The ACIT, Circle-4, Ahmedabad V. Indian Chronicle Ltd., Ahmedabad

ITA 2825/AHD/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5339 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 09-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 13-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S N SOPARKAR
• Assessee Lawyers: J P JHANGID
• Keywords: Depreciation; Business expenditure
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NOS. 2647 & 2825/AHD/2012 (ASSESSMENT YEAR: 2009-10) INDIAN CHRONICLE LTD. AHMEDABAD V/S THE ACIT, CIRCLE-4, AHMEDABAD (APPELLANT) (RESPONDENT) THE ACIT, CIRCLE-4, AHMEDABAD V/S INDIAN CHRONICLE LTD. AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAACI 0793 H APPELLANT BY : SHRI S.N. SOPARKAR RESPONDENT BY : SHRI J.P. JHANGID, SR. D.R. ( )/ ORDER DATE OF HEARING : 09-10-201 4 DATE OF PRONOUNCEMENT : 07 -02-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THESE TWO APPEALS, ONE FILED BY THE REVENUE AND THE OTHER FILED BY THE ASSESSEE ARE AGAINST THE ORDER OF CIT(A)-VIII AHMED ABAD, DATED 28.09.2012 FOR A.Y. 2009-10. ITA NOS. 2647 & 2825/A HD/2012 . A.Y. 2009-10 2 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER: 3. ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF FI NANCIAL SERVICES . IT FILED ITS RETURN OF INCOME FOR A.Y. 2009-10 ON 29.0 9.2009 DECLARING TOTAL INCOME OF RS. 187,17,280/-. THE CASE WAS SELECTED F OR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED UNDER SECTION 143( 3) VIDE ORDER DATED 03.11.2011 AND THE TOTAL INCOME WAS DETERMINED AT R S. 2,33,74,370/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED TH E MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 28.09.2012 PARTLY A LLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER CIT( A), THE ASSESSEE AND REVENUE BOTH ARE NOW IN APPEAL BEFORE US. THE CONCI SE GROUNDS OF APPEAL FILED BY THE ASSESSEE READS AS UNDER:- 1.1 IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF TH E APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN DISMISSING GROUND NO.1 OF THE APPELLANT'S APPEAL (CHALLENGING THE VERY VALIDITY OF THE ASSESSMENT ORDER IMPUGNED BEFORE HIM) ON THE GROUND THAT IT WAS GENERAL IN NATURE NOT REQUIRING ANY ADJUDICATION BY HIM. HE OUGHT TO HAVE APPRECIATED, INTER ALIA,: (A) THAT THE ASSESSMENT ORDER IMPUGNED BEFORE HIM C ONTAINED ADDITIONS OF RS.46.57 LACS OUT OF WHICH RS. 13.49 LACS ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE U/S.14A READ WITH RULE 8D WAS MADE WITHOUT JURISDICTION; (B) THAT THE REMAINING ADDITION OF RS.33.08 LACS, APART FROM SEEKING EFFEC TIVELY TO DISALLOW THE ENTIRE ADMINISTRATIVE EXPENDITURE DEBITED TO THE APPELLANT'S PROFIT AND L OSS ACCOUNT, WAS SO ERRONEOUS [WHICH ERROR HAD IN FACT BEEN APPRECIATED AND RECTIFIED BY THE LEARNED CIT(A)] AS CLEARLY TO SHOW THAT THE ASSESSMENT ORDER HAD BEEN PASSED WITHOUT APPLICATION OF MIND; 1.2 THE LEARNED CIT(A) OUGHT ACCORDINGLY TO HAVE QU ASHED THE ASSESSMENT ORDER IMPUGNED BEFORE HIM 2. WITHOUT PREJUDICE TO THE FOREGOING, IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE AP PELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN UPHOL DING THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS . 1,72, 329 AND ADMINISTRATIVE EXPENDITURE OF RS. 11, 76, 351 MADE BY THE LEARNED ASSESSING OFFICER U/S.14A READ WITH RULE 8D, IN THE FOLLOWING TERMS W HICH CLEARLY SHOWED THAT EVEN AS THE LEARNED CIT(A) HAD ACTUALLY NARRATED THE EMINENT MERITS OF THE CASE SUBMITTED BEFORE HIM (SHOWING THAT IN THE PECULIAR FACTS OF THE APPELLANT'S CASE, IT WAS NOT OPEN TO THE LEARNED ASSESSING OFFICER TO ASSUME JURISDICTION U/S.14A, AND SHOWING FURTHER THAT IN ANY CASE, THERE WAS ABSOLUTELY NO CASE FOR THE LEARNED ASSESSING OFFICER TO MAKE ANY DISALLOWANCE EITHER O N ACCOUNT OF INTEREST EXPENDITURE OR ADMINISTRATIVE EXPENDITURE U/S.14A), HE HAD UPHELD BOTH THE DISALL OWANCES WITHOUT AT ALL CONSIDERING AND/OR DEALING WITH THOSE MERITS (EMPHASIS SUPPLIED) '3.2 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORD ER AND THE ABOVE CONTENTIONS. IN MY VIEW WHEN THE APPELLANT HAS MADE INVESTMENT IN SHARES AN D EARNED INCOME BY WAY OF DIVIDEND WHICH IS NOT INCLUDIBLE IN TOTAL INCOME OF THE APPELLANT, THE DISALLOWANCE HAS TO BE MADE. THE APPELLANT'S CLAIM THAT THERE IS NO EXPENDITURE INCURRED IN THIS REGARD IS TOTALLY BASELESS. FOR EARNING OF SUCH INCOME AND MAINTAINING INVESTMENT T HE APPELLANT HAS TO INCUR CERTAIN EXPENDITURE. THE PROVISIONS OF SECTION 14A(2) AND RULE 8D CLEARL Y PROVIDE THAT WHEN THE APPELLANT HAS NOT BEEN ABLE TO ESTABLISH ITS CLAIM THAT THERE IS NO SUCH EXPENDITURE INCURRED FOR EARNING TAX FREE INCOME, THE DISALLOWANCE HAS TO BE WORKED OUT ON THE BASIS OF THE PROVISIONS OF ITA NOS. 2647 & 2825/A HD/2012 . A.Y. 2009-10 3 RULE 8D(2). ACCORDINGLY, THE A.O. WAS JUSTIFIED IN MAKING THE ABOVE DISALLOWANCE. IT IS TO BE NOTED THAT THE WORKING OF DISALLOWANCE MADE BY THE A.O. I S NOT IN DISPUTE. ACCORDINGLY, THIS GROUND OF APPEAL IS REJECTED.' 3. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN UPHOLDING DISALLOWANCE OF DEDUCTION FOR DE PRECIATION OF RS.2,35,848 EVEN THOUGH DEDUCTION FOR THE SAME WAS CLEARLY MERITED. 4. THE EFFECTIVE GROUND RAISED BY THE REVENUE READS AS UNDER:- 1 THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN D IRECTING THE ASSESSING OFFICER TO RESTRICT DISALLOWANCE TO RS. 2,35,848/- OUT OF TOTAL DISALLO WANCE OF RS. 33,08,407/- WITHOUT APPRECIATING FACTS THAT ASSESSEE HAD CLAIMED VARIOUS EXPENSES INSPITE OF THERE IS NO BUSINESS ACTIVITY. 5. WE NOW TAKE UP ASSESSEES APPEAL ITA NO. 2647/AHD/2 012 GROUND NO. 1.1 AND 1.2 ARE NOT PRESSED AND THE SAME ARE DISMISSED AS NOT PRESSED. 6. GROUND NO. 2 IS WITH RESPECT TO DISALLOWANCE UNDER SECTION 14A. 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O. N OTICED THAT ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 1,75,43,512/-. TH E ASSESSEE WAS ASKED TO SUBMIT AS TO WHY DISALLOWANCE UNDER SECTIO N 14A OF THE ACT NOT BE MADE. ASSESSEE INTERALIA SUBMITTED THAT THE INVE STMENTS WHICH WERE HELD BY IT WERE OLD INVESTMENTS, MADE OUT OF INTERE ST FREE FUNDS AND FURTHER NO NEW INVESTMENTS WERE MADE DURING THE YEA R. THE SUBMISSIONS OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE A.O . HE WAS OF THE VIEW THAT ASSESSEE HAS FAILED TO FURNISH AND PROVE THE N EXUS FROM WHICH IT COULD BE ESTABLISHED THAT THE INVESTMENT MADE IN SH ARES WERE FROM OWN FUNDS AND NOT FROM INTEREST BEARING FUNDS. HE THERE AFTER WORKED OUT THE DISALLOWANCE ON THE BASIS OF RULE 8D OF THE INCOME TAX RULES AND THE TOTAL DISALLOWANCE WAS WORKED OUT AT RS. 13,48,680/ -. AGGRIEVED BY THE ITA NOS. 2647 & 2825/A HD/2012 . A.Y. 2009-10 4 ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE C IT(A). BEFORE CIT(A) IT WAS SUBMITTED THAT NO NEW INVESTMENTS HAVE BEEN MADE UNDER THE YEAR UNDER CONSIDERATION AND THE EXPENDITURE AMOUNTING T O RS. 4,14,083/-, IT WAS SUBMITTED THAT FOR THE PURPOSE OF BUSINESS AND NO WAY CONNECTED WITH THE INVESTMENTS. IT WAS FURTHER SUBMITTED THAT INTEREST FREE FUNDS AVAILABLE WITH IT WAS FAR IN EXCESS OF THE INVESTME NT AND THEREFORE NO DISALLOWANCE UNDER SECTION 14A OF THE ACT WAS CALLE D FOR. CIT(A) DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND UPHELD TH E ORDER OF A.O. BY HOLDING AS UNDER:- 3.2 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDE R AND THE ABOVE CONTENTIONS. IN MY VIEW WHEN THE APPELLANT HAS MADE INVESTMENT IN SHARES AND EARNED INCOME BY WAY OF DIVIDEND WHICH IS NOT INCLUDIBLE IN TOTAL INCOME OF THE APPELLANT, THE DISALLOWANCE HAS TO BE MADE. THE APPELLANTS CLAIM THAT THERE IS NO EXPENDITURE INCURRED IN THIS REGARD IS TOTALLY B ASELESS. FOR EARNING OF SUCH INCOME AND MAINTAINING INVESTMENT THE APPELLANT HAS TO INCUR CERTAIN EXPEN DITURE. THE PROVISIONS OF SECTION 14A(2) AND RULE 8D CLEARLY PROVIDE THAT WHEN THE APPELLANT HAS NOT BEEN ABLE TO ESTABLISH ITS CLAIM THAT THERE IS NO S UCH EXPENDITURE INCURRED FOR EARNING TAX FREE INCOME, T HE DISALLOWANCE HAS TO BE WORKED OUT ON THE BASIS OF THE PROVISIONS OF RULE 8D(2). ACCORDINGLY, THE A .O. WAS JUSTIFIED IN MAKING THE ABOVE DISALLOWANCE. IT IS TO BE NOTED THAT THE WORKING OF DISALLOWANCE MADE BY THE A.O. IS NOT IN DISPUTE. ACCORDINGLY, TH IS GROUND OF APPEAL IS REJECTED. 8. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS N OW IN APPEAL BEFORE US. BEFORE US, THE LD. A.R. SUBMITTED THAT THE INVE STMENTS WHICH WERE HELD BY THE ASSESSEE WERE OLD INVESTMENTS AND NO NE W INVESTMENTS HAVE BEEN MADE DURING THE YEAR UNDER CONSIDERATION. HE FURTHER SUBMITTED THAT THE INTEREST EXPENDITURE OF RS. 4,14,083/- MAI NLY COMPRISED OF INTEREST ON SALARY PAID TO EMPLOYEES AS PER THE DEC ISION OF THE LABOUR COURT (RS. 3,93,027/-), INTEREST ON SERVICE TAX (RS . 7,824/-) AND BANK INTEREST ( RS. 3,236). HE FURTHER SUBMITTED THAT TH E INTEREST FREE FUNDS AVAILABLE IN THE FORM OF CAPITAL AND RESERVES WERE FAR IN EXCESS OF THE INVESTMENTS AND THEREFORE IT CANNOT BE PRESUMED THA T BORROWED FUNDS ITA NOS. 2647 & 2825/A HD/2012 . A.Y. 2009-10 5 HAVE BEEN USED FOR THE PURPOSE OF MAKING INVESTMENT S. HE FURTHER PLACED RELIANCE ON THE DECISION IN THE CASE OF CIT VS. REL IANCE UTILITIES AND POWER LTD. (2009) 313 ITR 340 (BOM.). HE ALSO PLAC ED RELIANCE ON THE DECISION OF AHMEDABAD TRIBUNAL IN THE CASE OF KAMAL MADMOHAN MANGALDAS ITA NO. 2839/AHD/2011 AND ALSO PLACED ON RECORD THE COPY OF THE AFORESAID ORDER. RELIANCE WAS ALSO PLACED O N THE DECISION IN THE CASE OF TORRENT POWER LTD. VS. DCIT (2013) 33 TAXMA N.COM 287 (AHMEDABAD) AND A COPY OF THE AFORESAID ORDER WAS A LSO PLACED ON RECORD. THE LD. A.R. FURTHER SUBMITTED AT THE MOST SOME ADHOC DISALLOWANCE MAY BE MADE. THE LD. D.R. ON THE OTHER SUBMITTED THAT IN THE YEAR UNDER APPEAL, PROVISIONS OF RULE 8D OF THE I.T. RULES WERE MANDATORY AND THEREFORE THE A.O. WAS FULLY JUSTIFIE D IN MAKING THE DISALLOWANCE. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS EARN ED DIVIDEND INCOME OF RS. 1.75 CRORES. FROM THE COPY OF THE BALANCE SHEET PLACED ON RECORDS IT CAN BE SEEN THAT THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE IN THE FORM OF SHARE CAPITAL AND RESERVES SURPLUS ARE IN E XCESS OF THE INVESTMENTS. BEFORE US, THE ASSESSEE HAS SUBMITTED THAT NO NEW INVESTMENTS HAVE BEEN MADE DURING THE YEAR AND THE INVESTMENTS HELD BY IT ARE BROUGHT FORWARD FROM EARLIER YEARS. FROM TH E COPY OF THE DETAILS OF INTEREST WHICH HAS BEEN REPRODUCED BY CIT(A) IN ITS ORDER, IT IS SEEN THAT THE MAJOR INTEREST COMPONENT IS ON ACCOUNT OF INTER EST ON SALARY PAID TO THE EMPLOYEES AS PER THE DECISION OF LABOUR COURT A ND INTEREST ON SERVICE TAX. ITA NOS. 2647 & 2825/A HD/2012 . A.Y. 2009-10 6 10. BEFORE US, THE AFORESAID SUBMISSIONS OF THE ASSESSE E HAS NOT BEEN CONTROVERTED BY REVENUE BY BRINGING ANY CONTRARY MA TERIAL ON RECORD. IT IS ALSO A FACT THAT ASSESSEE HAS EARNED DIVIDEND IN EXCESS OF RS. 1.73 CRORE. BEFORE US, HOWEVER NO DETAILS ARE AVAILABLE AS TO THE DAYS ON WHICH THE DIVIDEND WAS RECEIVED THE AMOUNT OF DIVIDENDS, THE NUMBER OF COMPANIES IN WHICH THE ASSESSEE HOLDS INVESTMENTS. CONSIDERING THE TOTALITY OF THE FACTS, WE ARE OF THE VIEW THAT THE DISALLOWANCE OF RS. 13.86 LACS MADE BY THE A.O. IS NOT WARRANTED BUT HOWEVER A DISALLOWANCE OF RS. ONE LAC MADE UNDER SECTION 14A WOULD MEET THE E NDS OF JUSTICE. WE THEREFORE DIRECT TO DISALLOW THE DISALLOWANCE UNDER 14A OF RS. ONE LAC AS AGAINST RS. 13,48,680/- MADE BY THE A.O. THUS THIS GROUND OF ASSESSEE IS PARTLY ALLOWED. 11. 3 RD GROUND IS WITH RESPECT OF DISALLOWANCE OF DEPRECIA TION OF RS. 2,35,848/- THIS GROUND WAS NOT PRESSED ON ACCOUNT OF SMALLNESS OF AMOUNT AND THEREFORE THIS GROUND IS DISMISSED. 12. IN THE RESULT THE APPEAL OF ASSESSEE IS PARTLY ALLO WED . ITA NO. 2825/AHD/2010 ( REVENUES APPEAL ) DISALLOWANCE OF EXPENSES OF RS. 33,08,407/-. 13. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O. N OTICED THAT ASSESSEE HAD NO BUSINESS DURING THE YEAR BUT HAS CLAIMED VAR IOUS EXPENDITURE AGGREGATING TO RS. 46,61,807/-. HE ALSO NOTICED THA T EVEN IN THE IMMEDIATELY PRECEDING YEAR THERE WAS NO BUSINESS OF ASSESSEE. FROM THE ITA NOS. 2647 & 2825/A HD/2012 . A.Y. 2009-10 7 PERUSAL OF THE PROFIT AND LOSS ACCOUNT, A.O. NOTICE D THAT THE INCOME OF ASSESSEE CONSISTED OF INTEREST ON BANK FDR, INTERES T INCOME, RENT INCOME, SHARE DIVIDEND INCOME AND PRIOR PERIOD INTE REST INCOME. HE WAS THEREFORE OF THE VIEW THAT SINCE THERE IS NO BUSINE SS INCOME EARNED BY THE ASSESSEE DURING THE YEAR AND IN IMMEDIATELY PRECEDI NG YEAR, THE BUSINESS EXPENDITURE CLAIMED BY THE ASSESSEE IS NOT ALLOWABL E. HE ALSO NOTED THAT OUT OF THE TOTAL EXPENDITURE OF RS. 46,61,807/-, RS . 13,41,680/- WAS DISALLOWED UNDER SECTION 14A, HE ACCORDINGLY DISALL OWED THE REST OF AGGREGATING TO RS. 33,08,407/-. AGGRIEVED BY THE OR DER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) AFTER CONS IDERING THE SUBMISSIONS MADE BY THE ASSESSEE GRANTED PARTIAL RE LIEF BY HOLDING AS UNDER:- 4.2 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AN D THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT. THE A.O. HAS GIVEN A SPECIFIC FINDING TH AT THE APPELLANT IS NOT DOING ANY BUSINESS IN THE CURRENT YEAR AS ALSO IN THE EARLIER YEAR. THE B USINESS OF THE APPELLANT IS THAT OF ADVERTISING BUSINESS OF ALL PUBLICATIONS OF LOK PRAKASHAN LTD. IT IS NEVER STATED THAT EARNING OF INCOME FROM FD IS BUSINESS ACTIVITY. EVEN EARNING OF INTEREST I NCOME FROM FD CANNOT BE CONSIDERED TO BE BUSINESS ACTIVITY. THUS THE A.O. WAS JUSTIFIED IN H OLDING THAT THE APPELLANT HAS NOT DONE ANY BUSINESS AND THEREFORE, INCOME IS TO BE ASSESSED AS INCOME FROM OTHER SOURCES. ACCORDINGLY HE HAD JUSTIFIABLY OBSERVED THAT BUSINESS EXPENDITURE CANNOT BE CLAIMED BY THE APPELLANT. IT IS NOTICED THAT THE APPELLANT HAS ITSELF CLAIMED ONLY AGGREGATE EXPENDITURE OF RS.18,64,109 IN THE RETURN OF INCOME AS AGAINST AGGREGATE EXPENDITURE O F RS.46,61,807 DEBITED IN THE PROFIT & LOSS ACCOUNT. THEREFORE, WHEN THE A.O. HAS ADOPTED THE I NCOME AS PER THE RETURN OF INCOME IN THE COMPUTATION OF TOTAL INCOME, HE WAS NOT JUSTIFIED I N CONSIDERING THE ENTIRE AMOUNT DEBITED TO THE PROFIT & LOSS ACCOUNT FOR THE PURPOSE OF MAKING DIS ALLOWANCE. THUS THE DISALLOWANCE, IF ANY, COULD BE OF RS. 18,64,109 CLAIMED IN THE RETURN OUT OF WHICH THE A.O. HAS ALREADY DISALLOWED RS.13,48,480 U/S. 14A. FURTHER TO THE ABOVE IT IS NOTICED THAT THE EXPENDI TURE CLAIMED BY THE APPELLANT IS ON ACCOUNT OF THE FOLLOWING:- I) ADMINISTRATIVE AND GENERAL EXPENDITURE RS. 6,0 2,761 II) DEPRECIATION RS. 2,35,848 III) EMPLOYEES COST RS. 10,25,500 TOTAL RS. 18,64,109/- ITA NOS. 2647 & 2825/A HD/2012 . A.Y. 2009-10 8 4.3. THE APPELLANT HAS NOT ESTABLISHED AS TO HOW TH E DEPRECIATION CAN BE SAID TO BE INCURRED FOR THE PURPOSE OF EARNING INCOME FROM OTHER SOURCE. AC CORDINGLY, THE DISALLOWANCE OF DEPRECIATION WAS JUSTIFIED. FURTHER, I FIND THAT THE EMPLOYEES C OST OF RS.10,25,500 AND THE GENERAL ADMINISTRATIVE EXPENDITURE ARE CLAIMED TO BE ADMISS IBLE RELYING UPON THE DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. NEW SAVA N SUGAR & GUR REFINING CO. LTD. 185 ITR 564 WHEREIN IT IS HELD THAT THAT A LIMITED COMPANY, EVEN IF IT DOES NOT CARRY ON ANY BUSINESS AND IT DERIVES INCOME ONLY FROM OTHER SOURCES, HAS TO M AINTAIN ITS ESTABLISHMENT SO LONG AS IT IS IN OPERATION AND ITS NAME IS NOT STRUCK OFF THE REGIST ER OF THE REGISTRAR OF COMPANIES. FOR THAT PURPOSE THE COMPANY HAS TO INCUR VARIOUS EXPENDITUR ES AND THE AMOUNT PAID BY THE APPELLANT FOR SECRETARIAL WORK AND OTHER SERVICES IS ONE OF SUCH EXPENDITURE. SUCH EXPENDITURE IS EXPENDITURE IN CONNECTION WITH AND IN RELATION TO EARNING OF IN COME FROM PROPER/OTHER SOURCES AND ITS DEDUCTION IS ALLOWABLE. THE NATURE OF ADMINISTRATIV E EXPENDITURE CLAIMED BY THE APPELLANT SHOWS THAT IT IS IN RESPECT OF AUDIT FEES, CONVEYANCE, BA NK COMMISSION, OFFICE MAINTENANCE, INTEREST, ROC FEES AND LIKESUCH EXPENDITURE IS HELD BY ME TO BE ADMISSIBLE FOLLOWING THE ABOVE DECISION OF THE CALCUTTA HIGH COURT. THUS, THE TOTAL EXPENDI TURE ADMISSIBLE IS OF RS. 16,28,261 (EMPLOYEES COST OF RS.10,25,500 + ADMINISTRATIVE EX PENSE OF RS.6.02,761). OUT OF THIS EXPENDITURE THE DISALLOWANCE OF RS.13,48,480 MADE B Y THE A.O. U/S. 14A IS ALREADY CONFIRMED. HENCE, THE REMAINING EXPENDITURE OF RS. 2,79,781/- IS HELD TO BE ADMISSIBLE. THE TOTAL DISALLOWANCE OF RS.2,35,848/- ON ACCOUNT OF DEPRECI ATION IS CONFIRMED OUT OF TOTAL DISALLOWANCE OF RS.33,08,407/-. THE ADDITION TO RETURNED INCOME, THEREFORE, WOULD B E AS UNDER: DISALLOWANCE EXPENSES U/S. 14A RS. 13,48,480 DISALLOWANCE OF CLAIM FOR DEPRECIATION RS. 2,35,8 48 THE A.O. IS DIRECTED TO WORK OUT THE TOTAL INCOME A CCORDINGLY. 14. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS NO W IN APPEAL BEFORE US. BEFORE US, THE LD. D.R. RELIED ON THE ORDER OF A.O. ON THE OTHER HAND THE LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE CIT(A) AND THUS SUPPORTED THE ORDER OF CIT(A). 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) HAS NOTED THAT THE ASSESSEE HAS ITSELF CLAIMED ONLY AGGREGATE EXPENDITURE OF RS. 18,64,109/- IN THE RET URN OF INCOME AS ITA NOS. 2647 & 2825/A HD/2012 . A.Y. 2009-10 9 AGAINST THE AGGREGATE EXPENDITURE OF RS. 46,61,807/ - DEBITED TO THE PROFIT AND LOSS ACCOUNT. HE THEREFORE CONCLUDED THAT WHEN THE A.O. HAS ADOPTED THE INCOME AS PER RETURN OF INCOME, HE WAS NOT JUSTIFIED IN CONSIDERING THE ENTIRE AMOUNT DEBITED TO THE PROFIT AND LOSS ACCOUNT FOR THE PURPOSE OF MAKING DISALLOWANCE. HE HAS FURTHER GIVEN A FINDING THAT THE NATURE OF ADMINISTRATIVE EXPENSES CLAIMED BY TH E ASSESSEE WAS IN RESPECT OF AUDIT FEES, CONVEYANCE, BANK COMMISSION, OFFICE MAINTENANCE ETC. HE RELYING ON THE DECISION OF CALC UTTA HIGH COURT IN THE CASE OF CIT VS. NEW SAVAN SUGAR AND GUR REFINING CO MPANY LTD. 185 ITR 564 HAS HELD THAT SUCH EXPENDITURE WAS ALLOWABL E IN VIEW OF THE FACT THAT THE COMPANY HAD TO INCUR VARIOUS EXPENDITURE A S IT HAS TO MAINTAIN ITS ESTABLISHMENT SO LONG AS IT IS IN OPERATION AND ITS NAME IS NOT STRUCK OFF FROM THE REGISTER OF THE REGISTRAR OF COMPANIES. H E HAS FURTHER GIVEN A FINDING THAT THE AMOUNT OF RS. 16,28,261/- COMPRISI NG OF EMPLOYEES COST OF RS. 10,25,500/- AND ADMINISTRATIVE EXPENSES OF R S. 6,02,761/- AND THE SAME WERE ADMISSIBLE. HE HAS FURTHER NOTED THAT THE EXPENDITURE OF RS. 13,48,480/- MADE BY THE A.O. UNDER 14A WAS ALREADY CONFIRMED AND THE REMAINING EXPENDITURE OF RS. 2,79,781/- WAS HELD TO BE ADMISSIBLE. HE THUS CONFIRMED THE DISALLOWANCE OF RS. 2,35,848/- O N ACCOUNT OF DEPRECIATION. 16. BEFORE US, THE REVENUE COULD NOT CONTROVERT THE FIN DINGS OF CIT(A) NOR HAS BROUGHT ANY MATERIAL ON RECORDS IN SUPPORT OF I TS CONTENTION. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERF ERE WITH THE ORDER OF CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED . 17. THUS THE APPEAL OF REVENUE IS DISMISSED. ITA NOS. 2647 & 2825/A HD/2012 . A.Y. 2009-10 10 18. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALL OWED AND APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 07 - 02 - 2014. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMED ABAD