Poonawalla Investments & Industries Pvt. Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 249/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9220 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 05-02-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 19-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NIRUPAMA KOTRU
• Assessee Lawyers: R S ABHYANKAR
• Keywords: Search and seizure; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE , . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKAR A RAO, AM . / ITA NOS.245 TO 250/PUN/2016 / ASSESSMENT YEARS : 2006-07 TO 2011-12 POONAWALLA INVESTMENT & INDUSTRIES PVT. LTD., SAROSH BHAVAN, 16-B/1, AMBEDKAR ROAD, PUNE 411 001 PAN : AAACP3265B . /APPELLANT VS. DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1(1), PUNE . / RESPONDENT / APPELLANT BY : SHRI R.S. ABHYANKAR / RESPONDENT BY : MS. NIRUPAMA KOTRU, CIT-DR / DATE OF HEARING : 26.02.2018 / DATE OF PRONOUNCEMENT: 28.02.2018 / ORDER PER D. KARUNAKARA RAO, AM : THERE ARE 6 APPEALS FILED BY THE ASSESSEE UNDER CON SIDERATION PERTAINING TO THE ASSESSMENT YEARS 2006-07 TO 2011-12. ITA NOS. 245 TO 247/PUN/2016 RELATE TO NON-ABATED ASSESSMENTS WHEREAS ITA NOS. 248 TO 2 50/PUN/2016 RELATE TO ABATED ASSESSMENTS. 2. BACKGROUND FACTS INCLUDE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF STUD FARM ACTIVITIES AND IT BELONGS TO POONAWALLA GROUP OF CASES. THERE WAS SEARCH AND SEIZURE ACTION ON THE ASSESSEES GRO UP OF CASES ON 21-06-2011. THESE ASSESSMENTS WERE COMPLETED U/S.153C R.W.S.143 (3) OF THE ACT. ITA NOS.245 TO 250/PUN/2016 POONAWALLA INVESTMENT AND INDUSTRIES PVT. LTD. 2 3. WE SHALL NOW DEAL WITH THE ASSESSMENT YEAR-WISE ADJUDICATION. TO START WITH WE SHALL TAKE UP THE APPEAL ITA NO.245/PUN/2016 FOR A.Y. 2006-07 . GROUNDS RAISED BY THE ASSESSEE IN THE APPEAL READS AS UNDER : ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN : 1. NOT APPRECIATING THE FACT THAT DIVIDEND RECEIVED ON INVESTMENTS IN GROUP COMPANIES SHOULD BE EXCLUDED WHILE COMPUTING DISALL OWANCE U/S.14A (REFER PARA 3.8 OF THE ORDER U/S.250). 2. CONFIRMING DISALLOWANCE OF RS.17,817/- BEING CONTRI BUTION TO GROUP GRATUITY SCHEME. 4. ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND, W HICH IS LEGAL IN NATURE, AND THE SAME IS EXTRACTED HERE AS UNDER : LD.CIT(A) FAILED TO APPRECIATE THE FACT THAT DISAL LOWANCE U/S.14A MADE BY THE AO IN THE ASSESSMENT ORDER PASSED U/S.153C R.W.S. 143( 3) OF THE ACT IS NOT SUSTAINABLE IN THE NON-ABATED ASSESSMENT AS THERE WAS NO INCRIMINATING MATERIAL FOUND DURING SEARCH IGNORING THE DECISION IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. VS. DCIT 147 TTJ 513 (MUM) (SB) AND THE DECISION OF BOM BAY HIGH COURT REPORTED AT 58 TAXMANN.COM 78 OF CIT-II, THANE VS. CONTINENTAL WAREHOUSING CORPORATION (NHAVA SHEVA) LTD. 5. BEFORE US, AND AT THE OUTSET, LD. AR FOR THE ASS ESSEE SUBMITTED THAT VALIDITY OF THE ADDITIONS RAISED IN THE ADDITIONAL GROUND, W HICH IS LEGAL AND GOES INTO THE ROOT OF THE SEARCH ASSESSMENT U/S.153C OF THE ACT, NEEDS TO BE ADJUDICATED FIRST. THEREFORE, LD. AR STARTED NARRATING THE FACTS RELEV ANT TO THE ADDITIONAL GROUND. ASSESSEE FILED THE RETURN OF INCOME ORIGINALLY ON 01 -11-2006 AND THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT VIDE ORDER DATE D 25-03-2008. THEREFORE, THE PRESENT ASSESSMENT MADE U/S.153C OF THE ACT CONSTIT UTES A NON-ABATED ASSESSMENT. FURTHER, COMING TO THE DETAILS OF THE ADDITIONS, WE FIND THE CONTENTS OF PARA NO.5 OF THE ASSESSMENT ORDER DEALS WITH THE DI SALLOWANCE U/S.14A OF THE ACT WHEN THERE IS NO REFERENCE TO ANY INCRIMINATING DOC UMENTS TO SUPPORT THE SAME. OTHERWISE, THE GENERAL FACTS RELATING TO THIS ADDIT ION INCLUDE THAT THE ASSESSEE CLAIMED THE EXEMPT INCOME OF AROUND RS.15 CRORES AN D THE SUM OF RS.22,68,817/- ITA NOS.245 TO 250/PUN/2016 POONAWALLA INVESTMENT AND INDUSTRIES PVT. LTD. 3 WAS CONSIDERED DISALLOWABLE BY THE ASSESSEE SUO MOT O. REACTING TO THE SAID CLAIMS OF THE ASSESSEE, THE PROVISIONS OF SECTION 14A OF T HE ACT R.W. RULE 8D OF THE I.T. RULES WERE INVOKED BY THE AO DURING THE ASSESSMENT PROCEEDINGS U/S.153C OF THE ACT. EVENTUALLY, THE AO DETERMINED THE DISALLOWANC E AT RS.34,46,681/- VIDE THE DISCUSSION GIVEN IN PARA NO.5 OF THE ASSESSMENT ORD ER. IT IS EVIDENT FROM THE DISCUSSION AVAILABLE IN THE SAID PARA ALONG WITH IT S SUB-PARAGRAPHS 5.1 TO 5.3 OF THE ASSESSMENT ORDER THAT THERE IS NO REFERENCE WHATSOE VER TO ANY SEIZED MATERIAL/INCRIMINATING MATERIAL IN SUPPORT OF ASSUM ING JURISDICTION TO MAKE THE ABOVE SAID DISALLOWANCE U/S.14A OF THE ACT R.W. RUL E 8D(2) OF THE I.T. RULES, 1962. 6. DURING THE FIRST APPELLATE PROCEEDINGS BEFORE TH E CIT(A), THE ASSESSEE COULD ONLY GET PART RELIEF IN THE MATTER. AGGRIEVED WITH THE ORDER OF CIT(A), THE ASSESSEE RAISED THE ABOVE SAID GROUNDS ORIGINALLY ON MERITS AND THE SAID ADDITIONAL GROUND. 7. DURING THE PROCEEDINGS BEFORE US, LD. COUNSEL FO R THE ASSESSEE BROUGHT OUR ATTENTION TO THE REGULAR ASSESSMENT PROCEEDINGS AND SUBMITTED THAT THIS ISSUE OF DISALLOWANCE U/S.14A OF THE ACT WAS THE SUBJECT MAT TER OF DISPUTE IN THE REGULAR ASSESSMENT TOO. EVENTUALLY, IN THE SAID REGULAR AS SESSMENT, AO MADE THE ADDITION VIDE HIS ORDER DATED 25-03-2008 BY INVOKING THE PRO VISIONS OF SECTION 14A OF THE ACT. FURTHER, THE CIT(A) ENHANCED THE ASSESSMENT O N THIS ACCOUNT VIDE HIS ORDER DATED 15-12-2008. THE TRIBUNAL SET-ASIDE THE MATTE R BACK TO THE AO FOR DOING A REASONABLE DISALLOWANCE. THE AO IS YET TO GIVE EFF ECT TO THE SAID DIRECTION OF THE ITAT. 8. WHILE THE DISALLOWANCE U/S.14A OF THE ACT IS THE BONE OF CONTENTION IN THE REGULAR ASSESSMENT, THE SAME ADDITION IS REPEATED B Y THE AO IN THE SEARCH ASSESSMENT MADE U/S.153C OF THE ACT. FURTHER, REFE RRING TO THE ADDITIONAL GROUND WHICH IS LEGAL IN NATURE, LD. AR FOR THE ASSESSEE S UBMITTED THAT SUCH ADDITIONS ARE NOT LEGALLY SUSTAINABLE IN THIS CASE OF A NON-ABATE D ASSESSMENT WHEN THERE IS NO ITA NOS.245 TO 250/PUN/2016 POONAWALLA INVESTMENT AND INDUSTRIES PVT. LTD. 4 SEIZED MATERIAL OR INCRIMINATING MATERIAL TO BACKUP THE SAME. IN THIS REGARD, LD. AR BROUGHT OUR ATTENTION TO VARIOUS DECISIONS TO SUPPO RT HIS ARGUMENTS. THE DECISION OF SPECIAL BENCH IN THE CASE OF ALL CARGO GLOBAL LO GISTICS LTD. 147 TTJ 513 (MUM) (SB) AND THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CONTINENTAL WAREHOUSING CORPORATION (NHAVA SHEVA) LTD. REPORTE D IN 58 TAXMANN.COM 78 WERE HEAVILY RELIED BY THE LD. AR FOR THE ASSESSEE. HE ALSO RELIED ON THE PUNE BENCH DECISION IN OF THE GROUP CASES, I.E. THE CASE OF S ERUM INSTITUTE OF INDIA LTD. FOR THE A.Y. 2008-09 VIDE ITA NO. 1183 AND 1537/PUN/2015, O RDER DATED 28-11-2017 AND SUBMITTED THAT THE PRESENT ADDITIONAL GROUND RAISED BY THE ASSESSEE SHOULD BE ALLOWED DELETING THE ADDITION MADE BY THE AO U/S.14 A OF THE ACT IN THE NON-ABATED ASSESSMENT. 9. LD. DR FOR THE REVENUE RELIED ON THE ORDERS OF T HE AO AND THE CIT(A). 10. WE HEARD BOTH THE PARTIES ON THE ISSUE OF MAKIN G OF DISALLOWANCE U/S.14A OF THE ACT IN THE NON-ABATED ASSESSMENT. IT IS AN UND ISPUTED FACT THAT THE AO ALREADY MADE AN ADDITION UNDER THE SAID PROVISIONS DURING T HE REGULAR ASSESSMENT PROCEEDINGS U/S.143(3) OF THE ACT. THIS ISSUE NOW STANDS REMITTED BY THE TRIBUNAL TO THE FILE OF AO. FURTHER, IT IS AN UNDISPUTED FA CT THAT NO SEIZED MATERIAL EXISTS TO SUPPORT THE REVENUE TO ASSUME JURISDICTION VALIDLY U/S.153C OF THE ACT FOR INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT SUCCESSFUL LY IN THIS NON-ABATED ASSESSMENT. IN THIS REGARD, WE HAVE PERUSED THE CONTENTS OF PAR A NOS. 5.1 TO 5.3 OF THE SEARCH ASSESSMENT ORDER AND FIND THERE IS NO REFERENCE TO THE SEIZED MATERIAL OF ANY KIND LINKED TO THE ASSESSEE AS WELL AS TO THE REQUIREMEN T OF MAKING DISALLOWANCE U/S.14A OF THE ACT IN THE SEARCH ASSESSMENT. FROM THIS LEG AL POSITION, WE FIND THE JUDGMENTS OF THE JURISDICTIONAL HIGH COURT IN THE C ASE OF CONTINENTAL WAREHOUSING CORPORATION (NHAVA SHEVA) LTD. (SUPRA) AND ALL CARG O GLOBAL LOGISTICS LTD. (SUPRA) HELPS THE ASSESSEE. THESE JUDGMENTS DO NOT APPROVE THE AOS ATTEMPTS TO RESORT ITA NOS.245 TO 250/PUN/2016 POONAWALLA INVESTMENT AND INDUSTRIES PVT. LTD. 5 TO MAKE ADDITIONS BY MAKING DISALLOWANCE U/S.14A OF THE ACT IN THE ASSESSMENT MADE U/S.153C OF THE ACT IN THE ABSENCE OF ANY INCR IMINATING MATERIAL. THEREFORE, WE ARE OF THE OPINION THAT THE ADDITIONAL GROUND RA ISED BY THE ASSESSEE IN THIS REGARD IS REQUIRED TO BE ALLOWED IN FAVOUR OF THE A SSESSEE. CONSIDERING THE SAME, WE ARE OF THE VIEW THAT ADJUDICATION OF GROUND NO.1 BECOMES AN ACADEMIC EXERCISE. ACCORDINGLY, GROUND NO.1 RAISED BY THE A SSESSEE IS DISMISSED AS ACADEMIC. 11. GROUND NO.2 RAISED BY THE ASSESSEE RELATES TO D ISALLOWANCE OF RS.17,817/- BEING CONTRIBUTION TO GROUP GRATUITY SCHEME. 12. RELEVANT FACTS INCLUDE THAT THE ASSESSEE DEBITE D AN AMOUNT OF RS.17,817/- TOWARDS PAYMENT TO EMPLOYEES. INVOKING THE PROVISI ONS OF SECTION 36(1)(V) OF THE ACT WHICH ALLOWS SUCH CLAIMS ON PAID BASIS, THE A O DISALLOWED THE CLAIM OF THE ASSESSEE WHO FAILED TO FURNISH THE SUPPORTING DOCU MENTS EVIDENCING THE PAYMENT AND PROOF OF APPROVING OF THE SAID GROUP GRATUITY S CHEME. CIT(A) CONFIRMED THE SAME AGAIN FOR WANT OF EVIDENCES. 13. AGGRIEVED WITH THE SAME, THE ASSESSEE RAISED TH E SAID GROUND NO.2 STATING THAT SUCH ADDITION IS UNWARRANTED AND UNSUSTAINABLE IN THE NON-ABATED ASSESSMENTS MADE U/S.153C OF THE ACT. ACCORDING TO THE LD. AR FOR THE ASSESSEE, THE ADDITION IS MADE WITHOUT HAVING ANY THE SUPPORT OF ANY INCRIMIN ATING MATERIAL. 14. BEFORE US, ON MERITS, LD. AR FOR THE ASSESSEE S UBMITTED THAT THE SAID GROUP GRATUITY SCHEME HAS NOT BEEN APPROVED TILL DATE. N OTWITHSTANDING THE SAME, LD. AR SUBMITTED THAT THE AO IS NOT EMPOWERED TO ASSUME JURISDICTION U/S.153C OF THE ACT IN THIS CASE OF NON-ABATED ASSESSMENT. IT IS A SETTLED LEGAL POSITION IN THE MATTER. ITA NOS.245 TO 250/PUN/2016 POONAWALLA INVESTMENT AND INDUSTRIES PVT. LTD. 6 15. WE FIND THE ARGUMENTS OF LD. AR ARE SUSTAINABL E LEGALLY. AS SUCH, NOTHING CONTRARY IS BROUGHT TO OUR NOTICE BY THE LD. DR FOR THE REVENUE. FURTHER, PERUSAL OF THE ORDERS OF THE REVENUE DOES NOT INDICATE THE EXISTENCE OF ANY INCRIMINATING MATERIAL LINKING TO THE SAID CLAIM OF THE ASSESSEE. WE FIND THE CONTENTS OF PARA NO.7 OF THE AO AND PARA NOS. 3.11 AND 3.12 OF THE O RDER OF CIT(A) ARE RELEVANT. CONSIDERING THE SAME, WE ARE OF THE VIEW THAT THIS ISSUE ALSO SHOULD BE DECIDED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, GROUND NO.2 R AISED BY THE ASSESSEE IS ALLOWED. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO.246 AND 247/PUN/2016 (A.YRS. 2007-08 AND 2008-09) 17. GROUNDS RAISED BY THE ASSESSEE IN THE APPEAL FO R A.Y. 2007-08 READ AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) ERRED IN 1. CONFIRMING THE DISALLOWANCE OF A SUM OF RS.49,12,71 5/- U/S.14A BY STATING THAT ISSUE OF DISALLOWANCE U/S.14A WAS NOT RELATED TO SE ARCH FINDINGS BUT ACTUALLY PERTAINS TO REGULAR ASSESSMENT. (REFER PARA 4.2 OF THE ORDER U/S.250). 2. CONFIRMING DISALLOWANCE OF RS.28,434/- BEING CONTRI BUTION TO GROUP GRATUITY SCHEME. SIMILAR GROUNDS HAVE BEEN RAISED BY THE ASSESSEE FO R A.Y. 2008-09 TOO. 18. GROUND NO.1 RELATES TO THE ISSUE OF DISALLOWANC E U/S.14A OF THE ACT. DURING THE FIRST APPELLATE PROCEEDINGS, CIT(A) HELD IN FAV OUR OF THE ASSESSEE STATING THAT THIS ISSUE RELATES TO THE REGULAR ASSESSMENT PROCEE DINGS MADE U/S.143(3) OF THE ACT AND GRANTED RELIEF IN THE APPEAL RELATING TO THE SE ARCH ASSESSMENT. CONSIDERING THE SAME, BEFORE US, LD. AR FOR THE ASSESSEE MENTIONED THAT THE SAID GROUND NO.1 IS NOT PRESSED. ACCORDINGLY, THE SAME IS DISMISSED AS NOT PRESSED. ITA NOS.245 TO 250/PUN/2016 POONAWALLA INVESTMENT AND INDUSTRIES PVT. LTD. 7 19. GROUND NO.2 RELATES TO DISALLOWANCE OF RS.28,43 4/- BEING CONTRIBUTION TO GROUP GRATUITY SCHEME. THIS ISSUE IS IDENTICAL TO THE ONE ALREADY ADJUDICATED BY US IN THE A.Y. 2006-07. IT IS THE SUBMISSION OF THE A SSESSEE THAT SUCH ADDITIONS ARE UNWARRANTED AND UNSUSTAINABLE IN THE NON-ABATED ASS ESSMENTS MADE U/S.153C OF THE ACT WHEN THERE IS NO INCRIMINATING MATERIAL TO SUPPORT THE SAID ADDITIONS. NOTWITHSTANDING, LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS THIS GROUND. HENCE, THIS GROUND BY THE ASSESSEE HAS TO BE DECIDED AGAIN ST THE ASSESSEE. RESULTANTLY, THE GROUND NOS. 1 AND 2 BY THE ASSESSEE ARE DISMISS ED. 20. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. 21. REGARDING THE GROUNDS RAISED BY THE ASSESSEE FO R A.Y. 2008-09 ARE IDENTICAL TO THE ONES RAISED IN THE APPEAL FOR A.Y. 2007-08. WE HAVE ALREADY ADJUDICATED THE SAID GROUNDS IN PARA NO. 17 TO 21 ABOVE AGAINST THE ASSESSEE. THEREFORE, APPLYING THE SAME REASONING, THE GROUNDS RAISED BY THE ASSES SEE IN THIS ASSESSMENT YEAR ARE ALSO DISMISSED. 22. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. 23. TO SUM UP, BOTH THE APPEALS OF THE ASSESSEE FOR A.YRS. 2007-08 AND 2008-09 ARE DISMISSED. ITA NOS.248/PUN/2016 (A.YR. 2009-10) 24. ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL IN THIS APPEAL : ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN : 1. CONFIRMING THE DISALLOWANCE OF A SUM OF RS.51,61,88 4/- U/S.14A BY APPLYING RULE 8D. 2. NOT GRANTING SET OFF OF THE AMOUNT OFFERED TOWARDS CONTINGENCY OF RS.60,00,000/- AGAINST DISALLOWANCE U/S.14A (REFER PARA 6.26 OF CIT(APPEALS)S ORDER. ITA NOS.245 TO 250/PUN/2016 POONAWALLA INVESTMENT AND INDUSTRIES PVT. LTD. 8 3. CONFIRMING DISALLOWANCE OF RS.40,772/- BEING CONTRI BUTION TO GROUP GRATUITY SCHEME. 4. CONFIRMING THE DISALLOWANCE OF PMS (PORTFOLIO MANAG EMENT SCHEME) FEES OF RS.17,15,457/- FROM THE SALE CONSIDERATION OF SHARE S WHILE COMPUTING CAPITAL GAINS. SIMILAR GROUNDS HAVE BEEN RAISED BY THE ASSESSEE FO R A.YRS. 2010-11 AND 2011-12. 25. ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND A ND THE SAME IS EXTRACTED AS UNDER : ADDITIONAL GROUND OF APPEAL NO.2(B) - ALTERNATIVE LY, THE LD.CIT(A) OUGHT TO HAVE GRANTED RELIEF BY REDUCING THE TOTAL INCOME ASSESSE D BY RS.60,00,000/- BEING THE CONTINGENCY OFFERED TO TAX IN RETURN OF INCOME AS N O EVIDENCE WAS FOUND DURING THE COURSE OF SEARCH AND/OR IN ASSESSMENT PROCEEDINGS R EGARDING UNDISCLOSED INCOME. WITH THIS AS ADDITIONAL GROUND, THE ORIGINAL GROUND NO.2 MAY PLEASE BE READ AS GROUND NO. 2(A). SIMILAR ADDITIONAL GROUND HAS BEEN RAISED BY THE A SSESSEE FOR THE A.YRS. 2010-11 AND 2011-12. 26. FROM THE ABOVE, IT IS EVIDENT THAT THE GROUND N OS. 1 AND 2 RELATES TO DISALLOWANCE U/S.14A OF THE ACT. WHILE GROUND NO.1 RELATES TO CORRECTNESS OF MAKING OF AND THE GROUND NO.2 RELATES TO ALLOWABILI TY OF THE BENEFIT OF SET OFF AGAINST THE CONTINGENCY OF RS.60 LAKHS DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME IN COMPLIANCE OF ADDITIONAL INCOME OFFERED B Y THE ASSESSEE IN SEARCH PROCEEDINGS. 27. IN CONNECTION WITH GROUND NO.1, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AO FAILED TO RECORD SATISFACTION WHICH IS REQUIRED WHILE INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT R.W. RULE 8D OF THE I.T. RUL ES, 1962. BRINGING OUR ATTENTION TO THE CONTENTS OF PARA NO.5.1 OF THE ASSESSMENT OR DER, LD. COUNSEL SUBMITTED THAT THE AO FAILED TO RECORD THE SATISFACTION BEFORE INV OKING THE PROVISIONS U/S.14A OF THE ITA NOS.245 TO 250/PUN/2016 POONAWALLA INVESTMENT AND INDUSTRIES PVT. LTD. 9 ACT. FURTHER, LD. AR READ OUT THE RELEVANT LINES F ROM THE SAID PARA OF THE ASSESSMENT ORDER. FOR THE SAKE OF COMPLETENESS, WE PROCEED TO EXTRACT THE SAME AS UNDER : 5.1. . . . . . . . IT IS DIFFICULT TO ACCEPT THE PROPOSITION THAT ALL THE TAX FREE INCOME HAS BEEN EARNED WITHOUT INCURRING THESE EXPENDITURES AND THESE EXPE NDITURE WERE INCURRED ONLY FOR EARNING TAXABLE INCOME. THEREFORE, I AM SATISFIED THAT THE ASSESSEE HAS NOT MADE ADEQUATE DISALLOWANCE AS MANDATED U/S.14A OF THE I. T. ACT AND THEREFORE, THE CASE OF THE ASSESSEE IS A FIT CASE FOR COMPUTATION OF TH E SAID DISALLOWANCE U/S.14A OF THE I.T. ACT. 28. FURTHER, LD. AR FOR THE ASSESSEE SUBMITTED THAT THE ABOVE RECORDED SATISFACTION , IS EXTREMELY GENERAL AND IT FALLS SH ORT OF THE LEGAL REQUIREMENT AS PROVIDED IN THE JUDGEMENT OF HONBLE APEX COURT IN THE CASE OF GODREJ AND BOYCE MANUFACTURING COMPANY LTD VS. DCIT 394 ITR 448 (SC) . CONTENTS OF PARA NO.37 OF THE SAID JUDGMENT IS RELIED HEAVILY AND PRAYED FOR DELETION OF THE ADDITION MADE BY THE AO INVOKING THE PROVISIONS OF SECTION 14A OF TH E ACT. 29. LD. DR FOR THE REVENUE RELIED ON THE ORDERS OF THE AO/CIT(A). 30. WE HEARD BOTH THE PARTIES ON THE ISSUE RELATING TO THE ISSUE OF RECORDING OF SATISFACTION AND PERUSED THE ABOVE EXTRACTED SATISF ACTION RECORDED BY THE AO ON THIS ISSUE. WE FIND THE LEGAL POSITION WAS EXPLAIN ED BY THE HONBLE APEX COURT AND THE PARA NO.37 OF THE JUDGMENT OF HONBLE APEX COUR T IN THE CASE OF GODREJ AND BOYCE MANUFACTURING COMPANY LTD. (SUPRA) ARE RELEVA NT. HONBLE SUPREME COURT EXPLAINED THE PROVISIONS OF SUB-SECTION (2) AND (3) OF SECTION 14A OF THE ACT. FOR THE SAKE OF COMPLETENESS, WE PROCEED THE EXTRACT TH E SAME HERE AS UNDER : 37. WE DO NOT SEE HOW IN THE AFORESAID FACT SITUAT ION A DIFFERENT VIEW COULD HAVE BEEN TAKEN FOR THE ASSESSMENT YEAR 2002-03. SUB-SE CTIONS (2) AND (3) OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES MEREL Y PRESCRIBE A FORMULA FOR DETERMINATION OF EXPENDITURE INCURRED IN RELATION T O INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT IN A SITUATI ON WHERE THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE. WHET HER SUCH DETERMINATION IS TO BE ITA NOS.245 TO 250/PUN/2016 POONAWALLA INVESTMENT AND INDUSTRIES PVT. LTD. 10 MADE ON APPLICATION OF THE FORMULA PRESCRIBED UNDER RULE 8D OR IN THE BEST JUDGMENT OF THE ASSESSING OFFICER, WHAT THE LAW POS TULATES IS THE REQUIREMENT OF A SATISFACTION IN THE ASSESSING OFFICER THAT HAVING R EGARD TO THE ACCOUNTS OF THE ASSESSEE, AS PLACED BEFORE HIM, IT IS NOT POSSIBLE TO GENERATE THE REQUISITE SATISFACTION WITH REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE . IT IS ONLY THEREAFTER THAT THE PROVISIONS OF SECTION 14A(2) AN D (3) READ WITH RULE 8D OF THE RULES OR A BEST JUDGMENT DETERMINATION, AS EARLIER PREVAILING, WOULD BECOME APPLICABLE. (EMPHASIS SUPPLIED). 31. THE ABOVE RATIO WAS ADOPTED BY THE PUNE BENCH O F THE TRIBUNAL IN THE CASE OF CAPGEMINI TECHNOLOGY SERVICES INDIA LIMITED, (IN THE MATTER OF IGATE COMPUTER SYSTEMS LIMITED, (FORMERLY PATNI COMPUTER SYSTEMS L IMITED AMALGAMATED WITH IGATE GLOBAL SOLUTIONS LIMITED AND NAME CHANGED) VS . DCIT VIDE ITA NOS. 216 AND 360/PUN/2015, ORDER DATED 25-01-2018 AND ALLOWED TH E ISSUE IN FAVOUR OF THE ASSESSEE. FOR THE SAKE OF COMPLETENESS, RELEVANT O PERATIONAL PARAS ARE EXTRACTED HERE AS UNDER : 34. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER IN PARA 10 HAD OBSERVED THAT THE ASSESSEE HAD EARNED SIGNIFICANT AMOUNT OF TAX FREE DIVIDENDS AND IN THE COMPUTATION OF INCOME, THE ASSESSEE HAS DISALLOWED SUM OF RS.50 LAKHS UNDER SECTION 14A OF THE ACT. THEN, REFERENCE IS MADE TO THE NOTE FILED BY THE ASSESSEE ON EXPENDITURE DISALLOWABLE UNDER SECTION 14A OF TH E ACT. THE ASSESSING OFFICER THEREAFTER, TAKES NOTE OF THE CONTENTS OF SAID EXPL ANATION AND OBSERVED AS UNDER:- I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE AS SESSEE. IT IS OBSERVED THAT APART FROM INVESTMENTS IN THE OVERSEAS SUBSIDI ARIES (WHERE THERE IS NO TAX-FREE INCOME SINCE THE DIVIDEND IS ALSO TAXABLE) THE INVESTMENTS MADE BY THE ASSESSEE ARE IN MUTUAL FUNDS. THE ENTIRE INVES TMENT IN MUTUAL FUND IS IN NON-EQUITY SCHEME. IN RESPECT OF INVESTMENT IN MUT UAL FUNDS, EXCEPT FOR GROWTH FUNDS, THE COMPANY RECEIVES TAX FREE DIVIDEN D. THE AMOUNT OF DIVIDEND RECEIVED BY THE COMPANY IS SUBSTANTIAL. T HIS IS A CLEAR CASE FOR APPLICATION OF RULE 8D. HENCE, THE CONTENTION OF T HE ASSESSEE CANNOT BE ACCEPTED. THE DISALLOWANCE U/S 14A IS REQUIRED TO BE MADE BY APPLYING RULE 8D. AS PER THE WORKING OF DISALLOWANCE U/S 14A AS PER RULE 8D, THE AMOUNT OF DISALLOWANCE COMES TO RS.5,68,32,323/-. THE ASS ESSEE HAS ALREADY DISALLOWED RS.50,00,000/- IN THE COMPUTATION OF INC OME. 35. THE REQUIREMENT OF SECTION 14(2) OF THE ACT IS THAT THE ASSESSING OFFICER IS TO RECORD AS TO WHY THE DISALLOWANCE MADE BY THE ASSES SEE I.E. RS.50 LAKHS UNDER SECTION 14A OF THE ACT IS NOT CORRECT. THE ASSESSI NG OFFICER TAKES NOTE OF THE DISALLOWANCE, CONSIDERS THE EXPLANATION OF ASSESSEE AND HOLDS THAT THE CONTENTION OF ASSESSEE CANNOT BE ACCEPTED. THE PRELIMINARY SATIS FACTION TO BE RECORDED BY ASSESSING OFFICER, BEFORE MAKING DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES, IS MISSING IN THE CASE; IN THE ABSENCE OF THE SAME, THERE IS NO MERIT IN THE DISALLOWANCE MADE BY THE ASSESSI NG OFFICER. WE FIND SUPPORT ITA NOS.245 TO 250/PUN/2016 POONAWALLA INVESTMENT AND INDUSTRIES PVT. LTD. 11 FROM THE RATIO LAID DOWN BY THE HON'BLE SUPREME COU RT IN GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT & ANR. (2017) 394 I TR 449 (SC). 37. WE DO NOT SEE HOW IN THE AFORESAID FACT SITUAT ION A DIFFERENT VIEW COULD HAVE BEEN TAKEN FOR THE ASSESSMENT YEAR 2002- 03. SUB-SECTIONS (2) AND (3) OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES MERELY PRESCRIBE A FORMULA FOR DETERMINATION OF EXPENDITUR E INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT IN A SITUATION WHERE THE ASSESSING OFFICER IS NOT SATISF IED WITH THE CLAIM OF THE ASSESSEE. WHETHER SUCH DETERMINATION IS TO BE MADE ON APPLICATION OF THE FORMULA PRESCRIBED UNDER RULE 8D OR IN THE BEST JUD GMENT OF THE ASSESSING OFFICER, WHAT THE LAW POSTULATES IS THE REQUIREMENT OF A SATISFACTION IN THE ASSESSING OFFICER THAT HAVING REGARD TO THE ACCOUNT S OF THE ASSESSEE, AS PLACED BEFORE HIM, IT IS NOT POSSIBLE TO GENERATE T HE REQUISITE SATISFACTION WITH REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE . IT IS ONLY THEREAFTER THAT THE PROVISIONS OF SECTION 14A(2) AN D (3) READ WITH RULE 8D OF THE RULES OR A BEST JUDGMENT DETERMINATION, AS EARL IER PREVAILING, WOULD BECOME APPLICABLE. (UNDERLINE PROVIDED BY US FOR EMPHASIS) 36. THE RATIO LAID DOWN BY THE HONBLE HIGH COURT O F DELHI IN INDIABULLS FINANCIAL SERVICES LTD. VS. DCIT (SUPRA) IS THUS, NOT APPLICA BLE. THE GROUND OF APPEAL NO.3 RAISED BY THE REVENUE IS THUS, DISMISSED. 32. FROM THE ABOVE, WE ARE OF THE VIEW THAT THE SAT ISFACTION RECORDED BY THE AO IN PARA NO.5.1 IS EXTREMELY BASED ON THE SUSPICION AND SURMISES. THE SATISFACTION ARRIVED AT BY THE AO WITH REFERENCE TO THE ENTRIES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ALSO HAVING REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. IN THAT SENSE OF THE MATTER, THE SATISFACTION RECORDED BY THE AO IS EXTREMELY GENERIC AND WHICH FALLS SHORT OF THE LEGAL REQUIREMENT FOR ASSUMING JURISDICTION U/S.14A OF THE ACT. CONSIDERING THE ABOVE POSITION, WE ARE OF THE VIEW THAT THE AO FAILED TO RECORD THE SUSTAINABLE SATISFACTION BEFORE INVOKIN G THE PROVISIONS OF SECTION 14A OF THE ACT. THEREFORE, THE DISALLOWANCE MADE BY THE A O IS UNSUSTAINABLE TECHNICALLY. ACCORDINGLY, THIS PART OF THE ARGUMENT OF GROUND NO .1 IS ALLOWED. WE FIND ADJUDICATION OF THE OTHER ISSUES OF THE SAID GROUND RELATING TO MERITS BECOMES AN ACADEMIC EXERCISE. THEREFORE, THE SAME ARE DISMISS ED AS ACADEMIC. ITA NOS.245 TO 250/PUN/2016 POONAWALLA INVESTMENT AND INDUSTRIES PVT. LTD. 12 33. GROUND NO.2 RAISED BY THE ASSESSEE RELATES TO G RANTING OF SET OFF OF THE DISALLOWED SUM OF RS.51,61,884/- AGAINST THE CONTIN GENCY OF RS.60 LAKHS DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME TOWARDS DIS CREPANCIES/ADDITIONS IF ANY. 34. BACKGROUND FACTS INCLUDE THAT THIS IS A CASE WH ERE ACTION U/S.132 OF THE ACT WAS CONDUCTED WHICH RESULTED IN THE DISCLOSURE OF A DDITIONAL INCOME. DURING THE PROCEEDINGS U/S.132(4) OF THE ACT PERTAINING TO THI S ASSESSEE AND IN THE ASSESSMENT YEAR ASSESSEE DISCLOSED ADDITIONAL INCOME OF RS.60 LAKHS TOWARDS CONTINGENCY IF ANY. ASSESSEE FILED THE RETURN OF INCOME OFFERING THE SAID RS.60 LAKHS IN THE RETURN OF INCOME. INFACT, ASSESSEE COMPUTED THE INCOME OF YEAR AT LOSSES BOTH UNDER NORMAL AS WELL AS MAT PROVISIONS. AO DID NOT GIVE SAID SET OFF OF BENEFIT OF SAID RS.60 LAKHS AGAINST THE DISALLOWANCE MADE BY HIM IN THE SEARCH ASSESSMENT. IT IS THE CLAIM OF THE ASSESSEE THAT SAID RS.60 LAKHS IS INTENDED FOR SET OFF AGAINST THE DISALLOWANCE, LIKE THE PRESENT ONE MADE BY THE AO U /S.14A OF THE ACT. WITH THESE BACKGROUND FACTS, ASSESSEE RAISED GROUND NO.2 CLAIM ING THAT THE DISALLOWANCE MADE BY THE AO IN THE SEARCH ASSESSMENT SHOULD HAVE BEEN ACCORDINGLY REDUCED OUT OF THE SAID RS.60 LAKHS WITH SPECIAL REFERENCE TO THE DISALLOWANCE U/S.14A OF THE ACT. 35. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITT ED THAT SIMILAR DISALLOWANCE WAS MADE U/S.14A OF THE ACT IN THE CASE OF ADURJEE & BROTHERS PVT. LTD. WHICH BELONGS TO THE ASSESSEES GROUP OF CASES AND THE TR IBUNAL ALLOWED SIMILAR CLAIM OF SET OFF IN FAVOUR OF THE ASSESSEE. FURTHER, LD. AR FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SERUM INSTITUTE OF INDIA LTD. VS. DCIT IN ITA NOS. 985 AN D 986/PUN/2015 AND ITA NOS. 1535 & 1536/PUN/2015, ORDER DATED 28-11-2017. CONT ENTS OF PARA NO.28 TO 41 OF THE ORDER OF THE TRIBUNAL ARE RELEVANT. ITA NOS.245 TO 250/PUN/2016 POONAWALLA INVESTMENT AND INDUSTRIES PVT. LTD. 13 36. AFTER HEARING BOTH THE SIDES ON THIS ISSUE AND ON PERUSAL OF THE SAID ORDER OF THE TRIBUNAL, WE FIND (1) THE SIMILAR ISSUE CAME UP FOR ADJUDICATION BOTH IN THE CASE OF ADURJEE & BROTHERS PVT. LTD. AND SERUM INSTITUT E OF INDIA LTD. IN THE FACTS OF SERUM INSTITUTE OF INDIA LTD. (SUPRA), WE FIND THE ASSESSEE DISCLOSED CONTINGENCY OF RS.1 CRORE AND THERE IS A DEMAND FOR SET OFF OF THE SAME TOWARDS THE DISCREPANCIES/OMISSIONS IF ANY. WE ALSO FIND THE C ASE OF ADURJEE & BROTHERS PVT. LTD. (SUPRA) IS RELEVANT FOR THE FINDING OF THE TRI BUNAL WHERE THE DISALLOWANCE U/S.14A OF THE ACT WAS ALLOWED TO BE SET OFF AGAINS T THE CONTINGENCY DISCLOSURE WHICH IS SIMILAR TO THE PRESENT CASE. CONTENTS OF PARA NO.12 OF THE ORDER OF THE TRIBUNAL IN THE CASE OF ADURJEE & BROTHERS PVT. LTD . VS. DCIT IN ITA NO.1067/PN/2014, ORDER DATED 10-08-2016 ARE RELEVAN T IN THIS REGARD AND THE SAME ARE EXTRACTED HERE AS UNDER : 12. WE FIND MERIT IN THE ALTERNATE CONTENTION OF T HE LD. COUNSEL FOR THE ASSESSEE THAT THE AMOUNT OF RS.75 LAKHS OFFERED TO TAX IN THE STATEMENT RECORDED U/S.132(4) BE SET OFF AGAINST THE DISALLOWANCE CALC ULATED UNDER THE PROVISIONS OF SECTION 14A R.W. RULE 8D. ADMITTEDLY, THE ASSESSEE HAD MADE DISCLOSURE OF RS.75 LAKHS VOLUNTARILY AS ADDITIONAL INCOME UNDER THE HE AD CONTINGENCIES TO COVER ANY OTHER ERRORS, OMISSIONS OR DISCREPANCIES. THE SUBM ISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE AMOUNT OF RS.75 LAKHS WAS VOLUNTA RILY OFFERED AND THERE WAS NO DETECTION OF ANY INCRIMINATING MATERIAL OR UNDISCLO SED INCOME COULD NOT BE CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE . WE, THEREFORE, FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE AMOUNT OF RS.75 LAKHS OFFERED BY THE ASSESSEE AS UNDISCLOSED INCOME TO CO VER ANY ERRORS, OMISSIONS OR DISCREPANCIES IN COMPUTING THE TAXABLE INCOME SHOUL D BE SET OFF AGAINST THE DISALLOWANCE MADE U/S.14A R.W. RULE 8D OF THE I.T. ACT. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE U/S.14A R.W. RULE 8D TO RS.18,19,294/- I .E. (RS.93,24,674 RS.75,00,000/-). GROUNDS OF APPEAL NO.1 TO 3 BY TH E ASSESSEE ARE ACCORDINGLY PARTLY ALLOWED. THE ABOVE DECISION OF THE TRIBUNAL ALLOWS THE SET O FF AGAINST THE DISALLOWANCE U/S.14A R.W. RULE 8D(2) 37. FROM THE ABOVE, IT IS SETTLED ISSUE THAT THE CO NTINGENT DISCLOSURE IS AVAILABLE FOR SET OFF AGAINST THE DISALLOWANCE U/S.14 OF THE ACT. HOWEVER, IN THE PRESENT CASE, THE QUESTION OF SET OFF DOES NOT ARISE AS WE HAVE ALREADY GRANTED RELIEF TO THE ITA NOS.245 TO 250/PUN/2016 POONAWALLA INVESTMENT AND INDUSTRIES PVT. LTD. 14 ASSESSEE ON LEGAL ISSUE RELATING TO THE RECORDING O F SATISFACTION BEFORE INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT R.W. RULE 8D(2 ) OF THE I.T. RULES. THE GROUND NO.2/ADDITIONAL GROUND NO.2(A) BECOMES ACADEMIC. 38. REGARDING THE ADDITIONAL GROUND TO BE RE-NUMBER ED AS 2(B), LD. AR SUBMITTED THAT THE ASSESSEES REQUEST IS FOR REDUCT ION OF RETURNED LOSS BY RS.60 LAKHS OFFERED BY THE ASSESSEE DURING THE SEARCH & S EIZURE PROCEEDINGS. 39. BEFORE US, REGARDING THE ISSUE OF ADMISSION OF THE SAID ADDITIONAL GROUND RELATING TO THE REDUCTION OF RETURNED LOSS, LD. AR SUBMITTED THAT THE SAID GROUND BEING LEGAL IN NATURE NEEDS TO BE ADMITTED. HE ALS O SUBMITTED THAT THERE IS NO NEED FOR INVESTIGATION INTO THE FACTS. 40. PER CONTRA, LD. DR FOR THE REVENUE STRONGLY OBJ ECTED TO THE ADMISSION OF THE SAID ADDITIONAL GROUND RAISED BY THE ASSESSEE DURIN G THE SECOND APPEAL PROCEEDINGS. ACCORDING TO HIM, THE ADJUDICATION OF THIS GROUND REQUIRES INVESTIGATION INTO CERTAIN FACTS. DETAILING THE SA ID INVESTIGATION, LD. DR SUBMITTED THAT THERE IS NEED TO EXAMINE THE MANNER OF DISCLOS URE OF RS.60 LAKHS GIVEN BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION IN THE NA ME OF THE ASSESSEE. FURTHER, FOR REDUCTION OF THE RETURNED LOSS BY RS.60 LAKHS, IT R EQUIRES INVESTIGATION INTO THE SEIZED MATERIAL AND BOOKS OF ACCOUNT, IF THERE EXIS TS ANY DISCREPANCY WHICH REQUIRES SET OFF AGAINST THE SAID CONTINGENCY OF RS.60 LAKHS . ACCORDING TO THE LD. DR, THE ADDITIONAL GROUND SHOULD NOT BE ADMITTED WHEN ADJUD ICATION OF THE SAME CALLS FOR INVESTIGATION INTO FACTS AT THE LEVEL OF THE AO. F OR THIS PROPOSAL, SHE RELIED ON THE SUPREME COURT JUDGMENT IN THE CASE OF NTPC LTD. VS. CIT 243 ITR 83 (SC). 41. WE HEARD BOTH THE PARTIES ON THE ISSUE OF ADMIS SION OF THE ADDITIONAL GROUND, AND IF IT IS ADMITTED WHETHER ADJUDICATION OF THE SAME DEMANDS INVESTIGATION INTO THE PRIMARY FACTS. WE EXAMINED THE OBJECTIONS RAISED BY THE LD. ITA NOS.245 TO 250/PUN/2016 POONAWALLA INVESTMENT AND INDUSTRIES PVT. LTD. 15 DR FOR THE REVENUE AND FIND THERE IS NEED FOR INVES TIGATION INTO THE SEIZED MATERIAL AND OTHER DOCUMENTS THAT WERE DISCOVERED DURING THE SEARCH AND SEIZURE OPERATION AND THE REASONS THAT LED TO THE DISCLOSURE OF RS.1. 91 CRORES IN GENERAL AND RS.60 LAKHS IN PARTICULAR FOR THE YEAR UNDER CONSIDERATI ON. IN OUR VIEW, THIS EXERCISE FALLS IN THE ZONE OF INVESTIGATION OF FACTS. ACCORDINGLY , THE CONDITIONS MENTIONED BY THE SUPREME COURT IN THE CASE OF NTPC LTD. (SUPRA) DO N OT ALLOW IN THIS CASE FOR ADMISSION OF THE ADDITIONAL GROUND. ACCORDINGLY, T HE ADDITIONAL GROUND NO.2(B) RAISED BY THE ASSESSEE IS NOT ADMITTED. THUS, THE REQUIREMENT OF GOING INTO THE ALLOWABILITY OF ISSUE BECOMES ACADEMIC IN NATURE. THEREFORE, THE ADDITIONAL GROUND NO.2(B) IS DISMISSED PRO TANTO. 42. GROUND NO.3 RAISED BY THE ASSESSEE RELATES TO T HE DISALLOWANCE OF RS.40,772/- BEING CONTRIBUTION TO GROUP GRATUITY SC HEME. 43. IT IS AN UNDISPUTED FACT THAT THE SAID SCHEME H AS NEVER BEEN APPROVED BY THE CIT TILL DATE. NO EVIDENCE OF SUCH APPROVAL WA S PLACED BEFORE THE REVENUE AUTHORITIES OR EVEN BEFORE US. THUS, THIS ISSUE I S CONSISTENTLY BEING RAISED BY THE ASSESSEE OVER THE YEARS BEFORE THE TRIBUNAL. BEFOR E US, LD. AR FOR THE ASSESSEE MERELY SUBMITTED THAT A DIRECTION MAY BE ISSUED TO THE ASSESSING AUTHORITY TO ALLOW THE CLAIM OF THE ASSESSEE AS AND WHEN THE SCHEME GE TS THE APPROVAL OF CIT IN ACCORDANCE WITH LAW. 44. ON PERUSAL OF THE ORDERS OF THE AO, WE FIND THI S ISSUE IS DISCUSSED IN PARA 10 OF THE ASSESSMENT ORDER AND PARA NO.6.21 OF THE ORD ER OF CIT(A). ON HEARING BOTH THE PARTIES, WE ARE OF THE OPINION THAT THE ORDER O F CIT(A) ON THIS ISSUE IS FAIR AND REASONABLE AS THE SCHEME HAS NOT BEEN APPROVED TILL DATE, AS ADMITTED BY THE LD. AR FOR THE ASSESSEE. HENCE, IT DOES NOT CALL FOR A NY INTERFERENCE ON THIS ISSUE. ACCORDINGLY, GROUND NO.3 RAISED BY THE ASSESSEE IS DISMISSED. ITA NOS.245 TO 250/PUN/2016 POONAWALLA INVESTMENT AND INDUSTRIES PVT. LTD. 16 45. GROUND NO.4 RAISED BY THE ASSESSEE RELATES TO T HE CONFIRMATION OF DISALLOWANCE OF PORTFOLIO MANAGEMENT FEES OF RS.17, 15,457/-. 46. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THI S ISSUE IS IDENTICAL TO THE ONE ALREADY DISCUSSED AND ADJUDICATED BY THE TRIBUNAL I N ASSESSEES FAVOUR IN THE CASE OF SERUM INSTITUTE OF INDIA LTD. (SUPRA) ORDER DATE D 28-11-2017. 47. AFTER HEARING BOTH THE PARTIES ON THIS ISSUE AN D CONSIDERING THE SETTLED NATURE OF THE ISSUE, WE PROCEED TO EXTRACT THE FIND ING OF THE TRIBUNAL HERE AS UNDER: 59. AFTER HEARING BOTH THE SIDES ON THIS ISSUE, WE PERUSED THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2007-08. W E FIND THE TRIBUNAL IN PARA NOS. 12 AND 12.1 OF THE ORDER HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE RELYING ON THE ORDER OF TRIBUNAL IN THE CASE OF KRA HOLDING AN D TRADING INVESTMENT PVT. LTD. (SUPRA). WE PROCEED TO EXTRACT THE OPERATIONAL PAR A NO.12.1 AND THE SAME READS AS UNDER : 12.1 RESPECTFULLY FOLLOWING THE DECISION OF THE TR IBUNAL IN THE CASE OF KRA HOLDING AND TRADING INVESTMENT PVT. LTD. (SUPRA) WE HOLD THAT THE PMS FEES PAID BY THE ASSESSEE IS AN ALLOWABLE DEDUCTION FROM THE CAPITAL GAINS. 60. CONSIDERING THE SETTLED NATURE OF THE ISSUE, W E ARE OF THE OPINION THAT THE GROUND RAISED BY THE ASSESSEE NEEDS TO BE ALLOWED. ACCORDINGLY, GROUND NO.6 RAISED BY THE ASSESSEE IS ALLOWED. 48. CONSIDERING THE FACT THAT NOTHING CONTRARY IS B ROUGHT TO OUR NOTICE, WE FIND THE CLAIM OF THE ASSESSEE WITH REGARD TO PAYMENT OF PMS FEES PAID BY THE ASSESSEE IS AN ALLOWABLE DEDUCTION FROM THE CAPITAL GAINS. THEREFORE, WE DIRECT THE AO TO EXAMINE THE FACTS OF THE PRESENT CASE AND APPLY THE RATIO LAID DOWN BY THE TRIBUNAL IN THE CASE OF SERUM INSTITUTE OF INDIA LTD. (SUPRA ). ACCORDINGLY, GROUND NO.4 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 49. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NOS.245 TO 250/PUN/2016 POONAWALLA INVESTMENT AND INDUSTRIES PVT. LTD. 17 ITA NOS.249 AND 250/PUN/2016 (A.YRS. 2010-11 AND 2011-12) 50. IN THESE TWO APPEALS FOR A.YRS. 200-11 AND 2011 -12, THE GROUNDS ORIGINALLY RAISED BY THE ASSESSEE ARE IDENTICAL AND THEY RELAT E TO (1) THE ISSUE OF DISALLOWANCE U/S.14A WITHOUT RECORDING PROPER SATISFACTION, (2) GRANTING OF SET OFF OF THE SAID DISALLOWANCE AGAINST THE CONTINGENCY OF RS.60 LAKHS , (3) DISALLOWANCE OF CONTRIBUTION TO THE GROUP GRATUITY SCHEME, (4) DISA LLOWANCE OF PMS FEES. FURTHER, THE ISSUE OF REDUCING THE RETURNED LOSSES TO THE EX TENT OF CONTINGENCY WAS THE ISSUE RAISED IN THE ADDITIONAL GROUND VIDE GROUND NO.2(B) FILED BY THE ASSESSEE FOR THE FIRST TIME BEFORE THE TRIBUNAL. THESE ISSUES ARE EXACTLY SIMILAR TO THE ONES ALREAD Y ADJUDICATED BY US WHILE DEALING WITH THE APPEAL ITA NO.248/PUN/2016 FOR A. Y. 2009-10. THE ARGUMENTS AS WELL AS THE COUNTER ARGUMENTS BY THE LD. AR FOR THE ASSESSEE AND LD. DR FOR THE REVENUE WERE IDENTICAL. THEREFORE, WE ARE OF THE O PINION THAT THE DECISIONS AND DIRECTIONS GIVEN IN A.YRS. 2009-10 ARE APPLICABLE T O THESE APPEALS ALSO. CONSIDERING THE SAME, WE ARE OF THE OPINION THAT THE GROUNDS RA ISED BY THE ASSESSEE ARE ALLOWED/DISMISSED, AS THE CASE MAY BE. 51. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. 52. TO SUM UP, APPEALS OF THE ASSESSEE FOR A.Y. 200 6-07 AND A.YRS 2009-10 TO 2011-12 ARE PARTLY ALLOWED AND THE APPEALS OF THE A SSESSEE FOR A.YRS. 2007-08 AND 2008-09 ARE DISMISSED. ORDER PRONOUNCED ON THIS 28 TH DAY OF FEBRUARY, 2018. SD/- SD/- (SUSHMA CHOWLA) (D.KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; DATED : 28 TH FEBRUARY, 2018. SATISH ITA NOS.245 TO 250/PUN/2016 POONAWALLA INVESTMENT AND INDUSTRIES PVT. LTD. 18 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 11 , PUNE 4. / THE CIT - 11 , PUNE 5. , , / DR B, ITAT, PUNE; 6. / GUARD FILE. / BY ORDER, //TRUE COPY// //TRUE COPY// SENIOR PRI VATE SECRETARY , / ITAT, PUNE