Punjab Tractors Limited, Mohali V. ACIT, Patiala

ITA 645/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77076 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 29-04-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 30-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Keywords: Depreciation; Earning of tax free income; Revenue expenditure; Capital expenditure
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 599 & 600/CHD/2013 ASSESSMENT YEARS : 2008-09 TO 2009-10 A.C.I.T, CIRCLE, PATIALA VS. M/S PUNJAB TRACTORS LTD. S.A.S. NAGAR, MOHALI AAACP 8578K ITA NO. 644 & 645/CHD/2013 ASSESSMENT YEARS : 2008-09 TO 2009-10 M/S PUNJAB TRACTORS LTD. VS. A.C.I.T. CIRCLE, PAT IALA S.A.S. NAGAR, MOHALI AAACP 8578K (APPELLANT) (RESPONDENT) DEPARTMENT BY: SMT. JYOTI KUMARI ASSESSEE BY: SHRI SUMEET KHURANA DATE OF HEARING 29.4.2014 DATE OF PRONOUNCEMENT 20 .5.2014 O R D E R PER BENCH THESE ARE CROSS APPEALS DIRECTED AGAINST THE ORDER DATED 22.3.2013 OF THE LD CIT(A), PATIALA. SOME ISSUES A RE COMMON IN THESE APPEALS WHICH WERE HEARD TOGETHER AND ARE BEI NG DISPOSEDOFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIE NCE. ITAS NO. 599 & 600/CHD/2013 REVENUE APPEALS 2. IN BOTH THESE APPEALS IDENTICAL GROUNDS HAVE BEE N RAISED BY THE REVENUE IN ASSESSMENT YEAR 2008-09 WHICH ARE A S UNDER: 1 IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 80,81,719/- M ADE BY THE A.O ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE INCURRED INT ERALIA ON PURCHASE OF NEW ITEMS LIKE WOODEN CABINETS, WOODEN PARTITIONS, NOTICE BOARDS, ALMIRAHS 66KV POTENTIAL TRANSFORMER, 3 PHASE DOUBLE SPEED MOTOR, STARTER MOTOR, SIMODRIVE, FABRICATION AND ERECTION OF STRUCTURES ETC. IGNORING THE FACT THAT MOST OF THE ITEMS PURCHASED BY THE APPELLANT WERE NEW IDENTIFIABLE ASSETS. 2 IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD . CIT(A) HAS ERRED IN HOLDING THE ACQUISITION OF NEW ASSETS FOR REPLACEMENT OF EXISTING ASSETS AS CURRENT REPAIRS, THROUGH THE HON'BLE SUPR EME COURT IN THE 2 CASES OF CIT VS. SRI MANGAYARKARSHI MILLS (P)LTD., 315 ITR 114, CIT VS. SARAVANA SPINNING MILLS (P) LTD, 293 ITR 201 HAS HE LD THAT REPLACEMENT OF MACHINERY WAS CAPITAL EXPENDITURE AND COULD NOT BE TREATED AS CURRENT REPAIRS. IN ASSESSMENT YEAR 2009-10 IDENTICAL GROUNDS HAVE BEEN RAISED BUT ONLY DIFFERENCE IS THAT THE AMOUNTS ARE DIFFERENT. 3 AFTER HEARING BOTH THE PARTIES WE FIND THAT DURIN G ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT ASS ESSEE HAS CLAIMED EXPENSES ON ACCOUNT OF REPAIR OF BUILDING A MOUNTING TO RS. 189.77 LAKHS AND REPAIR TO PLANT & MACHINERY AMOUNT ING TO RS. 193.39 LAKHS. THE ASSESSEE WAS ASKED TO FILE THE D ETAILS WHICH WERE DULY FURNISHED. THE ASSESSING OFFICER AFTER E XAMINATION OF THE DETAILS NOTICED THAT VARIOUS ITEMS LISTED AT PARA I(I) WHICH ACCORDING TO HIM WERE OF CAPITAL NATURE OUT OF THE BUILDING R EPAIR EXPENSES. TO THESE ITEMS 20% OF LABOUR EXPENSES WERE ADDED AND T HUS A SUM OF RS. 5913039/- WAS HELD TO BE OF CAPITAL NATURE. SI MILARLY IN CASE OF REPAIR TO PLANT & MACHINERY ITEMS LISTED AT PARA I( II) WERE HELD TO BE OF CAPITAL NATURE AND AFTER ADDING 20% OF LABOUR EX PENSES A SUM OF RS. 2759984/- WAS HELD TO BE OF CAPITAL NATURE. 4 ON APPEAL THESE ADDITIONS WERE DELETED BY THE LD. CIT(A) FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES O WN CASE IN EARLIER YEARS PARTICULARLY IN ITA NO. 594/CHD/2008 FOR ASS ESSMENT YEAR 2004-05 AND ITA NO. 107/CHD/2010 FOR ASSESSMENT YEA R 2006-07. 5 BEFORE US. THE LD. D.R. FOR THE REVENUE REFERRED TO THE LIST OF ITEMS AND SUBMITTED THAT PERUSAL OF THESE ITEMS WOU LD CLEARLY SHOW THE ITEMS ARE OF CAPITAL NATURE. HE FURTHER SUBMIT TED THAT IT CANNOT BE SAID THAT THE ISSUE IS COVERED BY THE ORDER OF T HE TRIBUNAL BECAUSE IN EACH YEAR THE ITEMS WOULD BE DIFFERENT A ND THE LD. CIT(A) SHOULD HAVE EXAMINED VARIOUS ITEMS ON MERITS . 6 ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESS EE SUBMITTED THAT THE ISSUES ARE COVERED BY THE ORDER OF THE TRI BUNAL FOR EARLIER YEARS AND IN THIS REGARD HE REFERRED TO VARIOUS ISS UES FILED IN BOOKS 3 OF ACCOUNTS FOR ASSESSMENT YEAR 2002-03, 2003-04 A ND 2006-07. HOWEVER, CERTAIN ITEMS LIKE PURCHASE OF WOODEN ALM IRAH WERE CONFRONTED TO HIM AND HE HAD NO SPECIFIC REPLY. 7 WE HAVE GONE THROUGH THE RIVAL SUBMISSIONS CAREFU LLY AND FIND FORCE IN THE SUBMISSIONS OF THE LD. D.R. FOR THE RE VENUE THAT IN SUCH MATTERS THE ISSUES CANNOT BE SAID TO BE COVERED BY EARLIER ORDER OF THE TRIBUNAL BECAUSE IT WOULD DEPEND ON THE NATURE OF THE ITEMS AND DEPENDING ON THE NATURE OF EACH ITEM THE SAME HAS T O BE TREATED AS CAPITAL EXPENDITURE OR REVENUE EXPENDITURE. THE AS SESSING OFFICER HAS MENTIONED VARIOUS ITEMS AND NO DOUBT THE WOODEN PANELING, WOODEN PARTITION, SOME SMALL ITEMS OF STEEL OR PURC HASE OF CEMENT ETC. MAY FALL UNDER REPAIR BUT AT THE SAME TIME PUR CHASE OF ALMIRAH IN ASSESSMENT YEAR 2008-09 AMOUNTING TO RS. 102600/ -, INSTALLATION OF BOARD ETC. CAN NOT BE TERMED AS REPAIR AND MAINT ENANCE. SIMILARLY THE ASSESSEE HAS SHOWN PURCHASE OF ORISSA TYPE W.C ALONG WITH G.I. FLUSH BEND, C.I PEE TRAP ETC. WHICH SHOWS CONSTRUCTION OF NEW BATH ROOM. THE LD. COUNSEL FOR THE ASSESSEE COULD NOT GIVE ANY ANSWER IN RESPECT OF THESE ITEM S. AT THE SAME TIME THERE IS NO PURPOSE IF THE ISSUE IS SET ASIDE, THEREFORE AFTER EXAMINING VARIOUS ITEMS WE ARE OF THE OPINION IF 10 % OF ITEMS LISTED BY THE ASSESSING OFFICER ARE HELD TO BE OF CAPITAL NATURE, SAME WOULD MEET THE ENDS OF JUSTICE. ACCORDINGLY WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO TR EAT 10% OF THE ITEMS FROM BUILDING REPAIR AS WELL AS PLANT & MACHI NERY REPAIR AS LISTED BY THE ASSESSING OFFICER AS REVENUE EXPENDIT URE. WE MAY FURTHER CLARIFY THAT ON CAPITAL PORTION OF THE ITEM REQUISITE DEPRECIATION MAY ALSO BE ALLOWED. 8. IN THE RESULT, APPEALS OF THE REVENUE IN ITAS NO . 599 & 600/CHD/2013 ARE PARTLY ALLOWED. ITAS NO. 644 & 645/CHD/CHD/2013 ASSESSEES APPEAL S 4 9 IN BOTH THESE APPEALS THE ASSESSEE HAS RAISED GRO UNDS OBJECTING TO THE DISALLOWANCE U/S 14A R.W.R. 8D. 10 AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT ASSE SSEE HAS MADE FRESH INVESTMENT TO SHARES AND MUTUAL FUNDS, THEREF ORE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE EXPENSES ATTR IBUTABLE TO THE EXEMPT INCOME SHOULD NOT BE DISALLOWED. IN RESPONS E IT WAS STATED VIDE LETTER DATED 12.11.2010 AS UNDER: IN THIS REGARD, WE SUBMIT THAT IT WAS ENTIRELY A BUSINESS DECISION DULY TAKEN AND APPROVED BY THE BOARD OF DIRECTORS TO INVEST IN THE SHARES OF OTHER COMPANIES. NOW, JUST BECAUSE THE INCOME FROM DIVIDE ND IS A TAX FREE INCOME AS PER THE ACT, THAT DOES NOT MEAN THAT THE EXPENSE HA VE NECESSARILY TO BE APPORTIONED TOWARDS OPERATING & ADMINISTRATIVE EXPE NSES TO EARN SUCH INCOME. AS YOU ARE AWARE OF THAT, OURS IS A MANUFACTURING C ONCERN AND THE INVESTMENTS ARE IN THE SHARES OF THE OTHER COMPANY AND IN VARIO US MUTUAL FUNDS WHICH ARE MAINLY IN D-MAT ACCOUNT AND WHERE THE ECS CREDIT OF DIVIDEND IS AUTOMATICALLY DONE. WE CAN COMPARE THIS DIVIDEND INCOME WITH THE INCOME FROM DIVIDENDS FROM INVESTMENTS IN SHARES OF COMPANIES BY THE INDI VIDUALS. ONCE THE INVESTMENT IS MADE, THERE ARE HARDLY ANY EXPENSES R EQUIRED TO BE INCURRED AFTER THAT. IN ANY CASE WE INFORM YOU THAT COMMISSIONER APPEALS IN THE A.Y. 2004-05 & 2006-07, HAVE MADE AN ADHOC ADDITION OF RS. 25 LAC S AGAINST THE ADDITIONS MADE BY THE ASSESSING OFFICER ON PROPORTIONATE BASI S. FURTHER TO INFORM YOU THAT HONBLE ITAT, CHANDIGARH BENCH A, VIDE ITS ORDER DATED 20 TH NOVEMBER 2009 PERTAINING TO A.Y. 2004-05, HAS DECIDED THE ISSUE I N THE FAVOUR OF THE ASSESSEE COMPANY AND ALLOWED THE DISALLOWANCE OF RS. 25 LACS MADE BY THE LD. CIT(A). THE ASSESSING OFFICER AFTER EXAMINING THE SUBMISSIO NS OBSERVED THAT EVEN EARNING OF DIVIDEND WOULD REQUIRE SOME MONITOR ING OF INVESTMENT AND OTHER FUNDS AND THEREFORE HE INVOKED RULE 8D. THEREAFTER THE ASSESSING OFFICER MADE DISALLOWANCE AMOUNTING TO RS. 144.03 LAKHS. 11 ON APPEAL IT WAS MAINLY SUBMITTED THAT ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN EARLIER YEARS. HOWEVER, IT WAS NOTICED BY THE LD. CIT(A) THAT THE ASSESSEE HAS MADE FRESH INV ESTMENTS, IT WAS ADMITTED DURING THE COURSE OF APPELLATE PROCEEDINGS THAT THE FACTS ARE DIFFERENT, THEREFORE THE ISSUE IS NOT COVERED. IT WAS FURTHER CONTENDED BEFORE THE LD. CIT(A) THAT THE INVESTMENT S WERE MADE AS PER THE BOARD RESOLUTION AND SINCE THE SHARE HOLDIN G WAS KEPT IN DEMAT ACCOUNT AND THE DIVIDEND HAS BEEN RECEIVED TH ROUGH ECS 5 THEREFORE NO DIRECT EXPENSES WERE INVOLVED. FURTHE R IT WAS SUBMITTED THAT ASSESSING OFFICER HAS NOT POINTED OU T WHICH PARTICULAR EXPENDITURE IS RELATABLE TO THE EXEMPT INCOME AND T HEREFORE INVOCATION OF RULE 8D WAS NOT JUSTIFIED. 12 THE LD. CIT(A) EXAMINING THE ISSUE IN EARLIER YE ARS OF ASSESSMENT YEAR 2004-05 AND 2006-07 AND OBSERVED T HAT THE TRIBUNAL HAS MADE ADHOC ADDITION OF RS. 25 LAKHS. HE FURTHER OBSERVED THAT THE ISSUE RELATING TO APPORTIONMENT O F THE EXPENDITURE COMES INTO PICTURE ONLY WHEN THE EXPENDITURE ARE OF CONSOLIDATED NATURE FOR WHICH LEGISLATURE HAS PROVIDED A MECHANI SM BY WAY OF RULE 8D. HE FURTHER OBSERVED THAT INVOCATION OF RU LE 8D WAS JUSTIFIED AND CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 13 BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE REIT ERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. HE FURTHER SUBMITTED THAT RULE 8D COULD NOT BE INVOKED UNLESS AND UNTIL SOME ERROR IS POINTED OUT IN THE METHOD ADOPTED BY THE A SSESSEE. 14 IN RESPECT OF ASSESSMENT YEAR 2009-10 HE REFER RED TO PAGE 13 OF THE PAPER BOOK AND POINTED OUT THAT FIRSTLY PROF IT AND LOSS ACCOUNT IS FOR THE PERIOD OF FOUR MONTHS. THIS IS SO BECAUS E THE COMPANY WAS MERGED WITH MAHINDRA GROUP. THEREFORE AS FAR AS DI SALLOWANCE UNDER CLAUSE (III) OF RULE 8D(2) WHICH IS @ % OF THE VALUE OF INVESTMENT SHOULD HAVE BEEN DETERMINED PROPORTIONAT ELY FOR FOUR MONTHS BECAUSE % WOULD RELATE TO WHOLE YEAR. SEC ONDLY DURING THE YEAR THERE WAS NO INTEREST EXPENDITURE AND IN F ACT THERE WAS INTEREST INCOME OF RS. 7.3 CRORES. THEREFORE NO DI SALLOWANCE COULD HAVE BEEN MADE IN RESPECT OF INTEREST. THIRDLY HE REFERRED TO PAGE 17 OF THE PAPER BOOK AND POINTED OUT HAT CERTAIN IN VESTMENTS HAVE BEEN MADE IN DEBT FUND AND INCOME FROM SAME, IS NOT EXEMPT. AT THIS JUNCTURE THE BENCH SPECIFICALLY ASKED WHETHER DIVIDEND FROM 6 DEBT FUND WAS EXEMPT OR TAXABLE AND HE ADMITTED THA T DIVIDEND FROM DEBT FUR WAS EXEMPT. HOWEVER, THE SALE OF SUCH UNI TS IS NOT EXEMPT. 15 ON THE OTHER HAND, THE LD. D.R. FOR THE REVENUE STRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A). 16 WE HAVE GONE THROUGH THE RIVAL SUBMISSIONS CAREF ULLY. WE AGREE WITH THE FINDING OF THE LD. CIT(A) THAT THE I SSUES ARE NOT COVERED BY THE ORDER OF THE TRIBUNAL IN EARLIER YEA RS BECAUSE IN EARLIER YEARS BEFORE ASSESSMENT YEAR 2008-09 RULE 8D WAS NOT APPLICABLE. HON'BLE BOMBAY HIGH COURT IN CASE OF G ODREJ & BOYCE MANUFACTURING VS. DCIT, 328 ITR 81 (BOM) HAS CLEAR LY HELD THAT RULE 8D HAS NO RETROSPECTIVE APPLICATION AND IS APP LICABLE ONLY FROM ASSESSMENT YEAR 2008-09. FURTHER WE FIND NO FORCE IN THE SUBMISSIONS THAT THE ASSESSING OFFICER HAS NOT GIVE N ANY REASON OR POINTED WHICH EXPENDITURE IS ALLOCABLE TO THE EXEMP T INCOME BEFORE INVOCATION OF RULE 8D. IN FACT THE ASSESSING OFFIC ER HAS OBSERVED IN THE ASSESSMENT ORDER AS UNDER: (I) THE ASSESSEE HAS CONTENDED THAT IT RECEIVED TH E DIVIDEND BY ECS CREDIT AND DEPOSITED INTO BANK ACCOUNT OF THE COMPANY AND THERE WAS NO EXPENDITURE INCURRED FOR EARNING DIVIDEND INCOME. THIS PLEA OF THE ASSESSEE IS NOT CORRECT BECAUSE WHEN THE ASSESSEE HAS INVESTED 6 CRORES APP ROX. IN DIFFERENT SECURITIES AND THE SECURITIES ARE OF SUCH A VOLATIL E NATURE THAT ONE HAS TO KEEP CONSTANT VIGIL ON THE MOMENTS OF PRICES AS WELL AS FINANCIAL GROUP VIABILITY OF THE COMPANY, MOMENT OF COMPANY, ITS SHARE PRICE ETC . HOW THE COMPANY REMAINS CONFIDENT WITHOUT EMPLOYING A SINGLE PERSON FOR THE JOB. II) SECONDLY, IN A CORPORATE ENTITY, THE COMPANY HA S TO REMAIN VIGILANT AND HAS TO KEEP TRACK OF EACH ACTIVITY UNDERTAKEN SO TH AT STAFF RESPONSIBLE HAVE TO ANSWER ANY NEGLIGENCE FOUND BY THE MANAGEMENT. III) THIRDLY, IT HAS TO KEEP SEPARATE RECORDS, FILI NG CORRESPONDENCE WITH COMPANY THEIR PORTFOLIO MANAGERS TRACK WITH STOCK E XCHANGE, ADHERENCE TO SEBI GUIDELINES, MAINTENANCE OF STATUTORY REGISTER HOLDING OF BOARD MEETING ETC. IV) FOURTHLY, THE ASSESSEE HAS POINTED OUT THAT IT HAS MADE THE INVESTMENTS WAY BACK. THIS PLEA OF THE ASSESSEE IS ALSO NOT TEN ABLE, HERE IT NEED TO BE APPRECIATED THAT IF THESE FUNDS WERE NOT BLOCKED IN THESE SECURITIES THEN THESE TO BE USED IN BUSINESS PURPOSE AND COMPANY TO THAT EXTENT MAY NOT HAVE NECESSARILY TO BORROW FROM THE BANK AND CERTAINLY, THE INTEREST BURDEN SHALL BE REDUCED APART FROM OTHER ENDURING BENEFITS DERIVED BY THE COMPANY DUE TO ITS EASIER LIQUIDITY. V) FIFTHLY, THE COMPANY HAD EMPLOYING BANK FACILITY SINCE LONG AND PAYING REGULARLY HEAVY INTEREST ON THESE BORROWED FUNDS, A S SUCH, THERE IS DIRECT NEXUS BETWEEN INVESTMENT AND BORROWED FUNDS. ACCORDINGLY, SECTION 14 A CLEARLY HAS APPLICATION IN THIS CASE. 7 THE ABOVE CLEARLY SHOW THAT THE ASSESSING OFFICER H AS GIVEN HIS REASONING. IT IS A COMMON KNOWLEDGE THAT THE INVES TMENTS IN SHARES AND MUTUAL FUND BY THE CORPORATE SECTOR REQUIRES BI G FINANCIAL EFFORTS AND ARE HANDLED BY A DEPARTMENT KNOWN AS TR EASURY OPERATIONS. IN FACT THIS IS ONE OF THE IMPORTANT F UNCTION OF THE FINANCE DEPARTMENT TO HANDLE SURPLUS FUNDS WITH RES PECT TO LIQUIDITY, SAFETY AND AT THE SAME TIME TO GENERATE MAXIMUM RET URNS. THEREFORE IT CANNOT BE SAID THAT NO EXPENDITURE IS REQUIRED T O BE INCURRED FOR MAKING INVESTMENTS AND RECEIVING DIVIDENDS. FIRSTL Y THE TREASURY DEPARTMENT HAS TO IDENTIFY THE SURPLUS FUNDS AND AV AILABILITY OF SAME AT THE VARIOUS POINTS OF TIME THEN INVESTMENTS HAVE TO BE IDENTIFIED KEEPING THE LIQUIDITY REQUIREMENTS OF THE COMPANY I N MIND AND THEN THE FINANCIAL INVESTMENTS ARE MADE AND ROTATED AS P ER THE LIQUIDITY AND OTHER REQUIREMENTS OF THE COMPANY. ALL THESE A CTIVITIES REQUIRE INVOLVEMENT OF VARIOUS MANAGEMENT AND FINANCE PERSO NNEL WHICH INVOLVES EXPENDITURE. THEREFORE TO SAY THAT THE ASS ESSEE HAS NOT INCURRED ANY EXPENDITURE OR THE ASSESSING OFFICER H AS NOT POINTED OUT ANY REASON, IS TOTALLY INCORRECT. IN VIEW OF T HIS MATTER RULE 8D HAS BEEN RIGHTLY INVOKED BY THE ASSESSING OFFICER. 17 AS FAR AS THE ISSUE REGARDING INVESTMENT IN DEBT FIND IN ASSESSMENT YEAR 2009-10 IS CONCERNED, WE FIND NO F ORCE BECAUSE DURING THE YEAR THE ASSESSEE HAS NOT SHOWN ANY TAXA BLE INCOME FROM DEBT FUNDS. IT WAS ADMITTED BEFORE US THAT DIVIDEN D INCOME EVEN FROM DEBT FUND WOULD BE EXEMPT. NOW SOME INCOME MA Y ARISE AT THE TIME OF SALE OF SUCH DEBT BUT IF THE ASSESSEE DOES NOT SELL SUCH DEBT AND SIMPLY REDEEM THE SAME THEN THAT WOULD BE TREAT ED AS REDEMPTION INCOME AND NO TAXABLE INCOME WOULD BE TH ERE. THEREFORE IN OUR OPINION, INCOME FROM DEBT FUND IS EXEMPT AND PROVISIONS OF SECTION 14A ARE RULE 8D WOULD BE APP LICABLE. 8 18 HOWEVER, AS FAR AS THE ISSUE REGARDING DISALLOW ANCE UNDER RULE 8D(III) IS CONCERNED, WE AGREE WITH THE CONTEN TION OF THE LD. COUNSEL FOR THE ASSESSEE. SINCE % DISALLOWANCE IS BASED ON THE INVESTMENT AND IT HAS TO BE TREATED DISALLOWANCE FO R THE FULL YEAR. IF AN ORGANIZATION HAS OPERATED ONLY FOR FOUR MONTHS T HEN DISALLOWANCE HAS TO BE RESTRICTED PROPORTIONATELY AND ACCORDINGL Y WE DIRECT THE ASSESSING OFFICER TO RESTRICT DISALLOWANCE U/S 8D(I I)(III) PROPORTIONATELY. 19 WE ALSO AGREE THAT IF NO INTEREST EXPENDITURE HA S BEEN INCURRED IN ASSESSMENT YEAR 2009-10 THEN NO PROPORTIONATE D ISALLOWANCE CAN BE MADE OUT OF INTEREST AND ACCORDINGLY WE DIRECT T HE ASSESSING OFFICER TO VERIFY THIS ASPECT AND THEN IF NO INTERE ST EXPENDITURE HAS BEEN INCURRED THEN NO DISALLOWANCE SHOULD BE MADE. 20. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO . 644/CHD/2013 FOR ASSESSMENT YEAR 2008-9 IS DISMISSED AND ITA NO . 645/CHD/2013 FOR ASSESSMENT YEAR 2009-10 IS PARTLY ALLOWED. 21 IN THE RESULT, REVENUES APPEALS IN ITAS NO. 599 & 600/CHD/2013 ARE PARTLY ALLOWED AND ASSESSEES APPE AL IN ITA NO. 644/CHED/2013 IS DISMISSED AND 645/CHD/2013 IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.5.2014 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 20.5.2014 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR 9