TATA PETRODYNE LTD, MUMBAI V. ASST CIT 2(3), MUMBAI

ITA 4887/MUM/2012

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 7246 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 30-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 27-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Assessee Lawyers: FIROZ B ANDHYARUJINA
• Keywords: Opportunity of being heard; Earning of tax free income; Retrospective amendment; Tax effect
• Section: 14A; 115JB; 12; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR , ACCOUNTANT MEMBER ITA NO. 4887/MUM./2012 ( ASSESSMENT YEAR : 20 08 09 ) TATA PETRODYNE LTD. THE METROPOLITAN BUILDING 3 RD FLOOR, BANDRA KURLA COMPLEX BANDRA (E), MUMBAI 400 051 PAN AAACT0090N . APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 2(3 ), MUMBAI . RESPONDENT ITA NO. 5571/MUM./2012 ( ASSESSMENT YEAR : 20 08 09 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 2(3 ), MUMBAI . APPELLANT V/S TATA PETRODYNE LTD. THE METROPOLITAN BUILDING 3 RD FLOOR, BANDRA KURLA COMPLEX BANDRA (E), MUMBAI 400 051 PAN AAACT0090N . RESPONDENT ITA NO. 4914/MUM./2012 ( ASSESSMENT YEAR : 20 08 09 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 2(3 ), MUMBAI . APPELLANT V/S TATA PETRODYNE LTD. THE METROPOLITAN BUILDING 3 RD FLOOR, BANDRA KURLA COMPLEX BANDRA (E), MUMBAI 400 051 PAN AAACT0090N . RESPONDENT 2 TATA PETRODYNE LTD. ITA NO. 2791/MUM./2013 ( ASSESSMENT YEAR : 20 09 10 ) TATA PETRODYNE LTD. THE METROPOLITAN BUILDING 3 RD FLOOR, BANDRA KURLA COMPLEX BANDRA (E), MUMBAI 400 051 PAN AAACT0090N . APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 2(3 ), MUMBAI . RESPONDENT ITA NO. 2469/MUM./2013 ( ASSESSMENT YEAR : 20 09 10 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 2(3 ), MUMBAI . APPELLANT V/S TATA PETRODYNE LTD. THE METROPOLITAN BUILDING 3 RD FLOOR, BANDRA KURLA COMPLEX BANDRA (E), MUMBAI 400 051 PAN AAACT0090N . RESPONDENT ASSESSEE BY : SHRI FIROZ B. ANDHYARUJINA REVENUE BY : SHRI V. JUSTIN DATE OF HEARING 04 .0 7 .2018 DATE OF ORDER 28.09.2018 O R D E R PER SAKTIJIT DEY, J.M. THIS BUNCH CONSISTS OF FIVE APPEALS. WHILE THERE ARE CROSS APPEALS BY THE ASSESSEE AND THE DEPARTMENT ARISING OUT OF TWO SEPARATE ORDERS OF THE LEARNED COMMISSIONER (APPEALS) 6, MUMBAI, PERTAINING TO 3 TATA PETRODYNE LTD. ASSESSMENT YEAR 2008 09 AND 2009 10, THERE IS AN APPEAL BY THE REVENUE ARISING OUT OF RECTIFICATION PROCEEDINGS UNDER SECTION 154 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) FOR THE ASSESSMENT YEAR 2008 09. ITA NO.4887/MUM./2012 ASSESSEES APPEAL A.Y. 2008 09 2 . IN THE GROUNDS OF APPEAL FILED ALONG WITH THE MEMORANDUM OF APPEAL, THE ONLY ISSUE RAISED BY THE ASSESSEE RELATES TO DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT R/W RULE 8D OF THE I.T. RULES, 1962. HOWEVER, SUBSEQUENTLY, THE ASSESSEE HAS FILED ADDITIONAL / SUPPLEMENTARY GROUNDS OF APPEAL VIDE L ETTERS DATED 7 TH JULY 2016, 4 TH OCTOBER 2017 AND 19 TH FEBRUARY 2018. THE ISSUES RAISED IN THE AFORESAID ADDITIONAL/SUPPLEMENTARY GROUNDS RELATE TO DISALLOWANCE MADE UNDER SECTION 14A R/W RULE 8D, WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE ACT A ND DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 80IB(9) OF THE ACT. SINCE, THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE ARE PURELY LEGAL IN NATURE AND CAN BE DECIDED ON THE BASIS OF FACTS AVAILABLE ON RECORD, WE ARE INCLINED TO ADMIT THE ADDITIONAL GRO UNDS. 3 . AS REGARDS THE FIRST ISSUE RELATING TO DISALLOWANCE OF EXPENDITURE UNDER SECTION 14A R/W RULE 8D, THE FACTS IN BRIEF ARE, THE ASSESSEE AN INDIAN COMPANY IS ENGAGED IN THE BUSINESS OF PROSPECTING, EXPLORATION 4 TATA PETRODYNE LTD. AND PRODUCTION OF MINERAL OIL AND NATURAL GAS. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 24 TH SEPTEMBE R 2008, DECLARING TOTAL INCOME OF ` 3,18,50,000 AFTER CLAIMING DEDUCTION UNDER SECTION 80IB(9) OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICING THAT IN THE RELEVANT PREVIOUS YEAR, THE ASSESSEE HAS RECEIVED DIVIDEND OF ` 5,03,45,485 FROM MUTUAL FUNDS AND CLAIMED IT AS EXEMPT UNDER SECTION 10(35) OF THE ACT , CALLED UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY EXPENDITURE ATTRIBUTABLE TO EARNING OF SUCH INCOME SHOULD NOT BE DISALLOWED UNDER SECTION 14A R/W RULE 8D. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE FIL ED ITS SUBMISSIONS ON 13 TH AUGUST 2010, STATING THAT THE ONLY EXPENDITURE INDIRECTLY ATTRIBUTABLE TO EARNING THE EXEMPT INCOME IS THE PROPORTIONATE SALARY COST OF TWO EMPLOYEES , PROPORTIONATE TELEPHONE EXPENDITURE AND RELATED OVERHEADS. ACCORDINGLY, THE AS SESSEE ESTIMATED THE EXPENDITURE ATTRIBUTABLE TO EARNING OF EXEMPT INCOME @ 5% OF THE EXEMPT INCOME AND QUANTIFIED THE DISALLOWANCE UNDER SECTION 14A AT ` 25,17,274. THE ASSESSING OFFICER AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE WAS NOT CONVINCED WITH THEM. HE OBSERVED , 2.88% OF THE AMOUNT INCURRED TOWARDS ESTABLISHMENT EXPENSES, OTHER EXPENSES AND BID RELATED EXPENSES ARE DIRECTLY RELATABLE TO THE EXEMPT INCOME. ACCORDINGLY, HE QUANTIFIED THE DISALLOWANCE UNDER RULE 8D(2)(I) AT ` 12,45,076. IN 5 TATA PETRODYNE LTD. ADD ITION, THE ASSESSING OFFICER DISALLOWED INDIRECT ADMINISTRATIVE EXPENDITURE OF ` 78,56,179 UNDER RULE 8D2(III). THUS, THE TOTAL DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER RULE 8D(2) AGGREGATED TO ` 91,01,755. PERTINENTLY, THE ASSESSING OFFICER WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JB OF THE ACT, ALSO ADDED THE DISALLOWANCE MADE UNDER SECTION 14A R/W RULE 8D. BEING AGGRIEVED OF THE AFORESAID DISALLOWANCE, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4 . THE LEARNED COMMIS SIONER (APPEALS) AF T ER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, T HOUGH, UPHELD T HE DISALLOWANCE MADE UNDER RULE 8D(2)(III) , HOWEVER, HE DIRECTED THE ASSESSING OFFICER TO VERIFY ASSESSEES CLAIM THAT INVESTMENT IN BONDS AND DEBT/GROWTH BASED MUTUAL FUND DO NOT RESULT IN ANY EXEMPT INCOME, HENCE, SHOULD BE EXCLUDED FROM THE AVERAGE VALUE OF INVESTMENT. AS REGARDS DISALLOWANCE UNDER RULE 8D(2)(I), HE DELETED THE DISALLOWANCE , SINCE , DISALLOWANCE UNDER THE SAID PROVISION CANNOT BE MADE ON ESTIMATE BASIS. 5 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , ULTIMATELY THE ASSESSING OFFICER HAS DETERMINED THE TAX LIABILITY OF T H E ASSESSEE AS PER THE BOOK PROFIT COMPUTED UNDER SECTION 115JB OF THE ACT. HE SUBMITTED , AS PER THE PROVISION OF SECTION 115JB OF THE AC T , THE BOOK 6 TATA PETRODYNE LTD. PROFIT HAS TO BE COMPUTED BY MAKING ADDITIONS OF THE AMOUNT AS PROVIDED UNDER EXPLANATION 1 OF THE SAID PROVISION. HE SUBMITTED , A READING OF THE SAID EXPLANATION 1 WOULD REVEAL THAT IT DOES NOT REFER TO SECTION 14A R/W RULE 8D. HOWEVER, HE SUB MITTED , AS PER CLAUSE (F) OF EXPLANATION - 1 OF SECTION 115JB OF THE ACT, ONLY DIRECT EXPENDITURE RELATABLE TO EXEMPT INCOME EARNED BY THE ASSESSEE CAN BE ADDED TO THE BOOK PROFIT. HE SUBMITTED , AS PER THE SPECIAL BENCH DECISION OF THE TRIBUNAL, DELHI BENCH, IN ACIT V/S VIREET INVESTMENT PVT. LTD., [2017] 82 TAXMANN.COM 415, THE ASSESSING OFFICER WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE ACT CAN MAKE ADDITION UNDER CLAUSE (F) OF EXPLANATION OF SECTION 115JB OF THE ACT, WITHOUT RESORTING TO COMPUT ATION AS CONTEMPLATED UNDER SECTION 14A R/W RULE 8D. HE SUBMITTED , IN VIEW OF THE SPECIAL BENCH DECISION OF THE TRIBUNAL , THE ADDITION MADE TO THE BOOK PROFIT ON ACCOUNT OF DISALLOWANCE UNDER SECTION 14A R/W RULE 8D IS UNSUSTAINABLE. HE SUBMITTED , THE ASSE SSEE ON A SCIENTIFIC BASIS HAS WORKED OUT AND QUANTIFIED THE DIRECT EXPENDITURE FOR EARNING EXEMPT INCOME AT ` 2,54,989 . A COPY OF THE WORKING OF THE SAID DISALLOWANCE WAS ALSO FURNISHED BEFORE THE BENCH. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , EV EN IN THE PRECEDING ASSESSMENT YEARS, WHEN RULE 8D WAS NOT IN THE STATUTE, THE ASSESSING OFFICER HIMSELF HAS RESTRICTED D ISALLOWANCE UNDER SECTION 14A @ 5% OF THE EXEMPT INCOME. THUS, THE LEARNED AUTHORISED 7 TATA PETRODYNE LTD. REPRESENTATIVE SUBMITTED , THE ISSUE MAY BE RESTORE D TO THE ASSESSING OFFICER TO EXAMINE ASSESSEES WORKING OF DIRECT EXPENDITURE FOR EARNING EXEMPT INCOME AND DECIDING THE ISSUE KEEPING IN VIEW THE RATIO LAID DOWN BY THE TRIBUNAL, SPECIAL BENCH. 6 . THE LEARNED DEPARTMENTAL REPRESENTATIVE ALSO SUBMITTED THAT THE ISSUE MAY BE RESTORED TO THE ASSESSING OFFICER FOR DETERMINING THE QUANTUM OF EXPENDITURE TO BE DISALLOWED FOR EARNING THE EXEMPT INCOME. 7 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. UNDISPUTEDLY, THE ASSESSING OFFICER H AVING FOUND THAT TAX LIABILITY OF THE ASSESSEE ON THE BOOK PROFIT COMPUTED UNDER SECTION 115JB OF THE ACT IS MORE THAN THE TAX LIABILITY ON THE TOTAL INCOME DETERMINED UNDER THE NORMAL PROVISION HAS PROCEEDED TO COMPUTE THE TOTAL INCOME OF THE ASSESSEE UND ER SECTION 115JB OF THE ACT. THUS, IN THE CONTEXT OF AFORESAID FACT S , IT NEEDS TO BE EXAMINED , WHILE COMPUTING THE BOOK PROFIT WHETHER THE ASSESSING OFFICER CAN INCREASE IT BY ADDING THE DISALLOWANCE MADE UNDER SECTION 14A R/W RULE 8D ? IT IS VERY MUCH CLEA R , THE BOOK PROFIT COMPUTED UNDER SECTION 1 15JB OF THE ACT CAN BE INCREASED BY THE AMOUNT S SPECIFIED UNDER EXPLANATION 1 TO THE SAID PROVISION. A CAREFUL READING OF EXPLANATION - 1 TO SECTION 115JB OF THE ACT MAKES IT CLEAR THAT IT DOES NOT REFER TO THE 8 TATA PETRODYNE LTD. DISA LLOWANCE MADE UNDER SECTION 14A R/W RULE 8D. THEREFORE, THE ASSESSING OFFICER CANNOT INCREASE THE BOOK PROFIT BY TAKING RECOURSE TO THE PROVISIONS OF SECTION 14A R/W RULE 8D. HOWEVER, CLAUSE (F) TO EXPLANATION 1 TO SECTION 115JB OF THE ACT EMPOWERS THE ASS ESSING OFFICER TO INCREASE THE BOOK PROFIT BY THE AMOUNT OF EXPENDITURE RELATABLE TO EXEMPT INCOME. THEREFORE, THE ASSESSING OFFICER HAS TO DETERMINE AND QUANTIFY WHAT IS THE EXPENDITURE INCURRED BY THE ASSESSEE FOR EARNING THE EXEMPT INCOME WITHOUT RESORT ING TO THE METHODOLOGY PROVIDED UNDER RULE 8D(2). THE AFORESAID PRINCIPLE HAS BEEN VERY CLEARLY LAID DOWN IN THE SPECIAL BENCH DECISION OF THE TRIBUNAL, DELHI BENCH, IN VIREET INVESTMENT PVT. LTD. (SUPRA) .T HAT BEING THE CASE, THE ADDITION MADE TO THE BOOK PROFIT ON ACCOUNT OF DISALLOWANCE UNDER SECTION 14A R/W RULE 8D IS UNSUSTAINABLE. HOWEVER, AS PER CLAUSE (F) TO EXPLANATION 1 TO SECTION 115JB OF THE ACT , THE ASSESSING OFFICER HAS TO DETERMINE THE QUANTUM OF EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME FOR INCREASING THE BOOK PROFIT TO THAT EXTENT. IT IS THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE BEFORE US THAT THE ASSESSEE HAS MADE A WORKING OF DIRECT EXPENDITURE ATTRIBUTABLE TO EARNING OF EXEMPT INCOME WHICH IS QUANTIFIED AT ` 2,54,989. UN DISPUTEDLY, THE AFORESAID WORKING WAS NEITHER BEFORE THE ASSESSING OFFICER NOR BEFORE THE LEARNED COMMISSIONER (APPEALS). THEREFORE, IN ALL FAIRNESS, THE CLAIM OF THE 9 TATA PETRODYNE LTD. ASSESSEE REQUIRES TO BE EXAMINED BY THE ASSESSING OFFICER. IN VIEW OF THE AFORESAID, WE A RE INCLINED TO RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION KEEPING IN VIEW THE RELEVANT CASE LAWS TO BE CITED BY THE ASSESSEE AS WELL AS THE PROVISION OF SECTION 115JB OF THE ACT. NEEDLESS TO SAY, THE ASSESSING OFFICER MUST AFFORD A R EASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE DECIDING THE ISSUE. GROUNDS RAISED IN THIS REGARD ARE ALLOWED FOR STATISTICAL PURPOSES. 8 . THE NE X T ISSUE WHICH ARISES FOR CONSIDERATION RELATES TO ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IB(9) OF THE ACT. 9 . AS DISCUSSED EARLIER, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROSPECTING, EXPLORATION AND PRODUCTION OF MINERAL OIL AND NATURAL GAS. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME CLAIMING DEDUCTION OF ` 16,95,29,150 UNDER SECTION 80IB(9) OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, WHEN THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO EXPLAIN WHY DEDUCTION CLAIMED UNDER SECTION 80IB(9) OF THE ACT SHOULD NOT BE DISALLOWED , THE ASSESSEE VIDE LETTER DATED 20 TH OCTOBER 2010, MADE ELABORATE SUBMISSIONS JUSTIF YING ITS ENTITLEMENT / ELIGIBILITY FOR CLAIMING DEDUCTION UNDER SECTION 80IB(9) OF THE ACT. IT WAS SUBMITTED , THE ASSESSEE IS A MEMBER OF A CONSORTIUM WHICH HAS ENTERED INTO A CONTRACT WITH THE 10 TATA PETRODYNE LTD. GOVERNMENT OF INDIA TO EXTRACT PETROLEUM IN CAUVERY OFF SHORE AREA. IT WAS SUBMITTED , AS PER THE PRODUCTION SHARING CONTRACT (PSC), THE ASSESSEE WAS AUTHORISED TO EXTRACT PETROLEUM PRODUCTS FROM TWO BLOCKS I.E., LAXMI FIELD AND GAURI FIELD. IT WAS SUBMITTE D THAT AS PER THE PETROLEUM TAX CODE, 1997, PSC PARTICIPANT WHO BEGIN S COMMERCIAL PRODUCTION OF PETROLEUM AND NATURAL GAS IN CERTAIN SPECIFIED STATES SHALL BE ENTITLED TO CLAIM A DEDUCTION OF 100% OF THEIR PROFITS DERIVED FROM PRODUCTION OF PETROLEUM AND N ATURAL GAS FROM ANY FIELD IN THOSE STATES FOR INITIAL FIVE YEARS COMMENCING FROM THE FIRST YEAR OF COMMERCIAL PRODUCTION IN SUCH FIELD. IT WAS SUBMITTED , IN TERMS OF THE SAID PROVISION, THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80IB(9) OF THE ACT IN RESPECT OF EACH OIL WELL IN THE BLOCK BY CONSIDERING EACH OIL WELL AS AN INDEPENDENT UNDERTAKING. IT WAS SUBMITTED , THE PROVISIONS OF SECTION 80IB(9) OF THE ACT WAS AMENDED BY FINANCE (NO.2) ACT, 2009, WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL 2000, BY IN SERTING AN EXPLANATION WHICH STATED THAT ALL BLOCK S LICENSED UNDER A SINGLE CONTRACT SHALL BE TREATED AS A SINGLE UNDERTAKING. THUS, AS PER THE AMENDED PROVISION OF SECTION 80IB(9) OF THE ACT, THE TWO BLOCKS UNDER THE CONTROL OF THE ASSESSEE ARE TO BE TREA TED AS TWO UNDERTAKING FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80IB(9) OF THE ACT. IT WAS SUBMITTED BY THE ASSESSEE , GOING BY THE AFORESAID PROVISION OF CONSIDERING EACH BLOCK AS AN INDEPENDENT UNDERTAKING , 11 TATA PETRODYNE LTD. ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80 IB(9) OF THE ACT WOULD NOT BE ALLOWABLE , SINCE , THE EXEMPTION PERIOD OF SEVEN YEAR FOR CLAIMING DEDUCTION UNDER SECTION 80IB(9) OF THE ACT IN RESPECT OF CY OS 90/1 BLOCK EXPIRED PRIOR TO ASSESSMENT YEAR 2005 06 AND IN RESPECT OF CB OS/2 BLOCK THE COMPANY I NCURRED A LOSS DURING THE IMPUGNED ASSESSMENT YEAR. THE ASSESSING OFFICER AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT SIMILAR DEDUCTION CLAIMED BY THE ASSESSEE IN THE PRECEDING ASSESSMENT YEARS WERE NOT ALLOWED AND THE FIRST APPELLATE A UTHORITYS DECISION IN ALLOWING ASSESSEES CLAIM WAS NOT ACCEPTED BY THE DEPARTMENT IN ASSESSMENT YEAR 2005 06, 2006 07 AND 2007 08. ACCORDINGLY, HE DISALLOWED ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IB(9) OF THE ACT. THE ASSESSEE DID NOT CHALLENGE T HE AFORESAID DECISION OF THE ASSESSING OFFICER IN THE APPEAL FILED BEFORE THE LEARNED COMMISSIONER OF INCOME - TAX. SUBSEQUENTLY, ON THE BASIS OF A DECISION OF THE HON'BLE GUJARAT HIGH COURT IN NIKO RESOURCES LTD. V/S UNION OF INDIA, 374 ITR 369 (GUJ.) , WHER EIN , THE HON'BLE GUJARAT HIGH COURT STRUCK DOWN EXPLANATION TO SECTION 80IB(9) OF THE ACT AS VIOLATIVE OF ARTICLE 14 OF THE CONSTITUTION OF INDIA, THE ASSESSEE HAS RAISED THE ISSUE OF DEDUCTION UNDER SECTION 80IB(9) OF THE ACT BEFORE US T HRO U GH ADDITIONAL GROUND S . 12 TATA PETRODYNE LTD. 10 . THE LEARNED AUTHORISED REPRESENTATIVE RELYING UPON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN NIKO RESOURCES LTD. (SUPRA) SUBMITTED , SINCE EXPLANATION 1 TO SECTION 80IB(9) OF THE ACT HAS BEEN STRUCK DOWN AS ULTRA VIRUS , THE AS SESSEE IS ENTITLED TO CLAIM DEDUCTION UNDER SECTION 80IB(9) OF THE ACT IN RESPECT OF EACH OIL WELL BY TREATING THEM AS INDEPENDENT UNDERTAKING. 11 . THE LEARNED DEPARTMENTAL REPRESENTATIVE OPPOSING THE AFORESAID CONTENTION OF THE LEARNED A.R. SUBMITTED THAT WH ILE ADMITTING DEPARTMENTS SPECIAL LEAVE PETITION AGAINST THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN GUJARAT STATE PETROLEUM CORPORATION ON IDENTICAL ISSUE , THE HON'BLE SUPREME COURT HAS DIRECTED THE HIGH COURTS NOT TO DISPOSE OFF APPEALS PENDING BEFORE THEM ON IDENTICAL ISSUE TILL THE ISSUE IS DEALT WITH BY THE HON'BLE SUPREME COURT. THUS, HE SUBMITTED , IN VIEW OF THE AFORESAID DECISION OF THE HON'BLE SUPREME COURT THE ISSUE CANNOT BE DECIDED IN FAVOUR OF THE ASSESSEE. 12 . IN REJOINDER, THE LEARNED AUTHORI SED REPRESENTATIVE SUBMITTED , THE DIRECTION OF THE HON'BLE SUPREME COURT IS CONFINED TO DISPOSAL OF APPEALS BY THE HIGH COURT S , HENCE, NOT APPLICABLE TO THE TRIBUNAL. 13 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD IN THE CONTEXT OF P ROVISION CONTAINED UNDER SECTION 80IB(9) OF THE ACT. AT THE OUTSET, IT NEEDS TO BE OBSERVED , THE ACTIVITY OF 13 TATA PETRODYNE LTD. PROSPECTING , EXPLORATION AND PRODUCTION OF MINERAL OIL AND NATURAL GAS UNDERTAKEN BY THE ASSESSEE , WHETHER SATISFIES THE ELIGIBILITY CONDITIONS OF SECTION 80IB(9) OF THE ACT , STANDS CONCLUDED IN FAVOUR OF THE ASSESSEE BY THE DECISION S OF THE TRIBUNAL AS WELL AS THE HON'BLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR S 2005 06 TO 2007 08 BY HOLDING THAT THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE QUALIFIES FOR DEDUCTION UNDER SECTION 80IB(9) OF THE ACT. THUS, ASSESSEES ELIGIBILITY TO CLAIM DEDUCTION UNDER SECTION 80IB(9) OF THE ACT IS NO MORE JUSTICIABLE. HOWEVER, THE LARGER ISSUE BEFORE U S IS , WHETHER ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IB(9) OF THE ACT IN RESPECT OF EACH WELL BY TREATING THEM AS INDEPENDENT UNDERTAKING IS ALLOWABLE QUA THE PROVISION OF SECTION 80IB(9) R/W THE EXPLANATION THEREIN. UNDISPUTEDLY, THE ASSESSEE ALL A LONG HAD CLAIMED DEDUCTION UNDER SECTION 80IB(9) OF THE ACT BY TREATING EACH OIL WELL AS AN INDEPENDENT UNDERTAKING. HOWEVER, THE PROVISION OF SECTION 80IB(9) OF THE ACT WAS AMENDED BY FINANCE ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL 2000 BY INSE RTING AN EXPLANATION WHICH PROVIDED THAT FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER THE SAID PROVISION ALL BLOCKS LICENSED UNDER A SINGLE CONTRACT SHALL BE TREATED AS A SINGLE UNDERTAKING. THUS, BY VIRTUE OF EXPLANATION TO SECTION 80IB(9) OF THE ACT, CLA IM ING DEDUCTION BY TREATING EACH OIL WELL AS A SINGLE UNDERTAKING WAS DONE AWAY WITH. THE 14 TATA PETRODYNE LTD. AFORESAID FACTUAL AND LEGAL POSITION HAS NOT BEEN DISPUTED BY THE ASSESSEE WHICH IS EVIDENT FROM THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. IN FACT, BECAUSE OF INSERTION OF EXPLANATION TO SECTION 80IB(9) OF THE ACT, THE ASSESSEE NEVER RAISED THE ISSUE OF CLAIM OF DEDUCTION UNDER SECTION 80IB(9) OF THE ACT IN THE APPEAL FILED BEFORE THE LEARNED COMMISSIONER (APPEALS). THUS, THE DEPARTMENTAL AUTHO RITIES NEVER HAD THE O C CASION TO EXAMINE ASSESSEES CLAIM OF DEDUCTION VIS A VIS THE RATIO LAID DOWN BY THE HON'BLE GUJARAT HIGH COURT IN NIKO RESOURCES LTD , WHICH IN ANY CASE OF THE MATTER WAS DELIVERED AFTER DISPOSAL OF APPEAL BY LEARNED COMMISSIONER (AP PEALS) . MOREOVER , THE AFORESAID DECISION OF THE HON'BLE GUJARAT HIGH COURT HAS BEEN CHALLENGED BY THE DEPARTMENT, BEFORE THE HON'BLE SUPREME COURT AND WHILE ADMITTING THE SLP OF THE DEPARTMENT THE HONBLE SUPREME COURT HAS PASSED THE FOLLOWING ORDER: O R D E R DELAY CONDONED. ISSUE NOTICES ON THE SPECIAL LEAVE PETITIONS AS ALSO ON THE PRAYER FOR INTERIM RELIEF RETURNABLE AFTER 10 WEEKS. MR. SHASHIBHUSHAN P. ADGAONKAR, MS. ABHA R. SHARMA AND MS. BINDI GIRISH DAVE, LEARNED COUNSEL, HAVE ENTERED APPEARANCE ON BEHALF OF THE RESPONDENTS. NO FURTHER NOTICE NEED TO BE ISSUED TO THEM. COUNTER AFFIDAVIT, IF ANY, BE FILED WITHIN SIX WEEKS. REJOINDER AFFIDAVIT, IF ANY, BE FILED WITHIN FOUR WEEKS THEREFROM. 15 TATA PETRODYNE LTD. LIST THE MATTERS AFTER TEN WEEKS. THE PRAYER FOR INTERIM RELIEF SHALL BE CONSIDERED ON THE NEXT DATE OF HEARING. AS WE ARE ENTERTAINING THE MATTER, THE HIGH COURT(S) WHERE THE APPEALS ARE PENDING SHALL NOT FINALISE THE SAME TILL THE MATTER IS DEALT WITH BY THIS COURT. 14 . AS COULD BE SEEN FROM T HE A FORESAID ORDER, THE HON'BLE SUPREME COURT HAS DIRECTED THE HIGH COURT S NOT TO FINALISE THE PENDING APPEALS ON SIMILAR ISSUE TILL THE ISSUE IS DECIDED BY THE HON'BLE SUPREME COURT. THUS, ON OVERALL CONSIDERATION OF FACTS AND MATERIAL ON RECORD, WE ARE OF TH E CONSIDERED OPINION, THE ISSUE RELATING TO ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IB(9) OF THE ACT AS RAISED IN THE ADDITIONAL GROUND S HAS TO BE RESTORED TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION FOR THE FOLLOWING REASONS. FIRSTLY; AS STATED EARLIER, DUE TO AMENDMENT OF SECTION 80IB(9) OF THE ACT BY INSERTION OF EXPLANATION, THE ASSESSEE GAVE UP ITS CLAIM OF DEDUCTION UNDER SECTION 80IB(9) OF THE ACT BY NOT RAISING THE ISSUE BEFORE THE FIRST APPELLATE AUTHORITY. ONLY AFTER THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN NIKO RESOURCES LTD. (SUPRA), THE ASSESSEE AT THIS STAGE HAS FILED ADDITIONAL GROUND S CLAIMING DEDUCTION UNDER SECTION 80IB(10) OF T HE ACT. SINCE , THE ISSUE WAS NEITHER RAISED BY THE ASSESSEE BEFORE THE DEPARTMENTAL AUTHORITIES NOR THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT (SUPRA) WAS AVA I LABLE BEFORE THEM, IN ALL FAIRNESS, THE ISSUE HAS TO BE EXAMINED BY THE ASSESSING OFFICER. SE CONDLY, THOUGH, IT MAY BE A FACT THAT THE HON'BLE GUJARAT HIGH COURT IN NIKO RESOURCES LTD. (SUPRA) HAS 16 TATA PETRODYNE LTD. STRUCK DOWN EXPLANATION TO SECTION 80IB(9) OF THE ACT BY DECLARING IT AS ULTRA VIRUS OF ARTICLE 14 OF THE CONSTITUTION OF INDIA, HOWEVER, IT CANNOT BE I GNORED THAT NO DECISION OF THE HONBLE SUPREME COURT OR THE HON'BLE JURISDICTIONAL HIGH COURT ON THE ISSUE IS AVAILABLE. MOREOVER, THE TRIBUNAL BEING A CREATURE OF THE STATUTE IS NOT COMPETENT TO EXAMINE OR DECIDE THE CONSTITUTIONAL VALIDITY/VIR E S OF A PRO VISION CONTAINED IN THE STATUTE. HAD IT BEEN A DECISION OF THE HON'BLE SUPREME COURT OR THE HON'BLE JURISDICTIONAL HIGH COURT , THE TRIBUNAL WOULD HAVE BEEN BOUND BY THE LAW DECLARED THEREIN. HOWEVER, THE LEGAL POSITION IS DIFFERENT WHEN THE DECISION DECLAR ING A PROVISION IN THE STATUTE AS ULTRA VIR E S IS BY A NON JURISDICTION HIGH COURT, WHOSE DECISION IS NOT BINDING BUT HA S PERSUASIVE VALUE. IN THIS CONTEXT WE MAY REFER TO THE FOLLOWING DECISIONS : - I ) COMPTROLLER OF ESTATE DUTY V/S SHRI ASHOK KUMAR M. PARIKH, [1990 - ] 186 ITR 212 (BOM.); AND II ) TAYLOR INVESTMENT CO. ( INDIA ) LTD. V/S CIT, [1998] 232 ITR 771 . 15 . MOREOVER, IT IS NOT DISPUTED THAT THE AFORESAID DECISION OF THE HON'BLE GUJARAT HIGH COURT HAS BEEN CHALLENGED BY THE DEPARTMENT BEFORE THE HON'BLE SUPREME COURT AND THE HON'BLE SUPREME COURT HAS DIRECTED ALL HIGH COURTS NOT TO DECIDE THE PENDING APPEALS ON IDENTICAL ISSUE TILL THE ISSUE IS DECIDED BY THEM. THOUGH, THE AFORESAID DIRECTION OF THE HON'BLE SUPREME COURT IS TO THE HIGH COURTS, HOWEVER IN OUR 17 TATA PETRODYNE LTD. VIE W, AS A MATTER OF PROPRIET Y NEITHER THE TRIBUNAL NOR THE DEPARTMENTAL AUTHORITIES SHOULD ALSO DECIDE THE ISSUE EITHER IN FAVOUR OR AGAINST THE ASSESSEE , BUT, SHOULD WAIT FOR THE DECISION OF THE HON'BLE SUPREME COURT ON THE ISSUE. IN THE AFORESAID FACT SITU ATION, THERE ARE TWO COURSES OPEN T O US, I.E., EITHER TO KEEP THE APPEAL PENDING TILL THE ISSUE IS DECIDED BY THE HON'BLE SUPREME COURT OR TO RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR DECI DING IT BY APPLYING THE LAW TO BE LAID DOWN BY THE HON'BLE SUPR EME COURT ON THE ISSUE. CONSIDERING THE FACT THAT THE ASSESSEE HAS RAISED THE ISSUE BY WAY OF ADDITIONAL GROUND S WHICH W ERE NEVER RAISED BEFORE THE FIRST APPELLATE AUTHORITY AND FURTHER , THE ISSUE RELATING TO ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 14A OF THE ACT IS RESTORED TO THE ASSESSING OFFICER , WE ARE INCLINED TO RESTORE THE ISSUE RELATING TO ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IB(9) OF THE ACT TO THE ASSESSING OFFICER FOR DECIDING AFRESH BY APPLYING THE RATIO TO BE LAID DOWN BY THE HON' BLE SUPREME COURT IN THE APPEAL PENDING BEFORE THEM ON IDENTICAL ISSUE AS REFERRED TO ABOVE. NEEDLESS TO MENTION, THE ASSESSING OFFICER BEFORE DECIDING THE ISSUE MUST AFFORD REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ADDITIONAL GROUNDS ARE ALLO WED FOR STATISTICAL PURPOSES. 16 . IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 18 TATA PETRODYNE LTD. ITA NO.5571/MUM./2012 REVENUES APPEAL A.Y. 2008 09 17 . THE ONLY GROUND RAISED BY THE REVENUE IS AGAINST THE DELETION OF DISALLOWANCE OF DIRECT EXPENDITURE MADE OF ` 12,45,576 UNDER RULE 8D(I) READ WITH SECTION 14A . 18 . AS DISCUSSED EARLIER IN ITA NO.4887/MUM./2012, THE ASSESSING OFFICER HAS ULTIMATELY PROCEEDED TO DETERMINE THE TOTAL INCOME AND COMPUTE TAX LIABILITY OF THE ASSESSEE UNDER SECTION 115JB OF THE ACT. WHILE DECIDING THE GROUNDS RAISED BY THE ASSESSEE ON APPLICABILITY OF SECTION 14A R/W RULE 8D TO THE PROVISIONS OF SECTION 115JB OF THE ACT , WE HAVE RES TORED THE ISSUE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION KEEPING IN VIEW THE SPECIAL BENCH DECISION OF THE TRIBUNAL, DELHI BENCH, IN VIREET INVESTMENT PVT. LTD. (SUPRA). THEREFORE, THE ISSUE RAISED IN THE PRESENT APPEAL BY THE REVENUE BECOMES REDUND ANT. EVEN OTHERWISE ALSO, THE QUANTUM OF ADDITION/DELETION DISPUTE D BY THE REVENUE IN THIS APPEAL IS ` 12,45,576. THE TAX EFFECT ON THE AFORESAID AMOUNT BEING LESS THAN ` 20 LAKH, AS FIXED BY THE CENTRAL BOARD OF DIRECT TAXES (CBDT) IN CIRCULAR NO.3/2018, D ATED 11 TH JULY 2018, F OR FILING APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL, THE APPEAL OF THE REVENUE IS OTHERWISE NOT MAINTAINABLE, HENCE, DISMISSED. 19 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. 19 TATA PETRODYNE LTD. ITA NO.4914/MUM./2012 REVENUES APPEAL A.Y. 2008 09 20 . THIS APPEAL BY THE REVENUE ARISES OUT OF ORDER PASSED UNDER SECTION 154 OF THE ACT BY THE LEARNED COMMISSIONER (APPEALS). HOWEVER, THE ISSUE RAISED BY THE REVENUE PERTAINS TO THE DISALLOWANCE MADE UNDER SECTION 14A R/W RULE 8D. 21 . WHILE DECIDING ASSESSEES APPEAL IN ITA NO.4887/MUM./2012, WE HAVE RESTORED THE ISSUE RELATING TO ADDITION MADE TO THE BOOK PROFIT ON ACCOUNT OF DISALLOWANCE MADE UNDER SECTION 14A R/W RULE 8D. THAT BEING THE CASE, THE ISSUE RAISED IN THE PRESENT APPEAL BECOMES REDUNDANT AS IT IS OF MERE ACADEMIC IMPORTANCE. HENCE, THERE IS NO NEED FOR ADJUDICATION. 22 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. ITA NO. 2791/MUM./2013 ASSESSEE S APPEAL A.Y. 200 9 1 0 23 . IN THIS APPEAL ALSO, IN ADDITION TO THE GROUNDS RAISED I N THE MEMORANDUM OF APPEAL, THE ASSESSEE HAS RAISED ADDITIONAL / SUPPLEMENTARY GROUNDS OF APPEAL VIDE LETTER DATED 7 TH JULY 2016 AND 19 TH FEBRUARY 2018. HOWEVER, THE ISSUE RAISED IN THE MAIN GROUND S AS WELL AS ADDITIONAL GROUND S PERTAIN TO DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 80IB(9) OF THE ACT AND DISALLOWANCE OF EXPENDITURE 20 TATA PETRODYNE LTD. UNDER SECTION 14A R/W RULE 8D. THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE BEING OF PURELY LEGAL NATURE AND WHICH CAN BE DECIDED ON THE BASIS O F FACTS AVAILABLE ON RECORD, WE ADMIT THE ADDITIONAL GROUNDS FOR ADJUDICATION. 24 . INSOFAR AS THE GROUNDS RAISED TOWARDS CLAIM OF DEDUCTION UNDER SECTION 80IB(9) OF THE ACT ARE CONCERNED, IN THE MAIN GROUND THE ASSESSEE HAS RAISED THE ISSUE OF COMPUTATION OF DEDUCTION UNDER SECTION 80IB(9) OF THE ACT WHETHER SHOULD BE RESTRICTED TO PROFITS AND GAINS OF BUSINESS OR PROFESSION OR GROSS TOTAL INCOME. WHEREAS, IN THE ADDITIONAL GROUND S , THE ASSESSEE HAS RAISED THE ISSUE OF CLAIM OF DEDUCTION UNDER SECTION 80IB(9) OF THE ACT IN RESPECT OF EACH OIL WELL AS A SEPARATE UNDERTAKING BY RELYING UPON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN NIKO RESOURCES LTD. (SUPRA). WHILE DECIDING IDENTI CAL ISSUE IN ITA NO.4887/MUM./2012. WE HAVE RESTORED SIMILAR ISSUE RAISED IN T HE ADDITIONAL GROUNDS TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION KEEPING IN VIEW THE DECISION OF THE HON'BLE SUPREME COURT ON IDENTICAL ISSUE. SINCE , THE ISSUE RELATING TO CLAIM OF DEDUCTION UNDER SECTION 80IB(9) OF THE ACT AS RAISED IN THE ADDITIONAL GROUND IS THE CORE ISSUE TO BE DECIDED, WE ARE INCLINED TO RESTORE ALL THE ISSUES RELATING TO ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IB(9) OF THE ACT AS RAISED IN THE MAIN AS WELL AS ADDITIONAL GROUND S TO THE ASSESSING OFFICER FOR FRESH ADJUDICATIO N KEEPING IN VIEW OUR DIRECTION 21 TATA PETRODYNE LTD. GIVEN ON IDENTICAL ISSUE HEREIN ABOVE AND ONLY AFTER DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 25 . AS REGARD S SECOND ISSUE RELATING TO DEDUCTION UNDER SECTION 14A R/W RULE 8D, BRIEF FACTS ARE, IN THE RELEVANT PREVIOUS YEA R, THE ASSESSEE EARNED EXEMPT INCOME OF ` 7,79,27,842, FROM MUTUAL FUND. WHEREAS, VOLUNTARILY THE ASSESSEE MADE A DISALLOWANCE OF ` 38,96,392 UNDER SECTION 14A OF THE ACT. THE ASSESSING OFFICER BEING OF THE VIEW THAT DISALLOWANCE UNDER SECTION 14A OF THE A CT HAS TO BE MADE AS PER RULE 8D OF THE I.T. RULES, PROPOSED TO MAKE SUCH DISALLOWANCE AS PER THE SAID RULE. THOUGH, THE ASSESSEE OBJECTING TO THE PROPOSED DISALLOWANCE SUBMITTED THAT THE ONLY EXPENDITURE INDIRECTLY ATTRIBUTABLE TO EARNING OF EXEMPT INCOME IS PROPORTIONATE SALARY COST OF TWO EMPLOYEES, PROPORTIONATE TELEPHONE EXPENSES AND RELATED OVERHEAD, HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE. THE ASSESSING OFFICER OBSERVED , THERE WAS NET INCREASE OF ` 180 C RORE IN INVESTMENT IN MUTUAL FUND WITHIN THE YEAR. FURTHER, THE ASSESSEE HAS MADE HUGE INVESTMENT OF ` 200 CRORE IN SHARES OF NAGARJUNA OIL CORPORATION LTD., WHICH MUST HAVE INVOLVED DECISION MAKING PROCESS OF THE PROMOTERS AND MANAGEMENT OF THE COMPANY INCLUDING TOP EXECUTIVE S . THEREFORE, HE HELD THAT ASSESSEES CLAIM OF PROPORTIONATE SALARY COST OF TWO E MPLOYEES CANNOT BE ACCEPTED. HE ALSO OBSERVED THAT SINCE THE DISALLOWANCE WORKED OUT 22 TATA PETRODYNE LTD. BY THE ASSESSEE IS ON AD HOC BASIS IT CANNOT BE ACCEPTED. THUS, THE ASSESSING OFFICER PROCEEDED TO COMPUTE DISALLOWANCE UNDER SECTION 14A R/W RULE 8D AT ` 93,11,108. BEING AGGRIEVED OF SUCH DISALLOWANCE, ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 26 . THE LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THOUGH, AGREED WITH THE DECISION OF THE ASSESSING OFFICER TO COMPUTE THE DISALLOWANCE UNDER RULE 8D, HOWEVER, HE DIRECTED THE ASSESSING OFFICER TO EXCLUDE THE INVESTMENT YIELDING TAXABLE INCOME FROM THE AVERAGE VALUE OF INVESTMENT FOR COMPUTING DISALLOWANCE UNDER RULE 8D. 27 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATER IALS ON RECORD. THE FIRST CONTENTION OF LEARNED AUTHORISED REPRESENTATIVE IS, THE ASSESSING OFFICER HAS NOT RECORDED SATISFACTION BEFORE REJECTING THE DISALLOWANCE MADE BY THE ASSESSEE. AS COULD BE SEEN FROM THE ASSESSMENT ORDER, THE ASSESSEE HAS ALLOCATED EXPENDITURE ON PROPORTIONATE BASIS TOWARDS EARNING OF EXEMPT INCOME. THE ASSESSING OFFICER , THOUGH , HAS REJECTED THE COMPUTATION OF THE ASSESSEE, HOWEVER, HE HAS NOT PROVIDED SPECIFIC REASON HOW THE DISALLOWANCE COMPUTED BY THE ASSESSEE IS INCORRECT HAVIN G REGARDS TO ITS BOOKS OF ACCOUNT. THE ASSESSING OFFICER , THOUGH , HAS MADE A GENERAL OBSERVATION WITH REGARD TO INVESTMENT MADE IN NAGARJUN OIL 23 TATA PETRODYNE LTD. CORPORATION THAT THERE MUST HAVE BEEN SOME DECISION MAKING PROCESS AT TOP EXECUTIVE AND MANAGEMENT LEVEL, HOWEVE R, HE HAS NOT QUANTIFIED THE PROPORTIONATE SALARY EXPENDITURE ATTRIBUTABLE TO SUCH ACTIVITY WHICH CAN BE APPORTIONED TO THE EARNING OF EXEMPT INCOME. BEFORE US, THE LEARNED AUTHORISED REPRESENTATIVE HAS FURNISHED A FRESH WORKING OF DISALLOWANCE UNDER SECTI ON 14A OF THE ACT AT ` 3,91,932 WHICH IS STATED TO HAVE BEEN ARRIVED AT ON A SCIENTIFIC BASIS. HOWEVER, THIS CLAIM OF THE ASSESSEE REQUIRES VERIFICATION. FURTHER, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE INVESTMENT IN THE SHARES OF NAGARJUN OIL CORPORATION IS A STRATEGIC INVESTMENT AS THE SAID COMPANY IS A SISTER CONCERN OF THE ASSESSEE. HE HAS FURTHER SUBMITTED , THE INVESTMENT MADE IN NAGARJUN OIL CORPORATION HAS NOT YIELDED DIVIDEND INCOME IN THE IMPUGNED ASSESSMENT YEAR, THEREFORE, SUCH I NVESTMENT HAS TO BE EXCLUDED FROM THE AVERAGE VALUE OF INVESTMENT FOR COMPUTING DISALLOWANCE UNDER RULE 8D(2)(III). FINALLY, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED DISALLOWANCE UNDER SECTION 14A R/W RULE 8D CANNOT BE ADDED TO THE BOOK PROFIT UNDER SECTION 115JB OF THE ACT. AS REGARDS THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT THE STRATEGIC INVESTMENT SHOULD BE EXCLUDED FOR THE PURPOSE OF COMPUTING DISALLOWANCE UNDER RULE 8D(2), THE SAME IS UN ACCEPTABLE IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN CASE OF MAXOPP INVESTMENT LTD. V/S CIT, [2018] 91 TAXMANN.COM 154. 24 TATA PETRODYNE LTD. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT THE INVESTMENT IN NAGARJUN OIL CORPORATION HAS NOT EARNED ANY DIVIDEND INCOME DURING THE YEAR, HENCE, SHOULD BE E XCLUDED , WE FIND MERIT IN THE SAME. IT HAS BEEN HELD BY THE SPECIAL BENCH OF THE TRIBUNAL IN CASE OF VIREET INVESTMENT PVT. LTD. (SUPRA) THAT INVESTMENT S WHICH HAVE NOT YIELDED ANY EXEMPT INCOME IN THE RELEVANT PREVIOUS YEAR SHOULD BE EXCLUDED WHILE COMPUTING DISALLOWANCE UNDER RULE 8D(2). IN VIEW OF THE AFORESAID , WE DIRECT THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE AND EXCLUDE THE INVESTME NT MADE IN NAGARJUN OIL CORPORATION FROM THE AVERAGE VALUE OF INVESTMENT IF IT HAS NOT YIELDED ANY EXEMPT INCOME DURING THE RELEVANT PREVIOUS YEAR. AS REGARDS THE FINAL SUBMISSION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT DISALLOWANCE MADE UNDER SECTIO N 14A R/W RULE 8D CANNOT BE ADDED TO THE BOOK PROFIT UNDER SECTION 115JB OF THE ACT , WE FIND MERIT IN THE SAID SUBMISSIONS. AS HELD IN THE SPECIAL BENCH DECISION OF THE TRIBUNAL, DELHI BENCH, IN VIREET INVESTMENT PVT. LTD. (SUPRA) COMPUTATION UNDER CLAUSE (F) OF EXPLANATION - 1 OF SECTION 115JB OF THE ACT IS TO BE MADE WITHOUT RESORTING TO COMPUTATION AS CONTEMPLATED UNDER SECTION 14A R/W RULE 8D. IN VIEW OF THE AFORESAID, WE RESTORE THE ISSUE OF DISALLOWANCE UNDER SECTION 14A R/W RULE 8D TO THE ASSESSING OFF ICER FOR DE NOVO ADJUDICATION KEEPING IN VIEW OUR OBSERVATION S HEREIN ABOVE 25 TATA PETRODYNE LTD. AND ONLY AFTER AFFORDING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . TH E GROUND S ARE ALLOWED FOR STATISTICAL PURPOSES. 28 . I N THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTI CAL PURPOSES. ITA NO.2469/MUM./2013 REVENUES APPEAL A.Y. 2009 10 29 . THE ONLY ISSUE RAISED BY THE REVENUE IS IN RELATION TO ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IB(9) OF THE ACT. 30 . AS COULD BE SEEN FROM THE FACTS ON RECORD, THE ASSESSING OFFICER DISALLOWED ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IB(9) OF THE ACT FOLLOWING HIS OWN DECISION IN ASSESSMENT YEAR 2005 06, 2006 07 AND 2007 08, HOLDING THAT ASSESSEES IS NOT ELIGIBLE TO CLAIM SUCH DEDUCTION AS THE ACTIVITIES CARRIED OUT BY IT DOES N OT FULFILL THE CONDITION OF SECTION 80IB(9)(IV)(V) OF THE ACT. HOWEVER, IT IS A FACT ON RECORD THAT THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN EARLIER ASSESSMENT YEAR S NOT ONLY BY THE TRIBUNAL BUT ALSO BY THE HON'BLE JURISDICTIONAL HIGH COURT WHICH IS EVIDENT FROM THE DECISIONS OF THE HON'BLE JURISDICTIONAL HIGH COURT IN INCOME TAX APPEAL NO. 1322 OF 2012, DATED 20.11.2014 FOR ASSESSMENT YEARS 2002 03 AND 2004 05 PLACED ON RECORD. IN VIEW OF THE AFORESAID, THE GROUND RAISED BY THE REVENUE DESE RVES TO BE DISMISSED. 26 TATA PETRODYNE LTD. 31 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. 32 . TO SUM UP, ASSESSEES APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES AND REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.09.2018 SD/ - RAMIT KOCHAR ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 28.09.2018 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ( SR. PRIVATE SECRETARY ) ITAT, MUMBAI