NSDL E-GOERNANCE INFRASTRUCTURE LIMITED, MUMBAI V. ACIT, CIRCLE - 7(1), MUMBAI

ITA 2727/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79518 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2002-2003
• Appeal Filed On: 08-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SATYANARAYAN RAJU
• Assessee Lawyers: K K VED; I A SINGH
• Keywords: Earning of tax free income; Retrospective amendment
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI , ! BEFORE SHRI SANJAY ARORA, AM AND DR. S. T. M. PAVA LAN, JM ' # I.T.A. NOS. 2726, 2727 & 2729/MUM/2013 ( / ASSESSMENT YEARS: 2001-02, 2002-03 & 2009-10) NSDL E-GOVERNANCE INFRASTRUCTURE LIMITED (FORMERLY KNOWN AS NATIONAL SECURITIES DEPOSITORY LTD.) TRADE WORLD, 4 TH FLOOR, KAMALA MILLS COMPOUND, LOWER PAREL, MUMBAI-400 013 # VS. ASST. CIT, CIRCLE-7(1), AAYAKAR BHAVAN, MAHARSHI KARVE MARG, MUMBAI-400 020 $ #'%' ./PAN/GIR NO. AAACN 2082 N ( $& /APPELLANT ) : ( '($& / RESPONDENT ) $&)* / APPELLANT BY : SHRI K. K. VED & MS. I. A. SINGH '($&)* / RESPONDENT BY : SHRI SATYANARAYAN RAJU + ,)- / DATE OF HEARING : 15.07.2014 ./0 )- / DATE OF PRONOUNCEMENT : 23.07.2014 '1# O R D E R PER SANJAY ARORA, A. M.: THIS IS A SET OF THREE APPEALS BY THE ASSESSEE, I.E ., FOR THREE YEARS, BEING ASSESSMENT YEARS (A.YS.) 2001-02, 2002-03 & 2009-10 , ARISING OUT OF SEPARATE ORDERS BY THE COMMISSIONER OF INCOME TAX (APPEALS)- 13, MUMBAI (CIT(A) FOR SHORT) OF EVEN DATE (01.01.2013), PARTLY ALLOWING THE ASSE SSEES APPEALS CONTESTING ITS ASSESSMENTS U/S.143(3) R/W S. 254 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE SAID YEARS VIDE ORDERS, AGAIN FOR EVEN DATE (29 .11.2010). THE ISSUES ARISING BEING 2 ITA NOS. 2726, 2727 & 2729/MUM/2013 (A.YS. 2001-02, 02-03 & 09-10) NSDL E-GOVERNANCE INFRASTRUCTURE LIMITED VS. ASST. CIT COMMON, THE APPEALS WERE TAKEN UP FOR HEARING TOGET HER, AND ARE BEING DISPOSED OF VIDE A COMMON, CONSOLIDATED ORDER. WE SHALL PROCEED YEAR-W ISE. A.Y. 2001-02 (ITA NO. 2726/MUM/2013) 2.1 THE SOLE ISSUE ARISING FOR THE CURRENT YEAR IS THE CONFIRMATION OF THE LEVY OF INTEREST U/S.234D BY THE LD. CIT(A). THE SAME IS ADMITTEDLY IN TERMS OF THE LAW, HAVING BEEN SINCE CLARIFIED PER THE RETROSPECTIVE AMENDMENT TO THE PROVISION, I.E., BY FINANCE ACT, 2012 W.E.F. 01.06.2003 THE DATE FROM WHICH THE PR OVISION OF SECTION 234D STOOD CO- OPTED ON THE STATUTE BOOK, BY WAY OF EXPLANATION 2 THEREOF. THE SAME READS AS UNDER: INTEREST ON EXCESS REFUND. 234D. (1) SUBJECT TO THE OTHER PROVISIONS OF THIS ACT, W HERE ANY REFUND IS GRANTED TO THE ASSESSEE UNDER SUB-SECTION (1) OF SECTION 143, AND ( A ) NO REFUND IS DUE ON REGULAR ASSESSMENT; OR ( B ) THE AMOUNT REFUNDED UNDER SUB-SECTION (1) OF SEC TION 143 EXCEEDS THE AMOUNT REFUNDABLE ON REGULAR ASSESSMENT, THE ASSESSEE SHALL BE LIABLE TO PAY SIMPLE INTEREST AT THE RATE OF 33 [ONE-HALF] PER CENT ON THE WHOLE OR THE EXCESS AMOUNT SO REFUN DED, FOR EVERY MONTH OR PART OF A MONTH COMPRISED IN THE PERIOD FROM THE DA TE OF GRANT OF REFUND TO THE DATE OF SUCH REGULAR ASSESSMENT. (2) .. EXPLANATION 1 EXPLANATION 2. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED T HAT THE PROVISIONS OF THIS SECTION SHALL ALSO APPLY TO AN A SSESSMENT YEAR COMMENCING BEFORE THE 1ST DAY OF JUNE, 2003 IF THE PROCEEDINGS IN RESPECT OF SUCH ASSESSMENT YEAR IS COMPLETED AFTER THE SAID DATE. AS SUCH, IRRESPECTIVE OF THE ASSESSMENT YEAR, INTER EST U/S.234D SHALL BE CHARGEABLE FOR ANY ASSESSMENT YEAR, PROCEEDINGS IN RESPECT OF WHICH AR E COMPLETED AFTER THE SAID DATE. THERE IS NO AMBIGUITY IN LAW, HAVING BEEN SINCE CLARIFIED BY THE HONBLE JURISDICTIONAL HIGH COURT PER ITS DECISION IN THE CASE OF CIT VS. INDIAN OIL CORPN. LTD. [2012] 210 TAXMAN 466 (BOM). THE ASSESSEES GRIEVANCE, HOWEVER, STEMS FROM THE FACT THAT THIS ISSUE HAD ARISEN IN ITS ASSESSMENT EARLIER, I.E., IN THE FIRS T ROUND, WHEREAT THE TRIBUNAL HAD DECIDED THE SAME IN ITS FAVOUR (IN ITA NO. 1191/MUM(C)/200 5 DATED 30.07.2009/COPY ON 3 ITA NOS. 2726, 2727 & 2729/MUM/2013 (A.YS. 2001-02, 02-03 & 09-10) NSDL E-GOVERNANCE INFRASTRUCTURE LIMITED VS. ASST. CIT RECORD), DIRECTING CANCELLATION OF INTEREST U/S.234 D FOLLOWING THE DECISION BY ITS LARGER BENCH IN ITO VS. EKTA PROMOTERS (P.) LTD. [2008] 113 ITD 719 (DEL) (SB). THE REVENUE HAVING NOT CARRIED THE MATTER IN FURTHER APPEAL, TH E ASSESSING OFFICER (A.O.) WAS OBLIGED NOT TO CHARGE INTEREST U/S.234D WHILE PASSING THE A PPEAL-EFFECT GIVING ORDER U/S.143(3) R/W S. 254 ON 29.11.2010. THE RETROSPECTIVE AMENDME NT IN LAW, AS AFORE-REFERRED, CAME ONLY SUBSEQUENTLY, I.E., PER FA, 2012. THE LD. CIT( A), BEFORE WHOM THIS SPECIFIC ISSUE WAS RAISED BY THE ASSESSEE IN APPEAL, I.E., THE LEV Y OF INTEREST U/S.234D DESPITE IT HAVING BEEN CANCELLED BY THE TRIBUNAL (PER GD. NO. 6 BEFOR E HIM), DID NOT ADDRESS THE SAME, BUT MERELY CONFIRMED THE SAID LEVY IN VIEW OF THE RETRO SPECTIVE AMENDMENT, SINCE AFFIRMED BY THE HONBLE HIGH COURT IN INDIAN OIL CORPN. LTD. (SUPRA). COULD AN ORDER BE POSSIBLY CHALLENGED BY NOT GIVING EFFECT THERETO, AS DONE BY THE A.O. ?, THE LD. AUTHORIZED REPRESENTATIVE (AR) WOULD ASSEVERATE BEFORE US, AND WHICH IN HIS OPINION WAS THE MOOT QUESTION ARISING BEFORE US IN-AS-MUCH AS THE ASSESS MENT ORDER AND THE APPELLATE ORDER (IN THE FIRST ROUND) MERGED WITH THAT BY THE TRIBUNAL QUA THE SAID MATTER/S OF APPEAL. 2.2 THE REVENUES STAND, ON THE OTHER HAND, WAS THA T THE LEVY STOOD UPHELD BY THE LD. CIT(A) NOT ON THE BASIS OF THE ORDER PASSED BY THE TRIBUNAL, BUT BY FOLLOWING THE BINDING DECISION BY THE HONBLE HIGH COURT, WHICH THE ISS UE BEING LEGAL, WOULD OBTAIN, SO THAT NO ARGUMENT AGAINST THE SAME COULD HOLD (REFER PARA 7. 2 OF THE IMPUGNED ORDER). 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 3.1 THE RESPECTIVE CASES OF THE PARTIES STAND DELIN EATED HEREINBEFORE. THE ASSESSEE DOES NOT, AS WE DISCERN, DENY THAT THERE IS NO ESTO PPEL AGAINST LAW, WHICH CANNOT BE, BUT THAT IT (LAW) COULD ONLY BE FOLLOWED BY ADOPTING TH E PROCESS KNOWN TO OR HAS THE SANCTION OF LAW. THE REVENUE COULD, FOR EXAMPLE, UPON RETROS PECTIVE AMENDMENT, MOVE A RECTIFICATION U/S.154; IT BEING WELL SETTLED THAT T HE SAME WOULD GIVE RISE THERETO WHERE AN ORDER IS INCONSISTENT THEREWITH (REFER: ESTER INDUSTRIES LTD. VS. UNION OF INDIA [2013] 39 TAXMANN.COM 107 (DEL)), OR PERHAPS EVEN MOVE THE TR IBUNAL IN-AS-MUCH AS ITS ORDER IS RENDERED, ON ACCOUNT OF THE RETROSPECTIVE AMENDMENT , AT VARIANCE WITH THE CLEAR POSITION 4 ITA NOS. 2726, 2727 & 2729/MUM/2013 (A.YS. 2001-02, 02-03 & 09-10) NSDL E-GOVERNANCE INFRASTRUCTURE LIMITED VS. ASST. CIT OF LAW IN THE MATTER. HOWEVER, THE REVENUE CANNOT P ROCEED DE HORS AND IN DISREGARD WITH THE ESTABLISHED LAW; THE DECISION BY A HIGHER APPEL LATE AUTHORITY BEING BINDING ON THE SUBORDINATE AUTHORITY, WHICH IN THE INSTANT CASE IS ONLY IN RESPECT OF THE ORDER APPEALED AGAINST, SO THAT THERE IS NO DISCRETION AVAILABLE T O THE AUTHORITY WHILE PASSING THE APPEAL EFFECT GIVING ORDER, MAKING A REFERENCE TO THE DECI SION IN THE CASE OF LOPAMUDRA MISRA VS. ASST. CIT [2011] 337 ITR 92 (ORISSA). 3.2 THE ISSUE HAVING BEEN FORMULATED, WE PROCEED TO ANSWER THE SAME. WITHOUT DOUBT, THE QUESTION POSED BY THE LD. AR AS THE MOOT QUESTI ON IS TO BE ANSWERED IN AN EMPHATIC NO. IN FACT, EVEN IF ONE OF THE PARTIES, THE REVE NUE IN THE INSTANT CASE, WERE TO CONTEST THE ORDER BY THE TRIBUNAL, SO THAT IT CANNOT BE SAI D TO HAVE ATTAINED FINALITY, IT IS STILL NOT OPEN FOR IT (REVENUE) NOT TO FOLLOW OR NOT TO GIVE EFFECT TO THE ORDER BY THE TRIBUNAL, WHICH WOULD BE, QUITE SIMPLY, JUDICIAL ANARCHY. HOW EVER, THAT TO OUR MIND IS NOT THE MOOT QUESTION, AND FOR THE SIMPLE REASON THAT THE S AME DOES NOT LEAD TO ANY DEFINITE ANSWER TO, OR RESOLVE, THE QUESTION OR THE ISSUE BE FORE US, I.E., AS STATED AT THE BEGINNING OF THIS ORDER (PARA 2.1 ). WE SHALL, HOWEVER, TAKE FORWARD THE DISCUSSION I NITIATED BY THE SAID QUESTION (AND ANSWER THERETO) TO ITS LOGICAL CONCLU SION. NO DOUBT, IN NOT FOLLOWING THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE, T HE A.O.S ORDER IS, TO THAT EXTENT, BAD IN LAW. THE LAW IS NOT REMEDY-LESS, AND THE RECOURSE T O BE FOLLOWED IS AGAIN TO BE FOUND AND PURSUED WITHIN THE FRAME-WORK OF LAW. THE ASSESSEE COULD MOVE THE HONBLE HIGH COURT UNDER ITS WRIT JURISDICTION FOR QUASHING THE LEVY O F INTEREST. IT COULD MOVE THE A.O. U/S.154, REQUIRING HIM TO RECTIFY THE ORDER GIVING APPEAL EFFECT, BEING INCONSISTENT WITH THE CLEAR DIRECTION BY THE TRIBUNAL. IT COULD PREFE R AN APPEAL, AS IT ACTUALLY DOES, AGAINST THE SAID ORDER. IT COULD MOVE THE TRIBUNAL TO STAY THE OPERATION OF THE ORDER, I.E., TO THAT EXTENT, IN-AS-MUCH AS THE SAID ORDER IS IN CLEAR BR EACH AND VIOLATION OF ITS DIRECTION. IT COULD EVEN SEEK ITS (TRIBUNALS) INDULGENCE TO REFE R CONTEMPT OF COURT PROCEEDINGS TO THE HONBLE HIGH COURT. THE ASSESSEE, IN ADOPTING THE A PPELLATE PROCESS, FOLLOWED ONE OF THE PERMISSIBLE REMEDIES AVAILABLE IN LAW, WHICH ARE NO T MUTUALLY EXCLUSIVE. HOWEVER, BY THE TIME THE FIRST APPELLATE AUTHORITY CAME TO DECIDE T HE MATTER, THE LAW ITSELF HAD CHANGED, 5 ITA NOS. 2726, 2727 & 2729/MUM/2013 (A.YS. 2001-02, 02-03 & 09-10) NSDL E-GOVERNANCE INFRASTRUCTURE LIMITED VS. ASST. CIT WITH RETROSPECTIVE EFFECT, RENDERING THE LEVY OF IN TEREST U/S.234D, AS MADE, GOOD IN LAW. THE LD. CIT(A) WAS BOUND TO TAKE COGNIZANCE OF THE LAW AS IT NOW STOOD, BEING APPLICABLE FOR THAT YEAR, HAVING BEEN FURTHER EXPLAINED AND DI LATED UPON BY THE HONBLE JURISDICTIONAL HIGH COURT. HOW COULD HIS ACTION IN UPHOLDING THE LEVY OF INTER EST BE FAULTED WITH ? TRUE, HE OUGHT TO HAVE ALSO ANSWERED THE QUESTION POSED B EFORE HIM BY THE ASSESSEE, AS WE HAVE SOUGHT TO. BUT PERHAPS DID NOT DO SO AS HE CON SIDERED IT AS LARGELY ACADEMIC IN-AS- MUCH AS THE SAID LEVY, IMPUGNED BEFORE HIM, COULD N OT BE SET ASIDE OR CANCELED BY HIM. IT NEEDS TO BE APPRECIATED THAT THE LAW ITSELF HAS INT ERVENED TO PROVIDE A CLEAR AND UNAMBIGUOUS ANSWER TO THE LEGAL ISSUE DECIDED BY TH E TRIBUNAL, WHICH THE ASSESSEE SEEKS TO BE GIVEN EFFECT TO, BESIDES HAVING BEEN CLARIFIE D BY THE HONBLE JURISDICTIONAL HIGH COURT. TO THE EXTENT, THEREFORE, THE ORDER BY THE T RIBUNAL IS INCONSISTENT THEREWITH; IT CEASES TO HAVE THE FORCE OF LAW, AND FROM THE DATE OF ITS PRONOUNCEMENT. THE LAW REPRESENTS THE SOVEREIGN WILL OF THE PARLIAMENT. AS EXPLAINED BY T HE APEX COURT IN A.K. GOPALAN V. STATE OF MADRAS [1950] AIR SC 27 IT IS DIFFICULT UPON ANY GENERAL PRINCIPLES TO LIMI T THE OMNIPOTENCE OF THE SOVEREIGN LEGISLATIVE POWER BY J UDICIAL INTERPOSITION, EXCEPT SO FAR AS THE EXPRESS WORDS OF A WRITTEN CONSTITUTION GIVE TH AT AUTHORITY . WE, ACCORDINGLY, FIND NO MERIT IN THE ASSESSEES CH ALLENGE TO THE IMPUGNED ORDER. WE DECIDE ACCORDINGLY. A.Y. 2002-03 (IN ITA NO. 2727/MUM/2013) 4. THE ONLY ISSUE ARISING FOR THIS YEAR, AS PROJECT ED BEFORE US BY THE LD. AR, IS THAT THE INTEREST, THOUGH CHARGEABLE U/S.234D, THE DETAILS T HEREOF HAVING NOT BEEN PROVIDED BY THE DEPARTMENT (A.O.), THE REVENUE MAY BE DIRECTED TO F URNISH THE WORKING OF THE SAID INTEREST THERETO FOR NECESSARY ACTION AT ITS END. 5. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THOUGH THE ASSESSEES GROUNDS SPEAK OF A DIRECTION BY THE TRIB UNAL, AS IN THE CASE OF A.Y. 2001-02, WE FIND NONE SUCH IN THE SAID ORDER DATED 30.07.200 9 (SUPRA), COMMON FOR THE A.YS. 2001-02 TO 2003-04 (IN ITA NO. 744/MUM(C)/2006). TH E ASSESSEES PRAYER BEFORE US IS 6 ITA NOS. 2726, 2727 & 2729/MUM/2013 (A.YS. 2001-02, 02-03 & 09-10) NSDL E-GOVERNANCE INFRASTRUCTURE LIMITED VS. ASST. CIT LIMITED TO IT BEING FURNISHED A COPY OF THE WORKING OF THE INTEREST CHARGED, SO THAT IT MAY VERIFY THE SAME FOR IT BEING CORRECT. THE LEVY OF T HE INTEREST IS, THEREFORE, NOT DISPUTED. THE APEX COURT PER ITS DECISION IN THE CASE OF CENTRAL PROVINCES MANGANESE ORE CO. LTD. VS. CIT [1986] 160 ITR 961 (SC) CLARIFIED THAT THE LEVY OF INTEREST UNDER THE ACT CANNOT BE APPEALED AGAINST, BEING THE COMPENSATORY AND MAN DATORY, EXCEPT WHERE THE ASSESSEE LIMITS HIMSELF TO THE GROUND THAT HE IS NOT LIABLE TO THE LEVY AT ALL, AND WHICH IS NOT SO IN THE INSTANT CASE. THE ASSESSEES APPEAL, IN VIEW OF THE ADMITTED LEGAL POSITION OF INTEREST U/S.234D BEING CHARGEABLE, IS THUS NOT MAINTAINABLE IN LAW. AS REGARDS ITS QUANTUM, THE ASSESSEE HAS NOT BROUGH T ANY MATERIAL ON RECORD TO SHOW THAT IT HAS COMMUNICATED WITH THE DEPARTMENT I N THE MATTER, AND WHICH HAS DECLINED TO OR NOT COOPERATED WITH IT IN THE MATTER OF FURNISHING THE REQUISITE INFORMATION, WHICH THE ASSESSEE IS WELL ENTITLED TO. THERE IS AL SO, ON THE BASIS OF THE MATERIAL ON RECORD, NOTHING TO SUGGEST OF THE ASSESSEE HAVING MOVED AN APPLICATION U/S.154, SUBMITTING ITS WORKING OF INTEREST, SEEKING RECTIFICATION FOR THE DIFFERENCE, IF ANY. IN OTHER WORDS, NO PRIMA FACIE CASE FOR OUR INDULGENCE IS ALSO MADE OUT. UNDER THE CIRCUMSTANCES, WE DECLINE TO. THE ASSESSEE IS AT LIBERTY TO ADOPT THE COURSE PERMISSIBLE IN LAW; WE HAVING ALREADY UNEQUIVOCALLY EXPRESSED ITS ENTITLEMENT TO THE RELEVANT DETAILS, BEING IN FACT A PART OF ITS ASSESSMENT (REFER: ITO VS. KALYANKUMAR RAY [1991] 191 ITR 634 (SC)), SO THAT WHERE ASKED FOR, OUGHT TO BE FURNISHED BY THE REVEN UE. WE DECIDE ACCORDINGLY. A.Y. 2009-10 (ITA NO. 2729/MUM/2013) 6. THE ONLY ISSUE IN THIS APPEAL IS THE DISALLOWANC E U/S.14A, WHICH STANDS CONFIRMED BY THE LD. CIT(A). THE A.O., APPLYING RULE 8D, WORK ED OUT THE DISALLOWANCE AT RS.57,36,018/- , AS AGAINST RS.10,20,000/- DISALLOWED SUO MOTU BY THE ASSESSEE, SO THAT A FURTHER DISALLOWANCE OF RS.47.16 LACS CAME TO BE MA DE. THE LD. CIT(A) OBSERVED THE ASSESSEE TO HAVE EARNED INCOME, CLAIMED AND ALLOWED AS TAX EXEMPT, AT RS.373.19 LACS. THERE WAS ALSO SUBSTANTIAL INVESTMENT ACTIVITY DURI NG THE YEAR, AND THE A.O. HAD, UPON BEING DISSATISFIED WITH THE ASSESSEES CLAIM IN THE MATTER, WORKED OUT THE DISALLOWANCE 7 ITA NOS. 2726, 2727 & 2729/MUM/2013 (A.YS. 2001-02, 02-03 & 09-10) NSDL E-GOVERNANCE INFRASTRUCTURE LIMITED VS. ASST. CIT UNDER RULE 8D, BEING SINCE MANDATORY, SO THAT NO IN FIRMITY THEREIN WAS FOUND BY HIM. AGGRIEVED, THE ASSESSEE IS IN APPEAL. 7. THE ASSESSEES CONTENTION BEFORE US WAS THAT THE A.O. WAS, BEFORE PROCEEDING TO APPLY RULE 8D, ADMITTEDLY MANDATORY W.E.F. A.Y. 200 8-09, OBLIGED TO EXPRESS HIS NON- SATISFACTION WITH THE ASSESSEES ACCOUNTS LEADING T O THE EXPENDITURE INCURRED IN RELATION TO THE INCOME NOT FORMING PART OF THE TAXABLE INCOME, WHICH HAD BEEN WORKED OUT BY THE ASSESSEE AT RS.10.20 LACS. ON BEING ENQUIRED BY THE BENCH AS TO THE BASIS OF THE ASSESSEES WORKING, IT WAS POINTED OUT BY THE LD. A R THAT THE ASSESSEE MAINTAINS TIME SHEETS, BOOKING EXPENDITURE IN RESPECT OF THE CORRE SPONDING ACTIVITY YIELDING INCOME NOT FORMING PART OF THE TOTAL INCOME. NO EXAMINATION IN THE MATTER HAD BEEN MADE BY THE AUTHORITIES BELOW. A RESTORATION IN THE MATTER BACK TO THE FILE OF THE A.O. FOR FRESH DETERMINATION WAS PRAYED FOR. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) WOULD, ON THE OTHER HAND, OBJECT THERETO, CLAIMING THAT APART FROM BALD CLAIMS, NO C ASE, INCLUDING FOR RESTORATION, HAD BEEN MADE BY THE ASSESSEE. 8. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE ENTIRE DISALLOWANCE IS UNDER RULE 8D(2)(III), I.E., AT 0.5 % OF THE AVERAGE VALUE OF THE INVESTMENT, RECKONED AT ONE HALF OF THE BOOK VALUE OF INVESTMEN TS (YIELDING TAX-EXEMPT INCOME), AS AT THE BEGINNING AND THE CLOSE OF THE YEAR. THE LD. CI T(A) HAS OBSERVED OF SUBSTANTIAL ACTIVITY, EVEN AS MERE HOLDING OF INVESTMENT, AS WH ERE IN STOCKS AND SHARES, SUBJECT TO MARKET VOLATILITY IN RESPONSE TO VARIOUS ECONOMIC MACRO AND MICRO, FACTORS, MAY REQUIRE DECISION MAKING AT, AND THUS INVOLVEMENT, O F THE HIGHER MANAGEMENT, ENTAILING INCURRING COST. IN FACT, AS WE OBSERVE, THERE IS NO T MUCH DIFFERENCE BETWEEN THE OPENING AND THE CLOSING VALUE OF THE INVESTMENT AND, TWO, T HE BULK OF THE TAX EXEMPT INCOME ARISING BY WAY OF INTEREST ON TAX-FREE BONDS. THE R EVENUE, IN OUR VIEW, OUGHT TO HAVE REQUIRED THE ASSESSEE TO SUBSTANTIATE ITS CLAIM OF THE WORKING OF SUO MOTU DISALLOWANCE U/S.14A WITH REFERENCE TO ITS ACCOUNTS, AND WHICH W OULD INCLUDE THE UNDERLYING VOUCHERS 8 ITA NOS. 2726, 2727 & 2729/MUM/2013 (A.YS. 2001-02, 02-03 & 09-10) NSDL E-GOVERNANCE INFRASTRUCTURE LIMITED VS. ASST. CIT AS WELL. THE A.O., UPON MAKING SUCH ENQUIRY AS HE D EEMS FIT AND PROPER IN THE MATTER, IS TO FORM HIS OPINION, EXPRESSING HIS SATISFACTION OR DISSATISFACTION, AS THE CASE MAY BE, IN THE MATTER. THIS EXAMINATION AND PROCESS, AS APPARE NT, HAS NOT BEEN UNDERTAKEN, WHICH, AS EXPLAINED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. V. DY. CIT [2010] 328 ITR 81 (BOM), IS MANDATORY, FORMING, IN FACT, PART OF BOTH, THE LAW - PER SECTION 14A, WHICH IS A COMPLETE CODE IN ITSELF, AS WELL AS THE DELEGATED LEGISLATION IN THE FORM OF RULE 8D. WE, ACCORDINGLY , RESTORE THIS MATTER BACK TO THE FILE OF THE A.O. TO ALLOW THE ASSESSEE AN OPPORTUNITY TO SU BSTANTIATE ITS CLAIM QUA THE SUO MOTU DISALLOWANCE BY IT, DECIDING THE MATTER AFRESH IN A CCORDANCE WITH LAW, OBSERVING THE PROCEDURE AS EXPLAINED, AND PROCEED IN THE MATTER F OLLOWING THE EXPRESS PROVISION OF SECTION 14A(2) OF THE ACT. WE DECIDE ACCORDINGLY. 9. IN THE RESULT, THE ASSESSEES APPEALS FOR A.YS. 2001-02 & 2002-03 ARE DISMISSED, AND THAT FOR A.Y. 2009-10 IS ALLOWED FOR STATISTICA L PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON JULY 23, 2014 SD/- SD/- (DR. S. T. M. PAVALAN) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER + 2, MUMBAI; 3 DATED : 23.07.2014 # ROSHANI , SR. PS ! ' #$%& ' &$ # COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. '($& / THE RESPONDENT 3. '' + 4- 5 6 / THE CIT(A) 4. '' + 4- / CIT CONCERNED 5. 78 9'-:; ' :;0 + 2, / DR, ITAT, MUMBAI 6. 9 <= , # GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , + 2, / ITAT, MUMBAI