STANDARD CHARTERED INVESTMENTS & LOANS (INDIA) LTD, MUMBAI V. DCIT 1(3), MUMBAI

ITA 7070/MUM/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6862 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 05-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SIMI SAMANT
• Keywords: Capital asset; Business income; Depreciation; Earning of tax free income; Additional evidence; Question of law; Cost of acquisition; Capital receipt; Revenue expenditure; TDS; Rule 8D; Set aside; Capital Gains
• Section: 143(3); 14A; 13; 22; 147; 263; 10

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL G BENCH MUMB AI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI S. RIFAUR REHMAN, ACCOUNTANT MEMBER ITA NO. 7070/MUM/2016 (ASSESSMENT YEAR 2008-09 ) ITA NO. 7069/MUM/2016 (ASSESSMENT YEAR 2007-08 ) STANDARD CHARTERED INVESTMENTS & LOANS (INDIA) LTD., CORPORATE OFFICE, 6 TH FLOOR, C-38/39, G BLOCK, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI- 400020 PAN: AAHCS6432N VS. DC IT 1(3) AAYAKAR BHAVAN, M.K. ROAD, MARINE LINES MUMBAI-400020. APPELLANT RESPONDE NT ITA NO. 7088/MUM/2016 (ASSESSMENT YEAR 2008-09 ) ITA NO. 7089/MUM/2016 (ASSESSMENT YEAR 2007-08 ) ACIT 1(2)(1) ROOM NO. 535, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. VS. STANDARD CHARTERED INVESTMENTS & LOANS (INDIA) LTD., 6 TH FLOOR, C-38/39, CRESCENZO BUILDING, G BLOCK, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI- 400020 PAN: AAHCS6432N APPELLANT RESPONDE NT APPELLANT BY : SHRI DHANESH BAFNA WITH MS. CHANDNI SHAH WITH SHRI NISHANT SHAH (AR) RESPONDENT BY : SHRI SIMI SAMANT (CIT-DR) DATE OF HEARING : 21.01.2020 DATE OF PRONOUNCEMEN T : 29.01.2020 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THESE FOUR APPEALS OUT OF TWO CROSS APPEALS FOR ASS ESSMENT YEAR 2007- 08 AND TWO CROSS APPEALS FOR ASSESSMENT YEAR 2008-0 9 ARE DIRECTED ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 2 AGAINST THE ORDER OF LD. CIT(A)-3, MUMBAI. IN ALL T HE APPEALS, THE PARTIES HAVE RAISED CERTAIN COMMON GROUNDS OF APPEA L, THEREFORE, ALL THE APPEALS WERE CLUBBED, HEARD AND ARE DECIDED BY A CO NSOLIDATED ORDER. FOR APPRECIATION OF FACT, THE APPEALS FOR ASSESSMEN T YEAR 2007-08 IS TREATED AS LEAD CASE. THE ASSESSEE IN ITS APPEAL HA S RAISED THE FOLLOWING GROUNDS OF APPEAL: GROUND 1 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) - 3 ('CIT (AN ERRED IN REMANDING THE MATTER TO ADDITIONAL COMMISSIONER OF INCOME-TAX, RANGE 1(3), MUMBAI ('ADDL. CIT') AND NOT DELETING THE ADD ITION MADE IN RELATION TO THE LEASEHOLD REFURBISHMENT EXPENSES OF RS. 4,49,08 ,640 CLAIMED BY THE APPELLANT AS REVENUE EXPENDITURE. GROUND 2 THE LEARNED CIT (A) ERRED IN CONFIRMING THE DISALLO WANCE MADE BY ADDL. CIT IN RELATION TO THE PROVISION FOR DEPRECIATION O N INVESTMENTS OF RS. 26,554,000 ON THE BASIS THAT INVESTMENTS IN DEBENTU RES UNDER CONSIDERATION IS SHOWN UNDER THE HEAD 'INVESTMENTS' AND NOT UNDER THE HEAD 'STOCK-IN TRADE' IN ITS BALANCE-SHEET. THE APPELLANT SUBMITS THAT THE LEARNED CIT(A) FAILE D TO APPRECIATE THE SUBMISSIONS MADE BY THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDINGS. THE LEARNED CIT(A) HAS OBSERVED THAT SOME CRITICAL QUESTIONS REMAINED UNEXPLAINED BY THE APPELLANT. IN THIS REGARD, THE A PPELLANT SUBMITS THAT THE LEARNED CIT(A) HAS NOT GRANTED ANY REASONABLE OPPOR TUNITY OF HEARING FOR THE SAME. GROUND 3 THE LEARNED CIT(A) ERRED IN REMANDING THE MATTER TO ADDL. CIT AND NOT DELETING THE ADDITION OF RS. 22,000,000 IN RELATION TO THE PROVISION FOR DOUBTFUL ADVANCES DEBITED TO PROFIT & LOSS ACCOUNT. GROUND 4 ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 3 THE LEARNED CIT(A) ERRED IN GRANTING ONLY PARTIAL R ELIEF ON THE DISALLOWANCE OF EXPENSES MADE BY THE ADDL. CIT UNDER SECTION 14A OF THE INCOME-TAX ACT, 1961 CONSIDERING THE SAME AS EXPENSES INCURRED IN RELATION TO EARNING THE EXEMPT INCOME. GROUND 5 THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION O F ADDL. CIT IN GRANTING TAX DEPRECIATION ON PRINTERS, CABLE LINES AND OTHER CONNECTIVITY CHARGES AT 15% AS AGAINST 60% THEREBY DISALLOWING THE DEPRECIA TION CLAIM OF RS. 45,46,456/-. 2. THE REVENUE IN ITS CROSS APPEAL HAS RAISED THE FOLL OWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 18,76,06,128/- BY DEVIATING FROM HIS PREDECESSOR'S ORDER FOR AY 2006- 07,WHEREIN SIMILAR ADDITION HAS BEEN UPHELD ON SIMILAR FACTS? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) HAS ERRED IN TREATING THE INTEREST CREDITED IN THE BOOKS AND NOT OFFERED TO TAX, AS PART OF THE CAPITAL RECEIPTS, WI THOUT GOING INTO THE MERIT AS TO HOW IT IS A CAPITAL RECEIPT AND NOT REVENUE RECE IPT? 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) HAS ERRED IN NOT HOLDING THE AMOUNT OF THESE RECEIPTS AS INTEREST INCOME WHEN ADMITTEDLY SUCH RECEIPTS ARE PART OF FI XED RETURNS AGREED BETWEEN THE ASSESSEE COMPANY AND THE PARTY FROM WHO M PREFERENCE SHARES WERE PURCHASED, AS ASSESSEE ITSELF, ADMITTED IT AS REVENUE RECEIPT AND SUCH RECEIPTS DO NOT EMANATE FROM PROFIT RESERVES AND HE NCE CANNOT BE TREATED AS DIVIDEND RECEIPTS? 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFF ICER TO RE-COMPUTE THE DISALLOWANCE U/S. 14A R.W. RULE 8D(2)(II) OF THE IT , ACT, WHEN THE SECTION 14A IS EXPLICIT IN MENTIONING THAT THE DISALLOWANCE CAN BE MADE EVEN IF THERE IS NO EXEMPT INCOME EARNED BY THE ASSESSEE'? 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS CORRECT IN DIRECTING THE ASSESSING OF FICER TO RESTRICT THE ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 4 DISALLOWANCE U/S. 14A R.W. RULE 8D(2)(III) OF THE I T, ACT TO 50% OF THE ADMINISTRATIVE EXPENSES WHEN THERE IS NO SUCH PROVI SION UNDER THE ACT? ITA NO. 7069/MUM/2016 FOR A.Y. 2007-08 BY ASSESSEE 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS NO N-BANKING FINANCE COMPANY. THE ASSESSMENT FOR ASSESSMENT YEAR 2007-08 WAS COMPLETED ON 28.12.2010. THE ASSESSING OFFICER WHIL E PASSING THE ASSESSMENT ORDER MADE THE FOLLOWING ADDITIONS/DISAL LOWANCE: 1. LEASEHOLD / REFURBISHMENT EXPENSES RS. 4,4 9,08,640/- 2. INCOME ACCRUED ON PREFERENCE SHARES RS. 18,7 6,06,128/- 3. DEBT ISSUE EXPENSES RS. 1,83,32,000/- 4. PROVISION FOR DEPRECIATION ON INVESTMENTS RS. 265 ,54,000/- 5. PROVISION FOR DOUBTFUL ADVANCES RS. 2,20,00,000/- 6. DISALLOWANCE UNDER SECTION 14A RS. 7,81,083/- 7. EXCESS TAX DEPRECIATION ON COMPUTERS RS. 4 5,46,456/- 4. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE WAS G IVEN PARTIAL RELIEF ON LEASE HOLD REFURBISHMENT EXPENSES AND ON DISALLO WANCE UNDER SECTION 14A. THUS, FURTHER AGGRIEVED BY THE ORDER O F LD. CIT(A) BOTH THE PARTIES HAVE FILED THEIR RESPECTIVE APPEAL BY R AISING THE GROUNDS OF APPEAL AS NARRATED ABOVE. 5. WE HAVE HEARD THE SUBMISSION OF BOTH THE PARTIES AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. 6. GROUND NO.1 RELATES IN RELATION TO LEASE-HOLD REFUR BISHMENT EXPENSES. THE LD. AR OF THE ASSESSEE SUBMITS THAT THIS GROUND OF APPEAL IS COVERED IN FAVOUR OF ASSESSEE IN ASSESSEES OWN CAS E FOR ASSESSMENT YEAR 2006-07 IN ITA NO. 279/MUM/2011 DATED 02.06.20 17 WHEREIN ON ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 5 SIMILAR GROUND OF APPEAL, THE ASSESSEE WAS ALLOWED RELIEF. THE LD. AR OF THE ASSESSEE SUBMITS THAT THERE IS NO MATERIAL C HANGE IN THE EXPENSES INCURRED FOR THE YEAR UNDER CONSIDERATION. THEREFOR E, THE ASSESSEE IS ENTITLED FOR ALL EXPENSES INCURRED BY THE ASSESSEE. 7. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE (DR) FOR THE REVENUE RELIED UPON THE ORDER OF LOWER AUTHORITIES. 8. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE NOTED THAT ON SIMILAR SET OF FACT, THE ASSESSEE CLAIMED SIMILAR EXPENSES FOR ASSESSMEN T YEAR 2006-07. THE ASSESSING OFFICER DISALLOWED THE EXPENSES; HOWE VER, ON APPEAL BEFORE THE TRIBUNAL, THE FOLLOWING ORDER WAS PASSED . 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED RELEVANT MATERIAL ON RECORD. IT IS UNDISPUTED FACT THAT THE ASSESSEE, BE ING NBFC, WAS ALREADY ENGAGED IN CORPORATE FINANCING. IT PROPOSED TO ENTE R INTO RETAIL FINANCE SEGMENT AND DURING THE COURSE, INCURRED THE IMPUGNE D EXPENDITURE. THEREFORE, AS RIGHTLY NOTED BY LD. CIT(A), THERE WA S NO NEW LINE OF BUSINESS. FROM THE MATERIAL AVAILABLE ON RECORD, IT IS EVIDENT THAT IMPUGNED EXPENDITURE WAS INCURRED AGAINST SEVERAL PROPERTIES LOCATED OVER DIFFERENT PLACES AND WERE INCURRED MAINLY ON ACCOUNT OF INTER IOR WORK, ELECTRICAL WORKS, CABLING & WIRING, CARPETS, SIGNAGE EXPENSES, ARCHITECT'S FEES, BROKERAGE EXPENSES, CONSULTANTS' FEES ETC. WHICH PR IMA FACIE, ARE EXPENSES OF REVENUE IN NATURE. IT IS WELL SETTLED PRINCIPLE THA T ENTRIES IN THE BOOKS OF ACCOUNTS ARE NOT CONCLUSIVE / DETERMINATIVE OF TAXA BILITY OF INCOME AND THEREFORE, ISSUE OF TAXABILITY HAS TO BE ADJUDGED W ITHIN THE STATUTORY FRAMEWORK ONLY. AT THIS JUNCTURE, IT WOULD BE PRUDE NT TO REPRODUCE THE RELEVANT OBSERVATIONS OF APEX COURT IN CIT VS. MADR AS AUTO SERVICES (P) LTD. [SUPRA]:- '11. ALL THESE CASES HAVE LOOKED UPON EXPENDITURE W HICH DID BRING ABOUT SOME KIND OF AN ENDURING BENEFIT TO THE COMPANY AS REVENUE EXPENDITURE WHEN THE EXPENDITURE DID NOT BRING INTO EXISTENCE A NY CAPITAL ASSET FOR THE COMPANY. THE ASSET WHICH WAS CREATED BELONGED TO SO MEBODY ELSE AND THE COMPANY DERIVED AN ENDURING BUSINESS ADVANTAGE BY E XPENDING THE AMOUNT. IN ALL THESE CASES, THE EXPENSES HAVE BEEN LOOKED UPON AS HAVING BEEN MADE FOR THE PURPOSE OF CONDUCTING THE BUSINES S OF THE ASSESSEE MORE ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 6 PROFITABLY OR MORE SUCCESSFULLY. IN THE PRESENT CAS E ALSO, SINCE THE ASSET CREATED BY SPENDING THE SAID AMOUNTS DID NOT BELONG TO THE ASSESSEE BUT THE ASSESSEE GOT THE BUSINESS ADVANTAGE OF USING MO DERN PREMISES AT A LOW RENT, THUS SAVING CONSIDERABLE REVENUE EXPENDITURE FOR THE NEXT 39 YEARS, BOTH THE TRIBUNAL AS WELL AS THE HIGH COURT HAVE RI GHTLY COME TO THE CONCLUSION THAT THE EXPENDITURE SHOULD BE LOOKED UP ON AS REVENUE EXPENDITURE.' THEREFORE, WE FIND THAT THE ASSESSEE MAY HAVE RECEI VED BENEFIT OF ENDURING NATURE BUT THE SAME WAS NOT SOLE AND DECISIVE FACTO R OF DETERMINING THE NATURE OF IMPUGNED EXPENDITURE. THE IMPUGNED EXPENS ES WERE ONLY TO CONDUCT THE BUSINESS MORE PROFITABLY AND THEREFORE, ALLOWABLE TO THE ASSESSEE AS REVENUE EXPENDITURE. THEREFORE, AFTER C ONSIDERING ALL THE FACTORS AS DISCUSSED ABOVE AND NOTING THAT THE IMPUGNED EXP ENDITURE DID NOT BRING INTO EXISTENCE ANY CAPITAL ASSET, WE SEE NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) AND HENCE, THE EXPENDITU RE BEING REVENUE IN NATURE AND INCURRED TOWARDS REFURBISHMENT OF LEASEH OLD PROPERTIES WERE ALLOWABLE TO THE ASSESSEE AS REVENUE EXPENDITURE. T HE REVENUE'S APPEAL STANDS DISMISSED WITH A DIRECTION TO LD. AO TO VERI FY THE FACT THAT THE ASSESSEE HAS DISALLOWED DEPRECIATION AGAINST THE SA ME IN SUCCEEDING YEARS AND THE ASSESSEE, IN TURN, IS ALSO DIRECTED TO DEMO NSTRATE THE SAME BEFORE LD. AO. 9. CONSIDERING THE DECISION OF TRIBUNAL ON SIMILAR SET OF FACT WHEN THE SIMILAR EXPENSES WERE ALLOWED AS REVENUE EXPENDITUR E IN FAVOUR OF ASSESSEE, NO VARIATION IN FACTS NOR ANY CONTRARY LA W IS BROUGHT IS BROUGHT TO OUR NOTICE THEREFORE, RESPECTFULLY FOLLO WING THE DECISION OF CO-ORDINATE BENCH OF TRIBUNAL, THIS GROUND OF APPEA L IS ALLOWED IN FAVOUR OF ASSESSEE. 10. GROUND NO.2 RELATES TO DISALLOWANCE OF PROVISION FO R DEPRECIATION ON INVESTMENT. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE INVESTMENT WAS HELD AS CURRENT INVESTMENT WITH THE INTENTION TO TRADE. THE ASSESSEE IS A NON-BANKING FINANCE COMPANY AND ITS MAIN OBJECT C ONSIST OF TO ACQUIRE, HOLD, DISPOSE DEAL AND TRADE IN THROUGH SU BSCRIPTION, THEREFORE, PURCHASE, SALE, EXCHANGE OR OTHERWISE IN THE NAME O F ASSESSEE-COMPANY ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 7 INCLUDING OF SHARE, STOCK, DEBENTURE AND DEBENTURE STOCK. THE DEBTS SECURITIES WERE PURCHASED BY ASSESSEE IN ITS ORDINA RY COURSE OF BUSINESS WITH THE INTENTION TO TRADE AND ARE SHOWN IN THE CU RRENT INVESTMENT. THE SECURITIES ARE VALUED AT LOWER WEIGHT, THE AVERAGE COST OF MARKET VALUE, DETERMINED SEPARATELY FOR EACH CATEGORY OF INVESTME NT HAS SHOWN IN PAGE NO. 13 OF PAPER BOOK. THE REVENUE HAS ALLOWED THE PROVISION FOR DEPRECIATION IN SOME ASSESSMENT YEAR AND DISALLOWED IN SOME OTHER ASSESSMENT YEAR. FURTHER ON SALE OF THESE INVESTMEN TS, THE DEPARTMENT HAS ALLOWED PROFIT/LOSS AS INCOME/LOSS. THERE IS IN CONSISTENT APPROACH FOLLOWED BY REVENUE. THE LD. AR OF THE ASSESSEE FUR NISHED THE DETAILS SHOWING THE TREATMENT BY REVENUE FOR PROVISION OF D EPRECIATION OF INVESTMENT AND PROFIT/LOSS ON SALE OF INVESTMENT IN THE FOLLOWING MANNER: ASSESSMENT YEAR INTIMATION UNDER SECTION 143(1)/ASSESSMENT AMOUNT OF PROVISION TREATMENT OF PROVISION BY DEPARTMENT AMOUNT OF PROFIT/LOSS ON SALE OF INVESTMENT TREATMENT OF PROFIT/LOSS ON SALE OF INVESTMENT 2005-06 ASSESSMENT U/S 147 32,51,57,000 DISALLOWED 8,25,000 ACCEPTED AS BUSINESS INCOME 2006 - 07 ASSESSMENT U/S 143(3) 10,56,44,000 ACCEPTE D AS ALLOWABLE DEDUCTION (1,60,171,000) ALLOWED AS BUSINESS LOSS 2007-08 ASSESSMENT U/S 143(3) 2,65,54,000 DISALLOWED (7,96,94,000) ALLOWED AS BUSINESS LOSS 2008 - 09 ASSESSMENT U/S 143(3) 10,14,000 DISALLOWED - - 2009 - 10 ASSESSMENT U/S 143(3) (1,41,000 ) PROVISION REVERSED AND OFFERED TO TAX AND ACCEPTED BY THE DEPARTMENT - - 2020-11 ASSESSMENT U/S 61,66,000 ACCEPTED AS - - ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 8 143(3) ALLOWABLE DEDUCTION NOTE 1: THE ASSESSMENT OF AY 2009-10 WAS REOPENED U /S 147 OF THE INCOME-TAX ACT, 1961. HOWEVER, NO ADDITION ON ACCOUNT OF PROVISION FOR DE PRECIATION ON INVESTMENT WAS MADE BY THE ASSESSING OFFICER. 11. THE LD. AR OF THE ASSESSEE SUBMITS THAT PROVISION F OR LOSS ON VALUATION OF CURRENT INVESTMENT OR LOSS ON SALE OF CURRENT IN VESTMENT IS ALLOWABLE DEDUCTION WHILE COMPUTING INCOME UNDER THE HEAD PR OFIT & GAINS OF BUSINESS OR PROFESSION. IN SUPPORT OF HIS SUBMISSI ON, THE LD. AR OF THE ASSESSEE RELIED UPON THE FOLLOWING DECISION: DDIT VS. CHOHUNG BANK [126 ITD 448 (MUMBAI TRIB.)] CIT VS. BANK OF BARODA [262 ITR 334 (BOMBAY HC)] YES BANK LTD. VS. DCIT [46 ITR (T) 121 (MUMBAI TRIB .)] JCIT VS. RABO INDIA FINANCE LIMITED (ITA NO.3169/M/ 2011) 12. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. DURING THE ASSESSMENT , THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS DEBITED AMOUNT OF RS. 2,65,54,000/- TOWARDS PROVISION FOR DEPRECIATION ON INVESTMENT IN ITS PROFIT & LOSS A/C. THE ASSESSEE WAS ASKED TO EXPLAIN THE TREATMEN T OF PROVISION FOR DEPRECIATION ON INVESTMENT IN ITS PROFIT & LOSS A/C . THE ASSESSEE FILED ITS REPLY AS RECORDED BY ASSESSING OFFICER IN PARA- 7.1 OF THE ASSESSMENT ORDER. IN THE REPLY, THE ASSESSEE STATED THAT IT IS A NON-BANKING FINANCE COMPANY, ALL NBFCS HAS TO FOLLOW ACCOUNTING STANDA RD-13 (AS-13) AND RESERVE BANK OF INDIA (RBI) GUIDELINES FOR CLAS SIFYING ITS ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 9 INVESTMENT PORTFOLIO, THE ACCOUNTING STANDARD PERMI TS TO NON BANKING FINANCE COMPANY (NBFC) TO CLASSIFY ITS INVESTMENT I NTO CURRENT INVESTMENT IN LONG TERM INVESTMENT. ON CERTAIN CRIT ERIA AND INTENDS BEHIND MAKING AND HOLDING THE INVESTMENT. THE ASSES SEE HAS CLASSIFIED ITS INVESTMENT INTO NON-CONVERTIBLE DEBENTURE INTO CURRENT INVESTMENT FOLLOWING THE AS-13 WITH INTEND TO HOLD THEM FOR TH E PURPOSE OF TRADING. THE MEMORANDUM OF ASSOCIATION OF ASSESSEE ALSO INCLUDED TO BUSINESS OF DEALING AND TRADING IN SHARE, STOCK, DE BENTURE AND DEBENTURE STOCK. THE ASSESSEE SUBMITS THAT CURRENT INVESTMENTS ARE AS PER THE ACCOUNTING STANDARD. THE MARKET VALUE IS DE TERMINED TAKING CERTAIN REFERENCE QUOTE FROM THE BROKERS TO REFLECT THE VALUE OF THESE SECURITIES AS ON 31.03.2006 AND 31.03.2007, THE REF ERENCE QUOTES ARE CONSIDERED AS MARKET RATES FOR SUB-DEBTS AT THE END OF EACH YEAR. THE ASSESSEE HAS DEBITED THE DIMINUTION IN THE VALUE OF INVESTMENT OF RS. 2.65 CRORE TO ITS PROFIT & LOSS A/C FOR THE FINANCI AL YEAR UNDER CONSIDERATION. THE CONTENTION OF ASSESSEE WAS NOT A CCEPTED BY ASSESSING OFFICER BY TAKING VIEW THAT THE INVESTMEN T ARE SHOWN AS INVESTMENT AND NOT AS STOCK-IN-TRADE IN THE BALANCE -SHEET OF THE COMPANY. THE DEBENTURE BONDS ARE STEEL CARRIED IN T HE BOOKS OF ACCOUNTS AT THE COST OF ACQUISITION. THE ASSESSEE H AS DEBITED THE SAID DIFFERENCE BETWEEN THE MARKET VALUE AND COST ACQUIS ITION AS PROVISION FOR DEPRECIATION. THIS AMOUNT IS PURELY NOTIONAL AN D CANNOT BE JUGGLERY ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 10 AND DISALLOWED THE SAME. THE LD. CIT(A) CONCUR WITH THE FINDING OF ASSESSING OFFICER BY TAKING VIEW THAT ASSESSEE FAIL ED TO EXPLAIN AS TO WHETHER IT HAS CREDITED THE APPRECIATED VALUE OF TH E INVESTMENT IN EARLIER YEARS BEFORE CLAIMING DEPRECIATION IN THE Y EAR UNDER CONSIDERATION. 14. BEFORE US, THE LD. AR OF THE ASSESSEE VEHEMENTLY AR GUED THAT THE REVENUE HAS ACCEPTED THE CLAIM IN ASSESSMENT YEAR 2 006-07, 2009-10 & 2010-11. HOWEVER, DISALLOWED IN ASSESSMENT YEAR 2 005-06, 2007- 08 & 2008-09 ONLY. THE LD. AR OF THE ASSESSEE STRON GLY RELIED UPON THE VARIOUS DECISION OF TRIBUNAL AND HIGH COURTS AS NOT ED ABOVE. IN CASE OF DDIT VS. CHOHUNG BANK (SUPRA), THE CO-ORDINATE B ENCH OF TRIBUNAL WHILE CONSIDERING THE ISSUE OF LOSS ON SALE OF SECU RITY AS BUSINESS LOSS PASSED THE FOLLOWING ORDER: 5. THE NEXT ISSUE TAKEN UP BY THE REVENUE IS AGAINST THE ALLOWING OF LOSS ON SALE OF SECURITIES AS BUSINESS LOSS IN ASSESSMENT YEAR 1999-2000. THE FACTS APROPOS THIS GROUND ARE THAT THE ASSESSEE INC URRED LOSS OF RS. 77,000 ON SALE OF GOVERNMENT SECURITIES. THE ASSESSING OFF ICER OBSERVED THAT IT WAS A CAPITAL LOSS LIABLE TO BE DISALLOWED. ON BEIN G SHOW CAUSED, THE ASSESSEE STATED THAT THE GOVERNMENT SECURITIES WERE HELD BY THE BANK AS 'CURRENT INVESTMENT' IN ACCORDANCE WITH THE NORMS L AID DOWN BY THE RESERVE BANK OF INDIA. IT WAS FURTHER STATED THAT B UYING AND SELLING OF SECURITIES WAS A NORMAL BUSINESS ACTIVITY OF A BANK ING COMPANY AND THE CURRENT INVESTMENTS WERE NOTHING BUT STOCK-IN-TRAD E. THE ASSESSING OFFICER NOTED THAT SINCE THE ASSESSEE HAD ITSELF SH OWN THE SECURITIES AS 'CURRENT INVESTMENTS', THEN ANY INCOME/LOSS FROM IN VESTMENT WAS TO BE DEALT WITH UNDER THE HEAD 'CAPITAL GAINS. THUS, HE TREATED THE SAID SUM AS CAPITAL LOSS AND DID NOT GRANT DEDUCTION AS CLAIMED BY THE ASSESSEE AS BUSINESS LOSS. THE LD. CIT(A) ACCEPTED THE CONTENTI ON ADVANCED ON BEHALF OF THE ASSESSEE AND ALLOWED DEDUCTION. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E RELEVANT MATERIAL ON RECORD. THE ASSESSEE IS A BANK GOVERNED BY THE R ULES OF THE RESERVE BANK OF INDIA. AS PER SUCH GUIDELINES, THE SECURITI ES ARE REQUIRED TO BE DIVIDED INTO TWO CATEGORIES, VIZ., ( A ) PERMANENT INVESTMENT, AND ( B ) CURRENT ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 11 INVESTMENT. THE DISTINCTION BETWEEN THE TWO IS THAT THE SECURITIES PURCHASED WITH THE INTENTION OF RETAINING IT TILL T HE MATURITY OF THE SECURITY ARE TO BE CLASSIFIED AS PERMANENT INVESTMENT, WHE REAS THE SECURITIES ACQUIRED BY THE BANK WITH THE INTENTION OF TRADING BY TAKING ADVANTAGE OF SHORT-TERM PRICE/INTEREST, ARE TO BE CONSIDERED AS CURRENT INVESTMENTS. THE SECURITIES FROM WHICH THE ASSESSEE HAS INCURRED LOS S WERE DEPICTED AS CURRENT INVESTMENT AS HAS ALSO BEEN NOTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. A CERTIFICATE FROM CHARTERED ACCO UNTANT CERTIFYING THAT THE SECURITIES SOLD BY THE ASSESSEE WERE UNDER 'CUR RENT INVESTMENT' CATEGORY HAS BEEN GIVEN TO THE LOWER AUTHORITIES. W HEN IT IS SO THE SECURITIES IN THE NATURE OF CURRENT INVESTMENTS AUT OMATICALLY BECOME THE STOCK-IN-TRADE OF THE ASSESSEE AND NOT INVESTMENT. IT IS A SETTLED LEGAL POSITION THAT THE NOMENCLATURE GIVEN BY THE PARTIES TO A PARTICULAR TRANSACTION IS NOT MATERIAL TO DECIDE ITS CHARACTER . RATHER IT IS THE TRUE NATURE OF THE TRANSACTION, WHICH MATTERS. WHEREAS A NY PROFIT OR LOSS FROM THE SALE OF INVESTMENT IS TAXED UNDER THE HEAD C APITAL GAIN, SUCH PROFIT OR LOSS FROM THE SALE OF STOCK-IN-TRADE IS CONSID ERED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE INSTANT LOSS OF RS. 77,000, ARISING FROM THE SALE OF STOCK-IN-TRADE REF ERRED TO AS CURRENT INVESTMENTS, IN OUR CONSIDERED OPINION HAS BEEN RI GHTLY HELD BY THE LD. CIT(A) TO BE A BUSINESS LOSS. ACCORDINGLY, THIS GRO UND IS NOT ACCEPTED. 15. THE HONBLE BOMBAY HIGH COURT IN CIT VS. BANK OF BA RODA (SUPRA) WHILE CONSIDERING THE QUESTION OF LAW WHETHER ON FA CTS AND CIRCUMSTANCES, THE TRIBUNAL WAS RIGHT IN HOLDING TH AT ASSESSEE WAS ENTITLED FOR DEDUCTION ON ACCOUNT OF DEPRECIATION I N VALUE OF INVESTMENT AND CONSEQUENTLY DEBITED THE DISALLOWANCE OF RS. ( XXX) ANSWERED THE QUESTION IN FAVOUR OF ASSESSEE BY PASSING THE FOLLO WING ORDER: FOR APPRECIATION OF FACTS AND SUBMISSION IS EXTRACTED B ELOW: 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION ON ACCOUNT OF DEPRECIATION IN THE VALUE OF INVESTMENTS AND, CO NSEQUENTLY, DEBITING DISALLOWANCE OF RS. 11,82,35,007?' FACTS 2. ASSESSEE IS A NATIONALISED BANK. ASSESSEE-BANK HAD IN ITS POSSESSION, DURING THE RELEVANT ASSESSMENT YEAR, SHARES AND SEC URITIES WORTH SEVERAL CRORES. THE METHOD OF VALUATION FOLLOWED BY THE ASS ESSEE WAS TO VALUE INVESTMENTS AT COST OR MARKET VALUE WHICHEVER WAS L OWER. DURING THE YEAR OF ACCOUNT, DEPRECIATION WITH REGARD TO SECURITIES HELD BY THE ASSESSEE WAS TO THE TUNE OF RS. 11,82,35,007. THE ASSESSEE-BANK CLAIMED DEDUCTION. ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 12 THIS WAS DISALLOWED BY THE ITO. THE ASSESSEE-BANK W ENT IN APPEAL TO THE COMMISSIONER OF INCOME-TAX (APPEALS), WHO TOOK THE VIEW THAT THE SAID INVESTMENTS WERE RIGHTLY VALUED AT THE END OF THE Y EAR AT COST OR MARKET VALUE WHICHEVER WAS LOWER AND THE DIFFERENCE ARISIN G AS A RESULT OF THIS VALUATION HAD TO BE ALLOWED TO THE ASSESSEE AS A LO SS. THE ASSESSEE CARRIES ON BUSINESS AS A BANKING COMPANY. THIS ORDER OF CIT (APPEALS) WAS CONFIRMED BY THE TRIBUNAL. THEREFORE, THE DEPARTMEN T HAS COME BY WAY OF THIS REFERENCE. ARGUMENTS 3. MR. R.V. DESAI, LEARNED SENIOR COUNSEL APPEARING O N BEHALF OF THE DEPARTMENT CONTENDED THAT THE SECURITIES WERE NOT H ELD AS STOCK IN TRADE. THAT, THEY WERE HELD AS INVESTMENTS AND, CONSEQUENT LY, THE ASSESSEE-BANK WAS NOT ENTITLED TO VALUE SUCH INVESTMENTS ON THE P RINCIPLE OF COST OR MARKET VALUE WHICHEVER WAS LOWER. IT WAS ARGUED THA T THE SECURITIES WERE HELD BY THE ASSESSEE-BANK AS PERMANENT INVESTMENTS. FINDINGS 4. WE DO NOT FIND ANY MERIT IN THIS ARGUMENT. IN THE CASE OF UCO BANK V. CIT [1999] 240 ITR 355 1 , THE ASSESSEE-BANK HAD SUBMITTED RETURN FOR ASSESSMENT YEAR 1982-83 CONTENDING THAT THERE W AS A NOTIONAL LOSS OF RS. 7.45 CRORES ON ACCOUNT OF CLOSING STOCK OF SECU RITIES VALUED AT MARKET PRICE WHICH FELL BELOW THE COST. THE ITO ACCEPTED T HE SAID LOSS VIDE ASSESSMENT ORDER DATED 19-3-1985. HOWEVER, THE COM MISSIONER OF INCOME-TAX INTERVENED BY ORDER DATED 9-3-1987 UN DER SECTION 263 OF THE INCOME-TAX ACT. BY THE SAID ORDER, THE COMMISSIONER SET ASIDE THE ORDER OF ASSESSMENT HOLDING THAT THE ASSESSEE-BANK HAD NO RI GHT TO CALCULATE PROFIT OR LOSS ARISING OUT OF INVESTMENT TRADING ACCOUNT A S THE SAID ACCOUNT DID NOT FORM PART OF FINAL ACCOUNT OF THE ASSESSEE-BANK . THAT, SINCE INVESTMENT TRADING ACCOUNT WAS NOT INCORPORATED IN THE FINAL A CCOUNT, THE ASSESSEE- BANK HAD NO RIGHT TO CALCULATE PROFIT OR LOSS ARISI NG OUT OF INVESTMENT TRADING ACCOUNT. IN THAT MATTER, THE ASSESSEE-BANK WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THE LOSS CLAIME D BY THE ASSESSEE WAS NOT DEBITED IN THE PROFIT AND LOSS ACCOUNT. AGAINST THE ORDER OF THE COMMISSIONER UNDER SECTION 263 OF THE ACT, THE ASSE SSEE-BANK PREFERRED AN APPEAL TO THE TRIBUNAL WHICH TOOK THE VIEW THAT THE ASSESSEE HAD CLAIMED THE LOSS BY FOLLOWING THE SAME METHOD WHICH IT WAS FOLLOWING FOR LAST 30 YEARS. CONSEQUENTLY, THE ORDER PASSED BY TH E COMMISSIONER UNDER SECTION 263 WAS SET ASIDE. AGAINST THE SAID ORDER O F THE TRIBUNAL, TWO QUESTIONS WERE REFERRED FOR OPINION TO THE HIGH COU RT. ANSWERING THE SAID QUESTIONS, THE HIGH COURT OBSERVED THAT THE ASSESSE E-BANK HAD NOT VALUED THE STOCK OF SHARES AND SECURITIES IN ITS BOOKS OF ACCOUNT IN ACCORDANCE WITH THE METHOD OF 'COST OR MARKET PRICE WHICHEVER IS LOWER'; IF THIS METHOD WAS NOT FOLLOWED IN PREPARING INVESTMENT TRA DING ACCOUNT, THEN THE ASSESSEE-BANK CANNOT CLAIM NOTIONAL LOSS/NOTION AL METHOD OF STOCK VALUATION FOR COMPUTING INCOME. THE HIGH COURT TOOK THE VIEW THAT THE BOOK RESULTS COULD BE REJECTED BY THE ITO UNDER SEC TION 145(1) OF THE INCOME-TAX ACT IF THE METHOD ADOPTED BY THE ASSESSE E-BANK DID NOT DISCLOSE A PROPER AND TRUE INCOME. THAT, MERELY BEC AUSE IN THE PAST THE SYSTEM FOLLOWED BY THE ASSESSEE-BANK WAS NOT QUESTI ONED WAS NO GROUND ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 13 TO SAY THAT IT SHOULD BE ACCEPTED FOR ALL TIMES. CO NSEQUENTLY, THE MATTER CAME BEFORE THE SUPREME COURT. THE APEX COURT CAME TO THE CONCLUSION THAT PREPARATION OF BALANCE SHEET BY THE ASSESSEE-B ANK WAS GOVERNED BY BANKING REGULATION ACT, 1949. THAT, UNDER THE THIRD SCHEDULE TO THAT ACT, BALANCE SHEET AND PROFIT & LOSS ACCOUNT HAVE BEEN P RESCRIBED. THAT, IN THE PRESCRIBED FORM, THERE IS A COLUMN OF 'PROPERTY & A SSETS'. ITEM 4 PROVIDES FOR INVESTMENTS (MODE OF VALUATION I.E. COST OR MARKET VALUE). NOTE ( F ) IN COLUMN 4 STATES THAT WHERE THE VALUE OF INVEST MENTS WAS HIGHER THAN THE MARKET VALUE, THE MARKET VALUE SHALL BE SH OWN SEPARATELY. FURTHER, UNDER SECTION 53 OF THE BANKING REGULATION ACT, 194 9, THE CENTRAL GOVERNMENT ON RECOMMENDATION OF RBI HAD ISSUED A NO TIFICATION FOR BANKS IN RESPECT OF ASSESSMENTS TO THE EFFECT THAT NOTE ( F ) SHALL NOT APPLY TO UCO BANK IN RESPECT OF BALANCE SHEET. ON THE BASIS OF THE SAID NOTIFICATION, UCO BANK DID NOT MENTION THE MARKET V ALUE OF THE INVESTMENTS. IN THE CIRCUMSTANCES, THE SUPREME COUR T CAME TO THE CONCLUSION THAT FROM THE FORM OF PRESCRIBED BALANCE SHEET, IT WAS EVIDENT THAT NATIONALISED BANKS WERE DIRECTED TO PUT THE VA LUE OF SHARES AND SECURITIES AT COST AND IF THE MARKET VALUE WAS LOWE R THAN THE COST THEN, IT WAS TO BE SHOWN SEPARATELY IN THE BRACKETS. BEFORE THE SUPREME COURT, HOWEVER, IT WAS ARGUED ON BEHALF OF THE DEPARTMENT THAT THE BALANCE SHEET/AUDITED ACCOUNTS MAINTAINED ON THE BASIS OF I NVESTMENT IN SHARES AT COST WOULD NOT DISCLOSE THE REAL PROFIT/LOSS OF THE BANK IN VIEW OF THE FACT THAT DEPRECIATION IN THE VALUE OF THE SHARES OR FAL L IN THE MARKET PRICE OF SHARES AND SECURITIES WAS NOT PROVIDED FOR IN THE A UDITED ACCOUNTS. ON THE OTHER HAND, IT WAS ARGUED ON BEHALF OF THE ASSESSEE -BANK THAT EVEN THOUGH IN THE BALANCE SHEET THE MARKET PRICE OF SHARES AND SECURITIES WAS NOT MENTIONED YET, FOR DETERMINING THE REAL INCOME OF T HE ASSESSEE, THE SAID PRICE WAS REQUIRED TO BE TAKEN INTO ACCOUNT. THAT, FOR LAST 30 YEARS, THE ASSESSEE-BANK WAS SUBMITTING INCOME-TAX RETURNS AFT ER TAKING INTO ACCOUNT THE MARKET PRICE OF SUCH SHARES AND SECURITIES WHIC H WAS ACCEPTED BY THE DEPARTMENT. IT WAS SUBMITTED THAT NOT MAKING PROPER ENTRIES IN THE BALANCE SHEET COULD HARDLY BE A GROUND FOR NOT ASSESSING TH E REAL INCOME. THE SUPREME COURT CAME TO THE CONCLUSION ON THE ABOVE A RGUMENTS THAT WHERE THE MARKET VALUE OF SHARES AND SECURITIES HAD FALLE N BELOW THE COST BEFORE THE DATE OF VALUATION AND WHERE ON THE DATE OF VALU ATION, THE MARKET VALUE IS LESS THAN THE ACTUAL COST THEN THE ASSESSEE WAS ENTITLED TO VALUE THE ARTICLES AT MARKET PRICE AND THE ASSESSEE WAS ENTIT LED TO CLAIM THE LOSS WHICH THE ASSESSEE WOULD PROBABLY INCUR AT THE TIME OF SALE OF SHARES AND SECURITIES. THAT, WHICHEVER METHOD THE ASSESSEE ADO PTS, IT SHOULD DISCLOSE THE TRUE PICTURE OF PROFITS AND GAINS. THAT, FOR DE TERMINING THE REAL INCOME, THE ENTRIES IN THE BALANCE SHEET WERE REQUIRED TO B E MAINTAINED IN THE STATUTORY FORM. HOWEVER, SUCH ENTRIES IN THE BALANC E SHEET WERE NOT DECISIVE OR CONCLUSIVE. IN SUCH CASES, IT WAS OPEN TO THE ITO AND THE ASSESSEE TO ASCERTAIN TRUE AND PROPER INCOME WHILE SUBMITTING INCOME-TAX RETURNS. THAT, FOR VALUING THE CLOSING STOCK, IT WA S OPEN TO THE ASSESSEE TO VALUE THE STOCK AT COST OR MARKET PRICE WHICHEVER I S LOWER. THAT, THE ASSESSEE WAS VALUING THE STOCK-IN-TRADE AT COST FOR THE PURPOSES OF STATUTORY BALANCE SHEET BUT, FOR THE PURPOSES OF INCOME-TAX R ETURN, THE ASSESSEE WAS VALUING THE STOCK-IN-TRADE AT COST OR MARKET VALUE WHICHEVER WAS LOWER AND THAT PRACTICE WAS ACCEPTED BY THE DEPARTMENT FOR 30 YEARS. CONSEQUENTLY, ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 14 THE SUPREME COURT ALLOWED THE APPEAL FILED BY UCO B ANK. IN OUR VIEW, THE JUDGMENT OF THE SUPREME COURT IN UCO BANK'S CASE ( SUPRA ) SQUARELY APPLIES TO THE FACTS OF THIS CASE. IN FACT, THE PRE SENT CASE BEFORE US IS ON A STRONGER FOOTING BECAUSE IN THE CASE OF UCO BANK ( SUPRA ), THE LOSS WAS NOT DEBITED TO THE PROFIT AND LOSS ACCOUNT WHEREAS IN T HIS CASE, AS CAN BE SEEN FROM THE WORKING AT PAGES 25 AND 26 OF THE PAPER-BO OK, THE LOSS OF RS. 11,82,35,007 HAS BEEN DEBITED TO THE PROFIT AND LOS S ACCOUNT WHICH IS REFLECTED AS A PROVISION FOR LIABILITY IN THE BALAN CE SHEET AND SHARES AND SECURITIES WERE VALUED AT COST ON THE ASSET SIDE. 5. FOR THE REASONS GIVEN HEREINABOVE, WE ANSWER THE A BOVEQUOTED QUESTION IN THE AFFIRMATIVE I.E. IN FAVOUR OF THE ASSESSEE-BANK AND AGAINST THE DEPARTMENT. 16. CONSIDERING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT AND CO- ORDINATE BENCH OF TRIBUNAL AND THE FACT THAT SIMILA R DEPRECIATION WAS ALLOWED BY REVENUE ITSELF IN SUBSEQUENT ASSESSMENT YEAR I.E. A.Y. 2009-10 & 2020-11. THIS GROUND OF APPEAL RAISED BY ASSESSEE IS ALLOWED. 17. GROUND NO.3 RELATES TO PROVISION FOR DOUBTFUL ADVAN CES. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE PROVISION HAS BEEN RE FLECTS IN A.Y. 2009- 10 AND OFFERED TO TAX TO AVOID THE DOUBLE DISALLOWA NCE, THE PROVISION SHOULD BE ALLOWED IN THE CURRENT YEAR. THE LD. AR O F THE ASSESSEE FURTHER SUBMITS THAT THE LD. CIT(A) HAS DIRECTED TH E ASSESSING OFFICER TO VERIFY THE FACT IN A.Y. 2009-10 AND IF THE SAME IS FOUND THAT CLAIM OF THE YEAR IN ORDER ALLOWED RELIEF TO THE ASSESSEE. 18. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUBMI TS THAT THE LD. CIT(A) HAS ALREADY GRANTED RELIEF TO THE ASSESSEE, THIS THERE IS NO NEED TO PASS FURTHER DIRECTION. ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 15 19. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND CONSIDERED THE FACT THAT LD. CIT(A) HAS ALREADY DIRECTED IN PA RA-10 OF HIS ORDER TO THE ASSESSING OFFICER TO VERIFY THE PLEA OF THE ASS ESSEE THAT IF THIS PROVISION HAS BEEN REVERSED IN A.Y. 2009-10 AND OFF ERED TO TAX IN A.Y. 2009-10 AND ALLOWED THE RELIEF TO THE ASSESSEE, IF FOUND IN YEAR. 20. CONSIDERING THE FACT THAT LD. CIT (A) HAS ALREADY D IRECTED THE ASSESSING OFFICER TO VERIFY, THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO COMPLY THE ORDER OF LD. CIT(A) IN ITS TRUE SPIRIT. 21. GROUND NO.4 RELATES TO DISALLOWANCE UNDER SECTION 1 4A. THE LD. AR OF THE ASSESSEE SUBMITS THAT DURING THE RELEVANT PERIO D, THE ASSESSEE EARNED DIVIDEND INCOME OF RS. 35.50 LAKHS WHICH WAS CLAIMED EXEMPT IN THE COMPUTATION OF INCOME. THE ASSESSING OFFICER INVOKED THE PROVISION OF RULE 8D FOR CALCULATING THE DISALLOWAN CE UNDER SECTION 14A. THE LD. AR OF THE ASSESSEE SUBMITS THAT RULE 8 D IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION AND APPLICATION FR OM A.Y. 2008-09. THE LD. AR OF THE ASSESSEE SUBMITS THAT ASSESSEES OWN SURPLUS FUND WERE MORE THAN THE INVESTMENT, THEREFORE, NO INTERE ST EXPENSES DISALLOWANCE UNDER SECTION 14A IS TO BE MADE. FOR I NDIRECT EXPENSES, THE LD. AR OF THE ASSESSEE SUBMITS THAT DISALLOWANC E UNDER SECTION 14A MAY BE RESTRICTED TO 2% OF THE EXEMPT INCOME AS HEL D BY HONBLE BOMBAY HIGH COURT IN CIT VS. GODREJ AGROVET LTD. IN ITA NO. 934 OF 2011. ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 16 22. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. 23. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. DURING THE RELEVANT P ERIOD, THE ASSESSEE HAS SOWN DIVIDEND INCOME OF RS. 35.50 LAKHS. THE AS SESSEE HAS NOT ALLOCATED ANY EXPENSES FOR EARNING THE SAID DIVIDEN D INCOME. THE ASSESSING OFFICER INVOKED THE PROVISION OF RULE 8D AND CALCULATED THE DISALLOWANCE UNDER SECTION 14A OF RS. 7,81,083/-. A DMITTEDLY, THE PROVISIONS OF RULE 8D IS NOT APPLICABLE FOR THE YEA R UNDER CONSIDERATION. THE LD. AR OF THE ASSESSEE PRAYED TH AT DISALLOWANCE UNDER SECTION 14A SHOULD BE RESTRICTED TO 2% OF THE TOTAL EXEMPT INCOME AND STRONGLY RELIED UPON THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT IN GODREJ AGROVET LTD. (SUPRA). 24. WE HAVE NOTED THAT HONBLE JURISDICTIONAL HIGH COUR T IN GODREJ AGROVET LTD. (SUPRA), WHILE CONSIDERING THE DISALLO WANCE UNDER SECTION 14A FOR A.Y. 2005-06 RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 2% OF TOTAL EXEMPT INCOME. CONSIDERING THE DECISION OF JURISDICTIONAL HIGH COURT, THE DISALLOWANCE FOR THE YEAR UNDER CONSIDER ATION IS RESTRICTED TO 2% OF THE EXEMPT INCOME. THE ASSESSING OFFICER IS D IRECTED ACCORDINGLY. 25. GROUND NO.5 RELATES TO DEPRECIATION ON PRINTERS, CA BLES, ROUTERS AND OTHER CONNECTIVITY CHARGES. THE LD. AR OF THE ASSES SEE SUBMITS THAT THIS ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 17 GROUND OF APPEAL IS COVERED IN FAVOUR OF ASSESSEE B Y VARIOUS DECISIONS OF TRIBUNAL INCLUDING SPECIAL BENCH OF MUMBAI TRIBU NAL IN DCIT VS. DATACRAFT INDIA LTD. (ITA NO. 754/MUM/2007), IN DCI T VS. BSES RAJDHANI POWERS LTD. (ITA NO. 1266 OF 2010), IN CIT VS. BONANZA PORTFOLIO LTD. (ITA NO. 833 OF 2011). THE LD. AR OF THE ASSESSEE SUBMITS THAT COMPUTER PERIPHERALS AND ACCESSORIES S UCH AS PRINTERS, CABLES, ROUTERS FORM AND INTEGRAL PART OF COMPUTER SYSTEM AND ELIGIBLE FOR DEPRECIATION AS HELD IN VARIOUS CASES AS REFERR ED ABOVE. 26. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. 27. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND PERUSED THE RECORD. THE ASSESSING OFFICER WHILE PASSING THE ASS ESSMENT ORDER ALLOWED DEPRECIATION @ 15% AGAINST THE CLAIM OF ASS ESSEE OF 60%. THE LD. CIT(A) CONFIRMED THE ACTION OF ASSESSING OFFICE R. 28. WE HAVE NOTED THAT HONBLE DELHI HIGH COURT IN DCIT VS. BSES RAJDHANI POWERS LTD. (SUPRA) AND IN CIT VS. BONANZA PORTFOLIO LTD. (SUPRA) HELD THAT COMPUTER PERIPHERALS AND ACCESSOR IES FORM AN INTEGRAL PART OF COMPUTER SYSTEM AND ELIGIBLE FOR DEPRECIATI ON @ 60%. CONSIDERING THE DECISION OF TRIBUNAL, THE HONBLE D ELHI HIGH COURT IS DIRECTED THE ASSESSING OFFICER TO ALLOW THE DEPRECI ATION @ 60% ON PRINTERS, CABLE LINES AND OTHER CONNECTED PERIPHERA LS. HENCE, THIS GROUND OF APPEAL IS ALLOWED. ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 18 29. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO. 7089/MUM/2016 FOR A.Y. 2007-08 BY REVENUE 30. GROUND NO.1 TO 3 RELATED TO DELETING THE ADDITION O N ACCOUNT OF INTEREST INCOME. AT THE OUTSET OF HEARING, THE LD. AR OF THE ASSESSEE SUBMITS THAT THESE GROUNDS OF APPEAL ARE COVERED IN FAVOUR OF ASSESSEE IN ASSESSEES OWN CASE FOR A.Y. 2006-07 IN ITA NO. 297 2/MUM/2011. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT ASS ESSING OFFICER IN ORDER GIVING EFFECT HAS ALLOWED THE RELIEF TO THE A SSESSEE. THE LD. AR OF THE ASSESSEE ALSO FURNISHED THE COPY OF ORDER GIVIN G EFFECT FOR A.Y. 2006-07 DATED 16.08.2018 PASSED UNDER SECTION 143(3 ) R.W.S. 244. 31. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF ASSESSING OFFICER. 32. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NO TED THAT ON SIMILAR GROUND OF APPEAL IN ASSESSEES OWN CASE FOR A.Y. 20 06-07, THE ISSUE WAS RESTORED TO THE FILE OF ASSESSING OFFICER BY TR IBUNAL IN ITA NO. 2792/MUM/2011 PASSED THE FOLLOWING ORDER: 17. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D RELEVANT MATERIAL ON RECORD. FIRST OF ALL, A PERUSAL OF ASSESSEE'S BALAN CE SHEET AS ON 31/03/2006 PLACED AT PAGE-26 OF THE PAPER-BOOK, REVEALS THAT T HE PREFERENCE SHARES HAS BEEN SHOWN UNDER THE HEAD LONG TERM INVESTMENTS, TH E DETAILED BREAK-UP OF WHICH HAS BEEN PROVIDED ON PAGE- 32 OF THE PAPER-BO OK ACCORDING TO WHICH THE ASSESSEE IS HOLDING PREFERENCE SHARES OF FOUR C OMPANIES NAMELY (I) IDEA CELLULAR LTD. (II)A.V. DIGITAL NETWORKS PVT. LTD. ( III) DECCAN DIGITAL NETWORKS PVT. LTD. &(IV) METRO DIGITAL NETWORKS PVT . LTD. ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 19 18. A PERUSAL OF TERMS OF PREFERENCE SHARES OF IDEA CELLULAR LTD. AS CONTAINED IN AMENDMENT AGREEMENT DATED 31/10/2005 R EVEALS THAT THE ASSESSEE COULD EARN TWO STREAMS OF INCOME ON THESE SHARES VIZ. RIGHT TO RECEIVE FIXED CUMULATIVE PREFERENTIAL DIVIDEND AND SECONDLY, CERTAIN PRE- DETERMINED REDEMPTION PREMIUM AS PER THE ATTACHED A NNEXURE. 19. FURTHER, A PERUSAL OF COPIES OF FINANCIAL STATE MENTS OF ISSUER COMPANIES AND RELEVANT SHARES CERTIFICATES PLACED IN THE PAPE R-BOOK REVEALS THAT THESE INSTRUMENTS HAVE BEEN CLASSIFIED AS PREFERENCE SHAR ES IN THE BOOKS OF ISSUER AS PART OF SHARE CAPITAL. 20. AS PER NOTE NO. 3 FORMING PART OF COMPUTATION A ND RETURN OF INCOME FOR IMPUGNED AY, IT IS STATED THAT THE ASSESSEE, FO LLOWING APPLICABLE ACCOUNTING GUIDELINES, HOLD PREFERENCE SHARES ON HE LD TO MATURITY BASIS / LONG TERM CAPITAL ASSETS AND ACCORDINGLY, INCOME CR EDITED TO PROFIT & LOSS ACCOUNT ON THESE SHARES HAS BEEN DEDUCTED FROM COMPUTATION OF INCOME AND WOULD BE OFFERED TO TAX IN ACCORDANCE WI TH SECTION 45 . THE AMOUNT SO ACCRUED AND DEDUCTED IN AY 2006-07, 2007- 08 & 2008-09 IS RS. 8.56 CRORES, RS.18.76 CRORES & RS.5.54 CRORES RESPE CTIVELY. THE ASSESSEE HAS REFLECTED 'SHORT TERM CAPITAL GAINS' ON SALE OF IDE A CELLULAR PREFERENCE SHARES IN AY 2007-08 FOR RS.8.44 & RS.8.47 CRORES AS 'LONG TERM CAPITAL GAINS' ON SALE OF PREFERENCE SHARES IN AY 08-09 WHICH HAS BEEN ACCEPTED BY THE REVENUE IN 143(3) ASSESSMENTS. THE SAME REVEALS CON SISTENCY IN THE ARGUMENTS OF THE LD. AR VIS--VIS FINANCIAL STATEME NTS / DOCUMENTS PLACED BEFORE US. 21. THEREFORE, ON THE FACTS AND CIRCUMSTANCES OF TH E CASE, WE FIND STRENGTH IN VARIOUS ARGUMENTS OF LD. AR THAT THE PREFERENCE SHA RES BEING HELD AS LONG TERM INVESTMENTS AS CAPITAL ASSETS WERE ASSESSABLE TO TAX UNDER THE HEAD 'CAPITAL GAINS' U/S 45. THE REVENUE COULD NOT BRING ANY MATERIAL TO ESTABLISH THE FACT THAT ANY DIVIDEND WAS ACTUALLY DECLARED BY THESE COMPANIES DURING THE IMPUGNED AY. FURTHER, THE CAPITAL GAINS OFFERED BY ASSESSEE UPON SALE OF PREFERENCE SHARES HAS BEEN ACCEPTED BY THE REVENUE IN SUCCEEDING YEARS IN SECTION 143(3) PROCEEDINGS AND THEREFORE, WE FIND NO REASON TO IN TERFERE WITH THOSE ASSESSMENTS. 22. CERTAIN ADDITIONAL EVIDENCES IN THE FORM OF PAP ER-BOOK DATED 24/10/2013 HAS BEEN PRODUCED BEFORE US IN SUPPORT OF CALCULATI ONS OF ACCRUAL OF INCOME ON PREFERENCE SHARES/ MATURITY VALUE ETC., WHICH RE QUIRE, APPRECIATION AT THE LEVEL OF LD. AO SINCE THE LD. AR HAS ASSERTED THAT WHATEVER DIVIDEND / INCOME HAS BEEN ACCRUED / RECEIVED ON THESE INSTRUM ENTS, THE SAME HAS BEEN INBUILT INTO THE MATURITY VALUE AND THERE IS NO REV ENUE LEAKAGE. THEREFORE, IN PRINCIPAL, WHILE UPHOLDING THE CLAIM OF THE ASSESSE E THAT THE INCOME ON THESE SHARES WAS ASSESSABLE UNDER THE HEAD 'CAPITAL GAINS ' UPON THEIR MATURITY, WE REMIT THE MATTER BACK TO THE FILE OF AO FOR THE PUR POSE OF VERIFYING THE FACT WHETHER ALL INCOME ACCRUED / RECEIVED ON THESE SHAR ES WAS INBUILT INTO THE MATURITY / REDEMPTION / SALE VALUE AND THERE WAS NO REVENUE LEAKAGE. THE ASSESSEE, IN TURN, IS DIRECTED TO SUBSTANTIATE THE SAME FORTHWITH, FAILING WHICH THE LD. AO SHALL BE AT LIBERTY TO DISPOSE-OFF THE I SSUE ON THE BASIS OF ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 20 MATERIAL AVAILABLE ON RECORD. THE ASSESSEE'S GROUND OF APPEAL STANDS ALLOWED FOR STATISTICAL PURPOSES. 33. WE HAVE FURTHER NOTED THAT IN ORDER GIVING EFFECT, THE ASSESSING OFFICER HAS GRANTED RELIEF TO THE ASSESSEE VIDE ITS ORDER D ATED 16.08.2016. CONSIDERING THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2007-08 WHEREIN NO MATERIAL DIFFERENCE IN FACT IS B ROUGHT TO OUR NOTICE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF T RIBUNAL, THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE FACT IN ACCORDANCE WITH THE DIRECTION IN ASSESSEES OWN CASE IN ITA NO. 2792/MU M/2011 AND ALLOWED THE RELIEF TO THE ASSESSEE IN ACCORDANCE WI TH LAW. 34. IN THE RESULT, GROUND NO. 1 TO 3 IS ALLOWED FOR STA TISTICAL PURPOSE. 35. GROUND NO.4 & 5 RELATES TO DISALLOWANCE UNDER SECTI ON 14A. WE HAVE NOTED THAT IN ASSESSEES OWN APPEAL, WE HAVE RESTRI CTED THE DISALLOWANCE UNDER SECTION 14A TO 2% OF THE EXEMPT INCOME. THEREFORE, THE GROUND OF APPEAL RAISED BY REVENUE I S BECOME INFRUCTUOUS. 36. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLO WED. ITA NO. 7070/MUM/2016 BY ASSESSEE FOR AY 2008-09 37. THE ASSESSEE HAS RAISED FOLLOWING GROUND OF APPEAL: 1. DISALLOWANCE FOR PROVISION OF DEPRECIATION ON INVES TMENT. 2. DISALLOWANCE UNDER SECTION 14A. 3. NOT GRANTING TDS CREDIT. 38. GROUND NO.1 RELATES TO DISALLOWANCE FOR PROVISION O F DEPRECIATION ON INVESTMENT. WE HAVE NOTED THAT THIS GROUND OF APPEA L IS SIMILAR TO THE ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 21 GROUND NO.2 IN ASSESSEES APPEAL FOR A.Y. 2007-08, WHICH WE HAVE ALLOWED, THEREFORE, FOLLOWING THE PRINCIPLE OF CONS ISTENCY, THIS GROUND OF APPEAL IS ALLOWED WITH SIMILAR DIRECTION. 39. GROUND NO.2 RELATES TO DISALLOWANCE UNDER SECTION 1 4A. THE LD. AR OF THE ASSESSEE SUBMITS THAT THIS GROUND OF APPEAL IS SIMILAR TO THE GROUND NO.4 IN ASSESSEES APPEAL FOR A.Y. 2007-08. THE ASS ESSEE HAS SUFFICIENT INTEREST FREE FUND AVAILABLE FOR MAKING INVESTMENT FOR EARNING EXEMPT INCOME. THEREFORE, NO DISALLOWANCE UNDER RULE 8D(2) (II) BE MADE. 40. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. 41. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. CONSID ERING THE FACT THAT ASSESSEE HAS CLAIMED THAT IT HAS SUFFICIENT INTERES T FREE FUNDS AVAILABLE FOR MAKING INVESTMENT FOR EARNING TAX FREE INCOME. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO VERIFY THE FACT AND ALLOW RELIEF TO THE ASSESSEE ON ACCOUNT OF INTEREST EXPENSES UNDER RULE 8D(2)(II). NEEDLESS TO DIRECT THAT BEFORE PASSING THE ORDER, THE ASSESS ING OFFICER SHALL GRANT OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE ITS CLA IM. IN THE RESULT, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE . 42. GROUND NO.3 RELATES TO NON GRANTING TDS CREDIT. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSING OFFICER HAS ALR EADY GRANTED RELIEF BY PASSING ORDER UNDER SECTION 154. THEREFORE, THIS GROUND OF APPEAL ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 22 HAS BECOME INFRUCTUOUS. CONSIDERING THE CONTENTION OF LD. AR OF ASSESSEE, THIS GROUND OF APPEAL IS DISMISSED. 43. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ITA NO. 7088/MUM/2016 BY REVENUE FOR AY 2008-09 44. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL: 1. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 5,54,38,356/- BY DEVIATING FROM HIS PREDECESSOR ORDER FOR AY 2006-07 , WHEREIN SIMILAR ADDITION HAS BEEN UPHELD ON SIMILAR FACTS? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD.CIT(A) HAS ERRED IN TREATING THE INTEREST CREDIT ED IN THE BOOKS AND NOT OFFERED TO TAX, AS PART OF THE CAPITAL RECEIPTS, WI THOUT GOING INTO THE MERIT AS TO HOW IT IS A CAPITAL RECEIPT AND NOT REVENUE RECE IPT? 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD.CIT(A) HAS ERRED IN NOT HOLDING THE AMOUNT OF TH ESE RECEIPTS AS INTEREST INCOME WHEN ADMITTEDLY SUCH RECEIPTS ARE PART OF FI XED RETURNS AGREED BETWEEN THE ASSESSEE COMPANY AND THE PARTY FROM WHO M PREFERENCE SHARES WERE PURCHASED, AS ASSESSEE ITSELF, ADMITTED IT AS REVENUE RECEIPT AND SUCH RECEIPTS DO NOT EMANATE FROM PROFIT RESERVES AND HE NCE CANNOT BE TREATED AS DIVIDEND RECEIPTS? 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFF ICER TO RE-COMPUTE THE DISALLOWANCE U/S. 14A R.W. RULE 8D(2)(II) OF THE IT , ACT, WHEN THE SECTION 14A IS EXPLICIT IN MENTIONING THAT THE DISALLOWANCE CAN BE MADE EVEN IF THERE IS NO EXEMPT INCOME EARNED BY THE ASSESSEE'? 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS CORRECT IN DIRECTING THE ASSESSING OF FICER TO RESTRICT THE DISALLOWANCE U/S. 14A R.W. RULE 8D(2)(III) OF THE I T, ACT TO 50% OF THE ADMINISTRATIVE EXPENSES WHEN THERE IS NO SUCH PROVI SION UNDER THE ACT? ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 23 45. AT THE OUTSET OF HEARING, THE LD. AR OF THE ASSESSE E SUBMITS THAT GROUND NO. 1 TO 3 ARE SIMILAR TO THE GROUND NO.1 TO 3 IN R EVENUES APPEAL FOR A.Y. 2007-08 AND SIMILAR ORDER MAY BE FOLLOWED. 46. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE RELIE D UPON THE ORDER OF ASSESSING OFFICER. 47. WE HAVE CONSIDERED THE SUBMISSION AND FIND THAT THI S GROUND OF APPEAL IS IDENTICAL TO THE GROUND NO. 1 TO 3 IN REVENUES APPEAL FOR A.Y. 2007- 08, THUS OUR DECISION IN A.Y. 2007-08 WILL APPLY MUTATIS MUTANDI IN THIS YEAR. 48. GROUND NO.4 RELATES TO DISALLOWANCE UNDER SECTION 1 4A R.W.R 8D(2)(II). WE HAVE NOTED THAT ON SIMILAR GROUND OF APPEAL IN A SSESSEES APPEAL WE HAVE RESTORED THE ISSUE TO THE FILE OF ASSESSING OF FICER. THEREFORE, OUR DIRECTION IN ASSESSEES APPEAL ON GROUND NO.2 WOULD APPLY MUTATIS MUTANDIS. 49. GROUND NO.5 RELATES TO DIRECTING THE ASSESSING OFFI CER TO RESTRICT THE DISALLOWANCE UNDER SECTION 14A/RULE 8D(2)(III) TO 5 0% OF ADMINISTRATIVE EXPENSES. THE LD. DR FOR THE REVENUE SUBMITS THAT LD. CIT(A) RESTRICTED THE DISALLOWANCE UNDER RULE 8D(2) (III) TO 50% OF THE ADMINISTRATIVE EXPENSES, WHEN THERE IS NO SUCH PROV ISION IN THE ACT. THE LD. DR FOR THE REVENUE PRAYED FOR UPHOLDING THE ORDER OF ASSESSING OFFICER. ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 24 50. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE ARGUE D THAT FOR ADMINISTRATIVE DISALLOWANCE ONLY THOSE INVESTMENT W HICH YIELDED EXEMPT INCOME IS TO BE CONSIDERED FOR CALCULATING D ISALLOWANCE UNDER RULE 8D(2)(III). IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESSEE THE DECISION OF ACIT VS. VIREET INVESTMENT (P.) LTD . (188 TTJ 1 (DEL. TRIB.) (SB), SAJJAN INDIA LTD. VS. ACIT (89 TAXMANN .COM 21 (MUM. TRIB.), KALYANI BARTER PVT. LTD. VS. ITO [2017] 79 TAXMANN.COM 457 (KOL. TRIB.), YASHODA HEALTH CARE SERVICES PVT. LTD . VS. DCIT [2017] 88 TAXMANN.COM 916 (HYD. TRIB.), REI AGRO LTD. VS. DCIT [2013] 35 TAXMANN.COM 404 (KOL. TRIB.) & EWART INVESTMENTS LT D. VS. DCIT (ITA NO. 3623/MUM/2017 (MUM. TRIB.). 51. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PART IES AND PERUSED THE RECORD. THE ASSESSING OFFICER WHILE MAKING THE DISA LLOWANCE CONSIDERED THE AVERAGE VALUE OF ENTIRE INVESTMENT M ADE FOR EARNING EXEMPT INCOME. THE LD. CIT(A) RESTRICTED THE DISALL OWANCE TO 50% OF THE AMOUNT ON ESTIMATION BASIS. CONSIDERING THE DEC ISION OF SPECIAL BENCH OF DELHI TRIBUNAL IN ACIT VS. VIREET INVESTME NT (P.) LTD. (SUPRA), WE DIRECT THE ASSESSING OFFICER TO RECOMPU TE THE DISALLOWANCE BY CONSIDERING ONLY THOSE INVESTMENTS WHICH YIELDED EXEMPT INCOME DURING THE YEAR. BEFORE MAKING RECOMPUTATION OF DIS ALLOWANCE UNDER THIS CLAUSE, THE ASSESSING OFFICER SHALL GRANT OPPO RTUNITY TO THE ITA NO. 7070, 7069, 7088 & 70 89 M 16-STANDARD CHARTERED INVESTMENTS & LOANS (IND IA) LTD. 25 ASSESSEE. IN THE RESULT, THIS GROUND OF APPEAL IS A LLOWED FOR STATISTICAL PURPOSE. 52. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 29/01/2020. SD/- SD/- S.RIFAUR RAHMAN PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 29.01.2020 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI