Adani Wilmar Ltd, Ahmedabad V. The ACIT.,Circle-1, Ahmedabad

ITA 1996/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9425 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 07-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 06-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Source of fund; Retrospective amendment; Tax effect; Commercial expediency
• Section: 143(3); 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE S/SHRI RAJPAL YADAV, JM, & MANISH BORAD, AM. ITA NO.1996 /AHD/2012 ASST. YEAR: 2007-08 ADANI WILMAR LTD., FORTUNE HOUSE, NR. ADANI HOUSE, MITHAKHALI SIX ROADS, AHMEDABAD. VS. ACIT, CIRCLE-1, AHMEDABAD. APPELLANT RESPONDENT PAN AABCA 8056G AND ITA NO.2140 /AHD/2012 ASST. YEAR: 2007-08 ACIT, CIRCLE-1, AHMEDABAD VS. ADANI WILMAR LTD., FORTUNE HOUSE, NR. ADANI HOUSE, MITHAKHALI SIX ROADS, AHMEDABAD. APPELLANT RESPONDENT ASSESSEET BY SHRI VARTIK CHOKSI, AR REVENUE BY SHRI KAMLESH MAKWANA, SR.DR DATE OF HEARING: 7/12/2015 DATE OF PRONOUNCEMENT: 02 /03/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THESE TWO CROSS APPEALS ONE BY THE ASSESSEE AND T HE OTHER BY THE REVENUE ARE DIRECTED AGAINST THE ORDER OF LD . CIT(A)-6, ITA NO.1996 & 2140/AHD/2012 ASST. YEAR 2007-08 2 AHMEDABAD, DATED 26.7.2012. ASSESSMENT WAS FRAMED ON 20.12.2010 U/S 143(3) OF THE INCOME-TAX ACT, 1961 ( IN SHORT THE ACT) FOR ASST. YEAR 2007-08 BY ACIT, CIRCLE-1, AHMEDABAD . 2. FIRST WE TAKE UP ASSESSEES APPEAL IN ITA NO.1996/AHD/2012 FOR ASST. YEAR 2007-08. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN THIS APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE APP ELLANTS CASE, THE LD. CIT(A) HAS ERRED IN CONFIRMING DISALL OWANCE OF RS.12,10,000/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF PRELIMINARY EXPENSES. THE SAME MAY BE DELETED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE APP ELLANTS CASE THE LD. CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS.4,08,471/- ON ACCOUNT OF PRIOR PERIOD EXPENSES. THE SAME MAY BE DELETED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE APP ELLANTS CASE THE LD. CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF RS.5,88,998/- MADE BY THE A) UNDER SECTION 14A OF T HE ACT. THE SAME MAY BE DELETED. 4. THE APPELLANT CRAVES LEAVE TO ADD TO ALTER, AMEN D AND OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEF ORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING/REFINING A ND TRADING OF EDIBLE OIL, SEEDS AND CAKES. IT FILED ITS RETURN OF INCOME ON 6.10.2007. ASSESSEES CASE WAS SELECTED FOR SCRUTINY ASSESSMEN T AND NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON 22/07/2008 WHICH WA S DULY SERVED ITA NO.1996 & 2140/AHD/2012 ASST. YEAR 2007-08 3 ON THE ASSESSEE. ASSESSMENT WAS COMPLETED AFTER MAK ING FOLLOWING ADDITIONS :- 1. DISALLOWANCE OF PRELIMINARY EXPENSES RS.12,10,0 00/- 2. DISALLOWANCE FOR LATE PAYMENT OF PF/ESIC RS.6,68 ,797/- 3. DISALLOWANCE OF PRIOR PERIOD EXPENSES RS.4,08,4 71/- 4. DISALLOWANCE U/S 14A R.W. RULE 8D RS.5,88,998/ - 4. IN THE ASSESSMENT ORDER U/S 143(3) OF THE ACT BO OK PROFIT OF THE ASSESSEE WAS RECOMPUTED BY ADDING DISALLOWANCE U/S 14A R..W.RULE 8D AT RS.5,88,998/-. 5. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE CIT(A) WHO PARTLY ALLOWED THE APPEAL. NOW BEING AGGRIEVED WITH THE OR DER OF CIT(A), AGAINST CONFIRMATION OF ADDITIONS, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. GROUND NO.1 IS NOT PRESSED BY THE LD. AR DURING THE COURSE OF HEARING AND SO THE SAME IS DISMISSED AS NOT PRESSED . 7. GROUND NO.2 OF THE ASSESSEE IS AGAINST THE ACTIO N OF LD. CIT(A) CONFIRMING ADDITION OF RS.4,08,471/- ON ACCOUNT OF PRIOR PERIOD EXPENSES. LD. AR SUBMITTED THAT EXPENSES OF RS.4,08 ,471/- ARE INCLUDED IN BROKERAGE AND COMMISSION EXPENSES AT RS .2,35,721/- AND PROFESSIONAL EXPENSES OF RS.1,72,750/- WHICH WE RE PERTAINING TO F.Y. 2005-06 AND THE SAME WERE SHOWN IN THE AUDITED STATEMENT ALSO AS PRIOR PERIOD EXPENSES BUT THE SAME HAVE BEEN CLA IMED BECAUSE ITA NO.1996 & 2140/AHD/2012 ASST. YEAR 2007-08 4 THE EXPENSES HAVE CRYSTALLIZED DURING THE YEAR UNDE R APPEAL AND THE SAME SHOULD HAVE BEEN ALLOWED. 8. LD. AR FURTHER SUBMITTED THAT SIMILAR ISSUES IN ASSESSEES OWN CASE WAS DECIDED IN ITS FAVOUR BY THE CO-ORDINATE B ENCH IN ITA NOS.2919 & 2920/AHD/2007 FOR ASST. YEARS 2003-04 AN D 2004-05 VIDE ORDER DATED 7.5.2010. 9. ON THE OTHER HAND LD. DR SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THIS GROUND IS WHETHER THE EXPENSES OF RS.4,08,471/- CLAIMED AS EXPENDITURE IN ASST. YEAR 2007-08 BEING CRYSTALLIZED IN THE YEAR UNDER APPEAL EVEN IF THE E XPENDITURE RELATES TO ASST. YEAR 2006-07. WE FIND FROM THE RECORD THAT TH ESE EXPENSES RELATE TO BROKERAGE/COMMISSION AND PROFESSIONAL FEE S AND ASSESSEE HAS CLAIMED THAT THESE EXPENSES HAVE CRYSTALLIZED I N THE YEAR UNDER APPEAL AND THE SAME, THEREFORE, HAVE BEEN CLAIMED A S EXPENDITURE. WE FURTHER FIND FROM ANNEXURE -9 TO FORM NO.3CD ATT ACHED WITH THE AUDIT REPORT U/S 44AB, DETAILS OF PRIOR PERIOD EXPE NDITURE HAVE BEEN SHOWN AND ALL THESE EXPENDITURE ARE OF REVENUE NATU RE WHICH HAVE BEEN INCURRED FOR COMMERCIAL EXPEDIENCY. FURTHER FR OM GOING THROUGH THE DECISION OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR ASST. YEARS 2003-04 AND 2004-05 VIDE ORDER DATED 7 .5.2010, WE FIND THAT CO-ORDINATE BENCH HAS OBSERVED AS UNDER :- ITA NO.1996 & 2140/AHD/2012 ASST. YEAR 2007-08 5 4. IN THE ASSESSMENT YEAR 2004-05 THE ASSESSEE MADE SIMILAR SUBMISSIONS THAT THE AMOUNT OF RS.17,23,464/- PERTAINING TO THE EXPE NDITURE OF PRIOR PERIOD WHICH HAD CRYSTALLIZED DURING THE ASSESSMENT YEAR UNDER A PPEAL. THE ASSESSEE, THEREFORE, MADE A CLAIM WHICH WAS DENIED BY THE AO. THE SUBMISSION OF THE ASSESSEE IS REPRODUCED IN THE APPELLATE ORDER. THE LEARNED CIT(A) FOUND THAT THE ENTIRE AMOUNT IN QUESTION PERTAINS TO THE PAYMENT O F EMPLOYEES WHICH WAS IN THE NATURE OF INCENTIVES AND PERFORMANCE REWARDS. THE S AME WAS WORKED OUT BY THE HR DEPARTMENT ON THE BASIS OF PERFORMANCE ETC. AND THE SAME WAS CLEARED FOR PAYMENT DURING THE YEAR UNDER APPEAL I.E. ASSESSMEN T YEAR 2004-05 AND THIS WORKING ITSELF WAS DONE IN THE MONTH OF JULY, 2003 ON THE BASIS OF PERFORMANCE OF THE EMPLOYEES IN THE EARLIER YEAR. THE LIABILITY CR YSTALLIZED DURING THE ASSESSMENT YEAR UNDER APPEAL AND WAS, THEREFORE, HELD TO BE AL LOWABLE DEDUCTION. ADDITION WAS ACCORDINGLY DELETED. 5. THE LEARNED DR RELIED UPON THE ORDER OF THE AO W ITHOUT POINTING OUT ANY INFIRMITY IN THE ORDERS OF THE LEARNED CIT(A). ON T HE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT THE LIABILITY WAS CRYSTAL LIZED DURING THE ASSESSMENT YEAR UNDER APPEAL. THEREFORE, ADDITIONS HAVE RIGHTL Y BEEN DELETED BY THE LEARNED CIT(A). 6. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEANED CIT(A) IN DELETING BOTH THE ADD ITIONS. THE HONBLE SUPREME COURT IN THE CASE OF METAL BOX COMPANY 73 ITR 53 HE LD THAT LIABILITY ACCRUED DURING THE YEAR WOULD BE CONSIDERED FOR THE PURPOSE OF DEDUCTION. THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS APPOLLO TEXTILES AGENCY HELD AS UNDER: (283/ITR/591) THE ASSESSEE DEALT IN STAPLE AND YEARN. FOR THE A SSESSMENT Y8EAR 1978- 79, IT CLAIMED RS.15,498 REPRESENTING ADDITIONAL DE MAND FOR SALES TAX LIABILITY ON IT FOR THE EARLIER YEARS. THE AUTHORIT IES BELOW DISALLOWED THE CLAIM BUT THE TRIBUNAL HELD THAT THE DEMAND OF SALE S TAX WAS THE ADDITIONAL DEMAND CREATED BY THE SALES TAX AUTHORITIES ON NOVE MBER 2, 1976, AND THEREFORE T4HE ADDITIONAL DEMAND CREATED IN THE REL EVANT ASSESSMENT YEAR OUGHT TO HAVE BEEN ALLOWED AS A DEDUCTION. ON A REF ERENCE AT THE INSTANCE OF THE REVENUE: HELD, THAT THE ASSESSEE HAD REALIZED SALES TAX FROM ITS CUSTOMERS AND WHATEVER AMOUNT HAD BEEN REALIZED HAD BEEN PAID OVE R TO THE SALES TAX AUTHORITIES. THE DEMAND OF SALES TAX WAS OVER AND A BOVE THE ADMITTED AMOUNT OF TAX LIABILITY WHICH HAD BEEN CREATED PURS UANT TO THE ASSESSMENT ORDER PASSED ON NOVEMBER 2, 1976. THEREFORE, THE LI ABILITY TO PAY THE AMOUNT OF RS.15,498 CAME INTO EXISTENCE AND ACCRUED FOR THE FIRST TIME ON NOVEMBER 2, 1976. THUS, THE CLAIM FOR RS.15,498 REP RESENTING SALES TAX LIABILITY AND PENAL INTEREST ON IT FOR THE EARLIER YEARS WAS ALLOWABLE AS DEDUCTION FOR THE ASSESSMENT YEAR 1978-79. ITA NO.1996 & 2140/AHD/2012 ASST. YEAR 2007-08 6 THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SAURA STRA CEMENT & CHEMICAL INDUSTRY LTD. (SUPRA) HELD THAT EXPENDITURE RELATI NG TO EARLIER YEARS, LIABILITY ARISING IN RELEVANT ASSESSMENT YEAR IS DEDUCTIBLE E XPENDITURE. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE ABOVE DECISIO NS, IT IS CLEAR THAT THE LIABILITY OF THE ASSESSEE FOR THE EXPENDITURE CRYSTALLIZED DURIN G THE ASSESSMENT YEAR IN QUESTION. THE LEARNED CIT(A) IN ASSESSMENT YEAR 200 3-04 AFTER VERIFICATION OF THE CERTIFICATE OF COMPLETION OF DISMANTLING/ERECTION W ORK FOUND THAT SAME WAS GIVEN IN MAY, 2002 WHICH PERTAINS TO THE ASSESSMENT YEAR UNDER APPEAL I.E. ASSESSMENT YEAR 2003-04. THE ASSESSEE EXPLAINED THA T THE BILL COULD BE ADMITTED ONLY ON GIVING SUCH A CERTIFICATE. THE LEA RNED CIT(A), THEREFORE, RIGHTLY FOUND THAT THE LIABILITY TO PAY THE EXPENDITURE CRY STALLIZED DURING THE ASSESSMENT YEAR IN QUESTION. SIMILARLY, IN ASSESSMENT YEAR 200 4-05 THE PAYMENT TO EMPLOYEES WAS MADE BASED UPON THE PERFORMANCE OF TH E EMPLOYEES IN THE EARLIER YEAR. THE LIABILITY CRYSTALLIZED DURING THE ASSESSMENT YEAR IN QUESTION, BECAUSE THE WORKING OF THE INCENTIVES BASED ON PERF ORMANCE WAS CLEARED FOR PAYMENT IN THE MONTH OF JULY, 2003 WHICH FALLS DURI NG THE ASSESSMENT YEAR UNDER APPEAL I.E. ASSESSMENT YEAR 2004-05. SINCE THE LIAB ILITY TO PAY THE EXPENDITURE CRYSTALLIZED DURING THE ASSESSMENT YEAR UNDER APPEA L, THEREFORE, THE LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION. THE LEARNED DR HAS NOT PRODUCED ANY MATERIAL CONTRARY TO THE FINDINGS OF THE LEARNE D CIT(A). THUS, THE REVENUE HAS FAILED TO REBUT THE FINDINGS OF THE LEARNED CIT (A). WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) IN DELETING THE DISALLOWANCE OF THE EXPENDITURE. WE CONFIRM HIS FINDINGS AND DISMISS BO TH THE APPEALS OF THE REVENUE. 7. AS A RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. IN VIEW OF OUR ABOVE DISCUSSIONS AND RESPECTFULLY F OLLOWING THE DECISION OF CO-ORDINATE BENCH WE ARE OF THE VIEW TH AT PRIOR PERIOD EXPENSES OF RS.4,08,471/- SHOULD HAVE BEEN ALLOWED AS THE SAME BEING OF REVENUE NATURE AND THE EXPENDITURE HAS CRY STALLIZED IN THE YEAR UNDER APPEAL. THIS GROUND OF ASSESSEE IS ALLOW ED. 11. GROUND NO.3 OF THE APPEAL IS AGAINST THE ACTION OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.5,88,998/- MADE B Y ASSESSING OFFICER U/S 14A OF THE ACT. LD. AR HAS SUBMITTED TH AT RULE 8D OF ITACT RULES HAVE BEEN INSERTED BY THE IT (VTH AMENDMENT) RULES ON ITA NO.1996 & 2140/AHD/2012 ASST. YEAR 2007-08 7 24.3.2008 AND THE APPEAL IS FOR ASST. YEAR 2007-08 AND, THEREFORE, LD. ASSESSING OFFICER WAS NOT CORRECT IN APPLYING THE M ETHOD OF RULE 8D OF THE IT RULES IN THE CASE OF ASSESSEE AND FURTHER SUBMITTED THAT THE ASSESSEE COMPANY IS HAVING HUGE CAPITAL AND RESERVE AND THE INVESTMENT IN ASSETS FETCH EXEMPTED INCOME IS QUITE MEAGER AND THE SOURCE OF FUNDS IN THESE INVESTMENTS IS OUT OF ITS CAPITAL AND FREE RESERVE. 12. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THIS GROUND IS AGAINST DISA LLOWANCE OF RS.5,88,998/- U/S 14A OF THE ACT. WE FIND FORCE IN THE CONTENTIONS OF ASSESSEE THAT RULE 8D OF IT RULE WAS INSERTED FROM ASST. YEAR 2008- 09 AND BEFORE THIS INSERTION THE DUTY IS CAST UPON THE ASSESSING OFFICER FOR DETERMINING THE AMOUNT OF EXPENDITURE U NDER THE PROVISIONS OF SECTION 14A IN RELATION TO SUCH INCOM E WHICH DOES NOT FORM PART OF THE TOTAL INCOME. FROM GOING THROUGH T HE ASSESSMENT ORDER WE FIND THAT ASSESSING OFFICER HAS JUST MENTI ONED THE AMOUNT OF EXEMPT INCOME AT RS.30 LACS AND ABOUT INVESTMENT AS ON 31.3.2007 AT RS.2,01,09,000/-, NO SPECIFIC DETAILS HAS BEEN C ULLED OUT BY THE ASSESSING OFFICER FROM THE BOOKS OF ACCOUNT TO SATI SFY HIMSELF THAT CERTAIN INTEREST BEARING FUNDS HAVE MOVED TO THE AP PLICATION OF FUNDS IN THE INVESTMENTS NOR ANY OTHER ADMINISTRATIVE EXP ENDITURE HAS BEEN SPECIFICALLY POINTED OUT TO HAVE BEEN INCURRED FOR EARNING EXEMPT INCOME. THEREFORE, IT SEEMS THAT ASSESSING OFFICER HAD MADE ITA NO.1996 & 2140/AHD/2012 ASST. YEAR 2007-08 8 DISALLOWANCE JUST FOLLOWING THE METHOD PROVIDED IN RULE 8D OF THE RULES WITHOUT APPRECIATING RULE 8D(1) WHEREIN IT IS MENTIONED THAT ASSESSING OFFICER HAS PLACED ON RECORD THAT HE IS N OT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE OR THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED. WE FIND THAT HON. JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT VS. TORRENT POWER LTD. 363 ITR 474 (GUJ) - SECTION 14A OF THE INCOME-TAX ACT, 1961 - EXPENDITU RE INCURRED IN RELATION TO INCOME NET INCLUDIBLE IN TOTAL INCOME (INTEREST - N ON-USER OF BORROWED FUNDS) - ASSESSMENT YEAR 2006-07 - FOR RELEVANT YEAR, ASSESS EE FILED ITS RETURN DECLARING EXEMPT INCOME BEING INTEREST ON BONDS, EXEMPTED UND ER SECTION 10(15) AND DIVIDEND INCOME EXEMPT UNDER SECTION 10(23D) - ASSE SSING OFFICER HAVING INVOKED PROVISIONS OF SECTION 14A. DISALLOWED ONE P ER CENT OF INTEREST EXPENSES INCURRED FOR EARNING EXEMPT INCOME - TRIBUNAL DELETED SAID DISALLOWANCE - WHETHER IN VIEW OF FACT THAT ASSESSEE HAD SUFFICIENT FUNDS FOR MAKING INVESTMENTS AND IT HAD NOT USED BORROWED FUNDS FOR SUCH PURPOSE, IMPUG NED ORDER PASSED BY TRIBUNAL DELETING DISALLOWANCE WAS TO BE UPHELD - H ELD, YES [PARA 7] [IN FAVOUR OF ASSESSEE] FACTS FOR THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE FILE D ITS RETURN SHOWING EXEMPT INCOME BEING FAX FREE IMEREST ON BONDS, EXEMPTED UNDER SEC TION I OF I5J AND DIVIDEND EXEMPT UNDER SECTION IO(23DI. THE TOTAL SUM WORKED OUT TO KS, J4 CRORCS. THE ASSESSING OFFICER HAVING INVOKED THE PROVISIONS OF SECTION 14A. DISALLOWED ONE PERCENT OF INTEREST EXPENSES INCURRED FOR EARNING E XEMPT INCOME, IN APPELLATE PROCEEDINGS, THE TRIBUNAL DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. ON REVENUE'S APPEAL: HELD IF WAS NOTED FROM RECORDS THAT THE ASSESSEE WAS HAV ING SHARE HOLDING FUNDS TO THE EXTENT OF 2607.18 CRORES AND THE INVESTMENT MADE BY IT WAS TO THE EX TENT OF RS. 195.10 CRORES. IN OTHER WORDS, THE ASSESSEE HAD SUFFICIENT FUNDS F OR MAKING THE INVESTMENTS AND IT HAD NOT USED THE BORROWED FUNDS FOR SUCH PURPOSE. THIS ASPECT OF HUGE SURPLUS FUNDS IS NOT DISPUTED BY THE REVENUE WHICH EARNED IT THE INTERES T ON BONDS AND DIVIDEND INCOME. WITH REGARD TO DISALLOWANCE OF 1% OF ADMINISTRATIVE EXPENSES AVERRED TO HAVE INCURRED ON ACCOUNT OF IHE EARNING OF INTEREST, THERE IS NOT HING ON RECORD TO INDICATE THAT THERE HAS ITA NO.1996 & 2140/AHD/2012 ASST. YEAR 2007-08 9 BEEN IN FACT ANY ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE FOR EARNING TAX FREE INCOME OF RS.I4 CRORES. IT IS ALSO TO BE NOTED THAT OUT OF THE TOTAL AMOUNT OF EXEMPT INCOME OF RS. 14 CRORES, THE ASSESSEE COULD POINT OUT THAT 6.12 C RORES (ROUNDED OIL) WAS EARNED BY 'S' PROJECT WHICH WAS UNDER CONSTRUCTION FOR WHICH NO E XPENDITURE HAD BEEN CLAIMED AND FOR THE REMAINING INCOME OF RS.7.88 CRORES WHICH CONSIS TS OF DIVIDEND AND TAX FREE INTEREST, NO PART OF EXPENDITURE APPEARS TO HAVE BEEN MADE TO WARDS THE INVESTMENT ACTIVITY AS EMERGING FROM THE MATERIAL. ACCORDING TO THE RESPON DENT, THE TOTAL INVESTMENT FROM THE HUGE SURPLUS IS COMPARATIVELY SMALL AND INVESTMENT MADE WAS EFFORTLESS, WITHOUT ANY BURDEN OF ADMINISTRATIVE EXPENSES. IN VIEW OF FACT THAT NO EXPENDITURE WAS INCUR RED FOR EARNING EXEMPTED INCOME AND THAT BEING THE QUESTION OF FACT, DISALLOWANCE OF 1% OF I NTEREST EXPENDITURE ARTIFICIALLY OR ON THE BASIS OF ASSUMPTION RIGHTLY HAS NOT BEEN SUSTAI NED BY THE TRIBUNAL. THE REVENUE'S APPEAL THEREFORE, REQUIRES NO FURTHER ENTERTAINMENT AND HENCE DISMISSED. 14. APPLYING THE FACTS OF THE CASE IN THE LIGHT OF DECISION OF JURISDICTIONAL HIGH COURT IN THE ABOVE REFERRED CAS E WE FIND THAT AS ON 31.3.2007 THE TOTAL OF SHARE CAPITAL AND RESERVE & SURPLUS OF THE ASSESSEE STOOD AT RS.184.92 CRORES AND INVESTMENTS IN EQUITY SHARES AND GOVT. SECURITIES AT RS.2.01 CRORES WHICH MEANS THAT ONLY 1.08% OF THE TOTAL OF SHARE CAPITAL AND RESERVE & SURPLUS HAS BEEN INVESTED IN EQUITY SHARES AND UNQUOTED GOVERNMENT SECURITIES AND ALSO THERE HAS NOT BEEN ANY MAJOR INVESTMENT DURING THE YEAR U NDER APPEAL INCURRED AS THE FIGURE IN BOTH THE YEARS IS APPROX . RS.2 CRORES AND THERE IS MINOR DECREASE IN INVESTMENT IN NSC WHICH HAS SCALED DOWN FROM RS.1,56,000/- TO RS.1,09,000/-. 15. IN VIEW OF OUR ABOVE DISCUSSION AND RESPECTFULL Y FOLLOWING THE DECISION OF HON. JURISDICTIONAL HIGH COURT IN THE C ASE OF CIT VS. TORRENT POWER (SUPRA) AND ALSO LOOKING TO THE RELAT ED FACTS AND FIGURES OF ASSESSEE WE ARE OF THE VIEW THAT LOOKING TO THE HUGE BASE OF CAPITAL AND FREE RESERVE AND SURPLUS VIS--VIS M INOR INVESTMENT IT CAN BE EASILY INFERRED THAT MOST PROBABLY NON-INTER EST BEARING FUNDS ITA NO.1996 & 2140/AHD/2012 ASST. YEAR 2007-08 10 HAVE BEEN INVESTED IN THE INVESTMENTS. ACCORDINGLY, WE DELETE THE ADDITION OF RS.5,88,998/- MADE U/S 14A OF THE ACT A ND ALLOW THIS GROUND OF ASSESSEE. 16. GROUND NO.4 IS GENERAL IN NATURE AND NEEDS NO A DJUDICATION. 17. NOW WE TAKE UP REVENUES APPEAL IN ITA NO.2140/AHD/2012 FOR ASST. YEAR 2007-08 WHEREIN FOLLOWING GRIEVANCES HAVE BEEN RAISED: 1. THAT THE ID. CIT(A) HAS ERRED IN LAW AND ON FACT S IN DIRECTING TO ALLOW DEDUCTION OF EMPLOYEES CONTRIBUTION TO PF/ESIC PAID BEFORE DUE D ATE OF FILING RETURN DESPITE THE FACT THAT SUCH LATE PAYMENTS ARE REQUIRED TO BE TREATED AS INCOME U/S 2(24)(X) READ WITH SECTION 36(1 )(VA) OF THE ACT. 2. THAT THE ID. CIT(A) HAS ERRED IN LAW AND ON FACT S IN DELETING THE ADDITION OF S.5,88,998/- TO THE BOOK PROFIT U/S 115JB OF THE AC T DESPITE THE FACT THAT DISALLOWANCE U/S 14A IS TO BE ADDED TO BOOK PROFIT AS PER EXPLANATION (1)(C) TO SECTION 115JB(2) OF THE ACT. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE ID. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER T O THE EXTENT MENTIONED ABOVE SINCE THE ASSESSEE HAS FAILED TO DISCLOSE HIS TRUE INCOME/BOOK PROFIT. THE APPELLANT PRAYS THAT THE ORDER OF ID. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED TO THE ABOVE EXTENT. THE APPELLANT CRAVES, TO LEAVE, TO AMEND OR ALTER ANY G ROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 18. THIS APPEAL WAS PRESENTED ON 26/9/2012. ON 10. 12.2015 THE CBDT HAS ISSUED INSTRUCTIONS BEARING NO. 21/2015 PR OHIBITING ITS ITA NO.1996 & 2140/AHD/2012 ASST. YEAR 2007-08 11 SUBORDINATE AUTHORITIES FROM FILING OF THE APPEAL T O THE TRIBUNAL AGAINST THE ORDER OF THE CIT(A) WHERE THE TAX EFFEC T BY VIRTUE OF THE RELIEF GIVEN BY THE CIT(A) IS LESS THAN RS.10 LAKHS . THE INSTRUCTIONS HAVE BEEN MADE APPLICABLE WITH RETROSPECTIVE EFFECT , MEANING THEREBY, THESE INSTRUCTIONS ARE APPLICABLE ON PENDI NG APPEALS ALSO. THE TAX EFFECT ON DELETION OF THIS TOTAL ADDITION W OULD BE LESS THAN RS.10 LAKHS. THE PRESENT APPEAL DESERVES TO BE DISM ISSED BEING TREATED TO BE FILED IN VIOLATION OF CBDT INSTRUCTIO NS. THE CASE DOES NOT FALL WITHIN THE AMBIT OF EXCEPTIONS PROVIDED IN THE INSTRUCTIONS. IT IS FURTHER OBSERVED THAT SINCE, WHILE HEARING THE APPE AL, SUCH FACTORS WERE NOT CONSIDERED, THEREFORE, IN CASE, ON RE-VERI FICATION AT THE END OF THE AO, IT CAME TO THE NOTICE THAT THE TAX EFFEC T IS MORE OR IT FALLS WITHIN THE AMBIT OF EXCEPTIONS PROVIDED IN THE INST RUCTION, THEN THE DEPARTMENT WILL BE AT LIBERTY TO APPROACH THE TRIBU NAL FOR RECALL OF THIS ORDER. SUCH APPLICATION SHOULD BE FILED WITHIN FOU R YEARS OF THIS ORDER. IN VIEW OF THE ABOVE, THE APPEAL OF THE REVENUE IS DISMISSED. 19. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED AND THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2/3/ 2016 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 2/3 /2016 MAHATA/- ITA NO.1996 & 2140/AHD/2012 ASST. YEAR 2007-08 12 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 17/02/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 24/02/2016 OTHER MEMBER: 3. DATE ON WHICH 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.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK:2 /3/16 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: