D.C.I.T Cir - 6,kolkata., Kolkata V. M/s Turner Morrison Ltd., Kolkata

ITA 297/KOL/2013

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0524 (ITAT-KOLKATA)
• Duration Of Justice: 5 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 04-10-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 12-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MD USMAN
• Assessee Lawyers: J P KHAITAN; ARV
• Keywords: Business income; Business expenditure; Earning of tax free income; Deemed dividend; Revised return
• Section: 14A; 56; 12

Judgement Text

I.T.A. NO 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 1 OF 23 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA D BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER & SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 DEPUTY COMMISSIONER OF INCOME TAX,................. .............................APPELLANT CIRCLE-6, KOLKATA, AAYAKAR BHAWAN, ROOM NO.17, 6 TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- M/S. TURNER MORRISON LIMITED,...................... ..................................RESPONDENT 6, LYONS RANGE, KOLKATA-700 001 [PAN: AAACT 9790 M] & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 M/S. TURNER MORRISON LIMITED,...................... ......................................APPELLANT 6, LYONS RANGE, KOLKATA-700 001 [PAN: AAACT 9790 M] -VS.- DEPUTY COMMISSIONER OF INCOME TAX,................. ............................ RESPONDENT CIRCLE-6, KOLKATA, AAYAKAR BHAWAN, ROOM NO.17, 6 TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 APPEARANCES BY: MD. USMAN, CIT, D.R. , FOR THE DEPARTMENT SHRI J.P. KHAITAN, SR. ADVOCATE AND SHRI ARVIND AGA RWAL, ADVOCATE, FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : JULY 02, 2018 DATE OF PRONOUNCING THE ORDER : SEPTEMBER 12, 2018 O R D E R PER SHRI P.M. JAGTAP, A.M. : THESE TWO APPEALS, ONE FILED BY THE REVENUE BEING ITA NO. 297/KOL/2013 AND THE OTHER FILED BY THE ASSESSEE BE ING ITA NO. I.T.A. NO 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 2 OF 23 161/KOL/2013, ARE CROSS APPEALS, WHICH ARE DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-6, KOLKATA DATED 16.11.2012. 2. THE COMMON ISSUES INVOLVED IN GROUNDS NO. 1 & 2 OF THE REVENUES APPEAL AS WELL AS GROUNDS NO. 1 & 2 OF THE ASSESSEE S APPEAL RELATE TO THE TREATMENT GIVEN BY THE LD. CIT(APPEALS) TO THE INCO ME RECEIVED BY THE ASSESSEE FROM SERVICE CHARGES RELATING TO HOUSE PRO PERTY AS BUSINESS INCOME AND ALLOWING SUBSTANTIAL EXPENSES CLAIMED BY THE ASSESSEE AGAINST THE SAID INCOME. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH WAS THE OWNER OF TWO BUILDINGS AT 6, LIONS RANGE, KOLKATA A ND AT 16, BANK STREET, MUMBAI. THE SPACE AVAILABLE IN THE SAID BUILDINGS H AD BEEN GIVEN ON RENT BY THE ASSESSEE-COMPANY TO DIFFERENT TENANTS AND TH E RENTAL INCOME RECEIVED DURING THE YEAR UNDER CONSIDERATION AMOUNT ING TO RS.5,49,40,017/- AFTER CLAIMING DEDUCTIONS ON ACCOU NT OF CORPORATION TAX AND STANDARD DEDUCTION WAS OFFERED TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ASSESSEE-COMPANY HAD RENDERED CERTAIN SERVICES TO THE TENANTS AND THE GROSS RECEIPTS FROM SERVICE AND MAINTENANCE CHARGES AMOUNTING TO RS.90,38,482/- WERE DECLARED BY THE AS SESSEE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. AGAINST THE SAID RECEIPTS, SUBSTANTIAL EXPENSES WERE CLAIMED BY THE ASSESSEE RESULTING INTO BUSINESS LOSS OF RS.3,21,29,852/- AND AFTER ADJUSTI NG THE SAME AGAINST THE INCOME FROM HOUSE PROPERTY, THE TOTAL INCOME OF RS. 1,28,10,165/- WAS DECLARED BY THE ASSESSEE IN THE REVISED RETURN OF I NCOME FILED FOR THE YEAR UNDER CONSIDERATION ON 30.03.2010. DURING THE COURS E OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED BY THE ASSES SING OFFICER TO EXPLAIN AS TO WHY THE SERVICE AND MAINTENANCE CHARG ES SHOULD NOT BE ASSESSED TO TAX UNDER THE HEAD INCOME FROM HOUSE P ROPERTY. IN THIS REGARD, THE ASSESSEE WAS ALSO REQUIRED BY THE ASSES SING OFFICER TO FILE THE COPY OF ANY AGREEMENT OR OTHER DOCUMENTS BY WHICH I T WAS REQUIRED TO RENDER VARIOUS SERVICES. THE ASSESSEE, HOWEVER, FAI LED TO OFFER ANY I.T.A. NO 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 3 OF 23 EXPLANATION TO THE SATISFACTION OF THE ASSESSING OF FICER AND ALSO FAILED TO FILE THE COPY OF ANY AGREEMENT OR OTHER DOCUMENTS A S REQUIRED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER, THEREFORE , TREATED THE ENTIRE SERVICE AND MAINTENANCE CHARGES RECEIVED BY THE ASS ESSEE AS AN INTEGRAL PART OF THE RENTAL INCOME LIABLE TO TAX UNDER THE H EAD INCOME FROM HOUSE PROPERTY. ACCORDINGLY, DEDUCTION OF 30% WAS ALLOWE D BY HIM AGAINST THE SERVICE AND MAINTENANCE CHARGES OF RS.90,38,482/- R ECEIVED BY THE ASSESSEE AND THE BALANCE AMOUNT OF RS.63,26,937 /- WAS ASSESSED BY HIM UNDER THE HEAD INCOME FROM HOUSE PROPERTY. AS RE GARDS THE CLAIM OF THE ASSESSEE FOR BUSINESS EXPENSES UNDER VARIOUS HE ADS, THE ASSESSING OFFICER FOUND THAT THE ONLY ACTIVITY OF THE ASSESSE E CARRIED OUT DURING THE YEAR UNDER CONSIDERATION WAS GIVING BUILDINGS ON RE NT AND PROVIDING SOME SERVICES AND HAVING ASSESSED THE ENTIRE INCOME FROM RENT AND SERVICE & MAINTENANCE CHARGES UNDER THE HEAD INCOM E FROM HOUSE PROPERTY, THE ASSESSING OFFICER HELD THAT THERE WA S NO INCOME CHARGEABLE TO TAX AS BUSINESS INCOME OF THE ASSESSEE AND ACCOR DINGLY THE ENTIRE EXPENSES CLAIMED BY THE ASSESSEE AS BUSINESS EXPENS ES WERE DISALLOWED BY HIM. 4. THE ACTION OF THE ASSESSING OFFICER IN TREATING ITS INCOME FROM SERVICE AND MAINTENANCE CHARGES AS INCOME FROM HOUS E PROPERTY AND DISALLOWING THE ENTIRE EXPENSES CLAIMED AS BUSINESS EXPENSES WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFO RE THE LD. CIT(APPEALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE A SSESSEE AND MATERIAL AVAILABLE ON RECORD INCLUDING THE CASE LAWS CITED O N BEHALF OF THE ASSESSEE, THE LD. CIT(APPEALS) HELD THAT THE SERVIC E AND MAINTENANCE CHARGES RECEIVED BY THE ASSESSEE FROM TENANTS WERE CHARGEABLE TO TAX AS ITS BUSINESS INCOME FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 8 TO 10 OF HIS IMPUGNED ORDER:- 8.THE APPELLANT IS PROVIDING THE SERVICE OF ELECTR ICITY BACK UP ON CHARGES TO SOME TENANTS AND SUPPLYING ELECTRI CITY TO OTHER COMMON AREAS, POWER BACK-UP FOR WHICH THE MON EY IS CHARGED AS PER THE CONSUMPTION FROM THE TENANTS; EL EVATOR I.T.A. NO 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 4 OF 23 FACILITY, CAR PARKING, LOBBY FACILITY, SECURITY SER VICE AND OTHER ROUTINE MAINTENANCE INCLUDING CLEANING, DRAIN AGE, SEWERAGE ETC. THE SERVICE CHARGES ARE TAKEN ON CASE TO CASE BASIS AS PER AGREEMENTS ENTERED WITH THE TENANTS. T HE APPELLANT HAS NOT PRODUCED ANY COPY OF AGREEMENT DU RING THE APPELLATE PROCEEDINGS TO SHOW WHETHER THE RATES ARE SEPARATE OR ONLY ONE CONTRACT IS MADE FOR HIRE/RENT CHARGES INCLUSIVE OF SERVICE CHARGES, THE SERVICE C HARGES INCLUDES PROVISION OF SECURITY, MAINTENANCE OF LIFT S AND COMMON AREA, PROVIDING LIGHTING IN COMMON AREA AND THE SAME IS RECOVERED EVEN FROM THOSE TO WHOM PART OF T HE PREMISES HAVE BEEN DISPOSED OFF AND EVEN IN RESPECT OF PREMISES WHICH ARE NOT TENANTED, ALL THE EXPENSES R ELATED TO CARRYING THE VARIOUS BUSINESSES AS WELL AS FOR MAINTAINING THE CORPORATE ACTIVITY, VIZ REMUNERATIO N OF COMPANY SECRETARY, MAINTENANCE OF REGISTERED OFFICE , CONDUCT OF BOARD MEETINGS INCLUDING TRAVEL AND STAY , TRAVELLING FOR NEW BUSINESS PROSPECTS ARE DEBITED T O THE P&L ACCOUNT BY THE APPELLANT. THE HON'BLE JURISDICT IONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TA X VS MODEL MANUFACTURING CO. PVT. LTD. (1986) 159 ITR 27 0 (CAL) HELD THAT THE SERVICES RENDERED BY THE ASSESS EE IN PROVIDING ELECTRICITY, USE OF LIFTS, SUPPLY OF WATE R, MAINTENANCE OF STAIRCASES AND WATCH AND WARD FACILI TIES TO THE TENANTS CONSTITUTED SEPARATE ACTIVITIES DISTINC T FROM THE LETTING OUT OF THE PROPERTY. THE SERVICE CHARGE S REALISED BY THE ASSESSEE WERE HELD TO BE NOT ASSESS ABLE UNDER SECTION 22 BUT WERE ASSESSABLE UNDER THE HEAD 'INCOME FROM OTHER SOURCES. IT FURTHER HELD A FOLLO WS:- '6. IN THE CASE OF KARNANI PROPERTIES LTD. (SUPRA) , THE SUPREME COURT HELD ON THE FACTS OF THAT CASE THAT T HE RENTAL INCOME AND THE SERVICE CHARGES ARE TWO DIFFE RENT SOURCES AND NOT ONE SOURCE. IN THAT CASE THE FLATS AND THE SHOPS WERE LET OUT TO THE TENANTS WHICH INCLUDED CH ARGES FOR ELECTRIC CURRENT, FOR THE USE OF LIFTS, FOR THE SUPPLY OF HOT AND COLD WATER, OR THE ARRANGEMENTS FOR SCAVENG ING, FOR PROVIDING WATCH AND WARD FACILITIES AS WELL AS OTHER AMENITIES, 7. IN THE CASE OF CIT V. KANAK INVESTMENTS (P.) LTD . [1974} 95 ITR 419 THIS COURT HELD THAT WHERE COMPOSITE REN T IS RECEIVED BY THE ASSESSEE FROM ITS TENANT, IT SHOULD BE SPLIT UP AND THE AMOUNT ATTRIBUTABLE TO THE BUILDING ONLY SHOULD BE COMPUTED UNDER SECTION 9(1) OF THE INDIAN INCOME -TAX ACT, 1922 ('THE 1922 ACT') WHILE THE AMOUNT ATTRIBU TABLE TO THE AMENITIES PROVIDED BY THE ASSESSEE TO THE TENAN TS SHOULD BE ASSESSED UNDER SECTION 12 OF THE 1922 ACT . I.T.A. NO 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 5 OF 23 8. IN THE CASE OF INDIAN CITY PROPERTIES LTD. V. CI T [1978] 111 ITR 19, THIS COURT HELD THAT THE INCOME DERIVED FROM LETTING OUT THE BUILDINGS WAS ASSESSABLE AS INCOME FROM HOUSE PROPERTY UNDER SECTION 22, THE LIFT CHARGES A ND AIR- CONDITIONING CHARGES, WHICH HAD BEEN SHOWN SEPARATE LY IN THE ITO'S ORDER, WERE ASSESSABLE UNDER SECTION 56 O F THE ACT AS 'INCOME. 9. THE TRIBUNAL FOUND THAT THE SERVICE CHARGES REAL ISED CONSTITUTE A SEPARATE ITEM OF RECEIPT. THE RENT AND SERVICE CHARGES HAVE BEEN SEPARATELY SHOWN AND ACCOUNTED FO R AS CONSIDERATION FOR DIFFERENT THINGS. THE TRIBUNAL, I N COMING TO ITS CONCLUSION THAT THE CHARGES RECEIVED FOR AME NITIES FURNISHED BY THE LANDLORD TO THE TENANTS WERE ASSES SABLE TO INCOME-TAX AS INCOME FROM OTHER SOURCES AND NOR AS INCOME FROM HOUSE PROPERTY, RELIED ON THE CASE OF K ARNANI PROPERTIES LTD. (SUPRA) AND THE OBSERVATION OF THE LORD MACMILLAN IN THE CASE OF SALISBURY HOUSE ESTATE LTD . V. FRY [I930J 15 TE 266 (HL). THIS COURT, IN THE CASE OFKA NAK INVESTMENTS (SUPRA), TOOK THE VIEW THAT EVEN WHERE A COMPOSITE RENT IS RECEIVED, THE AMOUNT ATTRIBUTABLE TO THE AMENITIES PROVIDED BY THE ASSESSEE TO THE TENANTS S HOULD BE ASSESSED UNDER THE HEAD 'INCOME FROM OTHER SOURCES' . IN OUR VIEW, ON THE FACTS FOUND BY THE TRIBUNAL, THE F IRST TWO QUESTIONS IN THIS REFERENCE MUST BE ANSWERED IN THE AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE. 9. THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF COMMISSIONER OF INCOME- TAX V. SHANKARANARAYANA HOT ELS (P.) LTD. IN IT REFERENCE CASE NOS. 4 TO 6 AND 12 O F 1990 DATED OCTOBER 15, 1992 REPORTED IN [1993] 67 TAXMAN 520 (KAR.), 201 ITR 138 (KAR) HAS HELD THAT IT WAS IMPERMISSIBLE TO SPLIT UP THE CONSIDERATION PAYABLE BY THE TENANT TO THE LANDLORD, ONE REPRESENTING THE 'INCOM E FROM HOUSE PROPERTY' AND THE OTHER TO REPRESENT THE INCO ME ATTRIBUTABLE TO THE AMENITIES OR SERVICES AS ALLEGE D SERVICES WERE INTEGRATED WITH THE PROPERTY LEASED A ND WITHOUT THE SERVICES, IT WAS NOT POSSIBLE FOR THE T ENANT TO ENJOY THE PREMISES AND, THEREFORE, THE ENTIRE RENT INCLUDING THE SERVICE CHARGES SHOULD BE CONSIDERED AS THE 'IN COME FROM HOUSE PROPERTY' UNDER SECTION 22. IT FURTHER O BSERVED AS FOLLOWS:- '9. THERE ARE THREE DECISIONS OF THE CALCUTTA HIGH COURT WHEREIN A SIMILAR VIEW HAS BEEN UPHELD. IN CI T V. KANAK INVESTMENTS (P.) LTD. [1974] 95 ITR 419, I T I.T.A. NO 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 6 OF 23 WAS HELD THAT WHERE COMPOSIIT RENT IS RECEIVED BY T HE ASSESSEE FROM ITS TENANTS, IT SHOULD BE SPLIT UP AN D THE AMOUNT ATTRIBUTABLE TO THE BUILDING ONLY SHOULD BE COMPUTED UNDER SECTION 9(1) OF THE 1922 ACT (SIMILAR TO SECTION 22 OF THE 1961 ACT), WHILE THE AMOUNT ATTRIBUTABLE TO THE AMENITIES PROVIDED BY TH E ASSESSEE TO THE TENANTS SHOULD BE ASSESSED UNDER SECTION 12 OF THE 1922 ACT. ACCORDINGLY, THE RECEIP TS ATTRIBUTABLE TO THE VARIOUS AMENITIES PROVIDED BY T HE LANDLORD IN THE SHAPE OF ELECTRIC FITTINGS, LIFT, G AS, SANITATION, ETC., WERE SEPARATELY TREATED UNDER SECTION 12. 10. INDIAN CITY PROPERTIES LTD. V. CIT [I978} 111 I TR 19 (CAL.) ALSO INVOLVE A SIMILAR QUESTION. THE LIFT CHARGES AND AIR-CONDITIONING CHARGES WERE HELD TO B E ASSESSABLE UNDER SECTION 86 TREATING THEM SEPARATEL Y FROM THE INCOME DERIVED FROM THE BUILDING UNDER SECTION 22. 11. CIT V. MODEL MFG. CO. (P.) LTD. [I986} 159 ITR 2701 (CAL.) ALSO STATED THAT THE SERVICES RENDERED BY THE ASSESSEE IN PROVIDING ELECTRICITY, USE OF LIFTS . SUPPLY OF WATER, MAINTENANCE OF STAIRCASES AND WATCH AND WARD FACILITIES TO THE TENANTS CONSTITUTE D SEPARATE ACTIVITIES DISTINCT FROM LETTING OUT OF TH E PROPERTY. THE SERVICE CHARGES REALISED BY THE ASSESSEE WERE HELD TO BE NOT ASSESSABLE UNDER SECTI ON 22 BUT WERE ASSESSABLE UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. 13. IN CASE THERE IS INSEPARABILITY, AS STATED ABOV E, THEN IT WILL NOT BE AN INCOME FROM THE HOUSE PROPERTY AT ALL AND WOULD BE THE INCOME FALLING UNDER THE PRESENT SECTION 56(2){III). FURTHER, WHAT FOLLOWS FROM THIS, IS, THAT IN CASE OF SEPARABILITY , THE TWO SETS OF INCOME ATTRIBUTABLE TO THE TWO SEPARATE ENTITLES ALSO SHOULD BE ASSESSED UNDER RESPECTIVE HEADS. IN OTHER WORDS, THE INCOME THAT SHOULD BE ATTRIBUTED TO THE PROPERTY AS SUCH ALONE SHOULD BE ASSESSED UNDER SECTION 22. 14. IN VIEW OF THE ABOVE DISCUSSION, WE HAVE NO HESITATION IN HOLDING THAT THE COMPOSITE RENT RECEIVED BY THE ASSESSEE COULD BE SPLIT UP IN THE INSTANT CASE AND CONSEQUENTLY, THE QUESTION REFERRE D I.T.A. NO 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 7 OF 23 TO US IS ANSWERED IN THE AFFIRMATIVE AND AGAINST TH E REVENUE. ' , 10. HOWEVER, IT IS SEEN THAT THE APPELLANT IS PROVI DING COMMON SERVICES AND IS CHARGING FOR THE SAME FROM T HE TENANTS. THE POWER BACK-UP IS CERTAINLY NOT AN INCO ME FROM HOUSE PROPERTY. IT IS HELD THAT SERVICE CHARGE S ARE NOT PART OF HOUSE PROPERTY INCOME AND HAS TO BE TREATED SEPARATELY. HOWEVER, THE CHARGES OF RS.83,57,523/- SHOULD BE DEDUCTED FROM THE GROSS RENT AND THEN DEDUCTION UNDER SECTION 24 (A) OF REBATE/ DEDUCTION OF 30% IS TO BE ALLOWED FROM HOUSE PROPERTY INCOME. 5. THE ISSUE RELATING TO CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF BUSINESS EXPENSES UNDER VARIOUS HEADS WAS DECIDE D BY THE LD. CIT(APPEAL) VIDE PARAGRAPHS NO. 13 TO 18 OF HIS IMP UGNED ORDER, WHICH READ AS UNDER:- 13. THE APPELLANT HAS NOT BEEN ABLE TO FIND ANY TR ADING ACCOUNTING FOR ANY BUSINESS BEING CARRIED OUT BY IT . BUT, ON THE OTHER HAND, THERE IS A HUGE PERSONAL EXPENSE S AMOUNTING TO RS.1,46,30,000/-; TRAVELLING & CONVEYA NCE OF RS.5,54,000/-; VEHICLES MAINTENANCE OF RS.8,56,0 00/-; COMMUNICATION EXPENSES OF RS.4,72,000/-; PRINTING & STATIONARY OF RS.2,21,000/-; MISCELLANEOUS EXPENSES OF RS.6,04,000/-. OUT OF THE VARIOUS EXPENSES, THE FOL LOWING EXPENSES ARE CONSIDERED ESSENTIAL FOR THE RUNNING O F THE COMPANY:- SL. NO. PARTICULARS AMOUNT (IN RS.) 1. POWER & FUEL 66,92,000 2. RATES & TAXES 58,64,000 3. INSURANCE 2,41,000 4. LEGAL & PROFESSIONAL EXPENSES 36,82,000 5. REPAIR & MAINTENANCE 21,000 6. OFFICE MAINTENANCE 3,66,000 TOTAL 1,68,66,000 I.T.A. NO 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 8 OF 23 14. THE OTHER EXPENSES BEING INCURRED BY THE APPELL ANT ARE NOT COMMENSURATE WITH BUSINESS OR MAINTENANCE O F THE RUNNING OF THE OFFICE. THE EXPENSES FOR PROVISI ON OF RENT AND OTHER ITEMS ARE NOT ALLOWABLE AS EXPENSE S INCE THE APPELLANT GETS STANDARD DEDUCTION FROM THE PROP ERTY INCOME. THE APPELLANT HAS NOT SHOW ADEQUATE EXPENSE S ON THE RENT EARNING I.E. HOUSE PROPERTY INCOME. THERE ARE MANY EXPENSES WHICH ARE INCURRED BY IT FOR EARNING OF HOUSE PROPERTY INCOME WHICH ARE BEING SHOWN IN THE PROFIT AND LOSS ACCOUNT. THE APPELLANT IS DOING IT TO CLAIM MORE DEDUCTION SINCE ITS BUSINESS LOSS IS SET OFF A GAINST THE HOUSE PROPERTY INCOME AND IF IT SHOWS EXPENSES INCURRED ON EARNING OF HOUSE PROPERTY INCOME, THE S AME WILL BE DISALLOWED SINCE APPELLANT GETS 30% DEDUCTI ON U/S 24(A) AND NO FURTHER EXPENSES CAN BE ALLOWED. THERE IS NO JUSTIFICATION GIVEN BY THE APPELLANT FOR SUCH HUGE EXPENSES WITHOUT BUSINESS BEING CARRIED OUT BY IT, SINCE THE EXPENSES ARE INCURRED FOR THE ONLY WORK BEING D ONE BY THE APPELLANT IS OF GIVING PROPERTY ON RENT. THE AP PELLANT HAS SHOWN INCOME ONLY FROM RENT AND OCCUPATION SERV ICE CHARGES AND PRIOR PERIOD INCOME. THE APPELLANT HAS SHOWN INTEREST OF RS.52,93,000/-. BUT, ON THE OTHER HAND HAS ALSO PAID INTEREST OF RS.2,61,13,000/- AND BANK CHARGES OF RS.83,000/-. THERE IS NO JUSTIFICATION O F SUCH HUGE EXPENSES FOR SUCH BUSINESS. 15. THE HUGE FINANCIAL EXPENSES AS PER SCHEDULE-17 AND LEGAL & PROFESSIONAL FEE OF RS.36,82,000/- AS PER T HE APPELLANT PERTAINS TO THE PROPERTY WHICH IS SEALED BY DELHI MUNICIPAL CORPORATION AND WAS ACQUIRED BY THE APPELLANT DUE TO THE MERGER OF M/S. TURNER MORRISON LAND LTD. WITH IT AFTER FOLLOWING DUE PROCEDURE. IT IS A MERGER WITH DUE APPROVAL FROM LOSS MAKING COMPANY BECAUSE OF NO INCOME DUE TO SEALING OF PROPERTY AND HAVING HUG E LOANS. THE APPELLANT HAS SHOWN EXPENSES OF RS.1,46,30,000/- AS PERSONAL EXPENSES AND RS.2,03,8 96/- AS OPERATING AND OTHER EXPENSES. THERE ARE FINANCIA L EXPENSES OF RS.2,61,96,000/- IN SCHEDULE-17. THE APPELLANT HAS ADDED BACK ONLY RS.20,500/- AS BUILDI NG REPAIRS; INSURANCE CHARGES OF RS.15,459/- AND CORPO RATION TAX OF RS.74,64,868/- PERTAINING TO RENTAL INCOME F OR THE PURPOSES OF HOUSE PROPERTY INCOME. ALL OTHER EXPENS ES HAVE BEEN CLAIMED IN THE PROFIT & LOSS ACCOUNT RELA TING TO BUSINESS. 16. DURING THE APPELLATE PROCEEDINGS WHEN IT WAS PO INTED OUT THAT THERE IS REQUIRED TO BE DISALLOWANCE OF I.T.A. NO 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 9 OF 23 EXPENDITURE RELATING TO THE EARNING OF HOUSE PROPER TY INCOME OUT OF THE EXPENSES MENTIONED IN SCHEDULE-14 , 15 & 17, IT WAS SUBMITTED THAT THE EXPENSES RELATING T O FINANCIAL EXPENSES, POWER & FUEL, RATE & TAXES, INSURANCE, AUDITOR'S REMUNERATION, LEGAL & PROFESSI ON FEE; RENT & SERVICE CHARGES ARE NOT PERTAINING TO H OUSE PROPERTY INCOME AT ALL. THESE ARE EXPENSES FOR THE RUNNING OF BUSINESS SINCE THE APPELLANT IS A CORPOR ATE ENTITY. HOWEVER, THE APPELLANT HAS GIVEN AN ALTERNA TIVE PLEA ACCEPTING THAT CERTAIN EXPENSES AS DISCUSSED A ND IDENTIFIED OUT OF THE TOTAL EXPENSES @40% MAY BE CONSIDERED AS PERTAINING TO EARNING OF HOUSE PROPER TY INCOME AND MAY NOT BE ALLOWED TO BE SET OFF AGAINST THE HOUSE PROPERTY INCOME. THE SAID EXPENSES ARE CONSID ERED TO BE PART OF THE EARNING OF HOUSE PROPERTY INCOME FOR WHICH THE APPELLANT HAS CLAIMED STANDARD DEDUCTION AMOUNTING TO RS.2,35,45,722/- AND HELD TO BE DISALLOWABLE ON THE BASIS OF THE ADMISSION OF THE APPELLANT WITHOUT FURTHER DISCUSSION, SINCE IT IS CONSIDERED TO BE FAIR AND REASONABLE. THE EXPENSES AS ACCEPTED BY THE APPELLANT AND TO BE APPORTIONED FOR EARNING OF HOUSE PROPERTY INCOME ARE AS FOLLOWS:- SL. NO. PARTICULARS AMOUNT (IN RS.) 1. PERSONAL EXPENSES 1,46,30,000 2. TRAVELLING & CONVEYANCE 5,54,000 3. VEHICLES MAINTENANCE 8,56,000 4. COMMUNICATION EXPENSES 4,72,000 5. MISCELLANEOUS EXPENSES 6,04,000 6. TOTAL 1,71,16,000 17. THE DISALLOWANCE @ 40% OF RS.1,71,16,000/- AMOU NTS TO RS.68,46,400/- IS CONSIDERED AND HELD TO BE PERT AINING TO EARNING OF HOUSE PROPERTY INCOME. THEREFORE, THI S WILL NOT BE ALLOWED AS BUSINESS EXPENSES WHILE CALCULATI NG THE LOSS IN THE PROFIT & LOSS ACCOUNT. THE FINANCIAL EX PENSES DO NOT PERTAIN TO HOUSE PROPERTY INCOME SINCE NO LO AN HAS BEEN TAKEN BY THE APPELLANT FOR THE BUILDING GI VEN ON RENT. THE BUILDING WHICH WAS EARLIER BELONGING TO M /S. TURNER MORRISON LAND LTD. IS PART OF PROFIT & LOSS ACCOUNT SINCE THE INCOME FROM THE SAME WAS BEING SH OWN BY THE APPELLANT UNDER THE HEAD 'INCOME FROM BUSINE SS' AS I.T.A. NO 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 10 OF 23 PER THE SUBMISSIONS DURING THE APPELLATE PROCEEDING S. THE MERGED COMPANY I.E. M/S. TURNER MORRISON LAND LTD. HAD TAKEN LOANS FOR THE PURPOSE OF CONSTRUCTION OF THIS BUILDING AND MAJORITY OF THE AMOUNT-BORROWED BELONG S TO THE SAID CONSTRUCTION OF PROPERTY. 18. THEREFORE, THIS GROUND OF APPEAL IS PARTLY ALLO WED BY CONSIDERING THAT OUT OF TOTAL EXPENSES CLAIMED B Y THE APPELLANT IN THE PROFIT & LOSS ACCOUNT AN AMOUNT OF RS.68,46,400/- IS TO BE DISALLOWED AND THE BALANCE AMOUNT IS ALLOWED AS PERTAINING TO THE BUSINESS OF THE APPELLANT. THE APPELLANT IS A COMPANY WHO WAS RUNNI NG EARLIER VARIOUS BUSINESSES AND HAS AGAIN STARTED TH E BUSINESS IN FINANCIAL YEAR 2011-12 AS PER THE SUBMISSIONS. THE APPELLANT DURING THE YEAR HAD BEEN PROVIDING VARIOUS SERVICES AND THE EXPENSES HAVE BE EN INCURRED TO KEEP THE COMPANY RUNNING. THEREFORE, IT IS HELD THAT THE COMPANY IS HAVING A BUSINESS ACTIVITY . THE BUILDING AT QUTAB INSTITUTIONAL AREA, NEW DELHI IS A BUSINESS ASSET AND WAS GIVING RETURNS AS BUSINESS I NCOME AND THAT STILL BELONGS TO THE APPELLANT, ALTHOUGH I T HAS BEEN SEALED BY MUNICIPAL CORPORATION SINCE 14/11/20 06 DUE TO CERTAIN DISPUTE. THE APPELLANT IS ENTITLED T O SET OFF THE BUSINESS LOSSES WITH THE CURRENT YEAR'S HOUSE P ROPERTY INCOME EXCEPT RS.68,46,400/- WHICH IS THE EXPENDITU RE RELATING TO EARNING OF HOUSE PROPERTY INCOME AND AR E NOT BUSINESS EXPENSES. THEREFORE, THE BUSINESS LOSS OF THE APPELLANT WILL BE REDUCED BY AN AMOUNT OF RS. 68,46 ,400/- TO BE SET OFF AGAINST HOUSE PROPERTY INCOME. THIS G ROUND OF APPEAL IS PARTLY ALLOWED. 6. THE CLAIM OF THE ASSESSEE FOR VARIOUS BUSINESS E XPENSES THUS WAS ALLOWED BY THE LD. CIT(APPEALS) TO THE EXTENT OF RS .2,71,35,600/-. AGGRIEVED BY THE SAME, THE REVENUE AND ASSESSEE BOT H HAVE RAISED THE FOLLOWING GROUNDS IN THEIR RESPECTIVE APPEALS:- REVENUES APPEAL (1) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN LAW IN HOLDING THAT INCOME RECEIVED IN RESPECT OF SERVICE CHARGES RELATED TO HOUSE PROPERT Y IS TO BE TREATED AS BUSINESS INCOME AS AGAINST HOUSE PROP ERTY INCOME. (2) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN LAW IN DELETING THE ADDITION MADE B Y AO I.T.A. NO 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 11 OF 23 IN RESPECT OF UNJUSTIFIED AND DISPROPORTIONATE EXPE NSES AGAINST INCOME FROM SERVICES RENDERED. ASSESSEES APPEAL (1) BECAUSE THAT THE LD. CIT(A) WAS ERRED IN LAW AS WEL L AS IN FACTS IN DISALLOWING A SUM OF RS.68,46,400/- BEING 40% OF THE BUSINESS EXPENDITURE OF RS.1,71,16,000/- APPORT IONED BY HIM ALLEGEDLY FOR EARNING OF HOUSE PROPERTY INCO ME AND DISALLOWING THE SAME AGAINST THE TOTAL CLAIM OF BUSINESS EXPENSES BY THE APPELLANT AND HIS SUCH CONCLUSIONS ARE BASED ON HIS SURMISES AND GUESSES A ND ARE CONTRARY TO THE FACTS AND MATERIALS ON RECORD. (2) BECAUSE THAT THE LD. CIT(A) WAS ERRED IN LAW AS WEL L AS IN FACTS IN REDUCING THE BUSINESS LOSS OF THE APPELLAN T BY RS.68,46,400/- TO BE SET OFF AGAINST THE HOUSE PROP ERTY INCOME OF THE YEAR UNDER APPEAL, ON THE ALLEGED GRO UND THAT, THE SAID PROPORTIONATE EXPENSES WAS FOR EARNI NG OF HOUSE PROPERTY INCOME AND WERE NOT RELATING TO EARN ING OF BUSINESS INCOME, HIS SUCH CONCLUSIONS ARE BASED ON HIS SURMISES AND GUESSES AND ARE CONTRARY TO THE FACTS AND MATERIALS ON RECORD. 7. THE LD. D.R. SUBMITTED THAT THE MAINTENANCE AND OTHER SERVICES RENDERED BY THE ASSESSEE TO THE TENANTS WERE INCIDE NTAL TO MAIN ACTIVITY OF LETTING OUT THE PROPERTY AND THE SAME WERE THUS IN THE NATURE OF ANCILLARY SERVICES TO THE LETTING OUT OF HOUSE PROP ERTY. HE CONTENDED THAT THE SAID CHARGES WERE DECLARED BY THE ASSESSEE AS I TS BUSINESS INCOME AND DISPROPORTIONATE EXPENSES OF ABOUT RS.4 CRORES WERE CLAIMED AGAINST THE SAID INCOME. HE INVITED OUR ATTENTION TO THE SPECIF IC ADVERSE OBSERVATIONS AND FINDINGS RECORDED BY THE ASSESSING OFFICER IN T HE ASSESSMENT ORDER TO POINT OUT AND HIGHLIGHT THE EXCESSIVE AND UNREASONA BLE EXPENSES CLAIMED BY THE ASSESSEE-COMPANY AS ITS BUSINESS EXPENSES. H E CONTENDED THAT EVEN THOUGH THE ASSESSEE-COMPANY WAS CLAIMED TO BE ENGAGED IN CARRYING OUT OTHER BUSINESS ACTIVITIES, THERE WAS NO EVIDENC E FILED BY THE ASSESSEE TO SUPPORT AND SUBSTANTIATE THE SAID CLAIM. HE CONT ENDED THAT THERE WAS NO INCOME WHATSOEVER EARNED BY THE ASSESSEE FROM SU CH ACTIVITIES CLAIMED TO BE CARRIED OUT BY IT. HE CONTENDED THAT THE LD. CIT(APPEALS), I.T.A. NO 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 12 OF 23 HOWEVER DID NOT APPRECIATE THIS FACTUAL POSITION IN THE RIGHT PERSPECTIVE AND ALLOWED THE CLAIM OF THE ASSESSEE OF BUSINESS E XPENSES UNDER VARIOUS HEADS TO THE SUBSTANTIAL EXTENT IGNORING COMPLETELY THAT THE ONLY INCOME EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSID ERATION WAS FROM LETTING OUT THE PROPERTIES AND THE SERVICE AND MAIN TENANCE CHARGES RECEIVED FROM THE TENANTS. HE CONTENDED THAT THE ON US TO SUPPORT AND SUBSTANTIATE ITS CLAIM FOR THE BUSINESS EXPENSES CL AIMED UNDER VARIOUS HEADS WAS ON THE ASSESSEE AND THERE WAS A FAILURE O N THE PART OF THE ASSESSEE TO DISCHARGE THE SAID ONUS. 8. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, SUBMITTED THAT THE LD. D.R. HAS NOT RAISED ANY MATERIAL CONTENTION TO DISPUTE OR CHALLENGE THE CONCLUSION DRAWN BY THE LD. CIT(APPEALS) WHILE TREATING THE SERVICE AND MAINTENANCE CHARGES AS ASSESSABLE TO TAX UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION. HE SUBMITTED THAT THE MAIN GRIEVANCE OF THE REVENUE AS PROJECTED BY THE LD. D.R. IN HIS ARG UMENT IS REGARDING THE CLAIM OF THE ASSESSEE FOR THE EXPENSES CLAIMED UNDE R VARIOUS HEADS, WHICH HAVE BEEN ALLOWED BY THE LD. CIT(APPEALS) SUB STANTIALLY. HE CONTENDED THAT THE ASSESSEE WAS ENGAGED IN CARRYING OUT VARIOUS BUSINESS ACTIVITIES IN EARLIER YEARS AND EVEN THOUGH THERE WAS A TEMPORARY LULL IN THE BUSINESS DURING THE YEAR UNDER CONSIDERATION, T HE ASSESSEE-COMPANY CONTINUED TO CARRY ON THE SAID ACTIVITIES IN THE SU BSEQUENT YEARS AND ALSO STARTED SOME NEW ACTIVITIES. HE CONTENDED THAT THE ASSESSEE-COMPANY THUS HAD NOT GONE OUT OF BUSINESS AND IT WAS A SUSP ENSION OF SUCH BUSINESS ACTIVITIES TEMPORARILY DUE TO LULL IN THE BUSINESS. HE SUBMITTED THAT THE ASSESSEE-COMPANY, THEREFORE, CONTINUED TO EMPLOY ITS WORK SOURCE AND MAINTAIN ITS CORPORATE STATUS AS GOING C ONCERN. HE CONTENDED THAT THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE NEED TO BE TAKEN INTO CONSIDERATION WHILE DECIDING THIS ISSUE. IN SUPPORT OF HIS CONTENTION, LD. COUNSEL FOR THE ASSESSEE RELIED ON THE FOLLOWING JU DICIAL PRONOUNCEMENTS- (I) LAKSHMI NARYAN BOARD MILLS PVT. LTD. VS.- CIT 205 ITR 88 (CALCUTTA HIGH COURT); I.T.A. NO 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 13 OF 23 (II) VEECUMSEES VS.- CIT 220 ITR 185 (SC). 9. IN THE REJOINDER, LD. D.R. CONTENDED THAT THE CL AIM OF THE ASSESSEE OF OTHER BUSINESS ACTIVITIES AS MADE BY THE LD. COUNSE L FOR THE ASSESSEE IS VERY VAGUE AND IT IS NOT CLEAR. HE CONTENDED THAT I T IS NOT CLEAR AS TO WHAT EXACTLY WAS THE MAIN BUSINESS OF THE ASSESSEE AND H OW THE VARIOUS OTHER ACTIVITIES CLAIMED TO BE CARRIED ON CONSTITUTED A C OMPOSITE BUSINESS. HE CONTENDED THAT THERE IS NO EVIDENCE BROUGHT ON RECO RD BY THE ASSESSEE TO SHOW THE EXISTENCE OF ANY OTHER BUSINESS ACTIVITIES AND THERE IS ALSO NO INCOME THAT IS SHOWN BY THE ASSESSEE FROM THE SAID BUSINESS. HE CONTENDED THAT THE ASSESSEE HAS ALSO FAILED TO ESTA BLISH ANY NEXUS BETWEEN THE VARIOUS EXPENSES CLAIMED BY IT AND THE BUSINESS ACTIVITY FOR WHICH THE SAME WERE INCURRED. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN OUR OPINI ON, THE FIRST AND FOREMOST ISSUE THAT IS REQUIRED TO BE CONSIDERED AN D DECIDED IN THE PRESENT CONTEXT IS REGARDING THE HEAD OF INCOME UND ER WHICH THE SERVICE AND MAINTENANCE CHARGES RECEIVED BY THE ASSESSEE AR E CHARGEABLE TO TAX. THE ASSESSING OFFICER HELD THE SAID RECEIPTS AS INC OME FROM HOUSE PROPERTY WHILE THE LD. CIT(APPEALS) TREATED THE SAM E AS BUSINESS INCOME AS CLAIMED BY THE ASSESSEE. IT IS OBSERVED THAT THE TOTAL SERVICE AND MAINTENANCE CHARGES OF RS.90,38,482/- WERE RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AND THE DETAILS OF THE SAME ARE GIVEN AT PAGE NO. 223 OF THE ASSESSEES PAPER BOOK. 11. A PERUSAL OF THE ABOVE DETAILS CLEARLY SHOWS TH AT OUT OF RS.90,38,482/- RECEIVED BY THE ASSESSEE TOWARDS SER VICE AND MAINTENANCE CHARGES, A SUM OF RS.71,25,442/- WAS RECEIVED ON AC COUNT OF RECOVERY OF ELECTRIC CHARGES. THIS AMOUNT, WHICH CONSTITUTES AB OUT 80% OF THE TOTAL SERVICE AND MAINTENANCE CHARGES, APPEARS TO BE RECO VERY MADE BY THE ASSESSEE FROM THE TENANTS TOWARDS COMMON ELECTRIC C HARGES AND WE ARE I.T.A. NO 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 14 OF 23 UNABLE TO UNDERSTAND WHAT EXACTLY ARE THE SERVICES THAT ARE REQUIRED TO BE RENDERED TO COLLECT THE COMMON ELECTRICITY CHARG ES FROM THE TENANTS THAT CAN BE TERMED AS AN INDEPENDENT BUSINESS ACTIV ITY OF THE ASSESSEE. EVEN THE EXACT NATURE OF THE BALANCE AMOUNT RECEIVE D BY THE ASSESSEE ON ACCOUNT OF SERVICE AND MAINTENANCE CHARGES IS NOT V ERY CLEAR FROM THE DETAILS FURNISHED BY THE ASSESSEE AND IF QUANTUM OF SUCH AMOUNT IS COMPARED, VIS-A-VIS THE SUBSTANTIAL RENTAL INCOME R ECEIVED BY THE ASSESSEE, IT DOES NOT APPEAR THAT THE SERVICE AND M AINTENANCE CHARGES WERE GENERATED BY THE ASSESSEE FROM ANY BUSINESS AC TIVITY CARRIED ON INDEPENDENTLY. WE, THEREFORE, FIND MERIT IN THE CON TENTION OF THE LD. D.R. THAT THE SERVICE AND MAINTENANCE CHARGES RECEIVED B Y THE ASSESSEE WERE ONLY INCIDENTAL TO RENTAL INCOME AND SINCE THE SAID ACTIVITY WAS ANCILLARY TO THE MAIN ACTIVITY OF LETTING OUT THE PROPERTIES, THE SERVICE AND MAINTENANCE CHARGES WERE CHARGEABLE TO TAX AS INCOM E FROM HOUSE PROPERTY AS RIGHTLY HELD BY THE ASSESSING OFFICER. 12. AS REGARDS THE ALTERNATIVE CLAIM OF THE LD. COU NSEL FOR THE ASSESSEE THAT THE ASSESSEE-COMPANY WAS ENGAGED IN OTHER BUSI NESS ACTIVITIES DURING THE EARLIER YEARS AND THERE WAS ONLY TEMPORA RILY SUSPENSION OF THE SAID ACTIVITIES DURING THE YEAR UNDER CONSIDERATION DUE TO LULL IN THE BUSINESS, WE FIND THAT THIS ASPECT HAS NOT BEEN SPE CIFICALLY CONSIDERED EITHER BY THE ASSESSING OFFICER OR EVEN BY THE LD. CIT(APPEALS). EVEN THE CLAIM OF THE LD. COUNSEL FOR THE ASSESSEE OF A COMP OSITE NATURE OF BUSINESS ACTIVITIES CARRIED ON BY THE ASSESSEE BY RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF VEECUMSEES (SU PRA) AS WELL AS THAT OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF L AKSHMI NARYAN BOARD MILLS PVT. LTD. (SUPRA), WE FIND THAT THE SAME HAS NOT BEEN CONSIDERED OR EXAMINED EITHER BY THE ASSESSING OFFICER OR BY THE LD. CIT(APPEALS). WE, THEREFORE, CONSIDER IT FAIR AND PROPER AND IN THE I NTEREST OF JUSTICE TO SEND THIS MATTER TO THE FILE OF THE ASSESSING OFFICER FO R CONSIDERING THE SAME AFRESH. SINCE THE ISSUE RELATING TO THE CLAIM OF TH E ASSESSEE FOR VARIOUS BUSINESS EXPENSES IS CONSEQUENTIAL TO THIS ISSUE, W E RESTORE THE ISSUE ALSO I.T.A. NO 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 15 OF 23 TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING T HE SAME AFRESH. WE MAY, HOWEVER, OBSERVE FOR THE SAKE OF CLARITY THAT EVEN IF THE CLAIM OF THE ASSESSEE FOR TEMPORARY SUSPENSION OF THE BUSINESS D UE TO LULL IS FOUND TO BE NOT ACCEPTABLE, THE EXPENSES INCURRED BY THE ASS ESSEE FOR CONTINUING AND MAINTAINING ITS CORPORATE STATUS ARE REQUIRED T O BE ALLOWED AS DEDUCTION UNDER THE HEAD PROFITS AND GAINS OF BUSI NESS OR PROFESSION AS HELD BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF LAKSHMI NARYAN BOARD MILLS PVT. LTD. (SUPRA). WE ACCORDINGLY ALLOW GROUND NO. 1 OF THE REVENUES APPEAL WHILE GROUND NO. 2 OF THE REVENUE S APPEAL AND GROUNDS NO. 1 & 2 OF THE ASSESSEES APPEAL ARE TREA TED AS ALLOWED FOR STATISTICAL PURPOSES. 13. IN GROUND NO. 3 OF ITS APPEAL, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(APPEALS) IN DELETING THE ADDITION MA DE BY THE ASSESSING OFFICER IN RESPECT OF DEEMED RENTAL INCOME FROM THE PROPERTY AT QUTUB INSTITUTIONAL AREA, NEW DELHI. 14. IN THE BALANCE-SHEET FILED ALONG WITH THE RETUR N OF INCOME, THE INVESTMENT IN BUILDING AT QUTUB INSTITUTIONAL AREA, NEW DELHI WAS SHOWN BY THE ASSESSEE AT RS.19,14,09,000/-. IN THIS REGAR D, IT WAS EXPLAINED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT THE SAID BUILDING HAD COME TO ITS BALANCE-SHEET AS A RESULT OF MERGER OF TMLL W.E.F. 01.04.2008 AND SINCE THE SAID BUILDING WAS SEALED BY THE MUNICIPAL CORPORATION OF DELHI, NO INCOME FROM THE SAME ON DEEMED BASIS WAS DECLARE D FOR THE YEAR UNDER CONSIDERATION. THIS EXPLANATION OF THE ASSESS EE WAS NOT FOUND ACCEPTABLE BY THE ASSESSING OFFICER. ACCORDING TO H IM, THE SAID BUILDING WAS SEALED BY THE MUNICIPAL CORPORATION ONLY ON 14. 10.2011 AND, THEREFORE, ANNUAL VALUE OF THE SAME WAS LIABLE TO B E TAXED AS HOUSE PROPERTY INCOME IN THE HANDS OF THE ASSESSEE UNDER SECTION 23(1)(C) OF THE ACT. ACCORDINGLY, NOTIONAL RENT FROM THE SAID P ROPERTY CALCULATED AT THE RATE OF 6% OF RS.19,14,09,000/- WAS WORKED OUT BY THE ASSESSING I.T.A. NO 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 16 OF 23 OFFICER AT RS.1,14,84,540/- AND AFTER ALLOWING DEDU CTION OF 30%, ADDITION OF RS.80,39,178/- WAS MADE BY HIM TO THE TOTAL INCO ME OF THE ASSESSEE. 15. THE ADDITION OF RS.80,39,178/- ON ACCOUNT OF DE EMED RENTAL INCOME FROM THE BUILDING AT QUTUB INSTITUTIONAL AREA AS MA DE BY THE ASSESSING OFFICER WAS CHALLENGED BY THE ASSESSEE IN THE APPEA L FILED BEFORE THE LD. CIT(APPEALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD . CIT(APPEALS) DELETED THE SAME FOR THE FOLLOWING REASONS GIVEN IN PARAGRA PH NO. 21 OF HIS IMPUGNED ORDER:- 21. I HAVE CAREFULLY CONSIDERED THE OBSERVATIONS O F THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, AND SUBMISSIONS OF THE APPELLANT. THE APPELLANT HAS PRO DUCED A COPY OF THE WRIT PETITION FILED IN THE HON'BLE DE LHI HIGH COURT RELATING TO SEALING OF THE PROPERTY IN WHICH IT IS CLEAR THAT THE BUILDING WAS SEALED ON 14/11/2006 IN THE SEALING DRIVE UNDERTAKEN BY MUNICIPAL CORPORATION O F DELHI. THEREFORE, THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE NOT TO LET OUT THIS PROPERTY. THER EFORE, THE NOTIONAL INCOME FROM THE SAID PROPERTY LYING VA CANT DUE TO ACT OF GOVERNMENT CANNOT BE ADDED BACK. HENC E, ADDITION OF RS.80,39,178/- IS DELETED. 16. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON REC ORD. THE LD. D.R. HAS CONTENDED THAT THE RELIEF ON THIS ISSUE WAS ALLOWED BY THE LD. CIT(APPEALS) BY RELYING ON THE COPY OF WRIT PETITIO N FILED BY THE ASSESSEE FOR THE FIRST TIME BEFORE HIM, WHEREIN THE DATE OF SEALING OF THE PROPERTY BY DELHI MUNICIPAL CORPORATION WAS MENTIONED AT 14. 11.2006 AS AGAINST THE DATE OF 14.11.2011 TAKEN BY THE ASSESSING OFFIC ER. HE HAS CONTENDED THAT THE LD. CIT(APPEALS), HOWEVER, DID NOT GIVE AN Y OPPORTUNITY TO THE ASSESSING OFFICER TO VERIFY THIS ADDITIONAL EVIDENC E IN THE FORM OF COPY OF WRIT PETITION FILED BY THE ASSESSEE BEFORE GIVING R ELIEF TO THE ASSESSEE ON THIS ISSUE AND THERE IS THUS A VIOLATION OF RULE 46 A OF INCOME TAX RULES BY THE LD. CIT(APPEALS). THE LD. COUNSEL FOR THE ASSES SEE, ON THE OTHER HAND, HAS SUBMITTED THAT THE DATE OF SEALING OF THE PROPE RTY BEING 14.11.2006 I.T.A. NO 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 17 OF 23 WAS SPECIFICALLY POINTED OUT BY THE ASSESSEE BEFORE THE ASSESSING OFFICER BUT THE SAME WAS WRONGLY TAKEN BY HIM ON 14.11.2011 . HE HAS CONTENDED THAT HE, HOWEVER, HAS NO OBJECTION IF THE MATTER IS SENT BACK TO THE ASSESSING OFFICER FOR VERIFICATION OF THE DATE OF S EALING OF THE PROPERTY. ACCORDINGLY, WE SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF TH E ASSESSING OFFICER FOR DECIDING THE SAME AFRESH AFTER VERIFYING THE EXACT DATE OF SEALING OF THE PROPERTY BY DELHI MUNICIPAL CORPORATION FROM THE RE LEVANT DOCUMENTARY EVIDENCE. GROUND NO. 3 OF THE REVENUES APPEAL IS A CCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 17. IN GROUND NO. 4, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(APPEALS) IN DELETING THE ADDITION MADE BY THE A SSESSING OFFICER IN RESPECT OF DEEMED RENTAL INCOME FROM THE PROPERTY A T SILVER ARCH APARTMENTS. 18. IN THE BALANCE-SHEET FILED ALONG WITH THE RETUR N OF INCOME, A SUM OF RS.2,35,00,000/- WAS SHOWN BY THE ASSESSEE AS ADVAN CE RECEIVED AGAINST SALE OF APARTMENT IN DELHI. IN THIS REGARD, IT WAS EXPLAINED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT THE SAID ADVANCE WAS RECEIVED FROM ONE MRS. BINDIA JAIN AGAINST SALE OF APARTMENT AT 506, 5 TH SILVER ARCH, NEW DELHI AND ALTHOUGH THERE WAS AN AGREEMENT TO SELL THE SAID FLAT FOR A CONSIDERATION OF RS.2,51,72,384/-, NO CONVEYA NCE COULD BE EXECUTED DUE TO SOME DISPUTE. ACCORDING TO THE ASSESSING OFF ICER, THE ASSESSEE THUS REMAINED THE OWNER IN POSSESSION OF THE SAID PROPER TY AND ANNUAL VALUE OF THE SAME WAS CHARGEABLE TO TAX IN THE HANDS OF T HE ASSESSEE. HE ACCORDINGLY WORKED OUT THE NOTIONAL RENTAL INCOME O F THE SAID PROPERTY AT RS.15,10,343/- AT THE RATE OF 6% OF RS.2,51,72,384/ - AND AFTER ALLOWING DEDUCTION OF 30%, ADDITION OF RS.10,57,240/- WAS MA DE BY HIM TO THE TOTAL INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. I.T.A. NO 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 18 OF 23 19. THE ADDITION OF RS.10,57,240/- MADE BY THE ASS ESSING OFFICER WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFO RE THE LD. CIT(APPEALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE A SSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD. CIT(APPEALS) DELETED THE SAID ADDITION FOR THE FOLLOWING REASONS GIVEN IN PARAGRA PH NO. 22 OF HIS IMPUGNED ORDER:- 22. THE APPELLANT HAS PRODUCED POSSESSION CERTIFIC ATE AS ANNEXURE-2 DULY SINGED BY MRS. BINDIA JAIN SHOWN THAT THE FIXED POSITION OF FLAT NO. 506, 5 TH SILVER ARCH APARTMENT WAS HANDED TO HER ON 01/12/2010. THEREFOR E, SINCE THE POSSESSION OF THE FLAT HAS BEEN HANDED OV ER, THE INCOME OF THE SAME CANNOT BE ADDED IN THE HANDS OF THE APPELLANT. THE APPELLANT HAS ALREADY RECEIVED ADVAN CE OF RS.2,35,00,000/- OUT OF TOTAL CONSIDERATION OF RS.2,51,72,384/- WHICH IS 90% OF THE TOTAL CONSIDER ATION. THE APPELLANT HAS NOT EXECUTED THE CONVEYANCE DEED DUE TO SOME DISPUTE, BUT POSSESSION WAS GIVEN SINCE THE MAJOR CONSIDERATION WAS RECEIVED AND POSSESSION HAN DED OVER. THEREFORE, IT CANNOT BE HELD THAT APPELLANT S HOULD HAVE GIVEN THIS PROPERTY ON RENT, THE ADDITION UNDE R SECTION 23(I)(A) IS NOT UPHELD. 20. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON REC ORD. THE LD. D.R. HAS SUBMITTED THAT THE RELIEF ON THIS ISSUE WAS GIVEN B Y THE LD. CIT(APPEALS) ON THE GROUND THAT MAJOR CONSIDERATION FOR THE FLAT WAS RECEIVED BY THE ASSESSEE AND POSSESSION OF THE SAME WAS ALSO HANDED OVER. HE HAS POINTED OUT THAT THE POSSESSION OF THE SAID FLAT WA S HANDED OVER BY THE ASSESSEE TO MRS. BINDIA JAIN ONLY ON 01.12.2010 AND SINCE THE ASSESSEE WAS VERY MUCH IN POSSESSION OF THE SAID PROPERTY DU RING THE YEAR UNDER CONSIDERATION, THE NOTIONAL RENTAL INCOME OF THE SA ME WAS CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE UNDER SECTION 23(1 )(A) AS RIGHTLY HELD BY THE ASSESSING OFFICER. THE LD. COUNSEL FOR THE ASSE SSEE, ON THE OTHER HAND, HAS SUBMITTED THAT THE ASSESSEE HAD AGREED TO SELL THE PROPERTY IN QUESTION AND 90% OF THE PAYMENT WAS ALREADY RECEIVE D BY IT FROM THE PURCHASER MRS. BINDIA JAIN. HE HAS CONTENDED THAT E VEN THOUGH THE POSSESSION OF THE PROPERTY WAS GIVEN ON 01.12.2010 AFTER RECEIPT OF THE I.T.A. NO 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 19 OF 23 BALANCE PAYMENT, THE ASSESSEE WAS NOT IN THE POSSES SION TO LET OUT THE SAID PROPERTY. RELYING ON THE DECISION OF THE HONB LE SUPREME COURT IN THE CASE OF S.N. WADIYAR (DECD. THROUGH L.R.) VS.- CIT [378 ITR 9], THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THE LD. CIT (APPEALS) WAS FULLY JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSE SSING OFFICER ON THIS ISSUE. 21. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL AVAILABLE ON RECORD, WE FIND IT DIFFICULT TO UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) ON THIS ISSUE. IT IS OBSERVED THAT ALTHOUGH SUBSTANTIAL PAYMENT AGAINST THE CONSIDERATION FOR S ALE OF THE PROPERTY IN QUESTION WAS RECEIVED BY THE ASSESSEE FROM MRS. BIN DIA JAIN, THE POSSESSION OF THE PROPERTY WAS NOT HANDED OVER BY T HE ASSESSEE TO THE PURCHASER DURING THE YEAR UNDER CONSIDERATION AND T HE SAME WAS HANDED OVER ONLY ON 01.12.2010. THE LD. CIT(APPEALS), IN O UR OPINION, THEREFORE, WAS NOT JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS ISSUE ON THE WRONG PRESUMPTION THAT THE POS SESSION OF THE PROPERTY WAS ALREADY HANDED OVER. AS RIGHTLY CONTEN DED BY THE LD. D.R., THE POSSESSION OF THE PROPERTY REMAINED WITH THE AS SESSEE DURING THE YEAR UNDER CONSIDERATION AND THE ASSESSEE BEING THE OWNER IN POSSESSION OF THE PROPERTY, THE NOTIONAL RENTAL INCOME FROM TH E SAME WAS CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE UNDER SECTION 2 3(1)(A) AS RIGHTLY HELD BY THE ASSESSING OFFICER. EVEN THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF S.N. WADIYAR (DECD. THROUGH L.R.) (S UPRA), CITED BY THE LD. COUNSEL FOR THE ASSESSEE IS OF NO HELP TO THE ASSES SEE ON THIS ISSUE AS THE SAME IS DISTINGUISHABLE ON FACTS AND THE ISSUE INVO LVED THE SAME THEREIN IS FOUND TO BE DIFFERENT. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE AND RESTORE THAT OF THE ASSESSING OFFICER. GROUND NO. 4 OF THE REVENUES APPEAL IS ACCORDINGLY ALLOWED. I.T.A. NO 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 20 OF 23 22. IN GROUNDS NO. 5 & 6, THE REVENUE HAS CHALLENGE D THE ACTION OF THE LD. CIT(APPEALS) IN DELETING THE ADDITION MADE BY T HE ASSESSING OFFICER ON ACCOUNT OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) O F THE ACT FOR THE LOANS RECEIVED FROM DEVBHOOMI AWAS LIMITED AND M/S. ARCUS LIMITED. 23. IN THE BALANCE SHEET FILED ALONG WITH RETURN OF INCOME, LOANS OF RS.99,00,000/- AND RS.1,15,00,000/- RECEIVED FROM D EVBHOOMI AWAS LIMITED AND M/S. ARCUS LIMITED WERE SHOWN BY THE AS SESSEE-COMPANY. ACCORDING TO THE ASSESSING OFFICER, THE PROVISIONS OF SECTION 2(22)(E) WERE SQUARELY APPLICABLE IN RESPECT OF THE SAID LOA NS RECEIVED BY THE ASSESSEE-COMPANY FROM THE RELATED PARTIES AND ACCOR DINGLY BY INVOKING THE SAID PROVISIONS, HE MADE AN ADDITION OF RS.2,14 ,00,000/- TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF DEEMED DIVIDEN D. ON APPEAL, THE LD. CIT(APPEALS) DELETED THE SAID ADDITION MADE BY THE ASSESSING OFFICER UNDER SECTION 2(22)(E) AFTER HAVING FOUND THAT BOTH THE LOANS IN QUESTION HAD BEEN TAKEN BY THE TMLL IN THE EARLIER YEARS AND THE SAME WERE TRANSFERRED TO THE ASSESSEE-COMPANY AS A RESULT OF MERGER OF TMLL WITH THE ASSESSEE-COMPANY. HE HELD THAT THE PROVISIONS O F SECTION 2(22)(E), THEREFORE, WERE NOT APPLICABLE IN RESPECT OF THE SA ID LOANS. 24. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON REC ORD. IT IS OBSERVED THAT THE ADDITION MADE BY THE ASSESSING OFFICER UNDER SE CTION 2(22)(E) IN RESPECT OF LOANS RECEIVED FROM DEVBHOOMI AWAS LIMIT ED AND M/S. ARCUS LIMITED BY TREATING THE SAME AS DEEMED DIVIDEND UND ER SECTION 2(22)(E) ARE DELETED BY THE LD. CIT(APPEALS) AFTER HAVING FO UND THAT THE SAID LOANS HAD BEEN TAKEN BY TURNER MORRISON LAND LIMITED (TML L) IN THE EARLIER YEARS AND THE SAME WERE TRANSFERRED TO THE ASSESSEE -COMPANY AS A RESULT OF MERGER OF TMLL WITH THE ASSESSEE-COMPANY. HE ALS O FOUND THAT THE ASSESSEE-COMPANY WAS NOT THE SHAREHOLDER OF BOTH TH ESE COMPANIES WHEN THE LOANS IN QUESTION WERE ACTUALLY RECEIVED. AT TH E TIME OF HEARING BEFORE US, THE LD. D.R. HAS NOT BEEN ABLE TO BRING ANYTHING ON RECORD TO I.T.A. NO 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 21 OF 23 DISPUTE THESE FINDINGS OF FACT RECORDED BY THE LD. CIT(APPEALS) WHILE DELETING THE ADDITION MADE BY THE ASSESSING OFFICER UNDER SECTION 2(22)(E). WE, THEREFORE, FIND NO JUSTIFIABLE REASON TO INTERFERE WITH THE IMPUGNED ORDER OF THE LD.CIT(APPEALS) ON THIS ISSUE AND UPHOLDING THE SAME, WE DISMISS GROUNDS NO. 5 & 6 OF THE REVENUES APPEAL. 25. AS REGARDS THE ISSUE INVOLVED IN GROUND NO. 7 O F THE REVENUES APPEAL RELATING TO THE DELETION BY THE LD. CIT(APPE ALS) OF THE ADDITION MADE BY THE ASSESSING OFFICER ON THE BASIS OF ITS D ATA, IT IS OBSERVED THAT THE DIFFERENCE IN RELEVANT ITS DATA AS NOTED BY THE ASSESSING OFFICER WAS RECONCILED BY THE ASSESSEE DURING THE COURSE OF APP ELLATE PROCEEDINGS BEFORE THE LD. CIT(APPEALS) AND AFTER CONSIDERING T HE SAME, THE LD. CIT(APPEALS) DIRECTED THE ASSESSEE TO PRODUCE ALL T HE RELEVANT DETAILS IN SUPPORT OF THE RECONCILIATION FOR VERIFICATION BEFO RE THE ASSESSING OFFICER. KEEPING IN VIEW THIS OPPORTUNITY GIVEN BY THE LD. C IT(APPEALS) TO THE ASSESSING OFFICER TO VERIFY THE RECONCILIATION PREP ARED AND FURNISHED BY THE ASSESSEE FROM THE RELEVANT DETAILS AND DOCUMENT S, WE ARE OF THE VIEW THAT THE REVENUE CANNOT BE SAID TO HAVE ANY GRIEVAN CE FROM THE ORDER OF THE LD. CIT(APPEALS) ON THIS ISSUE. EVEN THE LD. D. R. HAS NOT RAISED ANY ARGUMENT ON THIS ISSUE. WE, THEREFORE, FIND NO MERI T IN GROUND NO. 7 OF THE REVENUES APPEAL AND DISMISS THE SAME. 26. THE COMMON ISSUE INVOLVED IN GROUNDS NO. 3 TO 5 OF THE ASSESSEES APPEAL RELATES TO THE ACTION OF THE LD. CIT(APPEALS ) IN CONFIRMING THE DISALLOWANCE OF RS.30,90,656/- MADE BY THE ASSESSIN G OFFICER UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INC OME TAX RULES, 1962 AND FURTHER ENHANCEMENT OF THE SAME BY RS.16,84,057 /-. 27. AS NOTICED BY THE ASSESSING OFFICER FROM THE BA LANCE-SHEET, THE ASSESSEE-COMPANY IT HAD MADE SUBSTANTIAL INVESTMENT IN SHARES OF OTHER COMPANIES. HE ALSO FOUND THAT SUBSTANTIAL EXPENDITU RE ON INTEREST WAS INCURRED BY THE ASSESSEE DURING THE YEAR UNDER CONS IDERATION. HE, I.T.A. NO 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 22 OF 23 THEREFORE, REQUIRED THE ASSESSEE TO EXPLAIN AS TO W HY THE INTEREST EXPENDITURE ATTRIBUTABLE TO THE INVESTMENT MADE IN SHARES OF OTHER COMPANIES SHOULD NOT BE DISALLOWED UNDER SECTION 14 A OF THE ACT. IN THIS REGARD, IT WAS EXPLAINED BY THE ASSESSEE THAT THERE BEING NO EXEMPT INCOME IN THE FORM OF DIVIDEND RECEIVED DURING THE YEAR UNDER CONSIDERATION ON THE INVESTMENT MADE IN SHARES OF O THER COMPANIES, NO DISALLOWANCE UNDER SECTION 14A COULD BE MADE. THIS CONTENTION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE ASSESSING OFFICER AND BY RELYING ON THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL A T DELHI IN THE CASE OF CHEMINVEST LIMITED VS.- ITO [121 ITD 318], HE HELD THAT THE INTEREST EXPENDITURE INCURRED BY THE ASSESSEE AS ATTRIBUTABL E TO THE INVESTMENT MADE IN SHARES OF OTHER COMPANIES WAS LIABLE TO BE MADE UNDER SECTION 14A. HE ACCORDINGLY WORKED OUT SUCH INTEREST EXPEND ITURE BY APPLYING RULE 8D(2) AT RS.30,90,656 /- AND MADE DISALLOWANCE TO THAT EXTENT UNDER SECTION 14A. ON APPEAL, THE LD. CIT(APPEALS) NOT ON LY CONFIRMED THE SAID DISALLOWANCE MADE BY THE ASSESSING OFFICER BUT ALSO ENHANCED THE SAME BY RS.16,84,057/- BY APPLYING RULE 8D(2)(III) OF TH E INCOME TAX RULES, 1962. 28. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON REC ORD. AS AGREED BY THE LD. REPRESENTATIVES OF BOTH THE SIDES, THIS ISSUE I S SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY VARIOUS JUDICIAL PRONOUNC EMENTS INCLUDING THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF CHEMINVEST LIMITED [78 ITR 033], WHEREIN, WHILE OVERRULING THE DECISION OF THE SPECIAL BENCH OF ITAT AT DELHI, IT WAS HELD THAT NO DISALLOWANCE UNDER SECTION 14A CAN BE MADE IF THERE IS NO EXEMPT INCOM E ACTUALLY RECEIVED BY THE ASSESSEE IN THE RELEVANT YEAR. WE ACCORDINGL Y DELETE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND ENHA NCED BY THE LD. CIT(APPEALS) UNDER SECTION 14A READ WITH RULE 8D AN D ALLOW GROUNDS NO. 3 TO 5 OF THE ASSESSEES APPEAL. I.T.A. NO 297/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 161/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 23 OF 23 29. IN THE RESULT, THE APPEAL OF THE REVENUE AS WEL L AS ASSESSEE BOTH ARE PARTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER12, 2018. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 12 TH DAY OF SEPTEMBER, 2018 COPIES TO : (1) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-6, KOLKATA, AAYAKAR BHAWAN, ROOM NO.17, 6 TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (2) M/S. TURNER MORRISON LIMITED, 6, LYONS RANGE, KOLKATA-700 001 (3) COMMISSIONER OF INCOME TAX (APPEALS)-VI, KOLK ATA, (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, HEAD OF OFFICE/D.D.O. INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.