DCIT-8(2), MUMBAI V. OVIRA LOGISTICS PVT.LTD., MUMBAI

ITA 4567/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8368 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 18-10-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 06-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: D V LAKHANI
• Keywords: Depreciation; Opportunity of being heard; Earning of tax free income; Revenue expenditure; Capital expenditure
• Section: 43B; 143(3); 14A; 115JB; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI BEFORE SHRI DINESH KUMAR AGARWAL (J.M.) AND SHRI D. KARUNAKARA RAO (A.M.) ITA NO. 4567/MUM /2011 ASSESSMENT YEAR : 2007-08 DY. COMMISSIONER OF INCOME TAX 8(2), ROOM NO. 216-A, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. VS. M/S OVIRA LOGISTICS PVT. LTD., PLOT NO. 14, REHEJA VIHAR, IL&FS HOUSE, CHANDIVALI, ANDHERI (EAST), MUMBAI 400 072. PAN AABCP5129M (APPELLANT) (RESPONDENT) ITA NO. 4594/MUM /2011 ASSESSMENT YEAR : 2007-08 M/S OVIRA LOGISTICS PVT. LTD., PLOT NO. 14, REHEJA VIHAR, IL&FS HOUSE, CHANDIVALI, ANDHERI (EAST), MUMBAI 400 072. PAN AABCP5129M VS. DY. COMMISSIONER OF INCOME TAX 8(2), ROOM NO. 216-A, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI RAJARSHI DWIVEDY ASSESSEE BY : SHRI D.V. LAKHANI DATE OF HEARING 18-10-2012 DATE OF PRONOUNCEMENT 31-10-2012 O R D E R PER DINESH KUMAR AGARWAL, J.M. THESE CROSS APPEALS BY THE REVENUE AND THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DTD. 10-2-2011 PASSED BY THE LD. CIT(A) 17, MUMBAI ITA NO. 4567/MUM/2011 & 4594/MUM/2011 2 FOR THE A.Y. 2007-08. BOTH THESE APPEALS ARE DISPOS ED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY IS A SUBSIDIARY COMPANY OF M/S INFRASTRUCTURE LEASING & FINANCIAL SERVICES LTD. (IL&FS) AND DURING THE YEAR IT IS ENGAGED IN T HE BUSINESS OF PROVIDING MANAGEMENT CONSULTANCY, BUSINESS PROCESSE S OUTSOURCING, CAR RENTAL AND OTHER ANCILLARY ACTIVITIES. THE RETU RN WAS FILED DECLARING TOTAL INCOME OF AT RS. 4,46,46,873/-. HOWEVER, THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS. NIL UNDER THE NORMAL PROVISIONS OF THE ACT AND BOOK PROFIT U/S 115JB OF THE INCOME TAX ACT, 19 61 (THE ACT) AT RS. 8,97,48,777/- VIDE ORDER DTD. 29-12-2009 PASSED U/S 143(3) OF THE ACT. ON APPEAL, THE LD. CIT(A) PARTLY ALLOWED THE APPEAL . 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE REVENUE AND THE ASSESSEE BOTH ARE IN APPEAL BEFORE US. ITA NO. 4567/MUM/2011 (BY REVENUE) 4. GROUND NO. IS AGAINST THE PART RELIEF ALLOWED BY THE LD. CIT(A) IN RESPECT OF DISALLOWANCE U/S 14A OF THE ACT. 5. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE A.O. OBSERVED THAT THE ASSESSEE HAD MADE INVESTMENT IN SHARES AND ALSO CAR RIED OUT TRADING IN SHARES ON WHICH DIVIDEND INCOME OF RS. 12,02,765/- HAS BEEN EARNED WHICH WAS CLAIMED EXEMPT U/S 10(34) OF THE ACT. TH E A.O. FURTHER ITA NO. 4567/MUM/2011 & 4594/MUM/2011 3 OBSERVED THAT AN EXPENDITURE OF RS. 1,13,676/- HAS BEEN ALLOCATED AGAINST SUCH EXEMPT INCOME. THE A.O. FURTHER OBSER VED THAT THE COMPANY CANNOT EARN DIVIDEND WITHOUT ITS EXISTENCE AND MANAGEMENT. HE FURTHER OBSERVED THAT INVESTMENT DECISIONS ARE V ERY COMPLEX IN NATURE AND REQUIRE SUBSTANTIAL MARKET RESEARCH, DAY-TO-DAY ANALYSIS OR MARKET TRENDS AND DECISIONS WITH REGARD TO ACQUISITION, RE TENTION AND SALE OF SHARES AT THE MOST APPROPRIATE TIME AND HENCE NOT C ORRECT TO SAY THAT DIVIDEND INCOME CAN BE EARNED BY INCURRING NO OR N OMINAL EXPENDITURE. THUS, IT WAS DIFFICULT TO ACCEPT THAT A COMPANY CAN EARN SUBSTANTIAL DIVIDEND INCOME WITHOUT INCURRING ANY EXPENSES WHAT SOEVER INCLUDING MANAGEMENT OR ADMINISTRATIVE EXPENSES AS INVESTMENT DECISIONS ARE GENERALLY TAKEN IN THE MEETINGS OF THE BOARD OF DIR ECTORS FOR WHICH ADMINISTRATIVE EXPENSES ARE INCURRED. THE A.O. FUR THER OBSERVED THAT THE TERM EXPENDITURE OCCURRING IN SECTION 14A WOULD T AKE IN ITS SWEEP NOT ONLY DIRECT EXPENDITURE BUT ALSO ALL FORMS OF EXPEN DITURE REGARDLESS OF WHETHER THEY ARE FIXED, VARIABLE, DIRECT, INDIRECT, ADMINISTRATIVE, MANAGERIAL OR FINANCIAL. WITH THE SAID OBSERVATIONS , THE A.O. WHILE APPLYING THE PROVISION OF SECTION 14A READ WITH RUL E 8 D OF THE INCOME TAX RULES, 1962 ALSO RELIED ON THE DECISION OF THE SPECIAL BENCH OF ITAT IN THE CASE OF M/S DAGA CAPITAL MANAGEMENT PVT. LTD . (312 ITR (AT) 1 (MUM)[SB], COMPUTED THE DISALLOWANCE AT RS. 99,56,9 33/- AS PER WORKING GIVEN AT PAGE 5 & 6 OF THE ASSESSMENT ORDER . ON APPEAL, THE ASSESSEE WHILE RELYING ON THE DECISION OF THE HONB LE BOMBAY HIGH COURT ITA NO. 4567/MUM/2011 & 4594/MUM/2011 4 IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD. V. DC IT (2010) 328 ITR 81 (BOM) SUBMITTED THAT THE DISALLOWANCE OF INTEREST O N PRORATA BASIS OUGHT TO HAVE BEEN MADE BY ADOPTING THE VALUE OF INVESTME NT APPEARING IN THE BALANCE SHEET AS UNDER:- A INTEREST EXPENSES (IN RS.) 4,93,58,348 B AVERAGE INVESTMENT (IN RS.) PARTICULARS STOCK INVESTMENT TOTAL OPENING BALANCE 4,53,89,792 23,99,900 4,77,89,692 CLOSING BALANCE 1,36,13,050 12,24,000 1,48,37,050 TOTAL 5,90,02,842 36,23,900 6,26,26,742 AVERAGE INVESTMENT 2,95,01,421 18,11,950 3,13,13,371 C AVERAGE ASSETS PARTICULARS AMOUNT (RS) OPENING BALANCE 51,23,97,001 CLOSING BALANCE 51,81,00,000 TOTAL 103,04,97,001 AVERAGE INVESTMENT 51,52,48,501 THE LD. CIT(A) WHILE RELYING ON THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT IN GODREJ AND BOYCE MFG. CO. LTD. (SUPRA) REJ ECTED THE PLEA OF THE ASSESSEE THAT NO EXPENDITURE HAD BEEN INCURRED FOR EARNING EXEMPT INCOME AND THAT ONLY DIRECT EXPENDITURE CAN BE CONS IDERED FOR DISALLOWANCE OBSERVED THAT THE ASSESSEE HAS NOT EST ABLISHED THAT BORROWED FUNDS HAVE NOT BEEN UTILISED FOR MAKING SU CH INVESTMENTS INCOME FROM WHICH WAS EXEMPT FROM TAX, HOWEVER, ACC EPTED THE CALCULATION GIVEN BY THE ASSESSEE AND HELD THAT THE DISALLOWANCE U/S 14A SHOULD BE RESTRICTED TO RS. 31,69,778/-. 6. AT THE TIME OF HEARING THE LD. D.R. WHILE RELYIN G ON THE ORDER OF THE A.O. SUBMITS THAT HE HAS NO OBJECTION IF THE ISSUE IS SET ASIDE TO THE FILE ITA NO. 4567/MUM/2011 & 4594/MUM/2011 5 OF THE A.O. IN THE LIGHT OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD. (SUPR A). 7. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESS EE, AT THE OUTSET, SUBMITS THAT THE ASSESSEE HAS SUO MOTU DISALLOWED T HE EXPENDITURE OF RS. 1,13,676/- AGAINST THE EXEMPT INCOME. HE FURTH ER SUBMITS THAT IN VIEW OF THE RATIO OF THE DECISION IN GODREJ AND BOY CE MFG. CO. LTD. (SUPRA) THE ASSESSEE HAS WORKED OUT THE DISALLOWANCE OF RS. 31,69,778/- AS APPEARING AT PARA 4.3 OF THE APPELLATE ORDER AND TH E LD. CIT(A) AFTER CONSIDERING HAS ACCEPTED THE SAME. HE, THEREFORE, SUBMITS THAT THE ORDER PASSED BY THE LD. CIT(A) DOES NOT CALL FOR AN Y INTERFERENCE. 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSION OF T HE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUT E THAT FOLLOWING THE DECISION OF GODREJ AND BOYCE MFG. CO. LTD. (SUPRA) SOME DISALLOWANCE IS CALLED FOR ON REASONABLE BASIS. THE A.O. WHILE MAK ING THE DISALLOWANCE U/S 14A HAS WORKED OUT THE DISALLOWANCE AS PER RULE 8D OF THE INCOME TAX RULES, 1962 WHICH ACCORDING TO THE DECISION IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD. (SUPRA) IS NOT APPLICABLE F OR THE A.Y. 2007-08. HOWEVER, BEFORE THE LD. CIT(A) THE ASSESSEE HAS FIL ED WORKING OF DISALLOWANCE U/S 14A AMOUNTING TO RS. 31,69,778/-. THE LD. CIT(A) IN VIOLATION TO RULE 46-A OF THE INCOME TAX RULES, 196 2 AND WITHOUT GIVING ANY FINDING ON THE EXAMINATION OF THE WORKING GIVEN BY THE ASSESSEE HAS ITA NO. 4567/MUM/2011 & 4594/MUM/2011 6 ACCEPTED THE WORKING SUBMITTED BY THE ASSESSEE. TH EREFORE, IN THE INTEREST OF JUSTICE, WE CONSIDER IT FAIR AND REASON ABLE THAT THE MATTER SHOULD GO BACK TO THE FILE OF THE A.O. AND ACCORDIN GLY WE SET ASIDE THE ORDER PASSED BY THE REVENUE AUTHORITIES ON THIS ACC OUNT AND RESTORE THE SAME TO THE FILE OF THE A.O. TO EXAMINE THE SAME AF RESH IN THE LIGHT OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N GODREJ AND BOYCE MFG. CO. LTD. (SUPRA) AND ACCORDING TO LAW AFTER PR OVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GR OUND TAKEN BY THE REVENUE IS, THEREFORE, PARTLY ALLOWED FOR STATISTIC AL PURPOSE. 9. GROUND NO. 2 IS AGAINST THE DELETION OF DISALLOW ANCE OF SERVICE TAX U/S 43B OF THE ACT. 10. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE A.O . OBSERVED THAT THE ASSESSEE HAS SHOWN OTHER LIABILITY OF RS. 1,17,36,9 88/-. BY LETTER DTD. 25-12-2009 THE ASSESSEE FILED DETAILS OF OTHER LIAB ILITIES ALONG WITH PROOF OF PAYMENT. ON PERUSAL OF THE DETAILS, THE A.O. OB SERVED THAT IT INCLUDED SERVICE TAX PAYABLE OF RS. 48,10,998/- AND SERVICE TAX PAYABLE ON MANAGEMENT CONSULTANCY OF RS. 41,97,663/- FOR WHICH NO DOCUMENTARY EVIDENCE FOR PAYMENT WAS FILED. THE A.O. PRESUMED THAT SUCH SERVICE TAX HAD NOT BEEN PAID AND ACCORDINGLY DISALLOWED THE SE RVICE TAX PAYABLE OF RS. 90,08,661/- (RS. 48,10,998/- PLUS RS. 41,97,663 /-) U/S 43B OF THE ACT. ON APPEAL IT WAS SUBMITTED BY THE ASSESSEE THA T THE SUM OF RS. 41,97,663/- HAD BEEN PAID BEFORE THE DUE DATE OF FI LING OF RETURN AND IN ITA NO. 4567/MUM/2011 & 4594/MUM/2011 7 SUPPORT COPIES OF CHALLANS WERE ALSO FILED. REGARD ING SERVICE TAX PAYABLE OF RS. 48,10,998/- IT WAS CONTENDED THAT THERE WAS NO LIABILITY TO PAY SERVICE TAX AS ON 31-3-2007 AS THE AMOUNTS WERE NOT RECEIVED FROM THE PARTIES TO WHOM SERVICES WERE PROVIDED, THEREFORE, PROVISIONS OF SECTION 43B ARE NOT APPLICABLE. THE LD. CIT(A) WHILE DELETI NG THE PART OF THE DISALLOWANCE ON THE GROUND THAT THE SAID AMOUNT WAS PAID BEFORE THE DUE DATE OF FILING OF RETURN, OBSERVED IN RESPECT O F OTHER DISALLOWANCE THAT SERVICE TAX HAD NOT BECOME PAYABLE, 43B IS NOT APPL ICABLE AND HENCE HE DELETED THE ENTIRE DISALLOWANCE OF RS. 90,08,661/-. 11. AT THE TIME OF HEARING THE LD. D.R. SUPPORTS TH E ORDER OF THE A.O. 12. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSES SEE WHILE RELYING ON THE ORDER OF THE LD. CIT(A) SUBMITS THAT THE ASSESS EE HAS NOT DEBITED THE AMOUNT OF SERVICE TAX IN ITS P&L ACCOUNT. HE FURTH ER SUBMITS THAT SINCE THE ASSESSEE HAS PAID A SUM OF RS. 41,97,663/- BEFO RE THE DUE DATE OF FILING OF RETURN, THEREFORE, THE SAID AMOUNT CANNOT BE DISALLOWED. WITH REGARD TO OTHER DISALLOWANCE OF RS. 48,10,998/- HE SUBMITS THAT THE SERVICE TAX CANNOT BE SAID TO BE PAYABLE AND, THERE FORE, THE PROVISIONS OF SECTION 43B COULD NOT BE INVOKED AND IN SUPPORT THE RELIANCE WAS ALSO PLACED IN PHARMA SEARCH V. ACIT (2012) 53 SOT 1 (MU M.), ACIT VS. REAL IMAGE MEDIA TECHNOLOGIES P. LTD. (2008) 306 ITR (A T) 106 (CHENNAI) AND GOETZE (INDIA) LTD. VS. CIT (2009) 32 SOT 101 (DELH I). ITA NO. 4567/MUM/2011 & 4594/MUM/2011 8 13. WE HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUT E THAT THE ASSESSEE HAS PAID THE AMOUNT OF SERVICE TAX OF RS. 41,97,663/- B EFORE THE DUE DATE OF FILING OF RETURN, THEREFORE, THE LD. CIT(A) HAS RIG HTLY DELETED THE SAID DISALLOWANCE. AS REGARDS OTHER DISALLOWANCE OF SER VICE TAX PAYABLE RS. 48,10,998/- WE FIND MERIT IN THE PLEA OF THE LD. CO UNSEL FOR THE ASSESSEE THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN PHARMA SEARCH (SUPRA) WHEREIN THE TRIBU NAL AFTER CONSIDERING THE DECISION OF CHOWRINGHEE SALES BUREA U (P.) LTD. VS. CIT (1977) 110 ITR 385 (CAL), ACIT VS. REAL IMAGE MEDIA TECHNOLOGIES (P.) LTD. (2008) 114 ITD 573 (CHENNAI) AND OTHER DECISIO NS HELD AS UNDER:- .AS FAR AS SERVICE TAX IS CONCERNED, AS PER THE LAW PREVAILING DURING THE PREVIOUS YEAR, THE LIABILITY TO PAY THE SAME ARISES ONLY ON RECEIPT BY THE ASSESSEE. SINCE THE LIABILITY TO PAY SERVICE TAX DOES NOT EXIST IN THE PRESENT CASE, THE SERVICE TAX CANNOT B E SAID TO BE PAYABLE AND THEREFORE PROVISIONS OF SEC.43-B OF THE ACT COU LD NOT ALSO BE INVOKED. 14. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BR OUGHT ON RECORD BY THE REVENUE, WE RESPECTFULLY FOLLOWING THE CONSISTE NT VIEW OF THE TRIBUNAL DECLINE TO INTERFERE WITH THE ORDER OF THE LD. CIT( A) AND ACCORDINGLY THE GROUND TAKEN BY THE REVENUE IS REJECTED. 15. GROUND NO. 3 IS AGAINST THE DELETION OF DISALLO WANCE OF PAYMENT OF SOFTWARE CHARGES RS. 10,68,161/-. ITA NO. 4567/MUM/2011 & 4594/MUM/2011 9 16. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE A.O . OBSERVED THAT THE ASSESSEE HAS MADE PAYMENT OF SOFTWARE CHARGES TO IT S GROUP COMPANIES WHICH ARE (A) IL & FS INFOTECH LTD. RS. 9,80,825/ - AND (B) IL & FS INFOTECH FINVEST LTD. RS. 16,89,500/-. HE FURTHER OBSERVED THAT AS THE ASSESSEE HAS NOT SUBMITTED ANY DOCUMENTARY EVIDENCE WHICH COULD SUBSTANTIATE THAT THE ABOVE EXPENDITURE WERE REVENU E IN NATURE, THE A.O. TREATED THE ENTIRE SOFTWARE EXPENDITURE CLAIMED OF RS. 26,70,405/- AS CAPITAL EXPENDITURE AFTER ALLOWING DEPRECIATION @ 6 0% WHICH WAS WORKED OUT TO RS. 16,02,243/-, AND ACCORDINGLY HE DISALLOW ED A SUM OF RS. 10,68,162/-. ON APPEAL IT WAS SUBMITTED BY THE ASSE SSEE THAT THE EXPENDITURE WAS NOT INCURRED FOR PURCHASE OF SOFTWA RE BUT FOR MAINTENANCE OF SOFTWARE AND TECHNICAL SUPPORT SERVI CES PROVIDED BY IL & FS INFOTECH LTD. AND IL & FS FINANCIAL SERVICES LTD ., AND HENCE SUCH EXPENDITURE BEING REVENUE IN NATURE INCURRED FOR TH E PURPOSES OF BUSINESS IS ALLOWABLE AND IN SUPPORT COPY OF INVOIC ES WERE ALSO FILED. THE LD. CIT(A) AFTER CONSIDERING THE SAME DELETED THE D ISALLOWANCE MADE BY THE A.O. 17. AT THE TIME OF HEARING THE LD. D.R. SUPPORTS TH E ORDER OF THE A.O. 18. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSES SEE RELIED ON THE ORDER OF THE LD. CIT(A). 19. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE FACTS ARE ITA NO. 4567/MUM/2011 & 4594/MUM/2011 10 NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUT E THAT BEFORE THE A.O. IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE HAS MADE PAYMENT FOR MAINTENANCE OF SOFTWARE AND TECHNICAL SUPPORT SERVI CES PROVIDED BY THE ABOVE TWO COMPANIES AND IN SUPPORT, THE ASSESSEE HA S ALSO FILED PURCHASE DETAILS OF SOFTWARE EXPENSES ALONG WITH NA ME AND ADDRESS, AMOUNT AND TDS DEDUCTED ETC. HOWEVER, THE A.O. WIT HOUT CONSIDERING THE SAME HAS TREATED THE SOFTWARE EXPENDITURE AS CA PITAL IN NATURE AND AFTER ALLOWING THE DEPRECIATION @ 60% MADE THE DISA LLOWANCE OF RS. 10,68,162/- WHICH WAS DELETED BY THE LD. CITA) ON T HE GROUND THAT THE PAYMENT IS NOT FOR THE PURCHASE OF SOFTWARE BUT FOR MAINTENANCE OF SOFTWARE AND TECHNICAL SUPPORT. IN THE ABSENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD BY THE REVENUE AGAINST THE ABOVE F ACTUAL MATRIX, WE ARE OF THE VIEW THAT THE A.O. WAS NOT JUSTIFIED IN TREA TING THE MAINTENANCE OF SOFTWARE EXPENSES AS CAPITAL EXPENDITURE AND THE LD . CIT(A) HAS RIGHTLY DELETED SAME. HOWEVER, IT HAS BEEN AGREED BY THE L D. COUNSEL FOR THE ASSESSEE THAT IF THE SAID EXPENDITURE IS TREATED AS REVENUE EXPENDITURE, THE DEPRECIATION IS NOT ALLOWABLE AND HE AGREED FOR THE DISALLOWANCE OF THE SAME AND ACCORDINGLY TO THIS EXTENT THE ORDER P ASSED BY THE LD. CIT(A) IS MODIFIED. THE GROUND TAKEN BY THE REVENUE IS, T HEREFORE, PARTLY ALLOWED. 20. GROUND NO. 4 IN REVENUES APPEAL READS AS UNDER :- ITA NO. 4567/MUM/2011 & 4594/MUM/2011 11 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE OF RS. 99,56,933/- MADE U/S 14A OF THE ACT TO RS. 31,69,778/- FOR THE PURPOSE O F COMPUTATION OF BOOK PROFIT U/S 115JB OF THE I.T. ACT. 21. GROUND NOS. 1 TO 3 IN ASSESSEES APPEAL IN ITA NO. 4594/MUM/2011 READ AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L EARNED COMMR. OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THAT W HILE COMPUTING THE BOOK PROFIT U/S 115JB THE DISALLOWANCE MADE U/S 14A AMOUNTING TO RS. 31,69,788/- BE ADDED TO THE BOOK PROFIT. THE APPEL LANT PRAYS THAT THE CONCLUSION REACHED BY THE LEARNED CIT(A) IS ERRONEO US AND CONTRARY TO THE PROVISIONS OF LAW. 2. THE APPELLANT PRAYS THAT WHILE COMPUTING BOOK PR OFIT U/S 115JB NO ADDITION OF THE DISALLOWANCE COMPUTED U/S 14A SH OULD BE MADE TO THE BOOK PROFIT. 3. THE APPELLANT PRAYS THAT THE BOOK PROFIT MAY BE COMPUTED U/S 115JB WITHOUT MAKING ANY ADDITIONS ON ACCOUNT OF TH E DISALLOWANCE COMPUTED U/S 14A. 22. SINCE COMMON ISSUE IS INVOLVED, THE ABOVE GROUN DS ARE DISPOSED OF AS UNDER. 23. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE A.O . WHILE CALCULATING THE BOOK PROFIT U/S 115JB OF THE ACT HAS TAKEN NET PROF IT AS PER P&L ACCOUNT RS. 7,97,91,844/- AND ADDED DISALLOWANCE U/S 14A RS . 99,56,933/- AND THUS HE WORKED OUT THE TOTAL BOOK PROFIT RS. 8,97,4 8,777/-. ON APPEAL IT WAS SUBMITTED THAT AS PER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB OF THE ACT ONLY THE AMOUNT OF EXPENDITURE RELATABLE TO INCOME EXEMPT U/S 10 CAN BE ADDED. THE ASSESSEE HAD NOT EARNED ANY EX EMPT INCOME AS EVIDENT FROM P&L ACCOUNT. IT WAS FURTHER CONTENDED THAT THE DISALLOWANCE U/S 14A MADE WHILE COMPUTING PROFIT U/ S 28 WAS ON A ITA NO. 4567/MUM/2011 & 4594/MUM/2011 12 DIFFERENT FOOTING FROM COMPUTING BOOK PROFIT U/S 1 15JB AS THE WORDINGS OF BOTH SECTIONS ARE DIFFERENT, HENCE, THE ADDITION U/S 14A WHILE WORKING OUT BOOK PROFIT IS NOT CORRECT. THE LD. CIT(A) AFTE R CONSIDERING THE ASSESSEES SUBMISSION DIRECTED THE A.O. TO RESTRICT ADDITION TO THE DISALLOWANCE U/S 14A I.E RS. 31,69,778/-. 24. AT THE TIME OF HEARING THE LD. D.R. SUBMITS THA T THE LD. CIT(A) WAS NOT JUSTIFIED IN DIRECTING THE A.O. RESTRICT THE DI SALLOWANCE TO RS. 31,69,778/- FOR THE PURPOSE OF COMPUTING OF BOOK PR OFIT U/S 115JB OF THE ACT. HE FURTHER SUBMITS THAT IN VIEW OF THE PLE A TAKEN IN GROUND NO. 1 OF THE REVENUES APPEAL , THE ISSUE MAY BE SET ASID E TO THE FILE OF THE A.O. 25. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE WHILE REITERATING THE SAME SUBMISSION AS SUBMITTED BEFORE THE LD. CIT(A) FURTHER SUBMITS THAT THE PROVISION OF SECTION 14A C ANNOT BE IMPORTED INTO WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF THE AC T INASMUCH AS CLAUSE (F) OF EXPLANATION TO SEC. 115JB REFERS TO T HE AMOUNT DEBITED TO THE PROFIT & LOSS ACCOUNT WHICH CAN BE ADDED BACK T O THE BOOK PROFIT WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT AN D, THEREFORE, HE HAS NO OBJECTION IF THE ADDITION OF THE DISALLOWANCE U/ S 14A RS. 1,13,676/- IS MADE IN PLACE OF RS. 99,56,933/- AND FOR THIS PROPO SITION THE RELIANCE WAS ALSO PLACED IN QUIPPO TELECOM INFRASTRUCTURE LT D. VS. ACIT IN ITA NO. 4931/DEL/2010 FOR A.Y. 2007-08 DTD. 18-2-2011, M/S ESSAR ITA NO. 4567/MUM/2011 & 4594/MUM/2011 13 TELEHOLDINGS LTD. VS. DCIT IN ITA NO. 3850/MUM/2010 FOR A.Y. 2005-06 DTD. 29-7-2011 AND GOETZE (INDIA) LTD. VS. CIT (200 9) 32 SOT 101 (DELHI). 26. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE FACTS ARE NOT IN DISPUTE. WE FIND MERIT IN THE PLEA OF THE LD . D.R. THAT IN VIEW OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF GODREJ AND BOYCE MFG. CO. LTD. (SUPRA) THE ISSUE MAY BE SET AS IDE TO THE FILE OF THE A.O. SINCE WE HAVE SET ASIDE THE ISSUE OF DISALLOW ANCE U/S 14A TO THE FILE OF THE A.O., WE ARE OF THE VIEW THAT IN THE INTERES T OF JUSTICE THIS ISSUE MAY ALSO BE SET ASIDE TO THE FILE OF THE A.O. AND A CCORDINGLY WE SET ASIDE THE MATTER TO THE FILE OF THE A.O. TO DECIDE THE SA ME AFRESH IN THE LIGHT OF THE DIRECTION GIVEN IN PARA 8 OF THIS ORDER AND ACC ORDING TO LAW INCLUDING THE DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE AND ALSO THE DECISION IN THE CASE OF SONATA INFORMATION TECHNOLO GY LTD. VS. DY. CIT (2012) 19 ITR (TRIB) 408 (MUMBAI) AFTER PROVIDING R EASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUNDS TAKEN BY THE REVENUE AND ASSESSEE ARE, THEREFORE, PARTLY ALLOWED FOR STATIST ICAL PURPOSE. 27. IN THE RESULT, BOTH APPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 31-10-2012. (D. KARUNAKARA RAO ) ACCOUNTANT MEMBER (DINESH KUMAR AGARWAL) JUDICIAL MEMBER MUMBAI, DATED : 31-10-2012. ITA NO. 4567/MUM/2011 & 4594/MUM/2011 14 RK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 36, MUMBA I 4. COMMISSIONER OF INCOME TAX CENTRAL -1, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH C, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI