DCIT, New Delhi V. M/s. Ahuwalia Contacts (India) Ltd., New Delhi

ITA 975/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74370 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 18-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A: NEW DELHI BEFORE SHRI G.D. AGARWAL, VICE PRESIDENT AND SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 975/DEL/2013 ASSESSMENT YEAR: 2009-10 DCIT, CIRCLE 8(1), ROOM NO.163, C.R. BUILDING, NEW DELHI. VS. AHLUWALIA CONTACTS (INDIA) LTD., B-4/205, SAFDURJUNG ENCLAVE, NEW DELHI. PAN NO. AABCA4340K (APPELLANT) (RESPONDENT) & ITA NO. 13/DEL/2013 ASSESSMENT YEAR: 2009-10 AHLUWALIA CONTACTS (INDIA) LTD., B-4/205, SAFDURJUNG ENCLAVE, NEW DELHI. PAN NO. AABCA4340K VS. DCIT, CIRCLE 8(1), ROOM NO.163, C.R. BUILDING, NEW DELHI. (APPELLANT) (RESPONDENT) DATE OF HEARING: 18.03.2014 DATE OF ORDER: 21.03 .2014 APPELLANT BY: SH. Y. KAKKAR, SR. DR ASSESSEE/ RESPONDENT BY: NONE O R D E R PER BHAVNESH SAINI, J.M. BOTH THE CROSS APPEALS ARE DIRECTED AGAINST THE OR DER OF LD. CIT(APPEALS)-XI, NEW DELHI DATED 27/11/2012 FOR A.Y . 2009-10. 2. THE REVENUE IN THEIR APPEAL CHALLENGE THE ORDER OF LD. CIT(A) IN HOLDING THAT THE DISALLOWANCE OF INTEREST OF RS. 12 ,77,835/- UNDER THE RULE 8D ITA NOS. 975 & 13/D/2013 AHLUWALIA CONTACTS (INDI A) P. LTD. 2 READ WITH SECTION 14A OF THE ACT IS NOT WARRANTED. THE ASSESSEE IN ITS APPEAL CHALLENGE THE PART OF THE ADDITION SUSTAINED BY LD. CIT(A) IN A SUM OF RS. 1,43,479/- ON THE SAME ISSUE. 3. WE HAVE HEARD LD. DR AND PERUSED THE FINDINGS OF AUTHORITIES BELOW. HOWEVER, NONE APPEARED ON BEHALF OF THE ASS ESSEE DESPITE NOTIFYING THE DATE OF HEARING THROUGH REGISTERED POST. THE A PPEALS ARE, THEREFORE, HEARD IN THE ABSENCE OF THE ASSESSEE. 4. SINCE THE ISSUE IS COMMON IN BOTH THE APPEALS, T HEREFORE, BOTH CROSS APPEALS ARE DISPOSED OF THROUGH THIS COMMON C ONSOLIDATED ORDER. 5. BRIEFLY THE FACTS OF THE CASE ARE THAT THE AO CO NSIDERED THE ISSUE OF DISALLOWANCE U/S 14A OF THE INCOME TAX ACT AT THE A SSESSMENT STAGE. IT WAS SEEN FROM AUDITED ACCOUNTS THAT DIVIDEND INCOME OF RS. 75,000/- AND RS. 41,40,888/- WAS EARNED WHICH HAVE BEEN CLAIMED AS E XEMPT FROM TAX IN THE COMPUTATION. HOWEVER, NO EXPENDITURE INCURRED IN R ELATION TO EXEMPT INCOME WAS DEDUCTED. THE ASSESSEE WAS DIRECTED AS TO WHY THE EXPENSES INCURRED IN EARNING SUCH EXEMPT INCOME SHOULD NOT BE DISALLOWED AS PER PROVISIONS OF SECTION 14A READ WITH RULE 8D. THE ASSESSEE DID NO T FURNISH ANY EXPLANATION IN THIS REGARD BUT CONFIRM EARNING OF THE DIVIDEND OF SUCH AMOUNT. IT IS ALSO STATED THAT INVESTMENTS WERE HOWEVER, MADE IN EARLI ER YEARS. THE AO EXAMINED THE APPLICABILITY OF PROVISIONS OF SECTION 14A IN THE MATTER AND FOUND THAT ASSESSEE COMPANY HAS TAKEN LOANS FROM THE BANK S AND OTHERS TO THE EXTENT OF RS. 76,23,53,929/-. THE COMPANY HAS NOT BEEN ABLE TO DEMONSTRATE ITA NOS. 975 & 13/D/2013 AHLUWALIA CONTACTS (INDI A) P. LTD. 3 BY WAY OF ANY EVIDENCE THAT NONE OF THE LOAN FUNDS HAVE BEEN USED FOR MAKING INVESTMENTS. THE AO OBSERVED THAT CARRYING COST OF INVESTMENTS IN TERMS OF INTEREST PAID ON LOAN FUNDS TO THE EXTENT OF INVEST MENT CANNOT BE DENIED. HENCE, THE CONTENTION OF THE ASSESSEE THAT NO EXPEN DITURE HAS BEEN INCURRED IN RELATION TO THE INVESTMENTS WAS NOT FOUND ENABLE. THE AO, THEREFORE, DISALLOWED RS. 14,21,311/- U/S 14A READ WITH RULE 8 D OF THE I.T. ACT. THE SAID DISALLOWANCE WAS CHALLENGED BEFORE LD. CIT(A) AND W RITTEN SUBMISSIONS OF THE ASSESSEE IS QUOTED IN THE APPELLATE ORDER IN WHICH THE ASSESSEE EXPLAINED THAT INVESTMENTS IN SHARES WAS MADE IN EARLIER YEARS OUT OF AVAILABLE SURPLUS PROFIT AND RESERVES OF THE RESPECTIVE YEARS. IT IS MISCON CEIVED THAT THE INVESTMENTS IN SHARES HAVE BEEN MADE OUT OF INTEREST BEARING SECUR ED LOANS. NO DISALLOWANCES HAVE BEEN MADE IN EARLIER YEARS. THE INVESTMENT IN THE SHARES HAVE BEEN MADE OUT OF SURPLUS PROFIT AND RESERVES, THEREFORE, ADDITION IS UNJUSTIFIED. IT WAS EXPLAINED BEFORE AO THEN NO BO RROWED FUNDS HAVE BEEN EVER USED IN INVESTMENTS IN SHARES DURING THE YEAR AS WE LL AS IN EARLIER YEARS AS REFLECTED IN THE AUDITED ACCOUNTS. THE AO HAS NOT APPRECIATED THE FACTS THAT ASSESSEE HAS FIXED DEPOSITED OF RS. 31.60 CRORES WI TH THE BANKS AND RESERVE AND SURPLUS PROFITS OF RS. 164.58 CRORES AS ON 31/0 3/2009 AND EARNED INTEREST INCOME OF RS. 4.66 CRORES ON FIXED DEPOSITS. THE D ISALLOWANCES WAS NOT JUSTIFIED IN VIEW OF THE FACT AS NO EXPENDITURE DIR ECTLY, INDIRECTLY IS INCURRED OR IS EVEN REMOTTEDLY RELATED TO INVESTMENTS IN SHARE NOR HAS BEEN ACTUALLY INCURRED IN EARNING THE DIVIDEND INCOME CLAIMED EXEMPT. IT WAS ALSO EXPLAINED THAT THE ITA NOS. 975 & 13/D/2013 AHLUWALIA CONTACTS (INDI A) P. LTD. 4 SECURED LOANS WERE NIL AS ON 31/03/1999 WHICH CAN B E SEEN FROM THE AUDITED ACCOUNTS THE DETAILS OF THE SAME WERE ALSO FILED AN D DECISION OF DELHI HIGH COURT IN THE CASE OF MAX OPP. INVESTMENT LTD. VS. C IT, 347 ITR 272 WAS RELIED UPON ON THE PROPOSITION THAT NO DISALLOWANCE COULD BE MADE IN THE CASE OF THE ASSESSEE. 6. THE LD.CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND FINDING OF THE AO IN THE LIGHT OF PROVISIONS OF SEC TION 14A OF I.T. ACT READ WITH RULE 8D AND DECISION CITED BEFORE HIM, RESTRICTED T HE DISALLOWANCE OF RS. 1,43,479/-. BOTH PARTIES ARE, THEREFORE, IN APPEAL AS ABOVE. THE FINDINGS OF LD. CIT(A) IN THE IMPUGNED ORDER ARE REPRODUCED AS UNDE R: AFTER CONSIDERING ALL DOCUMENTS ON RECORD I SHALL NOW TAKE UP THE VARIOUS GROUNDS OF APPEAL. ALL THE GRO UNDS OF APPEAL ARE IN RESPECT OF ADDITION OF RS. 14,21,311/ - MADE U/S 14A. DURING THE YEAR UNDER CONSIDERATION THE APPELLANT HAD EARNED DIVIDEND INCOME OF RS. 75,000/- AND RS. 41,4 0,888/-. THE AO APPLIED SEC. 14A READ WITH RULE 8D AND DETER MINED A SUM OF RS. 14,21,311/- TO BE DISALLOWED U/S 14A. T HE APPELLANT HOWEVER CLAIMED THAT THERE SHOULD BE NO DISALLOWANCE. I SHALL NOW DISCUSS THE CASE ON MERIT S. I HAVE PERUSED THE ORDER OF THE HONBLE BOMBAY HIG H COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. V S. DCIT & 328 ITR 81 (2010). THE COURT OBSERVED AS UNDER O N 14A: THE FOLLOWING PRINCIPLES WOULD EMERGE FROM SECTION 14A AND THE DECISION IN WALFORT: A) THE MANDATE OF SEC. 14A IS TO PREVENT CLAIMS FOR DEDUCTION OF EXPENDITURE IN RELATION TO INCOME ITA NOS. 975 & 13/D/2013 AHLUWALIA CONTACTS (INDI A) P. LTD. 5 WHICH DOES NOT FORM PART OF THE TOTAL INCOME OF THE ASSESSEE; B) SECTION 14A(1) IS ENACTED TO ENSURE THAT ONLY EXPENSES INCURRED IN RESPECT OF EARNING TAXABLE INCOME ARE ALLOWED; C) THE PRINCIPLE OF APPORTIONMENT OF EXPENSES IS WIDENED BY SEC. 14A TO INCLUDE EVEN THE APPORTIONMENT OF EXPENDITURE BETWEEN TAXABLE AND NON-TAXABLE INCOME OF AN INDIVISIBLE BUSINESS; D) THE BASIC PRINCIPLE OF TAXATION IS TO TAX NET INCOM E. THIS PRINCIPLE APPLIES EVEN FOR THE PURPOSES OF SEC . 14A AND EXPENSES TOWARDS NON-TAXABLE INCOME MUST BE EXCLUDED; E) ONCE A PROXIMATE CAUSE FOR DISALLOWANCE IS ESTABLISHED WHICH IS THE RELATIONSHIP OF THE EXPENDITURE WITH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME A DISALLOWANCE HAS TO BE EFFECTED. ALL EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE PROVISIONS OF THE ACT HAS TO BE DISALLOWE D U/S 14A. INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME IS BROADLY ADVERTED TO AS EXEMPT INCOME AS AN ABBREVIATED APPELLATION. I HAVE ALSO PERUSED THE ORDER OF THE HONBLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD. VS . CIT (DELHI HC) (2011) 5 TAXCORP (DT) 49842 (DELHI). THE RELEVANT PORTIONS OF THE ORDER ARE AS UNDER: 30. AS WE HAVE ALREADY NOTICED, SUB-SECTION (2) OF SEC. 14A OF THE SAID ACT REFERS TO THE METHOD OF DETERMINATION OF THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME. THE EXPRESSION USED IS SUCH METHOD AS MAY BE PRESCRIBED. WE HAVE ALREADY MENTIONED ABOVE THAT BY VIRTUE OF NOTIFICATION NO. 45/2008 DATED 24/03/2008, THE CENTRAL BOARD OF DIRECT TAXES INTRODUCED RULE 8D IN THE SAID RULES. THE SAID RULE 8D ALSO MAKES IT CLEAR THAT WHERE THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE OF A PREVIOUS YEAR, IS NOT SATISFIED W ITH (A) THE CORRECTNESS OF THE CLAIM OF EXPENDITURE MAD E 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 ITA NOS. 975 & 13/D/2013 AHLUWALIA CONTACTS (INDI A) P. LTD. 6 INCOME IN ACCORDANCE WITH THE PROVISIONS OF SUB- RULE (2) OF RULE 8D. WE MAY OBSERVE THAT RULE 8D(1) PLACES THE PROVISIONS OF SEC. 14A(2) AND (3) IN THE CORRECT PERSPECTIVE. AS WE HAVE ALREADY SEEN, WHILE DISCUSSING THE PROVISIONS OF SUB-SECTIO NS (2) AND (3) OF SEC. 14A, THE CONDITION PRECEDENT FO R THE AO TO HIMSELF DETERMINE THE AMOUNT OF EXPENDITURE IS THAT HE MUST RECORD HIS DISSATISFACTION WITH THE CORRECTNESS OF THE CLAIM O F EXPENDITURE MADE BY THE ASSESSEE OR WITH THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED. IT IS ONLY WHEN THIS CONDITION PRECEDENT IS SATISFIED THAT THE AO I S REQUIRED TO DETERMINE THE AMOUNT OF EXPENDITURE IN RELATION TO INCOME NOT INCLUDABLE IN TOTAL INCOME I N THE MANNER INDICATED IN SUB-RULE (2) OF RULE 8D OF THE SAID RULES. 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 AO REJECTS THE CLAIM OF THE ASSESSEE IN THIS REGARD . IF ONE EXAMINES SUB-RULE (2) OF RULE 8D, WE FIND THAT THE METHOD FOR DETERMINING THE EXPENDITURE 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 BY WAY OF INTEREST WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT. THE FORMULA ESSENTIALLY APPORTIONS THE AMOUNT OF EXPENDITURE BY WAY OF INTEREST [OTHER THAN THE AMOUNT OF INTEREST INCLUDED IN CLAUSE (I)] INCURRED DURING THE PREVIOUS YEAR IN THE RATIO OF T HE AVERAGE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME , TO THE AVERAGE OF THE TOTAL ASSETS OF THE ASSESSEE. THE THIRD COMPONENT IS AN ARTIFICIAL FIGURE ONE HALF PERCENT OF THE AVERAGE VALUE OF THE INVESTMENT , INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME. THUS WHENEVER THE ISSUE OF 14A ARISES THE AO SHOULD ASCERTAIN THE CORRECTNESS OF THE CLAIM OF TH E APPELLANT IN RESPECT OF EXPENDITURE INCURRED OR NOT INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. ITA NOS. 975 & 13/D/2013 AHLUWALIA CONTACTS (INDI A) P. LTD. 7 IN CASE THE AO IS SATISFIED WITH THE CLAIM OF THE APPELLANT, THE AO SHOULD ACCEPT THE CLAIM OF THE APPELLANT SO FAR AS THE QUANTUM OF DISALLOWANCE IS CONCERNED. IN CASE THE AO AFTER GIVING THE APPELLA NT AN OPPORTUNITY OF BEING HEARD, IS NOT SATISFIED WITH T HE CORRECTNESS OF THE CLAIM OF THE APPELLANT, HE SHOUL D REJECT THE CLAIM AFTER GIVING REASONS. THE AO IS T O THEN DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. THE LANGUAGE OF SUB SECTION 14A(1) IS ABUNDANTLY CLEAR THAT RELATION HAS TO BE SEEN BETWE EN THE EXEMPT INCOME AND EXPENDITURE INCURRED IN RELAT ION TO IT. THE AO WHILE CLAIMING THE DISALLOWANCE U/S 14A READ WITH RULE 8D HAS CONSIDERED THE FIGURE OF RS. 9,69,23,571/- WHICH IS THE INTEREST ON TERM LOANS. FOR THE SAKE OF CLARITY I AM QUOTING RULE 8D2(I). THE EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME SHALL BE THE AGGREGATE OF FOLLOWING AMOUNTS, NAMELY: I) THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. II) IN A CASE WHERE THE ASSESSEE HAS INCURRED EXPENDITURE BY WAY OF INTEREST DURING THE PREVIOUS YEAR WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT, AN AMOUNT COMPUTED IN ACCORDANCE WITH THE FOLLOWING FORMULA, NAMELY: AXB/C WHERE A = AMOUNT OF EXPENDITURE BY WAY OF INTEREST OTHER THAN THE AMOUNT OF INTEREST INCLUDED IN CLAUSE (I) INCURRED DURING THE PREVIOUS YEAR; WHERE B = THE AVERAGE OF VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS ITA NOS. 975 & 13/D/2013 AHLUWALIA CONTACTS (INDI A) P. LTD. 8 APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. C = THE AVERAGE OF TOTAL ASSETS AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. III) AN AMOUNT EQUAL TO ONE HALF PER CENT OF THE AVERAGE OF THE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. RULE 8D2(I) IS NIL. AS PER RULE 8D2(II) OF THE INTEREST EXPENSES ARE NO T DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR R ECEIPT THE DISALLOWANCE IS TO BE COMPUTED BY A SPECIFIED FORMULA. THE APPELLANT HAS STATED THAT THE TERM LO AN ON WHICH INTEREST WAS PAID, WAS TAKEN AFTER FY 31/03/9 9. THE SHARES WERE ACQUIRED IN FY 98-99. THE TERM LOA N WAS NIL AS ON 31/03/99. THIS BEING THE CASE THE INTEREST PAID ON THE TERM LOAN IS CLEARLY NOT RELAT ED TO THE EXEMPT INCOME AND IS ONLY ATTRIBUTABLE TO BUSIN ESS INCOME. IN VIEW THEREFORE, THE AMOUNT AS PER RULE 8D2(II) IS NIL. HOWEVER, THE AMOUNT AS PER RULE 8D2(III) IS CORRECTLY CALCULATED AT RS. 1,43,479/-. THE DISALLOWANCE UNDER RULE 14A R.W.R. 8D IS THEREFORE RS. 1,43,479/-. (THE AGGREGATE OF 8D2(I),(II & III) IS RS. 1,43,479/-). THIS AMOUNT IS THEREFORE CONFIRMED AN D THE BALANCE IS DELETED. THE GROUND OF APPEAL IS PA RTLY ALLOWED. 7. LD. DR RELIED UPON THE ORDER OF THE AO AND ALSO REFERRED TO THE DETAILS MENTIONED IN THE ASSESSMENT ORDER AS WELL A S ORDER OF THE LD. CIT(A) AND ITA NOS. 975 & 13/D/2013 AHLUWALIA CONTACTS (INDI A) P. LTD. 9 ALSO SUBMITTED THAT MERE FACT THAT THOSE SHARES WER E OLD ONE AND NOT ACQUIRED RECENTLY WAS A IMMATERIAL AND RELIED UPON THE DECIS ION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF DHANUKA & SONS VS. CIT, 339 IT R 319 [2011] (CAL.). 7.1 LD. DR ALSO RELIED UPON THE DECISION OF KERALA HIGH COURT IN THE CASE OF CATHOLIC SYRIAN BANK LTD. VS. CIT, 330 ITR 556 [2011] (KER.) AND ALSO DECISION OF DELHI HIGH COURT IN THE CASE OF MAX OPP . INVESTMENTS LTD. VS. CIT (SUPRA) AS IS COATED IN THE IMPUGNED ORDER. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF LD. DR AND PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND DO NOT FIND A NY JUSTIFICATION TO INTERFERE WITH THE ORDER OF LD. CIT(A) IN RESTRICTING PART DISALLO WANCE OF THIS ISSUE. THE LD. CIT(A) EXAMINED THE FACTS OF THE CASE IN THE LIGHT OF SECTION 14A OF I.T. ACT READ WITH RULE 8D. THE LD. CIT(A) ALSO EXAMINED THE FAC TS OF THE CASE IN THE LIGHT OF THE DECISION OF BOMBAY HIGH COURT AND DELHI HIGH CO URT ABOVE. THE LD. CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE THAT TERM L OAN ON WHICH INTEREST WAS PAID, WAS TAKEN AFTER F.Y. 31/03/1999. THE SHARES WERE ACQUIRED IN F.Y. 1998- 99, THUS, THE TERM LOAN WAS NIL AS ON 31/03/1999. IT WAS, THEREFORE, FOUND THAT THE INTEREST PAID ON THE TERM LOAN IS CLEARLY NOT R ELATED TO THE EXEMPT INCOME. THEREFORE, THE AMOUNT AS PER RULE 8D(2) WOULD BE NI L. THESE FINDINGS OF FACT RECORDED BY LD. CIT(A) HAVE NOT BEEN CHALLENGED AND REBUTTED THROUGH ANY MATERIAL ON RECORD. THEREFORE, LD. CIT(A) WAS JUST IFIED IN DELETING THE ADDITION OF RS. 12,77,835/-. THE DECISIONS CITED BY LD. DR THU S, WOULD NOT SUPPORT THE CASE OF THE REVENUE IN ANY MANNER. THE DEPARTMENTAL APP EAL THUS, HAS NO MERIT ITA NOS. 975 & 13/D/2013 AHLUWALIA CONTACTS (INDI A) P. LTD. 10 AND IS, ACCORDINGLY, DISMISSED. SIMILARLY, ASSESSE E HAS NOT BEEN ABLE TO DEMONSTRATE BEFORE US AS TO HOW THE DISALLOWANCE CO NFIRMED BY LD. CIT(A) IN A SUM OF RS. 1,43,479/- WAS NOT SUSTAINABLE. 9. THE AO HAS SPECIFICALLY RECORDED IN THE ASSESSME NT ORDER THAT ASSESSEE DID NOT FURNISH ANY EXPLANATION IN THIS RE GARD. THEREFORE, IN THE ABSENCE OF ANY EVIDENCE OR MATERIAL ON RECORD THE C ALCULATION MADE BY AO FOR DISALLOWANCE U/S 14A READ WITH RULE 8D IS JUSTIFIED . THE APPEAL OF THE ASSESSEE HAS NO MERIT AND IS, ACCORDINGLY, DISMISSE D. 10. IN THE RESULT, BOTH THE CROSS APPEALS ARE DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.03.2014 SD/- SD/- (G.D. AGARWAL) VICE PRESIDENT (BHAVNESH SAINI) JUDICIAL MEMBER DATED: 21.03.2014 *KAVITA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. TRUE COPY BY ORDER ASSISTANT REGISTRAR