Jupiter Capial P. Ltd., V. CIT, Bangalore

ITA 253/BANG/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8563 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 25-08-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 19-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Earning of tax free income; Commercial expediency; Rule 8D; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 14A; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ASSESSEES APPEAL ITA NOS.60/BANG/2012 AND 253/BANG/2014 ASSESSMENT YEARS : 2008-09 AND 2009-10 M/S. JUPITER CAPITAL (P) LTD., NO. 54, RICHMOND ROAD, BENGALURU-560025. PAN : AABCJ5666R VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 11(5), BENGALURU-560001. APPELLANT RESPONDENT REVENUES APPEAL ITA NO.282/BANG/2012 ASSESSMENT YEAR : 2008-09 ASST. COMMISSIONER OF INCOME TAX, NO. 14/3, 5 TH FLOOR, NRUPATHUNGA ROAD, BENGALURU-560001. VS. M/S. JUPITER CAPITAL (P) LTD., BENGALURU-560025. PAN : AABCJ5666R APPELLANT RESPONDENT ASSESSEE BY : SMT. SHEETAL BORKAR, ADVOCATE REVENUE BY : SHRI. M. K. BIJU, JCIT DATE OF HEARING : 22.02.2017 DATE OF PRONOUNCEMENT : 28.02.2017 ITA NOS.60/BANG/2012, 253/BANG/2014, 282/BANG/2012 PAGE 2 OF 23 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THESE APPEALS ARE PREFERRED BY THE ASSESSEE AS WEL L AS REVENUE AGAINST THE RESPECTIVE ORDERS OF THE CIT(A). SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEALS, WE PREFERRED TO ADJUDICA TE THROUGH THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. WE , HOWEVER, PREFERRED TO ADJUDICATE THEM ONE AFTER THE OTHER. 2. ITA NO. 60/BANG/2012: THROUGH THIS APPEAL THE ASSESSEE CHALLENGED THE ORD ER OF THE CIT(A) MAINLY ON THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS OPPOSED TO THE FACTS OF THE CASE AND LAW APPLICABLE TO IT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT APPLICATION OF RULE 8D AND INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT IS CORRECT AND JUSTIFIED. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE FACT THAT INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT IS NOT AUTOMATIC. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE FACT THAT AS PER THE PROVISIONS OF SECTION 14A(2) O F THE ACT, THE PROVISIONS ITA NOS.60/BANG/2012, 253/BANG/2014, 282/BANG/2012 PAGE 3 OF 23 COULD BE INVOKED ONLY WHEN HAVING REGARD TO THE ACC OUNTS OF THE APPELLANT, THE ASSESSING OFFICER IS NOT SATISFIED WITH THE COR RECTNESS OF THE CLAIM OF THE APPELLANT IN RESPECT OF SUCH EXPENDITURE RELATABLE TO INCOME WHICH DO NOT FORM A PART OF TOTAL INCOME. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE FACT THAT IN THE ABSENCE OF ANY SUCH SATISFACTION IN REG ARD TO THE EXPENDITURE CLAIMED IN THE BOOKS OF ACCOUNT, UNDER LAW THE ASSE SSING OFFICER COULD NOT HAVE INVOKED THE PROVISIONS OF SECTION 14A OF T HE ACT. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS.1,10,87,925/- OUT OF THE FINANCE CHA RGES INVOKING THE PROVISIONS OF SECTION RULE 8D(2)(II) OF THE RULES. 7. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE FACT THAT THE APPELLANT WAS IN POSSESSION OF HUGE I NTEREST FREE FUNDS TO THE EXTENT OF 276.25 CRORES AVAILABLE FOR INVESTMENT AN D EVEN IF IT IS PRESUMED THAT THERE WERE SOME INVESTMENTS WHICH YIELDED INCOME EX EMPT UNDER THE PROVISIONS OF THE ACT, NO BORROWED FUNDS ON WHICH F INANCIAL CHARGES WERE INCURRED COULD BE PRESUMED AS UTILIZED FOR THE PURP OSE OF EARNING INCOME EXEMPT UNDER THE PROVISIONS OF THE ACT. 8. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE FACT THAT THERE WAS NO NEXUS BETWEEN THE BORROWED FUNDS ON WHICH THE FINANCIAL CHARGES WERE INCURRED AND THE INVESTMENTS ALLEGED T O HAVE BEEN MADE FOR THE PURPOSE OF EARNING INCOME EXEMPT UNDER THE PROVISIO NS OF THE ACT AND UNDER THE CIRCUMSTANCES, NO PORTION OF THE FINA NCIAL CHARGES COULD BE DISALLOWED. 9. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE FACT THAT OUT OF THE FINANCIAL CHARGES CLAIMED INTEREST TO THE EXTENT OF RS.5,85,6001/- WAS ALREADY DISALLOWED UNDER THE PRO VISIONS OF SECTION 37 OF THE ACT AND THE ASSESSING OFFICER BY QUANTIFYING THE DISALLOWANCE APPLYING RULE 8D(2)(II) OF THE INC OME TAX RULES ON THE WHOLE OF THE FINANCIAL CHARGES HAS MADE DOUBLE DISALLOWANCE OF THE SAME EXPENSE. ITA NOS.60/BANG/2012, 253/BANG/2014, 282/BANG/2012 PAGE 4 OF 23 10. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN NOT ONLY CONFIRMING THE DISALLOWANCE OF EXPENDITURE OF RS.91 ,59,391/- MADE BY THE ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 8 D(2)(III) OF THE RULE BUT ALSO ENHANCING THE SAME TO RS 1,15,70,677/-. 11. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN IGNORING THE FACT THAT UNDER THE LAW FOR ENHANCING THE INCOME THE APP ELLANT HAS TO BE PROVIDED WITH AN OPPORTUNITY OF HEARING. 12. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ENHANCING THE DISALLOWANCE THEREBY INCREASING THE TOTAL INCOM E WITHOUT PROVIDING AN OPPORTUNITY OF HEARING IS AGAINST NATURAL JUSTICE A ND THEREFORE BAD IN LAW. 13. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN IGNORING THE FACT THAT UNDER THE PROVISIONS OF SECTION 37 OF THE ACT THE ASSESSING OFFICER HAD SEPARATELY MADE DISALLOWANCES OF RS.99,60,600/- OUT OF THE TOTAL EXPENSES CLAIMED AND AGAIN BY ESTIMATING DISALLOWANCE UNDER THE PROVISIONS OF THE RULE 8D OF THE RULES, THE SAME EXPENDITURE HAS BEEN CONS IDERED TWICE FOR DISALLOWANCE. 14. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN IGNORING THE FACT THAT THE TOTAL DISALLOWANCE MADE EXCEEDS THE EXPEND ITURE CLAIMED BY THE APPELLANT AND UNDER LAW THE DISALLOWANCE IS WARRANT ED OUT OF THE EXPENSES CLAIMED AND THEREFORE THE DISALLOWANCE CANNOT EXCEE D THE EXPENDITURE CLAIMED. 15. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN NOT APPRECIATING THE FACT THAT THE INVESTMENTS IN SUBSIDIARIES ARE I N THE INTEREST OF THE BUSINESS ACTIVITY OF THE APPELLANT AND SUCH INVESTMENTS CANN OT BE CONSIDERED AS INVESTMENTS RESULTING IN EXEMPT INCOME FOR THE PURP OSE OF COMPUTATION IN RULE 8D R.W.S 14A OF THE ACT. 16. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN NOT APPRECIATING THE FACT THAT THE INVESTMENT IN PRIVAT E LIMITED COMPANIES ARE NOT MADE WITH THE INTENTION OF EARNING DIVIDENDS AND TH EREFORE SUCH INVESTMENTS CANNOT BE CONSIDERED AS FOR THE PURPOSE OF EARNING INCOME EXEMPT UNDER THE PROVISIONS OF THE ACT. ITA NOS.60/BANG/2012, 253/BANG/2014, 282/BANG/2012 PAGE 5 OF 23 17. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN NOT APPRECIATING THE FACT THAT ANY GAIN ARISING ON TRAN SFER OF INVESTMENTS IN PRIVATE LIMITED COMPANIES ARE ASSESSABLE TO TAX UND ER THE PROVISIONS OF THE ACT AND THEREFORE SUCH INVESTMENTS CANNOT BE CONSID ERED AS FOR THE PURPOSE OF EARNING INCOME EXEMPT UNDER THE PROVISIO NS OF THE ACT. 18. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN NOT PROVIDING WITH A SPECIFIC OPPORTUNITY OF HEARING TO THE APPEL LANT WHILE DEVIATING FROM THE STAND TAKEN BY THE ASSESSING OFFICER AND CONFIR MING A DISALLOWANCE EXCEEDING A DISALLOWANCE MADE BY THE ASSESSING OFFI CER. 19.THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE IN DETE RMINING TO THE EXTENT OF RS.2,26,58,602/- UNDER THE PROVISIONS OF SECTION 14A R.W. RULE 8D OF THE INCOME TAX RULES. 20.THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.5,85,600/- OUT OF THE FINANC IAL CHARGES CLAIMED, QUANTIFYING NOTIONALLY AT 12% ON INTEREST FREE ADVA NCES MADE TO M/S.AZURE MEDIA SERVICES (P) LTD A SUBSIDIARY OF TH E APPELLANT. 21. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN NOT APPRECIATING THE FACT THAT THE ADVANCES MADE TO M/S . AZURE MEDIA SERVICES (P) LTD WAS IN THE BUSINESS INTEREST OF THE APPELLA NT AND NO DISALLOWANCE WAS CALLED FOR ON THE ADVANCES MADE TO THE SAID SUB SIDIARY. 22. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN IGNORING THE RATIO LAID DOWN IN THE DECISION OF SUPREME COURT IN THE CASE OF S.A. BUILDERS VS. CIT(A) (2007) 288 ITR 1 (SC). 23. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN NOT APPRECIATING THE FACT THAT THERE WAS NO NEXUS BETWE EN THE BORROWED FUNDS ON WHICH THE FINANCIAL CHARGES WERE INCURRED AND IN TEREST FREE ADVANCES MADE TO M/S.AZURE MEDIA SERVICES (P) LTD AND UNDER THE CIRCUMSTANCES. NO DISALLOWANCE COULD HAVE BEEN MADE. ITA NOS.60/BANG/2012, 253/BANG/2014, 282/BANG/2012 PAGE 6 OF 23 24. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN NOT APPRECIATING THE FACT THAT THE APPELLANT HAD HUGE I NTEREST FREE FUNDS ALMOST TO THE EXTENT OF RS.276.25 CRORES AND UNDER THE CIRCUMSTANCES, THERE WAS NO CASE FOR PRESUMING THAT THE ADVANCES M ADE OF RS.48.80 LAKHS MADE TO M/S.AZURE MEDIA SERVICES (P) LTD WAS OUT OF THE BORROWED FUNDS. 25. THE APPELLANT CRAVES PERMISSION TO ADD, DELETE OR A LTER ANY OF THE GROUNDS AT THE TIME OF HEARING. PRAYER THE APPELLANT REQUEST THE HONOURABLE TRIBUNAL TO KI NDLY I) HOLD THAT THE ORDER OF THE CIT(A) IN ENHANCING T HE DISALLOWANCE U/S.14A OF THE ACT WITHOUT PROVIDING SPECIFIC OPPORTUNITY OF HEARI NG TO THE APPELLANT IS AGAINST NATURAL JUSTICE AND BAD IN LAW. II) DELETE THE DISALLOWANCE OF RS.2,26,58,6021- MAD E UNDER THE PROVISIONS OF SECTION 14A OF THE ACT R.W. RULE 8D OF THE RULES. III) DELETE THE DISALLOWANCE OF RS.5,85,6001- OUT O F THE FINANCIAL CHARGES. IV) HOLD THAT THE INVESTMENTS IN SUBSIDIARIES ARE F OR THE BENEFIT OF APPELLANT BUSINESS AND THE PROVISIONS OF SECTION 14A HAS NO A PPLICATION FOR SUCH INVESTMENTS. V) HOLD THAT THE INVESTMENT IN PRIVATE LIMITED COMP ANIES ARE NOT FOR THE PURPOSE OF EARNING DIVIDEND AND ALSO SINCE THE GAIN CONSEQUENT TO SALE OF SUCH INVESTMENTS ARE CHARGEABLE TO TAX UNDER THE PROVISI ONS OF THE ACT, SUCH INVESTMENTS CANNOT BE CONSIDERED FOR APPLYING THE P ROVISIONS OF SECTION 14A OF THE ACT. ITA NOS.60/BANG/2012, 253/BANG/2014, 282/BANG/2012 PAGE 7 OF 23 3. THOUGH VARIOUS GROUNDS ARE RAISED BUT THEY ARE M AINLY RELATED ON TWO ISSUES. FIRST ISSUE IS REGARDING THE CALCULATI ON OF DISALLOWANCE UNDER SECTION 14A AND THE OTHER IS DISALLOWANCE OF FINANC IAL CHARGES OF INTEREST FREE ADVANCES GIVEN TO SUBSIDIARY OF THE ASSESSEE. 4. WITH REGARD TO THE CALCULATION OF DISALLOWANCES UNDER SECTION 14A, THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE AO HAS NOT CALCULATED THE DISALLOWANCES AS PER RULE 8D OF THE INCOME TAX RULES. HE HAS ESTIMATED THE DISALLOWANCES AT 50% OF THE INDIR ECT EXPENSES WHEREAS IT SHOULD HAVE BEEN COMPUTED AS PER RULE 8D SUBSECT ION 2, CLAUSE (III). THOUGH THE ASSESSEE HAS BROUGHT THE COMPLETE FACTS BEFORE THE CIT(A), BUT HE DID NOT LOOK INTO IT AND HAS CONFIRMED THE D ISALLOWANCE MADE BY THE AO. THE LEARNED DR PLACED RELIANCE UPON THE ORDER OF THE AO. 5. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWE R AUTHORITIES AND IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE ARE OF THE V IEW THAT ONCE IT IS HELD THAT DISALLOWANCES ARE TO BE MADE UNDER SECTION 14A OF T HE ACT, THE DISALLOWANCES ARE TO BE CALCULATED AS PER RULE 8D O F THE INCOME TAX RULE. RULE 8D TAKES CARE OF ALL TYPES OF DIRECT AND INDIR ECT EXPENSES INCURRED TO EARN AN EXEMPTED INCOME. AFTER THE INSERTION OF RU LE 8D, THE AO HAS NO OTHER OPTION BUT TO CALCULATE THE DISALLOWANCES UND ER SECTION 14A AS PER RULE 8D OF THE INCOME TAX RULES. ITA NOS.60/BANG/2012, 253/BANG/2014, 282/BANG/2012 PAGE 8 OF 23 6. HAVING CAREFULLY EXAMINED THE ORDER OF THE LOWER AUTHORITIES, WE FIND THAT DISALLOWANCES ARE NOT CALCULATED CORRECTLY AS PER RULE 8D. THEREFORE, WE SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE TH E MATTER TO THE FILE OF THE AO WITH THE DIRECTION TO CALCULATE THE DISALLOWANCE S UNDER SECTION 14A OF THE ACT AS PER RULE 8D, AFTER AFFORDING AN OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE. 7. WITH REGARD TO THE NEXT ISSUE OF DISALLOWANCES O F FINANCIAL CHARGES, IT IS NOTICED THAT THE ASSESSEE HAS GIVEN THE INTEREST FREE ADVANCES OF RS.48,80,000/- TO ITS SUBSIDIARY M/S. AZURE MEDIA S ERVICES PVT. LTD. SINCE NO INTEREST WAS CHARGED, THE AO HAS MADE DISALLOWAN CE OF EXPENDITURE OF RS.5,85,600/-, BEING THE INTEREST AT 12% ON THE ABO VE AMOUNT. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND THE CIT(A), FOLLOWING THE JUDGMENT OF S. A. BUILDERS VS. CIT 288 ITR 1, C ONFIRMED THE DISALLOWANCES, HAVING OBSERVED THAT THE ASSESSEE H AS NOT FURNISHED THE EVIDENCE OF COMMERCIAL EXPEDIENCY FOR ADVANCING SUC H HUGE AMOUNT TO ITS SISTER CONCERN. WHILE DEALING WITH THE ISSUE, THE CIT(A) HAS ALSO PLACED RELIANCE ON THE JUDGMENT OF THE HONBLE HIGH COURT IN THE CASE OF CIT VS. ACCELERATED FREEZE DRYING CO. 324 ITR 316 (KER). 8. AGGRIEVED, THE ASSESSEE IS BEFORE US WITH THE SU BMISSION THAT THE ASSESSEE HAS GIVEN THE INTEREST FREE ADVANCES TO IT S SUBSIDIARY, THEREFORE NO DISALLOWANCE CAN BE MADE. THE LEARNED DR PLACED RELIANCE UPON THE ORDER OF THE CIT(A). ITA NOS.60/BANG/2012, 253/BANG/2014, 282/BANG/2012 PAGE 9 OF 23 9. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWE R AUTHORITIES AND IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT AS PER JUDGMENT OF THE APEX COURT IN THE CASE OF S. A. BUILDERS, THE ONUS IS UP ON THE ASSESSEE TO PROVE THAT THE INTEREST FREE ADVANCES TO ITS SISTER CONCE RN WAS GIVEN ON ACCOUNT OF COMMERCIAL EXPEDIENCY. IF THE ASSESSEE IS NOT ABLE TO ESTABLISH THESE FACTS, THE EXPENDITURE ON DISALLOWANCE OF INTEREST PAYMENT ON THE BORROWED FUNDS CAN BE MADE. DURING THE COURSE OF HEARING, A SPECIFIC QUERY WAS RAISED TO PLACE SOME EVIDENCE THAT THE INTEREST FRE E ADVANCES WERE GIVEN ON ACCOUNT OF BUSINESS EXPEDIENCY, BUT NOTHING HAS BEEN PLACED BEFORE US. UNDER THESE CIRCUMSTANCES, WE ARE CONSTRAINED TO HO LD THAT THE INTEREST FREE ADVANCES WERE NOT GIVEN TO SUBSIDIARY ON ACCOU NT OF BUSINESS EXPEDIENCY. THEREFORE, THE AO HAS RIGHTLY MADE 12% AS DISALLOWANCE OUT OF INTEREST FREE ADVANCES. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT(A). ITA NO. 282/BANG/2012: 10. THIS CROSS APPEAL IS PREFERRED BY THE REVENUE A GAINST THE ORDER OF THE CIT(A) ON THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED CIT (APPEALS), IN SO FOR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE, IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT (APPEALS) WAS NOT JUSTIFIED IN DELE TING THE DISALLOWANCE OF RENT PAID OF RS.3,75,000/- MADE U/S 37 OF THE ACT, WITHOUT APPRECIATING THE FACT THAT THE ASSESSE E HAS FAILED TO SUBSTANTIATE THE PAYMENT OF RENT TO THE G UEST HOUSE AND HAS ALSO FAILED TO FURNISH SPECIFIC PROOF AS RE GARDS THE ACTUAL UTILIZATION OF THE GUEST HOUSE FOR ITS BUSIN ESS AND ITA NOS.60/BANG/2012, 253/BANG/2014, 282/BANG/2012 PAGE 10 OF 23 THAT THE ONUS WAS ON THE ASSESSEE WHICH THE ASSESSE E FAILED TO DISCHARGE. 3. THE LEARNED CIT(APPEALS) WAS NOT JUSTIFIED IN DELET ING THE ADDITION OF RS.90,00,000/- MADE BY THE ASSESSING OF FICER ON ACCOUNT OF DISALLOWANCE OF CLAIM OF GOODWILI LICENC E FEES UNDER THE HEAD 'LEGAL AND PROFESSIONAL CHARGES', WI THOUT APPRECIATING THAT ASSESSEE HAD THESE PAYMENTS WERE MADE TO A RELATED PARTY AND THAT NO EVIDENCE WAS PROVIDED AS TO THE ACTUAL PROFIT EARNED ON THE STRENGTH OF THE GOODWIL L. 4. THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITI ON WITHOUT APPRECIATING THAT THE ABOVE PAYMENT WAS HELD TO BE EXCESSIVE AND UNREASONABLE AS THE ASSESSEE HAS NOT GAINED ANY BENEFIT TO ITS BUSINESS BY SUCH A TRANSACTION WITH A RELATED P ARTY AND THE ASSESSEE FAILED TO PROVE THE BUSINESS EXPEDIENCY OF SUCH PAYMENTS. 5. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE ORDER OF T HE CIT (A) BE REVERSED IN SO FOR AS THE ABOVE MENTIONED ISSUES AR E CONCERNED AND THAT OF THE ASSESSING OFFICER BE REST ORED. 6. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, TO AME ND OR TO DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. 11. THOUGH VARIOUS GROUNDS ARE RAISED, BUT THERE AR E MAINLY ONLY 2 GROUNDS. WITH REGARD TO FIRST GROUND I.E., DELETION OF DISALLOWANCE OF RENT PAID OF RS.3,75,000/- UNDER SECTION37 OF THE ACT, I T HAS BEEN BROUGHT TO OUR NOTICE THAT THIS GROUND IS COVERED BY THE ORDER OF THE TRIBUNAL IN THE CASE OF ASSESSEES SISTER CONCERN I.E., ACTI VS. JUPITER IT A NO. 801/BANG/2012. COPY OF THE ORDER IS PLACED ON RECORD. IN THE SAID ORDER, THE TRIBUNAL HAS ITA NOS.60/BANG/2012, 253/BANG/2014, 282/BANG/2012 PAGE 11 OF 23 ALLOWED THE PAYMENT OF RENT OF THE GUEST HOUSE. TH E LEARNED DR PLACED RELIANCE UPON THE ORDER OF THE AO. 12. HAVING CAREFULLY EXAMINED THE ORDER OF THE AUTH ORITIES BELOW, WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE CASE OF J UPITER (SUPRA). WE THEREFORE FIND NO JUSTIFICATION TO READJUDICATE THI S ISSUE AGAIN. WE, HOWEVER, FOR THE SAKE OF REFERENCE, EXTRACT THE REL EVANT PORTION OF THE ORDER OF THE TRIBUNAL: ON CAREFUL APPRECIATION OF THE FACTS OF THE CASE O N THE ISSUE OF THE ALLOWABILITY OF THE EXPENDITURE OF RS.11,33,806/- FOR MAINTENANCE OF A GUES HOUSE AT D ELHI BY THE ASSESSEE, WE ARE INCLINED TO AGREE WITH THE FIN DING OF THE LEARNED CIT(APPEALS). AS RIGHTLY OBSERVED BY THE L EARNED CIT(A), THE ASSESSING OFFICER HAD NOT QUESTIONED TH E GENUINENESS OF THIS PAYMENT, BUT QUESTIONED ONLY TH E ALLOWABILITY THEREOF. WE FIND FROM A PERUSAL OF TH E LEASE DEED DT. 20.07.2007 PLACED AT PAGES 10 TO 20 OF ASS ESSEES PAPER BOOK, BY WHICH THE ASSESSEE HAD TAKEN THE GUE ST HOUSE PREMISES SITUATED AT 2 ND FLOOR, A-264, DEFENCE COLONY, NEW DELHI, ON RENT WAS FOR COMMERCIAL USE/PURPOSES AS MENTIONED THEREIN. IT IS THE CONTE NTION OF THE ASSESSEE THAT SINCE IT IS ENGAGED IN AVIATION B USINESS, IT IS REQUIRED TO HAVE LIAISON AND CO-ORDINATION WITH VARIOUS GOVERNMENT DEPARTMENTS/AGENCIES IN DELHI. THE ASSE SSEE HAS ALSO FURNISHED DETAILS OF USAGE OF THE GUEST HO USE, FROM WHICH IT IS SEEN THAT SENIOR OFFICIALS OF THE ASSES SEE COMPANY HAD USED THE GUEST HOUSE ON VARIOUS DATES. IN VIEW OF THE ABOVE FACTUAL MATRIX, WE CONCUR WITH THE DECISION O F THE LEARNED CIT(A) IN HOLDING THAT THE EXPENDITURE OF RS.11,33,806/- INCURRED AS RENT ON MAINTENANCE OF G UEST HOUSE AT DELHI IS ALLOWABLE AND UPHOLD HIS ORDER. CONSEQUENTLY, GROUNDS RAISED AT S. NOS. 2 & 3 BY RE VENUE ARE DISMISSED. ITA NOS.60/BANG/2012, 253/BANG/2014, 282/BANG/2012 PAGE 12 OF 23 SINCE THE TRIBUNAL HAS TAKEN A PARTICULAR SET OF FA CTS, WE FIND NO JUSTIFICATION TO TAKE A CONTRARY VIEW. WE THEREFORE, FOLLOWING T HE SAME, DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, THE GROUND OF REVENUE IS REJECTED. 13. THE OTHER GROUND IS RELATED TO THE DELETION OF ADDITION OF RS.90,00,000/- MADE BY THE AO ON ACCOUNT OF DISALLO WANCE OF CLAIM OF GOODWILL, LICENSE FEE UNDER THE HEAD LEGAL AND PRO FESSIONAL CHARGES PAID TO ITS DIRECTOR. THE FACTS IN BRIEF ARE THAT THE A SSESSEE HAS PAID A SUM OF RS. 90,00,000/- TOWARDS GOODWILL AND LICENSE FEE TO M/S. VECTRA HOLDINGS PVT. LTD., FOR USING THE NAME OF MR. RAJEEV CHANDRA SHEKHAR AS A STANDALONE NAME OR IN CONJUNCTION WITH OTHER WORDS LIKE SUPPORTED BY, ASSOCIATED WITH IN INDIA. MR. RAJEEV CHANDRASHEK HAR IS A DIRECTOR IN BOTH THE APPELLANT COMPANY AS WELL AS M/S. VECTRA HOLDIN GS PVT. LTD. HAVING OBSERVED THAT THE EXPENDITURE IS UNREASONABLE AND E XCESSIVE IN NATURE, THE AO HAD DISALLOWED THE ENTIRE PAYMENT. WHEN THE APP EAL WAS PREFERRED BEFORE THE CIT(A), THE CIT(A), FOLLOWING ITS EARLIE R ORDER FOR AY 2007-08 HAS ALLOWED THIS PAYMENT OF EXPENDITURE. 14. NOW THE REVENUE IS BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT IN THE AY 2007-08, THE TRIBUNAL HAS SET ASIDE THE MATT ER TO THE AO WITH THE DIRECTION TO READJUDICATE THE ISSUE AFRESH BY PASSI NG A SPEAKING ORDER. IT WAS ALSO BROUGHT TO OUR NOTICE THAT IN THE AY 2007- 08, THE ASSESSEE HAS MADE PAYMENT OF RS.45 LAKHS UNDER THE SAME HEAD. F OR THAT YEAR, THE AO HAS INVOKED PROVISION OF SECTION 40A(2) WHILE MAKIN G THE DISALLOWANCE AND ITA NOS.60/BANG/2012, 253/BANG/2014, 282/BANG/2012 PAGE 13 OF 23 THE TRIBUNAL HAS RESTORED THE MATTER TO THE AO TO R EADJUDICATE THE ISSUE AFRESH. 15. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, HAS CONTENDED THAT IN 2007-08, THE AO HAS INVOKED THE P ROVISION OF SECTION 40A(2), WHEREAS IN THE IMPUGNED AY, THE DISALLOWANC E WAS MADE HAVING INVOKED THE PROVISION OF SECTION 37 OF THE ACT. TH EREFORE, THE TRIBUNALS FINDING FOR THE AY 2007-08 COULD NOT BE BINDING FOR THE IMPUGNED AY. 16. HAVING CAREFULLY EXAMINED THE ORDERS OF THE AUT HORITIES BELOW AND IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT UN DISPUTEDLY, DURING THE AY 2007-08, THE AO HAS MADE DISALLOWANCE OF THE PAYMEN T OF RS.45 LAKHS ON ACCOUNT OF GOODWILL, LICENSE FEE AFTER INVOKING THE PROVISIONS UNDER SECTION 40A(2) OF THE ACT AND THE TRIBUNAL HAS RESTORED THE MATTER BACK TO THE AO WITH THE DIRECTION TO EXAMINE ALL ASPECTS AND PASS A SPEAKING ORDER, WHEREAS IN THE IMPUGNED AY, THE DISALLOWANCE WAS MA DE UNDER SECTION 37 OF THE ACT. THE REVENUE HAS TAKEN A CONTRARY STAND WHILE MAKING THE DISALLOWANCE IN THE DIFFERENT AY WHEREAS THE NATURE OF PAYMENT IS SAME. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE REVENUE CANNOT TAKE A DIFFERENT STAND FOR MAKING THE DISALLOWANCE IN DIFFERENT AY. THEY SHOULD TAKE ONE CONSTANT STAND IN ALL THE YEARS. I N AY 2007-08, THE MATTER HAS ALREADY BEEN RESTORED BY THE TRIBUNAL TO THE AO TO READJUDICATE THE ISSUE AFRESH. THEREFORE, WE ARE OF THE VIEW THAT I N THE PRESENT YEAR, THE MATTER SHOULD GO BACK TO THE AO FOR ADJUDICATING TH E ISSUE AFRESH AFTER OBTAINING RELEVANT EVIDENCES FROM THE ASSESSEE. W E, THEREFORE, SET ASIDE ITA NOS.60/BANG/2012, 253/BANG/2014, 282/BANG/2012 PAGE 14 OF 23 THE ORDER OF THE CIT(A) AND RESTORE THE ISSUE TO TH E AO WITH THE DIRECTION TO ADJUDICATE THE ISSUE AFRESH AFTER MAKING NECESSARY VERIFICATION AND IF THE ASSESSEE IS NOT ABLE TO SPECIFY THE BUSINESS EXPEDI ENCY OF THESE PAYMENTS, THE AO SHOULD TAKE A CONSCIOUS VIEW FOR M AKING THE DISALLOWANCE AFTER RESORTING TO A PARTICULAR PROVIS ION OF THE IT ACT. ACCORDINGLY, THIS ISSUE IS DISPOSED OFF. ITA NO. 253/BANG/2014 17. THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINS T THE ORDER OF THE CIT(A) MAINLY ON THE FOLLOWING GROUNDS: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I , BANGALORE, HEREIN AFTER REFERRED TO AS ASSESSING OF FICER, ERRED IN CONSIDERING THE INTEREST AMOUNT OF RS 3,02,104 A S AN EXPENDITURE DISALLOWABLE UNDER SECTION 14A OF THE A CT IGNORING THE FACT THAT CORRESPONDING INVESTMENTS DOES NOT TO THE DIVIDEND EARNED BY THE APPELLANT. 2. THE LEARNED ASSESSING OFFICER OUGHT TO HAVE APPRECI ATED THE FACT THAT THE APPELLANT HAD LARGE INTEREST FREE FUNDS IN THE FORM OF PAID UP CAPITAL AND RESERVES IN THE FORM OF SHARE P REMIUM AND ACCUMULATED PROFITS AND THEREFORE IT WAS WRONG TO CONCLUDE THAT BORROWED FUNDS WERE UTILIZED FOR EARNING EXEMP TED INCOME. 3. THE LEARNED ASSESSING OFFICER SHOULD HAVE APPRECIAT ED THE FACT THAT THE BORROWED CAPITAL HAS BEEN USED FOR BUSINES S PURPOSE OF THE APPELLANT AND THEREFORE THERE IS NO CASE FOR DI SALLOWANCE UNDER SECTION 1 4A. 4. THE LEARNED ASSESSING OFFICER HAS ERRED IN IGNORING THE FACT THE BORROWING HAS NO NEXUS TO THE INVESTMENTS WHICH YIE LD DIVIDEND INCOME AND HENCE THERE IS NO CASE FOR DISALLOWANCE. 5. THERE IS NO FINDINGS OR FACTS BROUGHT ON RECORD TO ESTABLISH WHY THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CORRECT NESS OF THE CLAIM OF THE APPELLANT. ITA NOS.60/BANG/2012, 253/BANG/2014, 282/BANG/2012 PAGE 15 OF 23 6. NO MATERIALS HAVE BEEN INTRODUCED TO ESTABLISH THAT THE APPELLANT HAS IN FACT INCURRED CERTAIN EXPENDITURE IN CONNECT ION WITH EXEMPTED INCOME. 7. THE LEARNED ASSESSING OFFICER SHOULD HAVE APPRECIAT ED THE FACT THAT INVOKING THE PROVISIONS OF SECTION 14A AND RULE 8D ARE NOT AUTOMATIC OR MANDATORY. 8. THE LEARNED ASSESSING OFFICER HAS FAILED TO APPRECI ATE THE FACT THE PROVISIONS OF SECTION 14A (2) CAN BE INVOKED ONLY W HEN HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE APPELLANT IN RESPECT OF EXPENDITURE IN RELATION TO INCOME, WHICH DOES NOT FORM PART OF TOTAL INCOME. 9. THE LEARNED ASSESSING OFFICER HAS ERRED IN IGNORING THE FACT THAT HAVING INVOKED THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D, THE LAW DOES NOT PROVIDE AN OPTION TO ARBI TRARILY ESTIMATE A DISALLOWABLE EXPENDITURE. 10. THE APPELLANT HAS ADMITTED EARNED EXEMPTED INCOME T O THE TUNE OF RS 14,00,809 AND THE EXPENSES DISALLOWED IS RS 11,3 0,403. THIS REPRESENTS 81% OF THE INCOME HAS BEEN DEEMED TO BE COST INCURRED TO EARN THE SAID INCOME. 11. TO ASSUME THAT THE COST OF EARNING THE INCOME IS 81 % EVEN UNDER THE CIRCUMSTANCE THAT THE INVESTMENTS EXISTED DURING PR EVIOUS YEARS IS NOT BASED ON FACTS OR PRUDENCE. THE APPELLANT IS BEING TAXED FOR A NOTIONAL INCOME. DISALLOWANCE UNDER SECTION 37 - RS 28,03,850. 12. THE LEARNED ASSESSING OFFICER ERRED IN DISALLOWING THE EXPENDITURE OF RS 28,03,850 BEING FINANCIAL CONSULTANCY FEE PAID TO M /S LEXICON FINANCE IGNORING THE FACT THAT THE EXPENDITURE IS INCURRED FOR THE PURPOSE OF BUSINESS. 13. THE ASSESSING OFFICER HAD FAILED TO APPRECIATE THE FACT THAT THE PROVISIONS OF SECTION 37 OF THE ACT PROVIDES FOR ALLOWANCE OF EXPENDITURE INCURRED FOR THE BUSINESS, REVENUE IN NATURE AND GENUINELY INCUR RED. UNDER LAW THERE IS NO CASE FOR DISALLOWANCE. 14. THE ASSESSING OFFICER SHOULD HAVE APPRECIATED THE P OSITION IN LAW THAT ONCE THE EXPENDITURE IS GENUINELY INCURRED, IT IS N OT FOR THE REVENUE TO SIT ON JUDGMENT ON ITS REASONABILITY. ITA NOS.60/BANG/2012, 253/BANG/2014, 282/BANG/2012 PAGE 16 OF 23 15. THE LEARNED ASSESSING OFFICER HAS OBSERVED THAT THE INVESTMENTS OF THE APPELLANT COMPANY DURING THE YEAR HAS REMAINED SAME AS IN THE PREVIOUS YEAR, EXPENDITURE CLAIMED TOWARDS INVESTMENT IS NOT ALLOWABLE DEDUCTION. THIS IS CONTRARY TO THE POSITION TAKEN WHILE DETERM INING THE DISALLOWANCE UNDER SECTION 14A. 16. THE LEARNED ASSESSING OFFICER HAS FAILED TO SUBSTAN TIATE WHY HE IS OF THE OPINION THAT CONSULTING SERVICES HAS NO NEXUS WITH EARNING OF INTEREST AND DIVIDEND INCOME, EVEN THOUGH BASED ON THIS ASSUMPTI ON HE HAS DISALLOWED THE APPELLANTS CLAIM OF RS 28,03,850. 17. THE LEARNED ASSESSING OFFICER ERRED IN DISALLOWING THE AMOUNT OF RS 90,00,000 PAID TO M/S VECTRA HOLDINGS P LTD FOR USE OF THEIR GOODWILL FOR THE BUSINESS OF THE APPELLANT. 18. THE LEARNED ASSESSING OFFICER FAILED TO APPRECIATE THE FACT THAT THE PROVISIONS OF SECTION 37 OF THE ACT PROVIDES FOR AL LOWANCE OF EXPENDITURE INCURRED FOR THE BUSINESS, REVENUE IN NATURE AND GE NUINELY INCURRED. UNDER LAW THERE IS NO CASE FOR DISALLOWANCE. 19. THE ASSESSING OFFICER SHOULD HAVE APPRECIATED THE P OSITION IN LAW THAT ONCE THE EXPENDITURE IS GENUINELY INCURRED, IT IS N OT FOR THE REVENUE TO SIT ON JUDGMENT ON ITS REASONABILITY TO INVOKE PROVISIO NS OF SECTION 37 OF THE ACT. 20. THE FACT THAT VECTRA HOLDINGS P LTD IS A SUBLICENSE AND THE LICENSE IS GRANTED TO VECTRA HOLDING P LTD BY AN INDIVIDUAL HA S BEEN IGNORED 21. THE APPELLANT HAS RECEIVED ANY ENDURING BENEFIT OR ANY RIGHT WHICH HAVE PERMANENCY FOR USE HAS BEEN IGNORE D. 22. THE RIGHT GIVEN BY THE SUBLICENSE - VECTRA HOLDINGS P LTD IS NOT ON AN EXCLUSIVE BASIS NOR IS THERE TRANSFER OF RIGHT FOR A PERMANENT USE. 23. THE FACT THAT THE AGREEMENT HAS BEEN TERMINATED WIT H EFFECT FROM 31.3.2009. 24. THE ASSESSING OFFICER HAS ERRED IN ALLOWING A DEPR ECIATION OF 25% ON GOODWILL ON INTANGIBLE ASSET. THE FACT THAT THERE I S NO ASSET AT ALL HAS BEEN IGNORED. 25. THE APPELLANT CRAVES PERMISSION TO ADD, DELETE OR A LTER ANY OF THE GROUNDS AT THE TIME OF HEARING. 26. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TH E TIME OF HEARING, THE ITA NOS.60/BANG/2012, 253/BANG/2014, 282/BANG/2012 PAGE 17 OF 23 APPELLANT PRAYS THAT THE HONORABLE BENCH MAY KINDLY DELETE THE ADDITION MADE CONSEQUENT TO THE DISALLOWANCE OF: A. DISALLOWANCE UNDER SECTION 14A OF RS 11,30,403 B. DISALLOWANCE UNDER SECTION 37 OF RS 28,03,850 C. DISALLOWANCE UNDER SECTION 37 OF RS 90,001000 18. THOUGH VARIOUS GROUNDS ARE RAISED, BUT THEY REL ATE MAINLY ON 3 ISSUES. 1 ST ISSUE IS DISALLOWANCE UNDER SECTION 14A OF THE IT ACT AND 2 ND ISSUE IS DISALLOWANCE OF RS.28,03,850/- UNDER SECTI ON 37 OF THE ACT AND THE 3RD IS DISALLOWANCE OF RS.90,00,000/- UNDER SECTION 37 OF THE ACT. 19. GROUND NOS. 1 AND 3 ARE ALREADY BEEN ADJUDICATE D BY US IN THE FOREGOING APPEALS AND BOTH THE GROUNDS HAVE BEEN RE STORED BACK TO THE AO FOR READJUDICATION. ACCORDINGLY, WE SET ASIDE T HE ORDER OF THE CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO TO REA DJUDICATE THE ISSUE IN TERMS INDICATED IN THE FOREGOING APPEALS. THEREFOR E, WE ARE LEFT WITH ONLY ONE GROUND I.E., DISALLOWANCE OF RS.28,03,850/- UND ER SECTION 37 OF THE ACT. THE FACTS BORNE OUT FROM THE RECORD IN THIS REGARD ARE THAT THE ASSESSEE CLAIMED PAYMENT TOWARDS LEGAL AND PROFESSIONAL CHAR GES AMOUNTING TO RS.1,25,80,866/- CONSISTING OF PAYMENTS OF RS.90,00 ,000/- TO M/S. VECTRA HOLDINGS AND RS.28,03,850/- TO M/S. LEXICON FINANCE LTD. THE AO SOUGHT CLARIFICATION OF PAYMENT OF FEES TO M/S. LEXICON FI NANCE LTD. IT WAS EXPLAINED THAT THE SAID FEE WAS BEING PAID @ RS.2,5 0,000/- PER MONTH BY WAY OF CONSULTANCY FEES. ACCORDING TO THE AO, THE ASSESSEES CONTENTION THAT PAYMENT MADE IN THE NORMAL COURSE OF BUSINESS WAS GENERAL IN NATURE ITA NOS.60/BANG/2012, 253/BANG/2014, 282/BANG/2012 PAGE 18 OF 23 AS EARNING INCOME BY WAY OF INTEREST IN FIXED DEPOS ITS KEPT IN THE BANKS DID NOT REQUIRE ANY CONSULTANCY. THE AO ACCORDINGLY DIS ALLOWED THE PAYMENTS OF RS.28,03,850/-. AGGRIEVED, THE ASSESSEE PREFERR ED AN APPEAL BEFORE THE CIT(A) BUT COULD NOT JUSTIFY THE PAYMENT OF RS.28,0 3,850/-. THE CIT(A), ACCORDINGLY CONFIRMED THE ADDITION. THE CIT(A) HAS ALSO DEALT WITH THE ALTERNATE ARGUMENT OF THE ASSESSEE THAT THE CONSULT ANCY SERVICES ARE RELEVANT TO THE CURRENT BUSINESS OF JUPITER GROUP A ND WAS APPOINTED FOR ADVISING THE APPELLANT ON INVESTMENT STRATEGY. THE CIT(A), HAVING DEALT WITH ALL THE ARGUMENTS OF THE ASSESSEE, WAS OF THE VIEW THAT THE EXPENDITURE CLAIMED AS CONSULTANCY SERVICES IS NO NEXUS WITH THE EARNING OF THE INTEREST AND DIVIDEND INCOME. RELEVANT OBSE RVATIONS ARE EXTRACTED HERE: I HAVE CAREFULLY CONSIDERED THE APPELLANT'S SUBMIS SIONS AND ALSO THE REASONS GIVEN BY THE AO. THE AO HAS DISALL OWED A SUM OF RS.28,03,850/- MAINLY BECAUSE, DURING YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE APPELLANT EARNED INCOME BY WAY OF INTEREST ON FIXED DEPOSITS KEPT IN THE BANKS AND SUCH IT DID NOT REQUIRE ANY CONSULTATION. FURTHER, IT WAS ALSO HELD THAT THE INVESTMENTS OF THE APPELLANT COMPANY DURIN G THE YEAR HAVE REMAINED THE SAME I.E. RS.198,83,23,715/-, WHICH WA S THE SAME FIGURE IN THE PREVIOUS YEAR. THEREFORE, IN THE ABSE NCE OF ANY EVIDENCE AS TO ACTUAL SERVICE PROVIDED BY LEXICON F INANCE LTD., EXPENDITURE CLAIMED TOWARDS INVESTMENT IS NOT ALLOW ABLE DEDUCTION U/S 37 OF THE ACT. 4.4 THE APPELLANT'S SUBMISSION IS THAT M/S LEXICON FINANCE LTD., WAS APPOINTED AS CONSULTANTS FOR ADVI SING THE APPELLANT ON INVESTMENT STRATEGY. THE CONSULTANT WA S PAID AN AMOUNT OF RS.2,50,000/- PER MONTH. THE AO HAS IGNOR ED THE FACT THAT THE APPELLANT HAS MADE INVESTMENT OF NEARLY RS .200 CRORES AND THE CONSULTANTS ASSIST IN MONITORING THE INVESTMENT AS THEY HAVE NECESSARY EXPERTISE IN THE SAID FIELD. IT IS ALSO S UBMITTED THAT THE ITA NOS.60/BANG/2012, 253/BANG/2014, 282/BANG/2012 PAGE 19 OF 23 PROVISIONS OF SECTION 37 OF THE ACT STATE THAT, UNL ESS THE EXPENDITURE IS CAPITAL OR PERSONAL IN NATURE, WHICH IS PROHIBIT ED BY LAW FOR THE PURPOSE WHICH ARE AN OFFENCE, CAN BE ALLOWED. THE A O HAS NOT ESTABLISHED ANY OF THE ABOVE PARAMETERS LAID DOWN B Y THE ACT BUT YET CHOOSE TO DISALLOW THE APPELLANTS CLAIM. 4.5 THE MATERIAL AVAILABLE ON RECORD REVEALS THAT T HE APPELLANT HAS ISSUED A LETTER DATED 20/08/2008 TO M /S. LEXICON FINANCE LTD. FOR APPOINTMENT AS CONSULTANT AND TH E RELEVANT TERMS AND CONDITIONS ARE AS BELOW: ITA NOS.60/BANG/2012, 253/BANG/2014, 282/BANG/2012 PAGE 20 OF 23 4.6 A PLAIN READING OF THE AGREEMENT SHOWS THAT THE APPELLANT ENTERED INTO WITH M/S LEXICON FINANCE LTD ., NO.909, 'A' WING, DALAMAL TOWERS, FREE PRESS JOURNAL ROAD, NARI MAN POINT, MUMBAI 400-021 AN AGREEMENT FOR CONSULTANCY SERVICE NOT FOR THE APPELLANT COMPANY BUT ALSO FOR ITS ASSOCIATES AND G ROUP OF COMPANIES. THE CONSULTANCY SERVICES FROM M/S LEXICO N FINANCE LTD. ARE RELEVANT TO THE CURRENT BUSINESS OF JUPITE R GROUP WAS APPOINTED FOR ADVISING THE APPELLANT ON INVESTMENT STRATEGY. FURTHER, IT IS SUBMITTED THAT THE APPELLANT HAS MAD E INVESTMENTS OF NEARLY RS.200 CRORES AND THE CONSULTANTS ASSIST IN MONITORING THE INVESTMENT AS THEY HAVE THE NECESSARY EXPERTISE IN THE SAID FIELD. IN THIS REGARD, IT IS TO BE MENTIONED THAT THE APPE LLANT HAS MADE INVESTMENT IN EQUITY SHARES OF VARIOUS COMPANIES DU RING THE FINANCIAL YEAR 2007-08 OF THE AGGREGATE VALUE OF RS.198,83,23,715/- WHEREAS M/S LEXICON FINANCE LTD. WAS APPOINTED AS 'CONSULTANT' ON 26/6/2008. THEREFORE, THE 'CONSULTANT' HAD NO ROLE TO PLAY AT ALL IN REGARD TO THE INVESTM ENT WHICH ALREADY MADE. SECONDLY, THE SAID COMPANY WAS APPOINTED NOT ONLY FOR THE APPELLANT-COMPANY BUT FOR THE GROUP OF COMPANIES ON INVESTMENT STRATEGY. THUS, IN THIS WAY, THIS EXPENDITURE IS C APITAL IN NATURE. 4.7 DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE APPELLANT EARNED INCOME BY WAY OF INTEREST ON FIXED DEPOSITS, DIVIDEND AND INTEREST ON INCOME-TAX REFUND AS UNDER : INTEREST ON F.DS RS. 2,56,28,816 DIVIDEND RS. 14,00,309 INTEREST ON INCOME-TAX RS. 15,68,715 TOTAL RS. 2,85,97,840 ITA NOS.60/BANG/2012, 253/BANG/2014, 282/BANG/2012 PAGE 21 OF 23 4.8 THE OTHER INCOME IS ONLY RS.7,16,470/-. THESE INCOMES WERE COMPUTED BY THE APPELLANT AS 'INCOME F ROM OTHER SOURCES.' IN VIEW OF THE ABOVE, THE EXPENDITURE IS ALLOWABLE U/S 57(III) OF THE ACT IF EXPENDED WHOLLY AND EXCLUSIVE LY FOR THE PURPOSE OF MAKING OR EARNING SUCH INCOME. THE EXPEN DITURE CLAIMED AS 'CONSULTING SERVICES' IS NO NEXUS WITH T HE EARNING OF INTEREST AND DIVIDEND INCOME AND ON THIS GROUND ALS O EXPENSES ARE NOT ALLOWABLE. IN VIEW OF THE FACT AND CIRCUMST ANCES DISCUSSED ABOVE, I FIND NO REASON TO INTERFERE WITH THE AO'S FINDINGS AND, THEREFORE, THE DISALLOWANCE OF RS.28, 03,850/- IS CONFIRMED. THE APPEAL IN THIS GROUND THUS FAILS. 20. AGGRIEVED, THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL. BUT DURING THE COURSE OF HEARING, HE COU LD NOT JUSTIFY THE EXPENSES INCURRED ON ACCOUNT OF CONSULTANCY SERVICE S. HE, HOWEVER, REITERATED THE SUBMISSIONS RAISED BEFORE THE CIT(A) . 21. THE LEARNED DR PLACED RELIANCE UPON THE ORDER O F THE CIT(A). 22. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOW ER AUTHORITIES, WE FIND THAT IF ANY PAYMENTS ARE MADE BY THE ASSESSEE, THE ONUS IS UPON HIM TO ESTABLISH THAT THE PAYMENTS MADE ON THE EXPENDIT URE INCURRED WAS ON ACCOUNT OF BUSINESS EXPEDIENCY. THE ASSESSEE FAILE D TO ESTABLISH THESE FACTS. IN THE INSTANT CASE ALSO, THE LEARNED AR OF THE ASSESSEE COULD NOT ESTABLISH THAT THE EXPENDITURE WAS INCURRED ON ACCO UNT OF BUSINESS EXPEDIENCY. THEREFORE, WE FIND OURSELVES IN AGREEM ENT WITH THE ORDER OF THE CIT(A), WHO HAS RIGHTLY CONFIRMED THE DISALLOW ANCES MADE BY THE AO. ITA NOS.60/BANG/2012, 253/BANG/2014, 282/BANG/2012 PAGE 22 OF 23 ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT(A) AND REJECT THE GROUND OF THE ASSESSEE. 23. IN THE RESULT, ITA NO. 60/BANG/2012 AND 253/BAN G/2014 OF THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE S AND ITA NO. 282/BANG/2012 OF THE REVENUE IS ALSO PARTLY ALL OWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF FEBRUARY, 2017. SD/- SD/- (INTURI RAMA RAO) (SUNIL KUMAR YA DAV) ACCOUNTANT MEMBER JUDIC IAL MEMBER BANGALORE. DATED: 28 TH FEBRUARY, 2017. /NS/ ITA NOS.60/BANG/2012, 253/BANG/2014, 282/BANG/2012 PAGE 23 OF 23 COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.