T P R OVE D IN THE SENSE THAT THOUGH THE CAPI TAL HAS IN CREASED AND UNSECURED LOANS REPA ID IT IS SE E N THA T THE S T O CK OF LA ND HA S A L SO SUBSTANTIAL L Y INCREASED FROM RS . 1 9 .5 7 CRORES TO R S . 25 . 60 CRORES AND LOANS & ADVANCE S G ONE FROM R S . 1 .77 C R ORE S TO RS . 8.23 C R ORES . H E NC E T HE C O N TE N TION S RAISED BY THE APPELLANT ARE APPARENTLY NOT ACC E PTA BL E IN V IEW OF T HE ABO V E FACT S . 3 .5 THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GOD REJ & BOYCE, 328 ITR 81 ( BOM ) AUTHORIZES THE ASSESSING OFFICER TO RE- COMPUTE THE DISALLOWA N CE U/S 14A AS PER PRESCRIBED METHOD U/R 8D IN CASE HE IS NOT SAT I S FI ED WI T H THE CLAIM OF THE ASSESSEE HAVING REGA R D TO ITS ACCOUNTS . THE SAID PR I NC I PLE H A S ALSO BEEN UPHELD BY I T A T MADRAS I N THE CASE OF SIVA INDUSTRIES HOLDING L TD VS ACIT I N I TS O R D ER DATE D 2 0 - 05 - 2011 , ITA NO 2148/MDS/2010 AND ALSO BY T H E DE L HI T R IBUNAL I N D C IT VS JINDAL PHOTO L TD ITA NO.814/DEL/2011 DATED 23-09 - 2011 . THE FACT ON RECORD C LEARLY INDICATE THE APPELLANT TO BE IN RECEIPT OF EXEMP T I NCOME IN THE FO RM OF D I V I DEND OF RS . 66 , 60 , 794/- AND SHARE OF PROFIT FROM THE INVESTMENTS MADE BY IT DURING THE YEA R UNDER CONSIDERATION AND DURING THE EARLIER PERIOD. THUS , PRIMA FACIE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER HAS B E EN RI GHT L Y DONE U/S 14A R . W . RULE 8D(2)( III ) . THERE CANNOT BE ANY INCOME WITHOUT ANY KIND OF EXPENSES OR LABOUR HOWEVER SMALL IT CAN BE AND THEREFORE , THE ASSESSING OFFICER WAS JUSTIFIED IN CALCULATING THE DISALLOWAN CES ON THE 5 EXEMPTED INCOME. THE DIVIDEND INCOME MAY NOT INVOL VE SEPARATE / DIRECT EXPENSES BUT INDIRECT EXPENSES ARE THERE I N PURCHASING THOSE MUTUAL FUNDS AND OTHER ADMINISTRATIVE EXPENSE S IN THE EARNING OF INCOME. THE APPELLANT HAS UNDISPUTEDLY EARNED EXEMPT INCOME HENCE THE SEC 1 4A IS APPLICABLE WHERE I T PROVIDES THAT NO DEDUCTION BY THE ASSESSEE IN R ESPE C T OF EXPEND I TURE INCURRE D BY THE ASSESSEE IN RELATION TO EXEMPTED INCOM E WILL B E ALLOWED . THE R E ARE EXPENSE S INCURRED FOR EARNING THE EXEMPT INCOME A S WE LL AS EARNI N G OF OTHE R INCO M ES. 3.5.1 THE SECTION 14A DOES NOT TAKE CARE OF ONLY DI RECT EXPENSES BUT INDIRECT EXPENSES ARE ALSO TO BE ALLOCATED TO THE E XE MPTED INCOME . I N THE CASE OF ACIT VS CHAMPION COMMERCIAL CO . LT D (2012 ) 1 3 9 ITD 108 (KOL ) , IT WAS HELD THAT A DISALLOWANCE U/S 14A CAN ALSO BE MADE IN A CASE IN WHICH THE ASSESSEE CL AIMS NO EXPENDITURE HAS BEEN INCURRED FOR EARNING TAX EXEMP T INCOME . THEREFORE , WHEN THE ASSESSEE DOES NOT OFFER ANY D ISALLOWANCE U/S 14A O N HI S O WN , T H E PROVISIONS OF SEC 14A R . W. RUL E 8D CAN B E IN VO K ED WITHOU T THERE BEING A NY NEED TO EXP R ESS SATISFACTION A N D IN C ORRECTN E S S OF CLAIM . THE EARN I NG O F DIVIDEND INCOME HAS EMANATED FROM THE INVESTMENTS MADE BY THE APPE L LAN T . THE SATISFACTION IN ANY CASE AS TO THE NON - DISALLOWANCE OF EXPENSES AGAINST EXEMPT INCOME IS IN ANY CASE DISCERNING FRO M THE OBSERVATION OF THE ASSESSING OFFICER . THUS THE ISSUE IN APPEAL LIES IN A VERY NARROW COMPASS OF UNDISPUTED MATERIAL FAC TS AND IN PRINCIPLE THE DISALLOWANCE U/S 14A R . W . RULE 8D GETS ATTRACTED AND THE SAME HAS BEEN RIGHTLY WORKED OUT BY THE ASS ESSEE AND ALSO CONCURRED BY THE ASSESS I NG OFFICER WHILE WORKING OUT THE DISALLOWANCE. SO FAR AS THE CONTENTION OF THE APPELLANT I N THE PRESENT CASE REGARDING THE ASSESSING OFFICER HAVING NOT RECORDED THE SATISFACTION BEFORE RESORTI NG TO DISALLOWANCE IS CONCERNED , IT IS THE I NITIAL ONUS ON THE ASSESSEE TO EXHIBIT WITH REFERENCE TO ITS ACCOUNTS, THAT IT HAS NOT INCURRED ANY EXPENDITURE AS BEING C L AIMED BY I T WITH THE ASSESSEE RATHER HAVING MADE NO SUO MOTO DISALLOWANCE U/S 14A INSPIT E OF HAVING INVESTED A SUBSTANTIAL SUM IN INVESTMENTS YIELDING TAX-FREE INCOME . IT IS ON L Y WHEN THE ASSESSEE DOES SO THAT IT BECOMES INCUMBENT ON THE ASSESSING OFFICER TO, ON AN EXAMIN ATION OF THE ASSESSEE'S CLAIM TO EITHER ACCEPT THE SAME OR ' STATE HIS REASONS FOR HIS DISSATISFACTION THEREWITH AGAINST WITH REFERENC E TO THE. ACCOUNTS . APART FROM BEING THE REQUIREMENT OF LAW IT IS ONLY IN SUCH CASE THAT THE VALIDITY OF THE DISSATISFACTION OF THE ASSESSING OFFICER, ON AN APPEAL BY THE ASSESSEE COULD BE EXAM INED AND REVIEWED BY AN APPELLATE AUTHORITY. 3.6 IN VIEW OF THE ABOVE FACTS , THE DISALLOWANCE MADE BY THE ASSESS I NG O F FICER IS LIABLE TO BE UPHELD A N D G R O U ND OF APPEAL NO . 1 RAISED BY THE APPE LL ANT I S DISMISSED. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN AP PEAL BEFORE US . 6 4. BEFORE US, LD AR REITERATED THE SUBMISS I ONS MADE BEFORE LOWER AUTHORITIES AND FURTHER POINTING TO THE COPY OF THE BALANCE SHEET PLACED AT PAGE 23 OF THE PAPER BOOK SUBMITTED TH AT AGAINST THE INTEREST FREE FUNDS IN THE FORM OF PARTNERS CAPITAL ACC OUNT OF RS.33 . 39 CRORES, THE INVESTMENTS WERE TO THE EXTENT OF RS. 1 2 . 92 CRORES AND S I NCE THE CAPITA L IS MORE THAN INVESTMENTS, IT IS TO BE PRESUMED THAT NO INTEREST BEARING FUNDS HAVE BEEN UTILIZ ED FOR INVESTMENT AND FOR THIS PROPOSITION HE RELIED ON THE DECISIO N OF HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD VS. DCIT REPORTED IN 366 ITR 505 (BOM). HIS SECOND ARGUMENT WAS THAT EVEN IF THE DISALLOWANCE OF EXPENDITURE IS REQUIRED TO BE MADE, THAN ONLY THE NET INTEREST (RS.9,83,896/-) AND NOT THE GROSS INTEREST IS TO BE CONS I DERED. LD.D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF LOWER AUTHORIT I ES . 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD . THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO DISALLOWANCE U/S 14A R/W RULE 8D OF THE INCOME TAX RU LES. IT IS AN UNDISPUTED FACT THE PROVISIONS OF RULE 8D ARE APPLICAB LE TO THE ASSESSMENT YEAR UNDER CONSIDERATION IN VIEW OF THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG CO., LTD., VS. DCIT REPORTED IN (2016) 383 ITR 529 (BOM) . BEFORE US , IT IS ASSESSEE'S CONTENTION THAT DISALLOWANCE OF INTEREST UNDER RULE 8D(II) IS TO BE WORKED OUT ON THE BASIS OF NET INTEREST (RS.9,83,896/-) AS AGAINST THE STAND OF THE REVENUE OF TH E DISALLOWANCE TO BE WORKED OUT ON THE BASIS OF GROSS INTER EST PAYMENT . WE FIND THAT IN THE CASE OF CIT VS. JUBILIANT 7 ENTERPRISES PVT. LTD (ITA 1512 OF 2014 ORDER DATED 28.0 2.2017) , THE DIVISION BENCH OF THE BOMBAY HIGH COURT CONFIRMED THAT THE DISA L LOWANCE OF INTEREST UNDER SECTION 14A OF THE INCOME TAX ACT SHOULD BE MADE WITH REFERENCE TO NET INTEREST. THE RELEVA NT QUESTION AND HON'BLE HIGH COURT'S OBSERVATION ARE AS UNDER : 2. THIS APPEAL RAISES THE FOLLOWING QUESTIONS OF LA W FOR OUR CONSIDERATION : '(I) WHETHER ON THE FACTS AND I N THE CIRCUMSTANCES OF THE CASE AND I N LAW, THE T RIBUNAL WAS JUSTIFIED IN HOLDING THAT THE DISALLOWA NCE MADE UNDER SECTION 14A READ WITH RULE 8D ON THE BAS IS OF THE NETTING OF INTEREST RELYING UPON THE DECISION OF IN PARESH K . SHAH (ITA NO . 8214/MUM/2011) AND M/S . TRADE APARTMENTS LTD . ? 3. REGARDING QUESTION (I) : (A) THE IMPUGNED ORDER O F THE T RIBUNAL DISMISSED THE REVENUE ' S APPEAL HO L DING THAT THE DISALLOWANCE OF I NTEREST UNDER SECTION 1 4A OF THE ACT SHOULD BE MADE W I TH REFERENCE TO NET INTEREST LOAN. THIS WAS BY FOLLOWI NG THE DECISION OF ITS COORDINATE BENCH AT MUMBA I IN CASE OF PARESH K . SHAH (ITA NO.82 1 4/MUM/2011) AND THE DECISION OF I TS CALCUTTA BENCH IN TRADE APARTMENTS LTD . (ITA NO . 1277/KOL/2011) . MR . KOTANGALE , THE LEARNED COUNSEL APPEARING FOR THE REVENUE IS UN ABLE TO POINT OUT WHETHER THE DECISION OF THE TRIBUNAL IN PARESH K . SHAH (SUPRA) HAS BEEN CHALLENGED IN APPEAL . THIS IS IN ' VI E W OF ABSENCE OF ANY INSTRUCTIONS FROM THE OFFICERS OF THE REVENUE . IN THE ABOVE VIEW, ONE HAS TO PROCEED ON THE BASIS THAT THE DECISION O F THE MUMBAI BENCH OF THE TRIBUNAL IN PARESH K. SHAH (SUPRA) HAS BEEN ACCEPT E D BY THE REVENUE . IN ANY CASE, NO DISTINGUISHING FEATURES I N FACTS OR LAW HAS BEEN POINTED TO US FROM THOSE IN THE CASE OF PARESH K. SHAH (SUPRA) WHICH WOULD JUSTIFY THE DISA LLOWANCE ON THE GROSS INTEREST PAID AND NOT ON NET INTEREST. (B) IN THE ABOVE VIEW, QUESTION NO . (I) AS PROPOSED DOES NOT G I VE RISE TO ANY SUBSTANTIAL QUESTION OF LAW . THUS NOT ENTERTAINED . 6. BEFORE US, REVENUE HAS NOT PLACED ANY C ONTRARY BINDING DECISION I N ITS SUPPORT . IN VIEW OF THESE FACTS, AND FOLLOWING THE AFORESAID DECISION OF HON'BLE BOMBAY HIGH COURT BEING THE JURISDICTIONAL HIGH COURT, WE ARE OF THE VIEW THAT DISALLOWAN CE OF INTEREST UNDER RULE 8D(II) HAS TO BE WORKED OUT ON THE BA SIS OF NET I NTEREST AND WE THEREFORE DIRECT SO. AS FAR AS DISALLOWANCE OF ADMINISTRATIVE E XPENSES UNDER RULE 8D(III) IS CONCERNED, ASSESSEE 8 HAS NEITHER DEMONSTRATED OF IT HAVING NOT INCURRED ANY EXPENDITURE FOR EARNING OF EXEMPT INCOME NOR HAS PLACED A NY DECISION I N I TS SUPPORT . WE THEREFORE UPHOLD THE ACTION OF AO TO THE EXTENT OF DISALLOWANCE OF EXPENSES UNDER RULE 8D(II I ) . THUS THE GROUND OF ASSESSEE IS PARTLY ALLOWED. 7. IN THE RESULT, THE APPEA L OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 30 TH DAY OF JUNE, 2017. COMM SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; ! DATED : 30 TH JUNE, 2017. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5. 6. CIT(A)-2, PUNE. CIT-2, PUNE. #$% &&'(,* '(, / DR, ITAT, A PUNE; %+,-/ GUARD FILE. / BY ORDER, // //// // TRUE COP // /// TRUE // //COPY // TRUE COPY // . /012 / ASSISTANT REGISTRAR, * '( , / ITAT, PUNE.