SUN-N-SAND HOTELS P LTD, MUMBAI V. DCIT CIR 8(3), MUMBAI

ITA 2041/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4123 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 25-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Keywords: Earning of tax free income; Question of law; Capital receipt
• Section: 143(3); 14A; 260A; 80IB

Judgement Text

1 ( ) SUN - N - SAND HOTEL ( MUMBAI ) PVT LTD ITA NO. 2390/MUM/2014 SUN - N - SAND HOTEL PVT LTD ITA NO. 2041/MUM/2014 E IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E , MUMBAI , , BEFORE SHRI B R BASKARAN , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER ITA NO. 2390 /MUM/201 4 (ASSESSMENT YEAR 200 8 - 0 9 ) ( ) SUN - N - SAND HOTEL ( SHIRDI ) PVT LTD , 39, JUHU BEACH, MUMBAI - 400 049 PAN: AABCS 3521 J VS DCIT CIR. 8(3), 2 ND FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRAKASH JOTWANI RESPONDENT BY : SHRI A K NAYAK ITA NO. 2041/MUM/2014 (ASSESSMENT YEAR 20 08 - 09 ) SUN - N - SAND HOTEL PVT LTD , 39, JUHU BEACH, MUMBAI - 400 049 PAN: AAACS 5521 P VS DCIT CIR. 8(3), 2 ND FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRAKASH JOTWANI RESPONDENT BY : SHRI A K NAYAK /DATE OF HEARING : 12 - 04 - 201 6 /DATE OF PRONOUNCEMENT : 12 - 04 - 2016 ORDER , . : - PER AMIT SHUKLA, J. M. : T HE AFORESAID APPEAL S HA VE BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 1 7 TH FEBRUARY, 2014 AND 21 ST FEBRUARY, 2014 PASSED BY CIT(A) - 18, MUMBAI FOR THE QUANTUM OF 2 ( ) SUN - N - SAND HOTEL ( MUMBAI ) PVT LTD ITA NO. 2390/MUM/2014 SUN - N - SAND HOTEL PVT LTD ITA NO. 2041/MUM/2014 ASSESSMENT PASSED UNDER SECTION 143(3) FOR THE ASSESSEE YEAR 2008 - 09 ALONG WITH OTHER ASSESSMENT YEAR. SINCE COMMONS ISSUES ARE INVOLVED IN BOTH THE APPEALS, THEREFORE, SAME WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS CONSOLIDATED ORDER. FOR THE SAKE OF READY REFERENCE, THE GROUNDS OF APPEAL IN ITA NO.2390/MUM/2014 IS REPRODUCED HEREIN BELOW: - GROUND NO. 1: TAXING OF SALES TAX BENEFIT RECEIVED UNDER POWER POLICY IN RESPECT OF WIND MILLS : ( A ) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE TEAMED COMMISSIONER OF INCOME - TAX (APPEALS) {C.I.T. (A)} ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF TREATING THE SALES TAX SUBSIDY BEING SALES TAX BENEFIT OF RS. 56,00 835 / - AS REVENUE RECEIPT LIABLE TO TAX WHICH WAS RECEIVED BY THE APPELLANT UNDER POWER POLICY OF THE STATE GOVERNMENT AS INCENTIVE FOR SETTING UP WINDMILLS IN THE MAHARASHTRA STATE. HE FURTHER ERRED IN NOT ACCEPTING THE CONTENTIONS OF THE APPELLANT THAT THE SAI D RECEIPT WAS A CAPITAL RECEIPT NOT LIABLE TO TAX. ( B ) THE L D. C.I.T. (A) ERRED IN NOT APPRECIATING THE FACT THAT THE SAID SUBSIDY WAS FOR THE PURPOSE OF GIVING AN INCENTIVE TO SET UP THE INFRASTRUCTURE IN THE FORM OF WINDMILL TO GENERATE POWER IN THE STATE AND NOT TO MEET THE COST OF THE WINDMILL OR TO AUGMENT THE PROFIT OF THE APPELLANT AND AS SUCH APPLYING THE 'PURPOSE TEST' AS DEFINED BY THE SUPREME COURT IN THE CASE OF CIT VERSUS PONNI SUGARS & CHEMICALS LTD. 1[2008] 306 ITR 392 (SC)}, THE SAME WAS IN TH E NATURE OF CAPITAL SUBSIDY NOT LIABLE TO TAX. GROUND NO. 2: DISALLOWANCE OF EXPENSES U/S. 14 - A READ WITH RULE 8 - D: ( A ) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE L D. CIT(A) ERRED IN NOT DELETING THE DISALLOWANCE OF RS. 26,009/ - MADE BY THE A.O. U/S. 14 - A READ WITH RULE 8 - D INSTEAD DIRECTING HIM TO MAKE THE DISALLOWANCE AS PER RULE 8 - D. ( B ) THE L D. C I T(A) FAILED TO APPRECIATE THAT THE AO HAS NEITHER RECORDED ANY SATISFACTION WITH REGARD TO CORRECTNESS OF THE CLAIM OF THE APPELLANT HAVING REGARD TO THE ACCOUNTS NOR DID ANY FURTHER VERIFICATION AS TO WHICH EXPENSES HAD ANY NEXUS WITH THE EXEMPT INCOME OF THE APPELLANT AND AS SUCH NO DISALLOWANCE COULD HAVE BEEN MADE U/S. 14A OF THE ACT. ( C ) THE LD.CIT(A) ERRED IN NOT FOLLOWING THE DECISIONS RELIED UPON BY THE APPELLANT INCLUDING OF THE ITAT, MUMBAI IN THE CASE OF RAJ SHIPPING AGENCIES LTD. VS. ADD L. CIT REPORTED IN [2013] 38 TAXMANN.COM 345 (MUMBAI) FOR A Y 2009 - 10. 3 ( ) SUN - N - SAND HOTEL ( MUMBAI ) PVT LTD ITA NO. 2390/MUM/2014 SUN - N - SAND HOTEL PVT LTD ITA NO. 2041/MUM/2014 GROUND NO. 3: DISALLOWANCE OF CLAIM FOR DEDUCTION U/S. 80 - IA( IV ) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE L D. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF DEDUCTION UNDER SECTION 80 - IA (4)(IV) OF THE ACT WITH REFERENCE TO THE INTEREST INCOME OF RS. 15,583/ - ON DELAYED PAYMENT OF SALE PROCEEDS MADE BY THE AO. THE L D. CIT(A) ERRED IN FAILING TO APPRECIATE THAT THE INTEREST WAS RECEIVED BY THE APPELLANT ON THE DELAYED PAYMENT OF SALE PROCEEDS AND AS HELD BY THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. VIDHYUT CORP ORATION [2010] 324 ITR 221 (BOM), THE SAID INTEREST IS ASSESSABLE AS INCOME FROM ELIGIBLE BUSINESS AND ALSO ELIGIBLE FOR DEDUCTION U/S. 804A. GROUND NO. 4: LEVY OF INTEREST U/S. 234 - C: ON THE FACTS AND CIRCUMSTANC ES OF THE CASE AND IN LAW, THE L D. CIT(A) ERRED IN CONFIRMING THE LEVY OF INTEREST OF RS. 8,759/ - U/S. 234 - C OF THE ACT, WHICH LIABILITY IS DENIED BY THE APPELLANT . 2. SO FAR AS ISSUE RELATING TO GROUND NO.1, THAT IS, TAXING OF SALES - TAX SUBSIDY OF RS.56,00,850/ - AS REVENUE RECEIPTS INSTEAD OF CAPITAL, IT HAS BEEN ADMITTED BY BOTH THE PARTIES THAT, THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL AND THE MATTER IS ADMITTED BEFORE THE HONBLE HIGH COURT. THE ASSESSEE HAS FILED DECLA RATION UNDER SECTION 158A(1) CLAIMING THAT IDENTICAL QUESTION OF LAW IS PENDING BEFORE THE HONBLE HIGH COURT AND WHATEVER MAY BE THE FINAL DECISION ON THE QUESTION OF LAW, THE SAME SHALL BE FOLLOWED AND ASSESSEE WILL NOT RAISE ANY QUESTION BEFORE ANY APPE LLATE AUTHORITY OR BEFORE THE HIGH COURT UNDER SECTION 260 A . THE REVENUE HAS ALSO GIVEN I T S REPORT ON SUCH DECLARATION , WHICH IS REPRODUCED HEREUNDER: - THE COPIES OF DECLARATION UNDER SECTION 158A(1) FOR AYS 2006 - 07, 2007 - 08 & 2008 - 09 SUBMITTED BY THE A SSESSEE BEFORE THE ITAT AND APPEAL FILED BY THE ASSESSEE UNDER SECTION 260A FOR AY 2005 - 06 VIDE ITA NO.1167 OF 2014, HAVE BEEN PERUSED. THE ASSESSEES CONTENTION IS THAT ITS GROUND OF APPEAL AGAINST THE CIT(A) CONFIRMING THE ADDITIONS MADE BY TREATING SALE S TAX BENEFIT AS REVENUE RECEIPT IN AY 2005 - 06, 2006 - 07 & 2008 - 09 RESPECTIVELY, IS IDENTICAL TO THE QUESTION OF 4 ( ) SUN - N - SAND HOTEL ( MUMBAI ) PVT LTD ITA NO. 2390/MUM/2014 SUN - N - SAND HOTEL PVT LTD ITA NO. 2041/MUM/2014 LAW INVOLVED IN ITS APPEAL FILED U/S 260A BEFORE THE HONBLE BOMBAY HIGH COURT, FOR AY 2005 - 06, WHICH IS PENDING AS ON DATE. THE YEAR - WISE ADDIT IONS MADE IN RESPECT OF SALES - TAX SUBSIDY ARE AS UNDER: AY 2006 - 07 RS.74,67,780/ - AY 2007 - 08 RS.58,08,273/ - AY 2008 - 09 RS.56,00,835/ - 3. ON PERUSAL OF THE CASE RECORDS, IT IS NOTICED THAT IN THE RETURN OF INCOME FOR AY 2005 - 06, THE SALES TAX BEN EFIT OF RS.65,55,051/ - RELATED TO THE ASSESSEES WIND FARM PROJECT IN MAHARASHTRA, WAS TREATED BY THE ASSESSEE AS A CAPITAL RECEIPT. THE SAID RECEIPT WAS ON ACCOUNT OF TRANSFER OF SALES TAX BENEFIT/ ENTITLEMENT TO M/S TATA MOTORS LTD. UNDER THE AGREEMENT F OR TRANSFER OF SALES TAX INCENTIVE AVAILABLE FROM WIND FARM PROJECT. IN THE ASSESSMENT ORDER, THE SAID AMOUNT WAS TAXED AS REVENUE RECEIPT. THE CIT(A) AND THE ITAT CONFIRMED THE TAXING OF THE SAID BENEFIT AS REVENUE RECEIPT. 4. SIMILARLY IN AYS 2006 - 07, 2 007 - 08 & 2008 - 09, THE SALE TAX BENEFIT OF RS.74,67,780/ - , RS.58,08,273/ - & RS.56,00,835/ - RESPECTIVELY, HAS BEEN CLAIMED TO BE CAPITAL RECEIPT BY THE ASSESSEE, WHICH HAS BEEN TAXED AS REVENUE RECEIPT IN THE ASSESSMENT ORDER. HENCE, THE AGREEMENT FOR TRANSF ER OF SALES TAX INCENTIVE WAS WITH ANOTHER CONCERNS, M/S JEWEL OF INDIA, M/S PADMASHREE DR. V V PATIL SAHAKARI SAKHAR KARKHANA LTD AND CROMPTON GREAVES LTD. THE CIT(A) HAS CONFIRMED THE ASSESSMENT ORDER ON THIS ISSUE AND THE ASSESSEE IS IN APPEAL BEFORE TH E ITAT. 5. IN THE LIGHT OF THE ABOVE FACTS, THE ASSESSEES CONTENTION THAT THE ISSUE INVOLVED IN THE GROUND OF APPEAL IN ASSESSEES 5 ( ) SUN - N - SAND HOTEL ( MUMBAI ) PVT LTD ITA NO. 2390/MUM/2014 SUN - N - SAND HOTEL PVT LTD ITA NO. 2041/MUM/2014 APPEAL NOS. 2388 TO 2396/M/2012 BEFORE THE ITAT FOR AYS 2006 - 07 TO 2008 - 09 RESPECTIVELY (COPIES OF GROUNDS OF APPEAL FOR T HE THREE ASSESSMENT YEARS ARE ENCLOSED), IS FOUND TO BE IDENTICAL TO THE ISSUE INVOLVED IN ITS PENDING APPEAL U/S 260A BEFORE THE HIGH COURT IN APPEAL NO.ITXA/1167/2014 FOR AY 2005 - 06 (COPIES OF STATEMENT OF FACTS AND QUESTION OF LAW ARE ENCLOSED). THE ON LY DIFFERENCE IN THE TWO APPEALS, AS POINTED IN PARA NO.7, IS IN THE NAME OF THE PURCHASER OF SALES TAX BENEFIT AND THE AMOUNTS. A CCORDINGLY, GROUND NO. 1 IS TREATED AS DISMISSED. 3. AS REGARDS THE DISALLOWANCE OF EXPENDITURE UNDER SECTION 14A R.W. RULE 8D, THE RELEVANT FACTS ARE THAT, THE ASSESSEE HAS SHOWN DIVIDEND INCOME FROM MUTUAL FUNDS AND FROM SHARE S AMOUNTING TO RS.3,95,723/ - . A PART FROM THAT, ASSESSEE HAS ALSO MADE INVESTMENTS IN THE FORM OF CAPITAL IN THE PARTNERSHIP FIRM, THE SHARE PROFIT OF WHICH IS ALSO EXEMPT FROM TAX. THE AO, WORKED OUT THE DISALLOWANCE OF RS.20,009/ - IN ACCORDANCE WITH THE RULE 8D , WHICH HAS BEEN CONFIRMED BY THE CIT(A) ALSO. 4. BEFORE US, THE LD. COUNSEL SUBMITTED THAT, SO FAR AS THE INVESTMENT IN PARTNERSHIP FIRM IS CONCERNED, THE SAME WAS PURELY IN THE NATURE OF STRATEGIC INVESTMENT AND NO SHARE INCOME HAS BEEN RECEIVED IN THIS YEAR AND THEREFORE , TO THE EXTENT OF INVESTMENT MADE IN PARTNERSHIP FIRM SAME SHOULD BE REMOVED FROM WORKING OF RULE 8D. IN SUPPORT, HE RELI ED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS DELITE ENTERPRISE S . 5. ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON THE ORDER OF THE CIT(A). 6 ( ) SUN - N - SAND HOTEL ( MUMBAI ) PVT LTD ITA NO. 2390/MUM/2014 SUN - N - SAND HOTEL PVT LTD ITA NO. 2041/MUM/2014 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ON PERUSAL OF THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW, IT IS NOTICED THAT SO FAR AS DISALLOWANCE UNDER SECTION 14A IS CONCERNED, THE SAME IS REQUIRED TO BE MADE , AS THE ASSESSEE HAS EARNED EXEMPT INCOME FOR WHICH NO EXPENDITURE HAS BEEN ALLOCATED OR OFFERED FOR THE PURPOSE OF DISALLOWANCE UNDER SECTION 14A. ONLY ISSUE CANVASSED BEFORE US BY THE LD. COUNSEL IS THAT, INVESTMENT MADE IN THE PARTNERSHIP FIRM SHOULD BE REMOVED FROM THE WORKING OF RULE 8D AND ACCORDINGLY DISALLOWANCE SHOULD BE CALCULATED AND MODIFIED. TO THIS EXTENT, WE AGREE WITH THE CONTENTION RAISED BY THE LD. COUNSEL AND DIRECT THE AO THAT, IN SO FAR AS INVESTMENT IN PARTNERSHIP FIRM IS CONCERNED, WHICH IS A STRATEGIC INVESTMENT, THE SAME SHOULD BE EXCLUDED FROM THE WORKING OF THE VALUE OF AVERAGE INVESTMENT AS PROVIDED IN RULE 8D (2)(III) . ACCORDINGLY, DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D( 2 ) SHOULD BE WORKED OUT AFTER REMOVING THE INVESTMENT MADE IN PARTNERSHIP FIRM FROM THE AVERAGE INVESTMENT . THUS, GROUND NO.2 IS DECIDED ACCORDINGLY. 7. AS REGARDS DISALLOWANCE OF CLAIM OF DEDUCTION UNDER SECTION 80IA(4), THE LD. COUNSEL SUBMITTED THAT, THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF HONBLE TRIBUNAL IN THE CASE OF SUN N SAND HOTELS P. LTD IN ITA NO. 564 5 /MUM/2012 VIDE ORDER DATED 19.05. 2014 FOR THE ASSESSMENT YEAR 2009 - 10. LD. DR RELIED ON THE ORDER OF THE AO. 8. AFTER CONSIDERING THE SUBMISSION MADE BY THE LD. COUNSEL AND THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS, IT IS NOTICED THAT THE NATURE OF INTEREST IS ON ACCOUNT OF DELAYED PAYMENT OF SALE PROCEEDS AND NOT ON SOME FIXED DEPOSITS. THE ALLOWABILITY OF DEDUCTION UNDER SECTION 80IA ON SUCH AN INTEREST, I.E. ON DELAYED PAYMENT OF SALE PROCEEDS STANDS COVERED BY THE DECISION OF THE H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. VIDHYUT 7 ( ) SUN - N - SAND HOTEL ( MUMBAI ) PVT LTD ITA NO. 2390/MUM/2014 SUN - N - SAND HOTEL PVT LTD ITA NO. 2041/MUM/2014 CORPORATION [2010] 324 ITR 221 (BOM) . T HE TRIBUNAL ALSO IN AY 2009 - 10 IN ASSESSEES OWN CASE AFTER FOLLOWING THE PRINCIPLE LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE ABOVE CASE HAS DECIDED THIS ISSUE IN THE FOLLOWING MANNER: 6. AFTER CAREFULLY CONSIDERING THE RIVAL SUBMISSIONS AND ALSO THE FACTS AND MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF GENERATION OF POWER FROM WINDMILL AND SALE THEREOF. THE ASSESSEE HAS SOLD ITS POWER GENERATED FROM ITS WINDMILL TO MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. THE SAID COMPANY DID NOT PAY FULL CONSIDERATION TO THE ASSESSEE FROM THE PERIOD FROM JANUARY 2002 TO APRIL 2003. THEREAFTER, IN TERMS OF APPELLATE TRIBUNAL FOR ELECTRICITY, NEW DELHI, VIDE ORDER DATED 5TH FEBRUARY 20 08, THE SAID COMPANY AGREED TO PAY THE INTEREST ON THE ARREARS FOR THE ABOVE PERIOD. THE SAID INTEREST WAS QUANTIFIED ON ACCOUNT OF DELAYED PAYMENT OF RS. 10,41,315 / - WHICH WAS RECEIVED ON 30TH AUGUST 2008. IN THE CASE BEFORE THE BOMBAY HIGH COURT IN VIDYUT CORP. (SUPRA), THE ASSESSEE WAS AN INDUSTRIAL UNDERTAKING ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB. IT HAS RECEIVED INTEREST ON DELAYED PAYMENT ON SALE PRICE OF ITS PRODUCT HAD CLAIM DEDUCTION UNDER SECTION 80IB ON SUCH INTEREST. IN THAT CASE ALSO, THE D EPARTMENT HAS HELD THAT INTEREST RECEIVED COULD NOT BE REGARDED AS BEING DERIVED FROM THE INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF SECTION UNDER SECTION 80IB. THE JURISDICTIONAL HIGH COURT, AFTER REFERRING TO THE DECISION OF THE HON'BLE SUPREME COURT IN LIBERTY INDIA (SUPRA), HELD AS UNDER: HELD, THAT WHAT WAS RECEIVED BY THE ASSESSEE FROM THE PURCHASER WAS A COMPONENT OF INTEREST TOWARDS DELAYED PAYMENT OF THE PRICE OF THE GOODS SOLD, SUPPLIED AND DELIVERED BY THE ASSESSEE. THERE COULD BE NO DISPUTE ABOUT THE POSITION THAT THE PRICE REALIZED BY THE ASSESSEE FROM THE SALE OF GOODS MANUFACTURED BY THE PRICE REALIZED BY THE ASSESSEE FROM THE SALE OF GOODS MANUFACTURED BY THE INDUSTRIAL UNDERTAKING CONSTITUTED A COMPONENT OF THE PROFITS AND GAINS DERIVED FROM THE ELIGIBLE BUSINESS. THE PURCHASER, ON ACCOUNT OF THE DELAY IN PAYMENT OF THE SALE PRICE ALSO PAID INTEREST TO THE ASSESSEE. THIS FORMED A COMPONENT OF THE SALE PRICE ALSO PAID INTEREST TO THE ASSESSEE. THIS FORMED A COMPONENT OF THE SALE PRICE AND WAS PAID TOWARDS THE LAG WHICH HAD OCCURRED IN THE PAYMENT OF THE PRICE OF THE GOODS SOLD BY THE ASSESSEE. ON THESE FACTS, THEREFORE, THE PAYMENT OF INTEREST ON ACCOUNT OF THE DELAY IN PAYMENT OF THE SALE PRICE OF THE GOODS SUPPLIED BY THE UNDERTAKING PART OOK OF THE SAME NATURE AND CHARACTER AS THE SALE CONSIDERATION. 7. THUS, THE RATIO DECIDENDI DECIDED BY THE JURISDICTIONAL HIGH COURT ON SIMILAR SET OF FACTS, IS ALSO SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE AND RESPECTFULLY FOLLOWING THE SAID DECISION OF THE HIGH COURT, WE HOLD THAT THE DIRECTION GIVEN BY THE LEARNED COMMISSIONER 8 ( ) SUN - N - SAND HOTEL ( MUMBAI ) PVT LTD ITA NO. 2390/MUM/2014 SUN - N - SAND HOTEL PVT LTD ITA NO. 2041/MUM/2014 (APPEALS) IS LEGALLY AND FACTUALLY CORRECT AND THE SAME IS UPHELD. THUS, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED . ACCORDINGLY, WE DIRECT THE AO TO VERIFY THE NATURE OF DELAYED PAYMENT OF SALE PROCEEDS AND THE INTEREST THE REON AND THEN SAME RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT DECIDE THE ISSUE ACCORDINGLY . TH U S, GROUND NO. 3 IS TREATED AS ALLOWED. 9. AS REGARDS GROUND NO. 4 RELATING TO CHARGING OF INTEREST UNDER SECTION 234C, NO ARGUMENTS WERE PUT FORTH BEFORE US BY THE LD. COUNSEL AND ACCORDINGLY SAME IS TREATED AS DISMISSED AS NOT PRESSED. 10. NOW, COMING TO THE APPEAL IN ITA NO. 2041/MUM/2014, WE FIND EXACTLY SIMILAR GROUNDS HAVE BEEN RAISED, WHICH READS AS UNDER: - GROUND NO. 1 : TAXING OF SALES TAX BENEFIT RECEIVED UNDER POWER POLICY IN RESPECT OF WIND MILLS : ( A ) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE TEAMED COMMISSIONER OF INCOME - TAX (APPEALS) {C.I.T. (A)} ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF TREATING THE SALES TAX SUBSIDY BEING SALES TAX BENEFIT OF RS.2,02,04,360 / - AS REVENUE RECEIPT LIABLE TO TAX WHICH WAS RECEIVED BY THE APPELLANT UNDER POWER POLICY OF THE STATE GOVERNMENT AS INCENTIVE FOR SETTING UP WINDMILLS IN THE MAHARASHTRA STATE. HE FURTHER ERRED I N NOT ACCEPTING THE CONTENTIONS OF THE APPELLANT THAT THE SAID RECEIPT WAS A CAPITAL RECEIPT NOT LIABLE TO TAX. ( B ) THE LD. C.I.T. (A) ERRED IN NOT APPRECIATING THE FACT THAT THE SAID SUBSIDY WAS FOR THE PURPOSE OF GIVING AN INCENTIVE TO SET UP THE INFRASTRUCTURE IN THE FORM OF WINDMILL TO GENERATE POWER IN THE STATE AND NOT TO MEET THE COST OF THE WINDMILL OR TO AUGMENT THE PROFIT OF THE APPELLANT AND AS SUCH APPLYING THE 'PURPOSE TEST' AS DEFINED BY THE SUPREME COURT IN THE CASE OF CIT VERSUS PONNI SUGARS & CHEMICALS LTD. 1[2008] 306 ITR 392 (SC)}, THE SAME WAS IN THE NATURE OF CAPITAL SUBSIDY NOT LIABLE TO TAX. GROUND NO. 2 : DISALLOWANCE OF EXPENSES U/S. 14 - A READ WITH RULE 8 - D: ( A ) ON THE FACTS AND CIRCUMSTANC ES OF THE CASE AND IN LAW, THE L D. CIT(A) ERRED IN NOT DELETING THE DISALLOWANCE OF RS. 9,57,983 / - MADE BY THE A.O. U/S. 14 - A READ WITH RULE 8 - D INSTEAD DIRECTING HIM TO MAKE THE DISALLOWANCE AS PER RULE 8 - D. 9 ( ) SUN - N - SAND HOTEL ( MUMBAI ) PVT LTD ITA NO. 2390/MUM/2014 SUN - N - SAND HOTEL PVT LTD ITA NO. 2041/MUM/2014 ( B ) THE L D. C T T(A) FAILED TO APPRECIATE THAT THE AO HAS NEITHER RECORDED ANY SATISF ACTION WITH REGARD TO CORRECTNESS OF THE CLAIM OF THE APPELLANT HAVING REGARD TO THE ACCOUNTS NOR DID ANY FURTHER VERIFICATION AS TO WHICH EXPENSES HAD ANY NEXUS WITH THE EXEMPT INCOME OF THE APPELLANT AND AS SUCH NO DISALLOWANCE COULD HAVE BEEN MADE U/S. 14A OF THE ACT. ( C ) THE LD.CIT(A) ERRED IN NOT FOLLOWING THE DECISIONS RELIED UPON BY THE APPELLANT INCLUDING OF THE ITAT, MUMBAI IN THE CASE OF RAJ SHIPPING AGENCIES LTD. VS. ADD L. CIT REPORTED IN [2013] 38 TAXMANN.COM 345 (M UMBAI) FOR A Y 2009 - 10. GROUND NO. 3 : DISALLOWANCE OF CLAIM FOR DEDUCTION U/S. 80 - IA( IV ) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE L D. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF DEDUCTION UNDER SECTION 80 - IA (4)(IV) OF THE ACT WITH REFERENCE TO THE INTEREST INCOME OF RS. 29,461 / - ON DELAYED PAYMENT OF SALE PROCEEDS MADE BY THE AO. THE L D. CIT(A) ERRED IN FAILING TO APPRECIATE THAT THE INTEREST WAS RECEIVED BY THE APPELLANT ON THE DELAYED PAYMENT OF SALE PROCEEDS AND AS HELD BY THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. VIDHYUT CORPORATION [2010] 324 ITR 221 (BOM), THE SAID INTEREST IS ASSESSABLE AS INCOME FROM ELIGIBLE BUSINESS A ND ALSO ELIGIBLE FOR DEDUCTION U/S. 80 - IA(4) . AS ADMITTED BY BOTH THE PARTIES, THE ISSUE I NVOLVED IN THE AFORESAID APPEAL IS EXACTLY SAME, THEREFORE FINDING GIVEN HEREINABOVE WILL APPLY IN THIS APPEAL ALSO. SO FAR AS GROUND NO.1 IS CONCERNED, SAME IS TREATED AS DISMISSED IN VIEW OF THE ASSESSEES APPLICATION FILED UNDER SECTION 158( 1 ); AS REGARD ISSUE OF DISALLOWANCE UNDER SECTION 14A, THE SAME IS SET ASIDE TO THE FILE OF THE AO TO VERIFY THE EXTENT OF INVESTMENT MADE IN THE PARTNERSHIP FIRM AND ACCORD INGLY SUCH AN INVESTMENT SHOULD BE REMOVED FROM THE WORKING VALUE OF AVERAGE INVESTMENT FOR THE PURPOSE OF CALCULATING THE DISALLOWANCE UNDER RULE 8D (2)(III ) AND LASTLY , AS REGARD DISALLOWANCE U/S 80IA( IV ) IS CONCERNED, FOLLOWING THE JUDGMENT OF HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. VIDHYUT CORPORATION [2010] 324 ITR 221 (BOM) AND THE TRIBUNAL ORDER FOR AY 2009 - 10, THE ISSUE IS DECIDED ACCORDINGLY. THUS, GROUND RAISED BY THE ASSESSEE ARE TREATED AS PARTLY ALLOWED. 10 ( ) SUN - N - SAND HOTEL ( MUMBAI ) PVT LTD ITA NO. 2390/MUM/2014 SUN - N - SAND HOTEL PVT LTD ITA NO. 2041/MUM/2014 11. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH APRIL, 2016. SD/ - SD/ - ( ) ( ) (B R BHASKARAN ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 12 TH APRIL , 2016 /COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT(A) - 18 , MUMBAI. 4 ) THE COMMISSIONER OF INCOME TAX - 8 , MUMBAI. 5 ) , , / THE D.R. E BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / , ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS