Addl. Commissioner of Income Tax, Panaji V. M/S Prime Minerals Exports Pvt. Ltd., Panaji

ITA 52/PAN/2013

• Counselvise Citation: 5224114 RSA 2013
• Duration Of Justice: 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 13-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHA DESAI
• Assessee Lawyers: R S PURANI K
• Keywords: Earning of tax free income; Retrospective amendment; Question of law; Onus to prove; Revenue expenditure; Capital expenditure
• Section: 80HHC; 14A; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 28/PNJ/2013 : (ASST. YEAR : 2008 - 09) M/S. PRIME MINERAL EXPORTS PVT. LTD., F - 1, 1 ST FLOOR, OCEANIC APARTMENTS, BEHIND HANUMAN TEMPLE, MIRAMAR, PANAJI, GOA 403 001. (APPELLANT) PAN : AADCP1647E VS. ADDL. COMMISSIONER OF INCOME TAX, CIRCLE - 2(1), PANAJI, GOA (RESPONDENT) ITA NO. 52/PNJ/2013 : (ASST. YEAR : 2008 - 09) ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 1(1), PANAJI, GOA (APPELLANT) VS. M/S. PRIME MINERAL EXPORTS PVT. LTD., F - 1, 1 ST FLOOR, OCEANIC APARTMENTS, BEHIND HANUMAN TEMPLE, MIRAMAR, PANAJI, GOA 403 001. (RESPONDENT) PAN : AADCP1647E REVENUE BY : SMT. ASHA DESAI , DR ASSESSEE BY : NISHANT THAKKAR , ADV. & R.S. PURANIK, C.A DATE OF HEARING : 05 /0 8 /2013 DATE OF PRONOUNCEMENT : 28 /08/2013 O R D E R PER P.K. BANSAL : 1. THE CROSS APPEALS HAVE BEEN FILED AGAINST THE ORDER OF CIT(A) DT. 20.12.2012. THE ASSESSEE HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL - 2 ITA NOS. 28 & 52/PNJ/2013 (ASST. YEAR : 2008 - 09) THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.12,50,643/ - MADE BY THE AO UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 R.W.T. 8D OF THE RULES. WHILE T HE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A), PANAJI ERRED IN ALLOWING THE EXPENDITURE OF RS.16,70,000/ - INCURRED ON RENOVATION OF TEMPLE WHEN THERE IS NO PROXIMATE NEXUS BETWEEN THE BUSINESS OF THE ASSESSEE AND THE EXPENDITURE INCURRED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A), PANAJI ERRED IN ALLOWING THE EXPENDITURE OF RS.89,84,375/ - INCURRED ON CONSTRUCTION OF NEW BRIDGE WHEN THERE IS NO PROXIMATE NEXUS BETWEEN THE BUSINESS OF THE ASSESSEE I.E. PROCESSING AND TRADING OF IRON ORE. 2. THE ONLY ISSUE IN THE APPEAL OF THE ASSESSEE RELATES TO THE DISALLOWANCE OF RS.12,50,643/ - MADE BY THE AO UNDER SECTION 14A R/W RULE 8D CONFIRMED BY THE CIT(A). 2.1 THE BRIEF FACTS RELATING TO THIS GROUND ARE THAT THE ASSESSEE RECEIVED DIVIDEND INCOME AMOUNTING TO RS.67,41,460/ - BEING EXEMP T UNDER INCOME TAX ACT. THE ASSESSEE CLAIMED THAT HE DID NOT INCUR ANY EXPENDITURE IN RESPECT OF THE DIVIDEND INCOME. IT IS ONLY THE SURPLUS FUNDS WHICH HAS BEEN INVESTED THROUGH THE BANKERS TO HAVE GOOD RELATION WITH THE BANKS AND FINANCIAL INSTITUTIONS . THE MUTUAL FUND OFFICIALS USED TO COME TO THE DOOR STEP OF THE ASSESSEE AND FILL UP FORMS. THE ASSESSEE ONLY ISSUED THE CHEQUE. THE ASSESSEE POINTED OUT THAT THE ASSESSEE INVESTED ONLY IN MUTUAL FUNDS DURING THE YEAR. THE AO DID NOT AGREE AND TOOK TH E VIEW THAT WITHOUT ANALYSING THE NATURE OF THE INVESTMENT AND DEVOTING TIME, THE ASSESSEE COULD NOT HAVE MADE THE INVESTMENT IN MUTUAL FUNDS. THE AO TOOK THE VIEW THAT THE PROVISIONS OF SEC. 14A WERE CLEARLY APPLICABLE IN THE CASE OF THE ASSESSEE. HE AL SO OBSERVED THAT THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT, 234 CTR (BOM) 1 HELD THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF 3 ITA NOS. 28 & 52/PNJ/2013 (ASST. YEAR : 2008 - 09) EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO SUCH INCOME WHICH DOES NOT FORM P ART OF THE TOTAL INCOME UNDER THE ACT BY VIRTUE OF PROVISIONS OF SEC. 14A(1) AND PROVISIONS OF RULE 8D OF THE INCOME TAX RULES APPLICABLE DURING THE IMPUGNED ASSESSMENT YEAR. THE AO ACCORDINGLY APPLIED RULE 8D AND COMPUTED THE DISALLOWANCE OF THE EXTENT B EING 0.5% OF THE AVERAGE INVESTMENT OF RS. 25,01,28,565/ - AMOUNTING TO RS. 12,50,643 / - AND DISALLOWED THE SAME. THE ASSESSEE WENT IN APPEAL BEFORE CIT(A). CIT(A) CONFIRMED THE ORDER OF THE AO. 2.2 BEFORE US, THE LD. AR VEHEMENTLY CONTENDED THAT THE SATISF ACTION OF THE AO IS NECESSARY ABOUT THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. THE SATISFACTION MUST BE WITH REGARD TO THE ACCOUNTS OF THE ASSESSE E. ATTENTION WAS DRAWN TOWARDS SEC. 14A(2). IT WAS POINTED OUT THAT WITHOUT RECORDING THE SATISFACTION ABOUT THE INCORRECTNESS OF THE CLAIM OF THE ASSESSEE, THE AO CANNOT STRAIGHTAWAY APPLY RULE 8D OF THE INCOME TAX ACT. OUR ATTENTION WAS DRAWN TOWARDS PARA 5.3 TO 5.8 OF THE ASSESSMENT ORDER AND IT WAS POINTED OUT THAT THE AO HAS NOWHERE RECORDED ANY SATISFACTION ABOUT THE DISCREPANCY IN THE ACCOUNTS OF THE ASSESSEE WITH REGARD TO THE EXPENDITURE INCURRED IN RELATION TO THE DIVIDEND INCOME. THE AO MEREL Y OBSERVED THAT FROM A.Y 2008 - 09 ONWARDS THE POSITION IS THAT IN ALL CASES WHERE THE AO IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE INCURRED ON EARNINGS THAT DO NOT FORM PART OF THE TOTAL INCOME, THE EXPENDI TURE ON THIS ACCOUNT WILL NEED TO BE COMPUTED AS PER RULE 8D OF THE INCOME TAX ACT. OUR ATTENTION WAS ALSO DRAWN TOWARDS THE DECISION OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT, 328 ITR 81 (MUM). RELIANCE WAS ALSO PLACED ON THE SUBMISSIONS MADE BE FORE THE CIT(A). RELIANCE WAS ALSO PLACED ON THE DECISION OF THIS TRIBUNAL IN THE CASE OF ACIT VS. SESA GOA LTD. IN WHICH THIS TRIBUNAL VIDE ORDER DT. 8.3.2013 HELD THAT THE APPLICATION OF 4 ITA NOS. 28 & 52/PNJ/2013 (ASST. YEAR : 2008 - 09) PROVISIONS OF SUB - SECTION 2 & 3 OF SEC. 14A AND RULE 8D IS NOT AUT OMATIC IN EACH AND EVERY CASE WHERE THERE IS INCOME NOT FORMING PART OF THE TOTAL INCOME. BEFORE MAKING ANY DISALLOWANCE THE AO IS REQUIRED TO RECORD SATISFACTION HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE THAT THE CLAIM OF THE ASSESSEE THAT THE EXPEND ITURE INCURRED IS NOT RELATED TO THE INCOME FORMING PART OF THE TOTAL INCOME IS INCORRECT. SUCH SATISFACTION MUST BE ARRIVED AT ON OBJECTIVE BASIS. ONCE THE SATISFACTION IS MADE, ONLY THEN, THE APPLICABILITY OF RULE 8D WILL ARISE. IT WAS ALSO SUBMITTED THAT THE EXPENDITURE WHICH HAVE TO BE DISALLOWED UNDER RULE 8D MUST HAVE A PROXIMATE RELATIONSHIP WITH THE EARNING OF THE DIVIDEND INCOME. FOR THIS ALSO, RELIANCE WAS PLACED ON THE DECISION OF THIS TRIBUNAL IN THE CASE OF ACIT VS. SESA GOA LTD. ( SUPRA ) DT . 8.3.2013 FOR WHICH THE UNDERSIGNED IS THE AUTHOR. IT WAS ALSO POINTED OUT THAT THE DECISION OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT, 328 ITR 81 (MUM) ( SUPRA ) HAS DULY BEEN DISCUSSED BY THIS BENCH IN THAT CASE. IT WAS SUBMITTED THAT THERE IS N O SATISFACTION WHATSOEVER BEING RECORDED BY THE AO IN ACCORDANCE WITH SEC. 14A(2) AND THEREFORE IT IS A CASE WHERE RULE 8D COULD HAVE NOT BEEN APPLIED AND THERE COULD NOT BE ANY DISALLOWANCE AS PER SEC. 14A(2). 2.3 THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE AO. 2.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE NOTED FROM THE PROVISIONS OF SEC. 14A(2) THAT BEFORE MAKING ANY DISALLOWANCE U/S 14A, THE AO MUST RECORD SATISFACTION HAVING REGARD TO THE ACCOUNTS OF T HE ASSESSEE THAT THE CLAIM OF THE ASSESSEE THAT THE EXPENDITURE INCURRED IS NOT RELATED TO THE INCOME FORMING PART OF THE TOTAL INCOME IS INCORRECT. WE HAVE GONE THROUGH PARA 5.3 TO 5.8 OF THE ASSESSMENT ORDER. WE NOTED THAT THE AO ONLY DISCUSSED THE PRO VISIONS OF SEC. 14A(1) AND HAS NOT MADE OUT ANY SATISFACTION WHATSOEVER HOW THE EXPENDITURE INCURRED BY THE ASSESSEE DURING THE YEAR RELATE TO THE INCOME NOT FORMING PART OF THE TOTAL 5 ITA NOS. 28 & 52/PNJ/2013 (ASST. YEAR : 2008 - 09) INCOME OF THE ASSESSEE. NO WHISPER WHAT TO TALK OF THE RELATIONSHIP OF THE EXPENDITURE WITH THE EXEMPT INCOME IS MENTIONED. THE AO STRAIGHTAWAY JUMPED TO APPLYING RULE 8D RELYING ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT, 328 ITR 81 (MUM) ( SUPRA ) HOLDING TH AT RULE 8D PERTAINS TO BOTH DIRECT AND INDIRECT EXPENDITURE INCURRED ON EARNING TAX EXEMPT INCOME AND IN THE JUDGEMENT IT WAS HELD THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO SUCH INCOME WHICH DOES N OT FORM PART OF THE TOTAL INCOME UNDER THE ACT BY VIRTUE OF PROVISIONS OF SEC. 14A(1) AND RULE 8D OF THE INCOME TAX RULES. CIT(A), WE NOTED, HAS ALSO NOT DEALT WITH THE SUBMISSIONS OF THE ASSESSEE WITH REGARD TO THE SATISFACTION BEING RECORDED BY THE AO B EFORE APPLYING RULE 8D. THE MAIN CONTENTION OF THE ASSESSEE WHILE IS THAT THERE CANNOT BE ANY DISALLOWANCE UNDER THIS PROVISION. WE HAVE GONE THROUGH THE DECISION OF THIS BENCH IN THE CASE OF SESA GOA LTD. VS. JCIT ( SUPRA ) DT . 8.3.2013 FOR WHICH THE UNDERSIGNED IN THE AUTHOR. WE NOTED THAT THE CASE OF THE ASSESSEE IS DULY COVERED BY THE SAID DECISION. IN THAT DECISION, THIS TRIBUNAL HAS ELABORATELY DISCUSSED THE PROVISIONS OF SEC. 14A AS WELL AS RULE 8D AND ULTIMATELY HELD AS UNDER : 14. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS ALONG WITH THE ORDER OF THE AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH VARIOUS CASE LAWS AND THE PROVISIONS OF THE IT ACT IN THIS REGARD. THE ISSUE INVOLVED BEFORE US RELATE TO THE DISALLOWANCE MADE BY T HE AO BY APPLYING THE PROVISIONS OF SEC.14A OF THE IT ACT READ WITH RULE 8D OF THE IT RULES. SEC.14A WAS INSERTED BY THE FINANCE ACT, 2001 W.E.F. 1.4.1962. ORIGINALLY THIS SEC. PROVIDES THAT IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF THE EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. SUBSEQUENTLY, BY FINANCE ACT, 2002 WITH RETROSPECTIVE EFFECT FROM 11/5/2001 PROVISO WAS ADDED WHICH STAT ES THAT THIS SEC. SHALL NOT EMPOWER THE AO EITHER TO RE - ASSESS OR PASS AN ORDER ENHANCING THE ASSESSMENT OR REDUCING THE REFUND ALREADY MADE OR OTHERWISE INCREASING THE LIABILITY OF THE ASSESSEE FOR ANY ASSESSMENT YEAR BEGINNING ON OR BEFORE 1/4/2001. WITH EFFECT FROM 1/4/2007 BY FINANCE ACT, 2006 SUB - SEC. (2) EMPOWERS THE AO TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME IN ACCORDANCE WITH THE 6 ITA NOS. 28 & 52/PNJ/2013 (ASST. YEAR : 2008 - 09) METHOD AS MAY BE PRESCRIBED. SUCH POWER I S TO BE EXERCISED IF THE AO HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF THE EXPENDITURE MENTIONED IN SUB - SEC.(1). BEFORE APPLYING RULE 8D, IT IS APPARENT THAT THE AO MUST B E SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. SUCH SATISFACTION IS AN OBJECTIVE SATISFACTION THAT IT HAS TO BE JUDICIOUS AND BASED ON THE MATERIAL ON RECORD. IT CANNOT BE AN IMPRESSION THAT IT IS MUCH MORE THAN THE GOSSIP OR HEARSAY, IT MEANS JUDGMENT OR BELIEF THAT IT IS A BELIEF OR A CONNECTION RESULTING FROM WHAT ONE THINKS ON A PARTICULAR QUESTION. IT MUST BE BASED ON THE REASONS AND GROUND AS SEEMS GOOD TO HIM AND WHILE MAKING SUCH SATISFAC TION, THE AO MUST GIVE REGARD TO THE ACCOUNTS OF THE ASSESSEE. HE MUST RECORD DEFICIENCY IN THE ACCOUNTS WITH REGARDS TO THE CLAIM OF THE ASSESSEE. SUB - SEC.(3) PROVIDES THAT PROVISIONS OF SUB - SEC.(2) SHALL ALSO APPLY WHERE ASSESSEE CLAIMS THAT NO EXPENDITU RE HAD BEEN INCURRED IN RELATION TO INCOME NOT FORMING PART OF THE TOTAL INCOME. THIS IS NOT THE CASE OF THE ASSESSEE AS IN THE CASE OF THE ASSESSEE, ASSESSEE HIMSELF ESTIMATED THE EXPENSES RELATING TO THE EXEMPT INCOME AND DISALLOWED THE SAME. RULE 8D WAS INSERTED BY GAZETTE NOTIFICATION DATED 24/3/2008 IN VIEW OF THE POWER CONFERRED UNDER SUB - SEC (2). THIS RULE PRESCRIBES THE METHOD FOR COMPUTING THE EXPENDITURE INCURRED IN RELATION TO THE INCOME NOT FORMING PART OF THE TOTAL INCOME. THIS IS AN UNDISPUTED FACT THAT IN THIS CASE, THE ASSESSEE HAS INVESTED IN DEBTS MUTUAL FUNDS. THE ASSESSEE COMPUTED DISALLOWANCE U/S 14A(2) AT RS.25,78,156/ - AND DISALLOWED THE SAME, WHILE COMPUTING ITS TOTAL INCOME. THE WORKING OF THE SAID DISALLOWANCE CLAIMED BY THE ASSESSE E IS GIVEN HEREIN ABOVE IN THE SUBMISSIONS MADE BY THE ASSESSEE. THE AO WAS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE ESPECIALLY THE EXPLANATION OF THE ASSESSEE THAT NO ADMINISTRATIVE EXPENDITURE INCURRED ON EARNING THE DIVIDEND INCOM E. CONSIDERING THE MAGNITUDE OF THE INVESTMENTS AND THE DIVIDEND INCOME RECEIVED, THE AO WAS OF THE VIEW THAT THE DISALLOWANCE MADE BY THE ASSESSEE U/S 14A OF THE IT ACT TOWARDS THE ADMINISTRATIVE EXPENDITURE IS LOW ON COMPARING THE MAGNITUDE OF PURCHASE A ND SALES MADE BY THE ASSESSEE AND THE INVESTMENTS OF LARGE MAGNITUDE CANNOT BE MADE WITHOUT PROPER ANALYSIS OF THE MARKET CONDITION/STOCK MOVEMENT ETC. THE REVENUE WAS OF THE OPINION, THAT THE ASSESSEE HAS WORKED OUT THE ADMINISTRATIVE EXPENDITURE AND HAD NOT CONSIDERED ALL THE ADMINISTRATIVE EXPENDITURE. BOTH THE PARTIES BEFORE US VEHEMENTLY RELIED ON THE DECISION OF GODREJ BOYCE MFG CO. LTD. VS DCIT 328 ITR 81 (MUM). 15. WE HAVE GONE THROUGH THIS DECISION AND WE NOTED THAT IN THIS CASE, THE ASSESSEE CLA IMED EXEMPTION IN RESPECT OF DIVIDEND INCOME OF 34.34 CRORES U/S 10(33). THE AO ISSUED NOTICES FOR DISALLOWANCE OF INTEREST U/S 14A OF THE IT ACT. THE EXPLANATION OF THE ASSESSEE WAS THAT (I) 95% OF THE SHARES WERE BONUS SHARES FOR WHICH NO COST WAS INCURR ED; (II) NO INVESTMENT IN SHARES WAS MADE IN THE CURRENT YEAR AND NO DISALLOWANCE WAS MADE IN EARLIER YEARS AND (III) THERE WERE SUFFICIENT INTEREST FREE FUNDS AVAILABLE IN THE FORM OF SHARE CAPITAL, RESERVES ETC. WHICH WERE MORE THAN INVESTMENT IN SHARES. THE AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE 7 ITA NOS. 28 & 52/PNJ/2013 (ASST. YEAR : 2008 - 09) ASSESSEE AND HE MADE DISALLOWANCE U/S 14A ON PRORATA BASIS. THE CIT(A) FOLLOWING HIS ORDERS FOR EARLIER YEARS, ACCEPTED THE APPEAL OF THE ASSESSEE. THE TRIBUNAL FOLLOWING THE DECISION OF THE SPECIAL BEN CH IN THE CASE OF ITO VS DAGA CAPITAL MANAGEMENT (P) LTD 117 ITD 169 (SB) RESTORED THE MATTER TO THE FILE OF THE AO FOR THE CONSIDERATION IN THE LIGHT OF THE PROVISIONS OF SUB - SEC.(2) & (3) OF SEC.14A OF THE IT ACT. THE ASSESSEE, BEING AGGRIEVED, FILED APP EAL AS WELL AS WRIT PETITION CHALLENGING THE CONSTITUTIONAL VALIDITY OF SUB - SEC. (2) & (3) AND RULE D. THE HON'BLE HIGH COURT GAVE THE FOLLOWING FINDINGS; 1. THE PROVISIONS OF SEC. 14A AND RULE 8D ARE CONSTITUTIONALLY VALID. 2. THE PROVISIONS OF SUB - SEC . (2) & (3) OF SEC.14A AND RULE 8D ARE PROSPECTIVE AND NOT RETROSPECTIVE, IN NATURE AND THEREFORE, WOULD APPLY FROM ASSESSMENT YEAR 2007 - 08. 3. THE BASIC OBJECT OF SEC.14A IS TO DISALLOW THE DIRECT AND INDIRECT EXPENDITURE INCURRED IN RELATION TO INCOME W HICH DOES NOT FORM PART OF THE TOTAL INCOME (PAGE 21). 4. THE INSERTION OF SEC.14A WAS CURATIVE AND DECLARATORY OF THE INTENT OF THE PARLIAMENT. THE BASIC PRINCIPLE OF TAXATION IS THAT ONLY NET INCOME, NAMELY, GROSS INCOME MINUS EXPENDITURE THAT IS TAXABL E. EXPENSES INCURRED CAN BE ALLOWED ONLY TO THE EXTENT THAT THEY ARE RELATABLE TO THE EARNING OF TAXABLE INCOME (PAGES 22 - 23). THE TEST WHICH HAS BEEN ENUNCIATED IN WALLFORT FOR ATTRACTING THE PROVISIONS OF SEC.14A IS THAT THERE HAS TO BE A PROXIMATE CAUSE FOR DISALLOWANCE WHICH HAS ITS RELATIONSHIP WITH THE TAX EXEMPT INCOME. ONCE THE TEST OF PROXIMATE CAUSE, BASED ON THE RELATIONSHIP OF THE EXPENDITURE WITH TAX EXEMPT INCOME IS ESTABLISHED, A DISALLOWANCE WOULD HAVE TO BE EFFECTED UNDER SECTION 14A (PAGE 28) 5. WHAT MERITS EMPHASIS IS THAT THE JURISDICTION OF THE AO TO DETERMINE THE EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME, IN ACCORDANCE WITH THE PRESCRIBED METHOD, ARISES IF THE AO IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF THE EXPENDITURE WHICH THE ASSESSEE CLAIMS TO HAVE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. MOREOVER, THE SATISFACTION OF THE AO HAS TO BE ARRIVED AT, HAVING REGA RD TO THE ACCOUNTS OF THE ASSESSEE. HENCE, SUB - SEC (2) DOES NOT IPSO FACTO ENABLE THE AO TO APPLY THE METHOD PRESCRIBED BY THE RULES STRAIGHTAWAY WITHOUT CONSIDERING WHETHER THE CLAIM MADE BY THE ASSESSEE IN RESPECT OF THE EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME IS CORRECT. THE AO MUST, IN THE FIRST INSTANCE, DETERMINE WHETHER THE CLAIM OF THE ASSESSEE IN THAT REGARD IS CORRECT AND THE DETERMINATION MUST BE MADE HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. T HE SATISFACTION OF THE AO MUST BE ARRIVED AT ON AN OBJECTIVE BASIS. IT IS ONLY WHEN THE AO IS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE, THAT THE LEGISLATURE DIRECTS HIM TO FOLLOW THE METHOD THAT MAY BE PRESCRIBED. IN A SITUATION WHERE THE ACCOUNTS OF T HE ASSESSEE FURNISH AN OBJECTIVE BASIS FOR THE AO TO ARRIVE AT A 8 ITA NOS. 28 & 52/PNJ/2013 (ASST. YEAR : 2008 - 09) SATISFACTION IN REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE OF THE EXPENDITURE WHICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME, THERE WOU LD BE NO WARRANT FOR TAKING RECOURSE TO THE METHOD PRESCRIBED BY THE RULES. FOR, IT IS ONLY IN THE EVENT OF THE AO NOT BEING SO SATISFIED THAT RECOURSE TO THE PRESCRIBED METHOD IS MANDATED BY LAW (PAGES 31 - 32). 6. IN THE EVENT THAT THE AO IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE, HE MUST RECORD REASONS FOR HIS CONCLUSION (PAGE - 79). 7. THE EFFECT OF SEC.14A IS TO WIDEN THE THEORY OF THE APPORTIONMENT OF EXPENDITURE (PAGE 49). 8. THE EXPRESSION EXPENDITURE INCURRED; IN SEC.14A REFERS TO EXPENDITURE ON RENT, TAXES, SALARIES, INTEREST, ETC., IN RESPECT OF WHICH ALLOWANCES ARE PROVIDED FOR (PAGE - 50). 9. SUB - SECTIONS (2) & (3) OF SEC.14A ARE INTENDED TO ENFORCE AND IMPLEMENT THE P ROVISIONS OF SUB - SEC (1) (PAGES 50). 10. EVEN IN THE ABSENCE OF SUB - SECTION (2) OF SEC.14A THE AO WOULD HAVE TO APPORTION THE EXPENDITURE AND TO DISALLOW THE EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE AO WOULD HAVE TO FOLLOW A REASONABLE METHOD OF APPORTIONING THE EXPENDITURE CONSISTENT WITH WHAT THE CIRCUMSTANCES OF THE CASE WOULD WARRANT AND HAVING REGARD TO ALL RELEVANT FACTS AND CIRCUMSTANCES. THE SAID DECISION OF THE JU RISDICTIONAL HIGH COURT IS BINDING ON US. WHILE DECIDING THIS CASE, THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS WALLFORT SHARES & STOCK BROKERS LTD., 233 CTR (SC) 42 WAS REFERRED TO. IN THIS DECISION, WE NOTED THAT THE HON'BLE SUPREME C OURT IN THAT CASE UPHELD THE VIEW OF THE HON'BLE MUMBAI HIGH COURT IN THE CASE OF WALLFORT SHARES & STOCK BROKERS LTD. VS ITO 310 ITR 421. THE HON'BLE SUPREME COURT IN THIS DECISION, AT PAGE - 31 OF THE ORDER HELD AS UNDER; TO ATTRACT SEC.14A THERE HAS TO BE PROXIMATE CAUSE FOR DISALLOWANCE WHICH HAS ITS RELATIONSHIP WITH THE TAX EXEMPT. PAY BACK OR RETURN OF INVESTMENT IS NOT SUCH PROXIMATE CAUSE. HENCE, SEC.14A IS NOT APPLICABLE IN THE PRESENT CASE. THUS, IN THE ABSENCE OF SUCH PROXIMATE CAUSE FOR DISALL OWANCE, SEC.14A CANNOT BE INVOKED. 16. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS DCIT (SUPRA) THEREFORE AT PAGE - 28 HAS CLEARLY LAID DOWN THAT THERE MUST BE PROXIMATE CAUSE BASED ON THE RELATIONSHIP OF THE EXPENDITURE THAT TAX EXEMPT INCOME IS ESTABLISHED, ONLY THEN A DISALLOWANCE WOULD HAVE TO BE EFFECTED U/S 14A OF THE IT ACT. THEREF ORE, IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH COURT AND THE DECISION OF THE HON'BLE SUPREME COURT, WE ARE OF THE VIEW THAT SEC.14A CANNOT BE APPLIED UNLESS THERE IS A PROXIMATE CAUSE FOR DISALLOWANCE. THE ONUS TO ESTABLISH 9 ITA NOS. 28 & 52/PNJ/2013 (ASST. YEAR : 2008 - 09) THAT THERE IS PROXIMATE CAUSE BASED ON THE RELATIONSHIP OF THE EXPENDITURE WITH THE EXEMPT INCOME IN OUR OPINION IS ON THE REVENUE. THUS, THE APPLICATION OF THE PROVISIONS OF SEC. (2) & (3) OF SEC.14A AND RULE 8D IS NOT AUTOMATIC IN EACH AND EVERY CASE, WHERE THERE IS INCOME NOT FORMING PART OF THE TOTAL INCOME. SUB - SEC. (2) & (3) ARE INTENDED TO ENFORCE AND IMPLEMENT THE PROVISIONS OF SUB - SEC. (1). THEREFORE, IT IS NECESSARY FOR THE AO FIRST TO ASCERTAIN WHETHER THERE IS PROXIMATE CONNECTION BETWEEN THE EXPENDITURE INCURRED AND THE INCOME NOT FORMING PART OF THE TOTAL INCOME. IF SUCH PROXIMATE CONNECTION IS ESTABLISHED WITH THE EXEMPT INCOME, THE AO WOULD BE JUSTIFIED IN APPLYING THE PROVISIONS OF SUB - SEC (2) & (3) OF SEC.14A AND RULE 8D OF THE IT ACT, 1961. THE EXPENDITURE INCUR RED U/S 14A WOULD INCLUDE DIRECT AND INDIRECT EXPENDITURE, BUT RELATIONSHIP WITH EXEMPTED INCOME MUST BE PROXIMATE. IF THERE IS MATERIAL TO ESTABLISH THAT THERE IS DIRECT NEXUS BETWEEN THE EXPENDITURE INCURRED AND THE INCOME NOT FORMING PART OF TOTAL INCOM E THEN DISALLOWANCE WOULD BE JUSTIFIED EVEN WHERE THERE IS NO RECEIPT OF EXEMPTED INCOME U/S 10 IN THE YEAR UNDER CONSIDERATION IN VIEW OF THE DECISION OF SPECIAL BENCH IN THE CASE OF CHEMINVEST LTD. 124 TTJ 577 (DEL)(SB). 17. THE BASIC PRINCIPLE OF TAXA TION IS TO TAX THE NET INCOME. ON THE SAME ANALOGY, THE EXEMPTION IS ALSO TO BE ALLOWED ON NET BASIS I.E. GROSS RECEIPTS MINUS RELATED EXPENSES. THEREFORE, IF ANY EXPENDITURE IS DIRECTLY RELATED TO EXEMPTED INCOME, IT CANNOT BE ALLOWED TO BE SET OFF AGAINS T TAXABLE PROFIT. ON THE SAME ANALOGY, IN OUR OPINION, IF ANY EXPENDITURE IS DIRECTLY RELATED TO TAXABLE INCOME, IT CANNOT BE ALLOWED TO BE SET OFF AGAINST THE EXEMPTED INCOME MERELY BECAUSE SOME INCIDENTAL BENEFIT HAS ARISEN TOWARDS EXEMPTED INCOME. BEFOR E MAKING ANY DISALLOWANCE U/S 14A, THE AO IS REQUIRED TO RECORD A SATISFACTION, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, THAT CLAIM OF ASSESSEE THAT EXPENDITURE INCURRED IS NOT RELATED TO THE INCOME FORMING PART OF THE TOTAL INCOME IS INCORRECT. SUCH SATISFACTION MUST BE ARRIVED AT ON THE OBJECTIVE BASIS. HE IS ALSO REQUIRED TO RECORD THE REASONS FOR ARRIVING AT SUCH SATISFACTION. THE ASSESSING OFFICER IN THIS CASE, WE NOTED IS NOT SATISFIED WITH THE CORRECTNESS OF THE DISALLOWANCE MADE BY THE ASSESSE E EVEN THOUGH HE HAS ACCEPTED THE EXPLANATION OF THE ASSESSEE THAT NO INTEREST IS INCURRED WITH REGARD TO EXEMPT INCOME. HE REJECTED THE EXPLANATION OF THE ASSESSEE THAT NO ADMINISTRATIVE EXPENDITURE INCURRED ON EARNING DIVIDEND INCOME CONSIDERING THE MAGN ITUDE OF THE INVESTMENTS AND DIVIDEND INCOME RECEIVED AND THE DISALLOWANCE ACCORDING TO HIM MADE BY THE ASSESSEE U/S 14A TOWARDS ADMINISTRATIVE EXPENDITURE IS VERY LESS. THE ASSESSING OFFICER NOWHERE POINTED OUT THE PROXIMATE CONNECTION OF OTHER EXPENSES N OT APPORTIONED BY THE ASSESSEE FOR THE EARNING OF THE DIVIDEND INCOME. HE MERELY OBSERVED THAT THE ADMINISTRATIVE EXPENSES DISALLOWED BY THE ASSESSEE IS VERY LESS BUT HOW THEY ARE LESS AND HOW THE OTHER EXPENSES INCURRED BY THE ASSESSEE RELATED TO THE DIVI DEND INCOME HAS NOT BEEN BROUGHT ON RECORD. EVEN THE AO HAS NOT POINTED OUT THE EXPENSES EXCLUDED BY THE ASSESSEE FOR DISALLOWANCE HAS PROXIMATE CONNECTION WITH DIVIDEND INCOME. IN OUR OPINION, THE ASSESSING OFFICER BEFORE REJECTING THE DISALLOWANCE COMPUT ED BY THE ASSESSEE MUST GIVE A CLEAR CUT 10 ITA NOS. 28 & 52/PNJ/2013 (ASST. YEAR : 2008 - 09) FINDING HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE HOW THE OTHER EXPENDITURE CLAIMED BY THE ASSESSEE OUT OF NON EXEMPT INCOME IS RELATED WITH THE EXEMPT INCOME. NO DISCREPANCY IN THE CLAIM OF THE ASSESSEE WAS POI NTED OUT. THE ASSESSING OFFICER IN OUR OPINION IN VIEW OF THE JURISDICTIONAL HIGH COURT DECISION IS BOUND TO RECORD SATISFACTION AS TO HOW THE EXPENSES CLAIMED BY THE ASSESSEE HAVE BEEN INCURRED ON EARNING DIVIDEND INCOME WERE NOT SUFFICIENT AND CORRECT. W E HAVE ALREADY HELD THAT THE ONUS TO PROVE IN THIS REGARD LIES ON THE ASSESSING OFFICER. ALTHOUGH THE LD. DR HAD VEHEMENTLY CONTENDED AND TRIED TO BUILD UP HIS CASE BY SUBSTITUTING THE REASONS GIVEN BY THE CIT(APPEAL) IN PLACE OF THE AO, BUT FAILED TO BRIN G ANY COGENT MATERIAL OR EVIDENCE IN THIS REGARD WHICH MAY PROVE THAT THE OTHER EXPENSES CLAIMED BY THE REVENUE FOR APPORTIONMENT HAD PROXIMATE CONNECTION WITH THE EARNING OF THE DIVIDEND INCOME. IN OUR OPINION UNTIL AND UNLESS THIS IS PROVED OR ESTABLISHE D BY THE REVENUE, THE ASSESSING OFFICER DOES NOT HAVE ANY POWER TO REJECT THE ACCOUNTS OF THE ASSESSEE AND TAKE THE SHELTER OF RULE 8D FOR COMPUTING THE DISALLOWANCE OUT OF THE EXEMPT INCOME. WE ARE NOT AT ALL CONVINCED WITH THE SUBMISSION OF THE LD. DR RE LYING ON THE DECISION OF CIT(APPEAL) IN RESPECT OF EXPLANATION BB TO SEC. 80HHC THAT 10% OF THE RECEIPTS UNDER THE SOURCES MENTIONED THEREIN ARE DEEMED TO BE THE EXPENDITURE. THIS IN OUR OPINION WILL STRENGTHEN THE CASE OF THE ASSESSEE AS EXPLANATION BB TO SEC. 80HHC DOES NOT RECOGNIZE AMOUNT OF THE INVESTMENT MADE IN OTHER RECEIPT TO BE THE BASIS OF COMPUTING THE EXPENDITURE BEING INCURRED FOR THE EARNING OF THAT INCOME. SIMILAR VIEWS HAVE BEEN TAKEN BY HON'BLE TRIBUNAL IN THE FOLLOWING DECISIONS ALSO. I N THE CASE OF DCIT VS. JINDAL PHOTO LTD. HELD IN I.T.A.T. DELHI BENCH DATED 7.1.2011 IT WAS HELD AS FOLLOWS: NOW AS PER SECTION 14A(2) OF THE ACT, IF THE AO, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLA IM OF THE ASSESSEE IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE ASSESSEES TOTAL INCOME UNDER THE ACT, THE AO SHALL DETERMINE THE AMOUNT INCURRED IN RELATION TO SUCH INCOME, IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED, I.E., UNDER RULE 8D OF THE I.T. RULES. HOWEVER, IN THE PRESENT CASE, THE ASSESSMENT ORDER DOES NOT EVINCE ANY SUCH SATISFACTION OF THE AO REGARDING THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. AS SUCH, RULE 8D OF THE RULES WAS NOT APPROPRIA TELY APPLIED BY THE AO AS CORRECTLY HELD BY THE CIT(A). IT HAS NOT BEEN DONE BY THE AO THAT ANY EXPENDITURE HAD BEEN INCURRED BY THE ASSESSEE FOR EARNING ITS DIVIDEND INCOME. MERELY, AN ADHOC DISALLOWANCE WAS MADE. THE ONUS WAS ON THE AO TO ESTABLISH ANY S UCH EXPENDITURE. THIS ONUS HAS NOT BEEN DISCHARGED. IN .CIT VS. HERO CYCLES. (P&H) 323 ITR 518, UNDER SIMILAR CIRCUMSTANCES, IT WAS HELD THAT THE DISALLOWANCE U/S 14A OF THE ACT REQUIRES A CLEAR FINDING OF INCURRING OF EXPENDITURE AND THAT NO DISALLOWANCE CAN BE MADE ON THE BASIS OF PRESUMPTIONS. IN .ACIT VS. EICHER LTD.., 101 TTJ (DEL.) 369, THAT IT WAS HELD 11 ITA NOS. 28 & 52/PNJ/2013 (ASST. YEAR : 2008 - 09) THAT THE BURDEN IS ON THE AO TO ESTABLISH NEXUS OF EXPENSES INCURRED WITH THE EARNING OF EXEMPT INCOME, BEFORE MAKING ANY DISALLOWANCE U/S 14A OF THE ACT. IN MARUTI UDYOG VS. DCIT, 92 ITD 119 (DEL.), IT HAS BEEN HELD THAT BEFORE MAKING ANY DISALLOWANCE U/S 14A OF THE ACT, THE ONUS TO ESTABLISH THE NEXUS OF THE SAME WITH THE EXEMPT INCOME, IS ON THE REVENUE. IN WIMCO SEEDLINGS LIMITED VS. DCIT., 107 I TD 267 (DEL.) (TM), IT HAS BEEN HELD THAT THERE CAN BE NO PRESUMPTION THAT THE ASSESSEE MUST HAVE INCURRED EXPENDITURE TO EARN TAX FREE INCOME. SIMILAR ARE THE DECISIONS IN: 1. PUNJAB NATIONAL BANK VS. DCIT, 103 TTJ 908 (DEL.); 2. VIDYUT INVESTMENT LTD. , 10 SOT 284 (DEL.); AND 3. D.J. MEHTA VS. INCOME TAX OFFICER, 290 ITR 238 (MUM.) (AT) IN VIEW OF THE ABOVE, FINDING NO ERROR WITH THE ORDER OF THE CIT(A) ON THE POINT AT ISSUE, THE SAME IS HEREBY CONFIRMED. GROUND NO.3 IS THUS REJECTED. IN THE CASE OF JINDAL PHOTO LTD. VS. DCIT HELD IN I.T.A.T. DELHI BENCH DATED 23.9.2011 IT WAS HELD AS FOLLOWS: IN THE YEAR UNDER CONSIDERATION, IT IS SEEN THAT IT IS NOT INCORRECT WHEN THE ASSESSEE CONTENDS THAT NO SATISFACTION HAS BEEN RECORDED BY THE AO REGARDING THE ASSESSEES CALCULATION BEING INCORRECT. EVEN SO, RULE 8D OF THE RULES HAS BEEN APPLIED. THIS, IN OUR OPINION, IS NOT CORRECT. SUCH SATISFACTION OF THE ASSESSING OFFICER IS A PRE - REQUISITE TO INVOKE THE PROVISIONS OF RULE 8D OF THE RULES. THE LEARNED C IT(A), THEREFORE, ERRED IN PARTIALLY APPROVING THE ACTION OF THE ASSESSING OFFICER. IN THE CASE OF AVSHESH MERCANTILE P. LTD. VS. DCIT IN I.T.A.T. MUMBAI BENCH (I.T. ACT NO.5779/MUM/2006 & 208/MUM/2009) IT WAS HELD AS FOLLOWS: AT THE TIME OF HEARING, THE CONTENTION RAISED BY THE LEARNED DR IN THIS REGARD IS THAT THE APPEAL OF THE REVENUE ON THE ISSUE HAVING BEEN DISMISSED BY THE HON'BLE BOMBAY HIGH COURT MERELY OBSERVING THAT NO QUESTION ARISES, IT CANNOT BE TREATED AS A DECISION RENDERED BY THE HON'B LE HIGH COURT ON THE MERIT OF THE ISSUE WHICH IS BINDING ON THIS TRIBUNAL. WE ARE UNABLE TO ACCEPT THIS CONTENTION OF THE LEARNED DR. IT IS WELL SETTLED PROPOSITION OF JUDICIAL PRECEDENTS THAT IS APPEAL THE HON'BLE HIGH COURT CONSIDERS FACTS PERTAINING TO THE ISSUE AND GIVES APPROVAL TO THE DECISION OF THE LOWER FORUM, THE DECISION OF LOWER FORUM GETS MERGED WITH THE JUDGMENT AND ORDER OF THE HIGH COURT AND IT BECOMES BINDING PRECEDENT EVEN THOUGH APPROVAL TO DECISION OF LOWER FORUM/COURT IS SUMMARILY RECOR DED. SIMILAR SITUATION HAD ARISEN FOR CONSIDERATION BEFORE THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF NIRMA INDUSTRIES LTD. 283 ITR 402 WHEREIN THE EFFECTS OF SUMMARY DISPOSAL OF APPEAL 12 ITA NOS. 28 & 52/PNJ/2013 (ASST. YEAR : 2008 - 09) BY THE HIGH COURT WERE ANALYSED AND EXPLAINED BY THEIR LORDSHIPS. I T WAS CLARIFIED THAT WHILE HEARING AN APPEAL EVEN FOR DECIDING WHETHER SUBSTANTIAL QUESTION OF LAW ARISES OR NOT FROM THE ORDER OF THE TRIBUNAL, THE HIGH COURT DOES NOT EXERCISE EITHER THE ORIGINAL JURISDICTION OR THE JURISDICTION TO ISSUE WRITS AND THE ON LY JURISDICTION EXERCISED BY THE HIGH COURT IN THE FIRST INSTANCE DECIDES WHETHER OR NOT SUBSTANTIAL QUESTION OF LAW ARISES FROM THE ORDER OF THE TRIBUNAL, IT CANNOT BE SAID THAT THE HIGH COURT DOES NOT EXERCISE THE APPELLATE POWERS OR THAT THERE IS NO DEC ISION ON MERIT WHEN THE HIGH COURT DISMISSES AN APPEAL HOLDING THAT NO SUBSTANTIAL QUESTION OF LAW ARISES FROM THE ORDER OF THE TRIBUNAL. IT WAS HELD THAT WHENEVER AN ORDER OF THE SUBORDINATE FORUM IS CARRIED IN APPEAL BEFORE THE HIGHER APPELLATE FORUM/COU RT, OPERATIVE PART THEREOF MERGES INTO THE JUDGMENT, DECISION OR ORDER OF THE HIGHER COURT AFTER THE CONFIRMATION, MODIFICATION OR REVERSAL, AS THE CASE MAY BE, AND THE DECISION OF THE LOWER COURT OR FORUM HAS NO INDEPENDENT EXISTENCE THEREAFTER IN RELATIO N TO THE ISSUE WHICH WAS CARRIED BEFORE THE APPELLATE COURT OR FORUM. IT WAS HELD THAT WHERE THE HIGH COURT COMES TO THE CONCLUSION THAT NO SUBSTANTIAL QUESTION OF LAW ARISES ON A PARTICULAR ISSUE, IT CANNOT BE STATED THAT THE SUBJECT MATTER OF CONTROVERSY BETWEEN THE PARTIES HAS NOT BEEN DEALT WITH BY THE HIGH COURT. IT WAS HELD THAT WHEN THE DECISION OF THE TRIBUNAL IS AFFIRMED ON THE ISSUE BROUGHT BEFORE THE HIGH COURT, IT IS THE DECISION OF THE HIGH COURT WHICH BECOMES OPERATIVE AND WHICH IS CAPABLE OF BEING GIVEN EFFECT TO FOR ALL INTENTS AND PURPOSES. KEEPING IN VIEW THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF NIRMA INDUSTRIES LTD. (SUPRA), WE HAVE NO HESITATION TO HOLD THAT THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF DEL ITE ENTERPRISE LTD. (SUPRA) IS A DECISION ON MERIT WHICH IS BINDING PRECEDENT ON US. AS THE ISSUE INVOLVED IN THE PRESENT CASES AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THAT OF THE CASE OF DELITE ENTERPRISE (SUPRA), WE RESPECTFULLY FOLLOW THE SAID DECISION OF THE JURISDICTIONAL HIGH COURT AND DELETE THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(A) ON ACCOUNT OF PREMIUM PAID BY THE ASSESSEES ON REDEMPTION OF PREMIUM NOTES (OCPN) BY INVOKING THE PROVISIONS OF SECTIO N 14A OF THE ACT. AS REGARDS THE CASE LAWS CITED BY THE LEARNED DR, IT IS OBSERVED THAT IN NONE OF THESE CASES, THE FACTS INVOLVED WERE SIMILAR TO THE CASE OF THE PRESENT ASSESSEES IN AS MUCH AS THE INVESTMENT MADE THEREIN WAS NOT FOUND TO BE CAPABLE OF EA RNING TAXABLE AS WELL AS EXEMPT INCOME WHICH WAS ACTUALLY NOT EARNED BY THE ASSESSEE IN THE RELEVANT PERIOD AS ARE THE FACTS OF THE PRESENT CASE OR THAT OF THE CASE OF DELITE ENTERPRISE (SUPRA) DECIDED BY THE HON'BLE BOMBAY HIGH COURT. ACCORDINGLY, WE DECI DE THE COMMON ISSUE INVOLVED IN ALL THESE APPEALS IN FAVOUR OF THE ASSESSEES FOLLOWING THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF DELITE ENTERPRISES (SUPRA) AND ALLOW THE APPEALS OF ALL THE ASSESSEES. 13 ITA NOS. 28 & 52/PNJ/2013 (ASST. YEAR : 2008 - 09) 18. WE HAVE ALSO GONE THROUGH THE DECI SION RELIED UPON BY THE LEARNED DR ALSO. THE DECISION OF ACIT VS CITICORP FINANCE (IND.) LTD., 108 ITD 457 (BOM.) IS NO MORE RELEVANT, IN VIEW OF THE DECISION OF THE HON'BLE MUMBAI HIGH COURT IN THE CASE OF GODREJ BOYCE MFG CO. LTD. (SUPRA). THE DECISION O F SPIC VS DCIT 93 TTJ (CHENNAI) 161 IS NOT APPLICABLE TO THE FACTS OF THE CASE. AS IN THAT CASE, THE ASSESSEE WAS REGULARLY INVESTING IN THE SHARES. THE ASSESSEE HAS NOT DISALLOWED ANY EXPENDITURE WITH REGARD TO THE EARNING OF THE DIVIDEND INCOME. UNDER TH ESE FACTS, THE HON'BLE TRIBUNAL HELD THAT WHETHER TO INVEST OR NOT TO INVEST IS A VERY STRATEGIC DECISION AND TOP MANAGEMENT INVOLVE IN TAKING THE DECISIONS. THIS DECISION RELATE TO ASSESSMENT YEAR 2000 - 01 MUCH PRIOR TO THE INSERTION OF PROVISION OF SEC.14 A(2) OF THE IT ACT,1961. THE DECISION OF ACIT VS PREMIUM CONSOLIDATED CAPITAL TRUST 83 TTJ (BOM.) RELATES TO ASSESSMENT YEAR 1991 - 92 PRIOR TO INSERTION OF 14A(2) HENCE WILL NOT ASSIST THE REVENUE. THE OTHER DECISION RELIED ON ARE ALSO NOT APPLICABLE TO THE FACTS OF THE CASE, EXCEPT THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS DC IT & ANOTHER 328 ITR 81(BOM.). IN VIEW OF OUR AFORESAID DISCUSSION AND RESPECTIVELY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT & ANOTHER 328 ITR 81 (BOM), WE DELETE THE DISALLOWANCE MADE U/S 14A R.W. RULE 8D AND ACCORDINGLY, THE GROUND TAKEN BY THE ASSESSEE IN THIS REGARD IS ALLOWED. THE FINDING GIVEN BY THIS TRIBUNAL IN THE AFORESAID DECISION UNDER PARA 17 ARE EQUALLY APPLICABLE IN THE CASE OF THE ASSESSEE AS IN THE ASSESSMENT ORDER WE DO NOT FIND ANY WHISPER WHATSOEVER WHICH PROVES THAT THE AO WAS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPEC T OF EXPENDITURE WHICH THE ASSESSEE CLAIMS TO HAVE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. THE AO STRAIGHTAWAY WENT ON APPLYING RULE 8D WHILE, IN THE FIRST INSTANCE, THE AO SHO ULD HAVE DETERMINED WHETHER THE CLAIM OF THE ASSESSEE THAT IT HAS NOT INCURRED ANY EXPENDITURE WITH REGARD TO THE DIVIDEND INCOME IS CORRECT OR NOT AND SUCH DETERMINATION MUST HAVE BEEN MADE HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE ON OBJECTIVE BASIS. IT IS ONLY WHEN THE AO IS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE, THE LEGISLATURE HAS EMPOWERED THE AO TO FOLLOW THE METHOD FOR CALCULATING THE DISALLOWANCE AS MAY BE PRESCRIBED I.E. RULE 8D. THE AO INSTEAD OF DISCHARGING HIS OBLIGATION, STRAIGHTA WAY APPLIED RULE 8D AND 14 ITA NOS. 28 & 52/PNJ/2013 (ASST. YEAR : 2008 - 09) MADE DISALLOWANCE. HE HAS PUT THE CART BEFORE THE HORSE WHICH IS NOT PERMISSIBLE UNDER LAW. THE CASE OF THE ASSESSEE, IN OUR OPINION, IS COVERED BY OUR AFORESAID DECISION IN THE CASE OF SESA GOA LTD. VS. JCIT ( SUPRA ). RESPECTFULL Y FOLLOWING THE DECISION IN THE CASE OF SESA GOA LTD. VS. JCIT ( SUPRA ), WE DELETE THE DISALLOWANCE MADE U/S 14A. SIMILAR VIEW HAS BEEN TAKEN BY THIS BENCH IN ITA NO. 34/PNJ/2013 & ITA NO. 50/PNJ/2013 IN THE CASE OF M/S. INFRASTRUCTURE LOGISTICS PVT. LTD. VS. ACIT. THUS, THIS GROUND IS ALLOWED. 3. NOW, COMING TO THE APPEAL OF THE REVENUE, THE FIRST ISSUE RELATES TO DELETION OF THE DISALLOWANCE OF EXPENDITURE AMOUNTING TO RS.10,70,000/ - INCURRED ON RENOVATION OF THE TEMPLE. THE FACTS RELATING TO THI S GROUND ARE THAT THE AO NOTED THAT THE ASSESSEE HAS INCURRED A SUM OF RS.10,70,000/ - BEING CONTRIBUTION MADE FOR TEMPLE RENOVATION UNDER THE HEAD MISCELLANEOUS EXPENSES AND CLAIMED SAME AS DEDUCTION U/S 37(1). WHEN INQUIRED, THE ASSESSEE SUBMITTED EXPL ANATION MAINLY CLAIMING THAT THE IRON ORE WAS TRANSPORTED FROM THE MINES TO JETTIES AND THE SAID ORE HAS TO PASS THROUGH KAVREM VILLAGE WHICH RESULTED IN LOT OF DISTURBANCE TO THE VILLAGERS. TO HAVE CORDIAL RELATION AND BETTERMENT OF THE VILLAGERS, THE CO MPANY HAS TO INCUR THE SUM OF RS. 10,70,000/ - FOR RENOVATION OF PAIK DEVASTHAN LOCATED AT KAVREM SO AS TO HAVE EASY AND TROUBLE FREE MOVEMENT OF THE IRON ORE. THE EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. THE AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. HE DISALLOWED THE SAME. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). CIT(A) ALLOWED THE DEDUCTION BY OBSERVING AS UNDER : I HAVE GONE THROUGH THE FACTS OF THE CASE, CONTENTS OF THE ASSESSMENT ORDER, WRITTEN SUBMISSIONS OF THE ASSESSEE AND CASE LAWS REFERRED AND RELIED BY THE AO AND THE ASSESSEE. ASSESSEE IS IN THE BUSINESS OF PROCESSING AND TRADING OF IRON ORE WHICH IS PROCURED FROM VARIOUS MINES LOCATED IN GOA AND AND KARNATAKA AND ONE OF THE LOCATION IS KAVREM AND THE ORE PROCURED AT KAVREM HAS TO NECESSARILY PASS THROUGH THE VILLAGE WHERE THE TEMPLE IS LOCATED AND 15 ITA NOS. 28 & 52/PNJ/2013 (ASST. YEAR : 2008 - 09) UNDOUBTEDLY HEAVY MOMENT OF TRUCKS CAUSES LOT OF DISTURBANCE TO THE VILLAGERS AND ALSO TO THE TEMPLE. HENCE IN ORDER TO MAINTAIN CORDIAL RELATION WITH THE VILLAGERS AND TO ENSURE SMOOTH MOVEMENT OF TRUCKS ON DAY TO DAY BASIS TO THE VILLAGE IT WAS VERY MUCH ESSENTIAL FOR THE ASSESSEE TO CONTRIBUTE FOR THE RENOVATION OF THE TEMPLE. OTHERWISE VILLAGERS WOULD HAVE PROTESTED THE TRANSP ORTATION WHICH WOULD HAVE DIRECTLY AFFECTED THE TRANSPORTATION OF ORE AND EXPORT EARNINGS/PROFITABILITY OF THE COMPANY. THE ASSESSEE HAS RELIED ON THE DECISION OF MADRAS HIGH COURT IN CASE OF CIT VS MADRAS REFINERIES LTD. 266 ITR 170 AND ALSO DISTINGUISHED THE CASE RELIED UPON BY THE A.O I.E. DELHI HIGH COURT IN CASE OF MEATTLES VS CIT 68 ITR 79. AFTER GOING THROUGH THE ABOVE DISCUSSION THE EXPENDITURE INCURRED BY THE ASSESSEE TO CARRY ON THE BUSINE SS MAY BE ALLOWABLE U/S.37 OF THE IT ACT., ADDITION MADE BY THE AO DISMISSED AND ASSESSEES GROUND OF APPEAL IS ALLOWED. 3.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE HAVE ALSO GONE THROUGH THE ORDER OF THE TAX AUTHORITIE S BELOW. IT IS NOT DENIED THAT TRANSPORTATION OF THE IRON ORE WAS NOT POSSIBLE WITHOUT THE CO - OPERATION OF THE VILLAGERS AS THE MOVEMENT OF THE TRUCKS HA D TO BE THROUGH THE VILLAGE WHERE THE TEMPLE WAS LOCATED FOR WHICH THE ASSESSEE HAS CONTRIBUTED THE AM OUNT FOR RENOVATION. THE EXPENDITURE INCURRED FOR RENOVATION OF THE TEMPLE IS ALSO NOT DENIED. FOR CARRYING ON THE BUSINESS SMOOTHLY, IT WAS NECESSARY FOR ASSESSEE TO MAINTAIN CORDIAL RELATION TO ENSURE SMOOTH MOVEMENT OF THE TRUCKS OTHERWISE THE ASSESSE E WOULD NOT HAVE BEEN ABLE TO TRANSPORT THE ORE FROM THE MINES TO THE JETTY FOR THE PURPOSE OF THE EXPORT. IT WOULD HAVE AFFECTED THE EXPORT EARNINGS AND INCOME OF THE ASSESSEE. THE EXPENDITURE HAS BEEN INCURRED, IN OUR OPINION, DURING THE COURSE OF THE BUSINESS. BUSINESS EXPEDIENCY DEMANDS SUCH EXPENDITURE TO BE INCURRED. THE EXPENDITURE IS NEITHER A CAPITAL EXPENDITURE NOR PERSONAL EXPENDITURE OF THE ASSESSEE. THEREFORE, WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER OF CIT(A) WHILE ALLOWING THIS DEDUCTION. THUS, WE CONFIRM THE ORDER OF CIT(A) ON THIS ISSUE. THUS, THIS GROUND STANDS DISMISSED. 16 ITA NOS. 28 & 52/PNJ/2013 (ASST. YEAR : 2008 - 09) 4. THE NEXT GROUND IN REVENUES APPEAL RELATES TO DELETION OF DISALLOWANCE OF EXPENDITURE OF RS. 89,84,375/ - INCURRED ON CONSTRUCTION OF NEW BRIDGE . THE FACTS RELATING TO THIS GROUND ARE THAT THE AO NOTED DURING THE COURSE OF ASSESSMENT THAT THE ASSESSEE HAS DEBITED A SUM OF RS.89,84,375/ - AS CONTRIBUTION TO GOA INFRASTRUCTURE DEVELOPMENT CO. LTD. FOR THE CONSTRUCTION OF USGAO BRIDGE. WHEN QUESTION ED, THE ASSESSEE SUBMITTED THAT THE GOVERNMENT OF GOA HAD ASKED MINE OPERATORS WHO OWN MINES IN USGAO AREA TO CONSTRUCT BRIDGE AS THE BRIDGE WAS USED BY THEM FOR TRANSPORTATION OF MINERAL ORE. THE OLD BRIDGE WAS CLAIMED TO HAVE BEEN DAMAGED BECAUSE OF TRA NSPORTATION UNDERTAKEN BY THE MINE OWNERS. SINCE IT WAS NOT POSSIBLE FOR THE MINE OWNERS TO OPERATE THEIR MINES AND TRANSPORT ORE, ALL THE MINE OWNERS OF THE AREA WHO USED THIS BRIDGE AGREED FOR THE CONSTRUCTION OF THE BRIDGE. THE ASSESSEE CLAIMED THAT A LL THE MINE OWNERS HAD AGREED TO CONTRIBUTE FOR CONSTRUCTION OF THE BRIDGE TO SAFEGUARD THEIR BUSINESS INTEREST. THE BRIDGE WAS CONSTRUCTED BY GOA INFRASTRUCTURE DEVELOPMENT CO. LTD. THE SHARE OF THE ASSESSEE COMPANY CAME TO RS. 89,84,375/ - . RELIANCE WAS PLACED BY THE ASSESSEE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF L.H. SUGAR FACTORY AND OIL MILLS LTD. VS. CIT, 125 ITR 293 AND THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. COATS VYELLA INDIA LTD. , 253 ITR 667. THE AO WAS OF THE VIEW THAT THE ASSESSEE WAS MAINLY ENGAGED IN TRADING OF IRON ORE. THE ASSESSEE DOES NOT OWN ANY MINES IN THE AREA AND THE ASSESSEE HAS INCURRED HUGE EXPENSES AS TRANSPORT CHARGES AS WELL AS BARGE HIRE CHARGES. THE ASSESSEE WAS NOT DIRECTLY USING THE USG AO BRIDGE FOR ITS BUSINESS PURPOSE. THEREFORE, HE TOOK THE VIEW THAT THE EXPENDITURE CANNOT BE CONSIDERED ANY WAY CONNECTED WITH THE BUSINESS OF THE ASSESSEE. AT BEST, IT CAN BE SOME SORT OF GRATUITOUS PAYMENT OR IT CAN BE A CAPITAL EXPENDITURE. THE ASS ESSEE WENT IN APPEAL BEFORE THE CIT(A). CIT(A) AFTER GOING THROUGH THE SUBMISSION OF THE ASSESSEE AS WELL AS THE REMAND REPORT OF THE AO TOOK THE VIEW THAT THE EXPENDITURE IS A REVENUE EXPENDITURE AND HAS BEEN INCURRED FOR THE PURPOSE OF CARRYING ON THE B USINESS OF THE ASSESSEE 17 ITA NOS. 28 & 52/PNJ/2013 (ASST. YEAR : 2008 - 09) F OLLOWING THE DECISION OF THIS BENCH IN THE CASE OF CHOWGULE & CO. VS. ACIT, MARGAO, GOA IN ITA NO . 162/PNJ/2006 FOR A.Y. 2002 - 03 BY OBSERVING AS UNDER: CIT (APPEALS) CONCLUSION : CONTRIBUTION TO USGAO BRIDGE I HAVE GONE THROUGH THE FACTS OF THE CASE, CONTENTS OF THE ASSESSMENT ORDER, WRITTEN SUBMISSIONS FILED BY ASSESSEE, AND VARIOUS CASE LAWS REFERRED AND RELIED BY THE AO AND THE ASSESSEE. AND, REMAND OF THE AO AND ASSESSEES REPLY TO REMAND REPORT. THE ASSE SSEE IN ITS SUBMISSION HAS CLEARLY BOUGHT THE NEED FOR CONTRIBUTION FOR CONSTRUCTION OF THE USGAO BRIDGE, RELEVANCE OF THE EXPENDITURE BEING DIRECTLY RELATED TO THE BUSINESS OF THE ASSESSEE AND HOW THE CONSTRUCTION OF BRIDGE ENHANCE THE EFFICIENCY OF THE B USINESS BY SMOOTH TRANSPORTATION. ON THE SIMILAR ISSUE IN THE CASE OF CHOWGULE AND CO. LTD., VS ACIT, MARGAO, GOA. THE HON'BLE ITAT., PANAJI BENCH, PANAJI ITA NO. 162/PNJ/2006 FOR A.Y. 2002 - 03, IT WAS HELD THAT CONTRIBUTION TO GOA INFRASTRUCTURAL DEVELOPM ENT CO., PVT. LTD., FOR REPAIRS AND MAINTENANCE OF ROADS, FREQUENTLY USED BY THE COMPANY TO TRANSPORT ITS GOODS WHERE IN THE ASSESSING AUTHORITY HAS DISALLOWED EXPENDITURE ON THE GROUND THAT IT COULD BE A CAPITAL EXPENDITURE, THE HON'BLE ITAT., HELD THAT T HE ROAD IS OWNED BY THE PUBLIC AUTHORITY, IT IS A PUBLIC PROPERTY NOT OWNED BY THE ASSESSEE AND THE ROAD IS FREQUENTLY USED BY THE ASSESSEE COMPANY FOR ITS BUSINESS PURPOSE IN AS MUCH AS THE LOADS AND LOADS OF TRUCKS COMING AND GOING OUT THE ASSESSEES BUS INESS PLACE ARE PLYING ON THE ROAD. THEREFORE, THE LOCAL AUTHORITIES HAVE APPROACHED THE ASSESSEE COMPANY TO TAKE A SHARE IN THE REPAIR AND MAINTENANCE OF THE ROAD, OF WHICH THE ASSESSEE IS ONE OF THE PRINCIPAL BENEFICIARIES. SUCH A SOCIAL OBLIGATION DEM ANDED BY THE LOCAL COMMUNITY CANNOT BE OVERLOOKED BY THE ASSESSEE AND SUCH EXPENDITURE SHOULD BE TREATED AS EXPENDITURE INCURRED FOR THE PURPOSE OF CARRYING ON ITS BUSINESS. THE ASSESSEE IS NOT OWNING AN ASSET OR PROPERTY IN THAT WAY. THEREFORE, THE ASSE SSEE CANNOT ACCOUNT THE EXPENDITURE BY WAY OF CAPITAL EXPENDITURE IN ITS BOOKS OF ACCOUNTS. WE, THEREFORE, DIRECT THE ASSESSING AUTHORITY TO GIVE DEDUCTION FOR THE SAID AMOUNT OF EXPENDITURE. THIS GROUND IS, ACCORDINGLY, ALLOWED. TAKING THE SAME ANALOGY IN TO ACCOUNT THAT THE ASSESSEE HAS CONTRIBUTED TO GOA INFRASTRUCTURAL DEVELOPMENT CO., PVT. LTD., AND THE BRIDGE ALSO PUBLIC PROPERTY USED BY THE ASSESSEE TO CARRY ON THE BUSINESS ALONG WITH OTHERS. IT IS A SOCIAL OBLIGATION DEMANDED BY THE LOCAL COMMUN ITY CANNOT BE OVER LOOKED BY THE ASSESSEE AND SUCH EXPENDITURE HAS TO BE TREATED AS EXPENDITURE INCURRED FOR THE PURPOSE OF CARRYING ITS BUSINESS. THEREFORE, THE EXPENDITURE CANNOT BE TREATED AS A CAPITAL EXPENDITURE. SO, THE ADDITION MADE BY THE AO DELE TED AND THE ASSESSEES GROUND OF APPEAL IS ALLOWED. 18 ITA NOS. 28 & 52/PNJ/2013 (ASST. YEAR : 2008 - 09) 4.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE NOTED THAT CIT(A) WHILE DELETING THE SAID DISALLOWANCE RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF L.H. SUGAR FACTORY VS. CIT, 125 ITR 293 (SC) ( SUPRA ) AND THAT OF CIT VS COATS VYELLA INDIA LTD., 253 ITR 667 ( SUPRA ). HE ALSO RELIED ON THE DECISION OF THE ITAT, PANAJI BENCH IN ITA NO. 163/PNJ/2006 IN THE CASE OF CHOWGULE & CO. LTD. VS. ACIT IN WHICH THE HON'BLE TRIBUNAL HELD THAT THE CONTRIBUTION TO GOA INFRASTRUCTURE DEVELOPMENT CO. FOR REPAIR AND MAINTENANCE OF THE ROADS FREQUENTLY USED BY THE COMPANY TO TRANSPORT ITS GOODS IS NOT A CAPITAL EXPENDITURE BUT THE EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE OF THE BUSINESS. IT IS A SOCIAL OBLIGATION DEMANDED BY THE LOCAL COMMUNITY WHICH CANNOT BE OVERLOOKED BY THE ASSESSEE. EVEN THOUGH THE LD. DR VEHEMENTLY RELIED ON THE ORDER OF THE AO, NO CONTRARY DECISION WAS BROUGHT TO OUR KNOWLEDGE AND NO MATERIAL OR EVIDENCE WAS BROUGHT TO OUR KNOWLEDGE WHICH MAY PROVE THAT THE BRIDGE BELONGED TO THE ASSESSEE AND IT REPRESENTS CAPITAL EXPENDITURE INCURRED BY THE ASSESSEE. UNDER THESE CIRCUMSTANCES, WE DO NOT HAVE ANY OTHER ALTERNATIVE EXCEPT TO FOLLOW THE DECISION OF THIS TRIBUNAL IN THE CASE OF CHOWGULE & CO. LTD. ( SUPRA ) AND ACCORDINGLY, WE CONFIRM THE ORDER OF CIT(A). THUS, THIS GROUND STANDS DISMISSED. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED WHILE THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 6. ORDER PRONOUNCED IN THE OPEN COURT ON 28 /08/2013. SD/ - (D.T.GARASIA) JUDICIAL MEMBER SD/ - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 28 /08/ 2013 19 ITA NOS. 28 & 52/PNJ/2013 (ASST. YEAR : 2008 - 09) *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT, PANAJI (4) CIT(A), PANAJI (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER SR. P RIVATE S ECRETARY ITAT, PANAJI, GOA