The Assistant Commr. of Income Tax, Circle-2 (1), RAJKOT-GUJARAT V. Shri Girish R. Tanti, RAJKOT-GUJARAT

ITA 308/RJT/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9037 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 17-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: M J RANPURA A R
• Keywords: Business expenditure; Earning of tax free income; Proportionate interest; Commercial expediency
• Section: 14A; 147

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] JKTDKSV U;K;IHB] JKTDKSVA VK;DJ VIHYH; VF/KDJ.K] JKTDKSV U;K;IHB] JKTDKSVA VK;DJ VIHYH; VF/KDJ.K] JKTDKSV U;K;IHB] JKTDKSVA VK;DJ VIHYH; VF/KDJ.K] JKTDKSV U;K;IHB] JKTDKSVA IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E-COURT AT AHMEDABAD] EKUHK CKSJM EKUHK CKSJM EKUHK CKSJM EKUHK CKSJM BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI, MANISH BORAD, ACCOUNTANT MEMBER I.T.A. NO.308/RJT/2015 ( / ASSESSMENT YEAR : 2008-09) ACIT CIRCLE-2(1) RAJKOT. VS. SHRI GIRISH R. TANTI, RAJKOT. ! PAN/GIR NO. : ABFPT 3310 E ( ' / APPELLANT ) .. ( #' RESPONDENT ) '$ APPELLANT BY : SHRI AVINASH KUMAR, SR. DR #'%$ / RESPONDENT BY : SHRI M. J. RANPURA, AR & '(%)* / DATE OF HEARING 17/05/2017 +,-.%)* / DATE OF PRONOUNCEMENT 26/05/2017 / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINS T THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-I, RAJKOT, DATE D 20/03/2015 FOR THE ASSESSMENT YEAR (AY) 2008-09. 2. REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF APPEA LS: I. THE LD. CIT(A)-1, RAJKOT HAS ERRED IN LAW AND ON FA CTS IN DELETING THE ENTIRE ADDITION OF RS.83,51,614/- MADE U/S. 14A OF THE I.T. ACT BY THE A.O. ITA NO.308/RJT/ 2015 ACIT VS.SHRI GIRISH R. TANTI ASST.YEAR 2008-09 - 2 - II. THE LD. CIT(A)-1, RAJKOT HAS ON THE FACTS AND C IRCUMSTANCES OF THE CASE, ERRED IN HOLDING THAT ADVANCING OF LOANS TO RELATED PARTIES FOR PURCHASE OF SHARES IN GROUP COMPANIES A MOUNTED TO COMMERCIAL EXPEDIENCY. III. THE LD. CIT(A)-1, RAJKOT HAS ERRED IN CONSIDER ING THE FACT THAT COMMERCIAL EXPEDIENCY HAS TO BE WITH RESPECT TO THE AFFAIRS OF THE BUSINESS ESTABLISHMENT & NOT FOR PROTECTING THE INT EREST OF PROMOTERS / OWNERS. IV. THE LD. CIT(A)-I, RAJKOT HAS ERRED IN LAW AND O N FACTS IN ALLOWING INTEREST EXPENSES OF RS.83,51,614/-, WHERE AS, AS PER SECTION.14A R.W.R.8D, NO DEDUCTION SHALL BE ALLOWE D IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. FURTHER, THE SECURED LOANS TAKEN BY THE ASSESSEE WAS NOT SHOWN IN THE AU DITED ACCOUNTS OF HIS BUSINESS CONCERN BUT IT WAS SHOWN I N HIS PERSONAL P & L A/C. IN OTHER WORD, THE BORROWED FUNDS WERE N OT UTILIZED FOR HIS PROPRIETARY BUSINESS OF POWER GENERATION. V. ON THE FACTS OF THE CASE, THE LD. CIT(A)-1, RAJK OT OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. AS THE ASSESSEE HAS NO T UTILIZED BORROWED FUND FOR HIS PROPRIETARY BUSINESS AND ALSO FAILED TO PROVE THE SO CALLED BUSINESS EXPEDIENCY THAT FUND W AS BORROWED TO PURCHASE SHARES OF SISTER CONCERN COMPANIES IN T HE NAME OF HIMSELF AND THE NAME OF HIS FAMILY MEMBERS TO PREVE NT BACK-DOOR TAKE OVER. VI. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT(A)-1, RAJKOT MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY KINDLY BE RESTORED BACK TO THE EXTENT. VII. THAT THE REVENUE CRAVES LEAVE TO ADD, AMEND, A LTER OR WITHDRAW ANY GROUNDS OF APPEALS. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- ITA NO.308/RJT/ 2015 ACIT VS.SHRI GIRISH R. TANTI ASST.YEAR 2008-09 - 3 - ON GOING THROUGH THE DETAILS FURNISHED BY THE ASSES SEE, IT WAS OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION, HE HAS TA KEN LOANS TO THE TUNE OF RS.100 CRORES FROM THE FINANCIAL INSTITUTIONS. OUT OF THIS LOAN, A LOAN TO THE TUNE OF RS.14.56 CRORES HAVE BEEN UTILIZED FOR INVESTMENT IN SHARES OF THE GROUP COMPANIES OF THE ASSESSEE. IN THIS REGARD THE ASSESSEE HAS CLAIMED DEDUCTION TO THE TUNE OF 0.835 CRORES AS AL LOWABLE INTEREST EXPENSES. THE INCOME WHICH WILL BE GENERATED WILL B E EXEMPT INCOME. HERE IT IS PERTINENT TO MENTION THAT AS PER THE PRO VISIONS OF SECTION 14A OF THE INCOME-TAX ACT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THEREA FTER, A SHOW-CAUSE NOTICE WAS SERVED TO THE ASSESSEE AND SAME IS REPRO DUCED HEREUNDER: IN CONNECTION WITH THE ONGOING ASSESSMENT PROCEEDI NGS FOR THE ASSESSMENT YEAR 2008-09 RELEVANT TO THE FINANCIAL Y EAR 2007-08, YOU HAVE FURNISHED SUBMISSION DATED 22.10.2010 W.R.T IS SUE OF ELIGIBILITY OF CLAIM OF INTEREST OF RS.0.835 CRORES. HOWEVER, THE SAME IS NOT TENABLE ON ACCOUNT OF FOLLOWING GROUNDS. I. THE FIRST LOGIC PUT FORTH W.R.T ALLOWABILITY OF THE INTEREST EXPENSES CLAIMED IS THAT 'SINCE THE BORROWED FUNDS HAVE BEEN UTILIZED FOR THE PURPOSE OF BUSINESS BY THE COMPANY, INTEREST TH EREON IS AN ALLOWABLE EXPENDITURE AS THE SAME IS AS PER THE BUS INESS EXPEDIENCY'. IN THIS REGARD, IT IS TO BE NOTED THAT DURING THE Y EAR UNDER CONSIDERATION, THE ASSESSEE HAS BORROWED SUBSTANTIVE LOANS FOR WHI CH HE HAS TO PAY TOTAL INTEREST OF RS.6,95,96,790/-. THE SAID BORROW ED LOANS HAS BEEN ADVANCED OR INVESTED IN THE DIFFERENT COMPANIES (GR OUP COMPANIES AS WELL AS OTHERS) WITHOUT CHARGING THE INTEREST ON TH E SAME. LOANS TO THE TUNE OF RS.14.56 CRORES HAVE BEEN UTILIZED FOR INVE STMENT IN SHARES OF THE GROUP COMPANIES OF THE ASSESSEE. IN THIS CONNEC TION, THE ASSESSEE HAS ITA NO.308/RJT/ 2015 ACIT VS.SHRI GIRISH R. TANTI ASST.YEAR 2008-09 - 4 - CLAIMED DEDUCTION TO THE TUNE OF 0.835 CRORES AS AL LOWABLE INTEREST EXPENSES. IN THIS CONTEXT IT HAS TO BE NOTED THAT LOAN HAS BE EN UTILIZED FOR THE PURPOSE OF BUSINESS OF THE COMPANY IN WHICH THE ASS ESSEE HAS INVESTED. THIS DOES NOT MEAN THAT THE INTEREST EXPENDITURE IS FOR THE BUSINESS OF THE ASSESSEE. HAD THE LOAN BEEN TAKEN BY THE COMPAN Y AND COMPANY WOULD HAVE PAID THE INTEREST THE INTEREST WOULD BE CONSIDERED A BUSINESS EXPENDITURE. HERE ANOTHER FACT WHICH IS TO BE CONSI DERED IS WHAT WOULD BE THE INCOME IN THE HANDS OF ASSESSEE AND ITS TAXA BILITY OUT OF THE FUNDS INVESTED IN VARIOUS COMPANIES. WHETHER THE INCOME W OULD BE TAXABLE IN THE HANDS OF ASSESSEE OR WOULD IT FORM PART OF TAXA BLE INCOME OF THE ASSESSEE. HERE, THE INCOME WHICH WOULD COME OUT OF INVESTMENT IN GROUP COMPANIES IS DIVIDEND WHICH IS EXEMPT. HENCE ANY EXPENSE INCURRED FOR EARNING FUTURE EARNINGS OF EXEMPT INCO ME IS NOT AN ALLOWABLE EXPENDITURE AS PER INCOME TAX ACT. THEREF ORE, THE ABOVE CLAIMED INTEREST EXPENSES OF RS.0.835 CRORES WRONGL Y CLAIMED BY THE ASSESSEE AS AN ALLOWABLE EXPENSE ARE REQUIRED TO BE DISALLOWED. ON GOING THROUGH THE SUBMISSION OF THE ASSESSEE, IT IS OBSERVED THAT HE PLACED RELIANCE ON THE DECISION IN THE CASE OF S. A . BUILDERS V CIT. IN THIS CONTEXT IT IS WORTHWHILE TO MENTION THAT THE F ACTS OF THE CASE OF S. A. BUILDERS ARE QUITE DIFFERENT FROM THAT OF THE ASSES SEE UNDER CONSIDERATION THEREFORE THE RATIO OF THE JUDGMENT I N THE CASE OF S. A. BUILDERS CAN'T BE APPLIED IN THE ASSESSEE'S CASE. H ERE, IT IS VERY SURPRISING THAT THE ASSESSEE ON ONE HAND IS PAYING INTEREST ON THE BORROWED LOANS WHILE ADVANCING/INVESTING WITHOUT AN Y REVENUE RECOGNITION, THEREFORE RESULTING IN TO HUGE LOSSES RUNNING INTO CRORES. 4. IN REPLY TO THE SHOW-CAUSE, THE ASSESSEE SUBMITTED ITS REPLY THROUGH ITS AUTHORIZED REPRESENTATIVE. SAME IS REPRODUCED H ERE-IN-BELOW FOR REFERENCE: 1.0 THE ASSESSEE HAS BEEN SERVED WITH THE ABOVE LE TTER REQUIRING HIM TO SHOW CAUSE AS TO WHY INTEREST EXPENSE CLAIMED AT 0.835 CRORES SHOULD NOT BE DISALLOWED ON THE ALLEGED GROUNDS THA T: ITA NO.308/RJT/ 2015 ACIT VS.SHRI GIRISH R. TANTI ASST.YEAR 2008-09 - 5 - A. FUNDS ARE INVESTED INTO SHARES OF GROUP COMPANIES F ROM WHICH INCOME TO BE DERIVED IS DIVIDEND, WHICH IS EXEMPT. HENCE ANY EXPENSE INCURRED FOR EARNING / FUTURE EARNINGS OF E XEMPT INCOME IS NOT ALLOWABLE EXPENDITURE AS PER INCOME TAX ACT. B. FORMULA AS PRESCRIBED IN RULE 8D THROUGH WHICH ALLO WABLE INTEREST EXPENSE IS WORKED OUT CAN'T BE ADOPTED IN ASSESSEE' S CASE SINCE THE AMOUNT OF EXPENDITURE IS DIRECTLY RELATING TO INCOM E WHICH DOES NOT FORM PART OF TOTAL INCOME. 2.0 IN THIS CONNECTION IT IS SUBMITTED THAT A PORT ION OF BORROWED FUNDS I.E. RS.14.56 CRORES WAS UTILIZED FOR INVESTM ENT IN SHARES OF THE GROUP COMPANIES AND BALANCE AMOUNT WAS UTILIZED FOR ADVANCING TO OTHER FAMILY MEMBERS. 3.0 THEREFORE, IN VIEW OF THE PRINCIPLES OF BUSINES S EXPEDIENCY WHATEVER EXPENDITURE IS INCURRED FOR THE BUSINESS P URPOSE IS AN ALLOWABLE EXPENSE. IT IS IMMATERIAL WHETHER THE SAI D FUND IS USED BY THE ASSESSEE OR HIS GROUP COMPANIES. IT IS AN ESTABLISH ED FACT THAT THE BORROWED FUNDS ARE USED FOR THE BUSINESS PURPOSE ON LY BY GROUP COMPANIES. THEREFORE PROPORTIONATE INTEREST PAID ON THE FUNDS BORROWED IS AN ALLOWABLE EXPENSE. RELIANCE IS PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF MADHAV PRASAD JATIA V. CIT (1979) 118 ITR 200 AND ON THE DECISION HON'BLE APEX COURT IN T HE CASE OF S.A. BUILDERS V. CIT 288 ITR 1 (SC). 4.0 FURTHER KIND ATTENTION IS ALSO INVITED TO THE F ACT THAT THOUGH, THE DIVIDEND INCOME RECEIVED / RECEIVABLE BY THE SHAREH OLDER IS EXEMPT, HOWEVER, A COMPANY DECLARING AND DISTRIBUTING OR PA YING DIVIDEND IS REQUIRED TO PAY THE TAX ON SUCH DIVIDEND. THUS, IF TAX IS PAID OR IS PAYABLE OUT OF SUCH DIVIDEND DECLARED (WHETHER BY S HAREHOLDER DIRECTLY OR BY THE COMPANY IN AN INDIRECT MANNER), IT IS THE DIVIDEND INCOME WHICH HAS SUFFERED OR WILL SUFFER THE TAX BURDEN. I N FACT, DIVIDEND IF DECLARED BY THE COMPANY, IT WILL BE THE INCOME OF T HE SHAREHOLDER. BEFORE THE EXISTING PROVISIONS OF SECTION 115-O OF THE ACT, THE DIVIDEND INCOME WAS TAXABLE IN THE HANDS OF THE SHAREHOLDERS . NOW AS PER THE PROVISIONS OF SECTION 115-O, THE TAX IS BEING DEDUC TED BY THE COMPANY ITA NO.308/RJT/ 2015 ACIT VS.SHRI GIRISH R. TANTI ASST.YEAR 2008-09 - 6 - OUT OF DIVIDEND DECLARED, DISTRIBUTED OR PAID TO TH E SHAREHOLDER. THUS, THE DIVIDEND INCOME, WHICH BELONGS TO THE SHAREHOLD ER, SUFFERS THE TAX EITHER IN THE HANDS OF THE COMPANY OR IN THE HANDS OF THE SHAREHOLDER. THE SHAREHOLDER RECEIVES THE NET INCOME IN BOTH THE CASES. THE ONLY DIFFERENCE, WHICH HAS BEEN MADE BY THE PROVISIONS O F S. 115-0, IS THAT THE INCIDENCE OF TAX WILL BE SHIFTED FROM THE SHARE HOLDER TO THE COMPANY. THEREFORE, THE DIVIDEND IF AT ALL RECEIVED BY THE A SSESSEE WILL, IN FACT, NOT EXEMPTED FROM TAX BUT THE INCIDENCE OF TAX WILL BE SHIFTED FROM THE SHAREHOLDER TO THE COMPANY. ULTIMATELY IT WILL BE T HE INCOME OF THE SHAREHOLDER, WHICH WILL BE ASSESSED EITHER IN HIS O WN HANDS OR IN THE HANDS OF THE COMPANY. RELIANCE IS PLACED ON THE DECISION OF HON'BIE ITAT, MUMBAI 'C' BENCH IN THE CASE OF MAFATLAL HOLD INGS LTD. VS. ADDL. COMMISSIONER OF INCOME TAX 85 TTJ (MUMBAI) 82 1 WHEREIN IT HAS BEEN HELD THAT 'THE CONTENTION OF THE DEPARTMENT THAT THE DIVIDEND INCOME IS EXEMPTED FROM TAX AND, THEREFORE, NO EXPE NDITURE CAN BE ALLOWED AGAINST THAT INCOME IS WITHOUT ANY SUBSTANC E. THE DISALLOWANCE MADE BY THE TAX AUTHORITIES IS NOT JUSTIFIED. THERE FORE, THE CLAIM OF ALLOWANCE OF INTEREST PAYMENT AS BUSINESS EXPENSE I S ALLOWED AND THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE CI T(A) IS DELETED.' 5.0 THE ANOTHER CONTENTION IS THAT FORMULA AS PRESC RIBED IN RULE 8D THROUGH WHICH ALLOWABLE INTEREST EXPENSE IS WORKED OUT CAN'T BE ADOPTED IN ASSESSEE'S CASE SINCE THE AMOUNT OF EXPENDITURE IS DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. IN THIS CONNECTION IT IS SUBMITTED THAT WHILE CONSIDERING THE PROVISO 2(I) O F THE RULE 8D, REGARDING EXPENDITURE INCURRED FOR INCOME NOT FORMI NG PART OF TOTAL INCOME, ONLY DIVIDEND INCOME IS CONSIDERED, WHILE T HERE IS CHANCES OF CAPITAL GAINS ALSO, WHICH HAS TO BE INCLUDED IN TOT AL INCOME. THEREFORE IT CANNOT BE SAID THAT THE EXPENDITURE IS INCURRED FOR INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. 5.1 IN VIEW OF THE ABOVE THE WORKING OF ALLOWABLE I NTEREST EXPENSE HAS RIGHTLY BEEN CALCULATED BY USING THE FORMULA AS PRESCRIBE IN RULE 8D. 6.0 IN VIEW OF THE ABOVE, AS THE ASSESSEE IS ELIGIB LE FOR CLAIM OF INTEREST EXPENSES OF 0.835 CRORE, YOUR PROPOSAL FOR DISALLOWANCE OF INTEREST OF 0.835 CRORE IS STRONGLY OBJECTED. ITA NO.308/RJT/ 2015 ACIT VS.SHRI GIRISH R. TANTI ASST.YEAR 2008-09 - 7 - THE SAME WERE NOT TENABLE IN THE EYES OF THE LEARN ED AO. FINALLY DISALLOWANCE OF RS.83,51,614/- WERE MADE. 5. AGAINST THE SAID ORDER ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LEARNED CIT(A). LEARNED CIT(A) ALLOWED T HE APPEAL BY HOLDING AS UNDER: I HAVE GONE THROUGH THE FACTS AND THE CIRCUMSTANCE S OF THE CASE. THE CLAIM OF INTEREST EXPENDITURE HAS BEEN DISALLOW ED U/S. 14A OF THE IT ACT. SECTION 14A ENVISAGES DISALLOWANCE OF A LL THOSE EXPENSES WHICH ARE INCURRED TO EARN EXEMPT INCOME. THE WORKING OF DISALLOWANCE U/S. 14A IS CLEARLY SPELT OUT UNDER RULE 8D OF THE IT RULES, AS PER RULE 8D, THE APPELLANT HIMSELF HAD DISALLOWED CLAIM OF INTEREST EXPENDITURE TO THE EXTENT OF RS.6 ,95,96,790/-. THIS WAS NOT CHALLENGED BY THE AO AND THE AO HAS ACCEPTE D THE SAME. THEREFORE, IT CANNOT BE SAID THAT THE APPELLANT HAD NOT CONTRAVENED THE WORKING ENVISAGED UNDER RULE 8D. FOR THE BALANC E CLAIM OF INTEREST EXPENDITURE, THE APPELLANTS CLAIM OF BUSI NESS EXPEDIENCY HAS TO BE TAKEN VERY BROADLY. WHEN APPELLANT HIMSEL F HAS DISALLOWED A SUBSTANTIAL PART OF THE INTEREST PAID BY HIM, IT CANNOT BE SAID THAT THE APPELLANT HAD WRONGLY CLAIMED ONLY A SMALL PART OF INTEREST LIABILITY. THIS PARTICULARLY SO WHEN THE W ORKING OF DISALLOWANCE U/S. 14A HAS BEEN RIGHTLY ARRIVED AT A S PER THE PROVISIONS OF RULE 8D. THEREFORE, THE AO WAS NOT JU STIFIED IN DISALLOWING THE CLAIM OF INTEREST EXPENDITURE TO TH E TUNE OF RS.83,51,614/- AND THE DISALLOWANCE MADE BY THE AO IS DIRECTED TO THE DELETED. THIS GROUND OF APPEAL IS ALLOWED. 6. APART FROM THIS, ASSESSEE FILED HIS OWN JUDGMENT OF ITAT, AHMEDABAD IN SIMILAR CIRCUMSTANCES IN ITA NO.414/RJ T/2014 FOR A.Y. ITA NO.308/RJT/ 2015 ACIT VS.SHRI GIRISH R. TANTI ASST.YEAR 2008-09 - 8 - 2009-10. IN THIS CASE, ITAT HAS ALLOWED THE APPEAL. RELEVANT PART OF APPEAL IS AS UNDER:- BEFORE US THE LEARNED DR CONTENDED THAT LEARNED CI T(A) ERRED IN DELETING THE ADDITION OF RS.1,78,14,557/- WHICH WAS DISALLOWED UNDER SECTION 14A BY THE ASSESSING OFFICER. ON THE OTHER HAND THE LEARNED COUNSEL RELIED ON THE ORDER OF LEARNED CIT(A). WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERI AL ON RECORD CAREFULLY. WE FIND THAT THE ASSESSEE HAD ALREADY RE STRICTED CLAIM OF INTEREST ACCORDINGLY TO THE PROVISION OF SECTION 14 A OF THE ACT R.W.S 8D OF THE RULES AND DISALLOWANCE OF THE INTEREST EXPEN SES BY THE ASSESSING OFFICER IS AGAINST THESE PROVISION OF THE ACT. THE PROVISIONS OF SECTION 14A OF THE ACT ARE AS UNDER:- 14A. [(1)] FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME UNDER THIS CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESP ECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS A CT.] [(2). THE ASSESSING OFFICER SHALL DETERMINE THE AMO UNT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHI CH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IN ACC ORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED, IF THE ASSESSING OFFICE, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS N OT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE I N RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES N OT FORM PART OF THE TOTAL INCOME 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 INCURRED BY HIM IN RELATION TO INCOME WHIC H DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT] [PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SH ALL EMPOWER THE ASSESSING OFFICER EITHER TO REASSESS UNDER SECT ION 147 OR PASS ON ORDER ENHANCING THE ASSESSMENT OR REDUCING A REF UND ALREADY MADE OR OTHERWISE INCREASING THE LIABILITY OF THE A SSESSEE UNDER ITA NO.308/RJT/ 2015 ACIT VS.SHRI GIRISH R. TANTI ASST.YEAR 2008-09 - 9 - SECTION 154, FOR ANY ASSESSMENT YEAR BEGINNING ON O R BEFORE THE 1 ST DAY OF APRIL 2001.] IN THIS CONNECTION, RULE 8D PRESCRIBES THE MECHANIS M FOR WORKING OUT THE DISALLOWANCE UNDER SECTION 14A AND THE ASSESSIN G OFFICER IS BOUND TO ADOPT RULE 8D FOR MAKING DISALLOWANCE UNDER SECTION 14A WHERE HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH AN EXPENDITURE. WE FIND THAT THE LEARNED CI T(A) HAS REFERRED THE APPLICABILITY OF RULE 8D WHILE MAKING DISALLOWANCE UNDER SECTION 14A AND THE DISALLOWANCE WAS MADE ACCORDING TO THE PROC EDURE PRESCRIBED IN THESE LEGAL PROVISIONS. IN VIEW OF ABOVE FACTS AND FINDINGS WE UPHELD THE DECISION OF LEARNED CIT(A) APPEAL, AND DISMISS THE APPEAL OF THE REVENUE. 7. THEREFORE, FOLLOWING CO-ORDINATE BENCH ORDER IN ASSESSEES OWN CASE IN ITA NO.414/RJT/2014 FOR A.Y.2009-10. WE DIS MISS THE APPEAL OF THE DEPARTMENT. 8. IN THE RESULT, APPEAL FILED BY THE DEPARTMENT IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 26/05/2017 SD/- SD/- EKUHK CKSJM EKUHK CKSJM EKUHK CKSJM EKUHK CKSJM EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN YS[KK LNL; U;KF;D LNL; YS[KK LNL; U ;KF;D LNL; YS[KK LNL; U ;KF;D LNL; YS[KK LNL; U ;KF;D LNL; ( MANISH BORAD ) (MAHAVIR PRASA D) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 26/05/2017 PRITI YADAV, SR.PS ITA NO.308/RJT/ 2015 ACIT VS.SHRI GIRISH R. TANTI ASST.YEAR 2008-09 - 10 - COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #' / THE RESPONDENT. 3. 012) & 3) / CONCERNED CIT 4. & 3) 45 / THE CIT(A)-I, RAJKOT. 5. 678 )'12 *12. 0 / DR, ITAT, AHMEDABAD 6. 89:( GUARD FILE. / BY ORDER, #6) ) //TRUE COPY// / !'# ( DY./ASSTT.REGISTRAR) #$ %, / ITAT, AHMEDABAD TRUE COPY 1. DATE OF DICTATION 17/05/2017 (DICTATION-PAD 1 PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 19/05/2017 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 22/05/2017 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 26/05/2017. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 26/05/2017 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER