Joint CIT, Range-3, Pune V. M/s. Magarpatta Township Development and Construction Company Ltd., Pune

ITA 2114/PUN/2012

• Counselvise Citation: 211424514 RSA 2012
• Duration Of Justice: 1 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 29-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Keywords: Business income; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHE B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.2114/PN/2012 (ASSESSMENT YEAR : 2009-10) ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE- 3, PUNE. . APPELLANT VS. M/S MAGARPATTA TOWNSHIP DEVELOPMENT & CONSTRUCTION COMPANY LTD., 13, MEGA SPACE, SOLAPUR BAZAR ROAD, OFF EAST STREET CAMP, PUNE 411 001. PAN : AABCM2461K . RESPONDENT DEPARTMENT BY : MR. A. K. MODI ASSESSEE BY : MR. NIKHIL PATHAK DATE OF HEARING : 16-04-2014 DATE OF PRONOUNCEMENT : 27-05-2014 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGA INST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, PUNE D ATED 29.06.2012 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 30.12.2011 PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2009-10. 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL :- 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) ERRED IN DELETING THE DISALLOWANCE U/S.14A OF THE INCOME TAX , ACT 1961 (THE ACT). 2. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS) ERRED IN HOLDING THAT THE ASSESSING OFFIC ER DID NOT RECORD ANY SATISFACTION WITH RESPECT TO THE NEXUS BETWEEN BORR OWED FUNDS AND INVESTMENT IN MUTUAL FUNDS BEFORE APPLYING SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN NOT APPRECIATING THAT THE ASSESSEE FAILED TO QUANTI FY THE DIRECT/INDIRECT EXPENDITURE INCURRED BY NOT MAINTAINING SEPARATE AC COUNTS FOR FUNDS UTILIZED IN SUCH INVESTMENTS, INVITING APPLICATION OF RULE 8D O F THE RULES. ITA NO.2114/PN/2012 A.Y. 2009-10 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN HOLDING THAT THE INCOME DERIVED BY THE ASSESSEE FRO M THE LETTING OUT OF PREMISES OF THE 'CYBER CITY' HAS TO BE ASSESSED AS BUSINESS INCOME AND NOT AS INCOME UNDER THE HEAD 'HOUSE PROPERTY' AS HAD BE EN TAKEN IN THE ASSESSMENT. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN FAILING TO APPRECIATE THAT THE PRIMARY OBJECT OF TH E ASSESSEE WAS TO LET OUT THE PROPERTIES IN ORDER TO DERIVE INCOME THERE FROM AND NOT TO EXPLOIT THEM COMMERCIALLY AND MERELY BECAUSE CERTAIN INFRAS TRUCTURE HAS BEEN PROVIDED TO FACILITATE SUCH LETTING OUT, SUCH PROVISION CAN BY NO MEANS AMOUNT TO CARRYING ON COMPLEX COMMERCIAL ACTIVITIES. 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN ATTACHING UNDUE IMPORTANCE TO A CLAUSE IN THE AGREE MENT AS PER WHICH THE COST INVOLVED IN THE SERVICES IS BUILT INTO THE COS T PER SQ.FT. AS PER THE TENANCY AGREEMENT AND WITHOUT APPRECIATING THAT THE INFRAST RUCTURE AND SERVICES PROVIDED BY THE ASSESSEE WERE INCIDENTAL TO THE LET TING OUT OF THE PROPERTIES AND THAT SUBSTANTIAL INCOME AS PER THE AGREEMENT WA S TOWARDS RENT AND NOT TOWARDS PROVISION OF SERVICES. 3. IN TERMS OF GROUND OF APPEAL NO.1 TO 3, THE ISSU E RELATES TO THE ACTION OF THE CIT(A) IN DELETING THE DISALLOWANCE OF RS.20 ,66,011/- MADE BY THE ASSESSING OFFICER BY INVOKING SECTION 14A OF THE AC T. IN THIS CONTEXT, BRIEF FACTS ARE THAT THE ASSESSEE IS, INTER-ALIA, ENGAGED IN THE BUSINESS OF DEVELOPMENT OF INTEGRATED TOWNSHIP KNOWN AS MAGARP ATTA CITY AT HADAPSAR, PUNE. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAD EARNED DIVIDEND INCOME OF RS.2,75 ,483/- WHICH WAS EXEMPT FROM TAX. ON ACCOUNT OF EARNING OF SUCH EXE MPT INCOME, THE ASSESSING OFFICER SHOW-CAUSED THE ASSESSEE AS TO WH Y THE EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME BE NOT DISA LLOWED AS PRESCRIBED BY SECTION 14A OF THE ACT. THE ASSESSEE CONTENDED BEF ORE THE ASSESSING OFFICER THAT THE SAID DIVIDEND INCOME WAS CONSIDERED AS AN INCIDENTAL BUSINESS INCOME AND IT WAS NOT CONSIDERED AS AN EXEMPT INCOM E IN THE COMPUTATION OF INCOME AND THEREFORE, THERE WAS NO NECESSITY OF INV OKING SECTION 14A OF THE ACT. WITHOUT PREJUDICE TO THE ABOVE, ASSESSEE ALSO POINTED OUT THAT IT POSSESSED OWNED PAID-UP SHARE CAPITAL OF RS.54,99,0 0,900/- AND ACCUMULATED PROFITS AND FREE RESERVES OF RS.135.37 CRORES AS ON 31.03.2009 WHEREAS THE TOTAL INVESTMENT MADE IN THE SHARES OF THE SUBSIDIARY COMPANIES WAS ONLY TO THE TUNE OF RS.20,08,93,600/- AND THERE FORE NO BORROWED MONIES ITA NO.2114/PN/2012 A.Y. 2009-10 WERE USED TOWARDS INVESTMENT IN SHARES OR EVEN IN T HE MUTUAL FUNDS WHICH HAVE YIELDED THE IMPUGNED EXEMPT INCOME. SECONDLY, IT WAS ALSO ASSERTED THAT THE DIVIDEND INCOME WAS DIRECTLY CREDITED INTO THE BANK ACCOUNT AND THEREFORE THERE WAS NO POSSIBILITY OF INCURRENCE OF EVEN ANY EXPENDITURE TOWARDS COLLECTION OF DIVIDEND. 4. THE ASSESSING OFFICER DID NOT ACCEPT THE PLEA OF THE ASSESSEE AND INSTEAD DETERMINED AN EXPENDITURE OF RS.20,66,011/- AS HAVING BEEN INCURRED IN RELATION TO THE EXEMPT INCOME AND DISALLOWED THE SAME IN TERMS OF SECTION 14A OF THE ACT. IN COMPUTING SUCH DISALLOWANCE THE ASSESSING OFFICER APPLIED THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULES, 1962 (IN SHORT THE RULES), PARTICULARLY CLAUSES (II) AND (III) OF SUB-RULE (2) OF RULE 8D OF THE RULES. AGAINST SUCH A DISALLOWANCE, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). APART FROM REITERATING THE SUBMISSIONS MADE TO THE ASSESSING OFFICER, ASSESSEE ALSO SUBMITTED BEFORE THE CIT(A) THAT THE APPLICATION OF RULE 8D OF THE RULES TO COMPUTE THE DISALLOWANCE U/S 14A OF TH E ACT WAS NOT AUTOMATIC BECAUSE THE ASSESSING OFFICER WAS REQUIRED TO BE SA TISFIED WITH THE CORRECTNESS OR OTHERWISE OF THE CLAIM OF THE ASSESS EE IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO THE EXEMPT INCOME, WHICH WA S A REQUIREMENT OF SECTION 14A(2) OF THE ACT. IT WAS POINTED OUT THAT THE ASS ESSING OFFICER DID NOT RECORD ANY SATISFACTION AS REQUIRED BY SECTION 14A(2) OF T HE ACT, AS FACTUALLY IT WAS EVIDENT THAT THE ASSESSEE HAD MADE A SMALL INVESTME NT WHICH COULD YIELD EXEMPT INCOME, WHICH WAS MADE OUT OF OWN FUNDS AND THAT TOO TOWARDS THE END OF THE ASSESSMENT YEAR UNDER CONSIDERATION. IN SUPPORT OF SUCH PROPOSITION RELIANCE WAS PLACED ON THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. VS CIT, 328 ITR 81 (BOM). THE CIT(A) HAS UPHELD THE PLEA OF THE ASSESSEE AND HAS DELETED THE ADDITION ON THE GROUND THAT THE ASSESSING OFFICER ERRED IN I NVOKING RULE 8D OF THE RULES TO COMPUTE THE DISALLOWANCE WITHOUT RECORDING A SAT ISFACTION MANDATED IN TERMS OF SECTION 14A(2) OF THE ACT. THE CIT(A) ALS O RECORDS A FINDING IN PARA ITA NO.2114/PN/2012 A.Y. 2009-10 4.6 OF HIS ORDER THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THE NONE OF THE BORROWED FUNDS WERE UTILIZED TO MAKE THE IMPUGNED I NVESTMENTS. AGAINST SUCH ACTION OF THE CIT(A) IN DELETING THE DISALLOWA NCE, REVENUE IS IN APPEAL BEFORE US. 5. BEFORE US, THE LEARNED CIT-DR HAS POINTED OUT TH AT THE CIT(A) ERRED IN DELETING THE ADDITION BECAUSE THE ASSESSING OFFICER HAD DULY CONSIDERED THE SUBMISSIONS PUT-FORTH BY THE ASSESSEE AND HAD ALSO RECORDED HIS SATISFACTION THAT THE CLAIM OF THE ASSESSEE OF NO EXPENDITURE HA VING BEEN INCURRED IN RELATION TO THE EXEMPT INCOME WAS INCORRECT. IN TH IS CONTEXT, THE LEARNED CIT- DR HAS REFERRED TO THE DISCUSSION MADE BY THE ASSES SING OFFICER IN PARAS 3.4 AND 3.5 OF THE ASSESSMENT ORDER. 6. ON THE OTHER HAND, THE LEARNED REPRESENTATIVE FO R THE RESPONDENT- ASSESSEE HAS DEFENDED THE ORDER OF THE CIT(A) BY PO INTING OUT THAT IN THE PRESENT CASE, THERE WAS NO SATISFACTION RECORDED BY THE ASSESSING OFFICER WITH REGARD TO THE PLEA OF THE ASSESSEE THAT NO DIRECT O R INDIRECT EXPENDITURE IS INCURRED IN RELATION TO THE EARNING OF THE EXEMPT I NCOME. IT IS POINTED OUT THAT THE ASSESSING OFFICER SHOULD HAVE VERIFIED THE BOOK S OF ACCOUNT, FIRSTLY, TO CONFIRM AS TO WHETHER ANY EXPENSES DIRECTLY OR INDI RECTLY HAVE BEEN INCURRED IN CONNECTION WITH THE EXEMPT INCOME AND IF IT WAS SO FOUND ONLY THEN THE ASSESSING OFFICER COULD BE SAID TO HAVE RECORDED HI S SATISFACTION AS REQUIRED BY SECTION 14A(2) OF THE ACT AND THIS WOULD HAVE JU STIFIED INVOKING OF RULE 8D OF THE RULES TO COMPUTE THE DISALLOWANCE. IT IS VEHEM ENTLY ARGUED THAT NO SUCH EXERCISE HAS BEEN UNDERTAKEN BY THE ASSESSING OFFIC ER, AND THEREFORE THE CIT(A) HAS RIGHTLY HELD THAT THE DISALLOWANCE HAS B EEN INCORRECTLY MADE BY THE ASSESSING OFFICER. IN THIS CONTEXT, RELIANCE PLACE D BY THE CIT(A) ON THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE C ASE OF GODREJ BOYCE MFG. CO. LTD. (SUPRA) WAS REITERATED. THE LEARNED COUNSEL ALSO RELIED UPON A DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE C ASE OF KALYANI STEELS LTD. ITA NO.2114/PN/2012 A.Y. 2009-10 VS. ADDL.CIT VIDE ITA NO.1733/PN/2012 ORDER DATED 3 0.01.2014 WHEREIN FOLLOWING THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IT HAS BEEN HELD THAT INVOKING OF RULE 8D OF THE RULES IN ORDER TO C OMPUTE THE DISALLOWANCE U/S 14A OF THE ACT IS CONDITIONAL UPON RECORDING OF AN OBJECTIVE SATISFACTION BY THE ASSESSING OFFICER WITH REGARD TO THE INCORRECTNESS OF THE CLAIM OF THE ASSESSEE HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. ON THE AFORESAID BASIS, THE STAND OF THE CIT(A) IN DELETING THE ADDITION IS SOU GHT TO BE DEFENDED. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. IN SO FAR AS THE PROVISIONS OF SECTION 14A OF THE ACT IS CONCERNED, IT CONTEMPLATES THAT FOR THE PURPOSES OF COMPUTING TOTAL INCOME NO DEDUCTION IS TO BE ALLOWED IN RESPECT OF ANY EXPENDITURE INCURRED IN RELATION TO AN INCOME W HICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IN THE PRESENT CAS E, ASSESSEE WAS FOUND TO HAVE EARNED EXEMPT INCOME BY WAY OF DIVIDEND ON INV ESTMENTS MADE IN THE MUTUAL FUNDS. THE EXISTENCE OF SUCH EXEMPT INCOME PROMPTED THE ASSESSING OFFICER TO INVOKE SECTION 14A OF THE ACT WHILE COMP UTING THE TOTAL INCOME OF THE ASSESSEE. FURTHER, THE ASSESSING OFFICER INVOKED R ULE 8D OF THE RULES TO COMPUTE THE DISALLOWANCE. OSTENSIBLY, SUB-SECTION (2) OF SECTION 14A OF THE ACT ENABLES THE ASSESSING OFFICER TO INVOKE RULE 8D OF THE RULES SO AS TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN REL ATION TO AN INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. HOWEVER, T HE PHRASEOLOGY OF SUB- SECTION (2) OF SECTION 14A OF THE ACT ITSELF BRINGS OUT THAT THE POWER OF THE ASSESSING OFFICER TO INVOKE RULE 8D OF THE RULES IS SUBJECT TO THE CONDITION THAT THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNT S OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO THE INCOME WHIC H DOES NOT FORM PART OF THE TOTAL INCOME I.E. EXEMPT INCOME. IT IS NO LONGER RES INTEGRA THAT INVOKING OF RULE 8D OF THE RULES IN ORDER TO COMPUTE THE DISALL OWANCE U/S 14A OF THE ACT IS NEITHER AUTOMATIC AND NOR IS DEPENDENT MERELY ON TH E EXISTENCE OF AN EXEMPT INCOME IN THE HANDS OF THE ASSESSEE. IN SUPPORT OF THE AFORESAID PROPOSITION, ITA NO.2114/PN/2012 A.Y. 2009-10 A GAINFUL REFERENCE CAN BE MADE TO THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. (SU PRA) AS WELL AS THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CA SE OF MAXOPP INVESTMENT LTD. & ORS. VS. CIT, (2012) 247 CTR 162 (DEL). THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF KALYANI STEELS LTD. (SUPRA) HAS ALSO CONSIDERED THE AFORESAID JUDGEMENTS AND CONCLUDED THAT SECTION 14A (2) OF THE ACT ENVISAGES A CONDITION PRECEDENT FOR INVOKING RULE 8D OF THE R ULES AND COMPUTING DISALLOWANCE; AND, SUCH CONDITION BEING THAT THE AS SESSING OFFICER RECORDS THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF TH E CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO INCO ME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. NOTABLY, THE AFORESAID PRECEDENTS ALSO B RING OUT THAT THE SATISFACTION WHICH IS MANDATED IN TERMS OF SECTION 14A(2) OF THE ACT MUST BE BASED ON REASONS AND ON RELEVANT CONSIDERATION. IN OTHER WORDS, THE INVOKING OF RULE 8D OF THE RULES IN ORDER TO COMPUTE THE DIS ALLOWANCE U/S 14A OF THE ACT IS TO BE UNDERSTOOD AS BEING CONDITIONAL ON RECORDI NG OF AN OBJECTIVE SATISFACTION BY THE ASSESSING OFFICER WITH REGARD T O THE INCORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE IN RELATION TO THE EXEMPT INCOME, HAVING REGARD TO THE ACCOUNTS OF THE ASSESS EE. IN OUR CONSIDERED OPINION, THE AFORESAID PARITY OF REASONING IN RELAT ION TO INVOKING OF RULE 8D OF THE RULES READ WITH SECTION 14A OF THE ACT APPLIES TO THE FACT OF THE PRESENT CASE. 8. IN THE BACKGROUND OF THE AFORESAID DISCUSSION, W E MAY NOW EXAMINE THE FACTS OF THE PRESENT CASE. AS NOTED EARLIER, A SSESSEE HAS EARNED DIVIDEND INCOME OF RS. 2,75,483/- ON INVESTMENT IN MUTUAL FU NDS. IN THE COURSE OF PROCEEDINGS BEFORE THE LOWER AUTHORITIES, APART FRO M OTHER ASSERTIONS, ASSESSEE CLAIMED THAT NO EXPENDITURE WAS INCURRED I N RELATION TO EARNING OF SUCH INCOME. FIRSTLY, IT WAS POINTED OUT THAT THE DIVIDEND ON MUTUAL FUNDS WAS EARNED ON INVESTMENT MADE FOR ABOUT TWO MONTHS ONLY I.E. JANUARY AND ITA NO.2114/PN/2012 A.Y. 2009-10 FEBRUARY, 2009 (AS FOUND FROM EXTRACT OF ASSESSEES SUBMISSIONS TO THE CIT(A) REPRODUCED IN PARA 3.1 OF HIS IMPUGNED ORDER ). ON THE SAID BASIS, THE CASE SETUP BY THE ASSESSEE IS THAT THE FUNDS WERE P ARKED IN MUTUAL FUND BY THE BANK FOR A TEMPORARY PERIOD; AND, THAT IT HAD M ORE THAN ENOUGH NON- INTEREST BEARING FUNDS BY WAY OF SHARE CAPITAL AND ACCUMULATED PROFITS TO COVER THE IMPUGNED INVESTMENT. THUS, NO INTEREST WAS INC URRED IN RELATION TO THE INVESTMENT IN MUTUAL FUNDS, WHICH YIELDED THE IMPUG NED INCOME. SECONDLY, IT WAS POINTED OUT THAT THE DIVIDEND WAS CREDITED TO T HE BANK ACCOUNT DIRECTLY BY THE BANK I.E. HDFC AND IT HAS ALSO BEEN ASSERTED TH AT THE INVESTMENT IN THE MUTUAL FUNDS WERE ALSO MADE BY THE SAME BANK. IT W AS THEREFORE CONTENDED THAT THERE WAS NO DIRECT OR INDIRECT EXPENDITURE IN CURRED IN RELATION TO EARNING OF THE IMPUGNED EXEMPT INCOME. 9. IN PARA 4.2 OF THE IMPUGNED ORDER, THE CIT(A) NO TES THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE AVAILABILITY OF INTERE ST-FREE FUNDS AND THE INVESTMENTS MADE BY THE ASSESSEE IN THE MUTUAL FUND S DURING THE YEAR. THE CIT(A) FURTHER NOTES THAT THE ASSESSING OFFICER CON SIDERED INTEREST EXPENDITURE OF RS.3,00,19,761/- AS EXPENDITURE NOT DIRECTLY ATT RIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT AND SUBJECTED THE SAME TO DISALLO WANCE AS PER CLAUSE (II) OF SUB-RULE (2) OF RULE 8D OF THE RULES. AS PER THE C IT(A), THE MANNER AND THE WORKING FOR CONSIDERING RS.3,00,19,761/- FOR THE PU RPOSES OF CLAUSE (II) OF SUB- RULE (2) OF RULE 8D OF THE RULES HAS NOT BEEN RECOR DED BY THE ASSESSING OFFICER IN HIS ORDER. THE CIT(A) FURTHER RECORDS THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE ACCOUNTS OF THE ASSESSEE SO AS TO ARRI VE AT A SATISFACTION AND FINDING REGARDING INCURRENCE OF DIRECT OR INDIRECT EXPENSES IN CONNECTION WITH EARNING OF THE EXEMPT INCOME, AS REQUIRED BY SUB-SE CTION (2) OF SECTION 14A OF THE ACT. THE CIT(A) ALSO OBSERVED THAT ASSESSEE HA S MADE THE INVESTMENT FROM OWN FUNDS AND THEREFORE QUESTION OF ANY EXPENS E ON ACCOUNT OF INTEREST FOR EARNING OF IMPUGNED EXEMPT INCOME, IN THE GIVEN SET OF FACTS AND CIRCUMSTANCES OF THE CASE, DOES NOT ARISE . ITA NO.2114/PN/2012 A.Y. 2009-10 10. PERTINENTLY, WE FIND NO SUCH REASONS TO DISTRAC T FROM THE AFORESAID FINDINGS OF THE CIT(A) WHICH ARE CLEARLY BORNE OUT BY THE MATERIAL ON RECORD. IN-FACT, DISCUSSION IN THE ASSESSMENT ORDER, WHICH HAS BEEN REFERRED TO BY THE LEARNED CIT-DR BEFORE US DOES NOT SHOW AS TO HOW TH E CATEGORICAL ASSERTIONS OF THE CIT(A) ARE WRONG. THOUGH, THE ASSESSING OFF ICER DOES SAY THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE SO HOWEVER, THE SAME IS MERELY A BALD ASSERTION, DE VOID OF ANY OBJECTIVE ANALYSIS OF THE ACCOUNTS MAINTAINED BY TH E ASSESSEE, A MANDATORY REQUIREMENT OF SUB-SECTION (2) OF SECTION 14A OF TH E ACT. THEREFORE, IN THE ABSENCE OF ADHERENCE TO THE REQUIREMENTS OF SECTION 14A(2) OF THE ACT, THE ASSESSING OFFICER COULD NOT HAVE PROCEEDED TO INVOK E RULE 8D OF THE RULES AND SUBJECT THE IMPUGNED INTEREST EXPENDITURE FOR D ISALLOWANCE AS PER CLAUSE (II) OF RULE 8D OF THE RULES. SIMILARLY, THE CIT(A ) RECORDS ANOTHER FINDING WHICH IS TO THE EFFECT THAT THE DIVIDEND RECEIPT HAS BEEN DIRECTLY CREDITED INTO THE BANK ACCOUNT OF THE ASSESSEE, THUS LEAVING NO SCOPE FOR INCURRING ANY OTHER EXPENSES FOR EARNING EXEMPT INCOME BY THE ASSESSEE. FOR THE SAID REASON, THE INDIRECT EXPENDITURE SOUGHT TO BE DISALLOWED BY INVOKING CLAUSE (III) TO SUB- RULE (2) OF RULE 8D OF THE RULES HAS ALSO BEEN FAUL TED BY THE CIT(A). ON THIS ASPECT, WE ARE IN AGREEMENT WITH THE CIT(A) THAT UN DER THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSING OFFICER WA S NOT JUSTIFIED IN INVOKING RULE 8D OF THE RULES IN ORDER TO COMPUTE THE DISALL OWANCE U/S 14A(1) OF THE ACT. IN VIEW OF THE AFORESAID DISCUSSION, WE HEREB Y AFFIRM THE ACTION OF THE CIT(A) IN DELETING THE DISALLOWANCE OF RS.20,66,011 /- MADE BY THE ASSESSING OFFICER INVOKING SECTION 14A OF THE ACT. THUS, ON THIS ASPECT, REVENUE FAILS AND ACCORDINGLY THE GROUNDS OF APPEAL NO.1 TO 3 ARE DISMISSED. 11. BY WAY OF GROUNDS OF APPEAL NO. 4 TO 6, THE ISS UE RAISED IS WITH REGARD TO THE ACTION OF THE CIT(A) IN HOLDING THAT THE INC OME EARNED BY THE ASSESSEE FROM LETTING OUT OF PREMISES OF CYBER CITY IS LIA BLE TO BE ASSESSED AS ITA NO.2114/PN/2012 A.Y. 2009-10 BUSINESS INCOME AND NOT AS INCOME UNDER THE HEAD HOUSE PROPERTY, AS TAKEN BY THE ASSESSING OFFICER DURING THE ASSESSMEN T PROCEEDINGS. 12. ON THIS ASPECT, IT WAS A COMMON POINT BETWEEN T HE PARTIES THAT IDENTICAL CONTROVERSY WAS CONSIDERED BY THE TRIBUNAL IN THE A SSESSEES OWN CASE FOR EARLIER TWO ASSESSMENT YEARS OF 2007-08 AND 2008-09 VIDE ITA NO.822/PN/2011 ORDER DATED 18.09.2012 AND ITA NO.11 30/PN/2012 ORDER DATED 30.07.2013 RESPECTIVELY. 13. IN THE ABOVE BACKGROUND, WE HAVE PERUSED THE MA TERIAL ON RECORD AND ALSO THE PRECEDENTS IN THE ASSESSEES OWN CASE DATE D 18.09.2012 (SUPRA) AND 30.07.2013 (SUPRA) FOR ASSESSMENT YEARS 2007-08 AND 2008-09 RESPECTIVELY. THE RELEVANT OPERATIVE PORTION OF THE ORDER OF THE TRIBUNAL DATED 18.09.2012 (SUPRA) FOR THE LEAD ASSESSMENT YEAR OF 2007-08 IS REPRODUCED AS UNDER :- IN THIS BACKGROUND, IT IS CLEAR THAT ASSESSEE HAS PROVIDED VARIOUS COMPLEX INTEGRATED SERVICES AS MENTIONED IN SCHEDULE-II TO THE LEASE AGREEMENT WITH THE I.T. COMPANY. THE SERV ICES ARE VAST AND THE AMENITIES PROVIDED WERE IN THE NATURE OF PL ANT AND MACHINERY AS CONTENDED BY THE ASSESSEE AND IT HAS B EEN ESTABLISHED BY THE CLAUSES OF THE AGREEMENTS THAT T HE COST OF PROVIDING THESE SERVICES WAS ALSO INCLUDED IN THE L EASE RENT OF RS.14.30 PER SQ.FT.. THE ASSESSEE ALSO CLARIFIED TH AT COST INVOLVED IN THE SERVICES PROVIDED TO THE PARTICULAR COMPANY I.E ., EXL SERVICES.COM WAS RS.2.83 CRORES WHICH WAS ALMOST 40 % OF THE LAND AND BUILDING COST OF THAT TOWER. BY NO STRETCH OF I MAGINATION SUCH EXTENSIVE AND SPECIALIZED SERVICES WHICH COULD ONLY BE UTILIZED BY THE IT/SOFTWARE/BPOS BUSINESSES TO BE LOCATED IN TH E I.T. PART COULD BE TREATED AS FORMING PART OF INCOME FROM HOU SE PROPERTY. IT IS CERTAINLY A CONSTITUTION OF ORGANIZED STRUCTURE FOR CARRYING OUT BUSINESS ACTIVITIES. SECTION 22 PROVIDES ONLY FOR R ENTAL INCOME OUT OF BUILDING OR LAND APPURTENANT THERETO, WHEREAS IN THE CASE BEFORE US, COMPLEX AND VARIED SERVICES PROVIDED AND THE HU GE INVESTMENT THEREIN WERE IN THE NATURE OF PLANT AND MACHINERY W HICH COULD BE INCLUDED WITHIN THE EXPRESSION BUILDING OR LAND APP URTENANT THERETO. THUS, THE ASSESSEE HAS CONDUCTED SYSTEMATIC ACTIVIT Y TO EARN PROFIT AND ACCORDINGLY INCOME WAS TO BE ASSESSED AS INCOME FROM BUSINESS. IN VIEW OF THE SUBMISSIONS MADE ON BEHALF OF THE ITA NO.2114/PN/2012 A.Y. 2009-10 ASSESSEE, AND ANALYSIS OF VARIOUS CLAUSES AND SCHED ULE-II OF THE AGREEMENT ENTERED WITH THE I.T. COMPANY, CIT(A) WAS JUSTIFIED IN HOLDING THAT IN ASSESSEES CASE THE SAID INCOME WAS TO BE ASSESSED AS BUSINESS INCOME. THIS REASONED FACTUAL FINDING N EED NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 14. FOLLOWING THE AFORESAID DISCUSSION MADE BY THE TRIBUNAL IN ASSESSEES OWN CASE ON AN IDENTICAL ISSUE, WE HEREBY AFFIRM TH E ORDER OF THE CIT(A) IN HOLDING THAT THE INCOME EARNED BY WAY OF LICENSE OF LETTING OUT OF PREMISES OF CYBER CITY IS LIABLE TO BE ASSESSED AS BUSINESS INCOME AND NOT UNDER THE HEAD HOUSE PROPERTY, AS HELD BY THE ASSESSING OFF ICER. THUS, IN VIEW OF THE AFORESAID PRECEDENT, THE GROUNDS OF APPEAL NO. 4 TO 6 RAISED BY THE REVENUE ARE DISMISSED. 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH MAY, 2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G . S. PANNU) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE, DATED : 27 TH MAY, 2014 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-II, PUNE; 4) THE CIT-II, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE