M/s Ramtech Software Solutions Pvt. Ltd., Ludhiana V. ACIT, Ludhiana

ITA 477/CHANDI/2015

• Counselvise Citation: 47721514 RSA 2015
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 05-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS RAJINDER KAUR
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES SMC CHANDIGARH BEFORE SHRI H.L. KARWA, HONBLE VICE PRESIDENT ITA NO.477/CHD/2015 ASSESSMENT YEAR:2009-10 SH. RAMTECH SOFTWARE SOLUTIONS, VS. ACIT PVT. LTD. RANGE V SANWALKA BHAWAN LUDHIANA G.T. ROAD, MILLER GANJ LUDHIANA PAN NO. AABCG0991F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. SUBHASH AGGARWAL RESPONDENT BY : MRS. RAJINDER KAUR DATE OF HEARING : 10/08/2015 DATE OF PRONOUNCEMENT : 14/08/2015 ORDER PER H.L.KARWA, VP THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-2, LUDHIANA DT. 27/03/2015. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS RUNNING A SOFTWARE DEVELOPMENT UNIT. IT HAD SHOWN INVESTMENTS OF RS. 6 ,28,46,044/- AND RS. 5,28,71,243/- AS ON 31/03/2008 AND 31/03/2009 RESPE CTIVELY. THE AO NOTED THAT THE ASSESSEE HAD INCURRED INTEREST EXPENSES OF RS. 75,010/- AND PORTFOLIO MANAGEMENT EXPENSES AMOUNTING TO RS. 1,81,677/- DUR ING THE YEAR. WHEN CONFRONTED, THE ASSESSEE REPLIED THAT NO LOAN HAS B EEN TAKEN DURING THE YEAR UNDER CONSIDERATION AND ALL THE INVESTMENTS WERE MA DE OUT OF OWNED FUNDS. FURTHER IT WAS SUBMITTED THAT THE INTEREST EXPENSES OF RS. 75,010/- DEBITED TO THE 2 P&L ACCOUNT RELATED TO VEHICLE LOAN TAKEN FROM ARAB IAN AUTOMOBILE CO. IN VIEW OF THIS, IT WAS SUBMITTED THAT NO DISALLOWANCE U/S 14 A SHOULD BE MADE. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, THE AO HELD THAT PROVISION OF SECTION 14 A WERE APPLICABLE IN THIS CASE. ACCORDINGLY HE C OMPUTED DISALLOWANCE UNDER RULE 8D(2)(II) AT RS. 9257/- AND UNDER RULE 8 D(2)(III) AT RS. 2,89,293/- AND A TOTAL DISALLOWANCE AMOUNTING TO RS. 2,98,550/- WAS THUS MADE UNDER SECTION 14 A READ WITH RULE 8D. 3. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). H ERE THE ASSESSEES SUBMISSIONS WERE THREEFOLD. FIRSTLY, IT WAS SUBMITT ED THAT IN VIEW OF THE FACT THAT ASSESSEE HIMSELF HAS DISALLOWED AN AMOUNT OF 1,81,6 77/- SUOMOTO IN ITS RETURN OF INCOME, THE AO CANNOT STRAIGHT AWAY RESORT TO THE P ROVISION OF RULE 8D, WITHOUT RECORDING HIS SATISFACTION TO THE EFFECT AS TO HOW THE DISALLOWANCE SO MADE BY THE ASSESSEE ITSELF WAS WRONG. SECONDLY UNDER RULE 8D(2)(II) NO DISALLOWANCE IS WARRANTED AS THE ONLY AMOUNT OF INTEREST CLAIMED BY THE ASSESSEE IN ITS P&L ACCOUNT IS RELATED TO VEHICLE LOAN TAKEN BY THE ASS ESSEE AND NO APPORTIONMENT OF THE SAME CAN BE MADE FOR THE PURPOSES OF BEING R ELATED TO TAX FREE INCOME. THIRDLY, IT WAS CONTENDED THAT, WHILE COMPUTING THE DISALLOWANCE UNDER RULE 8D(2)(III), THE AO HAD TAKEN THE AVERAGE OF TOTAL I NVESTMENTS OF THE ASSESSEE, WHICH INCLUDES BOTH TAX FREE AND TAXABLE INCOME BEA RING INVESTMENTS, WHILE FOR THE PURPOSE OF SAID COMPUTATION, ONLY TAX FREE INCO ME BEARING INVESTMENTS ARE TO BE TAKEN. IT WAS ALSO PRAYED BEFORE THE CIT(A) T HAT THE CREDIT OF SUOMOTO DISALLOWANCE MADE BY ASSESSEE SHOULD ALSO BE GIVEN UNDER RULE 8D(2)(III). 4. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE , CIT(A) PREFERRED NOT TO COMMENT ON THE ISSUE OF SATISFACTION TO BE RECORDED BY THE A.O., HOWEVER, WITH REGARD TO RULE 8D(2)(II) HE GAVE RELIEF TO THE ASSE SSEE TO THE EXTENT OF RS. 9257/-, AS THE ONLY BORROWED FUNDS WERE WITH RESPECT TO CAR LOAN TAKEN BY THE ASSESSEE 3 AND THIS IS NOT A CASE OF MIXED FUNDS. AS REGARDS T HE STAND TAKEN BY THE ASSESSEE ON RULE 8D(2)(III), . THE CIT(A) HELD AS UNDER: 4.7 AS REGARDS THE DISALLOWANCE MADE UNDER RULE 8D (2)(III) THE APPELLANT HAS CONTENDED THAT IT HAD ITSELF DISALLOW ED RS. 1,81,677/- BEING PORTFOLIO MANAGEMENT EXPENSES. THE APPELLANT CONTENTED THAT CREDIT OF THIS DISALLOWANCE MAY BE GIVEN OUT O F DISALLOWANCE MADE BY THE AO. AS DISCUSSED ABOVE, THE DISALLOWANC E OF RS. 1,81,677/- BEING PORTFOLIO MANAGEMENT EXPENSES IS T O BE MADE UNDER RULE 8D(2)(I) BEING THE DIRECT EXPENSES AND T HEREFORE NO CREDIT FOR THIS DISALLOWANCE CAN BE GIVEN WHILE COM PUTING DISALLOWANCE UNDER RULE 8D(2)(III). AS REGARDS THE APPELLANTS CONTENTION THAT THE COMPUTATION OF DISALLOWANCE UND ER RULE 8D(2)(III) IS NOT CORRECT, THE AO IS DIRECTED TO VE RIFY THE FACTS AND RECOMPUTED THE DISALLOWANCE UNDER RULE 8D(2)(III) B Y TAKING THE VALUE OF INVESTMENT PERTAINING TO ONLY THOSE INVEST MENTS, INCOME FROM WHICH IS NOT TAXABLE. THIS GROUND OF APPEAL IS ACCORDINGLY PARTLY ALLOWED. THIS WAY CIT(A) PARTLY ALLOWED THE APPEAL OF THE AS SESSEE ON THIS GROUND. NOW, THE ASSESEE HAS CAME IN APPEAL BEFORE ME, RAIS ING THE FOLLOWING GROUNDS OF APPEAL. 1. THAT THE LEARNED CIT(A)-II HAS ERRED IN CONFIRMI NG THE DISALLOWANCE OF RS. 2,78,171/- U/S 14A R.W. RULE 8D(2)(III) OF THE INCO ME TAX RULES. 2. THAT THE LEARNED CIT(A) HAS IGNORED THE FACT THAT W HILE WORKING OF THE DISALLOWANCE UNDER RULE 8D(2)(III) IT IS ONLY THE I NVESTMENTS WHICH YIELD EXEMPT INCOME ARE TO BE TAKEN INTO CONSIDERATION AND FURTH ER NO EXPENDITURE HAD BEEN INCURRED FOR EARNING THE EXEMPT INCOME AND THE AO H AS ALSO NOT POINTED OUT THAT ANY EXPENDITURE HAS BEEN INCURRED SO AS TO CAL L FOR ANY DISALLOWANCE. 3. THAT IN ANY CASE THE DISALLOWANCE IS AGAINST THE LA W AND THE FACTS OF THE CASE. 5. LD. COUNSEL OF THE ASSESSEE, BEFORE ME, RAISED T HREEFOLD CONTENTIONS. FIRSTLY IT WAS ARGUED THAT THE ASSESSEE ITSELF DISA LLOWING AN AMOUNT OF RS. 1,81,677/- ON ACCOUNT OF PORTFOLIO MANAGEMENT SCHEM E (PMS) EXPENSES, BEING ADMINISTRATIVE EXPENSES RELATED TO EARNING OF EXEMP T INCOME, THE AO DID NOT BRING ON RECORD THAT ANY OTHER EXPENDITURE HAS BEEN INCURRED TO EARN EXEMPT INCOME AND STRAIGHT AWAY MADE THE DISALLOWANCE U/S 14A OF THE ACT READ WITH RULE 8D. FOR THIS PROPOSITION HE PLACED RELIANCE ON A NUMBER OF JUDGMENTS, INCLUDING THAT OF THE JURISDICTIONAL PUNJAB & HARYA NA HIGH COURT IN THE CASE OF 4 CIT VS. ABHISHEK INDUSTRIES LTD. (2015) 56 TAXMANN. COM 391(P&H) DT. 27/01/2015 & CIT VS. DEEPAK MITTAL 361 ITR 131 (P&H) DT. 03/09 /2013. 6. THE SECOND LIMB OF ARS ARGUMENT WAS THAT WHILE MAKING DISALLOWANCE UNDER RULE 8D(2)(III) IT IS ONLY THE AVERAGE OF THO SE INVESTMENTS WHICH HAVE YIELDED EXEMPT INCOME ARE TO BE TAKEN INTO CONSIDER ATION AND NOT THE AVERAGE OF ALL INVESTMENTS AS HAS BEEN DONE BY THE AO IN TH IS CASE. THE ARGUMENT PUT FORTH WAS THAT THOUGH CIT(A), AGREED IN PRINCIPLE W ITH THIS PROPOSITION, WHILE GIVING DIRECTIONS TO THE AO, HE HAS USED THE WRONG WORDINGS. RELIANCE WAS PLACED ON THE JUDGMENT OF THE DELHI HIGH COURT IN T HE CASE OF ACB INDIA P. LTD. VS. ACIT (2015) 374 ITR 108(DEL). 7. THIRDLY, IT WAS SUBMITTED THAT SINCE THE ASSESSE EE HAS ITSELF DISALLOWED AN AMOUNT OF RS. 1,81,677/- BEING PMS EXPENSES, WHICH ARE THE ONLY EXPENSES INCURRED BY THE ASSESSEE TO EARN TAX FREE INCOME, T HE CREDIT OF THE SAME MUST BE ALLOWED TO HIM UNDER RULE 8 D (2)(III). FOR THIS HE ALSO PLACED RELIANCE ON THE ORDER OF THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF ICICI VENTURE FUNDS MANAGEMENT CO. LTD. VS. DCIT, DT. 17/07/2015. 8. THE LD. DR, MAINLY RELIED ON THE ORDER OF THE AS SESSING OFFICER. SHE ALSO DREW MY ATTENTION TO THE FINDING GIVEN BY THE CIT(A ) AT PAGE 6 PARA 4.4 WHICH READS AS UNDER: 4.4 I HAVE CAREFULLY CONSIDERED THE APPELLANTS SUB MISSIONS. THE APPELLANT HAS HIMSELF SUBMITTED THAT IT HAD DISALLO WED RS. 1,81,677/- U/S 14A BEING PORTFOLIO MANAGEMENT EXPENSES. THUS THE A PPELLANT HAS ITSELF ADMITTED THAT EXPENSES WERE INCURRED IN RELATION TO EXEMPT INCOME. HOWEVER, THE APPELLANT HAS DISALLOWED ONLY DIRECT E XPENSES. NO AMOUNT OF ADMINISTRATIVE EXPENSES HAS BEEN DISALLOWED. MAK ING INVESTMENTS, CONTINUING WITH PORTFOLIO MANAGERS, SELECTING PORTF OLIO MANAGERS AND DECIDING ABOUT THE AMOUNT OF INVESTMENTS AND PERIOD OF INVESTMENTS INVOLVE DECISION MAKING PROCESS AT MANAGERIAL LEVEL AND THEREFORE INVOLVE ADMINISTRATIVE COSTS. AS THE APPELLANT HAS NOT DISALLOWED ANY ADMINISTRATIVE EXPENDITURE, THE DISALLOWANCE MADE B Y THE APPELLANT IS 5 NOT CORRECT AND THEREFORE THE PROVISIONS OF SECTION 14A WERE APPLICABLE IN THIS CASE. IN THIS WAY IT WAS ARGUED THAT THE PMS EXPENSES BEI NG DIRECTLY RELATABLE TO THE TAX FREE INCOME YIELDING INVESTMENTS THE BENEFIT OF SAME HAVING BEEN IMPUTED IN RULE 8D(2)(I) , NO FURTHER BENEFIT OF THE SAME U NDER RULE 8D(2)(III) SHOULD BE GIVEN. 9. I HAVE HEARD THE RIVAL CONTENTION AND PERUSED TH E MATERIAL ON RECORD. 10. IT IS AN ADMITTED FACT THAT THE ASSESSEE HAD SU OMOTO DISALLOWED AN AMOUNT OF RS. 1,81,677/- BEING PMS EXPENSES INCURRE D BY IT DURING THE YEAR. IT IS ALSO A MATTER OF RECORD THAT THE ASSESSEE VIDE ITS LETTER DT. 19.12.2011 STATED BEFORE THE AO THAT PROVISION OF SECTION 14A ARE NOT APPLICABLE IN ITS CASE AS NO LOAN HAS BEEN TAKEN DURING THE YEAR UNDER CONSIDERA TION AND ALL INVESTMENTS HAVE BEEN MADE OUT OF OWN SOURCES. SAME ARGUMENT WE RE REITERATED BEFORE THE CIT(A) ALSO. 11. IN SUCH A SCENARIO, THE A.O. HAD TO RECORD A SA TISFACTION AS TO WHY HE IS NOT SATISFIED WITH THE DISALLOWANCE MADE BY THE ASS ESSEE. UNDER SUB SECTION (2) TO SECTION 14A, THE AO IS REQUIRED TO EXAMINE THE A CCOUNTS OF THE ASSESSEE AND ONLY WHEN HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE IN RELATION TO EXEMPT INCOME , HE CAN DETERMINE THE AMOUNT OF EXPENDITURE WHICH SHOULD BE DISALLOWED IN ACCORDANCE WITH THE METHOD PRESCRIBED, I.E; RULE 8 D. SUB RULE (1) OF R ULE 8 D ALSO CATEGORICALLY STATES THE SAME POSITION. SUB RULE (2) WILL NOT CAM E INTO OPERATION UNLESS AND UNTIL THE SPECIFIC CONDITION PRESCRIBED UNDER SUB R ULE (1) ARE SATISFIED. I DO NOT FIND ANY SUCH SATISFACTION BEING RECORDED IN THE PR ESENT CASE BY THE AO, BEFORE HE INVOKED SUB RULE (2) OF RULE 8D OF THE RULES & M ADE THE RECOMPUTATION. 6 12. THERE ARE A NUMBER OF JUDICIAL PRONOUNCEMENTS T O THIS PROPOSITION BY MANY HIGH COURTS, INCLUDING THE JURISDICTIONAL PUNJ AB & HARYANA HIGH COURT. IN THE CASE OF ABHISHEK INDUSTRIES LTD. (SUPRA), ON WH ICH THE COUNSEL OF THE ASSESSEE HAS ALSO PLACED RELIANCE, IT HAS BEEN HELD THAT THE AO HAS TO RECORD A SATISFACTION THAT INTEREST BEARING FUNDS HAVE BEEN USED TO EARN TAX FREE INCOME AND THE SATISFACTION TO BE RECORDED MUST BE BASED U PON CREDIBLE AND RELEVANT EVIDENCE. SIMILAR VIEW HAD BEEN TAKEN IN THE CASE O F DEEPAK MITTAL (SUPRA) ALSO. HONBLE DELHI HIGH COURT, IN THE CASE OF CIT VS. TAIKISHA ENGINEERING INDIA LTD.(2015) 370 ITR 338 (DELHI), AFTER A THREADBARE ANALYSIS OF THE SECTION 14A AND RULE 8D, ALSO HAS HELD THE SAME. 13. IN VIEW OF THE ABOVE, THE ACTION OF THE AO INVO KING THE PROVISIONS OF RULE 8D OF INCOME TAX RULES, 1963, COULD NOT BE HELD PRO PER. HOWEVER, I FIND THAT THE RELEVANT FACTS OF THE CASE ARE ALREADY ON RECORD, T HEREFORE, I DO NOT THINK IT PROPER TO REMAND THE MATTER TO THE AO FOR A FRESH D ECISION AS PER LAW. SINCE ARGUMENTS AT LENGTH WERE MADE ON THE MERITS OF THE CASE ALSO, THEREFORE, I PROCEED TO DECIDE THE MERITS OF CASE IN SUCCEEDING PARAGRAPHS. 14. LD. AR ALSO RAISED THE ISSUE THAT WHILE MAKING COMPUTATION UNDER RULE 8D(2)(III) THE AO HAS TAKEN THE TOTAL VALUE OF INVE STMENTS BOTH AT THE OPENING AND CLOSING OF THE YEAR, WHILE IT SHOULD BE THE TOT AL VALUE OF TAX FREE INCOME YIELDING INVESTMENTS ONLY. I SEE THAT EVEN THE CIT( A) HAS AGREED WITH THE SAID CONTENTION OF THE ASSESSEE AND HAD GIVEN THE A.O. A DIRECTION TO DO THE SAME. THE FINDINGS ARE GIVEN AT PAGE 7 PARA 4.7 LAST SENT ENCE OF THE CIT(A)S ORDER IN THE FOLLOWING WORDS: 7 THE AO IS DIRECTED TO VERIFY THE FACTS AND RECOMP UTE THE DISALLOWANCE UNDER RULE 8D(2)(III) BY TAKING THE VALUE OF INVESTMENT P ERTAINING TO ONLY THOSE INVESTMENTS, INCOME FROM WHICH IS NOT TAXABLE. 15. SHRI SUBHASH AGGARWAL , LD. COUNSEL FOR THE ASS ESSEE SUBMITTED THAT THE DIRECTION GIVEN BY THE LD. CIT(A) ARE NOT PROPER AN D CORRECT IN LAW. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE THE AO MAY BE DIRECTED THAT WHILE WORKING OUT THE DISALLOWANCE UNDER RULE 8D(2)(III), IT IS O NLY THE INVESTMENTS WHICH YIELD EXEMPT INCOME ARE TO BE TAKEN INTO CONSIDERATION. I FIND SUBSTANCE IN THE ABOVE SUBMISSION OF LD. COUNSEL FOR THE ASSESSEE A ND ACCORDINGLY I MODIFY THE ORDER OF LD. CIT(A) TO THE ABOVE EXTENT AND DIRECT THE AO THAT WHILE WORKING OUT THE DISALLOWANCE UNDER RULE 8D(2)(III), IT IS ONLY THE INVESTMENTS WHICH YIELD EXEMPT INCOME ARE TO BE TAKEN INTO CONSIDERATION. T HIS GROUND OF APPEAL IS DISPOSED OF IN ABOVE TERMS. 16. FURTHER, THE AR PRAYED FOR THE CREDIT OF SUOMOT O DISALLOWANCE OF PMS EXPENSES AMOUNTING TO RS. 1,81,667/- MADE BY THE AS SESSEE. A DETAIL OF THESE EXPENSES WERE ALSO FILED DURING THE COURSE OF HEARI NG, STATING THAT THESE ARE THE ONLY EXPENSES INCURRED BY THE ASSESSE FOR EARNING T AX FREE INCOME. IT WAS ALSO STATED AT THE BAR THAT THE TAX FREE INCOME HAS BEEN EARNED ONLY THROUGH THE PORTFOLIO MANAGEMENT BY THESE PORTFOLIO MANAGERS ON LY. IT WAS ALSO STATED THAT NO OTHER EXPENDITURE WAS INCURRED TO EARN THE SAID TAX FREE INCOME. NOW THE ONLY ISSUE TO BE DECIDED IS WHETHER THE CREDIT OF P MS EXPENSES SHOULD BE GIVEN TO THE ASSESSEE UNDER RULE 8D(2)(I) OR RULE 8D(2)(I II) . THE AO HAS NOT GIVEN CREDIT OF THE SAID EXPENSES WHILE COMPUTING DISALLOWANCE U NDER RULE 8D. HOWEVER IT CAN BE SEEN THAT, WHILE COMPUTING THIS HE HAS COMPU TED NIL AMOUNT UNDER RULE 8D(2)(I) AND RS. 289293/- UNDER RULE 8D(2)(III ). THERE IS NO DISPUTE BEFORE ME 8 REGARDING RULE 8D(2)(II). THE CIT(A), HOWEVER WHILE ADJUDICATING THE ISSUE HAS HELD THAT THE CREDIT OF PMS EXPENDITURE HAS BEEN GI VEN UNDER RULE 8D(2)(I) BY THE AO. HIS FINDING TO THIS EFFECT HAS ALREADY BEEN QUOTED EARLIER IN THIS ORDER. IN PRINCIPLE HE HAS ACCEPTED THE PROPOSITION OF THE AS SESSEE THAT CREDIT OF PMS EXPENSES SUOMOTO DISALLOWED BY THE ASSESSEE SHOULD BE GIVEN TO HIM OUT OF THE DISALLOWANCE COMPUTED UNDER RULE 8D. IT IS A FACT THAT FOR MAKING INVESTMENTS, CONTINUING WITH PORTFOLIO MANAGEMENT, SELECTING POR TFOLIO MANAGER AND DECIDING ABOUT THE AMOUNT OF INVESTMENTS AND PERIOD OF INVESTMENTS INVOLVE DECISION MAKING PROCESS AT MANAGERIAL LEVEL AND THE REFORE INVOLVE ADMINISTRATIVE COSTS. THESE ALL A PART OF OVERHEAD EXPENSES WHICH AN ASSESSEE OUGHT TO INCUR FOR EARNING TAX FREE INCOME. A PART OF THESE ACTIVITIES ARE BEING TAKEN CARE OF BY THE PORTFOLIO MANAGER, WHO TAKE TH EIR FEE INTURN. IN SUCH CIRCUMSTANCES, IT CANNOT BE DENIED THAT THESE ARE T HE EXPENSES WHICH HAVE BEEN PERCEIVED WHILE DRAFTING CLAUSE (III) OF RULE 8D. IN SUCH CIRCUMSTANCES, THE PART OF THE EXPENSES BEING IN THE NATURE OF PMS EXP ENSES, WHICH THE ASSESSEE ITSELF HAS DISALLOWED, IT IS PERTINENT TO GIVE CRED IT OF THE SAME TO THE ASSESSEE UNDER THE SAME CLAUSE. THE RELIANCE, IN THIS REGARD, PLACED BY THE AR ON T HE ORDER OF THE BANGALORE BENCH OF THE ITAT IN THE CASE OF M/S ICIC I VENTURE FUNDS MANAGEMENT (SUPRA), IS NOT OUT OF PLACE, WHERE, IN A SIMILAR CIRCUMSTANCES THE ITAT HELD AS UNDER: 10. AS REGARDS THE DISALLOWANCE OF THE GENERAL ADMINIST RATIVE EXPENSES UNDER RULE 8D (2)(III) THE AO HAS COMPUTED THE DISALLOWANCE BEING 0.5% OF THE AVERAGE INVESTMENTS. IT IS NOT DISPUTED THAT THE ASSESSE HAS RECEIVED DIVIDEND INC OME ON WHICH THE EXPENDITURE INCURRED BY VARIOUS VENTURE CAPITAL FUNDS HAS ALREADY BEEN DISALLOWED AND THE AMOUNT RECEIVED BY THE ASSESSEE IS NET AMOUNT. THEREFORE, FOR THE PURPOSE OF DISALLOWANCE U/S 14A EXPENDITURE ALREADY DISALLOWED FROM THE DI VIDEND INCOME PRIOR OT THE ALLOCATION TO THE ASSESSEE IS REQUIRED TO BE TAKEN INTO ACCOUNT. IN THE FACTS AND CIRCUMSTANCES OF THE CASE , WE DIRECT THE AO TO RE-COMPUTE THE DISALLOWANCE BY REDUCING T HE AMOUNT OF EXPENDITURE ALREADY DISALLOWED FROM THE DIVIDEND INCOME FROM THE AMOUNT WORKED OUT BY THE AO AT RS. 6.04,000/-. 9 IN VIEW OF THE ABOVE THE CREDIT OF SUOMOTO DISALLOW ANCE OF RS. 1,81,677/- MADE BY ASSESSEE ON ACCOUNT OF PMS EXPENDITURE INCU RRED BY IT IS TO BE ALLOWED TO IT. MY VIEW ALSO GETS ITS STRENGTHENED B Y THE ORDER OF DELHI ITAT IN THE CASE OF DCIT VS. M/S I P SUPPORT SERVICES INDIA (P) LTD., ITA NO. 524/DEL/2013 DT. 08/08/2013, WHEREBY WHILE ADJUDICATING THE SAME ISS UE, THE HONBLE BENCH HELD AS UNDER: IT HAS BEEN HELD THAT THE ASSESSEE HAD ITSELF ADDE D PORTFOLIO MANAGEMENT EXPENDITURE INCURRED FOR MAINTAINING POR TFOLIO OF THE ASSESSEE AND THE ASSESSEE HAS ADDED EXPENDITURE OF PORTFOLIO MANAGEMENT SERVICES VOLUNTARILY, THEN IF IT IS FOUN D THAT NO INTEREST EXPENDITURE STOOD DEBITED IN THE P&L ACCOUNT. RULE 8D R/W SECTION 14A OF THE ACT CANNOT BE INVOKED. ACCORDINGLY, WE HOLD THA T THE COMMISSIONER OF INCOME TAX(A) RIGHTLY UPHELD PART ADDITION IN TH IS REGARD AND ANOTHER PART OF THE ADDITION HAS BEEN DELETED ON JUSTIFIED GROUNDS. WE ARE UNABLE TO SEE ANY VALID REASON TO INTERFERE WITH THE FINDI NGS OF THE COMMISSIONER OF INCOME TAX (A) IN THIS REGARD. THE COMMISSIONER OF INCOME TAX (A) HAS FOLLOWED THE ORDER OF THE TRIBUNAL FOR AY 2007-08(S UPRA) AND HAS ACCEPTED SUO MOTO ESTIMATED AMOUNT OFFERED BY THE A SSESSEE FOR TAXATION, HENCE WE UPHOLD THE OBSERVATIONS AND FIND INGS OF THE 10 ITA NO. 524/DEL/2013 ASST. YEAR: 2009-10 COMMISSIONER OF IN COME TAX (A) IN THIS REGARDS. 17. IN VIEW OF THE ABOVE, THE AO IS DIRECTED TO RED UCE THE AMOUNT OF PMS EXPENSES FROM THE DISALLOWANCE COMPUTED BY HIM UNDE R RULE 8D(2)(III). 18. IN THE RESULT, APPEAL IS ALLOWED PARTLY AS INDI CATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 14/08/2015 SD/- (H.L. KARWA) VICE PRESIDENT DATED: 14/08/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR