DCIT, New Delhi V. M/s Jubilant Securities Pvt. Ltd., New Delhi

ITA 3225/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65796 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 03-09-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 15-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHUMANA SEN
• Keywords: Rule of consistency; Earning of tax free income; Proportionate interest
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D NEW DELHI) BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.3225/DEL/2011 ASSESSMENT YEAR : 2008-09 DCIT, M/S JUBILANT SECURITIES PVT. LTD., CIRCLE-4 (1), 1517, 15 TH FLOOR, DEVIKA TOWER, NEW DELHI. V. NEHRU PLACE, NEW DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AAACH AAACH AAACH AAACH- -- -3072 3072 3072 3072- -- -J JJ J APPELLANT BY : SHUMANA SEN, DR. RESPONDENT BY : SHRI AJAY VOHRA, ADVOCATE. ORDER PER TS KAPOOR, AM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE OR DER OF LD CIT(A) DATED 9.4.2011. THE GROUNDS RAISED BY THE REVENUE AR E AS UNDER:- 1. THE ORDER OF LD CIT(A) IS ERRONEOUS AND CONTRARY TO F ACTS AND LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN RESTRICTING THE ADDITION U/S 14 A TO ` .71,45,268/- AS AGAINST ` .1,12,37,884/- MADE BY THE ASSESSING OFFICER. 2.1.THE LD CIT(A) IGNORED THE FACT THAT FINDING REC ORDED BY THE ASSESSING OFFICER AND THE FACT THAT THE DISALLOWANCE HAS BEEN CORRECTLY MADE BY THE ASSESSING OFFICER IN ACCORDANCE W ITH THE PROVISIONS OF RULE 8D OF THE IT RULES, 1962. ITA NO3225/DEL/2011 2 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` .63,274/-0 MADE U/S 35DD OF THE IT ACT BEING THE AMALGAMATION E XPENSES. 3.1. THE LD CIT(A) IGNORED THE FINDING RECORDED BY THE ASSESSING OFFICER AND THE FACT THAT NO SUCH DISALLOWANCE HAS BEE N MADE BY THE ASSESSING OFFICER. 4. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER OR AM END ANY GROUNDS OF THE APPEAL RAISED ABOVE AT THE TIME OF HEA RING. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND IS ENGAGED IN THE BUSINESS OF INVEST MENT, FINANCE AND BUSINESS SUPPORT SERVICES. THE CASE OF THE ASSESSEE WAS SELE CTED FOR SCRUTINY AND DURING ASSESSMENT PROCEEDINGS, THE ASSESSIN G OFFICER FOUND THAT ASSESSEE HAD EARNED TAX FREE DIVIDEND INCOM E OF ` .2,43,98,521/-. THE ASSESSEE WAS ASKED TO SHOW AS TO WHY DISALLOWANCE U/S 14A READ WITH RULE 8D SHOULD NOT BE M ADE AS THE ASSESSEE COMPANY HAD EARNED EXEMPT INCOME. IN RESPONSE TO THE SHOW CAUSE NOTICE THE ASSESSEE COMPANY FILED SUBMISSIONS WHI CH INTER ALIA PROVIDED WORKING OF DISALLOWANCE U/S 14A OF THE ACT. THE ASSESSING OFFICER AFTER EXAMINING THE SUBMISSIONS OF ASSESSEE DID NOT AGREE WITH THE WORKING OF ASSESSEE AND HELD THAT INTERE ST EXPENSE OF ` .1,31,46,920/- WAS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT AND ACCORDINGLY HE CALCULATED THE DISALLOWAN CE U/S 14A READ WITH RULE 8D AND ARRIVED AT THE FIGURE OF ` .97,02,068/- BEING DISALLOWABLE U/S 14A OF THE ACT IN RESPECT OF INTEREST AND FURTHER DISALLOWED A SUM OF ` .15,35,816/- ON ACCOUNT OF DISALLOWANCE U/S 14A IN RESPECT OF OTHER ADMINISTRATIVE AND MANAGERIAL EX PENSES ON THE BASIS OF % OF AVERAGE VALUE OF INVESTMENTS. THUS IN ALL A TOTAL AMOUNT OF ` .1,12,37,884/- WAS DISALLOWED U/S 14A AS PER RULE 8D. AS PER THE ASSESSING OFFICER, THE ASSESSEE HAD ITSELF OFFERED A N AMOUNT OF ITA NO3225/DEL/2011 3 ` .50,85,130/- AS DISALLOWANCE AND THEREFORE THE ASSESSING OFFICER MADE AN ADDITION OF ` .61,52,754/- BEING DIFFERENCE OF DISALLOWANCE CALCULATED BY ASSESSING OFFICER AND AS CALCULATED BY TH E ASSESSEE. 3. DISSATISFIED WITH THE ORDER OF ASSESSING OFFICER, THE ASSESSEE FILED APPEAL BEFORE THE LD CIT(A) AND SUBMITTED AS UNDER:- 1. THAT ASSESSEE HAD ALREADY OFFERED A SUM OF ` .64,39,822/- OUT OF TOTAL INTEREST EXPENSE OF ` .1,31,46,920/-. IN THIS RESPECT IT WAS SUBMITTED THAT IN THE ORIGINAL COMPUTATION OF INCOME , THE INTEREST FIGURE WAS ` .48,17,462/- WHEREAS IT WAS RAISED TO ` .64,39,822/- IN THE REVISED COMPUTATION OF INCOME AN D SIMILARLY IT WAS SUBMITTED THAT AN AMOUNT OF ` .7,05,446/- ON ACCOUNT OF ADMINISTRATIVE EXPENSES WAS IN THE REVISED COMPUTATION O F INCOME AS AGAINST ` .2,67,668/- IN ORIGINAL COMPUTATION OF INCOME. THEREFORE, IN ALL AN AMOUNT OF ` .71,45,268/- WAS DISALLOWED BY ASSESSEE ITSELF IN ITS REVISED COMPUTATION OF INCOME AS AGA INST ASSESSING OFFICER HAD CONSIDERED ONLY ` .50,85,130/- WHICH WAS AS PER ORIGINAL COMPUTATION. 2. THAT THE ASSESSEE HAD RECEIVED INTEREST BEARING LOAN OF ` . 500 LAKHS WHICH WAS EXCLUSIVELY UTILIZED FOR GIVING LOAN O F ` .500 LAKHS TO ANOTHER PARTY WHICH AT THE END OF YEAR STOOD AT ` .440 LAKHS. IN THE SCRUTINY ASSESSMENT OF THE YEAR FOR ASSESSMENT YEAR 2 007- 08, THE ASSESSING OFFICER AFTER DUE VERIFICATION HAD AC CEPTED THE CONTENTION OF APPELLANT TO THE EXTENT THAT THE LOAN RECEIVED WAS EXCLUSIVELY UTILIZED FOR EARNING TAXABLE INCOME. THE REFORE, THE INTEREST ON SUCH LOAN PROPORTIONATE TO SUCH UTILIZATIO N WAS EXCLUDED FROM TOTAL INTEREST FOR THE PURPOSE OF CLAUSE (II) OF SUB RULE 2 OF RULE 8D. ITA NO3225/DEL/2011 4 3. THAT THE POSITION IN RESPECT OF THAT LOAN DURING THE YEAR UNDER CONSIDERATION REMAINS THE SAME AND OUT OF TOTAL INTERE ST OF ` .1,31,46,920/-, ` .47,20,890/- IS RELATABLE TO THE INTEREST EXPENSE INCURRED FOR THE PURPOSE OF EARNING TAXABLE INCOME A ND THEREFORE ONLY BALANCE AMOUNT OF ` .84,26,030/- WAS LIABLE TO BE APPORTIONED AS PER METHOD PRESCRIBED OF CLAUSE (II) OF SUB RULE 2 OF RULE 8D. 4. THAT IN ACCORDANCE WITH THE SAID RULE AN AMOUNT OF ` .64,39,322/- OUT OF ` .84,26,030/- WAS APPORTIONED AS PER METHOD PRESCRIBED IN CLAUSE (II) OF SUB RULE 2 OF RULE 8D AND THE DISALLOW ANCE WAS ON THE SAME BASIS AS ADOPTED BY THE ASSESSING OFFICER IN THE PRECEDING PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2007 -08. 5. THAT IN RESPECT OF ADMINISTRATIVE AND OTHER EXPENSES, T HE TOTAL ADMINISTRATIVE EXPENSES OF ` .7,05,446/- WERE CONSIDERED FOR DISALLOWANCE BY THE ASSESSEE ALTHOUGH THE ASSESSEE HAD EARNE D SUBSTANTIAL TAXABLE INCOME. 6. THAT THE ASSESSING OFFICER WHILE MAKING ASSESSMENT COMPLETE LY OVER-LOOKED THE RECTIFICATION AND PROCEEDED TO MAKE DISALLOWANCE AS PER THE ORIGINAL COMPUTATION OF INCOM E. 7. THAT THE ASSESSING OFFICER PROCEEDED TO APPLY RULE 8D C OMPUTING THE INTEREST DISALLOWANCE UNDER CLAUSE (II) OF SUB RUL E 2 OF RULE 8D ASSUMING TOTAL INTEREST OF ` .1,31,46,920/-. 8. THAT THE ASSESSING OFFICER MADE DISALLOWANCE OF ADMINISTR ATIVE EXPENSES AFTER TAKING % OF AVERAGE INVESTMENT AS THE EXPENDITURE AS PER CLAUSE (III) OF SUB RULE 2 OF RULE 8D AMOUNTING TO ` .15,35,816/-. 9. THAT ASSESSING OFFICER HAS GROSSLY ERRED IN MAKING DISA LLOWANCE TOWARDS ADMINISTRATIVE AND OTHER EXPENSES AS ONE & HALF % OF AVERAGE INVESTMENT WHEN THE TOTAL ADMINISTRATIVE AND OTHER EXPENSES OF ` .7,05,446/- HAVE BEEN OFFERED AS DISALLOWANCE. THE ITA NO3225/DEL/2011 5 ACTION OF THE ASSESSING OFFICER HAS RESULTED IN A DISALLOW ANCE OF ` .15,35,816/- WHICH IS MORE THAN ACTUAL EXPENDITURE O F ` .7,05,446/-. 4. IT WAS ALSO SUBMITTED BEFORE LD CIT(A) THAT DURING ASSESSMENT YEAR 2005-06, AN AMOUNT OF ` .3,16,360/- WAS DISALLOWED TOWARDS AMALGAMATION EXPENSES BUT AN AMOUNT OF ` .63,274/- BEING 1/5 TH OF EXPENSES WERE ALLOWED U/S 35DD. THE ASSESSEE DID NOT CLAI M THE DEDUCTION U/S 35DD IN THE CURRENT YEAR IN ITS RETURN OF INCOME BUT DURING ASSESSMENT PROCEEDINGS THE ASSESSEE VIDE LETTER DAT ED 29.10.2010 HAD SUBMITTED THE COMPLETE DETAILS OF SUCH EXPENSES AND HAD REQUESTED FOR DEDUCTION OF ` .63,274/- U/S 35DD BUT ASSESSING OFFICER HAD OVER-LOOKED THIS REQUEST WHILE COMPLETING THE ASSESSMENT. 5. AFTER GOING THROUGH THE SUBMISSIONS FILED BY THE ASSESSE E, THE LD CIT(A) REDUCED THE DISALLOWANCE U/S 14A READ WITH RUL E 8D. THE RELEVANT PORTION OF LD CIT(A)S ORDER IS REPRODUCED B ELOW:- AS HELD BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. (SUPRA), RULE N8D OF THE INCOME TAX RULES, 1962 IS APPLICABLE ONLY PROSPECTIVELY I.E. FROM ASSESSM ENT YEAR 2008-09. SINCE THE ASSESSMENT YEAR INVOLVED IN THE PRESEN T CASE IS 2008-09, RESPECTFULLY FOLLOWING THE SAID JUDGMENT O F HON'BLE BOMBAY HIGH COURT, IT IS HELD THAT THE ASSESSING OFFICER WAS JUSTIFIED IN APPLYING THE SAID RULE TO QUANTIFY THE D ISALLOWANCE U/S 14A OF THE ACT. AS FURTHER HELD BY THE HON'BLE BOMBA Y HIGH COURT IN THE SAID CASE, THE QUANTUM OF DISALLOWANCE U/S 14A MUST BE DETERMINED HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE . THE APPELLANT HAS SUBMITTED THE DETAILED WORKING SHOWING T HAT INTEREST AMOUNTING TO ` .47,20,890/- HAS BEEN INCURRED EXCLUSIVELY TOWARDS EARNING TAXABLE INCOME AND THE SA ME IS ITA NO3225/DEL/2011 6 FOUND TO BE CORRECT THAT IN THE PREVIOUS YEAR 2006- 07 RELEVANT TO ASSESSMENT YEAR 2007-08 THE APPELLANT HAD RECEIVED THE INTEREST BEARING LOAN OF ` .5,00,00,000/- WHICH WAS EXCLUSIVELY UTILIZED FOR GIVING OF LOAN OF ` .5,00,00,000/- TO ANOTHER PARTY WHICH AT THE END OF THE PREVIOUS YEAR STOOD AT ` .4,40,00,000/-. IN THE SCRUTINY ASSESSMENT COMPLETED U/S 143(3) FOR ASSESSMENT YEAR 2007-08, THE ASSESSING OFFICER HAS AFTER DUE VERIFICATION HAS ACCE PTED THE CONTENTION OF APPELLANT THAT TO THE EXTENT THE LOAN RECEIVED WAS EXCLUSIVELY UTILIZED FOR EARNING TAXABLE INCOME, THE INTEREST PROPORTIONATE TO SUCH UTILIZATION IS TO BE EXCLUDED F ROM THE TOTAL INTEREST FOR THE PURPOSE OF CLAUSE (II) OF SUB RULE 2 O F RULE 8D. IT WAS FURTHER SUBMITTED ON BEHALF OF THE APPELLANT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE APPELLANT FILED A RECTIFICATION APPLICATION DATED 17.08.2010 SEEKING R ECTIFICATION IN RESPECT OF DISALLOWANCE OF EXPENSES U/S 14A OF THE ACT . A FURTHER REDUCTION IN CLAIM OF EXPENSES BY ` .20,60,138/-, CONSISTING OF ` .4,37,778/- TOWARDS TOTAL ADMINISTRATIVE AND MISCELLAN EOUS EXPENSES AND RS.16,22,360/- TOWARDS INTEREST, WAS MADE I N VIEW OF THE PROVISIONS OF SECTION 14 A. THUS THE TOTAL AMOUN T CONSIDERED FOR DISALLOWANCE UNDER THE RECTIFIED COMPU TATION WAS ` .71,45,268/- (AGAINST ` . 50,85,130/AS PER COMPUTATION OF ORIGINAL RETURN) CONSISTING OF INTEREST OF ` . 64,39,822/- ( ` . 46,17,462/- PLUS ` . 16,22,360/- TAKEN IN ORIGINAL COMPUTATION) AND ADMINISTRATIVE EXPENSES OF ` .705446/- I FIND THAT IN THE RECTIFIED COMPUTATION OF INCOME, THE METHOD OF DISA LLOWANCE OF INTEREST WAS TAKEN ON THE SAME BASIS AS ADOPTED BY THE AO IN A.Y 2007-08, WHEREIN THE AO HAD ARRIVED A FINDING T HAT INTEREST IN RESPECT OF CERTAIN PORTION OF LOAN TAKEN WAS USED F OR GIVING LOANS ON WHICH TAXABLE INTEREST INCOME WAS EARNED. HEN CE, THE AO, EXCLUDED, INTEREST INCURRED ON THE LOAN TAKEN TO THE EXTENT ITA NO3225/DEL/2011 7 USED FOR EARNING TAXABLE INTEREST INCOME FROM THE TOT AL EXPENDITURE ON INTEREST AS PER PROVISIONS OF CLAUSE (II) OF SUB-RULE (2) OF RULE 8D. THE STATUS OF THOSE PARTICULAR LOANS AS TAKEN/GIVEN DURING PREVIOUS YEAR RELEVANT TO A.Y 200 7-08 REMAINED THE SAME DURING THE PREVIOUS YEAR RELEVANT TO A.Y 2008-09 ALSO. HENCE THE APPELLANT HAS ADOPTED THE SAM E BASIS AS ADOPTED BY THE AO, IN PRECEDING YEAR FOR COMPUTAT ION OF INTEREST AND INTEREST OF ` .4P07,20,890/- WAS EXCLUDED FROM TOTAL INTEREST OF ` . 1,31,46,920/- AS BEING INCURRED EXCLUSIVELY FOR EARNING TAXABLE INCOME. BALANCE INTEREST CAME TO BE ` . 84,26,030/-, WHICH WAS APPORTIONED IN THE MANNER STIP ULATED AS PER THE PROVISIONS OF CLAUSE (II) OF SUB-RULE (2) OF RU LE 8D, AND INTEREST TO BE DISALLOWED CAME TO BE ` .64,39,822/- WHICH HAS BEEN WORKED OUT IN THE FOLLOWING MANNER:- (A) INTEREST EXPENDITURE CLAIMED IN THE P & L A/C ` . 84,26,030/- (B) (I) AVERAGE VALUE OF INVESTMENT ` .32,57,26,485/- (C) (I) AVERAGE VALUE OF ASSETS ` .42,61,88,963/- (D) RELATABLE INTEREST (AXB/C) ` .84,26,030/-X325726485 ` .42,61,88,963/ = ` .64,39,822/- IT IS ALSO OBSERVED THAT. THE APPELLANT HAS NOT CLAIMED THE DEDUCTION OF ADMINISTRATIVE EXPENSES TO THE EXTENT OF ` .7,05,446/- IN THE REVISED COMPUTATION OF DISALLOWAN CE OF INTEREST U/S 14A OF THE ACT WHICH WAS ORIGINALLY CLAI MED IN THE ORIGINAL COMPUTATION OF DISALLOWANCE OF INTEREST U/S 1 4A OF THE ACT. HENCE THE TOTAL DISALLOWANCE UNDER SECTION 14A O F THE ACT WOULD BE ` .71,45,268/-( ` .64,39,822/-+ ` .7,05,446/-). AS A RESULT, THE DISALLOWANCE IS CONFIRMED TO THE EXTENT OF ` .71,45,268/- AND THE APPELLANT GETS RELIEF OF ` .40,92,616/- (`.1,12,37,884/- MINUS `.71,45,268/-). ITA NO3225/DEL/2011 8 6. AGGRIEVED, THE REVENUE HAS FILED APPEAL BEFORE TH IS TRIBUNAL. 7. AT THE OUTSET, THE LD DR ARGUED THAT ASSESSING OFFIC ER HAS RIGHTLY MADE THE DISALLOWANCE U/S 14A READ WITH RULEN8D, THER EFORE, SHE RELIED HEAVILY ON THE ORDER OF ASSESSING OFFICER IN RESP ECT OF GROUND NO.2 AND IN RESPECT OF GROUND NO.3, SHE ARGUED THAT A SSESSING OFFICER HAD NOT MADE ANY DISALLOWANCE OF ` .63,274/- AND THE LD CIT(A) HAS WRONGLY DELETED THE DISALLOWANCE OF ` .63,274/-. 8. THE LD AR, ON THE OTHER HAND, ARGUED THAT LD ASSE SSING OFFICER HAS CALCULATED THE DISALLOWANCE U/S 14A WITHOUT CONSID ERING THE REVISED FIGURE OF COMPUTATION OF DISALLOWANCE U/S 14A SUBMITTED BY ASSESSEE. HE TOOK US TO PAGES 1 TO 2 & 3 TO 4 OF PAPER BO OK DATED 15.5.2012 WHEREIN COPIES OF ORIGINAL COMPUTATION OF INCOME AND REVISED COMPUTATION WERE PLACED. HE INVITED OUR ATTE NTION TO THE AMOUNT OF PROPORTIONATE INTEREST AND PROPORTIONATE E XPENSES IN THE ORIGINAL COMPUTATION AND REVISED COMPUTATION. THEREF ORE, HE ARGUED THAT ASSESSING OFFICER SHOULD HAVE CONSIDERED THE REVISED FIGURES OF DISALLOWANCE OF INTEREST AND EXPENSES WHICH COMES OUT AT ` .71,45,268/- INSTEAD OF ` .50,85,130/- TAKEN BY ASSESSING OFFICER. 9. HE FURTHER STATED THAT IN THE PRECEDING YEAR OF A SSESSMENT YEAR 2007-08, THE ASSESSING OFFICER HAD TAKEN INTO CONSIDERA TION INTEREST ON LOAN OF ` . 5 CRORES WHICH WAS TAKEN BY ASSESSEE TO EARN TAXABLE INCOME, IN VIEW OF THE ABOVE, HE ARGUED THAT FACTS A RE SAME IN THE PRESENT YEAR ALSO AND ASSESSEE HAD ON THE BASIS OF LAST YEAR (AS ACCEPTED BY ASSESSING OFFICER U/S 143(3) HAD CALCULATED AN AMOUNT OF ` .47,20,890/- BEING INTEREST PAID ON LOANS WHICH WAS USE D TO EARN TAXABLE INCOME. THEREFORE, BEFORE APPORTIONING OF T OTAL INTEREST, THIS ITA NO3225/DEL/2011 9 AMOUNT OF ` .47,20,890/- SHOULD HAVE BEEN DEDUCTED BY ASSESSING OFFICER FROM TOTAL INTEREST. 10. SIMILARLY IN RESPECT OF ADMINISTRATIVE AND GENERA L EXPENSES HE ARGUED THAT ASSESSEE HAD ITSELF CONSIDERED THE WHOLE OF G ENERAL EXPENSES AND MISC. EXPENSES FOR CONSIDERATION OF DISALLOWA NCE U/S 14A AND THEREFORE THE ASSESSING OFFICERS CALCULATION ON THE BASIS OF % OF VALUE OF INVESTMENTS WAS ILLEGAL AND WAS NOT BASED UPON THE FACTS OF THE CASE. OUR ATTENTION WAS INVITED TO PAGE 40 OF PAP ER BOOK DATED 1.9.2012 WHERE COPY OF P&L ACCOUNT FOR THE RELEVANT YEAR WAS PLACED. IN VIEW OF THE ABOVE HE ARGUED THAT REDUCTION OF DI SALLOWANCE MADE BY LD CIT(A) WAS LEGAL AND WAS BASED UPON FACTS OF THE CASE . 11. IN RESPECT OF THIRD GROUND OF APPEAL IN RESPECT O F DEDUCTION U/S 35DD THE LD AR TOOK US TO PAGE 89 & 90 OF PAPER BOOK DATED 1.9.2012 AND INVITED OUR ATTENTION TOWARDS ADDITION MADE BY A SSESSING OFFICER IN ASSESSMENT YEAR 2005-06 OF AN AMOUNT OF ` .2,53,096/- OUT OF ` .3,16,370/- AFTER ALLOWING 1/5 TH OF EXPENSES U/S 35DD OF THE ACT. THEREFORE, HE ARGUED THAT SIMILAR DEDUCTION OF ` .63,240/- OUGHT TO HAVE BEEN GIVEN BY ASSESSING OFFICER IN THE CURRENT YEAR ALSO . 12. THE LD DR IN HER REJOINDER ARGUED THAT THIS GROU ND BE REMITTED BACK TO ASSESSING OFFICER FOR VERIFICATION. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE H AVE OBSERVED THAT ASSESSING OFFICER WHILE MAKING THE ASSESSMENT AND CALCULATI NG OF ASSESSED INCOME HAS CONSIDERED THE WHOLE INTEREST OF ` .1,31,46,920/- FOR APPORTIONING BETWEEN RELATING TO TAXABLE INCOME AND EXEMPT INCOME WHEREAS THE ASSESSEE IN THE LAST YEAR I.E. ASSESSMENT YEAR ITA NO3225/DEL/2011 10 2007-08 HAD CALCULATED THE DISALLOWANCE OF INTEREST A FTER EXCLUDING AN AMOUNT OF ` .37,83,863/- WHICH WAS INCURRED EXCLUSIVELY FOR EARNI NG TAXABLE INCOME (PAPER BOOK PAGE 59) AND THE ASSESSMENT WAS COMPLETED U/S 143(3) AND ASSESSING OFFICER HAD NOT OBJEC TED TO THE EXCLUSION OF SUCH INTEREST (REFER PAGE 56). THE FACTS AND CIRCUMSTANCES IN THE PRESENT YEAR ARE SAME AND AMOUNT OF INTEREST IN THIS YEAR AS CALCULATED BY ASSESSEE COMES OUT AT ` .47,20,890/- THEREFORE ITS EXCLUSION FROM THE TOTAL INTEREST OF ` .1,31,46,920/- IS JUSTIFIED AND IS BASED UPON THE RULE OF CONSISTENCY. SIMILARLY THE LD A SSESSING OFFICER SHOULD HAVE CONSIDERED THE AMOUNT OF INTEREST CALCULAT ED BY ASSESSEE IN ITS REVISED COMPUTATION OF INCOME THEREFORE IN OUR CONSIDERED OPINION THE LD CIT(A) HAS RIGHTLY RESTRICTED THE DISAL LOWANCE U/S 14A MADE BY ASSESSING OFFICER IN RESPECT OF PROPORTIONATE I NTEREST. SIMILARLY WE FIND FROM PAGE 40 OF THE PAPER BOOK WH ERE A COPY OF P&L ACCOUNT IS PLACED THAT THE ASSESSEE HAS AT ITS OWN IN THE REVISED COMPUTATION OF INCOME HAD CONSIDERED ALL THE EXPENSES RELATING TO MISC. EXPENSES, BANK CHARGES, AUDITORS REMUNERATION AND LEGAL & PROFESSIONAL EXPENSES AS DISALLOWANCE U/S 14A, THEREFORE A SSESSING OFFICERS DISALLOWANCE OF ` .15,35,816/- BASED UPON % OF AVERAGE INVESTMENT WAS BOTH ILLEGAL AND AGAINST THE FACTS OF TH E CASE. 14. AS REGARDS GROUND NO.3, WE HAVE OBSERVED THAT ASSESSEE HAD INCURRED AN EXPENDITURE OF ` .3,16,370/- IN THE ASSESSMENT YEAR 2005- 06 AND ASSESSING OFFICER HAD ALLOWED CLAIM OF ` .63,240/- ONLY UNDER SECTION 35DD AND HAD ADDED BACK THE REMAINING AMOUNT OF ` .2,53,096/-. THIS GROUND OF APPEAL IS REMANDED BACK T O THE OFFICE OF ASSESSING OFFICER WITH THE DIRECTIONS TO ALLOW THE DEDUC TION OF ` .63,240/- AFTER VERIFYING FROM THE RECORDS OF ASSESSMEN T YEAR 2005- 06. ITA NO3225/DEL/2011 11 15. IN VIEW OF THE ABOVE, THE APPEAL OF THE REVENUE IS DISMISSED AS REGARDS GROUND NO.2 AND IS ALLOWED FOR STATISTICAL PURP OSES IN RESPECT OF GROUND NO.3. 16. ORDER PRONOUNCED IN THE OPEN COURT ON 26TH DAY OF OCTOBER, 2012. SD/- SD/- (U.B.S. BEDI) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 26.10.2012. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 3.9.2012 DATE OF DICTATION 18.10.2012 DATE OF TYPING 19.10.2012 DATE OF ORDER SIGNED BY 26.10.2012 BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET 30.10.2012 & SENT TO THE BENCH CONCERNED.