DCIT, New Delhi V. M/s. H T Media Ltd., New Delhi

ITA 2768/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2058 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 07-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: MEETA SINGH
• Keywords: Depreciation; Principle of natural justice; Additional depreciation; Earning of tax free income; Capital expenditure
• Section: 143(3); 14A

Judgement Text

1 ITA NO. 6394 /DEL/2013 & ORS IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SHRI P. M. JAGTAP, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER ITA NO. 6394/DEL/201 3 ( A.Y 2009-10) DCIT CIRCLE-12(1) NEW DELHI (APPELLANT) VS H. T. MEDIA LTD. HINDUSTAN TIMES HOUSE, 18-20, KASTURBA GANDHI MARG NEW DELHI AABCH3165P (RESPONDENT) ITA NO. 2768/DEL/2015 ( A.Y 2010-11) DCIT CIRCLE-12(1) NEW DELHI (APPELLANT) VS H. T. MEDIA LTD. HINDUSTAN TIMES HOUSE, 18-20, KASTURBA GANDHI MARG NEW DELHI AABCH3165P (RESPONDENT) ITA NO. 2100/DEL/201 5 ( A.Y 2010-11) H. T. MEDIA LTD. HINDUSTAN TIMES HOUSE, 18-20, KASTURBA GANDHI MARG NEW DELHI AABCH3165P (APPELLANT) VS DCIT CIRCLE-12101) NEW DELHI (RESPONDENT) ITA NO. 3532/DEL/201 6 ( A.Y 2011-12) DCIT CIRCLE-12101) NEW DELHI (APPELLANT) VS H. T. MEDIA LTD. HINDUSTAN TIMES HOUSE, 18-20, KASTURBA GANDHI MARG NEW DELHI AABCH3165P (RESPONDENT) 2 ITA NO. 6394 /DEL/2013 & ORS ITA NO. 2854/DEL/2016 ( A.Y 2011-12) H. T. MEDIA LTD. HINDUSTAN TIMES HOUSE, 18-20, KASTURBA GANDHI MARG NEW DELHI AABCH3165P (APPELLANT) VS ACIT CIRCLE-12101) NEW DELHI (RESPONDENT) APPELLANT BY SH. V. P. GUPTA, ADVOCATE RESPONDENT BY SH. SMT. MEETA SINGH, CIT DR & SH. ARUN KUMAR YADAV, SR. DR ORDER PER SUCHITRA KAMBLE, JM THESE APPEALS ARE FILED BY THE REVENUE AS WELL AS B Y THE ASSESSEE AGAINST THE ORDERS DATED 06/09/2013, 27/02/2015 AND 21/03/2 016 PASSED BY CIT(A)- XV, NEW DELHI FOR A.YS. 2009-10, 2010-11 AND 2011-1 2 RESPECTIVELY. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- ITA NO. 6394/DEL/2013 REVENUES APPEAL (A.Y 2009-10 ) 1. WHETHER LD. CIT (A) WAS CORRECT ON FACTS AND CI RCUMSTANCES OF THE CASE AND IN LAW IN DELETING THE ADDITION OF RS.9,91 ,48,048/- MADE BY THE AO U/S 14A R.W.R 8D ? 2. WHETHER LD. CIT (A) WAS CORRECT ON FACTS AND CI RCUMSTANCES OF THE CASE AND IN LAW IN DELETING THE ADDITION OF DEPRECIATION ON COMPUTER PERIPHERALS AMOUNTING TO RS.71,89,908/- DESPITE THE FACT THAT T HESE INCLUDES SOME OF THE ITEMS WHICH ARE NOT INTEGRAL PART OF THE COMPUT ER? DATE OF HEARING 12.07.2018 DATE OF PRONOUNCEMENT 05.09.2018 3 ITA NO. 6394 /DEL/2013 & ORS 3. WHETHER LD. CIT (A) WAS CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN DELETING THE DISALLOWANCE OF ADD ITIONAL DEPRECIATION ON COMPUTER SOFTWARE AMOUNTING TO RS.34,54,795/- DESPI TE THE FACT COMPUTER AND COMPUTER SOFTWARE ARE NOT MENTIONED IN THE RULE 5(1A) AND APPENDIX 1A FOR FULFILLING THE REQUIREMENT OF SECTION 32(L)( II) OF THE IT ACT. 4. WHETHER LD. CIT (A) WAS CORRECT ON FACTS AND CI RCUMSTANCES OF THE CASE AND IN LAW IN DELETING ADDITION ON ACCOUNT OF CLUB EXPENSES TO RS. 11,25,761/- DESPITE THE FACT THAT THESE EXPENSES DE VELOPS THE PERSONALITY TRAITS OF THE USERS OF THE COMPANY WHICH ULTIMATELY BENEFIT THE COMPANY FOR A LONGER PERIOD RESULTING IN TO CAPITAL EXPENDITURE ? 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PRINTING AND PUBLISHING OF NEWSPAPER, PERIODICALS AND BROADCASTI NG ON RADIO. THE RETURN WAS FILED ON 30.09.2009 DECLARING INCOME UNDER BUSI NESS AT NIL, CAPITAL LOSS OF RS. 73,69,13,822/- AND RS. 1,23,55,63,243/- UNDER S ECTION 115 JB OF THE INCOME TAX ACT. THIS WAS SUBSEQUENTLY REVISED ON 31 .03.2011 DECLARING INCOME UNDER BUSINESS AT NIL, CAPITAL LOSS OF RS. 7 3,69,13,822/- AND RS. 1,23,45,56,751/- UNDER SECTION 115 JB OF INCOME TAX ACT. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE INCOME TA X ACT 1961 ON 29.12.2011 ASSESSING INCOME UNDER BUSINESS AT NIL, CAPITAL LOS S OF RS. 73,69,13,822/- AND RS. 1,33,37,04,799/- UNDER SECTION 115 JB OF INCOME TAX ACT. THUS, THE ASSESSING OFFICER MADE FOLLOWING ADDITIONS: I) DISALLOWANCE UNDER SECTION 14A RS. 9,91,48,048/- II) DISALLOWANCE OF DEPRECIATION ON COMPUTER PERIPH ERALS RS. 71,89,908/- III) DISALLOWANCE OF ADDITIONAL DEPRECIATION ON COM PUTER RS.34,54,795/- AND COMPUTER SOFTWARE CLAIMED IV) DISALLOWANCE OF CAPITALIZATION OF TRAINING EXPE NSES RS.1,55,91,042/- V) ADDITION ON ACCOUNT OF CLUB EXPENSES RS.11,25, 761/- 4 ITA NO. 6394 /DEL/2013 & ORS THE TAX WAS PAID UNDER MAT BY THE ASSESSEE. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE. 5. THE LD. DR RELIED UPON THE ORDER OF THE ASSESSIN G OFFICER AND SUBMITTED THAT THE CIT(A) HAS WRONGLY DELETED THE A DDITIONS MADE BY THE ASSESSING OFFICER FOR ASSESSMENT YEAR 2009-10. 6. THE LD. AR SUBMITTED THAT AS REGARDS GROUND NO. 1 OF THE REVENUES APPEAL RELATING TO DISALLOWANCE U/S 14A READ WITH R ULE 8D OF THE INCOME TAX RULES, A STATEMENT GIVING FIGURES OF INVESTMENT S OWN FUNDS EXEMPT INCOME, DISALLOWANCE MADE BY THE ASSESSING OFFICER AND BY THE COMPANY IN A.Y. 2008-09 AND 2009-10 WAS PRODUCED. THE FACTS OF THE CASE ARE IDENTICAL TO THE FACTS OF A.Y. 2008-09 WHEREIN THE HONBLE DE LHI HIGH COURT IN CASE OF H.T. MEDIA LTD. VS. PRINCIPAL CIT (2017) 399 ITR 57 6 HELD THAT IN THE FACTS OF THE CASE NO DISALLOWANCE ON ACCOUNT OF INTEREST IS CALLED FOR AND DISALLOWANCE MADE BY THE COMPANY OF RS. 3 LAC ON AC COUNT OF ADMINISTRATIVE EXPENSES IS TO BE UPHELD, SINCE THE ASSESSING OFFIC ER HAD NOT RECORDED ANY SATISFACTION. THE LD. AR ALSO RELIED UPON THE DECIS ION OF DLF HOME DEVELOPERS LTD. VS. DCIT (2018) 53 CCH 0182 DEL TRI B. AND DCIT VS. CAPARO ENGINEERING INDIA PVT. LTD. 2018 (5) TMI 346. 7. AS REGARDS GROUND NO. 2 OF THE REVENUES APPEAL RELATING TO DISALLOWANCE ON ACCOUNT OF DEPRECIATION ON COMPUTER PERIPHERALS, THE LD. AR SUBMITTED THAT THIS GROUND IS COVERED IN FAVOUR OF THE ASSESSEE VIDE ORDERS OF THE TRIBUNAL FOR A.YS. 2007-08 AND 2008-0 9 IN ASSESSEES OWN CASE WHEREIN SIMILAR GROUND OF DEPARTMENT WAS DISMISSED FOLLOWING THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THIS REGARD IN T HE CASE OF CIT VS. BSES YAMUNA POWER LTD. 8. AS REGARDS TO GROUND NO. 3 OF THE REVENUES APPE AL RELATING TO ALLOWABILITY OF ADDITIONAL DEPRECIATION ON COMPUTER AND COMPUTER SOFTWARE 5 ITA NO. 6394 /DEL/2013 & ORS I.E. COMPUTER TO PLATE (CTP), THE LD. AR SUBMITTED THAT THIS GROUND IS COVERED IN FAVOUR OF THE ASSESSEE VIDE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2008-09 WHEREIN SIMILAR GROUND OF DEPARTMENT WAS DISMISSED HOLDING THAT COMPUTER AND COMPUTER SOFTWA RE ARE TO BE CONSIDERED AS PART OF MACHINERY FOR THE PURPOSE OF ADDITIONAL DEPRECIATION. 9. AS REGARDS TO GROUND NO. 4 OF THE REVENUES APPE AL RELATING TO ALLOWABILITY OF CLUB EXPENSES, THE LD. AR SUBMITTED THAT THIS GROUND IS COVERED IN FAVOUR OF THE ASSESSEE VIDE ORDERS OF TH E TRIBUNAL FOR AYS. 2007- 08 AND 2008-09 WHEREIN SIMILAR GROUND WAS DECIDED I N FAVOUR OF THE ASSESSEE FOLLOWING THE DECISION OF THE HONBLE SUPR EME COURT IN THE CASE OF CIT VS. UNITED GLASS MANUFACTURING CO. LTD. 2012-T IOL-102-SC-IT. 10. THE LD. DR RELIED UPON THE ASSESSMENT ORDER BUT COULD NOT CONTROVERT THE DECISIONS CITED BY THE LD. AR. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT RECORDS. AS REGARDS GROUND NO. 1, THE ISSUE RELATING TO DISA LLOWANCE U/S 14A READ WITH RULE 8D OF THE INCOME TAX RULES. THE FACTS OF THE CASE ARE THOUGH IDENTICAL TO THE FACTS OF THE A.Y. 2008-09 WHICH WA S DECIDED BY THE HONBLE HIGH COURT IN ASSESSEES FAVOUR. THE LD. DR COULD N OT CONTROVERT THE SAME. THEREFORE, GROUND NO. 1 IS DISMISSED. 12. AS REGARDS TO GROUND NO. 2 WHEREIN THE ISSUE CO NTESTED IS THAT OF DISALLOWANCE ON ACCOUNT OF COMPUTER PERIPHERALS. TH IS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2007-08 WHEREIN THE RATIO LAID DOWN BY THE HON BLE HIGH COURT IN CASE OF BSES YAMUNA POWER LTD. (SUPRA) IS FOLLOWED. THUS , GROUND NO. 2 IS DISMISSED. 13. AS REGARDS TO GROUND NO. 3 WHEREIN THE ISSUE IN VOLVED IS THAT OF ALLOWABILITY OF ADDITIONAL DEPRECIATION ON COMPUTER AND COMPUTER SOFTWARE I.E. COMPUTER TO PLATE (CTP). THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE 6 ITA NO. 6394 /DEL/2013 & ORS BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 200 8-09. THUS, GROUND NO. 3 IS DISMISSED. 14. AS REGARDS TO GROUND NO. 4, THE SAME IS RELATIN G TO ALLOWABILITY OF CLUB EXPENSES. THIS ISSUE IS COVERED IN FAVOUR OF THE AS SESSEE BY THE TRIBUNAL FOR A.Y. 2007-08 IN ASSESSEES OWN CASE WHEREIN THE RAT IO OF THE HONBLE APEX COURT IN CASE OF UNITED GLASS MANUFACTURING CO. LTD . (SUPRA) HAS BEEN FOLLOWED. THUS, GROUND NO. 4 IS DISMISSED. 15. IN RESULT, ITA NO. 6394/DEL/2013 FILED BY THE R EVENUE IS DISMISSED. 16. NOW WE ARE TAKING UP THE APPEALS FOR A.Y. 2010- 11 FILED BY BOTH REVENUE AS WELL AS BY THE ASSESSEE. THE GROUNDS OF BOTH THE APPEALS ARE AS FOLLOWS: ITA NO. 2768/DEL/2015 REVENUES APPEAL ( A.Y. 2010 -11) 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE ID. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 12 ,16,48,060/- MADE U/S 14A R.W.R. 8D. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE ID. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 1, 08,50,266/ - MADE ON ACCOUNT OF CAPITALIZATION OF TRAINING EXPENSES HAVI NG ENDURING BENEFITS. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE ID. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 17 ,72,651/- MADE ON ACCOUNT OF CAPITALIZATION OF CLUB EXPENSES HAVING E NDURING BENEFITS. 4. THE APPELLANT CRAVES LEAVE, TO ADD, ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. ITA NO. 2100/DEL/2015 ASSESSEES APPEAL (A.Y 2010- 11) 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN SUSTAINING DISALLOWANCE OF RS 8,223 ,500/- MADE BY THE ASSESSING OFFICER TOWARDS ADMINISTRATIVE EXPENSES U NDER CLAUSE (III) OF RULE 8D OF THE INCOME TAX RULES WITHOUT APPRECIATIN G THAT MAKING A DISALLOWANCE AS PER RULE 8D RESULTS IN ARBITRARY, U NREASONABLE AND 7 ITA NO. 6394 /DEL/2013 & ORS UNJUSTIFIED DISALLOWANCE. 2. THAT THE CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE APPELLANT HAD ADDED AN AMOUNT OF RS 500,000/- IN THE RETURN O F INCOME ON ACCOUNT OF DISALLOWANCE UNDER SECTION 14A OF THE ACT FOR AD MINISTRATIVE EXPENSES, AGAINST WHICH DURING THE COURSE OF ASSESSMENT PROCE EDINGS THE APPELLANT HAD OFFERED AN AMOUNT OF RS 545,000/- ON THE BASIS UPHELD IN APPEALS FOR EARLIER YEARS BY APPELLATE AUTHORITIES, WHICH AMOUN T OF DISALLOWANCE OUGHT TO HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER, BEI NG REASONABLE AND JUSTIFIED CONSIDERING FACT OF THE CASE. 3. THAT THE CIT (A) ERRED IN NOT APPRECIATING THE FAC T THAT THE ASSESSING OFFICER HAS NOT DISCUSSED AND RECORDED SATISFACTION TO THE EFFECT THAT DISALLOWANCE OF RS 545,000/- OFFERED BY THE APPELLA NT DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNDER SECTION 14A OF THE ACT WAS NOT APPROPRIATE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. WITHOUT PREJUDICE TO EARLIER GROUNDS, THAT THE CIT (A) ALSO ERRED IN NOT DIRECTING THE AO TO ALLOW ADJUSTMENT OF RS 500, 000/- ALREADY ADDED BY THE APPELLANT IN COMPUTATION OF TAXABLE INCOME A GAINST THE AMOUNT OF DISALLOWANCE OF RS 8,223,500/- DETERMINED BY HIM AN D MAKE NET ADDITION OF ONLY RS 7,723,500/-. 5. THAT THE APPELLANT CRAVES LEAVES TO ADD, ALTER, AM END OR FORGO ANY GROUND(S) OF THE APPEAL BEFORE OR AT THE TIME OF HE ARING. 17. THE BUSINESS OF THE ASSESSEE COMPANY REMAINED T HE SAME AS THAT OF THE EARLIER ASSESSMENT YEAR 2009-10. THE ASSESSEE FILED RETURN ON 02.10.2010 DECLARING INCOME AT RS RS.150,69,31,790/-. THE ASSESSING OFFICER ASS ESSED THE ASSESSEE AT AN INCOME OF RS.158,60,20,100/- AFTER MAKING FOLLOWING ADDITI ONS/DISALLOWANCES: S. NO. PARTICULARS AMOUNT (IN RS.) 1 DISALLOWANCE U/S 14A READ WITH RULE 8D 9,47,71,607/ - 2 DISALLOWANCE OF TRAINING EXPENSES 1,08,50,266/ - 3 DISALLOWANCE OF DEPRECIATION ON COMPUTER PERIPHERALS CLAIMED @ 60% 5,71,421/ - 4 DISALLOWANCE OF CLUB EXPENSES 17,72,651/ - 5 DISALLOWANCE OF ROYALTY & COPYRIGHT CHARGES 2,68,45,425/ - 8 ITA NO. 6394 /DEL/2013 & ORS 18. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE AS SESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) UPHELD THE DISALLOWAN CE U/S 14A READ WITH RULE 8D TO THE EXTENT OF RS. 82,23,500/-. THE CIT(A) DEL ETED THE ADDITIONS IN RESPECT OF DISALLOWANCE OF TRAINING EXPENSES, DISALLOWANCE OF DEPRECIATION ON COMPUTER PERIPHERALS CLAIMED @ 60%, DISALLOWANCE OF CLUB EXP ENSES AND DISALLOWANCE OF ROYALTY & COPYRIGHT CHARGES. THE REVENUE IS IN APPE AL FOR THE DELETION OF THE ADDITIONS MADE BY THE CIT(A) AND ASSESSEE IS IN APP EAL REGARDING DISALLOWANCE U/S 14A READ WITH RULE 8D. 19. ALL THE GROUNDS IN ASSESSEES APPEAL ARE RELATI NG TO DISALLOWANCE ON ACCOUNT OF ADMINISTRATIVE EXPENSES OF RS. 82,23,500 /- AS AGAINST DISALLOWANCE MADE BY THE COMPANY IN THE RETURN OF INCOME TO THE EXTENT OF RS.5 LACS AND REVISED TO RS.5,45,000/- DURING THE COURSE OF ASSES SMENT PROCEEDINGS. 20. THE LD. AR SUBMITTED THAT IT HAS BEEN HELD BY T HE HON'BLE HIGH COURT OF DELHI IN THE CASE OF ASSESSEE COMPANY FOR ASSESSMEN T YEAR 2008-09 THAT DISALLOWANCE MADE BY THE ASSESSING OFFICER WITHOUT RECORDING SATISFACTION IS NOT SUSTAINABLE. IN ASSESSMENT YEAR 2008-09, THE A SSESSEE COMPANY MADE DISALLOWANCE ON ACCOUNT OF ADMINISTRATIVE EXPENSES TO EXTENT OF RS.3,00,000/- WHICH WAS UPHELD BY THE HONBLE HIGH COURT. THE LD. AR SUBMIT TED THAT IN THIS YEAR I.E. A.Y. 2010-11, THE ASSESSEE COMPANY MADE D ISALLOWANCE OF RS.5,00,000/- IN ORIGINAL RETURN, WHICH WAS DULY SU BSTANTIATED WITH FACTS THAT THERE WERE ONLY EIGHT INVESTMENTS IN MUTUAL FUNDS A ND COMPANIES FROM WHICH EXEMPT INCOME WAS RECEIVED. INCOME ON FOUR MUTUAL F UNDS HAD ACCRUED AND REINVESTED. IN RESPECT OF OTHER FOUR INVESTMENTS DI VIDEND WARRANTS WERE RECEIVED AND CREDITED TO BANK ACCOUNT. THUS, THE LD . AR SUBMITTED THAT THERE WAS NEGLIGIBLE COST INCURRED BY THE ASSESSEE COMPAN Y. THE LD. AR FURTHER SUBMITTED THAT DISALLOWANCE WAS, THEREAFTER, REVISE D TO RS. 5,45,000/- AS PER CALCULATIONS OF PROPORTIONATE COST OF FINANCE DEPAR TMENT, FOR WHICH THE BASIS 9 ITA NO. 6394 /DEL/2013 & ORS UPHELD IN EARLIER YEARS. THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER WITHOUT DISCUSSING THE FACTS AND CONTENTIONS OF THE COMPANY DETERMINED DISALLOWANCE AT RS. 2,70,21,293/-. THE CIT(A) RESTR ICTED THE SAME TO RS.82,23,500/- EXCLUDING INVESTMENTS, INCOME FROM W HICH WAS TAXABLE AND ALSO INVESTMENTS IN SUBSIDIARY COMPANIES. THUS, THE LD. AR SUBMITTED THAT THE CIT(A) WRONGLY OBSERVED THAT ASSESSEE HAD NOT SUBST ANTIATED THE BASIS OF DISALLOWANCE IN THE RETURN OF INCOME. THE LD. AR S UBMITTED THAT THIS ISSUE IS COVERED BY THE ORDER OF THE HONBLE HIGH COURT IN C ASE OF ASSESSEE AND OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GO DREJ BOYCE. THEREFORE, THE LD. AR SUBMITTED THAT THE DISALLOWANCE HAS TO BE RESTRICTED TO RS.5,45,000/- ON THE GROUND THAT THE ASSESSING OFFICER AND THE CIT(A ) HAVE NOT GIVEN ANY FINDING AS TO HOW THE AFORESAID AMOUNT OF DISALLOWANCE MADE BY THE COMPANY WAS NOT CORRECT. THE LD. AR RELIED UPON THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF PR.CIT V. U.K. PAINTS (INDIA) (P) LTD. 21. IN THE ALTERNATIVE AND WITHOUT PREJUDICE TO ABO VE THE SUBMISSION, THE LD. AR FURTHER SUBMITTED THAT AVERAGE AMOUNT OF INVESTM ENT ON WHICH EXEMPT INCOME WAS RECEIVED DURING THE YEAR WORKS OUT TO RS . 133.50 CRORES (38.50 + 228.50 = 267 2) , THE DETAILS ARE GIVEN ON PAGE 4 OF THE ORDER OF THE CIT(A). ON THIS BASIS THE DISALLOWANCE WORKS OUT TO RS.66.7 5 LACS. THE LD. AR RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN TH E CASE OF ACB INDIA LTD. V. ACIT (2015) 374 ITR 108 (DEL) AND RECENT DECISION O F THE TRIBUNAL IN THE CASE OF FEDERAL MOGUL GOETZE INDIA LTD. V. DCIT DECIDED ON 27.06.2018. 22. AS REGARDS APPEAL OF DEPARTMENT, RELATING TO GR OUND NO. 1 FOR DISALLOWANCE U/S 14A READ WITH RULE 8D ON ACCOUNT O F INTEREST AND ADMINISTRATIVE EXPENSES, THE LD. AR SUBMITTED A STA TEMENT GIVING FIGURES OF INVESTMENTS, OWNED FUNDS AND LOANS DURING THE COURS E OF HEARING. THE LD. AR FURTHER SUBMITTED THAT BEFORE THE ASSESSING OFFICER AND ALSO BEFORE THE CIT(A) THE ASSESSEE SUBMITTED ALL INVESTMENTS WHICH WERE M ADE OUT OF ASSESSEES OWN FUNDS BY THE ASSESSEE AND NO BORROWED FUNDS WERE US ED. HENCE, THE LD. AR 10 ITA NO. 6394 /DEL/2013 & ORS SUBMITTED THAT NO DISALLOWANCE ON ACCOUNT OF INTERE ST SHOULD BE CALLED FOR. THE CIT(A) RECORDED THE FACTS AND DELETED THE DISALLOWA NCE ON ACCOUNT OF INTEREST AND HELD THAT THE COMPANY WAS HAVING RESERVES AND S URPLUS OF RS. 974 CRORES AS AGAINST TOTAL INVESTMENTS OF RS. 666.74 CRORES A S ON 31.03.2010. ACCORDINGLY, THE ISSUE REGARDING DISALLOWANCE OF IN TEREST IS COVERED IN FAVOUR OF THE COMPANY BY THE ORDER OF HON'BLE HIGH COURT OF D ELHI IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2008-09 AND ALSO BY TH E JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF GODREJ AND BOYCE MANU FACTURING CO. LTD. VS. DCIT (2017) 394 ITR 449 (S.C). THE LD. AR RELIED U PON THE ORDER OF THE TRIBUNAL, DELHI BENCH DATED 2/5/2018 IN THE CASE OF DCIT (LTU) VS. CAPARO ENGINEERING INDIA PVT. LTD. THUS, THE LD. AR SUBMIT TED THAT IN REGARD TO ADMINISTRATIVE EXPENSES, IT IS CROSS GROUND TO THE GROUND OF THE ASSESSEE AND THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY T HE DECISIONS THE HONBLE DELHI HIGH COURT AND THE HON'BLE SUPREME COURT, SINCE THE ASSESSING OFFICER HAD NOT RECORDED SATISFACTION. 23. THE LD. DR SUBMITTED THAT THE ASSESSING OFFICER HAS RIGHTLY MADE DISALLOWANCE U/S 14A READ WITH RULE 8D ON ACCOUNT O F ADMINISTRATIVE EXPENSES, BUT THE CIT(A) ERRED IN RESTRICTING THIS DISALLOWANCE U/S 14A READ WITH RULE 8D ON ACCOUNT OF INTEREST AND ADMINISTRAT IVE EXPENSES. THE LD. DR RELIED UPON THE ASSESSMENT ORDER. THE LD. DR SUBMIT TED THAT THIS YEAR IS NOT IDENTICAL WITH THE PREVIOUS ASSESSMENT YEAR I.E. 20 09-10. THE LD. DR SUBMITTED THAT IN THIS ASSESSMENT YEAR 2010-11, THE ASSESSEE MADE HUGE INVESTMENT FOR WHICH THE ASSESSEE HAS NOT PROPERLY QUANTIFIED ADMINISTRATIVE EXPENSES AS PER SECTION 14A READ WITH RULE 8D. THE LD. DR RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE O F INDIA BULLS FINANCIAL SERVICES LTD. VS. DCIT (2016) 76 TAXMAN.COM 268. T HE HON'BLE HIGH COURT HELD AS UNDER: 8. IN THIS INSTANCE THE ELABORATE ANALYSIS CARRIED OUT BY THE AO - AS INDEED THE THREE IMPORTANT STEPS INDICATED BY HIM IN THE O RDER, SHOWS THAT ALL THESE 11 ITA NO. 6394 /DEL/2013 & ORS ELEMENTS WERE PRESENT IN HIS MIND, THAT HE DID NOT EXPRESSLY RECORD HIS DISSATISFACTION IN THESE CIRCUMSTANCES, WOULD NOT PER SE JUSTIFY THIS COURT IN CONCLUDING THAT HE WAS NOT SATISFIED OR DID NOT REC ORD COGENT REASONS FOR HIS DISSATISFACTION TO REJECT THE AO'S CONCLUSION. TO I NSIST THAT THE AO SHOULD PAY SUCH LIP SERVICE REGARDLESS OF THE SUBSTANTIAL COMP LIANCE WITH THE PROVISIONS WOULD, IN FACT, DESTROY THE MANDATE OF SECTION 14A. 24. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE MATERIAL AVAILABLE ON RECORD. THE CONTENTION OF THE LD. AR THAT THERE IS NO SATISFACTION RECORDED BY THE ASSESSING OFFICER WHILE INVOKING SECTION 14A RE AD WITH RULE 8D. WE HAVE GONE THROUGH THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF INDIA BULLS FINANCIAL SERVICES LTD. (SUPRA) AS WELL AS TH E ASSESSEES OWN CASE. THE SATISFACTION OF THE ASSESSING OFFICER IS SEEN FROM THE THREE STEPS TAKEN BY HIM IN ASSESSMENT ORDER REGARDING THE INVOCATION OF SEC TION 14A READ WITH RULE 8D. BUT AT THE SAME TIME, THE ASSESSING OFFICER FA ILED TO TAKE THE COGNIZANCE OF THE LETTER DATED 08.02.2013 WHICH IS A SUBMISSION O F THE ASSESSEE COMPANY BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS, WHEREIN THE ASSESSEE REVISED ITS DISALLOWANCE TO RS. 5,45,000/- AS PER THE CALCULATIONS OF THE PROPORTIONATE COST OF FINANCE DEPARTMENT, FOR W HICH THE BASIS UPHELD IN EARLIER YEARS. THE ASSESSING OFFICER WITHOUT TAKING COGNIZANCE OF THE SAID AMOUNT, HAS TAKEN INVESTMENT OF RS.540,42,58,500 AN D CALCULATED AVERAGE INVESTMENT OF RS. 2,70,21,293 AND TAKEN INTO ACCOUN T ONLY 5,00,000 AS EXPENDITURE DIRECTLY RELATED TO INCOME WHICH DOES N OT FORM PART OF TOTAL INCOME. THUS, THE ASSESSING OFFICER HAS NOT TAKEN THE AVERA GE INVESTMENT AND THE EXPENDITURE INCURRED ON THE SAME IN PROPER WAY. EVE N IF WE GO BY THE ALTERNATE SUBMISSION OF THE LD. AR THAT AN AVERAGE AMOUNT OF INVESTMENT ON WHICH EXEMPT INCOME WAS RECEIVED DURING THE YEAR WORKS OU T TO RS. 133.50 CRORES (38.50 + 228.50 = 267 2), THE SAME NEEDS TO BE VERIFIED BY THE ASSESSING OFFICER AS THE DISALLOWANCE U/S 14A CANNOT BE MORE THAN THE EXEMPT INCOME AS THE VARIOUS DECISIONS OF THE HONBLE HIGH COURTS. T HEREFORE, IT WILL BE APPROPRIATE TO REMAND BACK THIS ISSUE TO THE FILE O F THE ASSESSING OFFICER FOR 12 ITA NO. 6394 /DEL/2013 & ORS CALCULATING THE AVERAGE INVESTMENT AND THE EXPENDIT URE INCURRED BY THE ASSESSEE ON NON-EXEMPT INVESTMENTS INCLUDING THE IN TEREST PORTION. WE REMAND BACK THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO ADJUDICATE IT A FRESH AS PER THE DIRECTIONS GIVEN BY US HEREINABOVE . NEEDLESS TO SAY, THE ASSESSEE BE GIVEN OPPORTUNITY OF HEARING BY FOLLOWI NG PRINCIPLES OF NATURAL JUSTICE. GROUND NO. 1 OF THE REVENUES APPEAL AND G ROUND NO. 1 TO 5 OF THE ASSESSEES APPEAL ARE PARTLY ALLOWED FOR STATISTICA L PURPOSE. 25. GROUND NO. 2 OF DEPARTMENTS APPEAL RELATING TO DISALLOWANCE ON ACCOUNT OF TRAINING EXPENSES, THE LD. AR SUBMITTED THAT THI S GROUND IS COVERED IN FAVOUR OF THE ASSESSEE COMPANY VIDE ORDERS OF TRIBU NAL FOR AYS 2007-08 AND 2008-09 WHEREIN SIMILAR GROUND OF DEPARTMENT WAS DI SMISSED FOLLOWING THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF CIT V. SOLUS PHARMACEUTICALS LTD. THE DEPARTMENT ALSO ACCEPTED T HE DECISION OF THE CIT(A) ON THIS ISSUE IN A.YS. 2009-10 AND 2011-12 IN WHICH YEARS GROUND IN THIS REGARD WAS NOT TAKEN IN THE APPEALS FILED. THIS ISS UE IS ALSO COVERED BY THE JUDGMENT OF DELHI HIGH COURT IN THE CASE OF H.T. MU SIC & ENTERTAINMENT CO. LTD. 26. THE LD. DR RELIED UPON THE ASSESSMENT ORDER BUT COULD NOT CONTROVERT THE DECISION OF THE TRIBUNAL FOR A.YS. 2007-08 AND 2008-09 PASSED BY THE TRIBUNAL. 27. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT RECORDS. THE OF DISALLOWANCE ON ACCOUNT OF TRAINING EXPENSES IS COVERED IN FAVOUR OF THE ASSESSEE COMPANY VIDE ORDERS OF TRIBUNAL FOR AYS 20 07-08 AND 2008-09 WHEREIN SIMILAR GROUND OF DEPARTMENT WAS DISMISSED FOLLOWING THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF CIT V. SOLU S PHARMACEUTICALS LTD. THE DEPARTMENT ALSO ACCEPTED THE DECISION OF THE CIT(A) ON THIS ISSUE IN A.YS. 2009-10 AND 2011-12 IN WHICH YEARS GROUND IN THIS R EGARD WAS NOT TAKEN IN THE APPEALS FILED. THIS ISSUE IS ALSO COVERED BY TH E JUDGMENT OF DELHI HIGH 13 ITA NO. 6394 /DEL/2013 & ORS COURT IN THE CASE OF H.T. MUSIC & ENTERTAINMENT CO. LTD. THEREFORE, GROUND NO. 2 OF THE REVENUES APPEAL IS DISMISSED. 28. AS RELATING TO GROUND NO.3 OF THE DEPARTMENTS APPEAL REGARDING ALLOWABILITY OF CLUB EXPENSES, THE LD. AR SUBMITTED THAT THIS GROUND IS SIMILAR TO GROUND NO. 4 OF THE DEPARTMENTS APPEAL FOR ASSE SSMENT YEAR 2009-10 AND IS COVERED IN FAVOUR OF THE ASSESSEE COMPANY VIDE O RDER OF TRIBUNAL FOR AYS 2007-08 AND 2008-09 WHEREIN SIMILAR GROUND WAS DECI DED IN FAVOUR OF THE ASSESSEE COMPANY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF UNITED GLASS MANUFACTURING COMPANY LTD. 29. THE LD. DR RELIED UPON THE ASSESSMENT ORDER BUT COU LD NOT CONTROVERT THE DECISION OF THE TRIBUNAL FOR A.YS. 2007-08 AND 2008-09 PASSED BY THE TRIBUNAL. 30. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THIS GROUND IS SIMILAR TO GROU ND NO. 4 OF THE DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 2009-10 AND IS COVERED I N FAVOUR OF THE ASSESSEE COMPANY VIDE ORDER OF TRIBUNAL FOR AYS 2007-08 AND 2008-09 WHEREIN SIMILAR GROUND WAS DECIDED IN FAVOUR OF THE ASSESSEE COMPAN Y FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF UNITED GLASS M ANUFACTURING COMPANY LTD. THEREFORE, GROUND NO. 3 OF THE REVENUES APPEAL IS DISMISSED. 31. IN RESULT, ITA NO. 2768/DEL/2015 AND ITA NO. 2100/DEL/2015 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. 32. NOW WE ARE TAKING UP THE APPEALS FOR A.Y. 2011- 12 FILED BY BOTH THE PARTIES. GROUNDS OF APPEALS ARE AS FOLLOWS: ITA NO. 3532/DEL/2016 REVENUES APPEAL (A.Y 2011-12 ) 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE DISALLOWANCES O F RS.4,47,52,906/- MADE U/S 14 ITA NO. 6394 /DEL/2013 & ORS 14A R.W.R. 8D. ITA NO. 2854/DEL/2016 ASSESSEES APPEAL (A.Y 2011-1 2) 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN SUSTAINING DISALLOWANCE OF RS 4,935 ,000/- MADE BY THE ASSESSING OFFICER TOWARDS ADMINISTRATIVE EXPENSES U NDER CLAUSE (III) OF RULE 8D OF THE INCOME TAX RULES WITHOUT APPRECIATIN G THAT MAKING A DISALLOWANCE AS PER RULE 8D RESULTS IN ARBITRARY, U NREASONABLE AND UNJUSTIFIED DISALLOWANCE. 2. THAT THE CIT(A) ERRED IN NOT APPRECIATING THE FA CT THAT THE APPELLANT HAD ADDED AN AMOUNT OF RS 100,000/- IN THE RETURN O F INCOME ON ACCOUNT OF DISALLOWANCE UNDER SECTION 14 A OF THE ACT FOR A DMINISTRATIVE EXPENSES WHICH OUGHT TO HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER, BEING REASONABLE AND JUSTIFIED CONSIDERING FACT OF THE CA SE. 3. THAT THE CIT (A) ERRED IN NOT APPRECIATING THE F ACT THAT THE ASSESSING OFFICER HAS NOT DISCUSSED AND RECORDED SATISFACTION TO THE EFFECT THAT DISALLOWANCE OF RS 100,000/- MADE BY THE APPELLANT IN THE RETURN OF INCOME UNDER SECTION 14A OF THE ACT WAS NOT APPROPR IATE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. WITHOUT PREJUDICE TO EARLIER GROUNDS, THE CIT(A ) ALSO ERRED IN NOT DIRECTING THE AO TO ALLOW ADJUSTMENT OF RS 100,000/ - ALREADY ADDED BY THE APPELLANT IN COMPUTATION OF TAXABLE INCOME AGAI NST THE AMOUNT OF DISALLOWANCE OF RS 4,935,000/- DETERMINED BY HIM AN D MAKE NET ADDITION OF ONLY RS 4,835,000/-. 33. THE ASSESSEE FILED ITS RETURN OF INCOME ON 28.0 9.2011 DECLARING AN INCOME OF RS.2,203,788,719 WHICH WAS SUBSEQUENTLY R EVISED ON 30.03.2013 AT AN INCOME OF RS 2,203,787,098. THE ASSESSMENT WA S COMPLETED BY THE LEARNED ASSESSING OFFICER UNDER SECTION 143(3) OF T HE INCOME TAX ACT, 1961 VIDE ORDER DATED 21.03.2014 AT AN INCOME OF RS.2,30 1,766,450. 34. THE LD. DR AS WELL AS THE LD. AR SUBMITTED THAT THE ISSUES ARE IDENTICAL TO THE ASSESSMENT YEAR 2010-11. 15 ITA NO. 6394 /DEL/2013 & ORS 35. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. GROUND NO. 1 OF THE REVENUES APPEAL AND GROUND NO. 1 TO 4 OF THE ASSESSEES APPEAL ARE IDENTICAL TO GROUND NO. 1 OF THE REVENUES APPEAL AND GROUND NO. 1 TO 5 OF THE ASSESSEES APPE AL FOR A.Y. 2010-11, THEREFORE, BOTH THE GROUNDS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. 36. IN RESULT, ITA NO. 3532/DEL/2016 AND ITA NO. 2854/DEL/2016 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH SEPTEMBER, 2018 . SD/- SD/- (P. M. JAGTAP) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 05/09/2018 R. NAHEED COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 16 ITA NO. 6394 /DEL/2013 & ORS DATE OF DICTATION 13.07.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 13.07.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 0 5 .0 9 .2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 0 5 .0 9 . 2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 0 5 .0 9 .2018 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER