ITO, Pune V. M/s National Heavy Engg. Co-Op Ltd, Pune

ITA 2385/PUN/2012

• Counselvise Citation: 238524514 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 30-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S PRAVINA
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Business income; Earning of tax free income
• Section: 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO S. 710 & 2385 /PN/20 1 2 ASSESSMENT YEAR S : 200 7 - 08 & 2008 - 09 INCOME TAX OFFIC ER, WARD - 2(3 ), PUNE VS. M/S. NATIONAL HEAVY ENGG. CO. OP. LTD., IIND FLOOR 17, M.G. ROAD, CAMP, PUNE (APPELLANT) (RESPONDENT) PAN NO. AA AAN4710D ITA NO. 300/PN/2013 ASSESSMENT YEAR : 2009 - 10 INCOME TAX OFFICER, WARD - 2(3), PUNE VS. M/S. NATIONA L HEAVY ENGG. CO. OP. LTD., IIND FLOOR 17, M.G. ROAD, CAMP, PUNE (APPELLANT) (RESPONDENT) PAN NO. AAAAN4710D APPELLANT BY: S MT. S. PRAVINA RESPONDENT BY: SHRI SUNIL PATHAK DATE OF HEARING : 29 - 0 1 - 2014 DATE OF PRONOUNCEMENT : 27 - 0 2 - 2014 OR DER P ER R.S. PADVEKAR , JM : - TH ESE THREE APPEALS ARE FILED BY THE REVENUE C HALLENG ING THE RESPECTIVE IMPUGNED ORDER S OF THE LD. CIT(A) - II, PUNE FOR THE A.YS. 2007 - 08, 2008 - 09 AND 2009 - 10. THE ISSUE ARISING FROM THE GROUNDS TAKEN IN THESE APPEALS IS IDEN TICAL IN ALL THE YEARS , HENCE, THESE APPEALS ARE DISPOSED OF BY THIS CONSOLIDATED ORDER. 2. WE FIRST TAKE THE APPEAL FOR THE A.Y. 2007 - 08. THE REVENUE HAS TAKEN THE MULTIPLE GROUNDS BUT THE SOLITARY ISSUE WHICH ARISES FOR OUR CONSIDERATION IS WHETHER TH E LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW PROPORTIONATE DEDUCTION U/S. 80P(2) OF THE INCOME - TAX ACT IN RESPECT OF THE INTEREST ON FIXED DEPOSITS KEPT WITH THE CO - OPERATIVE 2 ITA NO S. 710 & 2385/PN/2012 & 300/PN/2013, M/S. NATIONAL HEAVY ENGG. CO. OP. LTD., PUNE BANKS AFTER SETTING OFF THE PROPORTIONATE EXPENSES INCURRED TO EARN ON THE SAID INTEREST. 3. THE FACTS WHICH REVEALED FROM THE RECORD ARE AS UNDER. THE ASSESSEE IS A CO - OPERATIVE SOCIETY WHICH IS ENGAGED IN MANUFACTURING OF MACHINERY AND COMMISSIONING OF SUGAR FACTORIES ON TURNKEY CONTRACT BASIS. IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS KEPT THE FIXED DEPOSIT S WITH THE DIFFERENT CO - OPERATIVE BANKS AND HAS EARNED THE INTEREST ON IT WHICH WAS CLAIMED AS DEDUCTION U/S. 80P(2)(D) OF THE ACT. THE ASSESSING OFFICER HAS ALSO NOTED THAT THE ASSESSEE H AS BORROWED THE LOANS FROM THE BANKS AND HAS PAID THE INTEREST ON IT WHICH WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT. IN THIS CASE , IT IS NOT IN DISPUTE THAT THE ASSESSEE BEING A CO - OPERATIVE SOCIETY IS ELIGIBLE TO CLAIM THE DEDUCTION U/S. 80P(2)(D) IN R ESPECT OF THE FIXED DEPOSIT S KEPT WITH THE CO - OPERATIVE BANK AND OTHER CO - OPERATIVE SOCIETY . IN THE A.Y. 2007 - 08 , THE ASSESSEE HAD CLAIMED THE DEDUCTION TO THE EXTENT OF RS.38,82,302/ - U/S. 80P(2)(D) OF THE ACT. THE ASSESSING OFFICER HAD RESERVATION IN A LLOWING THE SAID DEDUCTION AS IN HIS OPINION IN THE SAID YEAR THE ASSESSEE HAS ALSO PAID THE INTEREST TO THE BANKS TO THE EXTENT OF RS.1,00,01,917/ - AS T HE ASSESSEE HAD BORROWED THE FUNDS TOWARDS CASH CREDIT. THE ASSESSING OFFICER, THEREFORE, PROCEEDED TO SET OFF INTEREST PAID AGAINST INTEREST RECEIVED AND AS PER THE WORKING MADE BY THE ASSESSING OFFICER INTEREST PAID WAS MORE THAN THE INTEREST RECEIVED HENCE, THE ASSESSEE WAS NOT ENTITLED FOR ANY DEDUCTION ON INTEREST RECEIVED FROM CO - OPERATIVE BANKS. TH E ASSESSEE OBJECTED TO THE ASSESSING OFFICERS ACTION BY STATING THAT THE FIXED DEPOSIT S ARE MADE OUT OF THE INTEREST F R EE DEPOSIT S RECEIVED FROM THE CUSTOMERS AND NONE OF THE DEPOSIT WAS RELATING TO ANY PREVIOUS YEAR FOR THE A.Y. 2007 - 08 AND ALL THE FIXED DEPOSITS WERE THERE SINCE THE F.Y. 2005 - 06. 4. THE ASSESSEE ALSO CONTENDED THAT THE CASH CREDIT FACILITY TAKEN BY THE ASSESSEE IS PURELY FOR HIS BUSINESS AND NONE OF THE INVESTMENT IN THE FIXED DEPOSIT IS MADE OUT OF THE BORROWED FUNDS. HE ALSO SUBMITT ED THAT 3 ITA NO S. 710 & 2385/PN/2012 & 300/PN/2013, M/S. NATIONAL HEAVY ENGG. CO. OP. LTD., PUNE THE CC ACCOUNT IS A RUNNING ACCOUNT AND ALL THE RECEIPTS FROM THE CUSTOMERS ARE ALSO DEPOSITED IN THE SAID ACCOUNT. THE ASSESSEE ALSO CONTENDED THAT ALL THE FIXED DEPOSITS WITH THE CO - OPERATIVE BANK S ARE CARR IED FORWARD SINCE 2005 AND THERE IS NO DIRECT NEXUS WITH THE INVESTMENT OF THE FIXED DEPOSIT AND THE FUNDS BORROWED. THE ASSESSE ALSO CONTENDED THAT THE ASSESSEE IS RECEIVING HUGE AMOUNT FROM THE CUSTOMERS TOWARDS ADVANCES. THE ASSESSEE ALSO REQUIRED TO GIVE BANK GUARANTEE FOR ENJOYING OF THE CREDIT FACILITY AND HENCE, THE ASSESSEE IS MAINTAINING THE FIXED DEPOSIT S . THE ASSESSEES CONTENTIONS WERE NOT FOUND FAVOUR AT THE ASSESSING OFFICERS LEVEL. THE ASSESSING OFFICER MADE THE ENTIRE DISALLOWANCE OF THE DEDUCTION CLAIMED BY THE ASSESSEE U/S . 80P(2)(D) AND MADE THE ADDITION WHICH RESULTED INTO ENHANCING THE TOTAL INCOME OF THE ASSESSEE. 4.1. THE ASSESSEE CARRIED THE ISSUE BEFORE THE LD. CIT(A). THE LD. CIT(A) PARTLY AGREED WITH THE ASSESSING OFFICER THAT THE CONTENTION OF THE ASSESSEE THAT T HE F.DS. HAVE BEEN MADE OUT OF INTEREST F R EE CUSTOMERS DEPOSITS HAS NOT BEEN DEMONSTRATED BY WAY OF ANY DOCUMENTARY EVIDENCE. THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO VIEW THE PROPORTIONATE DEDUCTION BY BIFURCATING THE TOTAL RECEIPTS OF THE ASSESS EE SOCIETY INTO INTEREST RECEIVED FROM CO - OPERATIVE SOCIETY AND OTHER BUSINESS RECEIPTS IN THE SAME RATIO AND T HE DEDUCTION U/S. 80P(2)(D) ON IN TEREST RECEIVED FROM CO - OPERATIVE BANK IS TO BE WORKED OUT. 5. IN SUM AND SUBSTANCE THE RATIO OF INTEREST REC EIVED FROM CO - OPERATIVE B ANK VIS - - VIS A TOTAL BUSINESS RECEIPT S ARE TO BE CONSIDERED FOR THE PURPOSE OF GUARANTING THE DEDUCTION U/S. 80P(2)(D) OF THE ACT. FOR THIS PROPOSITION THE LD. CIT(A) REL IED ON THE DECISION IN THE CASE OF CIT VS. RAJASTHAN RAJYA SAHAKARI UPBHOKTA SANGH LTD. 215 ITR 448 (RAJ.) AND LAHAUL POTATO GROWERS CO - OPERATIVE MARKETING PROCESSING SOCIETY LTD. VS. CIT 232 ITR 718 (HP) . FOR THE BENEFIT OF UNDERSTANDING THE DECISION OF THE LD. CIT(A) , W E ARE REPRODUCING THE OPERATIVE PART OF HI S FINDING: 4 ITA NO S. 710 & 2385/PN/2012 & 300/PN/2013, M/S. NATIONAL HEAVY ENGG. CO. OP. LTD., PUNE 5.6. THE APPELLANT IS IN RECEIPT OF BOTH TYPES OF INCOME, EXEMPT INCOME IN THE FORM OF INTEREST FROM THE COOPERATIVE BANK AND TAXABLE INCOME WHICH IS RECEIVED IN THE COURSE OF THE BUSINESS ACTIVITY CARRIED OUT BY THE APPELLANT. THE F.DS WHICH ARE MAINTAINED IN THE COOPERATIVE BANKS AND FROM WHICH THE INTEREST AMOUNTING TO RS.38,82,302/ - HAS EMANATED AND WHICH HAS BEEN CLAIMED AS A DEDUCTION U/S 80P(2)(D) HAS BEEN IN EXISTENCE SINCE 2005. THESE FIXED DEPOSITS ARE MADE OUT OF THE ADVANCES R ECEIVED FROM THE CUSTOMERS FOR WHOM THE APPELLANT EXECUTES THE WORK AS PER THEIR NEED AND ORDER SUCH AS CONTRACT FOR ERECTING AND COMMISSIONING OF SUGAR FACTORIES . THESE ADVANCES ARE ABOUT 20% OF THE TOTAL WORK ORDER OF THE CUSTOMERS WHICH IS DEPOSITED IN THE COOPERATIVE BANKS AND FDS MADE OUT OF THE SAME. THE NEED FOR THE F.DS ARISES BECAUSE THE COOPERATIVE BANK PROVIDE BANK GUARANTEE IN RETURN FOR THE F.DS. THESE ADVANCES FROM THE CUSTOMERS ARE SECURED BEFORE THE DISPATCHES ON THE PROJECT FOR WHICH CONTR ACT IS ENTERED INTO BY THE APPELLANT WITH THE RESPECTIVE CUSTOMERS COMMENCE. SO IN A WAY, THE ADVANCES AND THE FIXED DEPOSITS ARE MORE DUE TO BUSINESS CONSIDERATION THAN ON INVESTMENT, AS IN RETURN THE CUSTOMERS GET BANK GUARANTEE FROM THESE COOPERATIVE BA NKS WHERE THE F.DS ARE MADE. ONCE THE PROJECT OR THE CONTRACT WITH THE CUSTOMER IS OVER, THE NEXT CONTRACT IS MADE AND AGAIN THE SAME PROCESS OF MAKING F.DS AND GETTING BANK GUARANTEE BY THE CUSTOMERS CONTINUE AND THE PROCESS GOES ON AND IS CONTINUOUS. TH E CUSTOMERS WHOSE WORK CONTRACT IS COMPLETED, THE ADVANCES ARE ADJUSTED AGAINST THE SALES CONSIDERATION RAISED IN THE COURSE OF AND ON COMPLETION OF CONTRACT, WHICH IS DEPOSITED IN ANOTHER ACCOUNT, HOWEVER, THE NEW CUSTOMER REPLACES THE OLDER ONE AND THE F .DS MADE EARLIER CONTINUES AS BEFORE AND THE F.DS ARE CARRIED FORWARD YEAR AFTER YEAR. THESE F.DS BEAR INTEREST BETWEEN 8% TO 10% DURING THE F.Y. 2006 - 07 OR AT THE RATE PREVAILING AT THE TIME OF MAKING THE F.DS. IN THIS WAY THE F.DS MADE OUT OF THE ADVANCE S FROM CUSTOMERS RESULTS INTO INTEREST INCOME BY THE APPELLANT AND DURING THE YEAR THE TOTAL OF THE SAID F.DS HAS RESULTED INTO INCOME OF RS.38,82,302/ - , WHICH HAS BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT. THEREFORE, THE RECEIPT OF INTEREST FROM F.D. A RE TOTALLY SEPARATE THOUGH RECEIVED DURING THE COURSE OF BUSINESS. 5.7. NOW COMING TO THE INTEREST WHICH IS DEBITED OF RS.1,00,01,917/ - TO THE PROFIT AND LOSS ACCOUNT IS IN RESPECT OF THE CASH CREDIT ACCOUNT OPERATED BY THE APPELLANT FOR THE PURPOSES OF BU SINESS IN THE BANK. IN THE BALANCE - SHEET OF THE APPELLANT FOR A.Y. 2007 - 08 AN AMOUNT OF RS. 7.95 CRORES APPEAR AS CASH CREDIT, UNDER 5 ITA NO S. 710 & 2385/PN/2012 & 300/PN/2013, M/S. NATIONAL HEAVY ENGG. CO. OP. LTD., PUNE THE SECURED LOANS IN SCHEDULE I FROM PUNJAB NATIONAL BANK AS LEAD BANK IN CONSORTIUM WITH STATE BANK OF TRAVANCORE, MAHARAS HTRA STATE COOPERATIVE BANK. THESE CASH CREDITS HAVE BEEN SECURED AGAINST HYPOTHECATION OF STOCK IN TRADE, RAW MATERIAL, WORK - IN - PROGRESS AND SEMI FINISHED GOODS AND ADDITIONAL SECURITY OF MORTGAGE OF LAND AND BUILDING. THE APPELLANT UTILIZES THE CASH CRED IT ACCOUNT FOR RUNNING THE BUSINESS AND THE AFORESAID INTEREST DEBITED TO THE PROFIT AND LOSS ACCOUNT OF RS.1,00,01,917/ - PERTAINS TO SAID CASH CREDIT ACCOUNTS AND, THEREFORE, THERE IS NO CONNECTION, WHATSOEVER, WITH THE INTEREST RECEIVED FROM THE COOPERAT IVE BANK. THIS ACCOUNT IS A FLOATING CASH CREDIT ACCOUNT IN WHICH ALL THE RECEIPTS OF THE APPELLANT ARE DEPOSITED SUCH AS REMITTANCES BY WAY OF ADVANCES, SALE PROCEEDS FROM CUSTOMERS AND INTEREST FROM BANK FIXED DEPOSITS WHICH IS DIFFERENT FROM THE INTERES T RECEIVED FROM COOPERATIVE BANKS. THE INTEREST WHICH IS APPEARING AS EXPENSES IS ON ACCOUNT OF THE OVERDRAWN AMOUNT FROM THE SAID CASH CREDIT BANK ACCOUNT. THEREFORE, THERE IS NO NEXUS WITH THE INTEREST DEBITED TO THE PROFIT AND LOSS ACCOUNT. 5.8. THE A.O . HAS HELD IN THE ASSESSMENT ORDER THAT THE APPELLANT HAS BORROWED THE MONEY FOR INVESTMENT IN FIXED DEPOSITS BASED ON THE FINDING, OF LD. CIT - II, PUNE'S ORDER FOR THE YEARS 1999 - 2000 AND 2000 - 2001. THE A.O. HAS THUS LINKED THE INTEREST DEBITED OF RS. 1.01 CRORES TO THE EARNING OF INTEREST FROM THE F.DS, HOWEVER, THE A.O. HAS NOT BEEN ABLE TO JUSTIFY AND BRING ON RECORD ANY COGENT MATERIAL TO ARRIVE AT THE FINDING THAT THE MONEY BORROWED FROM THE CASH CREDIT ACCOUNT HAD BEEN UTILIZED FOR MAKING INVESTMENT I N FIXED DEPOSITS ON WHICH THE INTEREST HAS BEEN EARNED BY THE APPELLANT AND FOR WHICH THE DEDUCTION U/S 80P(2)(D) HAS BEEN CLAIMED. I FIND CONSIDERABLE FORCE IN THE VIEW OF THE APPELLANT THAT THE SOCIETY IS NOT AN INVESTMENT SOCIETY BUT, A MANUFACTURING AN D PROJECT COMMISSIONING UNIT AND THAT THE CASH CREDIT ACCOUNT IS NOT A DESIGNATED BORROWING FOR INVESTMENT IN F.DS RATHER IT IS A FLOATING BUSINESS BANK ACCOUNT WHERE THE RECEIPTS OF THE APPELLANT ARE ALSO DEPOSITED. HOWEVER, I AGREE WITH THE FINDING OF TH E A.O. THAT THE CONTENTION RAISED BY THE APPELLANT THAT FDRS HAD BEEN MADE OUT OF INTEREST FREE CUSTOMERS DEPOSITS HAS NOT BEEN SUBSTANTIATED BY WAY OF ANY DOCUMENTARY EVIDENCE. MOREOVER, THE APPELLANT HAS NOT MADE A SEPARATE ACCOUNT FOR THE RECEIPT ON ACC OUNT OF BUSINESS AND RECEIPTS FROM THE COOPERATIVE BANKS, RATHER IT IS A SINGLE COMPOSITE ACCOUNT AND BOTH OF WHICH APPEAR IN THE SINGLE PROFIT AND LOSS ACCOUNT MAINTAINED BY THE APPELLANT AND THIS .IS WHERE THE FINDING OF THE CASE LAW IS APPLICABLE. IN TH E LIGHT OF THE ABOVE FINDINGS, AND THE RATIO OF THE 6 ITA NO S. 710 & 2385/PN/2012 & 300/PN/2013, M/S. NATIONAL HEAVY ENGG. CO. OP. LTD., PUNE DECISION CITED BY THE APPELLANT IT WOULD BE PRUDENT TO BIFURCATE THE TOTAL RECEIPTS OF THE APPELLANT INTO INTEREST RECEIVED FROM COOPERATIVE SOCIETY AND OTHER BUSINESS RECEIPTS AND IN THE SAME RATIO THE D EDUCTION U/S 80P(2)(D) ON INTEREST RECEIVED FROM COOPERATIVE BANKS BE APPLIED. THUS, THE DEDUCTION U/S 80P(2)(D) IS ALLOWED ON A PROPORTIONATE BASIS BASED ON THE RATIO OF THE RECEIPTS RECEIVED BY THE APPELLANT. THE TOTAL BUSINESS RECEIPT OF THE APPELLANT AS REFLECTED IN THE PROFIT AND LOSS ACCOUNT IS RS. 37.16 CRORES AND THE OTHER INCOME OF RS. 41.98 LACS OUT OF RS. 80,80,359/ - WILL HAVE TO BE ADDED TO THE BUSINESS RECEIPT, AS THE REMAINING INTEREST FROM COOPERATIVE BANKS AMOUNTING TO RS. 38.82 LACS WILL H AVE TO BE CONSIDERED FOR DECIDING THE RATIO. THE RATIO OF THE INTEREST RECEIVED FROM' THE COOPERATIVE BANK VIS - A - VIS THE TOTAL BUSINESS RECEIPTS HAVE TO BE CONSIDERED IN THE LIGHT OF THE RATIO OF THE ABOVE CITED JUDICIAL DECISION FOR THE PURPOSE OF GRANTIN G DEDUCTION U/S 80P(2)(D). NOW BEING AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEAD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS NOT IN APPEAL EVEN THOUGH THE PRO - RATA DEDUCTION IS ALLOWED. THE GRIEVANCE OF THE REVENUE IS THAT IN THE A.YS. 1999 - 2000 AND 2000 - 01 , THE ASSESSEE HAS ADMITTED BEFORE THE LD. CIT - II, PUNE THAT THE FIXED DEPOSITS WERE MADE OUT OF THE BORROWING AND NOW THE ASSESSEE CANNOT TAKE THE DIFFERENT STANDS. PER CONTRA, THE LD. COUNSEL ARG UES THAT THE ISSUE IN A.YS. 1999 - 2000 AND 2000 - 01 WAS TOTALLY DIFFERENT THAT WHETHER THE INTEREST FROM NATIONALIZED BANK IS TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCE S OR UNDER THE HEAD BUSINESS INCOME. HE SUBMITS THAT SO FAR AS A.Y. 2007 - 08 IS C ONCERNED NO FRESH FIXED DEPOSIT IS MADE , ALL FIXED DEPOSITS ARE MADE IN THE YEAR 2005 ONWARDS . T HE ASSESSEE HAS FILED THE CHART IN THE PAPER BOOK (PAGE NOS. 2 TO 5) SHOWING THE DETAILS OF F.DS. WITH THE DIFFERENT BANKS FROM WHICH IT IS SEEN THAT AS RIGHTL Y ARGUED BY THE LD. COUNSEL NONE OF THE DEPOSIT RELATE BACK TO 2000 . IN OUR OPINION THE CONTROVERSY IS IN VERY NARROW COMPASS. ADMITTEDLY THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 80P(2)(D) IN RESPECT OF THE INTEREST RECEIVED FROM THE CO - OPERATIVE BANK S AS THE ASSESSEE ITSELF IS A CO - OPERATIVE SOCIETY BUT ONLY DISPUTE IS THE QUANTUM OF DEDUCTION . T HOUGH IT IS CONTENDED BY THE ASSESSEE BEFORE 7 ITA NO S. 710 & 2385/PN/2012 & 300/PN/2013, M/S. NATIONAL HEAVY ENGG. CO. OP. LTD., PUNE THE AUTHORITIES BELOW THAT THERE IS NO NEXUS OF THE BORROWED FUNDS WITH THE INVESTMENT MADE IN THE FIXED DEPOSIT BUT THE SAID CONTENTION HAS NOT BEEN ACCEPTED BY THE CIT(A) . THE CIT(A) KEPT PRAGMATIC APPROACH RELYING ON THE PRINCIPLES LAID IN THE CASE OF RAJASTHAN RAJYA SAHAKARI UPBHOKTA SANGH LTD. (SUPRA) . IN THE SAID CASE THE ASSESSEE WAS CO - OPERATIVE SOCIETY A ND HAS RECEIVED THE INTEREST INCOME FOR WHICH DEDUCTION U/S. 80P(2)(D) OF THE ACT WAS CLAIMED . T HE CONTROVERSY WAS IDENTICAL , TH E HON'BLE HIGH COURT HELD THAT WHEN NO SEPARATE BOOKS OR BOOKS OF ACCOUNT HAVE BEEN MAINTAINED F OR THE EXEMPTED AND NON - EXEMPTE D ACTIVITIES AND THE EXPENSES HAVE BEEN INCURRED JOINTLY FOR EARNING BOTH THE INCOMES THEN THE PROPER WAY IS TO ESTIMATE THE EXPENSES ATTRIBUTABLE FOR EARNING THE EXEMPT AS WELL AS NON - EXEMPT INCOME. 7. IN THE PRESENT CASE NOWHERE IT IS THE CASE OF THE A SSESSING OFFICER THAT THE ASSESSEE HAS MADE THE ENTIRE INVESTMENT S FROM THE BORROWED FUNDS NOR IT IS THE CASE THAT THE ENTIRE BORROWED FUNDS ARE USED FOR MAKING THE INVESTMENT IN THE FIXED DEPOSIT S O N WHICH THE ASSESSEE HAS EARNED THE INTEREST INCOME ON WH ICH DEDUCTION U/S. 80P(2)(D) OF THE INCOME - TAX ACT IS CLAIMED . THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO APPORTION THE EXPENDITURE OF THE INTEREST DEBITED TO THE PROFIT AND LOSS ACCOUNT CONSIDERING TAXABLE AS WELL AS NON - TAXABLE INCOME I.E. INTERES T INCOME WHICH IS CLAIMED AS DEDUCTION AND ALLOCATE THE INTEREST EXPENDITURE ON PROPORTIONATE BASIS. IN OUR OPINION THE APPROACH OF THE LD. CIT(A) CANNOT BE FAULTED WITH AS THE SAME IS SUPPORTED BY THE PRINCIPLES LAID DOWN IN THE CASE OF RAJASTHAN RAJYA S AHAKARI UPBHOKTA SANGH LTD. (SUPRA). WE, THEREFORE, FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) AND ACCORDINGLY, THE SAME IS CONFIRM IN THE A.Y. 2007 - 08 AND GROUNDS TAKEN BY THE REVENUE ARE DISMISSED. 8. SO FAR AS THE A.YS. 2008 - 09 AND 20 09 - 10 ARE CONCERNED, ISSUE S AND FACTS ARE IDENTICAL AS IN THE A.Y. 2007 - 08. IN THE A.Y. 2008 - 09 THE ASSESSEE HAD EARNED THE INTEREST ON THE FIXED DEPOSIT S WITH THE CO - 8 ITA NO S. 710 & 2385/PN/2012 & 300/PN/2013, M/S. NATIONAL HEAVY ENGG. CO. OP. LTD., PUNE OPERATIVE BANKS TO THE EXTENT OF RS. 51,54,664/ - AND HAS PAID THE INTEREST TO THE EXTENT OF RS.94,24,022/ - ON THE BORROWED FUNDS ON CASH CREDIT AND IN THE A.Y. 2009 - 10 , THE ASSESSEE HAS RECEIVED THE INTEREST OF RS.58,88,148/ - ON THE FIXED DEPOSIT S WITH THE CO - OPERATIVE BANK AND PAID THE INTEREST TO THE EXTENT OF RS.1,37,08,246/ - ON THE BORROWE D FUNDS ON CASH CREDIT ACCOUNT. THE ASSESSING OFFICER MADE THE DISALLOWANCE IN BOTH THE ASSESSMENT YEARS IN RESPECT OF THE DEDUCTION CLAIMED BY THE ASSESSEE U/S. 80P(2)(D). WHEN THE ISSUE WAS CARRIED BEFORE THE LD. CIT(A) , HE FOLLOWING HIS DECISION IN TH E A.Y. 2007 - 08 ALLOWED THE PRO - RATA DEDUCTION TO THE ASSESSEE . W E , THEREFORE, FOLLOWING OUR REASONS IN THE A.Y. 2007 - 08 CONFIRM THE ORDER OF THE LD. CIT(A) IN THE A.YS. 2008 - 09 AND 2009 - 10 AND DISMISS THE GROUNDS TAKEN BY THE REVENUE. 9. IN THE RESULT, AL L THE THREE APPEALS OF THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 27 - 0 2 - 201 4 SD/ - SD/ - ( R.K. PANDA ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 27 TH FEBRU ARY, 2014 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - II, PUNE 4 THE CIT - II, PUNE 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE