The ACIT, Circle-8, Ahmedabad V. Venus Infrastructure & Devlopers Ltd., Ahmedabad

ITA 2725/AHD/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0155 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 19-10-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 04-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Earning of tax free income; Additional evidence; Revenue expenditure
• Section: 143(3); 14A; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI R.P. TOLANI, JM, & SHRI MANISH BORAD , AM. ITA NO.2725/AHD/2011 ASST. YEAR: 2008-09 AND ITA NO.1675/AHD/2012 ASST. YEAR 2009-10 ACIT, CIRCLE-8, AHMEDABAD. VS. VENUS INFRASTRUCTURE & DEVELOPERS LTD., 801, BROODWAY BUSINESS CENTRE, NEAR LAW GARDEN, ELLISBRIDGE, AHMEDABAD. APPELLANT RESPONDENT PAN AAHCS 6254J ITA NO.1604/AHD/2012 ASST. YEAR 2009-10 VENUS INFRASTRUCTURE & DEVELOPERS LTD., 801, BROODWAY BUSINESS CENTRE, NEAR LAW GARDEN, ELLISBRIDGE, AHMEDABAD. VS. ACIT, CIRCLE-8, AHMEDABAD. APPELLANT RESPONDENT APPELLANT BY SHRI K. MADHUSUDAN, SR. DR RESPONDENT BY SHRI DHIREN SHAH, AR DATE OF HEARING: 19/10/2016 DATE OF PRONOUNCEMENT: 28/10/2016 O R D E R ITA NO. 2725, 1675 & 1604 ASST. YEAR 2008-09 & 2009-10 2 PER MANISH BORAD, ACCOUNTANT MEMBER . THESE ARE THREE APPEALS, TWO BY REVENUE FOR ASST. YEARS 2008- 09 & 2009-10 AND A CROSS APPEAL BY ASSESSEE FOR ASS T. YEAR 2009- 10. AS THE ISSUES RAISED IN THESE APPEALS ARE COMMO N IN NATURE, THEY HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. APPEAL FOR ASST. YEAR 2008-09 BY REVENUE IS DIRE CTED AGAINST THE ORDER OF LD. CIT(A)-XIV, AHMEDABAD DATED 12.8.2 011 IN APPEAL NO.CIT(A) XIV/ADDL.CIT R-8/264/20-11. ASSESSMENT U/ S 143(3) OF THE IT ACT, 1961 (IN SHORT THE ACT) WAS FRAMED ON 30/12 /2010 BY ADDL. CIT, RANGE-8, AHMEDABAD. 3. CROSS APPEALS FOR ASST. YEAR 2009-10 ARE DIRECTE D AGAINST THE ORDER OF LD. CIT(A)-XIV, AHMEDABAD, DATED 28/05/201 2 VIDE APPEAL NO.CIT(A) XIV/ACIT CIR.8/192/2011-12. 4. FIRST WE TAKE UP REVENUES APPEALS FOR ASST. YEA R 2008-09 & 2009-10. WE PROCEED TO ADJUDICATE BOTH THE APPEALS TOGETHER AS BELOW. 5. BRIEFLY STATED FACTS OF THE CASE FOR ASST. YEAR 2008-09 ARE THAT ASSESSEE IS A LIMITED COMPANY ENGAGED IN THE BUSINE SS OF INFRASTRUCTURE DEVELOPMENT. RETURN OF INCOME WAS E- FILED ON 29.9.2008 DECLARING TOTAL INCOME AT RS.13,53,33,440 /-. THE CASE WAS ITA NO. 2725, 1675 & 1604 ASST. YEAR 2008-09 & 2009-10 3 SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER S ECTION 143(2) OF THE ACT WAS ISSUED. NECESSARY DETAILS WERE FILED. A SSESSMENT WAS COMPLETED BY ASSESSING THE INCOME AT RS.140201170/- AFTER DISALLOWING VARIOUS EXPENSES TOTALING TO RS.4867729 /-. AS FAR AS ASST. YEAR 2009-10 IS CONCERNED, RETURN OF INCOME WAS FIL ED ON 26.09.2009 DECLARING TOTAL INCOME AT RS.8,38,49,970/-. THE CAS E WAS SELECTED FOR SCRUTINY ASSESSMENT. INCOME WAS ASSESSED AT RS.8,80 ,59,262/- AFTER MAKING ADDITIONS/DISALLOWANCES ON CERTAIN EXPENSES AT RS.42,09,292/- INCLUDING DISALLOWANCE U/S 14A OF TH E ACT. 6. APPEALS FOR BOTH THE YEARS I.E. ASST. YEARS 2008 -09 AND 2009- 10 WERE PARTLY ALLOWED BY LD. CIT(A). 7. AGGRIEVED, REVENUE IS NOW IN APPEALS BEFORE THE TRIBUNAL FOR BOTH THE YEARS. 8. THROUGH GROUND NO.1 FOR ASST. YEAR 2008-09 AND G ROUND NO.3 FOR ASST. YEAR 2009-10 REVENUE IS AGGRIEVED WITH THE ORDERS OF LD. CIT(A) DELETING DISALLOWANCE OF RS.80,833/- FOR ASS T. YEAR 2008-09 AND RS.61,500/- FOR ASST. YEAR 2009-10 MADE BY LD. ASSESSING OFFICER ON ACCOUNT OF LEGAL EXPENSES. 9. DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHIL E EXAMINING THE LEGAL EXPENSES, ASSESSEE WAS ASKED TO FURNISH T HE PURPOSE AND EVIDENCE FOR SUCH PAYMENTS. IN REPLY IT WAS SUBMITT ED THAT EXPENSES WERE INCURRED TOWARDS LEGAL EXPENSES TO LOOK AFTER LAND AND BUILDINGS DISPUTES. HOWEVER, ASSESSING OFFICER WAS OF THE VI EW THAT SUCH TYPE ITA NO. 2725, 1675 & 1604 ASST. YEAR 2008-09 & 2009-10 4 OF EXPENSES SHOULD HAVE BEEN CAPITALIZED TO THE PA RTICULAR PROJECT AND CANNOT BE ALLOWED AS REVENUE EXPENDITURE. WHEN THE ISSUE CAME UP BEFORE LD. CIT(A) THE IMPUGNED ADDITIONS WE RE DELETED. LD. CIT(A) OBSERVED THE FOLLOWING WHILE DELETING THE ADDITION/DISALLOWANCE ON LEGAL EXPENSES FOR ASST. Y EAR 2008-09 :- 3.3 DECISION : I HAVE CAREFULLY PERUSED THE FINDINGS OF THE ASSESS ING OFFICER AND SUBMISSIONS MADE BY THE ID.AR. THE A. O. HAS DISALL OWED THE LEGAL EXPENSES AS IT HAS BEEN HELD BY HIM THAT SINCE THE EXPENSES HAVE BEEN INCURRED FOR THE LANDS WHICH ARE SHOWN BY THE APPELLANT AS WORK IN PROGRESS. IT SHOULD BE CAPITALIZED IN THE P ROJECT FOR WHICH SUCH EXPENSES WERE INCURRED. THE APPELLANT HAS SUBM ITTED THAT THE LEGAL FEE WAS NOT FOR ANY PARTICULAR PROJECT BUT HI S SERVICES WERE PROVIDED TO THE COMPANY AS A WHOLE, AND THEREFORE, IT SHOULD BE ALLOWED IN THE PRESENT YEAR. 1 AM INCLINED TO ACCEP T THE SUBMISSION OF THE APPELLANT. THE EXPENDITURE HAS BEEN INCURRED BY THE APPELLANT NOT FOR A PARTICULAR PROJECT OUT FOR THE BUSINESS O F THE COMPANY IN GENERAL. ACCORDINGLY, THE EXPENDITURE IS ALLOWABLE AS A REVENUE ITEM U/S. 37 OF THE ACT FOR THE PRESENT YEAR. THE ADDITI ON MADE BY THE A. O., IS THEREFORE, DELETED AND THE GROUND OF APPEAL IS ALLOWED. , . 10. LD. CIT(A) FOLLOWED HIS DECISION FOR ASST. YEAR 2008-09 FOR DELETING THE DISALLOWANCE FOR ASST. YEAR 2009-10. 11. AGGRIEVED, REVENUE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 12. LD. DR VEHEMENTLY ARGUED AND SUPPORTED THE ORDE RS OF LD. ASSESSING OFFICER. 13. ON THE OTHER HAND, LD. AR SUBMITTED THAT ASSESS EE IS A LIMITED COMPANY REGULARLY ENGAGED IN THE BUSINESS OF INFRAS TRUCTURE DEVELOPMENT. THERE ARE VARIOUS ON GOING PROJECTS. A SSESSEE ITA NO. 2725, 1675 & 1604 ASST. YEAR 2008-09 & 2009-10 5 COMPANY PAID THE LEGAL EXPENSES TOWARDS LEGAL FEES WHICH WAS NOT SPECIFIC FOR A PARTICULAR PROJECT BUT FOR LOOKING A FTER THE ON GOING DISPUTES IN CONNECTION WITH LAND & BUILDING FOR WHI CH SERVICES OF ADVOCATE WERE TAKEN AND THE PAYMENT WAS MADE FOR TH E SAME. THEREFORE, LD. CIT(A) HAS RIGHTLY TREATED THE SAME AS REVENUE EXPENDITURE. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND MATERIA L PLACED BEFORE US. REVENUE IS AGGRIEVED WITH THE DELETION OF DISAL LOWANCES FOR RS. 80,833/- FOR ASST. YEAR 2008-09 AND RS.61,500/- FOR ASST. YEAR 2009- 10 TOWARDS LEGAL EXPENSES BY TREATING THEM AS REVEN UE EXPENDITURE. WE OBSERVE THAT DURING THE COURSE OF ASSESSMENT PRO CEEDINGS LD. ASSESSING OFFICER HAS PICKED UP CERTAIN EXPENSES FO R VERIFICATION. DURING THIS COURSE OF VERIFICATION LEGAL EXPENSES A RE EXAMINED. LD. ASSESSING OFFICER OBSERVED THAT LEGAL EXPENSES ARE NORMALLY PAID FOR A PARTICULAR PROJECT AND IF THE PARTICULAR PROJECT WAS WORK IN PROGRESS AT THE END OF THE YEAR, THEN THE IMPUGNED EXPENSES SHOULD HAVE BEEN ADDED TO THE CAPITAL WORK IN PROGRESS AND CARR IED FORWARD TO THE NEXT YEAR RATHER CLAIMING IT AS REVENUE EXPENDITURE . ON GOING THROUGH THE FINANCIAL STATEMENTS PLACED ON RECORD IN THE PA PER BOOK WE FIND THAT ASSESSEE HAS DISCLOSED INCOME OF RS.13.54 CROR ES IN ITS PROFIT AND LOSS ACCOUNT. THERE ARE SERIES OF PROJECTS UNDE RTAKEN BY THE ASSESSEE. CERTAINLY WHEN THERE ARE NUMBER OF PROJEC TS RUNNING ALL TOGETHER THERE IS A NEED OF AN ADVOCATE TO LOOK AFT ER THE LITIGATION WORK. THERE IS NO DISPUTE AS REGARDS THE GENUINENES S OF PAYMENT. FURTHER LD. ASSESSING OFFICER HAS NOT MADE ANY CLEA R FINDING IN THE ASSESSMENT ORDER ABOUT THE PARTICULAR PROJECT FOR W HICH THE LEGAL ITA NO. 2725, 1675 & 1604 ASST. YEAR 2008-09 & 2009-10 6 EXPENSES HAVE BEEN INCURRED RATHER IT IS GENERAL IN NATURE. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE WHEREIN T HERE IS NO DOUBT ABOUT THE GENUINENESS OF THE PAYMENT, WE ARE OF THE VIEW THAT THE LEGAL EXPENSES OF RS. 80,833/- FOR ASST. YEAR 2008- 09 AND RS.61,500/- FOR ASST. YEAR 2009-10, HAVE RIGHTLY BE EN TREATED AS REVENUE EXPENDITURE BY LD. CIT(A) AS THEY HAVE BEEN INCURRED IN THE REGULAR COURSE OF BUSINESS AND WERE NOT CONFINED TO A PARTICULAR PROJECT. WE FIND NO REASON TO INTERFERE WITH THE OR DER OF LD. CIT(A) ON THIS ISSUE AND WE UPHOLD THE SAME. ACCORDINGLY, THE GROUND NO.1 & GROUND NO.3 RAISED BY REVENUE FOR ASST. YEARS 2008- 09 AND 2009-10 RESPECTIVELY ARE DISMISSED. 15. GROUND NO.3 FOR ASST. YEAR 2008-09 AND GROUND N O.4 FOR ASST. YEAR 2009-10 HAVE BEEN RAISED BY REVENUE ASSAILING THE ORDER OF LD. CIT(A) DELETING THE DISALLOWANCE OF RS.6,74,160/- A ND RS.5,84,272/- PAID TOWARDS RETAINERSHIP FEES. 16. DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD. ASSESSING OFFICER OBSERVED THAT RETAINERSHIP FEES HAS BEEN PA ID TO M/S WAVELENGTH COMMUNICATION. LD. ASSESSING OFFICER TAK ING THE SIMILAR VIEW AS FOR LEGAL EXPENSES ALSO WAS OF THE VIEW THA T RETAINERSHIP FEES SHOULD HAVE BEEN CAPITALIZED FOR THE PARTICULAR PRO JECT AND NOT AS REVENUE EXPENDITURE. WHEN THE ISSUE CAME UP BEFORE LD. CIT(A) THE IMPUGNED DISALLOWANCE FOR ASST. YEAR 2008-09 HE DEL ETED THE SAME BY OBSERVING AS FOLLOWS :- 6.3 DECISION : ITA NO. 2725, 1675 & 1604 ASST. YEAR 2008-09 & 2009-10 7 I HAVE CAREFULLY PERUSED THE FINDINGS OF THE ASSESS ING OFFICER AND SUBMISSIONS MADE BY THE ID.AR. THE A. O. HAS MADE THE DISALLOWANCE HOLDING THAT THE SAME HAS BEEN SPENT FOR PROJECTS W HICH ARE SHOWN BY THE ASSESSEE AS WORK IN PROGRESS AND THEREFORE THE SAME SHOULD HAVE BEEN CAPITALIZED. THE APPELLANT HAS SUBMITTED THAT M/S. WAVELENGTH COMMUNICATIONS, TO WHOM THE PAYMENT HAS BEEN MADE, WAS ENGAGED AS A MARKETING STRATEGIST. IT PROVIDED CONSULTANCY ON TO HOW DEVELOP A BRAND OF THE COMPANY AND TO PROMOTE THE BUSINESS. IT WAS MAN AGING ALL ADVERTISEMENT RELATED WORK OF THE COMPANY IN PRINT AS WELL AS ELE CTRONIC MEDIA. THEREFORE, THE EXPENDITURE WAS NOT RELATED TO ANY PARTICULAR P ROJECT. MOREOVER, THE INVOICES WERE BASED ON A MONTHLY BASIS WHICH ALSO P ROVES THAT THE SERVICES WERE NOT IN RESPECT OF PARTICULAR PROJECT. I AM INC LINED TO ACCEPT THE SUBMISSION GIVEN BY THE APPELLANT. IT IS CLEAR FROM THE DETAILS SUBMITTED BY THE APPELLANT, THAT THE EXPENDITURE WAS NOT FOR ANY SPE CIFIC PROJECT BUT FOR THE COMPANY AS A WHOLE. THEREFORE, THE EXPENDITURE IS A LLOWABLE AS REVENUE ITEM IN THE CURRENT YEAR. THE ADDITION MADE BY THE A. O. , IS THEREFORE, DELETED. 17. FOR ASST. YEAR 2009-10 LD. CIT(A) FOLLOWING HIS DECISION FOR ASST. YEAR 2008-09 DELETED THE DISALLOWANCE OF RETA INERSHIP FEES. 18. AGGRIEVED, REVENUE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 19. LD. DR SUPPORTED THE ORDER OF ASSESSING OFFICER . 20. LD. AR ON THE OTHER HAND REITERATED THE SUBMISS IONS MADE BEFORE THE LD. CIT(A). 21. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. THROUGH GROUND NO.3 FOR ASST. YEA R 2008-09 AND GROUND NO.4 FOR ASST. YEAR 2009-10 REVENUE HAS CHAL LENGED THE ORDERS OF LD. CIT(A) DELETING THE DISALLOWANCE TOWA RDS RETAINERSHIP FEES PAID AT RS.6,74,160/- AND RS.5,84,272/- FOR AS ST. YEAR 2008-09 ITA NO. 2725, 1675 & 1604 ASST. YEAR 2008-09 & 2009-10 8 & ASST. YEAR 2009-10 RESPECTIVELY. WE OBSERVE THAT THE IMPUGNED RETAINERSHIP FEES WAS PAID TO M/S. WAVELENGTH COMMU NICATIONS TO ADVERTISE THE BRANDS OF THE ASSESSEE COMPANY. WE FI ND THAT M/S. WAVELENGTH COMMUNICATIONS WHICH IS INTO MARKETING S TRATEGY WORK PROVIDED CONSULTANCY TO ASSESSEE ON FREQUENCY OF TH E ADVERTISEMENT IN PRINT AS WELL AS IN ELECTRONIC MEDIA. FURTHER RE TAINERSHIP FEES WAS NOT A FOR PARTICULAR PROJECT BUT IT WAS FOR THE OVE RALL BUSINESS MODEL OF THE COMPANY AND ITS PROJECT. GENUINENESS OF PAYMENT S HAS NOT BEEN CHALLENGED BY THE REVENUE. INCOME TAX HAS BEEN DEDU CTED AT SOURCE. LD. ASSESSING OFFICER HAS BEEN UNABLE TO F IGURE OUT THAT THE RETAINERSHIP FEES WAS PAID FOR A PARTICULAR PROJECT WHICH STOOD AS CLOSING WORK IN PROGRESS AT THE END OF THE YEAR. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AND LOOKING TO THE NATURE OF BUSINESS, TURNOVER ACHIEVED AND INCOME DISCLOSED IN THE FINAN CIAL STATEMENT, WE ARE OF THE VIEW THAT RETAINERSHIP FEES PAID HAS BEEN INCURRED IN THE REGULAR COURSE OF BUSINESS FOR THE YEAR AND LD. CI T(A) HAS RIGHTLY TREATED IT AS REGULAR REVENUE EXPENDITURE. WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). WE UPHOLD T HE SAME. ACCORDINGLY GROUND NO.3 AND GROUND NO.4 RAISED BY R EVENUE FOR ASST. YEAR 2008-09 & ASST. YEAR 2009-10 RESPECTIVEL Y ARE DISMISSED. 22. NOW WE TAKE GROUND NO.2 FOR ASST. YEAR 2008-09 RAISED BY REVENUE CHALLENGING THE ORDER OF LD. CIT(A) FOR DEL ETING THE DISALLOWANCE OF RS.1,68,500/- MADE BY ASSESSING OFF ICER TOWARDS PROFESSIONAL FEES PAID TO VARIOUS ADVOCATES AND PRO FESSIONALS. LD. ASSESSING OFFICER TAKING A CONSISTENT VIEW THAT THE IMPUGNED ITA NO. 2725, 1675 & 1604 ASST. YEAR 2008-09 & 2009-10 9 PROFESSIONAL FEES SHOULD HAVE BEEN CAPITALIZED TO T HE PROJECT FOR WHICH IT HAS BEEN INCURRED AND ACCORDINGLY MADE DIS ALLOWANCE. 23. LD. CIT(A) DELETED THE IMPUGNED DISALLOWANCE BY OBSERVING AS BELOW :- 4.3 DECISION : I HAVE CAREFULLY PERUSED THE FINDINGS OF THE ASSESS ING OFFICER AND SUBMISSIONS MADE BY THE ID.AR. THE A. O. HAS MADE THE DISALLOWANCE HOLDING THAT THE AMOUNT HAS BEEN SPENT FOR THE LAND S WHICH ARE SHOWN BY THE ASSESSEE AS WORK IN PROGRESS AND SHOULD THEREFO RE BE CAPITALIZED. THE APPELLANT HAS SUBMITTED THAT THE EXPENDITURE HAS BE EN INCURRED NOT FOR ANY PARTICULAR PROJECT BUT GENERALLY FOR ALL THE PROJEC TS GOING ON WITH THE COMPANY. WHATEVER EXPENSES WERE INCURRED FOR A PART ICULAR PROJECT HAVE BEEN CAPITALIZED AND SHOWN IN THE WORK IN PROGRESS. HOWEVER, SINCE THESE CHARGES DO NOT RELATE TO A PROJECT, IT WAS NOT INCL UDED IN THE WORK IN PROGRESS. THE APPELLANT HAS FURTHER SUBMITTED THAT THE PAYMENT OF R$.1,55,000/.- HAS BEEN MADE TO SHRI NARANBHAI PATE L IN RESPECT OF THE PARAMOUNT RESIDENCY PROJECT WHICH HAS BEEN SHOWN AS SALE DURING THE CURRENT YEAR, AND THEREFORE, THE EXPENDITURE SHOULD BE ALLOWED IN THE PRESENT YEAR. THE OTHER EXPENSES RELATES TO THE PAY MENT MADE TO SHRI J. J. MEHTA AND SHRI A, G. BAPAT. THESE EXPENSES WERE GEN ERAL IN NATURE AND DID NOT RELATE TO ANY PARTICULAR PROJECT. I AM INCL INED TO ACCEPT THE SUBMISSION GIVEN BY THE APPELLANT. CONSIDERING ALL THE FACTS MENTIONED ABOVE, THE ADDITION MADE BY THE A. O. IS DELETED. 24. IN APPEAL BEFORE THE TRIBUNAL, LD. DR ON BEHALF OF THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER. ON THE OT HER HAND LD. AR REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AU THORITIES AND SUPPORTED THE ORDER OF LD. CIT(A) AND ASSERTED UPON THE FACT THAT THE IMPUGNED PROFESSIONAL FEES OF RS.1,55,000/- OUT OF TOTAL PROFESSIONAL FEES OF RS.1,68,850/- WAS PAID TO SHRI NARANBHAI PA TEL IN RESPECT OF PARAMOUNT RESIDENCY PROJECT OF WHICH UNITS HAVE BE EN SHOWN UNDER THE SALE HEAD FOR THE YEAR UNDER CONSIDERATION AND THE REMAINING AMOUNT OF RS.10,000/-AND RS.3,850/- WERE PAID TO SH RI A. G. BAPAT & ITA NO. 2725, 1675 & 1604 ASST. YEAR 2008-09 & 2009-10 10 CO. AND MR. J. MEHTA RESPECTIVELY WHICH WERE GENERA L IN NATURE AND NOT RELATED TO A PARTICULAR PROJECT. 25. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE. THROUGH THIS GROUND NO.2 FOR ASST. Y EAR 2008-09 REVENUE HAS CHALLENGED THE ORDER OF LD. CIT(A) DELE TING THE DISALLOWANCE OF RS.1,68,850/- ON ACCOUNT OF PROFESS IONAL FEES. WE FIND THAT PROFESSIONAL FEES OF RS.1,68,850/- HAS BE EN PAID TO FOLLOWING THREE PARTIES :- 1. NARANBHAI R. PATEL RS.1,55,000/- 2. A.G. BAPAT & CO. RS.10,000/- 3. J. MEHTA RS.3,850/- FURTHER WE OBSERVE THAT PAYMENT TO NARANBHAI R. PAT EL, A PRACTICING ADVOCATE AT RS.1,55,000/- WAS MADE TOWARDS PROFESSI ONAL FEES FOR THE PARAMOUNT RESIDENCY PROJECT. PAYMENT HAS BEEN M ADE BY ACCOUNT PAYEE CHEQUE AND TAX HAS BEEN DEDUCTED AT S OURCE. FURTHER SALE OF UNITS OF PARAMOUNT RESIDENCY PROJECT HAVE A LREADY BEEN SHOWN AS SALES IN THE YEAR UNDER APPEAL. HOWEVER, A S REGARDS PAYMENT TO A.G. BAPAT & CO. AND J. MEHTA AT RS.10,0 00/- AND RS.3,850/- RESPECTIVELY, WE FIND THAT PAYMENT IS GE NERAL IN NATURE AND INCURRED IN THE REGULAR COURSE OF BUSINESS. WE ARE, THEREFORE, OF THE VIEW THAT THE PROFESSIONAL FEES AT RS.1,68,850/- HA VE BEEN INCURRED IN REGULAR COURSE OF BUSINESS AND ARE OF REVENUE IN NA TURE AND WERE NOT REQUIRED TO BE CAPITALIZED. WE ARE, THEREFORE, NOT INCLINED TO MAKE AN ITA NO. 2725, 1675 & 1604 ASST. YEAR 2008-09 & 2009-10 11 INTERFERENCE IN THE ORDER OF LD. CIT(A). ACCORDINGL Y, THIS GROUND NO.2 OF REVENUE IS DISMISSED. 26.. NOW WE TAKE UP GROUND NO.4 FOR ASST. YEAR 2008 -09 AND GROUND NO.2 FOR ASST. YEAR 2009-10 WHEREIN REVENUE RAISED A COMMON ISSUE AGAINST THE ORDER OF LD. CIT(A) DELETI NG DISALLOWANCE OF RS.26,08,028/- FOR ASST. YEAR 2008-09 AND RS.11,01, 827/- FOR ASST. YEAR 2009-10 PAID TO GUJARAT INSTITUTE OF HOUSING A ND ESTATE DEVELOPERS (GIHED). LD. ASSESSING OFFICER DURING AS SESSMENT PROCEEDINGS OBSERVED THAT FOR ASST. YEAR A SUM OF R S.26,08,028/- HAS BEEN DEDUCTED AS GIHED PROPERTY SHOW EXPENSES. DETAILS WERE CALLED FOR THE SAME. IN REPLY ASSESSEE SUBMITTED TH AT THIS AMOUNT HAS BEEN SPENT FOR ADVERTISEMENT OF VARIOUS PROJECTS OF THE ASSESSEE COMPANY WHICH ARE UNDERGOING. TAKING A CONSISTENT V IEW LD. ASSESSING OFFICER OBSERVED THAT AS THE COMPANY IS I N THE BUSINESS OF DEVELOPMENT OF LAND AND BUILDING SUCH EXPENSES SHOU LD HAVE BEEN CAPITALIZED FOR THE PROJECT FOR WHICH SUCH EXPENSES WERE INCURRED. SIMILAR VIEW WAS TAKEN BY THE ASSESSING OFFICER FOR ASST. YEAR 2009- 10. 27. WHEN THE ISSUE FOR ASST. YEAR 2008-09 CAME UP B EFORE LD. CIT(A) THE IMPUGNED DISALLOWANCE FOR PAYMENT TO GIH ED WAS DELETED BY OBSERVING AS FOLLOWS :- 7.3 DECISION : I HAVE CAREFULLY PERUSED THE FINDINGS OF THE ASSESS ING OFFICER AND SUBMISSIONS MADE BY THE ID.AR. THE A. O. HAS MADE THE DISALLOWA NCE HOLDING THAT THE SAME HAS BEEN SPENT FOR PROJECTS WHICH ARE SHOWN BY THE ASSESSEE AS WORK ITA NO. 2725, 1675 & 1604 ASST. YEAR 2008-09 & 2009-10 12 IN PROGRESS AND THEREFORE THE SAME SHOULD HAVE BEEN CAPITALIZED. THE APPELLANT HAS SUBMITTED THAT THE EXPENDITURE WAS IN CURRED TOWARDS A SPONSORSHIP AND ORGANIZING OF A FAIR OF GUJARAT INS TITUTE OF HOUSING AND ESTATE DEVELOPERS (GIHED) PROPERTY SHOW. IT WAS FURTHER SU BMITTED THAT THE EXPENDITURE WAS NOT IN RESPECT OF A PARTICULAR PROJ ECT AND WAS TO FACILITATE THE PROMOTION OF BUSINESS OF THE APPELLANT. THE APPELLA NT COMPANY WAS A CO- SPONSOR OF THE SHOW. THE NAME OF THE COMPANY WAS HI GHLIGHTED IN THE BROACHERS, PAMPHLETS AND THE PLACES RELATED TO THE SHOW. I AM INCLINED TO ACCEPT THE SUBMISSION GIVEN BY THE APPELLANT. THE A PPELLANT WAS THE CO- SPONSOR OF THE GIHED PROPERTY SHOW AND THE EXPENDIT URE WAS, THEREFORE, NOT FOR A PARTICULAR PROJECT BUT WAS FOR THE ADVERTISIN G AND PROMOTION OF THE BUSINESS OF THE APPELLANT IN GENERAL. ACCORDINGLY, THE EXPENDITURE IS ALLOWABLE AS A REVENUE II IN THE PRESENT YEAR ITSELF. THE ADDITI ON MADE BY THE A.O., IS THEREFORE, DELETED. 28. FOR ASST. YEAR 2009-10 IN HIS APPELLATE ORDER L D. CIT(A) FOLLOWED HIS ORDER FOR ASST. YEAR 2008-09 AND DELET ED THE DISALLOWANCE OF EXPENSES PAID TO GIHED FOR ASST. YE AR 2009-10. 29. AGGRIEVED, REVENUE IS NOW IN APPEAL BEFORE THE TRIBUNAL FOR BOTH THE YEARS. 30. LD. DR SUPPORTED THE ORDERS OF ASSESSING OFFICE R. 31. LD. AR RELIED ON THE ORDERS OF LD. CIT(A) AND A LSO SUBMITTED THAT THE ASSESSEE COMPANY INCURRED EXPENSES TOWARDS A SP ONSORSHIP AND ORGANIZING OF A FAIR AT GIHED PROPERTY SHOW. AS SESSEE ALSO PARTICIPATED IN THIS FAIR IN ORDER TO ADVERTISE THE COMPANYS BRANDS AS WELL AS FOR PROMOTING ON-GOING PROJECTS. ASSESSEE C OMPANY BEING A CO-SPONSOROR, ITS NAME WAS HIGHLIGHTED IN THE BROC HURES, PAMPHLETS AND THE PLACES WHERE THE FAIR WAS ORGANIZED. THE SA ID EXPENDITURE WAS INCURRED TOWARDS A SPONSORSHIP AND NOT TOWARDS ANY PARTICULAR ITA NO. 2725, 1675 & 1604 ASST. YEAR 2008-09 & 2009-10 13 PROJECT. LD. AR FURTHER SUBMITTED THAT IT HAS BEEN IMPOSSIBLE TO APPORTION THE SAID COSTS AMONG VARIOUS PROJECTS AS THERE WAS NO BASIS FOR DOING THE SAME. 32. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US. REVENUE THROUGH THIS GROUND NO.4 FOR ASST. YEAR 2008-09 AND GROUND NO.2 FOR ASST. YEAR 2009-10 HAS CHALLENGED THE ORDERS OF LD. CIT(A) DELETING THE DISALLOWANCE OF E XPENSES PAID TO GIHED AT RS.26,08,028/- FOR ASST. YEAR 2008-09 AND RS.11,01,827/- FOR ASST. YEAR 2009-10 TOWARDS SPONSORSHIP AND ORGA NIZING A FAIR. WE OBSERVE THAT ASSESSEE BEING INTO THE BUSINESS OF DE VELOPMENT OF INFRASTRUCTURE AND RESIDENTIAL PROJECTS IS ALWAYS I N NEED TO ADVERTISE ITS PROJECTS AT VARIOUS PLATFORMS. WE FIND THAT ASS ESSEE IN ITS REGULAR COURSE OF BUSINESS HAS BECOME A CO-SPONSOROR OF A S HOW ORGANIZED BY GIHED. ASSESSEE ALSO PARTICIPATED IN THE SHOW FO R PROMOTION OF ITS BUSINESS. GENUINENESS OF THE PAYMENT IS NOT CHALLEN GED. NO PARTICULAR OBSERVATIONS HAS BEEN MADE BY ASSESSING OFFICER TO LINK UP THE IMPUGNED EXPENSES TO A PARTICULAR PROJECT. F URTHER WE OBSERVE FROM THE AUDITED FINANCIAL STATEMENTS THAT AS ON 31 ST MARCH, 2008 AS MANY AS 12 PROJECTS WERE UNDERGOING HAVING WIP OF RS.139.93 CRORES APPROX. HOWEVER, FOR ASST. YEAR 2008-09 INCO ME OF RS.13.54 CRORES HAVE BEEN OFFERED TO TAX. LOOKING TO THESE F ACTS, WE FIND THAT THE IMPUGNED EXPENSES OF RS.26,08,028/- FOR ASST. Y EAR 2008-09 AND RS.11,01,827/- FOR ASST. YEAR 2009-10 WERE INCURRE D BY ASSESSEE IN THE REGULAR COURSE OF BUSINESS TO DEVELOP ITS PROJE CTS AND NOT FOR A PARTICULAR PROJECT. IN THE GIVEN FACTS AND CIRCUMST ANCES OF THE CASE IN OUR VIEW IT IS PURELY OF REVENUE IN NATURE. THEREF ORE, WE FIND NO ITA NO. 2725, 1675 & 1604 ASST. YEAR 2008-09 & 2009-10 14 REASON TO INTERFERE WITH THE ORDERS OF LD. CIT(A). WE UPHOLD THE SAME. ACCORDINGLY, GROUND NO.4 FOR ASST. YEAR 2008-09 AND GROUND NO.2 FOR ASST. YEAR 2009-10 ARE DISMISSED. 33. NOW WE TAKE GROUND NO.1 OF REVENUES APPEAL FOR ASST. YEAR 2009-10 AND GROUND NO.1 OF ASSESSEES APPEAL FOR A SST. YEAR 2009- 10 RAISING A SIMILAR ISSUE RELATING TO BROKERAGE EX PENSES. BRIEFLY STATED FACTS ARE THAT DURING THE COURSE OF ASSESSME NT PROCEEDINGS FOR ASST. YEAR 2009-10 CLAIM OF BROKERAGE EXPENSES OF R S.17,50,000/- WAS SCRUTINIZED BY ASSESSING OFFICER. PROJECT-WISE DETAILS WERE CALLED FOR BY ASSESSING OFFICER IN ORDER TO JUSTIFY THE BR OKERAGE EXPENDITURE. GENUINENESS OF THE EXPENDITURE COULD NOT BE PROVED AS ASSESSEE FAILED TO PRODUCE PROJECT WISE BROKERAGE EXPENDITUR E, BILLS RAISED BY AGENTS AND CONFIRMATIONS LETTERS OF THE PERSONS TO WHOM BROKERAGE WAS PAID. AS A RESULT THEREON ASSESSING OFFICER DIS ALLOWED RS. 17,50,000/- AS BROKERAGE EXPENSES. WHEN THE ISSUE C AME UP BEFORE LD. CIT(A) THE GROUND OF ASSESSEE WAS PARTLY ALLOWE D TO THE EXTENT OF RS.9,00,000/- AND REMAINING AMOUNT OF ADDITION OF R S.8,50,000/- WAS CONFIRMED BY OBSERVING AS FOLLOWS :- 2.3 DECISION: I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AN D THE SUBMISSION FILED BY THE APPELLANT. THE A.O, HAS DISALLOWED THE BROKERAG E EXPENSES AS NO EXPENDITURE WAS CLAIMED IN EARLIER YEAR AND THE CON FIRMATION OF THE BROKERAGE RECEIPTS WERE NOT SUBMITTED. THE APPELLANT HAS SUBM ITTED THAT THOUGH ALL THE CONFIRMATIONS REGARDING THE BROKERAGE WERE NOT SUBM ITTED BUT CERTAIN CONFIRMATIONS INDICATING PAN AND SIGNATURE OF THE P ERSON WHO HAS RECEIVED BROKERAGE WERE SUBMITTED THE AO DURING THE COURSE O F ASSESSMENT PROCEEDINGS. THE CLAIM OF THE APPELLANT IS VERIFIED WITH REFERENCE TO THE CONFIRMATIONS SUBMITTED BY HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS. ITA NO. 2725, 1675 & 1604 ASST. YEAR 2008-09 & 2009-10 15 IT IS NOTED THAT THE APPELLANT HAS IN FACT SUBMITTE D CERTAIN CONFIRMATIONS IN RESPECT OF THE BROKERAGE WHICH CONTAINS THE PAN NUM BER AND COMPLETE DETAILS REGARDING THE BROKERAGE RECEIVED. THE APPEL LANT HAS ALSO SUBMITTED THE CONFIRMATION OF THE REMAINING PERSONS TO WHOM T HE BROKERAGE HAS BEEN PAID BEFORE ME AND HAS REQUESTED THAT THE SAME SHOU LD BE ADMITTED UNDER RULE 46A AS NEW EVIDENCE. THE CLAIM OF THE APPELLAN T REGARDING ADMISSION OF NEW EVIDENCE IS NOT ADMITTED AS IT IS NOTED THAT TH E APPELLANT WAS GIVEN SUFFICIENT TIME TO SUBMIT THE EVIDENCE BUT THE SAME WAS NOT SUBMITTED BY HIM BEFORE THE A. O. HE ONLY SUBMITTED CONFIRMATION OF CERTAIN PARTIES. IN VIEW OF THIS FACTUAL POSITION, THE CLAIM OF PAYMENT OF BROK ERAGE IS ALLOWABLE ONLY IN RESPECT OF THE PARTIES WHOSE CONFIRMATION WERE SUBM ITTED BEFORE THE A. O. IT IS NOTED FROM THE INFORMATION AVAILABLE ON RECORD THAT THE APPELLANT HAD FURNISHED CONFIRMATION IN RESPECT OF THE FOLLOWING BROKERAGE PAYMENTS: (I) AMIT A. BHATIA RS.2,00,000 (II) GHANSHYAMDAS K. BHATIA RS.2,00,000 (III) LILADHAR DHARAMSI DEDHIA RS.5,00,000 IT IS FURTHER NOTED THAT IDS HAS BEEN DEDUCTED, PER MANENT ACCOUNT NUMBER IS MENTIONED AND THE PAYMENT HAS BEEN MADE THROUGH BANK. THE CLAIM OF THE APPELLANT IS, THEREFORE, ALLOWED TO THE EXTENT OF RS.9,00,000/- IN RESPECT OF THE BROKERAGE MENTIONED ABOVE. THE BALANCE DISAL LOWANCE IS UPHELD. THE GROUND OF APPEAL IS ACCORDINGLY PARTLY ALLOWED. 34. NOW BOTH REVENUE AND ASSESSEE ARE IN APPEALS BE FORE THE TRIBUNAL AGAINST THE ORDER OF LD. CIT(A). REVENUE I S AGGRIEVED WITH THE DELETION OF DISALLOWANCE OF RS.9,00,000/- ON TH E OTHER HAND ASSESSEE HAS RAISED FOLLOWING GROUNDS AGAINST CONFI RMATION OF ADDITION OF RS.8,50,000/- :- 1. THE LEARNED CIT(A) HAS GRIEVOUSLY ERRED IN LAW A ND ON FACTS IN PARTLY CONFIRMING THE ADDITION TO THE EXTENT OF RS.8,50,0 00/- OUT OF TOTAL ADDITION OF RS.17,50,000/- MADE BY THE AO ON ACCOUNT OF DISALLO WANCE OF BROKERAGE EXPENSES. IN VIEW OF FACTS, EVIDENCES AND SUBMISSIO NS FILED, THE ENTIRE ADDITION OF RS.17,50,000/- REQUIRES TO BE DELETED. 35. LD. DR STRONGLY SUBMITTED THAT ASSESSEE HAS NOT FURNISHED ANY DETAIL BEFORE THE ASSESSING AUTHORITY DUE TO WHICH NECESSARY ENQUIRY ITA NO. 2725, 1675 & 1604 ASST. YEAR 2008-09 & 2009-10 16 COULD NOT BE CARRIED. FURTHER LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF BROKERAGE EXPENSES OF RS.9,00,000/- JUST ON THE BASIS OF CONFIRMATIONS FURNISHED BY ASSESSEE BEFORE LD. CIT(A). 36. ON THE OTHER HAND, LD. AR ACCEPTED THE FACT THA T CERTAIN DETAILS WERE NOT PROVIDED BEFORE THE ASSESSING AUTHORITY. L D. AR ALSO SUBMITTED THAT LD. CIT(A) HAS NOT ADMITTED ADDITION AL EVIDENCES IN RESPET OF TWO PARTIES TO WHOM BROKERAGE PAYMENT OF RS.4,50,000/- WAS MADE. FURTHER HE ALSO SUBMITTED THAT BROKERAGE EXPENSES HAVE BEEN PAID TOWARDS SALE OF FLATS IN THE PROJECTS. PA YMENT HAS BEEN MADE BY CHEQUES. TAX HAS BEEN DEDUCTED AT SOURCE. B ILLS RAISED BY BROKERS ARE PLACED ON RECORD. 37. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. THE ISSUE BEFORE US IN RELATION T O BROKERAGE EXPENSES AT RS.17,50,000/- CLAIMED BY ASSESSEE. WE OBSERVE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSE E FAILED TO PRODUCE THE BILLS OF BROKERAGE, PROJECT-WISE/FLAT-W ISE DETAILS OF BROKERAGE EXPENSES AND ALSO CONFIRMATIONS OF THE BR OKERS WERE NOT PLACED ON RECORD. FURTHER WHEN THE MATTER CAME UP B EFORE THE LD. CIT(A) IT WAS STRONGLY ARGUED BY THE ASSESSEE THAT NECESSARY DETAILS, COPY OF BROKERAGE A/C, CONFIRMATIONS OF TWO PARTIES , PAN AND ADDRESS OF THE PARTIES AND BROKERAGE BILLS ALONG WITH JUSTI FICATIONS WERE SUBMITTED BEFORE THE ASSESSING OFFICER BUT THEY HAV E BEEN GROSSLY IGNORED AND ADDITION WAS MADE. FURTHER WE ALSO OBSE RVE THAT ASSESSEE MADE A REQUEST BEFORE LD. CIT(A) FOR ADMIT TING ADDITIONAL EVIDENCES IN SUPPORT OF BROKERAGE EXPENSES OF RS.4 ,50,000/-. TAKING ITA NO. 2725, 1675 & 1604 ASST. YEAR 2008-09 & 2009-10 17 AN OVERALL VIEW, WE FIND THAT SOMEHOW OR THEN EITHE R AT THE END OF ASSESSEE OR ASSESSING OFFICER THERE IS SOME COMMUNI CATION GAP WITH REGARD TO THE EVIDENCE FOR PROVING THE GENUINENESS OF THE BROKERAGE EXPENDITURE. WE FEEL IT APPROPRIATE TO SET ASIDE TH IS ISSUE TO THE FILE OF ASSESSING OFFICER. NO OBJECTION HAS BEEN RAISED BY BOTH THE PARTIES TO THIS EFFECT. ACCORDINGLY, FOR THE LIMITED PURPOS E OF EXAMINING THE BROKERAGE EXPENSES OF RS.17,50,000/-, WE SET ASIDE THE ISSUE TO THE ASSESSING OFFICER. NEEDLESS TO MENTION THAT PROPER OPPORTUNITY OF BEING HEARD MAY BE GIVEN TO THE ASSESSEE FOR FURNIS HING NECESSARY DOCUMENTS AND EVIDENCE TO PROVE THE GENUINENESS OF THE BROKERAGE PAID AT RS.17,50,000/-. ACCORDINGLY, GROUND NO.1 OF REVENUE AND GROUND NO.1 OF ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 38. NOW WE TAKE UP GROUND NO.2 RAISED BY ASSESSEE F OR ASST. YEAR 2009-10 WHICH READS AS BELOW :- 2. THE LEARNED CIT(A) HAS ERRED IN LAW AS WELL AS ON F ACTS IN CONFIRMING THE DISALLOWANCE OF RS.7,11,693/- MADE BY THE AO WHILE APPLYING THE PROVISIONS OF SECTION 14A OF THE IT. ACT, 1961 READ WITH RULE 8D OF THE IT. RULES, 1962 WITHOUT PROPER CONSIDERATION AND APPRECIATION OF FA CTS AND SETTLED LEGAL POSITION AS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. WALFORT SHARE & STOCK BROKERS (P.) LTD. 326 JTR 1 ( SC). THE IMPUGNED ADDITION OF RS.7,11,693/- THUS REQUIRES TO BE DELET ED. 39. THE ASSESSING OFFICER DURING THE COURSE OF ASSE SSMENT PROCEEDINGS OBSERVED THAT ASSESSEE HAS MADE INVESTM ENTS IN EQUITY SHARES. LD. ASSESSING OFFICER ACCORDINGLY INVOKED P ROVISIONS OF SECTION 14A OF THE ACT R.W.S. RULE 8D OF THE IT RUL ES, 1962 (IN SHORT THE RULES) AND CALCULATED THE DISALLOWANCE AT RS.7, 11,693/-. WHEN ITA NO. 2725, 1675 & 1604 ASST. YEAR 2008-09 & 2009-10 18 THE ISSUE CAME UP BEFORE LD. CIT(A) THE IMPUGNED AD DITION WAS SUSTAINED BY OBSERVING AS BELOW :- 4.3 DECISION: T HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AN D THE SUBMISSION FILED BY THE APPELLANT. IT IS NOTED FROM THE ASSESSMENT O RDER THAT THE A. O. HAS MADE THE DISALLOWANCE AS THERE WAS AN INVESTMENT IN TAX EXEMPT ASSETS AND THE APPELLANT WAS NOT ABLE TO PROVE THAT NO EXP ENDITURE HAS BEEN INCURRED IN MAKING THE INVESTMENT IN SHARES. IT IS FURTHER NOTED IHAT THIS DISALLOWANCE HAS ONLY BEEN MADE UNDER THE THIRD LIM B OF RULE 8D I.E. ON ACCOUNT OF THE ADMINISTRATIVE EXPENSES. THE A. O. H AS GIVEN DETAILED FINDING WHILE MAKING THE DISALLOWANCE. THE APPLICATION OF RULE 8D FROM A. Y. 2008-09 ONWARDS IS NOW JUDICIALLY SETTLED. I AM IN COMPLETE AGREEMENT WITH THE FINDINGS GIVEN BY THE A. O. REGARDING DISALLOWANCE U/S. 14A BY APPLYING RULE 8D. THE CALC ULATION MADE BY THE A. O. HAS ALSO NOT BEEN DISPUTED BY THE APPELLANT AND NO MIST AKE THEREIN HAS BEEN POINTED OUT. THE DISALLOWANCE MADE IS ACCORDINGLY UPHELD AN D THE GROUND OF APPEAL IS DISMISSED. 40. NOW ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 41. AT THE OUTSET LD. AR SUBMITTED THAT THIS GROUND IS COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF HON. JURISDIC TIONAL HIGH COURT IN THE CASE OF CIT VS. CORRTECH ENERGY (P) LTD. 45 TAXMANN.COM 116 (GUJARAT) WHEREIN IT HAS BEEN OBSERVED THAT NO DISA LLOWANCE U/S 14A IF ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME FROM T HE INVESTMENTS MADE. 42. LD. AR FURTHER SUBMITTED THAT FOR THE YEAR UNDE R APPEAL I.E. ASST. YEAR 2009-10 ASSESSEE HAS NOT EARNED ANY EXEM PT INCOME AND THEREFORE, NO DISALLOWANCE COULD HAVE BEEN MADE U/S 14A OF THE ACT. ITA NO. 2725, 1675 & 1604 ASST. YEAR 2008-09 & 2009-10 19 43. LD. DR SUPPORTED THE ORDERS OF LOWER AUTHORITIE S. 44. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED ON RECORD. ASSESSEE HAS CHALLENGED THE ORDER OF CIT(A) SUSTAINING THE DISALLOWANCE U/S 14A OF THE ACT R.W. S. RULE 8D OF THE RULES AT RS.7,11,693/-. FROM GOING THROUGH THE PROF IT AND LOSS ACCOUNT WE OBSERVE THAT ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME FOR THE YEAR UNDER APPEAL. THERE IS ONLY AN INVESTMENT IN EQUITY SHARES BUT THERE IS NO CORRESPONDING EXEMPT INCOME EARNED DURING THE YEAR. IN THE GIVEN FACTS AND CIRCUMSTANC ES OF THE CASE, THE ISSUE IS NOW SQUARELY COVERED IN FAVOUR OF ASSESSEE BY THE JUDGMENT OF OF HON. GUJARAT HIGH COURT IN THE CASE OF CIT VS . CORRTECH ENERGY (P) LTD. (SUPRA) WHEREIN IT HAS BEEN HELD THAT SEC TION 14A OF THE ACT PROVIDES FOR THE PURPOSE OF COMPUTING TOTAL INCOME SECTION 14A(1) PROVIDES THAT FOR THE PURPOSE OF COMPUTING TOTAL IN COME UNDER CHAPTER IV. NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXP ENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NO T FORM PART OF THE TOTAL INCOME UNDER THE ACT. IN THE INSTANT CASE, TH E TRIBUNAL HAS RECORDED THE FINDING OF FACT THAT THE ASSESSEE DID NOT MAKE ANY CLAIM FOR EXEMPTION OF ANY INCOME FROM PAYMENT OF TAX. IT WAS ON THIS BASIS THAT THE TRIBUNAL HELD THAT DISALLOWANCE UNDER SECT ION 14A COULD NOT BE MADE. IN THE PROCESS TRIBUNAL RELIED ON THE DECI SION OF DIVISION BENCH OF PUNJAB AND HARYANA HIGH COURT IN CASE OF C IT V. WINSOME TEXTILE INDUSTRIES LTD. [2009] 319 ITR 204 IN WHICH ALSO THE COURT HAD OBSERVED THAT WHERE THE ASSESSEE DID NOT MAKE ANY CLAIM FOR EXEMPTION, SECTION 14A COULD HAVE NO APPLICATION. ITA NO. 2725, 1675 & 1604 ASST. YEAR 2008-09 & 2009-10 20 45. RESPECTFULLY FOLLOWING THE JUDGMENT OF HON. JUR ISDICTIONAL HIGH CURT REFERRED ABOVE WE ARE OF THE VIEW THAT NO DISA LLOWANCE U/S 14A OF THE ACT AT RS.7,11,693/- WAS REQUIRED TO BE MADE BY THE ASSESSING OFFICER. WE, THEREFORE, ALLOW THE GROUND OF ASSESSE E. 46. OTHER GROUNDS ARE OF GENERAL NATURE, WHICH NEED NO ADJUDICATION. 47. IN THE RESULT, APPEALS OF REVENUE ARE PARTLY AL LOWED AND ASSESSEES APPEAL IS ALSO PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH OCTOBER, 2016 SD/- SD/- (R.P. TOLANI) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 28/10/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD ITA NO. 2725, 1675 & 1604 ASST. YEAR 2008-09 & 2009-10 21 1. DATE OF DICTATION: 26/10/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 28/10/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 28/10/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: