M/s. Messung Systems Pvt. Ltd., Pune V. DCIT, Circle-9, Pune

ITA 816/PUN/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 85145 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 08-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAZHAR AKRAM
• Assessee Lawyers: P D KUDWA
• Keywords: Business income; Business expenditure; Earning of tax free income
• Section: 14A; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.816/PN/2013 (ASSESSMENT YEAR 2008-09) M/S. MESSUNG SYSTEMS PVT. LTD., 501, LUNKAD SKYMAX, DATTA MANDIR SQUARE, VIMAN NAGAR, PUNE 411014 .. APPELLANT PAN NO. AABCM1832E VS. DCIT, CIRCLE-9, PUNE .. RESPONDENT ASSESSEE BY : SHRI P.D. KUDWA REVENUE BY : SHRI MAZHAR AKRAM DATE OF HEARING : 31-10-2014 DATE OF PRONOUNCEMENT : 12-11-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 26-03-2012 OF THE CIT(A)-V, PUNE RELATI NG TO ASSESSMENT YEAR 2008-09. 2. THERE IS A DELAY OF ABOUT 309 DAYS IN FILING OF THIS APPEAL BY THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE REF ERRING TO THE CONDONATION PETITION FOR DELAY IN FILING OF THE APP EAL EXPLAINED THE REASONS FOR SUCH DELAY. AFTER HEARING BOTH THE SID ES AND AFTER CONSIDERING THE CONTENTS OF THE CONDONATION PETITIO N, THE DELAY IN FILING OF THIS APPEAL BY THE ASSESSEE IS CONDONED. 2 3. GROUND OF APPEAL NO.1 BY THE ASSESSEE READS AS U NDER : ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE HON CIT(A) ERRED IN CONFIRMING :- 1. DISALLOWANCE OF RS. 3,23,660/- U/R 8D R.W.S. 14A O F THE IT ACT AS RELATABLE TO EXEMPT DIVIDEND OF RS.7014015 ON GROUND THAT W.E.F. A.Y. 2008-09 THE AO HAD NO OPTION BUT TO APP LY THE RULE. 3.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING OF PROGRAMMABLE LOGIC CONTROLLERS AND PARTS THEREOF. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE A SSESSEE COMPANY HAS EARNED DIVIDEND INCOME OF RS.70,41,015/ - WHICH IT CLAIMED AS EXEMPT U/S.10(34) OF THE INCOME TAX ACT. IN THE RETURN OF INCOME THE ASSESSEE COMPANY HAS ADDED BACK RS.3, 23,660/- AS EXPENDITURE IN RELATION TO EARNING THE ABOVE SAID I NCOME. THE ASSESSING OFFICER THEREFORE ASKED THE ASSESSEE TO E XPLAIN THE JUSTIFICATION OF SUCH DISALLOWANCE. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE AND APPLYING THE PROVISIONS OF RULE 8D THE ASSESSING OFFICER DETERMINED SUCH DISAL LOWANCE AT RS.3,23,660/-. 4. BEFORE THE CIT(A) IT WAS SUBMITTED THAT IN THE Y EAR ENDING 31-03-2008 THE ASSESSEE INVESTED RS.11,57,23,427 IN MUTUAL FUNDS. THE PAID UP SHARE CAPITAL OF THE COMPANY AS ON 31-03-2007 WAS RS.49 LAKHS AND RESERVES AND SURPLUS AT RS.56,3 9,78,345/-. IT WAS ARGUED THAT THE ASSESSEE ALSO EARNED NET PROFIT AFTER TAX OF RS.23 CRORES DURING THE YEAR. IT WAS SUBMITTED THA T NO BORROWED FUNDS WERE USED FOR THE PURPOSE OF THESE INVESTMENT S. THE 3 ASSESSEE EARNED EXEMPT DIVIDEND INCOME OF RS.70,41, 015/- AND TAXABLE SHORT TERM CAPITAL GAIN OF RS.29,97,535/- O N REDEMPTION OF MUTUAL FUNDS UNITS AND PMS OF HDFC DURING THE YEAR. THERE ARE ONLY 4 TRANSACTIONS WITH REGARDS TO MUTUAL FUNDS RE DEMPTION. IT WAS SUBMITTED THAT THE ADMINISTRATIVE EXPENSES INCU RRED BY THE ASSESSEE FOR INVESTMENTS AND INCOME THERE FROM DUR ING THE YEAR WAS NEGLIGIBLE AND CONSIDERING THE NUMBER OF TRANSA CTIONS MENTIONED THEREIN IT CAN HARDLY BE EXPECTED TO EXCE ED RS.1,000/- FOR THE YEAR. THE ASSESSEE ALSO SUBMITTED BEFORE T HE ASSESSING OFFICER THAT THE DISALLOWANCE U/S.14A SHOULD BE LIM ITED TO THIS AMOUNT WHICH WAS THE EXPENSES REASONABLY ATTRIBUTAB LE TO THE EXEMPT INCOME. RELYING ON VARIOUS DECISIONS IT WAS SUBMITTED THAT NO DISALLOWANCE U/S.14A IS CALLED FOR. 5. HOWEVER, THE LD.CIT(A) WAS ALSO NOT CONVINCED WI TH THE EXPLANATION GIVEN BY THE ASSESSEE AND UPHELD THE AC TION OF THE ASSESSING OFFICER BY OBSERVING AS UNDER : 11. AFTER CAREFULLY CONSIDERING THE REPLY OF THE AP PELLANT AS WELL AS FACTS OF THE CASE, IT IS SEEN THAT THE ARGUMENTS OF THE APPELLANT ARE BEREFT OF MERIT. IT IS AN UNDISPUTED FACT THAT THE APPELLANT HAS SHOWN TAX FREE DIVIDEND. INCOME OF ` 70,41,015/- AGAINST WHICH NO EXPENDITURE HAS BEEN SHOWN. FOR THE PRESENT A.Y. RULE 8D IS APPLICABLE. THE CLAIM OF THE ASSESSEE T HAT NO EXPENDITURE WAS INCURRED WAS NOT ACCEPTED BY THE ASSE SSING OFFICER AND THE APPELLANT CAME WITH THE PROPOSAL THA T CONSIDERING THE NUMBER OF DIVIDEND WARRANT (9 IN TOTAL) AND 4 T RANSACTIONS IN RESPECT OF REDEMPTION OF MUTUAL FUND UNITS OF HDFC, EXPENDITURE COULD HARDLY BE EXPECTED TO INCREASE ` 1000/- FOR THE YEAR. THUS, IN VIEW OF REPLY OF THE APPELLANT ITSELF THE CLAIM O F NO EXPENDITURE HAVING BEEN INCURRED FOR EARNING SUCH INCOME LOST GRO UND AND THEREFORE, THE ASSESSING OFFICER WAS PERFECTLY JUSTIFIED IN APPLYING RULE 8D WHICH WAS APPLICABLE FOR THE RELEVANT A.Y. 2 008-09. THE APPELLANT'S PLEA THAT REASONABLE EXPENDITURE SHOULD B E ESTIMATED EVEN WHERE RULE 8D IS APPLICABLE CANNOT BE ACCEPTED IN VIEW OF 4 THE FACT THAT APPELLANT'S WORKING OF DISALLOWANCE (N IL EXPENDITURE) WAS REJECTED BY THE ASSESSING OFFICER AND ONCE THE WORKI NG IS REJECTED THERE IS NO OTHER OPTION AVAILABLE TO THE A SSESSING OFFICER BUT TO FOLLOW RULE 8D FOR THIS PURPOSE. THERE IS NO VI A MEDIA AVAILABLE TO THE ASSESSING OFFICER. THE APPELLANT'S REL IANCE ON HON'BLE DELHI HIGH COURT'S DECISION IN THE CASE OF MAX OPP INVESTMENT LTD. & OTHERS VS. CIT IS ALSO MISPLACED AS A.Y RS IN QUESTION WERE 1998-99 TO 2005-06 FOR WHICH RULE 8D W AS NOT HELD TO BE APPLICABLE. THEREFORE, I DO NOT FIND ANY MERIT IN THE ARGUMENTS ADVANCED BY THE APPLICANT. ACCORDINGLY, TH E GROUND IS DISMISSED. 5.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO TH E DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. FERROCARE MACHINES PVT. LTD. VS. JCIT VIDE ITA NO. 2497/PN/20 13 ORDER DATED 11-02-2014 SUBMITTED THAT THE TRIBUNAL, FOLLO WING THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF RAJ SHIPPING AGENCY LTD. VS. ADDL.CIT REPORTED IN 38 TA XMANN.COM 315, HAS DELETED THE DISALLOWANCE MADE U/S.14A ON T HE GROUND THAT THE AO CAN INVOKE RULE 8D ONLY WHEN HE RECORDS SATI SFACTION IN REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSES SEE, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. THE AO MUS T RECORD THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLA IM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. HE SUBMITTED THAT WHEN NO EXPENDITURE WAS INCURRED AND WHEN NO BORROWED FUND HAS BEEN UTILIZED TOWARDS INVESTMENT IN MUTUAL FUNDS, THE IN COME OF WHICH HAS BEEN CLAIMED AS EXEMPT, NO DISALLOWANCE U/S.14A CAN BE MADE. HE SUBMITTED THAT IN THE INSTANT CASE ALSO N O BORROWED FUND 5 HAS BEEN UTILIZED FOR INVESTMENT IN MUTUAL FUNDS, T HE DIVIDEND INCOME OF WHICH IS EXEMPT U/S.10(34) OF THE I.T. AC T. HE SUBMITTED THAT THE ENTIRE INVESTMENT IN THE MUTUAL FUNDS WAS OUT OF OWN FUNDS ON WHICH NO INTEREST LIABILITY WAS INCUR RED BY THE ASSESSEE. THEREFORE, THE FACTS OF THE CASE BEING I DENTICAL TO THE CASE DECIDED BY THE TRIBUNAL IN THE CASE OF M/S. FE RROCARE MACHINES PVT. LTD. (SUPRA) NO DISALLOWANCE U/S.14A R.W. RULE 8D SHOULD BE MADE. 7. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND STRONGLY RELIED ON THE ORDER OF THE CIT(A). 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE IN THE INSTAN T CASE HAS EARNED DIVIDEND INCOME OF RS.70,14,015/- FROM MUTUAL FUNDS HELD BY IT AND CLAIMED THE SAID INCOME AS EXEMPT U/S.10(34) OF THE I.T. ACT. WE FIND THE ASSESSING OFFICER APPLYING THE PROVISIO NS U/S.14A R.W. RULE 8D DISALLOWED AN AMOUNT OF RS.3,23,660/- WHICH HAS BEEN UPHELD BY THE CIT(A). IT IS THE CASE OF THE A SSESSEE THAT NO BORROWED FUND HAS BEEN UTILISED TOWARDS INVESTMENT IN MUTUAL FUNDS, THE INCOME OF WHICH HAS BEEN CLAIMED AS EXEM PT. FURTHER, THE ASSESSING OFFICER HAS ALSO NOT RECORDED ANY SAT ISFACTION WITH REFERENCE TO CORRECTNESS OF ACCOUNTS OF ASSESSEE NO R REJECTED THE CLAIM THAT NO EXPENDITURE WAS INCURRED. WE FIND TH E FACTS OF THE 6 INSTANT CASE ARE IDENTICAL TO THE FACTS IN THE CASE OF M/S. FERROCARE MACHINES PVT. LTD.(SUPRA) WHERE THE TRIBUNAL HAS DE LETED THE DISALLOWANCE MADE U/S.14A R.W. RULE 8D BY OBSERVING AS UNDER : 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE DECISION CITED BEFORE US. IN THE CASE O F RAJ SHIPPING AGENCIES LTD. (SUPRA). WE FIND IN THE INSTANT CASE TH E ASSESSEE HAD DECLARED DIVIDEND INCOME FROM MUTUAL FUNDS AT RS.21,90,651/- WHICH IT CLAIMED AS EXEMPT. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE, WE FIND NO BORROWED FU ND HAS BEEN UTILISED TOWARDS INVESTMENT IN THE MUTUAL FUNDS, T HE INCOME OF WHICH HAS BEEN CLAIMED AS EXEMPT. WE FIND THE ASS ESSING OFFICER DISALLOWED AN AMOUNT OF RS.3,03,823/- BEING E XPENDITURE INCURRED FOR EARNING THE DIVIDEND INCOME U/S.14A R.W . RULE 8D WHICH HAS BEEN UPHELD BY THE CIT(A). WHILE DOING SO, WE FIND THE ASSESSING OFFICER HAS NOT RECORDED ANY SATISFACTION WITH R EFERENCE TO ACCOUNTS OF ASSESSEE NOR REJECTED THE CLAIM THAT NO E XPENDITURE WAS INCURRED. IT IS THE CASE OF THE LD. COUNSEL FOR TH E ASSESSEE THAT THE ASSESSING OFFICER HAS NOT RECORDED ANY SATISFACTION WI TH REFERENCE TO ACCOUNTS OF THE ASSESSEE NOR REJECTED THE C LAIM THAT NO EXPENDITURE WAS INCURRED AND THEREFORE IN VIEW OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF RAJ SHIPPING AG ENCIES LTD. (SUPRA) NO DISALLOWANCE IS CALLED FOR. WE FIND MERIT IN THE ABOVE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE. 7.1 WE FIND THE FACTS OF THE INSTANT CASE ARE IDENTIC AL TO THE FACTS IN THE CASE OF RAJ SHIPPING AGENCIES LTD. (SUPRA ) WHERE THE ASSESSEE HAS DECLARED DIVIDEND INCOME FROM MUTUAL FUNDS AMOUNTING TO RS.1,12,84,713/- WHICH WAS CLAIMED AS EXE MPT. THE ENTIRE INVESTMENT IN THE MUTUAL FUND WAS OUT OF OWN S OURCE ON WHICH NO INTEREST LIABILITY WAS INCURRED BY THE ASSESSEE. SINCE THE ASSESSEE HAS NOT OFFERED ANY DISALLOWANCE U/S.14A THE ASS ESSING OFFICER DISALLOWED AN AMOUNT OF RS.4,40,138/- U/S.14A R.W. RULE 8D WHICH WAS UPHELD BY THE CIT(A). ON FURTHER APPEA L BY THE ASSESSEE THE TRIBUNAL DELETED THE ADDITION BY HOLDING A S UNDER : 6. THE ISSUE IN THIS APPEAL IS WITH REFERENCE TO INVOK ING OF PROVISIONS OF SECTION 14A AND RULE 8D. THE HON'BLE BOM BAY HIGH COURT WHILE UPHOLDING THE CONSTITUTIONAL VALIDITY OF THE SECTION 14A AND RULE 8D HAS THIS TO OBSERVE WITH REFERENCE TO SUB SECTION 2 & 3 OF SECTION 14A: 'SUB-SECTIONS (2) AND (3) OF SECTION 14A WERE INSERTED BY AN AMENDMENT BROUGHT ABOUT BY THE FINANCE ACT OF 2006 WITH EFFECT FROM APRIL 1, 2007. UNDER SUB-SECTION (2), THE ASSESSING OFFICER IS REQUIRED TO DETERMINE THE AMOUNT OF EXPENDITURE INC URRED BY AN ASSESSEE IN RELATION TO SUCH INCOME WHICH DOES NOT FORM P ART OF THE TOTAL INCOME UNDER THE ACT IN ACCORDANCE WITH SU CH METHOD AS MAY BE PRESCRIBED. SUB-SECTION (2) WAS INSERTED SO AS TO PROVIDE A UNIFORM METHOD APPLICABLE WHERE THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSE SSEE. 7 PARLIAMENT HAS PROVIDED AN ADEQUATE SAFEGUARD TO THE INVOCATION OF THE POWER TO DETERMINE THE EXPENDITURE INCURRED IN RELATION TO THE EARNING OF NON-TAXABLE INCOME BY ADOPTION OF TH E PRESCRIBED METHOD. THE INVOCATION OF THE POWER IS MADE CONDITIO NAL ON THE OBJECTIVE SATISFACTION OF THE ASSESSING OFFICER IN REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, HAVING REGARD T O THE ACCOUNTS OF THE ASSESSEE. THESE SAFEGUARDS WHICH ARE IMPLIC IT IN THE REQUIREMENTS OF FAIRNESS AND FAIR PROCEDURE UNDER ARTICLE 14 MUST BE OBSERVED BY THE ASSESSING OFFICER WHEN HE ARRIVES AT HIS SATISFACTION UNDER SUB-SECTION (2) OF SECTION 14A. SUB-R ULE (1) OF RULE 8D OF THE INCOME-TAX RULES, 1962, HAS ALSO INCORP ORATED THE ESSENTIAL REQUIREMENTS OF SUB-SECTION (2) OF SECTION 14A BEFORE THE ASSESSING OFFICER PROCEEDS TO APPLY THE METHOD PRESC RIBED UNDER SUB-RULE (2)' (EMPHASIS SUPPLIED) THE SAME OPINION WAS EXPRESSED BY THE HON'BLE DELHI HIG H COURT IN THE CASE OF MAXOPP INVESTMENT LTD AND OTHERS V. CIT 247 CTR 162 WHEREIN RELIANCE WAS PLACED ON THE DECISION OF TH E HON'BLE SUPREME COURT IN THE CASE OF CIT VS. WALFORT SHARE & STOCK BROKERS PVT. LTD 326 ITR 1 (SC) AND THE DECISION OF T HE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE CO MPANY LTD VS. DCIT (328 ITR 81). THE RELEVANT PORTIONS OF THE J UDGMENT OF HON'BLE DELHI HIGH COURT ARE AS UNDER: 29. SUB-SECTION (2) OF SECTION 14 A OF THE SAID ACT P ROVIDES THE MANNER IN WHICH THE ASSESSING OFFICER IS TO DETERMINE T HE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. HOWEVER, IF WE EXAMINE TH E PROVISION CAREFULLY, WE WOULD FIND THAT THE ASSESSING OFFICER IS R EQUIRED TO DETERMINE THE AMOUNT OF SUCH EXPENDITURE ONLY IF THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSES SEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHI CH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT. IN OTHER WORDS, THE REQUIREMENT OF THE ASSESSING OFFICER EMBARKING UPON A DETERMINATION OF THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME WOULD BE TRIGGERED ONLY IF THE ASSESSI NG OFFICER RETURNS A FINDING THAT HE IS NOT SATISFIED WITH THE COR RECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE . THEREFORE, THE CONDITION PRECEDENT FOR THE ASSESSING OF FICER ENTERING UPON A DETERMINATION OF THE AMOUNT OF THE EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME IS THAT THE ASSE SSING OFFICER MUST RECORD THAT HE IS NOT SATISFIED WITH THE CORRECTN ESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. SUB -SECTION (3) IS NOTHING BUT AN OFFSHOOT OF SUB-SECTION (2) OF SE CTION 14A. SUB- SECTION (3) APPLIES TO CASES WHERE THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT . IN OTHER WORDS, SUB-SECTION (2) DEALS WITH CASES WHERE THE ASSESSE E SPECIFIES A POSITIVE AMOUNT OF EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER T HE SAID ACT AND SUB-SECTION (3) APPLIES TO CASES WHERE THE ASSESSEE ASSE RTS THAT NO EXPENDITURE HAD BEEN INCURRED IN RELATION T O EXEMPT INCOME. IN BOTH CASES, THE ASSESSING OFFICER, IF SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUC H EXPENDITURE OR NO EXPENDITURE, AS THE CASE MAY BE, CA NNOT EMBARK 8 UPON A DETERMINATION OF THE AMOUNT OF EXPENDITURE I N ACCORDANCE WITH ANY PRESCRIBED METHOD, AS MENTIONED IN SUB-SECTION (2) OF SECTION 14A OF THE SAID ACT. IT IS ONLY IF THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE , IN BOTH CASES, THAT THE ASSESSING OFFICER GETS JURISDICTION TO DETE RMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SUCH I NCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT IN ACCORDANCE WITH THE PRESCRIBED METHOD. THE PRESCRIBED METHOD BEING THE METHOD STIPULATED IN RULE 8D OF THE SAID RU LES. WHILE REJECTING THE CLAIM OF THE ASSESSEE WITH REGARD TO THE EXPENDITURE OR NO EXPENDITURE, AS THE CASE MAY BE, IN RELATION TO EXEMPT INCOME, THE ASSESSING OFFICER WOULD HAVE TO INDICATE CO GENT REASONS FOR THE SAME. RULE 8D 30. AS WE HAVE ALREADY NOTICED, SUB-SECTION (2) OF SEC TION 14A OF THE SAID ACT REFERS TO THE METHOD OF DETERMINATION OF THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOM E. THE EXPRESSION USED IS - 'SUCH METHOD AS MAY BE PRESCRIBED'. W E HAVE ALREADY MENTIONED ABOVE THAT BY VIRTUE OF NOTIFICAT ION NO.45/2008 DATED 24/03/2008, THE CENTRAL BOARD OF D IRECT TAXES INTRODUCED RULE 8D IN THE SAID RULES. THE SAID RULE 8D ALSO MAKES IT CLEAR THAT WHERE THE ASSESSING OFFICER, HAVING REGAR D TO THE ACCOUNTS OF THE ASSESSEE OF A PREVIOUS YEAR, IS NOT SATIS FIED WITH (A) THE CORRECTNESS OF THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE; OR (B) THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT FOR SUCH PREVIOUS YEAR, THE ASSESSING OFFICER SHALL DETERMINE THE AMOUNT OF THE EXPENDITURE IN RELATION TO SUCH INCOME IN ACCORD ANCE WITH THE PROVISIONS OF SUB-RULE (2) OF RULE 8D. WE MAY OBSERVE T HAT RULE 8D(1) PLACES THE PROVISIONS OF SECTION 14A(2) AND (3) IN THE CORRECT PERSPECTIVE. AS WE HAVE ALREADY SEEN, WHILE DI SCUSSING THE PROVISIONS OF SUB-SECTIONS (2) AND (3) OF SECTION 14A, THE CONDITION PRECEDENT FOR THE ASSESSING OFFICER TO HIMSELF DETERMINE THE AMOUNT OF EXPENDITURE IS THAT HE MUST RECORD HIS DISSATISFACTION WITH THE CORRECTNESS OF THE CLAIM OF EXP ENDITURE MADE BY THE ASSESSEE OR WITH THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED. IT I S ONLY WHEN THIS CONDITION PRECEDENT IS SATISFIED THAT THE ASS ESSING OFFICER IS REQUIRED TO DETERMINE THE AMOUNT OF EXPEN DITURE IN RELATION TO INCOME NOT INCLUDABLE IN TOTAL INCOME I N THE MANNER INDICATED IN SUB-RULE (2) OF RULE 8D OF THE SAID RULE S. 31.IT IS, THEREFORE, CLEAR THAT DETERMINATION OF THE AMOUNT OF EXPENDITURE IN RELATION TO EXEMPT INCOME UNDER RULE 8D WOULD ONLY COME INTO PLAY WHEN THE ASSESSING OFFICER REJECTS T HE CLAIM OF THE ASSESSEE IN THIS REGARD. IF ONE EXAMINES SUB-RULE (2) OF RULE 8D, WE FIND THAT THE METHOD FOR DETERMINING THE EXP ENDITURE IN RELATION TO EXEMPT INCOME HAS THREE COMPONENTS. THE FIRST COMPONENT BEING THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. THE SECOND COMPONENT BEING COMPUTED ON THE BASIS OF THE FORMULA GIVEN THEREIN IN A CASE WHERE THE ASSESSEE INCURS EXPENDITURE B Y WAY OF INTEREST WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PA RTICULAR INCOME OR RECEIPT. THE FORMULA ESSENTIALLY APPORTIONS THE AMO UNT OF EXPENDITURE BY WAY OF INTEREST [OTHER THAN THE AMOUN T OF INTEREST 9 INCLUDED IN CLAUSE (I)] INCURRED DURING THE PREVIOUS YEAR IN THE RATIO OF THE AVERAGE VALUE OF INVESTMENT, INCOME FRO M WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, TO T HE AVERAGE OF THE TOTAL ASSETS OF THE ASSESSEE. THE THIRD COMPONENT IS AN ART IFICIAL FIGURE - ONE HALF PERCENT OF THE AVERAGE VALUE OF T HE INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE SHEETS OF ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR, IT IS THE AGGREGATE OF THESE THREE COMPONENTS WHICH WOULD CONSTITUTE THE EXPE NDITURE IN RELATION TO EXEMPT INCOME AND IT IS THIS AMOUNT OF EXPENDITURE WHICH WOULD BE DISALLOWED UNDER SECTION 14A OF THE SAI D ACT. IT IS, THEREFORE, CLEAR THAT IN TERMS OF THE SAID RULE, THE AMOUNT OF EXPENDITURE IN RELATION TO EXEMPT INCOME HAS TWO ASP ECTS - (A) DIRECT AND (B) INDIRECT. THE DIRECT EXPENDITURE IS ST RAIGHTAWAY TAKEN INTO ACCOUNT BY VIRTUE OF CLAUSE (I) OF SUB-RUL E (2) OF RULE 8D. THE INDIRECT EXPENDITURE, WHERE IT IS BY WAY OF INTEREST, IS COMPUTED THROUGH THE PRINCIPLE OF APPORTIONMENT, AS INDICATED ABOVE, AND, IN CASES WHERE THE INDIRECT EXPENDITURE IS NOT BY WAY OF INTEREST, A RULE OF THUMB FIGURE OF ONE HALF PERC ENT OF THE AVERAGE VALUE OF THE INVESTMENT, INCOME FROM WHICH D OES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, IS TAKEN. ............... 41. SUB-SECTION (2) OF SECTION 14A, AS WE HAVE SEEN, ST IPULATES THAT THE ASSESSING OFFICER SHALL DETERMINE THE AMOUNT OF EXP ENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM P ART OF THE TOTAL INCOME 'IN ACCORDANCE WITH SUCH METHOD AS MAY B E PRESCRIBED'. OF COURSE, THIS DETERMINATION CAN ONLY BE UNDERTAKEN IF THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CORRECT NESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. THI S PART OF SECTION 14A(2) WHICH EXPLICITLY REQUIRES THE FULFILLMENT OF A CONDITION PRECEDENT IS ALSO IMPLICIT IN SECTION 14A(1) [AS IT NOW STANDS] AS ALSO IN ITS INITIAL AVATAR AS SECTION 14A. IT IS ONLY T HE PRESCRIPTION WITH REGARD TO THE METHOD OF DETERMINING SUCH EXPEND ITURE WHICH IS NEW AND WHICH WILL OPERATE PROSPECTIVELY. IN OTHER WORDS, SECTION 14A, EVEN PRIOR TO THE INTRODUCTION OF SUB-SE CTIONS (2) AND (3) WOULD REQUIRE THE ASSESSING OFFICER TO FIRST REJECT THE CLAIM OF THE ASSESSEE WITH REGARD TO THE EXTENT OF SUCH EXPENDITU RE AND SUCH REJECTION MUST BE FOR DISCLOSED COGENT REASONS. IT I S THEN THAT THE QUESTION OF DETERMINATION OF SUCH EXPENDITURE BY THE ASSESSING OFFICER WOULD ARISE. THE REQUIREMENT OF ADOPTI NG A SPECIFIC METHOD OF DETERMINING SUCH EXPENDITURE HAS B EEN INTRODUCED BY VIRTUE OF SUB-SECTION (2) OF SECTION 14A . PRIOR TO THAT, THE ASSESSING WAS FREE TO ADOPT ANY REASONABLE AND ACCEPTABLE METHOD. 7. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE C ASE OF CIT VS. HERO CYCLES LTD 323 ITR 518 (P&H) HAS ALSO HELD THAT DISALLOWANCE UNDER SECTION 14A COULD NOT STAND WHERE I T WAS FOUND THAT FOR EARNING EXEMPTED INCOME NO EXPENDITU RE HAS BEEN INCURRED: 'HELD - DISMISSING THE APPEAL, THAT THE EXPENDITURE ON INTEREST WAS SET OFF AGAINST THE INCOME FROM INTEREST AND THE IN VESTMENT IN THE SHARES AND FUNDS WERE OUT OF THE DIVIDEND PROCEEDS. IN VIEW OF 10 THIS FINDING OF FACT, DISALLOWANCE UNDER SECTION 14A W AS NOT SUSTAINABLE. WHETHER, IN A GIVEN SITUATION, ANY EXPEND ITURE WAS INCURRED WHICH WAS TO BE DISALLOWED, WAS A QUESTION OF FACT. THE CONTENTION OF THE REVENUE THAT DIRECTLY OR INDIRECT LY SOME EXPENDITURE WAS ALWAYS INCURRED WHICH MUST BE DISALLOWE D UNDER SECTION 14A AND THE IMPACT OF EXPENDITURE SO INCURRED COULD NOT BE ALLOWED TO BE SET OFF AGAINST THE BUSINESS INCOME WHI CH MAY NULLIFY THE MANDATE OF SECTION 14A, COULD NOT BE ACC EPTED. DISALLOWANCE UNDER SECTION 14A REQUIRED FINDING OF IN CURRING OF EXPENDITURE AND WHERE IT WAS FOUND THAT FOR EARNING EXEMPTED INCOME NO EXPENDITURE HAD BEEN INCURRED, DISALLOWANC E UNDER SECTION 14A COULD NOT STAND. CONSEQUENTLY, THE DISALLOW ANCE WAS NOT PERMISSIBLE. 8. THE COORDINATE BENCH IN THE CASE OF JUSTICE SAM P BHARUCHA VS. ADDL. CIT IN ITA NO.3889/MUM/2011 DATED 25.07.2012 HAS ANALYZED SIMILAR ISSUE AND CAME TO THE FOLLOWING CONCL USION: '5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS R ELEVANT MATERIAL ON RECORD. SECTION 14A HAS WITHIN IT IMPLIC IT NOTION OF APPORTIONMENT IN THE CASES WHERE THE EXPENDITURE IS IN CURRED FOR THE COMPOSITE/INDIVISIBLE ACTIVITIES IN WHICH TAXABLE AND NON- TAXABLE INCOME IS RECEIVED. BUT WHEN IT IS POSSIBLE T O DETERMINE THE ACTUAL EXPENDITURE IN RELATION TO THE EXEMPT IN COME OR WHEN NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO THE EXEMPT INCOME, THEN PRINCIPLE OF APPORTIONMENT EMBEDDED IN SECTION 14 A HAS NO APPLICATION. THE OBJECTIVE OF SECTION 14 A I S NOT ALLOWING TO REDUCE TAX PAYABLE ON THE NORMAL EXEMPT INCOME B Y DEBITING THE EXPENDITURE INCURRED TO EARN THE EXEMPT INCOME. THUS, THE EXPENSES INCURRED TO EARN EXEMPT INCOME CANNOT BE ALL OWED AND THE EXPENSES SHALL BE ALLOWED ONLY TO THE EXTENT THEY ARE RELATED TO THE EARNING OF TAXABLE INCOME. IF THERE IS EXPEND ITURE DIRECTLY OR INDIRECTLY INCURRED IN RELATION TO EXEMPT INCOME, T HE SAME CANNOT BE CLAIMED AGAINST THE INCOME, WHICH IS TAXABLE AS IT IS HELD BY THE HON'BLE SUPREME COURT IN CASE OF COMMISSIONER OF INCOM E-TAX V. WALFORT SHARE AND STOCK BROKERS P. LTD. REPORTED IN 326 ITR 1 THAT FOR ATTRACTING THE PROVISIONS OF SECTION 14 A, THERE SH OULD BE PROXIMATE CAUSE FOR DISALLOWANCE WHICH AS RELATIONSHIP WITH THE TAX EXEMPT INCOME. 5.1 THE EXPENDITURE INCURRED IN RELATION TO THE INC OME WHICH DOES NOT FORM PART OF TOTAL INCOME HAS TO BE DISALLOWED. H OWEVER, IT SHOULD BE PROXIMATE RELATIONSHIP BETWEEN THE EXPENDIT URE AND THE INCOME, WHICH DOES NOT FORM PART OF TOTAL INCOME . ONCE SUCH PROXIMITY RELATIONSHIPS EXIST, THE DISALLOWANCE IS TO BE EFFECTED. IN CASE THE ASSESSEE HAD CLAIMED THAT NO EXPENDITURE HAS BE EN INCURRED FOR EARNING THE EXEMPT INCOME, IT WAS FOR T HE ASSESSING OFFICER TO DETERMINE AS TO WHETHER THE ASSESSEE HAD IN CURRED ANY EXPENDITURE IN RELATION TO INCOME WHICH DID NOT FOR M PART OF TOTAL INCOME AND IF SO TO QUANTIFY THE EXTENT OF DISALLOWAN CE. THUS, IN ORDER TO DISALLOW THE EXPENDITURE UNDER SECTION 14A, THERE MUST BE A LIVE NEXUS BETWEEN THE EXPENDITURE INCURRED AND THE INCOME NOT FORMING PART OF TOTAL INCOME. NO NOTIONAL EXPEN DITURE CAN BE APPORTIONED FOR THE PURPOSE OF EARNING EXEMPT INCOME UNLESS THERE IS AN ACTUAL EXPENDITURE IN RELATION TO EARNIN G THE INCOME NOT FORMING PART OF TOTAL INCOME. IF THE EXPENDITUR E IS INCURRED WITH A VIEW TO EARN TAXABLE INCOME AND THERE IS APPA RENT DOMINANT AND IMMEDIATE CONNECTION BETWEEN THE EXPEN DITURE 11 INCURRED AND TAXABLE INCOME, THEN NO DISALLOWANCE CA N BE MADE UNDER SECTION 14A MERELY BECAUSE SOME TAX EXEMPT INCOM E IS RECEIVED BY THE ASSESSEE. 5.2 AVERTING TO THE FACTS OF THE CASE IN HAND, THE ASSE SSEE HAD MADE A CLAIM THAT NO EXPENDITURE HAS BEEN INCURRED O R CLAIMED FOR EARNING THE EXEMPT INCOME. FROM THE DETAILS OF THE EXPENDITURE, IT IS CLEAR THAT THE EXPENDITURE INCURR ED AND CLAIMED BY THE ASSESSEE HAS DIRECT NEXUS WITH THE PROFESSIONAL INCO ME OF THE ASSESSEE. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS USED HIS OFFICIAL MACHINERY AND ESTABLISHMENT FOR EARN ING THE EXEMPT INCOME. THE ASSESSING OFFICER HAS NOT GIVEN ANY F INDING THAT ANY OF THE EXPENDITURE INCURRED AND CLAIMED BY THE ASSESSEE IS ATTRIBUTABLE FOR EARNING THE EXEMPT INCOME. IN OT HER WORDS WHEN THE ASSESSING OFFICER HAS NOT POINTED OUT THAT CERT AIN EXPENDITURE IS NOT INCURRED FOR EARNING THE PROFESSION AL INCOME; BUT ARE INCURRED IN RELATION TO DIVIDEND INCOME OR SUCH EXPENDITURE IS INCURRED FOR INSEPARABLE AND INDIVISIBL E ACTIVITIES COMPRISING PROFESSIONAL AS WELL AS THE ACTIVITIES ON WHIC H IS EXEMPT INCOME HAS BEEN EARNED BY THE ASSESSEE, THEN IN THE ABSENCE OF ANY SUCH INSTANCE OF EXPENDITURE, FINDING O F ASSESSING OFFICER OR ANY MATERIAL TO SHOW THAT THE EXPENDITURE INCURRED AND CLAIMED BY THE ASSESSEE AGAINST THE TAXABLE INCOME HAS ANY RELATION FOR EARNING THE EXEMPT INCOME, THE PROVISIO NS OF SECTION 14A CANNOT BE APPLIED. 5.3 IN THE CASE OF SHRI PAWAN KUMAR PARAMESHWAR LAL V S. ACIT (SUPRA) THIS TRIBUNAL HAS CONSIDERED AND DECIDED AN IDE NTICAL ISSUE IN PARA 4 AS UNDER: '4. AFTER HEARING THE ASSESSEE IN PERSON AND ARGUMENTS O F THE LEARNED D.R. WE ARE OF THE OPINION THAT NO DISALLOW ANCE IS CALLED FOR UNDER SECTION 14A. OBVIOUSLY THE ASSESSEE IS MAINTAINI NG SEPARATE BOOKS OF ACCOUNT FOR PURPOSE OF BUSINESS AND THE SE INVESTMENTS ARE IN HIS PERSONAL CAPACITY. THE A.O. ALSO HAS NOT DISALLOWED ANY EXPENDITURE OF PERSONAL NATURE OUT OF THE INCOME FROM BUSINESS OR PROFESSION IN THE COMPUTATION OF INCOME IN THE ASSESSMENT ORDER. IN VIEW OF THIS WE ARE OF THE OPINION THAT THE EXPENDITURE CLAIMED IN THE BUSINESS OF SHARE DEALINGS CA NNOT BE CORRELATED TO THE INCOMES EARNED IN PERSONAL CAPACITY THAT TOO ON DIVIDEND, PPF INTEREST AND TAX FREE INTEREST ON RBI B ONDS. IN VIEW OF THIS, WE ARE OF THE OPINION THAT ESTIMATION OF EXP ENDITURE OF RS.20,000/- OUT OF BUSINESS EXPENDITURE CLAIMED IN BUS INESS ACTIVITY CANNOT BE CONSIDERED FOR BEING INCURRED FOR THIS EARNING OF TAX FREE INCOME OF ABOVE NATURE. IN VIEW OF THIS DISALLOWANCE SO MADE UNDER SECTION 14A OF RS.20,000/- IS DELETED. NOT ONLY THAT THE CIT(A) DIRECTED THE A.O. TO CONSIDER THE ALLOWAN CE INVOKING RULE 8D. THE HON'BLE BOMBAY HIGH COURT IN THE CASE O F GODREJ & BOYCE MFG. CO. LTD. VS. DCIT 328 ITR 81 HAS CONSIDERE D RULE 8D TO BE APPLICABLE PROSPECTIVE AND SINCE THE ASSESSMENT YEAR INVOLVED IS BEFORE THE INTRODUCTION OF SUB- SECTION (2) & (3) O F SECTION 14A, THERE IS NO QUESTION OF DISALLOWING THE AMOUNTS INVOKIN G RULE8D. THEREFORE, THE CIT(A)'S DIRECTION ON THIS IS SET ASIDE AND THE ADDITIONS SO MADE BY THE A.O. IN THE COMPUTATION OF B USINESS INCOME IS DELETED. GROUND IS CONSIDERED ALLOWED.' 5.4 SIMILARLY IN CASE OF AUCHTEL PRODUCTS LTD (SUPRA), IT WAS HELD BY THIS TRIBUNAL IN PARA 15 HAS UNDER: 12 '15. A BARE PERUSAL OF THE ABOVE PROVISIONS INDICATES T HAT THE AO SHALL DETERMINE THE AMOUNT DISALLOWABLE AS PER RULE 8D , IF HE, 'IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE' IN RESPECT OF SUCH EXPENDITURE IN RELATION TO EXEMPT INC OME. EVEN IF THE ASSESSEE CLAIMS THAT NO EXPENDITURE WAS INCURRED IN R ESPECT OF EXEMPT INCOME, THE AO IS SUPPOSED TO FOLLOW THE MANDAT E OF RULE 8D IF HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE A SSESSEE'S CLAIM. TO PUT IT SIMPLY, THE FURTHER DISALLOWANCE U/S. 14A IS CALLED FOR WHEN THE AO IS NOT SATISFIED WITH THE ASSESSEE'S CLAIM OF HAVING INCURRED NO EXPENDITURE OR SOME AMOUNT OF EXP ENDITURE IN RELATION TO EXEMPT INCOME. SATISFACTION OF THE AO AS TO THE INCORRECT CLAIM MADE BY THE ASSESSEE IN THIS REGARD IS SIN E QUA NON FOR INVOKING THE APPLICABILITY OF RULE 8D. SUCH SATI SFACTION CAN BE REACHED AND RECORDED ONLY WHEN THE CLAIM OF THE ASSE SSEE IS VERIFIED. IF THE ASSESSEE PROVES BEFORE THE AO THAT IT I NCURRED A PARTICULAR EXPENDITURE IN RESPECT OF EARNING THE EXE MPT INCOME AND THE AO GETS SATISFIED, THEN THERE IS NO REQUIREMENT TO STILL PROCEED WITH THE COMPUTATION OF AMOUNT DISALLOWABLE AS PER RULE 8D. FROM THE ASSESSMENT ORDER, IT IS OBSERVED THAT THE A O SIMPLY KEPT THE ASSESSEE'S SUBMISSIONS ON RECORD WITHOUT APPRECIATI NG AS TO WHETHER THESE WERE CORRECT OR NOT. HE PROCEEDED O N THE PREMISE AS IF THE DISALLOWANCE AS PER RULE 8D IS AUTOMAT IC IRRESPECTIVE OF THE GENUINENESS OF THE ASSESSEE'S CLAIM IN RESPECT OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME. IT IS AN INCORRECT COURSE ADOPTED BY THE AO. THE CORRECT SEQUE NCE, IN OUR CONSIDERED OPINION, FOR MAKING ANY DISALLOWANCE U/S. 1 4A IS TO, FIRSTLY, EXAMINE THE ASSESSEE'S CLAIM OF HAVING INCURRED SOME EXPENDITURE OR NO EXPENDITURE IN RELATION TO EXEMPT INCOME, IF THE AO GETS SATISFIED WITH THE SAME, THEN THERE IS NO NEED T O COMPUTE DISALLOWANCE AS PER RULE 8D. IT IS ONLY WHEN THE AO IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF ASSESSEE IN RESPECT O F SUCH EXPENDITURE OR NO EXPENDITURE HAVING BEEN INCURRED IN RELATION TO EXEMPT INCOME, THAT THE MANDATE OF RULE 8D WILL OPE RATE. IN THE INSTANT CASE, THE AUTHORITIES BELOW HAVE DIRECTLY GONE TO THE SECOND STAGE OF COMPUTING DISALLOWANCE U/S. 14A AS PER RULE 8D WITHOUT RENDERING ANY OPINION ON THE CORRECTNESS OR O THERWISE OF THE ASSESSEE'S CLAIM IN THIS REGARD. WE, THEREFORE, SET AS IDE THE IMPUGNED ORDER ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF AO TO RE-COMPUTE DISALLOWANCE, IF ANY, IN ACCORDANCE WITH OUR ABOVE OBSERVATIONS AFTER DULY EXAMINING THE ASSESSEE'S CL AIM IN THIS REGARD.' 6. IN VIEW OF THE ABOVE DISCUSSION AND FACTS AND CIRCUM STANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT NO DI SALLOWANCE UNDER SECTION 14A IS CALLED FOR WHEN THE ASSESSEE HAS NOT INCURRED AND CLAIMED ANY EXPENDITURE FOR EARNING THE EXEMPT INCOME. 9. SIMILAR VIEWS WERE ALSO EXPRESSED BY THE COORDINATE BENCHES IN THE CASE OF RELAXO FOOTWEARS LTD, VS. ADDL. CIT (2012) 50 SOT 102 AND PRIYA EXHIBITORS (P) LTD VS. ACIT (2012) 54 SOT 3 56. IN THE CASE OF RELAXO FOOTWEARS LTD, IT WAS HELD AS UNDER: ' THE ASSESSING OFFICER SHOULD HAVE CONSIDERED THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATI ON TO EARNING THE EXEMPT INCOME. IF THE CLAIM WAS NOT FOUN D TO BE IN CONSONANCE WITH THE FACTS ON RECORD, IT COULD HAVE BE EN REJECTED AND DISALLOWANCE COULD HAVE BEEN MADE AS PER RULE 8D. HOWEVER, IT IS FOUND THAT THE ASSESSING OFFICER HAS NOT CONSIDERED THE CLAIM 13 OF THE ASSESSEE AT ALL AND HE HAS STRAIGHTWAY EMBARKED UP ON COMPUTING DISALLOWANCE UNDER RULE 8D. THE COMMISSION ER (APPEALS) MADE AN ASSUMPTION THAT WHENEVER EXEMPT INC OME IS EARNED THERE WILL BE SOME EXPENDITURE INCURRED IN RE LATION THERETO. SUCH PRESUMPTION CANNOT FORM THE BASIS FOR MA KING DISALLOWANCE UNDER RULE 8D.' 10. IN THE CASE OF PRIYA EXHIBITORS (P) LTD VS. ACIT ( 2012) 54 SOT 356 IT WAS HELD AS UNDER: ' FROM THE CAREFUL STUDY OF THE OBSERVATIONS MADE BY T HE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LT D. (SUPRA), IT IS APPARENT THAT FIRST THE ASSESSING OFFICER HAS TO DETERMIN E THE CLAIM OF THE ASSESSEE REGARDING EXPENSES WHICH NEITHER TH E ASSESSING OFFICER NOR THE COMMISSIONER (APPEALS) HAS DONE IN THE INSTANT CASE. IN FACT, THE SAID DECISION GOES AGAINST THE DEPARTMENT ITSELF IN SO FAR AS THEIR LORDSHIPS HAS HELD THAT THE AS SESSING OFFICER MUST IN THE FIRST INSTANCE DETERMINE WHETHER THE CLAIM OF THE ASSESSEE IS CORRECT AND DETERMINATION MUST BE MADE HA VING REGARD TO THE ACCOUNTS OF THE ASSESSEE. THE LEGISLATURE D IRECTS HIM TO FOLLOW RULE 8D ONLY WHERE THE ASSESSING OFFICER IS NO T SATISFIED WITH THE CLAIM OF ASSESSEE. ' 11. AFTER CONSIDERING THE PRINCIPLES LAID DOWN BY VAR IOUS JUDGMENTS, IT IS IMPERATIVE THAT THE ASSESSING OFFICER CA N INVOKE RULE 8D ONLY WHEN HE RECORDS SATISFACTION IN REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, HAVING REGARD T O THE ACCOUNTS OF THE ASSESSEE. THE CONDITION PRECEDENT FOR TH E ASSESSING OFFICER ENTERING UPON A DETERMINATION OF THE AMOUNT OF THE EXPENDITURE INCURRED IN RELATION TO EXEMPT INCO ME IS THAT THE ASSESSING OFFICER MUST RECORD THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUC H EXPENDITURE. WHILE REJECTING THE CLAIM OF THE ASSESSEE WITH REGARD TO THE EXPENDITURE OR NO EXPENDITURE, AS THE CASE MAY BE, IN RELATION TO EXEMPT INCOME, THE ASSESSING OFFICER WOULD HAVE TO INDICATE COGENT REASONS FOR THE SAME. THEREFORE, IT I S ALL THE MORE NECESSARY THAT AO HAS TO EXAMINE THE ACCOUNTS OF ASSESSEE FIRST AND THEN IF HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM, ONLY HE CAN INVOKE RULE 8D. NO SUCH EXAMINATION WAS M ADE OR SATISFACTION WAS RECORDED BY AO IN THIS CASE. IT WAS NOTI CED THAT THE ASSESSING OFFICER HAS NOT CONSIDERED THE CLAIM OF THE ASSESSEE AT ALL AND HE HAS STRAIGHTWAY EMBARKED UPON COMPUTIN G DISALLOWANCE UNDER RULE 8D. DISALLOWANCE UNDER SECTION 14A REQUIRED FINDING OF INCURRING OF EXPENDITURE AND WH ERE IT WAS FOUND THAT FOR EARNING EXEMPTED INCOME NO EXPENDITU RE HAD BEEN INCURRED, DISALLOWANCE UNDER SECTION 14A COULD NOT ST AND. CONSEQUENTLY, THE DISALLOWANCE WAS NOT PERMISSIBLE. 12. ALTERNATE CONTENTION WAS THAT THE DISALLOWANCE NE ED NOT BE MADE ON ENTIRE EXPENDITURE MADE AS ASSESSEE'S INCOME FRO M SHIPPING RELATED ACTIVITY WAS ASSESSED U/S 115VA ON PRESUM PTIVE BASIS. SINCE ASSESSEE HAS OFFERED INCOME UNDER THE TONNAGE TAX SCHEME, APPLICABILITY OF SECTION 14A WAS ALSO DISCUSSED B Y THE COORDINATE BENCH IN THE CASE OF VARUN SHIPPING COMPA NY LTD VS. ADDL. CIT IN ITA NO.5576/MUM/2011 WHEREIN THE COORD INATE BENCH HAS HELD AS UNDER: 14 '7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PER USED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE ASSESSEE IS MAINLY ENGAGED IN THE BUSINESS OF OPERATION OF SHIPS AN D ITS INCOME FROM THE SAID BUSINESS WAS DECLARED AND ASSESSED AS P ER THE SPECIAL PROVISIONS CONTAINED IN CHAPTER XIIG WHICH LAY DOWN TONNAGE TAX SCHEME. AS PER THE PROVISIONS OF SECTION 115 VA CONTAINED IN CHAPTER XIIG, THE INCOME FROM THE BUSI NESS OF OPERATING QUALIFYING SHIPS CAN BE COMPUTED AT THE OPT ION OF THE ASSESSEE IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XII G AND ONCE THIS OPTION IS EXERCISED BY THE ASSESSEE, THE INCOM E SO COMPUTED SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' NOTWITHSTANDING ANY THING TO THE CONTRARY CONTAINED IN SECTION 28 TO 43C. IT, THEREFORE, FOLLO WS THAT WHEN THE INCOME OF THE ASSESSEE FROM THE BUSINESS OF OPERATING SHIP S IS COMPUTED AS PER THE SPECIAL PROVISIONS CONTAINED IN CHA PTER XIIG, ONLY THE EXPENSES INCURRED BY THE ASSESSEE FOR EARNING I NCOME OF THE SAID BUSINESS ARE DEEMED TO BE ALLOWED AND NOTHING ELSE. IT, THEREFORE, CANNOT BE SAID THAT WHEN THE INCOME OF T HE ASSESSEE FROM THE BUSINESS OF OPERATING SHIPS IS COMPUTED AS PER THE SPECIAL PROVISIONS OF CHAPTER XIIG, ANY EXPENDITURE OT HER THAN THE EXPENDITURE INCURRED FOR THE PURPOSE OF THE SAID BUSIN ESS HAS BEEN ALLOWED AND CONSEQUENTLY NO ADDITION TO INCOME SO COMPUTED CAN BE MADE BY WAY OF DISALLOWANCE U/S 14A O N ACCOUNT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELA TION TO EARNING OF EXEMPT DIVIDEND INCOME. WE, THEREFORE, F IND MERIT IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE T HAT THE INCOME OF THE ASSESSEE FROM THE BUSINESS OF OPERATING SHIP S HAVING BEEN COMPUTED IN ACCORDANCE WITH THE PROVISI ONS OF CHAPTER XIIG, ONLY THE EXPENSES INCURRED FOR THE SAID BUSINESS ARE DEEMED TO HAVE BEEN ALLOWED AND NO ADDITION TO SUCH INCOME CAN BE MADE BY WAY OF DISALLOWANCE U/S 14A ON ACCOUNT OF ANY EXPENDITURE INCURRED IN RELATION TO EARNING OF EXEM PT DIVIDEND INCOME. IN OUR OPINION, IF AT ALL THE ASSESSEE HAS CLAIM ED ANY SUCH EXPENDITURE IN COMPUTATION OF PROFIT OF BUSINESS OF SH IPPING, THE SAME ARE TO BE TAKEN AS DISALLOWED WHEN THE INCOME OF THE SAID BUSINESS IS FINALLY COMPUTED IN ACCORDANCE WITH THE PR OVISIONS OF CHAPTER XIIG AND NO SEPARATE DISALLOWANCE ON ACCOUNT OF SUCH EXPENDITURE U/S 14A CAN BE MADE. WE, THEREFORE, DELE TE THE DISALLOWANCE MADE BY THE AO U/S 14A AND CONFIRMED BY THE LEARNED CIT(APPEALS) AND ALLOW GROUND NO. 1 OF THE A SSESSEE'S APPEAL'. 13. IN VIEW OF THE ABOVE, SINCE ASSESSEE HAS NOT DIRECTLY SPENT ANY EXPENDITURE FOR EARNING THE EXEMPT INCOME AND ALSO SI NCE AO HAS NOT RECORDED ANY SATISFACTION WITH REFERENCE TO THE ACCOUNTS OF ASSESSEE OR CLAIM THAT NO EXPENDITURE WAS INCURRED AND A LSO KEEPING IN MIND THE FACT THAT ASSESSEE HAS OFFERED MOST OF THE INCOME UNDER THE TONNAGE TAX SCHEME AND BALANCE OF THE EXPENDITURE WAS FOR EARNING TAXABLE NON-TONNAGE TAX INCOME, WE ARE OF THE OPINION THAT INVOCATION OF RULE 8D FOR D ISALLOWING THE EXPENDITURE UNDER SECTION 14A ON ESTIMATION/ PRESUMPTI VE BASIS DOES NOT ARISE. ACCORDINGLY, THE GROUNDS RAISED BY ASSESS EE ARE ALLOWED. 15 7.2 SINCE THE FACTS OF THE CASE DECIDED BY THE TRIBUN AL CITED ABOVE ARE IDENTICAL TO THE FACTS OF THE IMPUGNED APP EAL, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE MUMBAI BEN CH OF THE TRIBUNAL IN THE CASE OF RAJ SHIPPING AGENCIES LTD. ( SUPRA) AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTI CE BY THE LD. DEPARTMENTAL REPRESENTATIVE WE SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION . THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 8.1 SINCE FACTS OF THE INSTANT CASE ARE IDENTICAL T O THE CASE DECIDED BY THE TRIBUNAL CITED (SUPRA), THEREFORE, R ESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF T HE TRIBUNAL AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE BY THE LD. DEPARTMENTAL REPRESENTATIVE, WE SET-ASIDE T HE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE T HE DISALLOWANCE. GROUND OF APPEAL NO.1 BY THE ASSESSE E IS ACCORDINGLY ALLOWED. 9. GROUND OF APPEAL NO2 BY THE ASSESSEE READS AS UN DER : 2. DISALLOWANCE OF PROFESSIONAL FEES OF RS. 2,65,270 /- U/S 40(A)(IA) OF THE I.T. ACT ON GROUNDS THAT TDS WAS NOT DEPOSITED WITHIN TIME IN RESPECT OF BILLS APPROVED AND BOOKED I N MARCH 2008 BUT BEARING DATE PRIOR TO MARCH 2008. 9.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED T HAT THE ASSESSEE HAS PAID THE TAX DEDUCTED AT SOURCE ON 07- 04-2008 ON THE FOLLOWING INVOICES IN MARCH 2008 BUT WHICH ARE DATE D PRIOR TO 01- 03-2008 AND ARE RECORDED IN THE ACCOUNTS IN THE ORD INARY COURSE. S.NO. NAME OF THE DEDUCTEE DATE AMOUNT (IN RS.) 1 M/S. PASAYDAN SYSTEMS 31-10-2007 43,000 2 M/S. PASAYAN SYSTEMS 12-12-2007 43,000 3 M/S. PASAYAN SYSTEMS 03-01-2008 43,000 4 US AUTOMATION 29-01-2008 84,270 5 US AUTOMATION 29-02-2008 84,270 16 6 INTERSTAT CONSULTANTS 29-02-2008 93,635 7 INTERSTAT CONSULTANTS 29-02-2008 25,265 8 MAKRAND DEO 14-02-2008 27,000 9 AM CONSULTANCY 17-12-2007 25,000 TOTAL 4,68,439 9.2 ON BEING QUESTIONED BY THE ASSESSING OFFICER IT WAS EXPLAINED THAT THOUGH THE INVOICES WERE RAISED PRIO R TO MARCH, 2008 BUT THEY WERE APPROVED BY THE CONCERNED DEPART MENT IN MARCH 2008 AND WERE RECEIVED BY THE ACCOUNTS DEPART MENT IN THE MONTH OF MARCH 2008 OR CREDITED/PAID TO THE PARTIES IN MARCH, 2008. TAX HAS BEEN CORRECTLY DEDUCTED AND PAID IN APRIL, 2008. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WI TH THE EXPLANATION GIVEN BY THE ASSESSEE. HE NOTED THAT I NVOICES OF M/S. US AUTOMATION AND M/S. INTERSTAT CONSULTANTS WHICH ARE DATED 29- 02-2008 WERE RECEIVED AND RECORDED IN MARCH, 2008 I N ORDINARY COURSE. THE BALANCE OF THE INVOICE OF RS.2,65,270/ - SHOULD HAVE BEEN RECORDED IN FEBRUARY, 2008 OR EARLIER MONTHS A ND TDS THEREOF SHOULD HAVE BEEN DEDUCTED BY 07-03-2008 OR EARLIER DUE DATES. SINCE THE TDS IN RESPECT OF SUCH INVOICES I S DEPOSITED ON 07-04-2008, THEREFORE, THE ASSESSING OFFICER, INVOK ING THE PROVISIONS OF SECTION 40(A)(IA), DISALLOWED THE EXP ENSES AMOUNTING TO RS.2,65,270/-. IN APPEAL THE LD.CIT(A) UPHELD T HE ACTION OF THE ASSESSING OFFICER FOR WHICH THE ASSESSEE IS IN APPE AL BEFORE US. 10. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO T HE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. RAJ INDER KUMAR REPORTED IN (2013) 39 TAXMANN.COM 126 (DELHI) SUBMI TTED THAT THE 17 HONBLE HIGH COURT IN THE SAID DECISION HAS HELD TH AT THE EXPRESSION SAID DUE DATE AS OCCURRING IN ITEM (A) OF PROVISO TO SECTION 40(A)(IA) OF THE ACT CANNOT MEAN DATE ON WH ICH TDS AS PER CHAPTER XVIIB SHOULD HAVE BEEN PAID. IT REFERS TO DUE DATE OF FILING OF RETURN OF INCOME U/S.139(1). THEREFORE, WHEN ASSESSEE DEDUCTED TDS IN MARCH 2007, I.E. LAST MONTH OF THE PREVIOUS YEAR AND DEPOSITED THE SAME IN APRIL 2007, I.E., BEFORE THE SAID DUE DATE ON WHICH RETURN OF INCOME U/S.139(1) IS TO BE FILED , THEREFORE, PROVISIONS OF SECTION 40(A)(IA) COULD NOT HAVE BEEN INVOKED. HE ACCORDINGLY SUBMITTED THAT SINCE THE ASSESSEE IN TH E INSTANT CASE HAS DEPOSITED THE TDS IN THE MONTH OF APRIL, 2008,. I.E. BEFORE THE DUE DATE OF FILING OF THE RETURN, THEREFORE, NO DIS ALLOWANCE U/S.40(A)(IA) IS CALLED FOR. 11. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND HEAVILY RELIED ON THE ORDER OF THE ASSESSING OFFICE R. 12. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSES SEE UNDISPUTEDLY HAS PAID THE TDS ON 07-04-2008, A FACT BROUGHT ON RECORD BY THE ASSESSING OFFICER HIMSELF AT PAGE 7 O F THE ASSESSMENT ORDER. WE FIND THE HONBLE DELHI HIGH C OURT IN THE CASE OF CIT VS. NARESH KUMAR REPORTED IN 263 ITR 56 WHILE DELETING DISALLOWANCE U/S.40(A)(IA) HAS OBSERVED AS UNDER (HEAD NOTES) : SECTION 40(A)(IA), READ WITH SECTION 139, OF THE IN COME-TAX ACT, 1961 - BUSINESS DISALLOWANCE - INTEREST, ETC., PAID TO R ESIDENT WITHOUT DEDUCTION OF TAX AT SOURCE [2010 AMENDMENT] - ASSESSMENT YEAR 2008-09 - WHETHER SECTION 40(A)(IA) TO E XTENT OF 2010 AMENDMENT WAS PROCEDURAL AS SAME DID NOT IMPOSE A NEW 18 TAX BUT WANTED TO ENSURE COLLECTION OF TDS AND AMEND MENTS MADE HAD STREAMLINED AND CORRECTED ANOMALIES NOTICED IN SA ID PROCEDURE BY ALLOWING DEDUCTION IN YEAR WHEN EXPEND ITURE WAS INCURRED PROVIDED TDS WAS PAID BEFORE DUE DATE FOR F ILING OF RETURN - HELD, YES - WHETHER SECTION 40(A)(IA) SHOULD BE INTERPRETED LIBERALLY AND EQUITABLE KEEPING IN MIND OBJECT AND PURPOSE BEHIND SAME, SO THAT ASSESSEE SHOULD NOT SUFFER UNINTENDED AND DELETERIOUS CONSEQUENCES - HELD, YES - W HETHER, THEREFORE, AMENDMENT MADE IN SECTION 40(A)(IA) BY FI NANCE ACT, 2010 GIVING RELAXATION APPLIES RETROSPECTIVELY TO EAR LIER YEARS - HELD, YES [PARAS 17, 26 & 29] [IN FAVOUR OF ASSESSEE] THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF H ONBLE DELHI HIGH COURT IN THE CASE OF RAJINDER KUMAR (SUPRA) WE HOLD THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE DISA LLOWANCE. GROUND OF APPEAL NO.2 BY THE ASSESSEE IS ACCORDINGL Y ALLOWED. 13. GROUND OF APPEAL NO.3 BY THE ASSESSEE READS AS UNDER : 3. DISALLOWANCE OF CONTRACT PAYMENTS OF RS. 15,71,6 67/- U/S 40(A)(IA) OF THE I.T. ACT, ON GROUNDS THAT TDS WAS N OT DEPOSITED WITHIN TIME IN RESPECT OF BILLS APPROVED AND BOOKED I N MARCH 2008 BUT BEARING DATES PRIOR TO MARCH 2008. 13.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSE SSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVE D FROM THE VARIOUS DETAILS OF EXPENSES RECORDED IN MONTH OF MA RCH 2008 THAT THE INVOICES BEAR DATE 20-02-2008 AND EARLIER, WHER EAS THE ASSESSEE HAS PAID TDS ONLY ON 7 TH APRIL 2008. THE DETAILS ARE AS UNDER : EXPENSE GROSS AMOUNT (RS.) TDS (RS.) AGENCY COMMISSION 3,80,987 8,649 FREIGHT-TRADING GOODS 68,108 1,547 19 CARRIAGE OUTWARD 8,84,764 20,086 CLEANING & FORWARDING EXP. 30,626 695 LABOUR-MANPOWER 1,00,109 2,273 PRINTING & STATIONERY 17,109 388 SOFTWARE DEVELOPMENT (OTH) 90,000 2,043 TOTAL 15,71,667 35,681 ON BEING CONFRONTED, IT WAS EXPLAINED THAT THOUGH T HE INVOICES WERE RAISED PRIOR TO MARCH, 2008 HOWEVER THEY WERE APPROVED BY THE CONCERNED DEPARTMENTS IN MARCH, 2008 AND WERE R ECEIVED BY THE ACCOUNTS DEPARTMENT IN MARCH, 2008 OR CREDITED/ PAID TO THE PARTIES IN MARCH 2008. TAX HAS BEEN CORRECTLY DEDU CTED AND PAID IN APRIL, 2008. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND MADE ADDITION OF RS.15,71,667/- U/S.40(A)(IA) OF THE I.T. ACT. IN A PPEAL THE LD.CIT(A) UPHELD THE ADDITION FOR WHICH THE ASSESSE E IS IN APPEAL BEFORE US. 14. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSES SEE IN THE INSTANT CASE HAS UNDISPUTEDLY DEPOSITED THE TDS ON 07-04-2008, A FACT BROUGHT ON RECORD BY THE ASSESSING OFFICER HIM SELF AT PAGE 7 OF THE ASSESSMENT ORDER. SINCE IN THE INSTANT CASE THE ASSESSEE HAD DEPOSITED THE TDS IN THE MONTH OF APRIL 2008, THERE FORE, FOLLOWING THE REASONING GIVEN IN THE PRECEDING PARA GRAPHS WHILE DECIDING GROUND OF APPEAL NO.2, WE ARE OF THE CONSI DERED OPINION THAT NO DISALLOWANCE U/S.40(A)(IA) IS CALLED FOR. ACCORDINGLY, THE ORDER OF THE CIT(A) IS SET-ASIDE AND THE GROUND RAI SED BY THE ASSESSEE IS ALLOWED. 20 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 12-11-2014. SD/- SD/- (R.S.PADVEKAR) (R.K . PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: 12 TH NOVEMBER, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-V, PUNE 4. THE CIT-V, PUNE 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE