ADDL. CIT, SPECIAL RANGE- 03, NEW DELHI V. DLF LTD., NEW DELHI

ITA 5940/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6211 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 18-09-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: Business income; Depreciation; Transfer pricing; International transaction; Earning of tax free income; Retrospective amendment; Notional interest; Capital receipt; Rule 8D; Set aside
• Section: 92C; 92B; 14A; 250; 80IA; 64; 43; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1 NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.AS. NO.5940 & 5941/DEL/2017 ASSESSMENT YEARS 2012-13 & 2013-14 ADDL. CIT, SPECIAL RANGE-03, NEW DELHI. V. DLF LTD., DLF CENTRE, SANSAD MARG, NEW DELHI. TAN/PAN: AAACD3494N (APPELLANT) (RESPONDENT) COS. NO.5 & 6/DEL/2021 ASSESSMENT YEARS 2012-13 & 2013-14 DLF LTD., DLF CENTRE, SANSAD MARG, NEW DELHI. V. ADDL. CIT, SPECIAL RANGE-03, NEW DELHI TAN/PAN: AAACD3494N (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SURENDER PAL, CIT-DR RESPONDENT BY: S/SHRI R.S. SINGHVI & SATYAJEET GOEL , CA DATE OF HEARING: 19 07 2021 DATE OF PRONOUNCEMENT: 10 09 2021 O R D E R PER AMIT SHUKLA, A.M. THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGAINST ORDER DATED 20.06.2017, PASSED BY LD. CIT ( A)-3, NEW DELHI FOR THE QUANTUM OF ASSESSMENT FOR THE AY 2012 -13. THE ASSESSEE HAS FILED CROSS-OBJECTION INVOLVING SOLITA RY ISSUE. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL : I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 2 1) 'LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION O F RS. 2,04,73, 12,536/- MADE BY THE AO ON ACCOUNT OF REVENUE RECOG NITION AS PER POCM.' 2) 'LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON THE FACTS OF THE CASE THE ADDITION OF RS.1,52, 63,41,000/- MADE BY THE AO ON ACCOUNT OF CAPITALIZATION OF THE INTEREST.' 3) 'LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION O F RS. 2,21,32,624/- MADE BY THE AO ON ACCOUNT OF BROKERAG E AND COMMISSION.' 4) 'LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION O F RS. 38,08,6241- MADE BY THE AO ON ACCOUNT OF NET INTERE ST FREE SECURITY DEPOSIT.' 5) 'LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION O F RS. 6, 78,81,157/-MADE BY THE AO ON ACCOUNT OF NON-ALLOCAT ION OF PROPORTIONATE OVER HEAD EXPENDITURE TO OTHER GROUP ENTITIES.' 6) 'LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON THE FACTS OF THE CASE BY RESTRICTING THE ADDITIO N OF RS. 2,77,16,42, 129/- MADE BY THE AO TO RS.6,61,871/- U /S 14A. 7) 'LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION O F RS. 18,67,82,2877- MADE BY THE AO ON ACCOUNT OF TREATIN G THE BUSINESS INCOME AS 'INCOME FROM THE HOUSE PROPERTY. ' I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 3 8) 'LD. COMMISSIONER OF E CASE IN DELETING THE ADDI TION OF RS. 5,27,018/- MADE BY THE AO ON ACCOUNT OF NOTIONAL RE NT ON THE PROPERTIES LYING VACANT DURING THE YEAR.' 9) 'LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION O F RS.4,45,732 - MADE BY THE AO ON ACCOUNT OF DEPRECIATION.' 10) 'LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITI ON OF RS. 44,58,450/- MADE BY THE AO ON ACCOUNT OF EXPENDITUR E PERTAINING TO THE PRIOR PERIOD.' 11) 'LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITI ON OF RS.23,11,00,3671- MADE BY THE AO ON ACCOUNT OF PERS ONAL IN NATURE.' 12) 'LD COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION O F RS. 1,59,02,00,000/- MADE BY THE AO ON ACCOUNT OF NOTIO NAL INTEREST FROM THE SUBSIDIARIES. 13) 'LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITI ON OF RS. 14,64,00,000/- MADE BY THE AO ON ACCOUNT OF SHORT N ON- ALLOCATION OF PROPORTIONATE OVERHEAD EXPENDITURE TO WINDMILLS AT GUJARAT AND KARNATAKA.' 14) 'LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION O F RS. 9,52,53,136)- MADE BY THE AO ON ACCOUNT OF CARBON C REDITS WHICH IS CLAIMED BY THE COMPANY.' I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 4 15) 'LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION O F RS. 2,48,86,268/- MADE BY THE AO ON ACCOUNT OF ADJUSTME NT TOWARDS ARM'S LENGTH PRICE.' 3. ON THE OTHER HAND, THE CROSS-OBJECTION OF THE ASSESSEE IS AS UNDER: 1A. THAT LEARNED CIT(A) HAS GROSSLY ERRED IN LAW AN D ON THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S C ASE IN CONFIRMING THE NET ADDITION OFRS.6,80,874/- [I.E. A FTER ALLOWING STANDARD DEDUCTION @ 30% ON GROSS ADDITION OFRS.9,7 2,677/- WHICH WORKS OUT TORS.2,91,803/-) MADE BY THE ASSESS ING OFFICER ON ACCOUNT OF NOTIONAL RENT WHERE SECURITY DEPOSITS WERE RECEIVED FROM THE TENANTS BUT NO RENTAL INCOME HAS BEEN RECEIVED BY THE APPELLANT. 1B. THAT LEARNED CIT(A) HAS GROSSLY ERRED IN LAW AN D ON THE FACTS IN NOT APPRECIATING THE FACT THAT THE TAXABLE INCOME MEANS REAL INCOME AND NOT A FICTIONAL INCOME. 4. ON THE DATE OF HEARING, THE LD. COUNSEL SH. R.S. S INGHVI, CA APPEARING FOR THE ASSESSEE FILED GROUND-WISE CHA RT AND SUBMITTED THAT MOST OF THE ISSUES INVOLVED IN THE A PPEAL ARE SQUARELY COVERED BY THE DECISION OF COORDINATE BENC H IN ASSESSEES OWN CASE IN PRECEDING YEARS. IT WAS FURT HER, SUBMITTED THAT EXCEPT GROUND NO. 13 AND 15 OF THE A PPEAL WHICH ARE NEW ISSUES, ALL THE OTHER GROUNDS ARE FUL LY COVERED IN FAVOUR OF ASSESSEE. I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 5 5. THE LD. CIT DR DID NOT DISPUTE THE FACTUAL POSITIO N. HOWEVER, HE SUBMITTED THAT WHERE THE FACTS AND BASI S OF DISALLOWANCE/ADDITION IS SAME, THE ORDERS OF COORDI NATE BENCH MAY BE FOLLOWED. FURTHER, THE LD. DR ADVANCED ARGUM ENTS IN RESPECT OF GROUND 6,11 AND 15 INVOLVING ISSUE OF DI SALLOWANCE U/S 14A, DISALLOWANCE OF EXPENSE ON PERSONAL NATURE AND TRANSFER PRICING ADJUSTMENT U/S 92C RESPECTIVELY. W ITH REGARD, TO GROUND NO. 13, HE RELIED UPON THE ASSESS MENT ORDER AND SUPPORTED THE ACTION OF THE ASSESSING OFFICER. FIRSTLY, WE ARE TAKING UP APPEAL FILED BY THE REVEN UE. 6.1 GROUND NO. 1 IS AGAINST DELETION OF ADDITION ON ACCOUNT OF REVENUE RECOGNITION FROM CONSTRUCTION PROJECT AS PER PERCENTAGE OF COMPLETION METHOD (POCM). THE ASSESSI NG OFFICER HAS CONSIDERED THE ADDITION ON THE BASIS OF OBSERVATION OF SPECIAL AUDITOR IN AY 2009-10 WHEREIN IT WAS POI NTED OUT THAT APPELLANT COMPANY HAS CHANGED THE METHOD FOR APPORTIONMENT OF INTERNAL DEVELOPMENT CHARGES FROM FY 2008-09. AS PER THE NEW METHOD, THE INTERNAL DEVELO PMENT CHARGES INCURRED UPTO THE END OF A PARTICULAR YEAR IS CHARGED ON TOTAL SALEABLE AREA INCLUDING UN-LAUNCHED AREA W HEREAS UPTO FY 2008-09, THE IDC WAS CHARGED ONLY TO AREA P ERTAINING TO LAUNCHED PROJECT. THE ASSESSING OFFICER ON THE B ASIS OF FINDING RECORDED IN ASSESSMENT ORDER PASSED FOR AY 2011-12, MADE ADDITION OF RS. 204,73,12,536/- ON ACCOUNT OF UNDERSTATEMENT OF PROFIT DUE TO CHANGE IN POCM METH OD. I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 6 6.2 THE FIRST APPELLATE AUTHORITY VIDE FINDING RECO RDED AT PAGE 16-24 PARA 8.1 TO 8.2 DELETED THE ADDITION AFT ER OBSERVING THAT THIS VERY ISSUE HAS BEEN DECIDED IN PRECEDING YEARS FROM AY 2006-07 TO 2011-12. IT WAS CONCLUDED BY CIT(A) THAT SINCE THERE WAS INCREASE IN SALEABLE AR EA OF PHASE- V, GURGAON PROJECT AFTER REQUISITE APPROVAL FROM LO CAL AUTHORITIES, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN RESTRICTING THE APPORTIONMENT OF IDC ONLY TO PREVIO USLY LAUNCHED AREA AND REWORK THE PROFIT UNDER POCM METH OD. 6.3 WE HAVE CONSIDERED THE ORDERS OF THE SUB-ORDINA TE AUTHORITIES AND FIND THAT THE BASIS OF ADDITION IN THE YEAR UNDER REFERENCE IS IDENTICAL TO THAT IN PRECEDING Y EARS. IN FACT, THE ASSESSING OFFICER HIMSELF HAS FOLLOWED THE OBSE RVATION OF SPECIAL AUDITOR IN AY 2009-10 AND FINDING RECORDED IN THE ASSESSMENT ORDER FOR AY 2011-12. AS THE ISSUE OF RE WORKING OF PROFIT UNDER POCM ON THE BASIS OF RE-APPORTIONMENT OF IDC HAS BEEN DECIDED BY THE COORDINATE BENCH IN PRECEDI NG YEARS, THE SAME IS DECIDED AS PER THE TABLE GIVEN IN 19 OF THIS ORDER. 7.1 GROUND NO. 2 IS AGAINST DELETION OF DISALLOWANCE OF INTEREST EXPENSES OF RS. 152,63,41,000/- ON ACCOUNT OF CAPITALIZATION OF THE SAME. THE ASSESSING OFFICER C APITALIZED PART CLAIM OF INTEREST ON THE REASONING THAT INTERE ST EXPENSES ON FIXED PERIOD LOANS CANNOT BE FULLY ALLOWED AND I S ALLOWABLE IN PROPORTION TO REVENUE RECOGNIZED FROM VARIOUS PR OJECTS. THE DISALLOWANCE AND CAPITALIZATION OF INTEREST WAS COM PUTED AS PER FORMULA SUGGESTED BY SPECIAL AUDITOR IN PRECEDI NG YEARS. I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 7 7.2 THE CIT(A) AFTER REFERRING TO ORDER OF FIRST AP PELLATE AUTHORITY IN AY 2009-10 AND ITAT ORDER FOR AY 2006- 07 DELETED THE ADDITION VIDE FINDING RECORDED AT PAGE 46 PARA 10.1. 7.3 WE HAVE PERUSED THE ASSESSMENT ORDER AND THE IMPUGNED ORDER BEFORE US. IT IS NOTED THAT THE ISSU E OF CAPITALIZATION OF INTEREST IS A RECURRING ISSUE AND HAS BEEN EXTENSIVELY DEALT WITH FIRST APPELLATE AUTHORITY AN D COORDINATE BENCH IN FAVOUR OF ASSESSEE IN PRECEDING YEARS WHER EIN IT HAS BEEN HELD THAT NOTIONAL CAPITALIZATION OF INTEREST IS NOT PERMISSIBLE PARTICULARLY WHEN THE ASSESSEE HAS ALRE ADY CAPITALIZED INTEREST PERTAINING TO PROJECTS UNDER E XECUTION. THERE IS NOTHING ON RECORD TO SHOW THAT FACTS AND T HE BASIS OF DISALLOWANCE IN THE YEAR UNDER CONSIDERATION IS DIF FERENT FROM THAT IN PRECEDING YEARS. AS THE ISSUE OF CAPITALIZA TION OF INTEREST HAS BEEN DECIDED BY THE COORDINATE BENCH I N PRECEDING YEARS, THE SAME IS DECIDED AS PER THE TAB LE GIVEN IN PARA 19. 8.1 VIDE GROUND NO. 3 , THE REVENUE IS AGGRIEVED BY THE ORDER OF CIT(A) DELETING DISALLOWANCE OF BROKERAGE EXPENSE AMOUNTING TO RS. 2,21,32,083/-. THE ASSESSING OFFIC ER CONSIDERED THE DISALLOWANCE ON THE GROUND THAT BROK ERAGE PAID BY THE ASSESSEE SHOULD HAVE BEEN LINKED WITH E ACH PROJECT AND TRANSFERRED TO WIP AND RECOGNIZED AS PE R POCM METHOD. I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 8 8.2 THE CIT(A) DELETED THE ADDITION ON THE BASIS OF ORDER OF COORDINATE BENCH IN ASSESSEES OWN CASE FOR AY 2006 -07 AND FINDING RECORDED BY HIS PREDECESSOR IN AY 2009-10. 8.3 WE HAVE CONSIDERED THE ISSUE IN HAND. THE ACTIO N OF ASSESSING OFFICER IN TREATING BROKERAGE AS PART OF COST UNDER POCM METHOD HAS BEEN DEPRECATED BY THE COORDINATE B ENCH IN ORDERS PASSED FOR AY 2006-07 TO 2011-12 WHEREIN IT HAS BEEN HELD THAT BROKERAGE EXPENSES ARE ALLOWABLE IN THE YEAR OF INCURRING AND SAME CANNOT BE ASSOCIATED WITH CONSTR UCTION COST. IT HAS BEEN STATED BY LD. AR THAT THE DELETIO N OF DISALLOWANCE IN AY 2006-07 BY COORDINATE BENCH HAS BEEN ACCEPTED BY THE REVENUE AND NO FURTHER APPEAL HAS B EEN FILED BEFORE HIGH COURT ON THIS ISSUE. IN FACT, THE ASSES SING OFFICER HAS ACCEPTED THE CLAIM IN AY 2016-17. AS THIS GROUND IS SUBJECT MATTER OF ADJUDICATION BY THE COORDINATE BENCH IN PRECEDING YEARS, THE SAME IS DE CIDED AS PER THE TABLE GIVEN IN PARA 19 OF THIS ORDER. 9.1 GROUND NO. 4 IS DIRECTED AGAINST DELETION OF ADDITION OF RS. 38,08,624/- ON ACCOUNT OF NET INTEREST FREE MAI NTENANCE SECURITY DEPOSITS. THE ASSESSING OFFICER VIDE FINDI NG RECORDED AT PARA 4.5 AND 4.6 OF THE ASSESSMENT ORDER WAS OF THE OPINION THAT MAINTENANCE CHARGES COLLECTED BY THE A SSESSEE IS IN THE NATURE OF INCOME. 9.2 THE FIRST APPELLANT AUTHORITY DELETED THE ADDIT ION AFTER FOLLOWING THE CIT(A) ORDER FOR AY 2009-10. I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 9 9.3 WE HAVE CONSIDERED THE ENTIRE FACTS AND PERU SED THE ORDERS OF LOWER AUTHORITIES. IT IS NOTED THAT THE A SSESSEE IS COLLECTING INTEREST FREE MAINTENANCE SECURITY DEPOS IT FROM CUSTOMERS FOR MEETING OUT FUTURE LIABILITIES SUCH A S INSURANCE PREMIUM AND MAINTENANCE CHARGES OF THE BUILDINGS. T HE AMOUNT SO COLLECTED IS HANDED OVER TO RESIDENT ASSOCIATION/CONDOMINIUM ASSOCIATION UPON FORMATION AND ARE SHOWN AS LIABILITY IN THE BOOKS OF ACCOUNT. FUR THER, IT IS NOTED THAT THE ISSUE OF MAINTENANCE AND SECURITY DE POSIT IS A RECURRING ISSUE WHERE THE ASSESSING OFFICER IS MAKI NG ADDITION YEAR AFTER YEAR AND THE MATTER HAS TRAVELLED BEFORE COORDINATE BENCH IN SUCCESSIVE PRECEDING YEARS WHEREIN THE ADD ITION STOOD DELETED. IT HAS BEEN STATED BY LD. AR THAT TH E DELETION OF IDENTICAL DISALLOWANCE IN AY 2006-07 BY COORDINATE BENCH HAS BEEN ACCEPTED BY THE REVENUE AND NO FURTHER APP EAL HAS BEEN FILED BEFORE HIGH COURT ON THIS ISSUE. IN FACT , THE ASSESSING OFFICER HAS ACCEPTED THE CLAIM IN AY 2016 -17. AS THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY O RDERS OF COORDINATE BENCH, THE SAME IS DECIDED AS PER THE TA BLE GIVEN IN PARA 19 OF THIS ORDER. 10.1 GROUND NO. 5 IS AGAINST DELETION OF DISALLOWANCE OF EXPENSES TOWARDS ALLOCATION OF OVERHEADS TO OTHER G ROUP ENTITIES. THE ASSESSING OFFICER HAS CONSIDERED THE DISALLOWANCE OF RS. 6,78,81,157/- AFTER MAKING ALLOCATION OF OVE RHEAD EXPENSES CLAIMED BY THE ASSESSEE TO GROUP CONCERNS NAMELY M/S. DLF INFOCITY DEVELOPERS (CHENNAI) LTD. AND M/S . DLF I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 10 CYBER CITY DEVELOPERS LTD. THE ALLOCATION OF EXPENS E AND CONSEQUENTIAL DISALLOWANCE IS WHOLLY ON THE BASIS O F ASSESSMENT ORDER PASSED FOR AY 2006-07 TO 2011-12 W HICH IS EVIDENT FROM PARA 5.1 OF THE ASSESSMENT ORDER. 10.2 IN THE IMPUGNED APPELLATE ORDER, THE CIT(A) D ELETED THE ADDITION BY FOLLOWING THE REASONING GIVEN IN OR DER OF CIT(A) IN PRECEDING YEARS I.E. AY 2006-07 TO 2011-1 2 AS WELL AS ORDER OF ITAT IN ASSESSEES OWN CASE OF AY 2006- 07. 10.3 ON CAREFUL PERUSAL OF THE FACTS, WE FIND THAT THE BASIS ADOPTED BY THE ASSESSING OFFICE WHILE MAKING DISALLOWANCE OF EXPENSES IN THE HANDS OF THE ASSESS EE ON ACCOUNT OF ALLOCATION OF OVERHEADS TO GROUP CONCERN S IS STATIC AND BORROWED FROM EARLIER YEARS ASSESSMENT ORDERS. FURTHER, AS THIS ISSUE HAS ALREADY BEEN DECIDED BY COORDINAT E BENCH IN AY 2006-07 TO 2011-12 WHEREIN THE DISALLOWANCE W AS DELETED. ON PARITY OF FACTS, THIS GROUND IS ALSO DE CIDED AS PER TABLE GIVEN IN PARA 19 OF THIS ORDER. 11.1 GROUND NO. 7 IS REGARDING DELETION OF ADDITION OF RS. 186,782,287/- BY RECLASSIFYING INCOME OFFERED T O TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY TO INCOME UNDER HEAD BUSINESS AND PROFESSION. AS PER THE QUESTIONNA IRE REPRODUCED AT PAGE 60 PARA 7.11 OF THE ASSESSMENT O RDER, THE RECLASSIFICATION HAS BEEN DONE IN LINE WITH ASSESSM ENT ORDER FOR AY 2006-07 TO 2011-12. THE ASSESSING OFFICER IS OF THE VIEW THAT RENTAL INCOME EARNED ON PROPERTIES SHOWN AS ST OCK I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 11 UNDER CURRENT ASSET IS ASSESSABLE AS BUSINESS INCOM E AND NOT INCOME FROM HOUSE PROPERTY. 11.2 THE CIT(A) CONCURRED WITH ORDER OF CIT(A) PAS SED IN APPEAL FOR PRECEDING YEARS AND ORDERED THE DELETION OF ADDITION. 11.3 WE HAVE CONSIDERED THE ASSESSMENT ORDER, ORDE R OF CIT(A) AND ORDER PASSED BY COORDINATE BENCH IN PREC EDING YEARS. WE FIND THAT THIS ISSUE HAS BEEN DEALT WITH BY COORDINATE BENCH IN AY 2005-06 TO 2011-12 WHEREIN T HE ADDITION WAS DELETED BY HOLDING THAT LEASE INCOME F ROM ASSET LYING UNDER CURRENT ASSET IS ALSO ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ACCORDINGLY, THIS GROUN D IS ALSO DECIDED AS PER TABLE GIVEN IN PARA 19 OF THIS ORDER. 12.1 GROUND NO. 8 IS AGAINST DELETION OF ADDITION OF RS. 5,27,018/- MADE ON ACCOUNT OF RENT ON PROPERTIES LY ING VACANT DURING THE YEAR UNDER REFERENCE. THE ASSESSI NG OFFICER ON THE BASIS OF VIEW TAKEN IN AY 2006-07 TO 2011-12 , MADE ADDITION OF NOTIONAL RENT IN RESPECT OF PROPERTIES LISTED AT PAGE 64 OF THE ASSESSMENT ORDER. 12.2 THE ADDITION SO MADE WAS DELETED BY CIT(A) ON THE GROUND THAT SIMILAR ADDITION MADE IN PRECEDING YEAR S WAS DELETED BASED ON DETAILED REASONING. I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 12 12.3 WE HAVE GONE THROUGH THE FACTS OF THE CASE AN D ORDERS PASSED BY ASSESSING OFFICER AND CIT(A). IT I S NOT IN DISPUTE THAT ADDITION IN THE YEAR UNDER REFERENCE I S BASED ON ASSESSMENT ORDER FOR AY 2006-07 TO 2011-12 AND HAS COME UP FOR CONSIDERATION BEFORE COORDINATE BENCH. FURTH ER, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THA T THE DELETION OF IDENTICAL ADDITION IN AY 2006-07 BY COO RDINATE BENCH HAS BEEN ACCEPTED BY THE REVENUE AND NO FURTH ER APPEAL HAS BEEN FILED BEFORE HIGH COURT ON THIS ISS UE. IN FACT, THE ASSESSING OFFICER HAS NOT MADE ANY ADDITION ON THIS ISSUE IN AY 2016-17. AS THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY O RDERS OF COORDINATE BENCH, THE GROUND IS DECIDED AS PER THE TABLE GIVEN IN PARA 19 OF THIS ORDER. 13.1 GROUND 9 IS DIRECTED AGAINST ORDER OF CIT(A) DELETING DISALLOWANCE OF DEPRECIATION OF BUILDING D LF CENTRE TO THE TUNE OF RS. 4,45,732/- U/S 32 OF THE ACT. TH E ASSESSING OFFICER MADE THE DISALLOWANCE ON THE BASIS OF OBSER VATION OF SPECIAL AUDITOR RELEVANT FOR AY 2006-07 AS PER WHIC H WDV OF THE PROPERTY WAS CALCULATED AS ON 01/04/2005 AFTER REDUCING NOTIONAL DEPRECIATION FROM 01/04/1999 TO 31/03/2005 . THE INITIAL DISALLOWANCE OF DEPRECIATION WAS IN AY 2006 -07 AND THEREAFTER EVERY YEAR ON THE BASIS OF REDUCED WDV. 13.2 THE CIT(A) DELETED THE DISALLOWANCE IN AY 200 6-07 AND THE REVENUE ACCEPTED THE ORDER OF CIT(A) ON THI S ISSUE I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 13 AND DID NOT PREFER APPEAL BEFORE ITAT. HOWEVER, IN AY 2007- 08 THIS ISSUE CAME FOR CONSIDERATION BEFORE COORDIN ATE BENCH FOR THE FIRST TIME WHEREIN VIDE ORDER DATED 01/11/2 017 IN ITA NO. 4342/D/12 THE DISALLOWANCE OF DEPRECIATION WAS DELETED AS PER FINDING RECORDED IN PARA 151. FURTHER, THE L D. COUNSEL SUBMITTED THAT THE ASSESSING OFFICER HAS ACCEPTED T HE CLAIM OF DEPRECIATION ON DLF CENTRE BUILDING IN AY 2016-17 A ND NO DISALLOWANCE WAS MADE. 13.3 AS THE ISSUE OF DEPRECIATION IS RECURRING ISS UE BASED ON RECALCULATED WDV AND SAME HAVING BEEN DECI DED BY COORDINATE BENCH IN PRECEDING YEARS, THIS GROUND IS ALSO DECIDED AS PER TABLE AT PARA 19 OF THIS ORDER. 14.1 GROUND NO. 10 OF THE APPEAL IS AGAINST DELETION OF DISALLOWANCE OF EXPENSE TO THE EXTENT OF RS. 44,58, 450/- ON GROUND OF PRIOR PERIOD EXPENSES. THE ASSESSING OFFI CER ON THE BASIS OF TAX AUDIT REPORT NOTED THAT CLAIM OF VARIO US EXPENSES ENUMERATED AT PAGE 79 PARA 11.2 OF THE ASSESSMENT O RDER PERTAINS TO EARLIER YEARS AND HENCE NOT ALLOWABLE I N THE YEAR UNDER REFERENCE. 14.2 THE CIT(A) VIDE FINDING RECORDED AT PARA 18.1 HELD THAT LIABILITY IN RESPECT OF CLAIM OF EXPENSES CRYS TALLIZED DURING THE YEAR UNDER REFERENCE AND MERELY BECAUSE THE EXPENSE RELATES EARLIER YEAR WOULD NOT AFFECT THE A DMISSIBILITY OF THE CLAIM. I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 14 14.3 WE HAVE CONSIDERED THE ORDERS PASSED BY SUB- ORDINATE AUTHORITIES. IT IS NOTED THAT ASSESSING OF FICER HAS PRIMARILY RELIED UPON REPORTING IN TAX AUDIT REPORT AND THERE IS NO FINDING WITH REGARD TO ACTUAL NATURE OF EXPEN SES SO DISALLOWED OR WHETHER THE LIABILITY TOWARDS THE SAM E CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION. ON PE RUSAL OF ASSESSMENT ORDER, IT IS OBSERVED THAT EXPENSES DISA LLOWED ARE OF ROUTINE NATURE FOR EXAMPLE ADVERTISEMENT, INSURA NCE, TRAVELLING AND CONVEYANCE, LEGAL & PROFESSIONAL, SA LES PROMOTION, REPAIR AND MAINTENANCE ETC.. THE GENUINE NESS OF THESE EXPENSES IS NOT IN DISPUTE. FURTHER, THE CIT( A) HAS GIVEN A CLEAR FINDING THAT LIABILITY TO PAY EXPENSES HAS ACCRUED/AROSE DURING THE YEAR AND AS SUCH THE SAME ARE ALLOWABLE. MOREOVER, THESE EXPENSES ARE SETTLED IN THE YEAR UNDER CONSIDERATION. IN THESE CIRCUMSTANCES, WE FIN D NO CONVINCING REASONS TO INTERFERE WITH THE ORDER OF C IT(A) SETTING-ASIDE THE DISALLOWANCE. IN FACT, ON SIMILAR FACTS, THE COORDINATE BENCH HAS CONSIDERED SIMILAR ISSUE AND D ELETED THE DISALLOWANCE IN AY 2006-07 TO 2011-12 AND AS SU CH THIS GROUND IS DECIDED AS PER TABLE GIVEN AT PARA 19 OF THIS ORDER. 15.1 GROUND NO. 11 OF THE APPEALS RELATED TO CLAIM OF EXPENSES TOWARDS RUNNING AND MAINTENANCE OF HELICOP TER AND AIRCRAFT TO THE TUNE OF RS. 23,11,00,367/-. THE ASS ESSING OFFICER WHILE REFERRING TO ASSESSMENT ORDER FOR AY 2010-11 AND 2011-12 MADE THE DISALLOWANCE ON THE GROUND THAT AI RCRAFT AND HELICOPTER HAVE BEEN USED FOR PERSONAL PURPOSES AND I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 15 ACCORDINGLY ESTIMATED AD-HOC DISALLOWANCE @ 66.67% OF THE TOTAL EXPENSES RELATING TO AIRCRAFT AND HELICOPTER INCLUDING DEPRECIATION. 15.2 THE CIT(A) AFTER PLACING RELIANCE ON THE JUDGE MENT OF HONBLE DELHI HIGH COURT IN THE CASE OF DALMIA C EMENT (BHARAT) LTD. 254 ITR 377 HELD THAT ASSESSING OFFIC ER CANNOT QUESTION THE REASONABLENESS OF THE EXPENDITURE INCU RRED FOR THE PURPOSE OF BUSINESS. ON THE BASIS OF DECISION O F HONBLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON AND EN GG. CO 253 ITR 749I, IT WAS FURTHER HELD THAT ASSESSEE IS A PUBLIC LTD. COMPANY AND BEING A DISTINCT ASSESSEE, THERE CANNOT BE A CASE OF DISALLOWANCE OF EXPENSES ON ACCOUNT OF PERS ONAL EXPENSE. IF THE EXPENSES ARE INCURRED FOR THE PURPO SE OF DIRECTOR OR EMPLOYEES OF THE COMPANY, THE SAME ARE ALLOWABLE. 15.3 WE FIND THAT THIS ISSUE CAME FOR UP CONSIDERA TION BEFORE COORDINATE BENCH IN AY 2010-11 AND 2011-12 WHEREIN THE DISALLOWANCE OF EXPENSES RELATING TO AI RCRAFT AND HELICOPTER ON THE GROUND OF PERSONAL EXPENSE WAS DE LETED. THE FINDING OF COORDINATE BENCH IN ITA NO. 4793/D/15 RE LATING TO AY 2010-11 IS REPRODUCED HEREUNDER: 4. GROUND NUMBER 16 AND 17 OF THE APPEAL IS WITH RE SPECT TO THE DISALLOWANCE OF EXPENSES NOT INCURRED WHOLLY AN D EXCLUSIVELY FOR BUSINESS PURPOSES AMOUNTING TO 49,629,551 AND OPERATIONAL EXPENDITURE OF 387,449,073/. THIS ISSUE HAS BEEN RAISED BY THE LEARNED ASSESSING OFFICER WH EREIN HE DISALLOWED THE EXPENDITURE OF THE ABOVE SUM CONSIDE RING THE I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 16 SAME AS A PERSONAL IN NATURE AND DISALLOWED 66.6% O F THE EXPENDITURE AMOUNTING TO 387,449,073 ON THE MAINTENANCE OF THE AIRCRAFT AND HELICOPTER OBSERVING THAT ASSES SEE HAS NOT PROVED BUSINESS EXPEDIENCY OF THE EXPENDITURE AND T HOSE EXPENDITURE APPEAL TO BE PERSONAL IN NATURE. THE LE ARNED CIT A HAS DEALT WITH THIS ISSUE AT PARA NUMBER 23 OF HI S ORDER AT PAGE NUMBER 177 196 NOTING THAT ASSESSEE IS ENGAG ED IN THE BUSINESS OF DEVELOPMENT OF REAL ESTATE AND IT IS ON E OF THE LARGEST REALISTIC DEVELOPER IN THE FIELD OF COLONIZ ATION AND TOWNSHIP DEVELOPMENTS ALL OVER THE COUNTRY THE PROC UREMENT OF THE VARIOUS MATERIAL IS SOURCE FROM THE VARIOUS COU NTRIES ACROSS THE GLOBE. THE COMPANY TAKES TECHNICAL ASSISTANCE/KNOW-HOW FROM THE REPEATED TECHNICAL CON SULTANTS GLOBALLY. THE COMPANY REQUIRES TWO FLIGHTS DIRECTOR S, SENIOR EXECUTIVES, INGENIOUS AND CONSULTANTS BOTH ON ITS R OLLS AND HIRED IN INDIA AND ABROAD WHICH VARIOUS PROJECT SIT ES LOCATED ALL OVER THE COUNTRY. DUE TO THE FREQUENCY OF SUCH TRANSPORTATION THE COMPANY DEEMED IT FIT TO ACQUIRE THE AIRCRAFT AND HELICOPTER RATHER THAN ONLY HIRE SUCH SERVICES. THEREFORE THE EXPENDITURE ON MAINTENANCE AND OPERATION OF THE HELICOPTER AND AIRCRAFT AND CHARTERING OF AIRCRAFT AND OTHER ROUTINE EXPENDITURE WERE EXPENDED FOR THE PURPOSES OF THE BUSINESS. IT WAS FURTHER HELD BY HIM THAT ASSESSEE IS A PUBLIC LIMITED COMPANIES ARE DISTINCT ASSESSABLE ENTITY AS PER THE DEFINITION OF PERSON U/S TWO (31) OF THE ACT THEREF ORE IT CANNOT BE STATED THAT THE EXPENDITURE IDENTIFIED AS EXPEND ED BY THE DIRECTORS AND OTHER EMPLOYEES OF THE COMPANY IS PER SONAL IN NATURE BECAUSE OF THE LIMITED COMPANY IS AN IN ANIM ATED PERSON AND THERE CANNOT BE ANYTHING PERSONAL ABOUT SUCH AN ENTITY. HE FURTHER FOLLOWED THE DECISION IN CASE OF SAYAJI IRON I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 17 AND ENGINEERING CO LTD 253 ITR 749 AND DELETED THE ADDITION/DISALLOWANCE. THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT SHOW US ANY REASON TO STAT E THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON SUCH TRAVEL EXPENDITURE OF AIRCRAFT AND HELICOPTER CAN BE CONSI DERED AS A PERSONAL EXPENDITURE OF A COMPANY. THERE WERE NO CO NTRARY DECISION IS POINTED OUT BEFORE US. IN VIEW OF THIS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) IN DELETING THE ABOVE DISALLOWANCE. ACCORDINGLY GROUND NUMBER 16 AN D 17 OF THE APPEAL OF THE LEARNED ASSESSING OFFICER IS DISM ISSED. AS THE BASIS OF DISALLOWANCE IN THE PRESENT APPEAL IS SAME AS THAT IN AY 2010-11 AND RESPECTFULLY FOLLOWING THE O RDER OF COORDINATE BENCH, THIS GROUND IS DECIDED AS PER TAB LE AT PARA 19 OF THIS ORDER. 16.1 GROUND NO. 12 IS AGAINST DELETION OF ADDITION OF INTEREST OF RS. 1,59,02,000/- BY THE CIT(A). THE AS SESSING OFFICER VIDE PARA 13.3 AND 13.4 OF THE ASSESSMENT O RDER HAS OBSERVED THAT RATE OF INTEREST CHARGED BY THE ASSES SEE COMPANY ON LOANS ADVANCED TO GROUP CONCERNS IS LESS THAN THAT PAID TO FINANCIAL INSTITUTIONS AND BANKS. THE ASSESSING OFFICER WORKED OUT THE INTEREST SHORT CHARGED FROM THE GROUP CONCERNS ON PROPORTIONATE BASIS AND ACCORDINGLY MAD E ADDITION IN THE HANDS OF THE ASSESSEE. 16.2 THE ASSESSEE SUCCEEDED BEFORE CIT(A) WHO DELE TED THE ADDITION AS PER FINDING RECORD AT PARA 20.1 OF THE IMPUGNED ORDER. THE CIT(A) RELIED UPON THE DECISION S OF APEX I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 18 COURT IN THE CASE OF S.A. BUILDERS 288 ITR 1 AND M/ S. TAPARIA TOOLS 372 ITR 605 (SC) WHILE HOLDING THAT ASSESSING OFFICER WAS NOT EMPOWERED TO MAKE ADDITION OF NOTIONAL INTE REST. 16.3 WE HAVE CONSIDERED THE ASSESSMENT ORDER AND ORDER PASSED BY CIT(A). THE ISSUE UNDER CONSIDERATI ON IS ADDITION OF INTEREST OVER AND ABOVE WHAT HAS BEEN C HARGED BY THE ASSESSEE ON LOANS GIVEN TO GROUP CONCERNS ON TH E GROUND THAT THE INTEREST SO CHARGED IS LESS THAN THAT CHAR GED BY THE BANKS/FINANCIAL INSTITUTIONS ON LOANS TAKEN BY THE ASSESSEE. WE FIND THAT THERE IS NO PROVISION IN THE INCOME TA X ACT WHICH WARRANTS ADDITION OF INTEREST ON NOTIONAL BASIS AND AS SUCH THE ORDER OF CIT(A) DELETING THE ADDITION IS WELL R EASONED. IN FACT, IT IS NOT THE CASE OF THE ASSESSING OFFICE TH AT MONEY BORROWED FROM THE BANKS AND ITS SUBSEQUENT UTILIZAT ION IS NOT FOR THE PURPOSE OF BUSINESS AND AS SUCH WE SEE NO R ATIONALE BEHIND CHARGING OF ADDITIONAL INTEREST ON NOTIONAL BASIS ON MONEY ADVANCED TO GROUP CONCERNS. WE FURTHER FIND T HAT THIS VERY ISSUE HAS CAME UP FOR CONSIDERATION BEFORE COO RDINATE BENCH IN ASSESSEES OWN CASE FOR AY 2010-11 IN ITA NO. 4793/D/15 WHEREIN THE ADDITION WAS DELETED AS PER F OLLOWING FINDING: 26. THE ISSUE BEFORE US THAT THE LEARNED ASSESSING OFFICER HAS MADE THE ADDITION OF 693,100,000 ON ACCOUNT OF SHORT CHARGING OF INTEREST FROM THE SUBSIDIARIES AND FURT HER DISALLOWED A SUM OF RS 455,15,030 ON ACCOUNT OF NOT CHARGING OF INTEREST ON LOANS GIVEN TO RELATED PARTIES FOR B USINESS PURPOSES. THE MAIN REASON FOR THE DISALLOWANCES THA T THE I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 19 ASSESSEE HAS GIVEN FUNDS BORROWED AT A HIGHER RATES FROM FINANCIAL INSTITUTION AND BANKS TO GROUP ENTITIES A T LOWER RATES WHICH IS DISTORTING THE CORRECT TAXABLE PROFITS OF THE COMPANY. THEREFORE THE LEARNED ASSESSING OFFICER COMPUTED TH E DISALLOWANCE OF 69.31 CRORES. THE LEARNED CIT APPEAL NOTED THAT THE ORDER OF THE ASSESSMENT PASSED BY THE ASSE SSING OFFICER WHEREIN IT HAS BEEN HELD THAT THE COMPANY I S CLOSE TO ITS SUBSIDIARIES AT THE RATE OF 6.5% IN MOST OF THE CASES AND 12 14% IN CASE OF SOME OF THE ADVANCES. THE COMPANY HAS TAKEN LOAN FROM THE BANKS AND OTHER FINANCIAL INSTI TUTION WHERE THE WEIGHTED AVERAGE INTEREST COST IS 9 9.5 % AND THEREFORE THE DISALLOWANCE HAS BEEN MADE. HE DELETE D THE DISALLOWANCE HOLDING THAT IN THE INSTANT CASE THE L EARNED ASSESSING OFFICER HAS NOT RAISED THE QUESTION REGAR DING THE CAPITAL BORROWED FOR THE PURPOSES OF THE BUSINESS. THE ONLY OBJECTION IS THAT THE BORROWING IS AT THE RATE HIGH ER THAN THE AMOUNT OF INTEREST CHARGED FROM ITS SUBSIDIARIES. H E DELETED THE DISALLOWANCE RELYING ON THE DECISION OF THE HON OURABLE SUPREME COURT IN CASE OF SA BUILDERS (288 ITR 1) AN D M/S TAPARIA TOOLS V JCIT WHEREIN HE NOTED THAT THE HONO URABLE SUPREME COURT HAS OBSERVED THAT WHILE EXAMINING THE ALLOWABILITY OF DEDUCTION OF THE INTEREST THE AO IS REQUIRED TO CONSIDER THE GENUINENESS OF THE BUSINESS BORROWING AND THAT THE BORROWING WAS FOR THE PURPOSES OF THE BUSINESS AND NOT AN ILLUSIONARY AND COLOURABLE TRANSACTION. ONCE THE GE NUINENESS OF THE BORROWING IS PROVED AND THE INTEREST IS PAID ON THE BORROWING IT IS NOT WITHIN THE POWERS OF THE LEARNE D ASSESSING OFFICER DISALLOWED THE DEDUCTION EITHER ON THE GROU ND THAT THE RATE OF INTEREST IS UNREASONABLY HIGH OF THAT THE A SSESSEE HAD HIMSELF CHARGED THE LOWER RATE OF INTEREST ON THE M ONEY WHICH I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 20 IT HAS ADVANCED. THE LEARNED DEPARTMENTAL REPRESENT ATIVE COULD NOT CONTROVERT THE ABOVE FINDING OF THE LEARN ED CIT A. IN VIEW OF THIS, WE CONFIRM THE ORDER OF THE LEARNE D CIT CAPITAL AND DISMISS GROUND NUMBER 18 AND 19OF THE A PPEAL. RESPECTFULLY FOLLOWING THE ORDER OF COORDINATE BENC H AND TAKING THE CONSISTENT VIEW, WE UPHOLD THE ORDER OF CIT(A) DELETING THE ADDITION. THE GROUND NO. 12 IS DECIDED AS TABLE AT PARA 19 OF THIS ORDER. 17.1 GROUND NO. 14 IS DIRECTED AGAINST DELETION OF ADDITION OF RS. 9,52,53,136/- MADE ON ACCOUNT OF IN COME FROM SALE OF CARBON CREDITS BY TREATING THE SAME IS REVENUE RECEIPT. THE ASSESSEE HAS CLAIMED THAT CARBON CREDI TS ARE IN THE NATURE OF CAPITAL RECEIPT NOT TAXABLE UNDER THE I.T. ACT. 17.2 THE CIT(A) DELETED THE ADDITION BY PLACING RE LIANCE ON THE DECISION OF HONBLE ANDHRA PRADESH HIGH COUR T IN THE CASE OF CIT V. MY HOME POWER LTD. 365 ITR 82 WHEREI N IT WAS HELD THE INCOME FROM SALE OF CARBON CREDITS IS A CA PITAL RECEIPT. THE CIT(A) FURTHER MADE REFERENCE TO DECIS IONS OF COORDINATE BENCHES OF ITAT. 17.3 WE FIND THAT IN ASSESSEES OWN CASE FOR AY 20 11-12 IN ITA NO. 4794/D/15, THE COORDINATE BENCH HAS DECI DED THIS ISSUE IN FAVOUR OF ASSESSEE ON THE BASIS OF DECISIO N OF HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF MY HOME PO WER LTD. (SUPRA). THE RELEVANT FINDING IS REPRODUCED HE REUNDER: I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 21 15. GROUND NUMBER 19 OF THE APPEAL IS WITH RESPECT TO THE ADDITION ON ACCOUNT OF CARBON CREDITS AMOUNTING TO RS. 122,34,040/. THE ASSESSEE HAS SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE HONOURABLE ANDHRA PRADESH HIGH COURT IN COMMISS IONER OF INCOME TAX VERSUS MY HOME POWER LTD 365 ITR 82. ASSESSEE HAS CLAIMED THE ABOVE SUM AS A CAPITAL REC EIPT WHEREAS THE LEARNED ASSESSING OFFICER HAS MADE THE ADDITION ON THE GROUND THAT THE DECISION OF THE COORDINATE B ENCH IN CASE OF MY HOME POWER LTD DATED 2NOVEMBER 2012 HAS NOT B EEN ACCEPTED BY THE REVENUE AND IS FURTHER CHALLENGED. NOW WE FIND THAT ABOVE DECISION HAS BEEN CONFIRMED BY THE HONOURABLE ANDHRA PRADESH HIGH COURT IN [2014] 46 TAXMANN.COM 314 (ANDHRA PRADESH)/[2014] 225TAXMAN 8 (ANDHRA PRADESH) (MAG.)/ [2014] 365 ITR 82 (ANDHRA PRADESH)/[2015]276 CTR 92 (ANDHRA PRADESH WHEREIN I T HAS BEEN HELD THAT:- 3. WE HAVE CONSIDERED THE AFORESAID SUBMISSION AND WE ARE UNABLE TO ACCEPT THE SAME, AS THE LEARNED TRIBUNAL HAS FACTUALLY FOUND THAT 'CARBON CREDIT IS NOT AN OFF S HOOT OF BUSINESS BUT AN OFFSHOOT OF ENVIRONMENTAL CONCERNS. NO ASSET IS GENERATED IN THE COURSE OF BUSINESS BUT IT IS GE NERATED DUE TO ENVIRONMENTAL CONCERNS.' WE AGREE WITH THIS FACT UAL ANALYSIS AS THE ASSESSEE IS CARRYING ON THE BUSINES S OF POWER GENERATION. THE CARBON CREDIT IS NOT EVEN DIRECTLY LINKED WITH POWER GENERATION. ON THE SALE OF EXCESS CARBON CRED ITS THE INCOME WAS RECEIVED AND HENCE AS CORRECTLY HELD BY THE TRIBUNAL IT IS CAPITAL RECEIPT AND IT CANNOT BE BUS INESS RECEIPT OR INCOME. IN THE CIRCUMSTANCES, WE DO NOT FIND ANY ELEMENT OF LAW IN THIS APPEAL. I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 22 THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT C ONTROVERT THE ABOVE DECISION AND THEREFORE RESPECTFULLY FOLLO WING THE DECISION OF THE HONOURABLE ANDHRA PRADESH HIGH COUR T WE CONFIRM THE ORDER OF THE LEARNED CIT A IN DELETIN G THE ADDITION OF RS. 122,34,040 ON ACCOUNT OF CARBON CRE DIT RECEIPT HOLDING THE SAME TO BE A CAPITAL RECEIPT. ACCORDING LY GROUND NUMBER 19 OF THE APPEAL IS DISMISSED. IN THE LIGHT OF THE DECISION OF HONBLE ANDHRA PRAD ESH HIGH COURT AND COORDINATE BENCH, WE FIND NO REASONS TO D EVIATE FROM VIEW TAKEN BY THE CIT(A) AND THE ORDER OF CIT( A) DELETING THE ADDITION IS UPHELD. ACCORDINGLY, THIS GROUND IS ALSO DECIDED AS PER TABLE AT PARA 19 OF THIS ORDER. COMING TO THE CROSS OBJECTION OF THE ASSESSEE (CO N O.6 OF 2021) 18.1 THE SOLE ISSUE INVOLVED IN THE CO IS ADDITION OF RS. 6,80,874/- BEING NOTIONAL RENT IN RESPECT OF KIOSKS LET OUT TO TENANTS. THE ASSESSEE IS NOT RECOGNIZING THE RENTAL IN ITS HAND ON THE BASIS OF MUTUAL ARRANGEMENT WITH MAINTENANCE COMPANY M/S. DLF SERVICES LTD. WHICH IS PROVIDING MAINTENANCE AND UPKEEP SERVICES IN THE MALL. THE CL AIM OF THE ASSESSEE IS THAT THE INCOME DID NOT ACCRUE OR A RISE IN ITS HANDS AND SAME HAS DULY BEEN TAXED IN THE HANDS OF THE ACTUAL RECIPIENT M/S. DLF SERVICES LTD. 18.2 HOWEVER, THE AO AND CIT(A) DISAGREED WITH THE CONTENTION OF THE ASSESSEE AND CONSIDERED ADDITION ON THE I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 23 GROUND THAT SINCE THE SECURITY DEPOSIT FROM THESE K IOSKS HAS BEEN RECEIVED BY THE ASSESSEE, THE RENTAL INCOME AR ISING FROM THE SAME IS TAXABLE IN ITS HANDS ONLY. 18.3 WE FIND THAT THIS VERY ISSUE CAME UP BEFORE T HE COORDINATE BENCH WHILE DECIDING THE APPEAL FOR AY 2 007-08 IN ITA NO. 3846/D/12) WHEREIN IT WAS HELD THAT MUTUAL ARRANGEMENT CREATED AN OVERRIDING TITLE RESULTING I N DIVERSION OF RENTAL INCOME IN FAVOUR OF M/S. DLF SERVICES LTD . AND AS SUCH THE SAME CANNOT BE TAXED AGAIN IN THE HANDS OF THE ASSESSEE. 45. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE V IEW THAT THE APPELLANT ASSIGNED DLF SERVICES LTD. RIGHT TO R ECOVER LEASE RENT FOR MAINTENANCE AND UPKEEP SERVICES OF M ALL AND AS SUCH THERE WAS A GENUINE BUSINESS ARRANGEMEN T BETWEEN THE PARTIES. IF THE LEASE INCOME IS CONSIDE RED AS CHARGEABLE TO TAX IN THE CASE OF APPELLANT, THE APP ELLANT MAY BE ELIGIBLE FOR CLAIM OF EXPENSES ON ACCOUNT OF MAINTENANCE OF MALL WHICH WAS OWNED AND RUN BY THE APPELLANT AND AS SUCH APPELLANT HAS NOT DERIVED ANY TAX BENEFIT ON THE BASIS OF SUCH ARRANGEMENT AND FOR DIVERSION OF LEASE RENT. IT IS FURTHER RELEVANT TO TAKE NOTE OF THE FACT THAT SUCH LEASE RENT HAS BEEN SUBJECTED TO TAX IN CASE OF M/S. DLF SERVICES LTD. 46. AFTER CONSIDERING THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THERE IS NO JUSTIFICATION FOR ADDITION OF RS. 12,60,000/- AS SAME WAS TOWARDS BUSINESS OBLIGATION I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 24 AND FOR SPECIFIC SERVICES RENDERED BY M/S.DLF SERVI CES LTD. AND ACCORDINGLY THE IMPUGNED DISALLOWANCE IS DIRECTED TO BE DELETED. THE ABOVE DECISION OF COORDINATE BENCH HAS BEEN FOL LOWED AND APPLIED IN APPEALS FOR AY 2008-09 TO 2011-12. I N ABSENCE OF ANY DISTINGUISHING FACT AND RESPECTFULLY FOLLOWI NG THE DECISION OF COORDINATE BENCH, WE DIRECT THE ASSESSI NG OFFICE TO DELETE THE ADDITION AND THE CROSS OBJECTION FILED B Y THE ASSESSEE IS ALLOWED. 19. IN VIEW OF DISCUSSION IN AFORESAID PARAS IT IS CLE AR THAT THE MAJORITY OF THE GROUNDS RAISED IN THESE APPEALS ARE DECIDED BY THE COORDINATE BENCH IN APPEALS RIGHT FR OM AY 2006-07 TILL AY 2011-12AND IN ABSENCE OF ANY CHANGE OF FACTS AND RESPECTFULLY FOLLOWING THE DECISIONS OF COORDIN ATE BENCH WHICH IS BINDING UPON US, THE VARIOUS GROUNDS WHICH HAVE BEEN TABULATED HEREINBELOW IS BASED ON ORDER OF COO RDINATE BENCH FOR AY 2008-09 AND 2011-12 WHICH IS A MATTER OF PRECEDENCE, WE RESPECTFULLY FOLLOW. GR NO. PARTICULARS OF THE GROUND ISSUE COVERED BY ITA ORDER DTD. 27/5/2019 FOR A.Y. 2008-09 ISSUE ON IDENTICAL FACTS AND CIRCUMSTANCES DEALT WITH IN ORDER DATED 29/09/2020 IN ITA NO. 4187 & 4793/D/15 FOR A.Y. 2010- 11 ISSUE ON IDENTICAL FACTS AND CIRCUMSTANCES DEALT WITH IN ORDER DATED 29/09/2020 IN ITA NO. 4794/D/15 FOR A.Y. 2011- 12 OUR DECISION ON GROUNDS FOLLOWING THE ORDER OF COORDINATE BENCH IN PRECEDING YEARS I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 25 APPEAL OF THE REVENUE (ITA NO. 5941/DEL/17) 1 DISALLOWANCE DELETED ON ACCOUNT OF REVENUE RECOGNITION UNDER POCM PARA NUMBER 81- 87 OF THE ORDER PARA NUMBER 9 OF THE ORDER PARA NUMBER 13 OF THE ORDER DISMISSED 2 HOLDING THAT INTEREST EXPENDITURE IS CAPITAL IN NATURE WHICH CIT APPEAL ALLOWED IN FAVOUR OF THE ASSESSE HOLDING IT TO BE REVENUE IN NATURE PARAGRAPH 94-98 COVERS THE ISSUE IN FAVOUR OF THE ASSESSEE PARANUMBER 10 PARA NUMBER 13 OF THE ORDER DISMISSED 3 DISALLOWANCE ON ACCOUNT OF BROKERAGE AND COMMISSION EXPENDITURE DELETED B THE LEARNED CIT-A DECIDED IN FAVOUR OF THE ASSESSE AS PER PARAGRAPH NUMBER 99- 103 DECIDED IN FAVOUR OF THE ASSESSE AS PER PARAGRAPH NUMBER 11 OF THE ORDER PARA NUMBER 13 OF THE ORDER DISMISSED 4 DELETION OF DISALLOWANCE ON ACCOUNT OF NET INTEREST FREE SECURITY DEPOSIT COVERED IN FAVOUR OF THE ASSESSEE AS PER PARAGRAPH NUMBER 112-115 COVERED IN FAVOUR OF THE ASSESSEE AS PER PARAGRAPH NUMBER 13 PARA NUMBER 13 OF THE ORDER DISMISSED I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 26 5 DELETION OF DISALLOWANCE ON ACCOUNT OF NON-ALLOCATION OF OVERHEAD TO GROUP COMPANIES DECIDED IN FAVOUR OF THE ASSESSE BY PARAGRAPH NUMBER 125-130 DECIDED BY PARAGRAPH NUMBER 15 IN FAVOUR OF THE ASSESSE. PARA NUMBER 13 OF THE ORDER DISMISSED 7 DELETION DISALLOWANCE/ RECLASSIFICATION OF INCOME OF INCOME FROM HOUSE PROPERTY TO INCOME FROM BUSINESS AND PROFESSION DECIDED IN FAVOUR OF ASSESSE AS PER PARAGRAPH NUMBER 155-160 -- PARA NUMBER 13 OF THE ORDER DISMISSED 8 DELETION OF ADDITION ON ACCOUNT OF NOTIONAL RENT/ADDITIONAL ANNUAL LETTING VALE IN RESPECT OF THE VACANT AND LEAST OUT PREMISES. DECIDED IN FAVOUR OF THE ASSESSE AS PER PARAGRAPH NUMBER 161-165 DECIDED IN FAVOUR OF THE ASSESSE AS PER PARAGRAPH NUMBER 20 OF THE ORDER PARA NUMBER 13 OF THE ORDER DISMISSED 9 DELETION OF DISALLOWANCE OF DEPRECIATION ON DLF CENTRE BUILDING DECIDED IN FAVOUR OF THE ASSESSE BY PARAGRAPH NUMBER 166-170 DECIDED IN FAVOUR OF THE ASSESSE AS PER PARAGRAPH NUMBER 21 PARA NUMBER 13 OF THE ORDER DISMISSED I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 27 10 DELETION OF DISALLOWANCE ON ACCOUNT OF PRIOR PERIOD EXPENDITURE DECIDED IN FAVOUR OF THE ASSESSE AS PER PARAGRAPH NUMBER 42- 45 DECIDED IN FAVOUR OF THE ASSESSE IS FOR PARAGRAPH NUMBER 22 PARA NUMBER 13 OF THE ORDER DISMISSED 11 DISALLOWANCE OF EXPENSES FOR OPERATION AND MAINTENANCE OF HELICOPTER AND AIRCRAFT EXPENDITURE NOT BEEN FULLY AND EXCLUSIVELY INCURRED FOR THE PURPOSES OF THE BUSINESS -- ALLOWED IN FAVOUR OF THE ASSESSE S PER PARAGRAPH NUMBER 24 DEALING WITH GROUND NUMBER 16 AND 17 PARA NUMBER 13 OF THE ORDER DISMISSED 12 DELETION OF ADDITION ON ACCOUNT OF NOTIONAL INTEREST INCOME FOR INTEREST INCOME SHORT BOOK. -- -- COVERED IN FAVOUR OF THE ASSESSEE BY PARAGRAPH NUMBER 25-26 OF THE ORDER.25-26 OF THE ORDER. PARA NUMBER 13 OF THE ORDER DISMISSED 14 DELETION OF ADDITION ON ACCOUNT OF CARBON CREDITS -- -- PARA NUMBER 15 OF THE ORDER DISMISSED CROSS OBJECTION OF THE ASSESSEE (CO NO. 6 OF 2021) 1 ADDITION OF NOTIONAL RENT ON KIOSKS DECIDED IN FAVOUR OF THE ASSESSE AS PER PARAGRAPH COVERED IN FAVOUR OF THE ASSESSEE BY PARAGRAPH NUMBER 32 OF COVERED IN FAVOUR OF THE ASSESSEE BY PARAGRAPH NUMBER 7-10 ALLOWED I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 28 NUMBER 21- 24 THE ORDER. OF THE ORDER. 20. HOWEVER, WE DEEM IT FIT TO ADJUDICATE IN DETAIL THE GROUNDS FOR WHICH SPECIFIC ARGUMENTS WERE ADVANCED BY THE BOTH THE SIDES INCLUDING THE GROUNDS WHICH ARE NOT DIRECTLY COVERED BY THE ORDERS OF COORDINATE BENCH. 21.1 GROUND NO. 6 OF THE REVENUES APPEAL IS AGAINST DELETION OF DISALLOWANCE OF RS. 2,77,16,42,129/- U/ S 14A READ WITH RULE 8D OF THE INCOME TAX ACT, 1961. THE ASSES SEE IN ITS RETURN OF INCOME MADE SUO MOTO DISALLOWANCE U/S 14A TO THE EXTENT OF RS. 6,61,871/-. HOWEVER, THE ASSESSING OF FICER ENHANCED DISALLOWANCE U/S 14A ON THE BASIS OF RULE 8D(2)(II) AND (III) WITHOUT MAKING ANY COMMENT ON SUO MOTO DISALLOWANCE BY THE ASSESSEE. AGGRIEVED BY THE DISA LLOWANCE, THE ASSESSEE CHALLENGED THE SAME BEFORE CIT(A) WHIC H DELETED THE DISALLOWANCE ON THE GROUND OF NON-RECORDING OF SATISFACTION IN TERMS OF SECTION 14A(2) OF THE ACT. THE CIT(A) FURTHER OBSERVED THAT ASSESSEE WAS HAVING SUFFICIEN T FUNDS OF ITS OWN WHICH ARE USED FOR MAKING INVESTMENT. 21.2 AT THE TIME HEARING, THE LD DR APPEARING FOR THE REVENUE SUBMITTED THAT ASSESSING OFFICER HAS RECORD ED REQUISITE SATISFACTION BEFORE INVOKING RULE 8D AND AS SUCH THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE ENTIRE DIS ALLOWANCE ON TECHNICAL GROUND. IT WAS FURTHER ARGUED THAT ASSESS EE COMPANY HAS MADE HUGE INVESTMENT IN SHARES, MUTUAL FUNDS I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 29 AND PARTNERSHIP FIRMS AND MANAGING OF SUCH INVESTME NTS REQUIRES INCURRING OF ADMINISTRATIVE AND MANAGEMENT COST WHICH ARE INADMISSIBLE AND NEEDS TO BE DISALLOWED U /S 14A OF THE ACT. 21.3 THE LD. AR ON THE OTHER HAND SUPPORTED THE OR DER OF CIT(A) AND CONTENDED THAT IDENTICAL ISSUE HAS BE EN DECIDED IN AY 2010-11 AND 2011-12 WHEREIN THE ITAT WAS PLEA SED TO DELETE THE DISALLOWANCE ON ACCOUNT OF FAILURE TO RE CORD SATISFACTION. IT WAS HIGHLIGHTED THAT ORDER OF ASSE SSING OFFICER IN THE YEAR UNDER REFERENCE IS VERBATIM SAME AS THA T IN AY 2010-11 AND 2011-12. HOWEVER, THE COUNSEL IN HIS AL TERNATE SUBMISSION ARGUED THAT THE COMPUTATION OF DISALLOWA NCE UNDER RULE 8D IS INCORRECT AND ARBITRARY AS THE ENT IRE INVESTMENT IN SHARES, MUTUAL FUND AND PARTNERSHIP F IRM IS OUT OF OWN INTEREST FREE FUNDS AND THERE IS NO CASE OF CLAIM OF ANY DIRECT OR INDIRECT INTEREST EXPENSES IN RELATIO N TO EARNING OF TAX FREE INCOME. IT WAS FURTHER SUBMITTED THAT D ISALLOWANCE, IF ANY, IS REQUIRED TO BE MADE ONLY UNDER RULE 8D(2 )(III) I.E. 0.5% OF AVERAGE ANNUAL INVESTMENT YIELDING TAX FREE INCOME. THE WORKING OF PROPOSED DISALLOWANCE UNDER 8D WAS P LACED ON RECORD. HOWEVER, IT WAS CONTENDED THAT EVEN FOR MAKING DISALLOWANCE UNDER RULE 8D(2)(III), THE ASSESSING O FFICER IS REQUIRED TO GIVE FINDING THAT DISALLOWANCE CONSIDER ED BY THE ASSESSEE IS NOT CORRECT. 21.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GONE THROUGH THE MATERIAL ON RECORD. AS NOTED ABOVE, THE ASSESSEE I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 30 HAS MADE SUO MOTO DISALLOWANCE OF RS. 6,61,871/- BE ING SALARY TO AN EMPLOYEE LOOKING AFTER THE WORK OF INV ESTMENT WHICH ARE MAINLY CONTINUING FROM EARLIER YEARS. THE ASSESSING OFFICER MADE ENHANCED DISALLOWANCE U/S 14A AFTER IN VOKING RULE 8D(2)(II) AND (III). THE CIT(A) DELETED THE DI SALLOWANCE U/S 14A BY HOLDING AS UNDER: 13.4 I FIND THAT SECTION 14A(2) PROVIDES THAT THE ASSESSING OFFICER SHALL DETERMINE THE AMOUNT OF EXPENDITURE I NCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHO D AS MAY BE PRESCRIBED, IF THE ASSESSING OFFICER, HAVING REG ARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH COR RECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPEND ITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT AND SECTION 14A(3) PROVIDES THAT, 'T HE PROVISIONS OF SUB SECTION (2) SHALL APPLY IN RELATI ON TO A CASE WHERE AN ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BE EN INCURRED BY HIM IN RELATION TO INCOME WHICH DOES NO T FORM PART OF THE TOTAL INCOME UNDER THIS ACT'. WHILE A LOT OF EMPHASIS IS PLACED BY THE COUNSEL ON WORDINGS OF SECTION 14A(2) WHICH REFER TO THE NEED OF' ASSESSING OFFICER'S SATISFACT ION TO THE EFFECT THAT THE CLAIM, MADE BY THE ASSESSEE IS INCO RRECT, IT SIMPLY OVERLOOKS THE PROVISIONS OF SECTION 14A(3) W HICH STATE THAT A DISALLOWANCE U/S 14A(2) CAN ALSO BE MADE IN A CASE IN WHICH ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED FOR EARNING THE TAX EXEMPT INCOME. THEREFORE, A PLA IN READING OF THE STATUTORY, PROVISIONS OF SECTION 14A(2) AND (3) SHOWS THAT WHEN ASSESSEE OFFERS A DISALLOWANCE U/S 14A, T HE PROVISIONS OF SECTION 14A(2) READ WITH RULE 8D CANN OT BE I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 31 INVOKED UNLESS THE ASSESSING OFFICER IS SATISFIED A BOUT INCORRECTNESS OF THE DISALLOWANCE SO OFFERED, B T WHEN ASSESSEE DOES NOT OFFER ANY DISALLOWANCE U/S. 14A O N HIS OWN, THE PROVISIONS OF SECTION 14A(2) READ WITH RUL E 8D CAN BE INVOKED WITHOUT THERE BEING ANY NEED TO EXPRESS SAT ISFACTION ABOUT THE INCORRECTNESS OF SUCH A CLAIM. 13.5 IN THE INSTANT CASE, THE APPELLANT HAD MADE OF ITS OWN DISALLOWANCE OF RS. 6,61,871/- AND THE ASSESSING OF FICER HAS NOT RECORDED THE DISSATISFACTION ABOUT THE DISALLOW ANCE SO MADE BY THE APPELLANT. THE PLAIN READING OF THE STA TUTORY PROVISIONS OF SECTION 14A(2). AND 14A(3) SHOWS THAT WHEN THE ASSESSEE OFFERED THE DISALLOWANCE U/S 14A, THE PROV ISIONS OF SECTION 14A(2).READ WITH RULE 8D CANNOT BE INVOKED UNLESS THE ASSESSING OFFICER IS DISSATISFIED ABOUT THE COR RECTNESS OF THE DISALLOWANCE SO OFFERED. IN VIEW OF THIS, THE A DDITION ON THIS ACCOUNT IS RESTRICTED TO RS.6,61,871/- UNDER R ULES 8D(2) (II)&(III) READ WITH SECTION 14A OF THE ACT. FROM THE ORDER OF CIT(A), IT EMERGES THAT SATISFACT ION RECORDED BY THE ASSESSING OFFICER BEFORE APPLYING RULE 8D DI D NOT FIND FAVOUR WITH CIT(A) AND THE DISALLOWANCE WAS VITIATE D AT THE THRESHOLD. IT IS RELEVANT TO NOTE THAT HONBLE SUPR EME COURT IN THE CASE OF MAXOPP INVESTMENT LTD. V. CIT [2018] 402 ITR 640 (SC) HAS THRUSTED UPON RECORDING OF VALID SATISFACTION IN TERMS OF SECTION 14A(2) AND AS SUCH THE RECORDING SATISFACTION IS SINE QUA NON BEFORE PROCE EDING TO COMPUTE DISALLOWANCE UNDER 8D. ON CAREFUL PERUSAL OF ASSESSMENT ORDER, WE FIND THA T ASSESSING OFFICER HAS NOWHERE RECORDED ITS DISSATIS FACTION I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 32 REGARDING SUO MOTO DISALLOWANCE MADE BY THE ASSESSE E AND THE ENTIRE DISCUSSION REVOLVES AROUND QUANTUM OF IN VESTMENT APPEARING IN THE BALANCE SHEET. MOREOVER, THE ASSES SING OFFICER HAS OVERLOOKED THE AVAILABILITY OF INTEREST FREE OWN FUNDS AND SO-CALLED OBSERVATION REGARDING CLAIM OF INTEREST EXPENSES IS UNSUBSTANTIATED AND NOT BASED ON BOOKS OF ACCOUNT OF THE ASSESSEE. THE CIT(A) HAS GIVEN A SPE CIFIC FINDING THAT NO PART OF INTEREST BEARING FUNDS WERE USED FOR MAKING INVESTMENT YIELDING EXEMPT INCOME. IN THESE CIRCUMSTANCES, WE ARE CONSTRAINED TO OBSERVE THE SA TISFACTION RECORDED BY THE ASSESSING OFFICER FAILS TO PASS THE TEST LAID DOWN BY SUPREME COURT AND DOES NOT PROVIDE VALID BA SIS FOR INVOCATION OF RULE 8D. WE FIND THAT IDENTICAL ISSUE CAME UP FOR CONSIDERAT ION BEFORE COORDINATE BENCH IN THE CASE OF ASSESSEE FOR IMMEDI ATELY PRECEDING AY 2011-12 (ITA NO. 4794/D/15) AND AY 2010- 11 (ITA NO.4793/D/15) WHEREIN THE DISALLOWANCE WAS DELETED BY OBSERVING THAT SATISFACTION RECORDED BY THE ASSE SSING OFFICER IS INVALID. THE SATISFACTION RECORDED IN PR ESENT CASE IS AD-VERBATIM THAT IN AY 2010-11 AND 2011-12. THE FI NDING OF COORDINATE BENCH IN AY 2010-11 IS REPRODUCED HEREUN DER FOR READY REFERENCE: 18. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENT ION AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. APPARE NTLY IN THIS CASE THE LEARNED ASSESSING OFFICER HAS NOT RECORDED THE SATISFACTION STATING THAT WHY THE CLAIM OF THE ASSE SSEE THAT IT HAS INCURRED ONLY 1,815,695 ON ACCOUNT OF IN ADMISSIBLE I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 33 EXPENDITURE U/S 14 A OF THE ACT. THE LEARNED ASSESS ING OFFICER HAS ONLY GIVEN A GENERAL OBSERVATION. THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HONOURABLE DELHI HIG H COURT IN CASE OF EICHER MOTORS LTD. V. COMMISSIONER OF INCOM E-TAX-III* [2017] 86 TAXMANN.COM 49 (DELHI)/[2017] 250 TAXMAN 532 (DELHI)/[2017] 398 ITR 51 (DELHI) 13. AS REGARDS THE DISALLOWANCE OF EXPENDITURE FOR EARNING EXEMPT INCOME IN TERMS OF SECTION 14A OF TH E ACT, THE SETTLED LEGAL POSITION IS THAT THE AO HAD TO RE CORD REASONS FOR DISAGREEING WITH THE SUBMISSION OF THE ASSESSEE THAT IT HAD INCURRED NO EXPENDITURE FOR EA RNING SUCH EXEMPT INCOME. THIS IS PLAIN EVEN FROM RULE 8D (1) WHICH REQUIRES THE AO TO MANDATORILY RECORD HIS SATISFACTION THAT THE CLAIM MADE BY THE ASSESSEE TH AT NO EXPENDITURE HAS BEEN INCURRED IS INCORRECT 'HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE.' IN THIS CASE, A P ERUSAL OF THE AO'S REASONING SHOWS THAT THE AO HAS MERELY CONJECTURED THAT THERE IS AN INBUILT COST EVEN IN P ASSIVE INVESTMENT AS ALSO INCIDENTAL EXPENDITURE LIKE COLL ECTION, TELEPHONE, FOLLOW UP ETC., THE AO THUS CONCLUDES TH AT THE EXPENSES ARE EMBEDDED AS INDIRECT EXPENSES. THIS IS NOT AS PER THE REQUIREMENTS OF RULE 8D. THERE IS NO SATISFACTION RECORDED RS. BASED ON THE ACCOUNTS OF THE ASSESSEE'. THE AO SIMPLY PRESUMES THAT SINCE THE EX EMPT INCOME EXISTS AND IS BEING CLAIMED BY THE ASSESSEE, SOME PORTION OF THE EXPENSES OUGHT TO BE ADDED BACK. THI S IS NOT SUFFICIENT AS PER THE LAW. ONCE THIS MANDATORY REQUIREMENT IS ITSELF NOT FULFILLED, IN TERMS OF TH E LAW EXPLAINED BY THIS COURT IN MAXOPP INVESTMENT LTD. V . CIT [2012] 347 ITR 272/[2011] 203 TAXMAN 364/15 I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 34 TAXMANN.COM 390 (DELHI), THE QUESTION OF REMANDING THE MATTER TO THE CIT (A) AND TO CALL FOR A REMAND REPO RT FROM THE AO FOR THE PURPOSES OF RECTIFYING THIS JURISDIC TIONAL DEFECT SIMPLY DID NOT ARISE. IN THIS CONTEXT, THE C OURT ALSO NOTICES THAT IN THE ORDER PASSED BY THE AO ON 28/30 TH DECEMBER 2016 PURSUANT TO THE IMPUGNED ORDER OF THE ITAT ON REMAND, THE AO HAD SIMPLY REPEATED HIS ENTI RE ASSESSMENT ORDER PASSED IN THE FIRST INSTANCE. BE T HAT AS IT MAY, THE COURT IS OF THE VIEW THAT THE ITAT ERRE D IN OVERLOOKING THE CORRECT LEGAL POSITION IN REMANDING THE MATTER TO CIT (A). 14. ACCORDINGLY, BOTH THE QUESTIONS ARE ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE IMPUGNED ORDER OF THE ITAT AND THE CONSEQUENTIAL OR DER OF THE AO DATED 28/30TH DECEMBER 2016 ARE HEREBY SET ASIDE BUT WITHOUT ANY ORDER AS TO COSTS. THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF HO NOURABLE DELHI HIGH COURT, WE DIRECT THE LEARNED ASSESSING O FFICER TO DELETE THE DISALLOWANCES U/S 14 A OF THE ACT BY INV OKING RULE 8D WITHOUT RECORDING OF SATISFACTION. ACCORDINGLY G ROUND NUMBER 10 OF THE APPEAL OF THE LEARNED ASSESSING OF FICER IS DISMISSED AND GROUND NUMBER ONE OF THE APPEAL OF TH E ASSESSEE IS ALLOWED. IN THE LIGHT OF FINDING RECORDED IN AFORESAID PARA AND RESPECTFULLY FOLLOWING THE ORDER OF COORDINATE BENC H, WE FIND NO REASONS TO INTERFERE WITH ORDER OF CIT(A) DELETI NG THE DISALLOWANCE U/S 14A R.W.R 8D AND SAME IS UPHELD. I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 35 22.1 GROUND NO.13 IS IN RESPECT OF DELETION OF DISALLOWANCE OF EXPENDITURE TO THE TUNE OF RS. 14,6 4,00,000/- ON ACCOUNT OF SHORT/NON-ALLOCATION OF PROPORTIONATE OVERHEAD EXPENDITURE TO WINDMILL UNIT IN GUJARAT AND KARNATAK A. THE ASSESSING OFFICER MADE THE DISALLOWANCE ON THE GROU ND THAT THE WINDMILL UNITS LOCATED IN GUJARAT AND KARNATAKA ARE CLAIMING DEDUCTION U/S 80IA AND ASSESSEE HAS FAILED TO ALLOCATE OVERHEAD EXPENSES TO THESE UNITS. EVENTUAL LY, THE ASSESSING OFFICER ALLOCATED THE ESTABLISHMENT, FINA NCE AND GENERAL ADMINISTRATION EXPENSES IN THE RATIO OF TUR NOVER AND DISALLOWED THE EXPENSES SO ALLOCATED IN THE HANDS O F THE ASSESSEE COMPANY. THE IMPUGNED DISALLOWANCE WAS DEL ETED BY CIT(A). 22.2 THE LD. DR SUPPORTED THE ORDER OF ASSESSING O FFICER AND SUBMITTED THAT ALLOCATION OF EXPENSES TO WINDMI LL UNITS IN GUJARAT AND KARNATAKA AS DONE BY THE ASSESSING OFFI CER IS CORRECT. 22.3 THE LD. COUNSEL FOR THE ASSESSEE FILED SYNOPS IS ON THIS ISSUE AND ARGUED THAT SEPARATE BOOKS OF ACCOUN T ARE MAINTAINED IN RESPECT OF ELIGIBLE WINDMILL UNIT IN GUJARAT AND KARNATAKA AND THERE IS NO CASE OF ANY SHORT ALLOCAT ION OF EXPENSES. IT WAS FURTHER SUBMITTED THAT WORKING OF PROFIT IN THESE UNITS IS SUPPORTED FROM CERTIFICATE IN FORM 1 0CCB ISSUED BY CHARTERED ACCOUNTANT. THE LD. COUNSEL ALS O RELIED UPON THE DECISION OF ADDL. CIT V. DELHI PRESS PATRA PRAKASHAN [2006] 10 SOT 74 (DELHI) (URO). I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 36 22.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GONE THROUGH THE ORDERS PASSED BY SUB-ORDINATE AUTHORITI ES. THE ISSUE BEFORE US IS ALLOCATION OF EXPENSES TO ELIGIB LE UNITS CLAIMING DEDUCTION U/S 80IA AND CONSEQUENTIAL DISAL LOWANCE IN THE HANDS OF THE ASSESSEE COMPANY. IN SHORT, THE ASSESSING OFFICER HAS OBSERVED THAT COMMON EXPENSES PERTAININ G TO UNITS CLAIMING EXEMPTION U/S 80IA HAVE BEEN CLAIMED BY THE ASSESSEE COMPANY AND SAME ARE NOT ALLOWABLE. THE CI T(A) HAS DELETED THE DISALLOWANCE BY HOLDING AS UNDER: 21.1 HAVING GONE THROUGH THE SUBMISSIONS OF THE ASSESSEE, THE ORDER OF ASSESSMENT PASSED BY THE ASSESSING OFFICER AND THE MATERIAL EVIDENCES PLACED THE RECORD, IT EMERGES FROM THE FACTS OF THE CASE THAT THE ASSESSING OFFICER MADE THE DISALLOWANCE OF THE EXPENDITURE OF RS. 14,64,00,000/- ON ACCOUNT OF ALL OCATION TO THE WINDMILLS AT KARNATAKA AND GUJARAT. THE ASSESSING OFFICER IS OF THE VIEW THAT THE ASSESSEE HAS NOT ALLOCATED THE ESTABLISHMENT, FINANCE AND GENERAL ADMINISTRATIVE COST TO THE WINDMILL DIVISION AND PR OCEEDED TO MAKE THE ALLOCATION OF THE EXPENDITURE ON THE BA SIS OF THE PERCENTAGE OF THE TOTAL INCOME OF THE WIND MILL DIVISION IN PROPORTION TO THE NET PROFIT OF THE DLF AS A WHO LE THE ASSESSING OFFICER, ACCORDINGLY MADE THE ADHOC ALLOC ATION OF THE EXPENDITURE IN REGARD TO THE ESTABLISHMENT, FINANCE AND GENERAL ADMINISTRATIVE EXPENSES. BY DOING SO; T HE ASSESSING OFFICER ALLOCATED RS.3.90 CRORE TO THE WI NDMILL IN KARNATAKA AND RS.:10.74 CRORE TO WINDMILL IN GUJ ARAT. I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 37 IT IS PERTINENT TO NOTE THAT THE OPERATIONS AND MAI NTENANCE OF THE WINDMILLS HAS BEEN OUTSOURCED BY THE COMPANY TO M/S SUZLON INFRASTRUCTURE SERVICES LTD. AND M/S. EV ERCAN INDIA LTD. WHO SUBMIT THE QUARTERLY BILLS TO THE CO MPANY FOR THE OPERATION AND MAINTENANCE OF THE WINDMILLS. THE COMPANY HAS ONLY INCURRED EXPENDITURE IN CONNECTION WITH INSURANCE AND REBATE FOR THE EARLY PAYMENT TO THE P ARTIES. THERE IS NO LINKAGE AND JUSTIFICATION FOR THE ALLOC ATION OF ANY EXPENSES TO THE WINDMILL PROJECT, NO EXPENDITUR E CLAIMED IN THE TAXABLE INCOME CAN BE LINKED WITH TH E WINDMILL PROJECT. IN VIEW OF THE ABOVE, IT IS CLEAR THAT NO, EXPENDIT URE CAN BE ALLOCATED TO THE WINDMILL PROJECT. BOTH THE DIVISIO NS HAVE MAINTAINED THE SEPARATE BOOKS OF ACCOUNTS AND ALL T HE EXPENDITURE IN THE NATURE OF OPERATIONAL AND GENERA L AND ADMINISTRATIVE EXPENSES HAVE BEEN DEBITED TO THE RESPECTIVE DIVISIONS. THERE IS NO FORCE IN THE ARGU MENT OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS NOT ALL OCATED ANY EXPENSES TO THE SEPARATE DIVISIONS. THE SEPARAT E BOOKS OF ACCOUNTS MAINTAINED BY BOTH THE DIVISIONS LEAVE NO 'SCOPE FOR MAKING ANY ADDITION ON ACCOUNT OF THE ADMINISTRATIVE AND OTHER EXPENSES. THE ADDITION OF RS. 14,64,00,000/- MADE BY THE ASSESSING OFFICER IS THEREFORE, DELETED. THE ASSESSING OFFICER IS DIRECT ED TO MODIFY THE ORDER OF ASSESSMENT ACCORDINGLY. I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 38 THE LD. DR WAS UNABLE TO CONTROVERT THE FINDING REC ORDED BY CIT(A). ON CLOSER PERUSAL OF ASSESSMENT ORDER, WE F IND THAT ASSESSING OFFICER HAS NOT GIVEN ANY BASIS FOR MAKIN G IMPUGNED DISALLOWANCE AND THE ONLY REASONING BEHIND THE ALLOCATION OF EXPENSE IS THAT WINDMILL UNITS HAVE N OT CLAIMED ANY EXPENSES ON ACCOUNT OF FINANCE, ESTABLISHMENT O R GENERAL ADMIN COST. THE LD. AR HAS DRAWN OUR ATTENTION TO F ORM 10CCB WHICH CONTAINED COMPLETE WORKING OF PROFIT AN D CLAIM OF VARIOUS EXPENSES INCURRED FOR RUNNING THESE UNIT S. IT IS SELF EVIDENT THAT SEPARATE SET OF BOOKS OF ACCOUNT ARE M AINTAINED FOR RESPECTIVE WINDMILL UNIT AT GUJARAT AND KARNATA KA. IN THESE CIRCUMSTANCES, UNLESS THERE IS SOME MATERIAL OR CONCLUSIVE FINDING ON RECORD THAT BOOKS OF ACCOUNT OF THESE UNITS ARE NOT CORRECT OR EXPENSES PERTAINING TO THE SE UNITS HAVE NOT BEEN CLAIMED, THERE COULD BE NO CASE OF AN Y NOTIONAL ALLOCATION OF EXPENSES IN THE RATIO OF INCOME. THE ASSESSMENT ORDER IS SILENT ON THIS ASPECT AND MERELY CONTAINS WORKING OF DISALLOWANCE BY ALLOCATION EXPENSES IN THE RATIO OF INCOME WHICH IN OUR VIEW IS NOT SUSTAINABLE. AT THIS JUNCTU RE, IT IS PERTINENT TO MAKE REFERENCE TO DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT V. TRANSLAM LTD. [2014] 231 TAXMAN 901 (ALLAHABAD) WHEREIN IT WAS HELD THAT ASSESSING OFFICER IS BOUND TO POINT OUT DEFECT IN SEPARATE BO OKS OF ACCOUNT OF UNITS BEFORE DISPUTING THE CORRECTNESS O F INCOME/LOSS DECLARED THEREIN. IN VIEW OF ABOVE, WE FIND OURSELVES IN AGREEMENT WI TH THE ORDER OF CIT(A) DELETING THE DISALLOWANCE OF EXPENS ES ON I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 39 ACCOUNT OF NOTIONAL RE-ALLOCATION AND THE ORDER OF CIT(A) ON THIS COUNT IS UPHELD. AS A RESULT, THE GROUND 13 IS DISMISSED. 23.1 GROUND NO. 15 IS DIRECTED AGAINST DELETION OF TRANSFER PRICING ADJUSTMENT U/S 92C AMOUNTING TO RS . 2,84,86,268/- ON ACCOUNT OF CORPORATE GUARANTEE FEE . DURING THE YEAR UNDER REFERENCE, THE ASSESSEE HAS PROVIDED CORPORATE GUARANTEE TO STANDARD CHARTERED BANK FOR A LOAN AVA ILED BY ITS AE M/S DLF GLOBAL HOSPITALITY LTD., CYPRUS. THE TRANSFER PRICING OFFICER AFTER REJECTING THE CONTENTION OF T HE ASSESSEE THAT RENDERING CORPORATE GUARANTEE IS NOT AN INTERN ATIONAL TRANSACTION U/S 92B, CONSIDERED ADJUSTMENT U/S 92C AFTER BENCHMARKING THE SAME @ 0.3750% P.A. BEING 50% OF T HE INTEREST SAVED. 23.2 THE RESPONDENT SUCCEEDED BEFORE CIT(A) WHICH DELETED THE ADDITION BY HOLDING THAT CORPORATE GUAR ANTREE IS NOT AN INTERNATIONAL TRANSACTION IN TERMS OF SECTIO N 92B OF THE INCOME TAX ACT, 1961. 23.3 THE LD. DR DISPUTED THAT FINDING OF CIT(A) AN D ARGUED THAT GIVING OF CORPORATE GUARANTEE TO BANK O N BEHALF OF AE RESULTS IN SAVING OF INTEREST IN THE HANDS OF TH E AE. FURTHER, AS PER AMENDMENT BROUGHT IN BY FINANCE ACT , 2012 IN SECTION 92B, THE RENDERING OF CORPORATE GUARANTE E IS AN INTERNATIONAL TRANSACTION AS PER CLAUSE (C) OF EXPL ANATION TO SECTION 92B OF THE ACT. IT WAS ACCORDINGLY ARGUED T HAT TPO HAS RIGHTLY BENCHMARKED THE TRANSACTION FOR THE PUR POSE OF I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 40 TRANSFER PRICING ADJUSTMENT AFTER APPLYING INTEREST SAVING APPROACH. 23.4 THE LD. AR REITERATED THE ARGUMENTS ADVANCED BEFORE CIT(A) AND SUPPORTED THE ORDER OF CIT(A). IT WAS ARGUED THAT GIVING CORPORATE GUARANTEE TO BANK DOES NOT HA VE ANY BEARING ON PROFIT, INCOME, LOSSES OR ASSETS OF THE COMPANIES, THE SAME CANNOT BE TREATED AS INTERNATIONAL TRANSAC TION U/S 92B OF THE INCOME TAX ACT, 1961. THE LD. AR IS HIS ALTERNATE SUBMISSION ARGUED THAT THE BENCHMARKING OF GUARANTE E COMMISSION FEE BY APPLYING INTEREST RATE @ 0.375% P .A. IS EXCESSIVE AND SAME BE REDUCED TO 0.25% P.A.. 23.5 WE HAVE HEARD BOTH SIDES. THE ISSUE OF CORPOR ATE GUARANTEE HAS BEEN SUBJECT MATTER OF DISPUTE BETWEE N THE TAXPAYER AND REVENUE. FROM THE SIDE OF THE TAXPAYER , THE ARGUMENT TAKEN IS THAT CORPORATE GUARANTEE FALLS OU TSIDE THE PURVIEW OF SECTION 92B AND IS NOT AN INTERNATIONAL TRANSACTION, WHEREAS THE REVENUE CONTENDS THAT POST AMENDMENT IN SECTION 92B, THE CORPORATE GUARANTEE H AS BEEN EXPLICITLY INCLUDED IN THE DEFINITION OF INTERNATIO NAL TRANSACTION WITH RETROSPECTIVE EFFECT. THE REVENUE FURTHER ARGUES THAT PROVISION OF CORPORATE GUARANTEE RESULT S IN BENEFIT IN THE HANDS OF THE AE ON BEHALF OF WHICH SUCH GUAR ANTEE IS GIVEN AND AS SUCH UNDER THE ARMS LENGTH SITUATION, TRANSFER PRICING ADJUSTMENT IS REQUIRED IN THE HANDS OF THE GUARANTOR. I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 41 24. ON GOING THOUGH THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAD FURNISHED CORPORATE GUARANTEE TO STAND ARD CHARTERED BANK FOR LOAN FACILITY AVAILED BY ITS WHO LLY OWNED SUBSIDIARY IN CYPRUS. THE TPO AT PAGE 2 OF ITS ORDE R HAS EXTRACTED LETTER DATED 22 ND JANUARY 2015 STANDARD CHARTERED BANK (LENDER BANK) FROM WHICH IT IS NOTED THAT OWIN G TO GUARANTEE PROVIDED BY THE ASSESSEE, THE AE WAS ABLE TO AVAIL LOAN FACILITY AT DISCOUNTED INTEREST RATE OF LIBOR +425 BPPA IN PLACE OF LIBOR+500 BPPA. HOWEVER, ON CLOSER PERUSAL OF THE SAID LETTER, IT IS UNCLEAR WHETHER THE ASSESSEE HAS PROVIDE CORPORATE GUARANTEE OR LETTER OF COMFORT. OSTENSIBL E BOTH THE TERMS ARE USED IN THE SAID LETTER ISSUED BY THE BAN K WHICH IS CREATING DOUBT OVER THE REAL NATURE OF THE TRANSACT ION. IN FACT, THE ORDER OF TPO IS SILENT ON THIS ASPECT AND TPO H AS PROCEEDED ON THE GROUND THAT ASSESSEE HAS PROVIDED CORPORATE GUARANTEE. 25. ON THE ISSUE OF CORPORATE GUARANTEE, WE FIND TH AT HONBLE MADRAS HIGH COURT IN THE CASE OF PCIT V. REDINGTON (INDIA) LTD. [2020] 122 TAXMANN.COM 136 (MADRAS) HAS HELD THAT CORPORATE GUARANTEE IS AN INTERNATIONAL T RANSACTION U/S 92B REQUIRING ADJUSTMENT IN TERMS OF SECTION 92 C OF THE ACT. THE DECISION OF MADRAS HIGH COURT IS RELEVANT IN THE PRESENT CASE IN THE ABSENCE OF ANY CONTRARY DECISIO N OF JURISDICTION HIGH COURT OR ANY OTHER HIGH COURT. BAS ED ON CONTENTS OF COMMUNICATION OF STANDARD CHARTERED BAN K DATED 22 ND JANUARY, 2015, IT IS CLEAR THAT AE WAS ABLE TO OBTAIN LOAN AT CONCESSIONAL RATE OF INTEREST, HOWEV ER, IT IS I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 42 PERTINENT TO FIRST ASCERTAIN THE TRUE NATURE AND CH ARACTER OF ASSISTANCE GIVE BY ASSESSEE TO ITS AE I.E. WHETHER ITS A CASE OF COMFORT LETTER OR CORPORATE GUARANTEE. WE MAY MAKE IT CLEAR THAT IN CASE OF LETTER OF COMFORT, THERE MAY NOT BE ANY FINANCIAL IMPLICATION AS FAR AS ASSESSEE IS CONCERN ED WHICH IN TURN WILL TAKE THE ENTIRE ISSUE OUT OF PURVIEW OF S ECTION 92B OF THE ACT. FURTHER, IN CASE IT IS CONCLUDED THAT ASSE SSEE HAS PROVIDED CORPORATE GUARANTEE, ADJUSTMENT BASED ON PROVISIONS OF SECTION 92C IS REQUIRED IN LIGHT OF D ECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF PCIT V. REDINGTON (INDIA) LTD. (SUPRA). 26. KEEPING IN VIEW THE TOTALITY OF FACTS, WE ARE O F THE CONSIDERED VIEW THAT THE ISSUE REQUIRES RECONSIDERA TION AT THE LEVEL OF TPO. ACCORDINGLY THE ADJUSTMENT MADE BY TH E ASSESSING OFFICER IS SET-ASIDE AND THE MATTER IS RE STORED TO THE FILE OF TPO WITH THE DIRECTION TO EXAMINE THE NATUR E IS ASSISTANCE GIVEN TO AE I.E. LETTER OF COMFORT OR CO RPORATE GUARANTEE. ALSO, AS NOTED ABOVE, IN CASE THE ARRANG EMENT IS IN THE NATURE OF CORPORATE GUARANTEE, ALP, IF ANY SHOU LD BE DETERMINED ON THE BASIS OF FAR ANALYSIS AND EMPLOYI NG CUP METHOD. NEEDLESS TO SAY, THAT ASSESSEE SHOULD BE AF FORDED OPPORTUNITY TO FURNISH NECESSARY EXPLANATION/CLARIF ICATION. APPEAL FOR AY 2013-14 (ITA NO. 5940/D/17 AND CO NO. 5 OF 2021) I.T.AS. NO.5940 & 5941/DEL/2017 AND CO NO.5 & 6/DEL /2021 43 27. WE HAVE PERUSED THE GROUNDS RAISED IN THE APPEA L FILED BY THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE. IT IS NOTED THAT ALL THE ISSUES INVOLVED IN THIS APPEAL ARE EXA CTLY SAME AS THAT ADJUDICATED BY US IN APPEAL RELATING TO AY 2012 -13 AND AS SUCH THE FINDING AND DECISION RENDERED BY US IN ITA NO. 5941/D/17 AND CO NO. 6 OF 2021 ARE APPLICABLE MUTAT IS MUTANDIS TO THIS APPEAL AND CO. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH SEPTEMBER, 2021. SD/- SD/- [PRASHANT MAHARISHI] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10 TH SEPTEMBER, 2021 PKK: