ACIT, CHENNAI V. Farida Shoes Pvt. Ltd., CHENNAI

ITA 2102/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8329 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 30-10-2015
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: MRS S VIDYA
• Keywords: Earning of tax free income; Question of law
• Section: 43B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , ! ' , # $% BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ ITA NOS. 2102 & 2103/MDS/2015 / ASSESSMENT YEARS : 2011-12 & 2012-13 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CORPORATE CIRCLE 2(1), CHENNAI-34. ( /APPELLANT) VS M/S. FARIDA SHOES PVT. LTD., NO.151/4, MOUNT POONAMALLEE ROAD, RAMAPURAM, CHENNAI 600 089. PAN AAACF0496Q ( /RESPONDENT) / APPELLANT BY : SHRI P. RADHAKRISHNAN, JCIT / RESPONDENT BY : MRS. S. VIDYA, CA / DATE OF HEARING : 16.12.2015 ! / DATE OF PRONOUNCEMENT : 08.01.2016 & / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINS T THE COMMON ORDER OF THE COMMISSIONER OF INCOME-TAX(APPE ALS) DATED 18.5.2015 FOR THE ASSESSMENT YEARS 2011-12 & 2012-13. - - ITA 2102 & 2103/15 2 2. THE FIRST COMMON GROUND IN THESE APPEALS IS WITH REGARD TO DISALLOWANCE U/S.14A R.W. RULE 8D OF THE I.T.RUL ES. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS INVESTED A SUM OF ` 7,26,93,072/- AND ` . 8,98,00,072/- IN SHARES/MUTUAL FUNDS FOR THE ASSESSMENT YEARS ENDING ON 31.3.2011 AND 31.3.2012 RESPECTIVELY. THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SEC.14A R. RULE 8D OF THE IT RULES, W ORKED OUT THE DISALLOWANCE AT ` 63,78,704/- AND ` 42,69,311/- FOR THE ASSESSMENT YEARS 2011-12 AND 2012-13 RESPECTIVELY. ON APPEAL, THE COMMISSIONER OF INCOME-TAX(APPEALS) THO UGH CONFIRMED THE INVOKING OF PROVISIONS OF SEC.14A R.W . RULE 8D, HE OBSERVED THAT INTEREST PAID TO VARIOUS PARTIES IS R ELATING TO PACKING CREDIT, LETTERS OF CREDIT AND TERM LOANS, W HICH ARE DIRECTLY ATTRIBUTABLE TO THE ASSESSEES BUSINESS OF MANUFACT URING AND EXPORT OF SHOES AND IT DOES NOT RELATE TO ANY AMOUN T INVESTED IN THE SHARES/MUTUAL FUNDS. ACCORDING TO HIM, ONLY IN DIRECT INTEREST EXPENSES TO BE CONSIDERED FOR DISALLOWANCE U/S.14A R.W. RULE 8D OF THE I.T.RULES. ACCORDINGLY, THE COMMISSIONER OF INCOME- TAX(APPEALS) CONFIRMED THE DISALLOWANCE OF ` 8,93,146 AND ` 10,43,008/- FOR THE ASSESSMENT YEARS 2011-12 AND 20 12-13 - - ITA 2102 & 2103/15 3 RESPECTIVELY. AGAINST THIS, THE REVENUE IS IN APPE AL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. THE LD. DR SUBMITTED THAT THERE IS NO D OCUMENTARY EVIDENCE AVAILABLE TO SHOW THAT THE LOANS AVAILED B Y THE ASSESSEE WERE FOR THE BUSINESS PURPOSES AND THE COM MISSIONER OF INCOME-TAX(APPEALS) HAS GIVEN A RELIEF TO THE AS SESSEE AFTER CONSIDERING THE DETAILS OF THE LOANS BORROWED BY TH E ASSESSEE THOUGH THESE DOCUMENTS WERE NOT BEFORE THE AO FOR H IS EXAMINATION. ON THE OTHER HAND, THE LD. AR SUBMIT TED THAT ALL FINANCIAL STATEMENTS WERE PART OF THE RETURN OF INC OME OF THE ASSESSEE WHICH WERE VERY MUCH AVAILABLE BEFORE THE AO AT THE TIME OF ASSESSMENT PROCEEDINGS AND FROM THAT ONLY, HE CAME TO THE CONCLUSION THAT THERE WAS INVESTMENT IN SHARES/ MUTUAL FUNDS AND INVOKED THE PROVISIONS OF SEC.14A R.W. RULE 8D OF THE I.T.RULES. 5. IN OUR OPINION, THERE IS MERIT IN THE PLEA OF TH E LD. AR AND IT CANNOT BE SAID THAT THE BALANCE-SHEET AND PROFIT AND LOSS ACCOUNT PRODUCED BY THE ASSESSEE WERE NOT AVAILABLE BEFORE THE AO AS THESE ARE PART OF RETURN OF INCOME OF THE ASS ESSEE. THE DETAILS OF LOANS, PACKING CREDIT, LETTERS OF CREDIT AND TERM LOANS - - ITA 2102 & 2103/15 4 WERE AVAILABLE FROM THE FINANCIAL STATEMENTS FOR TH E PURPOSE OF BUSINESS AND THE DETAILS OF INTEREST PAID OUT OF BO RROWINGS WERE VERY MUCH REFLECTED IN THE P&L ACCOUNT. WHEN THE D ETAILS ARE VERY MUCH AVAILABLE IN THE RETURNS OF INCOME, THE D EPARTMENT IS PRECLUDED FROM SAYING THAT THERE IS ADMISSION OF EV IDENCE BEFORE THE COMMISSIONER OF INCOME-TAX(APPEALS). SO, IT CA NNOT BE SAID THAT THERE IS VIOLATION OF RULE 46A OF THE I.T.RULE S. 5.1 COMING TO THE MERITS OF THE ISSUE REGARDING DIS ALLOWANCE U/S.14A R.W. RULE 8D OF THE I.T.RULES, IN OUR OPINI ON, SIMILAR ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN THE CASE O F ACIT V. M/S. BEST & CROMPTON ENGINEERING LTD. IN ITA NO.1603/MDS /2012 DATED 16.7.2013, WHEREIN IT WAS OBSERVED THAT INTER EST ON BORROWINGS USED FOR THE BUSINESS PURPOSE CANNOT BE CONSIDERED FOR THE PURPOSE OF COMPUTING DISALLOWANCE U/S.14A R .W. RULE 8D(2)(II) OF THE IT RULES AND THE RELEVANT PORTION IS REPRODUCED AS BELOW: 10. HEARD BOTH SIDES. PERUSED THE ORDERS OF LOWER AUTHORITIES AND THE DECISION OF CALCUTTA BENCH OF T HIS TRIBUNAL RELIED ON BY THE ASSESSEES COUNSEL. THIS ISSUE HAS BEEN CONSIDERED ELABORATELY BY THE COMMISSIONER OF INCOME TAX(APPEALS) AND DELETED THE INTEREST ON BAN K LOAN AND TERM LOANS WHICH WERE NOT UTILIZED FOR MAK ING ANY INVESTMENTS HAVING TAX FREE INCOME. WHILE HOLDI NG - - ITA 2102 & 2103/15 5 SO, THE COMMISSIONER OF INCOME TAX (APPEALS) HELD A S UNDER:- 5.2.1 HAV I NG HELD THAT PROVIS I ONS OF RU L E 0D ARE APPLICABLE , LET US NOW EXAMINE WHETHER THE AMOUNT HAS BEEN CORRECTLY QUANT I FIED. THE AO HAD CALCU LAT ED THE DISALLOWANCE AT ` NIL, ` 1,04,38,000/- AND ` 26,87,000/- UNDER (I), (I I ) & (III) OF RULE 80 ( 2)RESPECTIVELY . THERE IS NO DISPUTE REGARDING THE FIRST COMPONENT , BECAUSE IT IS N I L . WITH REGARD TO THE SECOND COMPONENT BE I NG THE EXPENDITURE BY W A Y O F INTEREST WHICH IS NOT DIRECT L Y AT T RIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT , THE AO HAS DE T ERMINED THE AMOUNT AT ` 1,04,38,000/ . THE AO HAS TAKEN I NTO ACCOUNT T H E ENT I RE IN T EREST EXPEND I TURE OF ` . 5 , 79 , 46 ,000 /- FOR COMPUT I NG THE ABOVE D I SALLOWA N CE . THE I D . AR , IN H I S SUBMISS I ON , HAS G I VEN THE BREAK-UP OF INTEREST WH I CH INCLUDES ( 1) I NTEREST ON BANK LOANS: ` 67,92 , 000/- (2) I NTEREST ON TERM LOANS ` 3,82 , 11 , 000/- AND (3) I NTEREST ON OTHER ACCOUNTS: ` 1,29 , 43,000/- . IF LOANS HAVE BEEN SANCT I ONED FOR SPEC I FIC PROJECTS/EXPANS I ON AND HAVE BEEN UT I LIZED TOWARDS THE SAME , THEN O B VIOUSLY THEY COULD NOT HAVE BEEN UTI L IZED FOR MAKING ANY INVESTMENTS HAVING TAX - FREE I NCOMES . FROM THE COPY OF THE SANCT I ON LETTERS FROM STATE BANK OF BIKANER & JAIPUR I T CAN BE SEEN THA T THE LOAN WAS GRANTED WITH A SPECIFIC R EQU I REMEN T T HA T THE LOAN SHAL L BE UTI L IZE D FOR PURCHASE OF IMPOR T ED M A CHINERY WHI L E IN THE CASE OF LOAN FR O M FE D ERA L B ANK , I T I S SE E N T HAT T HE LOAN WAS TO BE U T I LI ZED FO R EXPANSION OF P R O J EC T S. S AN C T ION O F B OTH THESE LOANS PROHIB I T U T I L IZAT I ON OF FUNDS FOR PURPOSES OTHER THAN FOR THE U TILIZAT I ON F OR WHICH T HEY ARE S A NCTIONED . FROM THE LEDGER EX T RACT FOR THE YEAR ENDED 3 1. 03 . 2008 FOR BOTH LOAN ACCOU N TS, IT I S SEEN THAT NO AMOUNT HAS BEEN UT I LIZED F OR INVES T MENT IN SUBSID I ARIES WH I C H EARNS TAX-FREE INCOME . T HE LOAN AMOUNTS WERE FUL L Y D I SBU R S ED A N D U T IL IZ ED IN T H E YEA R ENDED 3 1. 03.2008 (A . Y . 2008-09) I T SE L F. TAK I NG IN T O A L L THE F A CTS AS ST AT ED ABOVE, I AM OF THE CONS I DERED OPINION THAT IF - - ITA 2102 & 2103/15 6 LOANS/BO R ROWED AMOUNTS ARE G RANTED F OR SPEC IF IC P R O J EC T S/EXPANS I ON AND NO AMOUNT FROM THE SAME H A S BEEN D IRECTLY U TILI ZED FOR I NVESTMEN T S , TH EN THE F I RS T AN D SECOND LIMB OF RU L E 80 A TT RI BUT ING THE I N T EREST PAYMENTS T O T HE I N VES T MEN T S WI L L NOT BE APPLICABLE. ACCORDING L Y, IN TE RES T ON BANK LOAN AND TERM LOAN AMOUNT I NG TO ` 67 , 92 , 000/- AND ` 3,82, 1 1,000/- R ESPECTIVE L Y ARE TO BE EXC L UDED FROM T HE CA L CULATION TO DETERM I NE THE D I SAL L OWANCE UNDER RULE 8D(2)(II). THE AO IS , THEREFORE, DIREC T ED TO T AKE INTO ACCOUNT ONLY T HE R EMAINING INTERES T ON OTHER ACCOUNTS AMOUNTING TO ` 1 , 29 , 43,000/- FOR COMPUTING THE PROPO R TIONATE DISA L LOWANCE UNDER RULE 80(2)( I I) . 11. ON GOING THROUGH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), WE FIND THAT THE COMMISSIONER OF INCOME TAX (APPEALS) EXCLUDED THE INTEREST ON BANK LOAN AND TERM LOANS FROM THE CALCULATION OF DISALLOWANCE UNDER RULE 8D(2)(II) AS THE ASSESSEE HAS UTILIZED T HE BANK LOAN AND TERM LOAN FOR THE PURPOSE OF PURCHASE OF MACHINERIES AND FOR EXPANSION OF PROJECTS AND THESE LOANS WERE SPECIFICALLY SANCTIONED FOR SPECIFIC PRO JECT AND SUCH LOANS WERE ALSO USED FOR THE PURPOSE FOR W HICH THEY WERE SANCTIONED. IN THE CIRCUMSTANCES, WE FIND THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS RIGHTL Y EXCLUDED SUCH INTEREST FROM THE PURVIEW OF COMPUTAT ION OF DISALLOWANCE UNDER RULE 8D(2)(II). 12. THE DECISION OF CALCUTTA BENCH OF THIS TRIBUNAL IN THE CASE OF CHAMPION COMMERCIAL CO.LTD. (SUPRA) ALSO SUPPORTS THE VIEW OF THE COMMISSIONER OF INCOME TAX (APPEALS). THE TRIBUNAL HAD CONSIDERED A SITUATION WHEN THE LOANS WERE UTILIZED FOR THE PURCHASE OF MACHINE RIES, INTEREST ARISING OUT OF SUCH LOANS, WHETHER SUCH IN TEREST IS TO BE EXCLUDED FOR THE PURPOSE OF COMPUTING DISALLOWANCE UNDER RULE 8D(2)(II), THE TRIBUNAL HEL D THAT SUCH INTEREST HAS TO BE EXCLUDED. WHILE HOLDING SO, IT HAS HELD AS UNDER:- - - ITA 2102 & 2103/15 7 11. THERE IS NO DISPUTE ABOUT WORKING OF THIS METHOD SO FAR AS RULE 8D(2)(I) AND (III) IS CONCERN ED. IT IS ONLY WITH REGARD TO THE COMPUTATION UNDER RUL E 8D(2)(II) THAT THE ASSESSING OFFICER AND THE CIT(A) HAVE DIFFERENT APPROACHES. THIS PROVISION ADMITTEDLY DEALS WITH A SITUATION IN WHICH THE ASSESSEE HAS INCURRED EXPENDITURE BY WAY OF INTEREST DURING THE PREVIOUS YEAR WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT . CLEARLY, THEREFORE, THIS SUB CLAUSE SEEK S TO ALLOCATE COMMON INTEREST EXPENSES TO TAXABLE INCOME AND TAX EXEMPT INCOME. IN OTHER WORDS, GOING BY THE PLAIN WORDINGS OF RULE 8D(2)(II) WHAT IS SOUGHT TO BE ALLOCATED IS EXPENDITURE BY WAY OF INTEREST..WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT AND THE ONLY CATEGORIES OF INCOME AND RECEIPT, SO FAR AS SCHEME OF RULE 8 D IS CONCERNED, ARE MUTUALLY EXCLUSIVE CATEGORIES OF TAX EXEMPT INCOME AND RECEIPT AND TAXABLE INCOME AND RECEIPT. NO OTHER CLASSIFICATI ON IS GERMANE TO THE CONTEXT IN WHICH RULE 8 D IS SET OUT, NOR DOES THE SCHEME OF SECTION 14 A LEAVE ANY AMBIGUITY ABOUT IT. 12. IRONICALLY, HOWEVER, THE DEFINITION OF VARIABLE A EMBEDDED IN FORMULA UNDER RULE 8D(2)(II) IS CLEARLY INCONGRUOUS INASMUCH WHILE IT SPECIFICALLY EXCLUDES INTEREST EXPENDITURE DIRECTLY RELATED TO TAX EXEMPT INCOME, IT DOES NOT EXCLUDE INTEREST EXPENDITURE DIRECTLY RELATED TO TAXABLE INCOME. RESULTANTLY, WH ILE RULE 8D(2)(II) ADMITTEDLY SEEKS TO ALLOCATE EXPENDITURE BY WAY OF INTEREST, WHICH IS NOT DIREC TLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT I T ENDS UP ALLOCATING EXPENDITURE BY WAY OF INTEREST, WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULA R INCOME OR RECEIPT, PLUS INTEREST WHICH IS DIRECTLY ATTRIBUTABLE TO TAXABLE INCOME (EMPHASIS BY UNDERLINING SUPPLIED BY US). THIS INCONGRUITY WILL BE MORE GLARING WITH THE HELP OF FOLLOWING SIMPLE EXAMPLE: IN THE CASE OF A & CO LTD, TOTAL INTEREST EXPENDITURE IS ` 1,00,000, OUT OF WHICH INTEREST - - ITA 2102 & 2103/15 8 EXPENDITURE IN RESPECT OF ACQUIRING SHARES FROM WHICH TAX FREE DIVIDEND EARNED IS ` 10,000. OUT OF THE BALANCE ` 90,000, THE ASSESSEE HAS PAID INTEREST OF ` 80,000 FOR FACTORY BUILDING CONSTRUCTION WHICH CLEARLY RELATES TO THE TAXABLE INCOME. THE INTEREST EXPENDITURE WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR RECEIPT OR INCOME I S THUS ONLY ` 10,000. HOWEVER, IN TERMS OF THE FORMULA IN RULE 8D (2)(II), ALLOCATION OF INTEREST WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCO ME OR RECEIPT WILL BE FOR ` 90,000 BECAUSE, AS PER FORMULA THE VALUE OF A (I.E. SUCH INTEREST EXPENSES TO BE ALLOCATED BETWEEN TAX EXEMPT AND TAXABLE INCOME) WILL BE A = AMOUNT OF EXPENDITURE BY WAY OF INTEREST OTHER THAN THE AMOUNT OF INTEREST INCLUDED IN CLAUSE (I) [ I.E. DIRECT INTEREST EXPEN SES FOR TAX EXEMPT INCOME] INCURRED DURING THE PREVIOUS YEAR. LET US SAY THE ASSETS RELATING TO TAXABLE INCOME AND TAX EXEMPT INCOME ARE IN THE RATIO OF 4:1. IN SUCH A CASE, THE INTEREST DISALLOWABLE UNDE R RULE 8 D(2)(II) WILL BE ` 18,000 WHEREAS ENTIRE COMMON INTEREST EXPENDITURE WILL ONLY BE ` 10,000/-. 13. THE INCONGRUITY ARISES BECAUSE, AS THE WORDINGS OF RULE 8D(2)(II) EXIST, OUT OF TOTAL INTEREST EXPE NSES, INTEREST EXPENSES DIRECTLY RELATABLE TO TAX EXEMPT INCOME ARE EXCLUDED, INTEREST EXPENSES DIRECTLY RELATABLE TO TAXABLE INCOME, EVEN IF ANY, ARE NOT EXCLUDED. 14. THE QUESTION THEN ARISES WHETHER WE CAN TINKER WITH THE FORMULA PRESCRIBED UNDER RULE 8D(2)(II) OF THE INCOME TAX RULES, OR CONSTRUE IT ANY OTHER MANNER OTHER THAN WHAT IS SUPPORTED BY PLAIN WORDS OF THE RULE 8 D (2)(II). 15. WE FIND THAT NOTWITHSTANDING THE RIGID WORDS OF RULE 8D(2)(II), THE STAND TAKEN BY THE REVENUE AUTHORITIES ABOUT ITS APPLICATION, AS WAS BEFORE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG CO LTD VS DCIT (328 ITR 81) WHEN - - ITA 2102 & 2103/15 9 CONSTITUTIONAL VALIDITY OF RULE 8 D WAS IN CHALLENG E, IS THAT IT IS ONLY THE INTEREST ON BORROWED FUNDS THAT WOULD BE APPORTIONED AND THE AMOUNT OF EXPENDITURE BY WAY OF INTEREST THAT WILL BE TAKEN (AS 'A' IN THE FORMULA) WILL EXCLUDE ANY EXPENDITURE BY WAY OF INTEREST WHICH IS DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT (FOR EXAMPLEANY ASPECT OF THE ASSESSEE'S BUSINESS SUCH AS PLANT/MACHINERY ETC.). THEREFORE, IT IS NOT ONLY THE INTEREST DIRECTLY ATTRIBUTABLE TO TAX EXEMPT INCOME, I.E. UNDER RULE 6D(2)(I), BUT ALSO INTEREST DIRECTLY RELATABLE TO TAXABLE INCOME, WHICH IS TO BE EXCLUDED FROM THE DEFINITION OF VARIABLE A IN FORMULA AS PER RULE 6D(2)(II), AND RIGHTLY SO, BECAUSE IT IS ONLY THEN THAT COMMON INTEREST EXPENSES, WHICH ARE TO BE ALLOCATED AS INDIRECTLY RELATABLE TO TAXABLE INCOME AND TAX EXEMPT INCOME, CAN BE COMPUTED. THIS IS CLEAR FROM THE FOLLOWING OBSERVATIONS MADE BY THEIR LORDSHIPS OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE (SUPRA): 60. IN THE AFFIDAVIT-IN-REPLY THAT HAS BEEN FILED O N BEHALF OF THE REVENUE AN EXPLANATION HAS BEEN PROVIDED OF THE RATIONALE UNDERLYING R. 8D. IN THE WRITTEN SUBMISSIONS WHICH HAVE BEEN FILED BY THE ADDL. SOLICITOR GENERAL IT HAS BEEN STATED, WITH REFERENCE TO R. 8D(2)(II) THAT SINCE FUNDS ARE FUNGIBLE, IT WOULD BE DIFFICULT TO ALLOCATE THE ACT UAL QUANTUM OF BORROWED FUNDS THAT HAVE BEEN USED FOR MAKING TAX-FREE INVESTMENTS. IT IS ONLY THE INTERES T ON BORROWED FUNDS THAT WOULD BE APPORTIONED AND THE AMOUNT OF EXPENDITURE BY WAY OF INTEREST THAT WILL BE TAKEN (AS 'A' IN THE FORMULA) WILL EXCLUDE ANY EXPENDITURE BY WAY OF INTEREST WHICH IS DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT (F OR EXAMPLEANY ASPECT OF THE ASSESSEE'S BUSINESS SUCH AS PLANT/MACHINERY ETC.) THE JUSTIFICATION THAT HAS BEEN OFFERED IN SUPPORT OF T HE RATIONALE FOR R. 8D CANNOT BE REGARDED AS BEING CAPRICIOUS, PERVERSE OR ARBITRARY. - - ITA 2102 & 2103/15 10 APPLYING THE TESTS FORMULATED BY THE SUPREME COURT IT IS NOT POSSIBLE FOR THIS COURT TO HOLD THAT THER E IS WRIT ON THE STATUTE OR ON THE SUBORDINATE LEGISLATI ON PERVERSITY, CAPRICE OR IRRATIONALITY. THERE IS CERT AINLY NO 'MADNESS IN THE METHOD'. 16. ONCE THE REVENUE AUTHORITIES HAVE TAKEN A PARTICULAR STAND ABOUT THE APPLICABILITY OF FORMULA SET OUT IN RULE 8 D(2)(II), AND BASED ON SUCH A STAND CONSTITUTIONAL VALIDITY IS UPHELD BY HONBLE HIGH COURT, IT CANNOT BE OPEN TO REVENUE AUTHORITIES TO TAKE ANY OTHER STAND ON THE ISSUE WITH REGARD TO TH E ACTUAL IMPLEMENTATION OF THE FORMULA IN THE CASE OF ANY ASSESSEE. VIEWED THUS, THE CORRECT APPLICATION OF THE FORMULA SET OUT IN RULE 8D(2)(II) IS THAT, A S HAS BEEN NOTED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE (SUPRA), AMOUNT OF EXPENDITURE BY WAY OF INTEREST THAT WILL BE TAKEN (AS 'A' IN THE FORMULA) WILL EXCLUDE ANY EXPENDITURE BY WAY OF INTEREST WHICH IS DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT (FOR EXAMPLEANY ASPECT OF THE ASSESSEE'S BUSINESS SUCH AS PLANT/MACHINERY ETC.) . ACCORDINGLY, EVEN BY REVENUES OWN ADMISSION, INTEREST EXPENSES DIRECTLY ATTRIBUTABLE TO TAX EXEM PT INCOME AS ALSO DIRECTLY ATTRIBUTABLE TO TAXABLE INCOME, ARE REQUIRED TO BE EXCLUDED FROM COMPUTATION OF COMMON INTEREST EXPENSES TO BE ALLOCATED UNDER RULE 8D(2)(II). 17. TO THE ABOVE EXTENT, THEREFORE, WE HAVE TO PROCEED ON THE BASIS THAT RIGOUR OF RULE 8 D (2)(II ) IS RELAXED IN ACTUAL IMPLEMENTATION, AND REVENUE AUTHORITIES, HAVING TAKEN THAT STAND WHEN CONSTITUTIONAL VALIDITY OF RULE 8 D WAS IN CHALLENG E BEFORE HONBLE HIGH COURT, CANNOT NOW DECLINE THE SAME. IDEALLY, IT IS FOR THE CENTRAL BOARD OF DIREC T TAXES TO MAKE THE POSITION CLEAR ONE WAY OR THE OTHER EITHER BY INITIATING SUITABLE AMENDMENT TO RU LE 8D(2)(II) OR BY ADOPTING AN INTERPRETATION AS PER PLAIN WORDS OF THE SAID RULE, BUT EVEN ON THE FACE OF - - ITA 2102 & 2103/15 11 THINGS AS THEY ARE AT PRESENT , IN OUR HUMBLE UNDERSTANDING, REVENUE AUTHORITIES CANNOT TAKE ONE STAND WHEN DEMONSTRATING LACK OF PERVERSITY, CAPRICE OR IRRATIONALITY IN RULE 8D BEFORE HONBLE HIGH COURT, AND TAKE ANOTHER STAND WHEN IT COMES TO ACTUAL IMPLEMENTATION OF THE RULE IN REAL LIFE SITUATIONS. THEREFORE, EVEN AS WE ARE ALIVE TO THE FACT THAT THE STAND OF THE LEARNED DEPARTMENTAL REPRESENTATIVE IS IN ACCORDANCE WITH THE STRICT WORDING OF RULE 8D(2)(II), WE HAVE TO HOLD THAT, FO R THE REASONS SET OUT ABOVE, THIS RIGID STAND CANNOT BE APPLIED IN PRACTICE. 13. IN VIEW OF THE DECISION OF THE CALCUTTA BENCH O F THIS TRIBUNAL CITED ABOVE, WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN EXCLUDING T HE INTEREST ON BANK LOAN AND TERM LOANS FOR THE PURPOS E OF COMPUTING DISALLOWANCE UNDER RULE 8D(2)(II). THE GROUNDS RAISED BY THE REVENUE ARE REJECTED ON THIS ISSUE. IN VIEW OF THE ABOVE, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 6. THE NEXT GROUND IN ITA NO.2103/MDS/15 IS WITH RE GARD TO DISALLOWANCE OF FOREIGN TRAVEL EXPENSES OF ` 2,61,898/-. 7. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF ` 41,89,798/- OUT OF WHICH ` 10,47,593/- WAS USED FOR PURCHASE OF FOREIGN CURRENCY BY THE DIRECTOR DU RING THE PERIOD OF FOREIGN TRAVEL. THE AO DISALLOWED 25% OF THE FO REIGN CURRENCY PURCHASES OF ` 10,47,593/- TOWARDS PERSONAL EXPENSES OF THE DIRECTOR. ON APPEAL, THE COMMISSIONER OF INCOME-TA X(APPEALS) - - ITA 2102 & 2103/15 12 DELETED THE DISALLOWANCE. AGAINST THIS, THE REVENU E IS IN APPEAL BEFORE US. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. THIS IS AN ADHOC DISALLOWANCE BY AO ON THE BASIS OF SURMISE AND WITHOUT BRINGING ANYTHING TO SUGGEST TH AT THE ASSESSEE HAS INCURRED EXPENDITURE TOWARDS ITS DIREC TORS PERSONAL BENEFIT DURING FOREIGN TRAVEL. IT IS ALSO BROUGHT TO OUR NOTICE THAT IN ASSESSEES SISTER CONCERN IN THE CAS E OF M/S. FARIDA CLASSIC SHOES P. LTD. V. DCIT IN ITA NO.179 2/MDS/2015 DATED 20.11.2015, THE TRIBUNAL VIDE ITS ORDER DATED 20.11.2015 OBSERVED AS FOLLOWS: 5. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PER USED THE MATERIALS AVAILABLE ON RECORD. FROM THE FACTS O F THE CASE, IT IS APPARENT THAT BOTH THE LD. ASSESSING OF FICER AND THE LD. CIT (A) HAS NOT DOUBTED THE GENUINENESS OF THE EXPENDITURE. THEY HAVE MADE THE ADDITION AND SUSTAINED THE SAME, ONLY FOR THE REASON THAT VOUCHE RS FOR EACH OF THE EXPENDITURE INCURRED WERE NOT FURNI SHED BEFORE THEM, THOUGH EVIDENCES WERE PRODUCED FOR PURCHASE OF FOREIGN EXCHANGE. CONSIDERING THE FACTS AND CIRCUMSTANCE OF THE CASE, THE NATURE OF THE BUSINES S OF THE ASSESSEE AND THE INCOME GENERATED BY THE ASSESSEE, WE ARE OF THE CONSIDERED VIEW THAT THE EXPENSES INCURRED BY THE ASSESSEE TO THE TUNE OF ` 5,02,047/- TOWARDS OVERSEAS TRAVELS IS QUIET REASON ABLE. MOREOVER IT IS EVIDENT THAT THE ASSESSEE HAD PURCHA SED THE FOREIGN CURRENCY AND NO PORTION OF THE SAME IS SURRENDERED. FROM THE MEAGER AMOUNT OF ` 15,02,047/- INCURRED TOWARDS FOREIGN TRAVEL EXPENDITURE IT CANN OT BE - - ITA 2102 & 2103/15 13 PRESUMED THAT ANY SIGNIFICANT AMOUNT WOULD HAVE BEE N SPENT FOR PERSONAL PURPOSE. THEREFORE, WE HEREBY DI RECT THE LD. ASSESSING OFFICER TO DELETE THE ADDITION MA DE FOR ` 3,75,512/- TOWARDS DISALLOWANCE OF FOREIGN TRAVEL EXPENSES. 9. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE C ASE, WE ARE INCLINED TO HOLD THAT ON SURMISES AND PRESUMPTI ON, ADHOC DISALLOWANCE IS NOT POSSIBLE. HOWEVER, WE MAKE IT CLEAR THAT THERE CANNOT BE DOUBLE CLAIM OF SAME EXPENDITURE, O NE IN THE HANDS OF THE ASSESSEE AND ANOTHER IN THE HANDS OF T HE SISTER CONCERN FOR THE SAME ASSESSMENT YEAR, VIZ. 2012-13. ACCORDINGLY, THIS GROUND OF APPEAL OF THE REVENUE I S ALSO DISMISSED. 10. THE NEXT GROUND IN ITA NO.2103/MDS/15 IS WITH R EGARD TO DISALLOWANCE U/S.43B OF THE ACT, IN RESPECT OF CONT RIBUTION TO THE EMPLOYEES TOWARDS PF & ESI. 11. THE AO DISALLOWED A SUM OF ` 2,29,048/-, BY INVOKING THE PROVISIONS OF SEC.43B OF THE ACT IN RESPECT OF EMPL OYEES CONTRIBUTION TOWARDS PF & ESI AS IT WAS NOT PAID WI THIN DUE DATE UNDER THE RESPECTIVE ACT. THE COMMISSIONER OF INCO ME- TAX(APPEALS) OBSERVED THAT THE EMPLOYEES CONTRIBUTI ON WAS REMITTED WITHIN DUE DATE OF FILING OF RETURN U/S.13 9(1) OF THE ACT AND ALLOWED THE CLAIM OF THE ASSESSEE. AGAINST THI S, THE REVENUE IS IN APPEAL BEFORE US. - - ITA 2102 & 2103/15 14 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THIS ISSUE WAS CONSIDERED BY THE JURISD ICTIONAL HIGH COURT IN THE CASE OF CIT V. M/S. INDUSTRIAL SECURI TY & INTELLIGENCE INDIA PVT. LTD. IN TC(APPEAL) NOS.585 & 586 OF 2015 DATED 24.7.2015 AND HELD AS UNDER : 5. WE FIND THAT THE TRIBUNAL HAS RIGHTLY RELIED ON THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT V. ALOM EXTRUSIONS LTD. REPORTED IN 319 ITR 386, WHEREBY, THE SUPREME COURT HELD THAT OMISSION OF SECOND PROVISO TO SECTION 43B AND AMENDMENT TO FIRS T PROVISO BY FINANCE ACT, 2003 ARE CURATIVE AND ARE EFFECTIVE RETROSPECTIVELY, I.E., WITH EFFECT FROM 1 .4.1988 I.E., THE DATE OF INSERTION OF FIRST PROVISO. THE DELHI HIGH COURT IN THE CASE OF CIT V. AMIL LTD. REPORTED IN 321 ITR 508 HELD THAT IF THE ASSESSEE HAD DEPOSITED EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND AND ESI AFTER DUE AS PRESCRIBED UNDER THE RELEVANT ACT, BUT BEFORE THE DUE DATE OF FILING OF RETURN UNDER THE I NCOME TAX ACT, NO DISALLOWANCE COULD BE MADE IN VIEW OF T HE PROVISIONS OF SECTION 43B AS AMENDED BY FINANCE ACT , 2003. 6. IN THE PRESENT CASE, THE ASSESSEE HAD REMITTE D THE EMPLOYEES CONTRIBUTION BEYOND THE DUE DATE FOR PAYMENT, BUT WITHIN THE DUE DATE FOR FILING THE RET URN OF INCOME. HENCE, FOLLOWING THE ABOVE-SAID DECISIONS, WE FIND NO REASON TO DIFFER WITH THE FINDINGS OF TH E TRIBUNAL. ACCORDINGLY, WE FIND NO QUESTION OF LAW MUCH LESS ANY SUBSTANTIAL QUESTION OF LAW ARISES FO R CONSIDERATION IN THESE APPEALS. ACCORDINGLY, BOTH THE TAX CASE (APPEALS) STAND DISMISSED. NO COSTS. CONSEQUENTLY, M.P.NO.1 OF 2015 IS ALSO DISMISSED. - - ITA 2102 & 2103/15 15 IN VIEW OF THE ABOVE JUDGMENT OF THE JURISDICTIONAL HIGH COURT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CO MMISSIONER OF INCOME-TAX(APPEALS) AND THE SAME IS CONFIRMED. THI S GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 13. IN THE RESULT, THE APPEALS OF THE REVENUE ARE D ISMISSED. ORDER PRONOUNCED ON WEDNESDAY, TH E 8 TH OF JAN., 2016 AT CHENNAI. SD/- SD/- ( '# $%& ' ) ( ' & ( ) ) *+,-..-/-01234-54-6-37 *+,-234-5889-4 :7 % '; /JUDICIAL MEMBER ';<=>>8?2@-2@A1BC14 '% /CHENNAI, D' /DATED, THE 8 TH JAN., 2016. MPO* 'E FGHG /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. I*7 /CIT(A) 4. I /CIT 5. GJ$ K /DR 6. $LM /GF.