Shri Omprakash F.Shah, Ahmedabad V. The Dy.CIT.,Circle-5, Ahmedabad

ITA 2812/AHD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60325 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 03-05-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 15-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVATIA
• Keywords: Salary income; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD C BENCH BEFORE: SHRI D.K. TYAGI, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT ME MBER I.T.A. NO.2812/AHD/2011 A.Y. 2008-09 OM PRAKASH F. SHAH RECLAMATION WELDING PVT. LTD. PVT. LTD. 129/129A GVMMSAV, ODHAV, AHMEDABAD-382410 PAN-ACEPS 6164 APPELLANT VS. THE DCIT, CIRCLE-5 AHMEDABAD RESPONDENT ASSESSEE BY :SHRI S.N. DIVATIA, A.R. DEPARTMENT BY :SHRI VINOD TANWANI, SR. D.R. ---------------- DATE OF HEARING : 03.05.2012 DATE OF PRONOUNCEMENT : 11.05.2012 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER THIS IS ASSESSEES APPEAL AGAINST THE ORDER DATED 1 4.09.2011, PASSED BY LD. CIT(A)-XI, AHMEDABAD IN APPEAL NO.CIT(A)-XI/ 252/2010-11. 2. THE ASSESSEE IS AGGRIEVED BY THE ACTION OF LD. CIT(A) IN UPHOLDING THE DISALLOWANCE U/S 14A READ WITH RULE 8D MADE BY THE A.O. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL WHO DERIVES INCOME FROM SALARY CAPITAL GAINS AND INCOME FROM OTHER SOURCES. THE ITA NO.2812/AHD/2011 , A. Y. 2008-09 2 RETURN OF INCOME WAS FILED DECLARING INCOME OF RS.7 ,84,782/-. DURING THE ASSESSMENT PROCEEDINGS THE A.O. OBSERVED THAT THE A SSESSEE HAS INVESTMENT IN SHARES AND MUTUAL FUNDS DERIVING EXEMPTED INCOME TH EREFORE INTEREST EXPENSE ON BORROWED FUNDS WAS INADMISSIBLE U/S 14A OF THE A CT. THE A.O. GAVE SHOW CAUSE TO THE ASSESSEE AS TO WHY EXPENSES RELATABLE TO EXEMPT INCOME MAY NOT BE DISALLOWED IN REPLY TO WHICH THE ASSESSEE FILED FOLLOWING EXPLANATION:- DURING THE YEAR UNDER ASSESSMENT THE ASSESSEE HAS PAID TOTAL INTEREST OF RS.17,96,010/-. OUT OF TOTAL INTEREST PAYMENT INTEREST EXPENSES OF RS.8,07,203/- HAS BEEN CLAIMED AS AN EXPENSES AGAIN ST INTEREST INCOME. THE ASSESSEE HAS NOT CLAIMED THE BALANCE INTEREST EXPEN SE AGAINST ANY OTHER INCOME. WE DRAW YOUR KIND ATTENTION THAT THE ASSESSEE HAS INTEREST INCOME FROM LOAN GIVEN TO MANISH B. MANDHANA AND ARIHANT D EVELOPERS. THESE LOANS WERE GIVEN OUT OF UNSECURED LOAN TAKEN FROM M/S SHA H MOHANLAL KAJODIMAL. FOR THE YEAR 2007-08 TOTAL INTEREST PAID TO M/S SHAH MO HANLAL KAJODIMAL TO RS.14,10,491/-. FOR YOUR READY REFERENCE WE SUBMIT THE COPY OF BANK STATEMENT SHOWING NEXUS OF THE FUNDS RECEIVED AND LOANS GIVEN TO MANISH B. MANDHANA AND ARIHAND DEVELOPERS. IN VIEW OF THESE FACTS INTERES T EXPENSES IS TO BE ALLOWED AGAINST INTEREST INCOME EARNED. ACCORDING TO SECTION 14A(3) THE PROVISIONS OF SEC TION 14A IS NOT APPLY IN CASE WERE ASSESSEE HAS NOT CLAIMED ANY INTEREST EXPENSES AGAINST THE EXEMPT INCOME DURING THE YEAR UNDER ASSESSMENT. THERE IS A CLEAR EXPLANATION REGARDING THE WORD EXPENDITURE INCURRED IN RELATIO N TO MEAN DOMINANT AND IMMEDIATE CONNECTION BETWEEN EXPENSES INCURRED AND THE INCOME NOT FORMING PART OF TOTAL INCOME. THE ASSESSEE HAS NOT CLAIMED ANY INTEREST EXPENSES WHICH ARE INCURRED EXCLUSIVELY FOR EARNING EXEMPT INCOME. FURTHER, THE DIVIDEND INCOME FROM SHARES AND MUTU AL FUND IS INCIDENTAL TO HOLDING OF SHARES FOR PARTICULAR PERI OD WHEN DIVIDEND DECLARE AND THE INTENTION OF ASSESSEE IN PURCHASING THE SHARES AND UNITS OF MUTUAL FUND WAS ONLY FOR INVESTING IN MARKET TRADED SECURITIES AND NOT FOR EARNING THE DIVIDEND INCOME. THE ASSESSEE IS INVESTOR IN SHARES AND SEC URITIES AND NOT A TRADER. HENCE, IT COULD NOT BE SAID THAT EXPENSES ON INTERE ST WERE INCURRED MERELY TO EARN DIVIDEND INCOME. AS THE INTEREST PAYMENT WAS NOT CLAIMED AGAINST A NY EXEMPT INCOME THERE SHOULD NOT BE ANY DISALLOWANCE U/S 14A. 4. THE EXPLANATION OFFERED BY THE ASSESSEE WAS NOT ACCEPTABLE TO THE A.O. AND HE MADE DISALLOWANCE OF RS.2,33,710/- AS P ER RULE 8D AND ADDED THE SUM TO THE TOTAL INCOME OF THE ASSESSEE BY OBSERVIN G AS UNDER:- ITA NO.2812/AHD/2011 , A. Y. 2008-09 3 THE CONTENTIONS OF THE ASSESSEE HAVE BEEN CONSIDER ED CAREFULLY. REGARDING THE ASSESSEES CONTENTION THAT THE INTERE ST BEARING FUNDS HAVE NOT BEEN UTILIZED FOR INVESTMENT IN SHARES AND MUTUAL F UNDS ETC., IT MAYBE SEEN THAT IT IS NOT POSSIBLE FOR THE ASSESSEE TO DIFFERENTIAT E IN BETWEEN ITS OWN FUNDS AND BORROWED FUNDS FROM THE TOTAL FUNDS AVAILABLE TO TH EM AT ANY POINT OF TIME. IT ALSO LEADS TO AN INTERESTING ISSUE THAT SINCE THE A SSESSEE IS PAYING HUGE AMOUNT OF INTEREST THEN WHY AND HOW IT HAS OPTED TO INVEST A PART OF BUSINESS FUNDS IN A PARTICULAR MANNER WHEREIN THE RETURN OF INVESTMENT WAS LESSER THAN THE EXPENDITURE ON ITS BORROWED FUNDS. REGARDING THE C ONCEPT OF NEXUS BETWEEN AN AMOUNT BORROWED AND THE AMOUNT INVESTED, IT MAYBE P OINTED OUT THAT IT IS OF NO SIGNIFICANCE AS IT WAS AN INTERNAL DECISION BASED O N ITS CONVENIENCE THE ASSESSEE MAY DECIDE FIRST INTEREST AND BORROWED THE FUNDS OR VISE VERSA. HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. H.R. SU GAR FACTORY PVT. LTD. 187 ITR 363 [ALL.] HAS HELD AS UNDER:- HAD THIS MONEY BEEN ADVANCED TO THE DIRECTORS, IT W OULD HAVE BEEN AVAILABLE TO THE ASSESSEE FOR ITS BUSINESS PURPOSE AND TO THAT E XTENT IT MIGHT NOT HAVE BEEN NECESSARY TO BORROW FROM BANK. THEREFORE, THE ITO W AS RIGHT IN DISALLOWING THE DIFFERENCE BETWEEN THE INTEREST PAID TO THE BANK AN D INTEREST RECOVERED FROM DIRECTORS. FURTHER, EXPENSES ARE ALSO NOT ALLOWABLE, AS THE SAME WERE INCURRED FOR EARNING INCOME, WHICH DID NOT FORM PART OF TOTA L INCOME. FROM THE BALANCE SHEET, IT IS SEEN THAT THE ASSESSEE HAD MADE INVEST MENTS OF RS.1,36,70,323/- (RS.1,39,70,323/- - RS.3,00,000/-) IN EQUITY SHARES AND MUTUAL FUNDS ETC, INCOME FROM WHICH DOES NOT FORM PART OF TOTAL INCOM E. IN VIEW OF THE PROVISIONS OF SECTIONS 10/10(34)/10(35) OF THE ACT, THE PROSPE CTIVE DIVIDEND/INTEREST INCOME OF SUCH INVESTMENTS WOULD BE AN EXEMPTED INC OME. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES, IT IS CLEA R THAT THE INVESTMENTS IN EQUITY SHARES/MUTUAL FUNDS ETC. BEARING TAX FREE RETURNS A MOUNTS TO DIVERSION OF THE BUSINESS FUNDS. BY USING THE BUSINESS FUNDS OF SUC H NATURE FOR OTHER FINANCIAL ACTIVITIES, WHICH DID NOT YIELD ANY TAXABLE RETURN, AMOUNTED TO AN EFFORT TOWARDS REDUCTION IN THE TAX LIABILITY WHILE CLAIMING INTER EST EXPENDITURE INCURRED ON FUNDS UTILIZED FOR SUCH INVESTMENTS. THIS IS NOT PERMISS IBLE IN VIEW OF THE LANDMARK JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF MA CDONNELL. IN ORDER TO DEAL WITH SUCH SITUATION, THE LEGISLATURE FRAMED AND INC ORPORATED SECTION 14A IN THE ACT WHICH READS AS UNDER:- 14A[(1)] FOR THE PURPOSES OF COMPUTING THE TOTAL I NCOME UNDER THIS CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITUR E INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT.] [(2)] THE ASSESSING OFFICER SHALL DETERMINE THE AMO UNT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCR IBED, IF THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSES SEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INC OME UNDER THIS ACT. (3) THE PROVISIONS OF SUB-SECTION (2) SHALL ALSO AP PLY IN RELATION TO A CASE WHERE AN ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INC URRED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT:] ITA NO.2812/AHD/2011 , A. Y. 2008-09 4 AS ALREADY DISCUSSED ABOVE, REGARDING THE ASSESSE ES CONTENTION THAT THE INTEREST BEARING FUNDS HAVE NOT BEEN UTILIZED F OR INVESTMENT IN SHARES, IT MAY BE SEEN THAT IT IS NOT POSSIBLE FOR THE ASSESSEE TO DIFFERENTIATE IN BETWEEN ITS OWN FUNDS AND BORROWED FUNDS FROM THE TOTAL FUNDS AVAIL ABLE TO THEM AT ANY POINT OF TIME. AS PER THE ASSESSEES EXPLANATION HE PAID IN TEREST OF RS.14,10,471/- ON BORROWED FUNDS OUT OF WHICH HE HAS CLAIMED EXPENSES AT RS.8,07,203/- I.E. TO THE EXTENT OF INTEREST INCOME EARNED FROM LOANS GIV EN OUT OF BORROWED FUNDS. IT IS THEREFORE CLEAR THAT THE ASSESSEE HAS CLAIMED EX PENSES TO THE EXTENT OF RS.8,07,203/-. REGARDING THE CONCEPT OF NEXUS BETW EEN AN AMOUNT BORROWED AND THE AMOUNT INVESTED, IT MAYBE POINTED OUT THAT IT IS OF NO SIGNIFICANCE AS IT WAS AN INTERNAL DECISION BASED ON ITS CONVENIENCE T HE ASSESSEE MAY DECIDE FIRST INTEREST AND BORROW THE FUNDS OF VISE VERSA. IN VI EW OF THE ABOVE DISCUSSION AND HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, I AM NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF THE EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INC OME UNDER THIS ACT. FURTHER THE ASSESSEE HAS CLAIMED THAT, NO EXPENDITURE HAS B EEN INCURRED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. FURTHER, IT MAY BE POINTED OUT THAT CONSEQUENT TO THE DECISION OF SPECIAL BENCH IN THE CASE OF ITO VS. DAGA CAPITAL M ANAGEMENT PVT,. LTD .(119 TTJ 289) REGARDING THE APPLICABILITY OF SECTION 14A WHEREIN IT WAS HELD BY SPECIAL BENCH OF HONBLE ITAT THAT RULE 8D WOULD COME INTO OPERATION, WHEN THE ASSESSING OFFICER IS SATISFIED WITH THE CORRECTNESS OF THE CLAIM IN RESPECT OF SUCH EXPENDITURE, THERE IS MATERIAL DIFFERENCE TO THE LE GAL APPROACH OF THE MATTER. IN VIEW OF THE INSERTION OF SUB-SECTIONS (2) & (3) TO SECTION 14A AND THE DECISION OF THE SPECIAL BENCH IN THE CASE OF DAGA CAPITAL MANAG EMENT PVT. LTD. (SUPRA) THAT RULE 8D IS OPERATIVE RETROSPECTIVELY. AS HAS BEEN STATED BY HONBLE SPECIAL BENCH, WHAT IS RELEVANT IS TO WORK OUT THE EXPENDIT URE IN RELATION EXEMPT INCOME AND TO EXAMINE WHETHER EXPENDITURE INCURRED BY THE ASSESSEE HAS RESULTED INTO EXEMPT INCOME OR TAXABLE INCOME. IN THE ASSESSEES CASE, ADMITTEDLY THE INVESTMENT MADE IN SHARE/MUTUAL FUNDS WOULD RESULT INTO EXEMPT INCOME. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CA SE, IT IS HELD THAT SECTION 14A READ WITH RULE 8D IS APPLICABLE IN THE ASSESSEES C ASE. ACCORDINGLY, THE EXPENDITURE IN RELATION TO THE EXEMPT INCOME IS COM PUTED AS UNDER:- I AMOUNT OF EXPENDITURE DIRECTLY RELATING TO THE INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. NIL (A) AMOUNT OF EXPENDITURE BY WAY OF INTEREST 8,07,203 (B) AVERAGE VALUE OF INVESTMENT ON WHICH TAX FREE INCOME IS RECEIVED OR RECEIVABLE 1,36,70,323 +59,84,731/2 98,27,527 (C) AVERAGE VALUE OF TOTAL ASSETS AS APPEARING IN THE BALANCE SHEET. 4,46,04,973 +4,13,53,878/2 4,29,79,425 II (A)X(B)/(C) 1,84,572 III 0.5% OF THE AVERAGE VALUE OF INVESTMENT ON WHICH TAX FREE INCOME IS RECEIVED OR RECEIVABLE. 49,138 ITA NO.2812/AHD/2011 , A. Y. 2008-09 5 IV TOTAL 2,33,710 IN VIEW OF THE ABOVE, THE EXPENDITURE U/S.14A IS CO MPUTED AT RS.2,33,710/- AND THE SAME IS DISALLOWED AND ADDED TO THE ASSESSEES INCOME. PENALTY PROCEEDING U/S 271(1) (C) ARE INITIATED SEPARATELY FOR FURNISH ING INACCURATE PARTICULARS OF INCOME. AGGRIEVED BY THIS ORDER OF THE A.O. THE ASSESSEE WENT IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 5. BEFORE LD. CIT(A), THE ASSESSEES CONTENTION WA S AS UNDER:- I) FIRSTLY, THE A.O. HAS FAILED TO APPRECIATE THA T SECTION 14A BECOMES APPLICABLE ONLY WHEN THE A.O. IS NOT SATISF IED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE IN RELATION TO EXEMPT INCOME OR THE ASSESSEE CLAIMS THAT NO EXPENDITURE WAS SO INCU RRED BY HIM. NOW, IN THE PRESENT CASE, AS EXPLAINED IN REPLY DATED 15.11.201 0 TO A.O., THE APPELLANT HAD CLAIMED INTEREST EXPENSES OF RS.8,07,203 OUT OF THE TOTAL INTEREST EXPENSES OF RS.17,96,010 AND BALANCE RS.9,88,807 WERE UNCLAIMED . THUS, THE APPELLANT HAD ALREADY DISALLOWED SAID RS.9,88,870/- WHILE COMPUTI NG THE TOTAL INCOME. THE A.O. HAS COMPUTED THE DISALLOWANCE AS PER RULE 8D A T RS.2,33,710 WHICH IS FAR LESS THAN THE DISALLOWANCE MDE BY THE APPELLANT. U NDER THE CIRCUMSTANCES, IT CANNOT BE SAID THAT THE CLAIM OF EXPENSES. IN RELAT ION TO EXEMPT INCOME WORKED OUT BY THE APPELLANT WAS NOT SATISFACTORY. THE A.O . COULD NOT HAVE INVOKED SECTION 14A WHEN A HIGHER DISALLOWANCE HAS ALREADY BEEN MADE BY THE APPELLANT. II) SECONDLY, THE A.O. HAS FAILED TO APPRECIATE TH AT RULE 8D IS NOT MANDATORY TO BE APPLIED IN ALL CASES, BUT IN A CASE WHERE NO OTHER METHOD OR REASONABLE AMOUNT COULD BE WORKED OUT, IT HAS OT BE APPLIED. NOW IN THE PRESENT CASE, THE APPELLANT HAD ALREADY WORKED OUT THE AMOU NT DISALLOWABLE WHICH CANNOT BE SAID TO BE UNREASONABLE. 6. AFTER TAKING INTO CONSIDERATION THIS SUBMISSION OF THE ASSESSEE LD. CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER:- I HAVE CAREFULLY CONSIDERED THE FACT OF THE CASE. I HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE LD. A.R. IT IS SUBMITTED BY THE APPELLANT THAT IT HAD ALREADY DISALLOWED INT EREST EXPENSES OF RS.9,88,870/- AND ACCORDINGLY, THE DISALLOWANCE MADE BY THE A.O. IS UNWARRANTED. THE SUBMISSIONS MADE BY THE ASSESSEE DURING THE APPELLA TE PROCEEDINGS HAVE ALREADY BEEN CONSIDERED BY THE A.O. IN THE ASSESSME NT ORDER. IT IS SEEN THAT THE A.O. HAD MADE DISALLOWANCE U/S 14A ON THE BASIS OF INTEREST EXPENDITURE INCURRED BY THE ASSESSEE OF RS.8,07,203/-. THUS, THE A.O. H AS NOT MADE DISALLOWANCE U/S 14A ON HE BASIS OF TOTAL INTEREST EXPENSES OF RS.17 ,96,010/-. THUS, THE BENEFIT ITA NO.2812/AHD/2011 , A. Y. 2008-09 6 OF INTEREST EXPENSES OF RS.9,88,807, AS PRAYED BY T HE APPELLANT HAS ALREADY BEEN ALLOWED TO THE APPELLANT IN THE ASSESSMENT ORDER IT SELF. THIS WAY THE APPELLANT DOES NOT HAVE ANY GRIEVANCE LEFT TO BE ADDRESSED. IN VIEW OF THE ABOVE, DISALLOWANCE MADE U/S 14A IS SUSTAINED IN PRINCIPLE . IT IS ALSO SEEN THAT IN THE BALANCE SHEET AS ON 3 1.3.2008, THE ASSESSEE HAS SHOWN INVESTMENT IN EQUITY SHARES AND MUTUAL FUNDS INCOME FROM WHICH IS EXEMPT FROM TAX. WHILE COMPUTING DISALLOW ANCE U/S 14A, THE A.O. HAS GIVEN BENEFIT OF RS.3,00,000/- INVESTED IN FD WITH ICICI BANK. THE ASSESSEE SUBMITTED THAT DISALLOWANCE U/S 14A SHOULD ALSO NOT BE MADE ON PPF ACCOUNT BALANCE OF RS.11,97,849/- SINCE THE DEPOSITS IN PPF ACCOUNT HAS TO BE MADE OUT OF TAXABLE INCOME. THE ASSESSEE HAD SHOWN BALANCE IN PPF ACCOUNT AS ON 31.3.2008 AT RS.11,97,849/-. IT IS FURTHER NOTICED THAT THE ASSESSEE IS REGULARLY CLAIMING DEDUCTIONS ASK PER THE CHAPTER-VI-A OF THE I.T. ACT. IN VIEW OF THIS, THE A.O. IS DIRECTED TO VERIFY WHETHER THE DEPOSITS IN PPF ARE MADE FROM THE TAXABLE INCOME. IN CASE THE DEPOSITS IN PPF ACCOUNT IS MADE FROM THE TAXABLE INCOME, DISALLOWANCE U/S 14A SHOULD NOT BE MADE ON PPF BALA NCE OF RS.11,97,849/-. DISALLOWANCE U/S 14A ON REST OF INVESTMENT OF RS.1, 24,72,274 (RS.13670323- 1197849) IS CONFIRMED. IN VIEW OF THE ABOVE FACT, THE APPEAL IS PARTLY ALLOWED. AGGRIEVED WITH THIS ORDER OF THE CIT(A) NOW THE AS SESSEE IS IN APPEAL BEFORE US. 7. AT THE TIME OF HEARING LD. COUNSEL OF THE ASSES SEE RELIED ON THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE LOWER A UTHORITY WHILE THE LD. D.R. RELIED ON THE DECISION OF LD. CIT(A). 8. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD WE FIND THAT ASSESSEES CONTENTION HAS CONSISTENTLY BEEN THAT TH OUGH DURING THE YEAR UNDER APPEAL ASSESSEE HAS PAID TOTAL INTEREST OF RS.17,96 ,010/-, BUT ONLY A SUM OF RS.8,07,203/- BEING ATTRIBUTABLE TO THE INTEREST I NCOME EARNED BY THE ASSESSEE WAS CLAIMED AS EXPENSES AND ASSESSEE DID NOT CLAIM BALANCE INTEREST EXPENSES AMOUNTING TO RS.9,88,807/- AGAINST ANY ANOTHER INCO ME. THIS IS CLEAR FROM PARAS 3 AND 5 OF OUR ORDER IN WHICH SUBMISSIONS OF THE AS SESSEE BEFORE LD. A.O. AND LD. CIT(A) RESPECTIVELY HAVE BEEN REPRODUCED BY US. THI S CONTENTION OF THE ASSESSEE HAS REMAINED UNCONTROVERTED BY THE LOWER AUTHORITIE S. IT IS CLEAR FROM PARAS 4 ITA NO.2812/AHD/2011 , A. Y. 2008-09 7 AND 6 OF OUR ORDER IN WHICH OBSERVATIONS OF THE A.O . AND LD. CIT(A) RESPECTIVELY HAVE BEEN REPRODUCED BY US ON THE SUBMISSION OF THE ASSESSEE. IN VIEW OF THIS UNDISPUTED FACT, WE ARE UNABLE TO UNDERSTAND AS TO HOW PROVISIONS OF SECTION 14A CAN BE INVOKED TO DISALLOW A SUM OF RS.2,33,710 /- OUT OF INTEREST EXPENSES/PAYMENTS OF RS.9,88,809/- WHICH WERE NEVER CLAIMED AS DEDUCTION BY THE ASSESSEE AND THEREFORE, DISALLOWANCE SO MADE BY THE A.O. AND PARTLY SUSTAINED BY THE CIT(A) IS HEREBY DELETED. 9. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED . THIS ORDER PRONOUNCED IN OPEN COURT ON 11/05/2012 . SD/- SD/- (ANIL CHATURVEDI) ( D.K. TYAGI) ACCOUNTANT MEMBER JU DICIAL MEMBER TRUE COPY N.K. CHAUDHARY, SR. P.S. - 11/05/2012 / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. !' / CONCERNED CIT 4. !' - / CIT (A) 5. #$% , & , / DR, ITAT, AHMEDABAD 6. %'( )* / GUARD FILE. BY ORDER/ , + / , & ,