ADDL CIT 10(1), MUMBAI V. JUNIPER HOTELS P.LTD, MUMBAI

ITA 4710/MUM/2012

• Counselvise Citation: 471019914 RSA 2012
• Duration Of Justice: 2 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 19-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 16-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHEKHAR L GAJBHIYE
• Assessee Lawyers: SUNI BHANDARI
• Keywords: Business income; Depreciation; Earning of tax free income; Retrospective amendment; Bad and doubtful debts; Revenue expenditure; Capital expenditure
• Section: 143(3); 234B; 14A; 115JB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL J , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA , A M & SHRI SANJAY GARG, J M ITA NO. 344 /MUM/20 12 ( ASSESSMENT YEAR :200 7 - 0 8 ) M/S JUNIPER HOTELS PVT. LTD., OFF WESTERN EXPRESS HIGHWAY, SANTACRUZ (E), MUMBAI - 400 055 VS. ADCIT, RG.10(1), MUMBAI - 20 PAN/GIR NO. : AA ECS 6336 E AND ITA NO. 4858/ MUM/20 12 ( ASSESSMENT YEAR :2008 - 09 ) M/S JUNIPER HOTELS PVT. LTD., OFF WESTERN EXPRESS HIGHWAY, SANTACRUZ (E), MUMBAI - 400 055 VS. ADCIT, RG.10(1), MUMBAI - 20 PAN/GIR NO. : AA ECS 6336 E AND ITA NO. 177 /MUM/20 12 ( ASSESSMENT YEAR :200 7 - 0 8 ) ACIT, RG.10(1), MUMBAI - 20 VS. M/S JUNIPER HOTELS PVT. LTD., OFF WESTERN EXPRESS HIGHWAY, SANTACRUZ (E), MUMBAI - 400 055 PAN/GIR NO. : AA ECS 6336 E AND ITA NO. 4710 / MUM/20 12 ( ASSESSMENT YEAR :200 8 - 0 9 ) ACIT, RG.10(1), MUMBAI - 20 VS. M/S JUNIPER HOTELS PVT. LTD., OFF WESTERN EXPRESS HIGHWAY, SANTACRUZ (E), MUMBAI - 400 055 PAN/GIR NO. : AA ECS 633 6 E /ASSESSEE BY : SHRI SUNI BHANDARI /REVENUE BY : SHRI SHEKHAR L. GAJBHIYE DATE OF HEARING : 19 TH AUGUST , 201 4 DATE OF PRONOUNCEMENT : 22/10/ 201 4 ITA NO S . 344 &4858 / 12 , & ITA NOS.177 & 4710/12 2 O R D E R PER R.C.SHARMA ( A .M.) : THE SE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF CIT(A ) , FOR THE ASSESSMENT YEAR S 207 - 08 & 2008 - 09, RESPECTIVELY , IN THE MATTER OF ORDER PASSED UNDER SECTION 143(3) OF THE I. T. ACT. 2 . SINCE COMMON ISSUES ARE INVOLVED IN ALL THE AFORESAID CASES , THEREFORE, ALL THE CASES HAVE BEEN HEARD TOGETHER AND NOW AND DISPOSED OF BY THIS CONSOLIDATED ORDER. 3 . THE ASSESSEE IN ITS APPEAL I.E. ITA NO. 344 /MUM/20 12 (AY 200 7 - 0 8 ) , HAS RAISED T HE FOLLOWING GROUNDS : - BEING AGGRIEVED BY THE ORDER PASSED BY THE COMMISSIONER OF INCOME - TAX (APPEALS) - 21, MUMBAI (HEREINAFTER REFERRED TO AS 'THE CIT(A)') YOUR APPELLANT SUBMITS, AMONG OTHERS, FOLLOWING GROUNDS FOR YOUR SYMPATHETIC CONSIDERATION : - 1. LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO OF NOT ALLOWING THE DEPRECIATION CLAIM OF RS. 9,64,368 / - IN RESPECT OF CAPITAL EXPENDITURE BEING TECHNICAL FEE AN D OTHER EXPENSES, INCURRED TOWARDS SETTING UP OF THE HOTEL PROJECT MERELY ON THE PRE MISE THAT THE RESPECTIVE INVOICES WERE APPROVED AND BOOKED DURING THE YEAR UNDER CONSIDERATION. LD. CIT(A) ALSO ERRED IN REJECTING THE DEPRECIATION CLAIM STATING THAT EXPENSES WERE NOT PERTAINING TO THE APPELLANT AND THEREFORE NOT ALLOWABLE BY OVERLOOKING THE FACT THAT THE INVOICES WERE RAISED IN THE EARLIER NAME OF THE APPELLANT FOR WHICH CERTIFICATE OF CHANGE OF NAME WAS ALSO FURNISHED DURING THE APPELLATE PROCEEDINGS. 2. LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION OF AO OF TAXING REVENUE OF RS. 61,36 ,898/- UNDER THE HEAD 'INCOME FROM OTHER SOURCES' RATHER THAN TAXING AS 'BUSINESS INCOME'. HE OUGHT TO HAVE APPRECIATED THAT: A) RENTAL INCOME OF RS.4,60,000/ - EARNED FROM MOBILE RECEIVING TOWERS INSTALLED BY CELL PHONE OPERATORS IS A BUSINESS INCOME ITA NO S . 344 &4858 / 12 , & ITA NOS.177 & 4710/12 3 B ) INTEREST ON INCOME TAX REFUND OF RS.14,59,365/ - IS OBVIOUSL Y BUSINESS INCOME C) INTEREST INCOME FROM UNSECURED LO AN AMOUNTING TO RS.42, 17,533/ - GRANTED TO THE SUBSIDIARY COMPANY VIZ. M/S M AHIMA HOLDINGS P LTD FOR BUSINESS PURPOS E IS DEFINITELY A BUSINE SS INCOME. 3. LEARNED CIT(A) FURTHER ERRED IN CONFIRMING THE ACTION OF THE AO OF NOT DELETI NG THE ADDITION CONSERVATIVELY MADE BY THE ASSESSEE COMPANY ON ACCOUNT OF DELAYED EMPLOYEE CONTRIBUTIONS TOWARDS ESI AMOUNTING TO RS.31, 720 / - ' AND IN APPEAL I.E. ITA NO. 4858 /MUM/20 12 (AY 200 8 - 0 9 ) , ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : - BEING AGGRIEVED BY THE ORDER PASSED BY THE COMMISSIONER OF INCOME - TAX (APPEALS) - 21, MUMBAI (HEREINAFTER REFERRED TO AS 'THE CIT(A)') YOUR APPELLANT SUBMITS, AMONG OTHERS, FO LLOWING GROUNDS FOR YOUR SYMPATHETIC CONSIDERATION : - 1. LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO OF NOT A LLOWING THE DEPRECIATION CLAIM OF RS. 18,32,300/ - IN RESPECT OF CAPITAL EXPENDITURE BEING TECHNICAL FEE AND OTHER EXPENSES, INCURRED TOWAR DS SETTING UP OF THE HOTEL PROJECT. 2. LD. CIT(A) FURTHER ERRED IN CONFIRMING DISALLOWANCE U/S 14A TO THE TUNE OF RS.7,67,065 /- TOWARDS ADMINISTRATIVE EXPENSES ALLOCABLE TO EXEMPT INCOME EARNED THROUGH INVESTMENT IN MUTUAL FUNDS. IN FACT AO HAD ACCEPTED THE FACTUAL CORRECTNESS OF THE SUBMISSIONS OF THE ASSESSEE BUT AS AGAINST THE ASSESSEE'S ESTIMATION OF OTHER EXPENSES AT RS.50,000/- , AO CONSIDERED THE SAME AT RS.1,00,000/ - AS CAN B E SEEN IN PARA 7.2 OF THE ORDER THOUGH ULTIMATELY D ISALLOWED A SUM OF RS. 7,67,065/ - . 3. LD. CIT(A) ALSO ERRED IN CONFIRMING THE DISALLOWANCE EXPENSES RS. 33,708/ - TOWARDS PAYMENT TO YOUNG PRESIDENT ORGANISATION WITHOUT APPR ECIATING THE FACT THAT THE SAID ORGANIZATION IS NOT A CLUB. 5 . THE REVENUE IN ITS APPEAL I.E. ITA NO. 1 77 /MUM/20 12 (AY 200 7 - 0 8 ) , HAS RAISED THE FOLLOWING GROUNDS : - '1. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS CORRECT IN TREATING THE IN TEREST INCOME OF RS.8,84,369 / - ON BANK FDS AS BUSINESS INCOME WITHOUT APPRECIAT ING THAT THE SAID INTEREST INCOME WAS NOT DERIVED FROM THE BUSINESS ACTIVITY OF THE ASSESSEE COMPANY. ITA NO S . 344 &4858 / 12 , & ITA NOS.177 & 4710/12 4 2. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) WAS CORRECT IN DELETING THE DISALLOWANCE OF PAYMENT OF RS. 2 0,778/ - IN RESPECT OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND MADE WITHIN GRACE PERIOD WITHOU T APPRECIATING THE FACT THAT THERE IS NO PROVISION TO CONSIDER THE GRACE PERIOD IN THE INCOME - TAX ACT. EXPLANATION TO SECTION 36(1)(VA) SPEAKS OF THE DUE DATE AND NOT GR ACE PERIO D. ' 3. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS CORRECT IN DIRECTING A. O . NOT TO CHARGE INTEREST U/S.234B AND 234C OF THE ACT TO THE EXTENT OF ENHANCEMENT OF THE TAX LIABILITY EMERGING FROM AMENDMENT T O SEC.115JB WITH RETROSPECTIVE EFFECT WITHOUT APPRECIATING THAT THE SAID SUM IS CLEARLY COVERED BY CLAUSE (I) OF THE EXPLANATION TO SECTION 115 JB OF THE ACT ' 4 . THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF T HE ASSESSING OFFICER BE RESTORED. AND IN APPEAL I.E. ITA NO. 4710 /MUM/20 12 (AY 200 8 - 0 9 ) , THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW CIT(A) ERRED IN ALLOWING DEPRECIATION OF RS.12,24,065/ - ON DP ROAD AS THE ASSET DOES NOT FORM PART OF SPECIFIED ASSETS AND THE ASSESSEE WAS NOT THE OWNER OF SUCH TOLL ROAD. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW CIT(A) ERRED IN ALLOWING DEPRECIATION OF RS.12,24,065/ - EVEN THOUGH THE ASS ESSEE WAS NOT ELIGIBLE TO CLAIM DEPRECIATION ON THE DP ROAD AS THE ASSESSEE WAS NOT THE OWNER OF SUCH TOLL ROAD. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW CIT(A) HAS NOT CONSIDERED THE FACT THAT TO CLAIM DEPRECIATION UNDER THE I .T A CT THE 'ASSET SHOULD BE SPECIFIED ASSET COVERED BY THE APPENDIX I TO RULE 5, THE ASSET SHOULD BE OWNED BY THE ASSESSEE. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE BY THE ASSESSI NG OFFICER ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENDITURE OF RS.88,98,293/ - WITHOUT APPRECIATING THE FACT THAT THE DISALLOWANCE OF INTEREST WAS MADE U / S. 14A ON PRO - RATA BASIS CONSIDERING THE PROPORTION OF BORROWED CAPITAL TO THE CAPITAL EMPLOYED AND THE AMOUNT OF FUNDS INVESTED IN MUTUAL FUND. ' THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. ITA NO S . 344 &4858 / 12 , & ITA NOS.177 & 4710/12 5 6 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF AR E THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANAGING AND RUNNING OF HOTELS. IN THE COMPUTATION OF INCOME FOR A.Y. 2007 - 08 , THE ASSESSEE CLAIMED DEPRECIATION OF RS.9,64,368/ - @ 5% ON THE SUMS OF RS. 1 ,92,87,365/ - BEING PRIOR PERIOD EXPENDITURE. IN THE COMPUTATION OF INCOME, BY WAY OF NOTE THE ASSESSEE EXPLAINED THE FACTS AS UNDER: 'IN THE COURSE OF SETTING UP THE HOTEL PROJECT AT MUMBAI, ASSESSEE COMPANY HAD ENGAGED M/ S. HOTEL PROJECT SYSTEMS PTE. LTD. (A FOREIGN COMPANY) FOR RENDERING TECHNICAL SERVI CES AS ENSHRINED IN THE CONTRACT ENTERED INTO ON 26TH MARCH, 1998 AND ACCORDINGLY THEY HAD RAISED BILLS FOR TECHNICAL SERVICES ON THE ASSESSEE COMPANY AMOUNTING TO RS.67,31,250/ - THE ASSESSEE COMPANY HAD ALSO ENTERED INTO A CONTRACT WITH HYATT CHAIN SERV ICES LTD. (A FOREIGN COMPANY). AS PER THE CONTRACT, THE ASSESSEE COMPANY HAD TO REIMBURSE EXPENSES TO THE TUNE OF RS.59,28,946/ - TO THE FOREIGN COMPANY. THE ASSESSEE COMPANY HAD ALSO ENTERED INTO A CONTRACT WITH M/ S. HOTEL PROJECT SYSTEMS PTE. LTD. (A FO REIGN COMPANY). AS PER THE CONTRACT, THE ASSESSEE COMPANY HAD TO REIMBURSE EXPENSES TO THE TUNE OF RS.58,44,358/ - TO THE FOREIGN COMPANY. ALL THE BILLS WERE RAISED PRIOR TO THE OPENING OF THE HOTEL. HOWEVER, FOR CERTAIN REASONS THE BILLS RAISED WERE NOT A PPROVED BY THE COMPANY. DURING THE YEAR UNDER CONSIDERATION, A SETTLEMENT WAS REACHED AND THE SUM OF RS.1,85,04,554/ - WAS REMITTED AFTER DEDUCTING TAX AT SOURCE U/S. 195 AS DETAILED BELOW: AS SUCH THE ASSESSEE COMPANY HAS COMPLIED WITH THE PROVISIONS OF SECTION 40(A) DURING THE YEAR WHICH IS PREREQUISITE CLAIMING DEDUCTION UNDER THE INCOME TAX ACT. HOWEVER, SINCE THE ASSESSEE COMPANY STARTED THE COMMERCIAL OPERATIONS OF THE HOTEL IN THE FINANCIAL Y E A R 2004 - 05 I.E. A. Y.2005 - 06, WHILE DRAWING UP THE FINANC IAL STATEMENTS OF THE COMPANY FOR THE F. Y.2006 - 07, THE SAID EXPENDITURE FOR RS.1,92,87,365/ - WAS ACCOUNTED FOR AS PRIOR PERIOD EXPENSES AND SO DISCLOSED IN THE TAX AUDIT REPORT IN CLAUSE NO.22(B). SINCE THE NECESSARY EXPENDITURE WAS INCURRED IN THE COURS E OF SETTING UP OF THE HOTEL, THE SAME DESERVES TO BE TREATED AS CAPITAL EXPENDITURE AND ELIGIBLE FOR DEPRECIATION. ACCORDINGLY, WHILE COMPUTING THE TAXABLE INCOME FOR THE YEAR, THE SAME HAS BEEN ADDED BACK AND DEPRECIATION CLAIM IS BEING MADE AT RS.9,64,3 68/ - . 7 . DURING ASSESSMENT PROCEEDINGS, THE A.O. ASKED THE ASSESSEE AS TO WHY THE DEPRECIATION SHOULD NOT BE DIS ALLOWED AS THE EXPENDITURE ITA NO S . 344 &4858 / 12 , & ITA NOS.177 & 4710/12 6 WAS PRIOR PERIOD EXPENDITURE AND NEVER DEBITED TO THE P&L ACCOUNT IN THE YEAR OF INCURRING OR CAPITALIZED. THE AP PELLANT EXPLAINED TO THE A.O. THAT THE ABOVE AMOUNTS WERE EXPENSES. INCURRED DURING THE CONSTRUCTION OF THE HOTEL. THE BILLS WERE KEPT PENDING SINCE THE BILLS WERE NOT APPROVED BY THE PROJECTEE. DURING THE YEAR UNDER CONSIDERATION A SETTLEMENT WAS REACHED AND ABOVE SUMS OF WAS REMITTED AFTER DEDUCTING REQUIRED TAX AT SOURCE U/S . 195. SINCE THE SUMS RELATED TO EXPENSES PRIOR TO THE CONSTRUCTION OF HOTEL, THE SAME WOULD HAVE BEEN CAPITALISED AND DEPRECIATION CLAIMED ON THE SAID AMOUNT. HENCE THE COMPANY HAD C LAIMED DEPRECIATION @ 5% IN A.Y.2007 - 08. 8 . THE A.O. WAS NOT CONVINCED WITH APPELLANT'S SUBMISSIONS. THE A.O. HELD THAT THOUGH THE EXPENSES WERE CLAIMED TO HAVE BEEN INCURRED PRIOR TO THE COMMENCEMENT OF THE HOTEL DURING THE CONSTRUCTION PERIOD, HOWEVER, THE SAID EXPENSES WERE NEVER ACCOUNTED FOR EITHER AS PREOPERATIVE EXPENSES OR AS CONSTRUCTION PERIOD EXPENSES IN THE BOOKS OF ACCOUNT S. ACCORDINGLY, THE AO DISALLOWED ASSESSEES CLAIM OF DEPRECIATION OF RS. 9,64368/ - 9 . IN APPEAL BEFORE THE CIT(A), THE AS SESSEE SUBMITTED THAT BILLS RAISED DURING THE PERIOD APRIL, 2002 TO DECEMBER, 2003 WERE NOT APPROVED DUE TO COST AND TIME OVER RUN OF THE HOTEL PROJECT AND FINALLY CLEARED DURING CURRENT YEAR AND HENCE EXPENSES WERE INCURRED DURING THE CURRENT YEAR ONLY . H E ALSO SUBMITTED THAT THE AMOUNTS WERE ITA NO S . 344 &4858 / 12 , & ITA NOS.177 & 4710/12 7 PAYABLE TO FOREIGN PARTIES COVERED BY WITHHOLDING OF TAX U/S . 195 AND IN ABSENCE OF TDS, THE SAME WERE COVERED BY RESTRICTIONS PROVIDED U/S. 40(A) (I) AND HENCE COULD HAVE BEEN CLAIMED ONLY AFTER COMPLIANCE WITH TDS PRO VISIONS. DURING APPELLATE PROCEEDINGS, THE APPELLANT ALSO FILED A DETAILED NOTE ON PRIOR PERIOD EXPENDITURE STATING THAT AFTER PROLONGED DISCUSSION AND NUMEROUS MEETINGS, THE DISPUTE BETWEEN THE PARTIES WERE RESOLVED IN THE YEAR 2006. ONCE THE INVOICES WE RE APPROVED, THE SAME WAS PROVIDED, APPLICABLE TAXES WERE PAID AND ULTIMATELY THE SAID PAYMENTS WERE AFFECTED IN 2006. DU RING APPELLATE PROCEEDINGS THE APPELLANT HAS TAKEN ADDITIONAL ARGUMENT THAT THE BIL LS WERE RAISED IN THE NAME OF M/ S.SEAJULI PROPERTY & VINIYOG PVT. LTD. NOT IN THE NAME OF APPELLANT COMPANY I.E. JUNIPER HOTELS PVT. LTD. IN THIS REGARD, THE APPELLANT ARGUED AND EXPLAINED THAT IT WAS EARLIER KNOWN AS M/ S. SEAJULI PROPERTIES & VIMIYOG P. LTD. AND ITS NAME WAS LATER ON CHANGED TO JUNIPER HO TELS PVT. LTD. W.E.F. 23RD DECEMBER 2003. IN SUPPORT OF ITS CLAIM, THE APPELLANT F ILED CERTIFICATE ISSUED BY ROC. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE APPELLANT'S ADDITIONAL ARGUMENT RAISED DURING THE APPELLATE PROCEEDINGS OF THIS YEAR. FROM C ERTIFICATE ISSUED BY ROC, IT IS UNDERSTOOD THAT THE APPELLANT WAS EARLIER KNOWN AS M/S. SEAJULI PROPERTIES &'VINIYOG PVT. LTD. IN VIEW OF THIS FACT, THE BILLS RAISED IN THE NAME OF M/S. SEAJULI PROPERTIES WERE RAISED ON APPELLANT ITSELF. 9A . HOWEVER, THE LD. CIT(A) DID NOT AGREE WITH ASSESSEES CONTENTION AND CONFIRMED THE ACTION OF THE A.O. AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. ITA NO S . 344 &4858 / 12 , & ITA NOS.177 & 4710/12 8 10 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT SOME OF THE EXPENDITURE INCURRED ON CONSTRUCTION OF H OTEL WAS NOT APPROVED BY THE PROJECTEE, THEREFORE, SAME WERE NEITHER PAID NOR BOOKED IN ACCOUNTS IN THE YEAR OF INCURRING . H OWEVER, IN THE PREVIOUS YEAR RELEVANT TO A.Y.2007 - 08 UNDER CONSIDERATION, A SETTLEMENT WAS REACHED WITH THE PROJECTEE, ASSESSEE COMP ANY APPROVED THE SAME AND AMOUNT WAS REMITTED AFTER DEDUCTING REQUIRED TAX AT SOURCE U/S. 195. AS THE EXPENSES WERE CRYSTALLIZED DURING THE YEAR ITSELF, THE ASSESSEE HAS CAPITALIZED THE SAME AND CLAIMED DEPRECIATION THEREON WHICH WAS DISALLOWED BY THE AO ON THE PLEA THAT EXPENSES WERE RELATED TO THE EARLIER YEAR. AS PER OUR CONSIDERED VIEW SINCE THE EXPENSES WERE CRYSTALLIZED ONLY DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE WAS ENTITLED TO CAPITALIZE THE SAME AND CLAIM DEPRECIATION THEREON . SO FAR AS I SSUE OF BILLS IN THE NAME OF SEAJULI PROPERTY & VINIYOG PVT. LTD. IS CONCERNED, WE FIND THAT AS PER REGISTRAR OF COMPANIESS LETTER, THE NAME OF ASSESSEE COMPANY WAS LATER ON CHANGED TO M/S JUNIPER HOTELS PVT. LTD.. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE LOWER AUTHORITIES FOR DENIAL OF CLAIM OF DEPRECIATION IN RESPECT OF EXPENDITURE WHICH WAS CRYSTALLIZED AND PAID DURING THE YEAR UNDER CONSIDERATION. IT IS ALSO NOT THE CASE OF THE AO THAT TAX WAS NOT DEDUCTED AT SOURCE IN RESPECT OF SUCH PAYMENTS. KEEPING IN VIEW THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE RESTORE THE MATTER BACK TO THE FILE OF THE AO IN BOTH THE YEARS WITH A DIRECTION TO VERIFY THE BILLS OF EXPENDITURE SO INCURRED AND CRYSTALLIZED DURING THE ITA NO S . 344 &4858 / 12 , & ITA NOS.177 & 4710/12 9 YEAR, AND IF THE AO FOUND AFTER VERIFICATION OF BILLS THAT AFTER DEDUCTION OF TAX AT SOURCE U/S. 195, THE SAME HAS BEEN PAID DURING THE YEAR UNDER CONSIDERATION , HE SHOULD ALLOW ASSESSEES CLAIM OF DEPRECIATION ON SUCH CAPITALIZED VALUE . WE DIRECT ACCORDINGLY. 11 . DURI NG ASSESSMENT PROCEEDINGS, T HE AO FOUND THAT ASSESSEES HOTEL REVENUE OF RS. 70,21,267/ - CONSISTED OF THE FOLLOWING RECEIPTS : - A) RENTAL INCOME RS. 4,60,000/- B) BANK INTEREST RS. 8,84,369/- C) INTEREST ON INCOME TAX REFUND RS. 14,59,365/ - D) INTEREST FROM MAHIMA HOLDINGS (P) LTD. RS . 42, 17,533/- RS. 70,21,267/ - THE AO TREATED ABOVE RECEI PTS AS INCOME FROM OTHER SOURCES. 12 . BY THE IMPUGNED ORDER, THE CIT(A) HELD THAT BANK INTEREST OF RS.8,84,369/ - WAS EARNED ON BANK FD KEPT AS MARGIN MO NEY FOR OBTAINING BANK GUARANTEE REQUIRED IN THE COURSE OF BUSINESS. FOLLOWING THE APPEAL ORDER OF A.YRS.2005 - 06 AND 2006 - 07, THE CIT(A) DIRECTED THE AO TO ASSESS THE BANK INTEREST UNDER THE HEAD BUSINESS INCOME . 13 . WE HAVE CONSIDERED RIVAL CONTENTIONS AN D FOUND THAT INTEREST INCOME WAS EARNED ON THE DEPOSIT KEPT WITH THE BANK AS MARGIN MONEY FOR OBTAINING BANK GUARANTEE. AS THE BANK DEPOSIT WAS MADE AS A BUSINESS COMPULSION FOR OBTAINING THE BANK GUARANTEE, THE INTEREST INCOME SO EARNED THEREON WAS CORREC TLY HELD BY THE CIT(A) AS INCOME ITA NO S . 344 &4858 / 12 , & ITA NOS.177 & 4710/12 10 FROM BUSINESS, INSOFAR AS THE BANK GUARANTEE WAS TO BE OBTAINED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 14. THE RENTAL INCOME OF RS. 4,60,000/ - WAS RECEIVED FOR RENTING THE SPACE FOR MOBILE SERVICING TOWERS. S INCE PART OF THE HOTEL BUILDING WAS GIVEN AND FIXED RENTAL INCOME WAS RECEIVED MONTHLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LOWER AUTHORITIES FOR TREATING SUCH INCOME AS INCOME FROM OTHER SOURCES. 15 THE INTEREST ON INCOME TAX REFUND OF RS. 1459,36 5/ - WAS CORRECTLY HELD BY THE LOWER AUTHORITIES AS INCOME FROM OTHER SOURCES. WITH REGARD TO THE INTEREST FROM MAHIMA HOLDINGS P. LTD., AMOUNTING TO RS. 42,17, 533/ - , THE CONTENTION OF THE LEARNED AR WAS THAT M/S MAHIMA HOLDINGS PVT. LTD. IS A 100% SUBSIDIAR Y OF THE ASSESSEE, THE INTEREST EARNED IS IN RESPECT OF UNSECURED LOANS PROVIDED BY THE ASSESSEE COMPANY TO MAHIMA HOLDINGS FOR ACQUIRING LAND ADJACENT TO THE HOTEL LAND. AS PER LEARNED AR THE SAID INCOME FORMS PART OF THE ASSESSEES INCOME AND THUS, ASSES SABLE AS BUSINESS INCOME. WE DO NOT FIND ANY MERIT IN THE CONTENTION OF THE LEARNED AR AND H O LD THAT INTEREST INCOME WAS CORRECTLY ASSESSED BY THE LOWER AUTHORITIES AS INCOME FROM OTHER SOURCES. 16 THE AO HAS ALSO DISALLOWED EMPLOYEES CONTRIBUTION OF ESI A MOUNTING TO RS. 31,720/ - , WHICH WAS DUE TO BE PAID ON 21 - 5 - 2006. WE FOUND THAT ON 21 - 5 - 2006, IT WAS SUNDAY, THEREFORE, ASSESSEE MADE THE PAYMENT ON THE NEXT DAY, HOWEVER, SINCE THE PAYMENT WAS MADE BEFORE THE LAST DATE OF FILING RETURN WHICH WAS ON 31 - 10 - 20 07, IN VIEW OF ITA NO S . 344 &4858 / 12 , & ITA NOS.177 & 4710/12 11 THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF ALOM EXTRUSIONS LTD., 319 ITR 306 (SC) , NO DISALLOWANCE IS TO BE MADE IF SUCH CONTRIBUTION IS PAID BEFORE LAST DATE OF FILING OF RETURN. 17 . A.O. DISALLOWED ASSESSEES CLAIM OF DEPRECIAT ION ON THE ROAD CONSTRUCTION BY ASSESSEE. THE ASSESSEE ARGUED AND EXPLAINED THAT IN ORDER TO FACILITATE PROPER ACCESS TO THE PROPERTY LOCATED AT VAKOLA IN SANTACRUZ (EAST), FROM THE WESTERN EXPRESS HIGHWAY, APPELLANT WAS ALLOWED THE PERMISSION BY THE BMC T O CONSTRUCT THE ROAD. THE APPELLANT INCURRED AGGREGATE EXPENDITURE OF RS.1,72,06,817 / - WHICH WAS SHOWN AS 'ASSETS OWNED BY THE COMPANY - ROAD' IN FIXED ASSETS SCHEDULE. AS PER THE LOCAL MUNICIPAL LAWS, APPELLANT ONLY HAD RIGHT TO ACCESS AND COULD NOT BECOME OWNER OF THE ROA D. OWNERSHIP VESTS WITH MUNICIPAL CORPORATION. ROAD CONSTRUCTION WAS COMPLETED IN F.Y. 2003 - 04 AND DEPRECIATION WAS BEING CLAIMED AND HAD BEEN DULY ALLOWED BY THE AO UPTO A.Y. 2007 - 08. THE APPELLANT RELIED ON THE DECISION OF GUJARAT HIGH C OURT IN THE CASE OF CIT VS. GUJARAT STATE FERTILIZER CO. LTD. 219 .ITR 550 WHEREIN THE ROAD WAS CONSIDERED AS PART OF BUILDING. APPELLANT FURTHER ARGUED AND EXPLAINED THAT THERE WERE NO DISPUTES REGARDING FACT THAT CAPITAL EXPENDITURE WAS DULY INCURRED BY THE APPELLANT. APPELLANT HAVING INCURRED THE EXPENDITURE, DEPRECIATION MUST BE ALLOWED EVEN THOUGH THE ASSET WAS OWNED BY MUNICIPAL CORPORATION AND NOT BY THE APPELLANT. THE ASSET WAS CAPITALIZED IN A.Y. 2004 - 05 ITA NO S . 344 &4858 / 12 , & ITA NOS.177 & 4710/12 12 AND DEPRECIATION HAD BEEN DULY ALLOWED BY TH E AO UPTO A.Y. 2007 - 08. ASSET HAVING ENTERED THE BLOCK, IT LOSSES ITS IDENTITY AND HENCE, NO ADJUSTMENTS COULD BE MADE IN A.Y. 2008 - 09. APPELLANT ALSO ARGUED THAT ALTERNATIVELY THE ENTIRE EXPENDITURE SHOULD BE ALLOWED AS REVENUE EXPENDITURE SINCE THE SAME WAS INCURRED FOR THE PURPOSE OF BUSINESS. 18 . BY THE IMPUGNED ORDER, CIT(A) ALLOWED ASSESSEES CLAIM OF DEPRECIATION AFTER HAVING FOLLOWING OBSERVATION. 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE. IT WAS AN UNDISPUTED FACT THAT THE EXPENDITURE INCURRED ON ROAD WAS INCURRED BY THE APPELLANT WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. THE SAID EXPENDITURE WAS CAPITALIZED IN A.Y. 2004 - 05. FROM A.Y. 2004 - 05 TO 2007 - 08, THE AO HAS GRANTED DEPRECIATION TO THE APPELLANT ON THE COST OF SAID ROAD. THE FA CTS OF THE YEAR UNDER CONSIDERATION ARE SAME TO THAT OF EARLIER YEARS. THEREFORE, THERE WAS NO. REASON .AVAILABLE WITH THE AO FOR DEVIATING FROM THE STAND TAKEN IN THE EARLIER YEARS. THUS, FOLLOWING THE STAND OF DEPARTMENT IN EARLIER YEARS, THE APPELLANT W AS ENTITLED FOR DEPRECIATION DURING THIS YEAR ALSO. 19 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT ASSESSEE HAS CONSTRUCTED ROAD TO FACILITATE PROPER ACCESS FROM EXPRESS HIGHWAY TO THE SITE OF THE HOTEL. NECESSARY PERMISSION WAS ALSO GRANTED BY THE BMC TO CONSTRUCT THE ROAD. AS THE EXPENDITURE WERE INCURRED BY THE ASSESSEE, THE SAME WERE CAPITALIZED AND SHOWN AS FIXED ASSETS. EVEN THOUGH THE OWNERSHIP OF THE ROAD WAS VESTED WITH THE MUNICIPAL CORPORATION, THE EXPENDITURE ON CONSTRUCTION OF ROAD W AS INCURRED BY THE ASSESSEE, THEREFORE, THERE WAS NO REASON TO DECLINE CLAIM OF DEPRECIATION O N SUCH ROAD. HON BLE GUJARAT IN THE CASE OF CIT VS. GUJARAT STATE FERTILIZERS CO , 219 ITR 550 , HELD THAT THE ROAD IS A PART ITA NO S . 344 &4858 / 12 , & ITA NOS.177 & 4710/12 13 OF BUILDING. THE SAID EXPENDITURE WAS CAPITALIZED IN THE ASSESSMENT YEAR 2004 - 05. FROM A.Y.2004 - 05 TO 2007 - 08, THE AO HAS ALLOWED DEPRECIATION ON THE COSTS OF SAID ROAD. SINCE THERE WAS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY REASON TO DECLINE ASSESSEES CLAIM OF DEPRECIATION BY DEVIATING FROM THE STAND TAKEN IN THE EARLIER YEARS. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DIRECTING THE AO TO ALLOW THE CLAIM OF DEPRECIATION ON SUCH ROAD WHICH WAS CONSISTENTLY ALLOWED BY THE DEPARTMENT IN EARLIER YEARS. 20 . WITH REGARD TO THE DISALLOWANCE MADE U/S.14A, T HE FACTS OF THE CASE WERE THAT THE ASSESSEE RECEIVED DIVIDEND OF RS.45,38,565 / - WHICH WAS CLAIMED EXEMPT U/ S.10(33) OF THE ACT. THE AO ASKED THE ASSESSEE AS TO WHY THE DISALLOWANCE OF INT EREST AND OTHER EXPENDITURE SHOULD NOT BE MADE U / S.14A OF THE ACT. THE APPELLANT EXPLAINED TO THE AO THAT NO INTEREST WAS ALLOCABLE TO MUTUAL FUND INVESTMENTS IN VIEW OF THE SUBSTANTIAL OWNED FUNDS AS ALSO CASH SURPLUS FOR THE YEAR WHICH WAS PARKED IN MUTU AL FUNDS. THE ASSESSEE FURTHER EXPLAINED TO THE AO THAT MORE THAN 99% OF THE INTEREST WAS PAID ON SPECIFIC BORROWALS FOR THE HOTEL PROJECT AND HENCE, SAME COULD NOT BE ALLOCATED TO INVESTMENTS. THE AO DID NOT ACCEPT ASSESSEE 'S ARGUMENT AND MADE DISALLOWANC E OF RS.96,65,358 / - U / S.14A OF THE ACT . DIRECT EXPENSES RS.NIL INDIRECT INTEREST EXPENDITURE RS.88,98,293 0.5% OF AVERAGE INVESTMENTS RS. 7,67,065 ITA NO S . 344 &4858 / 12 , & ITA NOS.177 & 4710/12 14 TOTAL : - RS.96,65,358 BY THE IMPUGNED ORDER, THE CIT(A) DELETED THE DISALLOWANCE ON ACCOUNT OF INTEREST EXPENDITURE, HOWEVER, HE CONFIRMED THE DISALLOWANCE ON ACCOUNT OF OTHER EXPENSES. THE PRECISE OBSERVATION AND FINDINGS OF THE CIT(A) ARE AS UNDER : - 4.3.(A) AS PER BALANCE SHEET, THE OPENING BALANCE OF INVESTMENT WAS ONLY RS.L,19,980/ - . THIS WAS ALSO CLOSING BALANCE AS ON 31.03.2007 PERTAINING TO A.Y. 2007 - 08. IN A.Y. 2007 - 08 THE AO HAS NOT MADE ANY DISALLOWANCE U/S.14A. THUS, A.O. ACCEPTED THE APPELLANT'S CLAIM THAT THE INVESTMENTS WAS MADE OUT OF OWN FUNDS. 4.3.(B) THE CLOSING BALANCE OF INVES TMENTS AS ON 31.03.2008 WAS AT RS.30,67,05,836/ - . THIS MEANS THAT DURING THE YEAR, FRESH INVESTMENTS OF RS.30,65,85,856/ - (30,67,05,836 - RS.1,19,980) WERE MADE DURING THE YEAR. THE APPELLANT HAS CLAIMED THAT THE INVESTMENT WAS MADE OUT OF ITS OWN FUNDS. T HE APPELLANT'S SUBMISSIONS AND CLAIM HAS BEEN CONSIDERED. OPENING AND CLOSING BALANCE OF SHARE CAPITAL WAS SAME I.E. RS.143.70 CRORE. THIS MEANS THAT THE SHARE CAPITAL WAS ALREADY UTILIZED IN THE BUSINESS AND WAS NOT AVAILABLE DURING THE YEAR FOR FRESH I NVESTMENTS. THE OPENING BALANCE OF RESERVES AND SURPLUS WAS RS.18.90 CRORE WHEREAS CLOSING BALANCE WAS RS.90.69 CRORE. THIS RESERVES AND SURPLUS HAD BEEN INCREASED ON ACCOUNT OF PROFIT OF THE YEAR AT RS.78.50 CRORE. IN THE P&L ACCOUNT, THERE WAS PROFIT O F RS. 71. 78 CRORE AFTER CONSIDERING DEPRECIATION AND PAYMENT OF ALL TAXES. THUS, IT IS EVIDENT THAT THE APPELLANT HAD GENERATED SURPLUS PROFITS DURING THE YEAR. THE OPENING BALANCE OF SECURED LOANS WAS RS.459.86 CRORE WHEREAS CLOSING BALANCE WAS RS.402. 89 CRORE. SIMILARLY, THE OPENING BALANCE OF IT UNSECURED LOANS WAS RS.35.51 CRORE WHEREAS CLOSING BALANCE WAS RS.NIL. THE OPENING BALANCE OF SECURED AND UNSECURED LOANS WERE ALREADY UTILIZED / CONSUMED BY THE APPELLANT IN EARLIER YEARS FOR THE PURPOSE OF BUSINESS. THUS, THERE WAS NO INCREASE IN SECURED AND UNSECURED LOANS WHICH COULD BE HELD AS UTILIZED FOR THE PURPOSE OF MAKING INVESTMENTS. AS ON 31.03.2008, THE APPELLANT WAS HAVING CASH IN HAND AT RS.15,51,210/ - , CHEQUES IN HAND RS.3.60 CRORE, BALANCE WITH BANKS RS.1.84 CRORE AND IN FIXED DEPOSITS AT RS.1.27 CRORE. THUS, THE ITA NO S . 344 &4858 / 12 , & ITA NOS.177 & 4710/12 15 APPELLANT WAS HAVING POSITIVE CASH BALANCES IN HAND DURING THE YEAR. THE ANALYSIS OF ABOVE FACTS SUPPORTS THE APPELLANT'S CLAIM THAT DURING THE YEAR IT HAD GENERATED SUFFICIENT FU NDS/PROFITS WHICH WERE UTILIZED FOR THE PURPOSE OF MAKING INVESTMENTS. DURING THE YEAR THE APPELLANT HAD INCURRED INTEREST EXPENDITURE OF RS.40.92 CRORE. THIS HAS BEEN INCURRED ON SECURED AND UNSECURED LOANS TAKEN BY THE APPELLANT IN THE EARLIER YEAR. AS E XPLAINED ABOVE, THE OPENING BALANCE OF SECURED AND UNSECURED LOANS WERE UTILIZED BY THE APPELLANT FOR THE PURPOSE OF BUSINESS AND NOT FOR THE PURPOSE OF INVESTMENTS. DURING THE YEAR THE SECURED AND UNSECURED LOANS HAD DECREASED. IN THE FACTS AND CIRCUMSTAN CES, IT CANNOT BE CONCLUDED THAT THE INTEREST BEARING FUNDS WERE UTILIZED BY THE APPELLANT FOR MAKING INVESTMENTS IN SHARES AND MUTUAL FUNDS. ON THE OTHER HAND, IT IS ALSO EVIDENT THAT THE APPELLANT WAS HAVING SUFFICIENT FUNDS /PROFITS DURING THE YEAR WHIC H COULD BE UTILIZED FOR THE PURPOSE OF MAKING INVESTMENTS. IN THE FACTS AND CIRCUMSTANCES, NO INTEREST EXPENDITURE WAS ATTRIBUTABLE TO THE INVESTMENTS. CONSEQUENTLY, NO DISALLOWANCE OF INDIRECT INTEREST EXPENDITURE WAS REQUIRED U/S.14A OF THE ACT. THE DISA LLOWANCE OF INTEREST EXPENDITURE IS, THEREFORE, DELETED. THE NEXT QUESTION FOR CONSIDERATION QS THE ADMINISTRATIVE AND MANAGERIAL EXPENSES OF RS.7,67,065/ - INCURRED BY THE APPELLANT ON MANAGEMENT OF INVESTMENTS. AS EXPLAINED ABOVE, THE OPENING BALANCE OF INVESTMENTS WAS RS.1,19,980/ - WHEREAS CLOSING BALANCE WAS RS.30.67 CRORE. DURING THE YEAR, THE APPELLANT HAD MADE FRESH INVESTMENTS OF RS.30,65,85,856/ - MAINLY IN MUTUAL FUNDS. THIS IS BESIDES UNITS OF MUTUAL FUNDS PURCHASED AND SOLD DURING THE YEAR AT RS. 48 CRORE. THUS, DURING THE YEAR THE APPELLANT HAD BEEN ACTIVELY INVOLVED IN SALE/PURCHASE OF UNITS OF MUTUAL FUNDS. SUCH ACTIVITY REQUIRES ADMINISTRATIVE AND MANAGERIAL EXPENSES. THE IT. RULES I.E. 8D(2)(III) HAS PROVIDED STATUTORY FORMULA FOR WORKING OUT THE EXPENSES INCURRED FOR MANAGEMENT OF SUCH INVESTMENTS. THE AO HAS WORKED OUT SUCH EXPENSES AT RS.7,67,065/ - AS PER FORMULA PROVIDED IN SUB - CLAUSE (3) OF RULE 8D(2). THE DISALLOWANCE OF RS.7,67,065/ - IS THEREFORE, UPHELD. 2 1 . IT WAS CONTENDED BY LEARNE D AR THAT ISSUE WITH REGARD TO DELETING THE DISALLOWANCE ON INTEREST IS COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES, 313 ITR 340 , WHEREIN IT WAS HELD THAT WHERE THE FUNDS ARE AVAILABLE BOTH INTEREST FREE A ND OVERDRAFT AND/OR LOANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENT WOULD BE OUT OF INTEREST FREE FUNDS ITA NO S . 344 &4858 / 12 , & ITA NOS.177 & 4710/12 16 GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INTEREST FUNDS WERE SUFFICIENT TO MEET THE INVESTMENT. FURTHER RELIANCE WAS PLACED BY LEARNE D AR ON THE DECISION OF HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF HERO CYCLES LTD., 323 ITR 518 , HONBLE SUPREME COURT IN THE CASE OF EAST INDIA PHARMACEUTICALS LD., 224 ITR 627 . FURTHER RELIANCE WAS PLACED BY LEARNED AR ON THE FINDINGS RECORDED BY THE CIT(A) TO THE EFFECT THAT INTEREST BEARING FUNDS HAVE NOT BEEN INVESTED IN MUTUAL FUNDS AND INVESTMENTS WAS MADE ONLY OUT OF SURPLUS CASH FROM THE REVENUE OF HOTEL OPERATIONS. 22 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT AFTER CONSIDERI NG THE AVAILABILITY OF INTEREST FUNDS WITH THE ASSESSEE IN THE FORM OF CAPITAL, RESERVES AND SURPLUS, THE CIT(A) REACHED TO THE CONCLUSION THAT DURING THE YEAR ASSESSEE HAD INCURRED INTEREST EXPENDITURE OF RS. 40.92 CRORE. THIS HAS BEEN INCURRED ON SECURED AND UNSECURED LOANS TAKEN BY THE ASSESSEE IN THE EARLIER YEAR. IT WAS FURTHER OBSERVED THAT THE OPENING BALANCE OF SECURED AND UNSECURED LOANS WERE UTILIZED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS AND NOT FOR THE PURPOSE OF INVESTMENTS. DURING THE YEAR THE SECURED AND UNSECURED LOANS HAD DECREASED. ACCORDINGLY IT WAS FOUND THAT INTEREST BEARING FUNDS WERE NOT UTILIZED BY THE ASSESSEE FOR MAKING INVESTMENTS IN SHARES AND MUTUAL FUNDS. IT WAS CATEGORICALLY OBSERVED THAT ASSESSEE WAS HAVING SUFFICIENT FUND S / PROFITS DURING THE YEAR WHICH COULD BE UTILIZED FOR THE PURPOSE OF MAKING INVESTMENTS. ACCORDINGLY, DISALLOWANCE O F INTEREST EXPENDITURE WAS DELETED BY THE CIT(A) . ITA NO S . 344 &4858 / 12 , & ITA NOS.177 & 4710/12 17 23 . WITH REGARD TO THE ADMINISTRATIVE AND MANAGERIAL EXPENSES OF RS. 7,67,065/ - INCURRED O N MANAGEMENT OF INVESTMENTS, BY OBSERVING THAT ASSESSEES ACTIVITY OF INVESTMENTS IN SHARES REQUIRES ADMINISTRATIVE AND MANAGERIAL EXPENSES, THE CIT(A) CONFIRMED THE ACTION OF THE AO FOR DISALLOWANCE OF RS. 7,67,065/ - AS WORKED OUT BY THE AO. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). FINDING RECORDED BY CIT(A) HAS NOT BEEN CONTROVERTED BY LD. DR BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, WE CONFIRM THE ACTION OF THE CIT(A) FOR DELETING THE DISALLOWANCE OF INTEREST AND CONFIRMING THE DISALLOWANCE ADMINISTRATIVE AND MANAGERIAL EXPENSES. 24 . IN THE A.Y. 2007 - 08, THE REVENUE HAS ALSO TAKEN GROUND AGAINST THE DELETION OF DISALLOWANCE OF RS. 20 , 778/ - IN RESPECT OF EMPLOYEES CONTRIBUTION TO PF MADE WITHIN THE GRACE PERIOD. 25 . WE HAVE CON SIDERED THE RIVAL CONTENTIONS AND FOUND THAT THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF CONTRIBUTION TO PF WAS DELETED BY THE LD. CIT(A) AFTER OBSERVING THAT THE PAYMENT WAS MADE WITHIN THE GRACE PERIOD AS THE ISSUE IS COVERED BY THE DECISION OF HONB LE SUPREME COURT IN THE CASE OF ALOM EXTRUSIONS LTD. 319 ITR 306 (SC). WE CONFIRM THE ACTION OF LD. CIT(A) FOR DELETING DISALLOWANCE OF RS. 20,778/ - . 26 . IN THE A.Y. 2007 - 08, THE REVENUE HAS ALSO TAKEN GROUND WITH REGARD TO LD. CIT(A)S DIRECTION TO THE A .O. FOR NOT CHARGING INTEREST U/S 234B AND 234C OF THE ACT TO THE EXTENT OF ENHANCEMENT OF TAX LIABILITY ITA NO S . 344 &4858 / 12 , & ITA NOS.177 & 4710/12 18 EMERGING FROM AMENDMENT TO SECTION 115JB OF THE ACT WITH RETROSPECTIVE EFFECT. 27 . WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOUND THAT THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION IS 2007 - 08 WHEREIN THE ASSESSEE PAID INSTALLMENT OF ADVANCE TAX. THE RETURN OF INCOME WAS FILED ON 31 - 10 - 2007. BY FINANCE ACT, 2009, CLAUSE (I) TO EXPLANATION 1 TO SECTION 115JB OF THE ACT WAS INSERTED WHICH WAS SUBSEQ UENT TO FILING OF RETURN . THE ASSESSEE COULD NOT HAVE PAID ADVANCE TAX DURING THE YEAR ANTICIPATING SUCH AMENDMENT . BY FOLLOWING THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. REVATHI EQUIPMENT LTD. , 298 ITR 67 (MAD.) AND THE DECISION OF ITAT, BANGALORE BENCH IN THE CASE OF JSW STEEL LTD. VS. ACIT 133 TTJ 742 (BANG.) , LD. CIT(A) HELD THAT THE INTEREST LEVIED U/S 234B AND 234C OF THE ACT BY DISALLOWING PROVISION FOR DOUBTFUL DEBTS AND ADVANCES WAS NOT JUSTIFIED . SINCE THE ASSESSEE COMPANY OBVIOUSLY COULD NOT HAVE PAID ADVANCE TAX ANTICIPATING THE AMENDMENT TO BE MADE IN LATER YEARS AND HENCE NO INTEREST CAN BE CHARGED U/S 234 B & 234 C OF THE I.T. ACT. WE DO NOT FIND ANY INFIRMITY IN THE DIRECTION OF LD. CIT(A). ITA NO S . 344 &4858 / 12 , & ITA NOS.177 & 4710/12 19 2 8 . IN THE RESUL T, APPEAL S OF THE ASSESSEE ARE ALLOWED IN PART FOR STATISTICAL PURPOSE WHEREAS APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22/10/ 201 4 . 22/10/ 2014 SD/ - SD/ - ( ) ( SANJAY GARG ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 22/10 /2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//