M/s Apex Packing Products Pvt. Ltd., Goa V. The Assistant Commissioner of Income Tax, Circle- 2 (1), Panaji., Panaji

ITA 28/PAN/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2106 (ITAT-PANAJI)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 24-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K MEHBOOB ALI KHAN
• Assessee Lawyers: DINESH P
• Keywords: Depreciation; Opportunity of being heard; Earning of tax free income
• Section: 14A; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 28/P A N/201 6 (ASST. YEAR : 20 1 0 - 1 1 ) M/S. APEX PACKING PRODUCTS PVT. LTD., PLOT NOS. 186 & 187, KUNDAIM INDUSTRIAL ESTATE, KUNDAIM, GOA. VS. A CIT, CIRCLE - 2(1), PANAJI. PAN NO. AACCA 3426 B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DINESH P. ADV. DEPARTMENT BY : SHRI K. MEHBOOB ALI KHAN - D R DATE OF HEARING : 27 / 0 4 /201 6 . DATE OF PRONOUNCEMENT : 2 7 / 0 4 /201 6 . O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) , HUBLI , DATED 26 / 11 /201 5 . 2. GROUND NOS. 1 & 9 ARE GENERAL IN NATURE AND HENCE, REQUIRE NO SEPARATE ADJUDICATION BY US. GROUND NO.2 OF THE APPEAL READS AS UNDER: - THE CIT(A) GROSSLY ERRED IN SUSTAI N ING THE DISALLOWANCE OF DEDUCTION UNDER SEC. 80 - IB(4) OF THE ACT WITHOUT PRO PERLY APPRECIATING THE FACTS OF THE CASE VIS - A - VIS THE REQUIREMENTS OF LAW AS SATISFIED BY THE APPELLANT . 3 . AT THE TIME OF HEARING, AUTHORIZED REPRESENTATIVE OF THE ASSESSEE NOT PRESSED THIS GROUND OF APPEAL AND MADE AN ENDORSEMENT TO THIS 2 ITA NO. 28 /P A N/201 6 EFFECT ON THE GROUNDS OF APPEAL FILED ALONG WITH FORM NO. 36 , T HEREFORE, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 4 . IN GROUND NOS. 3 & 4 OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT ALLOWING DEDUCTION UNDER SEC. 80 - IB(4) ON SALES - TAX INCENTIVE . 5. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PACKAGING MATERIAL FOR FMCG COMPAN I ES, SUCH AS NESTL E , HINDUSTAN LEVER & PARLE. ASSESSEE RECEIVED SALES - TAX INCENTIVE OF 30,95,163/ - AND C L AIMED DEDUCTION ON THIS AMOUNT UNDER SEC. 80 - IB OF THE ACT. THE ASSESSING OFFICER RELYING ON THE DECISION S OF THE HONBLE SUPREME COURT IN THE CASE OF STERLING FOODS VS. CIT (237 ITR 579) , PANDIAN CHEMICALS LTD. VS. CIT (262 ITR 278 ) , DISALLOWED DEDUCTION UNDER SEC. 80 - IB O N 30,95,163/ - . 6 . ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT (317 ITR 218) , WHERE IN IT WAS HELD THAT DUTY DRAWBACK S ARE INCENTIVE S WHICH FLOWS FROM THE SCHEME FRAMED BY THE CENTRAL GOVT. AND FROM SEC. 75 OF THE CUSTOMS ACT, 1962 , AND ARE THEREFORE, NOT PROFITS DERIVED FROM ELIGIBLE BUSINESS UNDER SEC. 80 - IB , DISALLOWED THE CLAIM OF THE ASSESSEE. 7 . BEFORE US, AUTHORIZED REPRESENTATIVE OF THE ASSESSEE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. MEGHALAYA STEELS LTD. IN CIVIL AP P EAL NO. 7622/2014 , ORDER DATED 09/03/2016 AND SUBMITTED THAT IT HAS BEEN HELD BY THE HONBLE SUPREME COURT THAT SUBSIDIES (SUCH AS TRANSPORT SUBSIDY, INTEREST SUBSIDY AND POWER SUBSIDY) PAID TO THE ASSESSEE WITH THE OBJECT OF REDUCING COST OF PRODUCTION CONSTITUTES PROFITS DERIVED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING AND IS ELIGIBLE FOR DEDUCTION UNDER SEC. 80 - IB . LIBERTY INDIA ((SUPRA) IS DISTINGUISHABLE ON FACTS . THEREFORE, HE 3 ITA NO. 28 /P A N/201 6 SUBMITTED THAT ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) SHOULD BE REVERSED AND THE APPEAL OF THE ASSESSEE SHOULD BE ALLOWED . 8 . THE DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES . 9. WE FIND THAT A SIMILAR ISSUE HAD COME UP BEFORE THIS TRIBUNAL IN THE CASE OF ACIT VS. M/S. CORAL CLINICAL SYSTEMS IN ITA NOS. 322 TO 324/PNJ/2015 FOR THE ASSESSMENT YEARS 2009 - 10 TO 2011 - 12 , ORDER DATED 09/07/2015 WHEREIN IT WAS HELD AS UNDER: - 13. WE FIND THAT ON A SIMILAR ISSUE, THE BOMBAY BENCH OF THE TRIBUNAL IN THE CASE OF M/S. DIAMOND TOOL INDUSTRIES VS. JCIT IN I.T.A.NO. 136/MUM/2009 VIDE ORDER DATED 14/12/2011, HE LD AS UNDER: - '6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PURSUED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT (A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE HON'BLE GAUHATI HIGH COURT IN THE CASE OF MEGHALAYA STEELS LTD. (SUPRA) AFTER CONSIDERING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA) HAS HELD THAT CENTRAL EXCISE DUTY HAS A DIRECT NEXUS WITH THE MANUFACTURING ACTIVITY AND SIMILARLY THE REFUND OF THE CENTRAL EXCISE D UTY ALSO HAD A DIRECT NEXUS WITH THE MANUFACTURING ACTIVITY. THE ISSUE OF PAYMENT OF CENTRAL EXCISE DUTY WOULD NOT ARISE IN THE ABSENCE OF ANY INDUSTRIAL ACTIVITY. IT WAS, ACCORDINGLY, HELD THAT THE REFUND OF EXCISE DUTY HAS TO BE TAKEN INTO ACCOUNT FOR PU RPOSES OF SECTION 80 - IB. FOLLOWING THE RATIO OF THE SAID DECISION, WE ARE OF THE CONSIDERED OPINION THAT THERE IS AN INEXTRICABLE LINK BETWEEN THE MANUFACTURING ACTIVITY, THE PAYMENT OF SALES TAX AND THE SALES TAX INCENTIVE. THEREFORE, IN OUR OPINION, SUCH SALES TAX INCENTIVE WHICH HAS BEEN RETAINED BY THE ASSESSEE FROM THE SALES TAX COLLECTED HAS TO BE HELD AS DERIVED FROM THE INDUSTRIAL UNDERTAKING AND CONSEQUENTLY IS ELIGIBLE FOR DEDUCTION U/S 80 - IB OF THE ACT. IN THIS VIEW OF THE MATTER, THE ORDER OF TH E LD.CIT(A) IS SET ASIDE AND THE A.O. IS DIRECTED NOT TO EXCLUDE THE SALES TAX INCENTIVE OF 12,94,1097 - AND RS.84,687/ - FROM THE PROFIT OF UNIT - 1 AND UNIT - II RESPECTIVELY WHILE CALCULATING DEDUCTION U/S 80 - IB OF THE ACT. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 4 ITA NO. 28 /P A N/201 6 10 . FACTS BEING IDENTICAL , RESPECTFULLY FOLL O W I NG THE PRECEDENT, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND ALLOW DEDUCTION UNDER SEC. 80 - IB CLAIMED BY THE ASSESSEE ON SALES - TAX INCENTIVE OF 30,95,163/ - AND ALLOW THE G ROUND OF APPEAL OF THE ASSESSEE. 11 . IN GROUND NO.5 , THE GRIEVANCE OF THE ASSESSEE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN SUSTAINING THE DISALLOWANCE OF ASSETS WRITTEN OFF WITHOUT APPRECIATING THE CLAIM OF THE ASSESSEE THAT WRITING OFF WAS STRICTLY IN ACCORDANCE WITH SEC. 43(6)(C)(I)(B) OF THE ACT. 12 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED DEDUCTION OF 6,86,413/ - AS VALUE OF ASSETS WRITTEN OFF . THE ASSESSING OFFICER DISALLOWED THE SAME AS WRITING OFF ASSETS OR SCRAP PING OF A FIXED ASSET IS A CAPITAL LOSS AND IS NOT ALLOWABLE DEDUCTION UNDER SEC. 37. ACCORDING TO THE ASSESSING OFFICER, SEC. 43(6) SPEAKS OF WRITTEN DOWN VALUE AND SUB - SECTION (C)(I)(B) SPEAKS ABOUT THE ADJUSTMENTS TO BE MADE TO THE WDV OF THE ASSET BY REDUCTION OF MONEYS PAYABLE IN RESPECT OF ANY ASSET FALLING WITHIN THAT BLOCK, WHICH IS SOLD OR DISCARDED OR DEMOLISHED OR DESTROYED DURING THE PREVIOUS YEAR TOGETHER WITH THE AMOUNT OF THE SCRAP VALUE , IF ANY, SO HOWEVER THAT THE AMOUNT OF SUCH REDUCTION DOES N OT EXCEED THE WDV AS SO INCREASED. UNDER THE BLOCK OF ASSET S METHOD, MONEYS PAYABLE ARE REDUCED FROM THE WDV OF THE BLOCK TO ARRIVE AT THE AMOUNT ELIGIBLE FOR DEPRECIATION. A CAPITAL GAIN OR LOSS WOULD ARISE ONLY WHERE SALE VALUE OF MONEYS PAYABLE EXCEED THE WDV OR ON EXTINGUISHMENT OF THE BLOCK RESPECTIVELY WHICH WOULD THEN BE DEALT WITH UNDER RELEVANT CAPITAL GAINS PROVISIONS . THE ASSESSEE HAS REDUCED THE VALUE OF ASSETS TO NIL BY WRITING OFF THE SAME FROM BOOKS AND IT HAS NEITHER SOLD THE ASSET NOR DISCARDED IT, AND THERE IS NO SCRAP VALUE EVEN . THUS, IT IS ONLY A CAPITAL LOSS WHICH IS NOT PERMISSIBLE TO BE DEDUCTED UNDER SEC. 43(6)(C)(I)(B) OF THE ACT. 5 ITA NO. 28 /P A N/201 6 13 ON APPEAL , COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ACTION OF THE ASSESSING OFFICER . 14 THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE, BEFORE US, SUBMITTED THAT IF THE LOSS AS CLAIMED BY THE ASSESSEE IS NOT ALLOWED BY THE ASSESSING OFFICER, THEN THE ASSESSING OFFICER SHOULD HAVE ALLOWED DEPRECIATION ON THE SAME. ON A QUERY BY THE BENCH , WHETHER ASSESSEE HAD CLAIMED DEPRECIATION BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR BEFORE COMMISSIONER OF INCOME TAX (APPEALS) , THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE CATEGORICALLY DENIED OF HAVING DONE SO. 15 ON THE OTHER HAND, DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 16 AFTER CONSIDERING THE RIVAL SUBMISSION S AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE ARE OF THE CONSIDERED OPINI O N THAT IF THE LOSS ON ACCOUNT OF ASSETS WRITTEN OFF HAS NOT BEEN ALLOWED TO THE ASSESSEE BY THE ASSESSING OFFICER CONSIDERING IT TO BE A CAPITAL LOSS, THEN HE SHOULD HAVE ALLOWED DEPRECIATION ON THE WDV OF THE ASSETS . WE, THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND REMAND BACK TO THE FILE OF THE ASSESSING OFFICER TO RE - ADJUDICATE THE ISSUE , AFRESH AFTER VERIFICATION AS PER LAW. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 17 GROUND NOS. 6 & 7 OF THE APPEAL ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) SUSTAI N ING DISALLOWANCE OF 3,87,977/ - UNDER SEC. 14 A READ WITH RULE 8D OF THE I.T. RUL ES . 18 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER FOUND FROM THE BALANCE SHEET OF THE ASSESSEE THAT THE ASSESSEE WAS HAVING INVESTMENTS AND THE SAID INVESTMENTS ARE EARNING DIVIDEND INCOME 6 ITA NO. 28 /P A N/201 6 WHICH IS EXEMPT FROM TAX. THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT IT HAS NOT INCURRED ANY EXPENDITURE ON INVESTMENT. THE ASSESSING OFFICER DID NOT ACCEPT THE SAME AND WORKED OUT DISALLOWANCE UNDER SEC. 14A READ WITH RULE 8D AND MADE DISALLOWANCE OF 3,87,977/ - , WHICH WAS CONFIRMED IN APPEAL BY THE COMMISSIONER OF INCOME TAX (APPE ALS). 19 AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER MAKING DISALLOWANCE OF 3,87,977/ - UNDER SEC. 14A OF THE ACT AND NOT ACCEPTING THE EXPLANATION OF THE ASSESSEE THAT IT HAS NOT INCURRED ANY EXPENDITURE FOR EARNING EXEMPT INCOME. 20 ON THE OTHER HAND, DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 21 AFTER CONSIDERING THE RIVAL SUBMISSION S AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE ASSESSING OFFICER WHILE WORKING OUT THE VALUE OF AVERAGE INVESTMENTS, HAS TAKEN THE COST OF INVESTMENT ON THE FIRST DAY OF THE PREVIOUS YEAR AND THE COST OF INVEST MENT ON THE LAST DAY OF THE PREVIOUS YEAR AND HAS WORKED OUT THE DISALLOWANCE AT HALF PER CENT OF THE AVERAGE COST OF INVESTMENTS. 22 WE FIND THAT THE PANAJI BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS. M/S. SESA GOA LTD. IN ITA NO S. 9 2 & 100 /PNJ/2015 IN THE ASSESSMENT YEAR 2010 - 11 , ORDER DATED 10/09/2015 HAS HELD AS UNDER: - 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE CALCULATION MADE BY THE AO SHOWS THAT THE AO HAS CONSIDERED ALL THE INVESTMENTS WHICH IS NOT PERMISSIBLE WHEREAS THE ASSESSEE HAS NOT PROVIDED A PROPER COMPUTATION OF THE DISALLOWANCE U/S 14A AND THE LD. CIT(A) HAS ALSO NOT CONSIDERED THE CALCULATION PROVIDED UNDER RULE 8D, THE ISSUE OF DISALLOWANCE U/S 14A IS RESTORED TO THE FILE OF THE AO FOR RE - ADJUDICATION IN LI NE WITH THE DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. SESA RESOURCES LTD. IN IN ITA NOS. 252 & 267/PNJ/2015 DT. 20.8.2015 WHEREIN IT HAS BEEN HELD AS FOLLOWS : 7 ITA NO. 28 /P A N/201 6 4. WE HAVE HEARD THE SUBMISSIONS. A PERUSAL OF THE CALCULATION MA DE BY THE AO AT PAGE 5 OF THE ASSESSMENT ORDER SHOWS THAT THE AO HAS CONSIDERED ALL THE INVESTMENTS. THIS IS NOT PERMISSIBLE. HERE, IT WAS BROUGHT TO THE ATTENTION OF THE LD. AR THAT THE COMPUTATION OF DEDUCTION U/S 14A WAS LIABLE TO BE MADE IN LINE WITH T HE DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF REI AGRO LTD., KOLKATA IN ITA NOS. 1331/KOL/2011 AND 1423/KOL/2011 DT. 19.6.2013 WHEREIN THE CO - ORDINATE BENCH OF THIS TRIBUNAL HAS HELD AS FOLLOWS : 7. NOW COMING TO THE MERITS OF THE ISSUE. A PERUSAL OF THE PROVISION OF SECTION 14A(1) CLEARLY SHOWS THE WORDINGS, 'IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT'. IN THE PRESENT CASE, THIS INCOME, WHICH DOES NOT FO RM PART OF THE TOTAL INCOME UNDER THE ACT, IS THE DIVIDEND INCOME OF RS.1,32,638/ - . THEREFORE, IF ANY DISALLOWANCE IS TO BE MADE IN RESPECT OF EXPENDITURE INCURRED, IT SHOULD BE IN RELATION TO THIS DIVIDEND INCOME OF RS.1,32,638/ - . IF AN ASSESSEE HAS INVES TED IN SHARES, WHICH COULD GET DIVIDEND OR THERE IS INVESTMENT WHICH GENERATES DIVIDEND INCOME OR EXEMPT INCOME AS ALSO INVESTMENT WHICH DOES NOT GENERATE EXEMPT INCOME, IT IS ONLY SUCH INVESTMENTS IN RESPECT OF WHICH THE DIVIDEND INCOME OR EXEMPTED INCOM E HAS BEEN EARNED WHICH CAN BE CONSIDERED WHEN COMPUTING THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D. A PERUSAL OF THE PROVISIONS OF RULE 8D ALSO TALKS OF SATISFACTION IN SUB - RULE (1). RULE 8D(2) HAS THREE SUB - PARTS. THE FIRST SUBPART I.E. (I) DEA LS WITH THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. THAT ISSUE IS NOT IN DISPUTE HERE AND THEREFORE, WE DO NOT GO INTO IT IN THIS CASE. IN SECOND SUB - PART I.E.(II), IT IS A COMPUTATION PROVIDED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE BY WAY OF INTEREST DURING THE PREVIOUS YEAR WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT. THIS CLEARLY MEANS THAT IF THERE IS ANY INTEREST EXPENDITURE, WHICH IS DIRECTLY RELATABLE T O ANY PARTICULAR INCOME OR RECEIPT, SUCH INTEREST EXPENDITURE IS NOT TO BE CONSIDERED UNDER RULE 8D(2)(II). IN THE ASSESSEE'S CASE HERE THE INTEREST HAS BEEN PAID BY THE ASSESSEE ON THE LOANS TAKEN FROM THE BANKS FOR ITS BUSINESS PURPOSE. THERE IS NO ALLEG ATION FROM THE BANKS NOR THE AO THAT THE LOAN FUNDS HAVE BEEN DIVERTED FOR MAKING THE INVESTMENT IN SHARES OR FOR NON - BUSINESS PURPOSES. FURTHER RULE 8D(2)(II) CLEARLY IS WORDED IN THE NEGATIVE WITH THE WORDS 'NOT DIRECTLY ATTRIBUTABLE'. THUS FOR BRINGING ANY INTEREST EXPENDITURE, CLAIMED BY THE ASSESSEE, UNDER THE AMBIT OF RULE 8D(2)(II) IT WILL HAVE TO BE SHOWN BY THE AO THAT THE SAID INTEREST IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT. WHY WE SAY HERE THAT IT IS TO BE SHOWN BY THE A O IS ON ACCOUNT OF THE WORDS IN RULE 8D(1) BEING 8 ITA NO. 28 /P A N/201 6 '(1) WHERE THE ASSESSING OFFICER, IS NOT SATISFIED WITH (A) TO (B)** ** ** IN RELATION TO INCOME., HE SHALL DETERMINE THE AMOUNT OF EXPENDITURE IN RELATION TO SUCH INCOME IN ACCORDANCE WITH THE PROVI SIONS OF SUB - RULE (2). IN THE ASSESSEE'S CASE, ADMITTEDLY, THE ASSESSEE HAS SUBSTANTIAL CAPITAL. THE INCREASE IN THE CAPITAL ITSELF IS TO AN EXTENT OF RS.4 CRORES AND IN RESPECT OF RESERVES AND SURPLUS, THE INCREASE IS RS.112 CRORES. THE LOANS TAKEN DURI NG THE YEAR ADMITTEDLY ARE FOR THE LETTERS OF CREDIT AND THE ASSESSEE IS BOUND TO PROVIDE THE BANK STOCK STATEMENT AND OTHER DETAILS TO SHOW THE UTILIZATION OF THE LOANS. NO BANK WOULD PERMIT THE LOAN GIVEN FOR ONE PURPOSE TO BE USED FOR MAKING ANY INVESTM ENT IN SHARES. THE LD. CIT(A), IT IS NOTICED THAT AFTER CONSIDERING THESE FACTS THAT THE ASSESSEE HAD NOT USED ANY OF ITS BORROWINGS FOR PURCHASING THE SHARES, HAS DELETED THE DISALLOWANCE. ON THIS GROUND ITSELF, THE DELETION AS MADE BY THE LD. CIT(A) IS L IABLE TO BE CONFIRMED AND WE DO SO. 7.1 IN ANY CASE, THE WORKING OF THE DISALLOWANCE UNDER SUB - PART (II) OF SUB - CLAUSE (2) OF RULE 8D AS MADE BY THE AO ALSO SUFFERS FROM A SUBSTANTIAL ERROR IN SO FAR AS IN THE SAID RULE IN REGARD TO THE NUMERATOR B, THE WORDS USED ARE THE AVERAGE VALUE OF TH E INVESTMENT, INCOME FROM WHICH DOES NOT FORM OR SHALL NOT FORM PART OF THE TOTAL INCOME AS APPEARING IN THE BALANCE - SHEET AS ON THE FIRST DAY AND IN THE LAST DAY OF THE PREVIOUS YEAR. HERE THE AO HAS TAKEN INTO CONSIDERATION THE INVESTMENT OF RS.103 CRORE S MADE THIS YEAR, WHICH HAS NOT EARNED ANY DIVIDEND OR EXEMPT INCOME. IT IS ONLY THE AVERAGE OF THE VALUE OF THE INVESTMENT FROM WHICH THE INCOME HAS BEEN EARNED WHICH IS NOT FALLING WITHIN THE PART OF THE TOTAL INCOME THAT IS TO BE CONSIDERED. THIS IS WHY THE QUESTION OF SATISFACTION IS PROVIDED IN SECTION 14A AND RULE 8D(1), THAT RELATES TO THE ACCOUNTS OF THE ASSESSEE. THUS, IT IS NOT THE TOTAL INVESTMENT AT THE BEGINNING OF THE YEAR AND AT THE END OF THE YEAR, WHICH IS TO BE CONSIDERED BUT IT IS THE AVE RAGE OF THE VALUE OF INVESTMENTS WHICH HAS GIVEN RISE TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME WHICH IS TO BE CONSIDERED. A QUESTION MAY ARISE AS TO WHY THE TERM 'AVERAGE OF THE VALUE OF INVESTMENT' IS THEN USED. THE TERM AVERAGE OF THE V ALUE OF INVESTMENT WOULD BE TO TAKE CARE OF CASES WHERE THERE IS THE ISSUE OF DIVIDEND STRIPING. IN ANY CASE, AS WE HAVE ALREADY HELD THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE BY WAY OF INTEREST DURING THE PREVIOUS YEAR, WHICH IS NOT DIRECTLY ATTR IBUTABLE TO ANY PARTICULAR INCOME, THE FINDINGS OF THE LD. CIT(A) ON THE ISSUE STAND CONFIRMED AND CONSEQUENTLY THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. 9 ITA NO. 28 /P A N/201 6 CONSEQUENTLY, GROUND NO. 2 OF THE REVENUES APPEAL AND GROUND NOS. 1.1 TO 1.3 OF THE ASSESS EES APPEAL STAND PARTLY ALLOWED FOR STATISTICAL PURPOSES . 23 AS THE ASSESSING OFFICER HAS NOT CONSIDERED THE ABOVE ORDER OF THE TRIBUNAL, THEREFORE, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND REMAND BACK TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATING THE ISSUE , AFRESH IN THE LIGHT OF THE OBSERVATIONS MADE HEREINABOVE AFTER ALLOWING REASON ABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, TH US TH E S E GROUND S OF APPEAL OF THE ASSESSEE ARE ALSO ALLOWED FOR STATISTICAL PURPOSE. 24 IN GROUND NO.8 OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE INTEREST CHARGED UNDER SEC. 234B, 234C & 234D OF THE ACT. 25 AT THE TIME OF HEARING, AUTHORIZED REPRESENTATIVE OF THE ASSESSEE MADE NO SUBMISSIONS ON THIS GROUND OF APPEAL. HENCE, WE HOLD THAT THE CHARGING OF INTEREST IS CONSEQUENTIAL AND ACCORDINGLY THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 26 IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE . ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON WEDNESDAY , THE 2 7 TH DAY OF APRIL , 201 6 AT GOA . S D / - S D / - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 2 7 TH APRIL, 201 6 . VR/ - 10 ITA NO. 28 /P A N/201 6 COPY TO: 1 . THE ASSESSEE. 2 . THE REVENUE. 3 . THE CIT 4 . THE CIT(A) 5 . THE D.R . 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI