ACIT 1(1), MUMBAI V. BOMBAY GAS CO. LTD, MUMBAI

ITA 6212/MUM/2011

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9891 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 08-09-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANISH V SHAH
• Assessee Lawyers: SUMAN KUMAR
• Keywords: Capital asset; Business income; Business expenditure; Rule of consistency; Earning of tax free income; Additional evidence; Capital expenditure
• Section: 143(3); 14A

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI G. S. PANNU , AM & SHRI SANDEEP GOSAIN, JM ./ I.T.A. NO . 6212 /MUM/2011 & 1187 / MUM/201 3 ( / ASSESSMENT YEAR: 2008 - 09 & 20 09 - 10 ) A CIT 1(1) ROOM NO. 579 , AAYAKARBHAVAN, MUMBAI - 400020 . / VS. BOMBAY GAS CO. LTD. EMPIRE HOUSE, A. K. NAYAK MARG, FORT, MUMBAI - 400001. ./ ./ PAN/GIR NO. A A ACB5863D & ./ I.T.A. NO. 725/MUM/2013 ( / ASSESSMENT YEAR: 2009 - 10 ) BOMBAY GAS CO. LTD. EMPIRE HOUSE, A. K. NAYAK MARG, FORT, MUMBAI - 400001. / VS. ITO 1(1) (1) ROOM NO. 579, AAYAKAR BHAVAN, MUMBAI - 400020. / APPELLANT BY : SH. MANISH V. SHAH, / RESPONDENTBY : SH. SUMAN KUMAR, DR / DATE OF HEARING : 01/01/2018 / DATE OF PRONOUNCEMENT : 07/03/2018 2 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. / O R D E R PER SHRI SANDEEP GOSAIN, JUDICIAL MEMBER : THE SE THREE A PPE AL S FILED BY THE REVENUE AS WELL AS ASSESSEE ARE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 1 MUMBAI DATED 13.06.11 AND 27.11.12 FOR AY 2008 - 09 & 2009 - 10 RESPECTIVELY. 2. SINCE ALL THE ISSUES INVOLVED IN THESE THREE APPEALS ARE COMMON, THEREFORE, THEY HAVE BEEN CLUBBED , HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA NO. 6212/MUM/2011 (AY 20 08 - 09 ) 3 . FIRST OF ALL WE TAKE UP REVENUE S APPEAL IN ITA NO. 6212/MUM/2011 FOR ASSESSMENT YEAR 2008 - 09 AS LEAD CASE . THE GROUND OF APPEAL ARE MENTIONED HEREIN BELOW: - 1. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A)IS RIGHT IN DELETING THE ADDITION OF RS. 12,50,000/ - BEING ACCRUED INTEREST ON INTER CORPORATE DEPOSITS (ICDS) MADE BY THE ASSESSING OFFICER?' 3 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. 2. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W, THE CIT (A)IS RIGHT IN CONFIRMING DISALLOWANCE ONLY TO THE EXTENT RS. 17,72,620/ - AS CAPITAL EXPENDITURE OUT OF TOTAL DISALLOWANCE OF RS. 62,76,048/ - MADE BY THE ASSESSING OFFICER BEING LEGAL AND PROFESSIONAL FEES, EVEN THOUGH THE BALANCE AMOUNT RELATED TO DISCONTINUED BUSINESS AND WAS THEREFORE NOT ALLOWABLE AS BUSINESS EXPENSES?' 3. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A)HAS ERRED IN TREATING THE PROFIT ON SALE OF SHARES OF RS. 2,47,49,139/ - AS CAPITAL GAIN AS AGAINS T THE BUSINESS INCOME ASSESSED BY THE ASSESSING OFFICER WHEREAS THE FACTS SHOW CLEAR INTENTION OF THE ASSESSEE TO EARN BUSINESS PROFITS?' 4. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A)ERRED IN TREATING THE RENTAL INCOME AS I NCOME FROM BUSINESS AND PROFESSION AS AGAINST INCOME TAXED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' BY THE ASSESSING OFFICER.' THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR WITHDRAW THE AFORESAID GROUND OF APPEAL.' 4 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. 4 . AS PER TH E FACTS OF THE PRESENT C ASE, THE ASSESSEE WAS CARRYING ON THE BUSINESS OF GAS DISTRIBUTION THROUGH ITS NETWORK OF UNDERGROUND PIPELINES. DUE TO STRIKE, FOLLOWED BY CLOSURE, THE COMPANY CLOSED ITS OPERATION WITH EFFECT FROM JULY 1981. THEREAFTER THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF SUBLETTING GUARANTEED PREMISES AND SUBSEQUENTLY ENTERED INTO FINANCE AND INVESTMENT ACTIVITY CLAIMING TO BE ANON - BANKING FINANCE COMPANY. DURING THE YEAR, THE ASSESSEE HAS SHOWN INCOME BY WAY OF RENT, COMPENSATION AND SERVICE AT RS. 1,89,64 ,556/ - , INTEREST AND OTH ERS AT RS.3,55,58,852/ - WHICH INCLUDES INTEREST ON ICDS, FIXED DEPOSITS, INCOME TAX REFUNDS, DIVIDEND, LONG TERM AND SHORT TERM CAPITAL GAINS , AFTER DEDUCTING ADMINISTRATIVE AND OTHER EXPENSES AS WELL AS MANPOWER AND INTEREST EXPENS ES, NET PROFIT HAS BEEN ARRIVED AT RS. 2,18,35,011/ - . THE RETURN OF INCOME WAS E LECTRONICALLY FILED FOR A.Y. 2008 - 09 ON 30.09.2008 DECLARING TOTAL INCOME AT RS. 16,12,642/ - . THE SAME WAS PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS TAKEN UP FOR SCRUTINY BY ISSUANCE OF NOTICE U/S. 143(2). AFTER SEEKING REPLY OF THE ASSESSEE, ORDER OF ASSESSMENT DATED 10.12.10 WAS PASSED BY THE AO THEREBY MAKING 5 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. ADDITIONS/DISALLOWANCE UNDER DIFFERENT HEADS AS MENTIONED IN THE ASSESSMENT ORDER. 5 . AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES PARTLY ALL OWED THE APPEAL OF THE ASSESSEE AND RESTRICTED THE ADDITIONS. AGGRIEVED BY THE O RDER OF LD. CIT(A), BOTH I.E. REVENUE AS WELL AS THE ASSESSEE HAVE FILED THE IR RESPECTIVE APPEAL S BEFORE US. HOWEVER AT PRESENT WE ARE DEALING WITH THE APPEAL FILED BY THE REVENUE BEARING ITA NO. 6212/MUM/11 ON THE GROUND S MENTIONED HEREIN ABOVE . GROUND NO. 1 6 . THIS GROUND RAISED BY THE REVENUE RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN DELETING THE ADDITION OF RS. 12,50,000/ - BEING ACCRUED INTEREST ON INTER CORPORATE DEPOSITS (ICDS ) , MADE BY THE ASSESSING OFFICER . 6 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. 7 . WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AT L ENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RAISED BY THE REVENUE IN ITS DETAILED ORDER IN PARA NO. 4 . THE OPERATIVE PORTION OF THE ORDER OF LD. CIT(A) IS CONTAINED IN PARA NO. 4.3 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 4.3 I HAVE DULY CONSIDERED THE APPELLANT AR'S SUBMISSION AND TH E FACTS OF THE CASE. I FIND THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME @ 5% ON THE DEBENTURES. HOWEVER, THE ASSESSEE HAS NOT OFFERED THE INTEREST INCOME ON THE GROUND THAT THE CONCERN PARTY HAS REQUESTED TO WAIVE THE INTEREST. IN FACT, THE ASSESSEE HAS N OT WAIVED INTEREST AS THERE IS NO SUCH BOARD'S RESOLUTION BUT THE ASSESSEE HAS PREFERRED NOT TO CHARGE INTEREST IN THE BOOKS OF ACCOUNTS WHICH IS A SEPARATE MATTER BUT FOR THE PURPOSE OF COMPUTATION OF INCOME UNDER THE INCOME TAX ACT, INCOME HAS TO BE COMP UTED IN ACCORDANCE WITH PRINCIPLE OF ACCOUNTING. IN THIS CASE, THE ASSESSEE HAS EARNED INCOME ON THE BASIS OF MERCANTILE SYSTEM OF ACCOUNTING; BUT THE 7 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. INTEREST INCOME HAS NOT BEEN SHOWN AS THE ASSESSEE HAS NOT RECEIVED THE INTEREST IN LAST THREE YEARS. THE MONEY LENT AS DEBENTURES HAS BECOME NON PERFORMING ASSET (NPA). HENCE, AS PER AS - 9 NO INTEREST IS TO BE CHARGED ON NPA. THEREFORE, THE AO IS NOT JUSTIFIED IN ADDING THE INTEREST INCOME NOT RECEIVED BY THE APPELLANT. RELIANCE IS PLACED ON THE DECISION OF D ELHI HIGH COURT IN THE CASE OF CIT VS. VASISTHCHAYVYAPAR (ITA 552 OF 2005), WHEREIN IT WAS HELD THAT IF THERE ARE UNCERTAINTIES REVENUE SHOULD NOT BE RECOGNIZED. SIMILAR DECISION WAS PRONOUNCED IN THE CASE OF ACIT V. RUBY MILLS LTD (ITA NO.587/MUM/06), WHE REIN IT WAS HELD THAT INTEREST SHOULD NOT BE TAKEN AS INCOME IF THERE WAS DEFAULT IN PAYMENT OF SUCH INTEREST BY THE OTHER PARTY. THIS GROUND OF APPEAL IS ALLOWED. AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE, ARGUMENTS ADDRESSED BY BOTH THE PARTIES, DOCUMENTS PLACED ON RECORD, JUDGMENT CITED AND ORDERS PASSED BY THE LOWER AUTHORITIES, WE FIND THAT LD. CIT(A) AFTER APPRECIATING THE FACTS OF THE PRESENT CAS E HAS RIGHTLY CONCLUDED THAT ALTHOUGH THE ASSESSEE HAS EARNED DIVIDEND INCOME @ 5% ON THE DEBENTURES, BUT THE A SSESSEE HAS NOT OFFERED THE INTEREST INCOME ON THE G ROUND THAT THE CONCERNED PARTY HAS REQUESTED TO WAIVE THE INTEREST. FROM THE 8 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. RECORDS, WE ALSO NOTICED, THAT THOUGH THE ASSESSEE HAS NOT WAIVED INTEREST, AS THERE IS NO SUCH BOARDS RESOLUTION, BUT THE ASSESSEE HAS PREFERRED NOT TO CHARGE INTEREST IN THE BOOKS OF ACCOUNT. AS PER THE ASSESSEE NO INTEREST INCOME HAS ACCRUED, T HEREFORE THE INTEREST IN COME HAS NOT BEEN SHOWN. WE ALSO NOTICED THAT THE MONEY LENT AS DEBENTURES HAVE BECOME NPA (NON - PERFORMING ASSET), AN ASPECT WHICH HAS NOT BEEN CHALLENGED BY THE REVENUE BEFORE US. T HEREFORE AS PER AS - 9, NO INTEREST IS TO BE CHARGED ON SUCH AN INVESTMENT . LD. CIT(A) WHILE REACHING TO THE SAID CONCLUSION HAD RELIED UPON THE JUDGMENT PASSED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. VASISTH CHAY VYAPAR (ITA 552 OF 2005) AND ACIT V. RUBY MILLS LTD (ITA NO.587/MUM/06) WHICH IS JUSTIFIED. MOREOVER, N O NEW FACTS OR CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD CIT (A) . THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS RECORDED BY THE LD. CIT (A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE 9 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, THIS GROUND RAISED BY THE REVENUE STANDS DISMISSED . GROUND NO. 2 8 . THIS GROUND RA ISED BY THE REVENUE RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN CONFIRMING DISALLOWANCE ONLY TO THE EXTENT RS. 17,72,620/ - AS CAPITAL EXPENDITURE OUT OF TOTAL DISALLOWANCE OF RS. 62,76,048/ - MADE BY THE ASSESSING OFFICER BEING LEGAL AND PROFESSIONAL FEES, EVEN THOUGH THE BALANCE A MOUNT RELATED TO DISCONTINUED BUSINESS AND WAS THEREFORE NOT ALLOWABLE AS BUSINESS EXPENSES. 9 . WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIE S. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RAISED BY THE REVENUE IN ITS DETAILED ORDER IN PARA NO. 5 . THE OPERATIVE PORTION OF THE ORDER OF LD. 10 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. C IT (A) IS CONTAINED IN PARA NO. 5.2 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 5.2 I HAVE DULY CONSIDERED THE SUBMISSION OF THE APPELLANT'S AR AND THE FACTS OF THE CASE. I FIND THAT THE ASSESSEE HAS INCURRED LEGAL AND PROFESSIONAL CHARGES IN CONNECTION WITH THE BUSINESS OF THE ASSESSEE. HAD THE ASSESSEE NOT CONTESTED THE LEGAL PROCEEDINGS WITH MIS. MARK MASCARENHAS, IN LONDON, THE ASSESSEE WOULD HAVE BEEN HELD LIABLE TO PAY MORE DAMAGES. ALTHOUGH THE ARBITRATION WAS PASSED AGAINST THE APPELLANT AT LONDO N, THE ASSESSEE INCURRED TOTAL EXPENSES OF RS.3 1,75,043/ - ONLY AS AGAINST THE TOTAL COST OF THE AWARD OF BRITISH POUND OF RS.6,25 ,695/ - . HENCE, THE AMOUNT OF LEGAL EXPENSES AMOUNTING TO RS.31,75,043/ - IS ALLOWABLE AS BUSINESS EXPENDITURE. AS REGARDS, THE EXPENDITURE OF RS. 17,72,620/ - IS CONCERNED, THIS EXPENDITURE WAS INCURRED ON LEGAL AND PROFESSIONAL CHARGES TO RECOVER FLAT FROM MR. ASHOK JALAN. MR. ASH OK JALAN, IS SON OF EX - DIRECTOR OF THE COMPANY AND TO RECOVER THE FLAT FROM HIM THE AS SE SSEE FILED SUIT AGAINST HIM. IN MY CONSIDERED VIEW THIS EXPENDITURE IS IN CONNECTION WITH THE FLAT WHICH IS CAPITAL ASSET. THEREFORE, EXPENDITURE INCURRED BY THE ASSESSEE ISALSO REQUIRED TO BE CAPITALIZED. EVEN THE ASSESSEE HAS ADMITTED IN THE ALTERNATIV E GROUNDS OF 11 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. APPEAL THAT THIS EXPENDITURE SHOULD BE ALLOWED TO BE SET OFF AGAINST CAPITAL INCOME IN SUBSEQUENT YEAR WHEN THE FLAT WAS SOLD. HENCE, THIS EXPENDITURE IS DISALLOWED AS CAPITAL EXPENDITURE AND THE ADDITION OF RS. 17,72,620/ - IS SUSTAINED AS CAP ITAL EXPENDITURE. OTHER EXPENDITURE LIKE LABOUR MATTERS, ON WHICH THE COMPANY HAS INCURRED AN AMOUNT OF RS.3,06,5 36/ - AND RETAINERSHIP FEES AND OTHERS AMOUNTING TO RS. 10,21,849/ - ARE REQUIRED TO BE ALLOWED AS THESE EXPENSES WERE INCURRED IN CONNECTION W ITH BUSINESS OF THE ASSESSEE AND THESE EXPENSES HAVE BEEN ALLOWED BY THE A.O. IN EARLIER YEARS ALTHOUGH THE ASSESSMENTS WERE SCRUTINIZED U/S. 143(3). IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THESE EXPENSES ARE ALLOWED. IN SHORT A SUM OF RS. 17,72,620/ - OUT OF TOTAL DISALLOWANCE OF RS.62,76,048/ - IS DISALLOWED AS CAPITAL EXPENDITURE. REST OF THE AMOUNT IS ALLOWED AS BUSINESS EXPENDITURE. THIS GROUND OF APPEAL IS PARTLY ALLOWED. AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE, ARGUMENTS ADDRESSED BY BOTH THE PARTIES, DOCUMENTS PLACED ON RECORD, JUDGMENT CITED AND ORDERS PASSED BY THE LOWER AUTHORITIES, WE FIND THAT LD. CIT(A) AFTER APPRECIATING THE FACTS OF THE PRESENT CASE HAS RIGHTLY CONCLUDED THAT THE ASSESSEE HAS 12 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. INCURRED LEGAL AND PROFESSIONAL CHARGES IN CONNECTION WITH THE BUSINESS OF ASSESSEE. THE ASSESSEE INCURRED TOTAL EXPENSES OF RS. 31,75,043/ - BEING THE AMOUNT OF LEGAL EXPENSES AND OTHER EXPENDITURE LIKE LABOR MATTERS, THE ASSESSEE HAS INCURRED AN AMOUNT OF RS. 3,06,536 AND RETAINERSHIP FEES AND OTHER S AMOUNTING TO RS. 10,21,849/ - AS EXPENSES IN CONNECTION WITH BUSINESS OF THE ASSESSEE. THE SAID EXPENSES HAVE ALSO BEEN ALLOWED BY THE AO IN THE EARLIER YEARS IN ASSESSMENT U/S 143(3) OF THE I.T. ACT. THEREFORE CONSIDERING THE ABOVE FACTS AN D CIRCUMSTANCES OF THE PRESENT CASE, WE FIND THAT LD. CIT(A) HAS DEALT WITH THIS GROUND JUDICIOUSLY. MOREOVER, N O NEW FACTS OR CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD CIT (A ) . THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS RECORDED BY THE LD. CIT (A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, TH IS GROUND RAISED BY THE REVENUE STANDS DISMISSED . 13 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. GROUND NO. 3. 10 . THIS GROUND GROUNDS RAISED BY THE REVENUE RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN TREATING THE PROFIT ON SALE OF SHARES OF RS. 2,47,49,139/ - AS CAPITAL GAIN AS AGAINST THE BUSINESS INCOME ASSESSED BY THE ASSESSING OFFICER WHEREAS THE FACTS SHOW CLEAR INTENTION OF THE ASSESSEE TO EARN BUSINESS PROFITS . 11 . WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RAISED BY THE REVENUE IN ITS DETAILED OR DER IN PARA NO. 7 . THE OPERATIVE PORTION OF THE ORDER OF LD. CIT(A) IS CONTAINED IN PARA NO. 7.1 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - DECISION I HA VE DULY CONSIDERED THE SUBMISSION OF THE APPELLANT'S AR AND FACTS OF THE CASE. I FIND THAT THE AO HAS NOTED THAT THE ASSESSEE HAS BEEN PURCHASING AND 14 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. SELLING SHARES FREQUENTLY AND SHOWING THE INCOME AS CAPITAL GAIN, SHORT TERM OR LONG TERM DEPENDING ON THE PERIOD OF INVESTMENT. HOWEVER, THE AO HAS TREATED THE INCOME AS BUSINESS INCOME AS, ACCORDING TO HIM, FREQUENT PURCHASING AND SELLING SHARES AMOUNT TO BUSINESS. I DO NOT AGREE WITH THE FINDINGS OF THE AO AS THE NATURE OF INCOME HAS TO BE DETERMINED FROM T HE FACTS OF THE CASE. IN THIS CASE, THE ASSESSEE HAS BEEN SHOWING INVESTMENT IN THE BALANCE SHEET AS INVESTMENTS ONLY. THEY ARE NOT TREATED AS STOCK IN TRADE. HENCE, THE INTENTION OF THE ASSESSEE IS CLEAR THAT HE WANTS TO EARN CAPITAL GAIN ON SALE OF SHARE S. THE ASSESSEE HAS ALSO NOT USED ANY BORROWED FUND SO THAT IT CAN BE SAID THAT THE ASSESSEE HAS INCURRED ANY LIABILITY FOR OBTAINING THE BUSINESS PROFIT. IN THE CASE OF JANAK S. RANGWALA V. ACIT (11 SOT 627 MUM), THE HON'BLE I.T.A.T. MUMBAI HAS HELD THAT THE FREQUENCY OF TRANSACTION SHOULD NOT DETERMINE THE NATURE OF INCOME. IF THE INTENTION WAS TO EARN THE CAPITAL GAIN, THE AO CANNOT TREAT THE CAPITAL GAIN AS BUSINESS INCOME. MOREOVER, CONSISTENCY HAS TO BE MAINTAINED IN INCOME TAX PROCEEDINGS IF IN EARLI ER YEARS, THE CLAIM OF THE ASSESSEE WAS ACCEPTED AS CAPITAL GAIN, THE SAME CANNOT BE CHANGED IN THIS YEAR ON THE SAME SET OF FACTS AND CIRCUMSTANCES OF THE CASE. THE AO IS DIRECTED TO ACCEPT THE CAPITAL GAIN OFFERED BY THE APPELLANT. THIS GROUND OF APPEAL IS ALLOWED. 15 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE, ARGUMENTS ADDRESSED BY BOTH THE PARTIES, DOCUMENTS PLACED ON RECORD, JUDGMENT CITED AND ORDERS PASSED BY THE LOWER AUTHORITIES, WE FIND THAT LD. CIT(A) AFTER APPRECIATING THE FACTS OF TH E PRESENT CASE HAS RIGHTLY CONCLUDED THAT THE ASSESSEE HAS BEEN SHOWING INVESTMENT IN THE BALANCE SHEET AS INVESTMENTS ONLY. WE HAVE ALSO NOTICED THAT THE ASSESSEE HAS NOT TREATED THE SHARES AS STOCK - IN - TRADE, HENCE THE INTENTION OF THE ASSESSEE IS TO EARN CAPITAL GAIN ON SALE OF SHARES. FROM THE FACTS OF THE CASE, THE ASSESSEE HAS NOT USED ANY BORROWED FUNDS FOR THE PURPOSE OF PURCHASING THE SHARES. LD. CIT(A) WHILE REACHING TO THE CONCLUSION HAD CORRECTLY RELIED UPON THE JUDGMENT IN THE CASE OF JANAK S. R ANGWALA V. ACIT (11 SOT 627 MUM ), WHEREIN THE HON'BLE I.T.A.T. MUMBAI , HAS HELD THAT THE FREQUENCY OF TRANSACTION SHOULD NOT DETERMINE THE NATURE OF INCOME. MOREOVER, CONSISTENCY HAS TO BE MAINTAINED IN INCOME TAX PROCEEDINGS IF IN EARLIER YEARS, THE CLAIM OF THE ASSESSEE WAS ACCEPTED AS CAPITAL GAIN, THE SAME CANNOT BE CHANGED IN THIS YEAR ON THE SAME SET OF FACTS A ND CIRCUMSTANCES OF THE CASE . THEREFORE 16 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES, WE DISMISS THIS GROUND RAISED BY THE REVENUE. GROUND NO. 4 12 . THIS GROUND GROUNDS RAISED BY THE REVENUE RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN TREATING THE RENTAL INCOME AS INCOME FROM BUSINESS AND PROFESSION AS AGAINS T INCOME TAXED UNDER THE HEAD 'I NCOME FROM HOUSE PROPERTY' BY THE A O. 13 . WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL A S THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RAISED BY THE REVENUE IN ITS DETAILED ORDER IN PARA NO. 8 . TH E OPERATIVE PORTION OF THE ORDER OF LD. CIT(A) IS CONTAINED IN PARA NO. 8.2 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 17 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. DECISION I FIND THAT THE ASSESSEE IS NOT THE OWNER OF THE HOUSE PROPERTY. IN FACT, THE ASSESSEE HAS OBTAINED THE PROPERTY ON LEASE FROM LIC OF INDIA AND GIVEN IT ON RENT TO STATE BANK OF INDORE. IN THIS YEAR, THE ASSESSEE HAS ALSO PROVIDED CERTAIN SERVICES LIKE FAC SIMILE MACHINE, TELEX MACHINE, COPYING MACHINE, WORD PROCESSORS ETC,. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, APPELLANT CANNOT BE HELD AS OWNER OF THE PROPERTY AND THE INCOME DERIVED BY HIM CANNOT BE TAXED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. T HE INCOME ALSO CANNOT BE TAXED UNDER THE PROVISIONS OF SECTION 27(III)(B) R.W.S. 269UA(F) OF THE I.T.ACT. EVEN IN EARLIER YEARS, MY PREDECESSOR HAS DECIDED THE SAME ISSUE IN FAVOUR OF THE APPELLANT. IN ORDER TO MAINTAIN CONSISTENCY, I HOLD THAT THE ASSESSE E IS DERIVING INCOME AS 'INCOME FROM BUSINESS AND PROFESSI ON'. RELIANCE IS PLACED ON THE D ECISION OF RADHASOAMISATSANG VS. CIT REPORTED IN 193 ITR 321. THIS GROUND OF A P PEAL IS ALLOWED. AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE, ARGUMENTS ADDRESSED BY BOTH THE PARTIES, DOCUMENTS PLACED ON RECORD, JUDGMENT CITED AND ORDERS PASSED B Y THE LOWER AUTHORITIES, WE NOTICED THAT IN THE PREVIOUS YEARS I.E. 2005 - 06, 18 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. 2006 - 07 & 2007 - 08 IN ASSESSEES OWN CASE, LD. CIT(A) DIRECTED THE AO TO ASSESS THE IN COME DERIVED FROM THE PROPERTY UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION RATHER THAN RENTAL INCOME IN VIEW OF RULE OF CONSISTENCY. WE FURTHER NOTICED THAT THEREAFTER AGAINST THE SAID ORDER, THE DEPARTMENT FILED AN APPEAL BEFORE HONBLE ITAT WHER EIN THE ISSUE WAS DECIDED A GAINST THE ASSESSEE/RESPONDENT AND THE ASSESSEE WAS TREATED AS DEEMED OWNER U/S 27(III)(B) OF THE ACT AND SUBSEQUENTLY TREATED THE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY. SINCE THIS GROUND HAS ALREADY BEEN DECIDED BY THE C OORDINATE BENCH OF HONBLE ITAT IN ASSESSEES OWN CASE, THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF HONBLE ITAT IN ASSESSEE OWN CASE AND WHILE MAINTAINING JUDICIAL CONSISTENCY WHICH IS APPLICABLE MUTANDIS MUTANDI IN THE PRESENT CASE . HOWEVER, LD. A R DRAWN OUR ATTENTION TO THE APPLICATION DATED 27 TH JAN 2017 MOVED IN ITA NO. 6212/MUM/11 FOR REQUESTING TO ADMIT ADDITIONAL EVIDENCE. ASSESSEE VIDE THE ABOVE APPLICATION SEEKS, ADMISSION OF ADDITIONAL EVIDENCE ON THE GROUND THAT ALTHOUGH LD. CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE /RESPONDENT IN RESPECT OF TAXING 19 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. THE RENTAL INCOME EARNED BY THE ASSESSEE UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS OR PROFESSION AGAINST THE HEAD INCOME FROM HOUSE PROPERTY. LD. AR FURTHER SUBMITTED THAT THE AO H AD ASSESSED THE AMOUNT RECEIVED AS RENT AND SERVICE CHARGES AS INCOME FROM HOUSE PROPERTY, BY INVOKING THE PROVISIONS OF SECTION 27(III)(B) R.W.S 269UA(F) OF THE ACT. THE LD. AR SUBMITTED THAT AGAINST THE AFORESAID INVOKING OF PROVISIONS OF SECTION 27( III) OF THE ACT, THE ASSESSEE WANTS TO SUBMIT THAT THE LEASE AGREEMENT WITH LIC IS A MONTHLY TENANCY RIGHT. SINCE, SECTION 27 OF THE ACT SPECIFICALLY EXCLUDES ANY RIGHT BY WAY OF ANY LEASE FROM MONTH TO MONTH, HENCE THE TENANCY IN THE PRESENT CASE CLEARLY FALLS WITHIN THE EXCLUSIONS AS PROVIDED IN SECTION 27(III)(B) OF THE ACT. IN ORDER TO SUBSTANTIATE THE ABOVE CONTENTIONS, THE ASSESSEE WANT TO BRING ON RECORD THE FOLLOWING DOCUMENTS: - 1 ) ORDER OF THE ESTATE OFFICER LIFE INSURANCE CORPORATION UNDER THE PUBLI C PREMISES (EVICTION OF UNAUTHORIZED OCCUPANT) ACT, 1971 DATED JULY 10, 2012, 2 ) ORDER OF THE BOMBAY CIVIL COURT DATED OCTOBER 12, 2012 20 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. 3 ) ORDER OF THE HONBLE BOMBAY HIGH COURT DATED FEBRUARY 5, 2013. IT WAS ALSO SUBMITTED THAT THE ABOVE DOCUMENTS COULD NOT BE SUBMITTED BEFORE THE LOWER AUTHORITIES, AS THE SAME WERE RECEIVED AFTER THE SAID PROCEEDINGS. 1 4. ON THE OTHER HAND, THE LD. DR RE FUTED THE CLAIM OF THE ASSESSEE. 1 5. WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES ON TH IS APPLICATION AND AFTER PERUSING THE CONTENTS OF THE APPLICATION , WE FIND THAT THE DOCUMENTS, WHICH THE ASSESSEE WANTS TO PLACE ON RECORD BY WAY OF ADDITIONAL EVIDENCE ARE ORDERS PASSED BY CIVIL COURT, HONBLE BOMBAY HIGH COURT A ND ESTATE OFFICER. IT IS A FACT THAT ALTHOUGH THE ORDERS WERE NOT BEFORE THE LOWER AUTHORITIES AND REFLECTS SUBSEQUENT DEVELOPMENTS. THEREFORE, CONSIDERING THE INTEREST OF JUSTICE AND HOLDING THAT ALL THE ABOVE DOCUMENTS GOES TO THE ROOTS OF THE CASE AND A RE NECESSARY FOR ADJUDICATING THE CONTROVERSY BETWEEN THE PARTIES EFFECTIVELY AND ALSO, KEEPING IN 21 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. VIEW THE PRINCIPLES LAID DOWN BY THE HIGHER COURTS, WE ALLOW THE APPLICATION MOVED BY THE ASSESSEE FOR ADMITTING ADDITIONAL EVIDENCE . HENCE, THE PRESENT APPL ICATION STANDS ALLOWED. S INCE WE HAVE ALREADY ALLOWED THE APPLICATION FILED BY THE ASSESSEE FOR LEADING ADDITIONAL EVIDENCE AND THUS ADMITTED THE ADDITIONAL EVIDENCE IN THE SHAPE OF ORDERS PASSED BY BOMBAY CIVIL COURT, HONBLE HIGH COURT AND ESTATE OFFICE R. WE HAVE NOTICED THAT T HESE ADDITIONAL EVIDENCE S WERE NOT AVAILABLE BEFORE THE LOWER AUTHORITIES, THEREFORE CONSIDERING THE INTEREST OF JUSTICE, WE THINK IT FIT TO RESTORE THE MATTER BACK TO THE FILE OF AO FOR PASSING AFRESH ORDER ON THIS GROUND BY TAKIN G INTO CONSIDERATION THE ADDITIONAL EVIDENCE S OR ANY OTHER DOCUMENT SO CALLED FOR OR PRODUCED /FILED BY THE ASSESSEE . THE AO SHALL PROVIDE SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE. BEFORE PARTING, WE MAY MAKE IT CLEAR THAT OUR DECISION TO RESTORE THE MATTER BACK TO THE FILE OF AO SHALL IN NO WAY BE CONSTRUED AS HAVING ANY REFLECTION OR EXPRESSION ON THE MERITS OF THE DISPUTE, WHICH SHALL BE ADJUDICATED BY THE AO INDEPENDENTLY 22 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. IN ACCORDANCE WITH LAW. THEREFORE, THIS GROUND IS ALLOWED FOR STATISTICA L PURPOSES. 1 6 . IN THE NET RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES . ITA NO. 1187 /M/ 2013FOR AY 2009 - 10 FILED BY REVENUE. 17 . IN THIS APPEAL, THE REVENUE HAS RAISED A SOLITARY GROUND, THEREBY CHALLENGING THE ORDER OF LD. CIT(A) IN DELETING THE ADDITIONS OF RS. 12,50,00 BEING ACCRUED INTEREST ON INTER - CORPORATE DEPOSITS (ICDS) MADE BY THE AO. SINCE WE HAVE ALREADY DE CIDED THE IDENTICAL GROUND OF APPEAL IN ITA NO. 6212/MUM/2011 FOR THE AY 2008 - 09 ON MERITS. THEREFORE , FOLLOWING OUR OWN DECISION IN ITA NO. 6212/M/13 , WE APPLY THE SAME FINDINGS IN THE PRESENT APPEAL IN ORDER TO MAINTAIN JUDICIAL CONSISTENCY WHICH IS APPL ICABLE MUTATIS MUT ANDIS IN THE PRESENT CASE . RESULTANTLY, TH E APPEAL FILED BY THE REVENUE STANDS DISMISSED . 23 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. ITA NO. 725/MUM/2013 FOR AY 2009 - 10. 18 . NOW WE TAKE UP ASSESSEES APPEAL FILED IN ITA NO. 725/MUM/2013 FOR AY 2009 - 10 ON THE GROUNDS MENTIONED HEREIN BELOW: - GROUND I: THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - I, MUMBAI ['THE CIT (A)'] ERRED IN UPHOLDING THE DECISION OF THE DEPUTY COMMISSIONER OF INCOME TAX - 1(1), MUMBAI ('THE AO') IN DISALLOWING A SUM OF ' 18,30,157/ - UNDER SECTION 14 A READ WITH RULE 8D OF THE INCOME TAX ACT,1961 ('THE ACT') ON THE ALLEGED GROUND THAT THE EXPENSES WERE INCURRED FOR EARNING TAX - FREE INCOME. 2. THE APPELLANT THEREFORE PRAYS THAT THE DISALLOWANCE OF 18,30,157/ - BEING ALLEGED EXPENSES ATTRIBUTED TO EARNING TAX - FREE INCOME BE DELETED. REVISED GROUND N O. II 1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) CI T(A) ERRED IN CONFIRMING THE ACTION OF THE AO IN ASSESSING THE INCOME OF' 2,03,70,306/ - RECEIVED IN THE 24 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. FORM OF RENT AND SERVICE CHARGES UNDER THE HEAD 'INCOME FORM HOUSE PROPERTY' INSTEAD OF ' PROFITS AND GAINS FROM BUSINESS AND PROFESSION', WITHOUT CONSIDERING THE ORDER DATED OCTOBER 20, 2012 PASSED BY THE HONBLE BOMBAY CITY CIVIL COURT, WHICH WAS SUBMITTE D TO THE CIT(A) ON NOVEMBER 26, 2012. THE CIT(A) WHILE PASSING HIS ORDER DATED NOVEMBER 27, 2012, HAD NOT CONSIDERED THE SAME ORDER. 2. THE APPELLANT, THEREFORE, PRAYS THAT AO BE DIRECTED TO ASSESS THE RENT AND SERVICE CHARGES OF RS. 2,03,70,307/ - RECEIVE D UNDER THE HEAD PROFIT AND GAINS FROM BUSINESS OR PROFESSION. GROUND III: 1. THE CIT(A) FURTHER ERRED IN DISALLOWING REPAIRS AND MAINTENANCE EXPENDITURE OF 4,93,810/ - ON THE AL LEGED GROUND THAT THE SAID EXPENDITURE WAS INCURRED IN RESPECT OF PROPERTY, WHERE THE INCOME THEREON IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. 2. THE APPELLANT PRAYS THAT T HE SAID EXPENDITURE OF 4,93,810 / - SHOULD BE ALLOWED ASDEDUCTION. 25 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. GROUND IV: 1. THE APPELLANT CRAVES LEAVES TO ADD TO, ALTER AND / OR AMEND TH E ABOVE GROUNDS OF APPEAL. GROUND NO. I. 19 . THIS GROUND GROUNDS RAISED BY THE ASSESSEE RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN UPHOLDING THE DECISION OF THE DEPUTY COMMISSIONER OF INCOME TAX - 1(1), MUMBAI ('TH E AO') IN DISALLOWING A SUM OF RS. 18,30,157/ - UNDER SECTION 14A READ WITH RULE 8D OF THE INCOME TAX ACT, 1961 ('THE ACT') ON THE GROUND THAT THE EXPENSES WERE INCURRED FOR EARNING TAX - FREE INCOME. 20 . LD. AR SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF FINANCE AND IS NON - B ANKING FINANCE COMPANY. IT WAS ALSO SUBMITTED THAT THE EXPENDITURE HAS NOT BEEN INCURRED IN RELATION TO EARNING EXEMPT INCOME AND THERE IS NO NEXUS BETWEEN THE EXPENSE AND EA RNING OF THE DIVIDEND INCOME. T HE BUSINESS OF THE COMPANY IS INDIVISIBLE AND THE EXPENDITURE INCURRED CANNOT BE APPORTIONED AND THE PORTION RELATING TO EXEMPT INCOME CANNOT 26 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. BE DISALLOWED. IT WAS SUBMITTED THAT AS PER THE FACTS, THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 18,58,735 AND LONG TERM CAPITAL GAIN OF RS. 51,49,068/ - AND T HAT THE DIVIDEND HAD BEEN CLAIMED BY THE ASSESSEE AS EXEMPT U/S 10(34) OF THE I.T. ACT. THE ASSESSEE HAD SUO MOTO DISALLOWED A SUM OF RS. 3,46,237/ - BUT THE REVENUE AUTHORITIES MECHANICALLY APPLIED THE PROVISIONS OF RULE 8D IN THE PRESENT CASE. WHEREAS AS ON THE CONTRARY, THE SAID PROVISION CANNOT BE APPLIED MECHANICALLY AND IT HAS TO APPLY ONLY IF THE AO IS NOT SATISFIED WITH CORRECTNESS OF THE CLAIM OF THE ASSESSEE AS PER THE PROVISIONS OF SECTION 14A(2) OF THE I.T. ACT. LD. AR FURTHER SUBMITTED THAT O NLY THOSE EXPENSES CAN BE ATTRIBUTABLE U/S 14A OF THE I.T. ACT WHICH ARE INCURRED IN R ELATION TO EARNING TAX FREE INCOME AND HENCE NO DISALLOWANCE CAN BE NOTIONALLY MADE. THE TERM IN RELATION TO MEANS THAT THE EXPENDITURE MUST HAVE BEEN ACTUALLY INCURR ED IN EARNING EXEMPT INCOME. LD. AR ALSO SUBMITTED THAT AS PER THE DECISIONS OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VRS. W ALFORT SHARE AND STOCK BROKERS PVT. LTD (REPORTED IN 310 ITR 421) WHEREIN IT WAS HELD THAT WHAT SECTION 14A CONTEMPLATES I S THE EXPENDITURE 27 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. ACTUALLY INCURRED FOR EARNING TAX FREE INCOME AND NOT ASSUMED EXPENDITURE OR DEEMED EXPENDITURE . APART FROM ABOVE, LD. AR ALSO SUBMITTED THAT THE ASSESSEE WAS HAVING OWN FUNDS AND NO BORROWED FUNDS WERE USED TO EARN EXEMPT INCOME AND THEREFORE THE PROVISION OF SECTION 14A(2) R.W.R 8D IS NO ATTRACTED. IN THIS RESPECT, ASSESSEE RELIED UPON THE JUDGMENT IN THE CASE OF CIT VRS. HDFC BANK LTD (366 ITR 505) (BOM HC) AND HDFC VRS. DCIT (383 ITR 529) (BOM HC). IT WAS ALSO SUBMITTED THAT THE UNSECURED LOANS, TAKEN WERE UTILIZED FOR GIVING ICDS (INTER CORPORATE DEPOSITS) TO PARTIES AT HIGHER RATE OF INTEREST. LD. AR FURTHER SUBMITTED THAT THE STRATEGIC INVESTMENTS ARE TO BE IGNORED FOR T HE PURPOSE OF DISALLOWANCE U/S 14A OF THE I.T. ACT AND IN THIS RESPECT, RELIED UPON THE JUDGMENT IN THE CASE OF EIH ASSOCIATED HOTELS LTD. VRS. D CIT ( ITA NO. 1503/MDS/2012) (MAD TRIB) AND ACIT VRS. M/S CROMPTION GREAVES LTD (ITA NO. 6277/MUM/2012) (MUM TRI B). IT WAS ALSO SUBMITTED THAT THE GROWTH INVESTMENTS SHOULD BE EXCLUDED WHILE COMPUTING DISALLOWANCE U/S 14A OF THE I.T. ACT AND IN THIS RESPECT, RELIED UPON THE JUDGMENT IN THE CASE OF D CIT VRS. M/S 28 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. PNB INSURANCE BROKING PVT. LTD ( ITA NO. 2517/MUM) (MUM TRIB) AND PR. CIT VRS. SINTEX INDUSTRIES LTD. (2017) 248 TAXMAN 449 (GUJ HC). LD. AR FURTHER SUBMITTED THAT THE INVESTMENTS WHICH HAVE NOT ACTUALLY YIELDED ANY EXEMPT INCOME SHOULD ALSO BE EXCLUDED AND RELIED UPON THE JUDGMENT IN THE CASE OF AVSHESH MERCAN TILE PVT. LTD VRS. DCIT (54 SOT 19) (MUM TRIB) AND REI AGRO LTD. VRS. DCIT (ITA NO. 1423/KOL/2011) (KOL TRIB.). 21 . ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS PASSED BY REVENUE AUTHORITIES. 22 . AFTER HEARING BOTH THE PARTIES AT LENGTH, CONSIDERING THE JUDGMENT RELIED UPON, DOCUMENTS PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES, WE FIND T HAT THE REVENUE AUTHORITIES WHILE RELYING UPON THE JUDGMENT S IN THE CASE OF M/S GODREJ & BOYCE MFG. CO. LTD. AND THE DECISION OF THE SPL. BE NCH OF HONBLE ITAT IN THE CASE OF DAGA HOSPITAL MANGEMENT PVT. LTD (119 TTJ 289) HAD APPLIED RULE 8D OF THE I.T ACT AND HAD INVOKE D THE PROVISIONS OF SECTION 14A R.W.R. 8D 29 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. OF THE I.T. ACT AND INCLUDED THE INVESTMENT, INCOME F ROM WHICH DOES NOT OR SHALL N OT PART OF TOTAL INCOME. IT IS A FACTUAL POSITION THAT IN THE JUDGMENT PASSED BY TH E HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S GODREJ & BOYCE MFG. CO. LTD , IT WAS HELD THAT THE AO CANNOT IPSO FACTO APPLY RULE 8D BUT CAN DO SO ONLY WHERE HE RECORDS SATISFAC TION ON AN OBJECTIVE BASIS THAT THE ASSESSEE IS UNABLE TO ESTABLISH THE CORRECTNESS OF THE CLAIM. THUS, RULE 8D IS NOT A MECHANICAL PROCEDURE THAT IN EVERY CASE WHERE SECTION 14A WOULD APPLY, THE FORMULA IN RULE 8D SHOULD BE FOLLOWED TO COMPUTE TH E DISALLOWANCE. IN OUR VIEW, TO I NVOKE RULE 8D, THE AO , AFTER CONSIDERING THE ACCOUNTS, SHOULD GIVE A REASONED FINDING THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM A PART OF THE TOTAL INCOME UNDER THIS ACT AND SUCH NON - SATISFACTION MUST BE OBJECTIVE AND JUDICIOUS. HENCE, IN THIS WAY, AS PER SECTION 14A(2) PROVIDES THAT THE SATISFACTION REGARDING CORRECTNESS OR OTHERWISE OF THE CLAIM OF THE ASSESSEE SHOULD BE VIEWED BASED ON THE ACCOUNTS OF THE ASSESSEE. 30 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. BE THAT AS IT MAY , AFTER CONSIDERING THE FACTS OF THE PRESENT CASE AND ORDERS PASSED BY LD. CIT(A) ON THIS GROUND, WE FIND THAT LD. CIT(A) HAS MERELY RELIED UPON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S GODREJ & BOYCE MFG. CO. LTD. AND DAGA HOSPITAL MANGEMENT PVT. LTD (119 TTJ 289) WHI LE APPLYING RULE 8D OF I.T. ACT, AND LD. CIT(A) HAS NOT CONSIDERED THE ARGUMENTS PUT FORTH BEFORE US. CONSIDERING THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF AO FOR PASSING AFRESH ORDER KEEPING IN VIEW THE ABOVE SUBMISSIONS AND JUDICIAL PRECEDENTS RAISED BY THE ASSESSEE AND APPLY PROVISION OF SECT ION 14A R.W. RULE 8D OF I.T. ACT ONLY IN RELATION TO THE INCOME WHICH DOES NOT FORM A PART OF THE TOTAL INCOME UNDER TH E ACT. IT IS NEEDLESS HERE TO MENTION THAT BEFORE PASSING THE ORDER OF ASSESSMENT, THE AO SHALL PROVIDE SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSE. BEFORE PARTING, WE MAY MAKE IT CLEAR THAT OUR DECISION TO RESTORE THE MATTER BACK TO THE FILE OF AO SHALL IN NO WAY BE CONSTRUED AS HAVING ANY REFLECTION OR EXPRESSION ON THE MERITS OF THE DISPUTE, WHICH SHALL BE ADJUDICATED BY THE AO 31 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. INDE PENDENTLY IN ACCORDANCE WITH LAW. RESULTANTLY, THIS GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO. II (REVISED) & III 23 . SINCE WE HAVE ALREADY DE CIDED THE SIMILAR GROUND OF APPEAL FILED BY REVENUE IN ITA NO. 6212/MUM/2011 FOR THE AY 2008 - 09 IN GROUND NO. 4 ON MERITS AND RESTORE THE MATTER BACK TO THE FILE OF AO FOR PASSING AFRESH ORDER ON THESE GROUND S BY TAKING INTO CONSIDERATION THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE. THEREFORE , FOLLOWING OUR OWN DECISION IN ITA NO. 6212/M/11 , WE APPLY THE SAME FINDINGS IN THE PRESENT APPEAL IN ORDER TO MAINTAIN JUDICIAL CONSISTENCY WHICH IS APPLICABLE MUTATIS MUT ANDIS IN THE CASE OF THE ASSESSEE AND RESTORE THE MATTER BACK TO THE FILE OF AO FOR PASSING AFR ESH ORDER. T HEREFORE, THESE GROUND ARE ALLOWED FOR STATISTICAL PURPOSES. GROUND NO. IV 2 4 . THIS GROUND IS GENERAL IN NATURE, THUS REQUIRES NO SPECIFIC ADJUDICATION. 32 ITA NO, 6212/MUM/2011 AND 1187 & 725/MUM/2013 BOMBAY GAS CO. LTD. 25 . IN THE NET RESULT, THE APPEALS FILED BY THE REVENUE I.E. ITA NO. 6212/MUM/2011 STANDS ALLOWED FOR STATISTICAL PURPOSES & ITA NO. 1187/MUM/2013 STANDS DISMISSED AND THE APPEAL FILED BY THE ASSESSEE I.E. ITA NO. 725/MUM/2013 STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH MARCH . 2018. SD/ - SD/ - (G. S. PANNU ) (SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 07 .03 .201 8 SR.PS . DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI