BINAYAK TEX PROCESSORS LTD., MUMBAI V. A.C.I.T. CENTRAL CIRCLE 38, MUMBAI

ITA 7740/MUM/2012

• Counselvise Citation: 774019914 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 28-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PITAMBAR DAS
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B , MUMBAI BEFORE SHRI P.M. JAGTAP , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 7740/M/2012 ASSESSMENT YEAR: 2009 - 10 M/S. BINAYAK TEX PROCESSORS LTD. , C/O. SHANKARLAL JAIN & ASSOCIAT ES, 12, ENGINEER BUILDING, 265, PRINCESS STREET, MUMBAI 400 002 PAN: AAACB1554D VS. A.C.I.T., CENTRAL CIRCLE 38, GROUND FLOOR, AAYAKAR BHAVAN, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.L. JAIN, A.R. REVENUE BY : SHRI PITAMBAR DAS, D.R. DATE OF HEARING : 12.03. 201 4 DATE OF PRONOUNCEMENT : 21.03.2014 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CO MMISSIONER OF INCOME TAX (APPEALS) [(HEREINAFTER REFERRED TO AS CIT(A)] DATED 27.11.2012 . THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL. 1. THE LD. CIT(A) ERRED IN CONFIRMING DISALLOWANCE AS MADE BY THE LD. ASSESSING OFFICER U/S 14A R.W.S. 8D OF INCOME TAX ACT OF RS.21,03,784/ - WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND LAW APPLICABLE THERETO. 2. THE LD. CIT(A) FAILED TO APPRECIATE THAT APPELLANT HAS NOT CLAIMED EXEMPTION FOR DIVIDEND RECEIVED FROM CO - OPERATIVE BANK; HENCE, PROVIS IONS OF SECTION 14A ARE NOT APPLICABLE. 3. THE LD. CIT(A) ERRED IN NOT CONSIDERING THE FACT THAT SHARE CAPITAL AND FREE RESERVES OF THE APPELLANT IN THE CURRENT ASSESSMENT YEAR AS WELL ITA NO. 7740/M/2012 M/S. BINAYAK TEX PROCESSORS LTD. 2 AS IN THE ASSESSMENT YEAR WHEN THE INVESTMENTS WERE MADE WAS ALWAYS MU CH HIGHER THAN INVESTMENTS MADE; HENCE, APPELLANT HAVING NOT USED ANY BORROWED FUNDS FOR INVESTMENT, NO INTEREST IS DISALLOWABLE. 4. LD. CIT(A) ALSO ERRED IN NOT CONSIDERING THE FACT THAT INVESTMENT HELD BY THE APPELLANT ARE INVESTMENTS IN PRIVATE LIMITED COMPANY AND A COOPERATIVE BANK. CAPITAL GAIN ARISING THEREON IS LIABLE TO BE TAXED AND HENCE INVESTMENTS HELD BY THE APPELLANT ARE NOT LIABLE TO THE PROVISIONS OF SECTION 14A OF INCOME TAX ACT. 5. LD. CIT(A) ERRED IN NOT CONSIDERING VARIOUS DECISIONS OF HON'BLE ITAT AS CITED BEFORE LD. CIT(A). 6. LD. CIT(A) FAILED TO APPRECIATE THAT APPELLANT HAS NOT INCURRED ANY EXPENSE FOR EARNING OF THE DIVIDEND AND WITHOUT CONSIDERING THE FACT ERRED IN CONFIRMING THE DISALLOWANCE UNDER RULE 8D(2)(III) OF RS.3,68,5 50/ - . 7. APPELLANT PRAY THAT DISALLOWANCE MADE U/S 14A OF RS.21,03,784/ - BE DELETED. 8. APPELLANT CRAVE YOUR HONOUR'S LEAVE TO ADD, ALTER OR AMEND ANY GROUND OF APPEAL AT THE TIME OF HEARING OR BEFORE. 2. THE ONLY ISSUE COMING OUT OF THE ABOVE GROUNDS OF APPEAL IS RELATING TO D ISALLOWANCE OF RS. 21,03,784/ - UNDER SECTION 14A OF THE INCOME TAX ACT READ W ITH R ULE 8 D OF THE INCOME TAX RULES. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING TEXTILES. DURIN G THE ASSESSMENT PROCEEDINGS, IT WAS N OTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD EARNED DIVIDEND INCOME OF RS. 2000/ - BUT THE ASSESSEE HAD NOT CLAIMED THE SAME AS EXEMPT. T HE ASSESSEE HAD NOT MADE ANY DISALLOWANCE U/S. 14A WHILE COMPUTING T HE T OTAL INCOME OF THE ASSESSEE. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY EXPENSES SHOULD NOT BE DISALLOWED U/S. 14A R EAD W ITH R ULE 8D OF THE I. T. RULES. THE ASSESSEE CONTENDED THAT IT HAD ALREADY OFFERED THE DIVIDEND ITA NO. 7740/M/2012 M/S. BINAYAK TEX PROCESSORS LTD. 3 INCOME FOR TAX. SINCE IT DID NOT CLAIM ANY EXEMPT INCOME, THE PROVISIONS OF SECTION 14A WERE NOT APPLICABLE. THE ASSESSEE, HOWEVER, OFFERED 0.5% OF THE AVERAGE INVESTMENT AMOUNTING TO RS.3,68,550 / - AS DISALLOWANCE IN RELATION TO EXPENDITURE INCURRED. THE ASSESSING OFFICER DID NOT FIND THE REPL Y OF THE ASSESSEE SATISFACTORY. HE NOTED THAT DIVIDEND EARNED WAS EXEMPT INCOME AND EVEN IF THE ASSESSEE HAD OFFERED THE EXEMPT INCOME FOR TAX, THE SAME CANNOT BE TAXED. HE HELD THAT THE PROVISIONS OF SECTION14A WERE CLEARLY APPLICABLE IN THE CASE OF THE A SSESSEE. BEING NOT SATISFIED WITH THE WORKING OF DISALLOWANCE U/S. 14A SUBMITTED BY THE ASSESSEE , HE MADE A DISALLOWANCE OF RS.17,25,234/ - TAK ING INTO CONSIDERATION THE EXPENDITURE ON ACCOUNT OF INTEREST AS PER THE METHOD PRESCRIBED UNDER RULE 8D(II) OF TH E I.T. RULES AND DI SALLOWANCE OF RS.3,68,550/ - AS PER THE METHOD PRESCRIBED UNDER RULE 8D (III) OF THE SAID RULES ON ACCOUNT OF ADMINISTRATIVE EXPENSES. THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 4 . THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAD NO T SHOWN THE NEXUS BETWEEN THE INVESTMENTS IN THE SHARES AND THE SURPLUS FUNDS, IF AT ALL, AVAILABLE WI TH THE ASSESSEE. THE ASSESSE HAD MADE A GENERAL STATEMENT THAT THE INVESTMENTS IN THE SHARES WERE OUT OF THE FREE RESERVES AND SURPLUS FUNDS AVAILABLE WIT H IT BASED ON THE FIGURES IN THE BALANCE - SHEET. T HE ASSESSEE HAD NOT SHOWN THAT THE AMOUN T S USED FOR INVESTMENTS WERE KEPT IN SOME OTHER BANK ACCOUNT AND IT WAS THESE AMOUNTS WHICH WERE USED FOR THE PURPOSES OF INVESTMENTS SHARES. HE HELD THAT O NCE THE FU NDS ARE NOT SEPARATE AND THE SAME INTEREST BEARING FUNDS ARE BEING USED FOR INVESTMENTS AS WELL AS BUSINESS, THEN, THE PROVISIONS OF RULE 14A WOULD DEFINITELY APPLY . HE THEREFORE CONFIRMED THE DISALLOWANCE SO MADE BY THE AO. ITA NO. 7740/M/2012 M/S. BINAYAK TEX PROCESSORS LTD. 4 5 . BEFORE US, A T THE OUTSET, THE LEARNED A.R. OF THE ASSESSEE RELIED UPON AN AUTHORITY OF THE HON'BLE BOMBAY HIGH COURT STYLED AS 'CIT VS. RELIANCE UTILITIES AND POWER LTD.' [2009] 313 ITR 340 (BOM.) WHEREIN THE HON'BLE BOMBAY HIGH COURT HAS HELD THAT IF THERE ARE FUNDS AVAILABLE, BO TH INTEREST FREE AND OVERDRAFT/LOANS TAKEN, THEN PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE INTEREST FREE FUND GENERATED OR AVAILABLE WITH THE COMPANY, IF, THE INTEREST FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. ON THE OTHER HA ND, THE CONTENTION OF THE LEARNED D.R. HAS BEEN THAT SUCH A PRESUMPTION WOULD ARISE ONLY IF ON THE DATE OF INVESTMENT, ASSESSEE HAD ITS OWN/INTEREST FREE FUNDS AVAILABLE WITH IT. HE HAS FURTHER CONTENDED THAT SINCE THE ASSESSEE HAS NOT PROVIDED ANY FUND FL OW STATEMENT TO PROVE THAT SUFFICIENT INTEREST FREE FUNDS WERE AVAILABLE WITH IT ON THE DATE OF INVESTMENT, HENCE THE PRESUMPTION OF INVESTMENT MADE BY THE ASSESSEE OUT OF ITS OWN FUNDS WOULD NOT BE APPLICABLE IN THE CASE IN HAND. 6 . WE HAVE HEARD THE LEA RNED REPRESENTATIVES OF THE PARTIES AND HAVE ALSO GONE THROUGH THE RECORD. WE MAY OBSERVE THAT THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF 'CIT VS. RELIANCE UTILITIES AND POWER LTD.' (SUPRA), HAS OBSERVED THAT IF THERE ARE FUNDS AVAILABLE, BOTH INTERES T FREE AND OVERDRAFT/LOANS TAKEN, THEN PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE INTEREST FREE FUND GENERATED OR AVAILABLE WITH THE ASSESSEE. HOWEVER, THERE SEEMS TO BE FORCE IN THE CONTENTION OF THE LEARNED D.R. THAT SUCH A PRESUMPTIO N WOULD ARISE ONLY IF ON THE DATE OF INVESTMENT, ASSESSEE HAD ITS OWN/INTEREST FREE FUNDS AVAILABLE WITH IT. HOWEVER, A PERUSAL OF THE ORDERS OF LOWER AUTHORITIES REVEAL THAT THE ABOVE STATED EXPLANATION PUT BY THE ASSESSEE REGARDING INVESTMENTS MADE FROM OWN FUNDS HAS NOT BEEN EXAMINED BY THE ITA NO. 7740/M/2012 M/S. BINAYAK TEX PROCESSORS LTD. 5 LOWER AUTHORITIES. THE SAME HAS BEEN REJECTED ON THE GROUND OF IT BEING GENERAL IN NATURE. 7 . WE MAY OBSERVE THAT IN DAY TO DAY BUSINESS, IT IS FOR THE ASSESSEE TO SEE HOW TO MANAGE ITS BUSINESS. EVEN THOUGH THE ASSE SSEE MAY NOT SHOW IN THE ABSENCE OF SEPARATE FUND FLOW STATEMENT OR SEPARATE ACCOUNTS RELATING TO BUSINESS LOANS AND TRANSACTIONS AND INVESTMENTS MADE FROM OWN FUNDS, BUT IF THE ASSESSEE IS ABLE TO SHOW THE NEAR PROXIMITY OF AVAILABILITY OF OWN FUNDS MAY BE EXACTLY NOT ON THE DATE OF INVESTMENT OR ADVANCEMENT OF LOAN BUT IN A VERY NEAR FUTURE DATE OR WITHIN A REASONABLE SHORT PERIOD OF TIME, EVEN THEN THE PRESUMPTION WILL BE THAT THE INVESTMENT WAS MADE BY THE ASSESSEE FROM HIS OWN FUNDS OR IN ANTICIPATION OF AVAILABILITY OF ITS OWN FUNDS WITHIN A SHORT PERIOD OF TIME. THE PRINCIPLE UNDERLYING THIS PROPOSITION IS THAT A BUSINESSMAN HAS TO CIRCULATE HIS MONEY ACCORDING TO THE DAY TO DAY REQUIREMENTS AND THE LIKELY INFLOW AND OUTFLOW OF MONEY IN THE NEAR FUT URE IS TAKEN INTO CONSIDERATION WHILE MAKING INVESTMENTS. EVEN IF ON THE DATE OF INVESTMENT/EXPENDITURE, OWN FUNDS MAY NOT BE AVAILABLE WITH THE ASSESSEE BUT IF THE INVESTMENT/ EXPENDITURE IS MADE IN ANTICIPATION OF AVAILABILITY OF OWN FUNDS AND THE OWN FU NDS ARE AVAILABLE TO THE ASSESSEE WITHIN A VERY SHORT PERIOD OF TIME, THEN UNDER SUCH CIRCUMSTANCES DISALLOWANCE CANNOT BE MADE ON THE ENTIRE LOAN AMOUNT BUT A VERY REASONABLE PROPORTIONATE DISALLOWANCE CAN BE MADE AND EVEN IN CERTAIN CASES CAN BE IGNORED DUE TO THE SHORTNESS OF THE PERIOD BETWEEN THE DATE OF ADVANCEMENT/EXPENDITURE AND DATE OF AVAILABILITY OF OWN FUNDS. IT CAN BE OBSERVED BY THE ASSESSING OFFICER FROM THE BALANCE SHEET AS TO WHETHER SUFFICIENT OWN FUNDS WERE AVAILABLE TO THE ASSESSEE DURI NG THE FINANCIAL YEAR OR THE INTEREST FREE FUNDS WERE GENERATED DURING THE COURSE OF THE YEAR EVEN IF THE ASSESSEE COULD NOT PROVE THE AVAILABILITY OF OWN FUNDS ON THE PARTICULAR DATE OF INVESTMENT/ADVANCEMENT/EXPENDITURE. ITA NO. 7740/M/2012 M/S. BINAYAK TEX PROCESSORS LTD. 6 8 . THE LD. AR OF THE ASSESSEE HAS RELIED UPON THE FOLLOWING REPRODUCED CHART TO SHOW THAT THE ASSESSEE WAS HAVING ITS OWN SUFFICIENT FUNDS FOR INVESTMENTS. PARTICULARS A.Y.05 - 06 A.Y.06 - 07 A.Y.07 - 08 A.Y.08 - 09 A.Y.09 - 10 1 INVESTMENTS HELD 7,20,10,000 7,20,10,000 7,37,10,000 7,37,10, 000 7,37,10,000 2 CAPITAL & FREE RESERVE 19,27,34,088 21,14,70,107 22,10,90,423 29,89,11,892 34,48,80,915 3 SECURED LOANS (A) PACKING CREDIT 63,68,100 1,04,77,100 1,26,08,000 4,82,95,721 4,53,37,824 (B) BILL DISCOUN T ING 5,43,24,5 25 3,27,77,988 5,37,92,429 19,51,17,861 16,78.65,401 (C) TERM LOAN ---- ---- 1,35,24,896 2,55,52,351 1,90,20,699 6,06,92,625 4,32,55,088 7,99,25,325 26,89,65,933 23,22,23,924 (D) UNSECURED LOAN 10,00, 000 10,00,000 10,00,000 -------- ---- TOTAL LOAN 6,16,92,625 4,42,55,088 8,09,25,325 26,89,65,933 23,22,23,924 4 CURRENT ASSETS (A) INVENTORY 2,92,55,376 4,72,33,666 4,10,88,378 10,32,78,183 11,43,39,202 (B) SUNDRY DEBTORS 12,69,19,694 11,02,79,113 23,87,39,116 33,94,67,035 26,92,01,126 15,61,75,070 15,75,12,779 27,98,27,494 44,27,45,218 38,35,40,328 5 INTEREST PAID (A) ON PACKING CREDIT 10,61,579 7,90,982 2,46,376 1,10,09,764 39,33,828 (B) B ILL DISCOUNTING 39,31,552 39,02,685 45,46,961 27,77,200 2,20,32,420 (C) TERM LOAN ---- ---- 7,70,367 22,25,123 26,26,090 49,93,131 46,93,667 55,63,704 1,60,12,087 2,85,92,338 LESS: SUBSIDY ON EXPORT CREDIT --- ---- ---- 21,31,220 45,74,694 1,38,80,867 2,40,17,644 ITA NO. 7740/M/2012 M/S. BINAYAK TEX PROCESSORS LTD. 7 AMOUNT YEAR OF INVE STMENT INTEREST HELD ARE AS UNDER : - SARASWAT CO - OP BANK 1 10,000 A.Y.2004 - 05 2 VALIANT GLASS WORKS (P) LTD 7,20,00,000 A.Y. 2005 - 06 3 PARAMOUNT FINTEX & INDUSTRIES (I) (P) LTD 17,00,000 A. Y. 2007 - 08 TOTAL : 7,37,10,000 THE LD. AR OF THE ASSESSE EXPLAINED THAT I N VESTMENT OF THE ASSESSEE IN THE ASSESSMENT YEAR 2003 - 04 WAS OF RS.10,000/ - AS AGAINST CAPITAL AND FREE RESERVE OF RS.17.0 5 C RORES. IN THE ASSESSMENT YEAR 2004 - 05, INVESTMENT CONTINUED TO B E RS. 10,000/ - AND ITS CAPITAL AND FREE R ESERVES WERE OF RS.17.90 CRORES, S ECURED LOANS FROM BANK WERE OF RS.5 . 42 CRORES AND UNSECURED LOANS WERE OF RS.15.00 LAKHS ON WHICH INTEREST WAS PAID TO THE BANK OF RS.34.90 LAKHS. IN ASSESSMENT YEAR 2005 - 06, SUCH INVESTMENT INCREASED TO RS.7,20,10,000/ - . ITS CAPITAL AND FREE RESERVES WERE OF RS.19.27CRORES, SECURED LOANS WERE OF RS.6.06 CRORES AND UNSECURED LOANS WERE OF RS.10.00 LAKHS. INTEREST PAID TO THE BANK WAS OF RS.49.93 LAKHS. THUS , SUBSTANTIAL INVESTMENT HAD BEEN MADE IN AY 2005 - 06, SECURED BORROWINGS HAD INCREASED DURING THIS YEAR BY RS.64.00 LAKHS AND UNSECURED LOANS HA D DECREASED BY RS.5.00 LAKHS. THUS, NET ACCRETION IN BORROWINGS WAS ONLY RS .59.00 LAKHS. FRESH INVESTMENT MAD E DURING THAT YEAR WAS OF RS.720.00 LAKHS. HE STRESSED THAT F ROM THE ABOVE, IT WAS CLEAR THAT THE ASSESSEE HAD NOT UTILIZED BORROWED FUNDS FOR MAKING INVESTMENTS. INCREMENTAL BORROWINGS OF R S .59.00 LAKHS HAS BEEN USED FOR ITA NO. 7740/M/2012 M/S. BINAYAK TEX PROCESSORS LTD. 8 THE PURPOSE OF BUSINESS AS THE ASSESSEE BORROWED FUNDS FROM BANKS FOR ITS EXPORT UNDER PCL LIMIT AS WELL AS BILL DISCOUNTING LIMIT. IN AY 2006 - 07, INVESTMENT CONTINUED TO BE THE SAME. HOWEVER, ITS SECURED BORROWINGS FELL DOWN TO RS.4.32 CRORES DURING THE YEAR. IN ASSESSMENT YEAR 2007 - 08, INVESTMENT INCREASED TO RS. 737.10 LAKHS. THUS, A FRESH INVESTMENT OF RS.17.00 LAKHS OVER ITS CAPITAL AND FREE RESERVES INCREASED TO RS.22.10 CRORES. SECURED LOANS WERE INCREASED TO RS.799.25 LAKHS AND UNSECURED LOANS WERE OF RS.10,000/ - . FOR ASSESSMENT YEARS 2008 - 09 AND 2009 - 10, SAME INVESTMENT CONTINUED AND NO FRESH INVESTMENT HAD BEEN MADE. IN ASSESSMENT YEAR 2008 - 09 FREE RESERVES AND CAPITAL OF THE COMPANY WERE OF RS.29.89 CRORE AND ITS BORROWINGS FROM THE BANK BEING SEC URED BORROWING WAS OF RS.2689.65 LAKHS. THERE WAS NO UNSE CURED LOAN. ASSESSEE PAID INTEREST TO THE BANK OF RS.138.80 LAKHS. UP TO ASSESSMENT YEAR 2008 - 09, NO DISALLOWANCE U/S 14A HA D BEEN MADE IN THE ASSESSEE 'S CASE WHILE ALL THE ASSESSMENTS H AD BEEN COMPL ETED U/S 143(3) OF THE ACT. HE FURTHER SUBMITTED THAT I N ASSESSMENT YEAR 2009 - 10, INV ESTMENT OF THE ASSESSE REMAINED SAME AT RS.737 .10 LAKHS. ITS CAPITAL AND FREE RESERVES WERE OF RS.3448.80 LAKHS AND SECURED LOANS OF RS.2322.20 LAKHS ON W HICH INTEREST PA ID WAS OF RS.240.17 LAKHS. THUS, IN AS SESSMENT YEAR 2009 - 10, THERE WAS NO FRESH INVESTMENT AND AS THERE WAS NO DISALLOWANCE U/S 14A UP TO ASSESSMENT YEAR 2008 - 09. HE THEREFORE CONTENDED THAT NO DISALLOWANCE WAS WARRANTED U/S 14A OF INCOME - TAX ACT FOR THE Y EAR UNDER CONSIDERATION ALSO . AFTER CONSIDERING THE ABOVE SUBMISSIONS OF THE ASSESSE AND AFTER GOING THROUGH THE ABOVE CHART WHICH IS THE SUMMARY OF BALANCE SHEETS RELATING TO DIFFERENT ASSESSMENT YEARS, WE ARE SATISFIED WITH THE SUBMISSIONS OF THE LD. A R THAT THE MAJOR INVESTMENTS WERE MADE BY THE ASSESSEE IN A SSESSMENT YEAR 2005 - 06. TOTAL INVESTMENT IN ASSESSMENT YEAR 2005 - 06 ITA NO. 7740/M/2012 M/S. BINAYAK TEX PROCESSORS LTD. 9 W AS OF RS.7.20 CRORES AS AGAINST WHICH CAPITAL AND FREE RESERVES WERE OF RS.27.00 CRORES. THUS, CAPITAL & FREE RESERVES EXCEEDED INVESTMENT. BORROWINGS WERE FROM BANKS IN THE FORM OF EXPORT BILL DISCOUNTING AND PACKING CREDIT. THESE TWO BORROWINGS WERE FOR EXPORT BUSINESS OF THE ASSESSEE AND COULD NOT BE SAID TO BE DIVERTED FOR THE PURPOSE OF I NVESTMENT IN SHARES. THE AUTHORITIES W ERE SATISFIED THAT THE INVESTMENTS IN THE SHARES WERE MADE FROM THE INTEREST FREE FUNDS A VAILABLE WITH THE ASSESSEE AND NOT FROM THE INTEREST BEARING FUNDS AND HENCE N O DISALLOWANCE WAS MADE U/S 14A BY THE AUTHORITIES FOR A.Y. 2005 - 06 . THESE INVESTMENTS CO NTINUED IN THE SUBSEQUENT ASSESSMENT YEARS. THE CAPITAL AND FREE RESERVES OF THE ASSESSE INCREASED DURING SUBSEQUENT YEARS AND THE BORROWINGS DECREASED. THUS, IN ASSESSMENT YEAR 2009 - 10, THERE WAS NO FRESH INVESTMENT AND AS THERE WAS NO DISALLOWANCE U/S 14 A UP TO ASSESSMENT YEAR 2008 - 09 . IN VIEW OF THE ABOVE STATED FACTUAL POSITION AND ALSO TAKING INTO CONSIDERATION OUR OBSERVATIONS MADE ABOVE IN RELATION TO THE CIRCUMSTANCES TO BE TAKEN INTO CONSIDERATION WHILE MAKING DISALLOWANCE U/S 14A OF THE ACT, NO DI SALLOWANCE IS CALLED FOR IN RELATION TO INTEREST EXPENDITURE UNDER RULE 8 D(II) OF THE I.T. RULES AND THE SAME IS HEREBY ORDERED TO BE DELETED. 9 . HOWEVER SO FAR THE DISALLOWANCE OF RS.3,68,550/ - AS PER THE METHOD PRESCRIBED UNDER RULE 8D (III) OF THE I. T. RULES ON ACCOUNT OF ADMINISTRATIVE EXPENSES IS CONCERNED, WE DO NOT FIND ANY REASON TO INTERFERE IN RELATION TO THE SAID DISALLOWANCE. MOREOVER THE ASSESSE HIMSELF HAD OFFERED THE SAID DISALLOWANCE BEING 0.5% OF THE AVERAGE INVESTMENT AMOUNTING TO RS.3 ,68,550/ - . THE SAID DISALLOWANCE MADE BY THE LOWER AUTHORITIES IS HEREBY CONFIRMED. ITA NO. 7740/M/2012 M/S. BINAYAK TEX PROCESSORS LTD. 10 10 . IN THE RESULT, THE APPEAL OF THE ASSESSE IS HEREBY PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/3/ 201 4 . SD/ - SD/ - ( P.M. JAGTAP ) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 21 ST MARCH 201 4 . * KISHORE COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// BY ORDER DY/A SSTT. REGISTRAR, ITAT, MUMBAI.