IL & FS FINANCIAL SERVICES LTD, MUMBAI V. DCIT (OSD) RG 10(1), MUMBAI

ITA 5622/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79131 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 28-04-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 06-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P SINGH; P K SHUKLA
• Assessee Lawyers: D V LAKHANI
• Keywords: Capital asset; Business income; Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL MUMBAI - I BENCH MUMBAI , / ! ! ! ! , BEFORE S/SH.VIJAYPAL RAO,JUDICIAL MEM BER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 5622/M/2012, ' ' ' ' # # # # / ASSESSMENT YEAR 2009-10 IL & FS FINANCIAL SERVICES LTD., THE IL & FS FINANCIAL CENTER, PLOT NO.C-22, G BLOCK, BANDRA-KURLA COMPLEX, BANDRA(E), MUMBAI- 400051 VS. DCIT (OSD) RANGE 10(1) AAYAKAR BHAVAN, M.K.ROAD, MARINE LINES, MUMBAI-400020 PAN: AAACI4805L ( $% / APPELLANT) ( &'$% / RESPONDENT) $% ( / APPELLANT BY : SHRI D.V.LAKHANI &'$% ) ( / RESPONDENT BY : SHRI P.K.SHUKLA & O.P.SINGH ' ' ' ' ) )) ) *+ *+ *+ *+ / DATE OF HEARING : 28-04-2014 ,-# ) *+ / DATE OF PRONOUNCEMENT : 11- 06- 2014 ' ' ' ' , 1961 ) )) ) 254 )1( *.* *.* *.* *.* / / / / ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,A.M. , ,, , ! ! ! ! ' ' ' ' : CHALLENGING THE ORDER DT.01.06.2012 OF THE CIT(A)-2 1,MUMBAI,ASSESSEE-COMPANY HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEARNE D COMMR. OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE DISALLOWANCE THE SUM OF RS.26,78, 43,504/-UNDER SECTION 14A READ WITH RULE 8D. THE DISALLOWANCE MADE AMOUNTING TO RS.26,78,43,504/ - IS NOT JUSTIFIED AND BE DELETED. 2. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEARNE D ASSESSING OFFICER HAD NOT GIVEN ANY REASONS FOR REJECTING THE CLAIM OF THE APPELLANT IN RESPECT OF THE EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. THE DISALLOWANC E IS MADE WITHOUT SATISFYING THE CONDITIONS OF SECTION 14A(2) OF INCOME TAX ACT, 1961. THE LEARNED COMRNR. OF INCOME TAX (APPEALS) HAS NOT REJECTED THE CLAIM OF THE APPEAL IN THIS REGARD. TH E APPELLANT PRAYS THAT THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER AND CONFIRMED BY THE COMMR. OF INCOME TAX (APPEALS) IS BAD IN LAW AND THE ADDITION MADE AMOUNTING TO RS.26,78,43, 504/- IS NOT JUSTIFIED AND BE DELETED. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE APPE LLANT PRAYS THAT THEIR NETWORTH IS MORE THAN THE INVESTMENTS MADE BY THE APPELLANT WHICH WILL YIELD INCOME NOT CHARGEABLE TO TAX. BASED ON THIS FACT THE DISALLOWANCE MADE AMOUNTING TO RS.26,78,43 ,504/- IS NOT JUSTIFIED AND BE DELETED. 4. WITHOUT PREJUDICE TO GROUNDS 1, 2 & 3 THE APPELLANT PRAYS THAT THE ACTIVITY OF PURCHASE AND SALE OF SHARES IS TREATED AS BUSINESS ACTIVITY AND THE RESU LT OF THE SAID ACTIVITY IS OFFERED FOR TAX UNDER TH E HEAD BUSINESS INCOME. IN VIEW OF THIS NO DISALLOW ANCE SHOULD BE MADE U/S 14A READ WITH RULE 8D. 5. WITHOUT PREJUDICE TO GROUNDS 1, 2 & 3 THE APPELL ANT PRAYS THAT IN RESPECT OF CERTAIN INVESTMENTS THE APPELLANT HAS NOT EARNED ANY EXEMPT INCOME. THE SAID INVESTMENTS SHOULD NOT BE CONSIDERED FOR THE PURPOSE OF DISALLOWANCE U/S. 14A RWR 8D. 6. WITHOUT PREJUDICE TO GROUNDS 1, 2 & 3 THE APPELLANT PRAYS THAT ON TRANSFER OF THE INVESTMENTS IN UNLISTED SHARES OF COMPANIES THE APPELLANT WILL EAR NED THE CAPITAL GAINS WHICH WILL BE CHARGEABLE 2 ITA NO.5622/MUM/2012 IL & FS FINANCIAL SERVICES LTD . TO TAX. BASED ON THIS THE INVESTMENTS IN UNLISTED S HARES A COMPANIES SHOULD NOT BE CONSIDERED FOR THE PURPOSE OF DISALLOWANCE U/S. 14A READ WITH RULE 8D. 7. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE APPELL ANT PRAYS THAT THE ADDITION MADE U/S 14A READ WITH RULE 8D AMOUNTING TO RS.26,78,43,504/- MAY BE DELETED. 8. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEARNE D COMMR. OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ADDITION OF RS.1,14,954/- ON THE GROUND THAT THERE IS A MISMATCH OF ITS DETAILS. THE APPELLANT PRAYS THAT THE ADDITION MADE IS NOT J USTIFIED AS THE APPELLANT HAS NOT EARNED ANY SUCH INCOME IN A.Y. 2009-10. THE ADDITION MADE BY L EARNED ASSESSING OFFICER MAY BE DELETED. 9. THE APPELLANT CRAVES THE PERMISSION TO ADD, ALTER O R AMEND THE GROUNDS OF APPEAL AT THE TIME OF HEARING. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF ASSET & STRUCTURED FINANCE BUSINESS,SYNDICATION BUSINESS AND ADVISORY BUSINESS FILED ITS RETURN OF INCOME ON 23.09.2010 DECLARING INCOME OF RS. 2,53,95,18,949/-. ASSESSING OFFICER (AO)FINALISED T HE ASSESSMENT ON 30.12.2011 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 273,31,05,200/- . 2. FIRST GROUND OF APPEAL IS ABOUT DISALLOWANCE MADE B Y THE AO UNDER SECTION 14A R.W.RULE 8D OF THE INCOME-TAX RULES,1962(RULES)OF THE ACT.DURING T HE ASSESSMENT PROCEEDINGS,AO FOUND THAT DURING THE YEAR THE ASSESSEE HAD EARNED DIVIDEND OF RS.23,81,31,028/-WHICH WAS CLAIMED AS EXEMPT ON GROSS BASIS.IN THE RETURN/ COMPUTATION OF INCOME THE ASSESSEE DISALLOWED EXPENSES OF RS.7,91,07,453/-U/S.14A OF THE ACT. THE AO ASKED AS SESSEE AS TO WHY THE DISALLOWANCE SHOULD NOT BE MADE AS PER FORMULA PROVIDED IN RULE 8D.IN ITS R EPLY THE ASSESSEE EXPLAINED THAT PROVISIONS OF RULE 8D R.W.S.14A SHOULD NOT BE APPLIED,THAT IT WAS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SECURITIES AND THIS ACTIVITY WAS TREATED AS BUSI NESS ACTIVITY,THAT THE INCOME / LOSS FROM THE SAID ACTIVITY WAS OFFERED TO TAX EITHER AS BUSINESS INCO ME OR AS BUSINESS 1OSS,THAT THE ASSESSEE WAS REGISTERED NON BANKING FINANCE COMPANY(NBFC),THAT R ULE 8D(2)(II) REFERRED TO THE WORDS INVESTMENT AT THE STAGE WHEN THE AVERAGE VALUE OF THE OPENING AND CLOSING BALANCE WAS TO BE TAKEN,THAT AS PER THE PROVISIONS OF THE SECTION WHE NEVER AN ASSESSEE WOULD TREAT THE INVESTMENT IN SECURITIES AS CAPITAL ASSET ONLY THEN IT WOULD GET THE CHARACTER OF INVESTMENT,THAT IN SUCH CIRCUMSTANCES ONLY THE PROVISIONS OF RULE 8D WERE A PPLICABLE.THE ASSESSEE ALSO FILED WORKING OF THE NET RESULT OF PURCHASE AND SALE OF SECURITIES W HICH WAS TREATED AS BUSINESS ACTIVITY AND NET RESULT WAS LOSS OF RS. 135.53 CRORES. BUSINESS LOSS ACCEPTED BY THE AO. THE ASSESSEE FURTHER ARGUED THAT IT HAD BORROWED MONEY FROM BANKS WHICH WERE EXCLUSIVELY MEANT FOR LENDING ONLY,THAT IT WAS NOT PERMITTED TO BORROW FUNDS FROM BANK FOR THE PURPOSE OF ANY INVESTMENT ACTIVITY,THAT IT HAD UTILISED THE FUND BORROWED FRO M THE BANK FOR THE PURPOSE OF LENDING ACTIVITY ONLY,THAT THE INTEREST PAID TO BANK AMOUNTING TO RS .5,61,94,71,887/-OUT OF TOTAL INTEREST COST OF RS.6,96,88,05,993/-FOR THE YEAR UNDER CONSIDERATION SHOULD NOT BE CONSIDERED WHILE APPLYING THE PROVISIONS FOR MAKING DISALLOWANCE UNDER RULE 8D,TH AT THE SAID SUBMISSION SHOULD BE CONSIDERED ONLY IF THE PROVISIONS OF RULE 8D WERE CONSIDERED T O BE INVOKED,THAT IT HAD NOT BORROWED ANY MONEY DIRECTLY WHICH WOULD BE ATTRIBUTABLE FOR THE PURPOSE OF EARNING INCOME WHICH WAS NOT CHARGEABLE TO TAX,THAT THERE WAS NO DIRECT LINK BET WEEN THE BORROWINGS AND CORRESPONDING INVESTMENT WHICH WOULD YIELD INCOME NOT CHARGEABLE TO TAX.IT WAS FURTHER ARGUED THAT IT HAD NET WORTH OF RS.12,96,22,54,443/- AS ON 31.03.2009,THAT THE TOTAL INVESTMENTS CAPABLE OF YIELDING EXEMPT INCOME AS ON 31.03.2009 WERE RS.9,41,58,58,5 57/-,THAT THE ASSESSEES NET WORTH WAS FAR IN EXCESS OF THE INVESTMENTS. ASSESSEE FILED DIFFERENT WORKING UNDER RULE 8D JUSTIFYING AS TO WHY THE ALTERNATE WORKINGS SHOULD BE CONSIDERED.THE AO AFTER CONSIDERING THE ASSESSEES SUBMISSIONS HELD THAT PROVISIONS OF RULE 8D WERE APPLICABLE WH ERE THE INVESTMENTS WERE HELD AS STOCK IN TRADE.HE RELIED ON THE ITAT DELHI SPECIAL BENCH DEC ISION IN THE CASE OF CHEMINVEST LTD.(121ITD318)WHEREIN IT WAS HELD THAT THE DISALLO WANCE U/S.14A WAS TO BE MADE EVEN IF INTEREST FROM FUNDS UTILISED FOR ACQUISITION OF SHA RES WAS ALLOWABLE U/S.37(L) OF THE ACT.THE AO, THEREFORE,WORKED OUT THE DISALLOWANCE U/S.14A R.W.R ULE 8D AND DISALLOWED AN AMOUNT OF RS.26, 3 ITA NO.5622/MUM/2012 IL & FS FINANCIAL SERVICES LTD . 78,43,504/- 3. DURING APPELLATE PROCEEDINGS,BEFORE THE FIRST APPEL LATE AUTHORITY (FAA)THE ASSESSEE REITERATED THE ARGUMENTS TAKEN BEFORE AO.IN RESPECT OF ADMINIS TRATIVE EXPENSES,THE ASSESSEE SUBMITTED THAT NO DIRECT EXPENDITURE WAS INCURRED IN EARNING OF EX EMPT INCOME.FAA,AFTER CONSIDERING THE ASSESSMENT ORDER AND THE ARGUMENTS OF THE ASSESSEE HELD THAT HE DID NOT AGREE WITH THE SUBMISSION OF THE ASSESSEE THAT THE PROVISIONS OF SEC. 14A R.W . RULE 8D WERE NOT APPLICABLE SINCE ITS NET WORTH WAS MORE THAN INVESTMENTS AND THE FUNDS WERE BORROW ED (ON WHICH INTEREST HAS BEEN PAID) FOR THE PURPOSE OF BUSINESS AND NOT FOR THE BUSINESS OF MAK ING INVESTMENTS,THAT ON SIMILAR FACTS IN THE AY.2008-09 HE HAD UPHELD THE ORDER OF THE AO,THAT T HE ASSESSEE ITSELF HAD ADMITTED THAT THE PROVISIONS OF SEC.14A R.W.S RULE 8D WERE APPLICABLE BY OFFERING DISALLOWANCE OF RS.7.91CRORES IN THE RETURN OF INCOME,THAT IN THE BODY OF ASSESSMENT ORDER THE AO HAD CONSIDERED ASSESSEES VARIOUS SUBMISSIONS,THAT THE DISALLOWANCE WAS MADE AFTER CONSIDERING ALL THE CONTENTIONS,THAT SATISFACTION OF THE AO,FOR INVOKING THE PROVISIONS OF SECTION 14A,WAS EVIDENT FROM THE ORDER OF THE AO,THAT THE CONDITIONS LAID DOWN U/S. 14A(2) W ERE DULY COMPLIED WITH,THAT ASSESSEES TOTAL INTEREST EXPENDITURE WAS RS.6,96,88,05,993/-,THAT O UT OF IT INTEREST PAID TO BANK WAS OF RS.5,61,94,71, 887/-,THAT THE AO HAD ACCEPTED ASSES SEES SUBMISSIONS AND HAD CONSIDERED ONLY THE BALANCE INTEREST EXPENDITURE OF RS.1,34,93,34,1 05/- IN THE WORKING OF RULE 8D,THAT ISSUE OF THE SHARES FORMING PART OF CLOSING STOCK IN TRADE AND N OT CONSIDERING THEM AS PART OF AVERAGE VALUE OF INVESTMENT AND AVERAGE ASSETS FOR THE PURPOSE OF WO RKING DISALLOWANCE OF INDIRECT INTEREST EXPENDITURE WAS DECIDED BY HIM AGAINST THE ASSESSEE IN THE ORDER FOR THE LAST AY.,THAT NOT CONSIDERING THE SHARES AND SECURITIES HELD AS STOCK IN TRADE IN WORKING OF RULE 8D HAD CONSEQUENTIAL EFFECT ON WORKING OF INDIRECT INTERES T EXPENDITURE AND ON WORKING OF ADMINISTRATIVE & MANAGERIAL EXPENSES AS PER SUB CLAUSE (III) OF RU LE 8D(2),THAT THE WORKING OF INDIRECT INTEREST COST AT RS. 18, 01,47,693/- AS PER SUB CLAUSE (II) OF RULE 8D(2) AND ADMINISTRATIVE & MANAGERIAL EXPENSES AT RS. 5,0L,95,186/ AS PER SUB CLAUSE (III ) OF THE RULE WAS REASONABLE.FAA DID NOT ACCEPT THE ARGUMENT OF THE ASSESSEE THAT NO ADMINISTRATIVE OR MANAGERIAL EXPENSES WERE INCURRED FOR THE PURPOSE OF EARNING EXEMPT INCOME.HE HELD THAT THE A SSESSEE WAS HAVING HUGE INVESTMENT PORTFOLIO ON WHICH IT HAD EARNED DIVIDEND OF RS.23. 81 CRORES,THAT EXEMPT INCOME COULD NOT BE EARNED WITHOUT INCURRING OF ADMINISTRATIVE AND MANA GERIAL EXPENSES,THAT IN ABSENCE OF ANY EXACT WORKING THE QUANTIFICATION OF SUCH ADMINISTRATIVE A ND MANAGERIAL EXPENSES DISALLOWANCE WAS TO BE WORKED OUT ONLY AS PER FORMULA PROVIDED IN RULE 8D.FINALLY,HE UPHELD THE DISALLOWANCE AS PER FORMULA PROVIDED IN SUB CLAUSE (III) OF RULE 8D(2). 4. BEFORE US,AUTHORISED REPRESENTATIVE(AR)STATED THAT THE ASSESSEE WAS HOLDING THE SHARES AS STOCK IN TRADE,THAT IT WAS AN NBFC,THAT INVESTMENTS MADE BY THE ASSESSEE,DURING THE YEAR,WERE FAR LESS THAN THE FUNDS AVAILABLE WITH IT AND THEREFORE NO INTEREST COST SHOULD BE DISALLOWED,THAT THE ASSESSEE HAD NOT INCURRED ANY ADMINISTRATIVE OR MAN AGERIAL EXPENSES FOR THE PURPOSE OF EARNING EXEMPT INCOME,THAT SHARES CAPABLE OF YIELDING TAXAB LE AND EXEMPT INCOME SHOULD NOT BE CONSIDERED FOR CALCULATING DISALLOWANCE,THAT THE IN TEREST RECEIVED BY THE ASSESSEE WAS MORE THAN THE INTEREST PAID AND HENCE NO DISALLOWANCE SHOULD BE MADE.HE RELIED UPON THE CASES OF RELIANCE UTILITIES AND POWER LTD.(313 ITR 340, MUM HC), UTI BANK LTD. (215 TAXMANN,GUJARAT HIGH COURT) & BNP PARIBAS SA (214 TAXMANN, BOMBAY HIGH C OURT). AR ALSO RELIED ON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES & POWER LTD.(313ITR430)ON THE PROPOSITION THAT IN CASE OF A COMPANY WHICH HAD INTEREST FREE F UNDS AVAILABLE, IT WOULD BE ALWAYS ASSUMED THAT THE COMPANY HAD INVESTED ITS OWN FUNDS AND INTEREST FREE FUNDS FOR THE PURPOSE OF MAKING INVESTMENTS.DR SUPPORTED THE ORDER OF THE AO AND TH E FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT SIMILAR ISSUE HAD ARISEN IN THE EARLIER ASSESSMENT YEAR ALS O AND DECIDING THE APPEAL(ITA7676/MUM/ 2011- 4 ITA NO.5622/MUM/2012 IL & FS FINANCIAL SERVICES LTD . DATED 13.09.2013),FILED BY THE ASSESSEE,TRIBUNAL HA D HELD AS UNDER : 5.BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT IN SOFAR AS THE INVESTMENT IN SHARES ARE CONCERNED, THE SHARES HAVE BEEN MADE IN LISTED SECU RITIES AS WELL AS UNLISTED SECURITIES. WHEN UNLISTED SHARES ARE SOLD, THE ASSESSEE HAD OFFERED IT AS CAPITAL GAIN. FURTHER, MOST OF THE SHARES WERE HELD AS STOCK IN-TRADE AND, THEREFORE, TO THE EXTENT OF THESE SHARES, NO DISALLOWANCE SHOULD BE MADE UNDER SECTION 14A, HE FURTHER CONTENDED THAT T HE ASSESSEES TOTAL NOT WORTH IS APPROXIMATELY RS. 1260 CRORES WHEREAS THE INVESTMENT IN SHARES WH ICH WAS CAPABLE OF EARNING EXEMPT INCOME WERE FAR LESS.THEREFORE, NO INTEREST COST SHOULD B E DISALLOWED WHILE WORKING OUT THE DISALLOWANCE UNDER SECTION UNDER RULE 3D. FOR ALL THE ABOVE PROP OSITIONS, HE RELIED UPON VARIOUS CASE LAWS INCLUDING THAT OF BOMBAY HIGH COURT IN CLT V/S RELI ANCE UTILITIES AND POWER LTD., [2009) 313 ITR 340 (BOM.). 6.BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE H AS SUBMITTED DIFFERENT WORKING OF DISALLOWANCE BASED ON HIS ABOVE PROPOSITION I.E.,(I)WORKING OF D ISALLOWANCE, IF NETWORTH IS MORE THAN INVESTMENT CAPABLE OF YIELDING EXEMPT INCOME; (II) DISALLOWANC E, IF INVESTMENT IN EQUITY SHARES IS EXCLUDED AND (III) DISALLOWANCE, IF ONLY STOCK-IN-TRADE IS E XCLUDED. 7.ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRE SENTATIVE RELYING UPON THE FINDINGS GIVEN BY THE ASSESSING OFFICER AS WELL AS THE LEARNED COMMIS SIONER (APPEALS), SUBMITTED THAT ONCE PROVISIONS OF RULE 8D ARE APPLICABLE, THEN THE DISA LLOWANCE HAS TO BE WORKED OUT AS PER FORMULA GIVEN THEREIN. MOREOVER, IT IS NOT A CASE THAT THE ASSESSEE HAS NOT PAID ANY INTEREST AND, THEREFORE, INTEREST ELEMENT CANNOT BE EXCLUDED IN THE WORKING. FROM THE OTHER PROPOSITION ALSO, HE RAISED STRONG OBJECTION. 8.WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE PERU SED THE RELEVANT FINDINGS OF THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER(APPEALS) AND T HE MATERIAL AVAILABLE ON RECORD.THE ASSESSING OFFICER HAS WORKED OUT THE DISALLOWANCE U NDER SECTION 14A AS PER RULE 8D AT RS.28,72, 22,642/-AFTER TAKING INTEREST COST OF RS. 24,99,03, 799/-AND ADMINISTRATIVE COST OF RS.3,73,18, 843/- .THE LEARNED COUNSEL HAS GIVEN VARIOUS WORKING OF D ISALLOWANCE UNDER SECTION 14A AND HAD SUBMITTED THAT IF ANY DISALLOWANCE IS CALLED FOR, T HEN SAME SHOULD BE MADE ON THAT BASIS ONLY. HIS MAIN CONTENTION HAS BEEN THAT THE ASSESSEES NETWOR IH AND AVAILABILITY OF FUNDS IS FAR MORE THAN INVESTMENT WHICH ARE CAPABLE OF YIELDING EXEMPT INC OME AND, THEREFORE, NO INTEREST COST SHOULD BE ATTRIBUTED FOR WORKING OUT THE DISALLOWANCE.IF THE ASSESSEE HAS HUGE FUNDS WHICH ALSO CONSIST OF INTEREST FREE FUNDS, THEN RESUMPTION WOULD BE THAT INVESTMENTS HAVE BEEN MADE OUT OF INTEREST FREE FUNDS,AVAILABLE WITH THE ASSESSEE AND, THEREFORE, I NTEREST COST CANNOT; HE MADE ATTRIBUTABLE. HOWEVER, AVAILABILITY OF INTEREST FREE FUNDS AND IN VESTMENTS WHICH ORE CAPABLE OF YIELDING EXEMPT INCOME HAS NOT BEEN EXAMINED PROPERLY EITHER BY THE ASSESSING OFFICER OR BY THE LEARNED COMMISSIONER(APPEALS).THEREFORE,RESPECTFULLY FOLLOW ING THE DECISION OF THE HONBLE JURISDICTI - ONAL HIGH COURT IN RELIANCE UTILITIES AND POWER LTD . (SUPRA), WE DIRECT THE ASSESSING OFFICER TO RE-EXAMINE THE NEXUS OF INTER INTEREST FREE FUNDS A ND INVESTMENT MADE. IN CASE, THE INTEREST TREE FUNDS ARE MORE THAN THE INVESTMENT, THEN INTEREST S HOULD BE COST EXCLUDED FROM THE WORKING OF THE DISALLOWANCE AND IN THAT SITUATION ONLY ADMINISTRAT IVE COST CAN ONLY BE DISALLOWED. OTHER WORKINGS GIVEN BY THE ASSESSEE ARE NOT BEING CONSIDERED IN V IEW OF THE AFORESAID DIRECTION. WE, THUS, SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMM ISSIONER (APPEALS) AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH THE ABOVE DIRECTION. NEEDLESS TO SAY THAT THE ASSESSING OFFICER SHALL GIVE DUE AND EFFECTIVE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND TO EXPLAIN ITS CASE. 6. WE FIND THAT THE FACTS AND SUBMISSION MADE BY THE A SSESSEE FOR THE YEAR UNDER APPEAL ARE SIMILAR TO THE FACTS OF THE LAST ASSESSMENT YEAR.THEREFORE, FOLLOWING THE ABOVE ORDER OF THE TRIBUNAL FOR THE AY.2008-09(ITA7676/MUM/2011),WE RESTORE BACK TH E MATTER TO THE FILE OF THE AO TO RE- EXAMINE THE NEXUS OF INTER INTEREST FREE FUNDS AND INVESTMENT MADE.HE SHOULD AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE DECID ING THE ISSUE.ASSESSEE IS DIRECTED TO FURNISH CASH FLOW STATEMENT BEFORE THE AO. GROUNDS NO.1-7 A RE DECIDED IN FAVOUR OF THE ASSESSEE,IN PART. 7. THE NEXT EFFECTIVE GROUND OF APPEAL I.E. GROUND NO. 8 IS ABOUT ADDITION OF RS. 1.14 LAKHS ON THE GROUND THAT THERE WAS MISMATCH OF ITS DETAILS. DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, AO 5 ITA NO.5622/MUM/2012 IL & FS FINANCIAL SERVICES LTD . DIRECTED THE ASSESSEE TO FURNISH DOCUMENTARY EVIDEN CES IN SUPPORT OF ITS DETAILS. AFTER CONSIDERING THE DETAILS FURNISHED BY THE ASSESSEE, HE FOUND THAT IT HAD NOT FURNISHED CONFIRMATION FROM THE 4 PARTIES, THAT THERE WAS DIFFERENCE OF RS . 4.32 LAKHS BECAUSE OF NON-SUBMISSION OF THE REQUIRED DETAILS. 8. ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA, BEFORE HIM IT WAS ARGUED THAT ITS DETAILS WERE MATCHED IN MOST OF THE CASES, THAT ASSESSEE HAD NOT EARNED ANY INCOME FROM THE PARTIES CONCERNED. IT WAS FURTHER STATED THAT ENTRY OF RS. 3.03 LAKHS PERTAIN TO IL & FS TRUST COMPANY AND NOT TO THE ASSESSEE, THAT THE TRUST COMPANY HAD GIVEN A CONFIR MATION AND HAD OWNED THAT TRANSACTION. SIMILARLY, IN RESPECT OF ANOTHER ENTRY OF RS. 14,01 1/- ASSESSEE FILED A CONFIRMATION FROM M/S. DEE PEE KAPOOR AND SERVICES STATING THAT TRANSACTION DI D NOT PERTAIN TO THE ASSESSEE. FAA WAS REQUESTED TO DELETE THE ADDITION OF RS. 3.14 LAKHS IN VIEW OF THE CONFIRMATIONS FILED AFTER CONSIDER -ING THE CONFIRMATIONS HE DELETED THE ADDITION OF R S. 3.03 LAKHS AND 14,011/-.THE REMAINING TWO ADDITIONS OF RS. 3533/- AND 1.11 LAKHS WERE UPHELD AS THE ASSESSEE HAD NOT SUBMITTED THE REQUISITE DETAILS.BEFORE US,AR STATED THAT MATTER SHOULD BE S ENT BACK TO THE FILE OF THE AO.DR SUPPORTED THE ORDER OF THE FAA. 9. WE HAVE PERUSED THE MATERIAL BEFORE US. WE FIND THA T FAA HAS ALREADY GIVEN SUBSTANTIAL RELIEF TO THE ASSESSEE ON PRODUCTION OF CONFIRMATIONS.ASSE SSEE HAD NOT PRODUCED ANY EVIDENCE FROM REMAINING TWO PARTIES I.E TATA TEA LTD. AND DISEHI SANKYO CO. LTD.BEFORE US, ALSO NO EVIDENCE HAS BEEN FILED ASSESSEE WAS AWARE OF THE MISMATCH F ROM THE DATE OF ASSESSMENT BUT TILL DATE IT HAS NOT BEEN RECONCILE THE REMAINING TWO ITEMS. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT MATTER SHOULD NOT BE SENT BACK TO THE AO. HAD THE ASSESSEE PRODUCED THE SAME KIND OF EVIDENCE BEF ORE US, WE WOULD HAVE DEFINITELY REMITTED BACK THE MATTER FOR VERIFICATION. IN ABSENCE OF ANY POSITIVE EVIDENCE, WE ARE INCLINED TO CONFIRM THE ORDER OF THE FAA. EFFECTIVE GROUND NO.2 (GROUND NO.8) IS DECIDED AGAI NST THE ASSESSEE-COMPANY. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS PAR TLY ALLOWED. 1*2 '3* ) /*2 4 ) * 56 ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JUNE,2014. / ) ,-# 7 8' 11 4' , 2014 - ) . 9 SD/- SD/- ( / VIJAY PAL RAO ) ( ! / RAJENDRA ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 8' /DATE: 11 . 06.2014 SK / / / / ) )) ) &* &* &* &* ; # ; # ; # ; #* ** * / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT (A) / < = , 4. THE CONCERNED CIT / < = 5. DR I BENCH, ITAT, MUMBAI / >. &*' , . . . 6. GUARD FILE/ . 1 '* '* '* '* &* &*&* &* //TRUE COPY// /' / BY ORDER, ? / 5 DY./ASST. REGISTRAR , /ITAT, MUMBAI