BENGAL FINANCE & INVESTMENT P.LTD, MUMBAI V. DCIT CIR 8(1), MUMBAI

ITA 3976/MUM/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6083 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2012-2013
• Appeal Filed On: 10-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: HARSH M KAPADIA
• Keywords: Rule of consistency; Earning of tax free income; Rule 8D
• Section: 14A; 115JB

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL H BENCH MUMB AI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH JUDICIAL MEMBER ITA NO. 3976/MUM/2016 (ASSESSMENT YEAR 2012-13 ) ITA NO. 2975/MUM/2016 (ASSESSMENT YEAR 2011-12 ) M/S BENGAL FINANCE & INVESTMENT PVT. LTD., BUILDING 2B, UNIT NO.10, MITTAL INDUSTRIAL ESTATE, ANDHERI (E), MUMBAI 400059 PAN AABCB7225Q VS. DY. CIT, CIRCLE-8(1) MUMBAI. APPELLANT RESPONDE NT ITA NO. 2580/MUM/2016 (ASSESSMENT YEAR 2011-12 ) ACIT-9(2)(1) ROOM NO. 665,A, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. VS. M/S BENGAL FINANCE & INVESTMENT PVT. LTD., BUILDING 2B, UNIT NO.10, MITTAL INDUSTRIAL ESTATE, ANDHERI (E), MUMBAI 400059 PAN AABCB7225Q APPELLANT RESPONDE NT APPELLANT BY : SHRI HARSH M. KAPADIA (AR) RESPONDENT BY : SHRI MANOJ KUMAR SINGH (DR) DATE OF HEARING : 07.08.2019 DATE OF PRONOUNCEMEN T : 25.09.2019 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS SET OF THREE APPEALS, OUT OF WHICH TWO CROSS A PPEALS FOR ASSESSMENT YEAR 2011-12 AND THIRD APPEAL BY ASSESSE E FOR ASSESSMENT YEAR 2012-13 ARE DIRECTED AGAINST THE ORDER LD. COM MISSIONER OF INCOME TAX (APPEALS)-16 [THE LD. CIT(A), MUMBAI DATED 13.0 1.2016 & ITA NO. 3976 , 2975 & 2580 MUM 2016-M/S BENGAL FINANCE & INVESTM ENT PVT. LTD. 2 31.03.2016 FOR ASSESSMENT YEAR 2011-12 & 2012-13 RE SPECTIVELY. THE PARTIES HAVE RAISED COMMON GROUNDS OF APPEAL. THUS, ALL APPEALS WERE CLUBBED AND HEARD TOGETHER AND DECIDED BY A CONSOLI DATED ORDER TO AVOID THE CONFLICTING DECISIONS. WITH THE CONSENT OF PART IES, ITA NO. 3976/MUM/2016 FOR ASSESSMENT YEAR 2012-13 WAS TREAT ED AS LEAD CASE. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL: 1. THE HON'BLE COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER BY CONSID ERING THE VALUE OF ' CURRENT ACCOUNT' BALANCE OF RS.48,90,00,000/- WITH PARTNERSHIP FIRM WHILE WORKING OUT THE' AVERAGE VALUE OF INVESTMENTS' WHIL E CALCULATING THE AMOUNT OF DISALLOWANCE U / S. 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D. 2. THE HON'BLE COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER WHILE CAL CULATING THE 'AVERAGE VALUE OF INVESTMENTS', ERRED IN TAKING THE OPENING AND CLOSING VALUE OF INVESTMENTS OF RS.1,37,34,68,089/- AND RS.2,94,62,5 4,452/ - RESPECTIVELY INSTEAD OF THE OPENING AND CLOSING VALUE OF INVESTM ENTS OF RS. 88,26,79,313/- AND RS. 1,66,22,60,632/- RESPECTIVEL Y AS PER THE WORKING OF THE APPELLANT. IT IS SUBMITTED THAT THE APPELLANT H AS CONSIDERED ONLY THOSE. INVESTMENTS ON WHICH ANY EXEMPT INCOME IS EARNED DU RING THE YEAR UNDER CONSIDERATION. FURTHER, IT IS SUBMITTED THAT THE AP PELLANT HAS BEEN CONSISTENTLY FOLLOWING THIS METHOD WHICH HAS BEEN A CCEPTED IN THE EARLIER ASSESSMENT YEARS. 3. THE HON'BLE COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER BY DISALL OWING THE DEMAT CHARGES OF RS. 9,38,703/- AS DIRECT EXPENSES INCURR ED FOR THE PURPOSE OF DISALLOWANCE U/S 14A OF THE INCOME TAX ACT, 1961. I T IS SUBMITTED THAT DEMAT CHARGES IS INCURRED IN RELATION TO SALE / PUR CHASE OF THE GOLD / SILVER AND NOT RELATED TO ANY EXEMPT INCOME. IT IS SUBMITT ED THAT THE HON'BLE CIT (A) FAILED TO CONSIDER THE SUBMISSION OF THE APPELL ANT AND ERRED IN STATING THAT THE APPELLANT HAS NOT FURNISHED ANY DOCUMENTAR Y EVIDENCE IN SUPPORT ITA NO. 3976 , 2975 & 2580 MUM 2016-M/S BENGAL FINANCE & INVESTM ENT PVT. LTD. 3 OF ITS CLAIM. IT IS SUBMITTED THAT DUE TO SUCH ACT THIS HAS RESULTED IN DOUBLE TAXATION OF THE SAME AMOUNT AS THE AMOUNT OF RS. 9, 38,703/- IS ALREADY DISALLOWED IN THE COMPUTATION OF TOTAL INCOME. IN V IEW OF THE ABOVE FACTS, NECESSARY DIRECTION SHOULD BE GIVEN IN THIS REGARD. 4. THE HON'BLE COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER BY DISALL OWING THE EXPENSES BY INVOKING U/S 14A OF THE INCOME TAX ACT, 1961 WHILE CALCULATING BOOK PROFIT U/S 115JB OF THE INCOME TAX ACT, 1961 WITHOU T CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. IN VIEW OF THE ABOVE FACTS, NECESSARY DIRECTION SHOULD BE GIVEN IN THIS REGARD. 5. THE HON'BLE COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER OF DISALL OWANCE AT RS. 1,08,14,461/- (U/S 14A OF THE INCOME TAX ACT, 1961 R.W.R. 8D(2)(III) WITHOUT CONSIDERING THE FACT THAT ACTUAL EXPENSE CL AIMED BY THE APPELLANT BEING RS. 71,43,784/- DURING THE YEAR UNDER CONSIDE RATION. 2. THE ASSESSEE FURTHER VIDE APPLICATION DATED 06.08.2 019 RAISED THE FOLLOWING ADDITIONAL GROUNDS OF APPEAL: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFIC ER UNDER SECTION 14A OF THE INCOME-TAX ACT, 1961('ACT') READ WITH RULE 8 D OF THE INCOME TAX RULES, 1962. THE APPELLANT THEREFORE, SUBMITS THAT THE ADDITION MADE BY THE ASSESSING OFFICER BE DELETED. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFIC ER BY INVOKING SECTION 14A READ WITH RULE 8D(2)(II) WITHOUT APPRECIATING T HE FACT THAT THE APPELLANT HAD SUFFICIENT OWN FUNDS AND NO PART OF T HE BORROWED FUNDS WERE UTILIZED IN MAKING INVESTMENTS FROM WHICH EXEM PT INCOME HAS BEEN EARNED BY THE APPELLANT. THEREFORE, THE APPELLANT S UBMITS THAT RULE 8D(II) CANNOT BE INVOKED IN ITS HANDS AND HENCE, THE ADDIT ION MADE BY THE ASSESSING OFFICER BE DELETED. ITA NO. 3976 , 2975 & 2580 MUM 2016-M/S BENGAL FINANCE & INVESTM ENT PVT. LTD. 4 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPA NY IS ENGAGED IN THE BUSINESS OF INVESTMENT IN SHARES AND SECURITIES AND FINANCE, FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2012-13ON 31.0 8.2012 DECLARING INCOME OF RS. 10,75,08,488/-. THE ASSESSEE DECLARED BOOK PROFIT UNDER SECTION 115JB AT RS. 11,18,41,287/-. THE CASE WAS S ELECTED FOR SCRUTINY. DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT ASSESSEE- COMPANY IS HOLDING INVESTMENT IN VARIOUS SCRIP/FUND AND IN PARTNERSHIP FIRM, INCOME FROM WHICH IS NOT INCLUDABLE IN TOTAL INCOME. THE ASSESSING OFFICER FURTHER RECORDED THAT THE ASSESSE E HELD INVESTMENT IN EQUITY SHARES WORTH RS. 83.34 CRORE AT THE END OF Y EAR, IT HELD THE SAID EQUITY SHARES INVESTMENT WORTH RS. 294.62 CRORE. IN ADDITION, THE ASSESSEE ALSO HELD A CAPITAL OF RS. 49 CRORE IN A P ARTNERSHIP FIRM. THE ASSESSEE EARNED TAX FREE EXEMPT INCOME OF RS. 3.05 CRORE, WHICH CONSIST OF DIVIDEND OF RS. 2.94 CRORE AND LONG TERM CAPITAL GAIN OF RS. 10.56 LAKHS. THE ASSESSEE MADE A SUO-MOTU DISALLOWANCE UN DER SECTION 14A OF RS. 86,67,731/-. THE ASSESSING OFFICER ON PERUSAL O F AUDIT REPORT IN FORM 3CD NOTED THAT AUDITOR HAS WORKED OUT THE DISA LLOWANCE UNDER SECTION 14A AT RS. 77.29 LAKHS WHICH CONSISTS PROPO RTIONATE INTEREST COMPONENT OF RS. 13.66 LAKHS AS PER RULE 8D(2)(II) AND AS PER RULE 8D(2)(III) RS. 63.62 LAKHS BEING .5% OF AVERAGE VAL UE OF INVESTMENT OF RS. 127.24 CRORE. THUS, THE ASSESSING OFFICER NOTED THE DIFFERENT WORKING OF ASSESSEE VIS--VIS THE TAX AUDIT REPORT. THE ASSESSEE WAS ITA NO. 3976 , 2975 & 2580 MUM 2016-M/S BENGAL FINANCE & INVESTM ENT PVT. LTD. 5 ISSUED SHOW-CAUSE NOTICE WHY DISALLOWANCE SHOULD NO T BE MADE IN ACCORDANCE WITH RULE 8D. THE ASSESSEE FILED ITS REP LY DATED 01.09.2014 AND STATED THAT ONLY THOSE INVESTMENTS NEED TO BE T AKEN INTO CONSIDERATION ON WHICH THE ASSESSEE EARNED EXEMPT I NCOME DURING THE YEAR. THE ASSESSEE CLAIMED THAT THE DISALLOWANCE UN DER SECTION 14A NEEDS TO BE RESTRICTED TO RS. 13.57 LAKHS ONLY. 4. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY ASSE SSING OFFICER. THE ASSESSING OFFICER RECORDED ITS DISSATISFACTION ABOU T THE CORRECTNESS OF CLAIM OF ASSESSEE UNDER SECTION 14A AND ACCORDINGLY WORKED OUT FURTHER DISALLOWANCE OF RS. 53.9 LAKHS IN ADDITION OF VOLUN TARY DISALLOWANCE. THE RELEVANT PART OF ORDER OF ASSESSING OFFICER IS REPRODUCED BELOW: 3.4 THUS, HAVING REGARD TO THE ACCOUNTS OF THE ASS ESSEE COMPANY OF THE PREVIOUS YEAR RELEVANT TO A.Y. 2012-13, THE UNDERSI GNED IS NOT SATISFIED WITH THE CORRECTNESS OF THE ASSESSEES CLAIM. ACCORDINGL Y, THE AMOUNT OF EXPENDITURE DISALLOWANCE U/S. 14A OF THE ACT IN RELATION TO SUC H INCOME IS HEREBY DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF RUL E 8D OF THE INCOME TAX RULES, 1962 AS UNDER: (I) THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME DEMAT CHARGES RS. 9, 38,703/ - (II) PROPORTIONATE OF INTEREST EXPENDITURE COMPUTED IN ACCORDANCE WITH THE FORMULA GIVEN IN RULE 8D(2)(II) (AXB/C) RS.23,19,768/ - (III) AMOUNT EQUAL TO ONE-HALF PERCENT OF THE AVERAGE OF THE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND 0.5% OF RS.215,98,61,271 RS.1,07,99,306/- ITA NO. 3976 , 2975 & 2580 MUM 2016-M/S BENGAL FINANCE & INVESTM ENT PVT. LTD. 6 THE LAST DAY OF THE PREVIOUS YEAR. TOTAL EXPENDITURE DISALLOWED U/S. 14A RS.1,40,57,77 7/- NOTE (I) A= INTEREST (FINANCE COST) = RS. 43,68,256/- (II) B = AVERAGE OF EXEMPT INCOME BEARING INVESTMENTS = RS. 215,98,61,271/ - (III) C = AVERAGE OF TOTAL AS S ETS APPEARING IN THE BALANCE SHEET ON THE FIRST AND LAST DAY OF THE PREVIOUS YEAR = RS. 406,71,779/- B AVERAGE VALUE OF INVESTMENTS [FIGURES TAKEN FROM NOTE NO.9 ANNEXED TO THE FINANCIAL STATEMENTS] = OPENING BALANCE OF INVESTMENTS + CLOSING BALANCE OF INVESTMENTS 2 [883468089 + 490000000] + [ 2946254452 + 1] 2 = RS. 215,98,61,271/- 3.5 THUS, THE AMOUNT OF EXPENDITURE ATTRIBUTABLE T O THE ACTIVITY OF INVESTMENTS, INCOME FROM WHICH IS NOT INCLUDIBLE IN TOTAL INCOME OF THE ASSESSEE-COMPANY, IS HEREBY DETERMINED IN ACCORDANCE WITH RULE 8D OF THE INCOME TAX RULES, 1962 AT RS. 1,40,57,777/-. THUS, CONSIDERING THE VOLUNTARY DISALLOWANCE TO TH E TUNE OF RS. 86,67,731/- [ 988703 + 1357738 + 637129 0], THE BALANCE SUM OF RS. 53,90,046/- IS HEREBY DISALLOWED U/S. 14A AND THE SAME IS ADDE D TO THE INCOME OF THE ASSESSEE-COMPANY. 5. THE ASSESSING OFFICER ALSO INCREASED THE BOOKS PROF IT UNDER SECTION 115JB ON DISALLOWANCE MADE UNDER SECTION 14A. AGGRI EVED BY THE ACTION OF ASSESSING OFFICER, THE ASSESSEE FILED APP EAL BEFORE THE LD. CIT(A). THE LD. CIT(A) GIVEN PARTIAL RELIEF OF INTE REST EXPENDITURE OF RS. 28,537/- UNDER THE DISALLOWANCE OF RULE 8D(2)(II). THUS, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE FILED THE PRESENT APPEAL BEFORE US. 6. WE HAVE HEARD THE SUBMISSION OF LD. AUTHORIZED REPR ESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (D R) FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE L D. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSEE HAS FILED ADDITIONAL GROU NDS OF APPEAL. IT WAS FURTHER SUBMITTED THAT NO ADDITIONAL FACTS ARE REQU IRED TO BE BROUGHT ON ITA NO. 3976 , 2975 & 2580 MUM 2016-M/S BENGAL FINANCE & INVESTM ENT PVT. LTD. 7 RECORD FOR CONSIDERING THE ADDITIONAL GROUNDS OF AP PEAL. ALL FACTS RELATING TO ADJUDICATION OF ADDITIONAL GROUNDS OF A PPEAL WHICH RELATES TO ADDITION/DISALLOWANCE UNDER RULE 8D(2)(II) ARE ALRE ADY AVAILABLE ON RECORD OF THE LOWER AUTHORITIES. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISIONS OF HONBL E SUPREME COURT IN JUTE CORPORATION OF INDIA [187 ITR 688 (SC)] AND NA TIONAL THERMAL POWER CORPORATION VS. CIT [229 ITR 383]. 7. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUBMI TS THAT THE ASSESSEE FOR THE FIRST TIME HAS RAISED THE GROUNDS OF APPEAL AND RAISED THE PLEA THAT THEY HAVE SUFFICIENT FUNDS TO MAKE THE INVESTM ENTS AND NO PART OF BORROWED FUNDS WERE UTILIZED IN MAKING INVESTMENT F ROM WHICH EXEMPT INCOME HAS BEEN EARNED BY THE ASSESSEE. THE LD DR S UBMITS THAT IN CASE THE ADDITIONAL GROUNDS OF APPEAL ARE ADMITTED THE G ROUNDS MAY BE RESTORED TO THE FILE OF ASSESSING OFFICER FOR VERIF ICATIONS OF FACTS AND ADJUDICATION OF THE ISSUES RAISED BY WAY OF ADDITIO NAL GROUNDS OF APPEAL. 8. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND FIND THAT THE MAIN GROUND OF APPEAL RAISED BY ASSESSEE RELATES TO DISALLOWANCE UNDER SECTION 14A. THE ADDITIONAL GROUND OF APPEAL RAISED BY ASSESSEE ALSO RELATES TO ONE OF THE COMPONENTS OF DISALLOWANCE UN DER SECTION 14A R.W.R 8D. CONSIDERING THE CONTENTION OF BOTH THE PA RTIES, WE ARE OF THE VIEW THAT NO ADDITIONAL FACTS OR EVIDENCE IS REQUIR ED TO BE BROUGHT ON ITA NO. 3976 , 2975 & 2580 MUM 2016-M/S BENGAL FINANCE & INVESTM ENT PVT. LTD. 8 RECORD FOR ADJUDICATION OF ADDITIONAL GROUND. THERE FORE, WE ADMIT THE ADDITIONAL GROUND OF APPEAL RAISED BY ASSESSEE. 9. ON MERITS, THE LD. AR OF THE ASSESSEE SUBMITS THAT GROUND NO.1, 2 & 5 ARE INTERCONNECTED GROUNDS OF APPEAL, IF THE ASSESS EE IS GRANTED RELIEF ON GROUND NO.2, THE GROUND NO. 1 & 5 WILL BECOME ACADE MIC. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE LOWER AUTHORITIES ERR ED IN CONSIDERING THE AVERAGE VALUE OF INVESTMENT BY TAKING OPENING AND C LOSING VALUE OF INVESTMENT OF RS. 137.34 CRORE AND RS. 294.62 CRORE , INSTEAD OF OPENING AND CLOSING VALUE OF INVESTMENT OF RS. 88.26 CRORE AND RS. 166.22 CRORE RESPECTIVELY AS PER THE WORKING OF ASSESSEE ON WHIC H THE ASSESSEE EARNED THE EXEMPT INCOME. THE LD. AR OF THE ASSESSEE SUBMI TS THAT ASSESSEE CONSIDERED ONLY THOSE INVESTMENTS ON WHICH EXEMPT I NCOME IS EARNED DURING THE PERIOD UNDER CONSIDERATION. THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING THIS METHOD WHICH HAS BEEN A CCEPTED IN ALL EARLIER ASSESSMENT YEARS. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION SPECIAL BENCH OF DELHI TRIBUNAL IN CIT VS. VIREET INVESTMENTS PVT. LTD. [(2017) 82 TAX MANN.COM 415 (DEL. TRIB.) (SB)]. 10. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND PERUSED THE ORDER OF LOWER AUTHORITIES. THE BONE OF CONTENTION BETWEEN THE PARTIES ITA NO. 3976 , 2975 & 2580 MUM 2016-M/S BENGAL FINANCE & INVESTM ENT PVT. LTD. 9 WITH REGARD TO THE AVERAGE VALUE OF INVESTMENT. THE LOWER AUTHORITIES HAVE CONSIDERED THE AVERAGE VALUE OF OPENING AND CL OSING OF INVESTMENT AS PER THE FIGURES IN BOOKS OF ACCOUNT OF THE ASSES SEE. THE ASSESSEE CLAIMED THAT ONLY OPENING AND CLOSING VALUE OF THE INVESTMENT WHICH YIELDED EXEMPT INCOME UNDER CONSIDERATION SHOULD BE CONSIDERED FOR MAKING DISALLOWANCE UNDER RULE 8D(2)(III). THE SPEC IAL BENCH OF DELHI TRIBUNAL IN VIREET INVESTMENT PVT. LTD. (SUPRA) HEL D THAT ONLY THOSE INVESTMENTS WHICH YIELD EXEMPT INCOME HAS TO BE CON SIDERED FOR COMPUTING THE AVERAGE VALUE OF INVESTMENT. THEREFOR E, RESPECTFULLY FOLLOWING THE SAME, WE DIRECT THE ASSESSING OFFICER TO CONSIDER ONLY THOSE INVESTMENT WHICH YIELDED EXEMPT INCOME AND MA DE THE COMPUTATION OF DISALLOWANCE UNDER RULE 8D(2)(III) A FRESH. 12. IN THE RESULT, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 13. SINCE WE HAVE GRANTED RELIEF TO THE ASSESSEE ON GRO UND NO. 2, THEREFORE, AS PER THE CONTENTION OF LD. AR OF THE ASSESSEE, TH E ADJUDICATION ON GROUND NO. 1 & 5 HAVE BECOME ACADEMIC. 14. GROUND NO.3 RELATES TO DISALLOWANCE OF DMAT CHARGES . THE LD. AR OF THE ASSESSEE SUBMITS THAT HE IS NOT PRESSING THIS G ROUND OF APPEAL. CONSIDERING THE SUBMISSION OF LD. AR OF THE ASSESSE E, THIS GROUND OF APPEAL IS DISMISSED. 15. GROUND NO.4 RELATES TO ADJUSTMENT OF BOOK PROFIT ON DISALLOWANCE OF SECTION 14A. THE LD. AR OF THE ASSESSEE SUBMITS THA T THIS GROUND OF ITA NO. 3976 , 2975 & 2580 MUM 2016-M/S BENGAL FINANCE & INVESTM ENT PVT. LTD. 10 APPEAL IS COVERED IN FAVOUR OF ASSESSEE BY THE DECI SION OF SPECIAL BENCH OF DELHI TRIBUNAL IN VIREET INVESTMENT PVT. LTD. (S UPRA), WHEREIN IT WAS HELD THAT COMPUTATION UNDER CLAUSE-(F) OF EXPLANATI ON-1 TO SECTION 115JB IS TO BE MADE WITHOUT RESORTING TO COMPUTATIO N AS CONTEMPLATED UNDER SECTION 14A R.W.R 8D. 16. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. 17. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND FOUND THAT THIS GROUND OF APPEAL IS SQUARELY COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF SPECIAL BENCH OF DELHI TRIBUNAL IN VIRE ET INVESTMENT PVT. LTD. (SUPRA), WHEREIN IT WAS HELD THAT ONLY THOSE I NVESTMENTS ARE TO BE CONSIDERED FOR COMPUTING AVERAGE VALUE OF INVESTMEN T WHICH YIELDED EXEMPT INCOME DURING THE YEAR. THEREFORE, THE ASSES SING OFFICER IS DIRECTED TO MAKE THE COMPUTATION OF BOOK PROFIT UND ER SECTION 115JB AFRESH BY FOLLOWING THE DECISION OF SPECIAL BENCH O F DELHI TRIBUNAL IN VIREET INVESTMENT PVT. LTD. (SUPRA). 18. IN THE RESULT, GROUND NO.4 IS ALLOWED. 19. THE ADDITIONAL GROUND OF APPEAL RELATES TO DISALLOW ANCE UNDER RULE 8D(2)(II). THE LD. AR OF THE ASSESSEE SUBMITS THAT ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS AVAILABLE AND THAT NO INTEREST BEARING FUND WAS INVESTED FOR MAKING INVESTMENT FOR EARNING EXEMPT I NCOME. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSEE UNDER RES ERVE AND SURPLUS OF ITA NO. 3976 , 2975 & 2580 MUM 2016-M/S BENGAL FINANCE & INVESTM ENT PVT. LTD. 11 MORE THAN RS. 400 CRORE AS ON 31.03.2012, WHICH ARE MORE THAN THE INVESTMENT MADE DURING THE RELEVANT PERIOS AND THER EFORE, NO INTEREST DISALLOWANCE UNDER RULE 8D(2)(II) IS WARRANTED. 20. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUBMI TS THAT THE ASSESSEE HAS RAISED THE ADDITIONAL GROUND OF APPEAL FOR THE FIRST TIME; HENCE, THIS GROUND OF APPEAL MAY BE RESTORED TO THE FILE OF ASS ESSING OFFICER TO EXAMINE AND VERIFY THE FACTS AND TO DECIDE IT AFRES H. 21. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NOTED THAT THE ASSESSEE HAS RAISED THIS PLEA BEFORE THE TRIBUNAL FOR THE FIRST TIME WHILE RAISING THE ADDITIONAL GROUND OF APPEAL. THEREFORE, IN ALL FAIR NESS, WE DEEM IT APPROPRIATE TO RESTORE THE PLEA/ISSUE TO THE FILE O F ASSESSING OFFICER TO EXAMINE THE FACTS AND RECORDS AND TO PASS THE ORDER /DISALLOWANCE UNDER RULE 8D(2)(II) IN ACCORDANCE WITH LAW AFTER CONSIDE RING THE SUBMISSIONS OF THE ASSESSEE MADE HEREINABOVE. NEEDLESS TO ORDER THAT BEFORE PASSING THE ORDER THE ASSESSING OFFICER SHALL GRANT OPPORTU NITY OF HEARING TO THE ASSESSEE. HENCE, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 22. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ITA NO. 2975/MUM/2016 FOR A.Y. 2011-12 23. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL: 1. THE HON'BLE COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER BY CONSID ERING THE VALUE OF 'CURRENT ACCOUNT' BALANCE OF RS.48,90,00,000/ - WIT H PARTNERSHIP FIRM ITA NO. 3976 , 2975 & 2580 MUM 2016-M/S BENGAL FINANCE & INVESTM ENT PVT. LTD. 12 WHILE WORKING OUT THE' AVERAGE VALUE OF INVESTMENTS ' WHILE CALCULATING THE AMOUNT OF DISALLOWANCE U/S. 14A OF THE INCOME T AX ACT, 1961 READ WITH RULE 8D. 2. THE HON'BLE COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER OF DISALL OWANCE AT RS. 92,98,995/- U/S 14A OF THE INCOME TAX ACT, 1961 R.W .R. 8D(2)(III) WITHOUT CONSIDERING THE FACT THAT ACTUAL EXPENSE CL AIMED BY THE APPELLANT BEING RS.45,14,435/- DURING THE YEAR UNDE R CONSIDERATION. 3. THE HON'BLE COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER WHILE CAL CULATING THE 'AVERAGE VALUE OF INVESTMENTS', ERRED IN TAKING THE OPENING AND CLOSING VALUE OF INVESTMENTS OF RS.2,34,61,30,240/- AND RS. 1,37,34,68,089/- RESPECTIVELY INSTEAD OF THE OPENING AND CLOSING VAL UE OF INVESTMENTS OF RS.3,90,82,818/- AND RS.1,40,56,76,529/- RESPECTIVE LY AS PER THE WORKING OF THE APPELLANT. IT IS SUBMITTED THAT THE APPELLANT HAS CONSIDERED ONLY THOSE INVESTMENTS ON WHICH ANY EXEM PT INCOME IS EARNED DURING THE YEAR UNDER CONSIDERATION. FURTHER , IT IS SUBMITTED THAT THE APPELLANT HAS BEEN CONSISTENTLY FOLLOWING THIS METHOD WHICH HAS BEEN ACCEPTED IN THE EARLIER ASSESSMENT YEARS 24. FURTHER, THE ASSESSEE HAS RAISED THE FOLLOWING GROU NDS OF APPEAL: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFIC ER UNDER SECTION 14A OF THE INCOME-TAX ACT, 1961('ACT') READ WITH RULE 8 D OF THE INCOME TAX RULES, 1962. THE APPELLANT THEREFORE, SUBMITS THAT THE ADDITION MADE BY THE ASSESSING OFFICER BE DELETED. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFIC ER BY INVOKING SECTION 14A READ WITH RULE 8D(2)(II) WITHOUT APPREC IATING THE FACT THAT THE APPELLANT HAD SUFFICIENT OWN FUNDS AND NO PART OF THE BORROWED FUNDS WERE UTILIZED IN MAKING INVESTMENTS FROM WHIC H EXEMPT INCOME HAS BEEN EARNED BY THE APPELLANT. THEREFORE, THE AP PELLANT SUBMITS THAT RULE 8D(II) CANNOT BE INVOKED IN ITS HANDS AND HENC E, THE ADDITION MADE BY THE ASSESSING OFFICER BE DELETED. ITA NO. 3976 , 2975 & 2580 MUM 2016-M/S BENGAL FINANCE & INVESTM ENT PVT. LTD. 13 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER BY MA KING AN ADDITION OF RS. 2,08,84,099/- BY INVOKING PROVISIONS OF SECTION 14A OF THE ACT WHILE CALCULATING 'BOOK PROFITS' UNDER SECTION 115JB OF T HE ACT. THE APPELLANT THUS, SUBMITS THAT THE ACTION OF THE ASSESSING OFFI CER IS BAD IN LAW AND DESERVES TO BE REVERSED. 25. WE HAVE NOTED THAT GROUND NO.2 OF THIS APPEAL IS ID ENTICAL TO THE GROUND NO.2 OF APPEAL FOR A.Y. 2012-13 WHICH WE HAV E ALLOWED FOR STATISTICAL PURPOSE BY FOLLOWING THE DECISION OF VI REET INVESTMENT PVT. LTD. (SUPRA). THEREFORE, FOLLOWING THE PRINCIPLE OF CONSISTENCY, THIS GROUND OF APPEAL IS ALSO ALLOWED WITH SIMILAR DIREC TION. 26. GROUND NO. 1 & 3 ARE IDENTICAL TO THE GROUND NO. 1 & 5 IN APPEAL FOR A.Y. 2012-13. SINCE WE HAVE ALLOWED THE GROUND NO.2 IN THE PRESENT APPEAL BY FOLLOWING THE ORDER IN A.Y. 2012-13, WHER EIN THE GROUND NO. 1 & 5 WAS RENDERED ACADEMIC. THEREFORE, THESE GROUN DS OF APPEAL ARE ALSO TREATED AS ACADEMIC WITH SIMILAR OBSERVATIONS. 27. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. 28. WE HAVE NOTED THAT THE ADDITIONAL GROUND OF APPEAL IS IDENTICAL TO THE ADDITIONAL GROUND OF APPEAL AS RAISED IN A.Y. 2012- 13, WHICH WE HAVE RESTORED TO THE FILE OF ASSESSING OFFICER. THEREFOR E, FOLLOWING THE PRINCIPLE OF CONSISTENCY, THIS GROUND OF APPEAL IS ALSO RESTORED TO THE FILE OF ASSESSING OFFICER WITH SIMILAR DIRECTIONS. ITA NO. 2580/MUM/2016 FOR A.Y. 2011-12 29. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL: ITA NO. 3976 , 2975 & 2580 MUM 2016-M/S BENGAL FINANCE & INVESTM ENT PVT. LTD. 14 (A) 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONSIDERING THE INTERE ST EXPENSES AT RS. 11,97,061/- WHILE COMPUTING THE DISALLOWANCE U/S 14 A OF THE ACT, THEREBY IGNORING THE FACT THAT THE ASSESSEE ITSELF COMPUTED THE DISALLOWANCE ON ITS OWN BY TAKING INTEREST EXPENSES OF RS. 2,89,27,097/- IN THE RETURN OF INCOME.' (B) 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONSIDERING THE INTERE ST EXPENSES AT RS. 11,97,061/- INSTEAD OF RS. 2,89,27,097/- IGNORING T HE FACT THAT THE TERM 'EXPENDITURE' OCCURRING IN SECTION 14A WOULD TAKE I N ITS SWEEP NOT ONLY DIRECT EXPENDITURE BUT ALSO ALL FORMS OF EXPENDITUR E REGARDLESS OF WHETHER THEY ARE FIXED, VARIABLE, DIRECT, INDIRECT, ADMINISTRATIVE, MANAGERIAL OR FINANCIAL.' 30. CONSIDERING THE FACT THAT WE HAVE RESTORED THE GROU ND NO.2 IN APPEAL OF ASSESSEE AND ADDITIONAL GROUND OF APPEAL TO THE FIL E OF ASSESSING OFFICER. THEREFORE, ADJUDICATION ON THE GROUNDS OF APPEAL RA ISED BY REVENUE HAS BECOME INFRUCTUOUS. 31. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COU RT ON 25/09/2019. SD/- SD/- SHAMIM YAHYA PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 25.09.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR H BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI