THE INDIAN HUME PIPE COMPANY LTD, MUMBAI V. DCIT CC 22, MUMBAI

ITA 3963/MUM/2013

• Counselvise Citation: 396319914 RSA 2013
• Duration Of Justice: 1 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 22-09-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 17-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: BHAVIN SHAH; VAIBHAVI PATEL
• Keywords: Depreciation; Earning of tax free income; Bad and doubtful debts; Commercial expediency; Onus to prove; Revenue expenditure; Capital expenditure
• Section: 14A; 37(1)

Judgement Text

, , INCOME TAX APPELLATE TRIBUNAL,MUMBAI - E BENCH. . . , , BEFORE S/SH.I.P.BANSAL, JUDICIAL MEMBE R & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.3963/MUM/2013, ! ! ! ! / ASSESSMENT YEAR-2010-11 THE INDIAN HUME PIPE COMPANY LIMITED, CONSTRUCTION HOUSE, 2ND FLOOR, WALCHAND HIRACHAND ROAD, BALLARD ESTATE, MUMBAI-400 001. ' ' ' ' . . . /PAN:AAACT4063D VS. D CIT CC - 22 CENTRAL RANGE -5,404 AAYKAR BHAVAN M K ROAD,MUMBAI-20 /. ITA NO.4431/MUM/2013, ! ! ! ! / ASSESSMENT YEAR-2010-11 ACIT CC-22 CENTRAL RANGE -5, 404 AAYKAR BHAVAN M K ROAD,MUMBAI-20 VS. THE INDIAN HUME PIPE COMPANY LIMITED, CONSTRUCTION HOUSE,2ND FLOOR, WALCHAND HIRACHAND ROAD, BALLARD ESTATE, MUMBAI-1. ( '# / APPELLANT) ( $%'# / RESPONDENT) &' &' &' &' ( ( ( ( / ASSESSEE BY : SHRI BHAVIN SHAH & MS. VAIBHAVI PATEL ) ( / REVENUE BY : SHRI NEIL PHILIP ) )) ) '* '* '* '* / DATE OF HEARING : 22-09-2014 +,! ) '* / DATE OF PRONOUNCEMENT : 22-09-2014 , 1961 ) )) ) 254(1) '-' '-' '-' '-' . . . . ORDER U/S..254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM : CHALLENGING THE ORDER DATED 19.03.2013 OF THE CIT(A )-39,MUMBAI,ASSESSEE-COMPANY AND THE ASSESSING OFFICER (AO) HAVE FILED CROSS APPEALS FOR THE YEAR UNDER CONSIDERATION.ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1)ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF CLAIM OF DEDUCTION U/S 80IA OF THE INCOME TAX ACT, 1961,RELYING UPON THE DECISIONS OF THE HONBLE ITAT MUMBAI, FOR ASST. YEA RS 2005-06 TO 2007-08, FOR THE REASONS MENTIONED IN THE ORDER. 2)ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF CLAIM OF DEDUCTION U/S.80IA OF THE I.T. ACT, 1961, TREATING THE APPELLANT AS WORKS CONTRACTOR AND NOT AS DEVELOPER FOR THE REASONS MEN TIONED IN THE ORDER. 3)ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) ERRED IN TREATING PAYMENT OF RS. 32,500/- AS CAPITAL EXPENDITURE WITH OUT APPRECIATING THE FACT THAT IT IS A PAYMENT OF PROFESSION FEES FOR VERIFICATION OF PROPERTY. 4)ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS.1,03,000/-,PAID AS SECURITY DEPOSIT WITHOUT APPRECIATING THE FACT THAT IT WAS A BUSINESS AND COMMERCIAL EXPEDIENCY. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, OMI T, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL AND/OR THE RELIEF CLAIMED, AT ANY TIME BEFOR E OR AT THE TIME OF HEARING OF THE APPEAL. GROUNDS OF APPEAL,FILED BY THE AO READ AS UNDER: 2 ITA NOS. 3963 & 4431/MUM/2013 THE INDIAN HUME PIPE COMPANY LIMITED ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE SUM OF RS. 2,87,449/- ON A/C OF SUBDIVISION OF EQUITY SHARES AS REVENUE EXPENDITURE, WITHOUT APPRECIATING THE FACT THAT SPLITTING OF SHARES DO N OT IN ANY WAY IMPROVE THE CONDUCT OF THE BUSINESS OR ITS PROFITABILITY OR INCOME. 2.ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE A.O. TO SUSTAIN THE ADDITION TO THE TUNE OF RS. 4,45,682/- ONLY AS AGAINST RS. 49,52,306/- AS MADE BY A.O. UNDER SECTION 14A OF THE I.T.ACT. R.W. R. 8D (2)(II) OF I.T.RULES., WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT MAINTAINED SEPAR ATE ACCOUNTS FOR EXEMPT INCOME YIELDING INVESTMENT AND FOR BUSINESS ACTIVITIES. THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND AND / O R TO ALTER ANY OF THE GROUNDS OF APPEAL, IF NEED BE. THE APPELLANT, THEREFORE, PRAYS THAT ON THE GROUNDS STATED ABOVE, THE ORDER OF THE CIT(A)-39, MUMBAI ASIDE AND THAT OF THE ASSESSING OFFICER REST ORED. ASSESSEE,A PUBLIC LIMITED COMPANY,ENGAGED IN THE BU SINESS OF DEVELOPMENT OF DESIGNING, MANUFACTURING AND LAYING OF PIPE LINES OF RCC PIPES , HUME STEEL PIPES, PRESTRESSED CONCRETE PIPES,BAR WRAPPED STEEL CYLINDER PIPES,FILED ITS RE TURN OF INCOME ON 29.09.2010,DECLARING TOTAL INCOME OF RS.52,59,28,720/-.LATER ON,IT FILED A REV ISED RETURN ON 27.03.2011.THE AO FINALISED THE ASSESSMENT U/S.143(3) OF THE ACT,ON,08.01.2013,DETE RMINING THE TOTAL INCOME AT RS.53,15, 55,110/-. 2. FIRST TWO GROUNDS OF APPEAL PERTAIN TO DISALLOWANCE OF CLAIM OF DEDUCTION U/S.80IA OF THE ACT AND TREATING THE ASSESSEE AS WORKS CONTRACTOR AND N OT A DEVELOPER.DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE ASKED THE AO TO RESERVE TH E CLAIM OF DEDUCTION UNDER 80IA OF THE ACT.IT HAD NOT CLAIMED THE DEDUCTION IN VIEW OF AMENDMENT MADE BY FINANCE ACT, 2009, BY INSERTING THE EXPLANATION BELOW SEC. 80IA(13).IT WAS STATED THAT THE MATTER WAS IN COURT IN ASSESSEES OWN CASE,THAT IT RESERVED THE RIGHT TO CLAIM THE DEDUCT ION IN CASE THE EXPLANATION WAS REMOVED OR ANY FAVOURABLE JUDGEMENT WAS RENDERED IN FAVOUR OF ASSE SSEE OR OTHERWISE.THE AO DECLINED TO ENTERTAIN THE CLAIM FOR THE REASON THAT NO CLAIM EX ISTED IN THE RETURN OF INCOME FILED,THAT AS PER THE PROCEDURAL REQUIREMENTS AUDIT REPORT HAD NOT BEEN F ILED,THAT NO CLAIM MADE OTHERWISE THAN THROUGH A RETURN OF INCOME CAN HE ENTERTAINED IN VI EW OF THE DECISION OF THE SUPREME COURT IN GOETZ INDIA LTD. 2.1. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FIRST APPEAL AUTHORITY (FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE AND THE ASSESSMENT ORDER HE HELD THAT THE ELIGIBILITY OR OTHER WISE OF THE ASSESSEE FOR GRANT OF DEDUCTION U/S.80IA WAS A MATTER THAT HAD ARISEN IN THE EARLIER YEARS TOO,THAT CLAIM MADE BY THE ASSESSEE WAS CONSISTENTLY DISALLOWED BY THE DEPARTMENT,THAT FOR ASSESSMENT YEARS 2005-06 TO 200 7-08 THE MATTER HAD COME UP BEFORE THE TRIBUNAL WHEREIN IT HAD CONSIDERED THE ISSUE,THAT T HE TRIBUNAL HAD HELD THAT IN THE AFTERMATH OF THE AMENDMENT BY WAY OF EXPLANATION BELOW 80IA OF ACT P ROVISIONS OF SEC. 80IA WOULD NOT APPLY TO A PERSON WHO EXECUTED A WORK-CONTRACT,THAT IN THE M EMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL 2007IT HAD BEEN CLARIFIED THAT THE PRO VISIONS OF 80IA WOULD NOT APPLY TO A PERSON WHO EXECUTED A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE REFERRED TO IN THE SAID SECTION,THAT IN A CASE WHERE THE PERSON MADE THE INVESTMENT AND HIMSELF CARRIED OUT THE DEVELOPMENT WORK,HE WOULD BE ELIGIBLE FOR THE TAX B ENEFIT U/S.80IA,THAT AS PER THE CLARIFICATION,IF A PERSON ENTERED INTO A CONTRACT WITH ANOTHER PERSO N I.E.THE UNDERTAKING OR ENTERPRISES REFERRED TO IN SEC.80IA FOR EXECUTING WORKS CONTRACT,IT WOULD N OT BE ELIGIBLE FOR THE TAX BENEFIT,THAT THE AMENDMENT HAD BEEN CONSIDERED BY THE TRIBUNAL,THAT IT HAD BEEN HELD BY THE TRIBUNAL THAT THE LAW AS IT STOOD THEN BARRED THE ASSESSEE FROM BEING ENTITLED TO THE CLAIM BENEFIT.FOLLOWING THE ORDER OF THE ITAT IN THE APPELLANTS OWN CASE FOR A SSESSMENT YEARS 2005-06 TO 2007-08,HE HELD THAT THE ASSESSEE WAS NOT ENTITLED TO THE CLAIM U/S . 80IA OF THE ACT. 2.2. BEFORE US,AUTHORISED REPRESENTATIVE(AR)STATED THAT WHILE ADJUDICATING THE ISSUE FOR THE EARLIER YEARS I.E.2008-09 AND 2009-10 THE TRIBUNAL HAD HELD THAT CLAIM MADE BY THE ASSESSEE 3 ITA NOS. 3963 & 4431/MUM/2013 THE INDIAN HUME PIPE COMPANY LIMITED SHOULD NOT BE ALLOWED FOR OLD PROJECTS,THAT FOR THE PROJECTS COMMENCED ON AND FROM AY.2007-08 THE TRIBUNAL HAD DIRECTED THE FAA TO PASS FRESH ORD ERS AFTER NECESSARY EXAMINATION.DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE FAA. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE TRIBUNAL IN ITS ORDER(ITA413&896/MUM/2012-AY.2008-0 9,DATED.19/06.2013)HAS DELIBERATED AND DECIDED THE ISSUE OF DEDUCTION U/S.80IA OF THE ACT AS UNDER: 5.IN THE COURSE OF THE ARGUMENTS, THE LEARNED COU NSEL REFERRED TO THE ORDERS FOR AY 2007-08 BY THE ITAT WHEREIN THE ISSUE IS RESTORED TO THE CIT(A ) TO EXAMINE WHETHER THE PROJECTS UNDERTAKEN DURING THE YEAR CAN BE CONSIDERED FOR ALLOWANCE OF SECTION 80IA. ACCORDINGLY THE LEARNED COUNSEL REQUESTED FOR RESTORING THE ISSUE TO THE FILE OF TH E CIT (A). 6. ITAT IN AY 2007-08 VIDE ITA NO. 8234/MUM/2010 AN D 8216/MUM/2010 DATED 28.09.2012 RESTORED THE ISSUE TO THE FILE OF AO BY OBSERVING A S UNDER: '2.3 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ALLOWABILITY OF DEDUCTION UNDE R SECTION 80IA(4) WHICH ALLOWS DEDUCTION IN RESPECT OF ENTERPRISES CARRYING ON -TH E BUSINESS OF DEVELOPING, OPERATING AND MAINTAINING OR DEVELOPING, OPERATING AND MAINTAININ G ANY INFRASTRUCTURE FACILITY. SUBSEQUENTLY BY THE FINANCE ACT, 2009, THERE WAS AM ENDMENT TO SECTION 80IA(4) BY WAY OF INSERTION OF EXPLANATION AS PER WHICH DEDUCTION UNDER SECTION 80IA(4) WAS NOT ALLOWABLE IN CASE OF WORKS CONTRACT EXECUTED BY AN UNDERTAKING OR ENTERPRISE. FOLLOWING THE SAID EXPLANATION, THE TRIBUNAL IN ASSESSEE/SOWN CASE FOR THE ASSESSMENT YEARS 2004-05 TO 2006-07 HAS DISALLOWED THE CLAIM THOUGH CLAIM HA D BEEN ALLOWED IN ASSESSMENT YEAR 2003-04. THE LD. AR HAS ARGUED THAT THE DECISION OF THE TRIBUNAL WOULD APPLY ONLY TO THE INCOME FROM THE PROJECTS STARTED IN THOSE YEARS. IT HAD BEEN POINTED OUT THAT IN THIS YEAR THE ASSESSEE HAD EXECUTED SOME NEW PROJECTS WHICH WERE DIFFERENT AND THEREFORE IT WAS REQUIRED TO BE SEEN WHETHER THE DECISION OF THE TRI BUNAL WOULD APPLY TO SUCH PROJECTS. HE ALSO REFERRED TO THE DECISION OF THE HYDERABAD BENC H OF THE TRIBUNAL IN THE CASE OF M/ S. KOYA & COMPANY CONSTRUCTION PVT. LTD. (SUPRA) IN WH ICH SIMILAR CLAIMS HAD BEEN ALLOWED AND HAS THEREFORE, DESIRED THAT THE CLAIM OF THE AS SESSEE SHOULD BE LOOKED INTO IN THE LIGHT OF THE SAID DECISION. 2.4 WE HAVE CAREFULLY CONSIDERED THE VARIOUS ASPECT S OF THE MATTER. IN SO FAR AS THE INCOME FROM THE PROJECTS UNDERTAKEN EARLIER IS CONCERNED, THE TRIBUNAL HAS ALREADY DISALLOWED THE CLAIM OF THE ASSESSEE IN ASSESSMENT YEARS 2004-05 T O 2006-07 AND, THEREFORE, IN RELATION TO INCOME FROM THESE PROJECTS, NO DEDUCTION CAN BE ALL OWED IN VIEW OF THE DECISION OF THE TRIBUNAL IN ASSESSEE'S OWN CASE. AS REGARDS THE CLA IM OF THE ASSESSEE THAT PROJECTS UNDERTAKEN THIS YEAR WERE DIFFERENT WE FIND THAT TH ESE ASPECTS HAD NOT BEEN EXAMINED BY CIT(A).CIT(A) HAD DISALLOWED THE CLAIM FOLLOWING TH E DECISION OF THE TRIBUNAL IN ASSESSEE'S OWN CASE IN ASSESSMENT YEAR 2006-07. IN OUR VIEW THE CLAIM OF THE LD. AR THAT THE PROJECTS EXECUTED IN THIS YEAR WERE DIFFERENT N EEDS TO BE EXAMINED AT THE LEVEL OF CIT(A). HOWEVER, WE MAY MAKE IT CLEAR THAT IN CASE THESE PROJECTS WERE FOUND TO BE SIMILAR TO THE PROJECTS UNDERTAKEN IN EARLIER YEAR IN RESPECT OF WHICH CLAIM HAD BEEN DISALLOWED BY THE TRIBUNAL, THE CLAIM HAS TO BE DIS ALLOWED, FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEE'S OWN CASE WHICH HAS TO BE FOL LOWED AND NOT THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN CASE OF M/ S. KO YA & COMPANY CONSTRUCTION PVT. LTD. (SUPRA). THEREFORE WHILE CONFIRMING THE DISALL OWANCE IN RESPECT OF PROJECTS STARTED IN EARLIER YEARS, WE RESTORE THE ISSUE OF ALLOWABILITY OF CLAIM IN RESPECT OF PROJECTS UNDERTAKEN THIS YEAR TO THE FILE OF CIT(A) FOR FRESH ORDER AFT ER NECESSARY EXAMINATION IN THE LIGHT OF OBSERVATIONS MADE ABOVE AND AFTER ALLOWING OPPORTUN ITY OF HEARING TO THE ASSESSEE. 7.CONSISTENT WITH THE VIEW TAKEN BY THE COORDINATE BENCH IN ASSESSEE'S OWN CASE IN EARLIER YEAR, WE HOLD THAT ASSESSEE IS NOT ENTITLED FOR DEDUCTION UNDER SECTION 80IA IN RESPECT OF THE PROJECTS STARTED IN EARLIER YEARS, WHEREAS THE ISSUE OF ALLO WABILITY IN RESPECT OF THE PROJECTS UNDERTAKEN DURING THE YEAR MAY HAVE TO BE RE- EXAMINED FOR WHI CH THE MATTER IS RESTORED TO THAT EXTENT TO THE FILE OF THE CIT (A) FOR FRESH ORDER, AFTER NECESSAR Y EXAMINATION IN THE LIGHT OF THE OBSERVATIONS MADE. ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY IN T HE COURSE OF THE PROCEEDINGS BY THE CIT(A).ACCORDINGLY THE GROUND IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. RESPECTFULLY FOLLOWING THE ABOVE,WE ARE RESTORING B ACK THE MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION.HE IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. GROUND 4 ITA NOS. 3963 & 4431/MUM/2013 THE INDIAN HUME PIPE COMPANY LIMITED NO.1&2 ARE ALLOWED FOR STATISTICAL PURPOSES,IN PART . 3. NEXT GROUND OF APPEAL(GOA-3)PERTAINS TO DISALLOWANC E OF PROFESSIONAL FEES AS CAPITAL EXPENDITURE.DURING THE ASSESSMENT PROCEEDINGS AO FO UND THAT THAT THE ASSESSEE HAD PAID RS. 32,500/- TOWARDS FEES FOR VERIFICATION OF PROPERTIE S,THAT THE PAYMENT WAS CONNECTED WITH THE PROPERTIES THAT WERE CAPITAL IN NATURE.HE HELD THAT THE ASSESSEE HAD NOT FURNISHED ANY EVIDENCE TO SHOW THE SAME WAS A REVENUE EXPENDITURE.HE DISALLOW ED THE AMOUNT IN QUESTION AND ADDED IT BACK TO THE INCOME OF THE ASSESSEE. 3.1. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FAA.BEFORE HIM THE ASSESSEE SUBMITTED THAT PAYMENT WAS FOR THE VERIFIC ATION OF THE PROPERTY WHICH WAS ALREADY IN EXISTENCE,THAT IT HAD TO TAKE BANK LOANS AND BANK F ACILITIES AND FOR THAT PURPOSE BANK NEEDED A CERTIFICATE THAT THE ASSESSEE WAS IN EXISTENCE,THAT IT HAD OBTAINED THE CERTIFICATE FOR SUBMITTING IT TO THE BANK AND HAD PAID FEES TOWARDS THE SAME,THAT TH E EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF AND DURING THE COURS E OF BUSINESS AND ALLOWABLE AS DEDUCTION U/S. 37(1) OF THE ACT.AFTER CONSIDERING THE ASSESSMENT O RDER AND THE SUBMISSIONS OF THE ASSESSEE,HE HELD THAT THE ASSESSEE HAD MADE PAYMENT OF RS. 32,5 00/- TO M/S. MANOHAR ASSOCIATES FOR VERIFICATION OF PROPERTY ALREADY IN EXISTENCE,THAT THE PAYMENT WAS MADE IN CONNECTION WITH THE PROPERTY,THAT EXPENDITURE WAS CAPITAL IN NATURE. 3.2. BEFORE US,AR CONTENDED THAT PROPERTY WAS SITUATED O UTSIDE BOMBAY,THAT FOR RAISING LOAN IT HAD TO PRODUCE A CERTIFICATE AS PER THE REQUIREMENTS OF THE BANK,THAT LOAN WAS TAKEN FOR BUSINESS PURPOSES,THAT EXPENDITURE WAS INCURRED FOR CARRYING OUT THE BUSINESS OF THE ASSESSEE. HE RELIED UPON THE DECISION OF INDIA CEMENTS LIMITED(60ITR52) .DR SUPPORTED THE ORDER OF THE AO. 3.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT IN THE MATTER OF (SUPRA)SIMILAR ISSUE HAD ARISEN WHEREIN E XPENDITURE INCURRED UNDER VARIOUS HEADS FOR OBTAINING LOAN WAS HELD TO BE CAPITAL EXPENDITURE.D ECIDING THE MATTER IN FAVOUR OF THE ASSESSEE HONBLE APEX COURT HELD THAT THE AMOUNT SPENT WAS N OT IN THE NATURE OF CAPITAL EXPENDITURE AND WAS LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE ASSESSEE'S BUSINESS AND WAS THEREFORE ALLOWABLE AS A DEDUCTION UNDER SECTIO N 10(2)(XV) OF THE INDIAN INCOME-TAX ACT, 1922,THAT THE ACT OF BORROWING MONEY WAS INCIDENTAL TO THE CARRYING ON OF BUSINESS, THE LOAN OBTAINED WAS NOT AN ASSET OR AN ADVANTAGE OF ENDURI NG NATURE, THE EXPENDITURE WAS MADE FOR SECURING THE USE OF MONEY FOR A CERTAIN PERIOD, AND IT WAS IRRELEVANT TO CONSIDER THE OBJECT WITH WHICH THE LOAN WAS OBTAINED,THAT WHERE THERE IS NO EXPRESS PROHIBITION, AN OUTGOING, BY MEANS OF WHICH AN ASSESSEE PROCURES THE USE OF A THING BY WH ICH HE MAKES A PROFIT, WAS DEDUCTIBLE FROM THE RECEIPTS OF THE BUSINESS TO ASCERTAIN THE TAXABLE I NCOME,THAT A LOAN OBTAINED CANNOT BE TREATED AS AN ASSET OR ADVANTAGE FOR THE ENDURING BENEFIT OF THE BUSINESS OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE ABOVE PRINCIPLES ENUMERA TED BY THE HONBLE COURT WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE,AS THE LOAN TAKEN WAS FOR BUSINESS PURPOSES AND FOR THAT IT HAD TO OBTAIN A CERTIFICATE FROM A QUALIFIED PROFESSIONAL.GROUND NO .3 IS ALLOWED IN FAVOUR OF THE ASSESSEE. 4. LAST GROUND OF APPEAL PERTAINS TO ADDITION OF RS.1, 03,000/-PAID AS SECURITY DEPOSIT.DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE H AD MADE A CLAIM OF A SUM OF RS.1,03,000/- UNDER THE HEAD ADVANCES WRITTEN OFF,THAT IT HAD CLA IMED THAT MONEY FROM THOSE TWO PARTIES WAS NOT RECOVERABLE.HE HELD THAT SAME WERE NOTHING BUT ADVA NCES WRITTEN OFF AND NOT BAD DEBTS WRITTEN OFF,THAT THE ASSESSEE HAD NOT SUBMITTED ANY DETAILS OR EXPLANATION AS TO HOW AND WHEN THAT AMOUNT HAD BEEN ACCOUNTED AS INCOME.FOR WANT OF SUFFICIENT EXPLANATION,HE ADDED BACK THE ADVANCE OF RS. 1,03,000/- TO THE INCOME OF THE ASSESSEE. 4.1. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FAA.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,THE HELD THAT THE S UNDRY DEPOSIT OF RS. 3000/- WAS IN CONNECTION WITH THE CANTEEN FACILITY FOR WHICH GAS CONNECTION WAS OBTAINED,THAT THE GAS CONNECTION WAS NORMALLY SURRENDERED SUBJECT TO RETURN OF THE SECUR ITY DEPOSIT,THAT THERE WAS NO CONVINCING EXPLANATION AS TO WHY THE SUNDRY DEPOSIT COULD NOT BE RETRIEVED,THAT THE SAME WAS THE CASE WITH SECURITY DEPOSIT OF RS. 1,00,000/-,THAT IT WAS IN C ONNECTION WITH A CONTRACT,THAT THE TEST OF 5 ITA NOS. 3963 & 4431/MUM/2013 THE INDIAN HUME PIPE COMPANY LIMITED COMMERCIAL EXPEDIENCY WAS NOT SATISFIED,THAT THE AS SESSEE HAD WRITTEN OFF THE OLD SUNDRY DEBIT BALANCES AMOUNTING TO RS.1,03,000/-FROM THE TWO PAR TIES AS NOT RECOVERABLE, THAT SAME WERE NOTHING BUT ADVANCES WRITTEN OFF AND NOT BAD DEBTS WRITTEN OFF.FINALLY,HE SUSTAINED THE ORDER OF THE AO IN DENYING THE CLAIM OF WRITE OFF. 4.2. BEFORE US,AR SUBMITTED THAT THE AMOUNTS IN QUESTION WERE SPENT FOR CARRYING OUT BUSINESS OF THE ASSESSEE,THAT SAME WERE ALLOWABLE U/S.37(1)OF T HE ACT.HE RELIED UPON THE CASES OF VANDER HORST LIMITED(ITA/68/MUM/2010-DATED ,AY.),FAB INDIA OVERSEAS PRIVATE LIMITED (ITA/199/ DEL/2012-DATED ,AY.)AND ITC LIMITED(ITA/KOL/2010-DA TED ,AY.).DR SUPPORTED THE ORDER OF THE FAA. 4.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE AO HAD DISALLOWED THE EXPENDITURE AS THE ASSESSEE DID NOT FILE NECESSARY DETAILS TO SUPPORT ITS CLAIM. AS PER THE ESTABLISHED PRINCIPLES OF TAX JURISPRUDE NCE THE ASSESSEE HAS TO PROVE THAT EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR CARRYING ON THE BUSINESS OF THE ASSESSEE FOR THE YEAR UNDER PARTICULAR AY.,IF THE ASSESSEE MAKES A CLAIM U/S. 37(1)OF THE ACT.WE FIND THAT THE ASSESSEE HAD NOT FURNISHED ANY EVIDENCE BEFORE ANY OF THE AU THORITIES TO PROVE THAT THE EXPENDITURE WAS INCURRED DURING THE YEAR UNDER APPEAL FOR BUSINESS PURPOSES.IN OUR OPINION,MERE MAKING A CLAIM IS NOT SUFFICIENT-IT HAS TO BACKED BY DOCUMENTS AND EVIDENCES.THE ASSESSEE HAS FAILED IN DISCHARGING THE ONUS CAST UPON IT.WE FIND THAT THE FACTS OF THE CASES RELIED UPON BY THE ASSESSEE ARE NOT IDENTICAL TO THE FACTS OF THE CASE UNDER AP PEAL.THEREFORE,IN OUR OPINION THEY ARE OF NO HELP.CONSIDERING THE FAILURE OF THE ASSESSEE TO DIS CHARGE THE BURDEN OF PROOF,WE DECIDE GROUND NO.4 AGAINST IT. ITA NO.4431/MUM/2013,AY.2010-11: 5. GROUND 1 RAISED BY THE ASSESSEE IS WITH REGARD TO D ISALLOWANCE OF RS.2,87,449/- ON ACCOUNT OF EXPENSES INCURRED FOR SUB-DIVISION OF EQUITY SHARES FROM RS. 10 TO RS. 2/-.DURING THE COURSE OF ASSESSMENT PROCEEDINGS,IT WAS SUBMITTED THAT THE EX PENSES INCURRED ON SUB-DIVISION OF NOMINAL VALUE OF EQUITY SHARES WERE NOT ON ACCOUNT OF ISSUE OF NEW SHARE,THAT THE SAME COULD NOT BE TREATED AS CAPITAL EXPENDITURE.THE AO HELD THAT THE RE WAS NO DOUBT THAT THE EXPENDITURE INCURRED BY THE ASSESSEE WAS CAPITAL IN NATURE AS THE EXPEND ITURE INCURRED ON SUB-DIVISION OF SHARES IN THE SHARE CAPITAL RELATED TO RE-ORGANISATION OF SHARE C APITAL STRUCTURE,THAT THE EXPENDITURE COULD NOT BE SAID TO BE INCURRED FOR EARNING THE INCOME OR REVEN UE OF THE COMPANY,THAT SUCH EXPENDITURE DID NOT FACILITATE EFFICIENT MANAGEMENT NOR IMPROVED TH E CONDUCT OF THE BUSINESS,THAT THE BASIC PRINCIPLE FOR ALLOWABILITY OF ANY EXPENDITURE WAS T HAT THE SAME SHOULD BE SPENT FOR EARNING INCOME OR FOR CONDUCTING BUSINESS,THAT THE EXPENDITURE INC URRED ON SPLITTING OF SHARES DID NOT IN ANY WAY IMPROVE THE CONDUCT OF THE BUSINESS OR ITS PROFITAB ILITY OR INCOME. 5.1. AGAINST THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA.AFTER TAKING INTO CONSIDERATION THE SUBMISSIONS OF THE ASSESSEE AND T HE ASSESSMENT ORDER,HE HELD THAT WITH THE SUB- DIVISION OF EQUITY SHARES THERE WAS NO INFLOW OF FR ESH FUNDS OR INCREASE IN THE CAPITAL EMPLOYED,THAT THE SUBDIVISION OF EQUITY SHARES LEFT THE CAPITAL EMPLOYED UNTOUCHED,THAT IT DID NOT RESULT IN CONFERRING AN ENDURING BENEFIT.FINALLY,HE HELD THAT THE SUM OF RS. 2,87,449/- HAD TO BE TREATED AS ALLOWABLE EXPENDITURE. 5.2. BEFORE US,DR ARGUED THAT THE EXPENDITURE WAS OF CAP ITAL NATURE. AR CONTENDED THAT HONBLE GUJARAT HIGH COURT IN THE MATTER OF GUJARAT STATE F ERTILISERS CO.LIMITED(TS-633-HC-2012),HAS HELD THAT SUB DIVISION OF EQUITY SHARES WAS ALLOWAB LE EXPENDITURE. 5.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT IDENTICAL ISSUE HAD ARISEN BEFORE THE HONBLE GUJARAT HIGH CO URT IN THE CASE OF GUJARAT STATE FERTILISERS CO.LIMITED(SUPRA).THE QUESTION FRAMED BY THE HONBL E COURT READ AS UNDER: WHETHER THE EXPENDITURE OF RS.4,12,595/-FOR SUB DI VISION OF SHARES OF THE COMPANY IS REVENUE EXPENDITURE AND THEREFORE ALLOWABLE. DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE THE CO URT HELD AS UNDER: IT IS, OF COURSE, TRUE THAT IN THE PRESENT CASE, W E ARE CONCERNED WITH A SLIGHTLY DIFFERENT NATURE OF 6 ITA NOS. 3963 & 4431/MUM/2013 THE INDIAN HUME PIPE COMPANY LIMITED EXPENDITURE UNDERTAKEN BY THE ASSESSEE COMPANY.BEFO RE THE SUPREME COURT, THE ISSUE INVOLVED WAS REGARDING EXPENDITURE INCURRED IN ISSUING BONUS SHARES. IN THE PRESENT CASE, THE EXPENDITURE IS INCURRED FOR THE PURPOSE OF SUBDIVISION OF THE SHAR ES. HOWEVER, WE DO NOT SEE HOW THE OBSERVATIONS MADE BY THE APEX COURT IN THE RATIO LA ID DOWN IN CASE OF GENERAL INSURANCE CORPORATION (SUPRA) CAN BE DISTINGUISHED IN VIEW OF SUCH DIFFER ENCE IN FACTS. IN CASE OF SUB- DIVISION OF THE SHARES ERE IS NO INCREASE IN THE SH ARE CAPITAL OF THE COMPANY.SO MUCH IS NOT EVEN SERIOUSLY DISPUTED BY THE COUNSEL FOR THE REVENUE.H IST CONTENTION,HOWEVER, THAT BY VIRTUE OF SUCH SUB DIVISION,THE COMPANY GAINS ENDURING BENEFIT IS WITHOUT ANY SUPPORT FROM THE RECORD.IN THE RESULT,WE ANSWER THE QUESTION IN FAVOUR OF THE ASSE SSEE. RESPECTFULLY,FOLLOWING THE ABOVE,WE DECIDE GROUND N O.1 AGAINST THE AO. 6. SECOND GROUND OF APPEAL PERTAINS TO DISALLOWANCE OF RS.49,52,306/-MADE BY THE AO U/S.14AR.W.RULE8D(II) OF THE INCOME TAX RULES,1962( RULES).DURING THE ASSESSMENT PROCEED - INGS,THE AO FOUND THAT THE ASSESSEE HAD TAXABLE AS WELL AS NON TAXABLE INCOMES,THAT IT MAINTAINED CONSOLIDATED ACCOUNTS.HE REQUIRED IT TO SHOW CAUSE AS TO WHY DISALLOWANCE U/S.14A SHOULD NOT BE MADE.AFTER CONSIDERING THE EXPLANATION OF THE ASSES SEE,THE AO COMPUTED THE DISALLOWANCE AT RS.53.97 LAKHS.AS THE ASSESSEE ITSELF HAD DISALLOWE D RS.4.45 LAKHS,SO,HE HELD THAT THE DISALLOWANCE SHOULD BE RESTRICTED TO RS.49.52 LAKHS AS PER THE PROVISIONS OF THE SEC.14A R.W.R.8D OF THE RULES. 6.1. CHALLENGING THE ORDER OF THE AO,THE ASSESSEE PREFER RED AN APPEAL BEFORE THE FAA.AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBMISSION S OF THE ASSESSEE,HE HELD THAT THE INVESTMENT MADE BY THE ASSESSEE WERE SUCH THAT THE INTEREST RE CEIVED FROM IT WAS TAXABLE,THAT SAME COULD NOT BE CONSIDERED FOR DISALLOWANCE U/S.14A OF THE ACT,T HAT INTEREST RECEIVABLE FROM HOUSING SOCIETY WAS TAXABLE,THAT DISALLOWANCE TO THE EXTENT OF RS.4 .45 LAKHS WAS JUSTIFIED,THAT THE ASSESSEE ITSELF HAD DISALLOWED INTEREST OF RS.4,45,682/-,THAT THERE WAS NO NEED FOR FURTHER DISALLOWANCE. 6.2. BEFORE US,DR SUPPORTED THE ORDER OF THE AO.AR CONTE NDED THAT SIMILAR ISSUE HAD BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL I N THE EARLIER YEARS.HE RELIED UPON THE DECISIONS OF THE TRIBUNAL DELIVERED FOR THE AY.2008-09 AND 2 009-10. 6.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. 8.THE SECOND ISSUE IS WITH REFERENCE TO THE DISALLO WANCE OF EXPENSES UNDER SECTION 14A.THE LEARNED CIT (A)CONSIDERED THE ISSUE ON FACTS AND LA W AND DECIDED THE MATTER AS UNDER: '6.9 I HAVE CONSIDERED THE ISSUE. THE APPELLANT HAS SUBMITTED THE SCHEDULE 'F' FORMING PART OF THE BALANCE SHEET FOR THE YEAR ENDED 31ST M ARCH, 2008. ON ANALYSIS OF THE SCHEDULE 'F', IT IS NOTICED THAT APPELLANT HAS MADE INVESTME NT IN FOL10WING TYPES OF INVESTMENT: IN GOVT. SECURITIES OPENING BALA NCE C10SING BALANCE 1.NATIONAL SAVING CERTIFICATES RS. 10,000 RS. NIL 2.POST OFFICE SAVING CERTIFICATES RS. 10,000 RS. 10,000 3.NABARD RS. 1,41,70,000 RS. NIL 4.NHA (NATIONAL HIGHWAY AUTHORITY OF INDIA) RS. 6,50,000 RS. 6,50,000 5.RURAL ELECTRIFICATION CORPN. LTD RS.5,80,40.000, RS.64,70,000 6.NHB CAPITAL BOND 2002 RS.6,80,00,000 RS.NIL 7.IN DIFFERENT COOP HSG.SOC. RS.14,000 RS.15,000 8.IN DIFFERENT TAX FREE INVESTMENT : RS.7,76,96,000 RS.1,75,77,000 6.9.1 IT IS TO BE NOTICED THAT THE TAX FREE INVESTM ENTS HAS COME DOWN TO ONLY (RS.1,75,77,000). FURTHER FROM THE ABOVE SUMMERY IT IS NOTICED THAT T HE INVESTMENT MADE AT S.NO.1 TO 6 ARE SUCH THAT THE INTEREST RECEIVED FROM IT IS TAXABLE AND THEREF ORE, IT CANNOT BE CONSIDERED FOR ARRIVING AT DISALLOWANCE UNDER SECTION 14A R. W. R. BD. FURTHER INVESTMENT MADE IN HOUSING COOP. SOCIETY ALSO CANNOT BE TAKEN INTO CONSIDERATION FOR DISALLOWANCE PURPOSE AS THE DIVIDEND RECEIVABLE FROM IT IS TAXABLE AND THEREFORE, IT CANNOT BE CONSIDERED FOR ARRIVING AT DISALLOWANCE UNDER SECTION 14A R.W.R.8D.FURTHER INVESTMENT MADE IN HOUSING COOP. S OCIETY ALSO CANNOT BE TAKEN INTO CONSIDERATION FOR DISALLOWANCE PURPOSE AS THE DIVIDEND RECEIVABLE FROM IT IS TAXABLE. 7 ITA NOS. 3963 & 4431/MUM/2013 THE INDIAN HUME PIPE COMPANY LIMITED 6.9.2 THE APPELLANT HAS FURNISHED THE DETAILS OF IN TEREST RECEIVED FROM' THE INVESTMENT MADE IN NABARD,NHAI,RECL AND NHB CAPITAL BOND.THE APPELLANT HAS RECEIVED TOTAL INTEREST OF RS.28,65,000 AND THE SAME HAS BEEN OFFERED FOR TAX. SINCE THE INTEREST HAS BEEN TAXED, THE INVESTMENT MADE IN THESE SECURITIES CANNOT BE CONSI DERED FOR ARRIVING AT THE DISALLOWANCE UNDER SECTION 14A R. W. R. 8D. FURTHER AS REGARDS TO THE TAX FREE INVESTMENT THE APPELLANT HAS SUBMITTED THAT IT HAS MADE ALL THE INVESTMENT OUT OF ITS ACCU MULATED PROFIT AND THE BANK LOAN HAS NOT BEEN USED FOR THE PURPOSE OF THESE INVESTMENT. THE APPEL LANT HAS SUBMITTED THE DETAILS OF ACCUMULATED PROFITS AND FUNDS, AS UNDER, IN SUPPORT OF ITS CLAI M THAT ALL THE INVESTMENT HAS BEEN MADE OUT OF ITS OWN FUNDS. THE DETAILS ARE AS UNDER: FINANCIAL YEAR PAID UP SHARE CAPITAL(RS.IN LAKHS) RESERVES AND SURPLUS(RS.IN LAKHS) DEPRECIATION RESERVE(RS.IN LAKHS) TOTAL ACCUMULATED FUNDS(RS.IN LAKHS) 1997-98 387.58 2692.85 1582.24 4662.67 1998 - 99 387.58 2947.38 1691.84 5026.80 1999-00 387.58 3228.89 1767.49 5383.96 2000 - 01 387.58 3631.17 1865.45 5884.20 2001-02 387.58 4246.98 1932.54 9567.10 2002-03 387.58 5276.75 2067.04 7731.37 2003 - 04 290.68 8950.93 2455.53 11697.14 2004-05 290.68 100 91.85 13955.98 2673.45 2005 - 06 484.47 11521.75 2873.84 14880.06 2005-06 484.47 12852.79 3215.19 16552.45 2006-07 484.47 13957.78 3425.38 17867.63 6.9.3 FROM THE ABOVE IT IS NOTICED THAT THE APPELLA NT HAD INTEREST FREE FUNDS OF ITS OWN WHICH HAD BEEN GENERATED IN THE DUE COURSE OF BUSINESS COMMEN CING FROM ITS INCEPTION. THE INTEREST FREE FUNDS WERE USED FOR THE INVESTMENT PURPOSE AND THER EFORE NO INTEREST EXPENSES HAVE BEEN INCURRED BY THE APPELLANT. THE APPELLANT HAS PRODUCED THE CO PIES OF BANK STATEMENTS FOR EACH INVESTMENT, WHICH SHOW THAT THE PAYMENT HAS BEEN MADE OUT OF PO SITIVE BALANCE AND NO OVERDRAFT ACCOUNT OR OVERDRAWN BALANCE WAS USED FOR INVESTMENT PURPOSE. IN THIS REGARD, THE APPELLANT HAS RELIED ON THE DECISIONS OF CALCUTTA HIGH COURT IN WOOLCOMBERS OF INDIA LTD. I AM FULLY CONVINCED WITH THE CONTENTION OF THE APPELLANT THAT NO BORROWED FUNDS WERE USED FOR ACQUIRING THE TAX FREE INVESTMENTS. IN VIEW OF THIS 1 HOLD THAT DISALLOWAN CE OF INTEREST NEED NOT BE MADE WITH REGARD TO THE TAX FREE INVESTMENTS. IN VIEW OF THIS I DIRECT AO TO DELETE THE DISALLOWANCE MADE UNDER RULE 8D(2}(II) OF THE I.T. ACT. 6.9.4 THE DISALLOWANCE UNDER RULE 8D(2)(III) IS DIS CUSSED AS UNDER: THE SCHEDULE 'F' FORMING PART OF THE BALANCE SHEET, SUBMITTED BY THE APPELLANT, GIVES LIST OF FULL INVESTMENT. FROM THIS SCHEDULE THE INVESTMENT MADE IN FOLLOWING INVESTMENTS ONLY ARE TAKEN FOR CONSIDERATION FOR ARRIVING AT THE AVERAGE INVESTMEN T AND DISALLOWANCE UNDER RULE 8D(2)(III) AS THE INCOME FROM OTHER INVESTMENTS ARE TAXABLE: NAME CLOSING VALUE AS OPENING VALUE AS ON 31.03. 2008 ON 31.03.2007 HINDUSTAN CON.CO.LTD RS.9,92,000.00 RS.9,92,00O.00 TATA CON. SERVICES LTD RS.8,50,000.00 RS.8,50,000.00 NATIONAL THERMAL POWER RS.10,39,000.00 RS.10,39,000.00 CORPN. LTD HDFC PRUDENCE FUND GROWTH RS.NIL RS.10,00,000.00 HDFC EQUITY FUND GROWTH RS.10,00,000.00 RS.10,00,000.00 HDFC TOO 200 FUND GROWTH RS.NIL RS.10,00,000.00 RELIANCE ECUITV FUND GROWTH RS.NIL RS.50,00,000.00 PRUDENTIAL ICICI FUSION FUND RS.50,00,000.00 RS.50,00,000.00 GROWTH PRUDENTIAL ICICI POWER GROWTH RS.NIL RS.50,00,000.00 PRUDENTIAL ICICI DYNAMIC RS.10,00,000.00 RS.10,00,000;00 FUND GROWTH SUNDARAM RURAL INDIA FUND RS.NIL RS.20,00,000.00 GROWTH FRANKLIN INDIA FLEXI CAP FUND RS.NIL RS.17 ,00,000.00 GROWTH 8 ITA NOS. 3963 & 4431/MUM/2013 THE INDIAN HUME PIPE COMPANY LIMITED FRANKLIN INDIA . PRIMA FUND RS.NIL RS.21,60,000.00 DIVIDEND STD. CHARTERED ENT.EQUITY RS.10,00,000.00 RS.10,00,000.00 FUND GROWTH SBI ONE INDIA FUND GROWTH RS.5,00,000,00 RS.5,00,000.00 JM EMERGING LEADER FUND RS.21,00,000,00 RS.21,00,000.00 GROWTH JP MORGAN INDIA EQUITY FUND RS.25,00,000.00 RS.NIL GROWTH SBI CAPITAL PROTECTION RS.5,00,000.00 RS.NIL ORIENTED FUND SERIES I HDFC AMC LTD A/C REP RS.10,96,000.00 RS.NIL PRUDENT ICICI LONG TERM RS.NIL RS.4,55,68,000.00 FLOATING RATE FUND A DIVIDEND HDFC LIQUID FUND DIVIDEND RS.NIL RS.50,87,000.00 REINVESTMENT TOTAL RS.1,75, 77 ,000.00 RS. 7,76,96,000.00 THUS,THE AVERAGE INVESTMENT COMES TO RS.1, 75, 77,0 00.00 +7,76,96,000/2 ASSESSEE4,76,36, 500. THEREFORE, DISALLOWANCE UNDER RULE 8D (2)(III) 4,76 ,36,500 X 0.5% ASSESSEE 2,38,183. 6.9.5. IN THIS CASE THERE WILL BE CERTAINLY CERTAIN ADMINISTRATIVE EXPENSES INVOLVED IN INVESTING IN TAX FREE INVESTMENTS, ADMINISTERING THE TAX FEE INV ESTMENTS AND RECEIVING OF TAX FREE INCOME.THE EXACT AMOUNT OF EXPENDITURE CANNOT BE FOUND OUT FRO M THE COMPOSITE ACCOUNTS MAINTAINED BY THE APPELLANT. IN VIEW OF THIS TO FIND OUT THE ADMINIST RATIVE EXPENSES INCURRED IN RELATION TO EARNING TAX FREE INCOME RULE 8D(2)(III) IS TO BE NECESSARILY AP PLIED. THE DISALLOWANCE AS STATED ABOVE COMES TO R2,38, 183. AO IS DIRECTED TO ALLOW RS.2,38,183 UND ER RULE 8D(2)(III) OF THE IT. RULES AS AGAINST THE DISALLOWANCE MADE BY AO. I THEREFORE, CONFIRM T HE ADDITION OF RS.2,38,183 ONLY AND DIRECT AO TO DELETE THE BALANCE ADDITION OF RS.41,58,305. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE DO NOT S EE ANY REASON TO INTERFERE WITH THE ORDERS OF THE CIT(A)WHICH IS CORRECT BOTH ON FACTS AND ALSO ON LA W. ACCORDINGLY, BOTH ASSESSEES GROUND AND REVENUE GROUND ARE REJECTED. WE FIND THAT THAT THE FACTS OF THE CASE FOR THE YEA R UNDER CONSIDERATION ARE ALMOST SIMILAR TO THE FACTS OF THE EARLIER AYS.THEREFORE,RESPECTFULLY FOL LOWING THE ABOVE MENTIONED ORDER OF THE COORDINATE BENCH,WE DECIDE GROUND NO.2 AGAINST THE AO. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS PA RTLY ALLOWED AND THE APPEAL OF THE AO STANDS DISMISSED. 0'1 &' 2 3 ) - .'1 4 ) ' 56 &' * ) - 4 ) ' 56 . ORDER PRONOUNCED IN THE OPEN COURT ON 22ND,SEPTEMBER2014 . . ) +,! 7 8 22 ' , 201 4 , ) - 9 SD/- SD/- ( . . / I.P. BANSAL) ( / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 8 /DATE: 22.09 . 2014. . . . . ) )) ) $': $': $': $': ;:!' ;:!' ;:!' ;:!' / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / '# 2. RESPONDENT / $%'# 3. THE CONCERNED CIT(A)/ < = , 4. THE CONCERNED CIT / < = 5. DR E BENCH, ITAT, MUMBAI / :>- $' , , . . . 6. GUARD FILE/ - 0 %:' %:' %:' %:' $ $$ $' '' ' //TRUE COPY// . / BY ORDER, ? / 5 DY./ASST. REGISTRAR , /ITAT, MUMBAI