M/s Sivan Securities Pvt Ltd , Bangalore V. The Deputy Commissioner of Income TAx Circle-12(3), Bangalore

ITA 713/BANG/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4128 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 07-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: C RAMESH
• Keywords: Business expenditure; Earning of tax free income; Rule 8D
• Section: 142(1); 14A; 37; 12; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA NO S . 713 TO 715 /BANG/201 8 ASSESSMENT YEAR S : 2009 - 10 TO 2011 - 12 M/S. SIVAN SECURITIES (P) LTD., NO. 1, RAHEJA CHAMBERS, MUSEUM ROAD, BANGALORE 560 001. PAN: AACCS5138G VS. THE DCIT, CIRCLE 12 (2), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI C. RAMESH, CA RESPONDENT BY : SHRI R.N. SIDDAPPAJI, ADDL. CIT (DR) DATE OF HEARING : 30 .04.201 9 DATE OF PRONOUNCEMENT : 08 .0 5 .201 9 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER ALL THESE THREE APPEALS ARE FILED BY THE ASSESSEE AND THESE ARE DIRECTED AGAINST THREE SEPARATE ORDERS OF LD. CIT (A)-6, BANGALORE ALL DATED 30.11.2017 FOR ASSESSMENT YEARS 2009-10 TO 2011-12. 2. THE GROUNDS RAISED BY THE ASSESSEE FOR ASSESSMENT YEAR 2009-10 IN ITA NO. 713/BANG/2018 ARE AS UNDER. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS OPPOSED TO THE FACTS OF THE CASE AND LAW APPLICABLE TO IT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF RS.70,29,354/- UNDER RULE 8D(2)(III) R.W.S 14A OF THE ACT IGNORING THE FACT THAT, NONE OF THE INVESTMENTS CONSIDERED BY THE ASSESSING OFFICER FOR QUANTIFYING DISALLOWANCE OF EXPENDITURE HAVE YIELDED INCOME EXEMPT UNDER THE PROVISIONS OF THE ACT. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE RATIOS LAID DOWN BY VARIOUS TRIBUNALS AND HIGH COURTS, WHEREIN IT IS HELD THAT, UNLESS THE APPELLANT IS IN RECEIPT OF INCOME EXEMPT UNDER THE PROVISIONS OF THE ACT, NO DISALLOWANCE CAN BE MADE. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT, UNDER LAW SATISFACTION THAT AN ASSESSEE HAS ITA NOS. 713 TO 715/BANG/2018 PAGE 2 OF 12 INCURRED CERTAIN EXPENDITURE IN CONNECTION WITH EXEMPT INCOME EARNED IF ANY IS REQUIRED TO BE RECORDED FOR INVOKING THE PROVISION OF SECTION 14A OF THE ACT AND IN THE ABSENCE OF ANY SUCH SATISFACTION NO DISALLOWANCE CAN BE MADE U/S.14A OF THE ACT. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE FACT THAT, THE APPELLANT EARNED DIVIDEND OF RS.1,66,143/- ONLY AND AGAINST SUCH INCOME A DISALLOWANCE OF RS.70,29,354/- UNDER RULE 8D(2)(III) R.W.S 14A OF THE ACT CANNOT BE MADE IN AS MUCH AS THIS HAS RESULTED IN ILLOGICAL, ABSURD AND HIGHLY UNREASONABLE DISALLOWANCE. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE POSITION OF LAW AS LAID DOWN BY ITAT, MUMBAI-TRIB IN THE CASE OF SAJJAN INDIA LTD V. ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-7(2), MUMBAI (2018) 89 TAXMANN.COM 21 (MUMBAI-TRIB), WHEREIN IT IS HELD THAT ONLY THOSE INSTRUMENTS AND SECURITIES WHICH YIELDED EXEMPT INCOME DURING THE PREVIOUS YEAR IS TO BE CONSIDERED FOR DISALLOWANCE, THEREBY THE INVESTMENTS WHICH DID NOT YIELD ANY EXEMPT INCOME CANNOT BE CONSIDERED FOR DISALLOWANCE AT ALL. 7. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE FACT THAT, ALL THE EXPENDITURE CLAIMED BY THE APPELLANT WAS FOR THE PURPOSE OF BUSINESS ACTIVITY CARRIED ON BY IT AND UNDER THE CIRCUMSTANCES THERE WAS NO CASE FOR DISALLOWANCE OF ANY PORTION OF THE EXPENDITURE. 8. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF PROFESSIONAL CHARGES OF RS.13,00,000/- BY THE ASSESSING OFFICER IGNORING THE FACT THAT, THE EXPENDITURE WAS GENUINELY INCURRED, WAS FOR THE PURPOSE OF BUSINESS ACTIVITY AND THEREFORE THE SAME SHOULD HAVE BEEN ALLOWED U/S.37 OF THE ACT. 9. THE APPELLANT CRAVES PERMISSION TO ADD, DELETE OR ALTER ANY OF THE GROUNDS AT THE TIME OF HEARING. 3. THE GROUNDS RAISED BY THE ASSESSEE FOR ASSESSMENT YEAR 2010-11 IN ITA NO. 714/BANG/2018 ARE AS UNDER. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS OPPOSED TO THEFACTS OF THE CASE AND LAW APPLICABLE TO IT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMINGDISALLOWANCE OF RS.1,14,68,338/- UNDER RULE 8D(2)(III) R.W.S 14A OF THE ACT IGNORINGTHE FACT THAT, NONE OF THE INVESTMENTS CONSIDERED BY THE ASSESSING OFFICER FORQUANTIFYING DISALLOWANCE OF EXPENDITURE HAVE YIELDED INCOME EXEMPT UNDER THEPROVISIONS OF THE ACT. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ITA NOS. 713 TO 715/BANG/2018 PAGE 3 OF 12 IGNORING THE RATIOS LAIDDOWN BY VARIOUS TRIBUNALS AND HIGH COURTS, WHEREIN IT IS HELD THAT, UNLESS THEAPPELLANT IS IN RECEIPT OF INCOME EXEMPT UNDER THE PROVISIONS OF THE ACT, NODISALLOWANCE CAN BE MADE. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING THEACT THAT, UNDER LAW SATISFACTION THAT AN ASSESSEE HAS INCURRED CERTAIN EXPENDITURE INCONNECTION WITH EXEMPT INCOME EARNED IF ANY IS REQUIRED TO BE RECORDED FOR INVOKINGTHE PROVISION OF SECTION 14A OF THE ACT AND IN THE ABSENCE OF ANY SUCH SATISFACTIONNO DISALLOWANCE CAN BE MADE U/S.14A OF THE ACT. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE FACT THAT,THE APPELLANT EARNED DIVIDEND OF RS.2,52,882/- ONLY AND AGAINST SUCH INCOME ADISALLOWANCE OF RS.1,14,68,338/- UNDER RULE 8D(2)(III) R.W.S 14A OF THE ACT CANNOT BEMADE IN AS MUCH AS THIS HAS RESULTED IN ILLOGICAL, ABSURD AND HIGHLY UNREASONABLEDISALLOWANCE. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE POSITION OFLAW AS LAID DOWN BY ITAT, MUMBAI-TRIB IN THE CASE OF SAJJAN INDIA LTD V. ADDITIONALCOMMISSIONER OF INCOME TAX, RANGE-7(2), MUMBAI (2018) 89 TAXMANN.COM 21(MUMBAI- TRIB), WHEREIN IT IS HELD THAT ONLY THOSE INSTRUMENTS AND SECURITIES WHICHYIELDED EXEMPT INCOME DURING THE PREVIOUS YEAR IS TO BE CONSIDERED FORDISALLOWANCE, THEREBY THE INVESTMENTS WHICH DID NOT YIELD ANY EXEMPTINCOMECANNOT BE CONSIDERED FOR DISALLOWANCE AT ALL. 7. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE FACT THAT,ALL THE EXPENDITURE CLAIMED BY THE APPELLANT WAS FOR THE PURPOSE OF BUSINESS ACTIVITYCARRIED ON BY IT AND UNDER THE CIRCUMSTANCES THERE WAS NO CASE FOR DISALLOWANCE OFANY PORTION OF THE EXPENDITURE. 8. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE FACT THAT,THE TOTAL OPERATIVE AND ADMINISTRATIVE EXPENSES CLAIMED BY THE APPELLANT WASRS.1,26,99,361/- AND OUT OF THIS EXPENDITURE THERE COULD NOT HAVE BEEN DISALLOWANCETO THE EXTENT OF RS.1,14,68,338/- WHICH IS HIGHLY UNREASONABLE AND ABSURD. 9. THE APPELLANT CRAVES PERMISSION TO ADD, DELETE OR ALTER ANY OF THE GROUNDS AT THE TIME OF HEARING. 4. THE GROUNDS RAISED BY THE ASSESSEE FOR ASSESSMENT YEAR 2011-12 IN ITA NO. 715/BANG/2018 ARE AS UNDER. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS OPPOSED TO THEFACTS OF THE CASE AND LAW APPLICABLE TO IT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMINGDISALLOWANCE OFRS.10,06,00,648/- U/S.14A OF THE ACT, ITA NOS. 713 TO 715/BANG/2018 PAGE 4 OF 12 IGNORING THE FACT THAT, NONE OFTHE INVESTMENTS CONSIDERED BY THE ASSESSING OFFICER FOR QUANTIFYING DISALLOWANCE OFEXPENDITURE HAVE YIELDED INCOME EXEMPT UNDER THE PROVISIONS OF THE ACT. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE RATIOS LAIDDOWN BY VARIOUS TRIBUNALS AND HIGH COURTS, WHEREIN IT IS HELD THAT, UNLESS THEAPPELLANT IS IN RECEIPT OF INCOME EXEMPT UNDER THE PROVISIONS OF THE ACT, FROM THEINVESTMENTS BEING CONSIDERED FOR QUANTIFYING DISALLOWANCE, NO DISALLOWANCE CAN BEMADE. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING THEFACT THAT, UNDER LAW SATISFACTION THAT AN ASSESSEE HAS INCURRED CERTAIN EXPENDITURE IN CONNECTION WITH EXEMPT INCOME EARNED IF ANY IS REQUIRED TO BE RECORDED FOR INVOKINGTHE PROVISION OF SECITON14A OF THE ACT AND IN THE ABSENCE OF ANY SUCH SATISFACTION NODISALLOWANCE CAN BE MADE U/S.14A OF THE ACT. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE FACT THAT,THE APPELLANT EARNED DIVIDEND OF RS.9,66,051/- ONLY AND AGAINST SUCH INCOME A TOTALDISALLOWANCE OF RS.11,10,43,666/- U/S.14A OFTHE ACT CANNOT BE MADE IN AS MUCH ASTHIS HAS RESULTED IN ILLOGICAL, ABSURD AND HIGHLY UNREASONABLE DISALLOWANCE. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE FACT THAT,THE APPELLANT ITSELF HAD QUANTIFIED A DISALLOWANCE OF RS.1,04,43,018/- UNDER THEPROVISIONS OF SECTION 14A OF THE ACT, CONSIDERING THE INVESTMENTS YIELDING EXEMPTINCOME AND THERE WAS NO CASE FOR QUANTIFYING ANY FURTHER DISALLOWANCE UNDER THESAID PROVISIONS. 7. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE POSITION OFLAW AS LAID DOWN BY ITAT, MUMBAI-TRIB IN THE CASE OF SAJJAN INDIA LTD V. ADDITIONALCOMMISSIONER OF INCOME TAX, RANGE-7(2), MUMBAI (2018) 89 TAXMANN.COM 21(MUMBAI-TRIB), WHEREIN IT IS HELD THAT ONLY THOSE INSTRUMENTS AND SECURITIES WHICHYIELDED EXEMPT INCOME DURING THE PREVIOUS YEAR IS TO BE CONSIDERED FORDISALLOWANCE, THEREBY THE INVESTMENTS WHICH DID NOT YIELD ANY EXEMPT INCOMECANNOT BE CONSIDERED FOR DISALLOWANCE AT ALL. 8. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN QUANTIFYING ADISALLOWANCE OF RS.8,63,17,806/- BEING PORTION OF INTEREST EXPENSES NOT DIRECTLYATTRIBUTABLE TO ANY INCOME UNDER RULE 8D(2)(II) R.W.S 14A OF THE ACT, IGNORING THE FACTTHAT, THE TOTAL INTEREST EXPENSES CLAIMED BY THE APPELLANT IN THE STATEMENT OFASSESSABLE INCOME WAS RS.1,44,86,902/- AND THERE COULD NOT HAVE BEEN MOREDISALLOWANCE THAN THE EXPENDITURE CLAIMED ITSELF. ITA NOS. 713 TO 715/BANG/2018 PAGE 5 OF 12 9. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE FACT THAT,ALL THE EXPENDITURE CLAIMED BY THE APPELLANT WAS FOR THE PURPOSE OF BUSINESS ACTIVITYCARRIED ON BY IT AND UNDER THE CIRCUMSTANCES THERE WAS NO CASE FOR DISALLOWANCE OFANY PORTION OF THE EXPENDITURE BY INVOKING PROVISIONS OF RULE 8D(2)(III) R.W.S 14A OF THE ACT. 10. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE FACT THAT,THE TOTAL OPERATIVE AND ADMINISTRATIVE EXPENSES CLAIMED BY THE APPELLANT WASRS.1,42,17,549/-, APART FROM PROFESSIONAL CHARGES, AND OUT OF THIS EXPENDITURE THERECOULD NOT HAVE BEEN DISALLOWANCE TO THE EXTENT OF RS.1,45,38,925/- WHICH IS HIGHLYUNREASONABLE AND ABSURD FOR THE REASON THAT, THERE CANNOT BE ANY DISALLOWANCEEXCEEDING THE EXPENDITURE CLAIMED. 11. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DISALLOWING THEEXPENDITURE TOWARDS PROFESSIONAL CHARGES OF RS.4,68,00,000/- IGNORING THE FACT THAT,THE EXPENDITURE IS INCURRED FOR THE PURPOSE OF BUSINESS ACTIVITY OF THE APPELLANT,GENUINELY INCURRED AND WAS ALLOWABLE UNDER THE PROVISIONS OF SECTION 37 OF THE ACT. 12. THE APPELLANT CRAVES PERMISSION TO ADD, DELETE OR ALTER ANY OF THE GROUNDS AT THETIME OF HEARING. 5. AT THE VERY OUTSET, IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT ONE ISSUE INVOLVED IS REGARDING DISALLOWANCE U/S. 14A R.W. RULE 8D AND IT IS COMMON IN ALL THE 3 YEARS AND THERE IS ONE MORE ISSUE INVOLVED IN TWO YEARS OUT OF THESE THREE YEARS I.E. ASSESSMENT YEARS 2009-10 AND 2011-12. THE SECOND ISSUE IS REGARDING DISALLOWANCE MADE BY THE AO OF PROFESSIONAL CHARGES OF RS. 13 LAKHS IN ASSESSMENT YEAR 2009-10 AND RS. 4.68 CRORES IN ASSESSMENT YEAR 2011-12. 2. REGARDING DISALLOWANCE U/S. 14A R.W. RULE 8D IN ALL THE 3 YEARS, THIS WAS THE FIRST SUBMISSION OF LD. AR OF ASSESSEE THAT THE DIVIDEND WAS NOT EARNED IN RESPECT OF INVESTMENT IN SHARES BUT THE DIVIDEND WAS EARNED IN RESPECT OF THOSE SHARES WHICH WERE HELD BY THE ASSESSEE IN COURSE OF ASSESSEES BUSINESS OF DEALING IN SHARES AND THEREFORE, SECTION 14A IS NOT APPLICABLE IN THE PRESENT CASE. AT THIS JUNCTURE, IT WAS POINTED OUT BY THE BENCH THAT AS PER THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF MAXOPP INVESTMENT VS. CIT AS REPORTED IN [2018] 402 ITR 640 (SC), IT WAS HELD THAT IF EXPENDITURE IS INCURRED ON EARNING DIVIDEND INCOME, THEN THAT MUCH OF THE EXPENDITURE WHICH IS ATTRIBUTABLE TO THE DIVIDEND INCOME HAS TO BE ITA NOS. 713 TO 715/BANG/2018 PAGE 6 OF 12 DISALLOWED AND CANNOT BE TREATED AS BUSINESS EXPENDITURE AS PER THE PROVISIONS OF SECTION 14A OF IT ACT. THE BENCH POINTED OUT THAT AS PER THIS JUDGMENT OF HONBLE APEX COURT, DISALLOWANCE U/S. 14A HAS TO BE MADE IN THE PRESENT CASE ALSO EVEN IF THE DIVIDEND WAS EARNED IN COURSE OF HOLDING OF SHARES FOR BUSINESS PURPOSE. THEREAFTER, THE LD. AR OF ASSESSEE RAISED THE SECOND CONTENTION THAT EVEN IF DISALLOWANCE HAS TO BE MADE, THE SAME SHOULD NOT EXCEED THE AMOUNT OF EXEMPT INCOME EARNED IN EACH OF THESE YEARS. IN SUPPORT OF HIS CONTENTION, HE PLACED RELIANCE ON THE TRIBUNAL ORDER RENDERED IN THE CASE OF M/S. WAY2WEALTH SECURITIES (P) LTD. VS. DCIT IN ITA NO. 1679/BANG/2017 DATED 01.06.2018. HE SUBMITTED A COPY OF THIS TRIBUNAL ORDER. OUR ATTENTION WAS DRAWN TO PARA 8 OF THIS TRIBUNAL ORDER AND IT WAS POINTED OUT THAT IN THIS CASE, THE TRIBUNAL HAS FOLLOWED THE JUDGMENT OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF JOINT INVESTMENTS (P) LTD. VS. CIT AS REPORTED IN 372 ITR 694 WHEREIN IT WAS HELD THAT THE DISALLOWANCE U/S. 14A OF IT ACT CANNOT EXCEED THE EXEMPT INCOME. HE FURTHER POINTED OUT THAT THE TRIBUNAL HAS CONSIDERED ONE MORE JUDGMENT OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CIT VS. HOLCIM INDIA PVT. LTD. AS REPORTED IN 272 CTR 282 (DEL) IN ADDITION TO THE TRIBUNAL ORDER OF MUMBAI BENCH RENDERED IN THE CASE OF FUTURE CORPORATE RESOURCES LTD. VS. ACIT IN ITA NO. 4658/MUM/2015 DATED 26.07.2017. IT WAS POINTED OUT THAT IN ALL THESE JUDGMENTS, IT WAS HELD THAT DISALLOWANCE U/S. 14A OF IT ACT CANNOT EXCEED THE EXEMPT INCOME. HE POINTED OUT THAT IN ASSESSMENT YEAR 2009-10, THE AMOUNT OF DIVIDEND INCOME WHICH IS EXEMPT IS ONLY RS. 1,66,143/- BUT THE AO HAS MADE DISALLOWANCE OF RS. 70,29,354/- U/S. 14A R.W. RULE 8D(2)(III). REGARDING ASSESSMENT YEAR 2010-11, IT WAS POINTED OUT THAT IN THIS YEAR, THE DIVIDEND INCOME IS RS. 2,52,882/- WHEREAS THE AO HAS MADE DISALLOWANCE OF RS. 1,14,68,338/- U/S. 14A R.W. RULE 8D(2)(III). IN RESPECT OF ASSESSMENT YEAR 2011-12, IT WAS POINTED OUT THAT IN THIS YEAR, THE DIVIDEND INCOME EARNED WAS ONLY RS. 9,66,051/- WHEREAS THE DISALLOWANCE U/S. 14A WAS MADE BY THE AO TO THE EXTENT OF RS. 11,10,43,666/-. IT IS SUBMITTED THAT THE AO SHOULD BE DIRECTED TO RESTRICT THE DISALLOWANCE INCLUDING DISALLOWANCE MADE BY THE ASSESSEE TO THE EXTENT OF ITA NOS. 713 TO 715/BANG/2018 PAGE 7 OF 12 EXEMPT INCOME EARNED BY ASSESSEE IN EACH OF THESE THREE YEARS. THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF MAXOPP INVESTMENT VS. CIT (SUPRA), WE REJECT THIS ARGUMENT OF LD. AR OF ASSESSEE THAT NO DISALLOWANCE SHOULD BE MADE U/S. 14A BECAUSE THE DIVIDEND INCOME WAS EARNED IN RESPECT OF THOSE SHARES WHICH WERE HELD BY ASSESSEE IN COURSE OF BUSINESS AND NOT AS INVESTMENT. REGARDING THE SECOND ALTERNATIVE ARGUMENT MADE BY LD. AR OF ASSESSEE THAT DISALLOWANCE SHOULD NOT EXCEED THE AMOUNT OF EXEMPT INCOME IN EACH OF THESE 3 YEARS, WE FIND FORCE IN THIS ALTERNATIVE SUBMISSION BECAUSE THE SAME IS SUPPORTED BY VARIOUS JUDICIAL PRONOUNCEMENTS. FOR READY REFERENCE, WE REPRODUCE PARA 8 FROM THE TRIBUNAL ORDER CITED BY LD. AR OF ASSESSEE RENDERED IN THE CASE OF M/S. WAY2WEALTH SECURITIES (P) LTD. VS. DCIT (SUPRA). THIS PARA READS AS UNDER. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE HON'BLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENTS (P) LTD. V. CIT, 372 ITR 694 HAS TAKEN THE VIEW THAT DISALLOWANCE U/S. 14A OF THE ACT CANNOT EXCEED THE EXEMPT INCOME. SIMILAR VIEW WAS EXPRESSED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. HOLCIM INDIA PVT. LTD., 272 CTR 282 (DEL). THESE DECISIONS WERE CONSIDERED BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF FUTURE CORPORATE RESOURCES LTD V. ACIT, ITA NO.4658/MUM/2015 DATED 26.07.2017 RELATING TO AY 2011-12 AND IT WAS HELD BY THE TRIBUNAL MUMBAI BENCH THAT DISALLOWANCE U/S. 14A OFTHE ACT CANNOT EXCEED THE EXEMPT INCOME. FOLLOWING THE AFORESAID DECISIONS, WE HOLD THAT DISALLOWANCE U/S. 14A OF THE ACT IN THE PRESENT CASE SHOULD BE RESTRICTED TO THE EXEMPT INCOME EARNED BY THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. 4. RESPECTFULLY FOLLOWING THIS TRIBUNAL ORDER, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE U/S. 14A IN EACH OF THESE THREE YEARS TO THE EXTENT OF EXEMPT INCOME EARNED BY THE ASSESSEE IN EACH OF THESE 3 YEARS AND SUCH TOTAL DISALLOWANCE TO BE MADE TO THE EXTENT OF EXEMPT INCOME SHOULD BE INCLUSIVE OF DISALLOWANCE MADE BY THE ASSESSEE SUO MOTO. ON THIS ISSUE, THE GROUND OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 5. NOW WE TAKE UP THE SECOND ISSUE REGARDING DISALLOWANCE OF RS. 13 LAKHS OUT OF PROFESSIONAL CHARGES IN ASSESSMENT YEAR 2009-10 RAISED BY ITA NOS. 713 TO 715/BANG/2018 PAGE 8 OF 12 ASSESSEE IN THIS YEAR AS PER GROUND NO. 8. IN THIS REGARD, THE LD. AR OF ASSESSEE REITERATED THE SAME CONTENTIONS WHICH WERE RAISED BEFORE CIT(A). THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE WAS DECIDED BY CIT (A) AS PER PARA 9 OF HIS ORDER FOR ASSESSMENT YEAR 2009-10. THE SAME IS REPRODUCED HEREINBELOW FOR READY REFERENCE. 9. THE APPELLANT HAS QUESTIONED THE DISALLOWANCE OF RS.13,00,000/- PAID AS PROFESSIONALCHARGES. THE APPELLANT HAS NOT BEEN ABLE TO SUBSTANTIATE THE CLAIM MADE AND DEMONSTRATETHAT THESE PAYMENTS WERE INDEED MADE FOR THE PURPOSE OF BUSINESS. THESE PAYMENTSAPPEAR TO BE PAYMENT OUT OF CAPITAL, UNRELATED TO BUSINESS. THE ADDITION MADE IS SUSTAINED. 7. FROM THE ABOVE PARA, IT IS SEEN THAT A CATEGORICAL FINDING IS GIVEN BY CIT(A) THAT ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE CLAIM MADE AND DEMONSTRATE THAT THESE PAYMENTS WERE INDEED MADE FOR THE PURPOSE OF BUSINESS. IN SPITE OF THIS CATEGORICAL FINDING OF CIT (A), NOTHING HAS BEEN BROUGHT ON RECORD BEFORE US TO ESTABLISH THAT THESE PAYMENTS WERE MADE FOR THE PURPOSE OF BUSINESS. AS PER THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2009-10, IT IS SEEN THAT IT IS NOTED BY THE AO IN PARA 3 OF THE ASSESSMENT ORDER IN THAT YEAR THAT AR WAS ASKED TO SPECIFICALLY EXPLAIN THE ACTUAL SERVICES RENDERED BY THESE PARTIES AND ALSO PROVIDE NECESSARY EVIDENCE TO PROVE THAT THE SERVICES RENDERED BY THESE PARTIES IS OF RELEVANCE TO THE BUSINESS OF TRADING. BUT ASSESSEE FAILED TO EXPLAIN THE SAME DESPITE GIVING SUFFICIENT OPPORTUNITIES. HENCE IT IS SEEN THAT AS PER THE ASSESSMENT ORDER ALSO, THIS IS THE FINDING OF AO THAT ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THAT THIS EXPENDITURE WAS INCURRED FOR AVAILING SOME SERVICES WHICH ARE RELEVANT TO THE BUSINESS. HENCE ON THIS ISSUE, WE FIND NO REASON TO INTERFERE IN THE ORDER OF CIT(A) FOR ASSESSMENT YEAR 2009-10. GROUND NO. 8 OF THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2009-10 IS REJECTED. 8. NOW WE TAKE UP THE SECOND ISSUE IN ASSESSMENT YEAR 2011-12 WHICH HAS BEEN RAISED BY ASSESSEE AS PER GROUND NO. 11 IN THAT YEAR. REGARDING THIS ISSUE IN ASSESSMENT YEAR 2011-12, IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT ON PAGE NO. 19 OF THE PAPER BOOK OF THE ASSESSEE FOR ASSESSMENT YEAR 2011-12 IS THE SUBMISSION OF THE ASSESSEE IN THIS REGARD WHICH SHOULD BE CONSIDERED. FOR READY REFERENCE, WE REPRODUCE THE SAME HEREINBELOW. ITA NOS. 713 TO 715/BANG/2018 PAGE 9 OF 12 THE ONLY JUSTIFICATION OF THE HON'BLE CIT(A) IS THAT, THE APPELLANT HAS NOT BEEN ABLE TOSUBSTANTIATE THAT, THE PAYMENT WAS MADE INDEED FOR THE PURPOSE OF THE BUSINESS. WE SUBMIT THAT, THE EXPENDITURE HAS BEEN INCURRED GENUINELY AND IS IN THE BUSINESS INTERESTOF THE COMPANY. IN VIEW OF THIS, THE EXPENDITURE IS ALLOWABLE AS REVENUE IN THE HANDS OF THECOMPANY. COPY OF THE INVOICE RAISED BY M/S.KKR HOLDINGS MAURITIUS WHICH WAS SUBMITTED TO THEASSESSING OFFICER AND ALSO THE CIT(A) ARE ENCLOSED. COPY OF THE CERTIFICATE ISSUED BY M/S. MANJUNATH & ASSOCIATES, CHARTERED ACCOUNTANTS CONFIRMING THE FACT OF THE COMPANY M/S.COFFEEDAY RESORTS (P) LTD RAISING US $ 200 MILLIONS (INR 960 CRS) TOWARDS EQUITY IS ALSOENCLOSED. IT IS OWING TO THE SERVICES RENDERED BY M/S.KKR HOLDING MAURITIUS, THAT THECOMPANY WAS IN A POSITION TO RAISE SUCH FUNDS. WITH THIS INVESTMENT THE NET WORTH OF THE COMPANY M/S.COFFEEDAY RESORTS (P) LTD INCREASED SUBSTANTIALLY AND SINCE THE APPELLANT COMPANY HAD SUBSTANTIAL HOLDINGS IN THE SAID COMPANY, THE NET WORTH OF THE APPELLANTCOMPANY ALSO INCREASED. UNDER THESE CIRCUMSTANCES, THE EXPENDITURE WAS CLAIMED ASREVENUE BY THE APPELLANT COMPANY. IN VIEW OF THIS, WE SUBMIT THAT, THE ASSESSING OFFICER HAS ERRED IN DISALLOWING THEEXPENDITURE ABOVE. THE HON'BLE COMMISSIONER OF INCOME TAX (APPEALS) HAS ALSO ERRED INCONFIRMING THE DISALLOWANCE. WE REQUEST THE HON'BLE TRIBUNAL TO KINDLY CONSIDER THESUBMISSION ABOVE AND DELETE THE ADDITION CONSEQUENT TO THE DISALLOWANCE OF THEEXPENDITURE OF RS.4,68,00,000/-. 9. IN ADDITION TO THAT, IT WAS SUBMITTED THAT AS PER THE CERTIFICATE OF CA B M MANJUNATH DATED 26.05.2011 AVAILABLE ON PAGE NO. 35 OF PAPER BOOK FOR ASSESSMENT YEAR 2011-12, IT IS CERTIFIED THAT M/S. COFFEE DAY RESORTS PRIVATE LIMITED HAD RAISED A SUM OF USD 200 MILLION IN THE MONTHS OF FEBRUARY AND MARCH 2010 AT A POST EQUITY VALUATION OF USD 700 MILLION (INR 3,360 CRORES). IT IS ALSO POINTED OUT THAT THIS IS ALSO CERTIFIED BY CA THAT THE EQUITY SHARE OF RS. 10/- EACH WAS ISSUED AT A PRICE OF RS. 1768/- PER SHARE, OF WHICH RS. 10/- IS FACE VALUE AND BALANCE IS TOWARDS SHARE PREMIUM. THEREAFTER OUR ATTENTION WAS DRAWN TO PAGE NO. 42 OF PAPER BOOK FOR ASSESSMENT YEAR 2011-12 AND IT WAS POINTED OUT THAT THE INVESTMENT OF THE ASSESSEE INCLUDES THE INVESTMENT IN THIS COMPANY I.E. M/S. COFFEEDAY RESORTS PVT. LTD. TO THE EXTENT OF RS. 170.97 CRORES. AT THIS JUNCTURE, THE BENCH WANTED TO KNOW REGARDING THE DATE OF THESE INVESTMENTS BECAUSE IN THE PREVIOUS YEAR FIGURE AS ON 31.03.2010 ALSO, SAME AMOUNT OF INVESTMENT ITA NOS. 713 TO 715/BANG/2018 PAGE 10 OF 12 WAS APPEARING IN THE NAME OF THIS COMPANY. IN REPLY, IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THIS DETAIL IS NOT READILY AVAILABLE. HE SUBMITTED THAT THE ASSESSEE COMPANY HAS SUBSTANTIAL HOLDINGS IN THE SAID COMPANY AND THEREFORE, BECAUSE OF THIS ISSUE OF SHARES AT A HIGH PREMIUM BY THAT COMPANY, NET WORTH OF THE ASSESSEE COMPANY HAS ALSO INCREASED AND THEREFORE, EXPENSES CLAIM OF ASSESSEE SHOULD BE ALLOWED AS BUSINESS EXPENSES OF ASSESSEE COMPANY. THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND NO MERIT IN THE ARGUMENTS MADE BY LD. AR OF ASSESSEE REGARDING THIS DISALLOWANCE OF RS. 4.68 CRORES OUT OF PROFESSIONAL CHARGES. WE FIND THAT AS PER THE CERTIFICATE OF CA AVAILABLE ON PAGE NO. 35 OF THE PAPER BOOK, AN AMOUNT OF RS. 960 CRORES WAS BROUGHT IN BY THREE INVESTORS DURING FEBRUARY AND MARCH 2010. AS PER THE BALANCE SHEET OF THE ASSESSEE COMPANY, THE HOLDING OF THE ASSESSEE IN THIS COMPANY I.E. M/S. COFFEEDAY RESORTS PVT. LTD. IS AROUND RS. 170.97 CRORES. EVEN IF THE SHARES OF THAT COMPANY I.E. COFFEEDAY RESORTS PVT. LTD. HAS BEEN ISSUED AT VERY HIGH PREMIUM AND BECAUSE OF THAT, IF THE MARKET VALUE OF ASSESSEES INVESTMENT IN THAT COMPANY HAS GONE UP, IT CANNOT BE SAID THAT ANY EXPENDITURE INCURRED IN THIS REGARD IS BUSINESS EXPENDITURE OF THE ASSESSEE COMPANY BECAUSE THE SHARES ARE HELD BY THE ASSESSEE AS AN INVESTMENT. 11. THIS ISSUE IN ASSESSMENT YEAR 2011-12 WAS DECIDED BY THE LD. CIT (A) AS PER PARA 9 OF HIS ORDER WHICH IS REPRODUCED HEREINBELOW FOR READY REFERENCE. 9. THE APPELLANT HAS QUESTIONED THE DISALLOWANCE OF RS. 4,68,00,000/- PAID AS PROFESSIONAL CHARGES TOONE KKR HOLDINGS MAURITIUS. THE APPELLANT HAS NOT BEEN ABLE TO SUBSTANTIATE THE CLAIM MADE ANDDEMONSTRATE THAT THIS PAYMENT WAS INDEED MADE FOR THE PURPOSE OFBUSINESS. THIS PAYMENT APPEARSTO BE PAYMENT OUT OF CAPITAL, UNRELATED TO BUSINESS. THE ADDITION MADE. IS SUSTAINED. 12. AS PER ABOVE PARA REPRODUCED FROM THE ORDER OF CIT(A), IT IS SEEN THAT A CATEGORICAL FINDING IS GIVEN BY CIT(A) THAT THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE CLAIM MADE AND DEMONSTRATE THAT THIS PAYMENT WAS INDEED MADE FOR THE PURPOSE OF BUSINESS. THIS FINDING IS ALSO GIVEN BY CIT (A) THAT THE PAYMENTS APPEAR TO BE PAYMENT OUT OF CAPITAL, UNRELATED TO BUSINESS ITA NOS. 713 TO 715/BANG/2018 PAGE 11 OF 12 AND WITH THIS FINDING, CIT (A) HAS UPHELD THE DISALLOWANCE MADE BY THE AO. AS PER THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2011-12, IT IS SEEN THAT IT IS NOTED BY THE AO IN PARA 3 OF THE ASSESSMENT ORDER THAT VIDE NOTICE U/S. 142(1) DATED 18.12.2013, THE AO SOUGHT FOR COMPLETE DETAILS OF AMOUNT PAID TO M/S. KKR HOLDING MAURITIUS, ALONG WITH LEDGER COPY AND A COPY OF THE AGREEMENT BETWEEN THE ASSESSEE AND M/S. KKR HOLDING MAURITIUS TO WHOM THIS AMOUNT OF RS. 4.68 CRORES WAS PAID BY THE ASSESSEE. THEREAFTER THE AO HAS NOTED THAT THE ASSESSEE VIDE ITS SUBMISSION DATED 24.12.2013 HAS ONLY SUBMITTED THAT THE SAID EXPENSES WERE TOWARDS THE SERVICES RENDERED BY M/S. KKR HOLDINGS MAURITIUS AND IN SUPPORT OF THIS, THE ASSESSEE HAS FURNISHED INVOICES FOR US$ 15,00,000 FROM KKR HOLDINGS AND A LETTER DATED 01.12.2010 FROM KKR HOLDING TO ASSESSEE STATING THAT NO FURTHER AMOUNT IS PAYABLE BY THE ASSESSEE. BUT NO OTHER DETAIL WAS BROUGHT ON RECORD BY ASSESSEE BEFORE THE AO. THE AO HAS FURTHER NOTED THAT ASSESSEE WAS ASKED TO FURNISH DETAILS VIDE ORDER SHEET NOTINGS DATED 20.01.2014 AND IN REPLY TO THIS, AS PER SUBMISSION DATED 29.01.2014, IT WAS SUBMITTED BEFORE THE AO THAT THE ASSESSEE HAS SOUGHT PROFESSIONAL SERVICES OF M/S. KKR HOLDINGS MAURITIUS WHICH WAS ENGAGED IN IDENTIFYING POTENTIAL INVESTORS AND ADVISORY ON THE TERMS AND STRUCTURING OF SUCH INVESTMENTS. THIS WAS ALSO SUBMITTED THAT THIS COMPANY HAS RENDERED SERVICES IN IDENTIFYING INVESTORS WHO HAVE INVESTED IN EQUITY, PREFERENCE & DEBENTURES IN M/S. COFFEE DAY RESORTS (P) LTD., IN WHICH THE ASSESSEE HAS INVESTED RS. 170 CRORES. IT IS ALSO STATED BEFORE THE AO THAT THE ASSESSEE COMPANY GOT BENEFIT BY WAY OF HIGHER VALUATION OF SHARES OF M/S. COFFEE DAY RESORTS (P) LTD. BASED ON THESE SUBMISSIONS, THE AO CAME TO THE CONCLUSION THAT THE EXPENSES IN QUESTION WERE NOT FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE BUT FOR THAT OF ITS SISTER CONCERN M/S. COFFEE DAY RESORTS (P) LTD. IN VIEW OF THESE FACTS AS DISCUSSED ABOVE, IT IS SEEN THAT THE AMOUNT IN QUESTION OF RS. 4.68 CRORES PAID BY ASSESSEE TO M/S. KKR HOLDINGS MAURITIUS WAS FOR THE PURPOSE OF ARRANGING INVESTMENTS IN M/S. COFFEE DAY RESORTS (P) LTD. BY WAY OF EQUITY, PREFERENCE AND DEBENTURES AND THEREFORE, BY NO STRETCH OF IMAGINATION, IT CAN BE ACCEPTED THAT THIS EXPENDITURE IS BUSINESS EXPENDITURE FOR THE PRESENT ASSESSEE. HENCE, ON THIS ISSUE ALSO, WE FIND NO REASON TO INTERFERE ITA NOS. 713 TO 715/BANG/2018 PAGE 12 OF 12 IN THE ORDER OF CIT (A). ACCORDINGLY GROUND NO. 11 IN ASSESSMENT YEAR 2011-12 IS ALSO REJECTED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEARS 2009-10 AND 2011-12 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2010-11 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- (LALIET KUMAR) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 08 TH MAY, 2019. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.