The DCIT, Circle-1, Ahmedabad V. M/s. Bharat Bobbins Ltd., Ahmedabad

ITA 290/AHD/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1218 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 19-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 29-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C MISHRA
• Assessee Lawyers: VIJAY RANJAN
• Keywords: Earning of tax free income; Revised return; Capital expenditure
• Section: 14A; 10; 154

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO.290/AHD/2014 WITH CO NO.139/AHD/2014 /BLOCK ASSTT. YEAR: 2009-2010 DCIT, CIR.1 AHMEDABAD. VS M/S.BHARAT BOBBINS LTD. OPP: AJIT MILLS LTD. RAKHIAL ROAD, AHMEDABAD. PAN : AAACB 6172 H ./ ITA NO.324/AHD/2014 /BLOCK ASSTT. YEAR: 2009-2010 M/S.BHARAT BOBBINS LTD. OPP: AJIT MILLS LTD. RAKHIAL ROAD AHMEDABAD. PAN : AAACB 6172 H VS DCIT, CIR.1 AHMEDABAD. %& / (APPELLANT) '( %& / (RESPONDENT) REVENUE BY : SHRI D.C. MISHRA, SR.DR ASSESSEE BY : SHRI VIJAY RANJAN / DATE OF HEARING : 19/08/2015 / DATE OF PRONOUNCEMENT: 21/08/2015 )*/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE AND REVENUE ARE IN CROSS-APPEAL AGAIN ST THE ORDR OF THE LD.CIT(A)-VI, AHMEDABAD DATED 8.11.2013 PASSED FOR THE ASSTT.YEAR 2009-10. ITA NO.290/AHD/2014 WITH CO AND ITA NO.32/AHD/2014 2 2. ON RECEIPT OF NOTICE IN THE REVENUES APPEAL, TH E ASSESSEE HAS FILED CROSS-OBJECTION ALSO BEARING NO.139/AHD/2014. THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE VERY OUTSET, SUBMI TTED THAT THE ISSUE AGITATED IN THE CO HAS ALSO BEEN TAKEN IN THE APPEA L FILED BY THE ASSESSEE, THEREFORE, THE CO AS SUCH IS A DUPLICATIO N OF THE APPEAL OF THE ASSESSEE, AND THE ASSESSEE IS NOT PRESSING THE CO. HENCE, IT IS REJECTED. 3. IN THE APPEAL OF THE REVENUE, THE SOLITARY GRIEV ANCE IS THAT THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 13.89 LAKHS, WHICH WAS ADDED BY THE AO BY TREATING THE EXPENDITURE CLA IMED BY THE ASSESSEE ON REPAIRS AS CAPITAL EXPENDITURE. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ON 18.9.2009 DECLARING TOTAL INCOME OF RS.45 ,85,240/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSE SSMENT AND NOTICE UNDER SECTION 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THA T THE ASSESSEE HAS DEBITED THE FOLLOWING EXPENDITURE: RUPEES ELECTRIC REPAIRS : 61,340/- AIR CONDITIONER REPAIRS : 10,673/- COMPUTER HARDWARE : 1,52,576/- RESURFACING OF EXISTING ROAD : 11,65,399/- TOTAL : 13,89,988/- 5. THE LD.AO HAS CONSTRUED, AS IF, TOTAL AMOUNT WAS INCURRED ON ROAD REPAIR, BECAUSE OPERATIVE PORTION OF HIS REASONING IS IN RESPECT OF THESE ITEMS ONLY. ACCORDING TO THE LD.AO CARPETING OF TH E ROAD WOULD NOT FALL WITHIN THE AMBIT OF THE CURRENT REPAIRS, AND THEREF ORE, IT IS TO BE TREATED AS EXPENDITURE IN THE CAPITAL FIELD. IN OTHER WOR DS, THE AO WAS OF THE VIEW THAT NEW ROAD WOULD GIVE ENDURING BENEFIT TO T HE ASSESSEE, AND ITA NO.290/AHD/2014 WITH CO AND ITA NO.32/AHD/2014 3 THIS ACTIVITY CANNOT BE TREATED AKIN TO CURRENT REP AIRS. THE LD.AO, ACCORDINGLY, MADE ADDITION OF RS.13,89,988/-. 6. ON APPEAL, THE LD.CIT(A) HAS DELETED THE ADDITIO N ON THE GROUND THAT THE INTERNAL ROAD WAS EXISTING FOR THE LAST 50 YEARS. THE ASSESSEE HAS JUST RE-LAID THE ROAD. IT HAS NOT BROUGHT ANY NEW ASSET INTO EXISTENCE. ACCORDINGLY, THE LD.CIT(A) HAS DELETED THE ADDITION OF RS.16,65,399/- REPRESENTING EXPENDITURE INCURRED ON RE-SURFACING OF THE EXISTING ROAD. 7. WITH REGARD TO OTHER ITEMS, THE LD.FIRST APPELLA TE AUTHORITY OBSERVED THAT THESE ITEMS ARE IN THE NATURE OF CURR ENT REPAIRS AND DELETED THE DISALLOWANCE. 8. WITH THE ASSISTANCE OF THE LEARNED REPRESENTATIV ES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. WE FIND THAT AS FAR AS THE ELECTRIC REPAIRS, AC REPAIRS AND COMPUTER HARDWARE ARE CONCERNED, THE LD.AO HAS NOT MADE ANY DETAILED DISCUSSION SPECIFIC TO THESE ITEM S. HE SIMPLY TOOK THE EXPENDITURE DEBITED UNDER THE CURRENT REPAIR AN D THEN FOCUSED HIS REASONING TOWARDS THE MAIN EXPENDITURE INCURRED BY THE ASSESSEE ON RE-SURFACING OF THE ROAD. WE FIND THAT THE ASSESSE E HAS RELIED UPON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF SATYADEV CHAMBERS P. LTD. VS. CIT, 117 ITR 86. THIS DECISIO N HAS BEEN FOLLOWED BY THE ITAT IN THE CASE OF ACCU DRESS VS. ACIT, 62 TTJ 755. IN THESE DECISIONS, THE ISSUE INVOLVED WAS, WHETHER THE EXPE NDITURE INCURRED ON RE-SURFACING AND CARPETING OF APPROACH ROAD WOULD B E TREATED AS CAPITAL EXPENDITURE OR REVENUE IN NATURE. IN THIS DECISION , IT HAS BEEN HELD THAT EXPENSES COULD NOT BE SAID TO HAVE BEEN MADE FOR AC QUIRING OR BRINGING INTO EXISTENCE THE ASSET OR ADVANTAGE OF ENDURING B ENEFIT TO THE BUSINESS. THE ASSET WAS ALREADY IN EXISTENCE WHICH HAS JUST BEEN REPAIRED. THEREFORE, WE DO NOT FIND ANY ERROR IN T HE ORDER OF THE CIT(A). ITA NO.290/AHD/2014 WITH CO AND ITA NO.32/AHD/2014 4 THIS GROUND OF THE REVENUE IS REJECTED, AND DISMISS THE APPEAL OF THE REVENUE. ITA NO.324/AHD/2014 (ASSESSEES APPEAL) 9. THE ASSESSEE IN THIS APPEAL HAS PLEADED THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.2,33,295 /- WHICH WAS MADE BY THE AO UNDER SECTION 14A R.W. RULE 8D OF THE INC OME TAX RULES. 10. BRIEF FACTS OF THE CASE ARE THAT THE ON SCRUTIN Y OF THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASSESSEE HAS EARNED DIV IDEND INCOME OF RS.3,78,247/-, WHICH IS EXEMPT FROM TAX. HE FURTHE R OBSERVED THAT THE ASSESSEE HAS INVESTMENT TO THE TUNE OF RS.6,40,36,2 97/- AS ON 31.3.2009 WHILE THE VALUE OF INVESTMENT WAS RS.5,90 ,57,952/- AS ON 31.3.2008. WHEN THE ASSESSEE FILED RETURN ORIGINAL LY, IT MADE A DISALLOWANCE OF RS.393/- UNDER SECTION 14A. THE AS SESSEE HAS REVISED ITS RETURN AND OFFERED AN AMOUNT OF RS.3,07,736/- F OR DISALLOWANCE U/S.14A R.W. RULE 8D. THIS RETURN WAS AGAIN REVISE D BY THE ASSESSEE, WHEREBY, IT OFFERED THE AMOUNT FOR DISALLOWANCE AT RS.74,441/-. THE LEARNED AO OBSERVED THAT THE DISALLOWANCE FOR THE P URPOSE OF SECTION 14A IS TO BE MADE UNDER RULE 8D. HE, ACCORDINGLY, COMPUTED THE DISALLOWANCE WITH THE HELP OF RULE 8D. THE LEARNED AO DID NOT MAKE ANY DISALLOWANCE UNDER RULE 8D(2)(I) AND RULE 8D(2) (II). UNDER BOTH THESE HEADS, THE EXPENDITURE DIRECTLY RELATING TO I NCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME AND THE EXPENDITURE I NCURRED BY WAY OF INTEREST DURING THE PREVIOUS YEAR DOES NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT, AS PER THE FORMULA, A RE TO BE DISALLOWED. THE AO HAS MADE NIL DISALLOWANCE UNDER BOTH THESE H EADS. HE MADE DISALLOWANCE UNDER RULE 8D(2)(III) WHEREIN HALF PER CENTAGE OF THE AVERAGE VALUE OF THE INVESTMENT, INCOME FROM WHICH WILL NOT FORM PART ITA NO.290/AHD/2014 WITH CO AND ITA NO.32/AHD/2014 5 OF THE TOTAL INCOME, IS TO BE DISALLOWED. HE COMPU TED DISALLOWANCE OF RS.3,07,736/- WHICH IS (6,15,47,125 X 0.5%). 11. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF T O THE ASSESSEE. 12. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE ASSTT.YEAR 2008-09, THE AO HAS MADE DISALLOWANCE OF RS.3,07,73 6/-, THEREFORE, THE ASSESSEE HAS OFFERED THIS AMOUNT IN THE FIRST R EVISED RETURN, BUT ON AN APPLICATION OF THE ASSESSEE, UNDER SECTION 154 O F THE INCOME TAX ACT, THE LD.AO HAS CONFIRMED THE DISALLOWANCE AT RS .68,853/-, THEREFORE, THE ASSESSEE HAS AGAIN REVISED ITS RETURN AND OFFER ED A SUM OF RS.74,441/- FOR DISALLOWANCE. THE LD.COUNSEL FOR T HE ASSESSEE FURTHER SUBMITTED THAT BEFORE INVOKING RULE 8D, THE AO HAS TO RECORD HIS SATISFACTION ABOUT THE CORRECTNESS OF THE ACCOUNTS OF THE ASSESSEE, WHEREBY THE ASSESSEE ITSELF OFFERED THE AMOUNT FOR DISALLOWANCE. IF THE AO FAILED TO RECORD SATISFACTION, THEN HE WILL BE P RECLUDED FROM MAKING THE DISALLOWANCE AS PER RULE 8D OF THE INCOME TAX R ULES, 1962. 13. TAKING US THROUGH THE ASSESSMENT ORDER, HE CONT ENDED THAT THE AO HAS NOWHERE RECORDED HIS DISSATISFACTION ABOUT T HE CORRECTNESS OF THE ASSESSEES ACCOUNT, THEREFORE, HE COULD NOT COM PUTE THE DISALLOWANCE WITH THE HELP OF RULE 8D. IN SUPPORT OF HIS CONTENTION, HE RELIED UPON THE ORDER OF THE ITAT, AHMEDABAD BENCH IN THE CASE OF M/S.DYNAMIC PRODUCTS LTD. VS. DCIT (OSD), VIDE ITA NO.2769/AHD/2011. HE PLACED ON RECORD COPY OF THE TRIBUNAL ORDER. HE FURTHER RELIED ON THE DECISION OF THE HONBLE DE LHI HIGH COURT IN THE CASE OF CIT VS. TAIKISHA ENGINEERING INDIA LTD., 54 TAXMANN.COM 109 (DELHI). HE PLACED ON RECORD COPY OF THIS DECISION OF THE HONBLE DELHI HIGH COURT. THE LD.COUNSEL FOR THE ASSESSEE FURTHE R RELIED UPON THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT RENDERED IN TAX APPEAL NO.276 AND 277 OF 2015 IN THE CASE OF PRINCIPAL CIT VS. INDIA GELTINE AND CHEMICALS LTD. COPY OF THIS ORDER HAS ALSO BEE N PLACED ON RECORD. ITA NO.290/AHD/2014 WITH CO AND ITA NO.32/AHD/2014 6 14. ON THE OTHER HAND, THE LEARNED DR DREW OUR ATTE NTION TOWARDS PAGE NO.11 OF THE ASSESSMENT ORDER AND SUBMITTED TH AT THE AO HAS RECORDED HIS DISSATISFACTION ABOUT THE CORRECTNESS OF THE ASSESSEES ACCOUNT. 15. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND G ONE THROUGH THE RECORD CAREFULLY. THE HONBLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD. VS. CIT, 347 ITR 272 (DELHI)= [2011] 15 TAXMANN.COM 390 (DELHI) HAS CONSIDERED THE SCOPE OF SUB-SECTION (2) AND (3) OF SECTION 14A OF THE INCOME TAX ACT. THE HONBLE COU RT HAS HELD THAT ONCE THE ASSESSEE HAS OFFERED AMOUNT FOR DISALLOWAN CE UNDER SECTION 14A ON THE GROUND THAT THIS MUCH EXPENDITURE IS ATT RIBUTABLE FOR EARNING EXEMPT INCOME, THEN THE AO HAS TO RECORD A FINDING ABOUT THE CORRECTNESS OF THE ASSESSEES CLAIM AND ONLY THEREA FTER, THE AO WOULD PROCEED TO CALCULATE THE AMOUNT REQUIRED TO BE DISA LLOWED AS PER RULE 8D. THE FINDING OF THE HONBLE HIGH COURT IS WORTH TO NOTE IN THIS CONNECTION. IT READS AS UNDER: 29. SUB-SECTION (2) OF SECTION 14 A OF THE SAID AC T PROVIDES THE MANNER IN WHICH THE ASSESSING OFFICER IS TO DETERMI NE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. HOWEVER, IF WE EXAMINE TH E PROVISION CAREFULLY, WE WOULD FIND THAT THE ASSESSING OFFICER IS REQUIRED TO DETERMINE THE AMOUNT OF SUCH EXPENDITURE ONLY IF TH E 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 W HICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT. I N OTHER WORDS, THE REQUIREMENT OF THE ASSESSING OFFICER EMBARKING UPON A DETERMINATION OF THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME WOULD BE TRIGGERED ONLY IF THE ASSESS ING OFFICER RETURNS A FINDING THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPEND ITURE. THEREFORE, THE CONDITION PRECEDENT FOR THE ASSESSIN G OFFICER ENTERING UPON A DETERMINATION OF THE AMOUNT OF THE EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME IS THAT THE A SSESSING OFFICER ITA NO.290/AHD/2014 WITH CO AND ITA NO.32/AHD/2014 7 MUST RECORD THAT HE IS NOT SATISFIED WITH THE CORRE CTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITUR E. SUB-SECTION (3) IS NOTHING BUT AN OFFSHOOT OF SUB-SECTION (2) O F SECTION 14A. SUB-SECTION (3) APPLIES TO CASES WHERE THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO INC OME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SA ID ACT. IN OTHER WORDS, SUB-SECTION (2) DEALS WITH CASES WHERE THE ASSESSEE SPECIFIES A POSITIVE AMOUNT OF EXPENDITURE IN RELAT ION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT AND SUB-SECTION (3) APPLIES TO CASES WHERE THE ASSE SSEE ASSERTS THAT NO EXPENDITURE HAD BEEN INCURRED IN RELATION T O EXEMPT INCOME. IN BOTH CASES, THE ASSESSING OFFICER, IF SA TISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE OR NO EXPENDITURE, AS THE CASE MAY BE, CANNOT EMBARK UPON A DETERMINATION OF THE AMOUNT OF EXPEND ITURE IN ACCORDANCE WITH ANY PRESCRIBED METHOD, AS MENTIONED IN SUB- SECTION (2) OF SECTION 14A OF THE SAID ACT. IT IS O NLY IF THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CORRECT NESS OF THE CLAIM OF THE ASSESSEE, IN BOTH CASES, THAT THE ASSESSING OFFICER GETS JURISDICTION TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT IN ACCORDANCE WITH THE PR ESCRIBED METHOD. THE PRESCRIBED METHOD BEING THE METHOD STIP ULATED IN RULE 8D OF THE SAID RULES. WHILE REJECTING THE CLAI M OF THE ASSESSEE WITH REGARD TO THE EXPENDITURE OR NO EXPEN DITURE, AS THE CASE MAY BE, IN RELATION TO EXEMPT INCOME, THE ASSE SSING OFFICER WOULD HAVE TO INDICATE COGENT REASONS FOR THE SAME. 16. AS FAR AS THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE AO WITHOUT RECORDING HIS DISSATISFACTION A BOUT THE CORRECTNESS OF THE ASSESSEES ACCOUNT HAS CALCULATED THE AMOUNT FOR ADDITION WITH THE HELP OF RULE 8D IS CONCERNED, WE FIND THAT SUCH ACTION IS CONTRARY TO THE MEANING OF SECTION 14A (2) GIVEN BY THE HONBL E DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD. (SUPRA) AS WE LL AS IN THE CASE OF TAIKISHA ENGINEERING INDIA LTD. (SUPRA) RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE. BUT THE FACTS ARE LITTLE DIFFERENT IN THE PRESENT CASE. COPY OF THE ORIGINAL RETURN FILED BY THE ASS ESSEE IS AVAILABLE AT PAGE NOS.1 TO 4. THE ASSESSEE HAS OFFERED A SUM OF RS.393/- AS DEMAT EXPENDITURE UNDER SECTION 14A. THEREAFTER, THE ASS ESSEE HAS REVISED ITS ITA NO.290/AHD/2014 WITH CO AND ITA NO.32/AHD/2014 8 RETURN. IN THE REVISED RETURN, THE ASSESSEE HAS OF FERED A SUM OF RS.3,07,736/-. THE ITEM READS AS UNDER: THE AMOUNT DISALLOWED U/S.14A READ WITH RULE 8D : 307736 17. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT IN THE ASSTT.YEAR 2008-09, A DISALLOWANCE WAS MADE UNDER S ECTION 14A WHICH LED THE ASSESSEE TO MAKE A DISALLOWANCE OF HIGHER A MOUNT, THEREFORE, THE ASSESSEE FILED A REVISED RETURN. BUT, WHEN THE AO ALLOWED ITS APPLICATION UNDER SECTION 154, THE ASSESSEE HAS ALS O SCALED DOWN THE AMOUNT FOR DISALLOWANCE. 18. WE HAVE PERUSED THE ORDER PASSED UNDER SECTION 154 OF THE INCOME TAX ACT. COPY OF THE ORDER IS AVAILABLE AT PAGE NO.13 OF THE PAPER BOOK. WE FIND THAT THE LD.AO HAS NOTICED THR EE TYPES OF INVESTMENTS, VIZ. (A) INVESTMENT ON WHICH EXEMPT IN COME IS EARNED, (B) INVESTMENTS ON WHICH EXEMPT INCOME IS NOT EARNED DU RING THE YEAR, AND (C) INVESTMENT IN DEBT FUNDS THAT CANNOT RESULT IN EXEMPT INCOME. THE LEARNED AO HAS CALCULATED THE AMOUNT FOR DISALL OWANCE AT THE RATE OF 0.5% OF THE AVERAGE INVESTMENT QUA (A) AND (B) ABOVE, BECAUSE, THESE TWO TYPES OF INVESTMENT WOULD RESULT IN EXEMP T INCOME TO THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE FUR THER CONTENDED THAT IN THE ASSTT.YEAR 2010-11 AND 2011-12 NO DISALLOWAN CE HAS BEEN MADE BY THE AO UNDER RULE 8D. HE PLACED ON RECORD COPIE S OF THE ASSESSMENT ORDER. HOWEVER, WE FIND THAT THIS ISSUE HAS NOT BEEN TAKEN UP BY THE AO. IN THE COMPUTATION FOR THE ASSTT.YEA R 2011-12, THE ASSESSEE HAS OFFERED THE EXPENSES OF RS.37,520/-. THE ASSESSMENT ORDER FOR THE ASSTT.YEAR 2011-12 IS RUNNING INTO ON LY ONE PAGE. THE AO HAS NOT TOUCHED ANY ISSUE. 19. FIRST, WE TAKE THE DECISION RELIED UPON THE LD. COUNSELF FOR THE ASSESSEE. WE FIND THAT THE ITAT IN THE CASE OF M/S .DYNAMIC PRODUCTS ITA NO.290/AHD/2014 WITH CO AND ITA NO.32/AHD/2014 9 LTD. (SUPRA) HAS DECIDED THE ISSUE, ON THE FACTS OF THAT CASE AND HELD THEREIN THAT THE ASSESSEE HAS MADE INVESTMENT OUT O F ITS OWN FUND. THE TRIBUNAL HAS REPRODUCED THE WORKING GIVEN BY TH E ASSESSEE FOR MAKING DISALLOWANCE BY ITSELF. AS FAR AS THE DECIS ION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF TAIKISHA ENGINEERI NG INDIA LTD. (SUPRA), THERE ALSO, THE ISSUE WAS WITH REGARD TO RULE 8D(2) (II). THE TRIBUNAL RECORDED A FINDING THAT THE ASSESSEE HAS SUFFICIENT INTEREST BEARING FUNDS FOR MAKING INVESTMENT, AND THEREFORE, INTERES T EXPENDITURE WOULD NOT BE ADDED BACK. THE HONBLE DELHI HIGH COURT WH ILE CONSIDERING THIS ASPECT, HAS OBSERVED THAT LOOKING TO THE FACTS AND CIRCUMSTANCES, COUPLED WITH THE FACT THAT THE AO HAS NOT RECORDED SATISFACTION AS TO WHY RULE 8D BE INVOKED, CONFIRMED THE ORDER OF THE CIT(A) AS WELL AS OF THE TRIBUNAL. THE DECISION OF THE HONBLE GUJARAT HIGH COURT IS ALSO CONFINED TO THE FACTS OF THE CASE. IT NOWHERE LAID DOWN PROPOSITION THAT IF THE AO FAILED TO RECORD HIS SATISFACTION, WHILE FOLLOWING RULE 8D, THEN THE ASSESSMENT ORDER TO THAT EXTENT WOULD BE QUASHE D. TO OUR MIND, IF ANY IRREGULARITY HAS CREPT IN THE PROCEEDING THAN T HAT HAS TO BE REMOVED FROM THAT STAGE AND NOT THE PROCEEDING ITSE LF IS TO BE CULMINATED. IT IS NOT THE QUESTION OF JURISDICTIO N IN THE LD.AO TO PASS THE ASSESSMENT ORDER. CONSIDERING STAND OF THE ASS ESSEE ITSELF THAT IT HAS MADE DISALLOWANCE UNDER SECTION14A R.W.S. RULE 8D, WE FIND THAT THE ASSESSEE FAILED TO GIVE ANY WORKING AS TO HOW I T ARRIVED AT A CONCLUSION THAT RS.74,441/- IS THE AMOUNT, WHICH IS TO BE DISALLOWED. IN THE ASSTT.YEAR 2008-09, THE AO HAS CONFIRMED THE DISALLOWANCE TO THE EXTENT OF HALF PERCENTAGE OF THE AVERAGE INVEST MENT, WHICH WILL RESULT TAX-FREE INCOME. HE HAS NOT MADE DISALLOWAN CE UNDER RULE 8D(2)(I)(II). TAKING INTO CONSIDERATION, OVERALL FA CTS AND CIRCUMSTANCES, WE SET ASIDE THE ORDERS OF THE REVENUE AUTHORITIES, AND RESTORE THIS ISSUE BACK TO THE FILE OF THE AO FOR RE-ADJUDICATIO N. THE LEARNED AO SHALL EXAMINE THE ACCOUNTS OF THE ASSESSEE, AND THE N RECORD HIS SATISFACTION WHY THE WORKING OF THE ASSESSEE IS NOT CORRECT AS PER SUB- ITA NO.290/AHD/2014 WITH CO AND ITA NO.32/AHD/2014 10 SECTION (2) OF SECTION 14A OF THE INCOME TAX ACT. THEREAFTER, HE WOULD WORK OUT THE DISALLOWANCE REQUIRES TO BE MADE, IF A NY, FOR THE PURPOSE OF SECTION 14A (RULE 8D). 20. IT IS MADE CLEAR THAT IN ANY CASE, THIS DISALLO WANCE WOULD NOT GO BEYOND RS.3,07,736/- WHICH HAS BEEN MADE IN THE ORI GINAL ASSESSMENT ORDER. 21. IN THE RESULT, THE APPEAL OF THE REVENUE AND CO OF THE ASSESSEE ARE REJECTED AND THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 21 ST AUGUST, 2015 AT AHMEDABAD. SD/- SD/- (MANISH BORAD) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER