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ITA 623/BANG/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89977 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-06-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 08-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Retrospective amendment
• Section: 14A; 147; 10; 154

Judgement Text

ITA.623/BANG/2014 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'B', BANGALORE BEFORE ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI. VIJAYPAL RAO, JUDICIAL MEMBER I.T.A NO.623/BANG/2014 (ASSESSMENT YEAR : 2011-12) M/S. MANIPAL MEDIA NETWORK LTD UDAYAVANI BUILDING, MANIPAL 576 104 .. APPELLA NT PAN : AAACM8839Q V. ADDITIONAL COMMISSIONER OF INCOME-TAX, UDUPI RANGE, UDUPI .. RESPONDENT ASSESSEE BY : SMT. SHEETAL BORKAR, ADVOCATE REVENUE BY : DR. P. K. SRIHARI, ADDL. JCIT HEARD ON : 24.06.2015 PRONOUNCED ON : 30 .06.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE IT IS AGGRIEVE D ON A DISALLOWANCE MADE BY THE AO U/S.14A OF THE INCOME-TAX ACT, 1961 (THE ACTIN SHORT) READ WITH RULE 8D OF THE INCOME-TAX RULES, 1962 (THE RULES IN SHORT), WHICH WAS CONFIRMED BY THE CIT (A). 02. FACTS APROPOS ARE THAT ASSESSEE, A PRINTER AND PUBLISHED HAD FILED ITS RETURN DECLARING INCOME OF RS.6,63,38,030/-. AO ON AN ANA LYSIS OF THE BALANCE SHEET DT.31.03.2011 FOUND THAT IT HAD INVESTMENTS IN GOVE RNMENT SECURITIES, MUTUAL ITA.623/BANG/2014 PAGE - 2 FUNDS AND SHARES WORTH RS.6,55,87,862/-. ASSESSEE HAD CLAIMED A SUM OF RS.18,58,763/- AS EXEMPT U/S.10(34) & 10 (35) OF TH E ACT. SINCE ASSESSEE HAD NOT MADE ANY DISALLOWANCE OF EXPENDITURE INCURRED I N RELATION TO THE EXEMPT INCOME, AN EXPLANATION FROM THE ASSESSEE WAS SOUGHT . REPLY OF THE ASSESSEE READ AS UNDER : WE HAVE NOT USED THE BORROWED FUNDS TO INVEST IN S HARES. ALL OUR BORROWED FUNDS WERE USED FOR THE PURPOSES OF THE BUSINESS. T HE EQUITY SHORES MID MUTUAL FUND UNITS WERE PURCHASED OUT OF THE INTERNAL ACCRU ALS OF THE COMPANY. YOU MAY OBSERVE TLIA! THE TOTAL NET WORTH OF THE COMPANV AS ON 31 ST MARCH 2011 IS RS.2468 LAKHS AND TRHERE AS THE TOTAL INVESTMENT IN MUTUAL FUNDS AND SHARES AS ON 31 5T MARCH 2011 15 RS. 666.96 LAKHS. THUS IT IS QUITE EVIDENT THAT WE HAVE USED THE OWN FUNDS FOR INVESTMENT IN SHARES. FURTHER ALL THE EXPENSES INCURRED BY TLZE COMPANY A S DEUULED III SCHEDULE 11 TO 17 OF THE PROFIT AND LOSS ACCOUNT, WERE INCURRED IN THE ORDINARY COURSE OF BUSINES. NO PORTION OF THE SAME IS ATTRIBUUIBLE TO EARNING OF DIVIDEND. NORMALLY WE RECEIVED HARDLY FEW NUMBER OF DIVIDEND WARRANTS AND IT TAKES HARDLY ANY TIME TO ENCASH. THEREFORE WE NEED NOT INCUR ANY EXPENSES TO ENCASH THE DIVIDENDS, FOR THE REASON THAT THE DIVIDEND WARRANTS ARE ENCASHABLE AT PAR. ACCORDINGLY WE ARE OF THE OPINION THAT THERE ARE NO DISALLOWANCE U/S 14A AND THEREFORE THE QUESTION OF APPLYING THE CALCULATIONS UNDER RULE 8D DOES NOT ARISE. 03. AO DID NOT ACCEPT THE ABOVE REPLY. ACCORDING T O HIM, ASSESSEES CLAIM THAT NO EXPENDITURE WAS INCURRED FOR EARNING EXEMPT ION INCOME WAS NOT ACCEPTABLE AS THE INVESTMENTS IN SHARES FOR EARNING EXEMPT INCOME ALWAYS HAD A NOTIONAL COST ATTACHED TO IT. RELYING ON THE JUDGM ENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OFGODREJ AND BOYCE MFG. CO. LTD. V. DCIT (328 ITR 81) AND THAT OF HONBLE APEX COURT IN THE CASE OF CIT V. WA LFORT SHARE & STOCK BROKERS (P) LTD. (326 ITR 001), AO HELD THAT EVEN IF ASSESSEE HAD NOT UTILISED ANY BORROWED FUNDS TO MAKE INVESTMENTS IN TAX-FREE SHARES, SECTION 14A OF THE ACT, HAD TO BE INVOKED. HE MADE A DISALLOWANCE OF RS.21,12,761/- UNDER RULE ITA.623/BANG/2014 PAGE - 3 8D(2)(II) FOR INTEREST AND RS.2,78,495/- UNDER RULE 8D(2)(III) FOR EXPENDITURE INCURRED. TOTAL DISALLOWANCE CAME TO RS.23,91,210/ -. 04. AGGRIEVED ASSESSEE MOVED IN APPEAL BEFORE THE C IT (A). SAME CONTENTIONS WHICH WERE TAKEN BEFORE THE AO WERE RE ITERATED. CIT (A) RELYING ON HIS OWN ORDER IN ASSESSEES OWN CASE FOR A. YS. 2009-10 AND 2010-11 DISMISSED THE GROUNDS RAISED BY THE ASSESSEE AND CO NFIRMED THE ADDITION MADE BY THE AO. 05. NOW BEFORE US, LD. AR SUBMITTED THAT CIT (A) HA D FOLLOWED HIS OWN DECISION FOR A. Y. 2009-10 IN CONFIRMING THE DISALL OWANCE MADE BY THE AO U/S.14A OF THE ACT. HOWEVER ACCORDING TO HER, THE SAID DECISION OF THE CIT (A) WAS CARRIED IN APPEAL BY THE ASSESSEE BEFORE THIS T RIBUNAL IN ITA.1266/BANG/2012, DT.25.10.2013. LD. AR SUBMITTE D THAT THE ISSUE WAS REMITTED BACK TO THE AO BY THIS TRIBUNAL FOR RECONS IDERATION. LD. AR SUBMITTED THAT SIMILAR DIRECTIONS COULD BE ISSUED FOR THE IMP UGNED ASSESSMENT YEAR ALSO. 06. PER CONTRA, LD. DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 07. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. IT IS TRUE THAT CIT (A) HAD FOLLOWED HIS OWN ORDER FOR A. YS. 2009- 10 AND 2010-11 FOR CONFIRMING THE DISALLOWANCE MADE BY THE AO U/S.14A READ ALONG WITH RULE 8D(2)(II) AND 8D(2)(III). ASSESSEE HAD MOVED IN AP PEAL BEFORE THIS TRIBUNAL FOR A. Y. 2009-10. THIS TRIBUNAL AT PARAS 5.3.1 TO 5.3 .5 OF THE ORDER HAD DIRECTED AS UNDER : ITA.623/BANG/2014 PAGE - 4 5.3.1 WE HAVE HEARD BOTH PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. IT IS SEEN THAT THE ASSESSING OFFICER, IN THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE BAL ANCE SHEET OF THE ASSESSEE AS ON 31.3.2009 REFLECTED INVESTMENTS IN S HARES / MUTUAL FUNDS AT RS.4,36,23,215 (OUT OF WHICHRS.34,49,660 PERTAIN TO THIS YEAR), ON WHICH IT HAD EARNED DIVIDEND INCOME OF RS.1,10,74,523 WHICH WAS EXEMPT UNDER SECTION 10(34) OF THE ACT. THE ASSESSING OFFICER O BSERVED THAT THE ASSESSEE HAD NOT SHOWN ANY EXPENDITURE AS HAVING BEEN EXPEND ED TOWARDS EARNING THIS EXEMPT INCOME. WHEN CALLED UPON TO EXPLAIN TH IS POSITION AND AS TO WHY DISALLOWANCE UNDER SECTION 14A OF THE ACT SHOULD NO T BE MADE IN ITS CASE, THE ASSESSEE ARGUED THAT IT DOES NOT HAVE ANY DIRECT OR INDIRECT EXPENDITURE ATTRIBUTABLE TO THE EARNING OF THE EXEMPT DIVIDEND INCOME. THE ASSESSING OFFICER FOLLOWING THE DECISION OF THE HONBLE BOMBA Y HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. V DCIT REPORTED IN 328 ITR 81, PROCEEDED TO INVOKE THE PROVISIONS OF RULE 8D OF IT RULES, 19 62 AND COMPUTE THE DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D AS UNDE R : 1. AMOUNT OF EXPENSES DIRECTLY RELATED TO INCOME W HICH DO NOT FORM PART OF TOTAL INCOME : NIL. 2. AMOUNT OF EXPENSES NOT DIRECTLY RELATED TO PARTICULAR INCOME : RS.21,80,167. 3. 0.5% OF AVERAGE VALUE OF INVESTMENT IN SHARES : RS.2,07,034. TOTAL DISALL OWANCE : RS.23,87,201. 5.3.2 ON APPEAL, THE LEARNED CIT (APPEALS) UPHELD T HE DECISION OF THE ASSESSING OFFICER AT PARAS 7 TO 9 AT PAGES 4 & 5 O F HIS ORDER HOLDING AS UNDER : I HAVE CONSIDERED RIVAL CONTENTION CAREFULLY. AS C OULD BE SEEN CLEARLY FROM THE ORDER OF THE ASSESSING OFFICER, TH E SATISFACTION OF THE ASSESSING OFFICER AND THE FINDINGS THEREOF ARE CLEA RLY EMANATING FROM THE ORDER. HENCE I DO NOT FIND ANY STRENGTH IN THE ARGUMENT OF THE APPELLANT THAT THE ASSESSING OFFICER CANNOT INVOKE THE PROVISIONS OF SECTION 14A R.W. RULE 8D. THE ASSESSING OFFICER H AS GIVEN COGNIZANT REASONS EVEN TO SEE FROM THE ANGLE OF APPLICABILITY OF THE CASE LAWS CITED BY THE APPELLANT. FURTHER, I HAVE GONE THROU GH THE CASE LAWS CITED BY THE APPELLANT. THEY ARE ALL FOR THE ASSES SMENT YEARS PRIOR TO THE AMENDMENT TO RULE 8D INSERTED W.E.F. 24.3.2008 APPLICABLE FROM A.Y. 2008-09 ONWARDS. 8. THE CITATION CIT VS. HERO CYCLES LTD (2010) 323 ITR 518 (P & H) IS FOR THE A.Y. 2004-05. THE SECOND CITATION MAXOPP INVESTMENTS LTD VS. CIT (2011) (ITA 687/2009) DELHI HIGH COURT IS FOR THE A.Y. 2002-03. SIMILARLY THE THIRD CITATION DCIT VS. MAHARASHTRA SEAMLESS LTD (2011) 52 DTR 5 (DEL) (TRI B) IS FOR THE A.Y. 2003-04. ITA.623/BANG/2014 PAGE - 5 9. IN VIEW OF THE AMENDED PROVISIONS THESE CASE LAW S CITED ARE NO MORE APPLICABLE. EVEN IN APPEAL STAGE THE DCIT VS. MAHARASHTRA SEAMLESS LTD. (2011) 52 DTR 5 (DEL) (TRIB), WHEN AS KED TO ESTABLISH, THAT WHAT IS INVESTED IS INVESTED FROM OWN FUNDS, T HE APPELLANT EXPRESSED INABILITY SINCE THE FUNDS ARE ALL MERGED. HENCE, I FIND THE OBSERVATION OF THE ASSESSING OFFICER THAT IT IS A C OMPOSITE BUSINESS IS CORRECT. THE ASSESSING OFFICER HAS ALSO ESTABLISHE D THAT IT IS NOT JUST OWN FUND BUT OTHER FUNDS AS WELL WHICH HAS A COST T HAT HAS GONE INTO THE INVESTMENTS. THE ASSESSING OFFICER HAS CATEGO RICALLY GIVEN FINDING TO THAT EFFECT AND GAVE COGENT REASONS CLEA RLY ESTABLISHING HIS SATISFACTION FOR INVOKING THE PROVISIONS U/S.14A R. E. RULE 8D. HENCE I FIND THAT THE ASSESSING OFFICER HAS CORRECTLY RELIE D ON THE DECISION OF THE HON'BLE BANGALORE HIGH COURT IN THE CASE OF GOD REJ AND BOYCE MFG. CO. LTD. VS. DCIT 328 ITR 81, AND MADE THE ADD ITION AS PER LAW. HENCE, ALL THE GROUNDS RAISED ON THIS ISSUE A RE DISMISSED AND THE ADDITION IS CONFIRMED. 5.3.3 WE HAVE CONSIDERED THE RIVAL SUBMISSION S. THE HONBLE BOMBAY HIGH COURT IN INCOME TAX APPEAL NO. 626 OF 2010 IN THE CASE OF GODREJ & BOYCE MFG.CO.LTD. MUMBAI. VS. DY. COMMISSIONER OF INCOME TAX, RANGE 10(2), MUMBAI & ANR. 328 ITR 81 (BOM) HELD A S FOLLOWS: INSERTION OF SUBSECTIONS (2) AND (3) TO SECTION 14 A : 25. SUBSECTIONS (2) AND (3) OF SECTION 14A WERE INS ERTED BY AN AMENDMENT BROUGHT ABOUT BY THE FINANCE ACT OF 2006 WITH EFFECT FROM 1 APRIL 2007. SUBSECTIONS (2) AND (3) PROVIDE AS FOLLOWS: 14A(2) THE ASSESSING OFFICER SHALL DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHI CH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IN ACCORDAN CE WITH SUCH METHOD AS MAY BE PRESCRIBED, IF THE ASSESSING OFFIC ER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED W ITH THE CORRECTNESS 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. (3) THE PROVISIONS OF SUBSECTION (2) SHALL ALSO APP LY IN RELATION TO A CASE WHERE AN ASSESSEE CLAIMS THAT NO EXPENDITURE H AS BEEN INCURRED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PA RT OF THE TOTAL INCOME UNDER THIS ACT: PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHA LL EMPOWER THE ASSESSING OFFICER EITHER TO REASSESS UNDER SECTION 147 OR PASS AN ORDER ENHANCING THE ASSESSMENT OR REDUCING A REFUND ALREADY MADE OR OTHERWISE INCREASING THE LIABILITY OF THE ASSESS EE UNDER SECTION 154 ITA.623/BANG/2014 PAGE - 6 FOR ANY ASSESSMENT YEAR BEGINNING ON OR BEFORE THE 1ST DAY OF APRIL, 2001. (THE PROVISO WAS INSERTED EARLIER BY THE FINANCE AC T OF 2002 WITH RETROSPECTIVE EFFECT FROM 11.5.2001) UNDER SUBSECTION (2), THE ASSESSING OFFICER IS REQU IRED TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED BY AN ASSESSEE I N RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED. T HE METHOD, HAVING REGARD TO THE MEANING OF THE EXPRESSION PRE SCRIBED IN SECTION 2(33), MUST BE PRESCRIBED BY RULES MADE UND ER THE ACT. WHAT MERITS EMPHASIS IS THAT THE JURISDICTION OF THE ASS ESSING OFFICER TO DETERMINE THE EXPENDITURE INCURRED IN RELATION TO S UCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME, IN ACCORDAN CE WITH THE PRESCRIBED METHOD, ARISES IF THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RES PECT OF THE EXPENDITURE WHICH THE ASSESSEE CLAIMS TO HAVE INCUR RED IN RELATION TO INCOME WHICH DOES NOT PART OF THE TOTAL INCOME. MOR EOVER, THE SATISFACTION OF THE ASSESSING OFFICER HAS TO BE ARR IVED AT, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. HENCE, SUB SECTION (2) DOES NOT IPSO FACTO ENABLE THE ASSESSING OFFICER TO APPL Y THE METHOD PRESCRIBED BY THE RULES STRAIGHTAWAY WITHOUT CONSID ERING WHETHER THE CLAIM MADE BY THE ASSESSEE IN RESPECT OF THE EXPEND ITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME IS CORRECT. THE ASSESSING OFFICER MUST, IN THE FIRST I NSTANCE, DETERMINE WHETHER THE CLAIM OF THE ASSESSEE IN THAT REGARD IS CORRECT AND THE DETERMINATION MUST BE MADE HAVING REGARD TO THE ACC OUNTS OF THE ASSESSEE. THE SATISFACTION OF THE ASSESSING OFFICER MUST BE ARRIVED AT ON AN OBJECTIVE BASIS. IT IS ONLY WHEN THE ASSESSIN G OFFICER IS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE, THAT THE LEGISLATURE DIRECTS HIM TO FOLLOW THE METHOD THAT MAY BE PRESCRIBED. IN A SITUATION WHERE THE ACCOUNTS OF THE ASSESSEE FURNISH AN OBJECTIVE B ASIS FOR THE ASSESSING OFFICER TO ARRIVE AT A SATISFACTION IN RE GARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE OF THE EXP ENDITURE WHICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME, THERE WOULD BE NO WARRANT FOR TAKING RECOURSE TO THE METHOD PRESCRIBED BY THE RULES. FOR, IT IS ONLY IN THE EVENT OF THE ASSESSING OFFICER NOT BEING SO SATISFIED THAT RECOU RSE TO THE PRESCRIBED METHOD IS MANDATED BY LAW. SUB SECTION ( 3) OF SECTION 14A PROVIDES FOR THE APPLICATION OF SUB SECTION (2) ALS O TO A SITUATION WHERE THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS B EEN INCURRED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. UNDER THE PROVISO, IT HAS BEE N STIPULATED THAT NOTHING IN THE SECTION WILL EMPOWER THE ASSESSING O FFICER, FOR AN ITA.623/BANG/2014 PAGE - 7 ASSESSMENT YEAR BEGINNING ON OR BEFORE 1 APRIL 2001 EITHER TO REASSESS UNDER SECTION 147 OR PASS AN ORDER ENHANCI NG THE ASSESSMENT OR REDUCING THE REFUND ALREADY MADE OR O THERWISE INCREASING THE LIABILITY OF THE ASSESSEE UNDER SECT ION 154. 26. THE CIRCUMSTANCES IN WHICH THE PROVISIONS OF SU B SECTIONS (2) AND (3) WERE INTRODUCED BY AN AMENDMENT HAVE BEEN ADVER TED TO IN A CIRCULAR OF THE CBDT DATED 28 DECEMBER 2006. (CIRCU LAR 14 OF 2006) THE CIRCULAR NOTES THAT IN THE EXISTING PROVISIONS OF SECTION 14A NO METHOD FOR COMPUTING THE EXPENDITURE INCURRED IN RE LATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME HAD BE EN PROVIDED. AS A RESULT THERE WAS A CONSIDERABLE DISPUTE BETWEEN TAX PAYERS AND THE REVENUE ON THE METHOD OF DETERMINING SUCH EXPENDITU RE. IN THIS BACKGROUND, SUB SECTION (2) WAS INSERTED SO AS TO M AKE IT MANDATORY FOR THE ASSESSING OFFICER TO DETERMINE THE AMOUNT O F EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME IN ACCORDANCE WITH THE METHOD THAT MAY BE PR ESCRIBED. THE CIRCULAR, HOWEVER, REITERATES THAT THE ASSESSING OF FICER HAS TO FOLLOW THE PRESCRIBED METHOD IF HE IS NOT SATISFIED WITH T HE CORRECTNESS OF THE CLAIM OF THE ASSESSEE HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. (UNDERLINING BY US FOR EMPHASIS) 5.3.4 RULE 8D WAS INSERTED BY THE INCOME-TAX AC T (FIFTH AMENDMENT) RULES, 2008, WHICH WERE PUBLISHED IN THE GAZETTE ON MARCH 24, 2008. THE RULES SPECIFICALLY PROVIDE THAT THEY SHALL COME INT O FORCE FROM THE DATE OF THEIR PUBLICATION IN THE OFFICIAL GAZETTE. '8D. (1) WHERE THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE OF A PREVIOUS YEAR, IS NOT SATISFIE D WITH (A) THE CORRECTNESS OF THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE ; OR (B) THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED, IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT FOR SUCH PREVIOUS YEAR, HE SHA LL DETERMINE THE AMOUNT OF EXPENDITURE IN RELATION TO SUCH INCOME IN ACCORDANCE WITH THE PROVISIONS OF SUB-RULE (2). (2) THE EXPENDITURE IN RELATION TO INCOME WHICH DOE S NOT FORM PART OF THE TOTAL INCOME SHALL BE THE AGGREGATE OF FOLLOWIN G AMOUNTS, NAMELY: (I) THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME ; (II) IN A CASE WHERE THE ASSESSEE HAS INCURRED EXPE NDITURE BY WAY OF INTEREST DURING THE PREVIOUS YEAR WHICH IS NOT DIRE CTLY ATTRIBUTABLE TO ITA.623/BANG/2014 PAGE - 8 ANY PARTICULAR INCOME OR RECEIPT, AN AMOUNT COMPUTE D IN ACCORDANCE WITH THE FOLLOWING FORMULA, NAMELY : B X A C WHERE A = AMOUNT OF EXPENDITURE BY WAY OF INTEREST OTHER THAN THE AMOUNT OF INTEREST INCLUDED IN CLAUSE (I) INCURRED DURING THE PREVIOUS YEAR ; B = THE AVERAGE OF VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPE ARING IN THE BALANCE-SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR ; C = THE AVERAGE OF TOTAL ASSETS AS APPEARING IN THE BALANCE-SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR ; (III) AN AMOUNT EQUAL TO ONE-HALF PER CENT. OF THE AVERAGE OF THE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE-SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS Y EAR.' 5.3.5 IN THIS APPEAL, THE DISPUTE IN RESPECT OF THE DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D IS WITH REGARD TO EXPENDIT URE UNDER RULE 8D(2)(II) I.E. EXPENDITURE WHICH IS NOT DIRECTLY AT TRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT AND RULE 8D(2)(III) I. E. OTHER INDIRECT EXPENDITURE THAN THAT REFERRED TO IN RULE 8D(2)(I) AND 8D(2)(II). IT IS SEEN FROM THE FACTS ON RECORD THAT THE ASSESSEE HAS NOT DEDUCTED ANY EXPENSES DIRECT OR INDIRECT, WHILE COMPUTING ITS IN COME FROM DIVIDEND INCOME WHICH IS EXEMPT UNDER SECTION 10(34) OF THE ACT. IN THIS REGARD ON A SIMILAR ISSUE, A CO-ORDINATE BENCH OF THIS TRI BUNAL IN THE CASE OF JINDAL ALUMINIUM LTD. IN ITA NOS. 799 & 864/BANG/20 12 DT.30.4.2012 CITED BY THE ASSESSEE (SUPRA), HAS HELD THAT IT IS NECESSARY FOR THE ASSESSEE TO POINT OUT HOW EACH ITEM OF EXPENSE DEBI TED TO ITS PROFIT AND LOSS ACCOUNT IS WHOLLY INCURRED FOR THE PURPOSE OF EARNING INCOME WHICH IS TAXABLE AND THEREFORE REMANDED THE MATTER FOR RE -EXAMINATION TO THE FILE OF THE ASSESSING OFFICER. IN THE CASE ON HAND TOO, SIMILARLY, WE FIND THAT THE POSITION IS THAT THE ASSESSEE HAS MERELY T AKEN THE STAND THAT IT HAS NOT INCURRED ANY DIRECT OR INDIRECT EXPENDITURE IN EARNING ITS DIVIDEND INCOME WHICH IS EXEMPT UNDER SECTION 10(34 ) OF THE ACT. WE ARE THEREFORE OF THE VIEW THAT IT WOULD BE IN THE I NTEREST OF EQUITY AND JUSTICE IF THE ASSESSEE MAKES ITS CLAIM IN THIS REG ARD BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER WILL EXAMINE THE CL AIM OF THE ASSESSEE AND THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW AND AS EXPLAINED IN THE JUDICIAL DECISIONS REFERRED TO (SUPRA). IT IS ORDERED ACCORDINGLY. ITA.623/BANG/2014 PAGE - 9 07. WE ALSO FIND THAT DURING THE RELEVANT PREVIOUS YEAR, VALUE OF THE INVESTMENTS MADE BY THE ASSESSEE HAD CHANGED. HENC E IN THE INTEREST OF JUSTICE, WE ARE OF THE OPINION THAT THE MATTER REQUIRES A FR ESH LOOK BY THE AO. WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND REMIT THE ISSUE REGARDING DISALLOWANCE U/S.14A OF THE ACT, BACK TO THE FILE O F THE AO WITH SIMILAR DIRECTIONS GIVEN BY US FOR A. YS. 2009-10, REPRODUC ED ABOVE. 08. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATE D AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DAY OF JUNE, 2015. SD/- SD/- (VIJAYPAL RAO) (ABRAH AM P GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER