Indian Sugar Exim Corporation Ltd., New Delhi V. Addl. CIT, New Delhi

ITA 5960/DEL/2010

• Counselvise Citation: 596020114 RSA 2010
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 28-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SALIL MISHRA
• Keywords: Depreciation; Earning of tax free income
• Section: 14A; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER & SHRI A.N. PAHUJA, ACCOUNTANT MEMBER ITA NO.5943/DEL/2010 ASSESSMENT YEAR: 2005-06 DCIT, VS. INDIAN SUGER EXIM CORPORATION LTD., CIRCLE 11(1), C-BLOCK, 2 ND FLOOR, ANSAL PLAZA, ROOM NO. 312, NEW DELHI. C.R. BLDG., NEW DELHI. AAACI1163M (APPELLANT) (RESPONDENT) & ITA NO.5960/DEL/2010 ASSESSMENT YEAR: 2005-06 INDIAN SUGER EXIM CORPORATION LTD., VS. ADDL. CIT, C-BLOCK, 2 ND FLOOR, ANSAL PLAZA, RANGE-11, NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. ASHWANI TANEJA, CA, SH. SUMIT JAIN, CA & SH . TARUN, ADV. RESPONDENT BY : SH. SALIL MISHRA, SR. DR ORDER PER C.L. SETHI, J.M. BOTH REVENUE AND ASSESSEE ARE IN APPEAL AGAINST THE ORDER DATED 19.10.10 PASSED BY THE LD. CIT(A), PERT AINING TO THE A.Y. 2005-06. ITA NOS. 5943 & 5960/D/10 2 2. ITA NO. 5943/D/10 : - WE SHALL FIRST TAKE THE APPEAL FILED BY THE REVENUE . 3. GROUND NO. 1 IS GENERAL IN NATURE AND NEED NO ADJUDICATION AS SO CONTENDED BY BOTH THE PARTIES. 4. GROUND NO. 2 IS DIRECTED AGAINST CIT(A)S ORDER IN DELETING THE ADDITION OF RS. 32,73,220/- ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON OFFICE BUILDING. 5. THE ASSESSES CLAIM OF DEPRECIATION ON BUILDING HAS BEEN DISALLOWED BY THE AO FOR THE REASON THAT THE CONVENIENCE DEED IN RESPECT OF PROPERTY BEING LEASE HOLD OWNERSHIP OFFICE, BUILDING AND CAR PARKING AT ANSAL PLAZA, WAS YET TO BE EXECUTED IN FAVOUR OF THE ASSESSEE. THE SAID DISALLOWANCE HAS BEEN MADE BY THE AO AS SO MADE IN THE A.Y. 2004-05. 6. ON AN APPEAL, LD. CIT(A) ALLOWED THE ASSESSEES CLAIM IN THE LIGHT OF THE FINDING OF HIS PREDECESSOR ON IDEN TICAL ISSUE IN THE PREVIOUS ASSESSMENT YEAR. THE LD. CIT(A) FOUND HIMSELF IN AGREEMENT WITH HIS PREDECESSOR AS HE FOUND THAT THE PROPERTY IN QUESTION WAS MUTATED IN THE ASSESSEES NAME BY ITA NOS. 5943 & 5960/D/10 3 MUNICIPAL CORPORATION OF DELHI AND HOUSE TAX WAS BE ING REGULARLY PAID AND THE ASSESSEE WAS USING THE SAID PREMISES FOR ITS BUSINESS PURPOSES. THE LD. CIT(A) HAS APPL IED THE RATIO OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF MYSORE MINERALS REPORTED IN 239 ITR 775 (SC). 7. BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 8. IN THE CASE OF HEARING OF THIS APPEAL, IT WAS PO INTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE THAT LD. CIT(A) S ORDER PASSED IN A.Y. 2004-05 HAS BEEN UPHELD BY THE INCOM E TAX APPELLATE TRIBUNAL, DELHI BENCH C VIDE ORDER DATE D 29.04.2011 BY HOLDING AND OBSERVING AS UNDER: - 35. WE HAVE HEARD BOTH THE PARTIES. THERE IS NO DISPUTE ABOUT THE FACT THAT ASSESSEE HAD PURCHASED THE PROPERTY IN THE FINANCIAL YEAR 1999-2000 AND WAS OCCUPIED BY THE ASSESSEE. THE ASSESSEE HAD BEEN PAYING HOUSE TAX IN ITS OWN NAME. THE ASSESSING OFFICER HAD DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE CONVEYANCE DEED WAS NOT REGISTERED IN THE NAME OF THE ASSESSEE. HONBLE SUPREME COURT HOWEVER, IN THE CASE OF MYSORE MINERALS VS. CIT 239 ITR 775 HAS HELD THAT SEC. 32 OF THE INCOME ITA NOS. 5943 & 5960/D/10 4 TAX ACT, 1961 ALLOWS DEDUCTION BY WAY OF DEPRECIATION ON BUILDING ETC. OWNED BY THE ASSESSEE AND USED FOR THE PURPOSE OF BUSINESS OR PROFESSION. THE TERMS OWNER, OWNERSHIP, OWNED ARE GENERIC AND RELATIVE TERMS. THEY HAVE A WIDE AND ALSO A NARROW CONNOTATION. THE MEANING WOULD DEPEND ON THE CONTEXT IN WHICH THE TERMS ARE USED. THE DECISION IN THE CASE OF CIT VS. PODAR CEMENT P. LTD. 226 ITR 625 (SC) HAS TO BE TAKEN AS A TRENDSETTER IN THE CONCEPT OF OWNERSHIP. ASSISTANCE FROM THE LAW LAID DOWN THEREIN CAN BE TAKEN FOR FINDING OUT THE MEANING OF THE TERM OWNED IS OCCURRING IN SEC. 32(1) OF THE INCOME TAX ACT. THE TERM OWNED IS OCCURRING IN SEC. 32(1) OF INCOME TAX ACT, MUST BE ASSIGNED A WIDER MEANING. ANYONE IN POSSESSION OF PROPERTY IN HIS OWN TITLE EXERCISING SUCH DOMINION OVER THE PROPERTY AS WOULD ENABLE OTHERS BEING EXCLUDED THERE FROM AND HAVING THE RIGHT TO USE AND OCCUPY THE PROPERTY AND/OR TO ENJOY ITS USUFRUCT IN HIS OWN RIGHT WOULD BE THE OWNER OF THE BUILDING THOUGH A FORMAL DEED OF TITLE MAY NOT HAVE BEEN EXECUTED AND REGISTERED AS CONTEMPLATED BY THE TRANSFER OF PROPERTY ACT, THE REGISTRATION ACT, ETC. IN VIEW OF THE DECISION OF HONBLE SUPREME COURT FOR THE PURPOSE OF SEC. 32(1), THE ASSESSEE IS OWNER ITA NOS. 5943 & 5960/D/10 5 OF THE PROPERTY AND IS ENTITLED FOR DEPRECIATION. MERELY BECAUSE THE PROPERTY HAS NOT BEEN REGISTERED IN THE NAME OF THE ASSESSEE, DISALLOWANCE OF DEPRECIATION CANNOT BE MADE. THE DECISION IN THE CASE OF TAMIL NADU CIVIL SUPPLIES CORPORATION LTD. (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE CASE BEFORE US AS IN THAT CASE THE ASSESSEE HAD NOT ACQUIRED DOMINION ON THE PROPERTY. BUT IN THE PRESENT CASE, THE ASSESSEE IS IN POSSESSION OF PROPERTY; HAS BEEN PAYING TAXES IN HIS OWN NAME; AND HAS USED THE PROPERTY FOR THE PURPOSES OF BUSINESS. HENCE, THE FACTS ARE DISTINGUISHABLE. THEREFORE, LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE ON ACCOUNT OF DEPRECIATION ON BUILDING. 9. RESPECTFULLY FOLLOWING THE TRIBUNALS ORDER PASS ED IN A.Y. 2004-05, WE DO NOT FIND ANY REASON TO INTERFER E WITH THE ORDER OF LD. CIT(A) IN ALLOWING THE DEPRECIATION ON OFFICE BUILDING. THUS, THE GROUND NO. 2 RAISED BY THE REV ENUE IS REJECTED. 10. GROUND NO. 3 IS DIRECTED AGAINST CIT(A)S ORDER IN DELETING THE ADDITION OF RS. 10,25,151/- ON ACCOUNT OF FOREIGN TRAVELING EXPENDITURE. ITA NOS. 5943 & 5960/D/10 6 11. IT HAS BEEN STATED BY THE AO THAT DURING A.Y. 2 002-03, 2003-04 & 2004-05, THE EXPENDITURE IN RESPECT OF AT TENDING MEETING OF GLOBAL ALLIANCE FOR SUGAR TRADE & REFORM & LIBERALIZATION WAS DISALLOWED. IT WAS SUBMITTED BY THE ASSESSEE THAT ASSESSEE COMPANYS COMMITTEE MEMBERS/DIRECTORS WERE REGULARLY ATTENDING DOHA MEE TING OF WTO AND THAT THE MEETING WERE ATTENDED TO ESTABLISH ASSESSEES BUSINESS CONNECTION AND RELATION WITH BU YERS AND SELLERS. HOWEVER, IN VIEW OF THE REASONS GIVEN BY THE AO IN THE ASSESSEES CASE IN A.Y. 2002-03, 2003-04 & 2004 -05, THE FOREIGN TRAVELING EXPENDITURE AMOUNTING TO RS. 10,2 5,151/- WAS DISALLOWED BY THE AO. 12. ON AN APPEAL, LD. CIT(A) ALLOWED THE ASSESSEES CLAIM AFTER FINDING THAT ATTENDING MEETING BY THE ASSESSE ES DIRECTORS/MEMBERS WERE FOR THE BUSINESS PURPOSES OF THE ASSESSEE, AND AFTER FOLLOWING THE TRIBUNALS ORDER IN ASSESSEES OWN CASE IN THE A.Y. 2003-04. 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ITA NOS. 5943 & 5960/D/10 7 14. FROM THE AOS ORDER, IT IS CLEAR THAT THE AO HA S DISALLOWED THE TRAVELING EXPENSES TO ATTEND THE CON FERENCES FOR THE REASONS GIVEN BY HIM IN A.Y. 2002-03, 2003- 04 & 2004-05. THE IDENTICAL ADDITIONS WERE DELETED BY T HE LD. CIT(A) IN EARLIER YEARS AGAINST WHICH DEPARTMENT DI D NOT FILE ANY APPEAL BEFORE THE TRIBUNAL EXCEPT FILING AN APP EAL BEFORE THE TRIBUNAL IN THE A.Y. 2003-04. THE LD. CIT(A) S ORDER PASSED IN A.Y. 2003-04 HAS BEEN UPHELD BY THE TRIBU NAL BY OBSERVING THAT THE DISALLOWANCES MADE IN EARLIER YE ARS WERE DELETED BY THE APPELLATE AUTHORITY AND WHICH HAVE N OT BEEN REVERSED BY ANY HIGHER FORUM AND THE RELIEF GRANTED TO THE ASSESSEE HAS BEEN ACCEPTED BY THE DEPARTMENT KEEPIN G THE ISSUE NO MORE OPEN. 15. WE HAVE PERUSED THE COMMON ORDER FOR A.Y. 2003- 04 OF THE TRIBUNAL DATED 19.03.2010, WHERE THE TRIBUNAL H AS AFFIRMED THE DECISION OF LD. CIT(A) IN DELETING THE DISALLOWANCE ON ACCOUNT OF FOREIGN TRAVELING EXPENSES INCURRED F OR ATTENDING MEETING OF GLOBAL ALLIANCE FOR SUGAR TRAD E REFORM & LIBERALIZATION. RESPECTFULLY FOLLOWING THE TRIBU NALS ORDER PASSED IN A.Y. 2003-04, THE ORDER OF LD. CIT(A) IN THE PRESENT A.Y. ON THIS ISSUE IS UPHELD. ITA NOS. 5943 & 5960/D/10 8 16. THE NEXT GROUND NO. 4 IS DIRECTED AGAINST CIT(A )S ORDER IN DELETING THE ADDITION OF RS. 9,08,359/- ON ACCOU NT OF UNREGISTERED PROVIDENT FUND TRUST. 17. THE CONTRIBUTION TO PROVIDENT FUND AMOUNTING TO RS. 9,08,359/- HAS BEEN DISALLOWED BY THE AO FOR THE RE ASON THAT THE PROVIDENT FUND OF THE ASSESSEE WAS NOT A RECOGN IZED PROVIDENT FUND AS PER SEC. 2(38) OF THE ACT. 18. ON AN APPEAL, THE LD. CIT(A) DELETED THE DISALL OWANCE BY FOLLOWING THE TRIBUNALS ORDER PASSED IN A.Y. 2003- 04. 19. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. 20. THE IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN A.Y. 2003-04 BY THE TRIBUNAL BY OBSERVI NG AND HOLDING AS UNDER: - 7. WE HAVE HEARD THE PARTIES AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. SEC. 36(1)(IV) PROVIDES AS UNDER: - (IV) ANY SUM PAID BY THE ASSESSEE AS AN EMPLOYER BY WAY ITA NOS. 5943 & 5960/D/10 9 OF CONTRIBUTION TOWARDS A RECOGNIZED PROVIDENT FUND OR AN APPROVED SUPERANNUATION FUND, SUBJECT TO SUCH LIMITS AS MAY BE PRESCRIBED FOR THE PURPOSE OF RECOGNIZING THE PROVIDENT FUND OR APPROVING THE SUPERANNUATION FUND, AS THE CASE MAY BE; AND SUBJECT TO SUCH CONDITIONS AS THE BOARD MAY THINK FIT TO SPECIFY IN CASES WHERE THE CONTRIBUTIONS ARE NOT IN THE NATURE OF ANNUAL CONTRIBUTIONS OF FIXED ON SOME DEFINITE BASIS BY REFERENCE TO THE INCOME CHARGEABLE UNDER THE HEAD SALARIES OR TO THE CONTRIBUTIONS OR TO THE NUMBER OF MEMBERS OF THE FUND. READING THE AFORESAID SECTION IT IS CLEAR THAT TO CLAIM DEDUCTION BY WAY OF CONTRIBUTION TO A RECOGNIZED PROVIDENT FUND, IT HAS TO BE DEMONSTRATED THAT THE CONTRIBUTION IS TOWARDS A RECOGNIZED PROVIDENT FUND. THE PHRASE RECOGNIZED PROVIDENT FUND IS DEFINED IN SEC. 2(38) OF THE ACT. AS PER THE DEFINITION IT MEANS A PROVIDENT FUND, WHICH HAS BEEN AND CONTINUES TO BE RECOGNIZED BY THE CHIEF COMMISSIONER OR COMMISSIONER IN ACCORDANCE WITH RULES CONTAINED IN PART A OF ITA NOS. 5943 & 5960/D/10 10 THE FOURTH SCHEDULE, AND INCLUDES A PROVIDENT FUND ESTABLISHED UNDER A SCHEME FRAMED UNDER THE EMPLOYEES PROVIDENT FUNDS ACT, 1952. SINCE AS PER THE LETTER ISSUED BY CIT, DELHI-III DATED 28.05.1976 THE PROVIDENT FUND IS CONSIDERED AS FUND TO WHICH PROVIDENT FUND ACT, 1925/1952 APPLIES, IT AMOUNTS TO A RECOGNIZED PROVIDENT FUND WITHIN THE MEANING OF SEC. 2(38) OF THE ACT AND HENCE IN TERMS OF SEC. 36(1)(IV) THE CONTRIBUTION TO RECOGNIZED PROVIDENT FUND IS ALLOWABLE AS SUCH. SINCE THERE IS NO DISPUTE THAT THE AMOUNT WAS PAID WITHIN THE DUE DATES PRESCRIBED, THE DISALLOWANCE IS TO BE DELETED. WE, THEREFORE, DELETE THE DISALLOWANCE OF RS. 15,22,234/-. 21. RESPECTFULLY FOLLOWING THE AFORESAID TRIBUNALS ORDER PASSED IN A.Y. 2003-04, WE ARE INCLINED TO UPHOLD T HE ORDER OF LD. CIT(A) IN DELETING THE ADDITION ON ACCOUNT OF C ONTRIBUTION TO PROVIDENT FUND ACCOUNT. 22. IN GROUND NO. 5, THE REVENUE HAS DISPUTED THE C IT(A)S ORDER IN DELETING THE ADDITION OF RS. 10,00,000/- O N ACCOUNT OF DISALLOWANCE U/S 14A OF THE ACT. HOWEVER, ON PERUS AL OF LD. CIT(A)S ORDER, WE FIND THAT THE LD. CIT(A) HAS ACT UALLY ITA NOS. 5943 & 5960/D/10 11 SUSTAINED THE DISALLOWANCE TO THE EXTENT OF RS. 649 336/- AS AGAINST DISALLOWANCE OF RS. 10,00,000/- MADE BY THE AO. 23. IN THIS CASE, IT WAS FOUND BY THE AO THAT THE A SSESSEE HAS EARNED EXEMPTED DIVIDEND INCOME FROM MUTUAL FUNDS/BONDS TO THE EXTENT OF RS. 3,41,56,014/-. TH E AO, THEREFORE, STATED THAT THE EXPENDITURES INCURRED BY THE ASSESSEE IN RELATION TO EXEMPT INCOME ARE TO BE DIS ALLOWED. THE AO THEN NOTED VARIOUS EXPENDITURES CLAIMED IN T HE PROFIT AND LOSS ACCOUNT. THE TOTAL EXPENDITURE CLAIMED B Y THE ASSESSEE WERE OF RS. 7,27,39,108/-. THE ASSESSEES TOTAL RECEIPTS WERE OF RS. 384,94,87,070/- AND THE EXEMPT ED INCOME WAS OF RS. 3,41,56,014/-. THE AO, THEREFORE , DISALLOWED THE PROPORTIONATE EXPENSES IN PROPORTION TO THE EXEMPTED INCOME TO THE TOTAL RECEIPTS. THE WORKING GIVEN BY THE AO IS AS UNDER: 4.14 THUS, ADMINISTRATIVE EXPENSES + INTEREST EXPENSES DISALLOWED U/S 14A OF THE I.T. ACT, 1961 ON AN APPORTIONMENT BASIS = ADMINISTRATIVE EXPENSES + INTEREST EXPENSES TOTAL RECEIPTS X EXEMPT INCOME = 72,73,91,08 X 3,41,56,014 384,94,87,078 = RS. 6,45,404/- ITA NOS. 5943 & 5960/D/10 12 AS THE ABOVE WORKING COMES TO RS. 6,45,404/-, AND IN A.Y. 2002-03 THE CIT(A) HAS UPHELD THE DISALLOWANCE TO THE EXTENT OF RS. 10 LAKHS, A TOTAL SUM OF RS. 10 LAKHS IS DISALLOWED U/S 14A OF THE I.T. ACT, 1961 FOR THE A.Y. 2005-06 ALSO RECOGNIZING THE FACT THAT THE BASIC ADMINISTRATIVE EXPENSES WOULD NOT GO BELOW A THRESHOLD LIMIT OF EXPENDITURE. AS THE ASSESSEE HAS FAILED TO DISALLOW EXPENDITURE INCURRED IN EARNING EXEMPT INCOME ON ITS OWN VOLITION RESULTING INTO CONCEALMENT OF INCOME PENALTY U/S 271(1)(C) OF THE I.T. ACT, 1961 AS INITIATED. 24. HOWEVER, THE AO DISALLOWED THE SUM OF RS. 10 LA KH AS THE SAME AMOUNT WAS DISALLOWED IN A.Y. 2002-03. 25. ON AN APPEAL, THE LD. CIT(A) CONFIRM THE DISALL OWANCE TO THE EXTENT OF RS. 6,49,336/- AS AGAINST RS. 10 LAKH DISALLOWED BY THE AO. THE WORKING OF RS. 6,49,336/- BEING THE AMOUNT OF DISALLOWANCE SUSTAIN BY THE LD. CIT(A) IS AS UNDER: - ON A PERUSAL OF THE DETAILS OF THE ABOVE EXPENSES AND NATURE OF FUNCTIONS PERFORMED BY THE PERSONNEL, I FIND THAT THE ADMINISTRATIVE EXPENSES WOULD MOSTLY RELATE TO THE CARRYING ON OF THE NORMAL & PRIMARY BUSINESS ACTIVITIES OF THE APPELLANT. HOWEVER, EVEN THE APPELLANT ITA NOS. 5943 & 5960/D/10 13 HAS ADMITTED VIDE SUBMISSION DATED 08.10.10 TO THE FACT OF PART OF SUCH EXPENSES HAVING BEEN INCURRED TO EARNING OF EXEMPT INCOME. IN FACT THE APPELLANT HAS ALSO PROVIDED ITS OWN WORKING OF SUCH EXPENSES RELATED TO HEAD OFFICE AT ANSAL PLAZA, DELHI ONLY, AS INVESTMENT IN TAX EXEMPT INSTRUMENTS ARE TAKEN ONLY AT HEAD OFFICE AND NOT AT APPELLANTS OFFICE AT MUMBAI, OR PORT OFFICES AT CHENNAI, KOLKATA OR KANDALA, WHICH CAN BE ATTRIBUTED TO EARNING OF EXEMPT INCOME. THE CONTENTION OF THE APPELLANT THAT EXPENSES AT THE PORT OFFICES CANNOT BE PROXIMATELY RELATED TO THEIR INVESTMENT DECISIONS WHICH ARE MADE AT HEAD OFFICE IS REASONABLE AND THEREFORE, ACCEPTABLE. ACCORDINGLY, ONLY SUCH OF THE ADMINISTRATIVE EXPENSES WHICH ARE MADE AT HEAD OFFICE AND WHICH CAN BE REASONABLY CO- RELATED TO EARNING OF EXEMPT INCOME ARE CONSIDERED FOR DISALLOWANCE. THESE EXPENSES ARE IN THE NATURE OF PRINTING & STATIONARY (RS. 4,26,054/-), TRAVELLING AND CONVEYANCE & MOTOR CAR (RS. 8,15,383/-), TELEPHONE, POSTAGE & TELEGRAM (RS. 15,11,878/-), DEPRECIATION (RS. 50,56,213/-), MAINTENANCE & REPAIR (RS. 37,42,893/-), ELECTRICITY & WATER (RS. 9,10,931/-) OFFICE EXPENSES (RS. 5,00,424/-) MISCELLANEOUS (RS. 42,43,318/-) AND RATES & TAXES RS. 49,52,873/-. THE TOTAL ITA NOS. 5943 & 5960/D/10 14 OF THESE EXPENSES, COMES TO RS. 2,21,59,967/-. AS REGARDS THE ISSUE OF ATTRIBUTING THE EXPENDITURE ON ACCOUNT OF MANAGERIAL REMUNERATION IS CONCERNED IT IS OBSERVED THAT THE APPELLANT ADMITTEDLY HAS A GM AND DY. GM WHOSE GROSS SALARY AND ALLOWANCE FOR THE YEAR ARE RS. 3,91,064/- AND RS. 1,86,594/- RESPECTIVELY. FURTHER SALARY PAID TO ACCOUNTS DEPARTMENT PERSONNEL AT HEAD OFFICE IS RS. 7,68,925/-. APART FROM THIS THE PROPORTIONATE CONTRIBUTION ON ACCOUNT OF PF BY THE APPELLANT COMPANY IN CASE OF GM, DM & ACCOUNTS DEPARTMENT IS RS. 32785/-, RS. 15643/-, AND RS. 64464/- RESPECTIVELY. LIKEWISE PROPORTIONATE WELFARE EXPENSES IN FAVOUR OF GM, DM & ACCOUNTS DEPARTMENT IS RS. 69072/-, RS. 32957/-, & RS. 135813/- RESPECTIVELY. THE APPELLANT HAS ITSELF ALLOCATED 10% OF SUCH SALARY, CONTRIBUTION TO PF AND EMPLOYEES WELFARE IN CASE OF GM & DY. GM & 5% OF SUCH SALARY, CONTRIBUTION TO PF AND EMPLOYEES WELFARE IN CASE OF ACCOUNTS DEPARTMENT TOWARDS EARNING OF EXEMPT INCOME. FURTHER, THE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE (SUPRA) HAS ALSO HELD THAT DISALLOWANCE U/S 14A(1) CAN BE MADE ON A REASONABLE BASIS AND THAT EXPENSES CAN BE ITA NOS. 5943 & 5960/D/10 15 APPORTIONED FOR THE ABOVE PURPOSE, AS PER THE EXTENSIVE QUOTATIONS FROM THE RELEVANT PORTIONS OF THE SAID JUDGMENT. CONSIDERING THE FACT THAT THERE HAS BEEN AN ADDITIONAL INVESTMENT OF RS. 31.6 CRORES IN SHARES AND MUTUAL FUNDS DURING THE YEAR, IN MY OPINION, IT WOULD BE REASONABLE TO DISALLOW U/S14A OF THE ACT 15% OF SALARY & REMUNERATION PAID TO THE GM & DY. GM OF THE COMPANY. THE TOTAL REMUNERATION PAID TO THEM (WHICH INCLUDES SALARY, EMPLOYERS CONTRIBUTION TO PF AND EMPLOYEES WELFARE EXPENSE) IS RS. 7,28,115/- AND 15% THEREOF WORKS OUT TO RS. 1,09,217/- WHICH IS DISALLOWED U/S 14A OF THE I.T. ACT. FURTHER A 10% DISALLOWANCE ON SALARY, EMPLOYERS CONTRIBUTION TO PF AND EMPLOYEES WELFARE PAYMENT TO PERSONNEL OF ACCOUNTS DEPARTMENT (TOTAL RS. 9,69,202/-) WHICH WORKS OUT TO RS. 96,920/- IS ALSO MADE. FURTHER, OUT OF THE TOTAL ADMINISTRATIVE EXPENSES AS DISCUSSED IN PRECEDING PARA FOR RS. 2,21,59,967/- AN AMOUNT OF 2% THEREOF (THE APPELLANT AHS IN ITS SUBMISSION DATED 08.10.10 HAS ALLOCATED 1% OF SUCH EXPENSES) IS REASONABLY ATTRIBUTED TO EARNING OF EXEMPTED INCOME. THIS WORKS OUT TO RS. 4,43,199/- WHICH IS DISALLOWED U/S 14A OF THE I.T. ACT. THUS, THE TOTAL DISALLOWANCE U/S 14A OF THE I.T. ACT AND AS DISCUSSED ITA NOS. 5943 & 5960/D/10 16 ABOVE WOULD WORK OUT TO RS. 6,49,336/- (RS. 1,09,217 + RS. 96,920 + RS. 4,43,199) APART FROM THIS DISALLOWANCE WHICH IS CALCULATED AND CONFIRMED ABOVE RS. 6,49,336/-, THE DISALLOWANCE OF RS. 10,00,000/- MADE BY THE AO ON THIS ISSUE IN HIS ORDER IS DIRECTED TO BE DELETED. 26. HENCE, THE REVENUE IS IN APPEAL AGAINST THE LD. CIT(A)S ORDER IN SUSTAINING THE DISALLOWANCE ONLY TO THE EX TENT OF RS. 6,49,336/- AGAINST RS. 10 LAKH DISALLOWED BY THE AO . 27. AT THIS STAGE, IT IS PERTINENT TO NOTE THAT THE GROUND NO. 1 RAISED BY THE ASSESSEE IN THE APPEAL FILED BY IT IS AGAINST CIT(A)S ORDER IN SUSTAINING THE DISALLOWANCE OF RS . 6,49,336/- U/S 14A OF THE ACT. WE, THEREFORE, TAKE UP THIS IS SUE RAISED BY THE ASSESSEE AS WELL AS BY THE REVENUE, TOGETHER. 28. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ON PERUSAL OF AOS ORDER, WE F IND THAT THE AO HAS WORKED OUT THE PROPORTIONATE EXPENSES INCURR ED FOR EARNING THE EXEMPTED INCOME AT RS. 6,45,404/-. HOW EVER, HE DISALLOWED THE SUM OF RS. 10 LAKH IN THE LIGHT OF T HE DISALLOWANCE SUSTAINED BY LD. CIT(A) IN A.Y. 2002-0 3. HOWEVER, IN THE PRESENT ASSESSMENT YEAR, THE LD. CI T(A) HAS ITA NOS. 5943 & 5960/D/10 17 WORKED OUT THE DISALLOWANCE, BY ALLOCATING THE VARI OUS EXPENSES TO EXEMPT INCOME, AT RS. 6,49,336/- WHICH IS MORE THAN THE WORKING OF RS. 6,45,404/- WORKED OUT BY TH E AO. THE AOS ACTION IN DISALLOWING THE EXPENSES TO THE EXTE NT OF RS. 10 LAKH ON ESTIMATE IS FOUND TO BE WITHOUT ANY BASIS. THE LD. CIT(A) HAS SUSTAINED THE ADDITION OF RS. 6,49,336/- AFTER GIVING HIS WORKING. IN THE COURSE OF HEARING OF TH IS APPEAL, THE LD. COUNSEL FOR THE ASSESSEE HAS NOT BEEN ABLE TO P OINT OUT ANY IRREGULARITY OR DEFECT IN WORKING GIVEN BY THE LD. CIT(A). IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS INCURRED VA RIOUS EXPENSES FOR EARNING EXEMPT INCOME. THE EXPENDITUR E INCURRED BY THE ASSESSEE IN EARNING EXEMPT INCOME H AS BEEN WORKED OUT BY THE LD. CIT(A) AT RS. 6,49,336/- ON A REASONABLE BASIS. WE, THEREFORE, FIND NO REASON TO INTERFER E WITH THE ORDER OF LD. CIT(A) IN SUSTAINING THE DISALLOWANCE TO THE EXTENT OF RS. 6,49,336/-. THUS, THIS GROUND RAISED BY BOT H REVENUE AS WELL AS BY ASSESSEE IS REJECTED. 29. GROUND NO. 6 IN REVENUES APPEAL IS GENERAL IN NATURE AND IS THUS, DISMISSED. ITA NOS. 5943 & 5960/D/10 18 30. THE ONLY GROUND LEFT IN APPEAL FILED BY THE ASS ESSEE IS REGARDING DISALLOWANCE OF RS. 2,431/- TOWARDS INTER EST ON LATE PAYMENT OF TDS. 31. IN THIS CONNECTION, NO SUBMISSIONS WERE MADE BY THE ASSESSEE. HOWEVER, THE LD. CIT(A) HAS RIGHTLY REJE CTED THIS GROUND IN AS MUCH AS INTEREST PAID ON TDS CANNOT BE ALLOWED AS AN EXPENDITURE WHILE COMPUTING THE ASSESSEES IN COME. THUS, GROUND NO. 2 RAISED BY ASSESSEE STANDS REJECT ED. 32. GROUND NO. 3 IN ASSESSEES APPEAL IS ALSO GENER AL AND HENCE, IT IS REJECTED. 33. IN THE RESULT, THE APPEALS FILED BY THE REVENUE AS WELL AS BY THE ASSESSEE ARE BOTH DISMISSED. THIS DECISION IS PRONOUNCED IN THE OPEN COURT ON 1 5 TH NOVEMBER, 2011. SD/- SD/- (A.N. PAHUJA) (C.L. SETH I) ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED: 15.11.11 *KAVITA ITA NOS. 5943 & 5960/D/10 19 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR ITA NOS. 5943 & 5960/D/10 20