DCIT 8(1), MUMBAI V. E-CITY INVESTMENTS & HOLDINGS CO. P.LTD, MUMBAI

ITA 5697/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2908 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 29-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 12-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Commercial expediency; Revised return
• Section: 14A; 115JB; 6; 12; 10; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI E BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER. ITA. NOS. 3163 & 5690/MUM/2013 (ASSESSMENT YEAR: 2009-10 & 2010-11) E-CITY INVESTMENTS & HOLDINGS COMPANY PRIVATE LIMITED, 844/4, SHAH INDUSTRIAL ESTATE, OFF. NEW LINK ROAD, OPP. LAXMI INDUSTRIAL ESTATE, ANDHERI (WEST), MUMBAI 400053 APPELLANT VS. DY. COMMISSIONER OF INCOME TAX RANGE 8(1) (OSD), MUMBAI 400020 RESPONDENT & ITA. NOS. 2930 & 5697/MUM/2013 (ASSESSMENT YEAR: 2009-10 & 2010-11) DY. COMMISSIONER OF INCOME TAX RANGE 8(1) (OSD), MUMBAI 400020 APPELLA NT VS. E-CITY INVESTMENTS & HOLDINGS COMPANY PRIVATE LIMITED, 844/4, SHAH INDUSTRIAL ESTATE, OFF. NEW LINK ROAD, OPP. LAXMI INDUSTRIAL ESTATE, ANDHERI (WEST), MUMBAI 400053 RESPONDENT ITA NOS.3163, 2930, 5690 & 5697/MUM/13 A.YS. 09-10 & 10-11 [M/S. E-CITY INVESTMENTS & HOLDINGS CO. PVT. LTD. V S. DCIT] PAGE 2 PAN: AAACE8030F / BY ASSESSEE : SHRI VIJAY MEHTA, A.R. / BY REVENUE : SHRI VINOD KUMAR, D.R. /DATE OF HEARING : 13.06.2016 /DATE OF PRONOUNCEMENT : 24.06.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THESE TWO CROSS APPEALS HAVE BEEN FILED BY ASSESSEE AND REVENUE AGAINST THE ORDERS OF COMMISSIONER OF INCOM E-TAX (APPEALS)-16, MUMBAI, DATED 01.01.2013 FOR A.Y. 200 9-10 AND 14.06.2013 FOR A.Y. 2010-11. 2. IN ITA NO.3163/MUM/2013 FOR A.Y.2009-10, ASSESSE E HAS FILED THE APPEAL ON THE FOLLOWING GROUND: 1. THE LD. CIT(A) ERRED IN LAW AND FACTS IN UPHOLD ING DISALLOWANCE OF INTEREST OF RS.9,81,55,591/- U/S.36(1)(III) OF THE ACT ON ACCOUNT OF FINANCE PRO VIDED BY WAY OF SHARE APPLICATION/LOAN TO ITS SUBSIDIARIES/SISTER CONCERNS OUT OF PRUDENCE COMMERCIAL EXPEDIENCY. THE REASONS GIVEN BY HER FO R DOING SO ARE WRONG, CONTRARY TO THE FACTS OF THE CA SE AND AGAINST THE PROVISIONS OF LAW. 2.1 IN ITA NO.2930/MUM/2013 FOR A.Y.2009-10, REVENU E HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS: ITA NOS.3163, 2930, 5690 & 5697/MUM/13 A.YS. 09-10 & 10-11 [M/S. E-CITY INVESTMENTS & HOLDINGS CO. PVT. LTD. V S. DCIT] PAGE 3 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALL OWANCE OF RS.3,79,01,645/- UNDER SECTION 14A READ WITH RUL E 8D, PLACING RELIANCE ON THE APPELLATE ORDER FOR A.Y . 2008-09 WITHOUT APPRECIATING THAT THE ASSESSEE HAS NOT SHOWN ANY INCOME OTHER THAN INTEREST INCOME OF RS.8,03,509/- WHICH CONSTITUTES INCOME ASSESSABLE UNDER THE HEAD 'INCOME FROM OTHER SOURCES' AND DOES NOT FORM PART OF BUSINESS AND THE INTEREST EXPENDIT URE OF RS.9,81,55,591/- HAS ARISEN TO THE ASSESSEE ON ACCOUNT OF INVESTMENTS IN EQUITY SHARES AND THEREFO RE, SECTION 14A READ WITH RULE 8D WAS SQUARELY APPLICAB LE TO THE ASSESSEE'S CASE.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALL OWANCE OF RS. 3,79,01,645/- UNDER SECTION 14A READ WITH RU LE 8D WITHOUT APPRECIATING THAT THE HON'BLE BOMBAY HIG H COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING C O. LTD V/S. DCIT -10(2) HAS HELD THAT RULE 8D IS CONSTITUTIONALLY VALID AND EFFECTIVE FROM A.Y. 2008 -09 ONWARDS.' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALL OWANCE OF RS.3,79,01,645/- UNDER SECTION 14A READ WITH RUL E 8D WITHOUT APPRECIATING THAT ONCE RULE 8D IS INVOKE D, THE DISALLOWANCE HAS TO BE COMPUTED WITHIN THE PROVISIONS OF THE SAID RULE AND NO DEVIATION CAN BE MADE THEREFROM.' 4. 'WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AN D IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.3,74,76,097/- (OUT OF RS 3,79,01,645/- DISALLOWE D UNDER SECTION 14A READ WITH RULE 8D) WITHOUT APPRECIATING THAT IN PARA 4.6. OF THE ASSESSMENT OR DER THE ASSESSING OFFICER HAD HELD THAT THE ENTIRE EXPENDITURE ON INTEREST AMOUNTING TO RS.9,81,55,591 /- AS DISALLOWABLE UNDER SECTION 36(1)(III) READ WITH SECTION 14A OF THE ACT WHICH HAS BEEN UPHELD BY THE LD. CIT(A)IN GROUND NO. 3 OF THE IMPUGNED ORDER AND ITA NOS.3163, 2930, 5690 & 5697/MUM/13 A.YS. 09-10 & 10-11 [M/S. E-CITY INVESTMENTS & HOLDINGS CO. PVT. LTD. V S. DCIT] PAGE 4 THEREFORE, THE DISALLOWANCE OF THE ENTIRE AMOUNT OF RS.9,81,55,591/-, WHICH INCLUDED THE TELESCOPED DISALLOWANCE OF RS 3,74,76,097/- UNDER SECTION14A, OUGHT TO HAVE BEEN UPHELD BY THE LD. CIT(A).' 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) IN DELETING THE INCREASE OF RS 3,79,01,645/- AS PER EXPLANATION 1(F) OF SECTION 11 5JB OF THE ACT IN THE BOOK PROFIT COMPUTED UNDER THE SA ID SECTION.' 3. ASSESSEE E-FILED ITS ORIGINAL RETURN OF INCOME D ECLARING NET LOSS AT RS.6,14,200/-. THEREAFTER, ASSESSEE E-FILE D ITS REVISED RETURN OF INCOME DECLARING NET LOSS AT RS.9,77,77,6 30/-. FIRST ISSUE RAISED IN REVENUES APPEAL IS WITH REGARDS TO DISALLOWANCE OF INTEREST U/S.14A OF THE ACT. ASSES SING OFFICER ON PERUSAL OF COMPARATIVE BALANCE SHEET NOTICED THA T ASSESSEE WAS HOLDING INVESTMENTS WORTH RS.64,96,53,500/- AS AT THE END OF YEAR. HOWEVER, ASSESSEE HAS NOT ATTRIBUTED ANY EXPENSES WHICH HAVE BEEN INCURRED TO CARRY OUT THE ACTIVITY OF INVESTMENTS, THOUGH IT WAS OBSERVED THAT FOR CARRYI NG OUT ANY SUCH ACTIVITY, SOME KIND OF EXPENDITURE NECESSARY H AS TO BE INCURRED. ASSESSEE WAS ASKED TO FURNISH COMPLETE D ETAILS OF INVESTMENTS AND TO SHOW CAUSE AND EXPLAIN AS TO WHY DISALLOWANCE OF EXPENDITURE SHOULD NOT BE MADE U/S. 14A OF THE ACT IN ACCORDANCE WITH THE FORMULA PRESCRIBED UNDER RULE 8D OF THE INCOME TAX RULES. IN RESPONSE TO SAME, ASSE SSEE COMPANY FURNISHED WRITTEN SUBMISSIONS INTER ALIA SU BMITTING THAT INVESTMENTS WERE STRATEGIC INVESTMENTS NOT MAD E WITH THE INTENTION TO EARN TAX FREE INCOME BY WAY OF DIVIDEN D OR CAPITAL GAIN, THAT TOTAL INVESTMENTS WERE MADE OUT OF INTER NAL ITA NOS.3163, 2930, 5690 & 5697/MUM/13 A.YS. 09-10 & 10-11 [M/S. E-CITY INVESTMENTS & HOLDINGS CO. PVT. LTD. V S. DCIT] PAGE 5 ACCRUALS/INTEREST FREE FUNDS, AND NO EXPENSES WERE INCURRED OR EFFORT MADE TO EARN DIVIDEND OR ANY INCOME FROM THI S INVESTMENT. ASSESSING OFFICER DID NOT ACCEPT THE C ONTENTIONS OF ASSESSEE AND MADE ADDITION BY OBSERVING THAT INVEST MENT DECISIONS ARE VERY COMPLEX AND REQUIRE SUBSTANTIAL MARKET RESEARCH, DAY-TO-DAY ANALYSIS OF MARKET TRENDS AND DECISIONS WITH REGARD TO ACQUISITION, RETENTION AND SALE OF S HARES AT THE MOST APPROPRIATE TIME ETC., AND IT IS DIFFICULT TO ACCEPT THAT ASSESSEE CAN CARRY OUT ANY SUCH ACTIVITY WITHOUT IN CURRING ANY EXPENSES WHATSOEVER INCLUDING MANAGEMENT OR ADMINIS TRATIVE EXPENSES AS INVESTMENT DECISIONS ARE GENERALLY, TAK EN IN A PLANNED MANNER, THAT 14A DISALLOWANCE ENCOMPASSES A LSO ALL FORMS OF EXPENDITURE REGARDLESS OF WHETHER THEY ARE FIXED, VARIABLE, DIRECT, INDIRECT, ADMINISTRATIVE, MANAGER IAL OR FINANCIAL. ACCORDING TO ASSESSING OFFICER, THERE W ERE NO FREE RESERVES AND SURPLUS LYING WITH ASSESSEE COMPANY AN D THAT IT HAD ALSO APPLIED ITS BORROWED FUNDS TOWARDS MAKING INVESTMENTS IN THE FORM OF EQUITY SHARES. ASSESSING OFFICER COMPUTED DISALLOWANCE U/S.14A OF THE ACT IN ACCORDA NCE WITH THE PROVISIONS OF RULE 8D OF THE ACT, TAKING I. DIRECT EXPENDITURE AT NIL, II. PROPORTIONATE OF INTEREST EXPENDITURE COMPUTED IN ACCORDANCE WITH THE FORMULA GIVEN IN RULE 8D(2)(II) AT RS.3,74,76,097/-, AND III. AMOUNT EQUAL TO ONE-HALF PERCENT OF THE AVERAG E OF THE VALUE OF INVESTMENT AT RS.32,47,895/-, TOTAL DISALL OWANCE WAS WORKED OUT AT RS.4,07,23,992/-. ITA NOS.3163, 2930, 5690 & 5697/MUM/13 A.YS. 09-10 & 10-11 [M/S. E-CITY INVESTMENTS & HOLDINGS CO. PVT. LTD. V S. DCIT] PAGE 6 3.1 IN APPEAL, VARIOUS CONTENTIONS WERE RAISED ON B EHALF OF ASSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) ALL OWED THE CLAIM OF ASSESSEE BY FOLLOWING ORDER FOR A.Y.2008-0 9. IT WAS BROUGHT TO OUR NOTICE THAT SIMILAR FACTS AROSE IN A .Y. 2008-09 WHEREIN THE SIMILAR ISSUE ALLOWED IN FAVOUR OF ASSE SSEE AT CIT(A)S LEVEL BY OBSERVING AS UNDER: IN THE PRESENT ASSESSMENT YEAR IN APPEAL THE FACTS ARE SIMILAR, AND IN FACT IT HAS BEEN SHOWN BY THE APPEL LANT THAT THE INVESTMENTS WERE MADE IN EARLIER YEARS AND THIS ITSELF HAD BEEN ACCEPTED BY THE AO IN AY 2008-09 IN HIS ASSESSMENT ORDER. IN AY 2008-09, THE AO HELD THAT N O BORROWED FUND HAS BEEN UTILIZED FOR INVESTMENT PURP OSES. HENCE, INTEREST WAS NOT DISALLOWED FOR THE PURPOSE OF COMPUTING DISALLOWANCE U/S 14A, AND DISALLOWANCE WA S COMPUTED AT ONE HALF PERCENT OF THE AVERAGE VALUE O F INVESTMENTS. THUS THE DISALLOWANCE ON ACCOUNT OF TH E INTEREST COMPONENT CANNOT BE SUSTAINED IN APPEAL FO R AY 2009-10. THE DISALLOWANCE COMPUTED AT ONE HALF PERC ENT OF THE AVERAGE VALUE OF INVESTMENTS IN AY 2009-10 IS RS.32,47,895/- AS AGAINST EXPENDITURE CLAIMED OF RS.4,25,428/- AND NO EXEMPT INCOME HAS BEEN DECLARE D BY THE APPELLANT. AS AGAINST THE TOTAL EXPENDITURE CLA IMED BY APPELLANT OF RS.4,25,428/-, THE AO HAS ALSO NOT IND ICATED WHETHER OR NOT THERE IS ANY EXPENDITURE WHICH HAS B EEN WRONGLY CLAIMED BY THE APPELLANT, IN VIEW OF FOREGO ING, NO DISALLOWANCE CAN BE MADE U/S. 14A. ACCORDINGLY, THE DISALLOWANCE MADE BY THE AO IS ACCORDINGLY DELETED. THIS GROUND OF APPEAL IS THUS ALLOWED. 3.2 THERE IS NOTHING CONTRARY WAS BROUGHT TO OUR KN OWLEDGE ON BEHALF OF REVENUE. IN VIEW OF THIS, THE DISALLO WANCE ON ACCOUNT OF INTEREST COMPONENT COULD NOT SUSTAINED I N THE YEAR UNDER CONSIDERATION I.E. A.Y. 2009-10. MOREOVER, A SSESSING OFFICER HAS NOT INDICATED WHETHER OR NOT THERE IS A NY EXPENDITURE WHICH HAS BEEN WRONGLY CLAIMED BY ASSES SEE. IN ITA NOS.3163, 2930, 5690 & 5697/MUM/13 A.YS. 09-10 & 10-11 [M/S. E-CITY INVESTMENTS & HOLDINGS CO. PVT. LTD. V S. DCIT] PAGE 7 VIEW OF THIS, CIT(A) WAS JUSTIFIED IN HOLDING THAT NO DISALLOWANCE HAS BEEN MADE U/S.14A OF THE ACT. SAM E HAS BEEN UPHOLD. 4. NEXT ISSUE IN APPEAL WITH REGARD TO DELETING THE INCREASE OF RS.3,79,01,645/- AS PER EXPLANATION 1(F) OF SECTION 115JB OF THE ACT IN BOOK PROFIT COMPUTED UNDER THE SAID SECTION. THIS ISSUE BEING CONSEQUENTIAL, SO, SAME IS DECIDED IN FAVOUR OF ASSESSEE BEING CONSEQUENTIAL TO THE ISSUE OF SECTION 14A OF THE ACT. 5. THE NEXT ISSUE AS RAISED IN ASSESSEES APPEAL WI TH REGARD TO DISALLOWANCE OF INTEREST OF RS.9,81,55,591/- U/S .36(1)(III) OF THE ACT ON ACCOUNT OF FINANCE PROVIDED BY WAY OF SH ARE APPLICATION/LOAN TO ITS SUBSIDIARIES/SISTER CONCERN S. ASSESSEE PROVIDED FINANCE BY WAY OF INTEREST FREE LOAN AND S HARE APPLICATION MONEY TO ITS SUBSIDIARIES/SISTER CONCER NS DURING THE YEAR AND IN EARLIER YEAR AS WELL AS OUT OF COMM ERCIAL EXPEDIENCY. THE SUBSIDIARY HAD USED THESE FUNDS FO R ITS BUSINESS, HENCE INTEREST THEREON WAS CLAIMED AS ALL OWABLE U/S.36(1)(III) OF THE ACT. HOWEVER, ASSESSING OFFI CER DISALLOWED RS.9,81,55,591/- U/S.36(1)(III) OF THE ACT ON THE G ROUND THAT ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM ITS CLAIM IN RESPECT OF INTEREST EXPENDITURE. HOWEVER, ASSESSING OFFICER R ESTRICTED THE DISALLOWANCE OF RS.6,06,79,494/- AS INTEREST OF RS. 3,74,76,097/- WAS ALREADY DISALLOWED BY HIM U/S.14A OF THE ACT. ITA NOS.3163, 2930, 5690 & 5697/MUM/13 A.YS. 09-10 & 10-11 [M/S. E-CITY INVESTMENTS & HOLDINGS CO. PVT. LTD. V S. DCIT] PAGE 8 5.1 CIT(A) UPHELD THE DISALLOWANCE RELYING UPON THE ORDER OF PREDECESSORS FOR A.Y. 2008-09 AND CONFIRMED THE DI SALLOWANCE OF RS.9,81,55,591/-. 5.2 LD. AUTHORIZED REPRESENTATIVE POINTED THAT IN A SSESSEES OWN CASE FOR A.Y. 2008-09 IN ITA NO.8382/MUM/2011 W HEREIN TRIBUNAL HAS DECIDED THE SIMILAR ISSUE IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER: 2.12 TO SUM UP THE MATTER, IN THE LIGHT OF THE AFO RESAID JUDICIAL PRONOUNCEMENT AND THE FACTUAL MATRIX AVAIL ABLE ON RECORD, WE FIND THAT THE MONEY WAS ADVANCED BY THE ASSESSEE HOLDING COMPANY TO ITS SUBSIDIARIES FOR 'B USINESS EXPEDIENCY', WHICH HAS TO BE JUDGED BY THE BUSINESS MAN ITSELF. THE FACTS BROUGHT BEFORE US ARE THAT THE AS SESSEE HAS PLEADED BEFORE THE LOWER AUTHORITIES THAT THE AMOUN T INVESTED HAS BEEN USED BY THE SUBSIDIARIES FOR THE PURPOSE OF BUSINESS. THE ASSESSEE HAS SIGNIFICANT INTEREST IN THE BUSINESS OF SUBSIDIARIES, AS THESE SUBSIDIARIES ARE IN SAME BUSINESS AS THAT OF ASSESSEE. IT IS FURTHER NOTED T HAT MAJOR PORTION OF THE AMOUNTS WERE INVESTED IN THE EARLIER YEARS. NO DISALLOWANCE HAS BEEN MADE IN ASSESSMENT YEAR 2007- 08 OR EARLIER. THUS, KEEPING IN VIEW, THE LEGAL POSITION AS DISCUSSED ABOVE AND FACTS OF THIS CASE, IT CAN BE S AID THAT AMOUNT INVESTED IN THE SUBSIDIARIES COMPANY WAS ARI SING OUT OF COMMERCIAL EXPEDIENCY AND WAS THUS FOR THE P URPOSE OF BUSINESS OF THE ASSESSEE. THEREFORE, WE REVERSE THE DECISION OF THE LD. COMMISSIONER OF INCOME TAX (APP EALS) AND ALLOW THE APPEAL OF THE ASSESSEE. 5.3 NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE. FACTS BEING SIMILAR, SO FOLLOWING SAME REASONING, WE ARE INCLINED TO CENSURE WITH THE ORDER OF CIT(A) WHO HAS DISALLOWED THE INTEREST IN QUESTION. ASSESSING OFFICER IS DIRECTE D ACCORDINGLY TO ALLOW THE INTEREST OF RS.9,81,55,591/- U/S.36(1) (III) OF THE ACT ITA NOS.3163, 2930, 5690 & 5697/MUM/13 A.YS. 09-10 & 10-11 [M/S. E-CITY INVESTMENTS & HOLDINGS CO. PVT. LTD. V S. DCIT] PAGE 9 ON ACCOUNT OF FINANCE PROVIDED BY WAY OF SHARE APPLICATION/LOAN TO ITS SUBSIDIARIES/SISTER CONCERN S. 6. IN ITA NO.5690/MUM/2013 FOR A.Y.2010-11, ASSESSE E HAS FILED THE APPEAL ON THE FOLLOWING GROUND: 1. THE LD. CIT(A) ERRED IN LAW AND FACTS IN UPHOLD ING DISALLOWANCE OF INTEREST OF RS.4,07,41,028/- U/S.36(1)(III) OF THE ACT ON ACCOUNT OF FINANCE PRO VIDED BY WAY OF SHARE APPLICATION/LOAN TO ITS SUBSIDIARIES/SISTER CONCERNS OUT OF PRUDENCE COMMERCIAL EXPEDIENCY. THE REASONS GIVEN BY HER FO R DOING SO ARE WRONG, CONTRARY TO THE FACTS OF THE CA SE AND AGAINST THE PROVISIONS OF LAW. 6.1 IN ITA NO.5697/MUM/2013 FOR A.Y.2010-11, REVENU E HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALL OWANCE OF RS.1,72,95,931/- UNDER SECTION 14A READ WITH RUL E 8D, PLACING RELIANCE ON THE APPELLATE ORDER FOR A.Y . 2009-10 WITHOUT APPRECIATING THAT THE ASSESSEE HAS NOT SHOWN ANY INCOME OTHER THAN INTEREST INCOME OF RS.3,02,49,717/- WHICH CONSTITUTES INCOME ASSESSABL E UNDER THE HEAD 'INCOME FROM OTHER SOURCES' AND DOES NOT FORM PART OF BUSINESS AND THE INTEREST EXPENDIT URE OF RS.4,07,41,028/- HAS ARISEN TO THE ASSESSEE ON ACCOUNT OF INVESTMENTS IN EQUITY SHARES AND THEREFO RE, SECTION 14A READ WITH RULE 8D WAS SQUARELY APPLICAB LE TO THE ASSESSEE'S CASE.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALL OWANCE OF RS.1,72,95,931/- UNDER SECTION 14A READ WITH RUL E 8D WITHOUT APPRECIATING THAT THE HON'BLE BOMBAY HIG H COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING C O. LTD V/S. DCIT -10(2) HAS HELD THAT RULE 8D IS ITA NOS.3163, 2930, 5690 & 5697/MUM/13 A.YS. 09-10 & 10-11 [M/S. E-CITY INVESTMENTS & HOLDINGS CO. PVT. LTD. V S. DCIT] PAGE 10 CONSTITUTIONALLY VALID AND EFFECTIVE FROM A.Y. 2008 -09 ONWARDS.' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALL OWANCE OF RS. 1,72,95,931/- UNDER SECTION 14A READ WITH RU LE 8D WITHOUT APPRECIATING THAT ONCE RULE 8D IS INVOKE D, THE DISALLOWANCE HAS TO BE COMPUTED WITHIN THE PROVISIONS OF THE SAID RULE AND NO DEVIATION CAN BE MADE THEREFROM.' 4. 'WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AN D IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 1,72,95,931/- WITHOUT APPRECIATING THAT IN PARA 6.6 . OF THE ASSESSMENT ORDER THE ASSESSING OFFICER HAD HELD THAT THE ENTIRE EXPENDITURE ON INTEREST AMOUNTING T O RS. 4,07,41,028/- AS DISALLOWABLE UNDER SECTION 36(1)(III) READ WITH SECTION 14A OF THE ACT WHICH H AS BEEN UPHELD BY THE LD. CIT(A)IN GROUND NO. 3 OF THE IMPUGNED ORDER AND THEREFORE, THE DISALLOWANCE OF T HE ENTIRE AMOUNT OF RS. 4,07,41,028/-, WHICH INCLUDED THE TELESCOPED DISALLOWANCE OF RS.1,72,95,931/- UND ER SECTION14A, OUGHT TO HAVE BEEN UPHELD BY THE LD. CIT(A).' 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) IN DELETING THE INCREASE OF RS. 1,77,89,754/- AS PER EXPLANATION 1(F) OF SECTION 11 5JB OF THE ACT IN THE BOOK PROFIT COMPUTED UNDER THE SA ID SECTION.' 7. IN ASSESSEES APPEAL, THE ISSUE OF DISALLOWANCE OF INTEREST OF RS.4,07,41,028/- U/S.36(1)(III) OF THE ACT ON AC COUNT OF FINANCE PROVIDED BY WAY OF SHARE APPLICATION/LOAN T O ITS SUBSIDIARIES/SISTER CONCERNS. SIMILAR ISSUE AROSE IN A.Y. 2009- 10 WHICH HAS BEEN DECIDED IN FAVOUR OF ASSESSEE IN PARA 7.2 & 7.3 OF THIS ORDER. FACTS BEING SIMILAR, SO FOLLOWI NG SAME REASONING DISALLOWANCE OF INTEREST OF RS.4,07,41,028/- ITA NOS.3163, 2930, 5690 & 5697/MUM/13 A.YS. 09-10 & 10-11 [M/S. E-CITY INVESTMENTS & HOLDINGS CO. PVT. LTD. V S. DCIT] PAGE 11 U/S.36(1)(III) OF THE ACT ON ACCOUNT OF FINANCE PRO VIDED BY WAY OF SHARE APPLICATION/LOAN TO ITS SUBSIDIARIES/SISTER C ONCERNS OUT OF PRUDENCE COMMERCIAL EXPEDIENCY IS DIRECTED TO BE AL LOWED. 8. OTHER ISSUE WHICH HAS BEEN RAISED BY REVENUE WIT H REGARD TO DISALLOWANCE OF RS.1,72,95,931/- U/S.14A READ WI TH RULE 8D. SIMILAR ISSUE AROSE IN 2009-10 IN ASSESSEES OWN CA SE WHERE IS SAME HAS BEEN DECIDED IN FAVOUR OF ASSESSEE VIDE PA RA 5 OF THIS ORDER. FACTS BEING SIMILAR SO FOLLOWING SAME REASO NING, THIS ISSUE IS DECIDED IN FAVOUR OF ASSESSEE. 9. NEXT ISSUE IN APPEAL WITH REGARD TO DELETING THE INCREASE OF RS.1,77,89,754/- AS PER EXPLANATION 1(F) OF SECTION 115JB OF THE ACT IN BOOK PROFIT COMPUTED UNDER THE SAID SECTION. THIS ISSUE BEING CONSEQUENTIAL, SO, SAME IS DECIDED IN FAVOUR OF ASSESSEE BEING CONSEQUENTIAL TO THE ISSUE OF SECTION 14A OF THE ACT. 10. IN THE RESULT, BOTH APPEALS FILED BY ASSESSEE A RE ALLOWED AND BOTH APPEALS FILED BY REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 24 TH DAY OF JUNE, 2016. SD/- SD/- ( RAJESH KUMAR ) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBE R MUMBAI: DATED 24/06/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. ! / CONCERNED CIT ITA NOS.3163, 2930, 5690 & 5697/MUM/13 A.YS. 09-10 & 10-11 [M/S. E-CITY INVESTMENTS & HOLDINGS CO. PVT. LTD. V S. DCIT] PAGE 12 4. !- / CIT (A) 5. )*+ ,--, , / DR, ITAT, MUMBAI 6. +12 34 / GUARD FILE. BY ORDER / , / , ,