Appeal details
Counselvise Citation
[2019] 112 COUNSELVISE.COM (IT) 1138 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 5 month(s) 24 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-12-2019
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
B
Assessment Year
2012-2013
Appeal Filed On
22-06-2017
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SH. H. S. SIDHU, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER ITA NO. 4156/DEL/2017 : ASSTT. YEAR : 2012-13 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-7(1), NEW DELHI VS M/S DLF UTILITIES LTD., 9 TH FLOOR, DLF CENTRE, SANSAD MARG, NEW DELHI-110001 (APPELLANT) (RESPONDENT) PAN NO. AAACN3199A ASSESSEE BY : SH. R. S. SINGHVI, CA REVENUE BY : MS. ASHIMA NEB, SR. DR DATE OF HEARING: 10.12.2019 DATE OF PRONOUNCEMENT: 16.12.2019 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AG AINST THE ORDER DATED 16.03.2017 OF THE LD. CIT (A)-3, DE LHI. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENU E: 1. THE LD. CIT (A) ERRED IN LAW AND ON FACTS OF TH E CASE IN DELETING THE ADDITION OF RS.4,32,71,702/- MADE BY T HE AO ON ACCOUNT OF INTEREST PAID U/S 36(1)(III) OF THE I.T. ACT, 1961 WITHOUT APPRECIATING THE FACTS OF THE CASE THAT THE INTEREST BEARING FUNDS TO GROUP COMPANY WITHOUT CHARGING INT EREST AND THE DEPARTMENT HAS ALSO FILED APPEAL BEFORE THE HON BLE ITAT IN A.Y. 2011-12 ON THE SIMILAR ISSUE. 2. THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITI ONS MADE BY THE AO U/S 14A OF RS.37,40,940/- ON THE GROUND THAT PROVISION OF SEC. 14A(2) READ WITH RULE 8D CANNOT BE INVOKED UNLESS THE A.O. IS DISSATISFIED ABOUT THE CORRECTNESS OF THE D ISALLOWANCE MADE BY THE ASSESSEE HIMSELF WHICH IS CORRECTNESS O F THE SUO- MOTO DISALLOWANCE. THE A.O. DEMONSTRATED HER DISSAT ISFACTION ABOUT THE CORRECTNESS OF THE SUO-MOTO DISALLOWANCE IN HER ITA NO. 4156/DEL/2017 DLF UTILITIES LTD. 2 ASSESSMENT ORDER WHEN SHE HAS ELABORATELY DISCUSSED WHY ADDITIONS OF RS.37,40,940/- IS BEING MADE U/S 14A O F THE I.T. ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S OBTAINED LOANS OF RS.17.15 CRORES ON WHICH INTEREST OF RS.1.44 CRORES HAS BEEN PAID. THE ASSESSEE HAS USED THIS AMOUNT TOWARDS EXTENDING INT EREST FREE LOANS & ADVANCES, INVESTMENTS AND CAPITAL WORK. THE SHARE C APITAL AND THE RESERVES & SURPLUS OF THE ASSESSEE ARE TO THE TUNE OF RS.397.96 CRORES. DETAILS OF OWN FUNDS AMOUNT(LACS) SHARE CAPITAL 10,707.46 RESERVES & SURPLUS 29,088.75 TOTAL INTEREST FREE FUNDS AVAILABLE 39,796.21 TOTAL INTEREST PAID 144 INVESTMENTS: ADVANCE GIVEN TO DLF LTD. 117 . 53 INVESTMENT OF IMMOVABLE PROPERTY 649. 14 INVESTMENT IN PARTNERSHIP FIRM 51. 89 ADVANCE RECOVERABLE 2070. 24 OTHER ADVANCES 81. 62 TOTAL INVESTMENTS 2970.4 4. THE ASSESSING OFFICER HELD THAT TO BE ELIGIBLE F OR DEDUCTION U/S 36(1)(III), THE FOLLOWING CONDITIONS MUST BE SATISF IED: I. THE MONEY MUST HAVE BEEN BORROWED BY THE ASSESS EE. II. IT MUST HAVE BEEN BORROWED FOR THE PURPOSES OF THE ASSESSEES OWN BUSINESS. III. THE ASSESSEE MUST HAVE PAID INTEREST ON THE SA ID AMOUNT AND CLAIMED IT AS DEDUCTION. 5. THE ASSESSING OFFICER FURTHER HELD THAT THE AMOUNT OF THE INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSE S OF BUSINESS OR PROFESSION. IT IS IMPLICIT IN THIS PROVISION THAT T HE CAPITAL SO BORROWED SHOULD NOT ONLY BE INVESTED IN THE BUSINESS BUT THA T THE AMOUNT BORROWED SHOULD CONTINUE TO REMAIN IN THE BUSINESS. THIS PRO VISION CANNOT BE CONSTRUED AS ENABLING AN ASSESSEE TO BURDEN THE BUS INESS WITH INTEREST EVEN WHILE TAKING THE AMOUNT INITIALLY BORROWED FOR THE BUSINESS BUT ITA NO. 4156/DEL/2017 DLF UTILITIES LTD. 3 SUBSEQUENTLY TAKEN OUT OF THE BUSINESS BY DIVERTING IT AS INTEREST FREE LOANS OR LOANS ON LOWER RATE OF INTEREST. 6. HE RELIED ON THE FOLLOWING CASE LAWS: SARABHAI SONS P. LTD. VS CIT 201 ITR 465 (GUJ.) CIT VS SUJANI TEXTILES P. LTD. 151 ITR 653 (MAD.) INDIA METALS & FERRO ALLOYS LTD. VS CIT 193 ITR 344 CIT VS ABISHEK INDUSTRIES LTD. 286 ITR 1 (P&H) 7. THE LD. CIT (A) DELETED THE ADDITION ON THE GROU NDS THAT THE AMOUNTS EXTENDED AS LOAN ARE NEITHER COLORABLE NOR ILLUSIONARY TRANSACTIONS AND SINCE THE MONIES HAVE BEEN RIGHTLY USED FOR THE PURPOSE OF THE BUSINESS NO DISALLOWANCE IS WARRANTED. 8. BEFORE US DURING THE ARGUMENTS, THE LD. DR VEHEM ENTLY ARGUED THAT ONCE THE AMOUNTS ARE INTEREST BEARING, ANY TYPE OF INTEREST FREE LOANS GIVEN SHOULD BE TREATED AS GIVEN FOR NON-BUSINESS P URPOSE. IT WAS ARGUED THAT THE ALLOWANCE IS ONLY IF THE BORROWED FUNDS AR E FULLY AND WHOLLY UTILIZED FOR THE PURPOSES OF THE BUSINESS. IN THIS CASE, THE INTEREST FREE LOANS GIVEN DO NOT FORM A PART OF THE BUSINESS ACTI VITIES OF THE ASSESSEE AND NO COMMERCIAL EXPEDIENCY HAS BEEN PROVED. 9. REBUTTING ARGUMENTS OF THE REVENUE, THE LD. AR A RGUED THAT THE JUDGMENT OF ABISHEK INDUSTRIES LTD. (SUPRA) IS NOT MORE GOOD LAW AND THE CASE OF SUJANI TEXTILES P. LTD. (SUPRA) IS DISTINGU ISHABLE ON THE FACTS THAT THE AMOUNTS UTILIZED IN THIS CASE ARE FOR NON-BUSIN ESS PURPOSE. SIMILARLY, THE CASE OF SARABHAI SONS P. LTD. (SUPRA), IT WAS A RGUED THAT THE PREDOMINANT PURPOSE OF EXPENDITURE WAS DIFFERENT FR OM THAT OF THE ASSESSEE WHO IS IN THE REGULAR BUSINESS OF POWER GE NERATION THROUGH GAS TURBINES AND RUNNING OF MULTIPLEX THEATRES. ITA NO. 4156/DEL/2017 DLF UTILITIES LTD. 4 10. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PER USED THE MATERIAL AVAILABLE ON RECORD. 11. THE ASSESSEE IS IN THE BUSINESS OF REAL ESTATE, ENTERTAINMENT & POWER GENERATION AND THE LOANS & ADVANCES INCLUDE I NVESTMENTS IN THE PROPERTY BUSINESS OF THE ASSESSEE. HENCE, IT CAN BE SAID THAT THE ADVANCES RECOVERABLE INCLUDED THE ADVANCES WHICH ARE BUSINES S ADVANCES ON WHICH NO INTEREST IS DISALLOWABLE. IT WAS ALSO PART OF TH E RECORD THAT ANOTHER ADVANCES INTEREST HAS BEEN CHARGED BY THE ASSESSEE AS FOUND OUT BY THE LD. CIT (A) ON GOING THROUGH THE SCHEDULE 17 OF THE BALANCE SHEET. SINCE, THE LOANS & ADVANCES HAVE BEEN GIVEN ON ACCOUNT OF COMMERCIAL EXPEDIENCY AND NOTIONAL INTEREST CAN BE CHARGED ON SUCH ADVANCES OR INTEREST CAN BE DISALLOWED U/S 36(1)(III). IN THE C ASE OF TAPARIA TOOLS VS JCIT CA NO. 6366 OF 2003, THE HONBLE APEX COURT OB SERVED THAT WHILE EXAMINING THE ALLOWABILITY OF DEDUCTION, THE ASSESS ING OFFICER IS TO CONSIDER THE GENUINENESS OF THE BUSINESS BORROWINGS AND THAT THE BORROWINGS WAS FURTHER PURPOSE OF BUSINESS AND GENU INE. ONCE, THE GENUINENESS IS PROVED AND INTEREST IS PAID ON THE B ORROWINGS, NO INTEREST CAN BE DISALLOWED ON THE GROUNDS THAT THE ASSESSEE HAS NOT CORRECTLY USED THE AMOUNTS BORROWED. FURTHER, THE HONBLE APEX COU RT IN THE CASE OF SA BUILDERS HELD THAT IN CASE OF INTEREST BEARING LOAN S TAKEN AND INTEREST FREE ADVANCES GIVEN, WHAT IS TO BE LOOKED INTO IS THE ME ASURE OF COMMERCIAL EXPEDIENCY AND FOR THE PURPOSE OF THE BUSINESS. HENCE, KEEPING IN VIEW THE FACTS OF THE CASE AND LEGAL PREPOSITIONS LAID D OWN ON THIS ASPECT OF ALLOWABILITY OF INTEREST U/S 36(1)(III), WE HEREBY DECLINE TO INTERFERE WITH THE ORDER OF THE LD. CIT (A). THE APPEAL OF THE REV ENUE ON THIS GROUND IS DISMISSED. ITA NO. 4156/DEL/2017 DLF UTILITIES LTD. 5 GROUND NO.2 12. THE FINANCIAL POSITION OF THE COMPANY RELEVANT TO THE ISSUE IS AS UNDER: PARTICULARS AMOUNT SHARE CAPITAL 10,707.46 RESERVES & SURPLUS 29,088.75 TOTAL INTEREST FREE FUNDS AVAILABLE 39,796.21 INVESTMENTS: SHARES & PARTNERSHIP FIRM ON WHICH EXEMPTED INCOME IS GENERATED 603.89 TOTAL INVESTMENTS 39,192.32 13. FROM THE ABOVE, IT IS CLEAR THAT THE INVESTMENT S MADE BY THE ASSESSEE ARE FAR LESS THAN THE OWN FUNDS AVAILABLE WITH THE ASSESSEE. FURTHER, IT IS FOUND FROM THE RECORD THAT THE ASSES SEE HAS DISALLOWED RS.6,76,757/- ON ACCOUNT OF DISALLOWANCE U/S 14A. B EFORE US IT WAS ARGUED BY THE LD. AR THAT THE ASSESSING OFFICER HAS NOT ME NTIONED ANYTHING ABOUT DISSATISFACTION REGARDING THE DISALLOWANCE MADE BY THE ASSESSEE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 14A(2) AN D THE LD. CIT (A) DELETED THE ADDITION OWING TO NON-ADHERENCE IN ACCO RDANCE WITH THE PROVISIONS OF SECTION 14A(2). THE LD. DR ON THE OT HER HAND, SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND ARGUED THAT TO I NVOKE RULE 8D(2), NO SATISFACTION IS REQUIRED AS IT IS AN AUTOMATIC PROV ISION FOR DETERMINING THE DISALLOWANCE. 14. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PER USED THE MATERIAL AVAILABLE ON RECORD. WE HAVE GONE THROUGH THE REASO NS GIVEN BY THE LD. CIT (A) IN DELETING THE ADDITION. THE ADDITION WAS DELETED FOLLOWING THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF MAXXOP INVESTMENT LTD. & ORS. 247 CTR 162 (DEL.). THE RELE VANT PORTION IS AS UNDER: 'SUB-SECTION (2) OF SECTION 14 A OF THE SAID ACT PR OVIDES THE MANNER IN WHICH THE ASSESSING OFFICER IS TO DETERMI NE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO INCOM E WHICH ITA NO. 4156/DEL/2017 DLF UTILITIES LTD. 6 DOES NOT FORM PART OF THE TOTAL INCOME. HOWEVER, IF WE EXAMINE THE PROVISION CAREFULLY, WE WOULD FIND THAT THE ASSESSING OFFICER IS REQUIRED TO DETERMINE THE AMOU NT OF SUCH EXPENDITURE ONLY IF THE ASSESSING OFFICER, HAVING R EGARD TO THE ACCOUNTS OF THE ASSESSEE, IS POT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXP ENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT. IN OTHER WORDS, THE REQU IREMENT OF THE ASSESSING OFFICER EMBARKING UPON A DETERMINATIO N OF THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO EXEMP T INCOME WOULD BE TRIGGERED ONLY IF THE ASSESSING OFFICER RE TURNS A FINDING THAT HE IS NOT SATISFIED WITH THE CORRECTNE SS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. THE REFORE, THE CONDITION PRECEDENT FOR THE ASSESSING OFFICER ENTER ING UPON A DETERMINATION OF THE AMOUNT OF THE EXPENDITURE INCU RRED IN RELATION TO EXEMPT INCOME IS THAT THE ASSESSING OFF ICER MUST RECORD THAT HE IS NOT SATISFIED WITH THE CORRECTNES S OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. SUB -SECTION (3) IS NOTHING BUT AN OFFSHOOT OF SUB-SECTION (2) O F SECTION 14A. SUB-SECTION (3) APPLIES TO CASES WHERE THE ASS ESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED IN REL ATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT. IN OTHER WORDS, SUB-SECTION (2) DEALS WIT H CASES WHERE THE ASSESSEE SPECIFIES A POSITIVE AMOUNT OF E XPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF T HE TOTAL INCOME UNDER THE SAID ACT AND SUB-SECTION (3) APPLI ES TO CASES WHERE THE ASSESSEE ASSERTS THAT NO EXPENDITURE HAD BEEN INCURRED IN RELATION TO EXEMPT INCOME. IN BOTH CASE S, THE ASSESSING OFFICER, IF SATISFIED WITH THE CORRECTNES S OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE OR N O EXPENDITURE, AS THE CASE MAY BE, CANNOT EMBARK UPON A DETERMINATION OF THE AMOUNT OF EXPENDITURE IN ACCOR DANCE WITH ANY PRESCRIBED METHOD, AS MENTIONED IN SUB-SEC TION (2) OF SECTION 14A OF THE SAID ACT. IT IS ONLY IF THE A SSESSING OFFICER IS NOT SATISFIED WITH THE CORRECTNESS OF TH E CLAIM OF THE ASSESSEE, IN BOTH CASES, THAT THE ASSESSING OFFICER GETS JURISDICTION TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT IN ACCORDANCE WITH THE PRESCRIBED METHOD. THE PRESCRIBED METHOD BEING THE METHOD STIPULATED IN RULE 8D OF THE SAID RULES. WHILE REJE CTING THE CLAIM OF THE ASSESSEE WITH REGARD TO THE EXPENDITUR E OR NO EXPENDITURE, AS THE CASE MAY BE, IN RELATION TO EXE MPT ITA NO. 4156/DEL/2017 DLF UTILITIES LTD. 7 INCOME, THE ASSESSING OFFICER WOULD HAVE TO INDICAT E COGENT REASONS FOR THE SAME. RULE 8D 30. AS WE HAVE ALREADY NOTICED, SUB-SECTION (2) OF SECTION 14A OF THE SAID ACT REFERS TO THE METHOD OF DETERMI NATION OF THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO E XEMPT INCOME. THE EXPRESSION USED IS - 'SUCH METHOD AS MA Y BE PRESCRIBED'. WE HAVE ALREADY MENTIONED ABOVE THAT B Y VIRTUE OF NOTIFICATION NO.45/2008 DATED 24/03/2008, THE CE NTRAL BOARD OF DIRECT TAXES INTRODUCED RULE 8D IN THE SAI D RULES. THE SAID RULE 8D ALSO MAKES IT CLEAR THAT WHERE THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSES SEE OF A PREVIOUS YEAR, IS NOT SATISFIED WITH (A) THE CORREC TNESS OF THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE; OR (B) T HE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDITURE HAS BEEN I NCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF T HE TOTAL INCOME UNDER THE SAID ACT FOR SUCH PREVIOUS YEAR, T HE ASSESSING OFFICER SHALL DETERMINE THE AMOUNT OF THE EXPENDITURE IN RELATION TO SUCH INCOME IN ACCORDANC E WITH THE PROVISIONS OF SUB-RULE (2) OF RULE 8D. WE MAY OBSER VE THAT RULE 8D(1) PLACES THE PROVISIONS OF SECTION 14A(2) AND (3) IN THE CORRECT PERSPECTIVE. AS WE HAVE ALREADY SEEN, W HILE DISCUSSING THE PROVISIONS OF SUB-SECTIONS (2) AND ( 3) OF SECTION 14A, THE CONDITION PRECEDENT FOR THE ASSESS ING OFFICER TO HIMSELF DETERMINE THE AMOUNT OF EXPENDITURE IS T HAT HE MUST RECORD HIS DISSATISFACTION WITH THE CORRECTNES S OF THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE OR WITH T HE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED. IT IS ONLY WHEN THIS CONDITION PRECEDENT IS SATISFIED THAT THE ASSESSING OFFICER I S REQUIRED TO DETERMINE THE AMOUNT OF EXPENDITURE IN RELATION TO INCOME NOT INCLUDABLE IN TOTAL INCOME IN THE MANNER INDICATED IN SUB-RULE (2) OF RULE 8D OF THE SAID RULES. 31. IT IS, THEREFORE, CLEAR THAT DETERMINATION OF THE AMOUNT OF EXPENDITURE IN RELATION TO EXEMPT INCOME UNDER R ULE 8D WOULD ONLY COME INTO PLAY WHEN THE ASSESSING OFFICE R REJECTS THE CLAIM OF THE ASSESSEE IN THIS REGARD. IF ONE EX AMINES SUB- RULE (2) OF RULE 8D, WE FIND THAT THE METHOD FOR DE TERMINING THE EXPENDITURE IN RELATION TO EXEMPT INCOME HAS TH REE COMPONENTS. THE FIRST COMPONENT BEING THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. THE SECOND COMPONENT BEIN G ITA NO. 4156/DEL/2017 DLF UTILITIES LTD. 8 COMPUTED ON THE BASIS OF THE FORMULA GIVEN THEREIN IN A CASE WHERE THE ASSESSEE INCURS EXPENDITURE BY WAY OF INT EREST WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULA R INCOME OR RECEIPT. THE FORMULA ESSENTIALLY APPORTIONS THE AMO UNT OF EXPENDITURE BY WAY OF INTEREST [OTHER THAN THE AMOU NT OF INTEREST INCLUDED IN CLAUSE (I)] INCURRED DURING TH E PREVIOUS YEAR IN THE RATIO OF THE AVERAGE VALUE OF INVESTMEN T, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE T OTAL INCOME, TO THE AVERAGE OF THE TOTAL ASSETS OF THE ASSESSEE. THE THIRD COMPONENT IS AN ARTIFICIAL FIGURE - ONE HALF PERCEN T OF THE AVERAGE VALUE OF THE INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPE ARING IN THE BALANCE SHEETS OF THE ASSESSEE, ON THE FIRST DAY AN D THE LAST DAY OF THE PREVIOUS YEAR. IT IS THE AGGREGATE OF TH ESE THREE COMPONENTS WHICH WOULD CONSTITUTE THE EXPENDITURE I N RELATION TO EXEMPT INCOME AND IT IS THIS AMOUNT OF EXPENDITU RE WHICH WOULD BE DISALLOWED UNDER SECTION 14A OF THE SAID A CT. IT IS, THEREFORE, CLEAR THAT IN TERMS OF THE SAID RULE, TH E AMOUNT OF EXPENDITURE IN RELATION TO EXEMPT INCOME HAS TWO AS PECTS - (A) DIRECT AND (B) INDIRECT. THE DIRECT EXPENDITURE IS STRAIGHTAWAY TAKEN INTO ACCOUNT BY VIRTUE OF CLAUSE (I) OF SUB- RULE (2) OF RULE 8D. THE INDIRECT EXPENDITURE, WHER E IT IS BY WAY OF INTEREST, IS COMPUTED THROUGH THE PRINCIPLE OF APPORTIONMENT, AS INDICATED ABOVE. AND, IN CASES WH ERE THE INDIRECT EXPENDITURE IS NOT BY WAY OF INTEREST, A R ULE OF THUMB FIGURE OF ONE HALF PERCENT OF THE AVERAGE VALUE OF THE INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, IS TAKEN.' 15. WE FIND THAT SECTION 14A(2) PROVIDES THAT THE A SSESSING OFFICER SHALL DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN REL ATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED, IF THE ASSES SING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATI SFIED WITH CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT ,OF SUCH EXPEN DITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT AND SECTION 14A(3) PROVIDES THAT, 'THE PROVISIONS OF SU B SECTION (2) SHALL APPLY IN RELATION TO A CASE WHERE AN ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED BY HIM IN RELATION TO INCOME WHICH DO ES NOT FORM PART OF THE ITA NO. 4156/DEL/2017 DLF UTILITIES LTD. 9 TOTAL INCOME UNDER THIS ACT'. WHILE A LOT OF EMPHAS IS IS PLACED BY THE COUNSEL ON WORDINGS OF SECTION 14A(2) WHICH REFER T O THE NEED OF ASSESSING OFFICER'S SATISFACTION TO THE EFFECT THAT THE CLAIM MADE BY THE ASSESSEE IS INCORRECT, IT SIMPLY OVERLOOKS THE PROV ISIONS OF SECTION 14A(3) WHICH STATE THAT A DISALLOWANCE U/S 14A(2) CAN ALSO BE MADE IN A CASE IN WHICH ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED FOR EARNING THE TAX EXEMPT INCOME. THEREFORE, A PLAIN READING O F THE STATUTORY PROVISIONS OF SECTION 14A(2) AND (3) SHOWS THAT WHE N ASSESSEE OFFERS A DISALLOWANCE U/S 14A,THE PROVISIONS OF SECTION 14A( 2) READ WITH RULE 8D CANNOT BE INVOKED UNLESS THE ASSESSING OFFICER IS S ATISFIED ABOUT INCORRECTNESS OF THE DISALLOWANCE SO OFFERED, BUT W HEN ASSESSEE DOES NOT OFFER ANY DISALLOWANCE U/S 14A ON HIS OWN, THE PROV ISIONS OF SECTION 14A(2) READ WITH RULE 8D CAN BE INVOKED WITHOUT THE RE BEING ANY NEED TO EXPRESS SATISFACTION ABOUT THE INCORRECTNESS OF SUC H A CLAIM. 16. IN THE INSTANT CASE, THE ASSESSEE HAD MADE A SU O-MOTO DISALLOWANCE OF RS.6,76,757/- AND THE ASSESSING OFFICER HAS NOT RECORDED THE DISSATISFACTION ABOUT THE DISALLOWANCE SUO-MOTO MAD E BY THE APPELLANT AND HAS NOT IDENTIFIED ANY EXPENDITURE WHICH CAN BE CONSIDERED TO BE EXPENDED IN CONNECTION WITH THE INVESTMENT ACTIVITY . THE APPELLANT HAS OWN FUNDS OF RS.39,796.21 LACS WHICH ARE FAR MORE T HAN THE INVESTMENTS OF RS.729.98 LACS. THE PLAIN READING OF THE STATUTO RY PROVISIONS OF SECTION 14A(2) AND 14A(3) SHOWS THAT WHEN THE ASSESSEE OFFE RED THE DISALLOWANCE U/S 14A, THE PROVISIONS OF SECTION 14A(2) READ WITH RULE 8D CANNOT BE INVOKED UNLESS THE ASSESSING OFFICER IS DISSATISFIE D ABOUT THE CORRECTNESS OF THE DISALLOWANCE SO OFFERED. 17. IN VIEW OF THE ABOVE, THE SUO-MOTO DISALLOWANCE OF RS. 6,76,757/- MADE BY THE ASSESSEE, THE FURTHER DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER RULE 8D(2)(II)&(III) READ WITH SECTIO N 14A, IS HEREBY DELETED. ITA NO. 4156/DEL/2017 DLF UTILITIES LTD. 10 18. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED ORDER PRONOUNCED IN THE OPEN COURT ON 16/12/2019. SD/- SD/- (H. S. SIDHU) (DR . B. R. R. KUMAR) JUDICIAL MEMBER ACCOUNT ANT MEMBER DATED: 16/12/2019 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR
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