MAFATLAL INDUSTRIES LTD, MUMBAI V. ITO 6(3)(2), MUMBAI

ITA 5288/MUM/2011

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5445 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 18-05-2017
• Assessment Year: 2002-2003
• Appeal Filed On: 12-07-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANTANU K SAIKIA
• Keywords: Depreciation; Business expenditure; Earning of tax free income; Notional interest; Unabsorbed depreciation; Capital expenditure
• Section: 143(3); 244A; 142(1); 14A; 37(1); 37

Judgement Text

1 ITA 5288/MUM/20111 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH , MUMBAI BEFORE SHRI PAWAN SINGH(JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.5288/MUM/2011 (ASSESSMENT YEAR: 2002-03) MAFATLAL INDUSTRIES LIMITED 3 RD FLOOR, MAFATLAL HOUSE BACKBAY RECLAMATION MUMBAI- 400 020 PAN :AAACM2813L VS ITO, 6(3)(2), MUMBAI APPELLANT RESPONDENT APPELLANT BY SHRI GIRISH DAVE RESPONDENT BY SHRI SANTANU K SAIKIA DATE OF HEARING 13-08-2018 DATE OF PRONOUNCEMENT 17-10-2018 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST ORDER OF THE CIT(A)-12, MUMBAI DATED 30-03-2011 AND IT PERTAINS TO AY 2002-03. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- THE APPELLANT OBJECTS TO THE ORDER DATED 30 MARCH 2 011 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-12, ON THE FOL LOWING AMONG OTHER GROUNDS: INTEREST IN RESPECT OF ADVANCES TO COMPANIES / OTHE R CONCERNS: 1. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONF IRMING THE DISALLOWANCE OF INTEREST AMOUNTING TO RS. 2,25,14,307 BEING ESTIMAT ED INTEREST AT THE RATE OF 15 PER CENT ON THE FOLLOWING AMOUNTS: SR. NO. PARTIES AMOUNT R . S . (A) IBIZA INDUSTRIES LIMITED 25,50,000 2 ITA 5288/MUM/20111 (B) MAFATLAL S A INTEX LTD. 1,38,01,210 (C) MAFATLAL V K INTEX LTD. 38,00,000 (D) REPAL APPAREL P. LTD. 75,76,557 (E) SILVIA APPAREL LTD. 80,00,000 (0 SUSHMITA HOLDINGS LTD. 4,75,02,610 (G) MAFATLAL ENGINEERING INDUSTRIES LIMITED (MEIL) 3,91,15,000 00 MEIL BY MAFATLAL FINE SPG. AND MFG, CO.LTD 2,77,50,000 TOTAL: 15,00,95,377 2. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HA VE APPRECIATED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN CHARGING TO TAX NOTIONAL INTEREST OF RS. 2,25,14,307 WHICH HAD NOT AT ALL ACCRUED TO THE APP ELLANT. 3. THE LEARNED COMMISSIONER APPEALS) OUGHT TO HAV E APPRECIATED THAT THE ADVANCES TO THE ABOVE PARTIES WERE FOR THE PURPOSE OF BUSINESS OF THE APPELLANT. 4. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NO T APPRECIATING THAT THE ABOVE AMOUNTS WERE ADVANCED IN THE COURSE OF THE APPELLAN T'S BUSINESS OF ENTREPRENEURSHIP AND PROJECT PROMOTION. THE LEARNED COMMISSIONER (APPEALS) FAILED TO APPRECIATE THAT THE APPELLANT HAD NOT BOR ROWED FROM BANKS/FINANCIAL INSTITUTIONS FOR FINANCING THESE COMPANIES. 5. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HA VE APPRECIATED THAT ADVANCES ADVANCES MADE TO MEIL WERE OUT OF OWN RESOURCES OF THE APPELLANT FROM DIVIDEND, INTEREST, SALES REALISATION AND REALISATION OF ASSE TS. AS THE LOANS ON WHICH INTEREST HAS BEEN PAID WERE BORROWED FOR THE PURPOSE OF BUSI NESS OF THE APPELLANT, THE INTEREST PAID SHOULD HAVE BEEN FULLY ALLOWED AS A D EDUCTION. 6. WITHOUT PREJUDICE, THE LEARNED COMMISSIONER (A PPEALS) OUGHT TO HAVE APPRECIATED THE FACT THAT AS PER THE REHABILITATION SCHEME OF MEIL, THE INTEREST ON LOANS PROVIDED TO MEIL WAS TO ACCRUE ONLY AFTER ALL THE DUES OF THE F INANCIAL INSTITUTIONS HAD BEEN PAID AND THAT THE QUESTION OF COMPARING THE INTEREST PAI D WITH THE INTEREST RECEIVED DID NOT ARISE IN THE PRESENT YEAR. 7. IN ANY EVENT AND WITHOUT PREJUDICE, AS THE AMO UNTS DUE FROM MEIL HAD BEEN WRITTEN OFF BY THE APPELLANT AS ON MARCH 31, 1991, THE SAID AMOUNTS WERE NOT OUTSTANDING DURING THE RELEVANT PREVIOUS YEAR 2001- 02 AND ACCORDINGLY NO DISALLOWANCE OUGHT TO HAVE BEEN MADE ON ACCOUNT OF INTEREST. 8. ALTERNATIVELY AND WITHOUT PREJUDICE, AS THE FU NDS UTILISED FOR THE ADVANCES TO MEIL HAD BEEN SUBSEQUENTLY RECOUPED OUT OF INTERNAL ACCRUALS, NO INTEREST OUGHT TO HAVE BEEN DISALLOWED. 9. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NO T APPRECIATING THE FACT THAT THE PRINCIPAL AMOUNT OF LOAN OF RS.25,50,000 GIVEN TO T HE SUBSIDIARY COMPANY IBIZA INDUSTRIES LIMITED ITSELF HAD BECOME DOUBTFUL OF RE COVERY. IN VIEW OF THE SAME, THE APPELLANT HAD NOT PROVIDED INTEREST ON LOAN GIVEN T O THE IBIZA INDUSTRIES LIMITED. 3 ITA 5288/MUM/20111 10. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE LOANS ADVANCED TO MAFATLAL S.A. INTEX AND MAFATLAL V.K. INTEX WERE FOR THE PURPOSES OF THE BUSINESS OF THE APPELLANT. 11. WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT S UBMITS THAT THE DISALLOWANCE OF THE INTEREST OUGHT TO BE REDUCED SUBSTANTIALLY. 12. THE LEARNED COMMISSIONER (APPEALS) ERRED IN REL YING ON THE DECISION OF THE COMMISSIONER (APPEALS) IN THE EARLIER YEARS. VALUATION OF CLOSING STOCK 13. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CON FIRMING ADDITION OF ESTIMATED AMOUNT TO EXCISE DUTY OF RS. 25,00,000 ON ACCOUNT O F VALUATION OF CLOSING STOCK OF FINISHED GOODS. DISALLOWANCE OF POOJA EXPENSES 14. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CON FIRMING DISALLOWANCE IN RESPECT OF POOJA EXPENSES OF RS. 1,63,210. DISALLOWANCE OF PAYMENTS TO RELATIVES OF DECEASED E MPLOYEES 15. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT SPECIFICALLY ALLOWING THE PAYMENTS MADE TO RELATIVES OF DECEASED EMPLOYEES OF RS. 49,260. DISALLOWANCE UNDER SECTION 14A 16. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CON FIRMING DISALLOWANCE OF INTEREST EXPENSES OF RS. 6,79,30,000 ON AN ESTIMATE BASIS UN DER SECTION 14A FOR EARNING INCOME NOT FORMING PART OF TOTAL INCOME. 17. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAV E APPRECIATED THAT THE LEARNED ASSESSING OFFICER ESTIMATED AND DISALLOWED INTEREST EXPENSES OF RS. 6,79,30,000 WITHOUT ESTABLISHING ANY NEXUS BETWEEN INVESTMENTS GENERATING TAX-FREE INCOME AND BORROWED FUNDS. 18.THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE APPRECIATED THAT NO SPECIFIC BORROWINGS HAD BEEN MADE FOR THE PURPOSE OF MAKING INVESTMENTS. 19. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED COM MISSIONER (APPEALS) ERRED IN NOT APPRECIATING THAT THE DISALLOWANCE OF RS. 6,79,30,0 00 UNDER SECTION 14A WAS EXCESSIVE AND UNREASONABLE AND OUGHT TO HAVE DIRECT ED THE LEARNED ASSESSING OFFICER TO REDUCE THE DISALLOWANCE SUBSTANTIALLY. NON EXCLUSION OF CFC GRANT FROM TOTAL INCOME 20. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CON FIRMING THE ACTION OF ASSESSING OFFICER IN NOT EXCLUDING FROM THE TOTAL INCOME OF T HE APPELLANT, THE CFC GRANT OF RS. 8,57,75,798 RECEIVED PURSUANT TO THE MONTREAL PROTO COL FOR PHASING OUT PRODUCTION OF REFRIGERANT GASES. DISALLOWANCE OF LOSS ON COMPENSATION ON ENFORCEMENT OF SECURITY 21. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CON FIRMING THE DISALLOWANCE OF LOSS ON ACCOUNT OF COMPENSATION ON ENFORCEMENT OF SECURI TY OF RS. 7,15,39,300 TREATING THE SAME AS CAPITAL IN NATURE. 22. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT ALLOWING LOSS ON COMPENSATION ON ENFORCEMENT OF SECURITY OF RS. 7,15,39,300 UNDER SECTION 28/29 OR SECTION 37 OF THE INCOME TAX ACT AS A LOSS OR EXPENSE INCIDENTAL TO T HE BUSINESS. PENALTY AND FINE 23. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CON FIRMING THE DISALLOWANCE OF RS. 8,000 ON ACCOUNT OF PENALTY AND FINE. INTEREST UNDER SECTION 244A 24. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT SPECIFICALLY DIRECTING THE ASSESSING OFFICER TO NOT RESTRICT INTEREST UNDER SE CTION 244A TO RS, 11,487 GROUNDS NOT DECIDED/ADJUDICATED GROUND 17 4 ITA 5288/MUM/20111 'THE LEARNED INCOME-TAX OFFICER ERRED IN NOT QUANTI FYING AND IN NOT SPECIFICALLY ALLOWING CARRY FORWARD OF THE UNABSORBED BUSINESS L OSSES AND UNABSORBED DEPRECIATION OF EARLIER ASSESSMENT YEARS FOR SET OF F IN THE SUBSEQUENT ASSESSMENT YEARS.' 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AN D TRADING IN FABRICS AND OTHER INDUSTRIAL ACTIVITIES, FILED ITS RETURN OF INCOME FOR AY 2002-03 ON 31-10-2002 DECLARING TOTAL LOSS OF RS.27 ,64,36,740. THE CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICE S U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED. IN RESPONSE TO NOTI CES, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME T O TIME AND FILED VARIOUS DETAILS, AS CALLED FOR. THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) OF THE ACT ON 14-03-2005 DETERMINING THE TOT AL LOSS AT RS.9,54,36,061 BY MAKING VARIOUS ADDITIONS / DISALL OWANCES TOWARDS INTEREST IN RESPECT OF ADVANCES TO COMPANIES / OTHE R CONCERNS, REVALUATION OF CLOSING STOCK OF FINISHED GOODS, DIS ALLOWANCE OF POOJA EXPENSES, DISALLOWANCE OF PAYMENTS TO RELATIVES OF DECEASED EMPLOYEES, DISALLOWANCE OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME U/S 14A, NON EXCLUSION OF CPC GRANT FROM TOT AL INCOME, DISALLOWANCE OF LOSS ON COMPENSATION ON ENFORCEMENT OF SECURITY AND DISALLOWANCE OF PENALTY AND FINE AND ALSO DISALLOWA NCE OF FOREX LOSS. 3. AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE PREF ERRED APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE HAS CHALLENGED 5 ITA 5288/MUM/20111 ADDITIONS MADE BY THE AO TOWARDS VARIOUS DISALLOWAN CES AND FILED ELABORATE WRITTEN SUBMISSIONS. THE LD.CIT(A), AFTE R CONSIDERING RELEVANT SUBMISSIONS OF THE ASSESSEE PARTLY ALLOWED APPEAL F ILED BY THE ASSESSEE WHEREIN HE HAS DELETED ADDITION MADE BY THE AO TOWA RDS DISALLOWANCE OF FOREX LOSS; HOWEVER, CONFIRMED REMAINING ADDITIO NS INCLUDING INTEREST IN RESPECT OF ADVANCES TO COMPANIES, DISALLOWANCE O F EXPENDITURE IN RELATION TO EXEMPT INCOME, ADDITION TOWARDS REVALUA TION OF CLOSING STOCK, DISALLOWANCE OF POOJA EXPENSES, PAYMENT TO RELATIVE S OF DECEASED EMPLOYEES, NON EXCLUSION OF CPC GRANT AND DISALLOW ANCE OF LOSS ON COMPENSATION ON ENFORCEMENT OF SECURITY AND ALSO DI SALLOWANCE OF PENALTY AND FINE. AGGRIEVED BY THE ORDER OF LD.CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUNDS 1 TO 12 IS DISALLOWANCE OF INTEREST IN RESPECT OF ADVANC ES TO COMPANIES / OTHER CONCERNS OF RS.2,25,14,307. THE LD.AR FOR TH E ASSESSEE, AT THE TIME OF HEARING SUBMITTED THAT THIS ISSUE IS COVERE D IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT, MUMBAI BENCH I IN ASSESSEES OWN CASE FOR AY 2001-02 IN ITA NO.4598/MUM/2005, WHERE, THE ITAT, BY FOLLOWING ITS EARLIER ORDER IN ASSESSEES OWN CASE FOR AY 1993-94 TO 1999-2000, HAS SET ASIDE THE ISSUE TO THE FILE OF T HE AO FOR FRESH CONSIDERATION IN THE LIGHT OF THE DECISION OF HONB LE SUPREME COURT IN THE 6 ITA 5288/MUM/20111 CASE OF S.A. BUILDERS VS CIT 288 ITR 1 (SC). 5. THE LD.DR, ON THE OTHER HAND, FAIRLY ACCEPTED TH AT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F ITAT FOR EARLIER YEARS AND FOR SIMILAR REASONS, THE ISSUE MAY BE SET ASIDE TO THE FILE OF THE AO, FOR THIS YEAR ALSO. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE ISSUE OF DISALLOWANCE OF INTEREST I N RESPECT OF ADVANCES TO COMPANIES / OTHER CONCERNS HAS BEEN SUBJECT MATT ER OF DELIBERATION FROM AYS 1993-94 TO 2001-02 WHERE THE ITAT, AFTER C ONSIDERING RELEVANT SUBMISSIONS AND BY FOLLOWING THE JUDGEMENT OF HONB LE SUPREME COURT IN THE CASE OF S.A. BUILDERS VS CIT(SUPRA) HAS REST ORED THE MATTER TO THE FILE OF THE AO FOR FRESH CONSIDERATION. THE RELEVA NT OBSERVATIONS OF THE ITAT ARE EXTRACTED BELOW:- 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE TRIBUNA L CONSISTENTLY SET ASIDE THE ISSUE TO FOLLOW THE PRECEDENT LAID DOWN BY HON'BLE SUPREME COURT IN THE CASE OF S.A. BUILDERS 288 ITR 1 (SC). ON SAME REASONING, WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO. THIS ISSUE IS ALLOWED FOR ST ATISTICAL PURPOSES. 7. IN THIS VIEW OF THE MATTER AND CONSISTENT WITH T HE VIEW TAKEN BY THE CO-ORDINATE BENCH, WE SET ASIDE THE ISSUE TO THE FI LE OF THE AO AND DIRECT HIM TO FOLLOW THE DIRECTIONS GIVEN BY THE ITAT FOR AY. 2001-02, WE SET ASIDE THE ISSUE TO THE FILE OF THE AO TO BE CONSIDE RED AFRESH IN THE LIGHT OF JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF S .A. BUILDERS VS 7 ITA 5288/MUM/20111 CIT(SUPRA). 8. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATIO N IS ADJUSTMENT TO CLOSING STOCK OF FINISHED GOODS. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF ITAT IN ASSESSEES OWN CASE FOR AY 2001-02 IN ITA NO.4598/ MUM/2005 WHERE THE CO-ORDINATE BENCH, BY FOLLOWING ITS EARLIER ORD ER HELD THAT ADJUSTMENT MADE BY THE AO TOWARDS INCLUSION OF EXCISE DUTY FOR VALUATION OF CLOSING STOCK OF FINISHED GOODS IS IN ACCORDANCE WITH LAW. HOWEVER, FURTHER STATED THAT ONCE ADJUSTMENT IS MADE TO CLOSING STOC K, THE AO IS BOUND TO MAKE ADJUSTMENT TO GIVE EFFECT TO THE OPENING STOCK . OTHERWISE IT GIVES A DISTORTED FIGURE. THE RELEVANT OBSERVATIONS OF T HE ITAT IS EXTRACTED BELOW:- 7. WE ARE OF THE VIEW THAT THIS ISSUE HAS TO BE ALLOWE D IN FAVOUR OF ASSESSEE BY GIVING DIRECTION IN REGARD TO ALTERNATI VE CLAIM THAT THE ADDITION TO CLOSING STOCK OF FINISHED GOODS MADE BY THE AO S HOULD BE GIVEN CONSEQUENTIAL EFFECT TO THE OPENING STOCK OF NEXT Y EAR ALSO. WE FIND THAT THE TRIBUNAL IN ITA NO.4029/MUM/2009 FOR ASSESSMENT YEAR 2003-04 VIDE ORDER DATED 29.4.2011 HAS GIVEN SOME DIRECTION VIDE PARA NOS.5 & 6 AS UNDER: '5. GROUND NO .2 IS ON THE ISSUE OF VALUATION OF CLOSIN G STOCK OF FINISHED GOODS, S) CONFIRMED THE ADDITION OF ESTIMATED AMOUNT OF EX CISE DUTY OF S ON ACCOUNT OF VALUATION OF CLOSING STOCKS OF FINISHED GOODS. THE. THE ASSESSES'S OWN CASE FROM THE ASSESSMENT YEARS 1994-95 TO 1997-98 HAS DE CIDED THE GROUND AGAINST THE ASSESSEE. RESPECTFULLY FOLLOWING THE SA ME, WE DISMISS THIS GROUND OF THE ASSESSEE. 6. THE ASSESSEE MADE AN ALTERNATIVE CLAIM THAT THE ADDITION SHOULD ALSO BE MADE FOR THE OPENING STOCK. THIS ALTERNATIVE CLAIM WAS ALLOWED BY THE TRIBUNAL. CONSISTENT WITH THE VIEW TAKEN BY THE TRIBUNAL, WE ALLOW THE ALTERNATIVE CLAIM OF THE ASSESSEE FOR ADDITION TO OPENING STOCK.' 8. AS THE ISSUE IS SQUARELY COVERED, WE ALSO DIRECT THE AO TO GIVE TO THE OPENING STOCK OF THE NEXT YEAR. THIS ISSUE OF THE A SSESSEE IS ALLOWED ACCORDINGLY. 8 ITA 5288/MUM/20111 9. IN THIS VIEW OF THE MATTER AND BEING CONSISTENT WITH THE VIEW TAKEN BY THE CO-ORDINATE BENCH, WE DIRECT THE AO TO MAKE SUITABLE ADJUSTMENTS TOWARDS OPENING STOCK IN RESPECT OF MODVAT ADJUSTME NT MADE TO CLOSING STOCK OF FINISHED GOODS. 10. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS DISALLOWANCE OF POOJA EXPENSES. THE LD.AR FOR THE ASSESSEE SUBMITT ED THAT THE ITAT HAD CONSIDERED SIMILAR ISSUE FOR EARLIER ASSESSMENT YEARS IN ITA NO.4598/MUM/2005 WHERE BY FOLLOWING ITS EARLIER DEC ISION FOR AY 1998- 99, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE ALL OWING THE CLAIM OF POOJA EXPENSES. 11. HAVING HEARD BOTH THE SIDES, WE FIND THAT THE C O-ORDINATE BENCH OF ITAT HAS CONSIDERED DISALLOWANCE OF POOJA EXPENSES FOR AY 2001-02 AND AFTER CONSIDERING RELEVANT FACTS AND ALSO BY FO LLOWING ITS OWN ORDER FOR AY 1998-99 IN ITA NO.4598/MUM/2005 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. SINCE, THE FACTS INVOLVED IN THIS YEAR ARE IDENTICAL TO THE FACTS WHICH HAVE BEEN CONSIDERED B Y THE ITAT FOR EARLIER ASSESSMENT YEARS, BY FOLLOWING THE TRIBUNALS ORDER IN ASSESSEES OWN CASE, WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND DIRECT THE AO TO DELETE DISALLOWANCE MADE TOWARDS DISALLOWANCE OF PO OJA EXPENSES. 12. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS PAYMENTS TO RELATIVES OF DECEASED EMPLOYEES. THE LD.AR FOR THE ASSESSEE 9 ITA 5288/MUM/20111 SUBMITTED THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT, MUMBAI BENCH I IN ASSESSEES OW N CASE FOR AY 2001-02 IN ITA NO.4598/MUM/2005 WHEREIN UNDER SIMIL AR SET OF FACTS, THE ITAT HAS ALLOWED THE CLAIM OF PAYMENTS MADE TO RELATIVES OF DECEASED EMPLOYEES. THE RELEVANT OBSERVATIONS OF T HE ITAT IS EXTRACTED BELOW:- 20. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINS T THE ORDER OF THE CIT(A) DISALLOWING THE CLAIM OF PAYMENT MADE TO RELATIVES OF DECEASED EMPLOYEES. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NOS. 14, 15 & 16 : 'PAYMENT TO RELATIVES OF DECEASED EMPLOYEES 14. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT SPECIFICALLY ALLOW THE APPELLANT'S CLAIM IN RESPECT OF AMOUNT OF RS. 57,68 4 BEING PAYMENT MADE TO RELATIVES OF DECEASED EMPLOYEES. 15. THE LEARNED COMMISSIONER (APPEALS) ERRED IN HOL DING THAT THE CLAIM OF THE APPELLANT OF RS. 57,684 IN RESPECT OF PAYMENT TO RE LATIVES OF DECEASED EMPLOYEES WAS ALLOWABLE IF THE PAYMENTS HAVE BEEN M ADE IN PURSUANCE OF WRITTEN AGREEMENTS WITH THE EMPLOYEES. 16. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE APPREC IATED THAT THE COMMISSIONER (APPEALS) IN THE ASSESSMENT YEARS 1987 -88, 1988-89, 1991-92 AND THE INCOME-TAX APPELLATE TRIBUNAL IN THE APPELL ANT'S OWN CASE FOR THE ASSESSMENT YEARS 1985-86 AND 1986-87 HAD IN FACT DE LETED THE DISALLOWANCE IN RESPECT OF PAYMENT TO RELATIVES OF DECEASED EMPLOYE ES.' 21. AS THE FACTS CIRCUMSTANCES ARE EXACTLY IDENTICA L IN THIS YEAR, RESPECTFULLY FOLLOWING THE TRIBUNAL'S ORDER IN EARLIER YEARS, WE DIRECT THE AO TO ALLOW THE CLAIM OF PAYMENT MADE TO RELATIVES OF DECEASED EMPLOYEES. THIS ISSUE OF THE ASSESSEE'S APPEAL IS ACCORDINGLY ALLOWED. 13. IN THIS VIEW OF THE MATTER AND BEING CONSISTENT WITH THE DECISION OF CO-ORDINATE BENCH, WE DIRECT THE AO TO ALLOW PAYMEN TS MADE TO RELATIVES OF DECEASED EMPLOYEES. 14. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS DISALLOWANCE OF EXPENDITURE IN RELATION TO EXEMPT INCOME U/S 14A OF THE INCOME-TAX ACT, 1961. THE LD.AR FOR THE ASSESSEE, AT THE TIME OF HEARING, SUBMITTED 10 ITA 5288/MUM/20111 THAT THIS ISSUE WAS ALSO SUBJECT MATTER OF DELIBERA TIONS OF ITAT FOR AY 2001-02 WHEREIN THE ITAT, BY FOLLOWING THE RATIO LA ID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS GOD REJ & BOYCE MFG CO LTD (2010) 320 ITR 81 (BOM) SET ASIDE THE ISSUE TO THE FILE OF THE AO TO ASCERTAIN CORRECT FACTS TO DETERMINE THE EXACT E XPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO EXEMPT INCOME. SINCE F ACTS ARE IDENTICAL TO THE FACTS WHICH ARE ALREADY CONSIDERED BY ITAT, FOR SIMILAR REASONS, THE ISSUE MAY BE SET ASIDE TO THE FILE OF THE AO FOR FR ESH CONSIDERATION. 15. HAVING CONSIDERED BOTH THE SIDES, WE FIND THAT THE CO-ORDINATE BENCH HAS CONSIDERED SIMILAR ISSUE FOR AY 2001-02 I N ITA NO.4598/MUM/2015 WHEREIN BY FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & B OYCE MFG CO LTD (SUPRA) HAS RESTORED THE MATTER BACK TO THE FILE OF THE AO FOR FRESH CONSIDERATION. THE RELEVANT OBSERVATION OF THE TRI BUNAL IS EXTRACTED BELOW:- 23. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT THE TRIBUNAL IN ITA NO.4597/MUM/2005 FOR ASSES SMENT YEAR 1999-2000 IN ASSESSEE'S OWN CASE VIDE ORDER DATED 21.10.2015 HAS SET ASIDE THE ISSUE TO THE FILE OF THE AO TO DECIDE A REASONABLE DISALLOWANCE BY FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & B OYCE MANUFACTURING COMPANY LIMITED VS. DCIT (2010) 328 ITR 81 (BOM). T HE TRIBUNAL OBSERVED IN PARA 42 UNDER: '42. WE HAVE HEARD BOTH THE PASTIES AND PERUSED THE RECORD. WE FIND THAT THE ASSESSEE EARNED DIVIDEND INCOME AND CLAIMED THAT TH E INTEREST PAID ON BORROWED FUNDS FOR MAKING INVESTMENT IS EXPENDITURE. WE FIND THAT AS PER THE PROVISIONS OF SECTION 14A THE ASSESSEE CANNOT CLAIM EXPENDITURE O F INTEREST FOR EARNING EXEMPT INCOME WHICH IS NOT FORMING PART OF THE TOTAL INCOM E. OBVIOUSLY, THE ASSESSEE BORROWED THE FUNDS FROM OUTSIDE AND INVESTED IT. TH E ASSESSEE ALSO EARNED DIVIDEND INCOME AND CLAIMED EXPENDITURE AS DEDUCTIBLE BUSINE SS EXPENDITURE. ON PERUSAL OF 11 ITA 5288/MUM/20111 THE DECISION RENDERED BY THE HON'BLE JURISDICTIONAL HIGH COURT; THE HON'BLE HIGH COURT OBSERVED AND HELD THAT: 'EVEN PRIOR TO ASSESSMENT YEAR 2008-09, WHEN RULE 8 O WAS NOT APPLICABLE, THE ASSESSING OFFICER HAS TO ENFORCE THE PROVISIONS OF SUB-SECTION (1) OF SECTION 14A. FOR THAT PURPOSE, THE ASSESSING OFFICER IS DUTY BOUND T O DETERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE ASSESSING OFFICER MUST ADOPT A R EASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMST ANCES AFTER FURNISHING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MA TERIAL ON THE RECORD; THE PROCEEDINGS FOR ASSESSMENT YEAR 2002-03 SHALL S TAND REMANDED BACK TO THE ASSESSING OFFICER, THE ASSESSING OFFICER SNAIL DETE RMINE AS TO WHETHER THE ASSESSEE HAS INCURRED ANY EXPENDITURE (DIRECT OR INDIRECT) I N RELATION TO DIVIDEND INCOME/INCOME FROM MUTUAL FUNDS WHICH DOES NOT FORM PART OF THE T OTAL INCOME AS CONTEMPLATED UNDER SECTION 14A. THE ASSESSING OFFICER CAN ADOPT A REASONABLE BASIS FOR EFFECTING THE APPORTIONMENT. WHILE MAKING THAT DETERMINATION, THE ASSESSING OFFICER SHALL PROVIDE A REASONABLE OPPORTUNITY TO THE ASSESSEE OF PRODUCING ITS ACCOUNTS AND RELEVANT OR GERMANE MATERIAL HAVING A BEARING ON THE FACTS AND CIRCUMSTANCES OF THE CASE' IN THE PRESENT CASE, THE ASSESSEE NEITHER BEFORE TH E AO NOR THE LD.CLT(A) OR THE TRIBUNAL PRODUCED ANY DOCUMENTS HOW THE ASSESSEE IS ELIGIBLE FOR DEDUCTION OF THE EXPENDITURES INCURRED FOR EARNING DIVIDEND INCO ME. WE FIND THAT THE ID, CIT(A) RESTRICTED THE CLAIM TO 50%, THEREFORE; WE ARE OF T HE CONSIDERED OPINION, THAT THIS FACTS REQUIRES DETAILS INVESTIGATION AND VERIFICATI ON AT THE LEVEL OF AO TO DETERMINE THE EXACT EXPENDITURE INCURRED BY THE ASSESSEE, THE AO IS DIRECTED TO FOLLOW THE DECISION RENDERED BY THE HON'BLE HIGH COURT IN GODR EJ & BOYCE MFG. CO. LTD (SUPRA). RESULTANTLY, GROUNDS NO. 25 AND 26 ARE ALL OWED FOR STATISTICAL PURPOSES. 24. WE FIND THAT THE TRIBUNAL IN EARLIER YEARS ALSO REMANDED THE MATTER BACK TO THE FILE OF THE AO WITH CERTAIN DIRECTIONS. ACCORDINGLY, WE ALSO DIRECT THE AO TO DECIDE THE ISSUE IN TERMS OF THE DIRECTIONS OF TRIBUNAL IN 1999-2000. ACCORDINGLY, THIS ISSUE IS REMANDED BACK TO THE FIL E OF THE AO. 16. IN THIS VIEW OF THE MATTER AND CONSISTENT WITH THE VIEW TAKEN BY THE CO-ORDINATE BENCH, WE RESTORE THE ISSUE TO THE FILE OF THE AO TO CONSIDER THE ISSUE AFRESH IN THE LIGHT OF EARLIER OBSERVATIO NS ISSUED BY THE ITAT TO ASCERTAIN THE CORRECT FACTS WITH REGARD TO THE EXPE NDITURE INCURRED BY THE ASSESSEE IN RELATION TO EXEMPT INCOME FOR THE YEAR UNDER CONSIDERATION. 17. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUNDS 21 & 22 IS DISALLOWANCE OF LOSS ON COMPENSATION OF ENF ORCEMENT OF SECURITY OF RS.7,15,39,300. THE FACTS WITH REGARD TO THE IM PUGNED DISPUTE ARE 12 ITA 5288/MUM/20111 THAT THE ASSESSEE HAS AVAILED A TERM LOAN FROM ILFS BY MORTGAGING SHARES OF NOCIL HELD BY ITS SUBSIDIARY COMPANIES, M /S MISHAPAR INVESTMENT LTD & VIBHADEEP INVESTMENT & TRADING LTD AS SECURITY. THE ASSESSEE HAS ENTERED INTO A MEMORANDUM OF UNDERSTAN DING WITH THOSE TWO SUBSIDIARY COMPANIES FOR PLEDGING SHARES HELD B Y THEM WITH ILFS, AS PER WHICH, IN CASE THE SUBSIDIARY COMPANIES INCU RRED LOSS ON ACCOUNT OF ENFORCEMENT OF SECURITY BY ILFS, THE ASSESSEE NE EDS TO COMPENSATE SUCH LOSS AND ACCORDINGLY, A CLAUSE IN MEMORANDUM O F UNDERSTANDING HAS BEEN PROVIDED TO INDEMNIFY THE SUBSIDIARY COMPA NIES. ACCORDINGLY, A MORTGAGE AGREEMENT HAS BEEN EXECUTED BETWEEN THE ASSESSEE, SUBSIDIARY COMPANIES AND THE BANK. SINCE THE ASSES SEE COULD NOT REPAY THE LOAN BORROWED FROM ILFS, THE LENDER HAS E NFORCED THE SECURITY OF AFORESAID NOCIL SHARES WHICH WAS PLEDGED BY M/S MISHAPAR INVESTMENT LTD & VIBHADEEP INVESTMENT & TRADING LTD . THE LENDER, ILFS HAS SOLD SHARES OF NOCIL HELD BY M/S MISHAPAR INVESTMENT LTD & VIBHADEEP INVESTMENT & TRADING LTD AND RECOVERED RS .12,60,000 AND RS.1,58,40,000, RESPECTIVELY. THE ASSESSEE HAS PRO VIDED LOSS INCURRED BY SUBSIDIARY COMPANIES ON ACCOUNT OF SALE OF SHARE S BY ILFS BY TAKING INTO ACCOUNT COST OF SHARES, AS PER BOOKS OF ACCOUN T OF SUBSIDIARY COMPANIES AND SALE PROCEEDS RECEIVED BY ILFS FROM S ALE OF SHARES AND ASCERTAINED TOTAL LOSS TO BE REIMBURSED TO TWO SUBS IDIARY COMPANIES AT 13 ITA 5288/MUM/20111 RS.7,15,39,300. THE ASSESSEE CLAIMS THAT SINCE THE LOSS INCURRED ON ACCOUNT OF ENFORCEMENT OF SECURITY BY THE LENDER, T HE ASSESSEE WAS LIABLE TO INDEMNIFY AND REIMBURSE LOSS INCURRED BY M/S MISHAPAR INVESTMENT LTD & VIBHADEEP INVESTMENT & TRADING LTD , AS PER TERMS OF AGREEMENT BETWEEN THE PARTIES. SINCE THE SAID LOSS WAS INCURRED IN CONNECTION WITH ITS BUSINESS, THE SAME NEEDS TO BE ALLOWED AS BUSINESS EXPENDITURE INCURRED AND ACCORDINGLY CLAIMED DEDUCT ION U/S 37(1) OF THE INCOME-TAX ACT, 1961. 18. THE AO DISALLOWED LOSS CLAIMED ON ACCOUNT OF SA LE OF SHARE BY ILFS ON THE GROUND THAT SUCH LOSS IS A CAPITAL LOSS AS T HE ASSESSEE HAS INCURRED LOSS ON ACCOUNT OF COMPENSATION PAID TO T WO SUBSIDIARY COMPANIES AS PER THE CONTRACTUAL AGREEMENT. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAD TAKEN A LOAN FROM ILFS AND TH IS LOSS HAS OCCURRED IN THE COURSE OF REPAYMENT OF LOAN AND HENCE, NATUR AL COROLLARY IS THAT THE LOSS HAS OCCURRED IN RESPECT OF TRANSACTIONS WH ICH ARE CAPITAL IN NATURE AND CONSEQUENTLY, IT IS CLEARLY IN THE NATUR E OF CAPITAL EXPENDITURE WHICH CANNOT BE ALLOWED AS DEDUCTION. THE AO HAS T AKEN SUPPORT FROM THE REPORT OF THE TAX AUDITORS AS PER WHICH, THE TA X AUDITORS HAVE QUANTIFIED COMPENSATION ON ENFORCEMENT OF SECURITY AS A CAPITAL EXPENDITURE AND REPORTED IN ITS TAX AUDIT REPORT UN DER PARA 17(A). THE AO FURTHER OBSERVED THAT EVEN OTHERWISE, THE SAID L OSS CANNOT BE 14 ITA 5288/MUM/20111 ALLOWED WHILE COMPUTING INCOME FROM BUSINESS AS THE ASSESSEE NEITHER OWNED THE SHARES IN ITS NAME NOR HAS INCURRED SUCH LOSS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 19. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE L D.CIT(A) WAS ERRED IN CONFIRMING DISALLOWANCE OF LOSS ON COMPENSATION ON ENFORCEMENT OF SECURITY WITHOUT APPRECIATING THE FACT THAT THE SAI D LOSS IS INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH BUSINESS OF THE ASSESSEE AS THE ASSESSEE HAS BORROWED LOAN FROM ILFS FOR THE PURPO SE OF BUSINESS BY PLEDING SHARES OF NOCIL HELD BY M/S MISHAPAR INVEST MENT LTD & VIBHADEEP INVESTMENT & TRADING LTD. THE ASSESSEE H AS ENTERED INTO AN AGREEMENT WITH THE COMPANIES AND INDEMNIFIED THE LO SS, IF ANY, INCURRED ON ACCOUNT OF PLEDGING OF SHARES WITH ILFS, AS PER WHICH IN CASE OF ANY LOSS IS SUFFERED ON ACCOUNT OF ENFORCEMENT OF SECUR ITY FOR NON REPAYMENT OF LOAN, THE ASSESSEE IS OBLIGED TO COMPENSATE SUCH LOSS, THEREFORE, THERE IS NO REASON FOR THE AO TO DISALLOW SUCH LOSS BY HOLDING THAT THE SAID LOSS WAS NOT INCURRED WHOLLY AND EXCLUSIVELY F OR THE PURPOSE OF BUSINESS. IN THIS REGARD, HE RELIED UPON THE DECIS ION OF HONBLE SUPREME COURT IN THE CASE OF BADRIDAS DAGA VS CIT 3 4 ITR 10 (SC) AND CIT VS NAINITAL BANK LTD 54 ITR 109(SC). 20. ON THE OTHER HAND, THE LD.DR STRONGLY SUPPORTED THE ORDER OF THE LD.CIT(A). 15 ITA 5288/MUM/20111 21. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIA L AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES B ELOW. THE ASSESSEE HAS CLAIMED LOSS INCURRED BY TWO SUBSIDIARY COMPANI ES M/S MISHAPAR INVESTMENT LTD & VIBHADEEP INVESTMENT & TRADING LTD ON THE GROUND THAT THE SAID LOSS HAS BEEN INCURRED WHOLLY AND EXC LUSIVELY IN CONNECTION WITH ITS BUSINESS FOR BORROWING LOAN FROM ILFS. TH E AO DISALLOWED LOSS CLAIMED BY THE ASSESSEE ON ACCOUNT OF COMPENSATION PAID TO TWO SUBSIDIARY COMPANIES ON THE GROUND THAT THE SAID LO SS IS IN THE NATURE OF CAPITAL EXPENDITURE WHICH IS INCURRED IN CONNECTION WITH REPAYMENT OF LOAN BORROWED FROM TWO SUBSIDIARIES, THEREFORE, THE SAID LOSS CANNOT BE ALLOWED AS EXPENDITURE. THE AO HAS ANALYSED THE FA CTS IN THE LIGHT OF EVIDENCES FILED BY THE ASSESSEE TO COME TO THE CONC LUSION THAT THE SAID EXPENDITURE IS NOT INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE BUSINESS, THEREFORE, MERELY FOR THE REASON THAT THE RE IS A CONTRACTUAL OBLIGATION BETWEEN THE PARTIES, COMPENSATION PAID T O REIMBURSE LOSS INCURRED BY TWO SUBSIDIARIES ON ACCOUNT OF ENFORCEM ENT OF SECURITY CANNOT BE ALLOWED AS DEDUCTION. THE AO HAS NOT DIS PUTED THE FACT THAT THE ASSESSEE HAS INCURRED LOSS ON ACCOUNT OF ENFORC EMENT OF SECURITY BY ILFS. IN FACT, M/S ILFS HAS SOLD SHARES BELONGING TO TWO SUBSIDIARY COMPANIES AND RECOVERED LOSS OF RS.12,60,000 AND RS .1,58,40,000. IT IS ALSO AN ADMITTED FACT THAT THERE IS A CONTRACTUA L OBLIGATION IN TERMS OF 16 ITA 5288/MUM/20111 AGREEMENT BETWEEN THE PARTIES THAT IN CASE ANY LOSS INCURRED ON ACCOUNT OF ENFORCEMENT OF SECURITY BY THE LENDER FOR NON RE PAYMENT OF LOANS, THEN SUCH LOSS SHALL BE INDEMNIFIED AND REIMBURSED TO TWO SUBSIDIARY COMPANIES. THESE FACTS ARE NOT DISPUTED BY THE LOW ER AUTHORITIES. THE AO IS ONLY ON THE POINT THAT THE SAID EXPENDITURE I S A CAPITAL EXPENDITURE BECAUSE IT ARISES OUT OF A LOAN TRANSACTION BETWEEN THE ASSESSEE AND THE BANK AND THE ASSESSAEE HAS REIMBURSED LOSS INCU RRED BY SUBSIDIARY COMPANIES IN THE PROCESS OF ENFORCEMENT OF SECURITY BEING SHARES PLEDGED WITH THE LENDER. 22. HAVING HEARD BOTH THE SIDES, WE DO NOT FIND ANY MERIT IN THE FINDINGS OF THE AO FOR THE REASON THAT THE AO HAS NOT DENIED THE FACT THAT THE ASSESSEE HAS BORROWED LOAN FROM M/S ILFS FOR THE PU RPOSE OF ITS BUSINESS. IN THE PROCESS, THE ASSESSEE HAS PLEDGED NOCIL SHARES HELD BY TWO OF ITS SUBSIDIARY COMPANIES WITH THE LENDER FOR SECURITY OF LOAN. AS PER THE CONTRACTUAL AGREEMENT BETWEEN THE PARTIE S, THE ASSESSEE HAS REIMBURSED LOSS INCURRED BY TWO SUBSIDIARY COMPANIE S. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE SAID LOSS IS IN CURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE BUSINESS OF THE ASSESSEE AND ACCORDINGLY, THE AO WAS INCORRECT IN DISALLOWING LO SS ON ACCOUNT OF COMPENSATION ON ENFORCEMENT OF SECURITY. 23. HAVING SAID SO, LET US EXAMINE THE QUANTUM OF L OSS CLAIMED BY THE 17 ITA 5288/MUM/20111 ASSESSEE. THE ASSESSEE CLAIMS TO HAVE REIMBURSED L OSS OF RS.7,15,39,000 TO TWO SUBSIDIARY COMPANIES. THE AS SESSEE FURTHER CLAIMS THAT SUCH LOSS HAS BEEN CLAIMED ON THE BASIS OF COST OF NOCIL SHARES HELD BY TWO SUBSIDIARY COMPANIES, IN THEIR B OOKS OF ACCOUNT. THE ASSESSEE HAS ARRIVED AT LOSS BY REDUCING COST OF SH ARES IN THE BOOKS OF ACCOUNT OF SUBSIDIARY COMPANIES FROM THE SALE PROCE EDS RECEIVED BY ILFS ON SALE OF SHARES. THEREFORE, WHETHER LOSS CL AIMED BY THE ASSESSEE IS BASED ON COST OF SHARES HELD BY TWO SUB SIDIARY COMPANIES FROM THE DATE OF ACQUISITION OF SUCH SHARES OR THE COST AS ON THE DATE OF PLEDGING THE SHARES WITH ILFS FOR SECURITY OF LOAN HAS TO BE ASCERTAINED. IN CASE, THE ASSESSEE HAS COMPUTED LOSS BY TAKING I NTO ACCOUNT COST OF NOCIL SHARES AS PER ITS BOOKS OF ACCOUNT AND THEN A PPLIED THE BENEFIT OF INDEXATION TO ARRIVE AT THE LOSS AS ON THE DATE OF SALE OF SHARES OF ILFS, THEN SUCH CLAIM CANNOT BE ALLOWED, BECAUSE TH E BENEFIT OF INDEXATION IS ONLY FOR THE PURPOSE OF COMPUTATION O F CAPITAL GAIN, BUT NOT FOR THE PURPOSE OF ARRIVING AT REAL LOSS INCURRED O N ACCOUNT OF SALE OF SHARES. IN CASE, THE ASSESSEE HAS ARRIVED AT A LOS S BY TAKING INTO ACCOUNT THE PRICE OF SHARES OF NOCIL AS ON THE DATE OF PLEDGING SUCH SHARES WITH ILFS AND REDUCED FROM THE SALE PRICE OF SHARES, THEN THE TOTAL LOSS CLAIMED BY THE ASSESSEE CAN BE ALLOWED I N TOTAL. THE FACTS ARE NOT CLEAR. THOUGH THE ASSESSEE HAS FILED COPIES OF RETURNS FILED BY TWO 18 ITA 5288/MUM/20111 SUBSIDIARY COMPANIES FOR AY 2002-03, ON PERUSAL OF STATEMENT OF LONG TERM CAPITAL LOSS COMPUTED BY THE COMPANIES, IT APP EARS THAT THE COMPANIES HAVE APPLIED THE BENEFIT OF INDEXATION TO ARRIVE AT A LOSS. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE I SSUE NEEDS TO BE RE- EXAMINED BY THE AO FOR THE LIMITED PURPOSE OF VERI FICATION OF FACTS WITH REGARD TO COMPUTATION OF LOSS ARRIVED AT BY THE PAR TIES IN TERMS OF THEIR AGREEMENT. ACCORDINGLY, WE SET ASIDE THE ISSUE TO THE FILE OF THE AO AND DIRECT HIM TO CAUSE NECESSARY ENQUIRIES IN THE LIGH T OF OUR DISCUSSION HEREINABOVE, AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 24. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED, FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH OCTOBER, 2018. SD/- SD/- (PAWAN SINGH) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 17 TH OCTOBER, 2018 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) BY ORDER 4. CIT 5. DR /TRUE COPY/ SR.PS, ITAT, MUMBAI