DCIT Circle 11 (1), V. Escorts Finance LTd,

ITA 3779/DEL/2007

• Counselvise Citation: 377920114 RSA 2007
• Duration Of Justice: 4 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 14-05-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 05-09-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARUN BHATIA; SIMRAN MEHTA
• Assessee Lawyers: ANUSHA KHURANA
• Keywords: Capital asset; Business income; Depreciation; Business expenditure; Earning of tax free income; Bad and doubtful debts
• Section: 244A; 234B; 14A; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.3779/DEL/2007 ASSESSMENT YEAR : 2003-04 DCIT, M/S ESCORTS FINANCE LTD., CIRCLE-11 (1), N-6, PRATAP BUILDING, NEW DELHI. V. CONNAUGHT PLACE, N. DELHI. AND I.T.A. NO.3818/DEL/2007 ASSESSMENT YEAR : 2003-04 M/S ESCORTS FINANCE LTD., DCIT. N-6, PRATAP BLDG. CIRCLE-11 (1), CONNAUGHT PLACE, N.DELHI. V. NEW DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AAACE AAACE AAACE AAACE- -- -0763 0763 0763 0763- -- -B APPELLANT BY : SHRI SIMRAN MEHTA, ADVOCATE & SHRI ARUN BHATIA, C.A. RESPONDENT BY : SMT. ANUSHA KHURANA, SR. DR. ORDER PER TS KAPOOR, AM: THESE CROSS APPEALS ARE FILED AGAINST THE ORDER OF LD C IT(A)-XIII, NEW DELHI DATED 21.6.2007. THESE APPEALS WERE HEARD T OGETHER AND FOR THE SAKE OF CONVENIENCE ARE BEING DISPOSED OFF BY THIS COMMON ITA NO3779 & 3818/DEL/207 2 ORDER. THE GROUNDS TAKEN BY THE DEPARTMENT AS WELL A S IN THE CROSS APPEALS ARE AS UNDER:- I.T.A. N I.T.A. N I.T.A. N I.T.A. NO. 3779/DEL/2007: (DEPARTMENTAL APPEAL): O. 3779/DEL/2007: (DEPARTMENTAL APPEAL): O. 3779/DEL/2007: (DEPARTMENTAL APPEAL): O. 3779/DEL/2007: (DEPARTMENTAL APPEAL): 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE FOR DO UBTFUL DEBTS OF ` .27,60,000/- MADE IN THE ASSESSMENT . 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF ` .8,45,000/- MADE IN THE ASSESSMENT ON ACCOUNT OF INCOME REVERSALS FO R PREVIOUS YEARS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF ` .79,80,000/- MADE IN THE ASSESSMENT U/S 14A. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING OF THE APPEAL. I.T.A. NO. 3818/DEL/2007: (ASSESSEES APPEAL): I.T.A. NO. 3818/DEL/2007: (ASSESSEES APPEAL): I.T.A. NO. 3818/DEL/2007: (ASSESSEES APPEAL): I.T.A. NO. 3818/DEL/2007: (ASSESSEES APPEAL): 1. THAT THE CIT(A) ERRED BOTH ON FACTS AND IN LAW I N DISALLOWING DEPRECIATION @ 40% ON VEHICLES WHICH HAD BEEN LEASED OUT. 2. THAT THE CIT(A) ERRED IN TAKING THE VIEW THAT TH E PRINCIPLES OF RES JUDICATA DID NOT APPLY IN AS MUCH AS DURING THE YE AR UNDER CONSIDERATION, THERE WERE NO FRESH LEASING TRANSACTION S AND THE BROUGHT FORWARD WDV WAS ENTITLED TO DEPRECIATION @ 4 0% WHICH ITA NO3779 & 3818/DEL/207 3 HAD BEEN ALLOWED BY THE HON'BLE TRIBUNAL TILL ASSESSMEN T YEAR 2002-03. 3. THAT THE CIT(A) ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING AN ADDITION OF ` .21,75,000/- ON ACCOUNT OF DIVIDEND WHEN ILN FACT T HE SAME WAS EXEMPT WITHIN THE MEANING OF SECTION 10(34) R EAD WITH THE PROVISIONS OF SECTION10(33) OF THE ACT. 4. THAT THE CIT(A) ERRED IN UPHOLDING THE LEVY OF I NTEREST U/S 234B AND 234D WHEN IN FACT NO SUCH INTEREST WAS LEVIABLE I N THE ALTERNATIVE, THE CIT(A) SHOULD HAVE DIRECTED CONSEQUE NTIAL REDUCTION. 5. THAT THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN WITHDRAWING INTEREST U/S 244A AND IN ANY C ASE CONSEQUENTIAL RELIEF SHOULD HAVE BEEN DIRECTED. 6. THE APPELLANT RESERVES TO ITSELF, THE RIGHT TO ADD , ALTER, AMEND SUBSTITUTE WITHDRAW AND OR ANY GROUND(S) OF APPEAL AT OR BEFORE THE DATE OF HEARING. 2. THE BRIEF FACTS OF THE CASE ARE THAT THAT THE ASSESSEE IS A NON BANKING FINANCE COMPANY AND IS GOVERNED BY THE RESERV E BANK OF INDIA GUIDELINES ISSUED FROM TIME TO TIME. THESE GUIDEL INES ARE MANDATORY WHICH AN NBFC HAS TO FOLLOW WHILE COMPUTIN G THE NET PROFITS OF THE COMPANY. THE ASSESSEE IS ALSO ENGAGED IN T HE BUSINESS OF LETTING OUT ON HIRE MOTOR VEHICLES, MOTOR TAXIES A ND LORRIES AND OTHER COMMERCIAL VEHICLES. THESE ASSETS ARE PURCHASED BY THE A SSESSEE AND ARE LET OUT TO OTHERS ON LEASE-HOLD BASIS. THE RETURN OF INCOME FOR ITA NO3779 & 3818/DEL/207 4 ASSESSMENT YEAR 2003-04 WAS FILED ON 2.12.2003 DECLARING AN INCOME OF ` .2,69,59,688/-. 3. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. DUR ING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER MADE CERTAIN A DDITIONS TO THE INCOME OF ASSESSEE WHICH ARE AS FOLLOWS:- I) DISALLOWANCE OF PROVISION FOR DOUBTFUL DEBT AS PER RBI DIRECTIONS. ` .27,60,000/- II) EXCESS INCOME REVERSALS FOR PREVIOUS YEAR. ` . 8,45,000/- III) ON ACCOUNT OF DEDUCTION U/S 35D. ` .21,01,228/- IV) ON ACCOUNT OF EXCESS DEPRECIATION ON LEASED VEHICLES. ` .1,24,01,235/- V) DIVIDEND INCOME. ` . 21,75,000/- VI) EXPENSES ATTRIBUTABLE TO EXEMPTED INCOME. ` . 79,80,000/- 4. THE FIRST TWO ADDITIONS WERE DELETED BY LD CIT(A) WHICH THE REVENUE HAS CHALLENGED BEFORE THIS TRIBUNAL. THE THIR D ONE WAS REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER AND IS NOT A PART OF EITHER REVENUE OR ASSESSEES APPEAL. THE ADDITIONS MADE AT POINTS (IV) TO (VI) ARE PART OF ASSESSEES APPEAL WHICH ARE BEFORE U S FOR ADJUDICATION. 5. WE WILL BE FIRST DEALING WITH REVENUES APPEAL. DISALLOWANCE OF PROVISIONS FOR DOUBTFUL DEBTS: DISALLOWANCE OF PROVISIONS FOR DOUBTFUL DEBTS: DISALLOWANCE OF PROVISIONS FOR DOUBTFUL DEBTS: DISALLOWANCE OF PROVISIONS FOR DOUBTFUL DEBTS: 6. DURING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOT ED THAT ASSESSEE HAD DEBITED AN AMOUNT OF `.27,60,000/- BEING P ROVISIONS FOR DOUBTFUL DEBTS. HE FURTHER OBSERVED THAT U/S 37(1) OF THE INCOME TAX ITA NO3779 & 3818/DEL/207 5 ACT, 1961 ONLY SUCH EXPENDITURES ARE ALLOWED TO BE DE DUCTED FROM THE BUSINESS INCOME AS ARE INCURRED IN THE PREVIOUS YEAR AND SINCE PROVISIONS WERE CREATED TO MEET OUT THE LIABILITY ON ACCOUNT OF EXPENDITURE THAT ARE LIKELY TO BE INCURRED IN SUBSEQ UENT YEAR, THE SAME SHOULD NOT BE ALLOWED TO BE DEDUCTED AND THEREFORE H E MADE AN ADDITION OF ` .27,60,000/- TO THE INCOME OF ASSESSEE. 7. DURING APPELLATE PROCEEDINGS BEFORE LD CIT(A), TH E LD AR ARGUED THAT PROVISIONS OF ` .27,60,000/- FOR BAD AND DOUBTFUL DEBTS WAS CREATED IN ACCORDANCE WITH RESERVE BANK OF INDIA GUIDELINES. HE FURTHER ARGUED THAT SIMILAR ADDITIONS WERE MADE IN THE EARLIER YEARS ALSO FOR ASSESSMENT YEAR 1998-99, 1999-00 AND 2000-01 AND THE HO N'BLE ITAT HAD ALLOWED DEDUCTION FOR THESE PROVISIONS. THE LD CIT (A) AFTER HEARING SUBMISSIONS OF ASSESSEE DELETED THE ADDITION OF `.27,60,00 0/-. THE RELEVANT PORTION OF LD CIT(A) IS REPRODUCED BELOW:- I HAVE CONSIDERED THE SUBMISSIONS MADE BY LD AR AND PER USED THE ORDER PASSED BY ITAT G BENCH, NEW DELHI IN I.T. A. NO.611/DEL/2005 FOR ASSESSMENT YEAR 2000-01 IN THE APPE LLANTS OWN CASE. THE HON'BLE ITAT DELHI BENCH G RELIED O N THE DECISION OF CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF OVERSEAS SANMAR FINANCE LTD., V. JCT 86 ITD 602 (CHENNAI) AN D THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE C ASE OF TEDCO INVESTMENT AND FINANCIAL SERVICES PVT. LTD. V. DCIT 8 2 TTJ 259 (DEL.) AND HELD THAT THE APPELLANT IS ENTITLED TO DE DUCTION FOR THE PROVISION MADE FOR DOUBTFUL DEBT IN LINE PRESCRIBED BY RBI IN VARIOUS CIRCULARS THAT ARE APPLICABLE TO NBFC. AS THE HON'BLE ITAT DECIDED THE ISSUE IN FAVOUR OF APPELLANT THROUGH THE ABOVE MENTIONED ORDERS IN APPELLANTS OWN CASE, HENCE RESPECT FULLY FOLLOWING THE SAME, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ITA NO3779 & 3818/DEL/207 6 ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF ` .27,60,000/- BEING PROVISION FOR BAD AND DOUBTFUL DEBTS. 8. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 9. THE LD DR ARGUED THAT THE MATTER REGARDING DISALL OWANCE OF PROVISION FOR BAD AND DOUBTFUL DEBT THOUGH WAS DECIDE D BY HON'BLE TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER YEARS IN FAVOUR OF ASSESSEE BUT FOR ASSESSMENT YEARS 2000-01 & 2001-02, THE HON'BLE TRIBUNAL IN ASSESSEES OWN CASE RELYING UPON THE JUDGMENT OF SPECIAL BENCH CASE IN THE CASE OF NEW INDIA INDUSTRIES LTD. V. ACIT REPOR TED AT 112 TTJ (DEL.) HAD HELD THAT PROVISIONS FOR BAD AND DOUBTFUL DEBT MERELY ON THE BASIS OF RBI GUIDELINES AND NOT WRITING OF SUCH IN PROF IT & LOSS ACCOUNT IS NOT ALLOWABLE. IN THIS RESPECT, SHE TOOK US TO PAGE 1 3 OF PAPER BOOK WHERE RELEVANT PORTION OF THE TRIBUNAL ORDER WAS PLA CED. 10. THE LD AR, ON THE OTHER HAND, ARGUED THAT PROVI SIONS FOR BAD AND DOUBTFUL DEBT WAS STRICTLY IN ACCORDANCE WITH GUIDELI NES OF RBI AND THEREFORE SHOULD BE ALLOWED AS BUSINESS EXPENDITURE OF THE COMPANY. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PA RTIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THIS MATTER IS COVERED AGAINST THE ASSESSEE BY ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2000-01 & 2001-02 WHEREIN THE HON'BLE T RIBUNAL HAD FOLLOWED SPECIAL BENCH DECISION IN THE CASE OF NEW IN DIA INDUSTRIES LTD. (SUPRA) AND WHEREIN IT WAS HELD THAT RBI ACT DO NOT O VER-RIDE THE PROVISIONS OF THE INCOME TAX ACT, 1961 SO FAR AS COMPLI ANCE OF INCOME TAX PROVISIONS ARE CONCERNED. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE TRIBUNAL WE ALSO ARE OF THE OPINION THAT PROVISIO NS FOR BAD AND DOUBTFUL DEBT THOUGH STATUTORILY REQUIRED UNDER THE RBI GUIDELINES DO ITA NO3779 & 3818/DEL/207 7 NOT QUALIFY FOR DEDUCTION AS A BUSINESS EXPENDITURE. TH EREFORE, THE FIRST GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE REVENUE . EXCESS INCOME REVERSALS FOR PREVIOUS YEAR: EXCESS INCOME REVERSALS FOR PREVIOUS YEAR: EXCESS INCOME REVERSALS FOR PREVIOUS YEAR: EXCESS INCOME REVERSALS FOR PREVIOUS YEAR: 12. DURING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NO TED THAT ASSESSEE HAD DEBITED TO ITS P&L ACCOUNT A SUM OF ` .8,45,000/- BEING INCOME REVERSAL RELATING TO EARLIER YEARS. THE ASSESSING OFFICER FURTHER NOTED THAT DURING PREVIOUS YEAR ALSO, SIMILAR ADDITION WAS MADE ON SIMILAR GROUNDS AND THEREFORE IN THIS YEAR UNDER SAME C IRCUMSTANCES, HE ADDED BACK THE AMOUNT OF ` .8,45000/- TO THE INCOME OF ASSESSEE. 13. DURING APPELLATE PROCEEDINGS BEFORE LD CIT(A), T HE LD AR SUBMITTED THAT IN THE PREVIOUS YEAR ALSO, SIMILAR ADDIT ION WAS MADE AND WAS DELETED BY HON'BLE ITAT ORDER FOR ASSESSMENT YEA R 1998-99, 1999-00 & 2000-01. THE LD CIT(A) AFTER HEARING THE SUBMISSIONS OF LD AR DELETED THE ADDITION OF ` .8,45,000/-. THE RELEVANT PORTION OF LD CIT(A)S ORDER IS REPRODUCED BELOW:- I HAVE PERUSED THE APPELLANTS ORDER PASSED BY DELHI B ENCH D IN I.T.A. NO.1263/DEL./2002 FOR ASSESSMENT YEAR 1998-9 9, DELHI BENCH C, NEW DELHI IN I.T.A. NO.3695/DEL/.2002 FO R ASSESSMENT YEAR 1999-00 AND DELHI BENCH G NEW DELHI IN I.T.A . NO.611/DEL/2005 IN APPELLANTS OWN CASE AS PER WHICH T HE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT . RESPECTFULLY FOLLOWING THE SAME, I DIRECT THE ASSESSING O FFICER TO DELETE THE ADDITION OF ` .8,45,000/- ON ACCOUNT OF INCOME REVERSAL DURING THE PREVIOUS YEAR UNDER CONSIDERATION. 14. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. ITA NO3779 & 3818/DEL/207 8 15. THE LD DR EXPLAINED THAT SIMILAR DISPUTE HAD ARI SEN FOR THE ASSESSMENT YEAR 2000-01 AND 2001-02 AND HON'BLE TRIBUNA L HAD SENT BACK THE MATTER TO THE FILE OF ASSESSING OFFICER FOR FR ESH CONSIDERATION AND SHE FURTHER BROUGHT TO OUR NOTICE THAT HON'BLE I TAT HAD REFERRED THE MATTER BACK WITH THE DIRECTIONS TO ASSESSING OFFICER TO ALLOW THE EXPENDITURE AFTER ASCERTAINING THAT AMOUNT WRITTEN O FF IS SAME WHICH WAS RECOGNIZED AS INCOME IN THE EARLIER YEAR. 16. THE LD AR ARGUED THAT THE NET PROFIT OF NBFC CA N BE CALCULATED ONLY AFTER COMPLYING WITH GUIDELINES OF RBI AND ASSESSEE HAD DONE EXACTLY AS PER THE GUIDELINES AND THEREFORE, IT SHOULD BE ALLOWED AS A BUSINESS EXPENDITURE OF THE COMPANY. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PA RTIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE HON'BLE ITAT FOR ASSESSMENT YEAR 2000-01 & 2001-02 HAD REMITTED BACK THE MATTER TO THE OFFICE OF ASSESSING OFFICER WITH DIRECTIONS TO ASC ERTAIN WHETHER THE SAID REVERSAL OF INCOME WAS PART OF INCOME DECLARE D IN EARLIER YEARS AND IF THE ANSWER IS YES THEN ALLOW IT OTHERWISE NOT. RESPECTFULLY FOLLOWING THE EARLIER ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE WE ALSO REMIT BACK THIS POINT TO THE FILE OF ASSESSING OFFIC ER TO ASCERTAIN WHETHER ` .8,45,000/- WAS PART OF INCOME DECLARED IN EARLIER Y EAR AND IF THE ANSWER IS YES THE SAME MAY BE ALLOWED. DISALLOWANCE OF EXPENDITURE ATTRIBUTABNLE TO EXEMPT ED INCOME: DISALLOWANCE OF EXPENDITURE ATTRIBUTABNLE TO EXEMPT ED INCOME: DISALLOWANCE OF EXPENDITURE ATTRIBUTABNLE TO EXEMPT ED INCOME: DISALLOWANCE OF EXPENDITURE ATTRIBUTABNLE TO EXEMPT ED INCOME: 18. GROUND NO.3 RELATES TO DISALLOWANCE OF EXPENSES ATT RIBUTABLE TO EXEMPTED INCOME OF ` .79,80,000/-. DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE COMPANY HAD E ARNED ITA NO3779 & 3818/DEL/207 9 INTEREST ON BONDS EXEMPT U/S 10(23G) OF THE ACT AMOUN TING TO ` .1,47,07,534/-. THE ASSESSEE WAS CONFRONTED AND WAS ASKED TO EXPLAIN THE APPLICABILITY OF SECTION 14A OF THE ACT. IN RESP ONSE THE ASSESSEE REPLIED THAT PROVISIONS OF SECTION 14A ARE NOT ATTRACT ED AS THIS SECTION PRE-SUPPOSES FOR INCURRENCE OF CERTAIN EXPENDITURE FOR EARNING EXEMPT INCOME. HOWEVER, THE ASSESSING OFFICER DID NOT AGREE WI TH THE CONTENTIONS OF ASSESSEE AND MADE ADDITION OF ` .79,80,000/- U/S 14A OF THE ACT. THE RELEVANT PORTION OF ASSESSING OFFICERS OR DER IS REPRODUCED BELOW:- THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE AS THE FACT REMAIN THAT SECTION 14A CLEARLY PRESCRIBED THAT NO D EDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED B Y THE ASSESSEE IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME UNDER THIS ACT. THE INVOCATION OF SECTIO N 14A IS AUTOMATIC AND COMES INTO OPERATION WITHOUT ANY EXCEP TION AS SOON AS THE DIVIDEND INCOME IS CLAIMED AS EXEMPT. SIN CE THE ENTIRE TAX FREE INTEREST INCOME FROM BONDS HAVE BEEN CLAIMED EXEMPT AND ARE NOT PART OF TOTAL INCOME UNDER THIS A CT. HENCE, SECTION 14A IS CLEARLY ATTRACTED IN THIS CASE AND ANY E XPENDITURE RELATABLE TO EARNING OF EXEMPT INCOME SHALL HAVE TO BE DISALLOWED. NO EVIDENCE HAS BEEN FURNISHED BY THE ASSESSE E COMPANY TO ESTABLISH THAT NO EXPENSE HAS BEEN INCURRED IN EARNING OF INTEREST INCOME FROM BONDS. THIS IS SPECIALLY REQUIRED IN THE LIGHT OF FACT THAT CERTAIN EXPENSES LIKE SALAR Y, EMPLOYEES WELFARE EXPENSES, POSTAGE AND TELEGRAM EXPENSES, TRAVELI NG AND CONVEYANCE EXPENSES AND RENT ETC. ARE COMMON EXPENSES WITH REGARD TO DIVIDEND INCOME/INTEREST FREE INCOME AND NORMAL/REGULAR BUSINESS ACTIVITY OF THE ASSESSEE COMPANY - ------- THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES AND INTERE ST ITA NO3779 & 3818/DEL/207 10 EXPENSES ON EARNING OF TAX FREE INTEREST/INCOME CLAIM ED EXEMPT IS ALSO HELD/PERMITTED BY THE VERDICT OF HON'BLE SUPR EME COURT IN THE CASE OF CIT V. UNITED GENERAL TRUST LTD. 200 ITR 488 (SC)------. THE ASSESSING OFFICER, THEN CALCULATED AN AMOUNT OF ` .79.80 LAKHS BEING AMOUNT OF INTEREST PAID ATTRIBUTABLE TO EARNIN G OF EXEMPT INCOME AND MADE THE ADDITION ACCORDINGLY. 19. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE LD CIT( A). 20. BEFORE LD CIT(A), THE LD AR SUBMITTED THAT ASSESSING OFFICER HAS NOT PROVED ANY NEXUS BETWEEN THE EXPENDITURE INCURRE D VIS-A-VIS EARNING OF EXEMPTED INCOME AND RELIED UPON THE DECI SION OF ITAT FOR ASSESSMENT YEAR 1999-00 WHEREIN THE ADDITION MADE BY TH E ASSESSING OFFICER HAD BEEN DELETED BY HON'BLE ITAT. LD CIT(A ) AFTER GOING THROUGH THE JUDGMENT HAD OBSERVED THAT ITAT IN ITS JU DGMENT IN I.T.A. NO.3695/DEL/2002 IN APPELLANTS OWN CASE HAD DELETED THE ADDITION. THUS RESPECTFULLY FOLLOWING THE ABOVE ORDER OF TRIBUN AL, THE LD CIT(A) DELETED THE ADDITION. 21. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 22. THE LD DR ARGUED THAT IN VIEW OF EXEMPT INCOME EARNED BY THE ASSESSEE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS J USTIFIED. SHE ARGUED THAT LD CIT(A) WAS NOT JUSTIFIED IN DELETI NG THE ADDITION U/S 14A ON THE BASIS OF EARLIER YEAR TRIBUNAL ORDER 23. THE LD AR, ON THE OTHER HAND, ARGUED THAT LD CI T(A) HAD RIGHTLY DELETED THE ADDITION AS IT WAS DONE KEEPING IN VIEW T HE FACTS AND CIRCUMSTANCES OF THE CASE WHICH WERE SIMILAR TO EARLIER YEAR AND IN ITA NO3779 & 3818/DEL/207 11 EARLIER YEAR THE HON'BLE TRIBUNAL HAD CONFIRMED THE DELETION MADE BY LD CIT(A) IN RESPECT OF DISALLOWANCE U/S 14A OF THE AC T. 24. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PA RTIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE ARE OF THE CONSIDERED OPINION THAT THIS POINT SHOULD BE EXAMINED BY THE ASSESSING OFFICER AFRESH IN VIEW OF HON'BLE DELHI HIGH C OURT JUDGMENT IN THE CASE OF MAXOP INVESTMENT LTD. WHEREIN HON'BLE COURT HAS HELD THAT ASSESSING OFFICER HAD TO FIRST GIVE FINDING AS TO T HE FACT THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM IN RESP ECT OF SUCH EXPENDITURE. THE HON'BLE COURT HAD FURTHER OBSERVED THAT WHILE REJECTING THE CLAIM OF ASSESSEE WITH REGARD TO EXPENDIT URE OR NO EXPENDITURE AS THE CASE MAY BE IN RELATION TO EXEMPT INCOME, THE ASSESSING OFFICER WOULD HAVE TO INDICATE COGENT REASONS F OR THE SAME. RESPECTFULLY FOLLOWING THE HON'BLE DELHI HIGH COURT JUDGMENT, WE REMIT THIS POINT BACK TO THE OFFICE OF ASSESSING OFFICER WITH DIRECTIONS TO EXAMINE AND GIVE FINDING AND ARRIVE AT THE DISALLOWA NCE OF INTEREST OR OTHER EXPENSES ACCORDINGLY IN THE LIGHT OF SUCH FINDIN GS. 25. IN VIEW OF THE ABOVE, THE APPEAL FILED BY REVEN UE IS DECIDED ACCORDINGLY. 26. NOW WE TAKE UP THE APPEAL FILED BY ASSESSEE. 27. THE FIRST GROUND OF APPEAL RELATES TO DISALLOWANCE OF EXCESS DEPRECIATION BEING @ 40% ON VEHICLES WHICH HAD BEEN LEASED OUT. THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS NOTED THAT T HE ASSESSEE HAD CLAIMED DEPRECIATION ON MOTOR LORRIES/TAXIS AND MOTOR CARS ETC, AT HIGHER RATE OF 40% IN CASE OF MOTOR LORR IES/TAXIES AND 25% AND IN RESPECT OF MOTOR CARS INSTEAD OF NORMAL DEPRECI ATION @ 20%. ITA NO3779 & 3818/DEL/207 12 THE ASSESSING OFFICER NOTED THAT DURING PREVIOUS YEAR AL SO ADDITION WERE MADE ON SIMILAR GROUNDS FOR CLAIMING EXCESS DEPREC IATION. THEREFORE, FOLLOWING EARLIER YEAR, THE ASSESSING OFFICE R MADE AN ADDITION OF ` .1,24,01,235/- ON ACCOUNT OF EXCESS DEPRECIATION. DUR ING APPELLATE PROCEEDINGS, THE ASSESSEE WAS ASKED TO SUBMIT CER TAIN DETAILS FOR THE PURPOSE OF VERIFICATION AS TO WHETHER ASSESSEE WAS ELIGIBLE FOR HIGHER DEPRECIATION OF 40%. HOWEVER, DESPITE VARIOUS REMINDERS BY LD CIT(A), THE ASSESSEE DID NOT FILE THE NE CESSARY PARTICULARS/INFORMATION. IN VIEW OF THE CIRCUMSTANCES, THE LD CIT(A) FINALLY GAVE NOTICE FOR UPHOLDING THE DISALLOWANCE O F EXCESS DEPRECIATION IF THE INFORMATION WAS NOT FURNISHED WIT HIN CERTAIN TIME. IN RESPONSE TO THAT, THE ASSESSEE REPLIED THAT WHAT EVER WA S STATED BEFORE THE ASSESSING OFFICER IS IDENTICAL TO THE SUBMISSION MADE BEFORE YOUR GOODSELF AND WE WOULD LIKE TO REITERATE THAT AT NO STAGE OF THE PROCEEDINGS HAS IT BEEN CONTENDED THAT THE DETAILS PER TAINING TO THE VEHICLES LEASED OUT ARE BEING FILED. SINCE IT IS THE STAND ALL ALONE THAT NO FRESH LEASING TRANSACTIONS HAVE BEEN UNDERTAKEN IN THE ASSESSMENT YEAR UNDER APPEAL AND IN THAT SENSE OF THE MATTER, TH E ISSUE IS PURELY CONSEQUENTIAL SINCE HIGHER RATE OF DEPRECIATION I.E. 40% HAS BEEN ALLOWED BY THE TRIBUNAL RIGHT UP TO THE ASSESSMENT YEAR 2002-03. THE LD CIT(A) HELD THAT PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO INCOME TAX PROCEEDINGS AND BECAUSE APPELLANT HAD FAILED TO J USTIFY ITS CLAIM OF DEPRECIATION AT HIGHER RATE DESPITE SUFFICIENT NUMBER OF OPPORTUNITIES GRANTED TO IT, HE UPHELD THE ACTION OF ASSESSING OFFICE R IN RESTRICTING THE CLAIM OF DEPRECIATION TO 20%. 28. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 29. AT THE OUTSET, THE LD AR ARGUED BEFORE US THAT NO FRESH LEASING TRANSACTIONS WERE DONE DURING THE YEAR UNDER CONSIDERA TION. THE DEPRECIATION WAS CLAIMED AT THE OPENING BALANCE OF W DV BROUGHT ITA NO3779 & 3818/DEL/207 13 FORWARD FROM PREVIOUS YEAR AND DURING PREVIOUS YEAR, THE DEPRECIATION WAS BEING CLAIMED AT 40% AND THEREFORE ON THE BASIS O F CONTINUITY AND IN VIEW OF THE FACT THAT VEHICLES REMAINED CONTINUED TO BE LET OUT ON HIRE, THE CLAIM OF DEPRECIATION AT 40% WAS LAW FULL AND JUSTIFIED. IN THIS RESPECT HE TOOK US TO PAGE 81-83 OF PAPER BOOK WHEREI N SCHEDULE OF DEPRECIATION AND DEPRECIATION CHART AS PER INCOME TA X ACT FOR THE YEAR ENDED ON 31.3.2003 WERE PLACED. HE INVITED OUR ATTE NTION TO THE FACT THAT NO ADDITION ON ACCOUNT OF PURCHASE OF MOTOR CA R WAS MADE DURING THE YEAR AND THEREFORE IT CAN BE SAID THAT NO FRESH LEASING OF VEHICLES WERE DONE DURING THE YEAR UNDER CONSIDERATION. RELIA NCE WAS PUT IN THE CASE OF CIT V. MGF 285 ITR 142 WHEREIN SIMILAR ISSU E WAS DECIDED IN FAVOUR OF THE ASSESSEE. 30. ON THE OTHER HAND, THE LD DR CONTENDED THAT ONU S WAS ON THE ASSESSEE TO PROVE THAT MOTOR CARS/LORRIES WERE ACTUALLY L ET OUT ON HIRE AND THE ASSESSEE DID NOT FILE REQUIRED INFORMATION BEFO RE ASSESSING OFFICER AND DURING APPELLATE PROCEEDINGS DESPITE VARI OUS REQUESTS. IN THIS RESPECT SHE INVITED OUR ATTENTION TO PAGE 7-8 OF LD CIT(A)S ORDER AND READ OUT THE FOLLOWING:- IN RESPONSE TO A LETTER WRITTEN BY DCIT, CIRCLE-11 ( 1), NEW DELHI YOU HAVE FILED A LETTER DATED 11.1.2007 BEFORE THE ASSESSING OFFICER STATING THAT THE COMPANY HAS NOT ENTERED INTO ANY FRESH LEASING TRANSACTIONS. IT HAS NOT BEEN MENTIONED IN YOU R COMMUNICATION AS TO THE ASSESSMENT YEAR IN WHICH THE INFORMATION IS SOUGHT. YOU FURTHER CONTENDED THAT TH E ISSUE BEFORE LD CIT(A) PERTAINS TO RATE OF DEPRECIATION OF VEHICLES LEASED OUT OF WHICH ITAT AND CIT(A) IN EARLIER YEARS HELD THE ISSUE IN FAVOUR APPELLANT BEING COVERED ISSUE. THE INFO RMATION CALLED FOR IS STATED TO BE OF NO CONSEQUENCE. AGAIN TH ROUGH LETTER ITA NO3779 & 3818/DEL/207 14 DATED 13.2.2007 YOU MENTIONED THAT SINCE THERE IS NO FRESH LEASING TRANSACTIONS DURING THE YEAR 2003-04 HENCE TH E QUESTION OF DEPRECIATION IS INCONSEQUENTIAL. IN A REPLY DATED 26.3.2007 FILED BEFORE LD DCIT, CIRCLE-11 (1). NEW DELHI YOU HAVE FURTHER MENTIONED THAT THE RELEVANT REPLIES IN CONNECTION W ITH THE AFORESAID INFORMATION HAVE ALREADY BEEN FILED WITH T HE UNDERSIGNED FROM TIME TO TIME. I HAVE GONE THROUGH T HE REPLIES FILED BY YOU AND THE CONTENTION PUT FORTH BY YOU BE FORE ASSESSING OFFICER ARE FOUND TO BE NOT CORRECT. NO INFORMATION HAS BEEN FILED WITH THIS OFFICE WITH RESPECT TO LEASED VEHICLES. EVE N ON 19.3.2007, SHRI JP CHAWLA, ATTENDED THIS OFFICE AND IN HIS PRESENCE THE UNDERSIGNED TALKED TO TELEPHONICALLY AND INFORMED ABOUT YOUR WILLINGNESS AND OR FOR FILING OF NECESSARY PARTICULARS/INFORMATION BEFORE THE ASSESSING OFFICER BUT DESPITE THAT YOU HAVE NOT FILED ANY DETAIL AS ASKED FOR BY TH E ASSESSING OFFICER KNOWING FULLY THAT THE PRINCIPLE OF RES JUDI CATA IS NOT APPLICABLE TO INCOME TAX PROCEEDINGS. THE CLAIM RELA TES TO THE YEAR UNDER CONSIDERATION AND HENCE THE SAME CAN BE SUB JECT TO VERIFICATION FOR DETERMINING ITS CORRECTNESS. IN THE LIGHT OF ABOVE SHE ARGUED THAT WITHOUT NECESSA RY INFORMATION/VERIFICATIONS BEING AVAILABLE WITH ASSESSIN G OFFICER AND LD CIT(A), THE CLAIM OF DEPRECIATION AT HIGHER RATE OF 40% WAS NOT JUSTIFIED AND HENCE THE ASSESSING OFFICER HAD RIGHTLY RESTRICTED T HE ALLOWANCE OF DEDUCTION AND LD CIT(A) HAD RIGHTLY UPHELD THE ADDI TION. 31. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PA RTIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED FROM THE MATERIAL AVAILABLE AND CONTENTIONS OF PARTI ES THAT THERE WAS NO FRESH LEASING ACTIVITY DONE BY THE ASSESSEE AS IS APPAR ENT FROM ITA NO3779 & 3818/DEL/207 15 PAGE 81-83 OF PAPER BOOK WHEREIN NO FRESH PURCHASES O F MOTOR CARS/LORRIES ETC,. WAS MADE DURING THE YEAR AND HENCE IT CAN BE CONCLUDED THAT ASSESSEE WAS CLAIMING DEPRECIATION ON OL D VEHICLES ONLY WHICH WERE ALREADY LET OUT ON HIRE AND ON WHIC H THE ASSESSEE HAD ALREADY BEEN ALLOWED DEPRECIATION @ 40%. IN THE CASE LAW RELIED UPON BY THE LD AR OF CIT V. MGF (SUPRA) IT WAS CLEARLY HEL D BY HON'BLE DELHI HIGH COURT THAT VEHICLES OWNED BY A NON BANKING FINA NCE COMPANY LEASED TO THIRD PARTY ARE ELIGIBLE FOR HIGHER RATE O F DEPRECIATION @ 40%. RESPECTFULLY FOLLOWING THE HON'BLE DELHI HIGH COURT JUDGMENT, WE HOLD THE VIEW THAT ASSESSEE WAS RIGHTLY ELIGIBLE FOR DEPRECI ATION AT HIGHER RATE. IN VIEW OF THE ABOVE, THE FIRST GROUND OF APPEAL SUCC EEDS. 32. THE SECOND GROUND RELATES TO ADDITION ON ACCOUNT OF DIVIDEND INCOME. THE ASSESSING OFFICER HAD DISALLOWED AN AMOUNT OF ` .21,75,000/- WHICH WAS BEING CLAIMED BY THE ASSESSEE AS D IVIDEND U/S 10(33) OF THE ACT. THE ASSESSEE HAD CLAIMED THAT THIS IN COME IS ON ACCOUNT OF 14 % DIVIDEND ON PREFERENCE SHARES OF M/ S CHETAN FOUNDRY FOR THE PERIOD 29.8.1999 TO 28.8.2007 AND C LAIMED EXEMPTION U/S 10(33)OF THE ACT. HOWEVER, THE ASSESSING OFFICER DID NOT AGREE WITH THE CONTENTIONS OF THE ASSESSEE AND MADE ADDITION OF ` .21,75,000/- ON THE BASIS THAT DIVIDEND INCOME DURING THAT YEAR WAS NO T EXEMPT. 33. DURING APPELLATE PROCEEDINGS BEFORE LD CIT(A) TH E LD AR SUBMITTED THAT APPELLANT COMPANY HAD CLAIMED THE SAI D DIVIDEND TO BE EXEMPT U/S 10(33) OF THE ACT WHICH WAS IN OPERATION T ILL 31.3.2003 THERE BEING AN AMENDMENT W.E.F. 1.4.2003. THE LD A R HAD FURTHER SUBMITTED VIDE LETTER DATED 13.11.2006 THAT SECTION 1 0(33) WAS OMITTED BY FINANCE ACT, 2002 W.E.F. 1.4.2003 I.E. A SSESSMENT YEAR ITA NO3779 & 3818/DEL/207 16 2003-04 AND THE SAME WAS INTRODUCED IN THE GUISE OF SEC TION 10(34) OF THE ACT W.E.F. 1.4.2004. THE LD AR ALSO SUBMITTED TH AT IN THE MEANTIME SECTION 80M WAS INTRODUCED W..E.F. 1.4.2003 FOR THE INTERVENING PERIOD NAMELY ASSESSMENT YEAR 2003-04, HOWE VER, THE LD CIT(A) DID NOT AGREE WITH THE CONTENTIONS OF ASSESSEE AN D UP HELD THE ADDITION MADE BY THE ASSESSING OFFICER. THE RELEVANT PO RTION OF LD CIT(A)S ORDER IS REPRODUCED BELOW:- I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT ON THE ISSUE UNDER CONSIDERATION. THE PROVISIONS OF SECTION 10(33) ARE NOT APPLICABLE TO ASSESSMENT YEAR 2003-04 AS NEW PRO VISIONS OF SECTION 10(34) CAME INTO BEING THROUGH FINANCE AC T, 2003 W.E.F. 1.4.2003 I.E. FOR ASSESSMENT YEAR 2003-04. THE N EW PROVISIONS MENTIONS ABOUT ANY INCOME ARISING FROM THE TRANSFER OF CAPITAL ASSET BEING A UNITE OF UNIT SCHEME, 1964 REFERRED TO IN SCHEDULE-I TO UTI AND HENCE THE NEW PROVISIONS ARE NO T APPLICABLE. THE OLD PROVISIONS OF SECTION 10(33) WERE OMITTED BY FINANCE ACT, 2002 W.E.F. 1.3.2003 I.E. FOR ASSESSMENT Y EAR 2003- 04 AND HENCE THE OLD PROVISIONS ARE ALSO NOT APPLICABL E TO THE INSTANT CASE. SECTION 10(34) IS ALSO NOT APPLICABLE TO THE INSTANT CASE FOR REASONS THAT IT IS INSERTED BY FINANCE ACT, 200 3 W.E.F. 1.4.2003 ASSESSMENT YEAR 2004-05 WHEREAS THE IMPUGNED ASSESSMENT ORDER RELATES TO ASSESSMENT YEAR 2003-04. I HAVE ALSO GONE THROUGH THE PROVISIONS OF SECTION 80M OF THE ACT WHICH DEALS WITH THE DEDUCTION IN RESPECT OF CERTAIN INTERC ORPORATE DIVIDENDS. THIS SECTION SAYS WHERE THE GROSS TOTAL INCOME OF A DOMESTIC COMPANY IN ANY PREVIOUS YEAR INCLUDES ANY INC OME BY WAY OF DIVIDEND FROM ANOTHER DOMESTIC COMPANY THERE SHALL IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SE CTION BE ALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH DOMESTI C ITA NO3779 & 3818/DEL/207 17 COMPANY, A DEDUCTION OF AN AMOUNT EQUAL TO SO MUCH O F THE AMOUNT OF INCOME BY WAY OF DIVIDEND FROM ANOTHER DO MESTIC COMPANY AS DOES NOT EXCEED THE AMOUNT OF DIVIDEND DIST RIBUTED BY THE FIRST MENTIONED DOMESTIC COMPANY ON OR BEFORE THE DUE DATE--------. THE ABOVE SECTION CLEARLY PRESCRIBES THE CONDITION WHICH ARE TO BE MET WITH BEFORE SEEKING ANY DEDUCTIO N U/S 80M OF THE ACT WHEREAS IN THE INSTANT CASE, THE APPELLANT IS NOT ABLE TO EITHER TO MEET OUT THE CONDITION AS PRESCRIBED IN SECTION 80M OF THE ACT OR TO FILE ANY DOCUMENTARY EVIDENCE TO J USTIFY ITS CLAIM OF DEDUCTION THAT THE DIVIDEND OF ` .21,75,000/- IS NOT TAXABLE. IN VIEW OF THIS AS WELL AS OBSERVATIONS BEFORE HAND THAT TH E PROVISIONS OF SECTION 10(33) & 10(34) ARE NOT APPLICA BLE TO THE INSTANT CASE, I HOLD THAT THE ASSESSING OFFICER HAS RIGHT LY SUBJECTED AMOUNT OF ` .21,75,000/- TO TAX. 34. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THIS TRI BUNAL. 35. THE LD AR ARGUED THAT COMPLETE DETAILS WERE FILE D WITH ASSESSING OFFICER REGARDING RECEIPT OF DIVIDEND ON PREFERENCE SHARES WHICH WERE EXEMPT U/S 10(34) OR SECTION 80M OF THE ACT AS INTERCO RPORATE DIVIDEND. 36. THE LD DR, ON THE OTHER HAND, ARGUED THAT THE A SSESSEE WAS NOT ELIGIBLE FOR EXEMPTION U/S 10(33) OR 10(34) OR SECTIO N 80M OF THE ACT AS WAS ELABORATED BY LD CIT(A) IN HIS ORDER. 37. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PA RTIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT IN THE SUBMISSIONS FILED BEFORE LD CIT(A) AND PLAC ED AT PAGE 79 OF THE PAPER BOOK, THE ASSESSEE TALKED ABOUT ONLY SECTION 1 0(33) OF THE ACT WHEREAS IN ITS FURTHER SUBMISSION OF DATED 13.11.200 6 PLACED AT ITA NO3779 & 3818/DEL/207 18 PAGE 86 OF THE PAPER BOOK, THE ASSESSEE TALKED ABOUT SEC TION 80-M ALSO WHICH WAS INTRODUCED W.E.F. 1.4.2003. THE DEDUCT ION U/S 10(33) WAS DENIED AS ACCORDING TO ASSESSING OFFICER THE DIVIDEND INCOME PERTAINED TO THE PERIOD 28.9.1999 TO 28.8.2001 AND WAS NOT COVERED BY SECTION 115-O. HOWEVER, ASSESSING OFFICER DID NOT T ALK ABOUT SECTION 10(34) OR SECTION 80M. THE LD CIT(A) UPHELD T HE DENIAL OF DEDUCTION U/S 10(33), 10(34) & SECTION 80M ON THE BASI S THAT SECTION 10(33) DEALT WITH ONLY GAINS ARISING ON ACCOUNT OF TR ANSFER OF UNITS OF UNIT SCHEME, 1964 & SECTION 10(34) CAME INTO BEING F ROM ASSESSMENT YEAR 2004-05. AS REGARDS DEDUCTION U/S 80M THE LD CIT( A) HELD THAT DEDUCTION WAS AVAILABLE SUBJECT TO FULFILLMENT OF CER TAIN CONDITIONS AND ASSESSEE HAD NOT FILED ANY EVIDENCE OF FULFILLING THESE CONDITIONS. FROM THE PLAIN READING OF SECTION 80M, IT BECOMES CLE AR THAT THERE WAS A PROVISION FOR DEDUCTION FOR INTERCORPORATE DIVIDEN DS FOR ASSESSMENT YEAR 2003-04 SUBJECT TO THE FULFILLMENT OF CERTAIN C ONDITIONS. HOWEVER, SINCE THE CLAIM OF ASSESSEE WAS NOT EXAMINED BY THE ASSESSING OFFICER U/S 80M, WE REMIT BACK THIS POINT TO THE FILE OF ASSESSIN G OFFICER FOR ASCERTAINING AS TO WHETHER THE ASSESSEE WAS ELIGIBLE AS PER LAW FOR DEDUCTION U/S 80M OR NOT. IN VIEW OF THE ABOVE, THE SECOND GROUND OF APPEAL SUCCEEDS FOR STATISTICAL PURPOSES. CHARGING OF INTEREST: CHARGING OF INTEREST: CHARGING OF INTEREST: CHARGING OF INTEREST: 38. CHARGING OF INTEREST U/S 234B & 234D AND WITHDRAW AL OF INTEREST U/S 244A. 39. THE ASSESSEE HAS TAKEN THESE AS GROUND NO.4 & 5 OF THE APPEAL. ITA NO3779 & 3818/DEL/207 19 40. THE LD AR ARGUED BEFORE US THAT INTEREST U/S 234D IS NOT APPLICABLE AS THE APPLICABILITY OF THIS SECTION IS FROM ASSESSMENT YEAR 2004-05 IN VIEW OF SPECIAL BENCH JUDGMENT IN THE CASE OF ITO V. EKTA PROMOTERS PVT. LTD. 305 ITR 1. HE FURTHER ARGUE D THAT INTEREST U/S 234B CAN BE CHARGED ONLY AFTER GIVING EFFECT AND IS OF CONSEQUENTIAL NATURE. SIMILARLY, HE ARGUED THAT WITHDRAWAL OF IN TEREST U/S 244A IS OF CONSEQUENTIAL IN NATURE. 41. THE LD DR RELIED UPON THE ORDER OF ASSESSING OFFICE R. 42. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PA RTIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE ARE OF THE CONSIDERED OPINION THAT CHARGING OF INTEREST U/S 234D IS NOT APPLICABLE FOR ASSESSMENT YEAR 2003-04 IN VIEW OF CASE LAW RELIED U PON BY THE ASSESSEE. AS REGARDS INTEREST U/S 234B AND 244A, WE ARE OF THE OPINION THAT THESE ARE OF CONSEQUENTIAL NATURE AND THE DETERM INATION OF INTEREST UNDER THESE SECTIONS WILL DEPEND UPON THE FINA L OUT COME OF THE CASE. IN VIEW OF THE ABOVE, GROUND NO.4 & 5 ARE ALSO ALLOWED. 42. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED AND THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 43. ORDER PRONOUNCED IN THE OPEN COURT ON THE 6TH DAY OF JULY, 2012. SD/- SD/- (R.P. TOLANI) (T.S. KAP OOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 06.7.2012. 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. ITA NO3779 & 3818/DEL/207 20 BY ORDER (ITAT, NEW DELHI). DATE OF HEARING DATE OF DICTATION 15.6.2012 DATE OF TYPING 22.6.2012 DATE OF ORDER SIGNED BY BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET & SENT TO THE BENCH CONCERNED.