M/s. IFCI Limited, New Delhi V. DCIT, New Delhi

ITA 2473/DEL/2014

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7698 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 27-04-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 22-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAMAR BHADRA
• Keywords: Business income; Depreciation; Share purchase agreement; Earning of tax free income; Retrospective amendment; Bad and doubtful debts; Assessment record; Onus to prove; Revised return; Unabsorbed depreciation; Rule 8D; Set aside; Capital Gains
• Section: 43B; 244A; 14A; 115JB; 139(5); 143(1); 207; 264; 192; 139(1); 139(4); 113; 43; 13; 22; 145; 37

Judgement Text

PAGE 1 OF 43 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI BEFORE MS SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO ASSESSMENT YEAR 3207/DEL/2011 2005 - 06 2199/DEL/2011 2006 07 1631/DEL/2011 2007 08 2062/DEL/2012 2008 - 09 THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 11(1) C R BUILDING I P ESTATE NEW DELHI VS. IFCI LIMITED IFCI TOWERS 61 NEHRU PLACE NEW DELHI PAN: AAACT0668G (APPELLANT) (RESPONDENT) ITA/ CO NO ASSESSMENT YEAR 3443/DEL/2011 2005 - 06 1984/DEL/2012 2008 - 09 2473/DEL/2014 2009 - 10 5381/DEL/2014 2009 - 10 IFCI LIMITED IFCI TOWERS 61 NEHRU PLACE NEW DELHI PAN: AAACT0668G VS. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 11(1) C R BUILDING I P ESTATE NEW DELHI PAGE 2 OF 43 (APPELLANT) (RESPONDENT) FOR ASSESSEE SHRI SAURAV SOOD ADV SHRI SHA SHANK SHARMA ADV MS SUBHASHREE RAO ADV FOR REVENUE SHRI SAMAR BHADRA CIT DR DATE OF HEARING 21 - 08 - 2020 DATE OF PRONOUNCEMENT 31/08/2020 O R D E R PER PRASHANT MAHARISHI AM THESE ARE [8] APPEALS OF THE SAME ASSESSEE INVOLVING SOME COMMON GROUNDS, THEREFORE, THOSE ARE HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER. IT A NUMBER 3207/DEL/2011 (BY AO ) AND ITA NUMBER 3443/DEL/2011 (BY ASSESSEE) ASSESSMENT YEAR 2005 06. 01. ABOVE TWO APPEALS ARE CROSS APPEALS FILED BY THE ASSESSEE IN ITA NUMBER 3443/DEL/2011 AND ITA NUMBER 3207/DEL/2011 FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2005 06 AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) , NEW DELHI DATED 6 APRIL 2011 WHEREIN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11 (1), NEW DELHI PASSED ON 27 TH OF DECEMBER 2007 U/S 143 (3) OF THE INCOME TAX ACT 1961 WAS PARTLY ALLOWED. THEREFORE, BOTH THE PARTIES ARE IN A PPEAL BEFORE US. PAGE 3 OF 43 02. ASSESSEE HAS PREFERRED FOLLOWING GROUNDS OF APPEAL 1) THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN NOT ALLOWING DEPRECIATION AMOUNTING TO 73,130,008/ CLAIMED BY THE APPELLANT IN RESPECT OF THE ASSESSEE GIVEN ON LEAS E. 2) THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN SIMPLY FOLLOWING THE ORDER FOR ASSESSMENT YEAR 2004 05, HOLDING THE LEASE TRANSACTION UNDERTAKEN BY THE APPELLANT TO BE A FINANCING TRANSACTION. 3) WITHOUT PREJUDICE TO GROUND OF APPEAL NUMBER 1, THAT IN CASE THE LEASE TRANSACTION UNDERTAKEN BY THE APPELLANT WAS HELD TO BE MERELY A FINANCING TRANSACTION, THEN THE ASSESSING OFFICER ERRED IN BRINGING TO TA X THE ENTIRE LEASE RENT RECEIVED AND OFFERED FOR TAX BY THE APPELLANT IN THE RETURN OF INCOME. 4) THAT THE ASSESSING OFFICER/COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT IN CASE THE LEASE TRANSACTIONS UNDERTAKEN BY THE APPELLANT WAS HELD TO BE MERELY A FINANCING TRANSACTION, THEN ONLY THE FINANCE/INTEREST COMPONENT OUT OF THE GROSSLY IS RENT RECEIVED SHOULD HAVE BEEN BROUGHT TO TAX AS INCOME OF THE APPELLANT. 5) THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING ADMINISTRATIVE EXPENSES AMOUNTING TO 8,577,000 U/S 14 A OF THE INCOME TAX ACT 1961 ATTRIBUTE IN THE SAME TOWARDS EARNING OF EXEMPT INCOME. 6) THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ORDER ON FACTS A ND IN LAW IN NOT APPRECIATING THAT ONLY EXPENDITURE ACTUALLY INCURRED IN RELATION TO THE EXEMPT INCOME WOULD BE DISALLOWED U/S 14 A OF THE ACT. 7) THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN PAGE 4 OF 43 TREATING THE PROVISIONS FOR BAD AND DOUBTFUL DEBT AND OTHER ASSETS AMOUNTING TO 790.33 CRORES DEBITED TO PROFIT AND LOSS ACCOUNT AS RESERVE. 03. THE LEARNED ASSESSING OFFICER HAS RAISED FOLLOWING 2 GROUNDS OF APPEAL, WHICH ARE AS UNDER . 01 ON THE FA CTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) HAS ERRED IN RESTRICTING THE ADDITION TWO 8,577,000 MADE ON ACCOUNT OF DISALLOWANCE U/S 14 A OF THE INCOME TAX ACT. 02 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) HAS ERRED IN DELETING THE ADDITION OF 72,317,718 MADE ON ACCOUNT OF INTEREST ON BONDS DISALLOWED U/S 43B OF THE INCOME TAX ACT. 04. BRIEFLY STATED THE FACTS OF THE CASE SHOWS THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF LEASING AND FINANCE AND IT ALSO FINANCES PROJECTS IN THE FORM OF RUPEE LOANS FOREIGN CURRENCY LOANS, UNDERWRITING AND SUBSCRIBING TO THE CAPITAL ISSUES. 05. ASSESSEE FILED ITS RETURN OF INCOME ON 31 ST OF OCTOBER 2005 SHOWING RS NIL L INCOME AFTER SETTING OFF CARRIED FORWARD BUSINESS LOSS OF 852, 935,720. ASSESSEE REVISED ITS RETURN OF INCOME ON 30 MARCH 2007 SHOWING THE TOTAL INCOME AT 1,249,647. SUBSEQUENTLY THE RETURN OF INCOME WAS PICKED UP FOR SCRUTINY AND THE ASSESSMENT U/S 143 (3) OF THE INCOME TAX ACT 1961 WAS PASSED BY THE LEARNED ASSESS ING OFFICER ON 27 DECEMBER 2007 WHEREIN GROSS TOTAL INCOME OF THE ASSESSEE WAS DETERMINED AT RS 1 10,82,38,936/ . THIS AMOUNT WAS SET OF F AGAINST THE BROUGHT FORWARD BUSINESS LOSSES AND TAXABLE BUSINESS INCOME WAS DETERMINED AT RS. NIL. 06. ASSESSEE AGGRIEVED WITH THE ORDER OF THE LEARNED ASSESSING OFFICER PREFERRED AN APPEAL BEFORE THE LEARNED CIT A WHO PASSED AN ORDER PARTLY ALLOWING THE APPEAL OF THE ASSESSEE. THEREFORE, FOR THE REASON THAT CERTAIN DISALLOWANCES HAVE BEEN DELETED, ASSESSING OFFICER IS IN PAGE 5 OF 43 APPEAL AND FOR THE ADDITION/DISALLOWANCE IS CONFIRMED BY THE CIT A, ASSESSEE IS IN APPEAL. 07. WE FIRST TAKE UP THE APPEAL OF THE LEARNED ASSESSING OFFICER. THIS APPEAL IN ITA NUMBER 3207/DEL/2011 AS THE FIRST GROUND OF APPEAL THAT THE LEARNED COMMISSIONER O F INCOME TAX (APPEALS) HAS ERRED IN RESTRICTING THE ADDITION OF RS 8,577,000 ON ACCOUNT OF DISALLOWANCE U/S 14 A OF THE INCOME TAX ACT. THIS GROUND IS ALSO RELATED TO GROUND NUMBER 3 OF THE APPEAL OF THE ASSESSEE. 08. BRIEF FACTS SHOWS THAT ASSESSEE HAS EARNED DIVIDEND INCOME OF 222,235,283 WHICH IS CLAIMED AS EXEMPT U/S 10 (34) OF THE ACT. THE LEARNED ASSESSING OFFICER AS PER QUESTIONNAIRE DATED 10 OCTOBER 2007 ASKED THE ASSESSEE TO JUSTIFY THE NON - DISALLOWANCE OF EX PENDITURE INCURRED FOR EARNING EXEMPT INCOME AS PER PROVISIONS OF SECTION 1 4 A OF THE ACT. AS PER LETTER DATED 14 TH 11 2007 , ASSESSEE SUBMITTED ITS REPLY STATING THAT ASSESSEE IS A FINANCIAL INSTITUTION AND WHAT IS DISALLOWABLE IS ONLY THE ACTUAL EXPEN DITURE INCURRED IN EARNING EXEMPT DIVIDEND INCOME. ASSESSEE FURTHER STATED THAT LEARNED CIT A IN ITS OWN CASE FOR ASSESSMENT YEAR 98 1999 HAS DISALLOWED ON AD HOC BASIS 2 LAKHS OUT OF THE ADMINISTRATIVE EXPENSES ATTRIBUTABLE TO EXEMPT INCOME U/S 10 ( 34) OF THE ACT. ASSESSEE HAS ALSO STATED THAT IT HAS NOT INCURRED ANY EXPENDITURE IN EARNING OF THE DIVIDEND INCOME. THE LEARNED ASSESSING OFFICER REJECTED THE CONTENTIONS OF THE ASSESSEE THAT ASSESSEE HAS NOT FURNISHED ANY DETAILS THAT IT HAS NOT INCURRED ANY EXPENDITURE FOR EARNING OF THE DIVIDEND INCOME. THEREFORE, THE LEARNED ASSESSING OFFICER FOUND THAT ASSESSEE HAS INCURRED EXPENDITURE ON SALARIES AND BENEFITS, MISCELLANEOUS EXPENSES AND THE COST OF BORROWINGS. TOTAL OF THESE EXPENDITURE IS RS 10092,0 00,000/ . THESE ADMINISTRATIVE EXPENSES WERE APPROPRIATED PROPORTIONATELY IN THE RATIO OF DIVIDEND INCOME EARNED TO TOTAL RECEIPTS AND THEREFORE THE AO COMPUTED THE SUM OF 17,01,00,000 PAGE 6 OF 43 AS EXPENSES ATTRIBUTABLE TO EARNING OF DIVIDEND INCOME. THIS AMOUNT WAS DISALLOWED U/S 14 A OF THE ACT. 09. ON APPEAL BEFORE THE LEARNED CIT A ASSESSEE CHALLENGED THE ADDITION TO THE EXTENT OF ONLY 169,900,000, BECAUSE AS PER THE LAST APPELLATE ORDER OF THE LEARNED CIT A , ADDITION WAS UPHELD TO THE EXTENT OF 2 LAKH S . THE ASSESSEE SUBMITTED THAT OUT OF THE TOTAL EXPENDITURE DISALLOWED OF RS 170,100,000, RS 161,523,000/ IS ON ACCOUNT OF THE COST OF BORROWING THAT IS INTEREST ET CETERA AND 8,577,000 IS ON ACCOUNT OF ADMINISTRATIVE EXPENSES. IT WAS SUBMITTED THAT AS SESSEE HAS INTEREST FREE FUNDS IN THE FORM OF SHARE CAPITAL AND R ESERVE AND SURPLUS AMOUNTING TO RS 1515.37 CRORES WHICH ARE USED FOR MAKING INVESTMENT IN EXEMPT INCOME YIELDING SHARES. ASSESSEE FURTHER STATED THAT IT HAS NOT BORROWED ANY NEW SUM DURING TH E YEAR AND ALL THESE INVESTMENTS ARE OLD. ASSESSEE RELIED UPON THE DECISION OF THE HONOURABLE BOMBAY HIGH COURT IN CASE OF CIT VERSUS RELIANCE UTILITIES AND POWER LTD (2009) 3 13 ITR 3 40 WHEREIN IT IS LAID DOWN THAT THE IF THERE WERE SUFFICIENT FUNDS AVAIL ABLE BOTH INTEREST FREE AND INTEREST - BEARING FUNDS, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENT WOULD BE OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE COMPANY. WITH RESPECT TO THE ADMINISTRATIVE EXPENDITURE, IT WAS SUBMITTED THAT FOR ASSESSMENT YEAR 2006 07 THE LEARNED COMMISSIONER OF INCOME TAX APPEAL HAS RESTRICTED THE DISALLOWANCE TO 10 LAKHS, THEREFORE, THE ABOVE ADDITION ON ACCOUNT OF ADMINISTRATIVE EXPENSES CANNOT BE MADE. 10. THE LEARNED CIT A, HE DELETED THE DISALLOWANCE ON ACCOUNT OF INTEREST EXPENDITURE HOWEVER SUSTAINED THE DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE OF 8,577,000. THEREFORE, BOTH THE PARTIES ARE IN APPEAL BEFORE US. 11. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED AS UNDER A. THE SHARES WERE HELD BY APPELLANT ASSESSEE AS STOCK - IN - TRADE AND AS SUCH NO DISALLOWANCE UNDER SECTION 14A OF THE IT ACT WAS CALLED FOR . PAGE 7 OF 43 B. INVESTMENTS IN SHARES WERE MADE OUT OF INTEREST FREE FUNDS HENCE INTEREST COST CANNOT BE ATTRIBUTED AS EXPENDITURE IN RELATION TO EARNING OF DIVIDEND INCOME. C. NO C OGENT REASONS WERE GIVEN BY THE RESPONDENT REVENUE FOR REJECTING SUO - MOTO DISALLOWANCE MADE BY THE APPELLANT ASSESSEE. ALSO, THE REASONS AS GIVEN BY THE RESPONDENT REVENUE WITH REGARD TO DOUBLE BENEFIT ON ACCOUNT OF LOSS ON SALE OF SHARES/BONDS BEING EXEMP T DUE TO THE TRANSACTION OF DIVIDEND STRIPPING (REDUCTION IN REDEMPTION VALUE DUE TO DECLARATION OF DIVIDEND) WAS WRONG IN THE LIGHT OF THE DECISION OF APEX COURT IN THE CASE OF CIT VS WALFORT SHARE & STOCK BROKERS (P.) LTD. [2010] 192 TAXMAN 211 (SC), THE LOSS ON SALE OF UNITS IN A DIVIDEND STRIPPING TRANSACTION, CANNOT BE CONSIDERED AS AN EXPENDITURE FOR DISALLOWANCE UNDER SECTION 14A OF THE IT ACT. FURTHER, IT IS SUBMITTED THAT THERE WAS NO LOSS ON SALE OF SHARES/ BONDS, WHICH WAS CLAIMED AS EXEMPT DURI NG THE YEAR UNDER CONSIDERATION, AND NO CONTRARY FINDING TO THAT EFFECT WAS GIVEN BY THE RESPONDENT REVENUE. FURTHER, INCOME/LOSS FROM SALE OF SHARES IN ASSISTED CONCERNS WAS SHOWN AS BUSINESS INCOME/LOSS BY THE APPELLANT ASSESSEE. D. RELIANCE BY RESPONDENT REVENUE ON UNITED GENERAL TRUST CASE WAS INCORRECT AS ON THE GROUND THAT THOUGH THE QUESTION FRAMED CONTAINED A REFERENCE TO PROPORTIONATE MANAGEMENT EXPENSES BUT THE CONTROVERSY WAS THAT WHETHER DEDUCTION IS ALLOWABLE FROM GROSS D IVIDEND OR NET DIVIDEND UNDER SECTION 80M OF THE IT ACT AND SECTION 14A OF THE IT ACT DOES NOT DEAL WITH THIS ISSUE. E. NO ACTUAL EXPENDITURE WAS INCURRED BY THE APPELLANT ASSESSEE TO EARN THE DIVIDEND INCOME. NO ACTUAL EXPENDITURE WAS INCURRED ON ITS COLLEC TION. ALSO, NO FOLLOW - UP WAS MADE FOR THE SAME. THUS, THE DISALLOWANCE OF RS. 2,00,000/ - AS MADE SUO MOTO BY THE APPELLANT ASSESSEE WAS JUST AND REASONABLE. PAGE 8 OF 43 F. BURDEN OF PROOF IS ON THE REVENUE TO SHOW THAT EXPENSES WERE ACTUALLY INCURRED TO EARN EXEMPT INCO ME AND THE RESPONDENT REVENUE HAD NOT BROUGHT ANYTHING ON RECORD TO SHOW THAT INTEREST/ADMINISTRATIVE EXPENSES WERE INCURRED TO EARN DIVIDEND INCOME. G. THERE WAS NO NEXUS BETWEEN INTEREST/ ADMINISTRATIVE EXPENDITURE INCURRED AND THE DIVIDEND INCOME. MERELY BECAUSE EXEMPT INCOME IS EARNED, IT DOES NOT MEAN THAT DISALLOWANCE UNDER SECTION 14A OF THE IT ACT MUST NECESSARILY BE CALLED FOR. 12. THE LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED AO. HE SUBMITTED THAT AS THE ASSESSEE HAS NOT GIVEN ANY DETAILS THAT IT HAS NOT INCURRED ANY EXPENDITURE, THE DISALLOWANCE IS MANDATORY U/S 14 A OF THE ACT. HE FURTHER SUBMITTED THAT ASSESSEE HAS ALSO NOT GIVEN ANY NEXUS OF THE BORROWED FUNDS OR AN INTEREST FREE FUND THAT HAS BEEN UTILIZED FO R THE PURPOSES OF MAKING AN ACQUISITION IN THE TAX - FREE INCOME EARNING INSTRUMENTS. HE SUBMITTED THAT IN ABSENCE OF ANY SUCH DETAIL, THE DISALLOWANCE OF INTEREST HAS RIGHTLY BEEN MADE BY THE LEARNED ASSESSING OFFICER. WITH RESPECT TO THE ADMINISTRATIVE EXP ENDITURE, HE SUBMITTED THAT ASSESSEE DID NOT GIVE ANY INFORMATION ABOUT ANY EXPENDITURE INCURRED FOR EARNING SUCH SECURITIES FOR EARNING DIVIDEND. HE SUBMITTED THAT IT IS NOT POSSIBLE FOR THE ASSESSEE TO EARN SUCH HUGE DIVIDEND WITHOUT INCURRING ANY EXP ENDITURE FOR EARNING THAT DIVIDEND. HE THEREFORE SUBMITTED THAT THE LEARNED ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE PROPORTIONATE SUM. HE FURTHER STATED THAT THE RATIO ADOPTED BY THE LEARNED ASSESSING OFFICER IS ALSO NOT DISPUTED BY THE ASSESSEE. HE F URTHER STATED THAT IN PAST ASSESSMENT YEAR AS WELL AS IN THE SUBSEQUENT ASSESSMENT YEARS THE ASSESSEE HAS MADE DISALLOWANCE U/S 14 A OF THE ACT ON ITS OWN; THEREFORE, THERE IS NO REASON THAT THERE SHOULD NOT BE ANY DISALLOWANCE FOR THIS ASSESSMENT YEAR. PAGE 9 OF 43 13. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. UNDOUBTEDLY ASSESSEE HAS EARNED THE DIVIDEND INCOME WHICH IS EXEMPT FROM TAX U/S 10 (34) OF THE ACT OF 22.22 CRORE . HOWEVER BEFORE THE LEARNED CIT A ASSES SEE HAS SUBMITTED THAT IT HAS HUGE INTEREST FREE FUNDS AVAILABLE WITH IT WHICH FAR EXCEEDS THE AMOUNT OF INVESTMENT MADE IN THOSE SECURITIES WHICH YIELDED TAX FREE EXEMPT INCOME U/S 10 (34) OF THE ACT. THEREFORE, NATURALLY THE PRESUMPTION WOULD BE AVAILAB LE IN FAVOUR OF THE ASSESSEE THAT, IF THE AMOUNT OF INVESTMENT MADE IN SUCH A TAX FREE EARNING INVESTMENTS DOES NOT HAVE ANY NEXUS WITH INTEREST BEARING BORROWED FUNDS, THAT THE AMOUNT OF INVESTMENT MADE BY THE ASSESSEE IN SUCH EXEMPT INCOME - YIELDING INSTRUMENT IS OUT OF INTEREST FREE FUNDS AVAILABLE WITH ASSESSEE. THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT SHOW THAT THE AMOUNT OF INVESTMENT MADE BY THE ASSESSEE IN THOSE INVESTMENTS, WHICH EARNED TAX - FREE INCOME, IS HIGHER THAN THE AMOUNT OF SH ARE CAPITAL AND FREE RESERVE AVAILABLE WITH THE ASSESSEE. IN VIEW OF THIS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT A IN DELETING THE DISALLOWANCE U/S 14 A OF THE INCOME TAX ACT ON ACCOUNT OF INTEREST EXPENDITURE FOLLOWING THE DECISIO N OF THE HONOURABLE BOMBAY HIGH COURT IN CIT VERSUS RELIANCE UTILITIES AND POWER LTD (SUPRA) . ACCORDINGLY, WE FIND NO INFIRMITY IN THE ORDER SO FAR AS THE DISALLOWANCE ON ACCOUNT OF INTEREST EXPENDITURE IS DELETED. 14. HOWEVER WITH RESPECT TO ADMINISTRATIVE EX PENDITURE IN ASSESSMENT YEAR 2008 09 THE ASSESSEE ITSELF DISALLOWED 10 LAKHS AND FURTHER FOR ASSESSMENT YEAR 2006 07 AND 2007 08 IN BOTH THE YEARS CIT APPEAL HAS RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 10 LAKHS THE ASSESSEE SUBMITTED THAT TH E AMOUNT OF EXPENDITURE DISALLOWED OF RS 8,577,000 IS UNWARRANTED. WE FIND THAT APPLYING THE RATIO OF ADMINISTRATIVE EXPENDITURE WITH RESPECT TO THE DIVIDEND INCOME TO THE TOTAL RECEIPT OF THE ASSESSEE AND THEREAFTER MAKING A PROPORTIONATE PAGE 10 OF 43 DISALLOWANCE IS UNWARRANTED. AS IN ABSENCE OF PROPER RULE FOR COMPUTATION OF DISALLOWANCE, WHICH CAME INTO EFFECT ONLY FOR ASSESSMENT YEAR 2008 09, THE ABOVE METHOD CANNOT BE UPHELD. THEREFORE LOOKING TO THE PAST ASSESSMENT RECORDS WHEREIN FOR ASSESSMENT YEAR 2004 05 THE DISALLOWANCE WAS RESTRICTED TO 2 LAKHS AND FOR ASSESSMENT YEAR 2006 07 THE DISALLOWANCES RESTRICTED TO RS. 10 LAKHS, WE FURTHER DIRECT THE LEARNED ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE OF EXPENDITURE TO RS 10 LAKHS ONLY FOR THIS YEAR TOO. THE GROUND NUMBER 1 OF THE APPEAL OF THE LEARNED ASSESSING OFFICER IS DISMISSED AND GROUND NUMBER 3 OF THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 15. GROUND NUMBER 2 OF THE APPEAL OF AO IS AGAINST THE DELETION OF ADDITION OF RS 72,317,718 ON ACCOUNT OF IN TEREST ON BONDS DISALLOWED U/S 43B OF THE ACT. THE LEARNED ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS CLAIMED DEDUCTION U/S 43B OF THE ACT TO THE EXTENT OF RS 263,479,074/ THE ASSESSEE WAS ASKED TO JUSTIFY THE CLAIM OF DEDUCTION. THE ASSESSEE FURNISHED DETAILS FROM WHICH IT WAS OBSERVED THAT A SUM OF RS 72,317,718 IS THE AMOUNT OF INTEREST ON PP BONDS PAYABLE TO UNIT TRUST OF INDIA. THIS AMOUNT HAS BEEN ADJUSTED ON RECONCILIATION IN THE MONTH OF SEPTEMBER 2005. AO FOUND THAT ASSESSEE HAS NOT MADE ANY PA YMENT IN RESPECT OF THE INTEREST ON THESE BONDS BUT HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT. THEREFORE, HE APPLIED THE PROVISIONS OF SECTION 43B OF THE ACT AND DISALLOWED THE ABOVE SUM. 16. BEFORE THE LEARNED CIT A ASSESSEE SUBMITTED THAT MERELY BECA USE A CLARIFICATION IS INSERTED AS PER THE FINANCE ACT 2006 WITH RETROSPECTIVE EFFECT FROM 1 APRIL 1989 THAT IN CASE OF SETTLEMENT MADE BY WAY OF ADJUSTMENT, PROVISION OF SECTION 43B APPLIES , CANNOT LEAD TO DISALLOWANCE IN THE HANDS OF THE ASSESSEE . ASSESS EE ALSO SUBMITTED THAT THERE IS NO CONVERSION OF INTEREST INTO LOAN OR BORROWING OR ADVANCES IN THE INSTANT CASE. ASSESSEE SUBMITS THAT ASSESSEES AS PAGE 11 OF 43 WELL AS THE UNIT TRUST OF INDIA ARE PUBLIC FINANCIAL INSTITUTIONS ESTABLISHED UNDER THE ACT OF PARLIAMENT A ND THERE IS NO FOUL MOTIVE. IT WAS ALSO SUBMITTED THAT THE TRANSACTION TOOK PLACE BEFORE THE PRESENT LAW CAME INTO FORCE AND IT WAS AS PER THE EXISTING LAW AT THAT POINT OF TIME. THEREFORE, IT WAS SUBMITTED THAT THE DISALLOWANCE MADE BY THE LEARNED ASSESSI NG OFFICER MAY BE DELETED. 17. THE LEARNED AND CIT A NOTED THAT ASSESSEE FILED ITS INCOME TAX RETURN AS PER THE PREVAILING TAX LAWS AT THAT PARTICULAR TIME. THE CLARIFICATION WAS INCORPORATED IN THE FINANCE ACT 2006 WITH RETROSPECTIVE EFFECT FROM 1 APRIL 198 9. THEREFORE, AT THAT PARTICULAR TIME, THERE IS NO SCOPE FOR THE APPELLANT TO PUT THE CLOCK IN REVERSE . IT IS FURTHER HELD THAT THE CLARIFICATION IN THE ACT WAS APPLICABLE TO CONVERSION OF INTEREST INTO LOAN, BORROWING, OR ADVANCES AND AS PRE CEDENT THE CAS E OF THE APPELLANT IS NOT F ALLING UNDER THAT MISCHIEF OF THE RETROSPECTIVE PROVISIONS. THEREFORE, THE ADDITION/DISALLOWANCE CANNOT BE MADE. THE LEARNED CIT A CONSIDERED THE JUDGMENT OF HONOURABLE CALCUTTA HIGH COURT IN CASE OF NATIONAL STANDARD DUNCAN LT D 2003 260 ITR 97 AND OF COORDINATE BENCH IN CASE OF PRATIBHA SYNTAX LTD VERSUS JOINT COMMISSIONER OF INCOME TAX (2002) 81 ITD 118 (A HM ). 18. THE LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED ASSESSING OFFICER. 19. THE LEARNED AUTHORISED REPRESENTATIVE SUPPORTED THE ORDER OF THE LEARNED CIT A AND REITERATED THE SAME SUBMISSIONS. 20. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE ASSESSEE HAD CLAIMED DEDUCTION OF INTEREST OF RS. 7,23,17,718/ - PAYABLE TO UTI ON PP BONDS. AS PART OF A SETTLEMENT ARRANGEMENT, THE ASSESSEE HAD ADJUSTED THE AMOUNT IN SEPTEMBER 2005. THE ASSESSING OFFICER DISALLOWED THE AMOUNT STATING THAT THE AMOUNT HAD NOT BEEN PAID BUT ONLY ADJUSTED. HE INVO KED THE EXPLANATION 3C TO SECTION 43B WHICH WAS INSERTED BY PAGE 12 OF 43 FINANCE ACT 2006 WITH RETROSPECT EFFECT FROM 1.4.1989. HOWEVER, THE CIT(A) HAD HELD THAT THE ASSESSMENT CANNOT BE EXPECTED TO COMPLY WITH THE LAW AND THE RETURN HAD BEEN FILED AS PER THE LAW PREVAIL ING AT THAT TIME AND HENCE THE DEDUCTION OF INTEREST WAS ALLOWABLE. WE FIND THAT WHEN THERE IS A RETROSPECTIVE LAW APPLICABLE WHICH SAYS THAT DEDUCTION OF ANY SUM, BEING INTEREST PAYABLE UNDER CLAUSE (D) OF SECTION 4 3B, SHALL BE ALLOWED , IF SUCH INTEREST HAS BEEN ACTUALLY PAID AND ANY INTEREST REFERRED TO IN THAT CLAUSE WHICH HAS BEEN CONVERTED INTO A LOAN OR BORROWING SHALL NOT BE DEEMED TO HAVE BEEN ACTUALLY PAID. THEREFORE, THE PROVISION OF THE LAW AMENDED RETROSPECTIVELY CLEARLY PROVIDES THAT WHEN SUCH INTEREST NOT ACTUALLY PAID BUT IS CONVERTED INTO LOAN OR BORROWING IT CANNOT BE CONSIDERED AS ACTUALLY PAID FOR THE PURPOSE OF ITS ALLOWABLITY U/S 43B OF THE ACT. EVEN OTHERWISE THE ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE H ONOURABLE SUPREME COURT IN CASE OF COMMISSIONER OF INCOME TAX VERSUS GUJARAT CYPROMET LTD [ 2019] 103 TAXMANN.COM 346 (SC)/[2019] 262 TAXMAN 93 (SC)/[2019] 412 ITR 397 (SC) WHICH IS RENDERED WITH RESPECT TO ASSESSMENT YEAR 2001 02. THEREFORE, GROUND NUMBE R 2 OF THE APPEAL OF ASSESSING OFFICER IS ALLOWED. 21. IN THE RESULT ITA NUMBER 3207/DEL/2011 FILED BY THE LEARNED ASSESSING OFFICER IS PARTLY ALLOWED. 22. NOW WE COME TO THE APPEAL OF THE ASSESSEE. GROUND NUMBERS 1 AND 1.1 ARE WITH RESPECT TO THE DISALLOWANCE CON FIRMED BY THE LEARNED CIT A OF 73,130,008/ IN RESPECT OF DEPRECIATION ON LEASE ASSETS. 23. THE LEARNED PARTIES CONFIRMED THAT THE FACTS OF THIS CASE ARE IDENTICAL TO THE FACTS IN CASE OF THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 99 2000 AND 2000 2001 WHICH IS ALSO HEARD TOGETHER WITH THIS APPEAL. 24. ON CAREFUL CONSIDERATION OF THE RELEVANT ORDERS OF THE LEARNED LOWER AUTHORITIES, FACTS OF THE PRESENT CASE, AND THE ISSUE INVOLVED IN THIS GROUND, WE ARE CONVINCED THAT IT IS IDENTICAL TO THE ISSUE DECID ED IN PAGE 13 OF 43 THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 99 2000 AND 2000 2001 IN ITA NUMBER 1201 AND 1200/DEL/2005 FOR THOSE YEARS WHICH HAD DECIDED BY US BY THE ORDER OF EVEN DATE WHEREIN WE HAVE ALLOWED THE CLAIM OF THE ASSESSEE HOLDING THAT ASSESSEE IS O WNER OF THE ASSET AND IS ENTITLED TO THE DEPRECIATION ON LEASE ASSETS. ACCORDINGLY, FOLLOWING REASONS GIVEN THERE UNDER , GROUND NUMBER 1 OF THE APPEAL IS ALLOWED. 25. GROUND NUMBER 2 IS CONSEQUENTIAL TO GROUND NUMBER 1, IN VIEW OF OUR DECISION IN GROUND NUMBER 1 OF THIS APPEAL, GROUND NUMBER 2 BECOMES INFRUCTUOUS AND HENCE SAME IS DISMISSED. 26. GROUND NUMBER 3 HAS ALREADY BEEN ADJUDICATED WHILE DECIDING THE GROUND NUMBER 1 OF THE APPEAL OF THE LEARNED ASSESSING OFFICER WHILE ADJUDICATING THE DISALLOWANCE CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) U/S 14 A OF THE INCOME TAX ACT. THEREFORE, FOR THE REASONS GIVEN BY US THEREIN, GROUND NUMBER 3 OF THE APPEAL IS PARTLY ALLOWED. 27. GROUND NUMBER 4 IS WITH RESPECT TO THE DISALLOWANCE CONFIRMED BY THE LEARN ED CIT A AMOUNTING TO 790.33 CRORE S BEING PROVISION FOR BAD AND DOUBTFUL THAT WHICH IS DEBITED TO THE PROFIT AND LOSS ACCOUNT AS RESERVE WHILE CALCULATING BOOK PROFIT U/S 115JB OF THE ACT. 28. B RIEF FACTS SHOW THAT AO OBSERVED THAT ASSESSEE HAS SHOWN THE B OOK PROFIT U/S 115JB LOSS OF 9,545,767,245. THE AO OBSERVED THAT ASSESSEE HAS NOT ADDED BACK THE PROVISIONS OF DOUBTFUL DEBTS AND THE SET OF F UNABSORBED DEPRECIATION OR BUSINESS LOSS HAS NOT BEEN CLAIMED AS PER THE COMPANIES ACT. ON QUESTIONED, THE ASSESSEE SUBMITTED THAT PROVISIONS FOR DOUBTFUL DEBTS ARE TO BE REDUCED FROM SUNDRY DEBTORS WHILE PREPARING THE ACCOUNTS AS PER THE COMPANIES ACT AN D SUCH PROVISIONS ARE REQUIRED TO BE MADE IN ACCORDANCE WITH SCHEDULE VI OF THE COMPANIES ACT. ASSESSEE RELIED UPON THE DECISION OF THE HONOURABLE SUPREME COURT IN CASE OF APOLLO TYRES LTD VERSUS COMMISSIONER OF INCOME TAX 255 ITR 273 STATING THAT THE AO HAS PAGE 14 OF 43 ONLY THE POWER OF EXAMINING WHETHER THE BOOKS OF ACCOUNTS CERTIFIED BY THE AUTHORITIES UNDER THE COMPANIES ACT AND HAVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH THE COMPANIES ACT. THEREFORE, ASSESSEE SUBMITTED THAT AO DOES NOT HAVE ANY AUTHORITY T O ADJUST THE BOOK PROFIT ON THIS ACCOUNT. THE LEARNED ASSESSING OFFICER REJECTED THE CONTENTIONS OF THE ASSESSEE AND HELD THAT THE PROVISION FOR DOUBTFUL DEBTS AND ADVANCES IS NOTHING BUT THE RESERVE REQUIRED TO BE CREATED UNDER THE COMPANIES ACT. HE HELD THAT AS PER CLAUSE ( B ) OF EXPLANATION TO SUBSECTION (2) OF SECTION 115JB OF THE ACT THE AMOUNT CARRIED TO ANY RESERVE BY WHATEVER NAME CALLED, IS REQUIRED TO BE ADDED BACK FOR THE PURPOSES OF THE BOOK PROFIT UNDER THE PROVISIONS OF 115 JB OF THE ACT. ACCOR DINGLY, HE ADJUSTED THE BOOK PROFIT OF RS 790.33 CRORES ON ACCOUNT OF PROVISIONS FOR BAD AND DOUBTFUL DEBTS. 29. THE ASSESSEE CARRIED THE ABOVE ISSUE BEFORE THE LEARNED CIT A, HE UPHELD THE ACTION OF THE LEARNED ASSESSING OFFICER. 30. THE LEARNED AUTHORISED REPR ESE NTATIVE SUBMITTED BEFORE US AS U NDER: - 1. I N THE INSTANT YEAR, THE APPELLANT ASSESSEE WAS REQUIRED TO MAKE PROVISION AS PER THE REQUIREMENT OF THE PROVISIONS OF SECTION 45Q OF THE RBI ACT. SUCH PROVISION WAS REQUIRED TO BE MADE, SINCE THE APPELLANT ASSESSEE IS IN THE BUSINESS OF PROVIDING FINANCIA L ASSISTANCE TO THE COMPANIES WHICH ARE NEED FOR FUNDS AND ANY DELAY IN PAYMENT OF INTEREST OR REPAYMENT OF LOAN, AS THE CASE MAY BE NEEDS TO BE PROVISIONED FOR ON IMMEDIATE BASIS UNLIKE IN CASE OF OTHER COMPANIES, WHICH MAKE PROVISION ONLY ON HAPPENING OF ANY UN - TOWARD EVENT. 2. THE APPELLANT ASSESSEE BEING A PUBLIC FINANCIAL INSTITUTION GOVERNED BY THE PROVISIONS OF RBI ACT, HAD TO CREATE SUCH PROVISION OUT OF COMPULSION AND NOT AS PER THE REQUIREMENT UNDER COMPANIES ACT, 1956. PAGE 15 OF 43 3. SINCE, IT HAS NOT BEEN CRE ATED UNDER THE COMPANIES ACT PROVISIONS, THE SAME IS NOT REQUIRED TO BE ADDED BACK UNDER THE PROVISIONS OF SECTION 115JB OF THE IT ACT. 4. THE APPELLANT ASSESSEE IS RELYING ON THE DECISION OF SUPREME COURT IN CASE OF SOUTHERN TECHNOLOGIES LTD.VS.JOINT COMMISS IONER OF INCOME - TAX (187 TAXMAN 346)(SC), WHERE IN THE HONBLE SUPREME COURT HELD THAT IT NEEDS TO BE EMPHASIZED THAT THE RBI DIRECTIONS ARE ONLY DISCLOSURE NORMS. THEY HAVE NOTHING TO DO WITH COMPUTATION OF TOTAL TAXABLE INCOME UNDER THE INCOME - TAX ACT O R WITH THE ACCOUNTING TREATMENT. THE RBI DIRECTIONS ONLY LAY DOWN THE MANNER OF PRESENTATION OF NPA PROVISION IN THE BALANCE SHEET OF AN NBFC. 5. THUS, IN THE INSTANT CASE A MERE COMPLIANCE WITH THE PROVISIONS OF RBI ACT SHALL NOT LEAD THE SAME BEING TAXABLE UNDER THE PROVISIONS OF MAT. THE PROVISION IS ONLY LIMITED COMPLIANCE TO BE DONE BY THE APPELLANT ASSESSEE AND UNDER NO CIRCUMSTANCES IS A RESERVE WHICH NEEDS TO BE ADDED BACK UNDER THE PROVISIONS OF SECTION 115JB OF THE IT ACT. 31. THE LEARNED DEPARTMENT AL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED LOWER AUTHORITIES. 32. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FIND THAT ASSESSEE HAS MADE A PROVISION FOR BAD AND DOUBTFUL AND HAS NOT ADDED BACK SAME TO THE BOOK PROFIT FOR WORK ING OUT BOOK PROFIT FOR MINIMUM ALTERNATIVE TAX U/S 115JB OF THE INCOME TAX ACT. EVEN OTHERWISE, IN VIEW OF THE RETROSPECTIVE AMENDMENT BY THE FINANCE NUMBER 2 A CT , 2009 , WITH RETROSPECTIVE EFFECT FROM 1 APRIL 2001 , ANY AMOUNT OR AMOUNT SET ASIDE A S A P ROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET IS REQUIRED TO BE ADDED BACK TO THE BOOK PROFIT AS PAGE 16 OF 43 PER EXPLANATION (1) OF SECTION 115JB OF THE INCOME TAX ACT . THE AMOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS IS DEFINITELY A DIMINUTION IN THE VALUE OF T HE ASSET I.E. BOOK DEBTS, THEREFORE, IT IS ALSO REQUIRED TO BE ADDED BACK TO THE BOOK PROFIT. IT MAY ALSO BE A RESERVE CREATED BY MAKING A PROVISION OUT OF BAD AND DOUBTFUL DEBTS FOR THE FUTURE LOSSES THAT MAY ARISE OUT OF DEBTS. IN VIEW OF THIS, WE DISMI SS GROUND NUMBER 4 OF THE APPEAL OF THE ASSESSEE. 33. ACCORDINGLY, ITA NUMBER 3443/DEL/2011 FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2005 06 IS PARTLY ALLOWED. 34. ACCORDINGLY, FOR ASSESSMENT YEAR 2005 06 APPEAL OF THE ASSESSEE AND APPEAL OF THE REVENUE ARE P ARTLY ALLOWED. ITA NUMBER 2199/DEL/2011 (BY AO) ASSESSMENT YEAR 2006 07 35. THIS APPEAL IS FILED BY THE LEARNED ASSESSING OFFICER AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX APPEALS XIII, NEW DELHI DATED 23 RD OF FEBRUARY 2011 WHEREIN THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED ASSESSING OFFICER PASSED U/S 143 (3) OF THE INCOME TAX ACT 1961 DATED 30 SEPTEMBER 2008, WAS PARTLY ALLOWED. 36. THE LEARNED ASSESSING OFFICER HAS RAISED THE FOLLOWING GROUNDS OF APPEAL 01. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) HAS ERRED IN DELETING THE DISALLOWANCE OF 32,023,047/ ON ACCOUNT OF DEPRECIATION 02. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) HAS ERRED IN RESTRIC TING THE DISALLOWANCE OF 88,697,740/ . THE SECTION 14 A OF THE ACT TO 10 LAKHS 37. BRIEF FACTS OF THE CASE SHOWS THAT THE ASSESSEE IS A COMPANY FILED ITS RETURN OF INCOME ON 28 NOVEMBER 2006 MERELY INCOME OF THE SETTING OFF AGAINST THE CARRIED FORWARD BUSI NESS LOSS OF RS 1,937,945,507/ . PAGE 17 OF 43 THE ASSESSEE HAS ALSO COMPUTED BOOK PROFIT U/S 115JB OF THE ACT TO LOSS OF RS 5,366,175,988/ . THE ASSESSMENT U/S 143 ( 3 ) OF THE INCOME TAX ACT WAS PASSED ON 30 SEPTEMBER 2008 WHEREIN THE TOTAL INCOME OF THE ASSESSEE WAS DE TERMINED AT RS 2,099,030,946. THE ASSESSING OFFICER HAS DISALLOWED DEPRECIATION ON THE FINANCE LEASE OF ASSETS OF 32,023,047 AND ALSO MADE A DISALLOWANCE U/S 14 A OF 88,697,740, WHICH IS REDUCED BY 2 LAKHS WHICH HAS BEEN SUO MOTU DISALLOWANCE MADE BY THE ASSESSEE. 38. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME TAX APPEALS WHO DELETED THE DISALLOWANCE OF 32,023,047/ ON ACCOUNT OF DEPRECIATION ON LEASE THE ASSESSEE. WITH RESPECT TO THE DISALLOWANCE U/S 14 A OF THE ACT HE R ESTRICTED THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER ONLY TO 10 LAKHS BEING THE ADMINISTRATIVE EXPENSES INCURRED. THEREFORE, WITH THESE TWO DISALLOWANCES DELETED BY THE LEARNED COMMISSIONER OF INCOME TAX APPEALS, ASSESSING OFFICER IS IN APPEA L BEFORE US. 39. GROUND NUMBER 1 OF THE APPEAL IS WITH RESPECT TO THE DISALLOWANCE OF DEPRECIATION OF 32,023,047 ON ACCOUNT OF LEASE D ASSETS . THE PARTIES BEFORE US SUBMITTED THAT THE ISSUE IS SIMILAR TO THE ISSUE IN APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 99 2000 AND 2000 2001. THEY SUBMITTED THAT THEIR ARGUMENTS ALSO REMAIN THE SAME. 40. ON CAREFUL CONSIDERATION OF THE RIVAL CONTENTIONS, PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES, THE ISSUE ARGUED BY BOTH THE PARTIES IN APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 99 2000 AND 2000 2001, WHICH HAS BEEN DECIDED BY US BY THE ORDER OF EVEN DATE IN ITA NUMBER 1200 AND 1201/DEL/2005, WHEREIN WE HAVE HELD THAT ASSESSEE IS A N OWNER OF THE LEASED ASSETS AND IS ENTITLED TO THE DEPRECIATION THEREON. FOR REASONS GIVEN BY US IN THAT APPEAL, WE DISMISS GROUND NUMBER 1 OF THE APPEAL OF THE AO. 41. GROUND NUMBER 2 OF THE APPEAL OF THE ASSESSING OFFICER IS SIMILAR TO GROUND NUMBER 1 OF TH E APPEAL IN ASSESSMENT YEAR 2005 06. BOTH PAGE 18 OF 43 THE PARTIES SUBMITTED THAT FACTS ARE SIMILAR EXCEPT THE CHANGE IN THE AMOUNT OF EXEMPT INCOME . THEY ALSO SUBMITTED THAT THEIR ARGUMENTS ARE ALSO THE SAME, THEREFORE, AS WE UPHELD THE ADDITION OUT OF THE ADMINIST RATIVE EXPENSES OF ONLY 10 LAKHS, THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT SHOW US ANY REASON WHY WE SHOULD DEVIATE FROM THE SAME, WE UPHOLD THE ORDER OF THE LEARNED CIT A, W HO DELETED THE DISALLOWANCE U/S 14 A WITH RESPECT TO THE INTEREST EXPENDITURE AND UPHELD THE DISALLOWANCE TO THE EXTENT OF 10 LAKHS OUT OF THE ADMINISTRATIVE EXPENSES. ACCORDINGLY, GROUND NUMBER 2 OF THE APPEAL OF THE AO IS DISMISSED. 42. IN THE RESULT ITA NUMB ER 2199/DEL/2011 FILED BY THE LEARNED ASSESSING OFFICER FOR ASSESSMENT YEAR 2006 07 IS DISMISSED. ITA NUMBER 1631/DEL/2011 (BY AO) ASSESSMENT YEAR 2007 08 43. T HIS APPEAL IS PREFERRED BY THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11 (1), NEW DEL HI FOR ASSESSMENT YEAR 2007 08 AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS ) XXX, NEW DELHI PASSED ON 4/01/ 2011 RAISING FOLLOWING GROUNDS OF APPEAL 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) HAS ERRED IN DELETING THE ADDITION OF 26,146,749 ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON PLANT AND MACHINERY 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) HAS ERRED IN DELETING THE ADDITION OF 102,097,461/ ON ACCOUNT O F U/S 14 A OF THE INCOME TA X ACT 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) HAS ERRED IN DELETING THE ADDITION OF 49,544,909/ ON ACCOUNT OF LEVY OF INTEREST U/S 234 C OF THE ACT 44. B RIEF FACTS OF THE CASE SHOWS THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 31/10/2007 SHOWING TOTAL INCOME OF RS 67,235,977/ OUT OF SET - OFF AGAINST THE CARRIED FORWARD BUSINESS LOSS OF RS 10,678,614,348/ . THE RETURN WAS REVISED ON 24/3/2009 AT THE PAGE 19 OF 43 SAME INCOME HOWEVER, THE CARRIED FORWARD BUSINESS LOSS SET OF AMOUNT WAS CHANGED . THE ASSESSEE HAS SHOWN PROFIT OF 87,512,7 2,324/ . THE ASSESSMENT U/S 143 ( 3 ) OF THE INCOME TAX ACT 1961 WAS PASSED ON 30/ 05 /2009 WHEREIN THE LEARNED ASSESSING OFFICER DISALLOWED THE DEPRECIATION ON ASSETS GIVEN ON FINANCE LEASE OF RS 2 61,46,749/ . HE FURTHER MADE A DISALLOWANCE U/S 14 A OF 102097461/ . CONSEQUENTLY, THE GROSS TOTAL INCOME OF THE ASSESSEE WAS DETERMINED AT 195,480,187. 45. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME TAX APPEALS. HE DELETED THE DISALLOWANCE ON ACCOUNT OF DEPRECIATION ON PLANT AND MACHINERY ON LEASED ASSETS OF RS 2 61,46,749/ . HE FURTHER DELETED THE ADDITION/DISALLOWANCE OF 10 2,097,461/ ON ACCOUNT OF DISALLOWANCE U/S 14 A OF THE INCOME TAX ACT. OVER AND ABOVE THE LEARNED COMMISSIONER OF INCOME TAX APPEALS DIRECTED THE LEARNED ASSESSING OFFICER TO DELETE THE CHARGING OF THE INTEREST OF 49,544,909/ U/S 234C OF THE ACT , THEREFORE THE LEARNED ASSESSING OFFICER IS IN APPEAL. 46. THE FIRST GROUND OF APPEAL IS WITH RES PECT TO THE DEPRECIATION ON THE LEASED ASSETS. THIS ISSUE IDENTICAL TO THE FACTS DECIDED BY US IN CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 99 2000 AND 2000 2001 WHEREIN WE HAVE HELD THAT ASSESSEE IS AN OWNER OF THE ASSET, WHICH ARE LEASED OUT, AND THER EFORE IS ENTITLED TO DEPRECIATION. FOR SIMILAR REASONS, BECAUSE OF THE IDENTICAL FACTS OF THE CASE AGREED BY BOTH THE PARTIES, WE DISMISS GROUND NUMBER 1 OF THE APPEAL OF THE AO. 47. GROUND NUMBER 2 IS AGAINST THE DISALLOWANCE DELETED U/S 14 A OF THE ACT. THE FACT SHOWS THAT ASSESSEE HAS EARNED DIVIDEND INCOME OF 256,316,814. IT HAS ALSO EARNED INTEREST INCOME FROM TAX - FREE BONDS OF RS 14 0,33,171/ . THE ASSESSEE WAS QUESTIONED BY THE AO FOR DISALLOWANCE U/S 14 A, WHICH ASSESSEE SUBMITTED THAT IN EARLIER YEARS THE LEARNED COMMISSIONER OF INCOME TAX APPEALS HAS RESTRICTED THE DISALLOWANCE FOR ASSESSMENT YEAR 98 99 ONLY TWO 2 LAKHS OUT PAGE 20 OF 43 OF ADMINISTRATIVE EXPENSES. THE LEARNED ASSESSING OFFICER REJECTED THE CONTENTIONS OF THE ASSESSEE AND FOUND THAT SALARIES AN D BENEFITS, MISCELLANEOUS EXPENSES AND COST OF BORROWINGS AMOUNTING TO RS 785 CRORES IS REQUIRED TO BE ALLOCATED BETWEEN THE EXEMPT INCOME SUCH AS DIVIDEND IN PROPORTION TO THE TOTAL RECEIPTS. HE THEREFORE WORD OUT THE DISALLOWANCE OF 102,097,461. 48. ON AP PEAL BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS HE UPHELD THE DISALLOWANCE OUT OF THE EXPENDITURE TO THE EXTENT OF 10 LAKHS, DELETED THE DISALLOWANCE ON ACCOUNT OF INTEREST EXPENDITURE FOR THE REASON THAT ASSESSEE HAS HUGE INTEREST FREE FUNDS AVAILABLE COMPARED TO THE AMOUNT INVESTED IN DIVIDEND YIELDING SECURITIES. 49. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF THE LEARNED AO AND THE LEARNED AUTHORISED REPRESENTATIVE SUPPORTED THE ORDER OF THE LEARNED CIT A. BOTH THE PARTI ES CONFIRMED THAT IDENTICAL ISSUE AROSE IN CASE OF THE ASSESSEE FOR EARLIER YEARS AND MOST RECENTLY IN ASSESSMENT YEAR 2006 07, THE FACTS ARE IDENTICAL EXCEPT THE AMOUNT OF EXEMPT INCOME. 50. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE ISSUE IS IDENTICAL TO THE ISSUE DECIDED BY US IN ASSESSMENT YEAR 2005 06 IN GROUND NUMBER ONE OF THE APPEAL OF THE AO. WE HAVE UPHELD THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX UPHOLDING THE DISALLOWANCE ONL Y TO THE EXTENT OF 10 LAKHS OUT OF ADMINISTRA TIVE EXPENDITURE. THEREFORE, FOR THE SIMILAR REASONS, WE UPHOLD THE ORDER OF THE LEARNED CIT A THIS YEAR ALSO. ACCORDINGLY, GROUND NUMBER 2 IS DISMISSED. 51. GROUND NUMBER 3 IS WITH RESPECT TO THE LEVY OF INTER EST U/S 234C OF THE ACT. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER DIRECTED TO CHARGE THE INTEREST U/S 234C FOR SHORT PAYMENT/DEFERMENT OF THE ADVANCE TAX. THE ASSESSEE CHALLENGED THE SAME BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (A) AS PER GROUN D NUMBER 5 (PARAGRAPH NUMBER 6 OF THE ORDER ) . PAGE 21 OF 43 52. THE FACT SHOWS THAT THAT ASSESSEE IS A FINANCIAL INSTITUTION ENGAGED IN THE BUSINESS OF FINANCING ACTIVITY. IN ASSESSMENT YEAR 2007 08 THE MAJOR PORTION OF THE PROFIT WAS ON THE TRANSACTIONS CONCLUDED ON 30 T H OF MARCH 2007 I.E. AFTER 15 MARCH 2007, WHICH COULD NOT BE ENVISAGED EARLIER. THE ASSESSEE SUBMITTED THAT SECURITI ES AND EXCHANGE BOARD OF INDIA H AS NOTIFIED SECURITIES CONTRACT REGULATION (MANNER OF INCREASING IN MAINTAINING PUBLIC SHAREHOLDING IN RECOGNIZED STOCK EXCHANGE) REGULATIONS ON 13 NOVEMBER 2006 PUTTING A BAR ON THE PERCENTAGE OF SHAREHOLDING IN A RECOGNIZED STOCK EXCHANGES. FURTHER IN THE CASE OF TH E EXISTING SHAREHOLDERS THE SHAREHOLDING WAS REQUIRED TO BE REDUCED TO THE MAXIMUM ALLOWABLE LIMIT WITHIN THE SPECIFIED STIPULATED TIME. ASSESSEE, WHICH WAS HOLDING 56 LAKHS EQUITY SHARES OF THE NATIONAL STOCK EXCHANGE OF INDIA CONSTITUTING 12.14% OF ITS E QUITY, SIGNED AN AGREEMENT ON 10 JANUARY 2007 TO OFFLOAD 7% EQUITY. APPROVAL FOR FOREIGN INVESTMENT PROMOTION BOARD WAS OBTAINED ON 5 MARCH 2007 AND APPROVAL OF SEBI AND RBI WERE GRANTED ON 23 RD MARCH AND 29 TH OF MARCH 2007 RESPECTIVELY. ACCORDING TO THE SHARE PURCHASE AGREEMENT ALL THE AGREEMENTS CONDITIONS WERE REQUIRED TO BE FULFILLED BY 26 TH OF MARCH 2007. DUE TO NON - AVAILABILITY OF REQUISITE APPROVALS THE DOCUMENTATION COULD NOT HAVE BEEN POSSIBLE BY 15 TH OF MARCH 2007 WHICH WAS THE LAST DATE FOR PAYM ENT OF FOURTH INSTALLMENT OF ADVANCE TAX. DUE TO THIS WHATEVER PROFIT ASSESSEE HAS EARNED, IT SHORT PAID THE ADVANCE TAX.. IN THE CASE OF THE ASSESSEE THE SALE PROCEEDS OF THE SALE OF SHARES WAS RECEIVED IN THE MONTH OF APRIL AFTER 31 ST OF MARCH 2007. THIS RESULTED INTO LEVY OF INTEREST U/S 234C OF THE ACT AMOUNTING TO 49,544,909/ . 53. THE ASSESSEE CHALLENGED THE SAME BEFORE THE LEARNED COMMISSIONER OF INCOME TAX APPEALS. HE PASSED AN ORDER AS PER HIS FINDING IN PARAGRAPH NUMBER 6.5 WHEREIN HE HELD THAT AFT ER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE DESCRIBING THE PECULIAR NATURE PAGE 22 OF 43 AND EVENTS WHICH COULD NOT HAVE BEEN ENVISAGED OR ANTICIPATED IN ADVANCE LEADING TO SHORTFALL IN THE POSITION OF ADVANCE TAX ON THE PART OF THE ASSESSEE HE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 54. THE LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUBMITTED THAT THE PROVISIONS OF SECTION 234C PROVIDES FOR MANDATORY CHARGING OF THE INTEREST FOR SHORTFALL OF ADVANCE TAX. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS WITHOU T CITING ANY PROVISION OF THE ACT HAS DELETED THE ABOVE INTEREST. 55. THE LEARNED AUTHORISED REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT A AND REITERATED THE SUBMISSIONS MADE BEFORE HIM AS UNDER: - 1. SECTION 234C OF THE IT ACT CONTAINS DIFFERENT PROVISIONS STIPULATING INTEREST TO BE LEVIED IN CASE OF DELAY IN PAYMENT OF ADVANCE TAX BEYOND CERTAIN DATES. THE SAID SECTION PROVIDES TWO EXCEPTIONS WITH REGARD TO NON - PAYMENT ADVANCE TAX NAMELY CAPITAL GAINS AND INCOME REFERRED TO IN SECTIO N 2(24)(IX) OF THE IT ACT. 2. THE PROVISIONS PERTAINING TO PAYMENT OF ADVANCE TAX ARE PROVIDED IN SECTION 207 TO SECTION 210 OF THE IT ACT. SECTION 207 OF THE IT ACT STIPULATES THAT ADVANCE TAX IS PAYABLE DURING ANY FINANCIAL YEAR IN RESPECT OF TOTAL INCOME WHICH WOULD BE CHARGEABLE TO TAX FOR THE ASSESSMENT YEAR IMMEDIATELY FOLLOWING THAT FINANCIAL YEAR. UNDER SECTION 207 OF THE IT ACT, THE TERM TOTAL INCOME HAS BEEN EQUATED TO THE EXPRESSION CURRENT INCOME. 3. SECTION 2(45) OF THE IT ACT DEFINES TOTAL IN COME AS TOTAL AMOUNT OF INCOME REFERRED TO IN SECTION 5, COMPUTED IN THE MANNER LAID DOWN IN THIS ACT. THE MANNER OF COMPUTATION OF TOTAL INCOME IS PROVIDED IN PAGE 23 OF 43 SECTION 145 OF THE IT ACT WHICH PROVIDES THAT INCOME UNDER THE HEAD PROFITS AND GAINS FROM B USINESS AND PROFESSION AND INCOME FROM OTHER SOURCES TO BE COMPUTED IN ACCORDANCE WITH EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING. 4. IT IS SUBMITTED THAT THE RESPONDENT ASSESSEE MAINTAINS ITS BOOKS OF ACCOUNTS AS PER MERCANTILE SYSTEM OF ACCOUNTING I .E ON ACCRUAL BASIS. IT IS SUBMITTED THAT THE INCOME IN QUESTION ON WHICH INTEREST IS SOUGHT TO BE LEVIED FOR NON - PAYMENT OF ADVANCE TAX HAS NOT YET BEEN ACCRUED IN THE BOOKS OF THE RESPONDENT ASSESSEE AND HENCE NO ADVANCE TAX IS PAYABLE ON THE SAME. ACCOR DINGLY, THE QUESTION OF INTEREST BEING LEVIED ON THE NON - PAYMENT OF THE SAME DOES NOT ARISE. 5. FURTHER, THE RESPONDENT ASSESSEE SUBMITS THAT THE BUSINESS OF THE RESPONDENT ASSESSEE WAS UNEXPECTEDLY HIGH IN THE LAST QUARTER AND DUE TO NON - RECEIPT OF REQUISITE APPROVALS FROM SEBI AND RBI WITH RESPECT TO TRANSFER OF SHARES, THE DOCUMENTATION COULD NOT HAVE BEEN POSSIBLE BY 15 TH MARCH 2007 (DEADLINE FOR PAYMENT OF ADVANCE TAX AS STIPULATED IN SECTION 234C OF THE IT ACT). THE DOCUMENTATION WITH RESPECT TO TRANSFER OF SHARES WAS COMPLETED ON 31/03/2007 AND THEREAFTER, THE RESPONDENT ASSESSEE MADE UP FOR THE DEFICIENCY IN PAYMENTS ON 31 ST MARCH 2007. 6. IT IS SUBMITTED THAT ACTION OF LD. AO, RIGHTLY DELETED BY CIT(A), OF PENALIZING THE RESPONDENT ASSESSEE BY CHARGING I NTEREST FOR NON - PAYMENT OF ADVANCE TAX IS BAD IN LAW. PAGE 24 OF 43 7. IT IS A SETTLED POSITION OF LAW THAT INTERPRETATION OR CONSTRUCTION OF A STATUTE IS NOT A MECHANICAL TASK. THE LEGISLATIVE INTENT BEHIND A PARTICULAR PROVISION IS TO BE SEEN. FAIRNESS, EQUITY AND JUSTI CE DEMANDS THAT STATUTES SHOULD BE INTERPRETED WITH REGARDS TO REALITIES OF THE SITUATION. A CONSTRUCTION, WHICH REDUCES THE STATUTE TO A FUTILITY, HAS TO BE AVOIDED. [ UNION OF INDIA V. FILIP TIAGO DE GAMA OF VEDEM VASCO DEE GAMA, AIR 1990 SC 981, MAXWELL ON STATUTES (11 TH EDITION ) PAGE 221, CRAIES ON STATUTES (7 TH EDITION) PAGE 95) . 8. IT IS SUBMITTED THAT UNCERTAINTIES ABOUT INCOME WHICH ARE NOT MENTIONED AS EXCEPTION IN SECTION 234C OF THE IT ACT CAN ALSO ARISE AND INCOME MAY SURFACE IN FROM UNEXPECTED QUA RTERS AFTER LAST DATES OF PAYMENTS OF ADVANCE TAX. EXCEPTION TO SECTION 234C SHOULD ALSO BE EXTENDED TO SITUATIONS, WHICH ARE NOT MENTIONED IN THE PROVISO BUT ARE OF LIKE NATURE SO AS TO NOT RENDER THE PROVI S O TO SECTION 234C OTIOSE. 56. WE HAVE CAREFULLY CO NSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. WE FIND THAT THE ISSUE SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONOURABLE REGISTRAR HIGH COURT IN CASE OF COMMISSIONER OF INCOME - TAX V. SMT. PREMLATA JALANI 2003] 264 ITR 744 (RAJASTHAN)/[2003] 185 CTR 601 (RAJASTHAN) AS IN THIS CASE ALSO THE CAPITAL GAIN AROSE AFTER THE LAST DATE OF PAYMENT OF THE LAST INSTALLMENT OF ADVANCE TAX BY THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR. FURTHER PROVISIONS OF SECTION 234C DOES NOT APPLY TO ANY SHORTFALL IN THE PAYMENT OF THE TAX DUE ON THE RETURNED INCOME OF SUCH THOUGHTFUL IS ON ACCOUNT OF UNDER IS TO OF THE AMOUNT OF CAPITAL GAIN. IN VIEW OF THIS, WE FIND NO PAGE 25 OF 43 INFIRMITY IN THE ORDER OF THE LEARNED CIT A AN D GROUND NUMBER 3 OF THE APPEAL OF THE LEARNED ASSESSING OFFICER. 57. IN THE RESULT, APPEAL OF THE LEARNED ASSESSING OFFICER FOR ASSESSMENT YEAR 2007 08 IN ITA NUMBER 1631/DEL/2011 IS DISMISSED. ITA NUMBER 2062/DEL/2012 (BY AO) AND ITA NUMBER 1984/DEL/2012 ( BY ASSESSEE) ASSESSMENT YEAR 2008 09 58. T HESE ARE THE CROSS APPEALS FILED BY THE PARTIES AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) XV, NEW DELHI DATED 21/2/2012 FOR ASSESSMENT YEAR 2008 09. 59. THE LEARNED ASSESSING OFFICER HAS PREFERRED FOLLOWING GROUNDS OF APPEAL 01 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN DELETING THE ADDITION OF 2,15,65,389/ MADE ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON PLANT AND MACHINERY LEASE TO VARIOUS AUTHORITIE S 02 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AND CIT (A) HAS ERRED IN RESTRICTING THE ADDITION OF 110,831,000/ TO THE EXTENT OF 4.40 CRORES MADE U/S 14 A READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 03 ON THE FACTS AN D CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN DELETING THE ADDITION OF 110,831,000 MADE BY TH E INVOKING RULE 8D READ WITH SECTION 14 A FOR THE PURPOSE OF COMPUTATION OF BOOK PROFITS U/S 115JB OF THE INCOME TAX ACT 04 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT A HAS ERRED IN ALLOWING THE DEDUCTION OF 7,999,069/ BEING THE FRINGE BENEFIT TAX IN COMPETITION OF BOOK PROFITS U/S 115JB OF THE ACT PAGE 26 OF 43 60. A SSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL 01 THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN UPHOLDING THE DISALLOWANCE TO THE EXTENT OF 4.40 CRORES U/S 14 A READ WITH RULE 8D FOR EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME 02 THAT ON THE FACTS AND CIRCUMSTANCES OF TH E CASE THE LEARNED CIT A ERRED IN OVERLOOKING THE AMOUNT OF DISALLOWANCE U/S 14 A MADE BY APPELLANT, DETERMINED BASED ON ITS CONSISTENT METHOD OF ACCOUNTING AND DETERMINATION OF SUCH EXPENDITURE. 03 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARN ED CIT A OR TO HAVE NOTED THAT THE AMOUNT DISALLOWED BY THE APPELLANT U/S 14 AO IS AFTER DUE CONSIDERATION OF THE EXPENDITURE INCURRED IN EARNING MORE TAXABLE NON - TAXABLE INCOME FROM ITS BOOKS OF ACCOUNTS AND HENCE ROUTINE APPLICATION OF RULE 8D OVERLOOK ING TO THE METHOD OF ACCOUNTING OF SUCH EXPENDITURE IS NOT CALLED FOR. 04 THAT THE LEARNED CIT A FAILED TO APPRECIATE THAT NO COGENT REASON WAS GIVEN BY THE ASSESSING OFFICER FOR NOT BEING SATISFIED WITH THE DISALLOWANCE MADE BY THE APPELLANT AND THEREBY IN VOKING RULE 8D. THE CIT A SHOULD HAVE NOTED THAT WHILE ACTUAL EXPENDITURE BY WAY OF FEES TO CUSTODIAN FOR ENTIRE INVESTMENT PORTFOLIO OF THE APPELLANT AMOUNTED TO 2 LAKHS ONLY THE APPELLANT IN ITS OWN VOLITION MADE A DISALLOWANCE OF 10 LAKHS AS CONSI STENT PRACTICE. 61. THE ASSESSEE FILED ITS RETURN OF INCOME ON 30 SEPTEMBER 2008 SHOWING TOTAL INCOME OF 74,860,399/ AFTER SETTING O F F THE CARRIED FORWARD BUSINESS L OSS OF RS 7,660,540,131. THE RETURN WAS REVISED PAGE 27 OF 43 ON 31 ST OF MARCH 2010 CHANGING THE AMOUNT OF SET - OFF OF BROUGHT FORWARD LOSSES. THE ASSESSEE HAS ALSO SHOWN BOOK PROFIT U/S 115JB OF RS 1 308192655/ . THE ASSESSMENT U/S 143 ( 3 ) OF THE ACT WAS PASSED ON 24 TH OF DECEMBER 2010 THE LEARNED ASSESSING OFFICER MADE A DISALLOWANCE U/S 14 A OF THE ACT O F RS 110,831,000 AND ALSO DISALLOWED DEPRECIATION ON THE FINANCE LEASE ASSETS OF 21,565, 389/ - . CONSEQUENTLY THE GROSS TOTAL INCOME OF THE ASSESSEE WAS DETERMINED AT RS 7,867,796,919/ AGAINST WHICH THE BROUGHT FORWARD LOSSES OR SET OFF TO THE EXTENT OF 7,283,446,620/ RESULTING INTO THE TOTAL ASSESSED INCOME OF 584,350,299/ . WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT, AO FURTHER INCREASE DATE BY DISALLOWANCE U /S 14 A OF THE ACT. 62. ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED COMMISSIONER OF INCOME TAX APPEALS WHO DELETED THE DISALLOWANCE ON ACCOUNT OF DEPRECIATION ON PLANT AND MACHINERY LEASED TO VARIOUS AUTHORITIES. WITH RESPECT TO DISALLOWANCE U/S 14 A OF THE ACT, HE UPHELD THE DISALLOWANCE TO THE EXTENT OF 0.5% OF THE AVERAGE VALUE OF INVESTMENT RESULTING AT 4.40 CRORES. WITH RESPECT TO THE ADJUSTMENT OF THE BOOK PROFIT BY DISALLOWANCE U/S 14 A, HE DELETED THE SAME. HE ALSO DELETED THE ADJUSTMENT OF THE BOO K PROFIT OF THE FRINGE BENEFIT TAX OF 7,999,069 FOLLOWING THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1999 2000. THEREFORE, ASSESSEE IS IN APPEAL WITH RESPECT TO THE DISALLOWANCE OF 4.4 CRORES UPHELD BY THE LEARNED C IT A U/S 14 A OF THE INCOME TAX ACT AND THE LEARNED ASSESSING OFFICER IS IN APPEAL WITH RESPECT TO THE OTHER DISALLOWANCE DELETED INCLUDING PARTIAL DISALLOWANCE U/S 14 A OF THE ACT. 63. WE FIRSTLY WITH THE APPEAL OF THE LEARNED ASSESSING OFFICER. 64. COMING TO THE FIRST GROUND OF APPEAL WITH RESPECT TO THE DISALLOWANCE OF DEPRECIATION ON PLANT AND MACHINERY LEASED TO VARIOUS AUTHORITIES, BOTH THE PARTIES CONFIRMED THAT IDENTICAL ISSUE HAS BEEN PAGE 28 OF 43 DECIDED IN CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 1999 2000 AND 2 000 2001. THEIR ARGUMENTS ARE SAME AS THE FACTS OF THE CASE ARE ALSO SIMILAR. ON CAREFUL CONSIDERATION OF THE RIVAL SUBMISSIONS AND THE FACTS ON RECORD, IN ABSENCE OF ANY CHANGE IN THOSE FACTS COMPARED TO THE FACTS OF THE CASE FOR ASSESSMENT YEAR 1999 2000 2000 2001, FOR SIMILAR REASONS AS GIVEN IN ITA NUMBER 1200 AND 1201/DEL/2005 OF EVEN DATE, WE CONFIRM THE ACTION OF THE LEARNED CIT A AND DISMISS GROUND NUMBER 1 OF THE APPEAL OF THE AO. 65. GROUND NUMBER 2 AND 3 RELATES TO THE COMPUTATION OF DISALLOW ANCE U/S 14 A OF THE ACT. THE ASSESSEE HAS EARNED DIVIDEND INCOME OF 238,145,137 AND INCOME FROM TAX FREE BONDS OF RS. 1 40,33,171 WHICH IS CLAIMED AS EXEMPT U/S 10 (34) AND 10 (15) OF THE INCOME TAX ACT. THEREFORE THE ASSESSEE WAS QUESTIONED ABOUT THE DI SALLOWANCE U/S 14 A OF THE ACT. THE ASSESSEE SUBMITTED A GENERAL REPLY. HOWEVER THE LEARNED ASSESSING OFFICER REJECTED THE CONTENTIONS OF THE ASSESSEE AND STATED THAT NO EVIDENCE OF BEEN FURNISHED BY THE ASSESSEE TO ESTABLISH THAT NO EXPENSES H AS BEEN INCU RRED BY IT FOR EARNING OF EXEMPT INCOME, HE COMPUTED THE DISALLOWANCE WORKING OUT SAME AS PER PROVISIONS OF RULE 8D OF THE INCOME TAX RULES 1962. HE COMPUTED THE DISALLOWANCE TO THE EXTENT OF ADMINISTRATIVE EXPENDITURE ONLY BY COMPUTING THE AGGREGATE OF OP ENING AND CLOSING VALUE OF THE INVESTMENT AND APPLYING THE STANDARD MULTIPLYING FACTOR OF 0.5% IN COMPUTED THE DISALLOWANCE AT 11.1031 CRORES. ON APPEAL BEFORE CIT A, THE ASSESSEE CHALLENGED THAT NO SATISFACTION HAS BEEN RECORDED BY THE ASSESSING OFFIC ER WITH RESPECT TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, THE LEARNED CIT A HELD THAT AS THE LEARNED ASSESSING HOURS INVOKE THE RULE 8D THEREFORE IT IS THUS IMPLIED THAT HE WAS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE APPELLANT. HE F URTHER HELD THAT THE POWERS OF THE COMMISSIONER APPEALS ARE COTERMINOUS WITH THAT OF THE ASSESSING OFFICER AND THEREFORE APPELLANT WAS GIVEN ANOTHER OPPORTUNITY TO JUSTIFY NON - DISALLOWANCE OF EXPENDITURE U/S PAGE 29 OF 43 14 A OF THE ACT. HOWEVER, HE ACCEPTED THE SUBMIS SION OF THE ASSESSEE THAT CERTAIN INVESTMENTS FROM WHICH TAXABLE INCOME IS ARISING SHOULD NOT HAVE BEEN CONSIDERED FOR WORKING OF DISALLOWANCE. THE LEARNED CIT A ACCEPTED THE SAME AND APPLIED THE MULTIPLYING FACTOR OF 0.5% ON THOSE ASSETS WHICH COULD HA VE RESULTED INTO EARNING OF TAXABLE INCOME AND COMPUTED DISALLOWANCE AT 4.40 CRORE. 66. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED AS UNDER: - I. THE SHARES WERE HELD BY APPELLANT ASSESSEE AS STOCK - IN - TRADE AND AS SUCH NO DISALLOWANCE UNDER SECTION 14A OF THE IT ACT WAS CALLED FOR. II. NO SATISFACTION WAS RECORDED BY THE RESPONDENT REVENUE FOR INVOCATION OF SECTION 14A(2) READ WITH RULE 8D(1). A. ONE OF THE ESSENTIAL REQUIREMENTS FOR INVOKING SECTION 14A OF IT ACT READ WITH RULE 8D OF THE INCOME - TAX RULES,1962 (RULES)IS THAT THE ASSESSING OFFICER IS REQUIRED TO RECORD ITS SATISFACTION HAVING REFERENCE TO THE ACCOUNTS OF THE ASSESSEE, THAT THE DIS ALLOWANCE MADE BY THE ASSESSEE WAS UNREASONABLE OR UNSATISFACTORY. REFERENCE IN THIS REGARD CAN BE MADE TO THE DECISION OF SUPREME COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD. [2017] 81 TAXMANN.COM 111 (SC) IN WHICH IT WAS HELD THAT ONLY AFTER RECORDING OF SATISFACTION BY ASSESSING OFFICER, THE PROVISIONS OF SECTION 14A(2) AND RULE 8D WOULD BECOME APPLICABLE. SAME CONCLUSION WAS ALSO REACHED IN THE DECISION OF HIGH COURT OF DELHI IN THE CASE OF CIT VS. TAIKIS HA ENGINEERING INDIA LTD [2015] 54 TAXMANN.COM 109 (DELHI). HOWEVER, IN THE ASSESSMENT ORDER NO SUCH SATISFACTION HAVING REFERENCE TO ACCOUNTS OF THE APPELLANT ASSESSEE WAS RECORDED BY THE RESPONDENT REVENUE FOR REJECTING SUO - MOTO DISALLOWANCE OF RS. 10,00 ,000 MADE BY THE APPELLANT ASSESSEE. PAGE 30 OF 43 B. REFERENCE IN THIS REGARD CAN ALSO BE MADE TO THE DECISION OF THE DECISION OF HIGH COURT OF DELHI IN THE CASE OF MAXOPP INVESTMENT LTD. VS. CIT [2011] 15 TAXMANN.COM 390 (DELHI) WHEREIN IT WAS HELD THAT ONLY ON RECORDIN G OF SUCH SATISFACTION, THE ASSESSING OFFICER GETS JURISDICTION TO DETERMINE THE AMOUNT OF EXPENDITURE UNDER SECTION 14A OF THE IT ACT READ WITH RULE 8D OF THE RULES. THE COURT ALSO CATEGORICALLY MENTIONED THAT WHILE REJECTING CLAIM OF SUO - MOTO DISALLOWANC E MADE BY THE ASSESSEE , THE ASSESSING OFFICER WOULD HAVE TO INDICATE COGENT REASONS. C. A PERUSAL OF REASONS OF PASSIVE INVESTMENT, WELL CO - ORDINATED MANAGEMENT DECISIONS, TELEPHONE EXPENSES, FOLLOW UP BEING EMBEDDED IN INDIRECT EXPENSES ETC AS GIVEN IN ASSES SMENT ORDER WILL SHOW THAT THE RESPONDENT REVENUE HAD FAILED TO RECORD DISSATISFACTION WITH RESPECT TO THE CLAIM MADE BY THE APPELLANT ASSESSEE OF RS. 10,00,000 BEING ALLOCATED FOR EARNING DIVIDEND INCOME. THE REASONS GIVEN BY THE RESPONDENT REVENUE WERE T OO GENERIC AND HAD NO REFERENCE TO ACCOUNTS OF THE APPELLANT ASSESSEE WHICH IS A PRE - REQUISITE FOR INVOKING RULE 8D. D. REFERENCE IN THIS REGARD CAN BE MADE TO THE DECISION OF THE HIGH COURT OF DELHI IN THE CASE OF H.T. MEDIA LTD. VS. PR. CIT [2017] 85 TAXMA NN.COM 113 (DELHI) WHEREIN THE ASSESSING OFFICER HAD GIVEN SAME REASONS OF PASSIVE INVESTMENT, WELL CO - ORDINATED MANAGEMENT DECISIONS, TELEPHONE EXPENSES AND FOLLOW UP BEING EMBEDDED IN INDIRECT EXPENSES FOR DISALLOWANCE OF ADMINISTRATIVE EXPENSES UNDER 14 A OF THE IT ACT. HOWEVER, THE HONBLE COURT DELETED THE DISALLOWANCE ON THE PART OF THE FAILURE OF THE ASSESSING OFFICER TO COMPLY WITH MANDATORY REQUIREMENT OF RECORDING SATISFACTION AS REQUIRED BY SECTION 14A(2) OF IT ACT READ WITH RULE 8D(1) OF THE RULE S. PAGE 31 OF 43 III. NO COGENT REASONS WERE GIVEN BY THE RESPONDENT REVENUE FOR REJECTING SUO - MOTO DISALLOWANCE MADE BY THE APPELLANT ASSESSEE. A. THE REASON AS GIVEN BY THE RESPONDENT REVENUE THAT INVOCATION OF SECTION 14A OF IT ACT IS AUTOMATIC AND COMES INTO OPERATION AS SOON AS DIVIDEND INCOME IS CLAIMED AS EXEMPT WAS UNTENABLE AND BAD IN LAW. REFERENCE IN THIS REGARD CAN BE MADE TO THE DECISION OF HIGH COURT OF DELHI IN THE CASE OF CIT VS. I.P. SUPPORT SERVICES INDIA (P.) LTD. [2017] 88 TAXMANN.COM 418 (DELHI) WHEREIN THE HONBLE COURT HELD THAT ASSESSING OFFICER PROCEEDED ON THE ERRONEOUS PREMISE THAT THE INVOCATION OF SECTION 14A OF IT ACT WAS AUTOMATIC AND COMES INTO OPERATION AS SOON AS DIVIDEND INCOME IS CLAIMED EXEMPT. FURTHER, RELYING UPON ITS EARLIER DECISION IN THE CASE OF MAXOPP INVESTMENT LTD. (SUPRA) AND CIT VS. TAIKISHA ENGINEERING INDIA LIMITED (SUPRA) , THE HONBLE COURT DISMISSED THE APPEAL BY HOLDING THAT ASSESSING OFFICER HAD FAILED TO COMPLY WITH THE MANDATORY REQUIREMENT OF LAW WITH REGARD TO RECORDING OF SATISFACTION AS TO WHY DISALLOWANCE MADE BY ASSESSEE WAS UNREASONABLE. B. ALSO, THE REASONS AS GIVEN BY THE RESPONDENT REVENUE WITH REGARD TO DOUBLE BENEFIT ON ACCOUNT OF LOSS ON SALE OF SHARES/BONDS BEING EXEMPT DUE TO THE TRANSACTION OF DIVIDEND STRIPPING ( REDUCTION IN REDEMPTION VALUE DUE TO DECLARATION OF DIVIDEND) WAS WRONG IN THE LIGHT OF THE DECISION OF APEX COURT IN THE CASE OF CIT VS WALFORT SHARE & STOCK BROKERS (P.) LTD. [2010] 192 TAXMAN 211 (SC), THE LOSS ON SALEOF UNITS IN A DIVIDEND STRIPPING TR ANSACTION, CANNOT BE CONSIDERED AS AN EXPENDITURE FOR DISALLOWANCE UNDER SECTION 14A OF THE IT ACT. FURTHER, IT IS SUBMITTED THAT THERE WAS NO LOSS ON SALE OF PAGE 32 OF 43 SHARES/BONDS WHICH WAS CLAIMED AS EXEMPT DURING THE YEAR UNDER CONSIDERATION AND NO CONTRARY FI NDING TO THAT EFFECT WAS GIVEN BY THE RESPONDENT REVENUE. FURTHER, INCOME/LOSS FROM SALE OF SHARES IN ASSISTED CONCERNS WAS CONSISTENTLY SHOWN AS BUSINESS INCOME/LOSS BY THE APPELLANT ASSESSEE. IV. RELIANCE BY RESPONDENT REVENUE ON UNITED GENERAL TRUST CASE WA S INCORRECTON THE GROUND THAT THOUGH THE QUESTION FRAMED CONTAINED A REFERENCE TO PROPORTIONATE MANAGEMENT EXPENSES BUT THE CONTROVERSY WAS THAT WHETHER DEDUCTION IS ALLOWABLE FROM GROSS DIVIDEND OR NET DIVIDEND UNDER SECTION 80M OF THE IT ACT AND SECTIO N 14A OF THE IT ACT DOES NOT DEAL WITH THIS ISSUE. V. NO ACTUAL EXPENDITURE WAS INCURRED BY THE APPELLANT ASSESSEETO EARN THE DIVIDEND INCOME. NO ACTUAL EXPENDITURE WAS INCURRED ON ITS COLLECTION. ALSO, NO FOLLOW - UP WAS MADE FOR THE SAME. FURTHER, THE APPELL ANT ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH STOCK HOLDING CORPORATION OF INDIA LTD. WHEREIN LATTER WAS TO LOOK AFTER (INCLUDING COLLECTION OF DIVIDENDS) ALL THE SECURITIES (WHETHER GENERATING TAX FREE INCOME OR TAXABLE INCOME) OWNED BY THE APPELLANT AS SESSEE FOR AN AMOUNT OF RS. 2,00,000. YET, SUO - MOTO DISALLOWANCE OF RS. 10,00,000/ - WAS MADE BY THE APPELLANT ASSESSEEWHICH WAS JUST AND REASONABLE BASED ON CONSISTENT PRACTICE FOLLOWED BY CIT(A) IN EARLIER YEARS. VI. BURDEN OF PROOF IS ON THE REVENUE TO SHO W THAT EXPENSES WERE ACTUALLY INCURRED TO EARN EXEMPT INCOME AND THE RESPONDENT REVENUE HAD NOT BROUGHT ANYTHING ON RECORD TO SHOW THAT INTEREST/ADMINISTRATIVE EXPENSES WERE INCURRED TO EARN DIVIDEND INCOME. PAGE 33 OF 43 VII. THERE WAS NO NEXUS BETWEEN INTEREST/ ADMINISTRA TIVE EXPENDITURE INCURRED AND THE DIVIDEND INCOME. MERELY BECAUSE EXEMPT INCOME IS EARNED, IT DOES NOT MEAN THAT DISALLOWANCE UNDER SECTION 14A OF THE IT ACT MUST NECESSARILY BE CALLED FOR. 67. THE LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES AS FAR AS SATISFACTION IS CONCERNED. WITH RESPECT TO THE QUANTUM OF THE DISALLOWANCE, HE SUPPORTED THE ORDER OF THE LEARNED ASSESSING OFFICER. 68. WE HAVE CAREFULL Y CONSIDERED THE RIVAL CONTENTION AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. AS THE FACTS AVAILABLE IN THE ASSESSMENT ORDER, THE ASSESSEE HAS EARNED EXEMPT DIVIDEND INCOME OF 238,145,137 AND INCOME FROM TAX - FREE BONDS OF 14,033,171. IN THE RETURN OF INCOME ASSESSEE, ITSELF HAS DISALLOWED A SUM OF RS. 2 LAKHS U/S 14 A OF THE INCOME TAX ACT WHICH IS ALSO MENTIONED AT PARAGRAPH NUMBER 6 OF THE ASSESSMENT ORDER. ON READING OF THE ASSESSMENT ORDER AT PARAGRAPH NUMBER 4 WE FIND THAT THE LEARNED ASSESSING OFFICER NOTED THAT ASSESSEE HAS EARNED DIVIDEND INCOME AND TAX - FREE INCOME FROM BOARDS. LOOKING AT THESE, HE ASKED THE ASSESSEE TO JUSTIFY THE NON - DISALLOWANCE OF EXPENDITURE U/S 14 A OF THE ACT. HE REJECTED THE CONTENTION OF THE ASSESSEE WITH SOME GENERAL STATEMENTS AND THEREAFTER REPRODUCES THE PROVISIONS OF SECTION 14 A OF THE INCOME TAX ACT AND COMPUTED DISALLOWANCE AS PER RULE 8D. THEREFORE, IT IS APPARENT THAT , THE LEARNED ASSESSING OFFICER HAS NOT RECORDED HIS OWN SATISFACTION / FINDING THAT HOW THE DISALLOWANCE SHOWN BY THE ASSESSEE ON ITS OWN OF 2 LAKHS IS INCORRECT. THE SATISFACTION OF THE ASSESSING OFFICER IS MANDATORY IN TERMS OF THE PROVISIONS OF SECTI ON 14 A (2) OF THE INCOME TAX ACT. THE SATISFACTION OF THE COMMISSIONER OF INCOME TAX APPEALS CANNOT BE REPLACED F OR SUBSTITUTED FOR THE SATISFACTION OF THE LEARNED ASSESSING OFFICER. THE HONOURABLE SUPREME PAGE 34 OF 43 COURT IN MAXOOP INVESTMENTS LTD VERSUS CIT [ 2018 ] 91 TAXMANN.COM 154 (SC)/[2018] 254 TAXMAN 325 (SC)/[2018] 402 ITR 640 (SC)/[2018] 301 CTR 489 (SC) HAS HELD THAT H AVING REGARD TO THE LANGUAGE OF SECTION 14A(2), READ WITH RULE 8D OF THE RULES, IT IS ALSO MADE CLEAR THAT BEFORE APPLYING THE THEORY OF APP ORTIONMENT, THE ASSESSING OFFICER NEEDS TO RECORD SATISFACTION THAT HAVING REGARD TO THE KIND OF THE ASSESSEE, SUO MOTU DISALLOWANCE UNDER SECTION 14A WAS NOT CORRECT. IT WILL BE IN THOSE CASES WHERE THE ASSESSEE IN HIS RETURN HAS HIMSELF APPORTIONED BUT T HE ASSESSING OFFICER WAS NOT ACCEPTING THE SAID APPORTIONMENT. IN THAT EVENTUALITY, IT WILL HAVE TO RECORD ITS SATISFACTION TO THIS EFFECT. FURTHER, WHILE RECORDING SUCH A SATISFACTION, NATURE OF LOAN TAKEN BY THE ASSESSEE FOR PURCHASING THE SHARES/MAKING THE INVESTMENT IN SHARES IS TO BE EXAMINED BY THE ASSESSING OFFICER. IN THE PRESENT CASE, WE DO NOT FIND ANY SUCH SATISFACTION RECORDED BY THE ASSESSING OFFICER WITH RESPECT TO THE DISALLOWANCE MADE BY ASSESSEE ON ITS OWN. IN VIEW OF THIS, WE HOLD THAT NO DISALLOWANCE U/S 14 A CAN BE MADE IN ABSENCE OF PROPER SATSIFACTION . ACCORDINGLY, GROUND NUMBER 2 OF THE APPEAL OF THE ASSESSING OFFICER IS DISMISSED. 69. WITH RESPECT TO GROUND NUMBER 3 OF THE APPEAL OF THE ASSESSING OFFICER WHICH IS AGAINST THE ORDER OF THE LEARNED CIT A DELETING THE DISALLOWANCE ARE WHILE COMPUTING THE BOOK PROFIT OF THE ASSESSEE WITH RESPECT TO THE DISALLOWANCE MADE IN THE ORIGINAL COMPUTATION OF THE INCOME U/S 14 A OF THE ACT. THE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF T HE ASSESSEE BY THE DECISION OF THE SPECIAL BENCH OF THE ITAT IN THE ASST COMMISSIONER OF INCOME TAX VERSUS VIREET INVESTMENTS PRIVATE LIMITED [2017] 82 TAXMANN.COM 415 (DELHI - TRIB.) (SB)/[2017] 58 ITR(T) 313 (DELHI - TRIB.) (SB)/[2017] 165 ITD 27 (DELHI - TRIB.) (SB)/[2017] 188 TTJ 1 (DELHI - TRIB.) (SB) WHEREIN IT HAS BEEN HELD THAT HOLDING THAT THE COMPUTATION UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB(2). IS TO BE MADE WITHOUT RESORTING TO PAGE 35 OF 43 THE COMPUTATION AS CONTEMPLATED U/S 14A READ WITH RULE 8D OF THE INCOME - TAX RULES, 1962.. ACCORDINGLY WE RESTORE THIS GROUND OF APPEAL BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER TO DECIDE THE ISSUE WITHOUT RESORTING TO THE RULE 8D OF THE INCOME TAX RULES FOR DISALLOWING EXPENDITURE IN RELATION TO THE E XEMPT INCOME BY WORKING OUT THE BOOK PROFIT. THUS, GROUND NUMBER 3 OF THE APPEAL IS ALLOWED WITH ABOVE DIRECTION. 70. GROUND NUMBER 4 IS WITH RESPECT TO THE DISALLOWANCE OF 7,999,069 OF THE FRINGE BENEFIT TAX CREDIT TO THE BOOK PROFIT U/S 115JB OF THE ACT BY THE LEARNED ASSESSING OFFICER DELETED BY HIM FOLLOWING THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1999 2000 DATED 31 ST OF OCTOBER 2008 IN ITA NUMBER 870/DEL/2004. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX APPEALS TO THAT EXTENT. ACCORDINGLY, GROUND NUMBER 4 IS DISMISSED. 71. IN THE RESULT, APPEAL OF THE LEARNED ASSESSING OFFICER IS PARTLY ALLOWED. 72. NOW WE COME TO THE APPEAL OF T HE ASSESSEE WHICH IS ONLY AGAINST THE DISALLOWANCE U/S 14 A OF THE INCOME TAX ACT. WHILE DECIDING GROUND NUMBER 2 OF THE APPEAL OF THE AO WE HAVE HELD THAT ASSESSING OFFICER HAS NOT RECORDED PROPER SATISFACTION IN TERMS OF PROVISIONS OF SUBSECTION (2) OF T HE ACT OF SECTION 14 A OF THE ACT AND THEREFORE THE DISALLOWANCE UNDER THAT SECTION CANNOT BE MADE. IN VIEW OF OUR THAT FINDING, THE GROUND NUMBER 1 & 2 OF THE APPEAL OF THE ASSESSEE IN ITA NUMBER 1984/DEL/2012 ARE ALLOWED. 73. ACCORDINGLY ITA NUMBER 1984/DEL /2012 FILED BY THE ASSESSEE IS ALLOWED. 74. IN THE RESULT ITA NUMBER 2062/DEL/2012 FILED BY THE LEARNED ASSESSING OFFICER IS PARTLY ALLOWED AND APPEAL OF THE ASSESSEE IN ITA NUMBER 1984/DEL/2012 FOR ASSESSMENT YEAR 2008 - 09 IS ALLOWED. ITA NUMBER 2473/DEL/201 4 (BY ASSESSEE ) PAGE 36 OF 43 AND ITA NUMBER 5381/DEL/2012 (BY ASSESSEE) ASSESSMENT YEAR 2009 10 75. T HESE ARE THE 2 APPEALS FILED BY THE ASSESSEE THE SAME ASSESSMENT YEAR. ITA NUMBER 2473/DEL/2014 IS FILED A GAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS ) XVIII, NEW DELHI DATED 29 TH OF JANUARY 2014 PASSED IN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11 ( 1 ), NEW DELHI FOR ASSESSMENT YEAR 2009 10. BRIEFLY STATED THE FACTS SHOW THAT THE ASSESSEE FILED ITS RET URN OF INCOME ON 30 SEPTEMBER 2009 SHOWING TOTAL INCOME OF 511,664,579/ AND BOOK PROFIT U/S 115 JB OF THE INCOME TAX ACT WAS COMPUTED AT RS 9 830080853/ . ASSESSEE REVISED RETURN OF INCOME ON 30 TH OF MARCH 2011 AT 531,060,593/ THE BOOK PROFIT WAS AL SO REVISED AT 359,931,876/ . THE ASSESSMENT ORDER U/S 143 (3) OF THE ACT WAS PASSED ON 19 TH OF DECEMBER 2011 BY THE LEARNED ASSESSING OFFICER WHEREIN HE MADE A DISALLOWANCE OF DEPRECIATION ON ASSETS GIVEN ON FINANCE LEASE OF RS. 1 83,30,580. HE FURTHER MAKE A DISALLOWANCE U/S 14 A OF THE INCOME TAX ACT OF RS 1 65,73,432/ . HE FURTHER MADE THE ADJUSTMENT OF DISALLOWANCE U/S 14 A OF THE INCOME TAX ACT OR THE BOOK PROFIT OF THE ASSESSEE ALSO. 76. AGGRIEVED BY THE ORDER OF THE LEARNED ASSESS ING OFFICER ASSESSEE PREFERRED AN APPEAL BEFORE THE LEARNED CIT A , HE CONFIRMED THE DISALLOWANCE UNDER SECTION 14 A OF THE INCOME TAX ACT OF RS. 165,73,432/ . HE ALSO CONFIRMED THE DISALLOWANCE OF DEPRECIATION ON LEASE ASSETS OF RS 18330580/ - . THEREFOR E, ASSESSEE IS IN APPEAL ON BOTH THESE ISSUE BEFORE US. THIS ISSUE IS CHALLENGED BY THE ASSESSEE IN ITA NUMBER 2473/DEL/2014. 77. THE FIRST GROUND OF APPEAL FILED BY THE ASSESSEE IS GENERAL IN NATURE AND THEREFORE IT IS DISMISSED. PAGE 37 OF 43 78. SECOND GROUND OF APPEAL IS WI TH RESPECT TO THE DISALLOWANCE BY THE LEARNED ASSESSING OFFICER CONFIRMED BY THE LEARNED CIT A ON ACCOUNT OF DEPRECIATION ON LEASE ASSETS OF RS 1 83,30,580/ . BOTH THE PARTIES SUBMITTED THAT THE ISSUE IS SIMILAR TO THE FACTS IN THE CASE OF THE APPEAL OF T HE ASSESSEE FOR ASSESSMENT YEAR 1999 2000 AND 2000 2001, WHICH WAS ARGUED TOGETHER WITH THIS APPEAL. WE HAVE ALREADY DECIDED THAT APPEAL BY THE ORDER OF THE EVEN DATE WHEREIN WE HAVE HELD THAT THE ASSESSEE IS THE OWNER OF THE LEASE ASSETS AND IS ENTITL ED TO DEPRECIATION THEREON. THEREFORE, FOLLOWING THE SAME REASONS GIVEN THERE UNDER , WE HOLD THAT ASSESSEE IS ENTITLED TO THE DEPRECIATION ON LEASE ASSETS. ACCORDINGLY, GROUND NUMBER TWO OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 79. GROUND NUMBER 3 IS WITH R ESPECT TO THE DISALLOWANCE U/S 14 A OF THE INCOME TAX ACT. BRIEFLY STATED THE FACTS SHOWS THAT DURING THE YEAR THE ASSESSEE HAS EARNED ACT FREE DIVIDEND INCOME OF 267,255,687 AND HAS EARNED INTEREST INCOME FROM TAX - FREE WANTS OF 20.87 CRORES. UNDISPUTE DLY BOTH THESE INCOME HAVE BEEN SHOWN AS AN EXEMPT INCOME. IN THE COMPETITION OF THE TOTAL INCOME ASSESSEE HAS DISALLOWED A SUM OF 10 LAKHS U/S 14 A OF THE INCOME TAX ACT. THE LEARNED ASSESSING OFFICER QUESTIONED THE ASSESSEE WITH RESPECT TO THE DISALLOW ANCE U/S 14 A OF THE ACT. ASSESSEE SUBMITTED ITS REPLY ON 25 TH / 11 / 2010 GIVING THE BRIEF HISTORY OF SUCH DISALLOWANCES UPHELD BY THE LEARNED CIT A. THE LEARNED ASSESSING OFFICER REJECTED THE CONTENTIONS OF THE ASSESSEE, REPRODUCED THE PROVISIONS OF SECT ION 14 A OF THE ACT AND THEREAFTER PROCEEDED TO C OMPUTE THE DISALLOWANCE U/S 14 A WITH RESPECT TO THE ADMINISTRATIVE EXPENDITURE BY APPLYING A MULTIPLYING FACTOR OF 0.5% THEREBY COMPUTING THE TOTAL DISALLOWANCE OF RS 1 75,73,432/ . AS ASSESSEE HAS DISALLOWED A SUM OF 10 LAKHS ON ITS OWN, THE ADDITION OF RS 1 65,73,432/ WAS MADE. ASSESSEE CHALLENGED THE SAME BEFORE THE LEARNED CIT A. HE A S PER PARAGRAPH PAGE 38 OF 43 NUMBER 9.1 OF HIS ORDER HELD THAT AO HAS CORRECTLY RECORDED THE FINDING AND THEREFORE THE DISALLOWANCE WAS CONFIRMED. 80. BOTH THE PARTIES SUBMITTED THAT THE FACTS IN THIS CASE ARE IDENTICAL TO THE FACTS IN THE CASE OF ASSESSEE FOR ASSESSMENT YEAR 2008 09 WHEREIN THE DISALLOWANCE U/S 14 A WAS PARTIALLY DELETED BY THE LEA RNED CIT A. THEY SUBMITTED THAT THEIR ARGUMENTS ARE ALSO THE SAME. 81. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION AND PERUSED THE ORDERS OF THE LEARNED ASSESSING OFFICER WHEREIN WE FIND THAT THE LEARNED ASSESSING OFFICER HAS NOT RECORDED ANY SAID SATI SFACTION WITH RESPECT TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE OF INCURRING ONLY 10 LAKHS AS AN EXPENDITURE FOR EARNING OF EXEMPT INCOME. THEREFORE FOR THE REASONS GIVEN BY US WHILE DECIDING THE APPEAL OF BOTH THE PARTIES FOR ASSESSMENT YEAR 2008 09, WHICH IS ON IDENTICAL FACTS, WE ALSO FOR THIS YEAR DIRECT THE LEARNED ASSESSING OFFICER TO DELETE THE DISALLOWANCE U/S 14 A OF THE ACT IN ABSENCE OF PROPER SATISFACTION ABOUT THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. ACCORDINGLY, GROUND NUMBER 3 OF THE APPEAL OF ASSESSEE IS ALLOWED. 82. GROUND NUMBER 4 OF APPEAL IS WITH RESPECT TO THE DISALLOWANCE U/S 14 A WHILE COMPUTING THE BOOK PROFIT WHICH IS SIMILAR TO GROUND NUMBER 3 IN THE APPEAL OF THE LEARNED ASSESSING OFFICER FOR ASSESSMENT YEAR 2008 09 WH EREIN FOLLOWING THE DECISION OF THE SPECIAL BENCH IN CASE OF CIT VERSUS VIREET INVESTMENTS PRIVATE LIMITED (SUPRA) WE HAVE SET ASIDE THE ISSUE BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER. THEREFORE, FOR SIMILAR REASONS THIS GROUND OF APPEAL IS ALSO THUS SENT BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER WITH SIMILAR DIRECTION. ACCORDINGLY, GROUND NUMBER 4 OF THE APPEAL IS ALLOWED ACCORDINGLY. 83. IN THE RESULT ITA NUMBER 2473/DEL/2014 FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2009 10 IS PARTLY ALLO WED. PAGE 39 OF 43 84. ASSESSEE HAS FILED ANOTHER APPEAL IN ITA NUMBER 5381/DEL/2012 FOR ASSESSMENT YEAR 2009 10 AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) XV, NEW DELHI DATED 9 AUGUST 2012 FOR ASSESSMENT YEAR 2009 10 WHEREIN ASSESSEE HAS CONTESTED IT THAT THE LEARNED CIT A AS ERRED IN NOT ALLOWING THE CORRECT INTEREST DUE U/S 244A BY HOLDING THAT THE DELAY IS ATTRIBUTABLE TO THE APPELLANT. 85. FOR ASSESSMENT YEAR 2009 10 ON THE RETURN OF INCOME FILED AS DESCRIBED ABOVE AN INTIMATION U/S 143 ( 1 ) OF T HE INCOME TAX ACT WAS PASSED ON 29 JULY 2011. 86. THE GRIEVANCE OF THE ASSESSEE IS THAT AT THE TIME OF PASSING THAT INTIMATION, SHORT INTEREST WAS PAID U/S 244A OF THE INCOME TAX ACT. THE ASSESSEES CLAIM IS THAT IT FILED ITS RETURN OF INCOME CLAIMING REFUND OF RS. , NIL WHICH WAS SUBSEQUENTLY REVISED CLAIMING REFUND OF 706,149,685. THE REVISED RETURN WAS PROCESSED U/S 143 (1) ON 29 TH OF JULY 2011 WHEREIN THE REFUND WAS DETERMINED OF T HE ABOVE SUM AND INTEREST U/S 244A OF RS 139,00,935/ - . WHILE CALCULATING THE INTEREST THE LEARNED ASSESSING OFFICER ALLOWED THE INTEREST FOR THE PERIOD 1 APRIL 2011 TO JULY 31, 2011. THE CLAIM OF THE ASSESSEE IS THAT THE AMOUNT OF REFUND AND ITS INTEREST SHOULD HAVE BEEN GRANTED AT THE RATE OF 0.5% FOR A MONTH FROM FIRST DA Y OF APRIL OF ASSESSMENT YEAR T O THE DATE OF ACTUAL REFUND. 87. THE LEARNED CIT A REJECTED THE APPEAL OF THE ASSESSEE HOLDING THAT THE DELAY IS ON PART OF THE APPELLANT AND THEREFORE IN T ERMS OF PROVISIONS OF SECTION 244A (2), THE LEARNED ASSESSING OFFICER HAS RIGHTLY CALCULATED THE REFUND. THEREFORE, ASSESSEE IS AGGRIEVED IN APPEAL BEFORE US. 88. BEFORE US ASSESSEE SUBMITTED AS UNDER: - I. THE APPELLANT HAD FILED RETURN OF INCOME ON 30 SEPTEMBER 2009 CLAIMING A NIL REFUND. THEREAFTER, THE APPELLANT FILED A REVISED RETURN ON 30 TH MARCH, 2011 CLAIMING A REFUND OF RS. 70,61,49,685/ - AND THE SAME WAS ASSESSED U/S 143(1) AT RS. PAGE 40 OF 43 70,89,47,660/ - COMPRISING OF PREPAID TAXES RS. 69,50,46,725/ - AND INTEREST U/S 244A AT RS. 1,39,00,935/ - . II. THE LD. AO HAD ALLOWED AN INTEREST OF RS. 1,39,00,935/ - STARTING FROM 1 ST APRIL 2011 TO JULY 31 ST , 2011 AND NOT FOR THE PERIOD STARTING FROM THE DATE OF FILING THE ORIGINAL RETURN ON THE PREMISE THAT DELAY IS ATTR IBUTABLE TO THE APPELLANT IN TERMS OF PROVISION OF SECTION 244(A)(2) OF THE IT ACT. III. IT IS SUBMITTED THAT THE INTEREST U/S 244A OF THE IT ACT IS ALLOWABLE FROM THE DATE OF FILING THE ORIGINAL RETURN BEING THE FIRST RETURN FILED FOR THE RELEVANT ASSESSMENT YEAR AND THE ACT OF FILING THE REVISED RETURN UNDER NO CIRCUMSTANCES CAN PUT THE APPELLANT IN A DIS - ADVANTAGEOUS POSITION OF LIMITING THE INTEREST ON REFUND TO BE COMPUTED FROM THE DATE OF FILING THE REVISED RETURN. FOR THIS PURPOSES, THE APPELLANT WISHES TO PLACE RELIANCE ON THE PROVISIONS OF SECTION 139(5) OF THE IT ACT WHICH STATES THAT ONLY RETURN FILED UNDER 139(1) OR 139(4) CAN BE REVISED UNDER THIS SECTION. THUS, ONE MAY READ IT TO UNDERSTAND THAT ONLY ONCE THE ASSESSEE HAS FILED THE RETURN UNDER S ECTION 139(1) OF THE IT ACT, THE ASSESSEE HAS AN OPTION TO REVISE THE RETURN AT LATER POINT IN TIME AND SUCH REVISION OF RETURN IS TAKEN AS A RETURN FILED IN COMPLIANCE WITH SECTION 139(1) OF THE IT ACT. THUS, THE ACT OF STEPPING INTO THE SHOES OF ORIGINA L RETURN IS SELF SUFFICIENT TO CLAIM THAT SINCE THE REVISED RETURN TAKES THE STATUS OF ORIGINAL RETURN FILED THERE IN, THEREFORE THE INTEREST ON REFUND SHOULD ALSO BE CALCULATED FROM SUCH DATE ONWARDS. IV. FO R THE ABOVE PROPOSITION, THE APPELLANT INTENDS TO RELY ON THE FOLLOWING CASE WHICH DEALS WITH THE INTERPRETATION OF THE PROVISIONS OF SECTION 139(1) AND SECTION 139(5) OF THE IT ACT. V. THE FOLLOWING IS THE DECISION WHICH SUPPORTS THE CLAIM OF THE APPELLANT: PAGE 41 OF 43 A. IN CIT V. PERIYAR DISTRICT CO - OPERATIVE MIK PROD UCERS UNION LTD (2004) 266 ITR 705 , IT WAS HELD AS FOLLOWS: VI. 7. A BARE PERUSAL OF THE AFORESAID TWO PROVISIONS, MORE PARTICULARLY THE PROVISION CONTAINED IN SECTION 139(3), MAKES IT CLEAR THAT A RETURN OF LOSS FILED UNDER SECTION 139(3) MAY BE FILED WITH IN THE TIME ALLOWED UNDER SECTION 139(1). ONCE SUCH A RETURN IS FILED, ALL THE PROVISIONS OF THE INCOME - TAX ACT SHALL APPLY AS IF SUCH RETURN HAS BEEN FILED UNDER SECTION 139(1). THIS POSITION IS CLEAR FROM THE EXPRESSION '. . . ALL THE PROVISIONS OF THIS ACT SHALL APPLY AS IF IT WERE A RETURN UNDER SUB - SECTION (1)'. IN OTHER WORDS, A RETURN FILED UNDER SECTION 139(3) IS DEEMED TO BE A RETURN FILED UNDER SECTION 139(1). THE PROVISION CONTAINED IN SECTION 139(3) MAKES IT CLEAR THAT ALL THE PROVISIONS OF THIS ACT SHALL APPLY TO SUCH A RETURN AS IF IT WERE A RETURN UNDER SECTION 139(1). IN VIEW OF SUCH A SPECIFIC PROVISION, THERE IS NO REASON TO EXCLUDE THE APPLICABILITY OF SECTION 139(5) TO A RETURN FILED UNDER SECTION 139(3). VII. BASED ON THE ABOVE SUBMISSION T HE APPELLANT ASSESSEE HUMBLY SUBMITS THAT THE LD. CIT(A) ERRED IN HOLDING THAT AO HAS RIGHTLY CALCULATED THE INTEREST ON REFUND. THE INTEREST ON REFUND AMOUNT SHOULD BE CALCULATED FROM THE DATE OF FILING ORIGINAL RETURN AND NOT FROM THE DATE OF FILING THE REVISED RETURN. 89. LEARNED DEPARTMENTAL REPRESENTATIVE HEAVILY SUPPORTED THE ORDER OF THE LEARNED AND CIT A AND SUBMITTED THAT THE DELAY IS ON ACCOUNT OF THE ASSESSEE AS ASSESSEE HAS NOT CLAIMED REFUND IN THE ORIGINAL RETURN OF INCOME BUT SAME WAS CLAIMED AT RS. NIL AND SUBSEQUENTLY IN THE REVISED RETURN IT HAS CLAIMED THAT REFUND. IT WAS SUBMITTED THAT IT IS NOT THE CASE OF THE ASSESSEE THAT IN THE ORIGINAL RETURN REFUND WAS CLAIMED AND THE CERTIFICATES WERE NOT ATTACHED. THIS IS THE PAGE 42 OF 43 CASE WHERE THE ASSESSEE DID NOT CARE TO CLAIM THE REFUND IN THE ORIGINAL RETURN BUT REVISED RETURN FOR THIS REASON ONLY. THEREFO RE THE DELAY IS ON PART OF THE ASSESSEE. HE THEREFORE SUBMITTED THAT THE ORDER OF THE LEARNED CIT A IS REQUIRED TO BE UPHELD. 90. WE HAVE CAREFULLY CONSIDERED T HE RIVAL CONTENTION AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. IN THE PRESENT CASE, THE AS SESSEE FILED ORIGINAL RETURN IN TIME WITHOUT CLAIMING ANY REFUND. SUBSEQUENTLY ON 31 ST OF MARCH 2011, THE ASSESSEE REVISED RETURN AFTER TWO YEARS AND CLAIMED THE SUBSTANTIAL REFUND. IN THE REVISED RETURN, THE ASSESSEE SUBMITTED THE DETAILS OF THE CERTIFICATE AS WELL AS THE CLAIM WERE MADE. THEREFORE, IT IS APPARENT THAT THE DELAY OF CLAIM OF THE REFUND IS ON ACCOUNT OF THE ASSESSEE AND THEREFORE THE REVENUE IS NOT OBLIGED TO GRANT INTEREST TO THE ASSESSEE FOR THIS PERIOD. IN VIEW OF THIS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT A IN REFUSING TO GRANT INTEREST TO THE ASSESSEE AS CLAIMED BY IT. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. 91. THUS, ITA NUMBER 5381/DEL/2012 FOR ASSESSMENT YEAR 2009 10 IS DISMISSED. ORDER PRO NOUNCED IN THE OPEN COURT ON 31 /08/2020. - SD/ - - SD/ - (SUCHITRA KAMBLE) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 3 1 /08/2020 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI