DCIT CC 9, MUMBAI V. ACME HOUSING (I) LTD, MUMBAI

ITA 4524/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3753 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-02-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 06-06-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Opportunity of being heard
• Section: 143(3); 153A; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BE NCH, MUMBAI , ! ! ! ! '#. .%&. . !', ) BEFORE SHRI SANJAY ARORA, A. M. AND DR. S. T. M. P AVALAN, J. M. ./ I.T.A. NOS.4524 & 4523/MUM/2011 ( ' + !,+ ' + !,+ ' + !,+ ' + !,+ / / / / ASSESSMENT YEAR: 2006-07 & 2007-08) ASST. CIT, CENTRAL CIRCLE 9, 8 TH FLOOR, OLD CGO BLDG., ANNEX, M.K. ROAD, MUMBAI-400 020 ' ' ' ' / VS. ACME HOUSING (INDIA) PVT. LTD. ACME GHAR, 19, K.D. ROAD, BEHIND RASRAJ RESTAURANT, VILE PARLE (W), MUMBAI-400 056 - ./ . ./ PAN/GIR NO. AADCA 0705 E ( -/ / APPELLANT ) : ( 01-/ / RESPONDENT ) & ./ I.T.A. NOS.4667, 4669 & 4662/MUM/2011 ( ' + !,+ ' + !,+ ' + !,+ ' + !,+ / / / / ASSESSMENT YEAR: 2006-07 TO 2008-09) ACME HOUSING (INDIA) PVT. LTD. ACME GHAR, 19, K.D. ROAD, BEHIND RASRAJ RESTAURANT, VILE PARLE (W), MUMBAI-400 056 ' ' ' ' / VS. DY. CIT, CENTRAL CIRCLE 9, 8 TH FLOOR, OLD CGO BLDG., ANNEX, M.K. ROAD, MUMBAI-400 020 - ./ . ./ PAN/GIR NO. AADCA 0705 E ( -/ / APPELLANT ) : ( 01-/ / RESPONDENT ) ! 2 / REVENUE BY : SHRI PRAVIN KUMAR ' +34 5 2 / ASSESSEE BY : SHRI VIJAY MEHTA '! 5 4& / // / DATE OF HEARING : 18.02.2013 6 , 5 4& / DATE OF PRONOUNCEMENT : 15.05.2013 2 ITA NOS. 4524 & 4523,4667, 4669 & 4662/MUM/2011 ACME HOUSING (INDIA) PVT. LTD. 7 / O R D E R PER SANJAY ARORA, A. M.: THIS IS A SET OF FIVE APPEALS, I.E., CROSS-APPEALS BY THE ASSESSEE AND THE REVENUE FOR THE ASSESSMENT YEARS (A.Y.) 2006-07 AND 2007-08 , AND THE ASSESSEES APPEAL FOR A.Y. 2008-09, ARISING OUT OF THE CONSOLIDATED ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-37, MUMBAI (CIT(A) FOR SHORT) DATED 28. 03.2001, PARTLY ALLOWING THE ASSESSEES APPEALS FOR A.YS. 2006-07 TO 2009-10 IN RESPECT OF ASSESSMENTS U/S. 143(3) R.W.S. 153A OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER). THE APPEALS RAISING COMMON ISSUES, WERE TAKEN UP TOGETHER FOR HEARING. WE SHALL TAKE UP THE CROSS APPEALS FIRST. ASST. YEARS 2006-07 & 2007-08 2. THE ONLY ISSUE ARISING IN THE REVENUES APPEALS AND GROUND #1 OF THE ASSESSEES APPEALS, IS THE PART DELETION OF THE DISALLOWANCE U /S. 14A BY THE LD. CIT(A). WHILE THE ASSESSING OFFICER (AO) WORKED OUT THE DISALLOWANCE WITH RESPECT TO RULE 8D (OF THE INCOME TAX RULES, 1962), THE FIRST APPELLATE AUTHOR ITY RETAINED THE SAME ONLY QUA THE ADMINISTRATIVE (INDIRECT) EXPENSES, WORKING OUT THE SAME AT 0.5% OF THE AVERAGE INVESTMENT FOR THE YEAR. THE AO HAD NOT STATED AS TO HOW THE INTEREST BEARING BORROWED FUNDS HAVE BEEN UTILIZED FOR THE PURPOSE OF MAKING THE INVESTMENTS (IN SHARES OF A SUBSIDIARY COMPANY), WHICH WERE CLAIMED BY THE ASSE SSEE TO BE OUT OF INTERNAL ACCRUALS/BUILT-UP RESERVES. HE HAD MADE NO ATTEMPT TO ANALYZE AND BASE HIS FINDINGS ON THE ASSESSEES CASH FLOW STATEMENT. THE INTEREST CO MPONENT OF THE DISALLOWANCE U/S. 14A, COMPUTED IN TERMS OF R.8D (2) (II), AND WHICH CONST ITUTES THE (ONLY) OTHER PART OF THE SAID DISALLOWANCE, WAS ACCORDINGLY DELETED. THE DISALLOW ANCE QUA INDIRECT EXPENDITURE, ESTIMATED AT 0.5% OF THE AVERAGE INVESTMENT BY THE ASSESSING OFFICER (A.O.), WAS CONFIRMED BY HIM, FINDING IT REASONABLE, RELYING ON THE DECISION IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DY. CIT [2010] 328 TR 81 (BOM). AGGRIEVED, BOTH THE ASSESSEE AND THE REVENUE ARE IN APPEAL. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 3 ITA NOS. 4524 & 4523,4667, 4669 & 4662/MUM/2011 ACME HOUSING (INDIA) PVT. LTD. 3.1 AS REGARDS THE INTEREST DISALLOWANCE, THE LIMIT ED ISSUE BEFORE US IS WHETHER THE INVESTMENT/S, YIELDING INCOME, WHICH DOES NOT FORM PART OF THE TOTAL INCOME, COULD BE SAID TO BE FINANCED, WHOLLY OR PARTLY, OUT OF INTER EST BEARING FUNDS. THE ASSESSEE IN THIS REGARD, AS APPEARS TO US, HAS FURNISHED A CASH FLOW STATEMENT. WE SAY SO AS WE ARE UNABLE TO SEE THE IMPORT OF THE ASSESSEES ARGUMENT THAT T HE AO DID NOT SEE THE CASH FLOW STATEMENT, WHICH FINDS MENTION IN THE IMPUGNED ORDE R, OTHERWISE, I.E., IF THE ASSESSEE HAS ITSELF NOT FURNISHED THE SAME. IN FACT, EVEN ASSUM ING ITS SUBMISSION BEFORE THE AO, SO THAT IT WAS INCUMBENT ON HIM TO EXAMINE THE SAME, A ND BASE HIS DECISION ON THE FINDINGS ARISING THERE-FROM, THE LD. CIT(A) OUGHT TO HAVE EI THER REQUIRED THE AO TO DO SO - BY CALLING FOR A REMAND REPORT FROM HIM - OR HIMSELF E XAMINED THE SAME, ISSUING APPROPRIATE FINDINGS OF FACT. IN ITS ABSENCE, THE MATTER, WHICH IS PRIMARILY FACTUAL, GETS DECIDED DE HORS ANY FACTS AND FIGURES. THERE IS NO ROOM FOR ANY PR ESUMPTION. ON THE CONTRARY, AS AFORE-NOTED, IT IS NOT EVEN CLEAR IF THE CASH FLOW STATEMENT WAS SUBMITTED BY THE ASSESSEE, TO WHICH NO REFERENCE STOOD MADE EVEN IN THE COURSE OF HEARING BEFORE US. THE PRIMARY ONUS TO SUPPORT ITS CLAIM OF NO INTEREST (OR ANY OT HER EXPENDITURE FOR THAT MATTER), AND WITH REFERENCE TO ITS ACCOUNTS, IS ON THE ASSESSEE. ONLY ONCE IT SO DOES, THAT THE ASSESSING AUTHORITY IS REQUIRED TO VERIFY THE CORRECTNESS OR OTHERWISE OF THE ASSESSEES CLAIM/S, AND BASE HIS CONCLUSION ON THE FINDING/S OF FACTS ISSUE D IN PURSUANCE TO THE EXERCISE. THIS OUGHT TO HAVE BEEN RECTIFIED BY THE FIRST APPELLATE AUTHORITY, WHO HOWEVER HAS NOT. 3.2 IN THE CASE OF DEDICATED BORROWINGS, VIZ. FOR W ORKING CAPITAL, TERM LOANS (FOR CAPITAL ASSETS), ETC., IF THE ASSESSEE HAS MAINTAIN ED THE RELEVANT ASSET/S DURING THE CURRENCY OF THE BORROWINGS, THERE IS NO QUESTION OF THE BORR OWINGS - OR TO THAT EXTENT HAVING BEEN UTILIZED FOR TAX-FREE INVESTMENTS, SO AS TO QUALIFY FOR THE GENERAL POOL OF FUNDS HYPOTHESIS, WHICH ATTENDS THE PRESCRIPTION OF THE PROPORTIONATE FORMULA OF R. 8D(2)(II). FURTHER, THE INVESTMENTS MAY HAVE BEEN MADE AT THE FAG-END OF TH E YEAR. AS SUCH, CLEARLY, R. 8D BEING NOT MANDATORY FOR THE RELEVANT YEARS, THE AVERAGE I NVESTMENT - A MATTER OF FACT - CANNOT BE STATED TO BE AS ONE-HALF OF THE OPENING & CLOSING V ALUE (COST) THEREOF. AT THE SAME TIME, THE INVESTMENT/S MAY WELL HAVE BEEN MADE AT THE BEG INNING OF THE YEAR, LEADING TO AGAIN 4 ITA NOS. 4524 & 4523,4667, 4669 & 4662/MUM/2011 ACME HOUSING (INDIA) PVT. LTD. INAPPROPRIATENESS OF THE VALUATION OF THE AVERAGE I NVESTMENT MADE WITH REFERENCE TO EQUAL WEIGHT-AGE BEING ACCORDED TO THE OPENING AND CLOSIN G VALUES. LIKEWISE, THE TIME OF AVAILING THE BORROWINGS DURING THE YEAR MAY ALSO BE COME RELEVANT. IT NEEDS TO BE REALIZED THAT THE DISALLOWANCE IS IN RESPECT OF EXPENDITURE ACTUALLY INCURRED, SO THAT THOUGH SUBJECT TO ESTIMATION, THE SAME OUGHT TO BE AS CLOSE TO ACT UALS, OR PRECISE, AS POSSIBLE. IN THE INSTANT CASE, THE AVERAGE VALUE OF THE INVESTMENTS (AS PER R.8D) HAS WITNESSED AN INCREASE OF RS. 380 LAKHS DURING THE PREVIOUS YEAR RELEVANT TO AY 2007-08 (I.E., WITH REFERENCE TO THE IMMEDIATELY PRECEDING YEAR), FOR WHICH YEAR THE ASSESSEE HAS IN FACT RETURNED A LOSS. IN FACT, EVEN IN A SCENARIO OF POSITIVE INCOME, IT MAY WELL BE THAT THE SAME HAS NOT BEEN REALIZED, AND CONTINUES TO BE EMBEDDED IN THE CURRE NT ASSETS. IN FACT, THE CURRENT ASSETS (OR THE NET CURRENT ASSETS, I.E., CURRENT ASSETS MINUS CURRENT LIABILITIES) MAY CONTINUE TO BE MAINTAINED AT THE SAME LEVEL DURING THE YEAR, IMPLY ING REALIZATION OF PROFITS, IN WHICH CASE THESE WOULD BE PRESUMED TO HAVE BEEN INVESTED IN INVESTMENTS. THIS WE ALSO UNDERSTAND TO BE THE IMPORT OF THE DECISION IN CASE OF CIT V. RELIANCE UTILITIES & POWER LTD . (2009) 313 ITR 340 (BOM.), RELIED UPON BY THE ASS ESSEE BEFORE US. THE APPLICATION OF THE BORROWINGS CAN ONLY BE ASCERTAINED WITH REFE RENCE TO THE PURPOSE/S FOR WHICH THEY WERE EXTENDED, SUBJECT OF COURSE TO THE BORROWING E NTITY MAINTAINING THE CORRESPONDING ASSET/S AT THE REQUIRED LEVEL. FOR EXAMPLE, IN CASE OF A WORKING CAPITAL ADVANCE, WITH A MARGIN OF 25%, NET CURRENT ASSETS OF RS.100 WOULD S IGNIFY A UTILIZATION OF THE BORROWED FUNDS TO THE EXTENT OF RS.75 AND OWN CAPITAL AT RS. 25. IF THAT BE SO, EVEN IF THE ASSESSEE HAD APPLIED ITS OWN FUNDS TO THE RELEVANT ASSETS, T HE SUBSEQUENT BORROWINGS WOULD HAVE TO BE CONSIDERED AS SUBSTITUTING THE EXISTING SOURCE O F FINANCE; THE FUNDS BEING FUNGIBLE, SO THAT NO DISALLOWANCE QUA INTEREST EXPENDITURE ON THIS ADVANCE WOULD ENSUE. AS SUCH, A FUND FLOW ANALYSIS, IN PREFERENCE TO A CASH FLOW AN ALYSIS, WOULD BE MORE APPROPRIATE OR RELEVANT, WHILE NONE OBTAINS IN THE INSTANT CASE. A GAIN, IN CASE OF BOTH DEDICATED BORROWINGS AS WELL AS GENERAL BORROWINGS, THE AVERA GE FORMULA CAN BE APPLIED ONLY FOR THE LATTER, EXCLUDING THE QUANTUM OF THE DEDICATED FUNDS (AND THE CORRESPONDING ASSETS) IN WORKING OUT THE AVERAGE ASSETS (TOTAL) FOR ALLOCATI NG THE INTEREST ON THE GENERAL BORROWINGS. REVERTING BACK TO THE FIGURES OF THE EX AMPLE CITED, THE INTEREST ALLOCATION QUA 5 ITA NOS. 4524 & 4523,4667, 4669 & 4662/MUM/2011 ACME HOUSING (INDIA) PVT. LTD. GENERAL BORROWINGS WOULD BE MADE BY REDUCING THE TO TAL ASSETS BY RS.100/- INASMUCH AS ASSETS STAND FINANCED BY DEDICATED BORROWINGS (WORK ING CAPITAL ADVANCE) TO THE EXTENT OF RS.75/- AND OWN FUNDS BY RS.25/-. IN FACT, ANY INTE REST ON DEDICATED BORROWINGS, WHICH IS ON ASSET/S YIELDING TAX-FREE INCOME, WOULD FORM PAR T OF THE DIRECT EXPENSES INCURRED IN RELATION TO SUCH INCOME OR ASSET/S, DISALLOWABLE UN DER RULE 8D (2)(I). 3.3 WITH REGARD TO THE INDIRECT EXPENDITURE, WE ARE IN AGREEMENT WITH THE ASSESSMENT OF THE SAME BY THE REVENUE AT 0.5% OF THE AVERAGE V ALUE OF THE INVESTMENTS HELD DURING THE YEAR. HOWEVER, AS INDICATED ABOVE, RULE 8D BEIN G NOT MANDATORY, THE SAID AVERAGE VALUE WOULD HAVE TO BE WORKED OUT WITH REFERENCE TO THE ASSESSEES ACCOUNTS, REFLECTING THE TIMING OF THE SAID INVESTMENT RATHER THAN IN A PRESUMPTIVE MANNER BY ACCORDING EQUAL WEIGHT TO THE OPENING AND THE CLOSING VALUES OF THE INVESTMENT. WE DECIDE ACCORDINGLY. 4. THE MATTER IN OUR VIEW WOULD THEREFORE REQUIRE B EING SET ASIDE BACK TO THE FILE OF THE FIRST APPELLATE AUTHORITY FOR ADJUDICATION AFRE SH IN ACCORDANCE WITH LAW PER A SPEAKING ORDER AFTER AFFORDING A PROPER OPPORTUNITY OF HEARI NG TO BOTH THE SIDES. WE DECIDE ACCORDINGLY. 5. THE ONLY OTHER ISSUE IN THE ASSESSEES APPEALS F OR A.Y. 2006-07 AND 2007-08, IS THE PART CONFIRMATION OF THE DISALLOWANCE EFFECTED BY THE A.O. QUA CERTAIN EXPENSES @ 10% THEREOF ON ACCOUNT OF THE SAME BEING UNVERIFIAB LE. THE ASSESSEE CLAIMING BEFORE HIM OF A PART OF THE SAID EXPENSES AS BEING BORNE BY CH EQUE/S, SO THAT THERE IS NO QUESTION OF THE SAME BEING NOT VERIFIABLE, THE LD. CIT(A) ALLOW ED IT RELIEF WITH REFERENCE TO THE SAID EXPENDITURE, SUBJECT TO THE VERIFICATION OF THE ASS ESSEES CLAIM QUA VERIFIABILITY BY THE A.O. AGGRIEVED, THE ASSESSEE IS IN APPEAL. 6. THE FACTS ARE NOT IN DISPUTE. THE ASSESSEE, A CO MPANY IN THE BUSINESS OF BUILDERS AND DEVELOPERS, WAS FOUND TO HAVE INCURRED EXPENDIT URE IN AN AGGREGATE SUM OF RS.14.91 LAKHS AND RS.90.46 LAKHS FOR THE TWO SUCCESSIVE YEA RS RESPECTIVELY, ON TRAVELLING & CONVEYANCE, EXHIBITION, BUSINESS PROMOTION, SITE EX PENSES, MOTOR CAR EXPENSES AND 6 ITA NOS. 4524 & 4523,4667, 4669 & 4662/MUM/2011 ACME HOUSING (INDIA) PVT. LTD. DEPRESSION THEREON. THE ASSESSEE PROVIDING CERTAIN DETAILS OF THE EXPENSES, WHICH IT COULD, GIVEN AN OPPORTUNITY, CAUSE TO BE VERIFIED, THE LD. CIT(A) ALLOWED IT RELIEF TO THAT EXTENT, SO THAT THE DISALLOWANCE, WORKED OUT AT 10% OF THE RELEVANT EXPENDITURE, STOOD REDUCED TO RS.1,43,620/- AND RS.6,09,905/- FOR THE SAID TWO YEARS RESPECTIVELY. WE ARE UNABLE TO UNDERSTAND THE CAUSE OF THE ASSESSEES GR IEVANCE, GIVEN THE FACT THAT THE BASIS OF THE DISALLOWANCE AS CONFIRMED IS THE NON-VERIFICATI ON OF THE RELEVANT EXPENDITURE. HOW COULD, IN VIEW OF THE SAME, IT BE SAID TO HAVE BEEN , FIRSTLY, INCURRED AND, SECONDLY, WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF ITS BUSINESS BY THE ASSESSEE ? THE ASSESSEE BEFORE US ALSO CLAIMED THAT THE ENTIRE EXPENDITURE STANDS CARRIED OVER IN THE FORM OF WORK-IN-PROGRESS (WIP) FOR THE RELEV ANT YEARS. AS SUCH, NO DISALLOWANCE FOR THE CURRENT YEAR/S WOULD ARISE, AS THE DISALLOW ANCE WOULD ONLY RESULT IN REDUCTION OF THE WIP TO THE EXTENT OF THE AMOUNT/S DISALLOWED. W E FIND MERIT IN THIS ALTERNATE ARGUMENT, WHICH OF COURSE WOULD BE REQUIRED TO BE V ERIFIED AT THE END OF THE A.O. WE DECIDE SO, AS THIS ALTERNATE PLEA, CONCERNING A MAT TER OF FACT, HAS NOT BEEN RAISED BY THE ASSESSEE FOR THE FIRST TIME BEFORE US, BUT BEFORE T HE LD.CIT(A) AS WELL (REFER GROUNDS OF APPEAL BEFORE HIM), WHO THOUGH HAS NOT RENDERED ANY FINDING IN THE MATTER. ACCORDINGLY, THE MATTER IS RESTORED BACK TO THE FILE OF THE A.O. TO VERIFY THE ASSESSEES CLAIM WITH REGARD TO THE SAID EXPENDITURE NOT OPERATING TO RED UCE THE ASSESSEES PROFIT FOR THE YEAR INASMUCH AS THE ENTIRE OF ITS STAND CARRIED OVER IN THE FORM OF INVENTORY OF WIP. IF AND TO THE EXTENT THE SAME IS CORRECT, THE DISALLOWANCE OF THE EXPENDITURE WOULD ONLY RESULT IN A CORRESPONDING REDUCTION IN THE COST WHICH WOULD BE CARRIED OVER TO THE FOLLOWING YEAR PER THE SAID ACCOUNT (WIP). THE DISALLOWANCE WOULD, THU S, GET REFLECTED OR MATERIALIZED IN THE YEAR IN WHICH THE SAID WIP TRANSLATES INTO INCOME O N SALE (OR OTHERWISE) INASMUCH AS THERE WOULD BE A DIFFERENCE BETWEEN THE BOOK FIGURE OF WIP AND THE AMOUNT AT WHICH THE SAME WOULD STAND TO BE CARRIED FORWARD AND TAKEN IN TO ACCOUNT IN COMPUTING THE ASSESSEES INCOME FOR THE PURPOSES OF TAX FOR THE R ELEVANT YEAR/S. THE A.O. SHALL ISSUE DEFINITE FINDINGS IN THE MATTER, AFTER ALLOWING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD IN THE MATTER. WE DECIDE ACCORDINGLY. 7 ITA NOS. 4524 & 4523,4667, 4669 & 4662/MUM/2011 ACME HOUSING (INDIA) PVT. LTD. 7. IN THE RESULT, BOTH THE ASSESSEES AS WELL AS TH E REVENUES APPEALS FOR A.YS. 2006- 07 AND 2007-08 ARE ALLOWED FOR STATISTICAL PURPOSES . 3 48 ' +34 ! ! 5 ' + !,+ 2 006-07 ! 2007- 08 ?5 @AB !C4 5 4 DE ASSESSMENT YEAR 2008-09 8. THE ASSESSEES APPEAL RAISES TWO GROUNDS; THE FI RST OF WHICH, AS IN THE CASE FOR THE PRECEDING TWO YEARS, CONCERNS THE DISALLOWANCE U/S. 14A. THE SAME HAS BEEN WORKED OUT BY THE A.O. WITH REFERENCE TO RULE 8D, AS UNDER: DIRECT EXPENDITURE U/R.8D 2(I) - NIL INTEREST EXPENDITURE U/R.8D 2(II) - RS.74,721/- INDIRECT EXPENDITURE U/R.8D 2(III) - RS.4,35,881/- TOTAL - RS.5,10,602 THE SAME BEING U/R. 8D, WHICH IS MANDATORY FOR THE CURRENT YEAR, WITH THE ASSESSEE BEING UNABLE TO EXHIBIT THE FINANCING OF THE INVESTMENT/S HELD DURING THE YEAR AS BEING OUT OF INTEREST-FREE CAPITAL/FUNDS AVAILABLE WITH IT, THE DISALLOWANCE STOOD CONFIRMED BY THE LD. CIT(A) (REFER PARA 5 AND PARA 2.3.3 OF THE ASSESSME NT AND THE IMPUGNED ORDER RESPECTIVELY). 9. THE FACTS OF THE CASE AS WELL AS THE RESPECTIVE CASES OF THE PARTIES WERE THE SAME, I.E., AS FOR THE PRECEDING YEARS; WITH, RATHER, RUL E 8D BEING MANDATORY FOR THE CURRENT YEAR. EVEN AS CLARIFIED DURING HEARING, THERE IS NO SCOPE FOR ANY INTERFERENCE TO THE INDIRECT EXPENDITURE, ESTIMATED UNDER RULE 8D(2)(III). THIS IS AS THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE ITS CLAIM THAT NO EXPENDITURE WHATSOEV ER STANDS INCURRED IN RELATION TO THE TAX-FREE INVESTMENTS, WHICH IN FACT HAVE AGAIN WITN ESSED AN INCREASE FOR THE CURRENT YEAR, I.E., AT AN AVERAGE OF RS.871.76 LAKHS, AS AGAINST AT RS.579.88 LAKHS FOR THE IMMEDIATELY PRECEDING YEAR. WITH REGARD TO THE INTEREST EXPENDI TURE, THOUGH WE WOULD NORMALLY, I.E., IN THE REGULAR COURSE, BE INCLINED TO RESTORE THE M ATTER BACK INASMUCH AS THE ASPECT OF 8 ITA NOS. 4524 & 4523,4667, 4669 & 4662/MUM/2011 ACME HOUSING (INDIA) PVT. LTD. DETERMINATION OF THE FINANCING PATTERN OF THE INVES TMENTS HAS BEEN REMITTED TO THE FILE OF THE FIRST APPELLATE AUTHORITY FOR THE IMMEDIATELY P RECEDING YEAR, AND WHICH MAY HAVE A BEARING IN THE MATTER, HOWEVER, WE DO NOT CONSIDER IT NECESSARY IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THIS IS BECAUSE WE OBSER VE A LARGE SCALE MOVEMENT IN FUNDS DURING THE YEAR. NOT ONLY HAS THE INVESTMENT PORTFO LIO WITNESSED A (NET) INCREASE OF APPROXIMATELY RS.2 CRORES, THE INTEREST EXPENDITURE STANDS REDUCED TO A MERE FRACTION, I.E., TO RS.8.72 LAKHS (FOR THE CURRENT YEAR) FROM RS.67. 82 LAKHS FOR A.Y. 2007-08, SIGNIFYING RETIREMENT OF DEBT TO A SUBSTANTIAL EXTENT. UNDER T HE CIRCUMSTANCES, THEREFORE, THE INTEREST DISALLOWANCE OF RS.74,721/- ON A GENERALIZED BASIS, PARTICULARLY CONSIDERING THAT THE ASSESSEE HAS NOT MADE OUT ANY CASE, CANNOT BE FAULT ED WITH. THE DISALLOWANCE IS, THEREFORE, CONFIRMED. 10. THE SECOND ISSUE, PER GROUND NO. 2, IS AGAIN TH E SAME AS FOR THE PRECEDING TWO YEARS (REFER PARAS 5,6 OF THIS ORDER); THE TOTAL EX PENDITURE INVOLVED BEING RS.57.56 LAKHS, WITH THE DISALLOWANCE HAVING BEEN RESTRICTED, ALBEI T RETAINING THE DISALLOWANCE RATIO OF 10%, TO RS.3,35,295/- BY THE LD.CIT(A). THE FACTS A ND CIRCUMSTANCES OF THE CASE AS WELL AS THE RESPECTIVE CASES BY THE PARTIES BEING THE SA ME, WE FIND NO REASON TO TAKE ANY DIFFERENT VIEW OF THE MATTER, I.E., AS EXPRESSED BY US VIDE PARA 6 OF THIS ORDER. WE, THEREFORE, SIMILARLY, CONFIRM THE DISALLOWANCE IN P RINCIPLE, SUBJECT OF COURSE TO THE DIRECTION WITH REFERENCE TO THE WIP AS MADE VIDE TH E SAID PARA 6. WE DECIDE ACCORDINGLY. 11. IN THE RESULT, THE ASSESSEES APPEAL FOR A.Y. 2 008-09 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 3 48 ' +34 5 !,+ 200 8 -0 9 ?5 @AB 7 !C4 5 4 DE ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH MAY, 2013 7 5 6, F'8 5 G SD/- SD/- (DR. S. T. M. PAVALAN) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; F' DATED : 15.05.2013 9 ITA NOS. 4524 & 4523,4667, 4669 & 4662/MUM/2011 ACME HOUSING (INDIA) PVT. LTD. !.'../ ROSHANI , SR. PS 7 5 04H IH,4 7 5 04H IH,4 7 5 04H IH,4 7 5 04H IH,4/ COPY OF THE ORDER FORWARDED TO : 1. -/ / THE APPELLANT 2. 01-/ / THE RESPONDENT . 3. J ( ) / THE CIT(A) 4. J / CIT - CONCERNED 5. H!MG 04' , , / DR, ITAT, MUMBAI 6. G'+ N / GUARD FILE. 7' 7' 7' 7' / BY ORDER, @ @@ @/ // /D D D D (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI