Appeal Details
Counselvise Citation
[2018] 119 COUNSELVISE.COM (IT) 5032 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 8 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
09-10-2018
Appeal Filed By
Department
Order Result
Allowed
Bench Allotted
Not Allotted
Assessment Year
2012-2013
Appeal Filed On
24-01-2017
Judgement Text
, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A , MUMBAI , . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.534/MUM/2017 ASSESSMENT YEAR 2012-13 ACIT CIRCLE-6(1)(2), R. NO.536, 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, CHURCHGATE, MUMBAI-400020 / VS. M/S ASK INVESTMENT MANAGERS PVT. LTD. 1 ST FLOOR BANDBOX HOUSE, DR. AB ROAD, WORLI, MUMBAI-400030 ( / REVENUE) ( !' /ASSESSEE) P.A. NO. AAFCA2302P / REVENUE BY SHRI NITIN WAGHMODE-DR !' / ASSESSEE BY SHRI J.D. MISTRI SR. ADVOCATE # $ % '& / DATE OF HEARING : 04/10/2018 % '& / DATE OF PRONOUNCEMENT 09/10/2018 ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATE D 08/11/2016 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, DELETING THE DISALLOWANCE OF RS.1,02,48,995/- MADE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 (HEREINAFTE R THE ACT) READ WITH RULES 8D OF THE INCOME TAX RULES, 19 62, RELYING UPON THE DECISION IN THE CASES OF J. M. FIN ANCIAL AND INVESTMENT CONSULTANTS PVT. LTD. IN ITA NO.92/MUM/2 012 AND GARWARE WALL ROPES IN ITA NO.5408/MUM/2012. 2. DURING HEARING, SHRI NITIN WAGHMODE, LD. DR, DEFENDED THE DISALLOWANCE MADE BY THE LD. ASSESSING OFFICER BY ADVANCING ARGUMENTS WHICH ARE IDENTICAL TO THE G ROUND RAISED. ON THE OTHER HAND, THE LD. SR. ADVOCATE, SH RI J. D. MISTRI, DEFENDED THE IMPUGNED ORDER BY EXPLAINING T HAT THE NO DIVIDEND INCOME WAS EARNED BY THE ASSESSEE FOR W HICH OUR ATTENTION WAS INVITED TO PAGE 11, 23 AND 39 OF THE PAPER BOOK BY FURTHER CLAIMING THAT THE ISSUE IN HAND IS COVERED BY THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL I N THE CASE OF ACIT VS VIREET INVESTMENT PVT. LTD. (ITA NO.502/DEL/2012), ORDER DATED 16/06/2017. ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 3 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION FROM THE AFORESAID ORDER OF THE TRIBUNAL DATED 16/0 6/2017 FOR READY REFERENCE AND ANALYSIS:- THE CAPTIONED DEPARTMENTAL APPEAL AND THE ASSESSEE S CROSS-OBJECTIONS HAVE BEEN PREFERRED AGAINST THE OR DER DATED 01- 11-2011 PASSED BY THE LD. COMMISSIONER OF INCOME-TA X (APPEALS)- XIX, NEW DELHI IN APPEAL NO. 131/2010-11 RELATING T O ASSESSMENT YEAR 2008-09. 2. THE HONBLE PRESIDENT, INCOME-TAX APPELLATE TRIB UNAL, HAS CONSTITUTED THIS SPECIAL BENCH TO ADJUDICATE THE FO LLOWING QUESTION: WHETHER THE EXPENDITURE INCURRED TO EARN EXEMPT IN COME COMPUTED U/S 14A COULD NOT BE ADDED WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY WAS CARRYING ON THE BUSINESS AS FINANCE AND INVESTM ENT COMPANY, MAKING INVESTMENT IN SHARES AND SECURITIES AND ADVANCING MONEYS AND BORROWING MONEYS TO/ FROM INDU STRIAL ENTERPRISES. THE ASSESSEE HAD FILED ITS RETURN OF I NCOME SHOWING INCOME OF RS. 6,17,39,487/-. HOWEVER, THE T AX WAS PAID U/S 115JB AT AN INCOME OF RS. 32,18,30,990/-. 3.1. THE AO NOTICED THAT THE ASSESSEE HAD SHOWN INC OME FROM OPERATION AT RS. 43,98,75,523/- WHICH INCLUDE D THE FOLLOWING INCOMES UNDER VARIOUS HEADS, AS FOLLOWS: I. SPECULATION PROFIT (PROFIT/LOSS) ON F&O RS. -185/- II. INTEREST INCOME RS. 44,44,186/- III. SHORT TERM GAIN ON SALE OF INVESTMENTS RS. 7,10,20 ,860/- IV. WINNING FROM RACE HORSES RS. 486/- RS. 7 ,54,65,532/- 3.2. HE FURTHER NOTED THAT AS PER SCHEDULE 13 & 14 OF THE P&L A/C, THE ASSESSEE HAD CLAIMED EXPENSES AT A TOTAL AMOUNT OF RS. ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 4 3,42,11,767/- [UNDER THE HEAD SALARY & OTHER BENEF ITS AT RS. 2,00,035/- AND ADMINISTRATION AND OTHER EXPENSES AT RS. 3,40,11,732/-]. THIS INCLUDED THE AMOUNT OF RS. 1,1 9,257/- TOWARDS HORSE RACE EXPENSES. THE AO, ACCORDINGLY, C ONCLUDED THAT APART FROM THE HORSE RACE EXPENSES, IN RESPECT OF W HICH AN INCOME OF RS. 486/- HAD BEEN SHOWN BY THE ASSESSEE, THE EX PENSES CLAIMED BY THE ASSESSEE WERE AT RS. 3,40,92,510/-. HE, ACCO RDINGLY, POINTED OUT THAT IF THE AMOUNT OF RS. 1,19,257/- (SIC COR RECT FIGURE RS. 486/-), WAS CONSIDERED SEPARATELY, THE AMOUNT OF RS . 7,53,45,789/- (SIC CORRECT FIGURE RS. 7,54,65,046), [I.E. 7,54 ,65,532-1,19,257/- (SIC CORRECT FIGURE RS. 486/-], WAS THE INCOME FROM ITS OPERATIONS. APART FROM THIS, AMOUNT OF RS. 7,54,65,532/-, WHICH HAD BEEN OFFERED FOR TAX, THE REMAINING AMOUNT OF RS. 36,44, 09,991/- (I.E. 43,98,75,523-7,54,65,532) HAD BEEN CLAIMED BY THE A SSESSEE COMPANY AS EXEMPT INCOME. THIS AMOUNT COMPRISED OF EXEMPT DIVIDENDS, TAX FREE INTEREST INCOME AND LONG TERM C APITAL GAINS. 3.3. THE AO NOTICED THAT ASSESSEE HAD OFFERED DISAL LOWANCE OF RS. 33,95,401/- U/S 14A AS PER RULE 8D, WHICH, AS PER A SSESSEE, WAS WORKED OUT @ .5% OF AVERAGE VALUE OF ITS INVESTMENT ON THE BASIS OF THEIR VALUE AS AT OPENING AND CLOSING OF THE REL EVANT FINANCIAL YEAR. AS PER ASSESSEES WORKING, DISALLOWANCE U/S 1 4A AMOUNTING TO RS. 14,73,715/- WAS IN RESPECT OF EXEMPT DIVIDEN D INCOME AND RS. 19,21,687/- WAS IN RESPECT OF LONG TERM CAPITA L GAIN, CLAIMED EXEMPT U/S 10(38) OF THE I.T. ACT. 3.4. HOWEVER, AO DID NOT ACCEPT THE ASSESSEES CONT ENTION AS THE MAIN SOURCE OF ASSESSEES INCOME WAS FROM DIVIDEND AND OTHER TAX FREE INCOMES. KEEPING IN VIEW THE EXEMPT INCOME, CL AIMED BY THE ASSESSEE, BEING RS. 36,44,09,991/-, THE AO COMPUTED THE PROPORTIONATE EXPENSES U/S 14A AS UNDER: ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 5 3,40,92,510 X 7,53,45,789 / 43,97,56,266 (I.E. 43,9 8,75,523- 1,19,257)= 58,41,251 (RELATING TO REGULAR OPERATIONS). 3.5. THE PROPORTIONATE EXPENSE FOR NET DISALLOWANCE U/S 14A IN RESPECT OF EARNING OF THE ASSESSEE RELATED TO NON T AXABLE INCOME COMES TO RS. 2,82,51,259/- (RS. 3,40,92,510-58,41,2 51). HE, ACCORDINGLY, MADE ADDITION OF RS. 2,82,51,259/- 3.6. THE AO, WHILE COMPUTING THE BOOK PROFITS U/S 1 15JB, MADE THE ADDITION OF RS. 2,82,51,260/- ON ACCOUNT OF DIS ALLOWANCE U/S 14A AS PER P&L A/C. 3.7. IN COURSE OF ASSESSMENT PROCEEDINGS THE AO FUR THER NOTICED THAT IN RESPECT OF DIVIDEND INCOME FROM MUTUAL FUN DS, CLAIMED EXEMPT BY THE ASSESSEE, SUBSEQUENT CAPITAL LOSSES ( SHORT TERM AND LONG TERM) WERE INCURRED ON ACCOUNT OF SALE/ TRANSF ER OF SUCH MUTUAL FUND UNITS. FROM THE DETAIL FURNISHED BY ASS ESSEE IT WAS NOTICED THAT AN AMOUNT OF RS. 64,000/- HAD BEEN TAK EN AS THE AMOUNT DISALLOWABLE U/S 94(7) IN RESPECT OF SHORT T ERM CAPITAL GAINS WITHOUT SECURITY TRANSACTION TAX. SIMILARLY, AN AMOUNT OF R.S 25,686/- HAD BEEN TAKEN AS THE AMOUNT DISALLOWABLE U/S 94(7) IN RESPECT OF SHORT TERM CAPITAL GAIN. 3.8. ON PERUSAL OF THE DETAILS, THE AO NOTICED THAT THE AMOUNT OF RS. 64,000/- WAS THE NET LOSS ON SALE/ PURCHASE OF UNITS OF VARIOUS MUTUAL FUNDS. HE FOUND THAT ASSESSEE HAD CLAIMED LO SS ON SALE OF INVESTMENT IN CONTRAVENTION OF PROVISIONS OF SEC. 9 4(7), AS THE INVESTMENT HAD BEEN CLEARED BY THE ASSESSEE WITHIN A PERIOD OF 3 MONTHS PRIOR TO THE RECORD DATE FOR DIVIDEND AND WE RE WITHIN A PERIOD OF 3 MONTHS AFTER SUCH RECORD DATE. HE, ACCO RDINGLY, MADE AN ADDITION OF RS. 64,000/- AND RS. 25,686/-. 3.9. THE AO FURTHER NOTICED THAT ASSESSEE COMPANY H AD GIVEN LOANS TO VARIOUS PERSONS AND ENTITIES AS NOTED AT PAGE 8 PARA IV.3 OF HIS ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 6 ORDER. FROM THE DETAILS FURNISHED, THE AO FOUND THA T EXCEPT IN THE CASE OF SNAM INVESTMENT PVT. LTD., TO WHICH INTERES T @ 6% HAD BEEN CHARGED, NO INTEREST HAD BEEN CHARGED/ RECEIVE D BY THE ASSESSEE IN RESPECT OF LOANS/ ADVANCES GIVEN TO THE OTHER PARTIES. 3.10. AFTER CONSIDERING THE ASSESSEES REPLY, HE MA DE ADDITION TO ASSESSEES TOTAL INCOME ON ACCOUNT OF INTEREST I NCOME COMPUTED @ 12% AS PER DETAILS GIVEN FROM PAGES 11 TO 12 OF H IS ORDER AND MADE ADDITION OF RS. 4,02,58,032/-. 3.11. BEFORE LD. CIT(A), THE ASSESSEES REPRESENTAT IVE OBJECTED TO THE METHOD OF WORKING OUT DISALLOWANCE U/S 14A BY AO AND POINTED OUT THAT THE ASSESSEE, WHILE WORKIN G OUT THE DISALLOWANCE, HAD TAKEN ONLY THE VALUE OF INVESTME NT YIELDING TAX EXEMPT INCOME INSTEAD OF TOTAL VALUE OF INVESTMENTS . . HOWEVER LD. CIT(A), IN VIEW OF THE DECISION OF SPECIAL BENCH OF THE ITAT IN THE CASE OF CHEMINVEST LTD. VS. ITO 121 ITD 318 (DE L)(SB), DID NOT AGREE WITH THIS CONTENTION OF ASSESSEE AND REQU IRED IT TO WORK OUT DISALLOWANCE BY TAKING THE VALUE OF INVESTMENT AS PER BOOKS OF A/C, WHICH WAS WORKED OUT AT RS. 91,95,698/- AS UND ER: OPENING BALANCE OF INVESTMENT = RS. 1,81,95,07,31 8/- CLOSING BALANCE OF INVESTMENT = RS. 1,85,87,71,9 86/- AVERAGE VALUE OF INVESTMENT = RS. 1,83,91,39,652 /- % OF AVERAGE VALUE OF INVESTMENT U/R 8D(2)(III) = RS. 91,95,698/- 3.12. THUS, THE LD. CIT(A) COMPUTED THE DISALLOWAN CE UNDER RULE 8D(2)(III) AND NO DISALLOWANCE WAS MADE UNDER RULE 8D(2)(I) AND RULE 8D(2)(II). THE ASSESSEE HAS FILED CROSS OBJECTION AGAINST THE FINDINGS OF LD. CIT(APPEALS) IN CONSIDERING THE VALUE OF INVESTMENTS AS PER BOOKS OF ACCOUNT IN STEAD OF ONLY THOSE INVESTMENTS WHICH YIELDED TAX FREE INCOME FOR COMPUTING DISALLOWANCE UNDER RULE 8D(2)(III) AND REVENUE IS A GGRIEVED AS NO DISALLOWANCE WAS MADE UNDER RULE 8D(2)(I) AND RU LE 8D(2)(II). ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 7 3.13. IN REGARD TO THE COMPUTATION OF BOOK PROFIT U /S 115JB, IT WAS SUBMITTED BEFORE LD. CIT(A) THAT ONLY EXPENDITU RE RELATED TO THE TAX FREE INCOME OTHER THAN INCOME U/S 10(38) CO ULD BE ADDED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 115JB. IT WAS FURTHER ARGUED THAT ONLY 24.9% OF EXPENSES, RELATED TO IN COME DECLARED U/S 10(34) AND 10(35), IS TO BE ADDED IN VIEW OF F OLLOWING BREAK UP OF EXPENDITURE ON PROPORTIONATE BASIS: PARTICULARS AMOUNT PERCENTAGE TO TOTAL INCOME EXEMPT UNDER SUB-SECTION (38) OF SECTION 10 24,22,20,566/- 75.6% DIVIDEND INCOME EXEMPT UNDER SUB-SECTION (34) OF SECTION 10 7,88,64,220/- 24.44% INTEREST INCOME ON UNIT SCHEME 1964 EXEMPT UNDER SUB-SECTION (35) OF SECTION 10 16,32,987/- 0.50% TOTAL 32,27,17,773/- 100% 3.14. LD. CIT(A) OBSERVED THAT AS PER CLAUSE (F) OF EXPLANATION 1 TO SEC. 115JB(2), ONLY THE EXPENDITUR E RELATING TO INCOME OTHER THAN INCOME ASSESSABLE U/S 10(38) WAS TO BE ADDED WHILE CALCULATING BOOK PROFITS U/S 115JB PROFITS. H E, ACCORDINGLY, DIRECTED THE AO TO ADD ONLY RS. 22,93, 407/- (BEING 24.9% OF RS. 91,95,698/-) OF THE DISALLOWANCE OF EX PENDITURE UPHELD BY HIM. REVENUE IS AGGRIEVED BY THE FINDING OF LD. CIT(APPEALS) IN CONSIDERING ONLY RS. 22,93,407/- IN STEAD OF RS.91,95,698/- FOR MAKING ADJUSTMENT OF DISALLOWANC E COMPUTED UNDER SECTION 14A, READ WITH RULE 8D, WHIL E COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE ACT. 3.15. AS REGARDS THE DISALLOWANCE OF SUM OF RS. 89 ,686/- U/S 94(7) BY AO, THE ASSESSEE POINTED OUT BEFORE LD. CI T(A) THAT THERE HAS BEEN AN ARITHMETICAL ERROR IN COMPUTATION OF DISALLOWANCE U/S 94(7). THE COMPUTATION WAS DONE WI TH RESPECT TO DATE OF RECEIPT OF DIVIDEND WHILE SECTION 94(7) SPECIFIES THE REFERENCE DATE AS THE RECORD DATE. HE, ACCORDINGLY, REVISED COMPUTATION U/S 94(7) WITH REFERENCE TO RECORD DATE , WHICH WAS ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 8 SUBMITTED BEFORE LD. CIT(A), ACCORDING TO WHICH DIS ALLOWANCE WORKED OUT TO RS. 2,884/- ONLY, WHICH, LD. CIT(A) R EFERRED TO THE AO FOR VERIFICATION. 3.16. AS REGARDS THE ADDITION OF RS. 4,02,58,032/- AS NOTIONAL INTEREST INCOME ON INTEREST FREE LOANS AND ADVANCES GIVEN BY THE ASSESSEE, LD. CIT(A) DELETED THE ADDITION, INTER AL IA, OBSERVING THAT ASSESSEE HAD NOT CLAIMED ANY INTEREST EXPENDIT URE AND THE AO COULD NOT CHARGE INTEREST ON AMOUNTS ADVANCED O N NOTIONAL BASIS DISREGARDING THE FACT THAT THERE WAS NO FINDI NG BY THE AO THAT THE ASSESSEE ACTUALLY RECEIVED INTEREST AMOUNT . 3.17. BEING AGGRIEVED WITH THE ORDER OF LD. CIT(A) THE DEPARTMENT HAS FILED APPEAL BEFORE THE ITAT IN WHIC H FOLLOWING GROUNDS WERE RAISED: 1. ' ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS. 1,90,55,561/- MADE U/S/14A OF THE I.T. ACT 1961 BY HOLDING THAT THE AO FAILED TO GIVE A FINDING THAT SOME EXPENSES WERE INCURRED FOR EARNING EXEMPT INCOME AND THAT THERE W AS NO INTEREST PAYMENT AND HENCE DISALLOWANCE UNDER RULE 8D(I)AND 8D(II)WAS NOT CALLED FOR.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) ERRED IN DIRECTING THAT THE SUM OF RS.L,90,55,561/- BE NOT TREATED AS INCOME OF THE AS SESSEE COMPANY WHILE COMPUTING BOOK PROFITS U/S 115JB IF T HE INCOME TAX ACT,1961.' 3.'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) ERRED IN GIVING DIRECTIONS TO TH E AO TO VERIFY THE CALCULATIONS U/S 94(7) OF THE INCOME TAX ACT,19 61 WITHOUT THERE BEING NO BASIS FOR THAT.' '4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) ERRED IN DELETING AN ADDITION OF RS.4,02,5S,032/- ON ACCOUNT OF INTEREST INCOME WITH OUT APPRECIATING THE FACTS THAT THE ASSESSEE HAD FAILED TO JUSTIFY AND EXPLAIN NON- CHARGING OF INTEREST FROM VARIOUS PART IES WITHOUT ANY BASIS.' 5. 'THE APPELLANT CRAVES LEAVE FOR RESERVING THE RI GHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND (S) OF APPE AL AT ANY TIME BEFORE OR DURING THE HEARING OF APPEAL.' 3.18. THEREAFTER ON 25-2-2014 THE ASSESSEE FILED CR OSS- OBJECTIONS, TAKING FOLLOWING GROUNDS: ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 9 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) E RRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A THE INCOME TAX ACT, 1961 ('THE ACT') TO THE EXTENT OF RS. 91.95,698 BY OBSER VING THAT FOR THE PURPOSE OF COMPUTING DISALLOWANCE UNDER RULE 8D OF THE INCOME TAX RULES, 1962 ('THE RULES'), TOTAL INVESTM ENTS AS APPEARING IN THE BALANCE SHEET NEEDS TO BE CONSIDER ED AS AGAINST THOSE INVESTMENTS WHICH ARE CAPABLE OF EARN ING EXEMPT INCOME. 2. THAI THE COMMISSIONER OR INCOME TAX ( APPEALS) ERRED ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN MAKING UPWARD ADJUSTMENT OF DISALLOWANCE COMPUTED UNDER SECTION 14A, READ WITH RULE 8D, WHILE COMPUTI NG 'BOOK PROFIT' UNDER SECTION 115JB OF THE ACT. 2.1 THAT THE COMMISSIONER OF INCOME TAX (APPEALS) E RRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE DISAL LOWANCE COMPUTED UNDER SECTION 14A OF THE ACT READ WITH RUL E 8D OF THE RULES DOES NOT REPRESENT ACTUAL EXPENDITURE INCURRE D FOR EARNING EXEMPT INCOME AND THE SAME, THEREFORE, NEED NOT TO BE ADDED BACK WHILE COMPUTING 'BOOK PROFIT' UNDER SECT ION 115JB OF THE ACT. 3.19. THE ASSESSEE HAS FILED APPLICATION FOR CONDON ATION OF DELAY IN FILING THE MEMORANDUM OF CROSS OBJECTIONS. IT IS STATED IN THE PETITION THAT THERE IS A DELAY OF APPROXIMATELY 686 DAYS IN FILING THE CROSS OBJECTION IS BECAUSE WHEN THE APPE AL WAS DECIDED BY LD. CIT(APPEALS), THE THEN COUNSEL ADVISED FOR N OT FILING THE APPEAL/CROSS OBJECTION. HOWEVER, THE CROSS-OBJECTIO N HAS BEEN FILED ON LEGAL ADVICE OF NEW COUNSEL, ENGAGED BY AS SESSEE. FURTHER, FROM THE FACTS NARRATED IN THE PETITION, I T IS EVIDENT THAT SINCE NO EFFECTIVE HEARING TOOK PLACE BETWEEN 4-4-2 012 TO 10-2- 2014, THE ASSESSEE WAS PREVENTED BY REASONABLE CAU SE FROM RAISING THE VARIOUS ISSUES BEFORE TRIBUNAL BY INVOK ING RULE 27. CONSIDERING THESE FACTS IN ORDER TO IMPART SUBSTANT IAL JUSTICE TO ASSESSEE, WE ARE OF THE OPINION THAT THE DELAY IN FILING THE CROSS- OBJECTION DESERVES TO BE CONDONED BECAUSE ASSESSEE IS PRIMARILY RAISING A LEGAL ISSUE AND WAS UNDER A BONA FIDE BEL IEF THAT THERE WAS NO PRESSING NEED FOR FILING SEPARATE APPEAL OR FILING CROSS- OBJECTION AS PER THE ADVICE OF ITS EARLIER COUNSEL. IT IS WELL SETTLED LAW THAT IF ASSESSEE IS ACTING UNDER A LEGAL ADVIC E THEN, IF, PREJUDICE IS LIKELY TO BE CAUSED ON ACCOUNT OF SUCH LEGAL ADVICE, THEN THE DELAY IN PREFERRING APPEAL SHOULD BE COND ONED. WE, ACCORDINGLY, CONDONE THE DELAY IN FILING THE CROSS- OBJECTION. ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 10 3.20. THEREAFTER, VIDE FURTHER ORDER DATED 10-9-201 4 THE CROSS OBJECTION, FILED BY ASSESSEE, WAS ALSO DIRECT ED TO BE LISTED ALONG WITH THE APPEAL BEFORE THE SPECIAL BENCH FOR DISPOSAL IN ACCORDANCE WITH LAW. ACCORDINGLY, WE FIRST PROCEED TO DECIDE THE MAIN QUESTION REFERRED FOR DECISION OF SPECIAL BENC H. FIRST WE WILL TAKE UP THE DEPARTMENTAL APPEAL AS FAR AS GROUND NO. 1 IS CONCERNED, THE CONTENTIO N OF ASSESSEE BEFORE ASSESSING OFFICER AS WELL AS BEFORE LD. CIT(APPEALS) WAS THAT ASSESSEE HAD NO INTEREST BEA RING LOANS AND HENCE THERE WAS NO LIABILITY TO PAY INTEREST. F URTHER, NO INTEREST EXPENDITURE HAD BEEN INCURRED OR CLAIMED I N THE P/L ACCOUNT. THEREFORE, NO DISALLOWANCE WAS MADE BY LD. CIT(APPEALS) INVOKING RULE 8D(2)(I) AND RULE 8D(2)( II). NOTHING HAS BEEN BROUGHT ON RECORD TO CONTROVERT TH E FINDINGS OF LD. CIT(APPEALS) BY REVENUE. WE, THEREFORE, DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF LD. CIT(AP PEALS). IN THE RESULT THIS GROUND IS DISMISSED. 4. AT THE OUTSET LD. COUNSEL SUBMITTED THAT KEEPING IN VIEW THE VARIOUS GROUNDS RAISED BY THE DEPARTMENT AND IN CRO SS OBJECTION, THE QUESTION REFERRED FOR ADJUDICATION BEFORE SPECI AL BENCH MAY BE REFRAMED AS UNDER: WHETHER IN TERMS OF CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB, ANY ADJUSTMENT IS REQUIRED TO BE MADE FOR TH E DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 WHILE COMPUTING B OOK PROFIT OF THE APPELLANT ON THE GROUND THAT THE SAME REPRES ENTS THE ACTUAL EXPENDITURE INCURRED FOR EARNING OF THE EXEM PT INCOME 4.1. LD. COUNSEL REFERRED TO RELEVANT PROVISIONS OF CLAUSE (F) TO EXPLANATION 1 TO SECTION 115JB WHICH ARE REPRODU CED HEREUNDER: 'SPECIAL PROVISION FOR PAYMENT OF TAX BY CERTAIN CO MPANIES. 115JB. (1) NOTWITHSTANDING ANYTHING CONTAINED IN AN Y OTHER PROVISION OF THIS ACT, WHERE IN THE CASE OF AN ASSE SSEE, BEING A COMPANY, THE INCOME-TAX, PAYABLE ON THE TOTAL INCOM E AS COMPUTED UNDER THIS ACT IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AF TER THE 1ST DAY OF APRIL, 2012, IS LESS THAN EIGHTEEN AND ONE-H ALF PER CENT OF ITS BOOK PROFIT, SUCH BOOK PROFIT SHALL BE DEEMED T O BE THE TOTAL INCOME OF THE ASSESSEE AND THE TAX PAYABLE BY THE A SSESSEE ON SUCH TOTAL INCOME SHALL BE THE AMOUNT OF INCOME-TAX AT THE RATE OF EIGHTEEN AND ONE-HALF PER CENT. (2) EVERY ASSESSEE,- ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 11 (A) BEING A COMPANY, OTHER THAN A COMPANY REFERRED TO IN CLAUSE (B), SHALL, FOR THE PURPOSES OF THIS SECTION , PREPARE ITS PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS Y EAR IN ACCORDANCE WITH THE PROVISIONS OF PART II OF SCHEDU LE VI TO THE COMPANIES ACT, 1956 (1 OF 1956); OR . EXPLANATION 1 - FOR THE PURPOSES OF THIS SECTION, ' BOOK PROFIT' MEANS THE NET PROFIT AS SHOWN IN THE PROFIT AND LOS S ACCOUNT FOR THE RELEVANT PREVIOUS YEAR PREPARED UNDER SUB-SECTI ON (2), AS INCREASED BY- ------------ (F) THE AMOUNT OR AMOUNTS OF EXPENDITURE RELATABLE TO ANY INCOME TO WHICH SECTION 10 (OTHER THAN PROVISIONS C ONTAINED IN CLAUSE (38) THEREOF) OR SECTION 11 OR SECTION 12 AP PLY; --------------- IF ANY AMOUNT REFERRED TO IN CLAUSES (A) TO (I) IS DEBITED TO THE PROFIT AND LOSS ACCOUNT, AND AS REDUCED BY- (I) THE AMOUNT OF INCOME TO WHICH ANY OF THE PROVISIONS OF [SECTION 10 (OTHER THAN THE PROVISIONS CONTAINED IN CLAUSE (38) THEREOF) J OR SECTION 11 OR SECTION 12 APPLY, IF ANY SUCH AMOUNT IS CREDITED TO THE PROFIT AND LO SS ACCOUNT; OR 4.2. LD. COUNSEL HAS FILED DETAILED SUBMISSIONS BY WAY OF BROAD PROPOSITIONS, WHICH ARE PLACED ON RECORD, IN WHICH, ON THIS ASPECT, IT HAS BEEN POINTED OUT THAT SECTION 14A CA NNOT BE READ INTO IN SECTION 115JB FOR THE FOLLOWING REASONS: I. SECTION 115JB IS A COMPLETE CODE IN ITSELF AND IT O VERRIDES ALL OTHER PROVISIONS OF THE ACT . THE BOOK PROFIT IS DEEMED TO BE TOTAL INCOME OF ASSESSEE AND PROVIDES MECHANISM FOR COMPUTING SUCH BOOK PROFIT A ND CONSEQUENTIAL TAX LIABILITY THEREON. HE , INTER-ALIA, RELIED ON THE D ECISION OF HONBLE SUPREME COURT IN THE CASE OF AJANTA PHARMA LTD. V. CIT 327 ITR 305 II. SECTION 115JB BY A DEEMING FICTION DEEMS BOOK PROF IT AS THE TOTAL INCOME OF THE ASSESSEE, AT VARIANCE WITH THE INCOME COMPUTED UNDER NORMAL PROVISIONS OF THE ACT. HE RELIED ON THE DECISION IN THE CASE OF AJANTA PHARMA LTD. (SUPRA) AND ALSO ON CIT V. NALWA SONS I NVESTMENTS LTD. 327ITR 543 (DELHI) III. SECTION 115JB OF THE ACT DOES NOT AUTHORIZE THE AO TO GO BEYOND THE AUDITED FINANCIAL STATEMENT OF THE ASSESSEE. HE, INTER-ALIA , RELIED ON THE DECISION IN THE CASE OF APOLLO TYRES 255 ITR 273(SC) 4.3. HE, ACCORDINGLY, SUBMITTED THAT THERE COULD NO T BE ANY ROOM FOR MAKING ADJUSTMENT IN ACCORDANCE WITH ANY O THER PROVISION OF THE ACT, EXCEPT TO THE EXTENT SPECIFIE D UNDER EXPLANATION 1 TO THAT SECTION. ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 12 4.4. LD. COUNSEL SUBMITTED THAT TAX LIABILITY U/S 1 15JB OF THE ACT IS TO BE WORKED OUT ONLY ON THE BASIS OF ADJUST ED BOOK PROFIT AND NOT ON THE BASIS OF INCOME/ PROFIT COMPUTED UND ER REGULAR PROVISIONS OF THE ACT. 4.5. TO BUTTRESS HIS SUBMISSION LD. COUNSEL POINTED OUT THAT CLAUSE (IV) OF EXPLANATION 1 TO SECTION 115JB (AS APPLICABLE UP TO ASSESSMENT YEAR 2005-06) PROVIDED THAT BOOK PROF IT HAD TO BE REDUCED BY THE AMOUNT OF PROFITS ELIGIBLE FOR DEDUC TION U/S 80HHC, COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR C LAUSE (C) OF SUB-SECTION (3) OR SUB-SECTION (3A), AS THE CASE MA Y BE, OF THAT SECTION. HE POINTED OUT THAT, AS PER THE ASSESSEE, THE BOOK PROFIT HAD TO BE REDUCED BY THE AMOUNT OF DEDUCTION ADMISS IBLE, COMPUTED WITH REFERENCE TO BOOK PROFIT. THE REVENUE , ON THE OTHER HAND, CONTENDED THAT DEDUCTION U/S 80HHC ADMI SSIBLE UNDER THE NORMAL PROVISIONS OF THE ACT, HAD ONLY TO BE REDUCED FROM THE BOOK PROFIT. HE POINTED OUT THAT IT WAS HE LD THAT SECTION 115J/ 115JA/ 115JB BEING COMPLETE CODE, DEDUCTION A DMISSIBLE U/S 80HHC, TO BE REDUCED FROM BOOK PROFIT, IN TERMS OF CLAUSE (IV) OF THE EXPLANATION HAD TO BE COMPUTED WITH REFERENCE TO BOOK PROFIT. HE HAS RELIED ON VARIOUS DECISIONS IN SUPPORT OF HIS CONTENTION. 4.6. LD. COUNSEL FURTHER POINTED OUT THAT IN CERTAI N DECISIONS, IN CONTEXT OF PROVISIONS OF CLAUSE (III) OF EXPLANA TION 1 TO SECTION 115JB OF THE ACT, IT HAS BEEN HELD THAT LOWER OF LO SS OR UNABSORBED DEPRECIATION HAD TO BE DETERMINED IN ACC ORDANCE WITH THE FIGURES APPEARING IN THE BOOKS OF A/C AND NOT O N THE BASIS OF NORMAL PROVISIONS. ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 13 4.7. LD. COUNSEL HAS SUBMITTED THAT CLAUSE (F) AND CLAUSE (II) OF SECTION 115JB ARE BASED ON MATCHING PRINCIPLES O F ACCOUNTING. THE WRITTEN SUBMISSIONS ARE REPRODUCED HEREUNDER: 4. CLAUSE (F) AND CLAUSE (II) OF SECTION 115JB BASE D ON MATCHING PRINCIPLE OF ACCOUNTANCY. MAT REGIME WAS FIRST INTRODUCED BY INSERTION OF SEC TION 115J VIDE FINANCE ACT, 1987 W.E.F. 01.04.1988, AND LATER SUBSTITUTED BY SECTION 115JA OF THE ACT W.E.F. 01.04.1997. UNDE R BOTH THESE SECTIONS, THE ABOVE CLAUSES (II) AND CLAUSE (F) OF SECTION 115JB OF THE ACT DID FIND MENTION IN THE EXPLANATION TO T HAT SECTIONS INASMUCH AS WHILE COMPUTING ADJUSTED BOOK PROFIT, E XEMPT INCOME CREDITED TO THE PROFIT AND LOSS ACCOUNT WAS REQUIRED TO BE EXCLUDED AND SIMULTANEOUSLY, UPWARD ADJUSTMENT W AS TO BE MADE ON ACCOUNT OF CORRESPONDING ACTUAL EXPENDITURE DEBITED TO THE PROFIT AND LOSS ACCOUNT RELATABLE THERETO. T HIS TREATMENT IS, IN OUR RESPECTFUL SUBMISSION, BASED ON THE MATC HING PRINCIPLE OF ACCOUNTANCY WHICH PROVIDES THAT EXPENS ES ARE RECOGNIZED IN THE PROFIT AND LOSS ACCOUNT ONLY TO T HE EXTENT RELATABLE TO THE ACCRUAL OF THE CORRESPONDING INCOM E. THE MATCHING PRINCIPLE FINDS MENTION UNDER THE ACCR UAL CONCEPT, WHICH IS ONE OF THE FUNDAMENTAL ACCOUNTING ASSUMPTIONS, OUTLINED IN ACCOUNTING STANDARD-L 'DIS CLOSURE OF ACCOUNTING POLICIES' ISSUED BY THE INSTITUTE OF CHA RTERED ACCOUNTANTS OF INDIA ( ICAI). REFERENCE, IN THIS REGARD, MAY ALSO BE MADE TO THE FRAMEWORK ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA ('ICAI') [SEE PAGES 498-503 @501 OF THE PAPER BOOK] , WHEREIN IT HAS BEEN MENTIONED AS UNDER: '93. EXPENSES ARE RECOGNIZED IN THE STATEMENT OF PR OFIT AND LOSS WHEN A DECREASE IN FUTURE ECONOMIC BENEFITS RELATED TO A DECREASE IN AN ASSET OR AN INCREASE OF A LIABILITY HAS ARISEN THAT CAN BE MEASURED RELIABLY. THIS MEANS, IN EFFECT, TH AT RECOGNITION OF EXPENSES OCCURS . SIMULTANEOUSLY WITH THE RECOGN ITION OF AN INCREASE 'OF LIABILITIES OR A DECREASE IN ASSETS (F OR EXAMPLE; THE ACCRUAL OF EMPLOYEES', SALARIES OR THE DEPRECIATION OF PLANT AND MACHINERY). 94. MAN V EXPENSES ARE RECOGNISED IN THE STATEMENT OF PROFIT AND LOSS ON THE BASIS OF A DIRECT ASSOCIATION BETWE EN THE COSTS INCURRED AND THE EARNING OF SPECIFIC ITEMS OF INCOM E. THIS PROCESS, COMMONLY REFERRED TO AS THE MATCHING OF COSTS WITH REVENUES, INVOLVES THE SIMULTANEOUS OR COMBINE D RECOGNITION OF REVENUES AND EXPENSES THAT RESULT DI RECTLY AND JOINTLY FROM THE SAME TRANSACTIONS OR OTHER EVENTS; FOR EXAMPLE, THE VARIOUS COMPONENTS OF EXPENSE MAKING UP THE COS T OF GOODS SOLD ARE RECOGNISED AT THE SAME TIME AS THE INCOME DERIVED FROM THE SALE OF THE GOODS. HOWEVER, THE APPLICATION OF THE MATCHING CONCEPT UNDER THIS FRAMEWORK DOES NOT ALLOW THE REC OGNITION OF ITEMS IN THE BALANCE SHEET WHICH DO NOT MEET THE DE FINITION OF ASSETS OR LIABILITIES.' (EMPHASIS SUPPLIED) ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 14 ON PERUSAL OF THE ABOVE EXTRACTS OF THE FRAMEWORK, IT WILL BE APPRECIATED THAT UNDER THE MATCHING PRINCIPLE, ONLY THOSE COSTS ARE RECOGNIZED IN THE PROFIT AND LOSS ACCOUNT WHICH HAVE DIRECT ASSOCIATION WITH THE EARNING OF INCOME. THE ABOVE MATCHING PRINCIPLE HAS ALSO BEEN DISCUSSE D BY THE SUPREME COURT IN THE CASE OF ROTORK CONTROLS INDIA PVT. LTD. V. CIT: 314 ITR 62 @ 73, WHILE UPHOLDING DEDUCTION OF WARRANTY LIABILITY PROVIDED IN THE BOOKS, AS UNDER: '13. IN THIS CASE' WE ARE CONCERNED WITH PRODUCT WARRANTIES. TO GIVE AN EXAMPLE OF PRODUCT WARRANTIES, A COMPANY DEALING IN COMPUTERS GIVES WARRANTY FOR A PERIOD OF 36 MONTHS FROM THE DATE OF SUPPLY. THE SAID COMPANY CONSIDERS FOLLOWING OPTIONS: (A) ACCOUNT FOR WARRANTY EXPENSE IN THE YEAR IN WHICH IT IS INCURRED; (B) IT MAKES A PROVISION FOR WARRANTY ONLY WHEN THE CUSTOMER MAKES A CLAIM; AND (C) IT PROVIDES FOR WARRANTY AT 2 PER CENT OF TURNOVER OF THE COMPANY BASED ON PAST EXPERIENCE {HISTORICAL TREND}. THE FIRST OPTION IS UNSUSTAINABLE SINCE IT WOULD TANTAMOUNT TO ACCOUNTING FOR WARRANTY EXPENSES ON CASH BASIS, WHICH IS PROHIBITED BOTH UNDER THE COMPANIES ACT. AS WELL AS BY THE ACCOUNTING STANDARDS WHICH REQUIRE ACCRUAL CONCEPT TO BE FOLLOWED. IN THE PRESENT CASE, THE DEPARTMENT IS INSISTING ON THE FIRST OPTION WHICH, AS STATED ABOVE, IS ERRONEOUS AS IT RULES OUT THE ACCRUAL CONCEPT. THE SECOND OPTION IS ALSO INAPPROPRIATE SINCE IT DOES NOT REFLECT THE EXPECTED WARRANTY COSTS IN RESPECT OF REVENUE ALREADY RECOGNIZED (ACCRUED). IN OTHER WORDS, IT IS NOT BASED ON MATCHING CONCEPT. UNDER THE MATCHING CONCEPT, IF REVENUE IS RECOGNIZED THE COST INCURRED TO EARN THAT REVENUE INCLUDING WARRANTY COSTS HAS TO BE FULLY PROVIDED (OR. WHEN VALVE ACTUATORS ARE SOLD AND THE WARRANTY COSTS ARE AN INTEGRAL PART O(THAT SALE PRICE THEN THE APPELLANT HAS TO PROVIDE (OR SUCH WARRANTY COSTS IN ITS ACCOUNT (OR THE RELEVANT YEAR, OTHERWISE THE MATCHING CONCEPT (AILS. IN SUCH A CASE THE SECOND OPTION IS ALSO INAPPROPRIATE. UNDER THE CIRCUMSTANCES, THE THIRD OPTION IS MOST APPROPRIATE BECAUSE IT FULFILS ACCRUAL CONCEPT AS WELL AS THE MATCHING CONCEPT. FOR DETERMINING AN APPROPRIATE HISTORICAL TREND, IT IS IMPORTANT THAT THE COMPANY HAS A PROPER ACCOUNTING SYSTEM FOR CAPTURING RELATIONSHIP BETWEEN THE NATURE OF THE SALES, THE WARRANTY PROVISIONS MADE AND THE ACTUAL EXPENSES INCURRED AGAINST IT SUBSEQUENTLY. THUS, THE DECISION ON THE WARRANTY PROVISION SHOULD BE BASED ON PAST EXPERIENCE OF ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 15 THE COMPANY. A DETAILED ASSESSMENT OF THE WARRANTY PROVISIONING POLICY IS REQUIRED PARTICULARLY IF THE EXPERIENCE SUGGESTS THAT WARRANTY PROVISIONS ARE GENERALLY REVERSED IF THEY REMAINED UNUTILIZED AT THE END OF THE PERIOD PRESCRIBED IN THE WARRANTY. THEREFORE, THE COMPANY SHOULD SCRUTINIZE THE HISTORICAL TREND OF WARRANTY PROVISIONS MADE AND THE ACTUAL EXPENSES INCURRED AGAINST IT. ON THIS BASIS A SENSIBLE ESTIMATE SHOULD BE MADE. THE WARRANTY PROVISION FOR THE PRODUCTS SHOULD BE BASED ON THE ESTIMATE AT YEAR END OF FUTURE WARRANTY EXPENSES. SUCH ESTIMATES NEED REASSESSMENT EVERY YEAR. AS ONE REACHES CLOSE TO THE END OF THE WARRANTY PERIOD, THE PROBABILITY THAT THE WARRANTY EXPENSES WILL BE INCURRED IS CONSIDERABLY REDUCED AND THAT SHOULD BE REFLECTED IN THE ESTIMATION AMOUNT. WHETHER THIS SHOULD BE DONE- THROUGH A PRO - RATA REVERSAL OR OTHERWISE WOULD REQUIRE ASSESSMENT OF HISTORICAL TREND. IF WARRANTY PROVISIONS ARE BASED ON EXPERIENCE AND HISTORICAL TREND(S) AND IF THE WORKING IS ROBUST THEN THE QUESTION OF REVERSAL IN THE SUBSEQUENT TWO YEARS, IN THE ABOVE EXAMPLE, MAY NOT ARISE IN A SIGNIFICANT WAY. IN OUR VIEW, ON THE FACTS AND CIRCUMSTANCES OF THIS CASE, PROVISION FOR WARRANTY IS RIGHTLY MADE BY THE APPELLANT- ENTERPRISE BECAUSE IT HAS INCURRED A PRESENT OBLIGATION AS A RESULT OF PAST EVENTS. THERE IS ALSO AN OUTFLOW OF RESOURCES. A RELIABLE ESTIMATE OF THE OBLIGATION WAS ALSO POSSIBLE: THEREFORE, THE APPELLANT HAS INCURRED A LIABILITY, ON THE FACT S AND CIRCUMSTANCES OF THIS CASE, DURING THE RELEVANT ASSESSMENT YEAR WHICH WAS ENTITLED TO DEDUCTION UNDER SECTION 37 OF THE 1961 ACT. THEREFORE, ALL THE THREE CONDITIONS FOR RECOGNIZING A LIABILITY FOR THE PURPOSES OF PROVISIONING STANDS SATISFIED IN THIS CASE. IT IS IMPORTANT TO NOTE THAT THERE ARE FOUR IMPORTANT ASPECTS OF PROVISIONING. THEY ARE - PROVISIONING WHICH RELATES TO PRESENT OBLIGATION, IT ARISES OUT OF OBLIGATING EVENTS, IT INVOLVES OUTFLOW OF RESOURCES AND LASTLY IT INVOLVES RELIABLE ESTIMATION OF OBLIGATION. KEEPING IN MIND ALL THE FOUR ASPECTS, WE ARE OF THE VIEW THAT THE HIGH COURT SHOULD NOT TO HAVE INTERFERED WITH THE DECISION OF THE TRIBUNAL IN THIS CASE. ' (EMPHASIS SUPPLIED) IN VIEW OF THE ABOVE, IT WILL BE NOTICED THAT MATCH ING PRINCIPLE OF ACCOUNTANCY IS CLEARLY EMBEDDED UNDER THE MAT RE GIME INASMUCH AS WHILE EXCLUDING EXEMPT INCOME CREDITED TO THE ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 16 PROFIT & LOSS ACCOUNT IN TERMS OF CLAUSE (II), PROF ITS ARE CONSEQUENTLY ADJUSTED BY ADDING BACK EXPENDITURE AC TUALLY RELATABLE THERETO WHICH IS DEBITED TO THE PROFIT AN D LOSS ACCOUNT. READING CLAUSE (T) AND CLAUSE (II) OF EXPLANATION T O SECTION 115JB OF THE ACT TOGETHER, IT IS THE SUBMISSION OF THE ASSESSEE RESPONDENT THAT ONLY EXPENSES DEBITED TO THE PROFIT AND LOSS ACCOUNT WHICH HAVE DIRECT AND PROXIMATE NEXUS WITH THE EXEMPT INCOME CREDITED TO THE PROFIT AND LOSS ACCOUNT, WHI CH IS EXCLUDED IN TERMS OF CLAUSE (II), HAVE TO BE ADDED BACK. 4.8. LD. COUNSEL SUBMITTED THAT SECTION 14A CONTEMP LATES DISALLOWANCE OF BOTH DIRECT AND INDIRECT EXPENDITUR E HAVING PROXIMATE CONNECTION WITH THE EXEMPT INCOME. HE SUB MITTED THAT IN TERMS OF SUB-SECTION (1) OF SECTION 14A OF THE A CT, ANY EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME IS NOT AN ALLOWABLE DEDUCTION THUS, THE PRE-REQUISITE CONDITI ON FOR APPLYING THE PROVISIONS OF SECTION 14A OF THE ACT IS THAT SO ME EXPENDITURE MUST BE INCURRED IN RELATION TO THE EARNING OF EX EMPT INCOME. THE SAID EXPRESSION IN RELATION TO HAS BEEN JUDIC IOUSLY EXPLAINED TO MEAN SOME REAL AND DOMINANT RELATIONSHIP. 4.9. IN THIS REGARD LD. COUNSEL HAS RELIED ON THE D ECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. WALFORD SHARE & STOCK BROKERS 326 ITR 1, WHEREIN IT HAS BEEN HELD BY THE APEX COURT THAT THERE MUST BE PROXIMATE RELATIONSHIP OF EXPEND ITURE WITH THE EXEMPT INCOME FOR THE PURPOSE OF MAKING DISALLOWANC E U/S 14A OF THE ACT. THIS DECISION WAS FOLLOWED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. V S. CIT 328 ITR 81. 4.10. HE FURTHER REFERRED TO THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD. 34 7 ITR 272, WHEREIN IT HAS BEEN HELD THAT NO DISALLOWANCE COULD BE MADE UNDER THE SAID SECTION WHERE NO EXPENDITURE HAD ACTUALLY BEEN INCURRED BY THE ASSESSEE IN RELATION TO EARNING OF THE EXEMP T INCOME. THE HONBLE DELHI HIGH COURT APPROVED THE CONTENTION RA ISED BY THE ASSESSEE THAT THE TERM EXPENDITURE INCURRED APPEA RING IN SEC. 14A(1) OF THE ACT WOULD MEAN ACTUAL EXPENDITURE INC URRED. THUS, THE PROVISIONS OF SEC. 14A OF THE ACT WOULD BE APP LICABLE ONLY WHEN THE ASSESSEE HAD ACTUALLY INCURRED CERTAIN EXP ENDITURE WHICH HAD PROXIMATE NEXUS WITH EARNING OF EXEMPT INCOME. 4.11. LD. COUNSEL POINTED OUT THAT THE CONTENTION O F REVENUE THAT DISALLOWANCE CALCULATED U/S 14A READ WITH RULE 8D OF THE I.T. ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 17 RULES SHOULD BE IPSO FACTO INCORPORATED IN CLAUSE ( F) OF EXPLANATION 1 OF SECTION 115JB OF THE ACT ON THE GR OUND THAT THE SCOPE OF BOTH THE PROVISIONS ARE SIMILAR IS NOT COR RECT INASMUCH AS WHILE U/S 14A THE EXPRESSION USED IS IN RELATION, U/S 115JB OF THE ACT, THE TERM USED IS RELATABLE TO. 4.12. LD. COUNSEL SUBMITTED THAT THIS REASONING IS LEGALLY UNTENABLE BECAUSE SEC. 14A CONTAINED IN CHAPTER IV OF THE ACT BEGINS WITH THE PHRASE FOR THE PURPOSES OF COMPUTI NG THE TOTAL INCOME UNDER THIS CHAPTER. IT WAS POINTED OUT THAT INCOME UNDER THE NORMAL PROVISIONS OF THE ACT IS COMPUTED UNDER THE FIVE HEADS SPECIFIED IN SECTION 14. PROVISIONS RELATING TO COM PUTATION OF INCOME UNDER DIFFERENT HEADS ARE CONTAINED IN SECTI ONS 14 TO 59, FORMING PART OF CHAPTER IV OF THE ACT. IN OTHER WOR DS, THE SAID CHAPTER PROVIDES FOR COMPUTATION OF INCOME OF AN AS SESSEE UNDER THE NORMAL PROVISIONS OF THE ACT. AS A NECESSARY CO ROLLARY, PROVISIONS OF SECTION 14A CANNOT BE EXTENDED TO ANY CHAPTER, OTHER THAN CHAPTER IV OF THE ACT. 4.13. SECTION 115JB FINDS PLACE UNDER CHAPTER XII-B OF THE ACT. BEING SO, PROVISIONS OF SEC. 14A CONTAINED IN CHAPTER IV CANNOT BE IMPORTED AND INCORPORATED U/S 115JB MORE SO WHEN CLAUSE (F) TO EXPLANATION 1 TO THE SAID SECTION CON TAINS NO REFERENCE TO SECTION 14A OF THE ACT. 4.14. LD. COUNSEL SUBMITTED THAT IF PROVISIONS OF S EC. 14A ARE TO BE IMPORTED INTO SECTION 115JB OF THE ACT, THE S AME WOULD TANTAMOUNT TO READING ADDITIONAL WORDS INTO THE STA TUTE WHICH IS NOT PERMISSIBLE AND WOULD BE AGAINST THE CARDINAL RULE OF LITERAL INTERPRETATION. IN THIS REGARD LD. COUNSEL HAS REL IED ON FOLLOWING DECISIONS: - JUGAL KISHORE SARAF V. RAW COTTON CO. LTD. AIR 1955 SC 376, WHEREIN IT HAS BEEN OBSERVED AS UNDER: ' THE CARDINAL RULE OF CONSTRUCTION OF STATUTES IS TO READ THE STATUTES LITERALLY, THAT IS, BY GIVING TO THE WORDS THEIR ORDINARY, NAT URAL AND GRAMMATICAL MEANING. IF, HOWEVER, SUCH A READING LEADS TO ABSUR DITY AND THE WORDS ARE SUSCEPTIBLE OF ANOTHER MEANING, THE COURT MAY ADOPT THE SAME. BUT IF NO SUCH ALTERNATIVE CONSTRUCTION IS POSSIBLE, THE COURT MUS T ADOPT THE ORDINARY RULE OF LITERAL INTERPRETATION. IN THE PRESENT CASE, THE LI TERAL CONSTRUCTION LEADS TO NO APPARENT ABSURDITY AND THEREFORE, THERE CAN BE NO C OMPELLING REASON FOR DEPARTING FROM THAT GOLDEN RULE OF CONSTRUCTION. ' 4.15. HE ALSO RELIED ON VARIOUS OTHER SUPREME COURT DECISIONS AS MENTIONED IN THE BROAD PROPOSITION ADVANCED BY THE LD. COUNSEL. ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 18 LD. COUNSEL ALSO REFERRED TO THE JURISDICTIONAL HIG H COURT IN THE CASE OF GREAT EASTERN EXPORTS V. CIT 332 ITR 14, WH EREIN ALSO IT HAS BEEN HELD THAT IF THE LANGUAGE OF THE STATUTE I S PLAIN AND CAPABLE OF ONE AND ONLY ONE MEANING, THAT OBVIOUS M EANING IS TO BE GIVEN TO THE SAID PROVISION. 4.17. ACCORDINGLY, LD. COUNSEL SUBMITTED THAT APPLI CABILITY OF PROVISIONS OF SEC. 14A IS CONFINED TO COMPUTATION O F TAX LIABILITY UNDER THE FIVE HEADS OF INCOME ENUMERATED IN SEC. 1 4 UNDER NORMAL PROVISIONS CONTAINED IN CHAPTER IV OF THE AC T. THE SAID SECTION 14A CANNOT BE EXTENDED AND READ INTO SECTIO N 115JB, FALLING UNDER CHAPTER XII-B OF THE ACT. 4.18. LD. COUNSEL FURTHER SUBMITTED THAT SCOPE OF S ECTION 14A AND SECTION 115JB OF THE ACT ARE ENTIRELY DIFFERENT . HE SUBMITTED THAT U/S 14A OF THE ACT DISALLOWANCE IS MADE OF EXP ENDITURE IN RELATION TO THE EARNING OF INCOME NOT FORMING PART OF THE TOTAL INCOME. THUS, SECTION 14A TAKES WITHIN ITS SWEEP BO TH DIRECT AND INDIRECT EXPENDITURE HAVING PROXIMATE CONNECTION WI TH EARNING OF EXEMPT INCOME. HOWEVER, UNDER CLAUSE (F) OF EXPL ANATION 1 TO SECTION 115JB OF THE ACT, ONLY THOSE EXPENDITURE DE BITED TO THE PROFIT AND LOSS AMOUNT, WHICH ARE RELATABLE TO EARN ING OF INCOME EXEMPT U/S 10 (EXCLUDING SECTION 10(38) OR SECTION 11 OR SECTION 12 ARE ADDED BACK WHILE COMPUTING ADJUSTED BOOK PRO FIT. THUS, ONLY DIRECT EXPENDITURE ASSOCIATED WITH THE EARNING OF SAID INCOME WOULD BE ADDED BACK. 4.19. LD. SENIOR COUNSEL VIDE HIS PETITION DT. OCTO BER 8, 2016, POINTED OUT THAT HONBLE DELHI HIGH COURT IN THE CA SE OF PR. CIT V. BHUSHAN STEEL LTD.:ITA NO.593/2015 HAS UPHELD TH E DECISION OF THE TRIBUNAL IN HOLDING THAT DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D CANNOT BE ADDED WHILE COMPUTING B OOK PROFITS AS PER SECTION 115JB AS EXPLANATION TO THAT SECTION DOES NOT SPECIFICALLY MENTIONS SECTION 14A OF THE INCOME TAX ACT, 1961. HE FURTHER POINTED OUT THAT REVIEW PETITION FILED BY REVENUE HAS BEEN DISMISSED BY HON,BLE HIGH COURT VIDE ORDER DT. 3-3-17. HE, THEREFORE, SUBMITTED THAT NOW THIS DECISION HOLDS T HE FIELD. 5. LD. PRINCIPAL CIT(DR), SHRI S.D. SRIVASTAVA, AT THE OUTSET SUBMITTED THAT IN ORDER TO APPRECIATE THE REAL CONT ROVERSY, IT IS NECESSARY TO FIND OUT THE INTENTION BEHIND THE INSE RTION OF SECTION 14A. IN THIS REGARD HE REFERRED TO MEMORANDUM, EXPL AINING THE ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 19 PROVISION --- 248 ITR (STAT.) 162 PAGE 195, WHEREIN IT HAS BEEN HELD AS UNDER: 'NO DEDUCTION FOR EXPENDITURE INCURRED IN RESPECT O F EXEMPT INCOME AGAINST TAXABLE INCOME CERTAIN INCOMES ARE N OT INCLUDIBLE WHILE COMPUTING THE TOTAL INCOME AS THES E ARE EXEMPT UNDER VARIOUS PROVISIONS OF THE ACT. THERE HAVE BEE N CASES WHERE DEDUCTIONS HAVE BEEN CLAIMED IN RESPECT OF SU CH EXEMPT INCOME. THIS IN EFFECT MEANS THAT THE TAX INCENTIVE GIVEN BY WAY OF EXEMPTIONS TO CERTAIN CATEGORIES OF INCOME IS BE ING USED TO REDUCE ALSO THE TAX PAYABLE ON THE NON- EXEMPT INCO ME BY DEBITING THE EXPENSES INCURRED TO EARN THE EXEMPT I NCOME AGAINST TAXABLE INCOME. THIS IS AGAINST THE BASIC P RINCIPLES OF TAXATION WHEREBY ONLY THE NET INCOME, I.E., GROSS I NCOME MINUS THE EXPENDITURE, IS TAXED. ON THE SAME ANALOGY, THE EXEMPTION IS ALSO IN RESPECT OF THE NET INCOME. EXPENSES INCURRE D CAN BE ALLOWED ONLY TO THE EXTENT THEY ARE RELATABLE TO TH E EARNING OF TAXABLE INCOME. IT IS PROPOSED TO INSERT A NEW SECTION 14A SO AS TO CLARIFY THE INTENTION OF THE LEGISLATURE SINCE THE INCEPTION OF THE INCOME- TAX ACT, 1961, THAT NO DEDUCTION SHALL BE MADE IN R ESPECT OF ANY EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE INCOME- TAX ACT. THE PROPOSED AMENDMENT WILL TAKE EFFECT RETROSPECTI VELY FROM APRIL 1, 1962, AND WILL ACCORDINGLY, APPLY IN RELAT ION TO THE ASSESSMENT YEAR 1962-63 AND SUBSEQUENT ASSESSMENT Y EARS. 5.1. LD. PRINCIPAL CIT(DR) POINTED OUT THAT IN PUR SUANCE OF THIS AMENDMENT, CIRCULAR NO. 14 WAS ISSUED. HE POINTED O UT THAT THIS AMENDMENT WAS A FALL OUT OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RAJASTHAN STATE WAREHOUSING CO RPORATION VS. CIT 242 ITR 450, RENDERED ON 23-2-2000 AND OTHER JU DGMENTS LAYING DOWN THE SAME RATIO DECIDENDI, AS UNDER: THE FOLLOWING PRINCIPLES MAY BE LAID DOWN: (I) IF THE INCOME OF AN ASSESSEE IS DERIVED FROM VARIOUS HEADS OF INCOME , HE IS ENTITLED TO CLAIM DEDUCTION PERMISSIBLE UNDER THE R ESPECTIVE HEAD, WHETHER OR NOT COMPUTATION UNDER EACH HEAD RE SULTS IN TAXABLE INCOME; (II) IF THE INCOME OF AN ASSESSEE A RISES UNDER ANY OF THE HEADS OF INCOME BUT FROM DIFFERENT ITEMS , E.G., DIFFERENT HOUSE PROPERTIES OR DIFFERENT SECURITIES, ETC., AND INCOME FROM ONE OR MORE ITEMS ALONE IS TAXABLE WHER EAS INCOME FROM THE OTHER ITEM IS EXEMPT UNDER THE ACT, THE EN TIRE PERMISSIBLE EXPENDITURE IN EARNING THE INCOME FROM THAT HEAD IS DEDUCTIBLE; AND (III) IN COMPUTING THE 'PROFITS AND GAINS OF BUSINESS OR PROFESSION WHEN AN ASSESSEE IS CARRYING ON BUSINESS IN VARIOUS VENTURES AND SOME AMONG THEM YIELD TAXAB LE INCOME AND THE OTHERS DO NOT, THE QUESTION OF ALLOWABILITY OF THE EXPENDITURE UNDER SECTION 37 OF THE INCOME-TAX ACT, 1961, WILL DEPEND ON : (A) FULFILLMENT OF REQUIREMENTS OF THAT PROVISION, ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 20 NAMELY, THAT (I) THE EXPENDITURE SHOULD NOT BE IN T HE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASS ESSEE; (II) IT SHOULD HAVE BEEN LAID OUT OR EXPENDED WHOLLY AND EX CLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION; AND (III) IT SHOULD HAVE BEEN EXPENDED IN THE PREVIOUS YEAR; AND (B) ON THE FACT WHETHER ALL THE VENTURES CARRIED ON BY HIM CONSTITU TED ONE INDIVISIBLE BUSINESS OR NOT; IF THEY DO THE ENTIRE EXPENDITURE WILL BE PERMISSIBLE DEDUCTION, BUT IF THEY DO NOT, THE P RINCIPLE OF APPORTIONMENT OF THE EXPENDITURE WILL APPLY, BECAUS E THERE WILL BE NO NEXUS BETWEEN THE EXPENDITURE ATTRIBUTABLE TO THE VENTURE NOT FORMING AN INTEGRAL PART OF THE BUSINESS AND T HE EXPENDITURE SOUGHT TO BE DEDUCTED AS THE BUSINESS E XPENDITURE OF THE ASSESSEE. 5.2. THUS, THE LEGISLATIVE INTENT WAS THAT NO DEDUC TION WAS TO BE ALLOWED IN RESPECT OF ANY EXPENDITURE INCURRED B Y THE ASSESSEE IN RELATION TO INCOME, WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE INCOME-TAX ACT. IT HAS FURTH ER BEEN MADE CLEAR THAT THE PURPOSE OF INSERTION OF SECTION 14A WAS NOT TO MAKE ANY DISALLOWANCE OF EXPENDITURE IN RELATION TO THE EXEMPT INCOME FOR THE FIRST TIME, BUT IT WAS ALWAYS THE IN TENTION OF THE ACT FOR NOT ALLOWING SUCH DEDUCTION AND THIS INSERT ION WAS MADE ONLY TO CLARIFY THE INTENTION OF THE LEGISLATURE AS IT WAS SINCE INCEPTION. HE POINTED OUT THAT SINCE SECTION 14A DI D NOT PROVIDE THE METHOD OF COMPUTING THE EXPENDITURE, THEREFORE, BY FINANCE BILL 2006, SUB-SECTION (2) TO SECTION 14A WAS INSER TED SO AS TO PROVIDE THAT IT WOULD BE MANDATORY FOR THE AO TO DE TERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME IN ACC ORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED. 5.3. LD. PRINCIPAL CIT(DR) FURTHER SUBMITTED THAT P ROVISIONS OF SECTION 14A ONLY REITERATE THE SETTLED LAW AS RE GARDING MATCHING PRINCIPLES OF ACCOUNTANCY AS PER WHICH AGA INST THE CURRENT INCOME ONLY CURRENT EXPENDITURE IS TO BE AL LOWED AND AGAINST THE EXEMPT INCOME NO EXPENDITURE IS TO BE A LLOWED, WHETHER DIRECT OR INDIRECT, OTHERWISE MATCHING PRIN CIPLE GETS DISTURBED BECAUSE ASSESSEE WHO DEBITED ONLY DIRECT EXPENDITURE AGAINST EXEMPT INCOME DERIVES A DOUBLE BENEFIT BY T AKING THE BENEFIT OF INDIRECT EXPENDITURE AGAINST TAXABLE INC OME THOUGH PART OF WHICH IS RELATABLE TO EXEMPT INCOME. IN THI S REGARD LD. CIT(DR) REFERRED TO THE DECISION OF HONBLE SUPREME COURT IN ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 21 THE CASE OF ESCORTS LTD. & ANOTHER VS. UNION OF IND IA & OTHERS 199 ITR 43, WHEREIN IT HAS BEEN HELD AS UNDER: THERE IS A FUNDAMENTAL, THOUGH UNWRITTEN, AXIOM TH AT NO LEGISLATURE COULD HAVE AT ALL INTENDED A DOUBLE DED UCTION IN REGARD TO THE SAME BUSINESS OUTGOING; AND IF IT IS INTENDED, IT WILL BE CLEARLY EXPRESSED. IN OTHER WORDS, IN THE A BSENCE OF CLEAR STATUTORY INDICATION TO THE CONTRARY, THE STA TUTE SHOULD NOT BE READ SO AS TO PERMIT AN ASSESSEE TWO DEDUCTIONS BOTH UNDER SECTION 10(2)(VI) AND SECTION 10(2)(XIV) OF THE 192 2 ACT OR BOTH UNDER SECTION 32(1)(II) AND SECTION 35(1)(IV) OF THE 1961 ACT.: 5.4. LD. PRINCIPAL CIT(DR), THEREFORE, SUBMITTED TH AT THE CONTENTION OF LD. COUNSEL FOR THE ASSESSEE THAT UND ER CLAUSE (F) TO EXPLANATION 1 TO SECTION 115JB ONLY DIRECT EXPENDIT URE ARE CONTEMPLATED IS AGAINST THE BASIC PRINCIPLE OF TAXA TION. HE SUBMITTED THAT PROXIMATE WILL MEAN DIRECT AS WELL AS INDIRECT EXPENDITURE AND DEPENDS ON FACTS OF EACH CASE. LD. CIT(DR) SUBMITTED THAT THE EXPRESSION IN RELATION TO USE D IN SECTION 14A AND THE EXPRESSION EXPENDITURE RELATABLE TO ANY IN COME AS USED IN CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB ARE IN THE SAME CONTEXT AND WILL, THEREFORE, HAVE TO BE UNDERSTOOD IN THE SAME SENSE. HE SUBMITTED THAT THE EXPRESSION USED IN CLA USE (F) TO EXPLANATION 1 OF SECTION 115JB(2) WILL TAKE COLOUR FROM THE EXPRESSION IN RELATION TO AS USED IN SECTION 14A. 5.5. LD. PRINCIPAL CIT(DR) FURTHER POINTED OUT THAT IN THE CASE OF CIT VS. WALFORT SHARE & STOCK BROKERS 326 ITR 1 (SC); AND IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. CIT 328 ITR 81 (BOM), IT HAS BEEN HELD THAT ALL THE EXPENSES HAVIN G PROXIMATE CONNECTION TO THE EARNING OF EXEMPT INCOME HAVE TO BE DISALLOWED WHICH WILL INCLUDE INDIRECT EXPENSES AL SO. 5.6. LD. PRINCIPAL CIT(DR) SUBMITTED THAT SECTION 1 4A(2)/(3) AND RULE 8D INCORPORATED IN THE STATUTE ONLY APPLY THIS PRINCIPLE OF LAW AND ACCOUNTANCY. THIS PRINCIPLE WILL APPLY B OTH TO THE NORMAL PROFITS AS WELL AS BOOK PROFITS, OTHERWISE T HE MATCHING PRINCIPLE OF ACCOUNTANCY WILL GET DISTURBED AND ASS ESSEE WILL GET A DOUBLE BENEFIT WHICH IS NOT PERMISSIBLE BOTH IN L AW AND ACCOUNTS. 5.7. LD. PRINCIPAL CIT(DR) FURTHER REFERRED TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF GOETZE IND IA LTD. 361 ITR 505 WHEREIN AT PAGE 530 OF THE REPORT IT HAS BE EN OBSERVED AS UNDER: ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 22 LD. COUNSEL FOR THE RESPONDENT-ASSESSEE, DURING TH E COURSE OF HEARING, HAS FAIRLY CONCEDED THAT THE FIRST QUESTIO N HAS TO BE ANSWERED IN FAVOUR OF THE REVENUE AND AGAINST THE A SSESSEE IN VIEW OF THE SPECIFIC PROVISIONS IN THE EXPLANATIO N 1 BELOW SECTION 115JB(2) CLAUSE (F).. 5.8. LD. PRINCIPAL CIT(DR) SUBMITTED THAT WHEN LD. COUNSEL WAS CONFRONTED WITH THE SPECIFIC PROVISIONS OF CLAU SE (F) TO EXPLANATION 1 BELOW SECTION 115JB, LD. COUNSEL FAIR LY CONCEDED. HE POINTED OUT THAT THIS WAS NOT A CONCES SION ON ANY FACT, BUT WHEN FACED WITH THE CLEAR PROVISIONS OF LAW, THE COUNSEL COULD NOT COUNTER IT AND, THEREFORE, THE CO URT GAVE THIS VERDICT BASED ON THE ABOVE ISSUE. 5.9. LD. PRINCIPAL CIT(DR) REFERRED TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. K.Y. P ILLIAH & SONS 1967 63 ITR 411 (SC), WHEREIN IN PARA 10 IT HA S BEEN OBSERVED AS UNDER: ............ 'THE ITAT IS THE FINAL FACT FINDING AUTHORITY AND NORMALLY IT SHOULD RECORD ITS CONCLUSION ON EVERY D ISPUTED QUESTION RAISED BEFORE IT, SETTING OUT ITS REASONS IN SUPPORT OF ITS CONCLUSION. BUT, IN FAILING TO RECORD REASONS, WHEN THE APPELLATE TRIBUNAL FULLY AGREES WITH THE VIEW EXPRESSED BY TH E APPELLATE ASSISTANT COMMISSIONER AND HAS NO OTHER GROUND TO R ECORD IN SUPPORT OF ITS CONCLUSION, IT DOES NOT ACT ILLEGALL Y OR IRREGULARLY, MERELY BECAUSE IT DOES NOT REPEAT THE GROUNDS OF TH E APPELLATE ASSISTANT COMMISSIONER ON WHICH THE DECISION WAS GI VEN AGAINST THE ASSESSEE OR THE DEPARTMENT ' 5.10. HE POINTED OUT THAT WHEN THE COUNSEL FAIRLY C ONCEDED THE MATTER IN THE HONBLE DELHI HIGH COURT, THE HON BLE DELHI HIGH COURT WAS NOT REQUIRED TO REPEAT THE REASONS AS STATED IN THE COURT BY THE LD. COUNSEL FOR THE ASSESSEE FOR CONCE DING THE SAME. RATHER IT AGREED WITH IT AND GAVE ITS DECISION. LD . CIT(DR), THEREFORE, SUBMITTED THAT AO IS EMPOWERED TO ADOPT THE DISALLOWANCE U/S 14A WHILE MAKING THE ADDITION AS C ONTEMPLATED UNDER CLAUSE (F) OF EXPLANATION 1 TO SEC. 115JB(2). LD. CIT(DR), THEREFORE, SUBMITTED THAT THIS ISSUE IS, THEREFORE, NO LONGER RES INTEGRA AND, THEREFORE THE QUESTION REFERRED TO BY HONBLE PRESIDENT FOR ANSWER IS SQUARELY COVERED BY THE DE CISION OF HONBLE DELHI HIGH COURT. 5.11. AS REGARDS RELIANCE PLACED BY LD. SENIOR COUN SEL ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF BHUSHAN STEEL (SUPRA), LD. CIT(DR) SUBMITTED THAT THE SAID DECISION HAS BEEN RENDERED WITHOUT CONSIDERING THE BINDING DECIS ION OF CO- ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 23 ORDINATE BENCH OF EQUAL STRENGTH AND, THEREFORE, CA NNOT HOLD THE FIELD. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. THERE CANNOT BE ANY QUARREL WITH THE SUBMISSIONS OF LD. SR. COUNSEL FOR THE ASSESSEE THAT SECTION 115JB IS A CO MPLETE CODE IN ITSELF. CHAPTER XII-B PROVIDES ALTERNATE SCHEME FOR COMPUTING TAX LIABILITY OF CERTAIN COMPANIES, WHOSE TOTAL INC OME UNDER NORMAL PROVISIONS IS BELOW THE THRESHOLD BOOK PROFI T AS PRESCRIBED UNDER CHAPTER XII-B. UNDER SECTION 115JB THIS THRESHOLD LIMIT IS 18.5%. THUS, TOTAL INCOME AS COM PUTED UNDER THE NORMAL PROVISIONS OF THE ACT IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AF TER THE 1 ST DAY OF APRIL 2012, IS LESS THAN 18.5% OF ITS BOOK PROFIT, SUCH BOOK PROFIT SHALL BE DEEMED TO BE THE TOTAL INCOME OF THE ASSESSEE AND TAX SHALL BE PAYABLE ON SUCH TOTAL INCOME @18.5 %. THUS, THE SCHEME OF THE ACT IS THAT THE COMPUTATION IS FIRST MADE UNDER THE NORMAL PROVISIONS OF INCOME-TAX ACT AND, THEREAFTER , UNDER AN ALTERNATE SCHEME PROVIDED U/S 115JB FOR COMPUTING T OTAL INCOME AS PER THE PRESCRIBED METHOD. IF THE TAX LIABILITY ON THE BASIS OF TOTAL INCOME AS PER MAT PROVISIONS IS MORE THAN THE TAX COMPUTED UNDER THE NORMAL PROVISIONS OF THE ACT, TH EN THE FORMER BECOMES THE FINAL TAX LIABILITY OF THE ASSES SEE. THE MODE OF COMPUTATION OF BOOK PROFIT HAS BEEN PRESCRIBED U NDER MAT PROVISIONS. THE ISSUE POSED FOR OUR CONSIDERATION I S WHETHER COMPUTATION PROVISIONS PRESCRIBED FOR COMPUTATION O F TOTAL INCOME UNDER NORMAL PROVISIONS WITH REFERENCE TO SE CTION 14A CAN OR CANNOT BE TAKEN INTO CONSIDERATION WHILE COM PUTING BOOK PROFITS UNDER MAT PROVISIONS. 6.1. SECTION 14A HAS BEEN INSERTED BY THE FINANCE A CT, 2001 WITH RETROSPECTIVE EFFECT FROM 1-4-1962. THE OBJECT FOR INSERTING SECTION 14A, WAS TO DENY THE EXPENDITURE RELATABLE TO THE EARNING OF EXEMPT INCOME BEING ALLOWED AS DEDUCTION AGAINST THE TAXABLE INCOME. THE PURPOSE WAS TO DENY DOUBLE DEDUCTION TO ASSESSEE FIRSTLY BY CLAIMING THE ENTIRE INCOME AS EXEMPT INC OME AND THEN AGAIN CLAIMING THE EXPENSES INCURRED RELATABLE TO T HE EXEMPT INCOME AGAINST THE TAXABLE INCOME. THIS WOULD HAVE RESULTED IN ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 24 REDUCTION OF THE TAXABLE INCOME TO THE EXTENT OF T HE EXPENSES RELATABLE TO EXEMPT INCOME. IN ORDER TO OVERCOME TH IS ANOMALY, SECTION 14A WAS INSERTED. CHAPTER XIIB HAS BEEN INSERTED BY THE FINANCE ACT, 1987 W.E.F. 1-4-1988 AND THE OBJECT WAS TO MAKE THE COMP ANIES WHICH WERE NOT AT ALL PAYING ANY TAXES TO PAY THE TAX ON THE BASIS OF BOOK PROFITS AS PER THE DEEMING PROVISIONS CONTAINE D IN THE CHAPTER. THE COMPUTATION OF BOOK PROFIT HAS BEEN SP ECIFICALLY PRESCRIBED IN THE SECTION ITSELF AND THE STARTING P OINT OF THE SAME IS THE NET PROFIT AS SHOWN IN THE P&L A/C PREPARED IN ACCORDANCE WITH SCHEDULE VI TO THE COMPANIES ACT, WHICH IS TO BE INCREASED BY VARIOUS ITEMS CONTEMPLATED IN THE EXPLANATION AN D ALSO TO BE REDUCED BY VARIOUS ITEMS, MENTIONED IN THE EXPLANAT ION ITSELF. THE ADJUSTMENTS CONTEMPLATED IN THE EXPLANATION ARE BROADLY THE SAME AS ARE BEING MADE WHILE COMPUTING PROFITS OF B USINESS IN CASE OF COMPANIES UNDER NORMAL PROVISIONS OF ACT. U NDER THIS CHAPTER SPECIFIC ITEMS HAVE BEEN PRESCRIBED FOR CO MPUTATION OF BOOK PROFIT. THE SAME HAVE TO BE FOLLOWED AND THE C OMPUTATION AS CONTEMPLATED UNDER CHAPTER IV OF THE INCOME-TAX ACT FOR COMPUTATION OF BUSINESS INCOME CANNOT BE IMPORTED I N WHOLE SUM PER SE UNDER THIS CHAPTER. HOWEVER, THE CONTENT ION OF LD.CIT (DR) IS THAT THE PROVISIONS OF CLAUSE (F) TO EXPLANATION 1 TO SECTION 115JB REQUIRES THE NET PROFIT AS SHOWN I N THE P&L A/C TO BE INCREASED BY THE AMOUNT OR AMOUNTS OF EXPENDI TURE RELATABLE TO ANY INCOME TO WHICH SECTION 10 (OTHER THAN THE PROVISIONS CONTAINED IN CLAUSE (38) THEREOF) OR SEC TION 11 OR SECTION 12 APPLY AND AS PER CLAUSE (II) OF THE EXPL ANATION, THE NET PROFIT IS TO BE REDUCED BY THE AMOUNT OF INCOME TO WHICH ANY OF THE PROVISIONS OF SECTION 10 (OTHER THAN THE PROVIS IONS CONTAINED IN CLAUSE (38) THEREOF), OR SECTION 11 OR SECTION 1 2 APPLY, IF ANY SUCH AMOUNT IS CREDITED IN THE P&L A/C. THUS, THE S UBMISSION IS THAT THE PROVISIONS OF CLAUSE (F) TO EXPLANATION 1 OF SECTION 115JB(2) ARE AKIN TO SECTION 14A. 6.2. NOW THE QUESTION BEFORE US IS, WHETHER THE AMO UNT OR AMOUNTS OF EXPENDITURE RELATABLE TO EXEMPT INCOME AS CONTEMPLATED IN CLAUSE (F) TO EXPLANATION 1 TO SECT ION 115JB(2) COULD BE ARRIVED AT BY RESORTING TO PROVISIONS OF SECTION 14A OR NOT. THE SUBMISSION OF LD. PRINCIPAL CIT (DR) IS T HAT IT CANNOT ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 25 BE DISPUTED THAT THE OBJECT OF SECTION 14A WAS ONLY TO DETERMINE THE EXPENDITURE IN RELATION TO EXEMPT INCOME AS NOT ED EARLIER. HIS CONTENTION, THEREFORE, IS THAT THE OBJECT OF SEC. 1 4A AND CLAUSE (F) TO EXPLANATION 1 TO SECTION 115JB(2) IS SAME AND, THEREFORE, IT CANNOT BE DISPUTED THAT SECTION 14A CAN BE RESORTED TO FOR FINDING OUT THE EXPENDITURE RELATABLE TO ANY INCOME WHICH I S EXEMPT. IN THIS REGARD LD. PRINCIPAL CIT(DR) HAS REFERRED TO S OME OF THE WELL SETTLED PRINCIPLES OF STATUTORY INTERPRETATION WHICH ARE DISCUSSED HEREUNDER. 6.3. WHEN THE QUESTION ARISES AS TO THE APPLICABILI TY OF SIMILAR PROVISIONS IN DIFFERENT PARTS OF THE STATUTE, THEN IT IS NOT ONLY LEGITIMATE BUT PROPER TO READ BOTH THE PROVISIONS I N THEIR CONTEXT. IF CONTEXT IS SAME, DIFFERENT MEANING CANNOT BE AS SIGNED. IT IS TO BE FOUND OUT THAT WHAT MISCHIEF WAS INTENDED TO B E REMEDIED BY INSERTING A PARTICULAR SECTION. THE INTENTION OF TH E LEGISLATURE ONCE IS MANIFESTED IN A PARTICULAR SECTION IN THE STATUT E THEN SAID INTENTION CANNOT BE GIVEN A DIFFERENT MEANING, IF A SIMILAR PROVISION HAS BEEN INCORPORATED IN A DIFFERENT SECT ION IN THE STATUTE. THE INTENTION OF THE LEGISLATURE MUST BE FOUND OUT BY READING THE STATUTE AS A WHOLE. 6.4. LITERAL MEANING CANNOT ALWAYS BE FOLLOWED LOG ICALLY, BECAUSE SOMETIMES IT TENDS TO DEFEAT THE OBVIOUS IN TENTION OF THE LEGISLATURE AND RESULTS IN PRODUCING A WHOLLY UNRE ASONABLE RESULT. TO ACHIEVE THE OBVIOUS INTENTION AND TO PRODUCE A R EASONABLE RESULT. 6.5. THE HONBLE SUPREME COURT IN THE CASE OF N.B. SANJANA V. ELPHINSTONE SPINNING & WEAVING MILLS LTD. AIR 1971 SC 2039, EXAMINED RULE 10 UNDER THE CENTRAL EXCISE ACT, 194 4 OBSERVING, INTER ALIA, AS UNDER: THIS RULE RELATES TO RAISING OF DEMAND FOR SHORT-L EVY WITHIN A E LIMIT IN CASES WHERE LESSER AMOUNTS HAVE BEEN PAID. THE PETITIONERS ARGUED THAT WHERE NO PAYMENTS HAD BEEN MADE AND WHERE NIL ASSESSMENTS E BEEN MADE, THERE WOULD BE N O APPLICATION OF THIS RULE AND NO DEMAND COULD BE RAI SED. THE SUPREME COURT OBSERVED THAT WE CANNOT TAKE A LITERA L INTERPRETATION IN SUCH A CASE. IT SHOULD BE AN INTE RPRETATION IN THE CONTEXT WHICH I MEAN APPROPRIATELY THAT THE WOR D 'PAID' WOULD INCLUDE 'OUGHT TO HAVE BEEN PAID' AND ASSESSM ENTS WOULD COVER 'NIL' ASSESSMENT. THE MACHINERY OF THE TAX - S STEM SHOULD BE MADE WORKABLE AND THE CLEAR INTENTION SHO ULD NOT BE PREVENTED. ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 26 6.6. IN THE CASE OF ASSTT. COLLECTOR OF CENTRAL EXC ISE V. NATIONAL TOBACCO COMPANY LTD. AIR 1972 SC 2563, TH E HONBLE SUPREME COURT HAS OBSERVED AS UNDER: THIS IS A CASE UNDER THE CENTRAL EXCISES ACT AND RULES, 1944 (AS THEY '7 STOOD BEFORE 1-8-1959) WHERE THE RULES 10 AND 1 OA HAVE AGAIN COME FOR FURTHER DISCUSSION EVEN AFTER I T WAS SETTLED IN SANJANA'S CASE (AIR 1971 SC 2039) THAT WHILE RUL E 10 WAS FOR SHORT-LEVY (FOR SPECIFIED REASONS), RULE 10A WA S FOR NON-LEVY OR SHORT-LEVY OR FOR REASONS OTHER THAN IN RULE 10. RULE 10 COVERED CASES OF INADVERTENCE, ERROR, COLLUSION, MI SCONSTRUCTION AND MISSTATEMENT. IN SANJANA'S CASE THE SUPREME COU RT HARMONISED THE TWO RULES BY INDICATING THAT RULE 10 A WHICH WAS RESIDUARY IN CHARACTER WOULD BE INAPPLICABLE IF A C ASE FELL WITHIN A SPECIFIED CATEGORY OF CASES MENTIONED IN R ULE 10. RULE 10 IS CONFINED TO CASES WHERE THE DEMAND IS TO BE M ADE FOR SHORT-LEVY CAUSED BY THE REASONS IN THAT RULE 10 IT SELF SO THAT AN ASSESSMENT HAS TO BE REOPENED. THE HIGH COURT OF CA LCUTTA IN THIS CASE HAD DECIDED THAT THE DEMAND COULD NOT BE RAISED UNDER RULE 10 BECAUSE IT IS A CASE OF INADVERTENCE. BUT T HE SUPREME COURT OBSERVED IN THIS CASE THAT THE HIGH COURT HAS CALLED IT A CASE OF NO ASSESSMENT AT ALL AND IN THAT CASE IT FA LLS UNDER RULE 10A (WHICH IS FOR CASES WHERE THERE IS NO ASSESSMEN T, THAT IS NON-LEVY). MOREOVER, THERE ARE OTHER CIRCUMSTANCES SUCH AS INSUFFICIENT INFORMATION GIVEN BY THE PETITIONERS W HICH IS NOT COVERED BY RULE 10. THAT MAKES THE DEMAND VALID UND ER RULE 10A. IF RULE 10 IS INTERPRETED VERY BROADLY AS DONE BY THE CALCUTTA HIGH COURT THEN THE RULE 10A WOULD BECOME USELESS. THE SUPREME COURT, THEREFORE, HELD THE DEMAND VALID UNDER RULE 10A WHICH IS WHERE THERE HAS BEEN NO ASSESSMEN T OR WHERE THERE IS SHORT-LEVY DUE TO REASONS OTHER THAN SPECI FIED IN RULE 10. THOUGH RULE 1 OA WAS NOT MENTIONED IN THE DEMAN D, QUOTING A WRONG RULE DOES NOT MAKE IT INVALID. THE SUPREME COURT HAS ELABORATED THE APPLICATION OF SOME FUNDAM ENTAL PRINCIPLES OF INTERPRETATION WHILE SETTING ASIDE TH E JUDGMENT OF THE CALCUTTA HIGH COURT. FIRST, THE HIGH COURT CONSIDERED THE APPLICABILITY OF RULE 10 ALONE AND NOT OF RULE 10A SINCE ONLY RULE 10 WAS ME NTIONED. THE SHUTTING OUT OF THE OTHER RULE 10A, UNDER WHICH ALSO DEMAND COULD BE VALID, HAS BEEN WRONG. WHAT THE HIG H COURT FOLLOWED WAS THE MAXIM: EXPRESSIO UNIUS EST EXCLUSI O ALTERIS. BUT THIS PRINCIPLE, OBSERVED THE SUPREME COURT, IS A VALUABLE SERVANT BUT A DANGEROUS MASTER. ''THE RULE IS SUBSE RVIENT TO THE BASIC PRINCIPLE THAT COURTS MUST ENDEAVOUR TO ASCER TAIN THE LEGISLATIVE INTENT AND PURPOSE AND ADOPT A RULE OF CONSTRUCTION WHICH EFFECTUATES RATHER THAN ON THAT WHICH MAY DEF EAT THESE.' THE HIGH COURT IGNORED IN THIS CASE THE LEGISLATIVE INTENT IN HAVING RULE 10A. RULE 10A WAS FOR 'SPECIAL CIRCUMST ANCES NOT FORESEEN BY THE FRAMERS OF THE ACT OR THE RULES'. T HE HIGH COURT DID NOT CONSIDER AT ALL WHETHER THE DEMAND WOULD FA LL UNDER ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 27 RULE 10A BUT MERELY INTERPRETED BROADLY RULE 10 TO CONCLUDE THAT THE DEMAND DID NOT FALL IN THAT RULE. THAT CLE ARLY GOES AGAINST THE LEGISLATIVE INTENT. THE SUPREME COURT T HEREFORE SET ASIDE THE HIGH COURT ORDER AND UPHELD THE DEMAND U NDER RULE 10A THOUGH THAT RULE WAS NOT QUOTED IN THE DEMAND D OING SO THE SUPREME COURT UPHELD THE BASIC PRINCIPLE OF LEGISLA TIVE INTENT AND PURPOSE. 6.7. AGAIN IN THE CASE OF K.P. VARGHESE V. ITO AIR 1981 SC 1922, WHILE EXAMINING THE TRUE MEANING OF SECTION 5 2(2), WHICH ENABLED THE REVENUE TO CHARGE TAX ON THE CAPITAL G AINS DEEMED TO ACCRUE, WHEREVER THE DECLARED VALUE FOR TRANSFER OF PROPERTY WAS LESS BY 15% OR MORE COMPARED TO THE FAIR MARKET VALUE, THE HONBLE SUPREME COURT REFUSED TO ACCEPT THE STRICT LITERAL MEANING, CALLING IT ABSURD. THE HONBLE COURT GAVE SOME EXAMPLES ON THE BASIS OF STRICT INTERPRETATION AND POINTED OUT THAT IT WOULD BE ABSURD AND UNREASONABLE TO APPLY SEC. 52(2) ACCORDING TO ITS STRICT LITERAL CONSTRUCTION. THE H ONBLE COURT FURTHER OBSERVED THAT WE MUST, THEREFORE, GIVE UP LITERALNESS IN THE INT ERPRETATION OF SEC. 52(2) AND TRY TO ARRIVE AT AN INTERPRETATION W HICH AVOIDS THIS ABSURDITY AND MISCHIEF AND MAKES THE PROVISION RATIONAL AND SENSIBLE, UNLESS, OF COURSE, OUR HANDS ARE TIED AND WE CANNOT FIND ANY ESCAPE FROM THE TYRANNY OF THE LITE RAL INTERPRETATION. IT WAS FURTHER OBSERVED THAT IT IS NOW A WELL SETTLED RULE OF CONSTRUCTION THAT WHERE THE PLAIN LITERAL INTERPRETATION OF A STATUTORY PROVISI ON PRODUCES A MANIFESTLY ABSURD AND UNJUST RESULT WHICH COULD NEV ER HAVE BEEN INTENDED BY THE LEGISLATURE, THE COURT MAY MOD IFY THE LANGUAGE USED BY THE LEGISLATURE OR EVEN DO SOME V IOLENCE TO IT SO AS TO ACHIEVE THE OBVIOUS INTENTION OF THE LE GISLATURE AND PRODUCE A RATIONAL CONSTRUCTION. 6.8. ACCORDINGLY, HONBLE SUPREME COURT HELD THAT A FAIR AND REASONABLE CONSTRUCTION WOULD BE THAT THE REVENUE M UST SHOW NOT ONLY THAT THE FAIR MARKET VALUE OF THE CAPITAL ASSET EXCEEDS THE DECLARED VALUE BY 15% OR MORE, AND ALSO THAT IT IS NOT A BONA FIDE DECLARATION AND THE ASSESSEE HAS ACTUALLY RECE IVED UNDERHAND PAYMENT APART FROM WHAT HAS BEEN ACTUALLY DECLARED BY HIM. ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 28 6.9. IN THE CASE OF CANADA SUGAR REFINERY CO. VS. R (1898) AC 735 AT PAGE 742, IT WAS OBSERVED THAT EVERY CLAU SE OF A STATUTE IS TO BE CONSTRUED WITH REFERENCE TO THE CO NTEXT AND OTHER CLAUSES OF THE ACT AS FAR AS POSSIBLE TO MAKE A CON SISTENT ENACTMENT OF THE WHOLE STATUTE OR SERIES OF STATUTE S RELATING TO THE SUBJECT MATTER. 6.10. THUS, THE SUBMISSION OF LD. CIT(DR) IS THAT W HEN BASIC OBJECT AND PURPOSE OF SECTION 14A AND CLAUSE (F) T O EXPLANATION 1 TO SECTION 115JB(2) IS SAME, THEN IT CANNOT BE SA ID THAT MERELY BECAUSE SECTION 14A HAS NOT BEEN MENTIONED IN CLAUS E (F), THEREFORE, IT HAS NO APPLICATION. THE MODE OF COMPU TATION WITH SAME PURPOSE CANNOT BE DIFFERENTLY MADE MERELY BECA USE SECTION 115JB CREATES A DEEMING SECTION. THE OBJECT OF DEEMING PROVISIONS IS TO SUBSTITUTE THE TOTAL INCOME COMPUT ED UNDER NORMAL PROVISIONS BY THAT COMPUTED UNDER MAT PROVIS IONS. SUBMISSION OF LD. CIT(DR) IS THAT THIS CANNOT BE EX TENDED TO COMPUTATION FOR SAME ITEMS UNDER NORMAL AS WELL AS MAT PROVISIONS. UNDER THE PROVISIONS OF SECTION 14A, BO TH DIRECT AND INDIRECT EXPENSES IN RELATION TO EARNING OF EXEMPT INCOME ARE TO BE REDUCED. THEREFORE, DIFFERENT MEANING CANNOT BE ASCRIBED IN CLAUSE (F) AND, THEREFORE, THE SUBMISSION OF LD. CO UNSEL FOR THE ASSESSEE THAT ONLY DIRECTLY RELATABLE EXPENDITURE I S TO BE REDUCED, CANNOT BE ACCEPTED. 6.11. LD. CIT(DR) FURTHER SUBMITTED THAT THE TERM RELATABLE TO USED IN CLAUSE (F) CANNOT BE ASCRIBED A RESTRIC TIVE MEANING AS COMPARED TO THE TERM USED IN RELATION TO IN SECTI ON 14A. BOTH TERMS ARE WITH THE SAME PURPORT AND OBJECT. 6.12. LD. COUNSEL HAS SUBMITTED THAT THE AO CANNOT GO BEYOND AUDITED FINANCIAL STATEMENTS OF THE ASSESSEE WHILE COMPUTING BOOK PROFITS U/S 115JB. HOWEVER, THE SUBMISSION OF LD. CIT(DR) IS THAT THIS ARGUMENT IS FALLACIOUS, BECAUS E HERE THE AO IS NOT GOING BEYOND THE AUDITED ACCOUNTS BUT IS COMPUTING THE EXPENDITURE DEBITED IN THE P&L A/C, WHICH IS RE LATABLE TO EARNING OF EXEMPT INCOME. THIS IS AS PER CLAUSE (F) ITSELF. 6.13. FURTHER REASONING ADVANCED BY LD. CIT(DR) IS THAT SECTION 14A HAS BEEN INCORPORATED MUCH AFTER THE IN CORPORATION OF CHAPTER XIIB IN 1987. SECTION 14A WAS INCORPORAT ED JUST AFTER SECTION 14, WHICH CLASSIFIES THE HEAD OF INCO ME FOR ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 29 COMPUTATION OF TOTAL INCOME. THIS SECTION WAS MADE APPLICABLE WITH RESPECT TO DETERMINATION OF TOTAL INCOME. THE MAT PROVISIONS ARE FOR COMPUTATION OF INCOME FROM BUSI NESS IN CASE OF SPECIFIC COMPANIES. THEREFORE, IT CANNOT BE SAID THAT SECTION 14A HAD NO APPLICABILITY TO MAT PROVISIONS, WHICH W ERE EXISTING WHEN SECTION 14A WAS INTRODUCED FOR THE FI RST TIME. THEREFORE, SECTION 14A IS APPLICABLE FOR ALL KINDS OF INCOMES, WHICH ARE CLAIMED AS EXEMPT BY ASSESSEE IN THE INC OME-TAX ACT. 6.14. THERE CANNOT BE ANY QUARREL WITH THE PROPOSIT ION THAT CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB(2) IS IN CONFORMITY TO MATCHING PRINCIPLES OF ACCOUNTING. LD. COUNSEL H AS SUBMITTED THAT MATCHING PRINCIPLE OF ACCOUNTANCY PROVIDES THA T EXPENSES ARE DEBITED IN THE P&L A/C ONLY TO THE EXTENT RELA TABLE TO THE ACCRUAL OF THE CORRESPONDING INCOME AND, THEREFORE, ONLY EXPENSES DEBITED TO THE P&L A/C WHICH HAVE DIRECT A ND PROXIMATE NEXUS WITH THE EXEMPT INCOME CREDITED TO THE P&L A/C ARE TO BE ADDED BACK. 6.15. LD. CIT(DR), HOWEVER, SUBMITS THAT THIS ARGUM ENT CANNOT BE ACCEPTED BECAUSE IF ASSESSEE HAS MADE PRO VISION IN RESPECT OF EXPENDITURE ACCRUED, A PART OF WHICH IS RELATABLE TO EXEMPT INCOME, THEN IT DOES NOT IMPLY THAT TO THAT EXTENT THE EXPENDITURE SHOULD NOT BE ADDED BACK. 6.16. THE SUBMISSION OF LD. CIT(DR) IS, THUS, THAT THE PHRASE IN RELATION TO AS USED IN SECTION 14A AND THE EXP RESSION EXPENDITURE RELATABLE TO, AS USED IN CLAUSE (F) O F EXPLANATION 1 TO SECTION 115JB(2), ARE IN THE SAME CONTEXT AND, T HEREFORE, HAVE TO BE UNDERSTOOD IN THE SAME SENSE. 6.17. LD. PRINCIPAL CIT(DR) HAS POINTED OUT THAT TH E PHRASE EXPENDITURE RELATABLE TO AS USED IN CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB(2) WILL TAKE ITS COLOR FROM THE PH RASE IN IN RELATION TO, USED IN SECTION 14A. THE CONTENTION OF LD. CIT(DR) IS THAT IF WE APPLY PRINCIPLES OF LITERAL INTERPRETATION, THEN THAT WOULD LEAD TO AN ANOMALOUS SITUATION, IN WHICH HIGHER EXPENDITURE, TO THE EXTENT OF INDIRECT EXPENSES, WI LL BE CHARGED TOWARDS THE EARNING OF EXEMPT INCOME U/S 14A, THERE BY REDUCING THE EXEMPT INCOME AS COMPARED TO EXPENDITU RE CHARGE WHILE COMPUTING BOOK PROFITS U/S 115JB BECAUSE NO I NDIRECT ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 30 EXPENDITURE WILL BE ALLOCATED TOWARDS EARNING OF EX EMPT INCOME. THE SUBMISSION IS THAT OBVIOUSLY, THIS CANN OT BE THE INTENTION OF LEGISLATURE. AS PER THE PROVISIONS OF SECTION 115JB(1), A COMPARISON OF THE TOTAL INCOME COMPUTED UNDER THE NORMAL PROVISIONS OF THE INCOME-TAX ACT IS TO BE MA DE WITH THE BOOK PROFITS AS COMPUTED U/S 115JB. THIS MAKES IT C LEAR THAT TOTAL INCOME AS CONTEMPLATED UNDER NORMAL PROVISION S IS INEXTRICABLY LINKED TO BOOK PROFITS UNDER MAT PROVI SIONS AND IT IS WRONG TO SUGGEST THAT BOTH OPERATE IN ENTIRELY D IFFERENT FIELDS. THIS INTERPRETATION OVERLOOKS THE VERY OBJECT OF IN SERTION OF MAT PROVISIONS. THEREFORE, THE SUBMISSION IS THAT W HEN WE RESORT TO COMPARISON BETWEEN COMPUTATION UNDER NORM AL PROVISIONS OF THE INCOME-TAX ACT AND MAT PROVISIONS , THE COMPARISON WILL NOT BE ON SAME FOOTING. SUBMISSION OF LD. CIT(DR) IS THAT IT CANNOT BE DENIED THAT THE LEGISL ATIVE INTENT REGARDING DISALLOWANCE OF EXPENDITURE RELATING TO E ARNING OF EXEMPT INCOME WAS SAME, WHETHER UNDER NORMAL PROVIS IONS OR UNDER THE MAT PROVISIONS. HENCE, THE WHOLE OBJECT O F COMPARISON BETWEEN THE TOTAL INCOME UNDER NORMAL PR OVISIONS AND MAT PROVISIONS WILL GET FRUSTRATED. 6.18. LD. CIT(DR) SUBMITTED THAT THE ABOVE INTERPRE TATION, WILL ENSURE IN ARRIVING AT THE SAME FIGURE OF EXPENDITUR E RELATABLE TO EXEMPT INCOME UNDER NORMAL PROVISIONS AND ALSO WHIL E COMPUTING THE BOOK PROFITS U/S 115JB. IF DIFFERENT MODES OF COMPUTATION ARE FOLLOWED U/S 14A AND IN CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB(2), THEN THE COMPARI SON WILL NOT BE ON SAME FOOTING AND WILL PRODUCE ABSURD RESULTS. HE FURTHER CLARIFIED THAT EVEN IF WE RESORT TO PLAIN MEANING R ULE, THE PHRASE IN RELATION TO USED IN SECTION 14A AND THE PHRASE EXPENDITURE RELATABLE TO EARNING OF EXEMPT INCOME, UNDER CLAUS E (F) OF EXPLANATION 1 TO SECTION 115JB(2), THE WORD RELATA BLE TO HAS WIDER CONNOTATION THAN THE WORDS IN RELATION TO, WHERE THE PROXIMATE RELATIONSHIP IS REQUIRED AND, THEREFORE, THE CONTENTION OF LD. COUNSEL FOR THE ASSESSEE THAT, WHILE COMPUTI NG BOOK PROFIT U/S 115JB, ONLY THOSE EXPENSES WHICH HAVE DIRECT NEXUS TO THE EARNI NG OF EXEMPT INCOME HAVE TO BE CONSIDERED UNDER CLAUSE (F ) OF EXPLANATION 1 TO SECTION 115JB(2), CANNOT BE ACCEPT ED. ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 31 6.19 LD. CIT(DR)S AFOREMENTIONED SUBMISSIONS ARE F ORTIFIED BY THE DECISION OF HONBLE DELHIT HIGH COURT IN TH E CASE OF GOETZE (INDIA) LTD.(SUPRA). ADMITTEDLY THE DECISION IS ON THE POINT IN ISSUE UNDER CONSIDERATION. THE SUBMISSION OF LD. SENIOR COUNSEL IS THAT THE DECISION OF HONBLE DELHI HIGH COURT IS BY WAY OF CONCESSION BY ASSESSEE AS THEY HAVE RECORDED THE STATEMENT OF ASSESSEES COUNSEL TO ANSWER THE QUEST ION OF LAW. PER CONTRA THE SUBMISSION OF LD. PRINCIPAL CIT(DR) IS THAT THE DECISION IS AFTER DUE CONSIDERATION OF PROVISIONS O F LAW. WE FIND CONSIDERABLE FORCE IN THE SUBMISSION OF LD. CIT(DR) THAT THE DECISION CANNOT BE SAID TO BE BY WAY OF CONCESSION MORE PARTICULARLY WHEN A SUBSTANTIAL QUESTION OF LAW AND NOT QUESTION OF FACT WAS UNDER CONSIDERATION OF HONBLE HIGH COU RT. IN THAT CASE PROCEEDINGS U/S 263 WERE INITIATED, INTER ALIA , ON THE GROUND THAT THE EXPENDITURE OF RS. 183.63 LACS, INCURRED FOR EARNING OF EXEMPT DIVIDEND INCOME U/S 14A OF THE ACT WAS NOT D ISALLOWED, THOUGH THE ASSESSEE HAD EARNED DIVIDEND INCOME OF R S. 157.85 LACS, WHICH WAS EXEMPT U/S 10(33) OF THE ACT. THE COMPUTATION OF INCOME WAS MADE U/S 115JA AND IN THAT CONTEXT TH E HONBLE HIGH COURT, INTER ALIA, OBSERVED AS UNDER: BY ORDER DATED MAY 16, 2012, THE FOLLOWING SUBSTAN TIAL QUESTIONS OF LAW WERE FRAMED IN THE PRESENT APPEALS . (I) WHETHER THE INCOME-TAX APPELLATE TRIBUNAL WAS RIGHT IN HOLDING THAT WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JA (SIC. SECTION 115JB) OF THE INCOME-TAX ACT, 1961, NO DISALLOWANCE UNDER SECTION 14A WAS REQUIRED TO BE MADE? (II) WHETHER THE INCOME-TAX APPELLATE TRIBUNAL WAS RIGHT IN DELETING INTEREST UNDER SECTION 234D OF THE INCOME-TAX ACT, 1961? LEARNED COUNSEL FOR THE RESPONDENT-ASSESSEE, DURING THE COURSE OF HEARING, HAS FAIRLY CONCEDED THAT THE FIRST QUES TION HAS TO BE ANSWERED IN FAVOUR OF THE REVENUE AND AGAINST THE A SSESSEE IN VIEW OF THE SPECIFIC PROVISIONS IN THE EXPLANATION 1 BELOW SECTION 115JB(2) CLAUSE (F). THE ASSESSING OFFICER IT IS STATED HAD MADE AN ADDITION OF RS. 88,292 TO THE BOOK PROF ITS TOWARDS EXPENDITURE INCURRED HAVING NEXUS WITH DIVIDEND INC OME, WHICH WERE EXEMPT UNDER SECTION 10(33). RECORDING THE SAI D STATEMENT, THE FIRST QUESTION IS ANSWERED IN FAVOUR OF THE APPELLANT-REVENUE AND AGAINST THE RESPONDENT-ASSESS EE. 6.20. THUS, IT CANNOT BE SAID THAT HONBLE DELHI HI GH COURT HAS NOT CONSIDERED THIS ISSUE AND MERELY ALLOWED THE RE VENUES ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 32 APPEAL ON CONCESSION. THE SUBSTANTIAL QUESTION OF L AW FRAMED BY HONBLE DELHI HIGH COURT CLEARLY SHOWS THAT THE SPECIFIC ISSUE WAS WHETHER DISALLOWANCE U/S 14A WAS REQUIRED TO BE MADE WHILE COMPUTING BOOK PROFIT U/S 115JA/ 115JB. THE HONBLE DELHI HIGH COURT HAS NOT ONLY RECORDED ASSE SSEES PLEA OF MERELY NOT CONTESTING THE ISSUE IN VIEW OF SPECI FIC PROVISIONS BUT HAS RECORDED THAT THE COUNSEL FAIRLY CONCEDED. THE EXPRESSION FAIRLY IMPLIES THAT HONBLE HIGH COURT WAS ALSO OF THE VIEW THAT THE PROVISIONS OF SECTION 14A WERE AP PLICABLE WITH FULL FORCE TO THE CORRESPONDING PROVISIONS U/S 115J . 6.21. LD. PRINCIPAL CIT(DR) HAS, IN THIS REGARD, RE FERRED TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF C IT VS. K.Y. PILLIAH & SONS (1967) 63 ITR 411 (SC), WHEREIN IN PARA 10, IT HAS BEEN OBSERVED AS UNDER: 10. THE FORM OF THE SECOND QUESTION NEEDS SOME EXPL ANATION. THE INCOME-TAX OFFICER WORKED OUT THE GROSS PROFIT ON THE ESTIMATED TURNOVER OF RS. 12 LAKHS AT 6.5% AND THAT THE PROFIT AMOUNTED TO RS. 78,000. THE ASSESSEES HAD BY THEIR RETURN DISCLOSED A GROSS PROFIT OF RS. 36,858. IN ADOPTING THE RATE OF 6.5% ON THE ESTIMATED TURNOVER, THE INCOME-TAX OFFI CER ADDED TO THE INCOME RETURNED RS. 41,142 BEING THE ADDITIO NAL PROFIT, AND LEVIED TAX THEREON. IT WAS NOT SUGGESTED THAT T HERE WERE ANY OTHER ADMISSIBLE OUTGOINGS WHICH COULD NOT DEBITED AGAINST THAT AMOUNT. THE QUESTION WHETHER RS. 41,142 WERE LIABLE TO BE TAXED FALLS TO BE DETERMINED UNDER THE FIRST QUESTI ON. THE SECOND QUESTION ONLY RELATES TO THE AMOUNT OF RS. 7,000 WH ICH WAS THE CASH CREDIT ITEM WHICH REPRESENTED AN UNEXPLAINED E NTRY IN THE BOOKS OF ACCOUNT OF THE ASSESSEES. IN RESPECT OF TH AT AMOUNT, THE INCOME-TAX OFFICER HELD THAT THE EXPLANATION OF THE ASSESSEE WAS UNTRUE AND THE APPELLATE ASSISTANT COMMISSIONER AND THE TRIBUNAL AGREED WITH THE VIEW. THE INCOME-TAX APPEL LATE TRIBUNAL IS THE FINAL FACT-FINDING AUTHORITY AND NO RMALLY TO SHOULD RECORD ITS CONCLUSION ON EVERY DISPUTED QUES TION RAISED BEFORE, IT SETTING OUT ITS REASONS IN SUPPORT OF IT S CONCLUSION. BUT, IN FAILING TO RECORD REASONS, WHEN THE APPELLA TE TRIBUNAL FULLY AGREES WITH THE VIEW EXPRESSED BY THE APPELLA TE ASSISTANT COMMISSIONER AND HAS NO OTHER GROUND TO RECORD IN S UPPORT OF ITS CONCLUSION, IT DOES NOT ACT ILLEGALLY OR IRREGU LARLY, MERELY BECAUSE IT DOES NOT REPEAT THE GROUNDS OF THE APPEL LATE ASSISTANT COMMISSIONER ON WHICH THE DECISION WAS GI VEN AGAINST THE ASSESSEE OR THE DEPARTMENT. THE CRITICI SM MADE BY THE HIGH COURT THAT THE TRIBUNAL HAD 'FAILED TO PER FORM ITS DUTY MERELY AFFIRMING. THE CONCLUSION OF THE APPELLATE A SSISTANT COMMISSIONER IS APPARENTLY UNMERITED. ON THE MERI TS OF THE CLAIM FOR EXCLUSION OF THE AMOUNT OF RS. 7,000, THE RE IS NO QUESTION OF LAW WHICH COULD BE SAID TO ARISE OUT OF THE ORDER OF ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 33 THE TRIBUNAL. THE ASSESSEES HAD CREDITED SAMPANGAPP A WITH TWO SUMS OF RS. 6,000 AND RS. 1,000 IN THE MONTHS O F NOVEMBER AND DECEMBER, 1950, RESPECTIVELY. IT WAS CLEAR THAT SAMPANGAPPA HAD NOT ADVANCED AT THE MATERIAL TIME A NY AMOUNT TO THE ASSESSEES. THE EXPLANATION OF THE ASS ESSEES WAS, THEREFORE, UNTRUE. THUS, IT IS EVIDENT THAT IN EVERY CASE IT IS NOT N ECESSARY THAT LONG DRAWN REASONING SHOULD BE GIVEN BEFORE AR RIVING AT ANY CONCLUSION MORE PARTICULARLY WHEN BOTH THE PART IES ARE AGREED ON CERTAIN PROVISION OF LAW. WE, THEREFORE , REJECT THE ASSESSEES CONTENTION THAT THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN GOETZE (INDIA) LTD. DOES NOT CONSTITU TE A BINDING PRECEDENT MORE PARTICULARLY IN RESPECT OF SUBORDINA TE COURTS INCLUDING TRIBUNAL FUNCTIONING WITHIN ITS JURISDICT ION. HOWEVER, LD. SENIOR COUNSEL HAS RELIED ON THE DEC ISION IN THE CASE OF BHUSHAN STEEL (SUPRA) WHEREIN IT HAS BEEN HELD AS UNDER:- ITA 593/2015 PR. CIT .. APPELLANT THROUGH: MR. N.P. SAHNI, SENIOR STANDING COUNSEL WITH MR. NITIN GULATI, ADVOCATE. VERSUS BHUSHAN STEEL LTD .. RESPONDENT THROUGH: MS. KAVITA JHA, ADVOCATE WITH MS. ROOPALI GUPTA, ADVOCATE. O R D E R 29.09.2015 1. . . 7. QUESTION NO.6 CONCERNS DELETION OF ADDITION OF RS.89,00,000 MADE BY THE AO FOR COMPUTATION OF THE INCOME FOR THE PURPOS ES OF MINIMUM ALTERNATE TAX (MAT) UNDER SECTION 115 JB OF THE ACT. THIS PERTAINED TO THE EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME UNDER SECTION 14 A READ WITH RULE 8D. THE ITAT HAS RIGHTLY HELD THAT THIS BEING IN THE NATURE OF DISALLOWANCE, AND WITH EXPLANATION 115JB NOT SPECIFICALLY MENTIONING SECTI ON 14A OF THE ACT, THE ADDITION OF RS.89,00,000 WAS NOT JUSTIFIED. THE VI EW TAKEN BY THE ITAT CANNOT BE FAULTED WITH. IT IS CONSISTENT WITH THE DECISIO N IN APOLLO TYRES LTD. V. COMMISSIONER OF INCOME TAX (2002) 255 ITR 273 (SC) WHICH HELD THAT THE ASSESSING OFFICER DOES NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFIT SHOWN IN THE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTENT PROVIDED IN THE EXPLANATION TO SECTION 115J. THE COURT DECLINES T O FRAME A QUESTION ON THE ABOVE ISSUE. ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 34 THUS, THIS DECISION IS ALSO ON THE SAME ISSUE TAKIN G CONTRARY VIEW. UNDER SUCH CIRCUMSTANCES THE ISSUE BEFORE US IS AS TO FOLLOW WHICH DECISION. LD. CIT(DR) IN COURSE OF HEARING FILED THE DECISION OF TRIBUNAL IN THE CASE OF GOETZE (INDIA) LTD. AND REF ERRED TO PARA 6 OF THE SAID DECISION WHICH IS REPRODUCED HEREUNDER: - 6. COMING TO THE SUSTENANCE OF DISALLOWANCE OF RS. 88,290/- U/S 115JB, THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS UPHELD THE DISALLOWANCE UNDER CLAUSE (F) OF EXPLANATION TO SEC TION 115JB(2) OF THE ACT. UNDER SECTION 115JB OF THE ACT, THE ASSESSEE IS REQUIRED TO PAY TAX ON ITS BOOK PROFIT SUBJECT TO CERTAIN CONDITIONS. THE BOOKS PROFIT IS TO BE DETERMINED U/S 115JB(2) AS PER PART II & III OF SCH EDULE VI TO COMPANYS ACT, 1956. EXPLANATION (1) TO SECTION 11 5JB(2) DEFINES THE EXPRESSION BOOK PROFIT AND MEANS THE NET PROFIT A S SHOWN IN THE P&L A/C FOR THE RELEVANT PREVIOUS YEAR PREPARED UNDER S UB-SECTION (2) AS INCREASED BY THE AMOUNTS SPECIFIED IN CLAUSE (A) TO (H) OF THE EXPLANATION 1. CLAUSE (F) OF THE EXPLANATION 1 REFERS TO THE A MOUNT OR AMOUNTS OR EXPENDITURE RETABLE TO ANY INCOME TO WHICH SECTION 10 (OTHER THAN PROVISIONS CONTAINED IN CLAUSE 38 THEREOF) OR SECTI ON 11 OR SECTION 12 APPLY. FOR APPLYING THE PROVISIONS OF CLAUSE (F) O F EXPLANATION TO SECTION 115JB(2), THERE SHOULD BE NEXUS BETWEEN THE AMOUNT OF EXPENDITURE RELATABLE TO THE INCOME EXEMPT U/S 10 OF THE ACT. THE DIVIDEND INCOME IS EXEMPT U/S 10(33) FOR ASSESSMENT YEAR 2001-02. SIN CE THE EXPENDITURE INCURRED HAS NOT BEEN IDENTIFIED AND NO NEXUS HAS B EEN ESTABLISHED WITH THE DIVIDEND INCOME, THE EXPENDITURE COULD NOT BE D ISALLOWED UNDER CLAUSE (F) OF THE EXPLANATION. AS PER THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD., THE ASSESSI NG OFFICER IS NOT ENTITLED TO TINKER WITH THE BOOK PROFITS AS DETERMI NED AS PER PROVISIONS OF COMPANYS ACT UNLESS THE AMOUNT IS SPECIFIED IN CLA USES (A) TO (H) OF THE EXPLANATION. THE AMOUNT OF RS.88,290/- HAS NOT BEE N ESTABLISHED TO HAVE NEXUS WITH THE DIVIDEND INCOME. THE AMOUNT OF RS.88,290/- HAS BEEN ESTIMATED AT 1% OF THE INCOME. IN OUR VIEW, N O DISALLOWANCE COULD BE MADE. ACCORDINGLY, WE DIRECT THE ASSESSING OFFI CER TO DELETE THE AMOUNT OF RS.88,290/- FROM THE BOOK PROFIT. THUS, HE SUBMITTED THAT THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD. WAS DULY CONSIDERED BY TRIBUNAL BEFORE TAKING CONTRARY VIEW IN THE MATTER. BUT HONBLE DELHI HIGH COURT DID NOT ACCEPT THE TRIBUNALS REASONING. LD. CIT(DR) FURTHER SUBMITTED THAT THE DECISION IN THE CASE OF BHUSHAN STEEL HAS BEEN REND ERED WITHOUT TAKING INTO CONSIDERATION THE DECISION IN T HE CASE OF GOETZE (INDIA) LTD. (SUPRA) OF CO-ORDINATE BENCH OF EQUAL ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 35 STRENGTH AS BOTH SIDES HAD NOT, BROUGHT TO THE NOT ICE OF THE BENCH THE SAID DECISION IN THE CASE OF GOETZE (INDI A) LTD. AND, THEREFORE, DOES NOT CONSTITUTE BINDING PRECEDENT. LD. CIT(DR) VEHEMENTLY CONTENDED THAT WHEN DECISION IN BHUSHAN STEEL WAS RENDERED, THE ISSUE WAS NO MORE RES-INTEGRA IN VIEW OF GOETZE DECISION. LD. CIT(DR) SUBMITTED THAT REVENUE HAD FILED REVIEW PETITION BEFORE HONBLE HIGH COURT IN THE CASE OF BHUSHAN STEEL WHICH HAS BEEN DISMISSED IN-LIMINE AT THE THRESHOLD ON THE GROUND OF DELAY IN FILING THE SAID REVIEW PETITION AND, THEREFORE, DOES NOT CONSTITUTE A BIND ING PRECEDENT. IN SUPPORT OF HIS CONTENTION HE HAS RELI ED ON THE COMMENTARY OF KANGA & PALKHIVALA, VOL. I , VIITH ED N.,PAG 43 WHICH IS REPRODUCED HEREUNDER:- 43. CIRCUMSTANCES THAT DESTROY OR WEAKEN THE BINDIN G FORCE OF PRECEDENT. A PRECEDENT LOSSES ALL OR SOME OF ITS BINDING FORCE IN THE FOLLOWING CIRCUMSTANCES: (I) IF IT IS REVERSED OR OVERRULED BY A HIGHER COURT REVERSAL OCCURS WHEN THE SAME DECISION IS TAKEN ON APPEAL AND IS REVERSE D BY THE HIGHER COURT, WHILE OVERRULING OCCURS WHEN THE HIGHER COUR T DECLARES IN ANOTHER CASE THAT THE EARLIER CASE WAS WRONG DECIDE D; (II) WHEN IT IS AFFIRMED OR REVERSED ON A DIFFERENT GROU ND, DEPENDING ON THE CIRCUMSTANCES OF SUCH AFFIRMATION OR REVERSAL; (III) WHEN THE LEGISLATURE ENACTS A STATE THAT IS INCONSI STENT WITH THE PRECEDENT; (IV) WHEN IT IS INCONSISTENT WITH THE EARLIER DECISIONS OF A HIGHER COURT OR A COURT OF THE SAME RANK; (V) IF IT IS A PRECEDENT SUB SILENTIO OR NOT FULLY ARGU ED; (VI) WHEN IT IS RENDERED PER INCURIAM, IE, IN IGNORANCE OF A STATUTORY PROVISION OR BINDING PRECEDENT HOWEVER, THE RULE OF PER INCURIAM IS OF LIMITED APPLICATION, AND IF THE PROVISION OF THE AC T WAS NOTICED AND CONSIDERED, THEN THE JUDGMENT CANNOT BE IGNORED AS BEING PER INCURIAM MERELY ON THE GROUND THAT IT HAS ERRONEOUSLY REACHE D THE CONCLUSION; AND (VII) WHEN IT IS AN ERRONEOUS DECISION, IE, A DECISION CO NFLICTING WITH THE FUNDAMENTAL PRINCIPLES OF LAW. LD. PRINCIPAL CIT(DR) FURTHER RELIED ON THE DECISIO N OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. THANA ELECT RICITY SUPPLY LTD. 206 ITR 727 WHEREIN HONBLE COURT WHILE ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 36 SUMMARIZING THE GENERAL PRINCIPLES WITH REGARD TO P RECEDENTS, INTER-ALIA, OBSERVED AS UNDER:- (III) WHERE THERE ARE CONFLICTING DECISIONS OF COURTS OF CO-ORDINATE JURISDICTION, THE LATER DECISION IS TO BE PREFERRED IF REACHED AFTER FULL CONSIDERATION OF THE EARLIER DECISIONS. LD. PRINCIPAL CIT(DR) HAS ALSO RELIED ON FOLLOWING DECISIONS :- - CIT VS. PAMWI TISSUES LIMITED, 313 ITR 137 - INDIAN OIL CORPORATION LTD. VS. STATE OF BIHAR, 167 ITR 897 - KUNHAYAMMED & ORS. VS. STATE OF KERALA & ANR., 245 ITR 360 LD. PRINCIPAL CIT(DR) HAS SUBMITTED FOLLOWING WRITT EN SUBMISSIONS IN THIS REGARD:- THE ASSESSEE HAD FILED A COMPILATION OF CASE LAWS ON 20/04/2017 AND THE DEPTT. HAD TO REPLY TO THE ABOVE. THE REPLY OF THE DEPTT. IS AS FOLLOWS :- 1. THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF SUNDEEP KUMAR BAFNA V/S STATE OF MAHARASHTRA AND ANOTHER AIR 2014 SC 1745 HAS HELD AS FOLLOWS IN PARA 12 OF THE JUDGEMENT :- IF THE THIRD SENTENCE OF PARA 48 IS DISCORDANT TO NIRANJAN SINGH, THE VIEW OF THE CO-ORDINATE BENCH OF EARLIER VINTAGE MUST PR EVAIL, AND THIS DISCIPLINE DEMANDS AND CONSTRAINS AS ALSO TO ADHERE TO NIRANJA N SINGH, ERGO, WE REITERATE AGAIN IN PARA 15 OF THE JUDGMENT IT HAS BEEN STATED AS FOLLOWS :- 15. IT CANNOT BE OVER EMPHASIZED THAT THE DISCIP LINE DEMANDED BY A PRECEDENT OR THE DISQUALIFICATION OR DIMUNITION O F A DECISION ON THE APPLICATION OF THE PER INCURIAM RULE OF GREAT IMPOR TANCE, SINCE WITHOUT IT, CERTAINITY OF LAW, CONSISTENCY OF RULINGS AND COMIT Y OF COURTS WOULD BECOME A COSTLY CASUALTY. A DECIRION OR JUDGEMENT CAN BE PER INCURIAM ANY PROVISION IN A STATUTE, RULE OR REGULATION, WHICH W AS NOT BROUGHT TO THE NOTICE OF THE COURT. A DECISION OR JUDGEMENT CAN A LSO BE PER INCURIAM IF IT IS NOT POSSIBLE TO RECONCILE ITS RATIO WITH THAT OF A PREVIOUSLY PRONOUNCED JUDGEMENT OF A CO-EQUAL OR LARGER BENCH, OR IF THE DECISION OF A HIGH COURT IS NOT IN CONSONANCE WITH THE VIEWS OF THIS COURT. IT MUST IMMEDIATELY BE CLARIFIED THAT THE PER INCURIAM RULE IS STRICTLY AN D CORRECTLY APPLICABLE TO THE RATIO DECIDENDI AND NOT TO OBITER DICTA. IT IS OFTEN ENCOUNTERED IN HIGH COURTS THAT TWO ARE MORE MUTUALLY IRRECONCILABLE DE CISIONS OF THE SUPREME COURT ARE CITED AT THE BAR. WE THINK THAT THE INVI OLABLE RECOURSE IS TO APPLY THE EARLIEST VIEW AS THE SUCCEEDING ONES WOULD FALL IN THE CATEGORY OF PER INCURIAM. THUS, BOTH PARAS 12 AND PARA 15 CITED ABOVE, IN THE SUPREME COURT JUDGEMENT IN SANDEEP KUMAR BAFNAS CASE (SUPRA) HOL D VERY CLEARLY THAT THE EARLIER DECISION IS TO BE FOLLOWED AND NOT THE LATER ONE OF CO-QUAL BENCH WHEN GIVEN IN IGNORANCE OF THE EARLIER DECISION WHICH IN THE PRESENT ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 37 CASE MAKES IT VERY CLEAR THAT THE DECISION RENDER ED IN THE CASE OF GOETZE SHOULD BE FOLLOWED AND NOT THE LATER DECISION GIVEN IN THE CASE OF BHUSHAN STEEL. FURTHER, THE HONBLE SUPREME COURT IN THE CASE OF M AMALESHWAR PRASAD V/S KANHAIYA LAL (DEAD) AIR 1975 SC 907 OBSE RVED AS FOLLOWS :- CERTAINITY OF THE LAW, CONSISTENCY OF RULINGS AND COMITY OF COURTS ALL FLOWERING FROM THE SAME PRINCIPLE CONVERGE TO THE C ONCLUSION THAT A DECISION ONCE RENDERED MUST LATER BIND LIKE CASES. WE DO NOT INTEND TO DETRACT FROM THE RULE THAT, IN EXCEPTIONAL INSTANCE S WHERE BY OBVIOUS INADVERTENCE OR OVER SIGHT A JUDGEMENT FAILS TO NOT ICE A PLAIN STATUTORY PROVISION OR OBLIGATORY AUTHORITY RUNNING COUNTER T O THE REASONING AND RESULT REACHED, IT MAY NOT HAVE THE SWAY OF BINDING PRECEDENTS. IT SHOULD BE A GLARING CASE, AN OBTRUSIVE OMISSION. ALTHOUGH THE ABOVE OBSERVATIONS ARE NOT RATIO BUT THEN AS HELD IN THE CASE OF (1) KHARAWALA V/S ITO 147 ITR PAGES 67, 85 :- THE OBSERVATION OF THE SUPREME COURT ON THE TRUE IN TERPRETATION OF SUB- S. (1) CANNOT, THEREFORE, BE REGARDED AS MERE PASSI NG OBSERVATIONS. AT THE HIGHEST, THEY MAY BE TREATED AS AN OBITER DICTUM, T HAT IS TO SAY THE EXPRESSION OF OPINION ON A POINT WHICH IT WAS NOT N ECESSARY FOR THE DECISION OF THE CASE. EVEN IF THEY ARE CONCEIVABLY REGARDED AS OBITER DICTUM IT IS SETTLED THAT IF AN OPINION IS EXPRESSED BY THE SUPR EME COURT ON THE INTERPRETATION OF A SECTION AFTER CAREFUL CONSIDERA TION AND SUCH OPINION IS DELIBERATELY AND ADVISEDLY GIVEN, THE OPINION WOULD BE BINDING ON THE HIGH COURT SEE MOHANDAS ISSARDAS V. A.N. SATTANATHAN (19 55) 56 BLR 1156; AIR 1955 BOM 113. UNDER THESE CIRCUMSTANCES, WERE ARE UNABLE TO ACCEDE TO THIS SUBMISSION MADE ON BEHALF OF THE REVENUE. (2) CIT V/S AP RIDING CLUB 168 ITR PAGES 393, 404 IT IS NOW-SETTLED THAT EVEN THE OBITER DICTUM OF TH EIR LORDSHIPS OF THE SUPREME COURT IS BINDING ON THE HIGH COURTS UNDER ARTICLE 1 41 OF CONSTITUTION OF INDIA. THE OBITER DICTA OF SUPREME COURT HAS TO BE FOLLO WED. HENCE, BOTH THE CASES OF SANDEEP KUMAR BAFNA AND MA MALESHWAR PRASAD V/S KANHAIYA LAL MAKE IT VERY CLEAR THAT T HE EARLIER DECISION CONSTITUTES THE BINDING PRECEDENT AND SHOULD BE F OLLOWED IN PREFERENCE TO THE LATER DECISION GIVEN IN IGNORANCE OF THE EARLIER DE CISION OF CO-EQUAL STRENGTH. HENCE, IT IS REQUESTED THAT THE HONBLE SPECIAL BEN CH MAY KINDLY FOLLOW THE EARLIER DECISION OF GOETZE IN PREFERENCE TO THE LATER DECISION OF BHUSHAN STEEL. PER CONTRA, LD. SENIOR COUNSEL, WITHOUT PREJUDICE T O HIS SUBMISSION THAT THE DECISION IN THE CASE OF GOETZE (INDIA) LTD. ON THIS ISSUE WAS BY OF CONCESSION, SUBMITTED THAT IN CASE OF CONFLICT/DIVERGENT VIEW EXPRESSED IN TWO SEPARATE P RONOUNCEMENTS OF A COURT BY A BENCH OF CO-EQUAL STRENGTH, THE DE CISION BEING LATER IN POINT OF TIME IS BINDING ON THE LOWER COUR TS. IN SUPPORT OF THIS PROPOSITION OF LAW HE HAS RELIED ON FOLLOWING DECISIONS :- 1. BHIKA RAM V. UOI : 238 ITR 113 (DEL.). ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 38 2. GOVINDANAIK G. KALAGHTIGI V. WEST PATENT PRESS CO. LTD.: AIR 1980 KAR 92 (FB). 3. VASANT TATOBA HARGUDE V. DIKKAYA MUTTAYA PUJARI : A IR 1980 BOMBAY 341. 4. PEEDIKKAKUMBHI JOSEPH V. SPECIAL TAHSILDAR : 2001 ( 1) KLT 747 (FB). 5. DATAMATICS FINANCIAL SERVICES LTD. V. JCIT : 95 ITD 23 (MUM. TRIB.) THE SECOND PROPOSITION ADVANCED BY LD. SENIOR COUNS EL IS THAT IN CASE OF CONFLICT/DIVERGENT VIEW EXPRESSED IN TWO S EPARATE PRONOUNCEMENTS OF A COURT BY A BENCH OF CO-EQUAL S TRENGTH, THE LOWER COURT SHALL FOLLOW THE JUDGMENT WHICH APPEAR S TO IT TO STATE THE LAW MORE ELABORATELY AND ACCURATELY. IN THIS RE GARD HE HAS RELIED ON FOLLOWING DECISIONS :- 1. INDO SWISS TIME LIMITED V. UMRAO : AIR 1981 P&H 213 2. AMAR SINGH YADAV V. SHANTI DEVI : AIR 1987 PAT 191 3. T.P. NAIK V. UOI : AIR 1998 MP 83 THIRD PROPOSITION ADVANCED BY LD. SENIOR COUNSEL IS THAT A LOWER AUTHORITY/COURT CANNOT DECLARE A JUDGMENT OF A HIGH ER COURT AS PER INCURIUM. IN THIS REGARD HE HAS RELIED ON FOLLOWING DECISIONS:- 1. CASSEL & CO. LTD. VS. BROOME [1972] 1 ALL ER 801 (H OUSE OF LORDS) QUOTED IN ITO V. MODERN INTERNATIONAL : ITA NO.1253 /KOL/2011. 2. CIT V. B.R. CONSTRUCTION : 202 ITR 222 (AP)(FB). THUS, WE ARE PITTED AGAINST TWO DECISIONS OF HONBL E JURISDICTIONAL HIGH COURT TAKING DIVERGENT VIEWS AN D, UNDER SUCH CIRCUMSTANCES WE HAVE TO DECIDE WHICH DECISION TO F OLLOW. WE FIND FROM THE DECISIONS RELIED UPON BY LD. SENIOR C OUNSEL MORE PARTICULARLY IN THE CASE OF BHIKA RAM (SUPRA) THAT LATER ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 39 PRONOUNCEMENT BY A BENCH OF CO-EQUAL STRENGTH SHOUL D BE FOLLOWED EVEN IF EARLIER DECISION WAS NOT CONSIDERE D. WE ARE NOT CONVINCED WITH THE SUBMISSION OF LD. SENIOR COUNSEL THAT TRIBUNAL CAN DECIDE WHICH DECISION STATE THE LAW MORE ELABOR ATELY AND ACCURATELY. WE ARE OF THE VIEW THAT DECISION IN THE CASE OF CASSEL & CO. LTD. V. BROOME (SUPRA) SHOULD GUIDE THE COURS E OF ACTION WHEREIN IT HAS BEEN OBSERVED AS UNDER:- THOUGH A JUDGMENT RENDERED PER INCURIAM CAN BE IGN ORED EVEN BY A LOWER COURT, YET IT APPEARS THAT SUCH A COURSE OF ACTION WAS NOT APPROVED BY THE HOUSE OF LORDS IN CASSELL & CO. LTD. V. BROOME [197 2] 1 AII ER 801, WHEREIN THE HOUSE OF LORDS DISAPPROVED THE JUDGMENT OF THE COURT OF APPEAL TREATING AN EARLIER JUDGMENT OF THE HOUSE OF LORDS AS PER INCURIUM. LORD HAILSHAM OBSERVED (AT PAGE 809) : IT IS NOT OPEN TO THE COURT OF APPEAL TO GIVE GRAT UITOUS ADVICE TO JUDGES OF FIRST INSTANCE TO IGNORE DECISIONS OF THE HOUSE OF LORDS IN THIS WAY. IT IS RECOGNIZED THAT THE RULE OF PER INCURIAM IS O F LIMITED APPLICATION AND WILL BE APPLICABLE ONLY IN THE RAREST OF RARE CASES. TH EREFORE, WHEN A LEARNED SINGLE JUDGE OR A DIVISION BENCH DOUBTS THE CORRECT NESS OF AN OTHERWISE BINDING PRECEDENT, THE APPROPRIATE COURSE WOULD BE TO REFER THE CASE TO A DIVISION BENCH OF FULL BENCH, AS THE CASE MAY BE, F OR AN AUTHORITATIVE PRONOUNCEMENT ON THE QUESTION INVOLVED AS INDICATED ABOVE. THE ABOVE-SAID TWO QUESTIONS ARE ANSWERED AS INDICATED ABOVE. IN SUCH A SCENARIO, IN OUR HUMBLE OPINION, PROPER COURSE WOULD BE TO FOLLOW THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V. VEGETABLE PRODUCTS LTD. (S.C.) 88 ITR 192. I N THIS CASE THE FACTS WERE LIKE THIS. THE RELEVANT ASSESSMENT YEAR WAS 1960-61. IN THAT REGARD THE INCOME-TAX OFFICER ISSUED A NOTICE UNDER SECTION 22(2) OF THE INDIAN INCOME-TAX ACT, 1922 ON JUNE1, 1960 ,SERVED ON ASSESSEE ON JUNE 13, 1960, REQUIRING THE ASSESSE E TO SUBMIT ITS RETURN ON OR BEFORE JULY18, 1960. ASSESSEE SOUGHT EXTENSION OF TIME FOR SUBMITTING ITS RETURN WHICH WAS EXTENDED B Y ITO FOR TWO MONTHS WITH RIDER FOR NO FURTHER EXTENSION. THE ASS ESSEE FAILED TO FURNISH THE RETURN OF INCOME WITHIN THE EXTENDED TI ME. THEREAFTER, A NOTICE UNDER SECTION 28(3) OF THE 192 2 ACT WAS SERVED ON THE ASSESSEE ON JANUARY 16, 1961. ON THE VERY NEXT DAY, ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 40 VIZ., JANUARY 17, 1961, THE ASSESSEE FILED ITS RETU RN FOR THE ASSESSMENT YEAR IN QUESTION. THE ASSESSMENT WAS CO MPLETED BY ITO ON OCTOBER 31, 1962. MEANWHILE, ON APRIL 1, 196 2, THE INCOME-TAX ACT, 1962( CAME INTO FORCE. AS UNDER THE PROVISIONS OF SECTION 297(2)(G) OF THE ACT, THE PROCEEDINGS FOR T HE IMPOSITION OF THE PENALTY HAD TO BE INITIATED AND COMPLETED UNDER THE ACT, A FRESH NOTICE WAS SERVED ON THE ASSESSEE. THE ITO DE TERMINED THE TAX DUE FROM THE ASSESSEE FOR THE ASSESSMENT YEAR A T RS.1,25,512.10 AND ON THAT BASIS, THE PENALTY PAYAB LE BY THE ASSESSEE WAS FIXED AT RS.12,734.10. IT MAY BE POINT ED OUT THAT ON FEBRUARY 2, 1961, A PROVISIONAL ASSESSMENT WAS MADE BY THE ITO UNDER SECTION 23B OF THE 1922 ACT. IMMEDIATELY THE REAFTER , THE ASSESSEE DEPOSITED RS. 92,294.55. IN DETERMINING T HE PENALTY DUE FROM THE ASSESSEE, THE ITO TOOK INTO CONSIDERATION NOT THE AMOUNT DEMANDED UNDER SECTION 156 OF THE ACT BUT THE AMOUN T ASSESSED UNDER SECTION 143 OF THE ACT. IN THE BACK DROP OF T HESE FACTS THE CONTROVERSY BEFORE HONBLE SUPREME COURT WAS WHETH ER THE PENALTY WAS TO BE LEVIED ON THE TAX ASSESSED UNDER SECTION 143 OR AS DEMANDED UNDER SECTION 156 BEING TAX ASSESSED MI NUS THE AMOUNT PAID UNDER THE PROVISIONAL ASSESSMENT ORDER. HONBLE SUPREME COURT BEFORE RESORTING TO THE INTERPRETATIO N OF TERM IN ADDITION TO THE AMOUNT OF THE TAX, IF ANY, PAYABLE BY HIM AS APPEARING IN SECTION 271(1)(A)(I) OBSERVED AS UNDER :- ON THE OTHER HAND, IT TWO REASONABLE CONSTRUCTIONS OF A TAXING PROVISION ARE POSSIBLE, THAT CONSTRUCTION WHICH FAVOURS THE A SSESSEE MUST BE ADOPTED. THIS IS A WELL-ACCEPTED RULE OF CONSTRUCT ION RECOGNIZED BY THIS COURT IN SEVERAL OF ITS DECISIONS. HON SUPREME COURT HELD AS UNDER:- WE MUST FIRST DETERMINE WHAT IS THE MEANING OF THE EXPRESSION THE AMOUNT OF THE TAX, IF ANY, PAYABLE BY HIM IN SECTI ON271(1)(A)(I). DOES IT MEAN THE AMOUNT OF TAX ASSESSED UNDER SECTION 143 O R THE AMOUNT OF TAX PAYABLE UNDER SECTION 156. THE WORD ASSESSED IS A TERM OFTEN USED IN TAXATION LAW. IT IS USED IN SEVERAL PROVISIONS IN THE ACT. QUANTIFICATION OF ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 41 THE TAX PAYABLE IS ALWAYS REFERRED TO IN THE ACT AS A TAX ASSESSED. A TAX PAYABLE IS NOT THE SAME THING AS TAX ASSESSED. THE TAX PAYABLE IS THAT AMOUNT FOR WHICH IS A DEMAND NOTICE IS ISSUED UNDER SECTION 156. IN DETERMINING THE TAX PAYABLE, THE TAX ALREADY PAID H AS TO BE DEDUCTED. HENCE, THERE CAN BE NO DOUBT THAT THE EXPRESSION T HE AMOUNT OF THE TAX, IF ANY, PAYABLE BY HIM REFERRED TO IN THE FIRST PART OF SECTION 271(1)(A)(I) REFERS TO THE TAX PAYABLE UNDER A DEMAND NOTICE. WE HAVE , THEREFORE, TO FOLLOW THE LATER DECISION O F HONBLE DELHI HIGH COURT IN THE CASE OF BHUSHAN STEEL (SUPRA). 6.22. IN VIEW OF ABOVE DISCUSSION, WE ANSWER THE QU ESTION REFERRED TO US IN FAVOUR OF ASSSESSEE BY HOLDING TH AT THE COMPUTATION UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB( 2), IS TO BE MADE WITHOUT RESORTING TO THE COMPUTATION AS CONTEMPLAT ED U/S 14A READ WITH RULE 8D OF THE INCOME-TAX RULES, 1962. 7. NOW COMING TO THE CROSS OBJECTION FILED BY ASSES SEE, WHEREIN THE MAIN ISSUE IS IN REGARD TO MODE OF COMPUTATION UNDER RULE 8D(2)(III). IN ORDER TO APPRECIATE THE CONTROVERSY, WE REPRODUCE RULE 8D [METHOD FOR DETERMINING AMOUNT OF EXPENDITURE IN R ELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME. 8D. (1) WHERE THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE OF A PREVIOUS YEAR, IS NOT SATISFIED WITH- (A) THE CORRECTNESS OF THE CLAIM OF EXPENDITURE MA DE BY THE ASSESSEE; OR (B) THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED, IN RELATION TO INCOME WHICH DOES NOT FORM PART OF T HE TOTAL INCOME UNDER THE ACT FOR SUCH PREVIOUS YEAR, HE SHA LL DETERMINE THE AMOUNT OF EXPENDITURE IN RELATION TO SUCH INCOM E IN ACCORDANCE WITH THE PRO VISIONS OF SUB-RULE (2). (2) THE EXPENDITURE IN RELATION TO INCOME WHICH DOE S NOT FORM PART OF THE TOTAL INCOME SHALL BE THE AGGREGATE OF FOLLOWING AMOUNTS, NAMELY:- (I) THE AMOUNT 0/ EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME; (II) IN A CASE WHERE THE ASSESSEE HAS INCURRED EXPENDITURE BY WAY OF INTEREST DURING THE PREVIOUS YEAR WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT, AN AMOUNT COMPUTED IN ACCORDANCE WITH THE FOLLOWING FORMULA, NAMELY:- A X B/C ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 42 WHERE A = AMOUNT OF EXPENDITURE BY WAY OF INTEREST OTHER THAN THE AMOUNT OF INTEREST INCLUDED IN CLAUSE (I) INCUR RED DURING THE PREVIOUS YEAR; B = THE AVERAGE OF VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND-THE LAST DAY OF THE PREVIOUS YEAR; C = THE AVERAGE OF TOTAL ASSETS AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAS T DAY OF THE PREVIOUS YEAR; (III) AN AMOUNT EQUAL TO ONE-HALF PER CENT OF THE A VERAGE OF THE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. (3) FOR THE PURPOSES OF THIS RULE, THE 'TOTAL ASSET S' SHALL MEAN, TOTAL ASSETS AS APPEARING IN THE BALANCE SHEET EXCL UDING THE INCREASE ON ACCOUNT OF REVALUATION OF ASSETS BUT IN CLUDING THE DECREASE ON ACCOUNT OF REVALUATION OF ASSETS.]' 7.1. IN THE PRESENT CASE, WE ARE ONLY CONCERNED WIT H CLAUSE (III) TO RULE 8D(2), REPRODUCED ABOVE. THE ASSESSEES FIR ST CONTENTION IS THAT WHILE CONSIDERING THE AVERAGE VALUE OF INVEST MENT, ONLY THOSE INVESTMENTS ARE TO BE TAKEN INTO CONSIDERATION WHIC H HAVE YIELDED EXEMPT INCOME AND NOT THOSE INVESTMENTS, WHICH DID NOT YIELD ANY EXEMPT INCOME DURING THE YEAR. THE SECOND CONTENTIO N IS THAT PHRASE SHALL NOT IN CLAUSE (III), REFERS ONLY TO THOSE INVESTMENTS, FROM WHICH INCOME EARNED CAN NEVER BE TAXABLE INCOM E. THE CONTENTION IS THAT MERELY BECAUSE THE INCOME IS EXE MPT IN A PARTICULAR YEAR, BUT CAN BECOME TAXABLE ON ACCOUNT OF AMENDMENT IN SUBSEQUENT YEAR, THEN THE SAID INVESTMENTS ARE N OT TO BE TAKEN INTO CONSIDERATION WHILE COMPUTING THE AVERAGE VALU E OF INVESTMENT. 8. LD. COUNSEL SUBMITTED THAT AS REGARDS INVESTME NTS, NOT YIELDING EXEMPT INCOME, THERE CAN BE TWO TYPES OF INVESTMENT S (A) INVESTMENT, INCOME WHEREFROM IS TAXABLE; (B) INVESTMENT, INCOME FROM WHICH THOUGH NOT EARNED D URING THE YEAR, IF EARNED, WOULD HAVE BEEN EXEMPT. 8.1. LD. COUNSEL POINTED OUT THAT AS FAR AS INVESTM ENTS MENTIONED IN CLAUSE (A) ARE CONCERNED, THE SAME HAS TO BE EXCLUDED WHILE COMPUTING AVERAGE VALUE OF INVESTMENT IN TERM S OF RULE 8D(2). HOWEVER, AS REGARDS THE INVESTMENT CONTEMPLA TED IN CLAUSE (B), THE CASE OF THE DEPARTMENT IS THAT IRRESPECTIV E OF A PARTICULAR INVESTMENT, CAPABLE OF EARNING EXEMPT INCOME, ACTUA LLY FETCHED ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 43 INCOME DURING THE YEAR OR NOT, THE SAME IS TO BE CO NSIDERED FOR CALCULATING AVERAGE INVESTMENT UNDER RULE 8D OF THE I.T. RULES. 8.2. LD. COUNSEL POINTED OUT THAT MANDATE OF SECTIO N 14A IS THAT EXPENDITURE INCURRED IN RELATION TO INCOME, WHICH D OES NOT FORM PART OF TOTAL INCOME UNDER THE ACT, SHALL NOT BE AL LOWED AS DEDUCTION. THIS CLEARLY IMPLIES THAT ASSESSEE SHOUL D HAVE EARNED SOME INCOME DURING THE RELEVANT PREVIOUS YEAR, WHIC H DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE PROVISIONS OF THE ACT AND SOME EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE IN RELATION TO THE AFORESAID INCOME, WHICH IS NOT INCLUDED IN THE TOTAL INCOME. UNLESS THESE TWO CONDITIONS ARE SATISFIED, THE PROV ISION OF SECTION 14A CANNOT BE INVOKED. 8.3. LD. COUNSEL REFERRED TO THE COLLINS COBUILD ST UDENTS DICTIONARY, WHEREIN THE EXPRESSION DOES REFERS TO THIRD PERSON SINGULAR OF THE PRESENT TENSE OF DO, WHICH MEANS THE ACT DONE IN PRESENT. THEREFORE, THE WORD DOES REFERS TO AN A CT OF THE PRESENT AND NOT THE FUTURE. 8.4. LD. COUNSEL SUBMITTED THAT IF THE DEPARTMENTS CONTENTION IS TO BE ACCEPTED, THEN IT IMPLIES THAT FIRSTLY THE INCOME FROM SUCH INVESTMENT WOULD BE EARNED IN FUTURE AND SECONDLY S UCH INCOME WOULD CONTINUE TO REMAIN EXEMPT FROM TAX I.E. THE LAW AT PRESENT WOULD PREVAIL IN THE SUBSEQUENT YEAR. HE SUBMITTED THAT THERE IS NO CERTAINTY THAT THE INCOME WHICH IS EXEMPT IN CURREN T YEAR WILL REMAIN EXEMPT IN SUBSEQUENT YEAR. HE POINTED OUT TH AT THE TERM SHALL IN CLAUSE (III) TO RULE 8D(2) IMPLIES THAT IN THE CURRENT YEAR ONE SHOULD BE SURE OF INCOME ACCRUING IN SUBSEQUENT YEAR TO REMAIN EXEMPT. IN SUPPORT OF HIS CONTENTION, HE POINTED OU T THAT DIVIDEND WAS FIRST EXEMPT FROM TAX BY INSERTION OF SEC. 10( 33) BY FINANCE ACT, 1997 W.E.F. 1-4-1998 BY THE FINANCE ACT 2002, THE EXEMPTION WAS REMOVED AND DIVIDENDS WERE MADE TAXABLE IN THE AY 2003-04. THE EXEMPTION WAS AGAIN RESTORED BY INSERTION OF SE CTION 10(34) BY FINANCE ACT 2003. THUS, HE SUBMITTED THAT IT IS NOT NECESSARY THAT, IF, IN ANY OF THE YEAR, ANY ITEM OF INCOME IS EXEMP T, THEN THE SAME WOULD CONTINUE REMAIN EXEMPT IN FUTURE ALSO. 8.5. SIMILARLY, HE POINTED OUT THAT WITH RESPECT TO EXEMPTION FROM TAX OF LONG TERM CAPITAL GAIN THE LEGISLATIVE HISTORY IS AS UNDER: SECTION 10(38), PROVIDING EXEMPTION OF LTCG EARNED ON SALE OF EQUITY SHARES/ SECURITIES ON WHICH STT IS P AID, WAS INSERTED ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 44 BY FINANCE ACT, 2004 W.E.F. 1-4-2005. PRIOR THERETO , SUCH LTCG WAS ALSO CHARGEABLE TO TAX. IT IS FURTHER TO BE NOT ED THAT UNTIL AMENDMENT BEING MADE VIDE FINANCE ACT 2006, W.E.F. 01.04. 2007 IN CLAUSE (II) TO EXPLANATION 1 TO SECTION 115JB, S UCH LTCG REMAINED TAXABLE UNDER MAT EVEN THOUGH THE SAME WAS EXEMPT UNDER NORMAL PROVISIONS BY VIRTUE OF SECTION 10(38) OF THE ACT. 8.6. LD. COUNSEL RELIED ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. H OLCEM INDIA PVT. LTD. (ITA NO. 486/2014 AND 299/14), 8.7. HE POINTED OUT THAT ONE OF THE ASSESSMENT YEAR S INVOLVED IN THE ABOVE APPEALS BEFORE THE HONBLE HIGH COURT WAS ASSESSMENT YEAR 2008-09 AND THE HONBLE COURT HAS S PECIFICALLY CONSIDERED, IN THE JUDGMENT, THE APPLICABILITY OF R ULE 8D FOR THE SAID YEAR. 8.8. LD. COUNSEL ALSO RELIED ON FOLLOWING DECISIONS : - CIT V. M/S SHIVAM MOTORS (P) LTD. ITA 88 OF 2014 (A LL.); - CIT V. WINSOME TEXTILE INDUSTRIES LTD. 319 ITR 204 (P&H) - CIT VS. M/S LAKHANI MARKETING ITA 970 OF 2008 (P&H) - CORRTECH ENERGY PVT. LTD. 223 TAXMAN 130 (GUJ.). 8.9. IN ALL THESE CASES IT HAS BEEN HELD THAT UNLES S AND UNTIL THE ASSESSEE HAS ACTUALLY EARNED INCOME DURING THE RELE VANT YEAR AND WHICH DOES NOT FORM PART OF THE TOTAL INCOME, SECTI ON 14A OF THE ACT WOULD HAVE NO APPLICATION. 8.10. LD. COUNSEL SUBMITTED THAT RULE 8D(2)(III) HA S TO BE READ HARMONIOUSLY WITH SECTION 14A BECAUSE RULE CANNOT O VERRIDE THE PROVISIONS OF THE ACT. 8.11. HE ALSO RELIED ON THE DECISION OF KOLKATA BEN CH OF THE ITAT IN THE CASE OF REI AGRO LTD. V. DCIT 160 TTJ 1 07, UPHOLDING THE AFOREMENTIONED VIEW. 9. LD. PRINCIPAL CIT(DR) SUBMITTED THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE LTD. 328 ITR 81 HAS HELD THAT RULE 8D, SECTION 14A, 14A(2) AND 14A(3) ARE REASONA BLE, PROPER AND VALID AND, THEREFORE, THE AO HAS USED RULE 8D A ND HAS, ACCORDINGLY, TAKEN ALL INVESTMENTS, CAPABLE OF YIEL DING EXEMPT INCOME, WHETHER ACTUALLY YIELDED OR NOT. HE SUBMITT ED THAT THE ACTION OF AO CANNOT BE STRUCK DOWN BY THE ITAT BECA USE AO HAS ONLY FOLLOWED THE MANDATE OF RULE 8D(2)(III). HE SU BMITTED THAT NONE OF THE DECISIONS RELIED UPON BY LD. COUNSEL FO R THE ASSESSEE ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 45 HAVE CONSIDERED THE PRINCIPLES LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF RAJEDNRA PRASAD MOODY 115 ITR 519 (SC), WHEREIN IT HAS BEEN HELD THAT AN EXPENDITURE TO BE ALLOWABLE, NEED NOT BE PROFITABLE, MEANING THEREBY THAT MERELY BECA USE THERE IS NO EXEMPT INCOME, EXPENDITURE IN RELATION TO THIS UNEA RNED EXEMPT INCOME CANNOT BE DISALLOWED. HE SUBMITTED THAT SINC E THE VARIOUS DECISIONS RELIED UPON BY THE LD. COUNSEL FOR THE AS SESSEE ARE AGAINST THE RATIO OF THE HONBLE SUPREME COURTS DECISION I N THE CASE OF RAJENDRA PRASAD MOODY (SUPRA), IT IS NOT BINDING ON THE TRIBUNAL. 9.1. LD. PRINCIPAL CIT(DR) FURTHER REFERRED TO THE DECISION OF SPECIAL BENCH OF THE ITAT IN THE CASE OF CHEMINVEST LTD. (SUPRA), WHEREIN THE CONTROVERSY WAS THAT THE ASSESSEE HAD N OT EARNED OR RECEIVED ANY DIVIDEND IN THE YEAR UNDER CONSIDERATI ON AND, THEREFORE, ASSESSEES CLAIM WAS THAT NO DISALLOWANC E COULD BE MADE BY INVOKING THE PROVISIONS OF SECTION 14A AND THIS ARGUMENT WAS REJECTED BY SPECIAL BENCH FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RAJENDRA PRASAD MOODY (SUPRA). 10. IN REJOINDER LD. COUNSEL REITERATED THE SUBMISS IONS WHICH WERE ADVANCED BEFORE THE SPECIAL BENCH OF THE ITAT IN THE CASE OF CHEMINVEST LTD. VS. ACIT 317 ITR (AT) 86. LD. COUN SEL VIDE HIS LETTER DT. SEPTEMBER 7, 2015 SUBMITTED THAT HONBLE DELHI HIGH COURT VIDE ORDER DT.02.09.2015 IN THE CASE OF CHEMI NVEST LIMITED V. CIT IN ITA NO. 749/2014 REVERSED THE DECISION OF SPECIAL BENCH AND , FOLLOWING THE EARLIER DECISION OF THE HONBLE HIGH COURT IN THE CASE OF CIT V. HOLCIM INDIA (P) LTD.: 272 CTR 282, HELD THA T WHERE NO EXEMPT INCOME HAS BEEN RECEIVED BY THE ASSESSEE IN THE PREVIOUS Y EAR, DISALLOWANCE UNDER SECTION 14A OF THE ACT IS NOT WARRANTED.THE HONBLE HIGH COURT HAS FURTHER HELD THAT RELIANCE PLACED BY THE SPECIAL BENCH ON T HE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RAJENDRA PRASAD MOODY: 115 ITR 519 WAS MISPLACED. IT HAS BEEN OBSERVED BY THE HONBLE HIG H COURT THAT DECISION OF HONBLE SUPREME COURT IN THE CASE OF RAJENDRA PRASA D MOODY (SUPRA) DEALT WITH THE INTERPRETATION OF SECTION 57(III) OF THE A CT, WHICH IS AN ALLOWANCE PROVISION, WOULD NOT APPLY WITH RESPECT TO INTERPRE TATION OF SECTION 14A OF THE ACT, WHICH IS FOR COMPUTING DISALLOWANCE OF EXPENDI TURE INCURRED IN RELATION TO EARNING OF EXEMPT INCOME. LD. SR. COUNSEL FURTHER POINTED OUT THAT NO SLP HAS BEEN FILED BY DEPARTMENT AGAINST THE SAID JUDGMENT. LD. CIT(DR) SUBMITTED THAT THE DECISION OF HONBLE DELHI HIGH COURT IS CONTRARY TO THE VIEW TAKEN BY HONBLE SUPR EME COURT IN THE CASE OF RAJENDRA PRASAD MODI (SUPRA). AS REGARDS NO N-FILING OF ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 46 SLP, LD. CIT(DR) SUBMITTED THAT THE SAME WAS NOT F ILED BECAUSE OF THE SMALLNESS OF AMOUNT. IN THIS REGARD HE REFER RED TO THE LETTER DT. 18/4/17 OF AO IN WHICH IT IS STATED TAX EFFECT INVOLVED WAS RS.5,72,107/-, WHICH WAS BELOW THE MONETARY LIMIT L AID DOWN AS PER THE INSTRUCTION NO.5 OF 2014 IN F.NO. 279/MISC.142/ 2007-ITJ(PT.) DATED 10.07.2014 FOR FILING OF SLP. THE CASE WAS A LSO NOT FOUND COVERED UNDER THE EXEMPTION CLAUSE AS PER SUB PARA (B) OF PARA 8 OF THE SAID INSTRUCTION NO.5/2014. IN VIEW OF THESE F ACTS, FILING OF SLP WAS NOT APPROVED BY THE BOARD. LD. CIT(DR) REFERRED TO PARA 6 OF CIRCULAR NO.21/2 015 WHICH IS REPRODUCED HEREUNDER:- 6. IN A CASE WHERE APPEAL BEFORE A TRIBUNAL OR A C OURT IS NOT FILED ONLY ON ACCOUNT OF THE TAX EFFECT BEING LESS THAN THE MONET ARY LIMIT SPECIFIED ABOVE, THE COMMISSIONER OF INCOME-TAX SHALL SPECIFICALLY RECOR D THAT EVEN THOUGH THE DECISION IS NOT ACCEPTABLE, APPEAL IS NOT BEING FIL ED ONLY ON THE CONSIDERATION THAT THE TAX EFFECT IS LESS THAN THE MONETARY LIMIT SPECIFIED IN THIS INSTRUCTION. FURTHER, IN SUCH CASES, THERE WILL BE NO PRESUMPTIO N THAT THE INCOME-TAX DEPARTMENT HAS ACQUIESCED IN THE DECISION ON THE DI SPUTED ISSUES. THE INCOME- TAX DEPARTMENT SHALL NOT BE PRECLUDED FROM FILING A N APPEAL AGAINST THE DISPUTED ISSUES IN THE CASE OF THE SAME ASSESSEE FO R ANY OTHER ASSESSMENT YEAR, OR IN THE CASE OF ANY OTHER ASSESSEE FOR THE SAME O R ANY OTHER ASSESSMENT YEAR, IF THE TAX EFFECT EXCEEDS THE SPECIFIED MONETARY LI MITS. LD. CIT(DR) FURTHER REFERRED TO SECTION 268A(4) WHI CH READS AS UNDER:- FILING OF APPEAL OR APPLICATION FOR REFERENCE BY I NCOME-TAX AUTHORITY. 268A. (1) .. (4) THE APPELLATE TRIBUNAL OR COURT, HEARING SUCH A PPEAL OR REFERENCE, SHALL HAVE REGARD TO THE ORDERS, INSTRUCTIONS OR DIRECTIO NS ISSUED UNDER SUB-SECTION (1) AND THE CIRCUMSTANCES UNDER WHICH SUCH APPEAL O R APPLICATION FOR REFERENCE WAS FILED OR NOT FILED IN RESPECT OF ANY CASE. HE, THEREFORE, SUBMITTED THAT THE DECISION IN THE C ASE OF CHEMINVEST OF HONBLE DELHI HIGH COURT HAS NO PRECEDENT VALUE. IN THIS REGARD HE ALSO FILED INSTRUCTIONS OF CBDT ON OBJECT OF INS ERTION OF SECTION 268A WHICH, INTER-ALIA, READS AS UNDER:- WHERE AN INCOME-TAX AUTHORITY HAS NOT FILED ANY AP PEAL OR APPLICATION FOR REFERENCE ON ANY ISSUE IN THE CASE OF AN ASSESS EE FOR ANY ASSESSMENT YEAR, DUE TO ABOVEMENTIONED ORDER/INSTRUCTION/DIREC TION OF THE BOARD, SUCH AUTHORITY SHALL NOT BE PRECLUDED FROM FILING A N APPEAL OR APPLICATION FOR REFERENCE ON THE SAME ISSUE IN THE CASE OF ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 47 (A) THE SAME ASSESSEE FOR ANY OTHER ASSESSMENT YEAR; OR (B) ANY OTHER ASSESSEE FOR THE SAME OR ANY OTHER ASSESS MENT YEAR. HE, THEREFORE, SUBMITTED THAT, IN VIEW OF STATUTORY PROVISIONS, CIRCULAR SHOULD BE GIVEN DUE WEIGHTAGE. LD. CIT(DR) FURTHER REFERRED TO 378 ITR 22 (JOURNA L SECTION) WHEREIN IT IS COMMENTED BY S. RAJARATNAM O N THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST (SUPRA) AS UNDER:- SECTION 14A PROVIDES FOR DISALLOWANCE OF EXPENDITU RE RELATING TO EXEMPT INCOME. WHERE THE EXEMPT SOURCE WAS INTACT BUT THERE WAS NO INCOME DURING THE YEAR, IT WAS DECIDED THAT SECTION 14A COULD HAVE NO APPLICATION, IN CHEMINVEST LTD. V. CI T [2015] 378 ITR 33 (DELHI). THE ARGUMENT OF THE REVENUE WAS THAT T HERE NEED NOT BE INCOME FOR EVERY YEAR FROM A SOURCE TO MERIT DEDUCT ION OR EXPENDITURE RELATING TO SUCH A SOURCE AS DECIDED BY THE SUPREME COURT IN CIT V. RAJENDRA PRASAD MOODY [1978] 115 ITR 519 (SC), SO T HAT THERE CANNOT BE A DIFFERENCE VIEW IN RESPECT OF DISALLOWA NCE OF EXPENDITURE. THE REASONING FOR NON-ACCEPTANCE OF THIS ARGUMENT W AS THAT THE LANGUAGE OF SECTION 57(3) UNDER WHICH THE DECISION WAS RENDERED IS DIFFERENT FROM THE LANGUAGE UNDER SECTION 14A. THE DECISION MAY NEED REVIEW BECAUSE THE MERE ACCIDENT THAT FOR A PA RTICULAR YEAR THERE WAS NO INCOME AS FOR EXAMPLE IN THE CASE OF DIVIDEN D INCOME, CANNOT MEAN THAT THE ASSESSEE WOULD GET ENTITLED TO THE EX PENDITURE RELATING TO INVESTMENT ON SHARES IN THE YEAR IN WHICH DIVIDE ND IS RECEIVED BUT NOT FOR A YEAR IN WHICH THERE WAS NO DECLARATION OF DIVIDEND. IT LEADS TO UNEVEN RESULT, SO THAT THERE WAS PROBABLY NO ADE QUATE REASON FOR NON-APPLICATION OF RAJENDRA PRASAD MOODYS CASE (SU PRA) IN RESPECT OF THIS ISSUE BEFORE THE COURT. 11. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. THE BASIC ISSUE FOR CONSIDERATION IS THAT THE INVESTMENT, WHICH DID NOT YIELD ANY EXEMPT INCO ME, SHOULD ENTER OR NOT ENTER INTO THE COMPUTATION UNDER RULE 8D, WHILE ARRIVING AT THE AVERAGE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME. 11.1. IN THE PRESENT CASE, OUR DECISION IS RESTRICT ED ONLY TO THE EXTENT OF INTERPRETATION OF LANGUAGE EMPLOYED IN RULE 8(2)(II I). THE SUBMISSION OF LD. COUNSEL FOR THE ASSESSEE IS THAT THIS ISSUE IS NOW COVERED BY THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 48 HOLCIN INDIA (P) LTD. (SUPRA), WHEREIN IT HAS BEEN HELD THAT IF NO DIVIDEND INCOME WAS EARNED, SECTION 14A COULD NOT B E INVOKED. THE HONBLE DELHI HIGH COURT HAS REFERRED TO THE DECISI ONS, WHICH WE HAVE NOTED EARLIER I.E.: - CIT V. M/S SHIVAM MOTORS (P) LTD. ITA 88 OF 2014 (A LL.); - CIT V. WINSOME TEXTILE INDUSTRIES LTD. 319 ITR 204 (P&H) - CIT VS. M/S LAKHANI MARKETING ITA 970 OF 2008 (P&H) - CORRTECH ENERGY PVT. LTD. 223 TAXMAN 130 (GUJ.). - CIT VS. HERO CYCLES LTD. 323 ITR 518. 11.2. THE SUBMISSION OF LD. PRINCIPAL CIT(DR) IS TH AT ITAT IN THE CASE OF DELHI SPECIAL BENCH IN THE CASE OF CHE MINVEST LTD. (SUPRA) HAS SPECIFICALLY HELD THAT EVEN IF THERE IS NO EXEMPT INCOME, THE PROVISIONS OF SECTION 14A ARE APPLICABL E IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RA JEDNRA PRASAD MOODY (SUPRA). HIS SUBMISSION IS THAT THE DECISION OF HONBLE DELHI COURT REVERSING THE DECISION OF SPECIAL BENCH IN CHEMINVEST SHOULD NOT BE FOLLOWED BECAUSE THAT IS C ONTRARY TO THE PRINCIPLES LAID DOWN IN RAJENDRA PRASAD MODI(SUPRA) . 11.3. IT IS AGAINST THESE SUBMISSIONS, WE FIRST REF ER TO THE FACTS AS WERE OBTAINING IN THESE TWO DECISIONS. 11.4. IN THE CASE OF CHEMINVEST LTD. (SUPRA), THE A SSESSEE HAD BORROWED FUNDS OF RS. 8,51,65,000/- AND DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2004-05 PAID INTEREST O F RS. 1,21,02,367/- THEREON. OUT OF THIS UNSECURED LOAN, THE ASSESSEE INVESTED A SUM IN PURCHASE OF SHARES, WHICH WAS SHO WN AS INVESTMENT FOR THE PURPOSE OF LONG TERM CAPITAL GAI NS. THE AO DISALLOWED INTEREST PROPORTIONATE TO THE INVESTMENT IN SHARES, THOUGH NO EXEMPT INCOME WAS EARNED DURING THE YEAR . THE CIT(A) AFFIRMED THIS BUT HELD THAT THE NET INTEREST DEBITED TO THE P&L A/C WAS REQUIRED TO BE APPORTIONED AND NOT THE GROSS INTEREST EXPENDITURE. THE TRIBUNAL HELD THAT INTEREST EXPEND ITURE INCURRED BY THE ASSESSEE WAS FOR BORROWING USED FOR THE PURP OSES OF INVESTMENT IN SHARES, BOTH HELD FOR TRADING AS WELL AS INVESTMENT PURPOSES. IRRESPECTIVE OF WHETHER OR NOT THERE WAS ANY YIELD OF DIVIDEND ON THE SHARES PURCHASED, THE INTEREST INCU RRED WAS RELATABLE TO EARNING OF DIVIDEND ON THE SHARES PURC HASED. THE DIVIDEND INCOME BEING EXEMPTED FROM TAX BY VIRTUE O F SECTION ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 49 10(34) OF THE ACT, THE INTEREST PAID ON BORROWED CA PITAL UTILIZED IN PURCHASE OF SHARES, BEING THE EXPENDITURE INCURRED IN RELATION TO DIVIDEND INCOME NOT FORMING PART OF THE ASSESSEES TOTAL INCOME, WAS HELD TO BE NOT AN ALLOWABLE DEDUCTION. IN COMIN G TO THE CONCLUSION, THE SPECIAL BENCH PRIMARILY RELIED ON T HE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF R AJENDRA PRASAD MOODY (SUPRA). 11.5. IN THE CASE OF RAJENDRA PRASAD MOODY (SUPRA), THE FACTS WERE THAT THE ASSESSEES WERE BROTHERS AND EACH OF T HEM HAD BORROWED MONEYS FOR THE PURPOSES OF MAKING INVESTME NT IN SHARES OF CERTAIN COMPANIES. DURING THE RELEVANT ASSESSMEN T YEAR THEY PAID INTEREST ON THE MONEYS BORROWED BUT DID NOT RE CEIVE ANY DIVIDEND ON THE SHARES PURCHASED WITH THESE MONEYS. BOTH OF THEM MADE A CLAIM FOR DEDUCTION OF THE AMOUNT OF INTERES T PAID ON BORROWED MONEYS BUT THIS CLAIM WAS NEGATED BY THE I TO AND ON APPEAL BY THE AAC ON THE GROUND THAT DURING THE REL EVANT ASSESSMENT YEAR THE SHARES DID NOT YIELD ANY DIVIDE ND AND, THEREFORE, INTEREST PAID ON THE BORROWED MONEYS COU LD NOT BE REGARDED AS EXPENDITURE LAID OUT OR EXPENDED WHOLL Y AND EXCLUSIVELY FOR THE PURPOSES OF MAKING OR EARNING I NCOME CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCE S, SO AS TO BE ALLOWABLE AS A PERMISSIBLE DEDUCTION U/S 57(III). T HE TRIBUNAL, HOWEVER, ON FURTHER APPEAL, DISAGREED WITH THE VIEW TAKEN BY THE TAXING AUTHORITIES AND UPHELD THE CLAIM OF EACH OF THE TWO ASSESSEES FOR DEDUCTION U/S 57(III). 11.6. IN THE BACKDROP OF THESE FACTS THE TRIBUNALS ORDER WAS UPHELD BY THE HONBLE HIGH COURT AND HONBLE SUPREM E COURT. THE HONBLE SUPREME COURT, INTER ALIA, HELD THAT IT IS THE PURPOSE OF THE EXPENDITURE THAT IS RELEVANT IN DETERMINING THE APPLICABILITY OF SECTION 57(III) AND THAT PURPOSE MUST BE MAKING OR EARNING OF INCOME. IT WAS FURTHER HELD THAT SECTION 57(III) DO ES NOT REQUIRE THAT THIS PURPOSE MUST BE FULFILLED IN ORDER TO QUALIFY THE EXPENDITURE FOR DEDUCTION. IT DOES NOT SAY THAT THE EXPENDITURE SHALL BE DEDUCTIBLE ONLY IF ANY INCOME IS MADE OR EARNED. TH ERE IS IN FACT NOTHING IN THE LANGUAGE OF SECTION 57(III) TO SUGG EST THAT THE PURPOSE, FOR WHICH THE EXPENDITURE IS MADE, SHOULD FRUCTIFY INTO ANY BENEFIT BY WAY OF RETURN IN THE SHAPE OF INCOME . ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 50 11.7. THUS, IN BOTH THE DECISIONS VIZ. IN THE CASE OF CHEMINVEST LTD. (SUPRA), AND IN THE CASE OF RAJENDR A PRASAD MOODY (SUPRA), THE ISSUE RELATED TO ALLOWABILITY OF EXPENDITURE WHICH HAD DIRECT NEXUS WITH THE EARNING OF INCOME. THE BORROWING IN BOTH THE CASES HAS NOT BEEN DISPUTED BEING FOR A CQUIRING SHARES. HONBLE DELHI HIGH COURT HAS SPECIFICALLY HELD IN P ARA 21 AS UNDER:- 21. THERE IS MERIT IN THE CONTENTION OF MR. VOHRA THAT THE DECISION OF THE SUPREME COURT IN RAJENDRA PRASAD MODDY (SUPRA) WAS RENDERED IN THE CONTEXT OF ALLOWABILITY OF DEDUCTION UNDER SECTION 57(III) OF THE ACT, WHERE THE EXPRESSION USED IS FOR THE PURPOSE OF MAKING OR EA RNING SUCH INCOME. SECTION 14A OF THE ACT ON THE OTHER HAND CONTAINS T HE EXPRESSION IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INC OME. THE DECISION IN RAJENDRA PRASAD MOODY (SUPRA) CANNOT BE USED IN THE REVERSE TO CONTEND THAT EVEN IF NO INCOME HAS BEEN RECEIVED, THE EXPENDITUR E INCURRED CAN BE DISALLOWED UNDER SECTION 14A OF THE ACT. 11.8. IN THE CASE OF HOLCIN INDIA (P) LTD. (SUPRA) THE FACTS WERE THAT THE RESPONDENT- ASSESSEE WAS A SUBSIDIARY OF HOLDERIND INVESTMENTS LTD., MAURITIUS, WHICH WAS FORMED AS A HOLDING COMPANY FOR MAKING DOWNSTREAM INVESTMENTS IN CEMENT MANUFACTURING VENTURES IN INDIA. IN THE RETURN OF I NCOME FILED FOR THE ASSESSMENT YEAR 2007-08, THE RESPONDENT-ASSESSE E DECLARED LOSS OF RS. 8.56 CRORES APPROXIMATELY. THE RESPONDE NT-ASSESSEE HAD DECLARED REVENUE RECEIPTS OF RS. 18,02,274/- WH ICH INCLUDED INTEREST OF RS. 726/- FROM FIXED DEPOSIT RECEIPTS A ND PROFIT ON SALE OF FIXED ASSETS OF RS. 16,52,225/-. AS AGAINST THIS, THE RESPONDENT ASSESSEE HAD CLAIMED ADMINISTRATIVE AND MISCELLANEOUS EXPENDITURE WRITTEN OFF AMOUNTING TO RS. 8.75 CRORE S. FOR THE ASSESSMENT YEAR 2008-09, THE ASSESSEE HAD FILED RET URN DECLARING LOSS OF RS. 6.60 CRORES APPROXIMATELY. THE ASSESSEE HAD DECLARED REVENUE RECEIPTS IN THE FORM OF FOREIGN CURRENCY FL UCTUATION DIFFERENCE GAIN OF RS. 12,46,595/-. IT HAD CLAIMED EXPENSES AMOUNTING TO RS. 7.02 CRORES AS PERSONAL EXPENSES, OPERATING AND OTHER EXPENSES, DEPRECIATION AND FINANCIAL EXPENSES . 11.9. IN BOTH THE ASSESSMENT ORDERS, THE ASSESSING OFFICER HELD THAT THE RESPONDENT-ASSESSEE HAD NOT COMMENCED BUSINESS ACTIVITIES AS THEY HAD NOT UNDERTAKEN ANY MANUFACTU RING ACTIVITY OR MADE DOWNSTREAM INVESTMENTS. IT WAS OBSERVED THAT T HE RESPONDENT-ASSESSEE, AFTER RECEIVING APPROVAL OF FO REIGN ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 51 INVESTMENT PROMOTION SOARD (FIPS) DATED 20.12.2000 ACQUIRED SHARES CAPITAL OF AMBUJA CEMENT INDIA LTD. THIS, TH E ASSESSING OFFICER FELT, WAS NOT SUFFICIENT TO INDICATE OR HOL D THAT THE RESPONDENT-ASSESSEE HAD STARTED THEIR BUSINESS. HE, ACCORDINGLY, DISALLOWED THE ENTIRE EXPENDITURE OF RS. 8.75 CRORE S FOR THE ASSESSMENT YEAR 2007-08 AND RS. 7.02 CRORES FOR THE ASSESSMENT YEAR 2008-09. 11.10. LD. CIT(A) DID NOT AGREE WITH THE FINDINGS OF ASSESSING OFFICER THAT THE BUSINESS OF THE RESPONDENT- ASSESS EE HAD NOT BEEN SET UP OR COMMENCED. THE CIT(A) OBSERVED THAT THE R ESPONDENT- ASSESSEE HAD BEEN SET UP WITH THE BUSINESS OBJECTIV E OF MAKING INVESTMENT IN CEMENT INDUSTRY AFTER DUE APPROVAL GI VEN BY THE GOVERNMENT OF INDIA, MINISTRY OF COMMERCE AND INDUS TRY VIDE LETTER DATED 18.12.2002 AND 20.12.2012. IT WAS OBSE RVED THAT IN FACT, THE RESPONDENT-ASSESSEE WAS NOT TO UNDERTAKE ANY MANUFACTURING ACTIVITY THEMSELVES. AFTER CONSIDERIN G THE FIPS APPROVAL AND THE PURCHASE OF SHARES IN THE SAID COM PANY OF RS. 1850.91 CRORES, LD. CIT(A), INTER ALIA, OBSERVED THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF HOLDING OF INVESTMENT AND WAS ENTITLED TO CLAIM EXPENDITURE PROVIDED. THE RE WAS A DIRECT CONNECTION BETWEEN EXPENDITURE INCURRED AND BUSINESS OF THE ASSESSEE COMPANY. HOWEVER, HE POINTED OUT TH AT SINCE THE BUSINESS OF THE RESPONDENT ASSESSEE WAS TO ACT AS A HOLDING COMPANY FOR DOWNSTREAM INVESTMENT AND AS IT WAS AN ACCEPTED FACT THAT THEY HAD INCURRED EXPENSES TO PR OTECT THEIR BUSINESS AND EXPLORE NEW AVENUES OF INVESTMENT, THE PROVISIONS OF SECTION 14A WERE APPLICABLE. 11.11. THE HONBLE HIGH COURT OBSERVED THAT THE REA SONING GIVEN BY THE CIT(A) WAS AMBIGUOUS AND UNCLEAR AND O N CLARITY BEING SOUGHT FROM THE REVENUE IT WAS POINT ED OUT THAT THE STAND OF THE ASSESSEE CONTAINED A CONTRADICTIO N TO THE EXTENT THAT ON THE ISSUE OF SETTING UP OF BUSINESS , IT WAS STATED THAT THE ASSESSEE HAD INCURRED EXPENDITURE ON ACQUI RING THE SHARES, THEREFORE, THE ASSESSEE COULD NOT NOW TAKE DIFFERENT STAND THAN THE ONE TAKEN IN THE FIRST ISSUE. ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 52 11.12. THE HONBLE HIGH COURT, AFTER CONSIDERING IN DETAIL THE DECISION OF LD. CIT(A) FINALLY OBSERVED IN PAR A 13 AS UNDER: 13. WE ARE CONFUSED ABOUT THE STAND TAKEN BY THE AP PELLANT- REVENUE. THUS, WE HAD ASKED SR. STANDING COUNSEL FO R THE REVENUE, TO STATE IN HIS OWN WORDS, THEIR STAND BEF ORE US. DURING THE COURSE OF HEARING, THE SUBMISSION RAISED WAS THAT THE SHARES WOULD HAVE YIELDED DIVIDEND, WHICH WOULD BE EXEMPT INCOME AND THEREFORE, THE CIT(A) HAD INVOKED SECTIO N 14A TO DISALLOW THE ENTIRE EXPENDITURE. THE AFORESAID SUBM ISSION DOES NOT FIND ANY SPECIFIC AND CLEAR NARRATION IN THE RE ASONS OR THE GROUNDS GIVEN BY THE CIT(A) TO MAKE THE SAID ADDITI ON. POSSIBLY, THE CIT(A), THOUGH IT IS NOT ARGUED BEFOR E US, HAD TAKEN THE STAND THAT THE RESPONDENT-ASSESSEE HAD MA DE INVESTMENT AND EXPENDITURE WAS INCURRED TO PROTECT THOSE INVESTMENTS AND THIS EXPENDITURE CANNOT BE ALLOWED UNDER SECTION 14A. 11.13. THUS, HONBLE DELHI HIGH COURT PRIMARILY DEC IDED THE ISSUE REGARDING APPLICABILITY OF SECTION 14A EVEN I F NO DIVIDEND INCOME WAS EARNED. THE HONBLE HIGH COURT IN PARAS 14 TO 16 OF ITS DECISION OBSERVED AS UNDER: 14. ON THE ISSUE WHETHER THE RESPONDENT-ASSESSEE CO ULD HAVE EARNED DIVIDEND INCOME AND EVEN IF NO DIVIDEND INC OME WAS EARNED, YET SECTION 14A CAN BE INVOKED AND DISALLOW ANCE OF EXPENDITURE CAN BE MADE, THERE ARE THREE DECISIONS OF THE DIFFERENT HIGH COURTS DIRECTLY ON THE ISSUE AND AGA INST THE APPELLANT-REVENUE. NO CONTRARY DECISION OF A HIGH C OURT HAS BEEN SHOWN TO US. THE PUNJAB AND HARYANA HIGH COURT IN COMMISSIONER OF INCOME TAX, FARIDABAD VS. MIS. LAKH ANI MARKETING INCL., ITA NO. 970/2008, DECIDED ON 02.04 .2014, MADE REFERENCE TO TWO EARLIER DECISIONS OF THE SAME COURT IN CIT VS. HERO CYCLES LIMITED, [2010]323 ITR 518 AND CIT VS. WINSOME TEXTILE INDUSTRIES LIMITED, [2009] 319 ITR 204 TO HOLD THAT SECTION 14A CANNOT BE INVOKED WHEN NO EXEMPT I NCOME WAS EARNED. THE SECOND DECISION IS OF THE GUJARAT HIGH COURT IN COMMISSIONER OF INCOME TAX-I VS. CORRTECH ENERGY (P .) LTD. [2014] 223 TAXMANN 130 (GUJ.). THE THIRD DECISION I S OF THE ALLAHABAD HIGH COURT IN INCOME TAX APPEAL NO. 88 OF 2014, COMMISSIONER OF INCOME TAX (II) KANPUR, VS. MIS. SH IVAM MOTORS (P) LTD. DECIDED ON 05.05.2014. IN THE SAID DECISION IT HAS BEEN HELD:- 'AS REGARDS THE SECOND QUESTION, SECTION 14A OF THE ACT PROVIDES THAT FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME UNDER THE CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 53 INCOME UNDER THE ACT. HENCE, WHAT SECTION 14A PROVIDES IS THAT IF THERE IS ANY INCOME WHICH DOES NOT FORM PART OF THE INCOME UNDER THE ACT, THE EXPENDITURE WHICH IS INCURRED FOR EARNING THE INCOME IS NOT AN ALLOWABLE DEDUCTION. FOR THE YEAR IN QUESTION, THE FINDING OF FACT IS THAT THE ASSESSEE HAD NOT EARNED ANY TAX FREE INCOME. HENCE, IN THE ABSENCE OF ANY TAX FREE INCOME, THE CORRESPONDING EXPENDITURE COULD NOT BE WORKED OUT FOR DISALLOWANCE. THE VIEW OF THE CIT(A), WHICH HAS BEEN AFFIRMED BY THE TRIBUNAL, HENCE DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. HENCE, THE DELETION OF THE DISALLOWANCE OF RS.2,03,752/- MADE BY THE ASSESSING OFFICER WAS IN ORDER '15. INCOME EXEMPT UNDER SECTION 10 IN A PARTICULAR ASSESSMENT YEAR, MAY NOT HAVE BEEN EXEMPT EARLIER AND CAN BECO ME TAXABLE IN FUTURE YEARS. FURTHER, WHETHER INCOME EARNED IN A SUBSEQUENT YEAR WOULD OR WOULD NOT BE TAXABLE, MAY DEPEND UPON THE NATURE OF TRANSACTION ENTERED INTO IN THE SUBSEQUENT ASSESSMENT YEAR. FOR EXAMPLE, LONG TERM. CAPITAL GA IN ON SALE OF SHARES IS PRESENTLY NOT TAXABLE WHERE SECURITY T RANSACTION TAX HAS BEEN PAID, BUT A PRIVATE SALE OF SHARES IN AN O FF MARKET TRANSACTION ATTRACTS CAPITAL GAINS TAX: IT IS AN UN DISPUTED POSITION THAT RESPONDENT ASSESSEE IS AN INVESTMENT COMPANY AND HAD INVESTED BY PURCHASING A SUBSTANTIAL NUMBER OF SHARES AND THEREBY SECURING RIGHT TO MANAGEMENT. POSSIBILITY O F SALE OF SHARES BY PRIVATE PLACEMENT ETC. CANNOT BE RULED OU T AND IS NOT ALL IMPROBABILITY. DIVIDEND MAY OR MAY NOT BE DECLA RED. DIVIDEND IS DECLARED BY THE COMPANY AND STRICTLY IN LEGAL SENSE, A SHAREHOLDER HAS NO CONTROL AND CANNOT INSIST ON P AYMENT OF DIVIDEND. WHEN DECLARED, IT IS SUBJECTED TO DIVIDEN D DISTRIBUTION TAX. 16. WHAT IS ALSO NOTICEABLE IS THAT THE ENTIRE OR W HOLE EXPENDITURE HAS BEEN DISALLOWED AS IF THERE WAS NO EXPENDITURE INCURRED BY THE RESPONDENT-ASSESSEE FOR CONDUCTING BUSINESS. THE CIT(A) HAS POSITIVELY HELD THAT THE BUSINESS WA S SET UP AND HAD COMMENCED. THE SAID FINDING IS ACCEPTED. THE RE SPONDENT- ASSESSEE, THEREFORE, HAD TO INCUR EXPENDITURE FOR T HE BUSINESS IN THE FORM OF INVESTMENT IN SHARES OF CEMENT COMPANIE S AND TO FURTHER EXPAND AND CONSOLIDATE THEIR BUSINESS. EXPE NDITURE HAD TO BE ALSO INCURRED TO PROTECT THE INVESTMENT MADE. THE GENUINENESS OF THE SAID EXPENDITURE AND THE FACT TH AT IT WAS INCURRED FOR BUSINESS ACTIVITIES WAS NOT DOUBTED BY THE ASSESSING OFFICER AND HAS ALSO NOT BEEN DOUBTED BY THE CIT(A). 11.14. NOW THE POSITION OF LAW AS STANDS IS THAT TH E DECISION OF HONBLE JURISDICTION HIGH COURT IS DIRE CTLY ON THE POINT IN DISPUTE WHEREAS THE DECISION OF HONB LE SUPREME COURT IN THE CASE OF RAJENDRA PRASAD MOODY ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 54 (SUPRA) HAS BEEN RENDERED IN THE CONTEXT OF SECTION 57(III), THE APPLICABILITY OF WHICH HAS BEEN RULED OUT BY HO NBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST (SUPRA). 11.15. UNDER ARTICLE 227 OF THE CONSTITUTION OF IND IA, THE COURTS FUNCTION UNDER THE SUPERVISORY JURISDICTION OF HONBLE HIGH COURT. THE DECISIONS RENDERED BY HONB LE HIGH COURT ARE BINDING ON ALL SUBORDINATE COURTS WO RKING WITHIN ITS JURISDICTION. IN THIS REGARD WE MAY REFE R TO THE FOLLOWING DECISIONS: (I) CIT V. THANA ELECTRICITY SUPPLY LTD. (1994) 206 ITR 727 (BOM.), WHEREIN ON THE ISSUE OF WHOSE DECISION IS BINDING ON WHOM, THE HONBLE BOMBAY COURT CONSIDERED IN DETAIL THE HIERARCHY OF THE COURTS AND HAS OBSERVED AS UNDER: IT IS ALSO WELL-SETTLED THAT THOUGH THERE IS NO SP ECIFIC PROVISION MAKING THE LAW DECLARED BY THE HIGH COURT BINDING ON SUBORDINATE COURTS, IT IS IMPLICIT IN TH E POWER OF SUPERVISION CONFERRED ON A SUPERIOR TRIBUNAL THA T THE TRIBUNALS SUBJECT TO ITS SUPERVISION WOULD CONFORM TO THE LAW LAID DOWN BY IT. IT IS IN THAT VIEW OF THE MAT TER THAT THE SUPREME COURT IN EAST INDIA COMMERCIAL CO. LTD. V. COLLECTOR OF CUSTOMS, AIR 1962 SC 1893 (AT PAGE 1905) DECLARED : WE, THEREFORE, HOLD THAT THE LAW DECLARED BY THE HIGHEST COURT IN THE STATE IS BINDING ON AUTHORITIES OR TRIBUNALS UNDER ITS SUPERINTENDENCE, AND THEY CANNOT IGNORE IT. .. .' THIS POSITION HAS BEEN SUMMED UP BY THE SUPREME CO URT IN MAHADEOLAL KANODIA V. ADMINISTRATOR GENERAL OF W EST BENGAL, AIR 1960 SC 936 (AT PAGE 941) AS FOLLOWS : JUDICIAL DECORUM NO LESS THAN LEGAL PROPRIETY FORMS THE BASIS OF JUDICIAL PROCEDURE. IF ONE THING IS MORE NECESSARY IN LAW THAN ANY OTHER THING, IT IS THE QUALITY OF CERTAINTY. THAT QUALIT Y WOULD TOTALLY DISAPPEAR IF JUDGES OF CO-ORDINATE JURISDICTION IN A HIGH COURT START OVERRULING ONE ANOTHERS DECISIONS. IF ONE DIVISION BENCH OF A HIGH COURT IS UNABLE TO DISTINGUISH A PREVIOUS DECISION OF ANOTHER DIVISION BENCH, AND HOLDING THE VIEW THAT THE EARLIER DECISION IS WRONG, ITSELF GIVES EFFECT TO THAT VIEW, THE RESULT WOULD BE UTTE R CONFUSION. THE POSITION WOULD BE EQUALLY BAD WHERE A JUDGE SITTING SINGLY IN THE HIGH COURT IS OF OPINION THAT THE PREVIOUS DECISION OF ANOTHER SINGLE JUDGE ON A QUESTION OF LAW IS WRONG AND ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 55 GIVES EFFECT TO THAT VIEW INSTEAD OF REFERRING THE MATTER TO A LARGER BENCH. THE ABOVE DECISION WAS FOLLOWED BY THE SUPREME COUR T IN BARADAKANTA MISHRA V. BHIMSEN DIXIT, AIR 1972 SC 2466, WHEREIN THE LEGAL POSITION WAS REITERATED IN THE FOLLOWING WORDS (AT PAGE 2469) : IT WOULD BE ANOMALOUS TO SUGGEST THAT A TRIBUNAL O VER WHICH THE HIGH COURT HAS SUPERINTENDENCE CAN IGNORE THE LAW DECLARED BY THAT COURT AND START PROCEEDING S IN DIRECT VIOLATION OF IT. IF A TRIBUNAL CAN DO SO, AL L THE SUBORDINATE COURTS CAN EQUALLY DO SO, FOR THERE IS NO SPECIFIC PROVISION, JUST LIKE IN THE CASE OF SUPREM E COURT, MAKING THE LAW DECLARED BY THE HIGH COURT BINDING ON SUBORDINATE COURTS. IT IS IMPLICIT IN TH E POWER OF SUPERVISION CONFERRED ON A SUPERIOR TRIBUNAL THA T ALL THE TRIBUNALS SUBJECT TO ITS SUPERVISION SHOULD CO NFORM TO THE LAW LAID DOWN BY IT. SUCH OBEDIENCE WOULD AL SO BE CONDUCIVE TO THEIR SMOOTH WORKING; OTHERWISE THERE WOULD BE CONFUSION IN THE ADMINISTRATION OF LAW AN D RESPECT FOR LAW WOULD IRRETRIEVABLY SUFFER.' (II) CIT V. SUNIL KUMAR (1995) 212 ITR 238 (RAJ.), IT WA S OBSERVED AS UNDER: THE POINT WHICH HAS BEEN RAISED COULD HAVE BEEN CONSIDERED TO BE DEBATABLE BECAUSE OTHER HIGH COURT S HAVE TAKEN A DIFFERENT VIEW. BUT SINCE THE VIEW TAK EN BY THIS COURT IS BINDING ON THE TRIBUNAL AND OTHER AUTHORITIES UNDER THE ACT IN THIS STATE, IT COULD N OT BE CONSIDERED TO BE A DEBATABLE POINT IN VIEW OF THE DECISION OF THIS COURT IN THE CASE OF CIT V. M.L. S ANGHI (1988) 170 ITR 670. (III) INDIAN TUBE COMPANY LTD. V. CIT & OTHERS (1993) 203 ITR 54 (CAL.) , IT WAS OBSERVED AS UNDER: IN THE IMPUGNED ORDER, RESPONDENT NO.1 HAS REJECTE D THE PETITIONERS CONTENTION BY STATING THAT, ALTHOU GH THE CALCUTTA HIGH COURT HAD HELD THAT AN ASSESSEE WAS ENTITLED TO INTEREST ON SUCH REFUND CALCULATED UP T O THE DATE OF THE ORDER PASSED CONSEQUENT UPON AN APPEAL OR REVISION OF THE ORIGINAL ASSESSMENT, THIS VIEW HAD NOT BEEN ACCEPTED BY THE BOMBAY HIGH COURT, THE ALLAHABAD HIGH COURT AND THE KERALA HIGH COURT. RESPONDENT NO.1, ACCORDINGLY, CHOSE TO ACCEPT THE V IEW OF THE BOMBAY, ALLAHABAD AND KERALA HIGH COURTS IN PREFERENCE TO THE VIEW OF THE CALCUTTA HIGH COURT. IN MY VIEW, THE ORDER OF RESPONDENT NO.1 CANNOT BE SUSTAINED ON THE SIMPLE GROUND THAT RESPONDENT NO. 1 IS AN AUTHORITY OPERATING WITHIN THE STATE OF WEST BEN GAL AND IS BOUND BY THE DECISIONS OF THE HIGH COURT OF THIS STATE ( SEE CIT V. INDIAN PRESS EXCHANGE LTD. [1989 ] 176 ITR 331 (CAL) ; EAST INDIA COMMERCIAL CO. LTD. V. COLLECTOR OF CUSTOMS AIR 1962 SC 1993, PARAGRAPH 29 ). ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 56 IN THAT VIEW OF THE MATTER, THE IMPUGNED ORDER MUS T BE SET ASIDE AND THE COMMISSIONER IS DIRECTED TO CONSI DER THE MATTER AFRESH IN KEEPING WITH THE DECISIONS OF THIS COURT AFTER GIVING THE PETITIONERS AN OPPORTUNITY OF BEING HEARD. AT LEAST 48 HOURS' CLEAR NOTICE MUST BE GIVEN TO THE PETITIONERS. THE COMMISSIONER WILL COMMUNICATE THE FINAL ORDER TO THE PETITIONER WITHI N EIGHT WEEKS FROM THE DATE OF HEARING. (IV) CIT VS. J.K. JAIN (1998) 230 ITR 839 (P&H), OBSERVI NG AS UNDER: WE HAVE CAREFULLY EXAMINED THE RECORDS AND HAVE HEARD LEARNED COUNSEL REPRESENTING THE PARTIES. WE ARE IN RESPECTFUL AGREEMENT WITH THE VIEW EXPRESSED BY THE ALLAHABAD HIGH COURT IN OMEGA SPORTS AND RADIO WORKS CASE [1982] 134 ITR 28, AS ALSO THE DECISION OF THIS COURT IN MOHAN LAL KANSALS CASE [1978] 114 IT R 583. FOLLOWING THE DECISION IN THE TWO CASES REFERR ED TO ABOVE, WE HOLD THAT IT WAS NOT A CASE OF DIVERGENCE OF OPINION INASMUCH AS THE OPINION EXPRESSED BY THIS C OURT WAS BINDING UPON THE TRIBUNAL. 11.16. THEREFORE, IN OUR CONSIDERED OPINION, NO CON TRARY VIEW CAN BE TAKEN UNDER THESE CIRCUMSTANCES. WE, ACCORDINGLY, HOLD THAT ONLY THOSE INVESTMENTS ARE T O BE CONSIDERED FOR COMPUTING AVERAGE VALUE OF INVESTMEN T WHICH YIELDED EXEMPT INCOME DURING THE YEAR. 11.17. AS FAR AS ARGUMENT RELATING TO MEANING TO B E ASCRIBED TO THE PHRASE SHALL NOT USED IN RULE 8D( 2)(III) IS CONCERNED, THE REVENUES CONTENTION IS THAT IT REFE RS TO THOSE INVESTMENTS WHICH DID NOT YIELD ANY EXEMPT IN COME DURING THE YEAR BUT IF INCOME WOULD HAVE BEEN YIELD ED IT WOULD HAVE REMAIN EXEMPT. THERE IS NO DISPUTE THAT IF AN INVESTMENT HAS YIELDED EXEMPT INCOME IN A PARTICULA R YEAR THEN IT WILL ENTER THE COMPUTATION OF AVERAGE VALUE OF INVESTMENTS FOR THE PURPOSES OF RULE 8D(2)(III). TH E ASSESSEES CONTENTION THAT IF THERE IS NO CERTAINT Y THAT AN INCOME, WHICH IS EXEMPT IN CURRENT YEAR, WILL CONTI NUE TO BE SO IN FUTURE YEARS AND, THEREFORE, THAT INVESTMENT SHOULD ALSO BE EXCLUDED, IS HYPOTHETICAL AND CANNOT BE ACC EPTED. 11.18. IN VIEW OF ABOVE DISCUSSION, THE MATTER IS R ESTORED BACK TO THE FILE OF AO FOR RECOMPUTING THE DISALLOW ANCE U/S 14A IN TERMS OF ABOVE OBSERVATIONS. THUS, REVENUES APPEAL ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 57 IS DISMISSED AND ASSESSEES CROSS-OBJECTION, ON THE ISSUE IN QUESTION, STAND ALLOWED FOR STATISTICAL PURPOSES, IN TERMS INDICATED ABOVE. 12. NOW WE WILL CONSIDER THE OTHER TWO GROUNDS. AS FAR AS GROUND NO. 3 IS CONCERNED, WE DO NOT FIND ANY RE ASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) BECAUSE LD. CIT(A) HAS ONLY REFERRED THE MATTER TO AO FOR VERIFYING TH E REVISED COMPUTATION U/S 94(7) WITH REFERENCE TO RECORD DATE AND NOT WITH RESPECT TO DATE OF RECEIPT OF DIVIDEND. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) ON THIS ISSUE. 13. AS REGARDS ADDITION OF RS. 4,02,58,032/-, WE FI ND THAT THE ENTIRE ADDITION HAD BEEN MADE BECAUSE ASS ESSEE DID NOT CHARGE ANY INTEREST FROM LOANEES. HOWEVER, ADMI TTEDLY ASSESSEE HAD NOT CLAIMED ANY INTEREST EXPENDITURE A ND, THEREFORE, THERE WAS NO REASON FOR MAKING ANY ADDIT ION ON THE GROUND OF INTEREST BEING NOT CHARGED BY ASSESS EE. LD. COUNSEL HAS RELIED ON FOLLOWING DECISIONS FOR THE PROPOSITION THAT ONLY REAL INCOME CAN BE TAXED AND NOT NOTIONAL INCOME. - SHOORJI VALLABHDAS & CO. 46 ITR 144 (SC); - GODHRA ELECTRICITY CO. LTD. . CIT 225 ITR 746 (SC); - CIT VS. A. RAMAN & CO. 67 ITR 11(SC); - UCO BANK V. CIT 237 ITR 889 (SC); - AIRPORT AUTHORITY OF INDIA V. CIT 340 ITR 407 (DEL. )(FB); - CIT V. MOTOR CREDIT CO. P. LTD. 127 ITR 572 (MAD.); - JCIT V. PANKAJ OXYGEN LTD. 78 TTJ 119 (NAG.) - ACIT VS. MANICK CHAND DAMANI 72 TTJ 675 (CAL.). 13.1. AFTER HEARING BOTH THE PARTIES, WE DO NOT FIN D ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A), BEC AUSE THE ISSUE THAT ONLY REAL INCOME AND NOT NOTIONAL INCOME IS TA XABLE, IS NO MORE RES-INTGRA IN VIEW OF AFOREMENTIONED DECISIONS , PARTICULARLY WHEN NO INTEREST WAS PAID BY ASSESSEE ON ITS BORROWINGS. WE, THEREFORE, CONFIRM THE ORDER OF LD. CIT(A). THIS GROUND IS DISMISSED. 14. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLOW ED AND THE ASSESSEES CROSS-OBJECTION STANDS ALLOWED FOR STATI STICAL PURPOSES. ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 58 2.2. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY, ENGAGED IN THE BUSINESS OF PROVIDING INVESTMENT ADVISORY, PORTFOLIO MANAGEMENT AND RELATED FINANCIAL SERVICES/SUPPORTS SERVICES. THE A SSESSEE DECLARED INCOME OF RS.1,55,39,380/- IN ITS RETURN. HOWEVER, THE LD. ASSESSING OFFICER WHILE COMPLETING THE ASSE SSMENT MADE DISALLOWANCE UNDER SECTION 14A OF THE ACT OF RS.1,02,48,995/- BY DETERMINING THE TOTAL INCOME AT RS.2,57,88,380/- WHILE FRAMING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT. ON APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEAL), THE FACTUAL MA TRIX WAS CONSIDERED AND THE DISALLOWANCE MADE BY THE LD. ASSESSING OFFICER WAS DELETED. THE REVENUE IS AGGRI EVED AND IS IN APPEAL BEFORE THIS TRIBUNAL. 2.3. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, AND THE CONCLUSION DRAWN BY THE SPECIAL BENCH OF TH E TRIBUNAL ((SUPRA)), ASSERTIONS MADE BY THE LD. RESP ECTIVE COUNSEL, IF KEPT IN JUXTAPOSITION AND ANALYZED, WE NOTE THAT THE LD. ASSESSING OFFICER MADE THE DISALLOWANCE UND ER ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 59 SECTION 14A OF THE ACT WITHOUT BRINGING ON RECORD A NY POSITIVE MATERIAL. IT IS FURTHER NOTED THAT THE ASS ESSEE HAS NOT MADE ANY FRESH INVESTMENT EXCEPT CONTINUING WIT H THE INVESTMENT IN SUBSIDIARIES/ASSOCIATED COMPANIES AND THE ENTIRE EXPENDITURE OF RS.1.98 CRORES WAS DEBITED TO PROFIT & LOSS ACCOUNT WHICH WAS INCURRED FOR BUSINESS PURPOS ES. BEFORE US, THE LD. SR. ADVOCATE, CLAIMED THAT NO DI VIDEND INCOME WAS EARNED DURING THE YEAR, THEREFORE, WE AR E OF THE VIEW THAT NO DISALLOWANCE IS REQUIRED TO BE MADE UN DER SECTION 14A OF THE ACT. EVEN OTHERWISE, THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISIONS OF TH E SPECIAL BENCH OF THE TRIBUNAL, WHICH HAS BEEN REPRODUCED AB OVE. THE DETAILS OF OTHER INCOME ARE AVAILABLE AT PAGES 11, 23 AND PAGE 39 OF THE PAPER BOOK FILED BY THE ASSESSE E. THE TRIBUNAL (SPECIAL BENCH), AT PAGE-67 OF THE ORDER, (PARA- 11.16) OBSERVED THAT THEREFORE, IN OUR CONSIDERED OPINION, NO CONTRARY VIEW CAN BE TAKEN UNDER THESE CIRCUMSTANCE S. WE, ACCORDINGLY, HOLD THAT ONLY THOSE INVESTMENTS ARE T O BE CONSIDERED FOR COMPUTING AVERAGE VALUE OF INVESTMEN T WHICH YIELDED EXEMPT INCOME DURING THE YEAR . IN PARA 11.17 AND 11.18, THE BENCH OBSERVED AS UNDER:- ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 60 11.17. AS FAR AS ARGUMENT RELATING TO MEANING TO BE ASCRIBED TO THE PHRASE SHALL NOT USED IN RULE 8D( 2)(III) IS CONCERNED, THE REVENUES CONTENTION IS THAT IT REFE RS TO THOSE INVESTMENTS WHICH DID NOT YIELD ANY EXEMPT IN COME DURING THE YEAR BUT IF INCOME WOULD HAVE BEEN YIELD ED IT WOULD HAVE REMAIN EXEMPT. THERE IS NO DISPUTE THAT IF AN INVESTMENT HAS YIELDED EXEMPT INCOME IN A PARTICULA R YEAR THEN IT WILL ENTER THE COMPUTATION OF AVERAGE VALUE OF INVESTMENTS FOR THE PURPOSES OF RULE 8D(2)(III). TH E ASSESSEES CONTENTION THAT IF THERE IS NO CERTAINT Y THAT AN INCOME, WHICH IS EXEMPT IN CURRENT YEAR, WILL CONTI NUE TO BE SO IN FUTURE YEARS AND, THEREFORE, THAT INVESTMENT SHOULD ALSO BE EXCLUDED, IS HYPOTHETICAL AND CANNOT BE ACC EPTED. 11.18. IN VIEW OF ABOVE DISCUSSION, THE MATTER IS R ESTORED BACK TO THE FILE OF AO FOR RECOMPUTING THE DISALLOW ANCE U/S 14A IN TERMS OF ABOVE OBSERVATIONS. THUS, REVENUES APPEAL IS DISMISSED AND ASSESSEES CROSS-OBJECTION, ON THE ISSUE IN QUESTION, STAND ALLOWED FOR STATISTICAL PURPOSES, I N TERMS INDICATED ABOVE. HOWEVER, IN PARA-3.1 OF THE ASSESSMENT ORDER, THE ASSESSEE EXPLAINED THAT THE COMPANY EARNED INTEREST INCOME OF RS.4,61,39,949/- AND THE DISALLOWANCE UNDER SECT ION 14A OF THE ACT R.W.R-8D OF THE RULES AT BEST CAN BE MAD E TO A SUM OF RS.16,857/- AS AGAINST THE DISALLOWANCE MADE IN THE COMPUTATION OF INCOME AT RS.54,964/-. IN PARA 3.3 OF THE ASSESSMENT ORDER, THE LD. ASSESSING OFFICER OBSERVE D THAT THE EXPENSES CONNECTED WITH THE EXEMPT INCOME HAS T O BE DISALLOWED UNDER SECTION 14A WHETHER THEY ARE DIREC T OR ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 61 INDIRECT, FIXED OR VARIABLE AND MANAGEMENT OR FINAN CIAL IN ACCORDANCE WITH LAW AND THUS HAS TO BE DETERMINED A S PER THE MECHANISM LAID DOWN IN SUB-SECTION (B) OF SECTI ON 14A AND THE METHOD PRESCRIBED UNDER RULE-8D. CONSIDERIN G THE OBSERVATION MADE IN THE ASSESSMENT ORDER AND THE OR DER OF THE SPECIAL BENCH OF THE TRIBUNAL, WE DIRECT THE LD . ASSESSING OFFICER TO EXAMINE THE FACTUAL MATRIX AND COMPUTE THE DISALLOWANCE UNDER SECTION 14A R.W.R 8D IN TERMS OF THE OBSERVATION MADE IN THE ORDER OF THE T RIBUNAL, THUS, THE APPEAL OF THE REVENUE IS ALLOWED FOR STAT ISTICAL PURPOSES ONLY. FINALLY, THE APPEAL OF THE REVENUE IS DISPOSED OF I N TERMS INDICATED HEREINABOVE AND ALLOWED FOR STATIST ICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 09/10/2018. SD/- (G. MANJUNATHA) SD/- (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER # $ MUMBAI; + DATED : 09/10/2018 F{X~{T? P.S/. . . , %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. ,-./ / THE APPELLANT 2. 01./ / THE RESPONDENT. ITA. NO.534/MUM/2017 M/S ASK INVESTMENT MANAGERS PVT. LTD. 62 3. 2 2 # 3' , ( ,- ) / THE CIT, MUMBAI. 4. 2 2 # 3' / CIT(A)- , MUMBAI 5. 56 0' , 2 ,-& , , # $ / DR, ITAT, MUMBAI 6. 7 8$ / GUARD FILE. / BY ORDER, / (DY./ASSTT. REGISTRAR) , # $ / ITAT, MUMBAI
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