DCIT 7(3), MUMBAI V. ZEE NEWS LTD, MUMBAI

ITA 7138/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84426 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 24-09-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 30-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R N DISOUZA
• Keywords: Business income; Rule of consistency; Earning of tax free income
• Section: 14A

Judgement Text

, G GG G IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL G GG G BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , . . , !' !' !' !' BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM & & & & SHRI SHRI SHRI SHRI . D. D.D. D.K KK KARUNAKARA ARUNAKARA ARUNAKARA ARUNAKARA RAO RAO RAO RAO , ,, , AM AMAM AM , , , , ./ I.T.A. NO I.T.A. NO I.T.A. NO I.T.A. NOS SS S. .. .7138 &7139 7138 &7139 7138 &7139 7138 &7139/MUM/2012 /MUM/2012 /MUM/2012 /MUM/2012 ( # # # # $ $ $ $ / ASSESSMENT YEARS : 2008-09 &2009-10) DEPUTY COMMISSIONER OF INCOME TAX -7(3), R.NO.615, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 # # # # / VS. ZEE NEWS LTD. 112, KUVAR HOUSE, 112, SBS ROAD, COLOBA, MUMBAI 400 005 '% ./ & ./ PAN/GIR NO. : AAACZ1213B ( %' / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( ()%' / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.5413/MUM/2013 5413/MUM/2013 5413/MUM/2013 5413/MUM/2013 ( # # # # $ $ $ $ / ASSESSMENT YEAR : 2010-11) DE PUTY COMMISSIONER OF INCOME TAX -7(3), R.NO.615, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 # # # # / VS. ZEE NEWS LTD. 112, KUVAR HOUSE, 112, SBS ROAD, COLOBA, MUMBAI 400 005 '% ./ & ./ PAN/GIR NO. : AAACZ1213B ( %' / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( ()%' / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) %' %' %' %' * * * * / APPELLANT BY : SHRI. R.N. DISOUZA (DR) ()%' ()%' ()%' ()%' + ++ + * * * * /RESPONDENT BY : SHRI. RAJESH CHAMARIA # # # # + ++ + , , , , / DT. OF HEARING : 10 TH DECEMBER 2014 -.$ -.$ -.$ -.$ + ++ + , , , , / DT.OFPRONOUNCEMENT: 17 TH DECEMBER 2014 !/ / O R D E R PER BENCH: THESE THREE APPEAL BY THE REVENUE ARE DIRECTED AGAI NST THREE SEPARATE ORDERS OF THE CIT(A) FOR THE ASSESSMENT YEARS 2008-09 TO 2010-11. ITA NOS.7138,7139&5413/M/12-13. . 2 2. FOR THE ASSESSMENT YEAR 2008-09, THE REVENUE HAS RAISED FOLLOWING GROUNDS IN THIS APPEAL ; I. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE DISALLOWANCE U/S.14A AS PER RULE 8D AMOUNTING TO RS.5,40,324/- BEING INTEREST O F RS.1,23,924/- AND THE EXPENSES OF RS.4,16,399/- CALCULATED @ 0.5% OF AVERAGE INVESTME NTS, WITHOUT PROPERLY APPRECIATING THE FACTUAL AND LEGAL MATRIX OF THE CASE AS CLEARLY BRO UGHT OUT BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. II. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N DELETING THE DISALLOWANCE U/S.14A AS PER RULE 8D AMOUNTING TO RS.5,40,324/- BEING INTEREST O F RS.1,23,924/- AND THE EXPENSES OF RS.4,16,399/- WITHOUT APPRECIATING THE FACT THAT FR OM A.Y.2008-09 ONWARDS THE DISALLOWANCE U/S.14A HAS TO BE MANDATORILY COMPUTED AS PER RULE 8D. II. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N DELETING THE DISALLOWANCE OF SHORT DEDUCTION OF TDS U/S.40(A)(IA) OF RS.4,88,500/-, WI THOUT PROPERLY APPRECIATING THE FACTUAL AND LEGAL MATRIX OF THE CASE AS CLEARLY BROUGHT OUT BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. IV. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N DELETING THE DISALLOWANCE OF SHORT DEDUCTION OF TDS U/S.40(A)(IA) OF RS.4,88,500/-, WI THOUT APPRECIATING THE FACT, THAT THE ASSESSEE WHO HAS NOT DEDUCTED TDS AT PRESCRIBED RATE CANNOT BE SAID TO HAVE COMPLIED WITH THE PROVISION OF TDS AS REQUIRED UNDER SECTION 40(A)(IA ). 2. THE LD. CIT(A)S ORDER IS PERVERSE IN LAW AND O N FACTS AND DESERVES TO BE SET ASIDE. 3. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO RESTORED. THE APPELLANT CRAVES LEAVE TO AMEN D OR ALTER ANY GROUND OR ADD A NEW GROUND THAT MAY BE NECESSARY. 3. GROUND NOS. 1 & 2 REGARDING DISALLOWANCE U/S.14A , THE ASSESSEE WAS HOLDING INVESTMENTS OF RS.8,32,79,820/-. THE OPENING AND CL OSING BALANCE OF INVESTMENTS WERE SAME WHICH MEANS THE INVESTMENTS WERE MADE IN THE EARLIER YEARS AND THERE WAS NO NEW/FRESH INVESTMENTS MADE DURING THE YEARS UNDE R CONSIDERATION. THE AOS PURPOSE TO MAKE DISALLOWANCE U/S.14A R.W. RULE 8D O F THE INCOME-TAX RULES. ACCORDINGLY, THE AO MADE DISALLOWANCE OF RS.5,40,32 4/- COMPRISING OF INTEREST DISALLOWANCE OF RS.1,23,924/- RULE 8D (II) AND ADMI NISTRATIVE EXPENSES OF RS.4,16,399/- UNDER RULE 8D(III). THE ASSESSEE CHAL LENGING THE ACTION OF THE AO BEFORE CIT(A) AND CONTENDED THAT THE INVESTMENT WERE MADE IN THE EARLIER YEAR IN ITS SUBSIDIARY ZEE AKASH NEWS (P) LTD. IT WAS FURTHER CONTENDED TH AT THE ISSUE WAS SPECIFICALLY EXAMINED BY THE AO IN THE ASSESSMENT YEAR 2006-07 W HEREAS NO DISALLOWANCE OF INTEREST AND OTHER EXPENSES WERE MADE BY THE AO U/ S.14A R.W. RULE 8D OF THE RULES. EVEN FOR THE ASSESSMENT YEAR 2007-08 THE AO DID NOT MAKE ANY DISALLOWANCE ON ITA NOS.7138,7139&5413/M/12-13. . 3 ACCOUNT OF INTEREST EXPENSES, HOWEVER, THE AO MADE DISALLOWANCE ON ACCOUNT OF ADMINISTRATIVE AND MANAGERIAL EXPENSES WHICH WERE D ELETED BY THE CIT(A). THE ASSESSEE PLACED RELIANCE ON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN CASE OF RELIANCE UTILITIES & POWER LTD. (313 ITR 340)(BO M). THE CIT(A) HAS DELETED THE ADDITION MADE BY THE AO, CONSIDERING THE FACT THAT IN THE EARLIER ASSESSMENT YEAR THE AO DID NOT MAKE ANY DISALLOWANCE ON ACCOUNT OF EXPE NDITURE FURTHER DISALLOWANCE ON ACCOUNT OF ADMINISTRATIVE AND MANAGERIAL EXPENSES F OR THE ASSESSMENT YEAR 2007-08 WAS DELETED BY THE CIT(A). THEREFORE, WHEN THERE IS NO NEW INVESTMENT DURING THE YEAR THE DISALLOWANCE MADE BY THE AO WAS DELETED BY THE CIT(A). 4. BEFORE US, THE LD. DR HAS SUBMITTED THAT IN THE EARLIER YEAR RULE 8D WAS NOT APPLICABLE WHEREAS FOR THE YEAR UNDER CONSIDERATION THE DISALLOWANCE HAS TO BE WORKED OUT AS PER RULE 8D OF THE INCOME TAX RULES. THEREFORE, EARLIER ASSESSMENT YEAR WILL NOT OPERATE RES-JUDICATA FOR THE ASSESSMENT YE AR UNDER CONSIDERATION. .. . HE HAS RELIED UPON ORDER OF THE ASSESSING OFFICER. ON THE OTHER H AND, LD. AR OF THE ASSESSEE HAS REITERATED ITS CONTENTION HAS RAISED BEFORE CIT(A) AND SUBMITTED THERE WAS NO FRESH INVESTMENT DURING THE YEAR AND FURTHER THE INVESTME NT IN QUESTION WAS ONLY IN THE SUBSIDIARY OF THE ASSESSEE. THEREFORE, SECTION 14A CANNOT BE INVOKED WHEN THE PURPOSES AND OBJECT IS NOT TO EARNING TO DIVIDEND I NCOME. HE HAS FURTHER CONTENDED THAT THERE WAS NO DIVIDEND INCOME AND THEREFORE, AS SESSEE HAS NOT CLAIMED ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION. ACCORDI NGLY, IN VIEW OF THE DECISIONS OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CORRTECH ENERGY (P) LTD. (223 TAXMAN 130), THE JUDGMENT OF P&H HIGH COURT IN THE CASE OF WINSO ME TEXTILE INDS. LTD. (319 ITR 204), AND THE JUDGMENT OF HONBLE P & H HIGH COURT LAKHAN I MARKETING IND. (226 TAXMAN 45) NO DISALLOWANCE U/S.14A CAN BE MADE. THE LD. AR HAS ALSO RELIED UPON THE DECISIONS OF THIS TRIBUNAL IN CASE OF GARWARE WALL ROPES LTD. V. ACIT 65 SOT 86) & JM FINANCIAL LTD. V. ACIT (MUM). THE LD. AR HAS REFERR ED THE ASSESSMENT ORDER AND SUBMITTED THAT ASSESSEE HAS EXPLAINED BEFORE THE AO THAT ASSESSEES OWN INTEREST FREE FUND IS MORE THAN SUFFICIENT FOR INVESTMENT IN QUES TION. ITA NOS.7138,7139&5413/M/12-13. . 4 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THERE IS FRESH INVESTMENT DURING THE YEAR BY THE ASSESSEE AND THE INVESTMENT OF RS.8,32,79,820/- WAS MADE IN THE EARL IER YEARS THAT TOO IN THE SUBSIDIARY OF THE ASSESSEE. THE ASSESSING OFFICER DID NOT DISA LLOW THE INTEREST EXPENDITURE U/S.14A, IN THE ASSESSMENT YEARS 2006-07 & 2007-08. IT IS PE RTINENT TO NOTE THAT THE USE OF BORROWED FUND HAS TO BE EXAMINED IN THE YEAR OF INV ESTMENT AND IF THE AO HAS NOT DISALLOWED ANY INTEREST EXPENDITURE IN THE YEAR INV ESTMENT THEN NO DISALLOWANCE CAN BE MADE IN THE SUBSEQUENT YEAR WHEN NO FRESH INVESTMEN T WAS MADE BY THE ASSESSEE. THEREFORE, AO CAN NOT TAKE A DIFFERENT VIEW IN VIOL ATION OF RULE OF CONSISTENCY WHEN THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES O F THE CASE RATHER IN THE YEAR UNDER CONSIDERATION THERE WAS NO FRESH INVESTMENT. APART FROM NO FRESH INVESTMENT FOR THE ASSESSMENT YEAR 2008-09 IT IS ALSO UNDISPUTED FACT THAT INVESTMENT IN QUESTION IS IN THE SUBSIDIARY OF THE ASSESSEE AND FURTHER THERE WAS NE ITHER DIVIDEND INCOME NOR ANY CLAIM OF EXEMPT INCOME OF THE ASSESSEE. THUS ISSUE WAS CO NSIDERED BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. CORRTECH ENERGY ( P) LTD.(SUPRA) AND AFTER FOLLOWING THE JUDGMENT OF HONBLE P & H HIGH COURT IN THE CASE OF CIT V. WINSOME TEXTILE INDS. LTD.(SUPRA) IT WAS HELD THAT WHEN THE ASSESSEE DID NOT CLAIM OF ANY EXEMPT INCOME, SECTION 14A HAS NO APPLICATION. A SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE P & H HIGH COURT IN THE CASE OF CIT V. LAKHANI MARKETING INC.(SUPRA) PARA 11 &12 AS UNDER; 11. IN VIEW OF THE AFORESAID FINDINGS, WHICH COULD NOT BE SHOWN TO BE ERRONEOUS, THE PLEA OF THE REVENUE CANNOT BE ACCEPTED. FURTHER, TH IS COURT IN HERO CYCLES LTD.'S CASE (SUPRA) RECORDED AS UNDER: '5. IN VIEW OF FINDING REPRODUCED ABOVE, IT IS CLEA R THAT THE EXPENDITURE ON INTEREST WAS SET OFF AGAINST THE INCOME FROM INTEREST AND TH E INVESTMENTS IN THE SHARE AND FUNDS WERE OUT OF THE DIVIDEND PROCEEDS. IN VIE W OF THIS FINDING OF FACT, DISALLOWANCE UNDER SECTION 14A WAS NOT SUSTAINABLE. WHETHER, IN A GIVEN SITUATION, ANY EXPENDITURE WAS INCURRED WHICH WAS T O BE DISALLOWED, IS A QUESTION OF FACT. THE CONTENTION OF THE REVENUE THA T DIRECTLY OR INDIRECTLY SOME EXPENDITURE IS ALWAYS INCURRED WHICH MUST BE DISALL OWED UNDER SECTION 14A AND THE IMPACT OF EXPENDITURE SO INCURRED CANNOT BE ALL OWED TO BE SET OFF AGAINST THE BUSINESS INCOME WHICH MAY NULLIFY THE MANDATE O F SECTION 14A, CANNOT BE ACCEPTED. DISALLOWANCE UNDER SECTION 14A REQUIRES F INDING OF INCURRING OF EXPENDITURE; WHERE IT IS FOUND THAT FOR EARNING EXE MPTED INCOME NO EXPENDITURE HAS BEEN INCURRED, DISALLOWANCE UNDER S ECTION 14A CANNOT STAND. IN ITA NOS.7138,7139&5413/M/12-13. . 5 THE PRESENT CASE FINDING ON THIS ASPECT, AGAINST TH E REVENUE, IS NOT SHOWN TO BE PERVERSE. CONSEQUENTLY, DISALLOWANCE IS NOT PERMISS IBLE. WE HAVE TAKEN THIS VIEW EARLIER ALSO IN IT APPEAL NO.504 OF 2008, CIT V. WINSOME TEXTILE INDUSTRIES LIMITED, DECIDED ON 25TH AUGUST, 2009 WHEREIN IT WAS OBSERVE D AS UNDER: '6. THE CONTENTION RAISED ON BEHALF OF THE REVENUE IS THAT EVEN IF THE ASSESSEE HAD MADE INVESTMENT IN SHARES OUT OF ITS OWN FUNDS, THE ASSE SSEE HAD TAKEN LOANS ON WHICH INTEREST WAS PAID AND ALL THE MONEY AVAILABLE WITH THE ASSESSEE WAS IN COMMON KITTY, AS HELD BY THIS COURT IN CIT Y . ABHISHEK INDUSTRIES LTD. [2006] 205 CTR (P&H) 304 [2006J 286 ITR I (P&H) AND THEREFORE, DISALLOWANCE UNDER SECTION L4A WAS JUSTIFIED. 7. WE DO NOT FIND ANY MERIT IN THIS SUBMISSION. JUD GMENT OF THIS COURT IN ABHISHEK INDUSTRIES (SUPRA) WAS ON THE ISSUE OF ALLOWABILITY OF INTEREST PAID ON LOANS GIVEN TO SISTER CONCERNS, WITHOUT INT EREST. IT WAS HELD THAT DEDUCTION FOR INTEREST WAS PERMISSIBLE WHEN LOAN WAS TAKEN FO R BUSINESS PURPOSE AND NOT FOR DIVERTING THE SAME TO SISTER CONCERN WITHOUT HA VING NEXUS WITH THE BUSINESS. OBSERVATIONS MADE THEREIN HAVE TO BE READ IN THAT C ONTEXT. IN THE PRESENT CASE, ADMITTEDLY, THE ASSESSEE DID NOT MAKE ANY CLAIM FOR EXEMPTION. IN SUCH A SITUATION, SECTION 14A COULD HAVE NO APPLICATION.' 12.AS A RESULT, THE SUBSTANTIAL QUESTIONS OF LAW AR E ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. CONSEQUENTLY, FINDIN G NO MERIT IN THE APPEALS, THE SAME ARE HEREBY DISMISSED. 6. EVEN OTHERWISE THE INVESTMENT IN QUESTION SO FOR AS THE ASSESSMENT YEAR 2008- 09 IS CONCERN WAS IN THE SUBSIDIARY OF THE ASSESSEE AND PURPOSE OF INVESTMENT IS NOT TO EARN THE DIVIDENT INCOME BUT FOR HOLDING THE CONTRO LLING STACK IN THE SUBSIDIARY. THE COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF GARWAR E WALL ROPES LTD. V. ACIT (MUM) AS WELL AS JM FINANCIAL LTD. V. ACIT (SUPRA) HAS TAKEN A VIEW THAT NO DISALLOWANCE CAN BE MADE U/S.14A IN THE CASE OF INVESTMENT IN THE SUBSI DIARIES FOR THE PURPOSE OF HOLDING THE CONTROLLING STACK AND NOT FOR EARNING DIVIDEND INCO ME. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND LEGAL IN THE ORDER OF THE CIT(A) IN DELETING THE ADDITION MADE BY THE AO U/S.14A. 7. GROUND NOS. 3 & 4 REGARDING DISALLOWANCE AS U/S. 40(A)(IA) FOR SHORT DEDUCTION OF TDS. WE HAVE HEARD LEARNED DR AS WELL AS LD. AR AND CONSIDERED RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS SHORT FALL IN DEDUCTION OF TAX AT SOURCE ON CERTAIN EXPENSES. THE DETAILS O F THE EXPENDITURE AND TDS ARE GIVEN BY THE ASSESSING OFFICER IN PARA 6 AS UNDER ; ITA NOS.7138,7139&5413/M/12-13. . 6 PARTICULARS OF PARTICULARS OF PARTICULARS OF PARTICULARS OF EXPENSES EXPENSES EXPENSES EXPENSES AMOUNT (A) AMOUNT (A) AMOUNT (A) AMOUNT (A) AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF TAX TAX TAX TAX DEDUCTIBLE DEDUCTIBLE DEDUCTIBLE DEDUCTIBLE (B) (B)(B) (B) AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF TAX TAX TAX TAX DEDUCTED DEDUCTED DEDUCTED DEDUCTED (C) (C)(C) (C) SHORT FALL SHORT FALL SHORT FALL SHORT FALL (D) (D)(D) (D) TDS TDS TDS TDS RATE RATE RATE RATE (F) (F)(F) (F) PROPORTIONATE PROPORTIONATE PROPORTIONATE PROPORTIONATE DISALLOWANCE DISALLOWANCE DISALLOWANCE DISALLOWANCE (F)/(D) (F)/(D) (F)/(D) (F)/(D) PRODUCTION CHARGES 36,233 4,105 1,303 2,802 11.33% 24,732 PRODUCTION CHARGES 1,364,370 2,31,875 154,584 77,291 16.995% 4,54,787 COMMUNICATION CHARGES 33,674 763 560 203 2.266% 8,959 PROPORTIONATE PROPORTIONATE PROPORTIONATE PROPORTIONATE DISALLOWANC DISALLOWANC DISALLOWANC DISALLOWANCE E E E U/S.40(A)(IA) U/S.40(A)(IA) U/S.40(A)(IA) U/S.40(A)(IA) 4,88,478 ROUNDED OFF TO 4,88,500 4,88,500 4,88,500 4,88,500 8. ACCORDINGLY, THE AO DISALLOWED THE PROPORTIONATE EXPENDITURE. U/S.40(A)(IA) OF THE INCOME TAX ACT. THE ASSESSEE CHALLENGED THE ACT ION OF THE AO BEFORE CIT(A) AND RELIED UPON THE DECISIONS OF THIS TRIBUNAL WHEREIN IT HAS BEEN HELD THAT DUE TO SHORT FALL OF DEDUCTION, THE PROVISIONS OF SECTION 40(A)(IA) C ANNOT BE APPLIED. ACCORDINGLY, THE CIT(A) HAS DELETED THE DISALLOWANCE U/S.40(A)(IA) I N PARA 3.3. AS UNDER; I HAVE CONSIDERED THE FACTS OF THE CASE. IN THE CA SE UNDER CONSIDERATION, THE APPELLANT HAS DEDUCTED TAX AT RATE LOWER THAN P RESCRIBED UNDER THE ACT/RULES. THUS, IT IS NOT A CASE WHERE NO TDS WAS DEDUCTED AT ALL. IN THE FOLLOWING CASE, IT HAS BEEN HELD THAT THE PROVISION S OF SEC.40A(IA) ARE APPLICABLE ONLY WHERE NO TDS HAS BEEN MADE AND THE PROVISIONS ARE NOT APPLICABLE WHERE TDS HAS BEEN MADE THOUGH AT A LOWER RATE. - CHANDABHOY & JASSOBHAY (49 SOT 448), ITAT MUMBAI - S.K TEKRIWAL (15 TAXMAN.COM 289), CALCUTTA (HC) -ACIT VS. QUALITY CINE LABS PVT LTD ,(2012) 31 CCH 053 MUM TRIBUNAL ORDER DATED 29/3/2012. SINCE IN THE CASE UNDER CONSIDERATION, THE APPELLAN T HAS DEDUCTED TDS THOUGH AT A LOWER RATE, THEREFORE PROVISIONS OF SEC .40A(IA) WAS NOT APPLICABLE AS HELD IN THE ABOVE CASE. FOLLOWING THE ABOVE DECISIONS OF TRIBUN ALS AND COURTS, DISALLOWANCE MADE BY THE AO IS DELETED. 9. THERE IS NO QUARREL SO FAR AS THE DECISIONS OF T HIS TRIBUNAL ON THE ISSUE THAT IF THE ASSESSEE HAS DEDUCTED THE TDS AT THE RATE PROVIDED UNDER A DIFFERENT PROVISION OF CHAPTER XVII AND SUBSEQUENTLY, THE AO FOUND THAT TH E TDS SHOULD HAVE BEEN DEDUCTED UNDER A DIFFERENT PROVISION OF THE SAID CHAPTER AT A HIGHER RATE. IN THOSE CASES THE TRIBUNAL HELD THAT THE ASSESSEE DEDUCTED THE TAX UN DER THE BELIEF THAT THE RATE OF TAX ITA NOS.7138,7139&5413/M/12-13. . 7 PROVIDED UNDER THE SPECIFIC PROVISION OF CHAPTER XV II APPLICABLE IN THE CASE OF THE ASSESSEE WHICH WAS NOT ACCEPTED BY THE AO, THEREFOR E, THE PROVISIONS OF SECTION 40(A)(IA) CANNOT BE APPLIED OF SHORT DEDUCTION OF T DS DUE TO THE BONA FIDE BELIEF OF THE ASSESSEE. IN THE CASE IN HAND THE FACTS ARE NOT BRO UGHT ON RECORD BY THE ASSESSEE AS WHAT IS THE REASON FOR SHORT DEDUCTION. THEREFORE, IN THE ABSENCE OF COMPLETE AND PROPER FACTS IT IS NOT POSSIBLE TO DECIDE THE ISSUE CONCLUSIVELY. ACCORDINGLY, WE SET ASIDE THIS ISSUE TO RECORD OF THE CIT APPEAL FOR VERIFICA TION OF THE RELEVANT FACTS AND PARTICULARLY THE REASON FOR SHORT DEDUCTION OF TDS BY THE ASSESSEE AND THEN DECIDE THE SAME AS PER LAW. 10. FOR THE ASSESSMENT YEAR 2009-10, THE REVENUE HA S RAISED FOLLOWING EFFECTIVE GROUNDS IN THIS APPEAL. 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE DISALLOWANCE U/S.14A AS PER RULE 8D AM OUNTING TO RS.29,96,260/-OUT OF INTEREST AND RS.4,16,399/- OUT OF EXPENSES CALCULATED @. 0.5% OF AVERAGE INVESTMENTS, WITHOUT PROPERLY AP PRECIATING THE FACTUAL AND LEGAL MATRIX OF THE CASE AS CLEARLY BRO UGHT OUT BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. 2. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE DISALLOWANCE U/S.14A AS RULE 8D AMOUNTING TO RS.29, 96,260/- OUT OF INTEREST AND RS.4,16,399/- OUT OF EXPENSES, WITHOUT APPRECIATING THE FACT THAT FROM A.Y.2008-09 ONWARDS THE DISALLOWANCE U/S.14A HAS TO BE MANDATORILY COMPUTED AS PER RULE 8D. 3. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE DISALLOWANCE OF SHORT DEDUCTION OF TDS U/S.40(A)(IA ) OF RS.28,46,340/-, WITHOUT PROPERLY APPRECIATING THE FACTUAL AND LEGAL MATRIX OF THE CASE AS CLEARLY BROUGHT OUT BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. 4.THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE DISALLOWANCE OF SHORT DEDUCTION OF TDS U/S.40(A)(IA ) OF ASSESSEE WHO HAS NOT DEDUCTED TDS AT PRESCRIBED RATE CANNOT BE SAID TO HAVE COMPLIED WITH THE PROVISION OF TDS AS REQUIRED UNDER SECTION 40(A)(IA). 11. THE GROUNDS ARE IDENTICAL TO THE GROUNDS FOR TH E ASSESSMENT YEAR 2008-09. IN VIEW OF OUR FINDING FOR THE ASSESSMENT YEAR 2008-09 GROUND NO.1 & 2 OF THE REVENUE APPEAL ARE DISMISSED. WHEREAS GROUND NO.3 AND 4 ARE SET ASIDE TO THE RECORD OF THE CIT(A) WITH IDENTICAL DIRECTIONS. ITA NOS.7138,7139&5413/M/12-13. . 8 12. FOR THE ASSESSMENT YEAR 2010-11, THE REVENUE HA S RAISED FOLLOWING EFFECTIVE GROUNDS IN THIS APPEAL. I)THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE DISALLOWANCE U/S.14A AS PER RULE 8D AMOUNTING THE RS.23,88,124/- BEING INTEREST OF RS.19,71,825/- AND THE EXPENSES OF RS.4,16,399/- CA LCULATED @ 0.5% OF AVERAGE INVESTMENTS, WITHOUT PROPERLY APPRECIATING THE FACT UAL AND LEGAL MATRIX OF THE CASE AS CLEARLY BROUGHT OUT BY THE ASSESSING OF FICER IN THE ASSESSMENT ORDER. II)THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE DISALLOWANCE U/S.14A AS RULE 8D AMOUNTING TO RS.23, 88,124/- BEING INTEREST OF RS.19,71,825/- AND THE EXPENSES OF RS.4 ,16,399/-, WITHOUT APPRECIATING THE FACT THAT FROM A.Y. 2008-09 ONWARD S THE DISALLOWANCE U/S14A HAS TO BE MANDATORILY COMPUTED AS PER RULE 8D. 13. THE ONLY ISSUE ARISING FOR THIS ASSESSMENT YEAR IS REGARDING DISALLOWANCE U/S.14A. SO FAR AS THE INVESTMENT WHICH WAS MADE IN THE EARLIER YEARS IS CONCERN NO DISALLOWANCES CAN BE MADE IN VIEW OF OUR FINDING FO R THE ASSESSMENT YEAR 2008-09. THERE IS A FRESH INVESTMENT DURING THE YEAR BY THE ASSESSEE WHICH IS NOT IN THE SUBSIDIARY BUT IN THE GROUP CONCERN OF THE ASSESSEE, THEREFORE , WE WILL CONSIDERED THE DISALLOWANCE U/S.14A ONLY TO THE EXTENT OF FRESH IN VESTMENT MADE BY THE ASSESSEE DURING THE YEAR. 14. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND CONSIDERED RELEVANT MATERIAL ON RECORD. THE LD. DR HAS POINTED OUT THAT THE ASSE SSING OFFICER HAS RECORDED THE FACT THAT THE ASSESSEE HAS MADE INVESTMENT OF RS.6 CRORE S DURING THE YEAR BY UTILISING BORROWED FUND TO THE EXTENT OF RS.15 LACS AND THERE FORE, THE ASSESSEE ALTERNATIVELY PLEADED BEFORE THE AO THAT DISALLOWANCE @ 17.5 0% ON ACCOUNT OF INTEREST EXPENDITURE TO BE MADE DUE TO BORROWED FUND OF RS.1 5 LACS WAS USED FOR INVESTMENT DURING THE YEAR. ON THE OTHER HAND, LD. AR HAS SUBM ITTED THAT THE ASSESSEES OWN FUND WAS MORE THAN SUFFICIENT FOR MAKING INVESTMENT DURI NG THE YEAR. HE HAS REFERRED THE BALANCE SHEET AND SUBMITTED ASSESSEES OWN FUND WAS MORE THAN 200 CRORES WHEREAS THE INVESTMENT WAS ONLY OF RS.6 CRORES DURING THE Y EAR, THUS HE HAS SUBMITTED THAT IN VIEW OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CASE OF RELIANCE UTILITIES & POWER LTD. 313 ITR 340, NO DISALLOWANCE CAN BE MADE WHEN THE ASSESSEES OWN FUND IS SUFFICIENT FOR MAKING THE INVESTMENT. ITA NOS.7138,7139&5413/M/12-13. . 9 15. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSAL OF THE RELEVANT RECORD WE NOTED THAT THE ASSESSEE HAS ADMITTED THE FACTS THAT AN AMOUNT OF RS.15 LACS WAS UTILISE FROM THE CASH CREDIT ACCOUNT WITH ICIC BANK FOR MAKING INVESTMENT DURING THE YEAR. THE SUBMISSIONS OF THE ASSESSEE BEFORE THE AO , IN THIS RESPECT ARE RECORDED AT PAGE 9 OF ASSESSMENT ORDER AS UNDER; WITHOUT PREJUDICE TO ABOVE, THAT NO DISALLOWANCE I S REQUIRED U/S.14A, EVEN IF THE DISALLOWANCE IS DONE, IT CAN NOLY BE DONE ON THE PA YMENT/INVESTMENTS OF RS.1,500,000/- MADE FROM THE CASH CREDIT ACCOUNT WITH ICIC BANK ON 4 TH JUNE 2009. ACCORDINGLY THE DISALLOWANCE @17.50% WORKS OUT OF RS.215,753/- 16. THOUGH THE DISALLOWANCE OF INTEREST UNDER RULE 8D(II) IS NOT APPLICABLE, WHEN THE ASSESSEE IS HAVING ITS OWN FUND WHICH ARE MORE THAN THE INVESTMENT IN QUESTION HOWEVER WHEN THERE IS A DIRECT CONNECTION OF THE BORROWED F UND USED FOR INVESTMENT THEN THE DECISION IN THE CASE OF RELIANCE UTILITIES & POWER LTD. WILL NOT HELP IN THE CASE OF THE ASSESSEE. ACCORDINGLY, THE DISALLOWANCE OF INTEREST OF RS.2,15,753/- AS A DIRECT INTEREST EXPENDITURE UNDER RULE 8D(I) HAS TO BE MADE. IN VIE W OF THE ABOVE DISCUSSION WE MODIFY THE ORDER OF THE AUTHORITIES BELOW AND RESTR ICT THE DISALLOWANCE TO THE EXTENT OF RS.2,15,753/- ON ACCOUNT OF INTEREST EXPENDITURE U/ S.14A. ACCORDINGLY, THIS GROUND IS PARTLY ALLOWED. 17. IN THE RESULT, APPEALS OF REVENUE FOR THE ASSES SMENT YEARS 2008-09 AND 2009- 10 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND ASSESSMENT YEAR 2010-11 IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 17 TH DAY OF DECEMBER, 2014. SD/- SD/- ( . ) !' (D. KARUNAKARA RAO) ACCOUNTANT MEMBER ( ) !' (VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 17 TH DECEMBER 2014 ITA NOS.7138,7139&5413/M/12-13. . 10 PATEL COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI