M/s. SAHARA INDIA MASS COMMUNICATION LTD., MUMBAI V. ACIT CIR. - 11(1), MUMBAI

ITA 522/MUM/2006

• Counselvise Citation: 52219914 RSA 2006
• Duration Of Justice: 5 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 26-04-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 23-01-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GOLI SRINIVAS RAO
• Assessee Lawyers: VIJAY MEHTA
• Section: 145; 43B; 143(3); 80HHC; 234B; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI, J. SUDHAKAR REDDY, ACCOUNTANT MEMBER A ND SMT. ASHA VIJAYRAGHAVAN, JUDICIAL MEMBER ITA NO.522/MUM./2006 (ASSESSMENT YEAR : 2002-03 ) DATE OF HEARING: 26.4.2011 M/S. SAHARA INDIA MASS COMMUNICATION LIMITED (FORMERLY SAHARA MEDIA COMMUNICATION LTD.) CTS 40 & 44, S.V. ROAD GOREGAON (W), MUMBAI 400 062 PAN AAACP3047R .. APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-11(1), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .... RESPONDENT ASSESSEE BY : MR. VIJAY MEHTA REVENUE BY : MR. GOLI SRINIVAS RAO O R D E R PER J. SUDHAKAR REDDY, A.M. THIS APPEAL FILED BY THE ASSESSEE, IS DIRECTED AGAI NST THE IMPUGNED ORDER DATED 28 TH NOVEMBER 2005, PASSED BY THE COMMISSIONER (APPEALS ) XI, MUMBAI, FOR ASSESSMENT YEAR 2002-03. 2. BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE IS A COMPANY AND IS IN THE BUSINESS OF MEDIA ENTERTAINMENT AND TELEVISION SOFT WARE PROGRAMME. IT FILED RETURN OF INCOME ON 31 ST OCTOBER 2002, DECLARING TOTAL INCOME AT ` 2,16,19,890, AFTER CLAIMING DEDUCTION UNDER SECTION 80HHC OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ). THE ASSESSING OFFICER COMPLETED THE SAHARA INDIA MASS COMMUNICATION LTD. ITA NO.522/MUM./2006 2 ASSESSMENT ON 24 TH MARCH 2005, COMPUTING TOTAL INCOME AT ` 2,90,52,353. THE ASSESSING OFFICER, INTER-ALIA, MADE ADDITIONS O N ACCOUNT OF DIFFERENCE IN INTEREST, UNDERSTATEMENT OF CLOSING STOCK, DISALLOW ANCE UNDER SECTION 14A OF THE ACT, DISALLOWANCE UNDER SECTION 43B OF THE ACT, ETC. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE FIRST APPELLATE AUTHORITY, WHEREIN THE COMMISSIONER (APPEALS) GRANTED RELIEF PARTIALLY. FU RTHER AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL RAISING F OLLOWING GROUNDS OF APPEAL:- 1. THE COMMISSIONER (APPEALS) HAS ERRED BY UPHOLDIN G THE ORDER OF ACIT REGARDING THE ADDITION MADE OF ` 2,14,16,107 BEING AMOUNT ADDED, AS STATED IN THE ASSESSMENT ORDER, DUE TO TH E CHANGE IN THE METHOD OF VALUATION OF CLOSING STOCK. THE COMMISSIO NER (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE CHANGE OF METHOD WAS BONAFIDE AND WAS REGULARLY FOLLOWED THEREAFTER AND THE METHO D OF VALUATION OF CLOSING STOCK WAS IN ACCORDANCE WITH ACCEPTED TRADE PRACTICE. 2A. THE COMMISSIONER (APPEALS) WAS WRONG IN UPHOLDI NG THE DISALLOWANCE MADE UNDER SECTION 14A AMOUNTING TO ` 18,56,000. 2B. IT WAS STATED BY THE APPELLANT WITH EVIDENCE TH AT THE BORROWED MONEY HAS NOT BEEN UTILIZED FOR THE PURPOSE OF THE INVESTMENT IN SHRAES AND SECONDLY, THE COMMISSIONER (APPEALS) SHO ULD HAVE APPRECIATED THE FACT THAT THE ACIT HAD ALSO FAILED TO PROVE THAT THERE WAS NEXUS BETWEEN THE BORROWED MONEY AND THE INVEST MENT. 3. THE COMMISSIONER (APPEALS) HAS ERRED IN FACTS AN D IN LAW IN UPHOLDING THE DECISION OF ACIT OF ADDING A SUM OF ` 3,89,610 I.E., EMPLOYEES CONTRIBUTION OF PF ` 1,96,805 AND EMPLOYERS CONTRIBUTION TO PF ` 1,92,805. THE COMMISSIONER (APPEALS) SHOULD HAVE APPRECIATED THE FACTS THAT THE PAYMENTS WERE MADE B EFORE THE DUE DATE OF FILING THE RETURN. 4. THE COMMISSIONER (APPEALS) WAS WRONG IN UPHOLDIN G THE DEDUCTION UNDER SECTION 80HHF AS COMPUTED BY THE AC IT IN THE ASSESSMENT ORDER. THE COMMISSIONER (APPEALS) SHOULD HAVE CONSIDERED THE DEDUCTION UNDER SECTION 80HHF BASED ON THE CERTIDICATE IN FORM 10CCAI. 5. THE APPELLANT OBJECTS TO THE INTEREST CALCULATED UNDER SECTION 234B AND 234C OF THE ACT. 3. LEARNED COUNSEL, MR. VIJAY MEHTA, APPEARING ON BEHA LF OF THE ASSESSEE, CONTENDS BEFORE US THAT GROUND NO.1, IS O N THE ISSUE OF VALUATION OF CLOSING STOCK. HE SUBMITTED THAT THE ASSESSEE PR ODUCED NEWS PROGRAMMES SAHARA INDIA MASS COMMUNICATION LTD. ITA NO.522/MUM./2006 3 AND EARLIER IN THE ASSESSMENT YEAR 2002-03, THE ASS ESSEE WAS VALUING THE CLOSING STOCK OF PROGRAMMES LIKE NEWS, CURRENT AFFA IRS, ETC., @ 2% AFTER THE FIRST EXPLOITATION. DURING THE YEAR UNDER ASSESSMEN T, THE ASSESSEE HAS CHANGED ITS POLICY OF VALUATION OF NEWS PROGRAMMES AFTER FIRST EXPLOITATION @ NIL FOR THE REASON THAT THE THERE IS PROLIFERATIO N OF NEWS CHANNELS AND THERE IS NO VALUE TO THE NEWS PRODUCTION AFTER EXPLOITATI ON. LEARNED COUNSEL FURTHER REFERRED TO THE POLICIES OF ZEE TELEFILMS, GEE NEWS, AS WELL AS THE POLICIES OF NDTV LIMITED IN VALUING SUCH PROGRAMMES AND POINTED OUT THAT THE INDUSTRY IN GENERAL HAS BEEN VALUING THE NEWS P ROGRAMMES AFTER FIRST EXPLOITATION @ NIL AND, HENCE, THE ASSESSEE CHANGED ITS POLICY TO VALUE NEWS PROGRAMMES AFTER THE FIRST EXPLOITATION FROM 2% TO NIL IN THE YEAR. IN CASE OF TV SERIALS, THE PREVIOUS POLICY OF CLOSING STOCK VA LUATION WAS TO VALUE THE SERIAL @ 10% ON FIRST EXPLOITATION AND, THEREAFTER, @ NIL ON THE SECOND EXPLOITATION. LEARNED COUNSEL FURTHER SUBMITTED THA T IN VIEW OF THE PREVIOUS EXPERIENCE, THE VALUE AFTER FIRST EXPLOITATION WAS RETAINED @ 10% AND THE VALUE AFTER THE SECOND EXPLOITATION HAS BEEN FIXED @ 3.33% INSTEAD OF NIL. HE SUBMITTED THAT THIS POLICY IS IDENTICAL TO THE POLI CY OF ZEE TELEFILMS LTD., WHOSE ACCOUNTING POLICY HAS BEEN FILED BEFORE US BY WAY OF A PAPER BOOK. LEARNED COUNSEL SUBMITTED THAT THE CHANGE IN THE VA LUATION OF CLOSING STOCK WAS A BONAFIDE CHANGE WHICH WAS NECESSITATED DUE TO THE CHANGE IN THE FACTUAL SCENARIO AND THE MARKETING CONDITIONS. THE LEARNED COUNSEL FILED A CHART TO DEMONSTRATE THAT IT HAS BEEN FOLLOWING THI S CHANGED POLICY OF VALUATION IN ALL THE SUBSEQUENT ASSESSMENT YEAR AND THAT THE ASSESSING OFFICER HAS ACCEPTED THIS CHANGE IN THE SUBSEQUENT ASSESSMENTS MADE UNDER SECTION 143(3) OF THE ACT. THUS, HE SUBMITS THAT EV EN ON THE PRINCIPLES OF CONSISTENCY, THE ASSESSING OFFICER SHOULD NOT HAVE MADE AN ADDITION ON ACCOUNT OF VALUATION OF CLOSING STOCK. HE CONTENDS THAT THE ASSESSEE HAS FOLLOWED THE PRACTICE AS FOLLOWED BY OTHERS IN SIMI LAR TRADE. HE RELIED ON THE FOLLOWING CASE LAWS:- 1. ECHKE LIMITED V/S CIT, (2009) 221 CTR (GUJ.) 642; A ND 2. SNOW WHITE FOOD PRODUCTS CO. LTD. V/S CIT, (1982) 1 41 ITR (CAL.) 861. SAHARA INDIA MASS COMMUNICATION LTD. ITA NO.522/MUM./2006 4 4. COMING TO GROUND NO.2, LEARNED COUNSEL SUBMITS THAT THE DISALLOWANCE IS WRONGLY MADE UNDER SECTION 14A. HE POINTED OUT T HAT OWN FUNDS ARE ` 90,47,73,000, AND THE ASSESSING OFFICER HAS WRONGLY TAKEN THE INVESTMENT AT ` 6,62,29,100. HE POINTED OUT THAT OUT OF ` 6,62,29,100, ` . 110 CRORES OF INVESTMENT PERTAINED TO DEBENTURE AND INVESTMENT OF ` 5,00,00,000, WAS MADE IN THE PREVIOUS YEAR AND ALSO THAT AS ON 31 ST MARCH 2001, I.E., THE END OF PREVIOUS YEAR, THE ASSESSEE HAD NOT BORROWED FUN DS. HE ALSO POINTED OUT THAT OUT OF THE BALANCE, ONLY ` 40,00,000 INVESTMENTS WERE MADE IN THE CURRENT YEAR IN ADDITION TO ANOTHER INVESTMENT OF ` 6,66,000. HIS SUBMISSION IS THAT, AT BEST, THE TOTAL INVESTMENT MADE DURING THE YEAR IS ` 47,00,000, AGAINST INTEREST FREE FUNDS OF ` 90,47,73,000. RELYING ON THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN CIT V/S RELIANCE UTILI TIES AND POWER LTD., (2009) 313 ITR 240 (BOM.), LEARNED COUNSEL SUBMITTE D THAT THE PRESUMPTION SHOULD BE THAT THE INVESTMENTS HAVE BEEN MADE FROM NON-INTEREST BEARING FUNDS WHEN THE SAME IS AVAILABLE TO THE ASSESSEE. H E ALSO POINTED OUT THAT IN THE PREVIOUS FINANCIAL YEAR ENDING 31 ST MARCH 2001, THE ASSESSEE HAS NOT PAID ANY INTEREST AND WAS HAVING INVESTMENT OF ` 5,50,00,000. 5. ON GROUND NO.3, THE LEARNED COUNSEL SUBMITTED THAT A LOOK AT THE DATE OF PAYMENT RECORDED BY THE ASSESSING OFFICER, SHOWS THAT THE EMPLOYERS CONTRIBUTION TO PROVIDENT FUND AS WELL AS EMPLOYEES CONTRIBUTION WERE MADE IN MOST OF THE CASES WITHIN THE GRACE PERIOD AND IN THE BALANCE OF THE CASES, PRIOR TO THE FILING OF THE RETURN OF INCOME. 6. ON GROUND NO.4, LEARNED COUNSEL DID NOT WISH TO PRE SS THIS GROUND. 7. INSOFAR AS GROUND NO.5 IS CONCERNED, THE LEARNED CO UNSEL SUBMITS THAT THE SAME IS CONSEQUENTIAL IN NATURE. 8. LEARNED DEPARTMENTAL REPRESENTATIVE, MR. GOLI SRINI VAS RAO, OPPOSED THE CONTENTIONS OF THE LEARNED COUNSEL AND SUBMITTE D THAT SUBSEQUENT TO THE INTRODUCTION OF SECTION 145A, W.E.F. 1 ST APRIL 1999, THE LEGAL POSITION HAS SAHARA INDIA MASS COMMUNICATION LTD. ITA NO.522/MUM./2006 5 CHANGED AND THE DECISIONS RELIED UPON BY THE LEARNE D COUNSEL ARE NO MORE APPLICABLE. HE TOOK THIS BENCH WITH THE LANGUAGE OF SECTION 145A, AND RELIED ON THE SAME. HE ALSO RELIED ON THE FOLLOWING CASE L AWS:- 1. AJANTA RAJ PROTEINS LTD. V/S DCIT, (2009) 124 TTJ 9 14 (DEL.) AND 2. DCIT V/S BECK INDIA LTD., (2010) 127 TTJ 410 (MUM.) . 9. ON A QUERY FROM THE BENCH, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE BASIS OF DISALLOWANCE MADE BY TH E ASSESSING OFFICER WAS THAT THE CHANGE WAS NOT BONAFIDE. 10. ON THE ISSUE OF DISALLOWANCE UNDER SECTION 14A, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ISSU E MAY BE SET ASIDE SO THAT THE ASSESSING OFFICER CAN DECIDE THE SAME IN A CCORDANCE WITH LAW. 11. ON THE ISSUE OF DISALLOWANCE OF PROVIDENT FUND, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THIS ISS UE SHOULD ALSO BE RESTORED TO THE FILE OF ASSESSING OFFICER FOR ADJUD ICATION DENOVO. 12. RIVAL CONTENTIONS WERE HEARD. ON CAREFUL CONSIDERAT ION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON PERUSAL OF THE PAP ERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE CASE LAWS CITE D BEFORE US, WE HOLD AS FOLLOWS. I) AS POINTED OUT BY THE LEARNED COUNSEL, THERE WAS NO CHANGE IN THE METHOD OF VALUATION OF CLOSING STOCK. THE ASSESSEE WAS ALWAYS FOLLOWING THE METHOD WHICH IS K NOWN AS COST OR NET REALIZABLE VALUE, WHICHEVER IS LESS . THE ISSUE HEAR IS, WHETHER THE ASSESSEE HAS PROPERLY AR RIVED AT A NET REALIZABLE VALUE? WHEN A NEWS PROGRAMME HAS B EEN PRODUCED, THE ASSESSEE WAS ORIGINALLY TAKING THE NE T REALIZABLE VALUE @ 2% OF THE PRODUCTION COST AFTER FIRST EXPLOITATION. FROM THE CURRENT YEAR, THE VALUE AFTE R 1 ST EXPLOITATION IS TAKEN AS NIL. WE HAVE PERUSED THE ACCOUNTING POLICY OF ZEE NEWS LIMITED, AS WELL AS T HE SAHARA INDIA MASS COMMUNICATION LTD. ITA NO.522/MUM./2006 6 POLICY OF NDTV LTD., ON THIS ISSUE. IN BOTH THE CAS ES, PROGRAMMES WHICH ARE CURRENT AND TOPICAL IN NATURE, ARE ENTIRELY AMORTIZED ON FIRST EXPLOITATION I.E., THEY ARE FULLY EXPENSED. THIS SHOWS THAT THE VALUATION OF A NEWS PROGRAMMES DONE BY THE ASSESSEE SUBSEQUENT TO THE F IRST EXPLOITATION AT NIL IS A BONAFIDE VALUATION. WE A LSO OBSERVED THAT IN ALL THE SUBSEQUENT YEARS, THE ASSE SSING OFFICER EVEN IN 143(3) PROCEEDINGS, HAS ACCEPTED SU CH A VALUATION. THERE IS AN ELEMENT OF CONSISTENCY. WE F IND NO INFIRMITY IN THE VALUATION DONE BY THE ASSESSEE ON THIS ASPECT AND, IN OUR OPINION, THE ADDITION MADE ON TH E GROUND OF UNDERVALUATION OF COST ON THIS ACCOUNT, H AS TO BE DELETED. II) COMING TO THE SECOND ASPECT I.E., VALUATION OF TV S ERIALS, THE ASSESSEE, AFTER FIRST EXPLOITATION, HAS EXPENDE D 90% AND VALUED THE CLOSING STOCK @ 10%. AFTER SECOND EXPLOITATION, THE ASSESSEE WAS VALUING THE TV SERIA LS @ NIL. NOW VALUATION IS CHANGED AND THE ASSESSEE HAS COME TO A CONCLUSION THAT AFTER THE SECOND EXPLOITATION, THE VALUATION OF THE TV SERIAL SHOULD BE @ 3.33%. WE DO NOT FIND ANY INFIRMITY IN SUCH METHODOLOGY ADOPTED BY THE ASSESS EE. III) NOW COMING TO THE CASE LAWS RELIED ON SNOW WHITE FO OD PRODUCTS CO. LTD. (SUPRA), THE HONBLE CALCUTTA HIG H COURT HELD THAT THE ASSESSEE HAS A RIGHT TO CHANGE THE ME THOD OF ACCOUNTING. THE ONLY CONDITION BEING WITH THE CHANG ED METHOD SHOULD BE CONSISTENTLY FOLLOWED. IN THIS CAS E, THE ISSUE IS NOT AS TO WHETHER THE ASSESSEE HAS CHANGED ITS METHOD OF ACCOUNTING. IN FACT, THE ASSESSEE IS CONT INUING TO FOLLOW THE SAME RECOGNIZED METHOD OF ACCOUNTING. WHAT IS CHANGED IS THE VALUE THAT HAS TO BE ASSIGNED TO A SAHARA INDIA MASS COMMUNICATION LTD. ITA NO.522/MUM./2006 7 PARTICULAR PRODUCT I.E., A NEWS PROGRAMME OR TV SER IALS SUBSEQUENT TO EXPLOITATION OF THE SAME. IV) IN THE CASE OF ECHKE LIMITED (SUPRA), THE HONBLE G UJARAT HIGH COURT HELD THAT MERELY BECAUSE THE TAXABLE INC OME OF THE ASSESSEE IS REDUCED IN A PARTICULAR YEAR, CANNO T BE SAID THAT THE CHANGE IN METHOD OF ACCOUNTING WAS UNDERTA KEN WITH AN INTENTION TO DELIBERATELY REDUCE THE TAX BU RDEN. THE ASSESSEE HAS BEEN CONSISTENTLY VALUING THAT STO CK ON THE POLICY, AFTER ADOPTING THE SAME THIS YEAR. THIS CASE LOW ALSO, TO OUR OPINION, DOES NOT APPLY, AS WHAT IS IN DISPUTE IS THAT, THE VALUE THAT HAS TO BE ASSIGNED TO A PAR TICULAR PRODUCT. V) COMING TO THE SUBMISSIONS OF THE LEARNED DEPARTMENT AL REPRESENTATIVE ON SECTION 145A, WE ARE OF THE OPINI ON THAT THIS SUBMISSION IS DEVOID OF MERIT. ALL THAT SECTIO N 145A REQUIRES IS THAT THE VALUATION OF INVENTORY SHOULD BE IN ACCORDANCE WITH THE METHOD OF ACCOUNTS REGULARLY EMPLOYED BY THE ASSESSEE. IN THIS CASE, THIS REQUIR EMENT IS SATISFIED. VI) COMING TO THE DECISION OF BECK INDIA LTD., (SUPRA), THE ISSUE WAS ADJUSTMENT IN OPENING INVENTORY WHEN CORRESPONDING ADJUSTMENT IS TO BE MADE IN THE CLOSI NG INVENTORY CONSEQUENT TO INTRODUCTION OF SECTION 145 A. THIS CASE LAW HAS NO RELEVANCE TO THE FACTS OF THE PRESE NT CASE. VII) COMING TO THE DECISION OF DELHI BENCH OF THIS TRIBU NAL IN AJANTA RAJ PROTEINS LTD. (SUPRA), THE TRIBUNAL WAS DEALING WITH CHANGE IN THE METHOD OF ACCOUNTING. THE ASSESS EE HAD EARLIER ADOPTED METHOD OF VALUATION OF STOCK AT COST AND SUBSEQUENTLY, WANTED TO CHANGE THE METHOD TO NE T REALIZABLE VALUE. NO SUCH CIRCUMSTANCES EXIST IN OU R CASE. SAHARA INDIA MASS COMMUNICATION LTD. ITA NO.522/MUM./2006 8 VIII) IN VIEW OF THE ABOVE DISCUSSION, WE UPHOLD THE CONT ENTION OF THE LEARNED COUNSEL AND DELETE THE ADDITIONS OF ` 2,14,16,107, MADE ON THE GROUND THAT THERE IS UNDERVALUATION OF CLOSING STOCK. IN OUR OPINION, TH ERE IS NO SUCH UNDERVALUATION AND THE ASSESSEE HAD UNDERTAKEN A BONAFIDE EXERCISE. THUS, ASSESSEE SUCCEEDS ON THIS GROUND. IX) COMING TO THE GROUND NO.2, WHICH IS ON THE ISSUE OF DISALLOWANCE UNDER SECTION 14A, THE ASSESSING OFFIC ER IN HIS ASSESSMENT ORDER, HAS, AT LAST PARA, AT PAGE-5, DETERMINED OWN FUNDS OF THE ASSESSEE AT ` 90,47,73,000. THESE FUNDS ARE NON-INTEREST BEARING FUNDS. THE ASS ESSING OFFICER AT PAGE-6, STATED THAT INVESTMENT IN SHARES AT ` 6,62,29,101. LEARNED COUNSEL DEMONSTRATED THAT THE ASSESSING OFFICER COMMITTED AN ERROR IN TAKING THIS FIGURE AS INVESTMENT IN SHARES. SCHEDULE-V OF THE BALANCE SHEET SHOWS THAT OUT OF ` 6,62,29,101, INVESTMENT IN DEBENTURE AMOUNTED TO ` 1,10,30,101. THIS FIGURE HAS TO BE REDUCED. COMING TO THE BALANCE FIGURE OF ` 5,51,99,000, AN AMOUNT OF ` 5,00,00,000 WERE INVESTED IN NON-CUMULATIVE PREFERENCE SHARES. THESE INVESTMENTS WERE MADE BEFO RE 31 ST MARCH 2001, AND, AS ON THAT DATE, THE ASSESSEE HAD NO BORROWED FUNDS WHATSOEVER. THE ASSESSEE HAS NOT INCURRED ANY INTEREST EXPENDITURE IN F.Y. 2000-01. THUS, THE CONCLUSION OF THE ASSESSING OFFICER THAT THE AS SESSEE SHOULD HAVE INCURRED CERTAIN INTEREST EXPENDITURE O N AMOUNT BORROWED FOR INVESTING IN NON-CUMULATIVE PREFERENCE SHARES OF ` 5,00,00,000, IS FACTUALLY WRONG. THE FACTS CLEARLY SHOW THAT NO BORROWED AMOUNT HAS BEEN UTILIZED FOR MAKING INVESTMENT IN ` 5,00,00,000, IN NON- CUMULATIVE PREFERENCE SHARES AND, HENCE, NO DISALLO WANCE SAHARA INDIA MASS COMMUNICATION LTD. ITA NO.522/MUM./2006 9 UNDER SECTION 14A, IS NOT CALLED FOR ON THESE TWO I TEMS.. THUS, THE ASSESSEE SUCCEEDS ON THIS GROUND X) COMING TO THE INVESTMENT IN EQUITY SHARES OUT OF ` 45,00,000, ` 5,00,000 HAS BEEN INVESTED IN PREVIOUS YEAR, WHEN THE ASSESSEE HAD NO BORROWED FUNDS. THIS LEAVE S US WITH ONLY ` 40,00,000 INVESTMENT IN EQUITY SHARES IN SAHARA INDIA LIFE INSURANCE CO. LTD., AND A FURTHER SUM OF ` 6,99,000 IN EQUITY SHARES IN SAHARA INDIA COMMERCI AL CORPORATION OVERSEAS LTD., MAURITIUS. THUS, THE TOT AL INVESTMENT MADE DURING THE YEAR IS ` 46,99,000. ADMITTEDLY, THE ASSESSEE HAS NON-INTEREST BEARING F UNDS OF ` 90,47,73,000. THE PRESUMPTION WOULD BE THAT ` 47,00,000, HAS BEEN INVESTED FROM OUT OF NON-INTERE ST BEARING FUNDS. THIS PROPOSITION IS LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN RELIANCE UTILITIES AND POWER L TD. (SUPRA). THUS, IN VIEW OF THE ABOVE ANALYSIS, THE DISALLOWANCE MADE UNDER SECTION 14A, IS HEREBY DELE TED AND THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. XI) NOW, COMING TO THE GROUND NO.3, THE ASSESSING OFFIC ER, IN HIS ASSESSMENT ORDER, AT PAGE-6, LAST PARAGRAPH, HA S LISTED OUT THE DIFFERENCE ON WHICH THE ASSESSEE HAS MADE PROVIDENT FUND PAYMENTS. IT IS SEEN THAT, FOR THE M ONTH OF MAY, JUNE, SEPTEMBER, DECEMBER 2001, AND MARCH 2002 , THE PAYMENTS OF EMPLOYEES CONTRIBUTION AND EMPLOYE RS CONTRIBUTION WERE MADE WITHIN THE GRACE PERIOD ALLO WED UNDER THE RESPECT ENACTMENTS. XII) COMING TO THE PAYMENTS MADE FOR THE MONTHS OF FEBRU ARY 2001, JANUARY AND FEBRUARY 2002, THE DATE OF PAYMEN TS WERE 24 TH NOVEMBER 2001, 26 TH FEBRUARY 2002 AND 21 ST MARCH 2002. THESE PAYMENTS ARE NOT ONLY BEFORE THE CLOSE SAHARA INDIA MASS COMMUNICATION LTD. ITA NO.522/MUM./2006 10 OF ACCOUNTING FINANCIAL YEAR BUT ALSO MUCH BEFORE T HE DUE DATE FOR FILING THE RETURN OF INCOME. THE MUMBAI BE NCH OF THIS TRIBUNAL IN ITA NO.6855/MUM./2008, DECIDED IN M/S. PRANAVADITYA SPINNING MILLS LTD. V/S ACIT, VIDE ORD ER DATED 22 ND MARCH 2010, FOR ASSESSMENT YEAR 2002-03, HAD TAKEN A VIEW THAT IN THE CASE OF EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND, THE SAME SHOULD BE ALLOWED EVEN THO UGH IT IS PAID BEYOND THE GRACE PERIOD, IF THE SAME IS PAI D BEFORE THE TIME ALLOWED FOR FILING THE RETURN OF INCOME. RESPECTFULLY FOLLOWING THE SAME, WE ALLOW THIS GROU ND OF APPEAL. XIII) INSOFAR AS GROUND NO.4 IS CONCERNED, THE LEARNED CO UNSEL DID NOT WISH TO PRESS THIS GROUND. THE LEARNED DEPARTMENTAL REPRESENTATIVE DID NOT OPPOSE THE SUBMISSIONS OF THE LEARNED COUNSEL. CONSEQUENTLY, T HIS GROUND IS DISMISSED AS NOT PRESSED . XIV) AS REGARDS GROUND NO.5, LEARNED COUNSEL CONTENDS TH AT THIS GROUND IS CONSEQUENTIAL IN NATURE. CONSEQUENTL Y, WE DIRECT THE ASSESSING OFFICER TO GIVE CONSEQUENTIAL EFFECT WHILE RE-COMPUTING THE INCOME OF THE ASSESSEE IN ACCORDANCE WITH LAW. 13. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED IN PART . ORDER PRONOUNCED IN THE OPEN COURT ON 28.4.2011. SD/- ASHA VIJAYRAGHAVAN JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI, DATED: 28.4.2011 SAHARA INDIA MASS COMMUNICATION LTD. ITA NO.522/MUM./2006 11 COPY TO : (1) THE ASSESSEE (2) THE RESPONDENT (3) THE CIT(A), MUMBAI, CONCERNED (4) THE CIT, MUMBAI CITY CONCERNED (5) THE DR, C BENCH, ITAT, MUMBAI TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT, MUMBAI BENCHES, MUMBAI DATE INITIAL 1. DRAFT DICTATED ON 26.4.2011 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 27.4.2011 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 27.4.2011 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 27.4.2011 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 27.4.2011 SR.PS/PS 6. DATE OF PRONOUNCEMENT 28.4.2011 SR.PS 7. FILE SENT TO THE BENCH CLERK 28.4.2011 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER