CONSTRUCTIVE FINANCE PVT. LTD., NEW DELHI V. ACIT, Jaipur

ITA 405/JPR/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5102 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2002-2003
• Appeal Filed On: 18-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DHK
• Assessee Lawyers: MANISH MEHTA
• Keywords: Business income
• Section: 143(3); 14A

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH ,-MH-TSU] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[ KK LNL; DS LE{K BEFORE: SHRI A.D. JAIN, JM & SHRI VIKRAM SINGH YADA V, AM VK;DJ VIHY LA-@ ITA NO. 405, 406 & 407/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2002-03, 2004-05 & 2005-06 M/S CONSTRUCTIVE FINANCE (P) LTD. 414/1 4 TH FLOOR DDA COMM.COMPLEX DISTT. CENTER, JANAK PURI, NEW DELHI 110058 CUKE VS. THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-1, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ A-@ PAN NO. AACCC 9252D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MANISH MEHTA (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL. CIT ) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 14.09.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 15/09/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THESE ARE THREE APPEALS FILED BY THE ASSESSEE FOR A .Y. 2002-03, 2004-05 & 2005-06 AGAINST THE ORDER OF LD. CIT(A) ALIGARH CAMP AT JAIPUR DATED 21.01.2016. ALL THESE APPEALS WERE HEARD TOGETHER AND DISPOSED OFF BY THIS CONSOLIDATED ORDER. ITA NO. 405/JP/16: THE ASSESSEE HAS TAKEN FOLLOWING GROUND OF APPEAL: (1) THAT THE ORDER PASSED BY THE LD. CIT(A) IS BAD IN L AW, EQUITY AND JUSTICE. (2) THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 2,21,99,976/- MADE U/S 14A OF THE IT ACT 1961 BY TH E AO, IGNORING ITA NOS.405, 406 & 407/JP/16 M/S CONSTRUCTIVE FINANCE (P) LTD. NEW DELHI VS. AC IT, CIRCLE-1, JAIPUR 2 COMPANYS CONTENTIONS THAT THE APPELLANT COMPANY BE ING A NON-BANKING FINANCE COMPANY, THE PROVISIONS OF SECTION 14A ARE NOT APPLICABLE. (3) THAT WITHOUT PREJUDICE TO COMPANYS CONTENTION IN GROUND NO.2 ABOVE THE LD. CIT(A) ERRED IN REJECTING THE APPELLANT COM PANYS CONTENTION THAT THE DISALLOWANCE U/S 14A BE MADE IN ACCORDANCE WITH THE FORMULA LAID DOWN BY THE KERALA HIGH COURT IN THE CASE OF CIT VS . CATHOLIC SYRIAN BANK LTD. AT RS.17,57,733/- BY APPORTIONING THE INTEREST EXPENDITURE IN THE RATIO OF TAX FREE INCOME AND TAXABLE INCOME. (4) THAT WITHOUT PREJUDICE TO COMPANYS CONTENTION IN GROUND NO.2 & 3 ABOVE THE LD. CIT(A) ERRED IN REJECTING THE APPELLA NT COMPANYS CONTENTION FOR RESTRICTING THE DISALLOWANCE U/S 14A TO THE EXTENT OF EXEMPT DIVIDEND INCOME OF RS. 1,13,83,550/- EARNED BY THE APPELLANT COMPANY DURING THE YEAR UNDER ASSESSMENT. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF INVESTMENT AND F INANCE. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR ASSESSMENT Y EAR 2002-03 DECLARING LOSS OF RS.97,33,490/- UNDER NORMAL PROVISION OF THE INC OME TAX ACT, 1961. DURING THE IMOUNGED ASSESSMENT YEAR, THE ASSESSEE COMPANY EARNED DIVIDEND INCOME OF RS.1,13,83,550/- WHICH WAS CLAIMED EXEMPT U/S 1 0(34) OF THE IT ACT. THE ASSESSMENT WAS COMPLETED BY THE AO VIDE ORDER DATED 21.12.2004 AT NIL INCOME BY MAKING DISALLOWANCE OF ENTIRE INTEREST EX PENDITURE OF RS. 2,21,99,976/- U/S 14A OF THE IT ACT, 1961 WHICH WAS CONFIRMED BY THE LD. CIT(A). IN APPEAL , THE COORDINATE BENCH OF ITAT VI DE ORDER DATED 24.06.2011 RESTORED BACK THE MATTER TO THE FILE OF THE AO TO Q UANTIFY THE DISALLOWANCE OF THE EXPENDITURE U/S 14A OF THE ACT. THE AO THEREAFT ER COMPLETED THE ASSESSMENT VIDE HIS ORDER U/S 143(3) /SET ASIDE OF THE IT ACT, 1961 DATED 21.03.2013 BY CONFIRMING THE DISALLOWANCE OF ENTIRE INTEREST EXPENDITURE AMOUNTING TO RS. 2,21,99,976/- OF THE IT ACT AS MAD E IN THE ORIGINAL ASSESSMENT ORDER. THE ASSESSEE CARRIED THE MATTER IN APPEAL B EFORE THE LD CIT(A) WHO HAS CONFIRMED THE DISALLOWANCE AND HENCE THE APPEAL BEF ORE US. ITA NOS.405, 406 & 407/JP/16 M/S CONSTRUCTIVE FINANCE (P) LTD. NEW DELHI VS. AC IT, CIRCLE-1, JAIPUR 3 2.1 THE FINDING OF THE LD. CIT(A) ARE AS UNDER: IN THE WRITTEN SUBMISSION, THE APPELLANT HAS CONTE NDED THAT IT IS AS NBFC AND IT IS ENGAGED IN THE BUSINESS OF BORROWIN G THE LENDING OF MONEY,INVESTMENT/BUYING AND SELLING OF SHARES AND T HE DIVIDEND INCOME EARNED IS ITS BUSINESS INCOME AND HENCE PROVISION O F SECTION 14A ARE NOT APPLICABLE. HOWEVER, IN THIS REGARD, IT IS TO BE N OTED THAT HONBLE ITAT HAD GIVEN FOLLOWING DIRECTIONS: ONE HAS TO CONSIDER THE SOURCE OF INVESTMENT AND A SSETS FROM WHICH ASSESSEE IS EARNING TAX FREE INCOME. IF SUCH INVES TMENTS ARE OUT OF BORROWED FUNDS THEN INTEREST IS TO BE DISALLOWED. IF THE ASSESSEE IS HAVING COMMON POOL THEN THE AO WILL ALLOW AN OPPORT UNITY TO THE ASSESSEE TO EXPLAIN AS TO HOW COMMON POOL IS TO BE BIFURCATED AMONGST THE INVESTMENT YIELDING TAX FREE INCOME AND THE INV ESTMENT YIELDING TAXABLE INCOME. IN THE SET ASIDE PROCEEDINGS, THE AO IS BOUND FOLLO W THE DIRECTIONS GIVEN BY THE HONBLE ITAT AND THERE IS NO SCOPE TO ENTERT AIN ANY OTHER ARGUMENTS OF THE APPELLANT. THEREFORE, THE AO WAS ONLY REQUIRED TO DETERMINE THE INVESTMENTS WHICH ARE OUT OF BORROWED FUNDS. FOR THIS PURPOSE THE AO HAS PROVIDED SUFFICIENT OPPORTUNITIE S TO THE APPELLANT BUT NO SUCH DETAILS WERE PROVIDED. IN THE APPELLATE PR OCEEDINGS, THE APPELLANT ONLY CONTENDED THAT THE INVESTMENT HAS BE EN FROM COMMON POOL BUT HAS NOT GIVEN ADEQUATE DETAILS WHICH WOULD HAVE BEEN FACILITATED BIFURCATION OF INVESTMENT INTO THOSE YI ELDING TAX FREE INCOME AND THOSE YIELDING TAXABLE INCOME. THE APPELLANT I S SUGGESTING THAT THE INTEREST EXPENSES SHOULD BE APPORTIONED IN THE RATI O OF THE TAX FREE INCOME AND TAXABLE INCOME IN ACCORDANCE WITH THE DE CISION OF KERALA HIGH COURT IN THE CASE OF CIT, TRICHUR V. THE CATHO LIC SYRIAN BANK LTD. HOWEVER, THIS CONTENTION OF THE APPELLANT IS NOT AC CEPTABLE AS THE HONBLE ITAT HAS SPECIFICALLY DIRECTED THAT THE A PPORTIONMENT HAS TO BE MADE IN THE RATIO OF THE INVESTMENT IN THE ASSETS Y IELDING TAX FREE INCOME AND THE INVESTMENT IN THE ASSETS YIELDING TAXABLE I NCOME. IN VIEW OF THESE DIRECTIONS OF HONBLE ITAT WHICH ARE BINDING ON THE LOWER AUTHORITIES THE APPELLANTS VARIOUS ARGUMENTS ARE R EJECTED. IT IS OBSERVED THAT THE APPELLANT HAS NOT PROVIDED SUFFICIENT DETAILS SO AS TO APPORTION THE INTEREST EXPENSES TO THE INVESTMEN TS YIELDING TAX FREE INCOME. IT WAS APPELLANTS ONUS TO ESTABLISH THAT P ART OF THE BORROWED ITA NOS.405, 406 & 407/JP/16 M/S CONSTRUCTIVE FINANCE (P) LTD. NEW DELHI VS. AC IT, CIRCLE-1, JAIPUR 4 FUNDS HAVE BEEN UTILISED IN MAKING INVESTMENT IN TH OSE ASSETS WHICH HAVE YIELDED TAXABLE INCOME. AS THIS ONUS HAS NOT BEEN DISCHARGED, THE AO WAS RIGHT IN HOLDING THAT THE WHOLE OF THE BORROWED FUNDS HAVE BEEN UTILISED TOWARDS THE INVESTMENTS WHICH HAVE YIELDED TAX FREE INCOME. THUS, I SUPPORT AOS ACTION OF DISALLOWANCE OF INTE REST EXPENSES OF RS.2,21,99,976/- U/S 14A. ACCORDINGLY THIS GROUND I S DISMISSED. 2.3 THE AR OF THE ASSESSEE HAS SUBMITTED THAT THE A PPELLANT COMPANY IS A NBFC (NON BANKING FINANCE COMPANY) AND IS ENGAGED I N THE BUSINESS OF BORROWING AND LENDING OF MONEY, INVESTMENT/BUYING A ND SELLING OF SHARES AND THE DIVIDEND INCOME EARNED BY IT IS ITS BUSINESS IN COME AND HENCE THE PROVISIONS OF SECTION 14A ARE NOT APPLICABLE AND N O DISALLOWANCE IS CALLED FOR ON THIS ACCOUNT. FURTHER THE APPELLANT COMPANY HAD SUBMITTED BEFORE THE AO THAT THE DISALLOWANCE U/S 14A BE MADE IN ACCORDANCE WITH THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF CIT, TRIC HUR VS. THE CATHOLIC SYRIAN BANK LTD. VIDE ITS JUDGEMENT DATED 21.10.2010 WHERE IN THE TRIBUNAL HAD SUGGESTED A FORMULA FOR COMPUTING DISALLOWANCE U/S 14A IN CASES PRIOR TO AY 2008-09 WHERE THE PROVISIONS OF RULE 8D OF IT RULES ARE NOT APPLICABLE. THE AO HOWEVER, DID NOT ACCEPT APPELLANTS ABOVE CONTENT IONS AND WENT AHEAD AND DISALLOWED THE ENTIRE INTEREST EXPENDITURE OF RS. 2 ,21,99,976/- U/S 14A. WITHOUT PREJUDICE TO THE APPELLANT COMPANYS ABOVE SUBMISSIONS, THE COMPANY FURTHER SUBMITS THAT IN ANY CASE DISALLOWAN CE U/S 14A CANNOT EXCEED THE AMOUNT OF DIVIDEND INCOME EARNED BY THE COMPANY DURING THE YEAR UNDER REFERENCE. SINCE THE COMPANY HAS EARNED EXEMPT DI VIDEND INCOME AMOUNTING TO RS. 1,13,83,550/- DURING THE YEAR UNDER ASSESSME NT, DISALLOWANCE U/S 14A CANNOT BE EXCEED THE SAID AMOUNT AND SHOULD BE REST RICTED TO THE SAME. RELIANCE IS PLACED IN THIS REGARD ON THE FOLLOWIN G DECISION OF THE HONBLE DELHI ITA NOS.405, 406 & 407/JP/16 M/S CONSTRUCTIVE FINANCE (P) LTD. NEW DELHI VS. AC IT, CIRCLE-1, JAIPUR 5 HIGH COURT WHEREIN THE HONBLE HIGH COURT HAS HELD THAT THE DISALLOWANCE U/S 14A CANNOT EXCEED THE AMOUNT OF DIVIDEND INCOME EAR NED BY THE ASSESSEE. 1. JOINT INVESTMENTS PVT. LTD. VS, CIT (ITA NO.117/ 2015 DELHI HIGH COURT. 2. CIT-IV VS. HOLCIM INDIA PVT. LTD. (ITA NO. 486/ 2014 & 299/2014 FELHI HIGH COURT) 3. M/S CHEMINVEST LIMITED VS. CIT-VI-ITA NO. 749/20 14 DELHI HIGH COURT ORDER DATED 02.09.2015. IN VIEW OF THE ABOVE SUBMISSIONS, IT IS PRAYED THA T THE DISALLOWANCE U/S 14A MADE BY THE AO NAY KINDLY BE DELETED OR IN THE ALT ERNATE BE RESTRICTED TO RS. 17,57,733/- (BEING THE AMOUNT COMPUTED IN ACCORDANC E WITH THE FORMULA LAID DOWN BY THE HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. THE CATHOLIC SYRIAN BANK) OR WITHOUT PREJUDICE TO THE ABOVE BE R ESTRICTED TO RS. 1,13,83,550/- (BEING THE DIVIDEND INCOME EARNED DUR ING THE YEAR) AS AGAINST THE DISALLOWANCE OF RS. 2,21,99,976/- ASSESSED BY T HE AO. 2.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS WE HAVE NOTED ABOVE, THE SUBJECT MAT TER HAD COME UP EARLIER BEFORE THE COORDINATE BENCH AND THE MATTER WAS REST ORED TO THE FILE OF THE AO TO QUANTIFY THE DISALLOWANCE OF THE EXPENDITURE UND ER SECTION 14A OF THE ACT. THEREFORE, THE CONTENTION OF THE ASSESSEE THAT BEIN G A NBFC, PROVISIONS OF SECTION 14A ARE NOT APPLICABLE CANNOT BE ENTERTAINE D AT THIS STAGE. THE APPLICABILITY OF SECTION 14A HAS ALREADY BEEN DECID ED BY THE COORDINATE BENCH EARLIER AND THE LIMITED ISSUE THAT REMAINS OPEN IS DETERMINATION OF QUANTIFICATION OF DISALLOWANCE UNDER SECTION 14A OF THE ACT. ITA NOS.405, 406 & 407/JP/16 M/S CONSTRUCTIVE FINANCE (P) LTD. NEW DELHI VS. AC IT, CIRCLE-1, JAIPUR 6 HERE IT WOULD BE RELEVANT TO REPRODUCE THE FINDINGS OF THE COORDINATE BENCH TO UNDERSTAND THE EXACT NATURE OF DIRECTIONS: PRIOR TO ASSESSMENT YEAR 2008-09, THE AO IS DUTY B OUND TO DETERMINE THE EXPENDITURE IN RELATION TO INCOME WHICH DOESNT FORM PART OF TOTAL INCOME. IN THE INSTANT CASE, THERE IS NO SUCH DETE RMINATION. THERE ARE DECISIONS OF DIFFERENT HIGH COURTS IN WHICH IT HAS BEEN HELD THAT RESERVES SURPLUS AND CAPITAL ARE FOR TAX FREE INVESTMENTS AN D BALANCE INVESTMENT IS OUT OF THE BORROWED FUNDS. ONE HAS TO CONSIDER T HE SOURCE OF INVESTMENT AND ASSETS FROM WHICH ASSESSEE IS EARNIN G TAX FREE INCOME. IF SUCH INVESTMENTS ARE OUT OF BORROWED FUNDS THEN INTERESTS IS TO BE DISALLOWED. IF THE ASSESSEE IS HAVING COMMON POOL T HEN THE AO WILL ALLOW AN OPPORTUNITY TO THE ASSESSEE TO EXPLAIN AS TO HOW COMMON POOL IS TO BE BIFURCATED AMONGST THE INVESTMENT YIELDING TAX F REE INCOME AND THE INVESTMENT YIELDING TAXABLE INCOME. IN THE ABSENCE OF NECESSARY FACTS, IT IS NOT POSSIBLE FOR US TO DECIDE THE QUANTUM OF DIS ALLOWANCE TO BE MADE UNDER SECTION 14A OF THE ACT. WE THEREFORE RESTORE BACK THE MATTER ON THE FILE OF THE AO TO QUANTIFY THE DISALLOWANCE OF THE EXPENDITURE U/S 14A OF THE ACT AFTER PROVIDING OPPORTUNITY TO THE ASSES SEE. THE ABOVE DIRECTIONS OF THE COORDINATE BENCH ARE CL EAR TO THE EFFECT THAT THE AO IS DUTY BOUND TO DETERMINE THE EXPENDITURE IN RE LATION TO INCOME WHICH DOESNT FORM PART OF TOTAL INCOME. IN THE ASSESSME NT ORDER, WE FIND THAT THERE IS NO SUCH DETERMINATION BY THE AO IN TERMS OF APPO RTIONMENT OF INTEREST EXPENDITURE BETWEEN INCOME WHICH DOESNT FORM PART OF TOTAL INCOME (DIVIDEND INCOME) AND INCOME WHICH FORM PART OF TO TAL INCOME (OTHER THAN DIVIDEND INCOME). THE LD CIT(A) HAS HELD THAT SINC E THE AO HAS PROVIDED SUFFICIENT OPPORTUNITY TO THE ASSESSEE AND NO DETAI LS WERE PROVIDED, THE AO WAS RIGHT IN HOLDING THAT THE WHOLE OF THE BORROWED FUNDS HAVE BEEN UTILISED TOWARDS THE INVESTMENTS WHICH HAVE YIELDED TAX FREE INCOME. IN OUR VIEW, THE SAID APPROACH OF THE AO AS CONFIRMED BY THE LD CIT( A) IS NOT CORRECT AS THE AO, HAVING NOT SATISFIED WITH THE EXPLANATION OF THE AS SESSEE, IS STILL DUTY BOUND TO ITA NOS.405, 406 & 407/JP/16 M/S CONSTRUCTIVE FINANCE (P) LTD. NEW DELHI VS. AC IT, CIRCLE-1, JAIPUR 7 DETERMINE THE EXPENDITURE IN RELATION TO INCOME WHI CH DOESNT FORM PART OF TOTAL INCOME. THE AO CANNOT PRESUME THAT THE WHOLE OF THE INVESTMENT WHICH HAVE YIELDED TAX FREE DIVIDEND INCOME HAVE BEEN MAD E OUT OF BORROWED FUNDS. SIMILARLY, THERE IS NO FINDING THAT WHETHER THE ASS ESSEE IS HAVING COMMON POOL OF FUNDS OR NOT . THE AO HAS TO GIVE A SPECIFIC FINDING AND BASIS OF ARRIVING AT SUCH FINDING AND PASS A SPEAKING ORDER IN THAT REGA RD. FOR THE PURPOSES, WE REFER TO THE OBSERVATIONS OF THE HONBLE DELHI HIGH COURT IN CASE OF MAXCOPP INVESTMENTS 347 ITR 272 WHICH ARE REPRODUCED AS UND ER: THUS THE FACT THAT WE HAVE HELD THAT SUB-SECTION( 2) AND (3) OF SECTION14A AND RULE 8D WOULD OPERATE PROSPECTIVELY ( AND NOT RETRO SPECTIVELY) DOES NOT MEAN THAT THE ASSESSING OFFICER IS NOT TO SATISFY HIMSEL F WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE WITH REGARD TO SUCH EXPENDITU RE. IF HE IS SATISFIED THAT THE ASSESSEE HAS CORRECTLY REFLECTED THE AMOUNT OF SUC H EXPENDITURE, HE HAS TO DO NOTHING FURTHER. ON THE OTHER HAND IF HE IS SATISF IED ON AN OBJECTIVE ANALYSIS AND FOR COGENT REASONS THAT THE AMOUNT OF SUCH EXPE NDITURE AS CLAIMED BY THE ASSESSEE IS NOT CORRECT, HE IS REQUIRED TO DETERMIN E THE AMOUNT OF SUCH EXPENDITURE ON THE BASIS OF A REASONABLE AND ACCEPT ABLE METHOD OF APPORTIONMENT. IT WOULD BE APPROPRIATE TO RECALL THE WORDS OF THE SUPREME COURT IN WALFORT (20210) 326 ITR 1 (SC) TO THE FOL LOWING EFFECT OF (PAGE 17) THE THEORY OF APPORTIONMENT OF EXPENDITURE BETWEEN TAXABLE AND NON TAXABLE HAS, IN PRINCIPLE, BEEN NOW WIDENED UNDER SECTION 1 4A SO, EVEN FOR THE PRE-RULE 8D PERIOD, WHENEVER THE I SSUE OF SECTION 14A ARISES BEFORE AN ASSESSING OFFICER, HE HAS, FIRST OF ALL, TO ASCERTAIN THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF THE EXPENDI TURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT. EVEN WHERE THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS B EEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME, THE ASSESSING OFFICER WILL HAVE TO VERIFY THE CORRECTNESS OF SUCH CLAIM. IN CASE THE AO IS SATISFIED WITH THE CLAIM OF THE ASSESSEE WITH REGARD TO THE EXPENDITU RE OR NO EXPENDITURE AS THE CASE MAY BE , THE AO IS TO ACCEPT THE CLAIM OF THE ASSESSEE IN SO FAR AS THE QUANTUM OF DISALLOWANCE UNDER SECTION 14A IS CONC ERNED. IN SUCH EVENTUALITY, THE AO CANNOT EMBARK UPON A DETERMINATION OF THE AM OUNT OF EXPENDITURE FOR THE PURPOSE OF SECTION 14A(1). IN CASE THE AO IS N OT, ON THE BASIS OF THE OBJECTIVE CRITERIA AND AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY, ITA NOS.405, 406 & 407/JP/16 M/S CONSTRUCTIVE FINANCE (P) LTD. NEW DELHI VS. AC IT, CIRCLE-1, JAIPUR 8 SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, HE WILL HAVE TO REJECT THE CLAIM AND STATE THE REASONS FOR DOING SO. HAV ING DONE SO THE AO WILL HAVE TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME UNDER THE SAID A CT. HE IS REQUIRED TO DO SO ON THE BASIS OF A REASONABLE AND ACCEPTABLE METHOD OF APPORTIONMENT. IN LIGHT OF ABOVE DISCUSSIONS, WE SET ASIDE THE MAT TER TO THE FILE OF THE AO TO QUANTIFY THE DISALLOWANCE OF THE EXPENDITURE U/S 14 A OF THE ACT AFTER PROVIDING OPPORTUNITY TO THE ASSESSEE. NEEDLESS TO SAY, THE A SSESSEE SHALL FURNISH THE NECESSARY INFORMATION/DOCUMENTATION AS REQUIRED BY THE AO AND SHALL COOPERATE WITH THE AO IN TIMELY COMPLETION OF SUCH DETERMINATION. IN ITA NOS. 406 & 407/JP/16, IDENTICAL ISSUES ARE I NVOLVED. OUR FINDINGS AND DIRECTIONS CONTAINED IN ITA NO. 405/JP/16 SHALL APP LY MUTATIS MUTANDIS TO THESE TWO MATTERS. IN THE RESULT THE APPEALS FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15/09 /2016. SD/- SD/- ( A.D. JAIN ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 15 / 09/2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S CONSTRUCTIVE FINANCE (P) LTD. DE LHI ITA NOS.405, 406 & 407/JP/16 M/S CONSTRUCTIVE FINANCE (P) LTD. NEW DELHI VS. AC IT, CIRCLE-1, JAIPUR 9 2. IZR;FKHZ@ THE RESPONDENT- THE CIT, CIRCLE-1, JAIPUR 3. VK;DJ VK;QDR@ CIT I, JAIPUR 4. VK;DJ VK;QDRVIHY@ THE CIT(A), ALIGARH CAMP AT JAIPUR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.405, 406 & 407 /JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR