DCIT, Circle-12(2), Kolkata, Kolkata V. M/S. Prachar Communication Ltd., Howrah

ITA 2262/KOL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1130 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 23-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Business expenditure; Earning of tax free income; Revenue expenditure; Capital expenditure
• Section: 143(3); 14A; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SHRI ABY. T. VARKEY, JM & SHRI M. BALAGANESH, AM ] I.T.A NO. 2262/KOL/20 14 ASSESSMENT YEAR : 2009-1 0 DCIT, CIRCLE-12(2), KOLKATA -VS- M/S PRACHER COMMUNICATION LTD. [PAN: AABCP 5657 L] (APPELLANT) (RESPONDENT) C.O. NO. 39/KOL/2017 (ARISING OUT OF I.T.A. NO. 2262/KOL/2014) ASSESSMENT YEAR : 2009-1 0 M/S PRACHER COMMUNICATION LTD. -VS- DCIT, CIRCLE-12(2), KOLKATA [PAN: AABCP 5657 L] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI DAVID Z. CHOW NGTHU, ADDL. CIT DR FOR THE RESPONDENT : SHRI S. JHAJHARIA, AR DATE OF HEARING : 24.10.2017 DATE OF PRONOUNCEMENT : 01.11.2017 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTI ON BY THE ASSESSEE ARISE OUT OF THE ORDERS OF THE COMMISSIONER OF INCOME TAX(APPEALS)-X II, KOLKATA [IN SHORT THE LD. CIT(A)] IN APPEAL NO. 376/XII/CIR.12/11-12 DATED 11 .08.2014 AGAINST THE ORDER PASSED BY THE DCIT, CIRCLE-12, KOLKATA [IN SHORT THE LD. A O] U/S 143(3) OF THE INCOME TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT] DA TED 21.12.2011 FOR THE ASSESSMENT YEAR 2009-10. 2 ITA NO.2262/KOL/2014 M/S PRACHAR COMMUNICAITON A.YR.2009-10 2 2. AT THE OUTSET, WE FIND THAT THERE IS A DELAY OF 44 DAYS IN FILING THE APPEAL BEFORE US BY THE REVENUE. THE LD AR FAIRLY CONCEDED FOR CONDONA TION OF THE SAID DELAY. WE HAVE GONE THROUGH THE REASONS GIVEN IN THE AFFIDAVIT FOR THE DELAY CONDONATION PETITION EXPLAINING THE REASONS FOR THE DELAY AND IN VIEW OF THE CONCESSION GIVEN BY THE LD AR , WE HEREBY CONDONE THE DELAY AND ADMIT THE APPEAL OF THE REVENUE FOR ADJUDICATION. 3. THE ONLY ISSUE TO BE DECIDED IN THE APPEAL OF TH E REVENUE IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN DIRECTING THE LD AO TO GRANT DEPRE CIATION @25% AS AGAINST 15% GRANTED BY THE LD AO, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSE SSEE IS A COMPANY ENGAGED IN ADVERTISING, POWER AND ENERGY SECTOR AND HAD FILED ITS RETURN OF INCOME FOR THE ASST YEAR 2009-10 ON 27.9.2009 DECLARING TOTAL INCOME OF RS 3,89,94,706/ -. THE LD AO OBSERVED THAT THE ASSESSEE IN ITS RETURN OF INCOME HAD CLAIMED RS 2,9 3,48,524/- BEING 1/5 TH OF TOTAL EXPENDITURE OF RS 14,67,42,620/- INCURRED BY THE AS SESSEE TOWARDS CONSTRUCTION OF BUS SHELTERS AT MUMBAI. IN THE BOOKS OF ACCOUNTS, IT D ECIDED TO TREAT THE SAME AS DEFERRED REVENUE EXPENDITURE BY AMORTISING IT EQUALLY OVER A PERIOD OF 5 YEARS. IN OTHER WORDS, IT DECIDED TO CLAIM 1/5 TH EVERY YEAR AMOUNTING TO RS 2,93,48,524/- AS REVENU E EXPENDITURE IN THE RETURN OF INCOME. THE SAID EXPENDITURE WAS INCURRED BY THE ASSESSEE AS PER THE CONTRACT WITH BEST DATED 27.7.2007 AND AS PER THE T ERMS OF THE CONTRACT, THE ASSESSEE IN LIEU OF HAVING INCURRED SUCH EXPENDITURE, OBTAINED THE RIGHT TO EARN ADVERTISING REVENUE FROM DISPLAYING ADVERTISEMENTS ON SUCH BUS SHELTERS . THE RELEVANT TERMS OF THE CONTRACT ARE AS UNDER:- A) THE CONTRACT IS FOR THE PERIOD OF 15 YEARS. B) ALL RISKS, RESPONSIBILITIES AND COSTS IN RESPECT OF SUCH BUS SHELTERS WAS THAT OF THE ASSESSEE. C) ALL EXPENDITURE USED ON REPAIRS AND MAINTENANCE OF THE BUS SHELTERS/ POLLS/ ADVERTISEMENT / ELIMINATED ADVERTISEMENT ETC SHALL BE OF THE ASSESSEE ONLY. 3 ITA NO.2262/KOL/2014 M/S PRACHAR COMMUNICAITON A.YR.2009-10 3 D) UPON TERMINATION OF THE CONTRACT, THE BUS SHELTE RS / POLLS SHALL BE THE PROPERTY OF BEST. E) THE BEST CAN TERMINATE THE CONTRACT IF IT IS SAT ISFIED THAT THE ASSESSEE HAS NOT PERFORMED THE CONTRACT AND HAS NOT EXECUTED THE CON TRACT IN THE MANNER AGREED UPON. 3.2. IN TERMS OF THE SAID CONTRACT, THE ASSESSEE ER ECTED 714 BUS SHELTERS OUT OF THE COMMITTED 1863 BUS SHELTERS WITHIN A PERIOD OF ONE YEAR. HOWEVER, SUBSEQUENTLY BOTH THE ASSESSEE AND BEST FILED WRIT PETITIONS BEFORE T HE VARIOUS COURTS AND SUBSEQUENTLY THE ISSUE WAS SETTLED AMONGST THE PARTIES THEMSELVE S AND AS PER SUPPLEMENTARY AGREEMENT, THERE WERE MINOR VARIATIONS MADE TO THE ORIGINAL CONTRACT DATED 27.7.2007. IN THE LIGHT OF THE AFORESAID FACTS, THE ASSESSEE S UBMITTED THAT SINCE THE ASSESSEE IS NOT THE OWNER OF BUS SHELTERS / POLLS THE AMOUNT SO IN CURRED MAY KINDLY BE TREATED AS BUSINESS EXPENDITURE ONLY. HOWEVER, IN THE ASSESS MENT ORDER, THE LD AO CONTENDED THAT THE SAID EXPENDITURE WAS NOT OF REVENUE NATURE FOR THE FOLLOWING REASONS:- A) THE EXPENSE HAS TO BE CAPITALIZED SINCE THE ASSE SSEE DERIVED BENEFIT OF ENDURING NATURE FOR THE PERIOD OF 15 YEARS. B) ANY REPAIRS AND MAINTENANCE ON IT FOR SUBSEQUENT PERIOD CAN BE CLAIMED AS REVENUE EXPENSE. C) THE LD AO HELD ON EXPLANATION 1 TO SECTION 32 OF THE ACT WHEREBY EVEN IF STRUCTURE IS NOT OWNED BY ASSESSEE BUT IN RESPECT OF WHICH LEASE OR OTHER RIGHT OF OCCUPANCY HAS BEEN GRANTED IT WILL BE TREATED AS BUILDING OW NED BY ASSESSEE. 3.3. THE LD AO ALSO PLACED RELIANCE ON THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ITO VS COOP PVT LTD IN ITA NO. 1707/KOL/2010 DATED 18.3.2011 WHEREIN THIS TRIBUNAL HAD HELD SIMILAR EXPENDITURE AS CAPITAL EXPENDITURE. THE LD AO TREATED THE TOTAL COST OF CONSTRUCTION OF BUS SHELT ERS OF RS 14,67,42,620/- AS PLANT AND 4 ITA NO.2262/KOL/2014 M/S PRACHAR COMMUNICAITON A.YR.2009-10 4 MACHINERY AND GRANTED DEPRECIATION @ 15% THEREON AS AGAINST THE 1/5 TH CLAIM OF TOTAL EXPENDITURE BY THE ASSESSEE. 3.4. THE LD CITA UPHELD THE ACTION OF THE LD AO IN TREATING THE TOTAL EXPENDITURE OF RS 14,67,42,620/- AS CAPITAL EXPENDITURE IN TUNE WITH THE DECISION OF THIS TRIBUNAL SUPRA. HOWEVER, HE HELD THAT THE LD AO HAD TREATED THE SAI D EXPENDITURE UNDER THE HEAD PLANT AND MACHINERY WITHOUT APPRECIATING / CONSIDERING TH E FACT THAT THE ONLY RIGHT VESTED WITH THE ASSESSEE WAS IN RESPECT OF SUCH BUS SHELTER WAS FOR DISPLAY OF ADVERTISEMENT BOARDS TO EARN REVENUE THEREON AND IT IS IN THIS LINE OF B USINESS THAT THE ASSESSEE IS ENGAGED AND AS SUCH A COMMERCIAL RIGHT IS VESTED WITH THE ASSES SEE. THE LD CITA HELD THAT A RIGHT TO DISPLAY ADVERTISEMENT IS A RIGHT FOR WHICH A VALUAB LE CONSIDERATION IS INCURRED. THE RIGHT ACQUIRED FOR CARRYING ON THE BUSINESS IS A BU SINESS RIGHT. THE WORD COMMERCIAL IS DEFINED IN BLACK LAWS DICTIONARY AS RELATED TO OR CONNECTED WITH TRADE AND COMMERCE IN GENERAL. THE TERM COMMERCE IS DEFINE D AS THE EXCHANGE OF GOODS, PRODUCTIONS OR PROPERTY OF ANY KIND ; THE BUYING, S ELLING AND EXCHANGING OF ARTICLES. HE ALSO HELD THAT THE RIGHT TO DISPLAY ADVERTISEMENTS VESTS A RIGHT IN THE ASSESSEE TO CARRY ON BUSINESS WHICH IN TURN CONFERS A COMMERCIAL RIGHT T O CARRY ON BUSINESS SMOOTHY. WHEN ONCE THE EXPENDITURE INCURRED FOR ACQUIRING THE SAI D RIGHT IS HELD TO BE CAPITAL IN NATURE, CONSEQUENTLY THE DEPRECIATION PROVIDED U/S 32(1)(II ) OF THE ACT WOULD GET ATTRACTED AND THE ASSESSEE WOULD BE ENTITLED FOR DEPRECIATION @ 2 5% UNDER THE HEAD INTANGIBLE ASSET AS AGAINST 15% GRANTED BY THE LD AO. THIS WAS DO NE BY THE LD CITA BASED ON THE ADDITIONAL GROUND RAISED BY THE ASSESSEE BEFORE THE LD CITA. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- 1. THAT IN THE FACTS OF THE CASE THE LD. CIT(A) ERR ED IN ALLOWING DEPRECIATION @ 25% INSTEAD OF 15%. THE ASSESSEE HAS ALSO RAISED CROSS OBJECTION BEFORE US ON THE FOLLOWING GROUND:- 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAD ERRED IN NOT ALLOWING THE ENTIRE SUM OF RS. 14,67,42,620/- I NCURRED BY THE APPELLANT TOWARDS BUS 5 ITA NO.2262/KOL/2014 M/S PRACHAR COMMUNICAITON A.YR.2009-10 5 SHELTER EXPENSES AS REVENUE EXPENDITURE, INSTEAD OF TREATING THE SAME TO BE INTANGIBLE ASSET AND ALLOWING DEPRECIATION @ 25% ON SUCH EXPE NSES. 3.5. THE LD DR ARGUED THAT THE BUS SHELTERS CONSTR UCTED BY THE ASSESSEE WAS ON THE LAND BELONGING TO THE GOVERNMENT. AS PER THE AGREEMENT ENTERED INTO BY THE ASSESSEE, THE RIGHT OF TERMINATION OF CONTRACT WAS WITH BOMBAY MU NICIPAL CORPORATION (BMC). ADMITTEDLY WHAT HAS BEEN CONSTRUCTED BY THE ASSESSE E WAS NOT BUILDING AND HENCE PROVISIONS OF EXPLANATION 1 TO SECTION 32 OF THE AC T ARE NOT APPLICABLE IN THE INSTANT CASE. HE ARGUED THAT WHAT HAS BEEN CONSTRUCTED IS OUT OF STEEL AND BRICKS AND HENCE CANNOT FALL UNDER THE CATEGORY OF TEMPORARY STRUCT URES. HENCE THE ONLY ALTERNATIVE IS TO TREAT THE SAME AS PLANT AND MACHINERY WHICH HAS BEEN RIGHTLY DONE BY THE LD AO AND DEPRECIATION @ 15% WAS RIGHTLY GRANTED BY THE LD AO . 3.6. THE LD AR VEHEMENTLY RELIED ON THE ORDER OF TH E LD CITA. HE ALSO PLACED ON RECORD THE COPY OF THE ORDER OF THE LD CITA FOR THE ASST Y EAR 2010-11 WHEREIN THE LD CITA GRANTED DEPRECIATION @ 25% TREATING THE AMOUNT PAID AS TOWARDS ACQUIRING A COMMERCIAL AND BUSINESS RIGHT TO DISPLAY ADVERTISEM ENT CATEGORIZING AS INTANGIBLE ASSET. HE FURTHER INFORMED THAT AGAINST THIS ORDER OF THE LD CITA, THE REVENUE HAD NOT PREFERRED FURTHER APPEAL BEFORE THIS TRIBUNAL FOR THE ASST YE AR 2010-11 EVENTHOUGH THE LD CITA HAD PASSED THE ORDER FOR BOTH ASST YEAR 2009-10 (I.E. THE YEAR UNDER APPEAL) AND 2010-11 ON THE SAM E DATE I.E 11.8.2014. ACCORDINGLY HE SUPPORTED THE ORDER OF THE LD CITA AND AGREED FOR W ITHDRAWAL OF THE GROUND RAISED IN THE CROSS OBJECTION THEREON. 3.7. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE FAC TS STATED HEREINABOVE REMAIN UNDISPUTED AND HENCE THE SAME ARE NOT REITERATED FO R THE SAKE OF BREVITY. IT IS NOT IN DISPUTE THAT THE AMOUNT PAID FOR CONSTRUCTION OF BU S SHELTERS IS CAPITAL EXPENDITURE INCURRED BY THE ASSESSEE. BUT THE BUS SHELTER HAS BEEN CONSTRUCTED ON THE LAND BELONGING TO THE BMC. BUT PURSUANT TO THE SAID CONSTRUCTION , AS PER THE AGREEMENT , THE ASSESSEE 6 ITA NO.2262/KOL/2014 M/S PRACHAR COMMUNICAITON A.YR.2009-10 6 HAD INDEED BEEN VESTED WITH A COMMERCIAL RIGHT OF D ISPLAYING ITS ADVERTISEMENT BOARDS IN CONSONANCE WITH THE BUSINESS CARRIED ON BY THE A SSESSEE. WE AGREE WITH THE OBSERVATION OF THE LD CITA THAT ASSESSEE HAD ACQUIR ED A COMMERCIAL AND BUSINESS RIGHT TO DISPLAY ADVERTISEMENT. WE ALSO AGREE THAT THE S AME DO FALL UNDER THE CATEGORY OF COMMERCIAL OR BUSINESS RIGHTS SO AS TO FALL WITHI N THE MEANING OF INTANGIBLE ASSETS U/S 32 OF THE ACT AND ACCORDINGLY ELIGIBLE FOR DEPRECIA TION @ 25% THEREON. WE FIND THAT THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS SELVEL ADVERTISING (P) LTD REPORTED IN (2015) 58 TAXMANN.COM 196 (KOLKATA TRIB .) DATED 1.1.2015 HAD HELD IN THE SIMILAR WAY IN SIMILAR CIRCUMSTANCES VIDE PARA 16 T O 21 OF THE SAID JUDGEMENT, WHICH ARE NOT REITERATED FOR THE SAKE OF BREVITY. WE ALSO F IND THAT THE LD AR INFORMED THIS BENCH THAT THE SIMILAR VIEW TAKEN FOR THE ASST YEAR 2010 -11 BY THE LD CITA HAD NOT BEEN APPEALED BY THE REVENUE BEFORE THIS TRIBUNAL. THI S ASPECT HAS NOT BEEN CONTROVERTED BY THE REVENUE BEFORE US. HENCE IN VIEW OF THESE FACT S AND FINDINGS, WE DO NOT FIND ANY JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF T HE LD CITA IN THIS REGARD. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED AND G ROUND 3 OF CROSS OBJECTION RAISED BY THE ASSESSEE IS DISMISSED AS WITHDRAWN. 4. THE GROUND NO. 1 RAISED IN THE CROSS OBJECTION B Y THE ASSESSEE WAS STATED TO BE NOT PRESSED BY THE LD AR. THE SAME IS RECKONED AS A ST ATEMENT FROM THE BAR AND ACCORDINGLY THE GROUND NO.1 OF CROSS OBJECTION OF T HE ASSESSEE IS DISMISSED AS NOT PRESSED. 5. THE LAST ISSUE TO BE DECIDED IN THE CROSS OBJECT ION OF THE ASSESSEE IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN UPHOLDING THE DISALLOWANCE MADE U/S 14A OF THE ACT READ WITH RULE 8D OF THE RULES, IN THE FACTS AND CIRCUMSTANCE S OF THE CASE. 5.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSE SSEE CLAIMED EXEMPT INCOME OF RS 5,87,709/- AND HAD DISALLOWED A SUM OF RS 11,754/- AS DIRECT EXPENSES INCURRED FOR 7 ITA NO.2262/KOL/2014 M/S PRACHAR COMMUNICAITON A.YR.2009-10 7 EARNING EXEMPT INCOME U/S 14A OF THE ACT IN THE RET URN OF INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD AO SOUGHT TO INVOKE THE PROVISIONS OF RULE 8D OF THE RULES FOR THE PURPOSE OF DISALLOWANCE U/S 14A OF TH E ACT. THE LD AO WORKED OUT THE DISALLOWANCE ON THE SAME AS UNDER :- UNDER RULE 8D(2)(I) - 11,754 UNDER RULE 8D(2)(II ) - 16,11,216 UNDER RULE 8D(2)(III) - 3,88,753 ----------------------- 19,99,669/- 5.2. THE ASSESSEE AGREED FOR SUCH DISALLOWANCE IN T HE ASSESSMENT PROCEEDINGS. LATER THE ASSESSEE PREFERRED AN APPEAL AGAINST THIS ADDIT ION BEFORE THE LD CITA AMONG OTHER ADDITIONS. THE LD CITA DIRECTED THE LD AO TO COM PUTE THE DISALLOWANCE UNDER RULE 8D(2)(II) AND RULE 8D(2)(III) IN THE LIGHT OF THE D ECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF REI AGRO LTD VS DCIT REPORT ED IN 144 ITD 141 WHEREIN IT WAS HELD THAT THE DISALLOWANCE U/S 14A READ WITH RULE 8 D COULD BE MADE SUBJECT TO FOLLOWING CONDITIONS:- A) SATISFACTION HAS TO BE RECORDED BY THE LD AO IN THE ASSESSMENT ORDER IN TERMS OF RULE 8D(1) . B) DISALLOWANCE UNDER RULE 8D(2)(II) CAN ONLY BE MADE IN RESPECT OF INTEREST WHICH CANNOT BE ATTRIBUTED TO ANY SPECIFIC SOURCE O F INCOME. C) UNDER RULE 8D(2)(II) & (III) , INVESTMENT WHICH HAV E NOT YIELDED INCOME CANNOT BE INCLUDED. 5.3. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 2.A) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E THE LEARNED CIT(A) HAD ERRED IN SETTING ASIDE/ DIRECTING THE AO TO FOLLOW THE PRINCIPLES AS LAID DOWN BY THE JURISDICTIONAL HIGH COURT AND THE JURISDICTIONA L TRIBUNAL IN KOLKATA INSTEAD OF NOT DELETING THE ADDITION OF RS. 19,99,969/-, HI MSELF, IN RESPECT OF THE ADDITION 8 ITA NO.2262/KOL/2014 M/S PRACHAR COMMUNICAITON A.YR.2009-10 8 MADE BY THE AO BY WRONGLY AND ILLEGALLY INVOKING TH E PROVISIONS OF SECTION 14A READ WITH RULE 8D. (B) WITHOUT PREJUDICE TO GROUND NO. 2(A) ABOVE, THA T ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAD G ROSSLY ERRED IN NOT UNDERSTANDING/APPRECIATING THAT SINCE THE RESERVE & SURPLUS AND SHARE CAPITAL OF THE RESPONDENT ASSESSEE WAS IN MUCH EXCESS OF TH E INVESTMENTS MADE, THE PROVISIONS OF RULE 8D WAS NOT AT ALL APPLICABLE IN THE ASSESSMENT YEAR UNDER CONSIDERATION (ASSESSMENT YEAR 2009-10). 5.4. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND ON PERUSAL OF THE BALANCE SHEET OF THE ASSESSEE, SUFFICIENT OWN FUNDS ARE AVAILABLE WI TH THE ASSESSEE FOR MAKING INVESTMENTS. HOWEVER, THE HONBLE JURISDICTIONAL H IGH COURT IN THE CASE OF DHANUKA & SONS REPORTED IN 339 ITR 319( CAL) HAD HELD THAT IT IS FOR THE ASSESSEE TO PROVE THE FACT AS TO WHETHER THE INVESTMENTS WERE MADE OUT OF OWN FUNDS OR BORROWED FUNDS IN THE RELEVANT YEARS OF MAKING INVESTMENTS. HENCE WE DE EM IT FIT AND APPROPRIATE TO REMAND THIS ASPECT FOR VERIFICATION TO THE FILE OF THE LD AO. THE ASSESSEE IS ALSO DIRECTED TO PRODUCE REQUISITE EVIDENCES IN THIS REGARD TO ARRIV E AT THE PROPER FINDING OF FACT. WE ARE IN AGREEMENT WITH THE ARGUMENT ADVANCED BY THE LD AR THAT WHILE COMPUTING THE DISALLOWANCE UNDER RULE 8D(2)(II) OF THE RULES, THE LD AO HAD ERRONEOUSLY TAKEN THE ENTIRE INTEREST PAID FOR COMPUTATION THEREON, WHICH IS NOT IN ACCORDANCE WITH THE RATIO LAID DOWN BY THIS TRIBUNAL IN THE CASE OF REI AGRO LTD SUPRA. WE FIND THAT THE ASSESSEE HAD PAID INTEREST AS UNDER:- INTEREST PAID TO BANK (FOR SECURED LOANS USED FOR BUSINESS PURPOSES) 1,40,13,966 INTEREST PAID ON OTHER LOANS 20,97,845 ---------------- TOTAL INTEREST PAID 1,61,11,811 ---------------- 9 ITA NO.2262/KOL/2014 M/S PRACHAR COMMUNICAITON A.YR.2009-10 9 WE HOLD THAT SINCE THE SECURED LOANS ARE USED ONLY FOR BUSINESS PURPOSES AND COULD NOT HAVE BEEN USED FOR THE PURPOSE OF MAKING INVESTMENT S AND THEREFORE, THE INTEREST PAID THEREON AMOUNTING TO RS 1,40,13,966/- SHOULD BE IGN ORED FOR COMPUTING THE DISALLOWANCE UNDER RULE 8D(2)(II) OF THE RULES. WE FURTHER HOLD THAT ONLY DIVIDEND BEARING INVESTMENTS SHOULD BE RECKONED FOR THE PURP OSE OF COMPUTING DISALLOWANCE UNDER RULE 8D(2)(II) AND 8D(2)(III) OF THE RULES. WE DIRECT THE LD AO TO RECOMPUTE THE DISALLOWANCE U/S 14A OF THE ACT READ WITH RULE 8D O F THE RULES ACCORDINGLY. ACCORDINGLY, THE GROUNDS 2 (A) & 2(B) RAISED BY THE ASSESSEE IN ITS CROSS OBJECTIONS ARE ALLOWED FOR STATISTICAL PURPOSES SUBJECT TO VARIOUS DIRECTIONS GIVEN ABOVE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED AND CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE COURT ON 01.11.2017 SD/- SD/- [A.T. VARKEY] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 01.11.2017 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. DCIT, CIRCLE-12(2), KOLKATA, P-7, CHOWRINGHEE SQ UARE, AAYAKAR BHAWAN, 3 RD FLOOR, KOLKATA-69. 2. M/S PRACHAR COMMUNICATION LTD. 79, UPENDRA MITRA LANE, SALKIA, HOWRAH-711106 3. C.I.T(A)- 4. C.I.T.- KOLKAT A. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S 10 ITA NO.2262/KOL/2014 M/S PRACHAR COMMUNICAITON A.YR.2009-10 10