Shiva Specific Family Trust, Ahmedabad V. The Dy.CIT.,Circle-10, Ahmedabad

ITA 1976/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6752 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 22-03-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 17-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Capital asset; Opportunity of being heard; Maximum Marginal Rate; Earning of tax free income; Source of fund; Retrospective amendment; Cost of acquisition
• Section: 244A; 234B; 14A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : A BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HON'BL E SHRI A.N.PAHUJA, A.M. ) I.T.A. NO. 1752/AHD./2009 : ASSESSMENT YEAR : 2004-2005 JETHIBEN K. PATEL DISCRETIONARY TRUST, AHMEDABA D -VS-D.C.I.T., CIRCLE-10, AHMEDABAD (PAN : AAATJ 0260F) (APPELLANT) (RESPONDENT) I.T.A. NO. 1753/AHD./2009 : ASSESSMENT YEAR : 2004-2005 KISAN DISCRETIONARY FAMILY TRUST, AHMEDABAD -V S- D.C.I.T., CIRCLE-10, AHMEDABAD (PAN : AAATK 2653D) (APPELLANT) (RESPONDENT) I.T.A. NO. 1754/AHD./2009 : ASSESSMENT YEAR : 2005-2006 SHIVA SPECIFIC FAMILY TRUST, AHMEDABAD -VS- THE D.C.I.T., CIRCLE-10, AHMEDABAD (PAN : AANHS 5646D) (APPELLANT) (RESPONDENT) I.T.A. NO. 1755/AHD./2009 : ASSESSMENT YEAR : 2005-2006 HARSIDH SPECIFIC FAMILY TRUST, AHMEDABAD -VS - THE D.C.I.T., CIRCLE-10, AHMEDABAD (PAN : AAATH 1941D) (APPELLANT) (RESPONDENT) I.T.A. NO. 1756/AHD./2009 : ASSESSMENT YEAR : 2004-2005 SHANTABEN KARSANBHAI PATEL, AHMEDABAD -VS- THE D.C.I.T., CIRCLE-10, AHMEDABAD (PAN : AGGPP 2908J) (APPELLANT) (RESPONDENT) I.T.A. NO. 1757/AHD./2009 : ASSESSMENT YEAR : 2004-2005 KARSANBHAI KHODIDAS PATEL HUF, AHMEDABAD-VS- D .C.I.T., CIRCLE-10, AHMEDABAD (PAN : AAAHP 7025Q) (APPELLANT) (RESPONDENT) I.T.A. NO. 1758/AHD./2009 : ASSESSMENT YEAR : 2005-2006 KARSANBHAI KHODIDAS PATEL HUF,AHMEDABAD -VS- D.C.I.T., CIRCLE-10, AHMEDABAD (PAN : AAAHP 7025Q) (APPELLANT) (RESPONDENT) 2 ITA NOS.1752 TO 1758 & 1976-AH D-2009 I.T.A. NO. 1976/AHD./2009 : ASSESSMENT YEAR : 2004-2005 SHIVA SPECIFIC FAMILY TRUST,AHMEDABAD -VS- D.C.I.T., CIRCLE-10, AHMEDABAD (PAN : AAATJ 0260F) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.N.SOPARKAR, A. R. RESPONDENT BY : SHRI R.K.DHANESTA, D.R O R D E R PER BENCH : THESE APPEALS FILED BY DIFFERENT ASSESSEES ARE AGA INST THE SEPARATE ORDERS OF VARIOUS DATES PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)-XVI, AHMEDABAD FOR THE ASSESSMENT YEARS 2004-05 AND 2005-2006, AS THE CASE MAY BE IN RESPECT OF DIFFERENT APPEALS. AS ALL THESE APPEALS WERE HEARD ON THE SAME DAY AND AR GUED BY THE COMMON REPRESENTATIVE, THEREFORE, THESE ARE DECIDED BY THIS COMMON ORDER F OR THE SAKE OF CONVENIENCE. 2. VARIOUS GROUNDS RAISED IN ITA NO. 1752/AHD./2009 FOR THE ASSESSMENT YEAR 2004-05 BY THE ASSESSEE JETHIBEN K. PATEL DISCRETIONARY TRUST ARE AS UNDER: 1. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE A PPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN POINTS OF LAW AND FAC TS. 2. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELL ANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE ADDITI ON ON CERTAIN LONG TERM CAPITAL ASSETS FOR RS.7,19,407. 3. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING DISALLOWAN CE OF ACCOUNTING CHARGES RS.10,00,000. 4. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN HOLDING THAT CHARGING OF INTEREST U/S.234B IS CONSEQUENTIAL. 2.1 VARIOUS GROUNDS RAISED IN ITA NO. 1753/AHD./2009 FOR THE ASSESSMENT YEAR 2004-05 BY THE ASSESSEE KISAN DISCRETIONARY FAMILY TRUST AR E AS UNDER: 1. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE A PPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN POINTS OF LAW AND FAC TS. 3 ITA NOS.1752 TO 1758 & 1976-AH D-2009 2. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELL ANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING DISALLOWAN CE OF RS.5,00,000 OUT OF CONSULTATION EXPENSES AND ACCOUNTING CHARGES RS.5 ,25,000.. 3. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING DISALLOWAN CE OF BANK COMMISSION EXPENSES RS.31,426. 4. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN HOLDING THAT CHARGING OF INTEREST U/S.234C IS CONSEQUENTIAL. 2.2 VARIOUS GROUNDS RAISED IN ITA NO. 1754/AHD./2009 FOR THE ASSESSMENT YEAR 2005-06 BY THE ASSESSEE SHIVA SPECIFIC FAMILY TRUST ARE AS UNDER : 1. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE A PPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN POINTS OF LAW AND FAC TS. 2. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELL ANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING DISALLOWAN CE OF INTEREST EXPENSES FOR RS.3,57,848. 3. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING DISALLOWAN CE OF ACCOUNTING AND RELATED CHARGES RS.2,50,000 AND CONSULTANT FEES R S.50,000. 4. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN HOLDING THAT CHARGING OF INTEREST U/S.234B IS CONSEQUENTIAL. 5. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN HOLDING THAT CHARGING OF INTEREST U/S.234C IS CONSEQUENTIAL 2.3 VARIOUS GROUNDS RAISED IN ITA NO. 1755/AHD./2009 FOR THE ASSESSMENT YEAR 2005-06 BY THE ASSESSEE HARSIDH SPECIFIC FAMILY TRUST ARE A S UNDER: 1. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE A PPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN POINTS OF LAW AND FAC TS. 2. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELL ANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING DISALLOWAN CE OF RS.2,90,000 OUT OF CONSULTATION EXPENSES, RENT EXPENSES RS.4,000 AND ACCOUNTING CHARGES RS.10,00,000. 4 ITA NOS.1752 TO 1758 & 1976-AH D-2009 3. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN HOLDING THAT CHARGING OF INTEREST U/S.234B IS CONSEQUENTIAL. 4. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN HOLDING THAT CHARGING OF INTEREST U/S.234D IS CONSEQUENTIAL. 5. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE A PPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN HOLDING THAT WITHDRAW ING INTEREST U/S.244A OF INCOME-TAX ACT IS CONSEQUENTIAL. 2.4 VARIOUS GROUNDS RAISED IN ITA NO. 1756/AHD./2009 FOR THE ASSESSMENT YEAR 2004-05 BY THE ASSESSEE SHANTABEN KARSANBHAI PATEL ARE AS UNDER: 1. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE A PPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN POINTS OF LAW AND FAC TS. 2. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELL ANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING DISALLOWAN CE OF ACCOUNTING CHARGES RS.4,00,000. 3. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN HOLDING THAT CHARGING OF INTEREST U/S.234B IS CONSEQUENTIAL. 4. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN HOLDING THAT CHARGING OF INTEREST U/S.234D IS CONSEQUENTIAL. 5. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE A PPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN HOLDING THAT WITHDRAW ING INTEREST U/S.244A IS CONSEQUENTIAL. 2.5 VARIOUS GROUNDS RAISED IN ITA NO. 1757/AHD./2009 FOR THE ASSESSMENT YEAR 2004-05 BY THE ASSESSEE KARSANBHAI KHODIDAS PATEL HUF ARE A S UNDER: 1. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE A PPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN POINTS OF LAW AND FAC TS. 2. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELL ANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING DISALLOWAN CE OF ACCOUNTING CHARGES RS.4,00,000. 5 ITA NOS.1752 TO 1758 & 1976-AH D-2009 3. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN HOLDING THAT CHARGING OF INTEREST U/S.234B IS CONSEQUENTIAL. 4. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN HOLDING THAT CHARGING OF INTEREST U/S.234D IS CONSEQUENTIAL. 2.6 VARIOUS GROUNDS RAISED IN ITA NO. 1758/AHD./2009 FOR THE ASSESSMENT YEAR 2005-06 BY THE ASSESSEE KARSANBHAI KHODIDAS PATEL HUF ARE A S UNDER: 1. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE A PPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN POINTS OF LAW AND FAC TS. 2. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELL ANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING DISALLOWAN CE OF ACCOUNTING CHARGES RS.3,00,000. 3. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN HOLDING THAT CHARGING OF INTEREST U/S.234B IS CONSEQUENTIAL. 4. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN HOLDING THAT CHARGING OF INTEREST U/S.234D IS CONSEQUENTIAL. 2.7 VARIOUS GROUNDS RAISED IN ITA NO. 1976/AHD./2009 FOR THE ASSESSMENT YEAR 2004-05 BY THE ASSESSEE SHIVA SPECIFIC FAMILY TRUST ARE AS UNDER: 1. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE A PPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN POINTS OF LAW AND FAC TS. 2. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELL ANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING DISALLOWAN CE OF INTEREST EXPENSES RS.25,37,280. 3. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING DISALLOWAN CE OF RS.2,50,000 OUT OF ACCOUNTING CHARGES AND CONSULTATION FEES RS.1,00, 000. 4. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN HOLDING THAT NOT ISSU ING REFUND OF RS.5,69,000 IS CONSEQUENTIAL. 6 ITA NOS.1752 TO 1758 & 1976-AH D-2009 3. GROUND NO.1 OF ALL THE APPEALS ARE GENERAL IN NA TURE, THEREFORE, NEEDS NO ADJUDICATION. 4. THE FACTS RELATING TO CONTROVERSY INVOLVED IN GR OUND NO. 2 IN THE CASE OF JETHIBEN K. PATEL DISCRETIONARY TRUST IN ITA NO.1752/A/2009 FOR THE ASSESSMENT YEAR 2004-05 ARE THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER MADE AD DITION IN RESPECT OF LONG TERM CAPITAL GAIN FOR RS.7,19,407/-. THE ASSESSEE CALCULATED LON G TERM CAPITAL LOSS FOR RS.29,19,871/- IN RESPECT OF TEN SECURITIES AFTER INDEXING THE COST O F ACQUISITION AS PER ANNEXURE E TO WRITTEN SUBMISSION DATED 28.01.2009. DURING THE YEAR, THE A SSESSEE HAS INCURRED LONG TERM CAPITAL LOSS AS WELL AS LONG TERM CAPITAL GAIN ON THE TRANS FER OF CERTAIN SECURITIES. WHEREVER THERE WAS A GAIN, THE ASSESSEE DID NOT OPT FOR INDEXATION . HOWEVER, WHERE THERE WAS A LOSS, THE ASSESSEE CHOSE TO CLAIM INDEXATION IN RESPECT OF TH AT PARTICULAR SCRIPT. THE LONG TERM CAPITAL LOSS WAS THEN SET OFF AGAINST THE LONG TERM CAPITAL GAIN. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE CANNOT FOLLOW DIFFERENT YARD STICKS FOR DIFFERENT TYPES OF LONG TERM CAPITAL GAIN/LOSS. THE DIFFERENCE BETWEEN INDEXATIO N COST OF ACQUISITION RS.48,15,084/- AND COST OF ACQUISITION RS.40,95,677/- RESULTING INTO D IFFERENCE OF RS.7,19,470/- WHICH WAS ADDED BY THE ASSESSING OFFICER IN LONG TERM CAPITAL GAIN. 5. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS), THE ASSESSEE CONTENDED THAT CONTENTION OF THE ASSESSING OFFICER IS UNJUSTIFIED, INCORRECT AND ILLEGAL. IT WAS CLAIMED THAT IT IS THE CHOICE AND OPTION OF THE ASS ESSEE WHETHER TO CALCULATE LONG TERM CAPITAL GAIN/LOSS WITH INDEXATION OR WITHOUT INDEXATION AND PAY TAX ACCORDINGLY. THE LONG TERM CAPITAL GAIN SHOULD BE WORKED OUT, AS PER THE PROVI SIONS OF SECTION 45 OF THE I.T.ACT AND THE MECHANISM OF INDEXATION IS GIVEN UNDER SECTION 48 O F THE I.T. ACT. THE CAPITAL GAIN IS TO BE CALCULATED FOR EACH OF THE LONG TERM CAPITAL ASSET WHICH IS DEFINED UNDER SECTION 2(29A) OF THE I.T. ACT, 1961. HENCE, THE CALCULATION MADE BY THE ASSESSEE IN THE RETURN OF INCOME, WHICH IS IN ACCORDANCE WITH THE PROVISIONS OF INCOM E TAX ACT SHOULD HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER. 5.1 AFTER CONSIDERING THE AFORESAID SUBMISSIONS, IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) UPHELD THE ACTI ON OF THE ASSESSING OFFICER FOR THE DETAILED REASONS GIVEN IN PARA 7.1, WHICH READS AS UNDER: 7 ITA NOS.1752 TO 1758 & 1976-AH D-2009 7.1 I HAVE CONSIDERED THE SUBMISSIONS OF THE APP ELLANT AND PERUSED THE ASSESSMENT ORDER. TO CLAIM THE BENEFIT OF INDEXATION OR NOT I S THE CHOICE AND OPTION AT THE APPELLANT. IF IT IS BENEFICIAL TO TAKE THE BENEFIT OF INDEXATION, THEN THE APPELLANT WOULD OPT FOR THIS OPTION FOR INDEXATION OTHERWISE NOT. IN THIS CASE THE APPELLANT HAS OPTED FOR THE BENEFIT OF INDEXATION WHEREVER THERE WAS L ONG TERM CAPITAL LOSS AND WHEREVER, THERE WAS LONG TERM CAPITAL GAIN, THE APPELLANT DI D NOT OPT FOR THE BENEFIT OF INDEXATION. THE LONG TERM CAPITAL LOSS WAS THEN SE T OFF AGAINST THE LONG TERM CAPITAL GAIN. BY NOT FOLLOWING UNIFORM METHOD OF INDEXATIO N, THE LONG TERM CAPITAL GAIN WAS REDUCED BY THE APPELLANT TO THE EXTENT AT RS. 7,19 ,407/-. IN MY OPINION, THOUGH THERE IS AN OPTION AVAILABLE WITH THE APPELLANT TO TAKE THE BENEFIT OF INDEXATION OR NOT, UNIFORM METHOD OF INDEXATION HAS TO BE FOLLOWED BY HIM IN RESPECT OF ALL THE SECURITIES. PROVISO TO SECTION 112 (WHICH PRESCRIBES THE TAX O N LONG TERM CAPITAL GAIN) SAYS THAT - ' PROVIDED THAT WHEREVER THE TAX PAYABLE IN RESPE CT OF ANY INCOME ARISING FROM THE TRANSFER OF A LONG TERM CAPITAL ASSET, B EING LISTED SECURITIES OR UNIT OR ZERO COUPON BOND, EXCEEDS TEN PERCENT OF THE AMOU NT OF CAPITAL GAINS BEFORE GIVING EFFECT TO THE PROVISIONS OF SECOND PROVISO TO SECTION 46. THEN SUCH EXCESS SHALL BE IGNORED FOR THE PURPOSE OF COMPUTING THE TAX PAYABLE BY THE ASSESSEE'. THE OPTION OF INDEXATION IS GIVEN TO THE APPELLANT EITHER TO TAKE BENEFIT OF INDEXATION OR NOT. BUT THE OPTION IS NOT GIVEN TO TAKE BENEFI T OF INDEXATION IN RESPECT OF ONE SHARE AND NO BENEFIT OF INDEXATION IN RESPECT OF OTHER S HARE. THE APPELLANT HAS TO EXERCISE THE OPTION IN RESPECT OF ALL THE SECURITIES & NOT IN RESPECT OF SELECTIVE SECURITIES AS DONE BY THE APPELLANT. I THEREFORE AGREE WITH THE VIEW TAKEN BY THE ASSE SSING OFFICER THAT THE APPELLANT CANNOT SELECTIVELY TAKE THE BENEFIT OF INDEXATION IN RESPECT OF THOSE SECURITIES IN WHICH THE APPELLANT HAD INCURRED LONG TERM CAPITAL LOSS AND NO INDEXATION WHERE THE APPELLANT HAS SHOWN LONG TERM CAPITAL GAIN. THE AD DITION OF RS.7,19,407/- MADE ON THIS ACCOUNT IS THEREFORE CONFIRMED. 6. AGGRIEVED WITH THE ABOVE, THE ASSESSEE IS IN APP EAL BEFORE THE TRIBUNAL. 7. AT THE TIME OF HEARING BEFORE US, SHRI S.N.SOPAR KAR, A.R. APPEARED AND CONTENDED THAT CONTROVERSY INVOLVED IN THIS GROUND OF APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT, MUMBAI BENCH B IN THE CASE OF MOHANLAL N. SHAH (HUF) VS- ACIT REPORTED IN [2008] 26 SOT 380 (MUM) WHEREIN IT WAS HELD THAT AS PER SECTION 48, OPTION IS WITH THE ASSESSEE TO OR NOT T O AVAIL OF BENEFIT OF INDEXATION FOR COMPUTATION OF CAPITAL GAINS ON TRANSFER OF LONG-TE RM CAPITAL ASSET. IN THIS DECISION, REFERENCE WAS ALSO MADE TO PROVISIONS CONTAINED IN SECTION 11 2 OF THE INCOME-TAX ACT, 1961 AND HELD 8 ITA NOS.1752 TO 1758 & 1976-AH D-2009 THAT IF AN ASSESSEE COMPUTES LONG-TERM CAPITAL GAIN S FROM THE SALE OF SHARES BY AVAILING OF BENEFIT OF INDEXATION, IT HAS TO OFFER SAME TO TAX AT FLAT RATE OF 20% AND IF AN ASSESSEE DOES NOT AVAIL OF BENEFIT OF INDEXATION THEN IT HAS TO OFFER CAPITAL GAIN TO TAX @10%. THE LD. COUNSEL OF THE ASSESSEE FURTHER POINTED OUT THAT CAPITAL GA IN COMPUTED BY THE ASSESSEE IS IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTION 112 OF THE I.T. ACT, 1961. THEREFORE, THE ASSESSING OFFICER BE DIRECTED TO ACCEPT THE CAPITAL GAINS AS DECLARED. 8. ON THE OTHER HAND, SHRI R. K. DHANESTA, LD. D.R. , APPEARING FOR THE REVENUE, VEHEMENTLY SUPPORTED THE ORDERS OF BOTH THE DEPARTM ENTAL AUTHORITIES BELOW. 9. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DECISION OF ITAT M UMBAI BENCH B IN THE CASE OF MOHANLAL N. SHAH (HUF) ( SUPRA ), RELIED ON BY THE COUNSEL OF THE ASSESSEE. IN TH IS DECISION, ITAT MUMBAI B BENCH, HAS FOLLOWED THE DECISION OF THE HON'BLE DELHI BENCH OF ITAT IN THE CASE OF DEVINDER PRAKASH KALRA VS- ACIT [2006] 151 TAXMAN 17 (MAG.) WHEREIN IT WAS HELD THAT SECTION 112 IS NOT ONLY A BENEFICIAL PROV ISION BUT IS ALSO MANDATORY PROVISION AND IF SEVERAL TRANSACTIONS HAVE TAKEN PLACE BY WAY OF SAL E OF SHARES, THE ASSESSEE CAN AVAIL OF THE BENEFIT OF INDEXATION IN A FEW TRANSACTIONS AND AVA IL OF 10% TAX RATE IN THE REMAINING TRANSACTIONS. WE ARE, THEREFORE, FOLLOWING THE DECI SIONS OF ITAT MUMBAI B BENCH AND DELHI BENCH OF ITAT ( SUPRA ), SET ASIDE THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO VERIFY THE WORKING OF CAPITAL GAINS SUBMITTED BY THE ASSESSEE. IN CASE, IT IS IN ACCORDANCE WITH THE RATIO OF DECISION OF THE AFORESAID TWO TRIBUNAL DECISIONS, IN THAT EVENT, TH E ASSESSING OFFICER IS DIRECTED TO ACCEPT THE CAPITAL GAINS, AS DECLARED BY THE ASSESSEE. RESULTA NTLY, THIS GROUND OF APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 10. GROUND NO.3 IN ITA NOS. 1752/A/09, 1754/A/09 AN D 1976/A/09 AND GROUND NO.2 IN ITA NOS.1753/A/09, 1755/A/09, 1756/A/09, 1757/A/09 AND 1758/A/09 ARE AGAINST CONFIRMING DISALLOWANCE OF ACCOUNTING CHARGES/CONSU LTATION FEES/RENT EXPENSES, ETC. THE RELEVANT GROUND NUMBER APPEAL NUMBER AND AMOUNT O F DISALLOWANCE ARE GIVEN AS UNDER: 9 ITA NOS.1752 TO 1758 & 1976-AH D-2009 ITA NO. GROUND NO . AMOUNT(RS.) REMARKS 1752/A/09 3 10,00,000/- ACCOUNTING CHARGES 1753/A/09 2 5,00,000/- CONSULTATION CHARGES 5,25,000/- ACCOUNTING CHARGES 1754/A/09 3 2,50,000/- ACCOUNTING AND RELATED CH ARGES 50,000/- CONSULTATION CHARGES 1755/A/09 2 2,90,000/- CONSULTATION CHARGES 4,000/- RENT EXPENSES 10,00,000/- ACCOUNTING CHARGES 1756/A/09 2 4,00,000/- ACCOUNTING CHARGES 1757/A/09 2 4,00,000/- ACCOUNTING CHARGES 1758/A/09 2 3,00,000/- ACCOUNTING CHARGES 1976/A/09 3 2,50,000/- ACCOUNTING CHARGES 1,00,000/- CONSULTATION FEES 10.1 BRIEF FACTS, REASONING GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER FOR MAKING DISALLOWANCE AND IN THE IMPUGNED ORDERS IN C ONFIRMING THE DISALLOWANCE ARE IDENTICAL. THEREFORE, OUR FINDING IN THE CASE OF ON E ASSESSEE WOULD HOLD GOOD IN RESPECT OF OTHER ASSESSEES IN RESPECT OF ACCOUNTING CHARGES/RE NT EXPENSES SINCE THE FACTS OF ALL THE ASSESSEES ARE IDENTICAL, WE SHALL HEREINBELOW DISCU SS FACTS RELATING TO JETHIBEN K. PATEL DISCRETIONARY TRUST IN ITA NO.1752/A/09 FOR THE ASS ESSMENT YEAR 2004-05. 10.2 IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER DISALLOWED ACCOUNTING CHARGES OF RS.10 LAKHS ON THE GROUND THAT THERE IS NO INCREASE BETWEEN INCOME EARNED FROM OTHER SOURCES AND THE ACCOUNTING CHARGES PAID. THE ASSESS ING OFFICER ALSO OBSERVED THAT THE ASSESSEE IS DERIVING INCOME FROM DIVIDEND AND INTER EST INCOME. ALL THESE INCOMES ARE TAXED UNDER THE HEAD, INCOME FROM OTHER SOURCES. ACCORD ING TO ASSESSING OFFICER, SINCE THE ASSESSEE IS NOT ENGAGED IN THE BUSINESS ACTIVITY, P AYMENT OF ACCOUNTING CHARGES OF RS.10 LAKHS TO NIRMA MANAGEMENT SERVICES PVT. LTD. CANNOT BE ALLOWED. IT WAS ALSO OBSERVED THAT DETAILS OF SERVICES RENDERED BY NIRMA MANAGEMENT SE RVICES PVT. LTD. WAS NOT FURNISHED BEFORE HIM. 10 ITA NOS.1752 TO 1758 & 1976-AH D-2009 11. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS), THE ASSESSEE FILED WRITTEN SUBMISSION DATED 28.01.2009, WHICH RE ADS AS UNDER: ' THE CONTENTIONS OF THE LD. A.O. IS INCORRECT AND IM PROPER. THE APPELLANT HAS CLAIMED AS DEDUCTION RS. 10,00,000 AGAINST INCOME FROM OTH ER SOURCES. THE APPELLANT HAD TAKEN SERVICES OF NIRMA MANAGEMENT SERVICES PVT. L TD. AND PAID SERVICE CHARGES OF RS.10,00,000. THE APPELLANT HAD BANKING TRANSACTIO NS 153 AND JOURNAL AND OTHER TRANSACTIONS 165 AGGREGATING TO 316 TRANSACTIONS. NIRMA MANAGEMENT SERVICES PVT. LTD. WAS ASSIGNED THE WORK OF ACCOUNTING AND BANKI NG RELATED TRANSACTIONS. APPELLANT HAD TOTAL ASSETS OF RS.85,37,25,671. THE COPY OF T HE ACCOUNTS FOR THE CURRENT ASST.YEAR: 2004-05 IS ENCLOSED HEREWITH MARKED ANNEXURE F . LOOKING TO THE VOLUME OF ASSETS AND THE TRANSACTIO NS UNDER THE HEAD INCOME FROM OTHER SOURCES, THE EXPENSES OF RS. 10,00,000 ARE R EASONABLE AND ALLOWABLE U/S.57(III) OF INCOME-TAX ACT. THE APPELLANT HAD EARNED SUBSTA NTIAL INCOME BY WAY OF INTEREST AND DIVIDEND FROM THE SHARE OF KALUPUR COMM. CO-OP . BONK LTD. THE EXPENDITURE CAN BE CLAIMED AS DEDUCTION AGAINST INCOME FROM OTHER SOURCES U/S.57 OF I.T. ACT. 11.1 AFTER CONSIDERING THE AFORESAID SUBMISSIONS AN D AFTER REFERRING TO THE DECISION DATED 09.03.2009 FOR THE ASSESSMENT YEAR 2005-06, IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE D ISALLOWANCE OF RS.10 LAKHS OBSERVING THAT THE ASSESSEE HAS CLAIMED CONSULTATION FEES OF RS.50,250/- IN THE COMPUTATION OF INCOME WHICH HAVE BEEN ALLOWED BY THE ASSESSING OFFICER. A GGRIEVED WITH THIS, THE ASSESSEE IS IN APPEAL. 12. AT THE TIME OF HEARING BEFORE US, SHRI S.N.SOPA RKAR, THE LD. COUNSEL FOR THE ASSESSEE APPEARED AND FILED A PAPER BOOK CONTAINING 45 PAGES , WHICH, INTER ALIA , INCLUDE THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2004-05, ACCOUNTS OF NIRMA MANAGEMENT SERVICES PVT. LTD. FOR THE YEAR ENDING 31.03.2004, ASSESSMENT ORDER OF NIRMA MANAGEMENT SERVICES PVT. LTD. FOR THE ASSESSMENT YEAR 2004-05, RETURN OF INCOME F ILED FOR THE ASSESSMENT YEAR 2005-06 BY NIRMA MANAGEMENT SERVICES PVT. LTD., ACCOUNTS AND A SSESSMENT ORDER OF NIRMA MANAGEMENT SERVICES PVT. LTD. FOR THE YEAR ENDING 3 1.03.2005. THE COUNSEL OF THE ASSESSEE FURTHER FURNISHED THE DETAILS OF SERVICE CHARGES PA ID BY VARIOUS ASSESSEES TO THE GROUP COMPANY, NAMELY, NIRMA MANAGEMENT SERVICES PVT. LTD . WHO IS MAINTAINING THE ACCOUNTS, ETC. HE FURTHER CLARIFIED THAT VARIOUS ENTITIES, WH ICH ARE UNDER APPEAL, HAVE NO STAFF AND ENTIRE ACTIVITY OF THE ASSESSEE ARE LOOKED AFTER BY NIRMA MANAGEMENT SERVICES PVT. LTD. THIS HAS 11 ITA NOS.1752 TO 1758 & 1976-AH D-2009 BEEN DONE TO REDUCE THE COST, BECAUSE INDIVIDUALLY, IT IS NOT POSSIBLE TO KEEP HIGHLY QUALIFIED STAFF/INFRASTRUCTURE, ETC. FOR EACH ENTITY. THE COU NSEL OF THE ASSESSEE PRODUCED A CHART INDICATING SERVICES CHARGES PAID TO NIRMA MANAGEMEN T SERVICES PVT. LTD. BY VARIOUS ENTITIES IN THE YEAR 2005-06. THE COUNSEL OF THE ASSESSEE AL SO FURNISHED THE CHARGES PAID TO NIRMA MANAGEMENT SERVICES PVT. LTD. FOR THE ASSESSMENT YE AR 2004-05 BY VARIOUS ENTITIES AND THE STATUS OF DISALLOWANCE MADE IN THE ASSESSMENT ORDER . OUR ATTENTION WAS ALSO DRAWN TO THE PROFIT & LOSS A/C. OF NIRMA MANAGEMENT SERVICES PVT . LTD. INDICATING THAT ALMOST ENTIRE AMOUNT IS SPENT AND ON INCOME EARNED NIRMA MANAGEME NT SERVICES PVT. LTD. IS PAYING THE TAX AT MAXIMUM MARGINAL RATE. ON THE BASIS, IT WAS CLAIMED THAT PROVISIONS CONTAINED IN SECTION 40A(2) ARE NOT ATTRACTED. THE COUNSEL OF T HE ASSESSEE FURTHER POINTED OUT THAT LOOKING TO THE SERVICES RENDERED BY NIRMA MANAGEMENT SERVIC ES PVT. LTD., THE ACCOUNTING CHARGES AND CONSULTATION CHARGES, BOTH ARE NEITHER EXCESSIV E NOR UNREASONABLE. THEREFORE, THE ASSESSING OFFICER BE DIRECTED TO ALLOW THE ENTIRE E XPENSES. 13. ON THE OTHER HAND, SHRI R. K. DHANESTA, D.R., A PPEARING ON BEHALF OF THE REVENUE, VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED COMMI SSIONER OF INCOME TAX(APPEALS). HE POINTED OUT THAT IN THE CASE OF KISAN DISCRETIONAR Y FAMILY TRUST IN ITA NO.1966/A/2007 FOR THE ASSESSMENT YEAR 2003-04, THE DISALLOWANCE IS CO NFIRMED BY THE TRIBUNAL. THEREFORE, THE ASSESSING OFFICER CAN EXAMINE THE REASONABLENESS OF THE EXPENDITURE. LOOKING TO THE FACT THAT THE INCOME DERIVED BY VARIOUS ASSESSEES IN THI S BUNCH OF APPEALS IS FROM INTEREST AND DIVIDEND, WHICH IS ASSESSABLE UNDER THE HEAD OTHER SOURCES AND CAPITAL GAIN, DISALLOWANCE MADE IS FAIR AND REASONABLE. THEREFORE , THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) BE UPHELD. 14. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ITAT, A BENCH, AHMEDABAD I N THE CASE OF DCIT -VS- KISAN DISCRETIONARY FAMILY TRUST IN ITA NO.1966/A/2007 BY ITS ORDER DATED 12.10.2007 IN PARA 9 OBSERVED AS UNDER: 9. AFTER CAREFUL CONSIDERATION OF THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THERE CANNOT BE A NY DISPUTE AS TO THE LIABILITY OF SUCH TYPE OF EXPENSES, BUT WHILE CONSIDERING THE JUSTIF ICATION FOR ALLOWING SUCH EXPENSES; 12 ITA NOS.1752 TO 1758 & 1976-AH D-2009 ONETHING WHICH IS TO BE KEPT IN MIND, IS THE REASO NABLENESS OF THE EXPENDITURE VISA-A- VIS TO THE EXIGENCIES/REQUIREMENTS OF THE BUSINESS WHICH MAY INCLUDE THE QUANTUM OF SERVICES, QUALITY OF SERVICES, NECESSITY FOR SUCH SERVICES, SO ON AND SO FORTH AND, THEREFORE, IF WE CONSIDER THE ASSESSEE S PRESENT C LAIM IN THE LIGHT OF THESE REQUIREMENTS, FT WILL BE SEEN THAT THOUGH THE ASSE SSEE'S BUSINESS EXIGENCIES MAY HAVE REQUIRED SUCH SERVICES, BUT KEEPING IN VIEW THE NA TURE OF SOURCES OF INCOME AS WELL AS THE QUANTUM OF THE INCOME ONE CANNOT PREVENT HIMSE LF FROM COMING TO THE CONCLUSION THAT BUSINESS EXIGENCIES WERE NOT COMMENSURATE TO THE QUANTUM OF EXPENDITURE; MEANING THEREBY THAT REQUIREMENTS OF SUCH SERVICES TO MEET THE BUSINESS EXIGENCIES WAS FAR FAR LITTLE THAN THE QUANTUM OF EXPENDITURE . THE ASSESSEE, DURING THIS YEAR, HAD INCOME EITHER FROM OTHER SOURCES, SUCH AS, INTERES T AND DIVIDEND ON OLD INVESTMENTS/DEPOSITS AND LOANS, ETC. AND/OR INCOME FROM CAPITAL GAIN FOR WHICH THE REQUIREMENT OF CONSULTANT AND ACCOUNTANT WAS VERY LITTLE ONE. SIMILARLY, THE BROKERAGE ACTIVITIES CARRIED ON BY THE ASSESSEE AL SO DID NOT REQUIRE SERVICES TO SUCH A LARGE EXTENT/SCALE, MEANING THEREBY THAT THOUGH TH E ASSESSEE MIGHT HAVE REQUIRED SUCH SERVICES, BUT IT WAS NOT TO SUCH A SCALE SO A S TO MAKE THE ASSESSEE TO INCUR SUCH A HUGE EXPENSES. 14.1 IT IS PERTINENT TO NOTE THAT THE RATIO OF AFOR ESAID DECISION IS NOT CONSIDERED BY ANY OF THE DEPARTMENTAL AUTHORITIES BELOW. WE, THEREFORE, SET ASIDE THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ON DISALLOWANCE OF SERVICE CHARGES/RENT IN RESPECT OF ALL THE ASSESSEES AND RESTORE THE SAME TO THE FI LE OF THE ASSESSING OFFICER WITH THE DIRECTION THAT THE ASSESSING OFFICER WILL RE-WORK OUT THE DIS ALLOWANCES, IF ANY, KEEPING IN VIEW THE RATIO OF THE DECISION OF ITAT A BENCH, AHMEDABAD IN THE CASE OF KISAN DISCRETIONARY FAMILY TRUST FOR THE ASSESSMENT YEAR 2003-04, AFTER GIVING OPPORTUNITY OF BEING HEARD TO BOTH THE SIDES. 14.2. IN RESPECT OF CONSULTATION CHARGES OF RS.5 LA CS IN THE CASE OF KISAN DISCRETIONARY FAMILY TRUST, AHMEDBAD, RS.50,000/- IN THE CASE OF SHIVA SPECIFIC FAMILY TRUST, AHMEDABAD (ITA NO.1754/AHD/2009 FOR A.Y.2005-06) A ND RS.1 LAC IN THE CASE OF SHIVA SPECIFIC FAMILY TRUST (ITA NO.1976/AHD./2009 FOR A .Y. 2004-05) IT WAS CONTENDED THAT THESE WERE PAID UNDER INCOME-TAX MATTER AND SAME AR E ALLOWABLE. THE ASSESSING OFFICER WILL VERIFY THIS CONTENTION AND IF THESE ARE PAID IN CON NECTION WITH INCOME-TAX MATTER IN THAT EVENT THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE SAME IN ACCORDANCE WITH LAW AFTER GIVING OPPORTUNITY TO BEING HEARD TO THE ASSESSEE. 13 ITA NOS.1752 TO 1758 & 1976-AH D-2009 15. TWO OF THE GROUNDS IN ALMOST ALL THE APPEALS EX CEPT IN ITA NO.1976/A/2009 ARE AGAINST LEVY OF INTEREST UNDER SECTION 234B AND 234 C OF THE I.T. ACT. BOTH ARE CONSEQUENTIAL IN NATURE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW CONSEQUENTIAL RELIEF ON ACCOUNT OF LEVY OF INTEREST UNDER BOTH THE SECTIONS, IF ANY. 16. GROUND NO.3 IN ITA NO.1753/A/2009 IS RELATING T O DISALLOWANCE OF BANK COMMISSION EXPENSES OF RS.31,426/-. THE FACTS RELATING TO THE CONTROVERSY INVOLVED IN THIS GROUND ARE THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER DISALLOWED BANK COMMISSION EXPENSES AMOUNTING TO RS.31,426/-. ON APPEAL, IN THE IMPUGNE D ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE SAME HOLDING THAT THERE IS NO DIRECT NEXUS WITH EARNING OF INCOME FROM OTHER SOURCES. HE FURTHER HELD THAT RS.50,000/- ALLOWED WILL INCLUDE RS.31,426/-. BEING AGGRIEVED, THE ASSESSEE IS IN AP PEAL. 17. AT THE TIME OF HEARING, THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT THERE IS NO DISCUSSION IN THE ASSESSMENT ORDER. THEREFORE, THIS ISSUE BE RESTORED TO THE FILE OF THE ASSESSING OFFICER. WE FIND CONSIDERABLE FORCE IN TH E SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE. ADMITTEDLY, THERE IS NO DISCUSSION IN THE ASSESSMENT ORDER. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO PASS A SPEAKING ORDER IN THIS REGARD, AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 18. THE FACTS RELATING TO CONTROVERSY INVOLVED IN G ROUND NO.2 IN ITA NO.1754/A/2009 IN THE CASE OF SHIVA SPECIFIC FAMILY TRUST FOR THE ASS ESSMENT YEAR 2005-06 ARE THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER DISALLOWED INTEREST EXPENSES OF RS.3,57,848/- VIDE DISCUSSION AT PARA 8 OF THE ASSESSMENT ORDER. THE R ELEVANT DISCUSSION CONTAINED IN THE ASSESSMENT ORDER READS AS UNDER: 8. THE ASSESSEE HAS CLAIMED INTEREST EXPENSE IN THE NET AMOUNT OF RS3,57,848/-. THE GROSS FIGURE IS RS. 4,26,522/-. IT IS CREDITED TO THE ACCOUNT OF NIMA SPECIFIC FAMILY TRUST. AS PER DETAILS FILED WITH THE RETURN AND IN THE COURSE OF ASSESSMENT PROCEEDINGS AND ALSO WITH REFERENCE TO THE EARLIER RECORD OF T HE CASE AND OFFER DULY HEARING THE CONTENTIONS MADE ON BEHALF OF THE ASSESSEE TRUST, IT IS HELD THAT THE CASE DOES NOT ADMIT OF THAT INTEREST EXPENSE BEING ALLOWED AS AN EXPENDITURE FOR THE REASONS : THAT IT HAS NO NEXUS WITH THE ASSESSEE'S INCOME THAT IS BE ING ASSESSED; THAT BY FOR THE GREATER 14 ITA NOS.1752 TO 1758 & 1976-AH D-2009 PART OF THE ASSESSEE'S INCOME IS THAT WHICH DOES N OT FROM PART OF ITS TOTAL INCOME; THAT THE NEXT SUBSTANTIAL PART OF THE ASSESSEE'S INCOME DID NOT INVOLVE ANY BORROWING AS THE ASSETS (REC BONDS AND OFCPNS) GIVING RISE TO SUCH INCOME WERE ACQUIRED SEVERAL YEARS BACK AND THE INVESTMENT THEN MADE IN THEM HA S NO NEXUS BY ANY STRETCH OF RECKONING, WITH THE INTEREST EXPENSE CLAIMED; THAT THE CLAIMED INTEREST PAYMENT IS DEVOID OF ANY RELEVANCE TO THE MATTER OF INTEREST ON INCOME-TAX REFUND; AND THAT TO EARN AN INTEREST INCOME OF RS. 68,674/- ONE CAN NO T JUSTIFIABLY CLAIM THE INCURRING OF RS.4,26,522/- INTEREST EXPENSE. ACCORDINGLY RS.3,5 7,848/- INTEREST EXPENSE IS DISALLOWED. 19. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS), IT WAS CLAIMED THAT INCOME OF REC BONDS/OFCPNS IS OFFERED BY THE A SSESSEE IN THE YEAR OF RECEIPT BECAUSE THE ASSESSEE IS FOLLOWING CASH METHOD OF ACCOUNTING . FOR THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAS ACTUALLY INCURRED EXPENSES AND AS PER THE METHOD OF ACCOUNTING, IT IS ALLOWABLE THOUGH THERE IS NO INCOME IN THE CURRENT YEAR. 19.1 AFTER CONSIDERING THE AFORESAID SUBMISSIONS, I N THE IMPUGNED YEAR, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE D ISALLOWANCE ON THE GROUND THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROVE AS TO WHY AND W HERE THE NET INTEREST EXPENSES OF RS.3,57,848/- WAS INCURRED AND WHETHER THE CORRESPO NDING INCOME HAD BEEN SHOWN. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) FURTHER HELD THAT IF THE INTEREST EXPENSES ARE INCURRED FOR ACQUIRING SHARES AND SECURITIES ON WHI CH THE ASSESSEE RECEIVED TAX-FREE DIVIDEND INCOME, THE SAME IS NOT ALLOWABLE UNDER SECTION 14A OF THE I.T.ACT. IN THE ABSENCE OF PURPOSE OF UTILIZATION OF THE FUND, HE CONFIRMED TH E ADDITION OF RS.3,57,848/-. AGGRIEVED, THE ASSESSEE IS IN APPEAL. 20. AT THE TIME OF HEARING, LEARNED COUNSEL FOR THE ASSESSEE HAS POINTED OUT THAT THE ASSESSING OFFICERS VIEW THAT THERE IS NO NEXUS IN ASSESSEES INCOME AND THAT SUBSTANTIAL PART OF THE ASSESSEES INCOME DID NOT INVOLVE ANY BORROW ING AS THE ASSETS, I.E. REC BONDS AND OFCPNS, ON WHICH SUCH INCOME IS EARNED WERE ACQUIR ED SEVERAL YEARS BACK. THE INCOME OF RAC BONDS/OFCPNS IS OFFERED BY THE ASSESSEE IN THE YEAR OF RECEIPT AS THE ASSESSEE IS FOLLOWING CASH METHOD OF ACCOUNTING. ASSESSEE HAD INTEREST EXPENSES DURING THE YEAR AND THESE EXPENSES HAD TO BE ALLOWED THOUGH THE INCOME MAY BE TAXED IN THE CURRENT YEAR OR IN THE SUBSEQUENT YEAR. IT WAS ALSO POINTED OUT THAT SHARES OF RS.154 CRORES OF MIRZA TANNERS 15 ITA NOS.1752 TO 1758 & 1976-AH D-2009 LTD. AND SHARES OF NIRMA LTD. OF RS.3,47,90,831/- W ERE ACQUIRED BEFORE FEW YEARS. THERE IS NO INTEREST EXPENSES ON THE BORROWING EITHER IN THE CURRENT ASSESSMENT YEAR 2005-06 OR IN THE EARLIER ASSESSMENT YEAR 2004-05 FOR ACQUISITION OF THESE SHARES. THEREFORE, INTEREST EXPENSES OF RS.3,57,848/- SHOULD BE ALLOWED. 20.1. SHRI R.K.DHANESTA, LEARNED DEPARTMENTAL REPRE SENTATIVE APPEARED ON BEHALF OF THE REVENUE AND VEHEMENTLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. HE POINTED OUT THAT IT IS THE DUTY OF ASSESSEE TO FURNISH CASH FLOW/FUN D FLOW CHART OF THE YEAR IN WHICH ASSETS YIELDING EXEMPT INCOME WERE PURCHASED. SINCE THE A SSESSEE HAS NOT DISCHARGED THE ONUS, ADDITION WAS RIGHTLY MADE AND CONFIRMED BY THE LEAR NED CIT(APPEALS) IN THE IMPUGNED ORDER. 20.2. WE HAVE HEARD BOTH THE SIDES AND CAREFULLY GO NE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. AT THE OUTSET, WE MAY OBSERVE THAT TH E ASSESSEE IS FOLLOWING CASH METHOD OF ACCOUNTING. UNDER THESE CIRCUMSTANCES, INTEREST CA NNOT BE DISALLOWED MERELY ON THE GROUND THAT IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YE AR UNDER APPEAL, THE ASSESSEE HAS NOT EARNED ANY INCOME. HOWEVER, IN RESPECT OF INVESTME NT IN SHARES, THE ASSESSEE IS REQUIRED TO FURNISH THE CASH FLOW/FUND FLOW CHART IN WHICH THE INVESTMENT WAS MADE. IN CASE, THE INVESTMENT IS MADE OUT OF BORROWED FUND ON WHICH IN TEREST IS PAID IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER APPEAL, THEN IN T HIS YEAR THE ASSESSING OFFICER MAY DISALLOW U/S.14A OF THE I.T.ACT, 1961. IN SUPPORT OF THIS CONTENTION, RELIANCE IS PLACED ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & B OYCE MFG. CO.LTD. THEREFORE, WE DEEM IT PROPER TO FOLLOW THE VERDIT OF THE HON'BLE BOMBAY HIGH COURT PRONOUNCED IN THE CASE OF GODREJ & BOYCE MFG. CO.LT D. MUMBAI VS. DY.CIT IN INCOME TAX APPEAL NO.626 OF 2010 AND WRIT PETITION NO.758 OF 2010 OR DER DATED 12/08/2010 [ NOW REPORTED AS 328 ITR 81(BOM)]. IN THIS JUDGEMENT AT THE END, THE HON'BLE COURT HAS ALSO RECAPITULATED THE CONCLUSION AND PRONOUNCED THAT A FINDING IS REQUIRED WHETHER THE INVESTMENT IN SHARES IS MADE O UT OF OWN FUNDS OR OUT OF BORROWED FUNDS. A NEXUS IS REQUIRED TO BE ESTABLISHED BETWE EN THE INVESTMENTS AND THE BORROWINGS. IN SECTION 14A OF THE ACT EXPENDITURE INCURRED IN R ELATION TO EXEMPTED INCOME IS TO BE DISALLOWED ONLY IF THE ASSESSING OFFICER IS SATISFI ED WITH THE EXPENDITURE CLAIMED BY THE 16 ITA NOS.1752 TO 1758 & 1976-AH D-2009 ASSESSEE PERTAINING TO THE SAID EXEMPT INCOME. RA THER, THE COURT WAS VERY SPECIFIC THAT IN CASE, NO SUCH EXERCISE WAS CARRIED OUT BY THE AS SESSING OFFICER THEN THE MATTER IS TO BE REMANDED BACK FOR AFRESH INVESTIGATION. IT HAS ALS O BEEN MADE CLEAR THAT THE PROVISO TO SECTION 14A OF THE ACT WAS EFFECTIVE FROM 2001-02. THE HON'BLE COURT HAS ALSO POINTED OUT THE IMPORTANCE OF RULE 8D OF THE I.T.RULES, 196 2. IT WAS MADE CLEAR THAT SUB-SECTION (1) TO SECTION 14A WAS INSERTED WITH RETROSPECTIVE EFFECT FROM 01/04/1962, HOWEVER, SUB- SECTIONS (2) & (3) WERE MADE APPLICABLE WITH EFFECT FROM 01/04/2007. THE PROVISO WAS INSERTED WITH RETROSPECTIVE EFFECT FROM 11/05/2001, HOWEVER RULE 8D WAS INSERTED BY THE INCOME TAX (FIFTH AMENDMENT), RULES, 2008 BY PUBLI CATION IN THE GAZETTE DATED 24/03/2008, RELEVANT FINDINGS ARE REPRODUCED BELOW: - A) THE ITAT HAD RECORDED A FINDING IN THE EARLIE R ASSESSMENTS THAT THE INVESTMENTS IN SHARES AND MUTUAL FUNDS HAVE BEEN MADE OUT OF OW N FUNDS AND NOT OUT OF BORROWED FUNDS AND THAT THERE IS NO NEXUS BETWEEN T HE INVESTMENTS AND THE BORROWINGS. HOWEVER, IN NONE OF THOSE DECISIONS WA S THE DISALLOWABILITY OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME EARN ED OUT OF INVESTMENTS MADE OUT OF OWN FUNDS CONSIDERED. MOREOVER, UNDER SECTI ON 14A, EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME CAN BE DISALLOWED ONLY IF THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CORRECTNESS OF THE EXPENDITURE C LAIMED BY THE ASSESSEE. IN THE PRESENT CASE, NO SUCH EXERCISE HAS BEEN CARRIED OUT AND, THEREFORE, THE TRIBUNAL WAS JUSTIFIED IN REMANDING THE MATTER. B) SECTION 14A WAS INTRODUCED BY THE FINANCE ACT 20 01 WITH RETROSPECTIVE EFFECT FROM 1 APRIL 1962. HOWEVER, IN VIEW OF THE PROVISO TO T HAT SECTION, THE DISALLOWANCE THEREUNDER COULD BE EFFECTIVELY MADE FROM ASSESSMEN T YEAR 2001-2002 ONWARDS. THE FACT THAT THE TRIBUNAL FAILED TO CONSIDER THE A PPLICABILITY OF SECTION 14A IN ITS PROPER PERSPECTIVE, FOR ASSESSMENT YEAR 2001-2002 W OULD NOT BAR THE TRIBUNAL FROM CONSIDERING DISALLOWANCE UNDER SECTION 14A IN ASSESSMENT YEAR 2002-2003. C) THE DECISIONS REPORTED IN SRIDEV ENTERPRISES (SUPRA), MUNJAL SALES CORPORATION (SUPRA) AND RADHASOAMI SATSANG (SUPRA) HOLDING THAT THERE MUST BE CONSISTENCY AND DEFINITENESS IN THE APPROACH OF THE REVENUE WOU LD NOT APPLY TO THE FACTS OF THE PRESENT CASE, BECAUSE OF THE MATERIAL CHANGE INTROD UCED BY SECTION 14A BY WAY OF STATUTORY DISALLOWANCE IN CERTAIN CASES. THERE, TH E DECISIONS OF THE TRIBUNAL IN THE EARLIER YEARS WOULD HAVE NO RELEVANCE IN CONSIDERIN G DISALLOWANCE IN ASSESSMENT YEAR 2002-2003 IN THE LIGHT OF SECTION 14A OF THE A CT. 17 ITA NOS.1752 TO 1758 & 1976-AH D-2009 73. FOR THE REASONS WHICH WE HAVE INDICATED, WE HA VE COME TO THE CONCLUSION THAT UNDER SECTION 14A(1) IT IS FOR THE ASSESSING OFFICE R TO DETERMINE AS TO WHETHER THE ASSESSEE HAD INCURRED ANY EXPENDITURE IN RELATION T O THE EARNING OF INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE AC T AND IF SO TO QUANTIFY THE EXTENT OF THE DISALLOWANCE. THE ASSESSING OFFICER WOULD HAVE TO ARRIVE AT HIS DETERMINATION AFTER FURNISHING AN OPPORTUNITY TO THE ASSESSEE TO PRODUCE ITS ACCOUNTS AND TO PLACE ON THE RECORD ALL RELEVANT MATERIAL IN SUPPORT OF THE CIRCUMSTANCES WHICH ARE CONSIDERED TO BE RELEVANT AND GERMANE. FOR THIS PURPOSE AND I N LIGHT OF OUR OBSERVATIONS MADE EARLIER IN THIS SECTION OF THE JUDGMENT, WE DEEM IT APPROPRIATE AND PROPER TO REMAND THE PROCEEDINGS BACK TO THE ASSESSING OFFICER FOR A FRESH DETERMINATION. CONCLUSION : 74. OUR CONCLUSIONS IN THIS JUDGMENT ARE AS FOLLOWS ; I) DIVIDEND INCOME AND INCOME FROM MUTUAL FUNDS FALLIN G WITHIN THE AMBIT OF SECTION 10(33) OF THE INCOME TAX ACT 1961, AS WAS A PPLICABLE FOR ASSESSMENT YEAR 2002-03 IS NOT INCLUDIBLE IN COMPUT ING THE TOTAL INCOME OF THE ASSESSEE. CONSEQUENTLY, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT, BY VIRTUE OF THE PROVISIONS OF SECTION 14A(1); II) THE PAYMENT BY A DOMESTIC COMPANY UNDER SECTION 115 O(1) OF ADDITIONAL INCOME TAX ON PROFITS DECLARED, DISTRIBUTED OR PAID IS A CHARGE ON A COMPONENT OF THE PROFITS OF THE COMPANY. THE COMP ANY IS CHARGEABLE TO TAX ON ITS PROFITS AS A DISTINCT TAXABLE ENTITY AND IT PAYS TAX IN DISCHARGE OF ITS OWN LIABILITY AND NOT ON BEHALF OF OR AS AN AGE NT FOR ITS SHAREHOLDERS. IN THE HANDS OF THE SHAREHOLDER AS THE RECIPIENT OF DI VIDEND, INCOME BY WAY OF DIVIDEND DOES NOT FORM PART OF THE TOTAL INCOME BY VIRTUE OF THE PROVISIONS OF SECTION 10(33). INCOME FROM MUTUAL FUNDS STANDS ON THE SAME BASIS; III) THE PROVISIONS OF SUB SECTIONS (2) AND (3) OF SECTI ON 14A OF THE INCOME TAX ACT 1961 ARE CONSTITUTIONALLY VALID; IV) THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULES A S INSERTED BY THE INCOME TAX (FIFTH AMENDMENT) RULES 2008 ARE NOT ULT RA VIRES THE 18 ITA NOS.1752 TO 1758 & 1976-AH D-2009 PROVISIONS OF SECTION 14A, MORE PARTICULARLY SUB SE CTION (2) AND DO NOT OFFEND ARTICLE 14 OF THE CONSTITUTION; V) THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULES W HICH HAVE BEEN NOTIFIED WITH EFFECT FROM 24 MARCH 2008 SHALL APPLY WITH EFFECT FROM ASSESSMENT YEAR 2008-09; VI) EVEN PRIOR TO ASSESSMENT YEAR 2008-09, WHEN RULE 8D WAS NOT APPLICABLE, THE ASSESSING OFFICER HAS TO ENFORCE THE PROVISIONS OF SUB SECTION (1) OF SECTION 14A. FOR THT PURPOSE, THE ASSESSING OFFICE R IS DUTY BOUND TO DETERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED I N RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE ASSESSING OFFICER MUST ADOPT A REASONABLE BASIS OR METHOD CON SISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON TH E RECORD; VII) THE PROCEEDINGS FOR ASSESSMENT YEAR 2002-03 SHALL S TAND REMANDED BACK TO THE ASSESSING OFFICER. THE ASSESSING OFFICER SH ALL DETERMINE AS TO WHETHER THE ASSESSEE HAS INCURRED ANY EXPENDITURE ( DIRECT OR INDIRECT) IN RELATION TO DIVIDEND INCOME / INCOME FROM MUTUAL FU NDS WHICH DOES NOT FORM PART OF THE TOTAL INCOME AS CONTEMPLATED UNDER SECTION 14A. THE ASSESSING OFFICER CAN ADOPT A REASONABLE BASIS FOR EFFECTING THE APPORTIONMENT. WHILE MAKING THAT DETERMINATION, TH E ASSESSING OFFICER SHALL PROVIDE A REASONABLE OPPORTUNITY TO THE ASSES SEE OF PRODUCING ITS ACCOUNTS AND RELEVANT OR GERMANE MATERIAL HAVING A BEARING ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 20.3. FOR THIS PURPOSE, WE SET ASIDE . THE ORDER OF THE LEARNED CIT(APPEALS) AND RESTORE THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER WITH TH E DIRECTION THAT THE ASSESSEE SHOULD FURNISH THE COMPLETE DETAILS, ASSESSING OFFICER WILL EXAMIN E THE SAME AND READJUDCATE THE DISALLOWANCE OF INTEREST EXPENSES OF RS.3,57,848/- AFRESH AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 21. GROUND NO.4 IN ITA NO.1755/A/2009 IS AGAINST LE VY OF INTEREST UNDER SECTION 234D AND GROUND NO.5 IS AGAINST WITHDRAWING INTEREST CHA RGED UNDER SECTION 244A OF THE I.T. ACT, 19 ITA NOS.1752 TO 1758 & 1976-AH D-2009 1961 IN ITA NOS. 1755/A/2009 AND 1756/A/2009. NO S PECIFIC ARGUMENTS WERE RAISED AGAINST BOTH THESE GROUNDS OF APPEAL. THEREFORE, BO TH THESE GROUNDS ARE DISMISSED. 22. GROUND NO.4 IN ITA NO.1756/A/2009 AND ITA NO.17 57/A/2009 IS AGAINST LEVY OF INTEREST UNDER SECTION 234D OF THE I.T. ACT, 1956. THE ITAT, SPECIAL BENCH IN THE CASE OF ITO VS- EKTA PROMOTERS PVT. LTD. REPORTED IN [2008 ] 113 ITR 719 (DELHI) HELD THAT SECTION 234D HAS BEEN BROUGHT ON THE STATUTE FROM 01/06/200 3 WHICH WILL HAVE APPLICATION ONLY WITH EFFECT FROM A.Y.2004-05 AND THEREFORE INTEREST U/S .234D CANNOT BE CHARGED FOR EARLIER YEARS, EVEN THOUGH REGULAR ASSESSMENTS FOR THOSE YEARS WER E FRAMED AFTER THE SAID DATE. ASSESSMENT YEAR INVOLVED IN BOTH THESE APPEALS IS A SSESSMENT YEAR 2004-05. THEREFORE, INTEREST U/S.234D IS RIGHTLY LEVIED AND CONFIRMED B Y THE LEARNED CIT(APPEALS) IS HEREBY UPHELD. THIS GROUND OF THE ASSESSEES IN BOTH THE A PPEALS IS REJECTED. 23.. GROUND NO.4 IN ITA NO.1758/A/2009 IS AGAINST L EVY OF INTEREST UNDER SECTION 234D . NO SPECIFIC ARGUMENTS WERE RAISED AGAINST THIS GROU ND OF APPEAL. THEREFORE, THIS GROUND IS DISMISSED. 24. THE GROUND NO.2 IN ITA NO. 1976/A/2009 IS REL ATING TO THE CONTROVERSY ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENSES OF RS.25,37,28 0/-. 25. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING AS SESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT, 1961 DATED 27/12/2006 WERE THAT THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE-TRUST HAD MADE INVESTMENT IN SHARES AND DEBENTURES WORTH RS.15,33,90,985/- AND, THEREFORE, INTEREST EXPENSES SHOULD BE DISALLOWED TOWARDS THE INVESTMENT MADE IN EXEMPTED ASSETS. ON APPEAL BEF ORE THE FIRST APPELLATE AUTHORITY, ASSESSEE CONTENDED AS UNDER:- 8. GROUND NO.6 IS REGARDING DISALLOWANCE OF INTE REST EXPENSES OF RS.25,37,280/-. THIS ADDITION WAS MADE BY THE AO VIDE DISCUSSION A T PARA 6 OF THE ASSESSMENT ORDER. THE AO OBSERVED THAT THE APPELLANT TRUST HAD MADE INVESTMENT IN SHARES AND 20 ITA NOS.1752 TO 1758 & 1976-AH D-2009 DEBENTURES WORTH RS.15,33,90,985/- AND HENCE INTERE ST EXPENSES SHOULD BE DISALLOWED TOWARDS THE INVESTMENT MADE IN EXEMPTED ASSETS. ON THIS POINT THE WRITTEN SUBMISSION OF THE APPELLANT IS REPRODUCED AS UNDER: VIDE DISCUSSION AT PARA 6 OF THE ASSESSMENT ORDER, THE LD.A.O. DISALLOWED INTEREST EXPENSES RS.25,37,280/-. A) VIDE DISCUSSION AT PARA 6.3. OF THE A.O., THE L D.A.O. IS OF THE VIEW THAT APPELLANT TRUST MADE INVESTMENT IN SHARES AND DEBENTURES FOR RS.15,33,90,985 AND HENCE INTEREST EXPENSES SHOULD BE DISALLOWED AS INVESTMENT IS MADE IN EXEMPTED ASSETS. I. FIRSTLY, IT IS SUBMITTED THAT THERE IS NO EXEMP T ASSETS UNDER THE INCOME-TAX ACT, PROBABLY LD.A.O. IS REFERRING THAT INVESTMENT IS MADE IN CERTAIN ASSETS FROM WHICH INCOME IS EXEMPT AND H ENCE, HE HAS DISALLOWED THE INTEREST EXPENSES. II. SECONDLY, IT IS SUBMITTED THAT APPELLANT HAD M ADE INVESTMENT IN SHARES AND BONDS AGGREGATING TO RS.15,33,90,985. T HE BREAK-UP THEREOF IS AS UNDER. INVESTMENT IN SHARES RS.3,47,90,985 INVESTMENT IN BONDS AND OFCPNS RS.11,86, 00,000 ------------------- RS.15,33,90,985 AS REGARDS THE INVESTMENT IN DEBENTURES, INTEREST T HEREOF IS NOT EXEMPT AND HENCE LD.A.O. HAS WRONGLY STATED THAT IT IS INV ESTMENT IN EXEMPTED ASSETS. FURTHER, IT IS SUBMITTED THAT THE INCOME OF REC BON DS/OFCPNS IS OFFERED BY THE APPELLANT IN THE YEAR OF RECEIPT AS THE APPELLANT IS FOLLOWING CASH METHOD OF ACCOUNTING. APPELLANT HAD INTEREST EXPENSES DURING THE YEAR AND THE EXPENSES HAS TO BE ALLOWED. THE INCOME MAY BE TAXED IN THE CURRENT YEAR OR IN THE SUBSEQUENT Y EAR WOULD NOT MAKE ANY DIFFERENCE. IT MAY ALSO BE NOTED THAT SHARES O F RS.154 OF MIRZA TANNERS LTD. AND SHARES OF NIRMA LTD. RS.3,47,90,83 1 WHICH WERE ACQUIRED BEFORE FEW YEARS. THERE IS NO INTEREST EX PENSES ON THE BORROWING EITHER IN THE CURRENT ASST.YEAR 2004-05 O R IN THE EARLIER ASST.YEAR 2003-04 FOR ACQUISITION OF THESE SHARES. HENCE, WHOLE OF THE INTEREST EXPENSES RS.25,37,280 SHOULD BE ALLOWED. 21 ITA NOS.1752 TO 1758 & 1976-AH D-2009 25.2. AFTER CONSIDERING THE ADDITION IN THE IMPUGNE D ORDER, THE LEARNED CIT(APPEALS) CONFIRMED THE DISALLOWANCE KEEPING IN VIEW OF HIS D ECISION IN ASSESSEES WON CASE FOR ASSESSMENT YEAR 2005-06. AGGRIEVED THE ASSESSEE IS IN APPEAL. 25.3. WE HAVE HEARD BOTH THE SIDES. IT IS PERTIN ENT TO NOTE THAT IN THE ASSESSMENT YEAR 2005-06, THE ASSESSING OFFICER DISALLOWED SUM OF RS.25,37,280/-. THE REASONING GIVEN BY THE LD.CIT(A) IN THAT YEAR IS SAME AS GIVEN FOR THI S ASSESSMENT YEAR. IN THE ASSESSMENT YEAR 2005-06 VIDE ORDER OF EVEN DATE IN ITA NO.1754/AHD /2009 (SUPRA) WHILE ADJUDICATING THE GROUND NO.2, WE HAVE RESTORED THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER. RELEVANT DISCUSSION IS CONTAINED IN PARA 20.2 (SUPRA). WE , THEREFORE FOLLOWING THE SAME, RESTORE THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER TO RE ADJUDCATE THE DISALLOWANCE OF INTEREST EXPENSES OF RS.25,37,280/- AFRESH AFTER GIVING OPP ORTUNITY OF BEING HEARD TO THE ASSESSEE. 26. IN THE RESULT, FOR STATISTICAL PURPOSES, ALL TH E APPEALS FILED BY THE ASSESSEES ARE PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE COURT ON 06.05.201 1. SD/- SD/- (A.N.PAHUJA) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 06/05/2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE 2) THE DEPARTMENT. 3) CIT(A.) CONCERNED, 4) CIT CONCERNED, 5) D.R., ITAT, AHMEDABAD. //TRUE COPY// . BY ORDER DEPUTY REGISTRAR, IT AT, AHMEDABAD TALUKDAR/SR.P.S. 22 ITA NOS.1752 TO 1758 & 1976-AH D-2009 1. DATE OF DICTATION.. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR .P.S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R.P.S./P.S 06.05.2011 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK ..06.05.2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER