ICICI SECURITIES PRIMARY DEALERSHIP LTD ( FORMERLY KONW AS ICICI SECURITIES LTD ), MUMBAI V. DCIT RT 3(2), MUMBAI

ITA 3285/MUM/2009

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0387 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 22-12-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 18-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Assessee Lawyers: J D MISTRY
• Keywords: Capital asset; Transfer pricing; Business expenditure; International transaction; Wholly owned subsidiary; Speculation loss; Tax effect; Commercial expediency
• Section: 143(3); 92E; 14A; 154

Judgement Text

J IN THE INCO ME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, A CCOUNTANT M EMBER AND SHRI SANDEEP GOSAIN, J UDICIAL M EMBER ./I.T.A. NO. 3285/M/2009 (ASSESSMENT YEAR: 2006 - 2007 ) ./I.T.A. NO.7775/M/2010 (ASSESSMENT YEAR: 2006 - 2007 ) ICICI SECURITIES PRIMARY DEALERSHIP LIMITED, (FORMERLY KNOWN AS (ICICI SECURITIES LIMITED) ICICI CENTRE, H.T. PAREKH MARG, CHURCHGATE, MUMBAI - 400020. / VS. DCIT, RANGE 3(2), MUMBAI. ./ PAN : AAACI0995H ( / APPELLANT) .. ( / RESPONDENT ) ./I.T.A. NO. 3298/M/2009 (ASSESSMENT YEAR: 2006 - 2007 ) DCIT, RANGE 3(2), MUMBAI. / VS. ICICI SECURITIES PRIMARY DEALERSHIP LIMITED, (FORMERLY KNOWN AS (ICICI SECURITIES LIMITED) ICICI CENTRE, H.T. PAREKH MARG, CHURCHGATE, MUMBAI - 400020. ./ PAN : AAACI0995H ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI J.D. MISTRY & NIRAJ SHETH / RESPONDENT BY : MISS ARJU GARODIA, DR / DATE OF HEARING : 06.04 .2017 / DATE OF PRONOUNCEMENT : 20. 0 6 .2017 / O R D E R PER R.C. SHARMA, AM: THERE ARE THREE APPEALS UNDER CONSIDERATION. OUT OF THE THREE APPEALS, ITA NO. 3298 /M/200 9 IS FILED BY THE REVENUE WHEREAS APPEAL IN ITA NO. 3285/M/2009 IS 2 FILED BY ASSESSEE. APPEAL NO. 7775/MUM/2010 IS FILED BY ASSESSEE IN THE MATTER OF ORDER PASSED U/S. 154 OF I. T. ACT. ALL THESE APPEALS ARE FILED FOR THE ASSESSMENT YEAR 2006 - 07. SINCE, THE ISSUES RAISED IN THESE APPEALS ARE INTER - CONNECTED, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED , HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPE AL WISE ADJUDICATION IS GIVEN IN THE SUCCEEDING PARAGRAPHS OF THIS ORDER. ITA NO. 3285/M/2009 (AY 2006 - 2007) ( BY ASSESSEE) ITA NO.3298/M/2009 (AY 2006 - 2007) ( BY REVENUE) 2. IN THESE CROSS APPEALS, BOTH THE ASSESSEE AND THE REVENUE ARE AGGRIEVED WITH THE DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE INCOME TAX ACT, 1961. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 4. BRIEFLY FACTS ARE THAT THE ASSESSEE IS A PRI MARY DEALER AND MERCHANT BANKER AND REGISTERED AS A NON - BANKING FINANCING COMPANY (NBFC). THE ASSESSEE CARRIES OUT INVESTMENT AND TRADING IN GOVERNMENT SECURITIES, CORPORATE BONDS, SHARES AND OTHER SECURITIES. THE ASSESSEE HAD MADE INVESTMENTS IN SHARES OF SUBSIDIARY COMPANY IE ICICI BROKERAGE SERVICES LTD (IBSL) OF RS. 45.01 MILLIONS AND IN SHARES OF ICICI SECURITIES HOLDINGS INC OF RS. 522.28 MILLIONS RESPECTIVELY. FURTHER, THE ASSESSEE HAS INCURRED EXPENDITURE OF RS. 18,56,46,260/ - ON BEHALF OF IBSL. IN THE ASSESSMENT, AO DISALLOWED INTEREST ON THE BORROWED FUNDS OF RS. 6,87,83,942/ - ON THE ALLEGED GROUND THAT BORROWED FUNDS WERE USED; (I) FOR MAKING INVESTMENT IN SHARES OF SUBSIDIARY COMPANY IE ICICI BROKERAGE SERVICE LIMITED (IBSL); (II) FOR MAKING INVESTMENT S IN SHARES OF ICICI SECURITIES HOLDINGS INCORPORATION (ISHI); (III) FOR ZERO COUPON BONDS 5. THE AO ALSO DISALLOWED INTEREST ON THE BORROWED FUNDS OF RS. 18,22,427/ - ON THE ALLEGED GROUND THAT BORROWED FUNDS WERE USED FOR EXPENDITURE INCURRED ON BEHALF OF SUBSI DIARIES. IN THE ASSESSMENT COMPLETED U/S 143(3) OF THE ACT, AO DISALLOWED INTEREST OF RS. 6,90,08,992/ - U/SS 14A AND 36(1)(III) OF THE ACT. 6. BY THE IMPUGNED ORDER, CIT (A) CONFIRMED THE DISALLOWANCE OF INTEREST TO THE EXTENT OF RS. 3,85,35,103/ - U/S 36( 1)(III) OF THE ACT AFTER HAVING FOLLOWING OBSERVATION. 3 7 . IN THIS BACKGROUND , SECTION 36(1)(III) WOULD WARRANT DISALLOWANCE OF INTEREST . IF THERE IS A DIVERSION OF FUNDS FROM BUSINESS TO OTHER ACTIVITIES. BEFORE ME , IT HAS BEEN STRONGLY ARGUED THAT ENTIRE INVESTMENT IN THE TWO COMPANIES IS OUT OF OWN FUNDS OF APPELLANT . IT HAS ALSO BEEN CONTENDED THAT THE ONUS OF ESTABLISHING THE NEXUS IS UPON THE ASSESSING OFFICER WANTING TO MAKE DISALLOWANCE . IT HAS BEEN CLAIMED THAT THIS ONUS HAS NOT BEEN ESTABLIS HED. I FIND THAT ASSESSING OFFICER HAS RELIED UPON THE ORDER OF ASSESSMENT FOR EAR1IER YEAR WHERE ASSESSING OFFICER HAS REASONABLY ATTEMPTED TO ESTABLISH THE ONUS. HOWEVER, IN THE APPELLATE ' PROCEEDINGS AN ATTEMPT WAS MADE TO DISCHARGE THIS ONUS STILL FURT HER AND APPELLANT WAS ASKED TO FURNISH THE BALANCE SHEET AND FUND FLOW STATEMENTS IN RELATION TO PURCHASE OF SHARES OF THE TWO COMPANIES, AS EXISTING IN THOSE YEARS . THIS WAS CALLED FOR VIDE ORDER SHEET NOTING DATED 18 TH MARCH , 2008 . A FUND FLOW STATEMENT IS A TECHNICAL ANALYSIS WHICH REVEALS THE AVAILABILITY OF FUNDS FROM VARIOUS SOURCES AND THEIR DEPLOYMENT IN VARIOUS ASSETS . THIS FUND FLOW STATEMENT CAN GIVE A CLEAR CUT PICTURE OF WHETHER AN ASSESSEE HAD SUFFICIENT FUND OF ITS OWN, IN THE FORM OF OWN CAP ITAL, RESERVES, ETC. WHICH COULD HAVE BEEN INVESTED IN AN INVESTMENT UNDER CONSIDERATION. FURTHER, A COMPARATIVE POSITION OF FUND FLOW STATEMENTS CAN MAKE THE ISSUE BEYOND DOUBT AND CAN BECOME A CONCLUSIVE EVIDENCE. IN RESPONSE TO THIS REQU I REMENT . ON 29 11 1 APRIL, 2008, THE REPRESENTATIVE OF APPELLANT CATEGORICALLY REFUSED SUBMISSION OF FUND FLOW STATEMENTS. THIS POSITION REQUIRES A PAUSE TO PONDER OVER THE REASONS FOR REFUSAL . APPELLANT IS A WELL KNOWN CORPORATE ENTITY IN THEIR FIELD OF OPERATION AND HAS A SSISTANCE OF QUAL I FI E D PERSONNEL, IN HOUSE AS WELL AS OTHERWISE , YET , THE REFUSAL . THE LEGAL IMPLICATIONS NEED TO BE SPELT OUT . TH E INCOME - TAX ACT HAS IMPOSED AN ONUS UPON THE AUTHORITIES WANTING TO MAKE A DISALLOWANCE U/S. 36(1)(III). THAT ONUS IS TO ESTABLISH A NEXUS BETWEEN FUNDS BORROWED FOR THE BUSINESS ON ONE HAND AND, INVESTMENTS IN ASSETS FALLING OUTSIDE THE BUSINESS SCENARIO OF APPELLANT ON THE OTHER HAND. 8 . TO MY MIND, THE ONLY AVAILABLE BASIS FOR ESTABLISHING THIS NEXUS - IS THE FUND FLOW STATEMENT . THIS IS BECAUSE NO SEPARATE BANK ACCOUNTS ARE MAINTAINED FOR VARIOUS ACTIVITIES A CORPORATE ENTITY PURSUES . THEREFORE, EVEN IF BANK STATEMENTS ARE SCRUTINIZED IT WOULD NOT GIVE THE NEXUS EVEN IF IT EXISTS. AND THERE IS NO MECHANISM OR DOCUMENT WHICH CAN THROW LIGHT ON THIS NEXUS . IN MY VIEW, IN A SITUATION LIKE THIS, THERE IS A SHIFT OF ONUS . IT WAS APPELLANT'S CONTENTION THAT INVESTMENT HAS BEEN MADE OUT OF OWN FUNDS . IN THIS CONNECTION, PARA NO . 3(I) OF THE FIRST GROUND OF APPEAL NEEDS PARTICULAR MENTION. IT IS REPRODUCED HERE BELOW : 'HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT (I) THE INVESTMENTS IN SUBSIDIARY COMPA NIES IN EARLIER YEARS WERE MADE FROM OWN FUNDS AND INTERNAL CASH ACCRUALS, NO PORTION OF THE BORROWED FUNDS WAS USED FOR THE SAME: 9. THE FUND FLOW STATEMENT WERE CALLED FOR VIDE ORDER SHEET ENTRY DATED 18 TH MARCH, 2008 AND THESE WERE DENIED IN THE COURSE OF APPELLATE PROCEEDINGS ON 29 TH APRIL 2008. EVEN IN SUBSEQUENT PROCEEDINGS BEFORE ME, APPELLANT HAS NOT TAKEN ANY STEPS NOR HAS FILED ANY DOCUMENTARY EVIDENCE TOWARDS THEIR CONTENTION THAT INVESTMENTS WERE MADE OUT OF OWN FUNDS. THIS SITUATION CALLS FOR AN ADVERSE VIEW TO THE EFFECT THAT THE INVESTMENT HAS BEEN MADE OUT OF BORROWED FUNDS. IT NEEDS TO BE PARTICULARLY MENTIONED THAT APPLICABILITY OF DECISION IN THE CASE OF TIN BOX CO AND MARUTI UDYOG LTD. RELI ED UPON IN THE COURSE OF APPELLATE PROCEEDINGS GET EXTINCT IN THE FACTS OF THE PRESENT COMPANY AND GET ABSOLUTELY DISTINGUISHED AND THEREFORE THESE DECISIONS DO NOT SUPPORT THE CAUSE OF THE APPELLANT IN ANY WAY. ON THE ISSUE OF WHETHER ALLOCATION IS JUSTI FIED,' FIND THAT THERE ARE A SERIES OF DECISIONS FROM APEX COURT WHICH HAVE ESTABLISHED THAT IN PROCEEDINGS UNDER THE INCOME - TAX ACT , THE THEORY OF APPORTIONMENT IS JUDICIALLY RECOGNIZED. SOME SUCH DECISIONS ARE AS FOLLOWS: - ANGLO FRENCH TEXTILE CO . 25 ITR 27 (SC) AHMEDABAD UMEDBHAL & CO. 181TR 472 (SC) CONTINENTAL CONSTRUCTION LTD. 1951TR 81 (SC) MUMBAI ITAT IN THE CASE OF M.P. BARUCHA IN ITA NO.4421 OF 2003 HAS HELD THAT APPORTIONMENT IS JUSTIFIED. 10. APPELLANT HAS PLACED RELIANCE UPON THE DECI SION OF SUPREME COURT IN THE CASE MUNJAL SALES CORPORATION. IN THIS JUDGRNENT, NEITHER ANY PRINCIPLE HAS BEEN EVOLVED NOR HAS ANY RATIO BEEN DECIDED ON THE ISSUE UNDER CONSIDERATION. LD. REPRESENTATIVE OF THE APPELLANT HAVE PARTICULARLY POINTED OUT TO ONE PARA FROM THIS ORDER WHICH READS AS UNDER . '17 . ONE ASPECT NEEDS TO BE MENTIONED DURING THE AY 1995 - 96. APART FROM THE LOAN GIVEN IN AUGUST / SEPTEMBER,1991, THE ASSESSEE ADVANCED INTEREST FREE LOAN TO ITS SISTER CONCERN AMOUNTING TO RS. 5 LACS . ACCORDING TO THE TRIBUNAL, THERE WAS NOTHING ON RECORD TO SHOW THAT THE 4 LOANS WERE GIVEN TO THE SISTER CONCERN BY THE ASSESSEE - FIRM OUT OF ITS OWN FUNDS AND, THEREFORE, IT WAS NOT THE ENTITLED TO CLAIM DEDUCTION UNDER SECTION 36(1)(III). THIS FINDING IS ER RONEOUS. THE OPENING BALANCE AS ON 1 . 4 . 94 WAS RS. 1.91 CORES WHEREAS THE LOAN GIVEN TO THE SISTER CONCERN WAS A SMALL AMOUNT OF RS. 5 LACS, IN OUR VIEW, THE PROFITS EARNED BY THE ASSESSEE DURING THE RELEVANT YEAR WERE SUFFICIENT TO COVER THE IMPUGNED LOAN OF RS. 5 LACS.' : 11 . A PERUSAL OF THIS PORTION OF THE JUDGEMENT CLEARLY REVEALS THAT HON'BLE APEX COURT HAS COMMENTED UPON PARTICULAR FACTS OF THE CASE. FROM HERE NO PRINCIPLE CAN BE CARVED OUT. THERE IS NO ISSUE EITHER. THEREFORE RELIANCE UPON THE DEC ISION DOES NOT FURTHER THE CAUSE OF APPELLANT . THE LAST ISSUE RAISED IN THIS CONNECTION IS THAT THE INVESTMENT WAS MADE IN COMMERCIAL EXPEDIENCY AND THEREFORE FOLLOWING THE DECISION OF APEX COURT IN THE CASE OF SA BUILDERS REPORTED IN 288 ITR 1, INTEREST SHOULD BE ALLOWED AS EXPENDITURE. INVOKING THE JUDGRNENT OF HON'BLE SUPREME COURT IS NOT MECHANICAL . IT REQUIRES ANALYSIS OF FACTS OF THE PARTICULAR CASE VIS - A - VIS WHAT IS COMMERCIAL EXPEDIENCY. THIS LATTER TERM 'EXPEDIENCY HAS NE! BEEN DEFINED BY HON'BLE COURT IN THE DECISION UNDER THE CASE . HOWEVER, TO DECIDE THE ISSUE IT IS ABSOLUTELY NECESSARY TO FIRST BE CLEAR OF WHAT IS 'COMMERCIAL EXPEDIENCY'. IN THIS CONNECTION, THE FOLLOWING OBSERVATIONS OF THE APEX COURT NEEDS PARTICULAR MENTION . WE WISH TO MAKE IT CLEAR THAT IT IS NOT OUR OPINION THAT IN EVERY CASE INTEREST ON BORROWED LOAN HAS TO BE ALLOWED IF THE ASSESSEE ADVANCES IT TO A SISTER CONCERN. IT ALL DEPENDS ON THE FACTS AND CIRCUMSTANCES OF THE RESPECTIVE CASE: (MARGIN NO.36 PAGE 9) 12. THEREFORE THE FACTS REQU I RE ANALYSIS BEFORE THE PRINCIPLE LAID DOWN IN THE DECIS I ON IN THE CASE OF S . A . BUILDERS CAN BE INVOKED . IN THE INSTANT CASE , THE FACT IS THAT APPELLANT HAS NOT ADVANCED ANY MONEY TO SUBSIDIARY/SISTE R CONCERNS . THE MONEY HAS GONE INTO INVESTMENT IN SHARES OF THESE COMPANIES . AT THE OUTSET, IT IS RELEVANT TO NOTE THAT THE DECISION OF HON ' BLE SUPREME COURT IS STRICTLY NOT APPLICABLE AS HON ' BLE COURT WAS CEASED WITH THE ISSUE OF MONEY ADVANCED TO SISTER CONCERN AND NOT MONEY INV ESTED IN SHARES. INVESTMENT IN SHARES IS ON AN ALTOGETHER DIFFERENT FOOTING THAN ADVANCEMENT OF MONEY INVESTMENT IN SHARES IS ACQUISITION OF OWNERSHIP RIGHTS IN THE COMPANY . THESE OWNERSHIP RIGHTS ARE NOTHING BUT A CAPITAL ASSET OF THE APPELLANT . THEREFORE , B Y INVESTING IN SHARE CAPITAL OF THE COMPANIES, APPELLANT HAS ACQUIRED A RIGHT ; RIGHT OF OWNERSHIP , IN THE NATURE OF A CAPITAL ASSET AND, WHEN A CAPITAL ASSET IS ACQUIRED, THE CORRESPONDING EXPENSES ARE NOT ALLOWABLE AS REVENUE EXPENSES. IT FURTHER NEED S TO BE ELABORATED THAT INVESTMENT IN SHARES IS NOT A BUSINESS (APPELLANT, IN THE PARTICULAR FACTS UNDER CONSIDERATION . THE DISTINCTION BETWEEN INVESTMENT IN SHARES AND HOLDING OF SHARES FOR TRADING (FOR BUSINESS) HAS BEEN RECOGNIZED EVEN BY THE CBDT IN IT S CIRCULAR NO. 412007 DATED 15.062007 . IT HAS ALREADY BEEN EXPLAINED THAT IN THE BALANCE SHEET OF APPELLANT, THE INVESTMENT IN SHARES UNDER CONSIDERATION IS CATEGORIZED AS LONG THE INVESTMENT . THEREFORE, BY DIVERTING FUNDS TOWARDS ACQUISITION OF THESE CAP ITAL RIGHTS , THE SHARES OF THE CORNPONES, APPELLANT IS NOT ENGAGED IN ANY ACTIVITY BUSINESS . AGAIN, IN THIS VIEW, THE RATIO OF DECISION OF HON ' BLE SUPREME COURT IS NOT APPLICABLE TO THE FACTS OF APPELLANT . WITHOUT PREJUDICE TO THE APPLICABILITY OF THE RATIO I WOULD PREFER TO DEAL WITH THE CONCEPT OF 'COMMERCIAL EXPEDIENCY'. THE WEBSTER ' S DICTIONARY DEFINES COMMERCIAL EXPEDIENCY AS UNDER: 'THE QUALITY OF BEING PROPER, SUITABLE AND ADVANTAGEOUS UNDER GIVEN CIR CUMSTANCES' FROM : THE NEW INTERNATIONAL WEBSTER ' S COMPREHENSIVE D I CTIONARY OF THE ENGLISH LANGUAGE, DELUXE ENCYCLOPEDIA EDITION TRIDENT PRESS INTERNATIONAL 1996 . THREE TH I NGS REQUIRE ANALYSIS FROM HERE 1 . A COMMERCIAL EXPED I ENCY SHALL EXIST ONLY WHEN THERE IS PERCEPTION OF ADVANTAGEOUS POSITION. 2 . THE PERCEPTION SHOULD BE A T THE TIME WHEN A TRANSACT I ON TAKES PLACE AND CANNOT BE DEC I DED UPON BY WHAT HAPPENS SUBSEQUENTLY . 3 . THE CLAIM OF COMMERC I AL EXPEDIENCY , BEING FROM APPELLANT , THE ONUS OF ESTABLISH I NG COMMERCIAL EXPEDIENCY IS UPON THE APPELLANT . 13 . IT IS NECESSARY TO POINT OUT HERE THAT THE ISSUE OF COMMERCIAL EXPEDIENCY WAS NEVER RAISED 5 BEFORE THE ASSESSING OFFICER AND HAS BEEN RAISED I N THE APPELLATE PROCEEDINGS FOR THE FIRST TIME . APP ELLANT HAS FILED A DETAI L ED NOTE OF WHAT THEY CONSIDER TO BE COMMERCIAL EXPEDIENCY. TH I S IS REPRODUCED HEREUNDER . ( I X) WITHOUT PREJUDICE TO ABOVE, THE APPELLANT SUBMITS THAT D I SALLOWANCE MADE BY THE ASSESSING OFFICER BE DELETED RELYING ON THE DECISION OF THE SUPREME COURT IN THE CASE OF S.A . BUILDERS LTD. VS . CIT(A) (288 ITR 1) WHEREIN IT HAS BEEN HELD THAT EVEN IF BORROWED FUNDS ARE USED FOR MAKING INTEREST FREE ADVANCE TO SISTER CONCERN FOR COMMERCIAL EXPEDIENCY THEN INTEREST ON BORROW I NGS IS ALLOWABLE EXPENDITURE : IN THE APPELLANT'S CASE THE I NVESTMENT MADE IN SUBSIDIARIES WAS FOR THE PURPOSE OF THE BUS I NESS AND COMMERC I AL EXPEDIENCY FOR THE FOLLOWING REASONS : A) THE APPELLANT IS AN UNL I STED IND I AN COMPANY, REGISTERED UNDER THE COMPANIES ACT, 1956 . THE APPELLANT HAS A WHOLLY OWNED SUBSIDIARY, ICICI SECURITIES HOLDING INC . , WHICH . IN TURN, HAS A WHOLLY OWNED SUBSIDIARY I . E. ICICI SECURITIES INC . (ISI) BOTH INCORPORATED IN THE USA . THE APPELLANT IS A PRIMARY DEALER , MERCHANT BANKER AND REGISTERED AS NON BANKING FINANCIAL COMPANY IN INDIA . ICICI SECURITIES INC . (ISI) I S A COMPANY REGISTERED WITH SECURITIES EXCHANGE COMMISS I ONER AS BROKER - DEAL AND IS A MEMBER OF NATIONAL ASSOCIATION OF SECURITIES DEA L ERS RNASDAQ'). ISI WAS FORMED TO SOLICIT USA BASED C L I ENTS WHO WOULD BE DESIROUS OF INVESTING IN IND I A AND ALSO PROVIDES VARIOUS ADV I SORY SERVICES L I KE M&A . GDR ISSUE MANAGEMENT . PRIVATE PLACEMENTS, ETC . ISI MANAGES VARIOUS OVERSEAS ISSUES OF INDIAN CORPORATES . ISI HAD AN ARRANGEMENT WITH THE APPELLANT WHE REBY THE APPELLANT W ILL PROV I DE TRANSACT I ON SUPPORT TO IS I WITH REGARD TO ITS ACT I VITIES RELAT I NG TO MANAGEMENT OF ISSUES OF GLOBA L DEPOSIT RECE I PTS (GDR) , FORE I GN CURRENCY CON V E R T I B LE BONDS AND SUCH OTHER I NSTRUMENT . FOR TH I S , IS I WOULD PAY SERVICE FEES TO THE APPELLANT AS MAY BE MUTUALLY AGREED BETWEEN THEM FROM TIME TO TIME. THE DETAILS OF INCOME RECEIVED FROM ISI IN THE SUCCEEDING YEAR ARE AS UNDER: - NATURE OF INCOME ASSESSMENT YEAR 2006 - 07 ASSESSMENT YEAR 2007 - 2008 FEES FOR TRANSACTION SUPPORT SERVICES RS. 10,64 , 48,265/ - RS . 1,52,19,460/ -- B . THE APPELLANT IS AT THE FOREFRONT OF CAPITAL MARKETS ADVISORY HAVING BEEN INVOLVED IN MOST MAJOR BOOK BUILDING AND FIXED PRICE OFFERINGS . THE APPELLANT IS AMONGST THE LEADING UNDERWRITERS OF INDIAN EQUITY AND EQUITY LINKED OFFERINGS WITH UNPARALLED EXECUTION CAPABILITIES . THE APPELLANT PROVIDES END - TO - END FUND RAISING SOLUTIONS, FROM STRUCTURING TO PLACEMENT OF THE EQUITY INSTRUMENT SUCH AS INTITIAL PUBLIC OFFERINGS (IPOS), RIG HTS OFFERINGS, CONVERTIBLE OFFERINGS, AND PRIVATE PLACEMENT AND INTERNATIONAL OFFERINGS, FOR BOTH, UNLISTED AND LISTED ENTITIES . WHEREAS, IBSL IS A MEMBER OF THE NATIONAL STOCK EXCHANGE AND BOMBAY STOCK EXCHANGE LIMITED. IT PROVIDES SECONDARY MARKET AS W ELL AS PRIMARY MARKET BROKERAGE SERVICES. IN SECONDARY MARKET, IBSL EXECUTES TRADES FOR CLIENTS. IN PRIMARY MARKETS IBSL ASSISTS CORPORATES IN PLACING THEIR EQUITY/DEBT ISSUES . THE APPELLANT IS COMMITTED TO PROVIDE A GAMUT OF FINANCIAL PRODUCTS AND SERVIC ES UNDER ONE ROOF . THE INVESTMENT IN IBSL ENABLES THE APPELLANT TO EXPAND ITS SUITE OF CAPITAL MARKET - RELATED FACILITIES TO ITS CUSTOMERS IN TERMS OF BRAKING SERVICES. THE SYNERGY AND STRENGTHS OF THE APPELLANT AND IBSL GIVE THE APPELLANT AN OPPORTUNITY T O OFFER STATE - OF - THE - ART SERVICES TO CUSTOMERS. THIS ALLIANCE ALLOWS CUSTOMERS TO SEAMLESSLY EXECUTE THEIR TRANSACTIONS TO SUIT THEIR NEEDS AND DEMANDS. THE DETAILS OF INCOME RECEIVED FROM IBSL IRJ THE SUCCEEDING YEAR ARE AS UNDER: - NATU RE OF ASSESSMEN T YEAR ASSESSMENT Y E A R INCO ME 2006 - 07 2007 - 08 DIVI DEND RS . 16,65,25,900/ - RS . 18,90,29 , 4 00/ - 6 14. TO MY MIND, THE ENTIRE SUBMISSIONS OF APPELLANT ARE REVOLVING AROUND SUBSEQUENT DEVELOPMENTS WHICH ARE OF NO SIGNIFICANCE AT ALL FOR THE PURPOSE AT HAND. MOREOVER, APPELLANT IS TALKING OF RESULTING PROFITS FOR INVESTMENT WHEREAS HON'BLE COURT HAVE OBSERVED AS FOLLOWS: - 'AS ALREADY STATED ABOVE, WE HAVE TO SEE THE TRANSFER OF THE BORROWED FUNDS TO A SISTER CONCERN FROM THE POINT OF VIEW OF COMMERCIAL EXPEDIENCY AND NOT FROM THE POINT OF VIEW WHETHER THE AMOUNT WAS ADVANCED FOR EARNING PROFITS.' (MARGIN NO.3 5 PAGE 9) IF APPELLANT DESIRES THE BENEFIT OF THE DECISION IN THE CASE OF SA BUILDERS, COMMERCIAL EXPEDIENCY SHOULD HAVE BEEN ESTABLISHED AS EXISTING WHEN THE INVESTMEN T WAS MADE. THIS HAS NOT EVEN BEEN ATTEMPTED. IT FOLLOWS THAT APPELLANT HAS FAILED TO D ISCHARGE ITS ONUS IN THE PRESENT SITUATION OF ESTABLISHING COMMERCIAL EXPEDIENCY. WHAT WAS NECESSARY WAS THE PERCEPTION OF MANAGEMENT AT THE TIME OF MAKING INVESTMENT THAT THEY WERE INVESTING IN SHARES OF THE COMPANIES BECAUSE SUCH AN INVESTMENT WAS ' ADVAN TAGEOUS' IN RELATION TO THE EXISTING CIRCUMSTANCES AT THAT POINT OF TIME. IN THE ABSENCE OF ANY EVIDENCE TO THIS EFFECT, COMMERCIAL EXPEDIENCY CANNOT BE SAID TO HAVE EXISTED . IT IS ALSO RELEVANT TO POINT OUT THAT THE UTILIZATION OF FUNDS BY THE SISTER CONC ERN ALSO ASSUMES AN IMPORTANT ROLE IN INVOKING THE RATIO LAID DOWN BY HON'BLE SUPREME COURT . APPELLANT HAS BEEN SILENT UPON HOW THE FUNDS GIVEN TO THESE COMPANIES AS SHAREHOLDING WERE UTILIZED BY THESE COMPANIES . WHETHER AT ALL, THESE FUNDS WERE UTILIZED B Y THESE COMPANIES FOR THEIR BUSINESS. THERE IS NOTHING ON RECORD TOWARDS THIS NECESSITY. IN THIS CONNECTION , THE FOLLOWING OBSERVATIONS OF HON' BLE SUPREME COURT NEED PARTICULAR REFERENCE . 'FOR INSTANCE, IF THE DIRECTORS OF THE SISTER CONCERN UTILIZE THE AMOUNT ADVANCED TO IT BY THE ASSESSEE FOR THEIR PERSONAL BENEFIT, OBVIOUSLY IT CANNOT BE SAID THAT SUCH MONEY WAS ADVANCED AS A MEASURE OF COMMERCIAL EXPEDIENCY.' (MARGIN NO.36 PAGE 9) NOTHING HAS BEEN BROUG HT ON RECORD TO SATISFY HOW FUNDS WERE UTILIZED BY THE SUBSIDIARY CORPORATE ENTITIES. THEREFORE, THE CONTENTION THAT INVESTMENT WAS MADE IN VIEW OF COMMERCIAL EXPEDIENCY IS REJECTED . CONSEQUENTLY, THE DECISION OF THE APEX COURT IN THE CASE OF SA BUILDERS DOES NOT SUPPORT THE CAUSE OF APPELLANT . 15 . APPELLANT HAS TAKEN AN ALTERNATIVE PLEA THAT THE INTEREST, IN THE SITUATION OF ASSESSING OFFICER HOLDING THAT THE FUNDS WERE DIVERTED TOWARDS INVESTMENT IN SHARES, WAS OTHERWISE ALLOWABLE U/S. 57(3) . IT IS THER EFORE CONTENDED THAT INTEREST IS ALLOWABLE AS DEDUCTION IN ANY CASE . THIS CONTENTION IS NOT CORRECT . APPELLANT HAS MADE INVESTMENT IN SHARES OF THE TWO COMPAN I ES . THE RESULTANT INCOME FROM SHARES WOULD BE EITHER DIVIDEND OR CAPITAL GAIN. DURING THE YEAR UN DER CONSIDERATION, APPELLANT HAS NOT SOLD ANY SHARES. THEREFORE, QUESTION OF CAPITAL GAINS AND ALLOWABLLITY OF INTEREST AGAINST CAPITAL GAINS DOES NOT ARISE. AS FAR AS DIVIDEND IS CONCERNED, THE SAME IS NOT CHARGEABLE TO TAX AND, THEREFORE, IF AT ALL, THERE IS CASE OF ALLOWABILITY OF INTEREST U/S . 57(3), THIS CLAIM IS HIT BY PROVISION S OF SECTION 14A AND CANNOT BE SUSTAINED . THEREFORE, ALTERNATIVE PLEA IS ALSO REJECTED . ' 3. LEARNED COUNSEL OF APPELLANT HAS ARGUED THAT THE FACTS IN THIS YEAR ARE DIFFERE NT AND THEREFORE , THE ISSUE IS REQUIRED TO BE DECIDED AFRESH. HE HAS ARGUED THAT THE PURPOSE OF INVESTMENT IN THE TWO SUBSIDIARIES WAS FOR THE PURPOSE OF BUSINESS AND COMMERCIAL EXPEDIENCY . IN THIS CONNECTION, HE HAS FILED WRITTEN SUBMISSIONS WHICH ARE AS UNDER: 2 . IN THE APPELLANT'S CASE THE INVESTMENT MADE IN SUBSIDIARIES WAS FOR THE PURPOSE OF THE BUSINESS AND COMMERCIAL EXPEDIENCY FOR THE FOLLOWING REASONS : A) THE APPELLANT IS AN UNLISTED INDIAN COMPANY, REGISTERED UNDER THE COMPANIES ACT , 1956. THE APPELLANT HAS A WHOLLY OWNED SUBSIDIARY, ISHI WHICH, IN TURN, HAS A WHOLLY OWNED SUBSIDIARY I . E. ICICI SECURITIES INC.(ISI) BOTH INCORPORATED IN THE USA . THE APPELLANT IS A PRIMARY DEALER, MERCHANT BANKER AND REGISTERED AS NON BANKING FINANCIAL COMPANY IN INDIA. ISL HAS AN ARRANGEMENT WITH THE APPELLANT WHEREBY THE APPELLANT WILL PROVIDE TRANSACTION SUPPORT TO ISI WITH REGARD TO ITS ACTIVITIES RELATING TO MANAGEMENT OF ISSUES OF GLOBAL DEPOSIT RECEIPTS (GDR), FOREIGN CURRENCY CONVERTIBLE BONDS AND SUCH OTHER INSTRUMENT . FOR THIS, ISI WOULD PAY SERVICES FEES TO THE APPELLANT AS MAY BE MUTUALLY AGREED BETWEEN THEM FROM TIME TO TIME. THE APPELLANT HAS RECEIVED FEES FOR TRANSACTION SUPPORT SERVICES AMOUNTING TO RS.10,64 , 48,265/ - AS INCOME FROM ISLLN THE YEAR UNDER CONSIDERATION. DETAILS OF INCOME FROM ISI ARE ATTACHED AT PAGE 35 OF THE PAPER BOOK. FURTHER, REPORT U/S. 92E RELATING TO INTERNATIONAL TRANSACTIONS WITH ISI IS ENCLOSED AT PAGES 36 - 40 OF THE PAPER BOOK. 7 B. THE APPELLANT IS AT THE FOREFRONT OF CA PITAL MARKETS ADVISORY HAVING BEEN INVOLVED IN MOST MAJOR BOOK BUILDING AND FIXED PRICE OFFERINGS . THE APPELLANT IS AMONGST THE LEADING UNDERWRITERS OF LNDIAN EQUITY AND EQUITY LINKED OFFERINGS WITH UNPARALLED EXECUTION CAPABILITIES . THE APPELLANT PROVIDES END TO END FUND RAISING SOLUTIONS, FROM STRUCTURING TO PLACEMENT OF THE EQUITY INSTRUMENT SUCH AS INITIAL PUBLIC OFFERING (IPOS), RIGHTS OFFERINGS, CONVERTIBLE OFFERINGS, AND PRIVATE PLACEMENT AND INTERNATIONAL OFFERINGS, FOR BOTH, UNLISTED AND LISTED ENT ITIES . WHEREAS, IBSL IS A MEMBER OF THE NATIONAL STOCK EXCHANGE AND BOMBAY STOCK EXCHANGE LIMITED. IT PROVIDES A GAMUT OF FINANCIAL PRODUCTS AND SERVICES UNDER ONE ROOF . THE INVESTMENT IN IBSL ENABLES THE APPELLANT TO EXPAND ITS SUITE OF CAPITAL MARKET RELATED FACILITIES TO ITS CUSTOMERS IN TERMS OF BOOKING SERVICES. THE SYNERGY AND STRENGTHS OF THE APPELLANT AND IBSL GIVE THE APPELLANT AN OPPORTUNITY TO OFFER STATE - OF - THE ART SERVICES TO CUSTOMERS . THIS ALLIANCE ALLOWS CUSTOMERS TO SEAMLESSLY EXECUTE TH EIR TRANSACTIONS TO SUIT THEIR NEEDS AND DEMANDS. THE APPELLANT HAS EARNED DIVIDEND INCOME AMOUNTING TO RS. 16,65,25,9001 - FROM IBSL IN THE YEAR UNDER CONSIDERATION. 4. NO FURTHER INVESTMENT HAS BEEN MADE IN SHARES OF THE SUBSIDIARY COMPANY DURING THE YEAR U NDER APPEAL . THE FUNDS WERE UTILIZED FOR THE PURPOSES OF THE BUSINESS AND ALL TOE CONDLTLONS STIPULATED UNDER SECTION 36(1)(III) HAD BEEN FULFILLED IN THE APPELLANT'S CASE, THUS, ENTIRE INTEREST PAID INCURRED WAS ALLOWABLE . 5. BASED ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANT CASE, THE DISALLOWANCE U/S . 36(1)(III) WAS UNJUSTIFIED AND UNWARRANTED . ' HE HAS RELIED UPON THE DECISION OF HON'BLE DELHI TRIBUNAL IN THE CASE OF MARUTI UDYOG LTD . REPORTED IN 142 TAXRNAN 57 AND DECISION OF HON'BLE PUNJAB HIGH COURT IN THE CASE OF ROCKMEN CYCLE INDUSTRIS LTD REPORTER 175 TAXMAN. 21 . IT IS FURTHER CLAIMED THAT APPELLANT COMPANIES ' OWN FUNDS WERE SUFFICIENT TO MAKE INVESTMENT IN SUBSIDIARY COMPAN I ES AND ZERO COUPON BONDS. HE HAS FILED DETAILS OF INVESTMENT ON THE ONE HAND AND AVAILABILITY OF OWN FUNDS ON THE OTHER HAND WHICH ARE AS BELOW : SR . NO . FOR THE YEAR ENDED INVESTME NT I N OWN FUNDS SUBSIDIAR IES A N D Z E R O (RS . IN MILLION) COUPON BONDS (RS . IN MILLION) 1. 31 . 03 . 1995 0 . 0 1 1397 . 80 2 . 31 . 03 . 1996 45 . 01 1419 . 78 3 . 31 . 03 . 2000 45 . 0 1 2555 . 07 ' - - - 4 . 31 . 03 . 2001 95 . 62 2731 . 54 5 . 31.03 . 2002 95 . 62 3191 . 88 6. 31 . 03.2003 120 . 03 3510.81 7. 31.03 . 2005 841 . 54 4190 . 57 8 . 31.03.2006 567 . 29 4107 . 64 HE HAS ALSO RELIED UPON THE DECISION OF MUMBAI HIGH COURT IN THE CASE OF REL I ANCE UTILIT I ES AND POWER LTD . REPORTED I N 221 CTR 435 AND HAS ARGUED THAT IN A CASE WHERE INTEREST FREE FUNDS AS WEL L AS BORROWED FUNDS ARE AVAILABLE, THE PRESUMPTION THAT INTEREST FREE FUNDS WILL BE UTILIZED FOR MAKING INVESTMENT , IS MORE LOGICAL AND NEEDS TO BE ADOPTED . I HAVE PERUSED THE FACTS OF THE CASE AND I FIND THAT IN THE EARTIER YEAR, AS HAS ALREADY BEEN MENTIONED IN THE REPRODUCED PORTION OF ORDER FOR A . Y . 2005 - 06 THE ISSUE REVOLVED AROUND ATTEMPTING TO ESTABLISH NEXUS FROM FUND FLOW STATEMENT OF THE RESPECTIVE YEARS IN WHICH INVESTMENT WAS MADE IN THE SUBSIDIARY COMPANIES. IN THA T YEAR , APPELLANT HAD DENIED SUBM I SSION OF TILE FUND FLOW STATEMENT . SURPRISINGLY , EVEN DUR I NG THE APPELLATE PROCEEDINGS FOR THE CURRENT YEAR, THIS FUND FLOW STATEMENT HAS NOT BEEN FILED. INSTEAD APPELLANT IS ONLY TRYING TO COMPARE QUANTUM OF INVESTMENT WI TH QUANTUM OF OWN FUNDS AVAILAB L E . TO MY MIND, THIS IS NOT ENOUGH. THE APPLICAB I L I TY OF THE DECISIONS RELIED UPON BY LEARNED COUNSEL OF APPELLANT ARISE ONLY IN A SITUATION WHERE IT IS NOT POSSIBLE TO ESTABL I SH NEXUS. HOWEVER , WHEN APPELLANT IS NOT PERM I TTI NG ESTABLISHING OF THAT NEXUS , THE SANCTITY OF THESE DECISIONS CANNOT BE ADMITTED . THEREFORE , I DECLINE TO BE GUIDED BY THE DECISIONS IN THE CASES OF MARUTI UDYOG LIMITED , ROCKMEN CYCLES INDUSTRIES 8 LTD . AND IN THE CASE OF RELIANCE UTILITIES AND POWER LTD . ON THE SECOND CONTENTION NOW RAISED THAT APPELLANT HAD RECEIVED FEES FOR TRANSACTION SUPPORT SERVICES FROM THE SUBSIDIARY COMPANIES AND, THEREFORE, IN VIEW OF DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SA BUILDERS THE TRANSACTION OUGHT TO BE CONSIDE RED AS UNDERTAKEN UNDER COMMERCIAL EXPEDIENCY, I AM NOT INCLINED TO ACCEPT THE CONTENTION OF LEARNED COUNSEL OF APPELLANT . IN THAT APPELLATE ORDER FOR EARLIER YEAR I HAD GIVEN A CATEGORICAL FINDING THAT DEVELOPMENT SUBSEQUENT TO THE GIVING OF ADVANCE ARE O F NO SIGNIFICANCE. I HAD ALSO HELD THAT EARNING PROFITS ALONE IS NOT ENOUGH TO ESTABLISH COMMERCIAL EXPEDIENCY. A S I TUATION OF COMMERCIAL EXPEDIENCY WOULD REQUIRE ESTABLISHMENT OF A ADVANTAGEOUS POS I TION ON THE DATE ON WHICH FUNDS WERE ADVANCED. THESE ADVA NTAGEOUS POSITION WOULD BE RELEVANT ONLY WHEN LOOKED AT FROM THE POINT OF VIEW OF MANAGEMENT ON THE DATE OF MAKING INVESTMENT AND NOT SUBSEQUENTLY. THAT ADVANTAGEOUS POSITION CRUCIALLY REQUIRED FOR ESTABLISHING COMMERCIAL EXPEDIENCY HAS NOT BEEN . ATTEMPTED TO BE ESTABLISHED BY LEARNED COUNSEL OF APPELLANT . TO MY MIND, THEREFORE SIMPLY BECAUSE APPELLANT HAS EARNED SOME INCOME DURING THE YEAR FROM ITS SUBSIDIARY COMPANIES IT CANNOT BE CONCLUDED THAT THE MATTER GETS COVERED BY COMMERCIAL EXPED I ENCY . EARNING OF PROFITS IS NOT OF SIGNIFICANCE. THIS HAS BEEN CATEGORICALLY HELD BY HON'BLE SUPREME COURT IN THE CASE OF S.A . BUILDERS AND I REPRODUCE THE RELEVANT PORTION FROM MARGIN NO . 35 OF PAGE 9. AS ALREADY STATED ABOVE, WE HAVE TO SEE THE TRANSFER OF THE BORROWED FUNDS TO A SISTER CONCERN FROM THE POINT OF VIEW OF COMMERCIAL EXPEDIENCY AND NOT FROM THE POINTS OF VIEW WHETHER THE AMOUNT WAS ADVANCED FOR EARNING PROFITS . ' THEREFORE THE ADDITIONAL ARGUMENT TAKEN BY LEARNED COUNSEL OF APPELLANT RING THE YEAR UNDER CONSIDERATION DO NOT FURTHER THEIR CAUSE . CONSEQUENTLY, FOR DETAILED REASONS CONTAINED IN THE APPELLATE ORDER FOR A . Y . 2005 - 06 AND FOR THE GROUNDS AND REASONS DISCUSSED HEREINABOVE, IT IS HELD THAT DISALLOWANCE OF INTEREST BY ASSESSING OFFICER IS JUSTIFIED. 7. AGGRIEVED WITH THE SAID ORDER OF THE CIT (A), BOTH ASSESSEE AND REVENUE ARE IN FURTHER APPEAL BEFORE US. 8. BEFORE US, IT WAS CONTENDED BY THE LD AR THAT NO DISALLOWANCE U/S 36(1)(III) IS WARRANTED IF OWN FUNDS OR INTEREST FREE FUNDS ARE SUFFICIENT T O MEET THE INVESTMENTS. FOR THIS PROPOSITION, LD AR RELIED ON THE FOLLOWING JUDICIAL PRECEDENTS. (I) CIT VS. RELIANCE UTILITIES & POWER LIMITED (313 ITR 340) (BOM.) (II) CIT VS. RELIANCE COMMUNICATIONS INFRASTRUCTURE LTD (207 TAXMAN 219) (BOM.) (III) KANSAI NEROLAC PAINTS LTD VS. DCIT (32 TAXMANN.COM 60 / 57 SOT 10) (MUM). 9. LD AR FURTHER SUBMITTED THAT THE ISSUE UNDER CONSIDERATION IS COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.884/M/2007 AND ITA NO.928/M/2007. 10. WE HAVE HEARD THE RIVAL CONTENTIONS CAREFULLY AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE JUDICIAL PRONOUNCEMENT CITED BY LD. AR AND DR DURING THE COURSE OF HEARING BEFORE US. ISSUE WITH REGARD TO DISALLOWANCE OF INTEREST ON THE PLEA OF AS SESSEE NOT HAVING OWN SUFFICIENT FUNDS IS COVERED BY THE ORDER OF I. T. ACT IN ASSESSEES OWN CASE DATED 15.9.2015 FOR THE A.Y. 2002 - 03, WHEREIN P RECISE OBSERVATION OF TRIBUNAL WAS AS UNDER: 9 15. GROUND NO. 1 & 2 OF ASSESSEE'S APPEAL AND GROUND NO. 1 OF REV ENUE'S APPEAL: IN THESE GROUNDS, THE ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF INTEREST AMOUNTING TO RS.59,40,000/ - AND RS.4,03,00,000/ - MADE BY THE AO, WHEREAS THE REVENUE HAS CHALLENGED THE RELIEF PROVIDED BY THE LD. CIT(A) OF RS.7,44,10,000/ - , OUT OF TOTAL DISALLOWANCE OF RS.11,4 7,10,000/ - MADE BY THE AO IN THE ASSESSMENT ORDER. 15.1. THE AO HAS DISCUSSED THIS ISSUE AT PARA 2.1 TO 2.3, AND PARA 3 OF THE ASSESSMENT ORDER, WHEREIN DISALLOWANCE OF INTEREST HAS BE EN MADE, ON THE GROUND THAT BORROWED FUNDS WERE USED BY THE ASSESSEE COMPANY FOR MAKING INVESTMENT IN SHARES OF SUBSIDIARY COMPANIES AND FOR TAX FREE SECURITIES. 15.2. THE LD. CIT(A) HAS DISCUSSED THESE ISSUES IN PARA 2 TO 2.3 AND PARA 3 OF THE APPELLATE ORDER, WHEREIN DISALLOWANCE MADE BY THE AO HAS BEEN PARTLY CONFIRMED, FOLLOWING THE APPEAL ORDERS OF PRECEDING ASSESSMENT YEARS IN ASSESSEE'S OWN CASE .FOR ASSESSMENT YEARS 2000 - 01 & 2001 - 02. 15.3. BEFORE US, THE LD. COUNSEL HAS RELIED UPON HIS SUBMISSION S MADE IN A.Y. 2000 - 01 AND 2001 - 02 AND ALSO DREW OUR ATTENTION TOWARDS THE FACTS AND FIGURES AS CONTAINED IN THE WORKING SHEET SUBMITTED BY HIM TO IMPRESS UPON THE POINT THAT OWN FUNDS WERE FAR IN EXCESS OF INVESTMENT MADE IN THESE SECURITIES. IN ADDITION TO THE ABOVE, LD. COUNSEL ALSO DREW OUR ATTENTION UPON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF SA BUILDERS VS. CIT 288 ITR 1 (SC). ON THE OTHER HAND, THE LD. DR RELIED UPON THE ORDERS OF LD. CIT(A) AND THE AO. 15.4 WE HAVE HEARD BOTH THE SIDES. IT IS SEEN BY US THAT FACTS IN THE PRECEDING YEARS ARE IDENTICAL. IN ADDITION TO THE ABOVE, IT IS FURTHER OBSERVED THAT HON'BLE SUPREME COURT IN THE CASE OF SA BUILDERS LTD.,SUPRA, HAD OBSERVED THAT EVEN IF EXPENDITURE MA Y NOT HAVE BEEN INCURRED UNDER ANY LEGAL OBLIGATION, YET IT IS ALLOWABLE AS BUSINESS EXPENDITURE IF IT WAS INCURRED ON THE GROUNDS OF COMMERCIAL EXPEDIENCY. THUS KEEPING IN VIEW THE AFORESAID FACTUAL POSITION AND CLEAR POSITION OF LAW AND FOLLOWING THE ORD ER OF ASSESSMENT YEARS 2000 - 01 AND 2001 - 02, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND ACCORDINGLY DISALLOWANCE OF INTEREST OF RS. 59,40,000/ - IS DIRECTED TO BE DELETED. THUS, TOTAL DISALLOWANCE OF RS.11,47,10,000/ - MADE BY THE AO IS ALSO DELETED AND CONSEQUENTLY GROUNDS NO. 1 AND 2 OF THE ASSESSEE'S APPEAL ARE ALLOWED. 11. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME AS DISCUSSED IN THE ORDER OF THE TRIBUNAL, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE AND ALSO AFTER FINDING THAT THE ASSESSEES OWN FUNDS IS MUCH MORE THAN THE INVESTMENT IN SUBSIDIARY COMPANY, WE DO NOT FIND ANY REASON FOR THE DISALLOWANCE U/S. 36(1)(III). 12. IN GROUND NO. 2 THE ASSESSEE IS AGGRIEVED FOR NOT ALLOW ING SET OFF OF SPECULATION LOSS OF EARLIER YEARS AGAINST SPECULATION GAIN. 13. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT EVEN THOUGH THIS ISSUE HAS BEEN RAISED BEFORE THE LD. CIT(A), HOWEVER HE HAS NOT ADJUDICATED THIS GROUND . IN THE INTEREST OF JUSTICE AND FA IR PLAY, WE RESTORE THIS GROUND TO THE FILE OF THE CIT(A) FOR DECIDING THE ISSUE ON MERIT AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. 14 . REGARDING THE APPEAL FILED BY THE REVENUE VIDE ITA NO.3298/M/2009, LD AR FAIRLY AG REED THAT THE TAX EFFECT INVOLVED IN THE REVENUES APPEALS IS BELOW RS. 10 LAKHS. THEREFORE, THIS CASE IS COVERED BY THE CBDT CIRCULAR NO.21/2015, DATED 10 10.12.2015 WHICH IS RELEVANT FOR THE PROPOSITION THAT THE APPEALS FILED BY THE REVENUE WITH A TAX EFFE CT OF RS. 10 LAKHS AND BELOW ARE TO BE EITHER DISMISSED BY THE TRIBUNAL AS NOT MAINTAINABLE OR NOT PRESSED BY THE REVENUE. THEREFORE, CONSIDERING THE LOW TAX EFFECT INVOLVED IN THE PRESENT APPEAL FILED BY THE REVENUE, IT IS REQUIRED TO BE DISMISSED SINCE, THE SAME ARE NOT MAINTAINABLE. ACCORDINGLY WE ORDER. 1 5 . LD AR FAIRLY CONSIDERED THAT IN VIEW OF THE TRIBUNALS DECISI ON ON ASSESSEES APPEAL ITA NO.3285/M/2009 ON MERITS , WHICH IS ADJUDICATED IN THE ABOVE PARAGRAPHS OF THIS ORDER, THE APPEAL ITA NO.7775/M/2010, IN RESPECT OF ORDER PASSED U/S 154 OF THE ACT HAS BECOME INFRUCTUOUS. ACCORDINGLY, THE SAID APPEAL ITA NO.7775 /M/2010 IS DISMISSED AS INFRUCTUOUS. 16 . IN THE RESULT, APPEAL ITA NO.3285/M/2009 IS ALLOWED IN PART WHEREAS THE APPEALS ITA NO.3298/M/2009 AND ITA NO.7775/M/2010 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 JUNE, 2017. SD/ - SD/ - ( SANDEEP GOSAIN) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 20.06.2017 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI