DCIT, CHENNAI V. Savorit Limited, CHENNAI

ITA 874/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8682 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 05-04-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: G BASKAR
• Keywords: Capital asset; Business income; Depreciation; Business expenditure; Earning of tax free income; Question of law
• Section: 143(3); 142(1); 14A

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 874 /MDS/201 6 / ASSESSMENT YEAR :20 12 - 1 3 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 6(1), AAYAKAR BHAVAN, NEW BLOCK, 121, M.G. ROAD, 7 TH FLOOR, CHENNAI 600 034. VS. M/S. SAVORIT LIMITE D, 22, NORTH TERMINUS ROAD, TOLLGATE, C HENNAI 602 08 1. [PAN: A A A C S9903R ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI A.V. SREEKANTH , J CIT / RESPONDENT BY : SHRI G. BASKAR, ADVOCAT E / DATE OF HEARING : 07 . 0 6 .201 6 / DATE OF P RONOUNCEMENT : 29 . 0 7 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIO NER OF INCOME TAX (APPEALS) 15 , C HENNAI DATED 1 1 . 0 1 .201 6 RELEVANT TO THE ASSESSMENT YEAR 20 12 - 13 . THE REVENUE HAS RAISED TWO EFFECTIVE GROUNDS: (I) THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICR TO TAX THE INCOME DECLARED BY THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY INSTEAD OF BUSINESS INCOME ASSESSED BY THE ASSESSING OFFICER FOR .1,00,02,061/ - AND (II) THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING I.T.A. NO . 874 /M/ 1 6 2 OFFICER TO DELETE THE ADDITION OF .6,65,941/ - MADE UNDER SECTION 14A R.W. RULE 8D. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HAS FILED ITS RETURN OF INCOME FOR THE ASSESSME NT YEAR 2012 - 13 ON 01.10.2012 DECLARING TOTAL INCOME OF .97,76,571/ - . THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT]. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER S ECTION 143(2) OF THE ACT WAS ISSUED ON 12.08.2013. NOTICE UNDER SECTION 142(1) OF THE ACT DATED 18.08.2014 WAS ALSO ISSUED TO THE ASSESSEE. IN RESPONSE THERETO, THE ASSESSEE FILED ALL THE DETAILS. AFTER EXAMINING THE DETAILS FILED BY THE ASSESSEE, THE ASSE SSING OFFICER HAS COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT .1,34,02,789/ - AFTER MAKING VARIOUS ADDITIONS. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND BY FOLLOWING VARIOUS DECISION, THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE. 4. ON BEING AGGRIEVED THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. WITH REGARD TO THE FIRST GROUND RAISED IN THE APPEAL OF THE REVENUE, THE LD. DR HAS SUBMITTED THAT AGAINST THE ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE, THE DEPARTMENT HAS PREFERRED AN APPEAL BEFORE THE HON BLE HIGH COURT I.T.A. NO . 874 /M/ 1 6 3 AND THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER SHOULD BE CONFIRMED. 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS RELIED ON THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSES SMENT YEAR 2010 - 11 IN I.T.A. NO. 2238/MDS/2013 DATED 30.01.2014 AND SUBMITTED THAT THE ABOVE DECISION OF THE TRIBUNAL SHOULD BE FOLLOWED FOR THE ASSESSMENT YEAR UNDER APPEAL. 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. SIMILAR ISSUE ON IDENTICAL FACTS CAME BEFORE THE TRIBUNAL FOR THE ASSESSMENT YEAR 2010 - 11 (SUPRA) IN ASSESSEE S OWN CASE , WHERE, THE TRIBUNAL HAS OBSERVED AS UNDER: 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTAT IVES OF BOTH THE SIDES. WE HAVE ALSO PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE JUDGMENT RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE. THE CASE OF THE ASSESSEE IS, THAT THERE HAS BEEN SUBSTANTIAL DECLINE IN THE GRINDING BUSINESS OF THE ASS ESSEE. THE GODOWNS WHICH WERE EARLIER USED BY THE ASSESSEE FOR ITS BUSINESS PURPOSE ARE LYING VACANT. SINCE THERE IS NO INTENTION ON THE PART OF ASSESSEE TO REVIVE THE BUSINESS, THE ASSESSEE HAS FORMED A SEPARATE RENTAL DIVISION TO MANAGE THE RENTING OF GO DOWNS AND THE INCOME FROM RENTING/LEASING OF GODOWNS IS RETURNED AS INCOME FROM HOUSE PROPERTY . THE CIT(APPEALS) HAS DIS - ALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT, THE ASSESSEE HAS BEEN RETURNING THE INCOME FROM LETTING OF GODOWN AS ITS BUSIN ESS INCOME FROM 1975 TO 31 - 03 - 2008 AND THE SAME WAS ACCEPTED BY THE DEPARTMENT. THE ASSESSEE HAS NOW CHANGED ITS STAND AND CLAIMED THE INCOME FROM LETTING OF GODOWNS AS INCOME FROM HOUSE PROPERTY MERELY TO CLAIM NOTIONAL DEDUCTION U/S.24(A) OF THE ACT. THE ASSESSEE HAS BEEN CLAIMING DEPRECIATION ON THE GODOWN BUILDINGS SINCE BEGINNING. NOW, THAT THE WRITTEN DOWN VALUE OF THE GODOWNS HAS I.T.A. NO . 874 /M/ 1 6 4 EXHAUSTED, THE ASSESSEE SHIFTED THE HEAD OF INCOME TO CLAIM DOUBLE DEDUCTION. 6. IT IS AN ADMITTED FACT, THAT EARLIER THE ASSESSEE HAS BEEN CLAIMING DEPRECIATION ON THE GODOWNS AND HAS BEEN RETURNING THE RENTAL INCOME FROM THE GODOWNS AS INCOME FROM BUSINESS . IT IS ALSO NOT DISPUTED THAT THERE HAS BEEN RECESSION IN THE GRINDING BUSINESS OF THE ASSESSEE AND ONE OF THE M ILLS WAS CLOSED DOWN WAY BACK IN THE YEAR 2002 AND ANOTHER MILL IS WORKING AT A REDUCED CAPACITY. THE ASSESSEE IS NOT USING THE GODOWNS FOR HIS BUSINESS PURPOSES ANY MORE. IT IS A WELL SETTLED LAW THAT IF THE PRIMARY OBJECT IS TO LEASE OR LET OUT PROPERTY, THE INCOME DERIVED FROM PROPERTY WOULD BE REGARDED AS INCOME FROM HOUSE PROPERTY . ON THE OTHER HAND, IF THE INTENTION OF THE ASSESSEE IS TO EXPLOIT A COMMERCIAL ASSET BY CARRYING ON COMMERCIAL ACTIVITY, THE INCOME WOULD HAVE TO BE TREATED AS INCOME FRO M BUSINESS . WHAT HAS TO BE SEEN IS WHETHER THE LETTING OUT OF THE PROPERTY CONSTITUTES A DOMINANT ASPECT OF THE TRANSACTION OR WHETHER IT IS SUBSERVIENT TO THE MAIN BUSINESS OF THE ASSESSEE. THE HON BLE SUPREME COURT OF INDIA IN THE CASE OF UNIVERSAL PLAS T LTD., VS. CIT REPORTED AS 237 ITR 454 (SC) HAS LAID DOWN GENERAL PRINCIPLES TO DETERMINE WHETHER THE INCOME FROM LETTING OR LEASING OF THE PROPERTY IS TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY OR BUSINESS INCOME . THE SAME ARE RE - PRODUCED HEREIN BE LOW: (1) NO PRECISE TEST CAN BE LAID DOWN TO ASCERTAIN WHETHER INCOME (REFERRED TO BY WHATEVER NOMENCLATURE, LEASE, AMOUNT, RENTS, LICENCE FEE) RECEIVED BY AN ASSESSEE FROM LEASING OR LETTING OUT OF ASSETS WOULD FALL UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'; (2) IT IS A MIXED QUESTION OF LAW AND FACT AND HAS TO BE DETERMINED FROM THE POINT OF VIEW OF A BUSINESSMAN IN THAT BUSINESS ON THE FACTS AND IN THE CIRCUMSTANCES OF EACH CASE, INCLUDING TRUE INTERPRETATION OF THE AGREEMENT UNDE R WHICH THE ASSETS ARE LET OUT; (3) WHERE ALL THE ASSETS OF THE BUSINESS ARE LET OUT, THE PERIOD FOR WHICH THE ASSETS ARE LET OUT IS A RELEVANT FACTOR TO FIND OUT WHETHER THE INTENTION OF THE ASSESSEE IS TO GO OUT OF BUSINESS ALTOGETHER OR TO COME BACK A ND RESTART THE SAME; (4) IF ONLY A FEW OF THE BUSINESS ASSETS ARE LET OUT TEMPORARILY, WHILE THE ASSESSEE IS CARRYING OUT HIS OTHER BUSINESS ACTIVITIES, THEN IT IS A CASE OF EXPLOITING THE BUSINESS ASSETS OTHERWISE THAN EMPLOYING I.T.A. NO . 874 /M/ 1 6 5 THEM FOR HIS OWN USE FOR M AKING PROFIT FOR THAT BUSINESS; BUT IF THE BUSINESS NEVER STARTED OR HAS STARTED BUT CEASED WITH NO INTENTION TO BE RESUMED, THE ASSETS ALSO WILL CEASE TO BE BUSINESS ASSETS AND THE TRANSACTION WILL ONLY BE EXPLOITATION OF PROPERTY BY AN OWNER THEREOF, BUT NOT EXPLOITATION OF BUSINESS ASSETS . 7. THE HON BLE APEX COURT IN AN UN - AMBIGUOUS WORDS HAS EXPLAINED THAT IN CASE THE ASSESSEE IS USING ANY ASSET/PROPERTY FOR HIS BUSINESS PURPOSES AND THE BUSINESS CEASES WITH NO INTENTION TO RESUME, THE ASSET CEASES TO BE BUSINESS ASSET AND THE INCOME ARISING THERE FROM SHALL NOT BE TREATED AS BUSINESS INCOME . 8. IN THE PRESENT CASE, INITIALLY THE ASSESSEE WAS USING GODOWNS FOR HIS BUSINESS PURPOSES. AFTER THE DOWNFALL OF THE BUSINESS, THE ASSESSEE RENTED THE GO DOWNS TO THIRD PARTIES. FINALLY, WHEN THE ASSESSEE HAD NO INTENTION TO REVIVE HIS BUSINESS, IT CREATED A RENTAL DIVISION FOR THE PURPOSE OF RENTING OF THE GODOWNS AND ASSESSED THE INCOME ARISING FROM THE LETTING OF GODOWNS AS INCOME FROM HOUSE PROPERTY . ONCE THE ASSET CEASES TO BE A BUSINESS/COMMERCIAL ASSET, ANY INCOME ARISING THERE FROM SHOULD NOT BE REGARDED AS BUSINESS INCOME . 9. IN VIEW OF OUR ABOVE OBSERVATIONS AND THE LAW LAID DOWN BY THE HON BLE SUPREME COURT OF INDIA IN THE CASE OF UNIVERSAL PLAST LTD., VS. CIT (SUPRA), WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE HAD RIGHTLY TREATED THE INCOME FROM RENTING/LEASING OF GODOWNS UNDER THE HEAD INCOME FROM HOUSE PROPERTY . WE ARE NOT IN CONSONANCE WITH THE FINDINGS OF THE CIT(APPEALS). THE IMPUGNED ORDER IS SET ASIDE AND THE APPEAL OF THE ASSESSEE IS ALLOWED. 7. B Y FOLLOWING THE RATIO LAID DOWN BY THE HON BLE SUPREME COURT IN THE CASE OF UNIVERSAL PLAST LTD. V. CIT (SUPRA) THE TRIBUNAL HAS HELD THAT ONCE THE ASSET CEASES TO BE A BUSINESS /COMMERCIAL ASSET, ANY INCOME ARISING THERE FROM SHOULD NOT BE REGARDED AS BUSINESS INCOME. THE LD. DR COULD NOT CONTROVERT THE ABOVE FINDINGS OF THE TRIBUNAL. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL, THE GROUND RA ISED BY THE REVENUE IS DISMISSED. I.T.A. NO . 874 /M/ 1 6 6 8. THE NEXT GROUND RAISED IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF .6,65,941/ - MADE UNDER SECTION 14A RULE 8D. 9. THE FINANCIAL STATEM ENTS OF THE ASSESSEE REVEALS THAT THE ASSESSEE HAS MADE INVESTMENT TO THE EXTENT OF .13,31,88,200/ - . THE ASSESSING OFFICER HAS OBSERVED THAT THE RETURN OF SUCH INVESTMENTS CAN ONLY BE DIVIDENDS WHICH ARE NOT TAXABLE UNDER THE PROVISIONS OF THIS ACT AND TH EREFORE EXPENSES PERTAINING TO SUCH INVESTMENTS CANNOT BE ALLOWED AS PER THE PROVISIONS OF SECTION 14A OF THE ACT. HOWEVER, BY FURNISHING THE SOURCES OF INVESTMENT OUT OF SALE VALUE OF PROPERTY, THE ASSESSEE HAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT IT HAS NOT MADE ANY INVESTMENT IN SHARES OUT OF BORROWED FUNDS. FURTHER, THE ASSESSEE HAS SUBMITTED THAT IT HAS NOT EARNED ANY EXEMPTED INCOME DURING THE ASSESSMENT YEAR UNDER CONSIDERATION OUT OF THE INVESTMENTS MADE AND NO EXPENDITURE WAS INCURRED FOR TH E INVESTMENT IN SHARES, THE PROVISIONS OF RULE 8D IS NOT APPLICABLE. THE ASSESSING OFFICER HAS NOT ACCEPTED THE WRITTEN SUBMISSIONS OF THE ASSESSEE AND OBSERVED THAT IF THE ASSESSEE HAS NOT RECEIVED ANY EXEMPT INCOME DURING THE RELEVANT ASSESSMENT YEAR, TH E RETURN WHICH THE ASSESSEE CAN EXPECT FROM SUCH SHAREHOLDING WOULD BE ONLY DIVIDEND. BY RELYING THE CBDT CIRCULAR NO.5 OF 2014 WHICH WARRANTS DISALLOWANCE UNDER SECTION 14A EVEN WHERE THE ASSESSEE HAS RECEIVED NO EXEMPT INCOME AND BY FOLLOWING THE I.T.A. NO . 874 /M/ 1 6 7 SPECIAL BENCH DECISION IN THE CASE OF CHEMINVEST LTD. 121 ITD 318 (DELHI), THE ASSESSING OFFICER WORKED OUT THE DISALLOWANCE UNDER SECTION 14A R.W. THIRD LIMB OF RULE 8D AND DISALLOWED .6,65,941/ - . 10. ON APPEAL, BY FOLLOWING THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. V. CIT 126 DTR 289, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION MADE UNDER SECTION 14A R.W. RULE 8D. 11. ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. BY RELYING ON THE DECISION OF THE DELHI BENCHES OF THE TRIBUNAL IN THE CASE OF ESCORTS LTD. V. ACIT 102 TTJ 522, WHEREIN IT WAS HELD THAT INDIRECT MANAGEMENT AND ADMINISTRATIVE EXPENSES QUALIFY FOR DISALLOWANCE UNDER SECTION 14A OF THE ACT, THE LD. DR HAS PLEADED THAT T HE ORDER PASSED BY THE LD. CIT(A) SHOULD BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 12. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. ADMITTEDLY, THE ASSESSEE HAS MADE INVESTMENT IN SHARES . HOWEVER, THE ASSESSEE HAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT IT HAS MADE THE INVESTMENTS OUT OF SALE VALUE OF PROPERTY AND ALSO SUBMITTED THAT IT HAS NOT MADE ANY INVESTMENT IN SHARES OUT OF BORROWED FUNDS. FURTHER, THE ASSESSEE HAS SU BMITTED THAT IT HAS NOT EARNED ANY EXEMPTED INCOME OUT OF THE INVESTMENTS MADE AND NO I.T.A. NO . 874 /M/ 1 6 8 EXPENDITURE WAS INCURRED FOR THE INVESTMENT IN SHARES AND, THEREFORE, THE PROVISIONS OF RULE 8D IS NOT APPLICABLE. BY FOLLOWING THE SPECIAL BENCH DECISION IN THE CASE OF CHEMINVEST LTD. V. ITO 121 ITD 318 (DELHI)(SB), THE ASSESSING OFFICER WORKED OUT THE DISALLOWANCE UNDER SECTION 14A R.W. THIRD LIMB OF RULE 8D AND DISALLOWED .6,65,941/ - . THE DELHI SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF CHEMINVEST LTD. V. ITO (SUPRA) HAS OBSERVED AND HELD AS UNDER: 'THE CONTROVERSY RAISED IN THE INSTANT CASE WAS THAT THE ASSESSEE HAD NOT EARNED OR RECEIVED ANY DIVIDEND IN THE YEAR UNDER CONSIDERATION AND, THEREFORE, NO DISALLOWANCE COULD BE MADE BY INVOKING THE PROVISIONS OF SECTION 14A. THERE WAS NO FORCE IN THE SAID CONTENTION OF THE ASSESSEE. WHEN THE EXPENDITURE OF INTEREST IS INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME, IT HAS TO SUFFER THE DISALLOWANCE, IRRESPECTIVE OF THE FACT WHETHER ANY INCOME IS EARNED BY THE ASSESSEE OR NOT. SECTION 14A DOES NOT ENVISAGE ANY SUCH EXCEPTION. THIS IS SO EVEN IF THE INTEREST PAID ON BORROWINGS FOR THE PURCHASE OF SHARES IS ALLOWABLE UNDER SECTION 57 AS AN EXPENDITURE INCURRED FOR EARNING OR MAKING INCOME OR UNDER SECTION 36(1)(III) AS AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. WHEN PRIOR TO INTRODUCTION OF SECTION 14A, AN EXPENDITURE BOTH UNDER SECTIONS 36 AND 57 WAS ALLOWABLE TO AN ASSESSEE WITHOUT SUCH REQUIREMENT OF EARNING OR RECEIPT OF INCOME, NO SUCH CONDITION COULD BE IMPORTED WHEN IT CAME TO DISALLOWANCE OF THE SAME EXPENDITURE UNDER SECTION 14A. NOW SINCE DIVIDEND WAS EXEMPT, AS A CONSEQUENCE THEREOF EXPENDITURE HAD TO BE DISALLOWED.' [PARA 22] 13. IN THE ABOVE DECISION OF THE DELHI SB OF THE TRIBUNAL, IT WAS HELD THAT DISALLOWANCE OF EXPENDITURE UNDER SECTION 14A OF THE ACT SHOULD BE MADE EVEN IN THE YEAR WHERE NO EXEMPT INCOME H AS BEEN EARNED OR RECEIVED BY THE ASSESSEE. I.T.A. NO . 874 /M/ 1 6 9 14. HOWEVER, AGAINST THE DECISION OF THE DELHI SB OF THE TRIBUNAL IN THE CASE OF CHEMINVEST LTD. V. ITO (SUPRA), VIDE ITS ORDER DATED 02.09.2015 IN THE CASE OF CHEMINVEST LTD. V. ITO REPORTED IN 126 DTR 289, TH E HON BLE DELHI HIGH COURT HAS OBSERVED AND HELD AS UNDER: 5. IN THE AY IN QUESTION, THE APPELLANT BORROWED FUNDS ON WHICH INTEREST EXPENDITURE OF RS.1,21,03,367/ - WAS INCURRED. THE FACTUAL ASSERTION OF THE APPELLANT, WHICH HAS NOT BEEN CONTROVERTED, IS THAT IN THE RELEVANT AY NO DIVIDEND INCOME WAS EARNED BY THE APPELLANT FROM THE AMOUNT INVESTED IN VARIOUS SHARES. FOR THE AY IN QUESTION, THE APPELLANT FILED A RETURN OF INCOME DECLARING A LOSS OF RS.13,84,086/ - . THIS CASE WAS PICKED UP FOR SCRUTINY AND THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT DISALLOWING RS.97,87,570/ - OUT OF THE TOTAL EXPENDITURE INCURRED DURING THE YEAR UNDER SECTION 14A OF THE ACT. THE REASON RECORDED BY THE AO FOR THIS DISALLOWANCE WAS THAT THE BORROWED FUNDS WERE UTILIZED FOR THE PURPOSE OF PURCHASE OF SHARES FOR THE PURPOSE TO EARN DIVIDEND INCOME WHICH IS EXEMPTED UNDER SECTION 10(33) OF THE ACT AND THUS, NOT FORMING A PART OF THE TOTAL INCOME, AND THEREFORE THE INTEREST PAID THEREON HAD TO BE DISALLOWED UNDER SECTION 14A . 6. IT MAY BE MENTIONED AT THIS STAGE THAT THE ASSESSEE HAS MADE A DISTINCTION BETWEEN INVESTMENTS IN UNQUOTED SHARES, WHICH WAS IN THE SUM OF RS.4,16,155/ - , AND INVESTMENTS IN SHARES (OTHER THAN TRADE) ON LONG TERM BASIS TO THE EXTENT OF RS.6,88,70,000/ - . BASED ON THE AFOREMENTIONED DISTINCTION, THE AO IN THE ASSESSMENT ORDER DATED 28 TH DECEMBER, 2006, COMPUTED THE DISALLOWANCE AS RS.97,87,570/ - BEING THE INTEREST PAID ON BORROWED FUNDS INVESTED IN LONG TERMS SHARES. 7. MR. AJAY VOHRA, LEARNED SENIOR COUNSEL AP PEARING FOR THE ASSESSEE, PRODUCED THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT AS WELL AS THE COMPUTATION OF INCOME PREPARED BY THE ASSESSEE FOR THE AY IN QUESTION I.E. 2004 - 05. IN THE BALANCE SHEET, IT IS SEEN THAT THE INVESTMENT IN QUOTED SHARES OF MAX INDIA LIMITED IS SHOWN UNDER THE HEAD QUOTED - OTHER THAN TRADE - LONG TERM . AN INVESTMENT OF APPROXIMATELY RS.2,13,38,698 OVER THE PREVIOUS YEAR HAS BEEN MADE IN THE SHARES OF MAX INDIA LTD. IT IS ALSO SEEN THAT THE INVESTMENTS IN OTHER INVESTMENT COMPANIE S TO THE EXTENT OF RS.4,61,155 IS SHOWN UNDER THE SUB - HEAD UNQUOTED - TRADE - LONG TERM . THIS FIGURE HAS REMAINED UNCHANGED OVER THE PREVIOUS YEAR. IN THE COMPUTATION FILED FOR I.T.A. NO . 874 /M/ 1 6 10 THE PURPOSES OF THE INCOME TAX RETURN, THE DETAILS OF INVESTMENTS HAVE BEEN SHOWN IN TWO BROAD CATEGORIES OF CAPITAL ASSETS AND TRADING ASSETS AND THE INVESTMENT IN MAX INDIA LIMITED IS UNDER THE HEAD TRADING ASSETS WITH THE INVESTMENTS IN THE INVESTMENT COMPANIES SHOWN UNDER THE HEAD OF CAPITAL ASSETS . 8. THE AO APPEARS TO H AVE PROPORTIONATELY DISALLOWED, FOR THE PURPOSES OF SECTION 14A OF THE ACT, THE INTEREST ATTRIBUTABLE TO THE LONG TERM INVESTMENT (OTHER THAN TRADE) FOR THE PURPOSES OF EARNING EXEMPTED INCOME. SINCE THE UNSECURED LOAN BORROWED FOR THE PURPOSE WAS RS.6,88,70,000 THE DISALLOWANCE OF THE AMOUNT UNDER SECTION 14 A OF THE ACT WAS CALCULATED THUS: '1,21,03,367 X 6,88,70,000 = RS. 97,87,570 8,51,65,000' 9. THE CIT (A) BY AN ORDER DATED 27TH SEPTEMBER 2007 UPHELD THE APPLICABILITY OF SECTION 14A OF THE ACT BUT AGREED WITH THE CONTENTION OF THE APPELLANT THAT ONLY THE NET INTEREST AMOUNT DEBITED IN THE PRO FIT AND LOSS ACCOUNT WAS REQUIRED TO BE PROPORTIONATELY DISALLOWED UNDER SECTION 14A OF THE ACT. 10. IN THE APPEALS FILED BOTH BY THE REVENUE AND THE ASSESSEE BEFORE THE ITAT, A SPECIAL BENCH WAS CONST ITUTED TO DECIDE THE QUESTION REGARDING APPLICABILITY OF SECTION 14A OF THE ACT IN AN YEAR WHEN NO EXEMPT INCOME HAD BEEN EARNED. THE SPECIAL BENCH BY AN ORDER DATED 5TH AUGUST 2009 ANSWERED THE QUESTION BY INTER ALIA REFERRING TO THE DECISION OF THE SUPREME COURT IN CIT V. RAJENDRA PRASAD MOODY [1978] 115 ITR 519 (SC). THE REASONING OF THE SPECIAL BENCH WAS AS UNDER: '22. THE CONTROVERSY RAISED IN THI S CASE IS THAT THE ASSESSEE HAD NOT EARNED OR RECEIVED ANY DIVIDEND IN THE YEAR UNDER CONSIDERATION AND, THEREFORE, NO DISALLOWANCE CAN BE MADE BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT. WE DO NOT FIND ANY FORCE IN THIS CONTENTION OF THE ASSESSE E. WHEN THE EXPENDITURE OF INTEREST IS INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME, IT HAS TO SUFFER THE DISALLOWANCE IRRESPECTIVE OF THE FACT WHETHER ANY INCOME IS EARNED BY THE ASSESSEE OR NOT. SECTION 14A DOES NOT ENVISAGE AN Y SUCH EXCEPTION. THIS IS EVEN IF THE INTEREST PAID ON BORROWINGS FOR THE PURCHASE OF SHARE WERE ALLOWABLE U/S 57 AS AN EXPENDITURE INCURRED FOR EARNING OR MAKING INCOME AS HELD BY THE SUPREME COURT IN THE CASE OF RAJENDRA PRASAD MOODY I.T.A. NO . 874 /M/ 1 6 11 (SUPRA) OR U/S 36 (L )(III) AS AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS AS HELD BY VARIOUS DECISIONS RIGHT FROM BEGINNING OF THE INCOME TAX ACT . WHEN, PRIOR TO INTRODUCTION OF SECTION 14A , ANEXPENDITURE BOTH U/S 36 AND 57 WAS ALLOWABLE TO AN ASSESSEE WITHOUT SUCH REQUIREMENT OF EARNING OR RECEIPT OF INCOME, WE CANNOT IMPORT ANY SUCH CONDITION WHEN IT COMES FOR DISALLOWANCE OF THE SAME EXPE NDITURE U/S 14 A OF THE ACT . THIS IS WHAT IS HELD BY THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF HARISH KRISHNAKANT BHAT (SUPRA) WHEN IT OBSERVED THAT INTEREST ON MONIES BORROWED FOR PURCHASE OF S HARES HELD AS INVESTMENT IS NOT ALLOWABLE WHETHER OR NOT THERE IS ANY YIELD OF DIVIDEND. IT IS SO HELD BY APPLYING THE DECISION OF THE SUPREME COURT IN RAJENDRA PRASAD MOODY (SUPRA) IN THE REVERSE CASE WHEREIN IT IS THAT IRRESPECTIVE OF DIVIDEND RECEIPT, E XPENDITURE HAS TO BE ALLOWED. NOW SINCE DIVIDEND IS EXEMPT, AS A CONSEQUENCE THEREOF EXPENDITURE HAS TO BE DISALLOWED.' 11. THE SPECIAL BENCH OF THE ITAT NEGATIVED THE SUBMISSION OF THE APPELLANT THAT THE LANGUAGE OF BOTH SECTIONS 57 (III) AND SECTION 14A OF THE ACT WERE MATERIALLY DIFFERENT. THE APPELLANT'S FURTHER CONTENTION AND THAT SINCE THE DECISION IN RAJENDRA PRASAD MOODY (SUPRA) WAS ONLY IN TH E CONTEXT OF PURCHASE OF SHARES IN WHICH CASE A DEDUCTION OF EXPENSES CAN BE CLAIMED UNDER SECTION 57(III) OF THE ACT WHEREAS IN THE PRESENT CASE THE ASSESSEE WAS ENTITLED TO DEDUCTION OF EXPENSES UNDER SECTION 36(1)(III) OF THE ACT AND, THEREFORE, SECTION 14A CANNOT BE APPLIED, WAS ALSO REJECTED. 12. THE MATTER WAS THEN PLACED BEFORE THE REGULAR BEN CH OF THE ITAT WHICH PASSED THE IMPUGNED ORDER ON 4TH JANUARY 2013 REMANDING THE MATTER TO THE FILE OF THE AO FOR RECONSIDERATION OF THE ISSUE AFRESH. THE ITAT REFERRED TO THE DECISION OF THIS COURT IN MA XOPP INVESTMENT LTD. V. COMMISSIONER OF INCOME - TAX, NEW DELHI (2012) 347 ITR 272 (DEL). 13. AT THE HEARING OF THIS CASE ON 6TH JULY 2015, THE COURT HAD ASKED THE PARTIES TO ALSO ADDRESS THE ISSUE OF WHETHER THE INTEREST PAID ON BORROWINGS FOR THE PURPOS ES OF INVESTMENT BY THE ASSESSEE COULD BE TREATED AS BUSINESS EXPENDITURE? 14. MR. VOHRA HAS PLACED BEFORE THE COURT A LARGE NUMBER OF DECISIONS INCLUDING THE DECISION OF THIS COURT IN EICHER GOODEARTH LTD. V. COMMISSIONER OF INCOME - TAX [2015] 60 TAXMANN.COM 268 (DELHI) I.T.A. NO . 874 /M/ 1 6 12 WHICH ANSWERED THE QUESTION IN THE AFFIRMATIVE. MR. VOHRA HAS ALSO PLACED RELIANCE ON DECISIONS OF THE SUPREME COURT IN CIT V. CHUGAN DAS & CO . [1964] 55 ITR 17 (SC) AND CIT V. COCANADA RADHASWAMI BANK LTD. [1965] 57 ITR 306 (SC) WHICH HOLD THAT WHERE SHARES WERE HELD AS BUSINESS INVESTMENT, THE DIVIDEND INCOME THOUGH ASSESSABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES, WOULD R ETAIN ITS CHARACTER AS BUSINESS INCOME FOR ALL INTENTS AND PURPOSES. IN THE LATTER DECISION IT WAS SPECIFICALLY HELD THAT THE INCOME FROM SECURITIES WHICH FORMS PART OF THE ASSESSEE S TRADING ASSETS OR PART OF ITS INCOME IN BUSINESS IF LOSS INCURS IN BUSIN ESS WOULD BE SET OFF AGAINST THAT INCOME IN SUCCEEDING YEARS. MR. VOHRA POINTED OUT THAT EVEN IN THE ASSESSEE S CASE THE BUSINESS LOSS OF PREVIOUS YEAR HAS BEEN SET OFF AGAINST THE INCOME OF THE SUBSEQUENT YEARS. 15. TURNING TO THE CENTRAL QUESTION THAT ARISES FOR CONSIDERATION, THE COURT FINDS THAT THE COMPLETE ANSWER IS PROVIDED BY THE DECISION OF THIS COURT IN CIT V. HOLCIM INDIA (P) LTD. (DECISION DATED 5TH SEPTEMBER 2014 IN ITA NO. 486/2014). IN THAT CASE A SIMILAR QUESTION AROSE, VIZ., WHETHER THE I TAT WAS JUSTIFIED IN DELETING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT WHEN NO DIVIDEND INCOME HAD BEEN EARNED BY THE ASSESSEE IN THE RELEVANT AY? THE COURT REFERRED TO THE DECISION OF THIS COURT IN MAXOPP INVESTMENT LTD. (SUPRA) AND TO THE DECISION OF THE SPECIAL BENCH OF THE ITAT IN THIS VERY CASE I.E. CHEMINVEST LTD. V. CIT (2009) 317 ITR 86. THE COURT ALSO REFERRED TO THREE DECISIONS OF DIFFERE NT HIGH COURTS WHICH HAVE DECIDED THE ISSUE AGAINST REVENUE. THE FIRST WAS THE DECISION IN COMMISSIONER OF INCOME TAX, FARIDABAD V. M/S. LAKHANI MARKETING INCL . (DECISION DATED 2ND APRIL 2014 OF THE HI GH COURT OF PUNJAB AND HARYANA IN ITA NO. 970/2008) WHICH IN TURN REFERRED TO TWO EARLIER DECISIONS OF THE SAME COURT IN CIT V. HERO CYCLES LIMITED [2010] 323 ITR 518 AND CIT V. WINSOME TEXTILE INDUSTRIES LTD . [2009] 319 ITR 204. THE SECOND WAS OF THE GUJARAT HIGH COURT IN COMMISSIONER OF INCOME TAX - I V. CORRTECH ENERGY (P) LTD . [2014] 223 TAXMANN 1 30 (GUJ.) AND THE THIRD OF THE ALLAHABAD HIGH COURT IN COMMISSIONER OF INCOME TAX, KANPUR V. SHIVAM MOTORS (P) LTD. (DECISION DATED 5TH MAY 2014 IN ITA NO. 88/2014). THESE THREE DECISIONS REITERATED THE POSITION THAT WHEN AN ASSESSEE HAD NOT EARNED ANY TAX ABLE INCOME IN THE RELEVANT AY IN QUESTION 'CORRESPONDING EXPENDITURE COULD NOT BE WORKED OUT FOR DISALLOWANCE.' 16. IN CIT V. HOLCIM INDIA (P) LTD. (SUPRA), THE COURT FURTHER EXPLAINED AS UNDER: I.T.A. NO . 874 /M/ 1 6 13 '15. INCOME EXEMPT UNDER SECTION 10 IN A PARTICULAR ASSESSMENT YEAR, MAY NOT HAVE BEEN EXEMPT EARLIER AND CAN BECOME TAXABLE IN FUTURE YEARS. FURTHER, WHETHER INCOME EARNED IN A SUBSEQUENT YEAR WOULD OR WOULD NOT BE TAXABLE, MAY DEPEND UPON THE NATURE OF TRANS ACTION ENTERED INTO IN THE SUBSEQUENT ASSESSMENT YEAR. FOR EXAMPLE, LONG TERM CAPITAL GAIN ON SALE OF SHARES IS PRESENTLY NOT TAXABLE WHERE SECURITY TRANSACTION TAX HAS BEEN PAID, BUT A PRIVATE SALE OF SHARES IN AN OFF MARKET TRANSACTION ATTRACTS CAPITAL G AINS TAX. IT IS AN UNDISPUTED POSITION THAT RESPONDENT ASSESSEE IS AN INVESTMENT COMPANY AND HAD INVESTED BY PURCHASING A SUBSTANTIAL NUMBER OF SHARES AND THEREBY SECURING RIGHT TO MANAGEMENT. POSSIBILITY OF SALE OF SHARES BY PRIVATE PLACEMENT ETC. CANNOT BE RULED OUT AND IS NOT AN IMPROBABILITY. DIVIDEND MAY OR MAY NOT BE DECLARED. DIVIDEND IS DECLARED BY THE COMPANY AND STRICTLY IN LEGAL SENSE, A SHAREHOLDER HAS NO CONTROL AND CANNOT INSIST ON PAYMENT OF DIVIDEND. WHEN DECLARED, IT IS SUBJECTED TO DIVIDEN D DISTRIBUTION TAX.' 17. ON FACTS, IT WAS NOTICED IN CIT V. HOLCIM INDIA (P) LTD. (SUPRA) THAT THE REVENUE HAD ACCEPTED THE GENUINENESS OF THE EXPENDITURE INCURRED BY THE ASSESSEE IN THAT CASE AND THAT EXPENDITURE HAD BEEN INCURRED TO PROTECT INVESTMENT MADE. 18. IN THE PRESENT CASE, THE FACTUAL POSITION THAT HAS NOT BEEN DISPUTED IS THAT THE INVESTMENT BY THE ASSESSEE IN THE SHARES OF MAX INDIA LTD. IS IN THE FORM OF A STRATEGIC INVESTMENT. SINCE THE BUSINESS OF THE ASSESSEE IS OF HOLDING INVESTMENTS, THE INTEREST EXPENDITURE MUST BE HELD TO HAVE BEEN INCURRED FOR HOLDING AND MAINTAINING SUCH INVESTMENT. THE INTEREST EXPENDITURE INCURRED BY THE ASSESSEE IS IN RELATION TO SUCH INVESTMENTS WHICH GIVES RISE TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOM E. 19. IN LIGHT OF THE CLEAR EXPOSITION OF THE LAW IN HOLCIM INDIA (P) LTD. (SUPRA) AND IN VIEW OF THE ADMITTED FACTUAL POSITION IN THIS CASE THAT THE ASSESSEE HAS MADE STRATEGIC INVESTMENT IN SHARES OF MAX INDIA LTD.; THAT NO EXEMPTED INCOME WAS EARNED BY THE ASSESSEE IN THE RELEVANT AY AND SINCE THE GENUINENESS OF THE EXPENDITURE INCURRED BY THE ASSESSEE IS NOT IN DOUBT, THE QUESTION FRAMED IS REQUIRED TO BE ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 20. SINCE THE SPECIAL BENCH HAS RE LIED UPON THE DECISION OF THE SUPREME COURT IN RAJENDRA PRASAD MOODY (SUPRA), IT IS CONSIDERED I.T.A. NO . 874 /M/ 1 6 14 NECESSARY TO DISCUSS THE TRUE PURPORT OF THE SAID DECISION. IT IS NOTICED TO BEGIN WITH THAT THE ISSUE BEFORE THE SUPREME COURT IN THE SAID CASE WAS WHETHER THE EXPENDITURE UNDER SECTION 57 (III) OF THE ACT COULD BE ALLOWED AS A DEDUCTION AGAINST DIVIDEND INCOME ASSESSABLE UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. UNDER SECTION 57 (III) OF THE ACT DEDUCTION IS ALLOWED IN RESPECT OF ANY EXPENDITURE LAID OUT OR EXPENDED WHOLLY OR EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING SUCH INCOME. THE SUPREME COURT EXPLAINED THAT THE EXPRESSION 'INCURRED FOR MAKING OR EARNING SUCH INCOME , DID NOT MEAN THAT ANY INCOME SHOULD IN FACT HAVE BEEN EARNED AS A CONDITION PRECEDENT FOR CLAIMING THE EXPENDITURE. THE COURT EXPLAINED: 'WHAT S. 57(III) REQUIRES IS THAT THE EXPE NDITURE MUST BE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING INCOME. IT IS THE PURPOSE OF THE EXPENDITURE THAT IS RELEVANT IN DETERMINING THE APPLICABILITY OF S. 57(III ) AND THAT PURPOSE MUST BE MAKING OR EARNING OF INCOME. S. 57(III) DOES NOT REQUIRE THAT THIS PURPOSE MUST BE FULFILLED IN ORDER TO QUALIFY THE EXPENDITURE FOR DEDUCTION. IT DOES NOT SAY THAT THE EXPENDITURE SHALL BE DEDUCTIBLE ONLY IF ANY INCOME IS MADE OR EARNED. THERE IS IN FACT NOTHING IN THE LANGUAGE OF S. 57(III) TO SUGGEST THAT THE PURPOSE FOR WHICH THE EXPENDITURE IS MADE SHOULD FRUCTIFY INTO ANY BENEFIT BY WAY OF RETURN IN THE SHAPE OF INCOME. T HE PLAIN NATURAL CONSTRUCTION OF THE LANGUAGE OF S. 57(III) IRRESISTIBLY LEADS TO THE CONCLUSION THAT TO BRING A CASE WITHIN THE SECTION, IT IS NOT NECESSARY THAT ANY INCOME SHOULD IN FACT HAVE BEEN EARN ED AS A RESULT OF THE EXPENDITURE.' 21. THERE IS MERIT IN THE CONTENTION OF MR. VOHRA THAT THE DECISION OF THE SUPREME COURT IN RAJENDRA PRASAD MOODY (SUPRA) WAS RENDERED IN THE CONTEXT OF ALLOWABILITY OF DEDUCTION UNDER SECTION 57(III) OF THE ACT, WHERE THE EXPRESSION USED IS FOR THE PURPOSE OF MAKING OR EARNING SUCH INCOME . SECTION 14A OF THE ACT ON THE OTHER HAND CONTAINS THE EXPRESSION IN RELAT ION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. THE DECISION IN RAJENDRA PRASAD MOODY (SUPRA) CANNOT BE USED IN THE REVERSE TO CONTEND THAT EVEN IF NO INCOME HAS BEEN RECEIVED, THE EXPENDITURE INCURRED CAN BE DISALLOWED UNDER SECTION 14A OF THE ACT. 22. IN THE IMPUGNED ORDER, THE ITAT HAS REFERRED TO THE DECISION IN MAXOPP INVESTMENT LTD. (SUPRA) AND REMANDED THE MATTER TO THE AO FOR RECONSIDERATION OF THE ISSUE AFRESH. THE ISSUE IN MAXOPP INVESTMENT LTD. (SUPRA)WAS WHETHER THE EXPENDITURE (INCLUDING INTEREST ON I.T.A. NO . 874 /M/ 1 6 15 BORROWED FUNDS) IN RESPECT OF INVESTMENT IN SHARES OF OPERATING COMPANIES FOR ACQUIRING AND RETAINING A CONTROLLING INTEREST THEREIN WAS DISALLOWABLE UNDER SECTION 14 A OF THE ACT. IN THE SAID CASE ADMITTEDLY THERE WAS DIVIDEND EARNED ON SUCH INVESTMENT. IN OTHER W ORDS, IT WAS NOT A CASE, AS THE PRESENT, WHERE NO EXEMPT INCOME WAS EARNED IN THE YEAR IN QUESTION. CONSEQUENTLY, THE SAID DECISION WAS NOT RELEVANT AND DID NOT APPLY IN THE CONTEXT OF THE ISSUE PROJECTED IN THE PRESENT CASE. 23. IN THE CONTEXT OF THE FA CTS ENUMERATED HEREINBEFORE THE COURT ANSWERS THE QUESTION FRAMED BY HOLDING THAT THE EXPRESSION DOES NOT FORM PART OF THE TOTAL INCOME IN SECTION 14A OF THE ENVISAGES THAT THERE SHOULD BE AN ACTUAL R ECEIPT OF INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME. IN OTHER WORDS, SE CTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. 24. CONSEQUENTLY, THE IMPUGNED ORDER OF THE ITAT IS SET ASIDE AND THE APPEAL IS ALLOWED IN THE ABOVE TERMS. THIS COURT SHOULD NOT BE UNDERSTOOD TO HAVE EXPRESSED ANY OPINION ON THE ISSUE OF WHETHER FOR THE AY IN QUESTION THE INTEREST EXPENDITURE INCURRED BY THE ASSESSEE WOULD BE ALLOWABLE AS BUSINESS EXPENDITURE UNDER SECTION 36 (1)(III) OF THE ACT . 15. IN THE INSTANT CASE, I T IS AN ADMITTED FACT THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE BY WAY PAYMENT OF INTEREST DURING THE PREVIOUS YEAR WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT. NOW, FROM THE ABOVE JUDGEMEN T OF THE HON BLE DELHI HIGH COURT, IT HAS BEEN MADE IT CLEAR THAT THERE SHOULD BE AN ACTUAL RECEIPT, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SA ID INCOME. IN VIEW OF THE ABOVE JUDGEMENT OF THE HON BLE DELHI HIGH COURT, THE RELIANCE PLACED BY THE DEPARTMENT IN THE CASE OF ESCORTS LTD. V. ACIT 102 TTJ 522, WHEREIN IT I.T.A. NO . 874 /M/ 1 6 16 WAS HELD THAT INDIRECT MANAGEMENT AND ADMINISTRATIVE EXPENSES QUALIFY FOR DISALLOWA NCE UNDER SECTION 14A OF THE ACT DOES NOT HOLD GOOD. THE DEPARTMENT COULD NOT CONTROVERT THE ABOVE DECISION OF THE HON BLE DELHI HIGH COURT. RESPECTFULLY FOLLOWING THE ABOVE JUDGEMENT OF THE HON BLE DELHI HIGH COURT, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 6 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED . ORDER PRONOUNCED ON THE 29 TH JU LY , 20 16 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 29. 0 7 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.