ACIT, CHENNAI V. M/s. Tropical Agrosystem (India) Ltd., CHENNAI

ITA 91/CHNY/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81235 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 21-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 13-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GURU BHASHYAM
• Assessee Lawyers: DR ANITA SUMANTH
• Keywords: Business income; Depreciation; Earning of tax free income; Revenue expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHE NNAI . . . , ! , ' # $ BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NO. 91/MDS/2012 & C.O. NO. 25/MDS/2012 ( IN ITA NO. 91/MDS/2012 ) ASSESSMENT YEAR : 2008-09 THE ASSISTANT COMMISSIONER OF INCOME TAX , COMPANY CIRCLE III(2), NEW BLOCK, 4 TH FLOOR, 121, MAHATMA GANDHI ROAD, NUNGAMBAKKAM, CHENNAI VS M/S.TROPICAL AGROSYSTEM (INDIA) LTD., NO.72, MARSHALLS ROAD, EGMORE, CHENNAI-600 008 [PAN: AAACT 4250 E] (APPELLANT) (RESPONDENT/CROSS OBJECTOR) REVENUE BY : SHRI GURU BHASHYAM , J CIT ASSESSEE BY : DR.ANITA SUMANTH, ADVOCATE / DATE OF HEARING : 21-08-2014 / DATE OF PRONOUNCEMENT : 30-10-2014 #% / O R D E R PER VIKAS AWASTHY, J.M: THE APPEAL IS FILED BY THE REVENUE AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-III, CHENNAI DA TED 07-10-2011 FOR THE ASSESSMENT YEAR (AY) 2008-09. I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 2 -: THE ASSESSEE HAS FILED CROSS-OBJECTIONS AGAINST THE SAME ORDER OF COMMISSIONER OF INCOME-TAX(APPEALS). 2. IN APPEAL, THE REVENUE HAS RAISED FIVE GROUNDS. GROUND NOS.1 & 5 ARE GENERAL IN NATURE. THEREFORE, THE TH REE EFFECTIVE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: I. DELETING OF DIS-ALLOWANCE OF ` 1,75,82,000/- CLAIMED BY THE ASSESSEE AS COST OF IMPROVEMENT OF PROPERTY; II. ALLOWING CLAIM OF ASSESSEE TO THE TUNE OF ` 7.00 CRORES FOR PERFECTING THE TITLE OF THE PROPERTY SOLD; AND III. DELETING OF ADDITION MADE TOWARDS EXPENDITURE ON OFFICE RENOVATION. IN THE CROSS-OBJECTION, ASSESSEE HAS ASSAILED THE F INDINGS OF COMMISSIONER OF INCOME-TAX(APPEALS) IN CONFIRMING A DDITION OF ` 3,42,556/- U/S.14A OF THE INCOME TAX ACT, 1961 (HER EIN AFTER REFERRED TO AS THE ACT). I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 3 -: 3. THE FACTS OF THE CASE AS EMANATING FROM RECORDS ARE AS UNDER: THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACT URING OF PESTICIDES AND CHEMICALS. APART FROM THE BUSINESS INCOME, THE ASSESSEE HAS EARNED SHORT TERM CAPITAL GAINS FROM S ALE OF LAND AT THIRUVOTTIYUR. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY.2008-09 ON 29-09-2008 DECLARING AN INCOME OF ` 13,11,89,740/-. THE CASE OF ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U/S. 143(2) OF THE ACT WAS ISSUED TO THE ASSESSEE ON 31-08-2009. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDING MADE ADDITIONS/DIS-ALLOWANCES INTER ALIA ON ACCOUNT OF COMPENSATION OF `7.00 CRORES PAID BY THE ASSESSEE IN PERFECTING THE TITLE OF THE PROPERTY WH ICH WAS SOLD DURING THE YEAR; EXPENDITURE OF ` 1.75 CRORES TOWARDS IMPROVEMENT OVER THE LAND SOLD DURING THE YEAR; AND THE EXPENDITURE ALLEGEDLY INCURRED TOWARDS RENOVATION O F OFFICE PREMISES. THE ASSESSING OFFICER HELD THAT THE EXPE NDITURE ON RENOVATION IS CAPITAL IN NATURE AND ALLOWED DEPRECI ATION. THE ASSESSING OFFICER FURTHER MADE DIS-ALLOWANCE U/S.14 A R.W.RULE 8D ON THE INVESTMENTS MADE BY THE ASSESSEE IN SHARES A ND DEBENTURES. I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 4 -: AGGRIEVED BY THE ASSESSMENT ORDER DT.31-12-2010, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONE R OF INCOME-TAX(APPEALS). THE COMMISSIONER OF INCOME-TA X(APPEALS) AFTER EXAMINING THE DOCUMENTS ON RECORD AND THE SUB MISSIONS OF THE LD.AR OF THE ASSESSEE HELD THAT THE EXPENDITURE OF ` 1.75 CRORES CLAIMED TOWARDS IMPROVEMENT OF LAND IS DEDUC TIBLE WHILE COMPUTING THE SHORT TERM CAPITAL GAINS. SIMILARLY, THE PAYMENT OF ` 7.00 CRORES MADE FOR PERFECTING THE TITLE OF THE PR OPERTY SOLD DURING THE YEAR WAS ALSO HELD TO BE ALLOWABLE. ON T HE ISSUE OF ALLOWABILITY OF EXPENDITURE ON RENOVATION OF OFFICE PREMISES, THE COMMISSIONER OF INCOME-TAX(APPEALS) HELD THAT THE P AYMENTS MADE AS ADVANCE FOR PURCHASE OF IRON AND STEEL WERE RECEIVED BACK AS NO RENOVATION WORK WAS UNDERTAKEN. THEREFO RE, THERE IS NO QUESTION OF TREATING THE SAID AMOUNT EITHER AS C APITAL OR REVENUE EXPENDITURE. AS FAR AS DIS-ALLOWANCE U/S.1 4A IS CONCERNED, THE COMMISSIONER OF INCOME-TAX(APPEALS) CONFIRMED THE FINDINGS OF ASSESSING OFFICER BY FOLLOWING THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD., REPORTED AS 328 ITR 81 (BOM) NOW, THE REVENUE AS WELL AS THE ASSESSEE HAVE COME IN APPEAL AND CROSS- OBJECTION I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 5 -: BEFORE THE TRIBUNAL ASSAILING THE CONCERNED FINDING S OF THE FIRST APPELLATE AUTHORITY. 4. SHRI GURU BHASHYAM, APPEARING ON BEHALF OF THE R EVENUE SUBMITTED THAT THE EXPENDITURE OF ` 1.75 CRORES ALLEGED TOWARDS IMPROVEMENT OF PROPERTY IS NOT AN ALLOWABLE EXPENDI TURE. THE ASSESSEE HAD PURCHASED THE PROPERTY IN DECEMBER, 20 05 FOR ` 13.80 CRORES AND WITHIN A SHORT SPAN OF LESS THAN T WO YEARS, THE ASSESSEE HAS SOLD THE PROPERTY VIDE FOUR DIFFERENT SALE DEEDS FOR A TOTAL CONSIDERATION OF ` 37.99 CRORES. THE ASSESSEE IN ORDER TO REDUCE CAPITAL GAINS HAS FABRICATED THE DOCUMENTS A ND CLAIMED EXPENDITURE TO THE TUNE OF ` 1.75 CRORES TOWARDS THE COST OF IMPROVEMENT. THE LD.DR POINTED OUT THAT IN PAPER B OOK OF THE ASSESSEE, AT PAGE NOS.42 TO 45 THE ORDER OF THE DIS TRICT REVENUE OFFICER, CHENNAI IS PLACED. THE DISTRICT REVENUE O FFICER AFTER INSPECTING THE SITE HAS CATEGORICALLY STATED IN HIS ORDER THAT THE BUILDINGS ON THE LAND-IN-QUESTION ARE DILAPIDATED D UE TO LACK OF PROPER MAINTENANCE. THE LD.DR FURTHER POINTED OUT THAT IN THE REPORT IT HAS BEEN STATED THAT THERE IS NO LAY OUT, THE AREA BEING LOW LYING IS COVERED BY STAGNANT WATER. THE PROPER TY-IN-QUESTION I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 6 -: WAS ADVERTISED FOR SALE @ ` 170.83 PER SQ. FT., EVEN AT THAT RATE, NO ONE HAD COME FORWARD TO PURCHASE. THE LD.DR POINTE D THAT THE ORDER OF DISTRICT REVENUE OFFICER IN PROCEEDINGS UN DER THE INDIAN STAMPS ACT, 1899 FOR VALUATION OF STAMP DUTY IS DT. 11-01-2007. THEREAFTER, THE PROPERTY WAS SOLD IN THE MONTH OF M AY, 2007. THE ALLEGED IMPROVEMENT WORK VALUING ` 1.75 CRORES WAS UNDERTAKEN DURING THE SHORT SPAN OF TWO MONTHS FROM JANUARY, 2 007 TO MARCH, 2007 WHICH IS HIGHLY IMPROBABLE. THERE IS NO IMPRO VEMENT WHAT- SO-EVER AS CLAIMED BY THE ASSESSEE. ON THE ISSUE OF EXPENDITURE CLAIMED TOWARDS PERFECT ING THE TITLE, THE LD.DR SUBMITTED THAT THE ASSESSEES WAS U NDER NO OBLIGATION TO PAY ` 7.00 CRORES TO M/S.OPG METALS PRIVATE LIMITED, WITH WHOM THE ASSESSEE HAD INITIALLY ENTERED AGREEM ENT OF SALE OF THE LAND-IN-QUESTION. THE LD.DR DRAWS OUR ATTENTION TOWARDS CLAUSE-6 OF THE AGREEMENT FOR SALE DT.12 TH APRIL, 2006, PLACED ON RECORD BY THE ASSESSEE IN ITS PAPER BOOK AT PAGE NO S.1 TO 8. THE LD.DR ARGUED THAT CLAUSE-6 OF THE AGREEMENT CLEARLY STATES THAT, IN CASE THE PURCHASER IS UNABLE TO FULFILL ITS OBLI GATION WITHIN THE PERIOD STIPULATED IN CLAUSE-1 AND 4, THE ADVANCE PA ID BY THE I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 7 -: PURCHASER SHALL STAND FORFEITED AND THE AGREEMENT W ILL STAND TERMINATED WITHOUT ANY FURTHER NOTICE. THE VENDOR SHALL BE AT LIBERTY TO DEAL WITH THE SCHEDULE PROPERTY IN ANY M ANNER WHAT-SO- EVER. SINCE, THE PURCHASER I.E., M/S.OPG METALS PR IVATE LIMITED, FAILED TO COMPLY WITH THE CONDITIONS LAID DOWN IN T HE AGREEMENT FOR SALE, THE ASSESSEE WAS AT LIBERTY TO FORFEIT TH E ADVANCE RECEIVED AND DEAL WITH THE PROPERTY IN WHATEVER MAN NER IT DEEMED APPROPRIATE. THUS, THERE WAS NO QUESTION OF PAYING ANY AMOUNT OF COMPENSATION TO THE VENDEE FOR VIOLATING THE TERMS OF AGREEMENT FOR SALE. THE LD.DR CONTENDED THAT PAYME NT OF ` 7.00 CRORES FOR ALLEGEDLY PERFECTING THE TITLE IS NOTHIN G BUT A COLOURABLE DEVICE TO REDUCE THE MARGIN OF SHORT TERM CAPITAL G AINS. ON THE THIRD ISSUE OF EXPENDITURE INCURRED ON OFFIC E RENOVATION, THE LD.DR CONTENDED THAT THE ASSESSING OFFICER HAD CATEGORICALLY STATED IN HIS ORDER THAT THE ASSESSEE HAD PAID A SUM OF ` 1.28 CRORES TO M/S.ARIHANTH STEEL FOR THE PURPOSE O F OFFICE RENOVATION AND HAS CHARGED THE SAME TO THE PROFIT & LOSS A/C. THE SAID EXPENDITURE HAS BEEN INCURRED FOR BRINGING A PERMANENT I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 8 -: CHANGE IN THE OFFICE STRUCTURE. THEREFORE, IT IS C APITAL IN NATURE. THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION ON T HE SAME. 5.1. ON THE OTHER HAND, DR.ANITA SUMANTH, APPEARING ON BEHALF OF THE ASSESSEE CONTROVERTING THE SUBMISSIONS OF TH E LD.DR SUBMITTED THAT THE EXPENDITURE OF ` 1,75,82,000/- CLAIMED BY THE ASSESSEE TOWARDS THE COST OF IMPROVEMENT OF PROPERT Y WAS NOT INCURRED ON THE BUILDINGS IN THE LAND-IN-QUESTION. THE SAID EXPENDITURE WAS TOWARDS LAYING OF ROADS, REPAIRS OF COMPOUND WALLS, FILLING OF EARTH ETC., THE ASSESSEE HAD MAI NTAINED ALL THE VOUCHERS OF THE PAYMENTS MADE. ALL THE PAYMENTS WE RE MADE THROUGH BANK ACCOUNTS OF THE CONTRACTORS. THE CONT RACTORS HAD CONFIRMED THE RECEIPT OF PAYMENTS. THE ASSESSEE WH ILE MAKING PAYMENTS TO THE CONTRACTORS HAD DEDUCTED TAX AT SOU RCE. THE ASSESSING OFFICER HAS NOT DISPUTED THE GENUINENESS OF THE PAYMENTS. THE LD.COUNSEL FOR THE ASSESSEE REFERRED TO THE BILLS RAISED BY M/S.ANKUR CONSTRUCTION COMPANY AND M/S. O M SAKTHI SEETHA, ENGINEERING CONTRACTORS WHO HAD EXECUTED TH E WORK. THE SAID BILLS ARE PLCED ON RECORD AT PAGE NOS.61 T O 67 OF THE PAPER BOOK FILED BY THE ASSESSEE. I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 9 -: 5.2. ON THE ISSUE OF PAYMENT OF COMPENSATION FOR PE RFECTING THE TITLE OF THE LAND, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PAYMENT WAS MADE TO M/S.OPG METALS PRIVATE LIMI TED, WITH WHOM THE ASSESSEE HAD INITIALLY ENTERED INTO AN AGR EEMENT FOR SALE OF LAND. SINCE, THE PURCHASER FAILED TO COMPL Y WITH THE CONDITIONS WITH RESPECT TO PAYMENT OF CONSIDERATION INSTALMENT AS SPECIFIED IN THE AGREEMENT, THE ASSESSEE INVOKED TH E TERMS OF CLAUSE-6 OF THE AGREEMENT FOR TERMINATING THE SAME. HOWEVER, THE PURCHASER INVOKED THE PROVISIONS OF CLAUSE-12 O F THE AGREEMENT AND INSISTED FOR ARBITRATION AND CONCILIA TION PROCEEDINGS. ACCORDINGLY, JUSTICE MARUTHAMUTHU (RE TIRED) WAS APPOINTED AS CONCILIATOR. AFTER SERIES OF CONCILIA TORY SESSIONS, SETTLEMENT AGREEMENT WAS DRAWN BETWEEN THE ASSESSEE AND M/S.OPG METALS PRIVATE LIMITED ON 29 TH NOVEMBER, 2006. ACCORDING TO THE AGREEMENT, THE ASSESSEE WAS REQUIR ED TO PAY ` 7.00 CRORES TO M/S.OPG METALS PRIVATE LIMITED, IN L IEU OF M/S.OPG METALS PRIVATE LIMITED, RELINQUISHING ALL I TS RIGHTS AND CLAIMS OVER THE PROPERTY IN DISPUTE. THE LD.COUNSE L FOR THE ASSESSEE SUBMITTED THAT THE DECISION TO PAY ` 7.00 CRORES AS COMPENSATION WAS TAKEN IN THE INTEREST OF THE ASSES SEE-COMPANY. I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 10 - : THE ASSESSEE HAD INITIALLY ENTERED INTO AN AGREEMEN T OF SALE OF PROPERTY WITH M/S.OPG METALS PRIVATE LIMITED, FOR A CONSIDERATION OF ` 26,69,00,000/-. WHEREAS, THE ASSESSEE SUBSEQUENTLY SOLD THE PROPERTY FOR ` 37,99,80,000/-. EVEN AFTER PAYING ` 7.00 CRORES AS COMPENSATION, THE ASSESSEE GAINED MORE THAN ` 4.00 CRORES FROM THE SALE OF PROPERTY. PAYMENT OF COMPENSATION AND SELLING IT TO THE SUBSEQUENT VENDEES WAS PURELY A BUSINESS DIC ISION. 5.3. ON THE THIRD ISSUE RAISED BY THE REVENUE WITH REGARD TO EXPENDITURE OF ` 1.25 CROES ON OFFICE RENOVATION, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD PA ID THE SAID AMOUNT TO M/S.ARIHANTH STEEL AS ADVANCE FOR PURCHAS E OF IRON AND STEEL FOR OFFICE RENOVATION. SINCE, RENOVATION WOR K WAS NOT CARRIED OUT, THE AFORESAID AMOUNT PAID WAS RECEIVED BACK NE XT YEAR. THE ASSESSEE HAD NOT DEBITED ANY EXPENDITURE IN THE PRO FIT & LOSS A/C OR HAS CLAIMED ANY DEDUCTION IN COMPUTING THE INCOM E. SINCE NO RENOVATION WAS UNDERTAKEN, THERE IS NO EXPENDITURE EITHER REVENUE OR CAPITAL AS ALLEGED BY THE REVENUE. I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 11 - : 5.4. THE LD.COUNSEL SUBMITTED THAT THE ASSESSEE HAD FILED CROSS- OBJECTIONS AGAINST THE FINDINGS OF COMMISSIONER OF INCOME- TAX(APPEALS) ON THE ISSUE OF DIS-ALLOWANCE U/S.14A. THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS FAILED TO T AKE INTO CONSIDERATION THAT INVESTMENT IN SHARES AND DEBENTU RES WERE MADE FROM ASSESSEES OWN FUND. NO EXPENDITURE WAS INCURRED FOR EARNING EXEMPT INCOME. THE DIS-ALLOWANCE HAS B EEN MADE MERELY ON ASSUMPTIONS. 6. CONTROVERTING THE SUBMISSIONS OF THE LD.COUNSEL FOR THE ASSESSEE, THE LD.DR SUBMITTED THAT THE ASSESSING OF FICER MADE DIS-ALLOWANCE U/S.14A R.W.RULE 8D. THE COMMISSIONE R OF INCOME-TAX(APPEALS) HAS FOLLOWED THE DECISION OF HO N'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD., (SUPRA), WHEREIN IT HAS BEEN HELD THAT THE PROVISIO NS OF RULE 8D ARE APPLICABLE W.E.F. AY.2008-09. THE ASSESSEE HAS RECEIVED A DIVIDEND INCOME OF ` 11,618/- DURING THE YEAR. THE ASSESSEE HAD INVESTMENT PORTFOLIO TO THE TUNE OF ` 1,26,88,410/-. THE ASSESSEE HAS NOT FURNISHED ANY DETAILS TO SHOW THAT THE INVE STMENTS IN SHARES AND DEBENTURES WERE MADE OUT OF OWN FUNDS AN D NOT FROM I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 12 - : BORROWED FUNDS. THE LD.DR PRAYED FOR SUSTAINING TH E FINDINGS OF COMMISSIONER OF INCOME-TAX(APPEALS) ON THE ISSUE. 7. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES AT LENGTH AND ALS O PERUSED THE ORDERS OF THE AUTHORITIES BELOW, AS WELL AS THE DOC UMENTS REFERRED DURING THE COURSE OF ARGUMENTS PLACED IN THE PAPER BOOK. THE REVENUE IN ITS APPEAL HAS RAISED THREE ISSUES. 8. BEFORE PROCEEDING FURTHER, WE WOULD LIKE TO RE-C APITULATE THE UN-DISPUTED FACTS IN THE CASE. THE ASSESSEE PURCHA SED PROPERTY MEASURING 304 GROUNDS AND 2032 SQ. FT., AT TONDIYAR PET, CHENNAI FROM M/S.HINDUSTAN LEVER LTD., ON 12-12-2005 FOR A CONSIDERATION OF ` 13.80 CRORES. THEREAFTER, THE ASSESSEE ENTERED INT O AN AGREEMENT FOR SALE OF THE AFORESAID LAND ON 12 TH APRIL, 2006 WITH M/S.OPG METALS PRIVATE LIMITED, FOR A TOTAL CONSIDE RATION OF ` 26,29,00,000/-. ` 10.00 LAKHS WAS RECEIVED AS ADVANCE BY THE ASSESSEE. AS PER THE TERMS AND CONDITIONS OF THE A GREEMENT, ` 5.00 CRORES WAS TO BE PAID BY M/S.OPG METALS PRIVAT E LIMITED, ON OR BEFORE 30-06-2006 AND THE REMAINING AMOUNT OF I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 13 - : ` 21,59,00,000/- WAS TO BE PAID ON OR BEFORE 30-09-20 06. ON 03-06-2006, M/S.OPG METALS PRIVATE LIMITED, EXPRESS ED THEIR INABILITY TO PAY THE INSTALMENT OF ` 5.00 CRORES ON OR BEFORE THE DATE FIXED AND SOUGHT EXTENSION OF TIME TO COMPLY W ITH THE CONDITIONS. THE ASSESSEE VIDE COMMUNICATION DT.03- 07-2006 REFUSED TO GRANT EXTENSION AND INVOKED THE PROVISIO NS OF CLAUSE-6 OF THE AGREEMENT TO FORFEIT ADVANCE AND TERMINATE A GREEMENT. M/S.OPG METALS PRIVATE LIMITED, VIDE LETTER DT.10-0 7-2006 INVOKED CLAUSE-12 OF THE AGREEMENT TO SETTLE THE DI SPUTE BETWEEN THE PARTIES THROUGH ARBITRATION AND CONCILIATION PR OCEEDINGS. BOTH THE PARTIES AGREED TO APPOINT MR. JUSTICE MARUTHAMU THU (RETIRED) AS CONCILIATOR. AFTER SERIES OF CONCILIATORY SESSI ONS, THE DISPUTE WAS SETTLED AND SETTLEMENT AGREEMENT DT.29-11-2006 WAS MADE. ACCORDING TO ASSESSMENT, THE ASSESSEE HAD TO PAY ` 7.00 CRORES TO M/S.OPG METALS PRIVATE LIMITED, IN LIEU OF M/S.O PG METALS PRIVATE LIMITED, RELINQUISHING ITS RIGHTS AND CLAIM S OVER THE PROPERTY-IN-QUESTION. SIMULTANEOUSLY, PROCEEDINGS UNDER INDIAN STAMPS ACT, 1899 WERE GOING ON IN THE OFFICE OF DIS TRICT REVENUE OFFICER, (STAMPS), CHENNAI FOR DETERMINING STAMP DU TY TO BE PAID BY THE ASSESSEE AT THE TIME OF PURCHASE OF PROPERTY . IN THE SAID I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 14 - : PROCEEDINGS, THE DRO VIDE ORDER DT.11-01-2007 OBSER VED THAT BUILDINGS WHICH ARE ON THE PROPERTY-IN-QUESTION ARE DILAPIDATED DUE TO LACK OF PROPER MAINTENANCE. IT IS NECESSARY TO DEMOLISH THE BUILDINGS. THERE IS NO LAY OUT FOR ROADS, PATH WAY AND OPEN SPACE. THE AREA BEING LOW HAD STAGNANT WATER. THE ASSESSEE ALLEGEDLY INCURRED EXPENDITURE OF MORE THAN ` 1.75 CRORES ON THE DEVELOPMENT OF THE LAND. THE AMOUNT WAS ALLEGEDLY SPENT IN CONNECTION WITH FILLING OF EARTH, REPAIRING COMPOUN D WALL, LAND LEVELING, LAYING OF ROAD AND DRAINAGE WORK ETC. TH E ASSESSEE IN ORDER TO SUPPORT ITS CONTENTIONS PLACED ON RECORD B ILLS OF THE CONTRACTORS WHO PERFORMED THE WORK. THE ASSESSEE SOLD THE LAND TO FOUR DIFFERENT PARTIE S VIDE SEPARATE SALE DEEDS DT.09-05-2007 FOR A TOTAL CONSI DERATION OF ` 37.99 CRORES. WHILE DETERMINING SHORT TERM CAPITAL GAINS ON SALE OF PROPERTY, THE ASSESSEE CLAIMED ` 1.75 CRORES TOWARDS THE COST OF IMPROVEMENT AND ` 7.00 CRORES PAID AS COMPENSATION FOR PERFECTING TITLE OF THE PROPERTY. BOTH THE AFORESA ID EXPENDITURES HAVE BEARING IN DETERMINING SHORT TERM CAPITAL GAIN S FROM THE SALE OF LAND. I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 15 - : 9. AFTER CONSIDERING ALL THE ASPECTS OF THE CASE, W E PROCEED TO DISPOSE OF THE ISSUES PLACED BEFORE US. THE FIRST ISSUE RAISED BY THE REVENUE IS THE QUESTION OF COST OF IMPROVEMENT OF ` 1,75,82,000/- . IT IS TO BE SEEN THAT THE ASSESSE E ACQUIRED THE PROPERTY IN DECEMBER, 2005 AND THEREAFTER, SOLD THE PROPERTY IN MAY, 2007. THE PROPERTY WAS UNDER THE POSSESSION O F THE ASSESSEE ONLY FOR A PERIOD OF LESS THAN TWO YEARS. THE DISTRICT REVENUE OFFICER, CHENNAI HAD AN OCCASION TO STUDY T HE NATURE OF THE PROPERTY WITH REFERENCE TO DECIDING THE VALUE O F THE PROPERTY FOR THE PURPOSE OF STAMP DUTY. THE FINDINGS OF THE DISTRICT REVENUE OFFICER, CHENNAI HAVE BEEN CONSOLIDATED IN A REPORT DATED 11.01.2007. THAT IS, THE SAID REPORT WAS MAD E WITHIN THREE MONTHS BEFORE THE SALE OF THE SAID PROPERTY IN MAY, 2007. IN THE SAID REPORT, THE DISTRICT REVENUE OFFICER, CHENNAI HAS CLEARLY STATED THAT THE SUBJECT PROPERTY WAS IN A DEPRESSED STATE OF CONDITION WITH NO SIGN OF ANY IMPROVEMENT OR WORK. THE DISTRICT REVENUE OFFICER HAS STATED IN HIS REPORT THAT THE B UILDINGS AVAILABLE ON THE LAND IN QUESTION WERE IN A DILAPID ATED CONDITION FOR WANT OF MAINTENANCE AND UPKEEP. HE HAS ALSO ST ATED THAT THE WHOLE PROPERTY WAS IN A LOW LYING AREA INUNDATED WI TH STAGNANT I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 16 - : WATER. IT IS CLEAR THAT IT IS A WATER LOGGED PROPE RTY WITH NO VISIBLE MARK OF ANY ACTIVITY OR IMPROVEMENT. WHEN SUCH FIN DING IS AVAILABLE ON RECORD, AS MADE OUT BY A COMPETENT AUT HORITY OF THE STATE GOVERNMENT, IT IS NOT POSSIBLE TO ACCEPT THE CONTENTIONS OF THE ASSESSEE ONLY ON THE GROUNDS OF CERTAIN TECHNIC AL POINTS. THOSE TECHNICAL POINTS HIGHLIGHTED BY THE ASSESSEE ARE THAT THE PAYMENTS TO THE CONTRACTORS WERE MADE THROUGH BANKI NG CHANNELS AFTER DEDUCTING TAX AT SOURCE; ALL THE PAY MENTS WERE SUPPORTED BY VOUCHERS AND THE REVENUE DID NOT DOUBT ANY OF SUCH PAYMENTS MADE TO THE CONTRACTORS. IF ALL THES E TECHNICAL ARGUMENTS OF THE ASSESSEE ARE TO BE ACCEPTED, THE C ORRESPONDING RESULT SHOULD BE REFLECTED IN THE PROPERTY, AS WELL . IN THE PRESENT CASE, THE SAID PROPERTY IS DUMB AND DEAF TOWARDS TH E ARGUMENT OF THE ASSESSEE THAT AN AMOUNT OF ` 1,75,82,000/- WAS SPENT ON IMPROVEMENT OF THE PROPERTY. IT IS THE CASE OF THE ASSESSEE THAT THE AMOUNT WAS SPENT FOR NOT CONSTRUCTING ANY BUILD INGS ON THE LAND IN QUESTION, BUT TOWARDS THE IMPROVEMENT OF LA ND AND PROPERTY ITSELF. THE ASSESSEE SOUGHT TO EXPLAIN THA T THE EXPENDITURE WAS INCURRED TOWARDS LAYING OF ROADS, R EPAIRS OF COMPOUND WALLS, EARTH FILLING ETC. BUT THE REPORT OF THE STATE I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 17 - : GOVERNMENT OFFICER DOES NOT CONTAIN ANY SUCH FINDIN GS. IT IS TO BE FURTHER SEEN THAT IF AT ALL, AS ARGUED BY THE ASSES SEE, IMPROVEMENTS WERE MADE ON THE LANDSCAPE OF THE PROP ERTY, THE SAME SHOULD HAVE BEEN MADE WITHIN A SHORT PERIOD OF THREE MONTHS. THIS IS BECAUSE, THE REPORT OF THE DISTRIC T REVENUE OFFICER WAS IN JANUARY, 2007 AND THE PROPERTY WAS S OLD IN MAY, 2007. EVEN IF, IT MIGHT NOT BE IMPOSSIBLE, IT IS H IGHLY IMPROBABLE THAT THE ASSESSEE COULD SPEND A WHOPPING AMOUNT OF ` 1,75,82,000/- WITHIN A PERIOD OF JUST THREE MONTHS TO IMPROVE THE LAND-PROPERTY BY EARTH FILLING, REPAIRS OF COMPOUND WALLS AND LAYING OF ROADS. WHEN THE REVENUE HAS ALLEGED A CA SE OF COLOURABLE DEVICE AGAINST THE ASSESSEE, THERE IS NO REASON TO TREAT THE TECHNICAL COMPLIANCE MADE BY THE ASSESSEE AS THE FINAL PIECE OF EVIDENCE. THE PAYMENTS TO THE CONTRACTORS MIGHT HAVE BEEN MADE THROUGH BANKS. SUCH BANK PAYMENTS DO NOT ESTABLISH THAT THE ASSESSEE HAD CARRIED OUT IMPROVEMENT IN TH E PROPERTY WITHIN THE SAID PERIOD OF THREE MONTHS. DEDUCTION OF TAX AT SOURCE IS AGAIN TECHNICAL IN NATURE, WHERE THE RATE OF DED UCTION IS FAR LESS THAN THE RATE OF TAX. THE VOUCHERS PREPARED BY THE ASSESSEE COMPANY ARE THE EVIDENCES CREATED BY THE ASSESSEE I TSELF. THOSE I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 18 - : EVIDENCES COULD BE ACCEPTED ONLY IF THE CIRCUMSTANC ES SURROUNDING THE CASE JUSTIFY SUCH PAYMENTS. THE IN CIDENCE OF EXPENDITURE CANNOT BE INFERRED ONLY FOR THE REASON THAT THE PAYMENTS WERE MADE AND SUPPORTED BY VOUCHERS, ESPEC IALLY, WHEN THERE ARE MATERIALS ON RECORD TO SHOW THAT NO IMPROVEMENT WAS TAKEN UP IN THE PROPERTY TILL JANUARY, 2007. W HEN ALL THESE CIRCUMSTANCES ARE CONSIDERED TOGETHER, WE COME TO A N IRREFUTABLE CONCLUSION THAT THE CLAIM OF THE ASSESSEE FOR DEDUC TING AN AMOUNT OF ` 1,75,82,000/- TOWARDS THE COST OF IMPROVEMENT OF TH E PROPERTY, IS NOT AT ALL ACCEPTABLE. WE AGREE WITH THE ASSESSING OFFICER THAT THIS IS ONLY A MAKE-BELIEVE STORY. TH E COMMISSIONER OF INCOME-TAX(APPEALS) HAS GONE WRONG IN ACCEPTING THE CONTENTION OF THE ASSESSEE ON THE BASIS OF CERTAIN TECHNICAL COMPLIANCES REPORTED BY THE ASSESSEE. HE HAS IGNOR ED THE VITAL MATERIALS AVAILABLE ON RECORD AGAINST THE ASSESSEE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOM E- TAX(APPEALS) ON THIS POINT. THE DISALLOWANCE OF ` 1,75,82,000/- MADE BY THE ASSESSING AUTHORITY IS RESTORED. THIS ISSUE IS DECIDED IN FAVOUR OF THE REVENUE. I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 19 - : 10. NEXT ISSUE RELATES TO THE DEDUCTIBILITY OF ` 7.00 CRORES CLAIMED BY THE ASSESSEE AS PAYMENT MADE TO M/S. OPG METALS PRIVATE LIMITED TO PERFECT THE TITLE OF THE PROPERT Y AND TO SETTLE THE DISPUTE. THE ASSESSEE HAD PURCHASED THE PROPERTY I N DECEMBER, 2005 FOR A CONSIDERATION OF ` 13.80 CRORES AND SOLD THE SAME WITHIN A SHORT SPAN OF LESS THAN TWO YEARS, IN MAY, 2007 FOR A CONSIDERATION OF ` 37.99 CRORES. EARLIER, THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH M/S.OPG METALS PRIVA TE LIMITED. THE AGREEMENT WAS EXECUTED ON 12 TH APRIL, 2006. AS PER THE SAID AGREEMENT, M/S.OPG METALS PRIVATE LIMITED HAD AN OB LIGATION TO MAKE PERIODICAL PAYMENTS TO THE ASSESSEE AGAINST TH E CONSIDERATION. THE AGREEMENT FURTHER STIPULATES TH AT IF M/S.OPG METALS PRIVATE LIMITED FAILS IN FULFILLING THE OBLI GATION CAST ON IT, THE ASSESSEE COULD TERMINATE THE AGREEMENT WITHOUT A NO TICE AND ADVANCE PAID BY M/S. OPG METALS PRIVATE LIMITED COU LD BE FORFEITED. WHEN M/S. OPG METALS PRIVATE LIMITED FA ILED IN PAYING THE AGREED INSTALMENTS, THE ASSESSEE INVOKED THE CO NDITIONS STATED IN CLAUSE-6 OF THE AGREEMENT AND SOUGHT TO T ERMINATE THE AGREEMENT. BUT THE OTHER PARTY, M/S. OPG METALS PR IVATE LIMITED INVOKED CLAUSE-12 OF THE AGREEMENT AND INSISTED THA T THE MATTER I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 20 - : BE REFERRED TO ARBITRATION AND CONCILIATION PROCEED INGS. THE ASSESSEE AGREED TO THIS PROPOSITION. THE MATTER WA S REFERRED TO JUSTICE MARUTHAMUTHU (RETIRED), WHO WAS APPOINTED A S CONCILIATOR. FINALLY AS A CONCLUSION OF THE CONCIL IATION PROCEEDINGS, AN AGREEMENT WAS EXECUTED ON 29-11-200 6, FOR SETTLING THE DISPUTE BETWEEN THE ASSESSEE AND M/S. OPG METALS PRIVATE LIMITED. AS PER THE SAID AGREEMENT, THE AS SESSEE HAD TO PAY ` 7.00 CRORES TO M/S.OPG METALS PRIVATE LIMITED IN SE TTLEMENT OF ALL CLAIMS AGAINST THE PROPERTY. IT IS IN THE L IGHT OF THE ABOVE AGREEMENT THAT THE ASSESSEE HAS CLAIMED A DEDUCTION OF ` 7.00 CRORES IN COMPUTING SHORT TERM CAPITAL GAINS ON THE GROUND THAT THE SAID AMOUNT WAS PAID TO M/S.OPG METALS PRIVATE LIMITED FOR PERFECTING THE TITLE OF THE PROPERTY. 11. THIS CLAIM OF DEDUCTION OF ` 7.00 CRORES WAS DISALLOWED BY THE ASSESSING AUTHORITY STATING THAT IT WAS ONLY A PURPOSEFUL ADJUSTMENT MADE BY THE ASSESSEE TO REDUCE THE INCID ENCE OF TAX ON SHORT TERM CAPITAL GAINS. AS PER THE SALE AGREE MENT DATED 12 TH APRIL, 2006, THE SALE CONSIDERATION WAS ` 26.69 CRORES. ` 10.00 LAKHS WAS PAID AS ADVANCE TO THE ASSESSEE. AS PER THE I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 21 - : AGREEMENT, M/S. OPG METALS PRIVATE LIMITED HAD TO P AY ` 5.00 CRORES AS PART OF CONSIDERATION ON OR BEFORE 30-06- 2006. M/S. OPG METALS PRIVATE LIMITED HAS EXPRESSED ITS INABIL ITY TO PAY THE SAID AMOUNT AND THIS WAS COMMUNICATED ON 03-06-2006 . AT THIS POINT OF TIME, THE ASSESSEE INVOKED CLAUSE-6 OF THE AGREEMENT DATED 12 TH APRIL, 2006 AND SOUGHT TO CANCEL THE AGREEMENT ON 03-07-2006. THEREAFTER, M/S.OPG METALS PRIVATE LIM ITED INVOKED ARBITRATION CLAUSE ON 05-07-2006. IMMEDIATELY ON 0 7-07-2006, THE ASSESSEE AGREED TO ARBITRATION AND CONCILIATION PROCEEDINGS. MR. JUSTICE M. MARUTHAMUTHU WAS APPOINTED AS CONCIL IATOR, ON 28-07-2006. CONCILIATORY PROCEEDINGS WERE INITIATE D ON 10-08-2006. THE PARTIES CAME TO AN AGREEMENT ON 29 -11-2006, BY WHICH THE ASSESSEE HAD TO PAY ` 7.00 CRORES TO M/S. OPG METALS PRIVATE LIMITED IN VIEW OF RELINQUISHING ITS RIGHTS AND CLAIMS OVER THE PROPERTY. THE ASSESSING OFFICER REFERRED TO THE SPEED IN WHICH ALL THESE EVENTS HAPPENED WITHIN A SPAN OF 7 MONTHS. FINALLY, THE ASSESSEE SHOULDERED ITSELF A LIABILITY OF ` 7.00 CRORES. THE ASSESSING OFFICER HAS HELD THAT AS PER THE AGRE EMENT, THE ASSESSEE HAD NO OBLIGATION TO MAKE ANY SUCH PAYMENT TO M/S. OPG METALS PRIVATE LIMITED. HE ALSO POINTED OUT TH AT THE I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 22 - : ASSESSEE COULD HAVE EVEN FORFEITED THE ADVANCE AMOU NT OF ` 10.00 LAKHS. WHEN THE ASSESSEE WAS NOT AT ALL UNDE R ANY LEGAL OBLIGATION TO PAY ANY COMPENSATION TO M/S. OPG META LS PRIVATE LIMITED, THE PAYMENT OF ` 7.00 CRORES WAS STATED TO BE MADE BY THE ASSESSEE ONLY FOR THE PURPOSE OF REDUCING THE T AX INCIDENCE. 12. ON THE OTHER HAND, THE CRUCIAL CONTENTIONS OF T HE ASSESSEE ARE THAT THE SETTLEMENT AGREEMENT UNDER CONCILIATIO N PROCEEDINGS IS AKIN TO ARBITRATION AWARD U/S.30 OF ARBITRATION AND CONCILIATION ACT AND, THEREFORE, THE AGREEMENT WAS BINDING ON TH E ASSESSEE. THE ASSESSEE EXPLAINED THAT THE AWARD IS EXECUTABLE AS A DECREE OF CIVIL COURT AND THEREFORE, THE ASSESSEE WAS UNDE R AN OBLIGATION TO PAY ` 7.00 CRORES TO M/S.OPG METALS PRIVATE LIMITED. IT IS ALSO THE CASE OF THE ASSESSEE THAT THE REVENUE NEVER QUE STIONED THE GENUINENESS OF CONCILIATORY PROCEEDINGS. 13. ON GOING THROUGH THE CHRONOLOGY OF EVENTS AND S URROUNDING CIRCUMSTANCES OF THE CASE, WE FIND THAT THE COMMISS IONER OF INCOME-TAX(APPEALS) HAS ERRED IN ACCEPTING THE CONT ENTION OF THE ASSESSEE ONLY ON THE BASIS OF CONCILIATION PROCEEDI NGS SETTLED I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 23 - : BEFORE RETIRED JUSTICE MARUTHAMUTHU. IT IS TRUE TH AT A SETTLEMENT ARRIVED AT UNDER CONCILIATION PROCEEDINGS IS SIMILA R TO AN ARBITRATION AWARD U/S.30 OF ARBITRATION AND CONCILI ATION ACT. IT IS ALSO TRUE THAT ARBITRATION AWARD IS EXECUTABLE AS A DECREE OF THE COURT. AS PER THE TERMS OF SALE AGREEMENT, THE AS SESSEE WAS IN A POSITION TO TERMINATE THE SALE AGREEMENT. M/S. O PG METALS PRIVATE LIMITED FAILED TO MAKE THE PAYMENT IN INSTA LLMENT AS ENVISAGED IN THE AGREEMENT. THEREFORE, LAW PERMITS THE ASSESSEE TO WITHDRAW FROM THE AGREEMENT. IN SPITE OF SUCH A BETTER LEGAL POSITION IN FAVOUR OF THE ASSESSEE, TH E ASSESSEE HAS JUMPED INTO CONCILIATION PROCEEDINGS IMMEDIATELY AF TER THE NOTICE FROM M/S. OPG METALS PRIVATE LIMITED. THE SEQUENCE OF THESE EVENTS REASONABLY TAKE US TO A POSSIBLE CONCLUSION THAT THE CONCILIATION PROCEEDINGS WERE THE RESULT OF A PREME DITATED PLAN. THE AMOUNT OF ` 7.00 CRORES PAID THROUGH BANK IS NOT THE CRUCIAL TEST IN THE PRESENT CASE. THE CONCILIATION AGREEME NT WOULD BE BINDING ON THE ASSESSEE, BUT THAT IS NOT THE QUESTI ON EXACTLY HERE. THE QUESTION IS, WHY THE ASSESSEE OPTED FOR CONCILI ATORY PROCEEDINGS. THAT QUESTION WAS NEVER ANSWERED BY TH E ASSESSEE. THAT IS THE PRIMARY ISSUE TO BE INVESTIG ATED. THIS WAS I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 24 - : DONE BY THE ASSESSING AUTHORITY. THE COMMISSIONER OF INCOME- TAX(APPEALS), ON THE OTHER HAND, IGNORED THIS CRUCI AL ASPECT AND RELIED ON CONCILIATION PROCEEDINGS. THE COMMISSION ER OF INCOME- TAX(APPEALS), WHILE CONCENTRATING ON CONCILIATORY A GREEMENT, HAS NOT EXAMINED WHETHER THE CONCILIATORY PROCEEDINGS W ERE NOT AT ALL NECESSARY OR NOT. 14. EVEN IF, ALL THESE THINGS ARE TAKEN AS A PRUDEN T BUSINESS DECISION ADOPTED BY THE ASSESSEE, STILL THE ISSUE C ANNOT BE DECIDED IN FAVOUR OF THE ASSESSEE ONLY ON THE GROUN D OF CONCILIATION PROCEEDINGS CONCLUDED IN THE PRESENCE OF RETIRED JUSTICE. THE SALE AGREEMENT AND THEREAFTER, CONCILI ATION AGREEMENT ARE ALL MATTERS OF PRIVATE ARRANGEMENTS B ETWEEN THE ASSESSEE AND M/S. OPG METALS PRIVATE LIMITED. UNLE SS AND UNTIL THESE AGREEMENTS AND CONSEQUENTIAL ACTIONS OF THE P ARTIES INSPIRE SOME AMOUNT OF CONFIDENCE ACCEPTABLE TO AN ORDINARY MAN OF REASONABLE PRUDENCE, IT IS NOT POSSIBLE TO ACCEPT T HE CONTENTION OF THE ASSESSEE THAT THE AMOUNT OF ` 7.00 CROES WAS PAID FOR PERFECTING THE TITLE OF THE PROPERTY. I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 25 - : 15. WE AGREE WITH THE ASSESSING OFFICER THAT THIS I S A PLANNED COLOURABLE DEVICE ATTEMPTED BY THE ASSESSEE TO MIN IMIZE THE INCIDENCE OF TAX ARISING OUT OF THE SALE OF THE PRO PERTY. THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS OVERLOOKED THE PITH AND SUBSTANCE OF THE CASE AND RELIED ONLY ON TECHNI CAL ASPECTS LIKE PAYMENTS THROUGH BANK, AGREEMENT OF SALE, CONC ILIATORY AGREEMENT ETC. IT IS NOT POSSIBLE TO ACCEPT THE AR GUMENT OF THE ASSESSEE THAT ` 7.00 CRORES WAS PAID FOR PERFECTING THE TITLE OF TH E PROPERTY. THEREFORE, THE DISALLOWANCE OF ` 7.00 CRORES MADE BY THE ASSESSING AUTHORITY IS RESTORED AND THE ORDER O F THE COMMISSIONER OF INCOME-TAX(APPEALS) IS SET ASIDE. THIS ISSUE IS DECIDED IN FAVOUR OF THE REVENUE. 16. THE NEXT GROUND RAISED BY THE REVENUE IN ITS AP PEAL IS WITH REGARD TO EXPENDITURE OF ` 1.28 CRORES ON OFFICE RENOVATION. THE COMMISSIONER OF INCOME-TAX(APPEALS) IN HIS ORDER HA S CLEARLY STATED THAT THE AMOUNT PAID TO M/S.ARIHANTH STEEL A S ADVANCE TOWARDS THE PURCHASE OF IRON AND STEEL FOR RENOVATI ON OF OFFICE PREMISES DURING THE PERIOD BETWEEN 12-12-2007 AND 1 6-02-2008 HAS BEEN RECEIVED BACK BY ASSESSEE DURING THE PERIO D 26-05- I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 26 - : 2008 TO 24-12-2008. BOTH THE PAYMENTS AND RE-PAYME NTS HAVE BEEN MADE THROUGH BANK ACCOUNT OF THE ASSESSEE MAIN TAINED WITH INDIAN OVERSEAS BANK. THUS, NO AMOUNT WAS SPE NT ON RENOVATION OF THE BUILDING. THEREFORE, THERE IS N O QUESTION OF ALLOWING THE EXPENDITURE OF ` 1.28 CRORES EITHER AS REVENUE OR CAPITAL. THEREFORE, THIS GROUND OF APPEAL OF THE R EVENUE IS DISMISSED. 17. THE ASSESSEE IN ITS CROSS-OBJECTIONS HAS ASSAIL ED THE FINDINGS OF COMMISSIONER OF INCOME-TAX(APPEALS) WIT H REGARD TO DIS-ALLOWANCE U/S.14A. THE ASSESSING OFFICER HAS M ADE DIS- ALLOWANCE OF ` 3,42,556/- BY APPLYING RULE 8D(II)(III). THE ASSESSEE DURING THE YEAR HAS RECEIVED DIVIDEND INCO ME OF ` 11,618/-. THE ASSESSEE HAS AN INVESTMENT PORTFOLIO IN SHARES AND DEBENDITURES TO THE TUNE OF ` 1,26,88,410/-. THE STAND OF THE ASSESSEE IS THAT INVESTMENTS IN SHARES AND DEBENTUR ES HAVE BEEN MADE FROM OWN FUND AND NOT FROM BORROWED FUNDS . HOWEVER, NOTHING HAS BEEN PLACED ON RECORD TO SHOW THAT THE INVESTMENTS HAVE BEEN MADE FROM ASSESSEES OWN FUND S ALONE. THE ASSESSEE HAS NOT MADE DIS-ALLOWNACE U/S.14A ON ITS OWN IN I.T.A. NO. 91/MDS/12 & C.O. NO. 25/MDS/12 :- 27 - : EARNING DIVIDEND INCOME. WE DO NOT FIND ANY INFIRM ITY IN THE ORDER OF COMMISSIONER OF INCOME-TAX(APPEALS) IN CONFIRMIN G DIS-ALLOWANCE U/S.14A. THE CROSS OBJECTIONS OF THE ASSESSEE ARE ACCORDINGLY DISMISSED. 18. IN RESULT, APPEAL OF THE REVENUE IS PARTLY ALLO WED AND THE CROSS-OBJECTIONS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 30 TH OCTOBER, 2014 AT CHENNAI. SD/- SD/- ( . . . ) ( ! ) (DR. O.K. NARAYANAN) (VIKAS AWAS THY) / VICE PRESIDENT / JUDICIAL MEMBER /CHENNAI, /DATED: 30 TH OCTOBER, 2014 TNMM !'#$ %&$ /COPY TO: 1. %'#() /APPELLANT 2. !*() /RESPONDENT 3. + (%'#) /CIT(A) 4. + /CIT 5. $./' !01 /DR 6. /23 4# /GF