The Dy. Commissioner of Income Tax, Bathinda V. M/s Dabwali Transport Company Ltd, Bathinda

ITA 488/ASR/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2582 (ITAT-AMRITSAR)
• Duration Of Justice: 4 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 21-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BHAVESH JINDAL CAS
• Keywords: Unexplained investment; Capital asset converted into stock in trade; Depreciation; Opportunity of being heard; Earning of tax free income; Deemed to accrue or arise in india; Proportionate interest; Question of law; Tangible material; Fair market value; Rule 8D; CHAPTER IV
• Section: 14A; 69B; 201; 13; 22; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. LALIET KUMAR, JUDICIAL MEMBER AND DR. M. L. MEENA, ACCOUNTANT MEMBER I.T.A. NO. 488 & 487/ASR/2017 ASSESSMENT YEARS:2014-15 & 2013-14 DCIT, BATHINDA. (APPELLANT) VS. M/S DABWALI TRANSPORT COMPANY LTD, BATHINDA. [PAN: AAACT5071B] (RESPENDENT) I.T.A. NOS. 506 & 507/ASR/2017 ASSESSMENT YEARS: 2013-14 & 2014-15 M/S DABWALI TRANSPORT COMPANY LTD, BATHINDA. [PAN: AAACT5071B] (APPELLANT) VS. ACIT, CIRCLE-2, BATHINDA. (RESPENDENT) APPELLANT BY SH. SANJAY DHARIWAL, DR RESPONDENT BY SH. ASHWANI KUMAR & BHAVESH JINDAL, CAS. DATE OF HEARING 15.09.2021 DATE OF PRONOUNCEMENT 14.10.2021 ORDER PER DR. M. L. MEENA, AM: THESE ARE CROSS APPEALS BY THE REVENUE AND THE ASSE SSEE AGAINST THE ORDER DATED 25.05.2017 PASSED BY THE CIT(A) BATHINDA. I.T.A. NO. 488 & 487/ASR/2017 & I.T.A. NOS. 506 & 507/ASR/2017 2 2. THE DEPARTMENT HAS RAISED THE FOLLOWING COMMON GRO UNDS OF APPEAL IN ITA NO. 487 AND 488/ASR/2017: 1. THE LD. C1T(A) HAS ERRED IN HOLDING THAT NO DISA LLOWANCES U/S 14A COULD BE MADE IF THE ASSESSEE HAD NOT EARNED ANY EXEMPT I NCOME DURING THE YEAR EVEN THOUGH THE CBDT VIDE CIRCULAR NO. 5/2014 DATED 11.02.2014 HAS CLARIFIED THAT RULE 8D READ WITH SECTION 14A OF THE ACT PROVIDED FOR DISALLOWANCE OF THE EXPENDITURE EVEN WHERE TAX PAYE R IN A PARTICULAR YEAR HAD NOT EARNED ANY EXEMPT INCOME. 2. THE LD. CIT(A) HAS EARNED IN HOLDING THAT NO DI SALLOWANCES U/S 14A COULD BE MADE AS THE INVESTMENTS IN SHARES WERE MAD E OUT OF INTEREST-FREE FUNDS BEING SHARE CAPITAL AND RESERVES AND SURPLUS, IGNORING THE FACT THAT THE INTEREST FREE FUNDS WERE ALREADY UTILIZED BY THE AS SESSEE IN BUSINESS ASSETS AND INTEREST BEARING FUNDS WERE RAISED TO MEET THE DEFICIT. 3. THE LD. CIT(A) HAS ERRED IN HOLDING THAT INTERE ST FREE FUNDS EXCEEDED THE VALUE OF INVESTMENTS IN SHARES, IGNORING THAT T HE BURDEN WAS UPON THE ASSESSEE TO SHOW AND PROVE THAT INTEREST FREE FUNDS EXCEEDED THE VALUE OF INVESTMENTS AS HELD BY THE HON'BLE KARNATKA HIGH CO URT IN BHARAT BEEDI WORKS (P) LTD VS ADDL CIT, 74 TAXMANN.COM 95, AND T HAT IN THE PRESENT CASE, THE SAID BURDEN HAD NOT BEEN DISCHARGED SATISFACTOR ILY BY THE ASSESSEE. 4. THE LD. CIT(A) HAS ERRED IN HOLDING THAT DEPREC IATION @ 30% WAS ALLOWABLE ON BUSES BY FAILING TO APPRECIATE THAT TH E ASSESSEE WAS USING THE BUSES FOR ITS OWN BUSINESS AND HENCE WAS ENTITLED T O DEPRECIATION @ 15% ON SUCH BUSES AS PROVIDED IN PARA III(L) OF APPENDIX 1 OF RULE 5(L)OF THE RULES. I.T.A. NO. 488 & 487/ASR/2017 & I.T.A. NOS. 506 & 507/ASR/2017 3 5. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON MADE UNDER PROVISO TO SECTION 36(I)(III) OF THE ACT THEREBY IGNORING T HE ADMITTED FACT THAT THE ASSETS ACQUIRED DURING THE YEAR WERE NOT PUT TO BUS INESS USE AND PROPORTIONATE INTEREST ON SUCH INVESTMENTS WAS REQU IRED TO BE CAPITALIZED. 6. THE LD. CIT(A) HAS ERRED IN HOLDING THE INCOME FROM RENTING OUT OF ROOT SPACE FOR INSTALLATION OF TOWER AS INCOME FROM HOUSE PROPERTY WITHOUT APPRECIATING THAT OPEN SPACE ON ROOT TOP WAS NEITHE R BUILDING NOR LAND APPURTENANT THERETO. IN ITA NO. 506 AND 507/ASR/2017, THE ASSESSEE HAS R AISED THE FOLLOWING COMMON GROUND OF APPEAL: 1. THAT ORDER PASSED U/S 250(6) OF THE INCOME TAX ACT, 1961 BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), BATHINDA IS A GAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO A RBITRARILY UPHOLD DISALLOWANCE OF RS. 7,35,571/- OUT OF A TOTAL DISAL LOWANCE OF RS. 52,03,787/- MADE BY THE LD. ASSESSING OFFICER U/S 14A OF THE IN COME TAX ACT, 1961. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) WAS NOT JUSTIFIED TO UPHOLD THE ACTION OF THE ASSESSING OFFICER IN MA KING A REFERENCE TO THE DVO FOR DETERMINING THE VALUE OF INVESTMENT IN THE WORKSHOP OF BADAL ROAD, BATHINDA WITHOUT PIN POINTING ANY DEFECT IN T HE BOOKS OF ACCOUNTS. 3. THAT HE WAS FURTHER NOT JUSTIFIED TO ARBITRARILY UPHOLD AN ADDITION OF RS. 18,89,495/- MADE BY THE LD. ASSESSING OFFICER U /S 69B BEING THE ALLEGED DIFFERENCE BETWEEN THE VALUE SHOWN BY THE APPELLANT AND THE VALUE OF INVESTMENTS DETERMINED BY THE DVO. I.T.A. NO. 488 & 487/ASR/2017 & I.T.A. NOS. 506 & 507/ASR/2017 4 THERE ARE COMMON ISSUE BEING INVOLVED IN THESE CROS S APPEALS, AND HENCE THEY ARE BEING HEARD TOGETHER AND DISPOSED OFF BY THIS COMMO N ORDER FOR BREVITY. 3. BRIEFLY, THE FACTS AS PER RECORD ARE TAKEN FROM ITA NO. 488/ASR/2017 BEING A LEAD CASE WHEREIN THE ASSESSMENT WAS MADE U/S L43(3 ) VIDE AN ASSESSMENT ORDER DATED 30.11.2016 AT A TOTAL INCOME OF RS.21,86,92,4 70/- AFTER MAKING ADDITIONS ON ACCOUNT OF DISALLOWANCE OF EXPENSES OF RS.70,28,614 /- U/S 14A OF THE ACT ON ACCOUNT OF INVESTMENT IN SHARES, ADDITION OF RS.2,4 0,81,985/- ON ACCOUNT OF RESTRICTION OF DEPRECIATION RATE FROM 30% TO 15%, A DHOC ADDITION OF RS.6,00,000/- ON ACCOUNT OF DISALLOWANCE OF UNVOUCHED EXPENSES, A DDITION OF RS.8,91,006/- U/S 69B OF THE ACT ON ACCOUNT OF DIFFERENCE IN VALUE OF INVESTMENT IN CONSTRUCTION OF BUILDING CLAIMED BY THE ASSESSEE AND AS REPORTED BY THE VALUATION OFFICER, ADDITION OF RS.8,20,550/- ON ACCOUNT OF DISALLOWANCE OF PROP ORTIONATE INTEREST UNDER PROVISO TO SECTION 36(L)(III) OF THE ACT ON ACCOUNT OF INVE STMENT IN PURCHASE OF ASSETS NOT PUT TO USE AND ADDITION OF RS 78,556/- ON ACCOUNT O F DISALLOWANCE OF DEDUCTION CLAIMED BY THE ASSESSEE U/S 24(A) OF THE ACT. 4. BEING AGGRIEVED WITH THE ASSESSMENT ORDER, THE AS SESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A), BATHINDA WHO VIDE HIS ORDER DATE D 25.05.2017 PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY RESTRICTING THE DISAL LOWANCE OF EXPENSES OF RS. 70,26,841/-U/S 14A OF THE ACT TO RS. 9,26,938/-, AN D DELETED THE ADDITIONS OF RS 2,40,81,985/-MADE ON ACCOUNT OF RESTRICTION OF DEPR ECIATION RATE FROM 30% TO 15% AND THAT RS 8,20,550/-MADE ON ACCOUNT OF DISALLOWAN CE OF PROPORTIONATE INTEREST UNDER PROVISO TO SECTION 36(L)(III) OF THE ACT, AND FURTHER DELETED RS 78,556/- MADE ON ACCOUNT OF DISALLOWANCE OF DEDUCTION CLAIMED BY THE ASSESSEE U/S 24(A) OF THE ACT BY OBSERVING AS UNDER: 4. THE SUBMISSIONS OF THE APPELLANT HAVE BEEN CONS IDERED. ALL THE JUDICIAL PRECEDENTS ARE UNANIMOUS IN HOLDING THAT W HEREIN IT HAS BEEN HELD I.T.A. NO. 488 & 487/ASR/2017 & I.T.A. NOS. 506 & 507/ASR/2017 5 THAT INTEREST-FREE FUNDS FAR EXCEEDED INVESTMENTS M ADE FOR EARNING EXEMPT DIVIDEND INCOME AND THE AO HAS FAILED TO ESTABLISH THE NEXUS BETWEEN BORROWED FUNDS AND INVESTMENTS MADE, NO DISALLOWANC E COULD BE MADE UNDER SECTION 14A. THE HONBLE BOMBAY HIGH COURT IN THE C ASE OF RELIANCE UTILITIES AND POWER LTD [2009] 221 CTR 435 HAS CATEGORICALLY HELD THAT IF AVAILABLE FUNDS COMPRISE BOTH, INTEREST-FREE AND OVERDRAFT/LO ANS, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENT WOULD BE OUT OF THE INT EREST-FREE FUNDS GENERATED OR AVAILABLE, IF THE INTEREST-FREE FUNDS ARE SUFFIC IENT TO MEET THE INVESTMENTS. IN THE APPELLANTS CASE, THE CONTENTION MADE BEFORE TH E AO THAT THE INTEREST-FREE FUNDS WERE UTILISED FOR MAKING INVESTMENTS WERE NEI THER CONTESTED NOR NEGATED. THE HIGHER APPELLATE AUTHORITIES HAVE CONS ISTENTLY HELD THE VIEW THAT FOR MAKING A DISALLOWANCE UNDER SECTION 14A, THERE IS A REQUIREMENT OF ESTABLISHING A NEXUS BETWEEN THE INTEREST-BEARING F UNDS AND THE INVESTMENTS MADE. NO EFFORT TOWARDS THIS EXERCISE IS SEEN TO HA VE BEEN MADE BY THE AO WHICH IS MANIFEST IN THE IMPUGNED ASSESSMENT ORDER. IT WOULD BE EXPEDIENT TO EXTRACT HEREINBELOW PARAGRAPHS 10 & 11 OF THE JUDGE MENT OF THE JURISDICTIONAL HIGH COURT OF PUNJAB AND HARYANA IN THE CASE OF ABHISHEK INDUSTRIES LTD [2016] 380 ITR 652: 10. SECTION 14A OF THE ACT REQUIRES THE AO TO RECO RD THE SATISFACTION THAT INTEREST-BEARING FUNDS HAVE BEEN USED TO EARN TAX FREE INCOME. THE SATISFACTION TO BE RECORDED MUST BE BASED UPON CREDIBLE AND RELEVANT EVIDENCE. THE ONUS, THEREFORE, TO PROVE TH AT INTEREST BEARING FUNDS WERE USED, LIES SQUARELY ON THE SHOULDERS OF FE REVENUE. THUS, IF THE AO IS ABLE TO REFER TO RELEVANT MATERIAL WHILE RECORDING SATISFACTION THAT BORROWED FUNDS WERE USED TO EARN INTEREST FREE INCOME AS PROPOSED TO THE ASSESSEES OWN FUNDS, THE AO MAY LEGITIMATELY DISALLOW SUCH A CLAIM. THE AO, HOWEVER , CANNOT, BY RECORDING GENERAL OBSERVATIONS, PARTICULARLY WHERE THE ASSESSEE HAS DENIED USING INTEREST-BEARING FUNDS, PROCEED TO INF ER THAT INTEREST- BEARING INCOME MUST HAVE BEEN USED TO EARN EXEMPTED INCOME. SECTION 14A OF THE ACT, BEING IN THE NATURE OF AN E XCEPTION, HAS TO BE CONSTRUED STRICTLY AND ONLY WHERE THE AO RECORDS SA TISFACTION, ON THE BASIS OF CLEAR AND COGENT MATERIAL, SHALL AN ORDER BE PASSED UNDER SECTION 14 A OF THE ACT, DISALLOWING SUCH A CLAIM. AS THERE IS NO TANGIBLE MATERIAL ON RECORD THAT COULD HAVE ENABLED THE AO TO RECORD SATISFACTION IN TERMS OF SECTION 14A OF THE ACT, FI NDINGS RECORDED BY I.T.A. NO. 488 & 487/ASR/2017 & I.T.A. NOS. 506 & 507/ASR/2017 6 THE CIT(A) AND THE TRIBUNAL THAT THE AO HAS FAILED TO DISCHARGE THIS ONUS ARE NEITHER PERVERSE NOR ARBITRARY AND, THEREF ORE, DO NOT CALL FOR INTERFERENCE. 11. EVEN OTHERWISE, THE CONTROVERSY, IN OUR CONSIDE RED OPINION, IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE J UDGEMENT IN CIT VS. WINSOME TEXTILES INDUSTRIES LTD. WE, THEREFORE, FIN D NO REASON TO INTERFERE WITH THE FINDINGS RECORDED BY THE TRIBUNA L, ANSWER THE QUESTION OF LAW AGAINST THE REVENUE AND DISMISSED T HE APPEAL ACCORDINGLY. 5. IN ADDITION TO THE ABOVE, IT IS AN ADMITTED FACT THAT NO DIVIDEND INCOME WAS RECEIVED BY THE APPELLANT COMPANY DURING THE YE AR UNDER CONSIDERATION. THOUGH THE CBDT'S CIRCULAR DATED 11 FEBRUARY, 2014 [ NO. 5/2014; F. NO. 225/182/2013-14] HAS CLARIFIED THAT RULE 8D READ WI TH SECTION 14A SHALL BE APPLICABLE FOR 2 ALLOWANCE OF THE EXPENDITURE EVEN WHERE TAX PAYER IN A PARTICULAR YEAR HAS NOT EARNED ANY EXEMPT INCOME, T HERE ARE MANY DECISIONS OF VARIOUS HIGH COURTS HOLDING CONTRARY VIEW. THE J URISDICTIONAL HIGH COURT OF PUNJAB AND HARYANA IN THE CASE OF CIT, FARIDABAD VS. LAKHANI MARKETING INC. [2014] 49 TAXMANN.COM 257, VIDE ORDER DATED 2N D OF APRIL, 2014 HAS CATEGORICALLY HELD THAT UNLESS AND UNTIL THERE IS A RECEIPT OF EXEMPTED INCOME FOR THE CONCERNED ASSESSMENT YEARS, SECTION 14A CAN NOT BE INVOKED. IN DOING SO, THE HONBLE HIGH COURT MADE A REFERENCE TO TWO EARLIER DECISIONS OF THE SAME HIGH COURT : CIT VS. HERO CYCLES LTD. [2010] 3 23 ITR 518 AND CIT VS. WINSOME INDUSTRIES LTD. [2009] 319 ITR 204, TO HOLD THAT SECTION 14A CANNOT BE INVOKED WHEN NO EXEMPT INCOME WAS EARNED. SUBSEQ UENTLY, ON 5TH. OF SEPTEMBER, 2014, THE HONBLE DELHI HIGH COURT FOLLO WED THE AFORESAID DECISION OF THE PUNJAB AND HARYANA HIGH COURT IN TH E CASE OF CIT VS. HOLCIM INDIA (P.) LTD. [2015] 57 TAXMANN.COM 28. SI MILAR VIEW HAVE ALSO BEEN TAKEN BY VARIOUS OTHER COURTS IN CORRTECH ENER GY (P) LTD. [2014] 272 CTR 262 (GUJ.), SHIVAM MOTORS (P) LTD [2015] 272 CT R 277 (ALL) AND CHEMINVEST LTD. [2015] 378 ITR 33 (DELHI). 6. RECENTLY, THE HON'BLE HIGH COURT OF MADRAS IN TH E CASE OF REDINGTON (INDIA) LTD. [2017] 392 TR 633 EXPRESSED ITS INABIL ITY TO SUBSCRIBE TO THE VIEW EXPRESSED VIDE THE AFORESAID CIRCULAR OF THE CBDT. ELABORATING ON THE DISAPPROVAL OF THE CIRCULAR IT WAS STATED THAT THE PROVISIONS OF SECTION 14A I.T.A. NO. 488 & 487/ASR/2017 & I.T.A. NOS. 506 & 507/ASR/2017 7 WERE INSERTED AS RESPONSE TO THE JUDGEMENTS OF THE SUPREME COURT IN CIT VS. MAHARASHTRA SUGAR MILLS LTD. [1971] 82 ITR 452 AND RAJASTHAN STATE WAREHOUSING CORPORATION VS. Z T [2000] 242 ITR 450 IN TERMS OF WHICH, EXPENDITURE INCURRED BY AN ASSESSEE CARRYING ON A C OMPOSITE BUSINESS GIVING RISE TO BOTH TAXABLE AS WELL AS NON-TAXABLE INCOME, WAS ALLOWABLE IN ENTIRETY WITHOUT APPORTIONMENT. IT WAS THUS THAT SECTION 14A WAS INSERTED PROVIDING THAT NO DEDUCTION SHALL BE ALLOWABLE IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO THE EARNING OF INCOME EXEMPT FROM TAXAT ION. AS OBSERVED BY THE SUPREME COURT IN THE JUDGEMENT IN THE CASE OF CIT V S. WALFORT SHARE & STOCKBROKERS (P.) LTD. [2010] 326 ITR 1 : ............ THE MANDATE OF S. 14A IS CLEAR. IT DE SIRES TO CURB THE PRACTICE TO CLAIM DEDUCTION OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME AGAINST TAXABLE INCOME AND AT THE SAME TIME AVAIL O F THE TAX INCENTIVE BY WAY OF AN EXEMPTION OF EXEMPT INCOME WITHOUT MAK ING ANY APPORTIONMENT OF EXPENSES INCURRED IN RELATION TO E XEMPT INCOME. 7. IN VIEW OF THE AFORESAID, THE HONBLE MADRAS HIG H COURT HELD THAT THE PROVISION IS CLEARLY RELATABLE TO THE EARNING OF AC TUAL INCOME AND NOT NOTIONAL OR ANTICIPATED INCOME. THE VIEW PROPOUNDED BY THE C BDT CIRCULAR TO THE EFFECT THAT SECTION 14A WOULD BE ATTRACTED EVEN TO EXEMPT INCOME INCLUDABLE IN TOTAL INCOME WOULD ENTAIL THE ASSES SMENT OF NOTIONAL INCOME, ASSUMED TO BE EXEMPT IN THE FUTURE, IN THE PRESENT ASSESSMENT YEAR. THE COMPUTATION OF TOTAL INCOME IN TERMS OF SECTION 5 O F THE ACT IS ON REAL INCOME AND THERE IS NO SANCTION IN LAW FOR THE ASSESSMENT OF ADMITTEDLY NOTIONAL INCOME, PARTICULARLY IN THE CONTEXT OF EFFECTING A DISALLOWANCE IN CONNECTION THEREWITH. THE EXEMPTION EXTENDED TO DIVIDEND INCOM E, IT WAS HELD, WOULD RELATE ONLY TO THE PREVIOUS YEAR WHEN THE INCOME WA S EARNED AND NONE OTHER AND CONSEQUENTLY THE EXPENDITURE INCURRED IN CONNEC TION THEREWITH SHOULD ALSO BE DEALT WITH IN THE SAME PREVIOUS YEAR. THUS, BY APPLICATION OF THE MATCHING CONCEPT, IN A YEAR WHERE THERE IS NO EXEMP T INCOME, THERE CANNOT BE A DISALLOWANCE OF EXPENDITURE IN RELATION TO SUCH A SSUMED INCOME [MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD. 225 ITR 802, (SC)]. THE HONBLE COURT, THEREAFTER, HELD THAT LANGUAGE OF SECTION 14 A SHOULD BE READ IN THAT CONTEXT AND SUCH THAT IT ADVANCES THE SCHEME OF THE ACT RATHER THAN DISTORT IT I.T.A. NO. 488 & 487/ASR/2017 & I.T.A. NOS. 506 & 507/ASR/2017 8 AND CONCLUDED THAT THE PROVISIONS OF SECTION 14A RE AD WITH RULE 8D CANNOT BE MADE APPLICABLE IN A VACUUM I.E. IN THE ABSENCE OF EXEMPT INCOME. 8. ON A CONSPECTUS OF HIS ENTIRE FACTS AND CIRCUMST ANCES, IT IS HELD THAT SINCE THE APPELLANT COMPANY HAD NON-INTEREST-BEARIN G FUNDS FAR EXCEEDING THE INVESTMENTS MADE AND THERE WAS NO EXEMPT INCOME WHI CH WAS INCLUDED IN THE TOTAL INCOME DURING THE YEAR UNDER CONSIDERATION, T HERE CANNOT BE ANY PROPORTIONATE DISALLOWANCE [RS. 61,01,676/-] OF INT EREST PAID WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME IN T HE PROPORTION OF AVERAGE VALUE OF INVESTMENTS TO THE AVERAGE VALUE OF TOTAL ASSETS. HOWEVER, THE AMOUNT EQUAL TO ONE-HALF PERCENT [RS. 9,26,938/-] OF THE A VERAGE OF THE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE SHEET OF THE AP PELLANT, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR, NEEDS TO BE DISALLOWED AS PER THE PROVISIONS OF SECTION 14A READ WITH RULE 8D. THIS C OMPONENT OF DISALLOWANCE DOES NOT PERTAIN TO PROPORTIONATE DISALLOWANCE OF I NTEREST PAID BUT ACCOUNTS FOR AN ESTIMATED GENERAL AND ADMINISTRATIVE EXPENSE S FOR ACQUISITION OF INVESTMENTS WHICH WOULD EARN TAX FREE INCOME. ACCOR DINGLY, THE AO IS DIRECTED TO RESTRICT THE ADDITION TO RS. 9,26,938/- UNDER THE PROVISIONS OF SECTION 14A. 5 . THE GROUND NO. 1 TO 3 OF THE DEPARTMENT AND 1 OF THE ASSESSEE PERTAINS TO COMMON ISSUE OF DISALLOWANCE U/S 14A WHERE ASSESSEE HAS NOT EARNED EXEMPT INCOME DURING THE YEAR. 5.1 THE LD. DR SUPPORTED THE ASSESSMENT ORDER AND CONTENDED THAT THE LD. C1T(A) HAS ERRED IN HOLDING THAT NO DISALLOWANCES U /S 14A COULD BE MADE IF THE ASSESSEE HAD NOT EARNED ANY EXEMPT INCOME DURING TH E YEAR EVEN THOUGH THE CBDT VIDE CIRCULAR NO. 5/2014 DATED 11.02.2014 HAS CLARI FIED THAT RULE 8D READ WITH SECTION 14A OF THE ACT PROVIDED FOR DISALLOWANCE OF THE EXPENDITURE EVEN WHERE TAX PAYER IN A PARTICULAR YEAR HAD NOT EARNED ANY E XEMPT INCOME. HE HAS SUBMITTED THAT AGAIN THE LD. CIT(A) HAS EARNED IN HOLDING THA T NO DISALLOWANCES U/S 14A COULD BE MADE AS THE INVESTMENTS IN SHARES WERE MAD E OUT OF INTEREST-FREE FUNDS I.T.A. NO. 488 & 487/ASR/2017 & I.T.A. NOS. 506 & 507/ASR/2017 9 BEING SHARE CAPITAL AND RESERVES AND SURPLUS, IGNOR ING THE FACT THAT THE INTEREST FREE FUNDS WERE ALREADY UTILIZED BY THE ASSESSEE IN BUSI NESS ASSETS AND INTEREST-BEARING FUNDS WERE RAISED TO MEET THE DEFICIT. THE DR FURTH ER SUBMITTED THAT THE LD. CIT(A) HAS ERRED IN HOLDING THAT INTEREST FREE FUND S EXCEEDED THE VALUE OF INVESTMENTS IN SHARES, IGNORING THAT THE BURDEN WAS UPON THE ASSESSEE TO SHOW AND PROVE THAT INTEREST FREE FUNDS EXCEEDED THE VALUE O F INVESTMENTS AS HELD BY THE HON'BLE KARNATKA HIGH COURT IN BHARAT BEEDI WORKS ( P) LTD VS ADDL CIT, 74 TAXMANN.COM 95, AND THAT IN THE PRESENT CASE, THE S AID BURDEN HAD NOT BEEN DISCHARGED SATISFACTORILY BY THE ASSESSEE. HE REQUE STED THAT THE ISSUE MAY BE RESTORED TO CIT(A) TO EXAMINE IN THE LIGHT OF THE J UDGEMENT OF HONBLE KARNATAKA HIGH COURT IN CASE OF BHARAT BEEDI WORKS (P) LTD (S UPRA). 5.2. THE DEFENDANT LD. COUNSEL FOR THE ASSESSEE SUPPORT TED THE IMPUGNED ORDER OF THE LD. CIT(A), HOWEVER HE HAS SUBMITTED THAT TH ERE CAN NOT BE ANY DISALLOWANCE U/S 14A OF THE ACT IN THE CASE OF NO E XEMPT INCOME AND CONTENDED THAT THE ORDER OF THE LD. CIT(A), BATHINDA IS AGAIN ST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO ARBITRARILY UPHOLD DISALLOWANCE OF RS. 7,35,571/- OUT OF A TOTAL DISALLOWANCE OF RS. 52,03,787/- MADE BY THE LD. ASSESSING OFFICER U/S 14A OF THE INCOME TAX ACT, 1961. IN SUPPORT, HE RELIED UPON HONBLE MUMBAI HIGH COURT IN CASE OF RELIANCE UTILITY AND POWER LT D [2009] 221 CTR 435 WHERE IT HAS BEEN CATEGORICALLY HELD THAT IF AVAILABLE FU NDS COMPRISE BOTH, INTEREST-FREE AND OVERDRAFT/LOANS, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENT WOULD BE OUT OF THE INTEREST-FREE FUNDS GENERATED OR AVAILABLE, IF THE INTEREST-FREE FUNDS ARE SUFFICIENT TO MEET THE INVESTMENTS. 5.3 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE DO CUMENTS FILED ON RECORD AND IMPUGNED ORDER. I.T.A. NO. 488 & 487/ASR/2017 & I.T.A. NOS. 506 & 507/ASR/2017 10 5.4 WE NOTICED THE FUNDAMENTAL AND ADMITTED FACT THAT D URING THE ASSESSMENT YEARS UNDER CONSIDERATION NO DIVIDEND INCOME WAS RE CEIVED BY THE APPELLANT COMPANY. ALTHOUGH THE CBDT'S CIRCULAR DATED 11 FEBR UARY, 2014 [ NO. 5/2014; F. NO. 225/182/2013-14] HAS CLARIFIED THAT RULE 8D REA D WITH SECTION 14A SHALL BE APPLICABLE FOR DISALLOWANCE OF THE EXPENDITURE EVEN WHERE TAX PAYER IN A PARTICULAR YEAR HAS NOT EARNED ANY EXEMPT INCOME, BUT THERE AR E MANY DECISIONS OF VARIOUS HIGH COURTS HOLDING CONTRARY VIEW. THE JURISDICTION AL HIGH COURT OF PUNJAB AND HARYANA IN THE CASE OF CIT, FARIDABAD VS. LAKHANI M ARKETING INC. [2014] 49 TAXMANN.COM 257, VIDE ORDER DATED 2ND OF APRIL, 201 4 HAS CATEGORICALLY HELD THAT UNLESS AND UNTIL THERE IS A RECEIPT OF EXEMPTED INC OME FOR THE CONCERNED ASSESSMENT YEARS, SECTION 14A CANNOT BE INVOKED. 5.5 AS REGARD TO THE EXEMPTION EXTENDED TO DIVIDEND INC OME, IT WAS HELD, WOULD RELATE ONLY TO THE PREVIOUS YEAR WHEN THE INCOME WA S EARNED AND NONE OTHER AND CONSEQUENTLY THE EXPENDITURE INCURRED IN CONNECTION THEREWITH SHOULD ALSO BE DEALT WITH IN THE SAME PREVIOUS YEAR. THUS, BY APPLICATIO N OF THE MATCHING CONCEPT, IN A YEAR WHERE THERE IS NO EXEMPT INCOME, THERE CANNOT BE A DISALLOWANCE OF EXPENDITURE IN RELATION TO SUCH ASSUMED INCOME [MAD RAS INDUSTRIAL INVESTMENT CORPORATION LTD. 225 ITR 802, (SC)]. THE HONBLE CO URT, THEREAFTER, HELD THAT LANGUAGE OF SECTION 14A SHOULD BE READ IN THAT CONT EXT AND SUCH THAT IT ADVANCES THE SCHEME OF THE ACT RATHER THAN DISTORT IT AND CO NCLUDED THAT THE PROVISIONS OF SECTION 14A READ WITH RULE 8D CANNOT BE MADE APPLIC ABLE IN A VACUUM I.E. IN THE ABSENCE OF EXEMPT INCOME. 5.6 THE CIT(A) AFTER CONSIDERING THE ENTIRE FACTS AND C IRCUMSTANCES, CATEGORICALLY HELD THAT SINCE THE APPELLANT COMPANY HAD NON-INTEREST-BEARING FUNDS FAR EXCEEDING THE INVESTMENTS MADE AND THERE WAS NO EXEMPT INCOME WHICH WAS INCLUDED IN THE TOTAL INCOME DURING THE YEAR UNDER CONSIDERATION, THERE CANNOT BE I.T.A. NO. 488 & 487/ASR/2017 & I.T.A. NOS. 506 & 507/ASR/2017 11 ANY PROPORTIONATE DISALLOWANCE [RS. 61,01,676/-] OF INTEREST PAID WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME IN T HE PROPORTION OF AVERAGE VALUE OF INVESTMENTS TO THE AVERAGE VALUE OF TOTAL ASSETS. I N OUR VIEW, HOW SARCASTICALLY ASSUMED THAT HOWEVER, THE AMOUNT EQUAL TO ONE-HALF PERCENT [RS. 9,26,938/-] OF THE AVERAGE OF THE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE SHEET OF THE APPELLANT, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS Y EAR, NEEDS TO BE DISALLOWED AS PER THE PROVISIONS OF SECTION 14A READ WITH RULE 8D.. SUCH FINDING OF CIT(A) ON THE COMPONENT OF DISALLOWANCE DOES NOT PERTAIN TO PROPO RTIONATE DISALLOWANCE OF INTEREST PAID BUT ACCOUNTS FOR AN ESTIMATED GENERAL AND ADMINISTRATIVE EXPENSES FOR ACQUISITION OF INVESTMENTS TO EARN TAX FREE INCOME CONTRARY TO HIS FINDING OF NO EXEMPTED (TAX FREE INCOME) ON MERE PRESUMPTION AND CONJECTURES CAN NOT BE APPROVED. ACCORDINGLY, THE AO IS DIRECTED TO 5.7 IN THE ABOVE VIEW AND RESPECTFULLY FOLLOWING JURISDICTIONAL HIGH COURT ON THE ISSUE OF 14A, WE HEREBY DELETE THE PART ADDITIO N OF RS. 9,26,938/- CONFIRMED BY THE LD. CIT(A) UNDER THE PROVISIONS OF SECTION 14A. THUS GROUND 1 TO 3 OF THE DEPARTMENT ARE REJECTED AND GROUND NO.1 OF THE ASSE SSEE IS ALLOWED. 6. THE NEXT GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN HOLDING THAT DEPRECIATION @ 30% WAS ALLOWABLE ON BUSES BY F AILING TO APPRECIATE THAT THE ASSESSEE WAS USING THE BUSES FOR ITS OWN BUSINESS A ND HENCE WAS ENTITLED TO DEPRECIATION @ 15% ON SUCH BUSES AS PROVIDED IN PAR A III(L) OF APPENDIX 1 OF RULE 5(L)OF THE RULES. 6.1 AFTER HEARING BOTH THE SIDES ON THE CIT(A)S HOLDIN G THE ISSUE OF ALLOWABILITY OF DEPRECIATION AT 30% AS AGAINST FIND ING OF THE OF ENTITLEMENT OF 15% DEPRECIATION ON THE USE OF OWN BUSES AND OTHER VEHI CLES CLAIMED BY THE I.T.A. NO. 488 & 487/ASR/2017 & I.T.A. NOS. 506 & 507/ASR/2017 12 DEPARTMENT, WE OBSERVE THAT THE LD. CIT(A) HAS GRAN TED RELIEF FOLLOWING ORDER OF COORDINATE AMRITSAR BENCH IN THE ASSESSEE OWN CASE AS A COVERED MATTER IN AS MUCH AS IN THE APPELLANTS OWN CASE FOR ASSESSMENT YEARS 2008-09 TO 2012-13, THE HONBLE INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BEN CH, AMRITSAR VIDE ITS ORDER DATED 17/06/2016 IN ITA NOS. 256 TO 260 (ASR)/2016 HAS CATEGORICALLY HELD IN PARAGRAPH 29 & 30 AS UNDER:- 29. THEN, ON MERITS ALSO, AS PER BALAKRISHNA TRANS PORTS (SUPRA), SAROJINI TRANSPORTS (P) LTD (SUPRA), PEPSU TRANSPORT CORPORATION (SUPRA) AND SHAM MOTORS SERVICE (SUPRA) , THE ASSESSEE IS ENTITLED TO A HIGHER CLAIM OF DEPRECIAT ION @30% AND NOT THAT @15%. 30. ACCORDINGLY, THE GRIEVANCE OF THE ASSESSEE IN T HIS REGARD IS FOUND TO BE JUSTIFIED AND IS ACCEPTED AS SUCH. THER EFORE, GROUND NO. 2 IS ACCEPTED. 6.2 IN ANOTHER CASE OF M/S TAJ TRAVELS PRIVATE LIMITED (SUPRA) IT WAS HELD THAT DEPRECIATION AT THE RATE OF 30% IS ALLOWABLE ON BUS ES MEANT FOR TRANSPORTATION OF PASSENGERS. BY FOLLOWING THE DECISION OF THE TRIBUN AL IN THE APPELLANTS OWN CASES FOR THE PRECEDING YEARS (SUPRA), THE CIT(A) IS JUST IFIED IN ALLOWING THE ISSUE IN FAVOUR OF THE APPELLANT UPHOLDING THE CLAIM OF 30% DECREPITATION. ACCORDINGLY, WE CONFIRM THE DECISION OF THE CIT(A) APPEAL ON THIS I SSUE AND DISMISS THE GROUND OF REVENUE. 7. NEXT ISSUE IS DELETING THE ADDITION MADE UNDER PRO VISO TO SECTION 36(I)(III) OF THE ACT WHERE DEPARTMENT ALLEGED THAT ASSETS ACQUIR ED DURING THE YEAR WERE NOT PUT TO BUSINESS USE. 7.1. THE LD. CIT(A) HAS FURTHER OBSERVED THAT: I.T.A. NO. 488 & 487/ASR/2017 & I.T.A. NOS. 506 & 507/ASR/2017 13 14. THE NEXT GROUND OF APPEAL PERTAINS TO DISALLO WANCE OF PROPORTIONATE INTEREST AMOUNTING TO RS. 8,20,550/- BY INVOKING THE PROVISO TO SECTION 36(1)(III) OF THE ACT, WHICH MAN DATES THAT ANY AMOUNT OF INTEREST PAID, IN RESPECT OF CAPITAL BORR OWED FOR ACQUISITION OF AN ASSET [WHETHER CAPITALIZED IN THE BOOKS OF AC COUNTS OR NOT] FOR ANY PERIOD BEGINNING FROM THE DATE ON WHICH THE CAP ITAL WAS BORROWED FOR ACQUISITION OF THE ASSET TILL THE DATE ON WHICH SUCH ASSET WAS FIRST PUT TO USE, SHALL NOT BE ALLOWED AS DEDUC TION. IT IS OBVIOUS THAT FOR INVOKING THIS PROVISO, IT HAS TO BE FIRST ESTABLISHED THAT ACQUISITION OF ASSET WAS FINANCED BY BORROWED FUNDS ON WHICH INTEREST WAS PAID. WITHOUT ESTABLISHING THE FACT OF ASSET HA VING BEEN ACQUIRED BY BORROWED FUNDS, NO PROPORTIONATE DISALLOWANCE OF INTEREST CAN BE MADE ON THE PRESUMPTION THAT BORROWED FUNDS WERE US ED FOR SUCH ACQUISITION. 15. IN THE APPELLANTS CASE, TWO LANDED PROPERTIES WERE ACQUIRED FOR AN AMOUNT OF RS. 1,06,99,125/-. THE STATED PURP OSE FOR SUCH ACQUISITION WAS TO SET UP AN OFFICE BUILDING WHICH WAS TO SERVE AS THE REGIONAL OFFICE OF THE APPELLANT COMPANY. HOWEVER, NO DEPRECIATION WAS CLAIMED DURING THE YEAR UNDER CONSIDERATION. ON BEING QUESTIONED IN THE ASSESSMENT PROCEEDINGS, THE APPEL LANT CONTENDED THAT THE SAID ACQUISITION WAS MADE FROM INTEREST FR EE FUNDS WHICH WAS AVAILABLE WITH IT. IT WAS CATEGORICALLY STATED THAT THE APPELLANT COMPANY HAD RESERVES AND SURPLUSES OF RS. 45.74 CRO RES WHICH WAS MORE THAN SUFFICIENT TO COVER THE ENTIRE INVESTMENT OF RS. 1.06 CRORES. IT IS NOTED THAT THE AO HAS NEITHER CONTESTED THIS ASSERTION NOR HAS HE NEGATIVED IT. THE CONCLUSION OF THE AO COULD HAVE B EEN APPROVED OR I.T.A. NO. 488 & 487/ASR/2017 & I.T.A. NOS. 506 & 507/ASR/2017 14 UPHELD, ONLY IF HE WAS ABLE TO DEMONSTRATE THAT BOR ROWED FUNDS WERE UTILIZED FOR MAKING THE AFORESAID INVESTMENT/ACQUIS ITION. CONSIDERING THE VARIOUS JUDICIAL PRECEDENTS AND SIMILAR FACTUAL POSITION IN THE APPELLANTS CASE WHEREIN THE APPELLANT HAD ENOUGH I NTERNAL ACCRUALS AND INTEREST-FREE FUNDS BEING SHARE CAPITAL AND RES ERVES AND SURPLUS, NO DISALLOWANCE OF PROPORTIONATE INTEREST EXPENDITU RE IS CONSIDERED WARRANTED AND DESERVES TO BE DELETED. IT IS ORDERED ACCORDINGLY. 7.2 THE LD. CIT(A) HAS NOTED THAT THE APPELLANT COMPANY HAD RESERVES A ND SURPLUSES OF RS. 45.74 CRORES WHICH WAS MORE THAN S UFFICIENT TO COVER THE ENTIRE INVESTMENT OF RS. 1.06 CRORES. HE FURTHER NOTED THA T THE AO HAS NEITHER CONTESTED THIS ASSERTION NOR HAS HE NEGATIVED IT. THE FINDING S OF THE AO IN THIS REGARD COULD HAVE BEEN APPROVED, ONLY IF HE WAS ABLE TO DEMONSTR ATE THAT BORROWED FUNDS WERE UTILIZED FOR MAKING THE AFORESAID INVESTMENT/ACQUIS ITION LAND. CONSIDERING THE FACTUAL FINDINGS IN THE APPELLANTS CASE WHEREIN TH E APPELLANT HAD ENOUGH INTERNAL ACCRUALS AND INTEREST-FREE FUNDS BEING SHARE CAPITA L AND RESERVES AND SURPLUS, NO DISALLOWANCE OF PROPORTIONATE INTEREST EXPENDITURE IS CONSIDERED WARRANTED. WE FIND NO INFIRMITY IN THE IMPUGNED ORDER ON THIS ISS UE. ACCORDINGLY, WE UPHOLD THE FINDING OF THE CIT(A) ON DELETING THE INTEREST DISA LLOWANCE BY THE AO. THIS GROUND OF DEPARTMENT IS DISMISSED. 8. THE NEXT ISSUE PERTAINS INCOME FROM HOUSE PROPERTY CLAI MED BY THE APPELLANT TOWARDS RENTED OUT OF THE ROOF OF ITS BUI LDING TO M/S VIOM NETWORKS FOR SETTING UP OF A TOWER, AND SO EARNED A RENTAL INCOM E OF RS. 2,61,855/- WHICH WAS DECLARED UNDER THE HEAD INCOME FROM HOUSE PROPERTY . 8.1 IN THE ASSESSMENT ORDER, THE AO ALLEGED THAT THE R OOF OF THE BUILDING RENTED OUT COULD NOT BE TREATED AS PART OF HOUSE PROPERTY, AND, THUS, EFFECTED A I.T.A. NO. 488 & 487/ASR/2017 & I.T.A. NOS. 506 & 507/ASR/2017 15 DISALLOWANCE OF THE CLAIM OF DEDUCTION OF RS. 78,55 6/- UNDER SECTION 24(A) OF THE ACT, CONTEMPLATING THAT THE RENTAL INCOME FROM LETT ING OUT THE ROOF OF THE APPELLANTS BUILDING HAS TO BE ASSESSED AS INCOME FROM OTHER SOURCES. 8.2 THE CIT(A) DELETED ADDITION BY OBSERVING AS UNDER: 16. DURING THE YEAR UNDER CONSIDERATION, THE APPELL ANT RENTED OUT THE ROOF OF ITS BUILDING TO M/S VIOM NETWORKS FOR SETTING UP OF A TOWER, AND, EARNED A RENTAL INCOME OF RS. 2,61,855/- WHICH WAS DECLARE D UNDER THE HEAD INCOME FROM HOUSE PROPERTY. HOWEVER, THE AO ALLEG ED THAT THE ROOF OF THE BUILDING RENTED OUT COULD NOT BE TREATED AS PAR T OF HOUSE PROPERTY, AND, THUS, EFFECTED A DISALLOWANCE OF THE CLAIM OF DEDUC TION OF RS. 78,556/- UNDER SECTION 24(A) OF THE ACT, CONTEMPLATING THAT THE RE NTAL INCOME FROM LETTING OUT THE ROOF OF THE APPELLANTS BUILDING HAS TO BE ASSESSED AS INCOME FROM OTHER SOURCES. THE SUBMISSIONS OF THE APPELLANT IN THIS REGARD HAS BEEN CONSIDERED. 17. PART (C) OF CHAPTER IV INCOME FROM HOUSE PROP ERTY I.E. SECTIONS 22 TO 27 OF THE ACT GOVERN THE TAXATION PROVISIONS OF INCOME EARNED FROM HOUSE PROPERTY. SECTION 22 OF THE ACT STATES THAT THE ANN UAL VALUE OF ANY PROPERTY CONSISTING OF ANY BUILDING OR LAND APPURTENANT THER ETO, OF WHICH THE ASSESSEE IS OWNER EXCLUDING SUCH PORTION OF SAID PROPERTY AS IS OCCUPIED FOR THE PURPOSES OF ANY BUSINESS OR PROFESSION CARRIED ON B Y THE ASSESSEE WHICH ARE CHARGEABLE TO INCOME TAX, SHALL BE CHARGED TO INCOM E TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THEREFORE, INGREDIENT S FOR A PARTICULAR INCOME TO FALL UNDER THE HEAD INCOME FROM HOUSE PR OPERTY IS THAT IT SHOULD BE EARNED FROM ANY BUILDING OR LAND APPURTEN ANT THERETO, OF WHICH THE ASSESSEE IS OWNER AND THAT THE BUILDING OR LAND APPURTENANT THERETO SHOULD BE OTHER THAN WHICH HAS BEEN OCCUPIED BY THE ASSESSEE FOR THE PURPOSES OF HIS BUSINESS OR PROFESSION, THE INCOM E ON WHICH IS CHARGEABLE TO TAX. TESTING THE FACTS OF THE PRESENT CASE WITH RESPECT TO THE AFORESAID, THE TERRACE ON WHICH THE TOWER IS INSTALLED IS VERY MUC H A PART OF THE BUILDING OF THE APPELLANT AS TERRACE FLOOR DOESNT EXIST IN THE AIR. IT IS A PART OF THE BUILDING WHICH HAS BEEN CONSTRUCTED ON THE LAND BEN EATH THE SUPERSTRUCTURE. IT IS, THEREFORE, NOT CORRECT TO HOLD THAT THE TERR ACE DOES NOT HAVE ANY I.T.A. NO. 488 & 487/ASR/2017 & I.T.A. NOS. 506 & 507/ASR/2017 16 APPURTENANT LAND. BESIDES, THE RENT EARNED BY THE A PPELLANT IS NOT FOR THE TOWER BUT FOR THE SPACE FOR THE INSTALLATION OF THE SAID TOWER. WHAT IS RELEVANT IS THE SPACE WHICH HAS BEEN RENTED OUT AND , THEREFORE, AS LONG AS THE SPACE, WHICH HAS BEEN RENTED OUT, IS PART OF TH E BUILDING, THE RENT IS REQUIRED TO BE TREATED AS INCOME FROM HOUSE PROPER TY. IN THIS VIEW OF THE MATTER, THE AO IS DIRECTED TO DELETE THE AFORESAID IMPUGNED ADDITION. IT IS ORDERED ACCORDINGLY. 8.3 WE NOTED THAT THE ALLEGED TERRACE LET FOR TOWER WAS A PART OF THE BUILDING WHICH WAS CONSTRUCTED ON THE LAND BENEATH THE SUPER STRUCTURE. THEREFORE, IT WOULDNT BE, CORRECT TO HOLD THAT THE TERRACE DID N OT HAVE ANY APPURTENANT LAND. FURTHER, THE RENT EARNED BY THE APPELLANT WAS NOT F OR THE TOWER BUT FOR THE SPACE FOR THE INSTALLATION OF THE SAID TOWER. WHAT IS RELEVAN T IS THE SPACE WHICH HAS BEEN RENTED OUT AND, THEREFORE, AS LONG AS THE SPACE, WH ICH HAS BEEN RENTED OUT, IS FORMING PART OF THE BUILDING, AND THE RENT IS SO RE QUIRED TO BE TREATED AS INCOME FROM HOUSE PROPERTY. IN OUR VIEW, THE LD. CIT(A) W AS JUSTIFIED IN ALLOWING RELIEF TO THE ASSESSEE. THIS GROUND IS ALSO REJECTED. 9. ON THE LAST ISSUE THE ASSESSEE OBJECTED VIDE GROUND NO.2 AND 3 THAT T HE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIF IED TO UPHOLD THE ACTION OF THE ASSESSING OFFICER IN MAKING A REFERENCE TO THE DVO FOR DETERMINING THE VALUE OF INVESTMENT IN THE WORKSHOP OF BADAL ROAD, BATHIN DA WITHOUT PIN POINTING ANY DEFECT IN THE BOOKS OF ACCOUNTS AND THAT HE HAS ARB ITRARILY UPHOLD AN ADDITION OF RS. 18,89,495/- MADE BY THE LD. ASSESSING OFFICER U/S 6 9B BEING THE ALLEGED DIFFERENCE BETWEEN THE VALUE SHOWN BY THE APPELLANT AND THE VALUE OF INVESTMENTS DETERMINED BY THE DVO. 9.1 THE CIT(A) WHILE REJECTING THE CONTENTIONS OF THE ASSES SEE ON THIS ISSUE OF VALUATION, HAS OBSERVED AS UNDER: I.T.A. NO. 488 & 487/ASR/2017 & I.T.A. NOS. 506 & 507/ASR/2017 17 11. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE APPELLANT COMPANY HAD PURPORTEDLY INCURRED A COST OF RS. 1,04 ,13,426/- ON THE CONSTRUCTION OF WORKSHOP AT BADAL ROAD, BATHINDA, W HICH EXPENSE WAS DULY RECORDED IN THE BOOKS OF ACCOUNTS. HOWEVER, TH E AO, WITH A VIEW TO DETERMINING THE TRUE VALUE OF INVESTMENT MADE BY TH E APPELLANT, MADE A REFERENCE TO THE VALUATION OFFICER UNDER THE PROVIS IONS OF SECTION 142A OF THE ACT. THE VALUATION OFFICER DETERMINED THE COST OF CONSTRUCTION AT RS. 1,13,04,432/-. AS A RESULT OF DIFFERENCE BETWEEN TH E COST OF CONSTRUCTION AS DISCLOSED IN THE RETURN AND COST OF CONSTRUCTION ES TIMATED BY THE VALUATION OFFICER, AN AMOUNT OF RS. 8,91,006/- WAS HELD TO BE THE DEEMED INCOME UNDER THE PROVISIONS OF SECTION 69B OF THE ACT. 12. CASTIGATING THE AFORESAID ADDITION, IT WAS CONT ENDED THAT WITHOUT SPECIFICALLY REJECTING THE BOOKS OF ACCOUNTS MAINTA INED BY THE APPELLANT, THE ASSESSING OFFICER COULD NOT HAVE REFERRED THE M ATTER TO THE VALUATION OFFICER. IT WAS FURTHER AVERRED THAT VALUATION IS J UST AN ESTIMATION AND THERE IS BOUND TO BE A DIFFERENCE IN DIFFERENT METHODS AD OPTED FOR THE VALUATION, WHICH DOES NOT MAKE IT AT ALL NECESSARY TO ADD BACK THE DIFFERENCE IN VALUATION. SEVERAL JUDICIAL PRECEDENTS WERE REFERRE D BY THE APPELLANT TO BOLSTER THE AFORESAID TWO PROPOSITIONS. 13. THE SUBMISSIONS OF THE APPELLANT HAVE BEEN CONS IDERED. SECTION 142A HAS BEEN SUBSTITUTED WITH EFFECT FROM 1ST. OF OCTOB ER, 2014. THE NEWLY SUBSTITUTED SECTION PROVIDES THAT THE AO MAY, FOR T HE PURPOSES OF ASSESSMENT OR REASSESSMENT, REQUIRE THE ASSISTANCE OF A VALUATION OFFICER TO ESTIMATE THE VALUE, INCLUDING FAIR MARKET VALUE, OF ANY ASSET, PROPERTY OR INVESTMENT AND SUBMIT THE REPORT TO HIM. THE AO MAY MAKE A REFERENCE WHETHER (OR NOT) HE IS SATISFIED ABOUT THE CORRECTN ESS OR COMPLETENESS OF THE I.T.A. NO. 488 & 487/ASR/2017 & I.T.A. NOS. 506 & 507/ASR/2017 18 ACCOUNTS OF THE ASSESSEE. THE VALUATION OFFICER, IN TURN, IS REQUIRED TO ESTIMATE THE VALUE OF THE ASSET, PROPERTY OR INVEST MENT AFTER TAKING INTO ACCOUNT THE EVIDENCE PRODUCED BY THE ASSESSEE AND A NY OTHER EVIDENCE IN HIS POSSESSION GATHERED, AFTER GIVING AN OPPORTUNIT Y OF BEING HEARD TO THE ASSESSEE. IN THIS VIEW OF THE MATTER, IT CANNOT BE DENIED THAT THE VALUATION OFFICER BRINGS IN HIS TECHNICAL EXPERTISE IN MAKING AN ESTIMATE OF CONSTRUCTION COST AS PER THE WELL-DEVELOPED AND DEF INED PARAMETERS. ONCE AN ESTIMATE HAS BEEN MADE BY A TECHNICAL EXPERT, TH E SAME CANNOT BE REJECTED BY THE ASSESSEE WITHOUT POINTING OUT ANY T ECHNICAL BREACH IN HIS ASSESSMENT. AND IF THERE IS A DIFFERENCE, IT SHALL NOT ONLY BE TOO REASONABLE BUT ALSO STATUTORILY VALID TO TREAT THE SAID DIFFER ENCE AS UNEXPLAINED INVESTMENT AND DEEMED INCOME UNDER THE PROVISIONS O F SECTION 69B OF THE ACT. THE ACTION OF THE AO IN DOING SO IS, THUS, SUS TAINED. THE GROUND OF APPEAL PERTAINING TO THIS ISSUE IS, ACCORDINGLY, DI SMISSED. 9.2 AS PER AMENDED PROVISIONS, THE NEWLY SUBSTITUTED S ECTION W.E.F. 1ST. OF OCTOBER, 2014, PROVIDES THAT THE AO MAY, FOR THE PU RPOSES OF ASSESSMENT OR REASSESSMENT, REQUIRE THE ASSISTANCE OF A VALUATION OFFICER TO ESTIMATE THE VALUE, INCLUDING FAIR MARKET VALUE, OF ANY ASSET, PROPERTY OR INVESTMENT AND THAT THE AO MAY MAKE A REFERENCE WHETHER (OR NOT) HE IS SATISFI ED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE. THE L D. CIT(A) HAS RIGHTLY OBSERVED THAT THE VALUATION OFFICER, IN TURN, IS REQUIRED TO ESTIMATE THE VALUE OF THE ASSET, PROPERTY OR INVESTMENT AFTER TAKING INTO ACCOUNT TH E EVIDENCE PRODUCED BY THE ASSESSEE AND ANY OTHER EVIDENCE IN HIS POSSESSION G ATHERED, AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN VIEW OF THAT MATTER, IT CANNOT BE DENIED THAT THE VALUATION OFFICER BRINGS IN HIS TEC HNICAL EXPERTISE IN MAKING AN ESTIMATE OF CONSTRUCTION COST AS PER THE WELL-DEVEL OPED AND DEFINED PARAMETERS. IN I.T.A. NO. 488 & 487/ASR/2017 & I.T.A. NOS. 506 & 507/ASR/2017 19 OUR VIEW, ONCE AN ESTIMATE HAS BEEN MADE BY A TECHN ICAL EXPERT, THE SAME CANNOT BE DENIED BY THE ASSESSEE BY WAY OF REBUTTAL WITHOU T POINTING OUT ANY TECHNICAL BREACH IN HIS ASSESSMENT. AND IF THERE IS A DIFFERE NCE, IT SHALL NOT ONLY BE REASONABLE BUT ALSO STATUTORILY VALID TO TREAT THE SAID DIFFERENCE AS UNEXPLAINED INVESTMENT AND DEEMED INCOME UNDER THE PROVISIONS O F SECTION 69B OF THE ACT. THUS, THE CIT (A) WAS JUSTIFIED IN UPHOLDING THE AC TION OF THE AO IN DOING SO. THUS, THIS FINDING OF THE CIT(A) IS SUSTAINED. THE GROUND OF APPEAL TO THIS ISSUE IS DECIDED AGAINST THE ASSESSEE, AND ACCORDINGLY, DISM ISSED. 10. IN THE RESULT, THESE CROSS APPEALS ARE DECIDED ON EACH ISSUE IN THE TERMS INDICATED AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 14.10.2021 SD/- SD/- (LALIET KUMAR) ( DR. M. L. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DOC* COPY OF THE ORDER FORWARDED TO: (1)THE APPELLANT (2) THE RESPONDENT (3) THE CIT (4) THE CIT (APPEALS) (5) THE DR, I.T.A.T. TRUE COPY BY ORDER