BALGOPAL HOLDINGS & TRADERS LTD, MUMBAI V. ASST CIT CIR 6(1), MUMBAI

ITA 5438/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71616 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 29-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHWA NI SINHA
• Assessee Lawyers: SANJIV SHAH
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI , BEFORE SHRI SANJAY ARORA, AM AND DR. S. T. M. PAVAL AN, JM ! ' I.T.A. NO. 5438/MUM/2012 ( / ASSESSMENT YEAR: 2008-09) BALGOPAL HOLDINGS & TRADERS LTD. 307, 3 RD FLOOR, TRADE WORLD-B WING, TRADE WORLD, KAMALA CITY, S. B. MARG, LOWER PAREL, MUMBAI-400 013 ' VS. ASST. CIT- CIRCLE 6(1) ROOM NO.506, 5 TH FLOOR, AAYKAR BHAVAN, M. K. ROAD, MUMBAI-400 020 # '!$! ./PAN/GIR NO. AAACB 2492 G ( #% /APPELLANT ) : ( &'#% / RESPONDENT ) #%( / APPELLANT BY : SHRI SANJIV SHAH &'#% )( / RESPONDENT BY : SHRI ASHWANI SINHA * + ), / DATE OF HEARING : 22.10.2013 - ./ ), / DATE OF PRONOUNCEMENT : 31.10.2013 !0' O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-14, MUMBAI (CIT(A) FOR SH ORT) DATED 28.03.2012, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSES SMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2008-09 VIDE ORDER DATED 20.12.2010. 2 ITA NO. 5438/MUM/2012 (A.Y. 2008-09) BALGOPAL HOLDINGS & TRADERS LTD. VS. ASST. CIT 2. AT THE OUTSET, IT WAS OBSERVED THAT THE ASSESSEE S APPEAL IS DELAYED BY 79 DAYS; HAVING BEEN FILED ON 29.08.2012 AS AGAINST THE DUE DATE OF 10.06.2012. THE SAME IS ACCOMPANIED BY A CONDONATION APPLICATION EXPLAINING THE REASONS FOR THE DELAY, WHICH IS ASCRIBED TO AN OMISSION ON THE PART OF THE ASSESSEE S COUNSEL BEFORE THE FIRST APPELLATE AUTHORITY, SHRI BRIJMOHAN L. SARDA, WHO HAS ALSO DE POSED VIDE AN AFFIDAVIT DATED 29.08.2012. UPON HEARING THE PARTIES AND GOING THRO UGH THE AVERMENTS MADE THEREIN, WHICH STAND EXHIBITED, WE FIND THE DELAY AS SUITABL Y EXPLAINED. THE APPEAL WAS ACCORDINGLY ADMITTED, AND THE HEARING IS PROCEEDED WITH. 3. THE ONLY ISSUE ARISING IN THE INSTANT APPEAL IS THE DISALLOWANCE U/S.14A, EFFECTED IN ASSESSMENT AT RS.39,94,365/-, SINCE RESTRICTED BY T HE LD. CIT(A) TO RS.4,41,686/-. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 4.1 WHILE THE BASIS OF THE ASSESSING OFFICERS (A.O .S) DISALLOWANCE WAS RULE 8D, MANDATORY W.E.F. THE CURRENT YEAR, THE LD. CIT(A) A LLOWED RELIEF ON THE BASIS THAT THE ASSESSEE HAD INCURRED INTEREST EXPENDITURE AT RS.1, 93,500/-, AND THE INDIRECT EXPENDITURE, WHICH COULD BE CONSIDERED AS RELEVANT FOR THE PURPO SES OF DIVIDEND INCOME, I.E., ON THE ASSESSEE PROVIDING THE DETAILS OF THE TOTAL ADMINIS TRATIVE EXPENDITURE OF RS.3,67,436/- (SCHEDULE L TO ITS BALANCE SHEET / PB PGS.9, 27 & 2 8), IS ONLY RS.2,48,186/-. 4.2 THE ASSESSEES CASE, RELYING ON THE DECISIONS I N THE CASE OF CIT VS. RELIANCE INDUSTRIES LTD. [2011] 339 ITR 632 (BOM) AND MAXOPP INVESTMENT LTD. VS. CIT [2012] 347 ITR 272 (DELHI), IS THAT THE DISALLOWANCE COULD ONLY BE WITH REFERENCE TO THE EXPENDITURE ACTUALLY INCURRED AND CLAIMED. THE A.O. OR THE LD. CIT(A) HAVE NOT POINTED OUT ANY NEXUS OF THE BORROWED CAPITAL WITH THE INVE STMENTS, INCOME FROM WHICH DOES NOT FORM PART OF THE TOTAL INCOME. THE ASSESSEE HAS SUF FICIENT CAPITAL OF ITS OWN IN THE FORM OF SHARE CAPITAL AND FREE RESERVES, AND WHICH COULD TH EREFORE BE CONSIDERED AS TOWARD THE SAID INVESTMENTS. THE REVENUES CASE, ON THE OTHER HAND, IS THAT THE LD. CIT(A) HAS ALREADY ALLOWED RELIEF TO THE ASSESSEE TO THE EXTEN T WARRANTED IN THE FACTS AND CIRCUMSTANCES OF THE CASE, SO THAT NO CASE FOR ANY FURTHER RELIEF IS MADE OUT. 3 ITA NO. 5438/MUM/2012 (A.Y. 2008-09) BALGOPAL HOLDINGS & TRADERS LTD. VS. ASST. CIT 4.3 WE FIND SOME MERIT IN THE CASE OF BOTH THE SIDE S. WITHOUT DOUBT, THE DISALLOWANCE U/S.14A COULD ONLY BE WITH REFERENCE TO THE EXPENDI TURE ACTUALLY INCURRED, AND NO DISALLOWANCE COULD BE MADE DE HORS THE SAME ON THE OSTENSIBLE GROUND OF FOLLOWING RUL E 8D. THE SAID RULE, PER CLAUSE (1) THEREOF, REITERAT ES THE PRESCRIPTION OF SECTION 14A(2). THE DISALLOWANCE AS MADE BY THE A.O. IS THUS NOT CONSIS TENT WITH THE LAW IN THE MATTER. HIS ORDER, HOWEVER, GETS MERGED WITH THAT BY THE FIRST APPELLATE AUTHORITY, SO THAT IMPUGNING THE SAME BY THE LD. AUTHORIZED REPRESENTATIVE (AR) BEFORE US IS TO NO CONSEQUENCE INASMUCH AS THE ASSESSMENT ORDER IS TO BE CONSIDERE D AS FURTHER MODIFIED BY THE IMPUGNED ORDER; THE REVENUE BEING NOT IN APPEAL. FU RTHER, AS EXPLAINED BY THE TRIBUNAL IN THE CASE OF AFL PRIVATE LIMITED (IN ITA NOS. 3123/MUM/2011 & 951/MUM/2012 DATED 14.08.2013), ON RELIANCE BEING SIMILARLY PLAC ED ON THE DECISIONS IN THE CASE OF MAXOPP INVESTMENT LTD. (SUPRA) AND RELIANCE INDUSTRIES LTD. (SUPRA), THE DISALLOWANCE U/S.14A(1) IS A STATUTORY DISALLOWANCE. NO DOUBT, T HE A.O. IS, PRIOR TO EFFECTING ANY DISALLOWANCE THEREUNDER, OBLIGED TO BE SATISFIED WI TH REGARD TO THE INCORRECTNESS OF THE ASSESSEES CLAIM QUA THE EXPENDITURE INCURRED IN RELATION TO INCOME NOT FORMING PART OF THE TOTAL INCOME. HOWEVER, THIS COULD ONLY FOLLOW A NY SUCH CLAIM BEING MADE BY THE ASSESSEE AND, FURTHER, WITH REFERENCE TO ITS ACCOUN TS, AND NOT OTHERWISE. IT IS ONLY ON DOING SO, AS EXPLAINED THEREUNDER, THAT THE ONUS SHIFTS T O THE A.O. TO COMMENT UPON THE CORRECTNESS OR THE INFIRMITY, AS THE CASE MAY BE, A TTENDING THE ASSESSEES CLAIM. REFERENCE IN THIS REGARD MAY BE MADE TO PARA 6.3 OF THE SAID ORDER, WHICH WE REPRODUCE FOR THE SAKE OF READY REFERENCE: 6.3 IT IS, THEREFORE, CLEAR THAT THE INITIAL ONUS, EVEN AS STATED BY THE LD. CIT(A), TO MAKE A CLAIM IN RESPECT OF THE EXPENDITU RE INCURRED IN RELATION TO THE INCOME THAT DOES NOT FORM PART OF THE TOTAL INC OME, IS ON THE ASSESSEE. ONCE THE ASSESSEE MAKES SUCH A CLAIM WITH REFERENCE TO ITS ACCOUNTS, THE A.O. IS BOUND TO EXAMINE THE SAME FOR THE PURPOSE OF SAT ISFYING HIMSELF WITH REGARD TO ITS CORRECTNESS OR OTHERWISE, AND WHERE N OT SATISFIED, DETERMINE THE SAME IN ACCORDANCE WITH THE PRESCRIBED METHOD. FURT HER, THEREFORE, THOUGH THERE IS NO SPECIFIC REQUIREMENT OF RECORDING DISSA TISFACTION, IT IS INCUMBENT ON A.O. TO DO SO, AS IN ITS ABSENCE IT CANNOT BE AS CERTAINED IF HE HAD ACTUALLY EXAMINED THE ASSESSEES CLAIM OR PROCEEDED MECHANIC ALLY. TWO, HIS ORDER BEING APPEALABLE, IT IS ONLY WHERE IT BEARS HIS REA SONS, COULD THE VALIDITY 4 ITA NO. 5438/MUM/2012 (A.Y. 2008-09) BALGOPAL HOLDINGS & TRADERS LTD. VS. ASST. CIT THEREOF AND, THUS, OF HIS ACTION OF DISALLOWANCE U/ R. 8D, BE SUBJECT TO JUDICIAL REVIEW. IT IS IN THIS CONTEXT THAT IT HAS BEEN HELD THAT THE SAID DISSATISFACTION HAS TO BE EXPLICIT AND INFORMED. THE SAME, THUS, IS NOT A JURISDICTIONAL REQUIREMENT, BUT TOWARD COMPLETING THE INBUILT FAIR NESS OF THE PROCEDURE AS PROVIDED FOR. THE REQUIREMENT OF RECORDING DISSATIS FACTION PREDICATES ON THE DISCHARGE OF THE ONUS CAST ON THE ASSESSEE, AND WHI CH MAY NOT ALWAYS OBTAIN. THE REVENUE ON ITS PART COULD ONLY EXTEND OPPORTUNI TY TO THE ASSESSEE FOR THE DISCHARGE OF THE SAID ONUS. IN A PARTICULAR CASE, T HE ASSESSEE MAY NOT PRODUCE THE ACCOUNTS. HOW COULD THE A.O. POSSIBLY VERIFY THE CORRECTNESS OF THE ASSESSEES CLAIM IN SUCH A CASE? IN ANOTHER, THE ASSESSEE DOES NOT STATE THE BASIS OF ITS CLAIM OR MAKES THE SAME DE HORS THE EXPENSES INCURRED AND CLAIMED. THE A.O. COULD NOT POSSIBLY VERIFY THE COR RECTNESS OF SUCH AN INCOHERENT OR INFIRM CLAIM. TRUE, HE SHOULD STATE T HIS IN AS MANY WORDS, BUT THEN, COULD ONE SAY THAT HIS ACTION FAILS FOR WANT THEREOF WHERE HIS DISSATISFACTION OTHERWISE FLOWS FROM THE FACTUAL MA TRIX OF THE CASE OR IS OTHERWISE PATENT OR SELF-EVIDENT. THE CLAIM (TOWARD DISALLOWANCE), IT NEEDS TO BE APPRECIATED, IS A MATTER OF FACT, AND SO, CONSEQ UENTIALLY, IS ITS VERIFICATION. THE DECISION AS REGARDS ITS CORRECTNESS OR OTHERWIS E THUS IS ESSENTIALLY AN ISSUE WHICH TURNS ON FACTS . THE LAW POSTULATES A DISALLOWANCE ON THE ASSESSEES PART, AND FAIRNESS OF PROCEDURE REQUIRES INFORMING THE BASIS OF THE ADJUSTMENT, SO AS TO ENABLE THE ASSESSEE TO MEET IT WHERE THE A.O. DOES NOT ACCEPT THE ASSESSEES ESTIMATE. AS LONG AS THESE IN GREDIENTS ARE SATISFIED, OR ALTERNATIVELY INCAPABLE OF BEING SO, THE A.O.S ACT ION IN EFFECTING THE DISALLOWANCE UNDER RULE 8D CANNOT BE ASSAILED. 4.4 COMING TO THE FACTS OF THE CASE, THE ASSESSEE H AS COMPLETELY FAILED TO DISCHARGE THE SAID ONUS CAST ON IT BY LAW. A SUBSTANTIAL PART OF ITS ASSETS AND, CORRESPONDINGLY, INCOME, EVEN AS POINTED OUT BY THE BENCH DURING HEARING, FL OWS FROM SUCH INVESTMENTS (PB PGS. 8, 9). WHY, OUT OF THE TOTAL INTEREST EXPENDITURE ( INDIRECT) OF RS.1.94 LACS, THE PROPORTIONATE EXPENDITURE, I.E., ON THE BASIS OF TH E AVERAGE INVESTMENT TO THE AVERAGE TOTAL ASSETS, WORKS TO RS.1.73 LACS, OR CLOSE TO 90%. THE OTHER INDIRECT EXPENDITURE, WHICH IS PRINCIPALLY QUA ADMINISTRATIVE FUNCTION, IS ONLY TOWARD PROVIDING SUPPORT TO THE PRINCIPAL ACTIVITIES AND, THEREFORE, COULD REASONABLY BE CONS IDERED AS INCURRED IN THE PROPORTION OF THE PRINCIPAL OR THE MAJOR ACTIVITIES UNDERTAKEN, O R ON SOME OTHER REASONABLE BASIS. THE ASSESSEE HAS NOWHERE EXPLAINED ITS STAND IN THE MAT TER. THE PALTRY DISALLOWANCE OF RS.39/- MADE BY IT IS FOR DE-MAT CHARGES, AND WHICH IS ONLY A DIRECT EXPENDITURE, QUA WHICH NO DISALLOWANCE HAS IN FACT BEEN MADE BY THE REVENUE, BUT ONLY QUA INDIRECT EXPENDITURE. 5 ITA NO. 5438/MUM/2012 (A.Y. 2008-09) BALGOPAL HOLDINGS & TRADERS LTD. VS. ASST. CIT 4.5 THE REVENUES CASE, ON THE OTHER HAND, IS ALSO NOT WITHOUT BLEMISH. THE LD. CIT(A) HAS CONFIRMED THE INTEREST DISALLOWANCE AT R S.1,93,500/- , EVEN AS THE A.O. HIMSELF, FOLLOWING THE PRESCRIPTION OF RULE 8D, WOR KED OUT THE SAME AT RS.1,72,890/- . THE LD. CIT(A) HAS ALSO CONSIDERED THE TOTAL ADMINISTRA TIVE EXPENDITURE, I.E., WHICH IS NOT SOLELY IN RELATION TO INCOME FORMING PART OF THE TO TAL INCOME, AS TOWARD THE TAX-EXEMPT INCOME. HE HAS, AS IT APPEARS, IN DOING SO, BEEN GU IDED BY THE FACT OF THE DIVIDEND INCOME BEING AT RS.101.10 LACS, AND PROFIT ON SALE OF INVE STMENTS AT RS.70.42 LACS, BESIDES PERHAPS BY THE DISALLOWANCE U/R. 8D PER SE WORKING OUT TO A MUCH HIGHER FIGURE (RS.39.94 LACS). THE VOLUME OF THE TAX-EXEMPT INCOME IS AN IR RELEVANT CONSIDERATION. THE LD. CIT(A) HAS, IN RESTRICTING THE DISALLOWANC E QUA INDIRECT EXPENDITURE (OTHER THAN INTEREST) TO THE EXPENDITURE INCURRED BY THE A SSESSEE, I.E., RS.2.48 LACS, AS AGAINST RS.38.21 LACS IN TERMS OF RULE 8D(2)(III) (@ 0.5% O F THE AVERAGE INVESTMENT), HIMSELF NOT APPLIED RULE 8D PER SE . THAT IS, FOUND RULE 8D(2)(III) AS NOT STRICTLY AP PLICABLE IN THE FACTS OF THE CASE. THE SAME IS IN ORDER. EVEN AS NOTED EA RLIER, RULE 8D, WHICH IS CAST ONLY TO EFFECTUATE THE DISALLOWANCE U/S.14A(1), ITSELF CONT AINS THE STIPULATION OF SECTION 14A(2), PER CLAUSE (1) THEREOF. HOWEVER, HE STOPS AT THAT, ASCRIBING THE WHOLE OF THE ADMINISTRATIVE EXPENDITURE, I.E., TO THE EXTENT FOU ND NOT WHOLLY RELATABLE TO THE ASSESSEES OTHER BUSINESS, AS ELIGIBLE FOR DISALLOWANCE U/S. 1 4A(1) IN FULL. MERELY BECAUSE THE DISALLOWANCE WORKABLE UNDER RULE 8D(2)(III) WORKS T O A MUCH HIGHER FIGURE, WOULD NOT BY ITSELF RESULT IN THE ENTIRE COMMON EXPENDITURE BEIN G ATTRIBUTED TO THE ASSESSEES ACTIVITY YIELDING TAX-EXEMPT INCOME. THE WHOLE PREMISE OF S ECTION14A, IT MAY BE EMPHASIZED, IS THAT THE EXPENDITURE INCURRED IN RELATION TO INCOME NOT FORMING PART OF THE TOTAL INCOME IS NOT, EITHER IN WHOLE OR IN PART, SET OFF IN COMPUTI NG THE TOTAL INCOME. AS A NATURAL COROLLARY, NO EXPENDITURE INCURRED IN RELATION TO I NCOME FORMING PART OF THE TOTAL INCOME COULD BE DISALLOWED U/S. 14A IN COMPUTING THE TOTAL INCOME. THE PROCESS MAY INVOLVE ESTIMATION, AT TIMES NECESSARILY SO, AND RULE 8D IS ONLY TOWARD PROVIDING A UNIFORM BASIS FOR THE SAME, AND IS SUBJECT TO THE CONDITIONS SPEC IFIED IN THE PROVISION, AS WELL AS THE RULE ITSELF. HAVING, HOWEVER, FOUND RULE 8D(2)(III) AS N OT APPLICABLE IN THE FACTS OF THE CASE, IT WAS IN OUR OPINION INCUMBENT ON HIM TO ARRIVE AT A REASONABLE ESTIMATION OF THE 6 ITA NO. 5438/MUM/2012 (A.Y. 2008-09) BALGOPAL HOLDINGS & TRADERS LTD. VS. ASST. CIT ADMINISTRATIVE (INDIRECT) EXPENDITURE ATTRIBUTABLE TO THE INCOME NOT FORMING PART OF THE TOTAL INCOME. THOUGH THE INITIAL ONUS TO SUBSTANTIA TE ITS CLAIM, TOWARD WHICH WE FIND IT TO HAVE TOTALLY FAILED, IS ONLY ON THE ASSESSEE, THAT WOULD NOT ALLOW THE REVENUE TO EXCEED THE MANDATE OF SECTION OF 14A(1), AND IT IS BOUND T O ARRIVE AT A REASONABLE ALLOCATION OF COMMON EXPENDITURE. THIS, IT WOULD BE APPRECIATED, IS ALSO IN LINE WITH THE DECISIONS IN THE CASE OF RELIANCE INDUSTRIES LTD . (SUPRA) AND MAXOPP INVESTMENT LTD . (SUPRA). REFERENCE IN THIS REGARD MAY ALSO BE MADE TO THE DE CISION BY THE TRIBUNAL IN THE CASE OF DY. CIT VS. DAMANI ESTATES & FINANCE PVT. LTD . (IN ITA NO.3029/MUM/2012 DATED 17.07.2013), WHEREIN, WHILE UPHOLDING THE STATUTORY DISALLOWANCE U/S. 14A(1) QUA DIVIDEND INCOME, FOLLOWING THE HONBLE JURISDICTION AL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. V. DY. CIT [2010] 328 ITR 81 (BOM) AND THE HONBLE CALCUTTA H IGH COURT IN DHANUKA & SONS VS. CIT [2011] 339 ITR 319 (CAL), FOLLOWING IT, THE TRIBUNA L DIRECTED THE RESTRICTION OF THE DISALLOWANCE WORKAB LE WITH REFERENCE TO RULE 8D(2)(II) TO 20% THEREOF. IT WAS EXPLAINED THAT SHARES, WHICH YIELD THE TAX-E XEMPT DIVIDEND INCOME, INTEREST QUA WHICH IS TO BE DISALLOWED, BEING HELD AS STOCK-IN- TRADE, ALSO YIELD SHARE TRADING INCOME, WHICH IS TAXABLE. THEREFORE, TO SAY THAT TH E ENTIRE INTEREST RELATABLE TO THE AVERAGE SHARE HOLDING IS TO BE ATTRIBUTED TO THE TAX-EXEMPT DIVIDEND INCOME WOULD BE PATENTLY INCORRECT ON FACTS. FURTHER, THAT THE SHARES ARE IN FACT BOUGHT AND HELD PRIMARILY FOR TRADING PURPOSES, FURTHER ACCENTUATES THE APPARENT INCONGRUITY OF THE SITUATION THAT WOULD ARISE ON A MECHANICAL APPLICATION OF R. 8D(2), SO T HAT THE AMOUNT AS PER R. 8D(2)(II) WOULD NEED TO BE SCALED DOWN, BIFURCATING THE EXPENDITURE SO ARRIVED AT BETWEEN THESE TWO INCOMES. THE SAME, IT WAS FURTHER EXPLAINED, IS NOT A BREAK DOWN OR FAILURE OF R. 8D, BUT IS MANDATED BY THE LANGUAGE OF R. 8D(2)(II) ITSELF INASMUCH AS IT PRESCRIBES OR AUTHORIZES A DISALLOWANCE ONLY QUA INVESTMENT, INCOME FROM WHICH IS NOT TAXABLE, SO T HAT IN LIMITING THE AMOUNT WORKED OUT WITH REFERENCE TO THE TOTAL I NVESTMENT; THE SAME ALSO YIELDING TAXABLE INCOME, IS ONLY TOWARD OPERATIONALIZING OR IMPLEMENTING THE SAID RULE. NOT DOING SO WOULD ALSO VIOLATE THE PRINCIPLE OF ONLY THE NET INCOME (FROM ANY SOURCE) BEING SUBJECT TO TAX INASMUCH AS DISALLOWANCE OF THE TOTAL INTERE ST AS PER R. 8D(2)(II) WOULD IN EFFECT 7 ITA NO. 5438/MUM/2012 (A.Y. 2008-09) BALGOPAL HOLDINGS & TRADERS LTD. VS. ASST. CIT BRING THE SHARE TRADING INCOME TO TAX WITHOUT DEDUC TION OF THE INTEREST EXPENDITURE ALLOCABLE OR ATTRIBUTABLE THERETO (REFER PARA 5.6 O F THE SAID ORDER). 4.6 IN FINE, THE MATTER IS PRIMARILY FACTUAL, AND W OULD TURN ON THE FACTS OF THE CASE, THE ONUS TO ESTABLISH WHICH, WITH REFERENCE TO ITS ACCO UNTS, IS ON THE ASSESSEE. IF, FOR EXAMPLE, IT IS NOT ABLE TO ESTABLISH A DIRECT NEXUS OF THE B ORROWED CAPITAL WITH ITS ASSETS YIELDING TAXABLE INCOME, THE GENERAL POOL OF FUNDS HYPOTHESI S UNDERLYING THE PRESCRIPTION OF RULE 8D, WOULD APPLY, AND THE DISALLOWANCE U/S.14A WORKE D OUT PROPORTIONATELY FOLLOWING RULE 8D(2)(II). LIKEWISE, THE ONUS TO ESTABLISH THA T THE INDIRECT EXPENDITURE HAS NO BEARING ON THE INCOME NOT FORMING PART OF THE TOTAL INCOME IS SQUARELY ON THE ASSESSEE, FAILING WHICH THE PRESCRIPTION OF RULE 8D, SUBJECT OF-COURS E TO THE EXPENDITURE ACTUALLY INCURRED AND CLAIMED (IN COMPUTING TOTAL INCOME), WOULD FOLL OW. THE SAME, IT NEEDS TO BE APPRECIATED, IS ONLY A RULE OF ALLOCATION, AND WHIC H IS TO APPLY IN THE ABSENCE OF CLEAR AND DEFINITE EVIDENCE ESTABLISHING OTHERWISE, WITHOUT V IOLATING THE PREMISE OF THE SECTION. UNDER THE CIRCUMSTANCES, THEREFORE, WE ONLY CONSIDE R IT FIT AND PROPER THAT THE MATTER IS RESTORED BACK TO THE FILE OF THE LD. CIT(A) TO ALLO W THE ASSESSEE AN OPPORTUNITY TO PRESENT ITS CASE WITH REFERENCE TO THE DISALLOWANCE ADMISSI BLE U/S.14A R/W R. 8D, AND DECIDE THE SAME IN ACCORDANCE WITH LAW PER A SPEAKING ORDER, H AVING REGARD TO THE OBSERVATIONS MADE IN THIS ORDER. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 1/ ,23 41, ) 5 )678 9 : , ) ,;<= ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 31, 2 013 SD/- SD/- (DR. S. T. M. PAVALAN) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER * + MUMBAI; > DATED : 31.10.2013 ' ROSHANI , SR. PS 8 ITA NO. 5438/MUM/2012 (A.Y. 2008-09) BALGOPAL HOLDINGS & TRADERS LTD. VS. ASST. CIT ! ' #$%& ' &$ ' COPY OF THE ORDER FORWARDED TO : 1. #% / THE APPELLANT 2. &' #% / THE RESPONDENT 3. ! ! * ?, @ A / THE CIT(A) 4. ! ! * ?, / CIT CONCERNED 5. BC D&,E3 ! E3 / * + / DR, ITAT, MUMBAI 6. D 4F + ' GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , * + / ITAT, MUMBAI