IFCI LTD.,NEW DELHI vs. DCIT, NEW DELHI

per explanation (1) of Section 115JB of The Income Tax Act. The amount of provision for bad and doubtful debts is definitely a diminution in the value of the asset i.e. book debts, therefore, it is also required to be added back to the book profit. It may also be a reserve created by making a provision out of bad and doubtful debts for the future losses that may arise out of debts. In view of this, we dismiss ground number 4 of the appeal of the assessee. 33. Accordingly, ITA number 3443/del/2011 filed by the assessee for assessment year 2005 – 06 is partly allowed. 34. Accordingly, for assessment year 2005 – 06 appeal of the assessee and appeal of the revenue are partly allowed. ITA number 2199/del/2011 (by AO) Assessment year 2006 – 07 35. This appeal is filed by the learned assessing officer against the order of the learned Commissioner of income tax appeals – XIII, New Delhi dated 23rd of February 2011 wherein the appeal filed by the assessee against the order of the learned assessing officer passed u/s 143 (3) of the income tax act 1961 dated 30 September 2008, was partly allowed. 36. The learned assessing officer has raised the following grounds of appeal 01. on the facts and circumstances of the case and in law, the CIT (A) has erred in deleting the disallowance of ₹ 32,023,047/– on account of depreciation 02. on the facts and circumstances of the case and in law, the CIT (A) has erred in restricting the disallowance of ₹ 88,697,740/–. The Section 14 A of the act to ₹ 10 lakhs 37. Brief facts of the case shows that the assessee is a company filed its return of income on 28 November 2006 merely income of the setting off against the carried forward business loss of Rs 1,937,945,507/–. Page 16 of 43

The assessee has also computed book profit u/s 115JB of the act to loss of Rs 5,366,175,988/–. The assessment u/s 143 (3) of the income tax act was passed on 30 September 2008 wherein the total income of the assessee was determined at Rs 2,099,030,946. The assessing officer has disallowed depreciation on the finance lease of assets of ₹ 32,023,047 and also made a disallowance u/s 14 A of ₹ 88,697,740, which is reduced by ₹ 2 lakhs which has been suo motu disallowance made by the assessee. 38. The assessee preferred an appeal before the learned Commissioner of income tax appeals who deleted the disallowance of ₹ 32,023,047/– on account of depreciation on lease the assessee. With respect to the disallowance u/s 14 A of the act he restricted the disallowance made by the learned assessing officer only to ₹ 10 lakhs being the administrative expenses incurred. Therefore, with these two disallowances deleted by the learned Commissioner of income tax appeals, assessing officer is in appeal before us. 39. Ground number 1 of the appeal is with respect to the disallowance of depreciation of ₹ 32,023,047 on account of leased assets. The parties before us submitted that the issue is similar to the issue in appeal of the assessee for assessment year 99 – 2000 and 2000 – 2001. They submitted that their arguments also remain the same. 40. On careful consideration of the rival contentions, perusal of the orders of the lower authorities, the issue argued by both the parties in appeal of the assessee for assessment year 99 – 2000 and 2000 – 2001, which has been decided by us by the order of even date in ITA number 1200 and 1201/del/2005, wherein we have held that assessee is an owner of the leased assets and is entitled to the depreciation thereon. For reasons given by us in that appeal, we dismiss ground number 1 of the appeal of the AO. 41. Ground number 2 of the appeal of the assessing officer is similar to ground number 1 of the appeal in assessment year 2005 – 06. Both Page 17 of 43

the parties submitted that facts are similar except the change in the amount of exempt income. They also submitted that their arguments are also the same, therefore, as we upheld the addition out of the administrative expenses of only ₹ 10 lakhs, the learned departmental representative could not show us any reason why we should deviate from the same, we uphold the order of the learned CIT – A, who deleted the disallowance u/s 14 A with respect to the interest expenditure and upheld the disallowance to the extent of ₹ 10 lakhs out of the administrative expenses. Accordingly, ground number 2 of the appeal of the AO is dismissed. 42. In the result ITA number 2199/del/2011 filed by the learned assessing officer for assessment year 2006 – 07 is dismissed. ITA number 1631/del/2011 (by AO) Assessment year 2007 – 08 43. This appeal is preferred by the learned Deputy Commissioner of income tax, Circle 11 (1), New Delhi for assessment year 2007 – 08 against the order of the Commissioner of Income Tax (Appeals) –XXX, New Delhi passed on 4/01/ 2011 raising following grounds of appeal 1) on the facts and circumstances of the case and in law, the CIT (A) has erred in deleting the addition of ₹ 26,146,749 on account of disallowance of depreciation on plant and machinery 2) on the facts and circumstances of the case and in law, the CIT (A) has erred in deleting the addition of ₹ 102,097,461/– on account of u/s 14 A of the income tax act 3) on the facts and circumstances of the case and in law, the CIT (A) has erred in deleting the addition of ₹ 49,544,909/– on account of levy of interest u/s 234 C of the act 44. Brief facts of the case shows that the assessee filed its return of income on 31/10/2007 showing total income of Rs 67,235,977/– out of set-off against the carried forward business loss of Rs 10,678,614,348/–. The return was revised on 24/3/2009 at the Page 18 of 43

same income however, the carried forward business loss set of amount was changed. The assessee has shown profit of ₹ 87,512,7 2,324/–. The assessment u/s 143 (3) of the income tax act 1961 was passed on 30/05/2009 wherein the learned assessing officer disallowed the depreciation on assets given on finance lease of Rs 261,46,749/–. He further made a disallowance u/s 14 A of ₹ 102097461/–. Consequently, the gross total income of the assessee was determined at ₹ 195,480,187. 45. Aggrieved, assessee preferred an appeal before the learned Commissioner of income tax appeals. He deleted the disallowance on account of depreciation on plant and machinery on leased assets of Rs 261,46,749/–. He further deleted the addition/disallowance of ₹ 102,097,461/– on account of disallowance u/s 14 A of the income tax act. Over and above the learned Commissioner of income tax appeals directed the learned assessing officer to delete the charging of the interest of ₹ 49,544,909/– u/s 234C of the act , therefore the learned assessing officer is in appeal. 46. The first ground of appeal is with respect to the depreciation on the leased assets. This issue identical to the facts decided by us in case of the assessee for assessment year 99 – 2000 and 2000 – 2001 wherein we have held that assessee is an owner of the asset, which are leased out, and therefore is entitled to depreciation. For similar reasons, because of the identical facts of the case agreed by both the parties, we dismiss ground number 1 of the appeal of the AO. 47. Ground number 2 is against the disallowance deleted u/s 14 A of the act. The fact shows that assessee has earned dividend income of ₹ 256,316,814. It has also earned interest income from tax-free bonds of RS 140,33,171/–. The assessee was questioned by the AO for disallowance u/s 14 A, which assessee submitted that in earlier years the learned Commissioner of income tax appeals has restricted the disallowance for assessment year 98 – 99 only two ₹ 2 lakhs out Page 19 of 43

of administrative expenses. The learned assessing officer rejected the contentions of the assessee and found that salaries and benefits, miscellaneous expenses and cost of borrowings amounting to Rs₹ 785 crores is required to be allocated between the exempt income such as dividend in proportion to the total receipts. He therefore word out the disallowance of ₹ 102,097,461. 48. On appeal before the learned Commissioner of income tax (appeals he upheld the disallowance out of the expenditure to the extent of ₹ 10 lakhs, deleted the disallowance on account of interest expenditure for the reason that assessee has huge interest free funds available compared to the amount invested in dividend yielding securities. 49. The learned departmental representative relied upon the order of the learned AO and the learned authorised representative supported the order of the learned CIT – A. Both the parties confirmed that identical issue arose in case of the assessee for earlier years and most recently in assessment year 2006 – 07, the facts are identical except the amount of exempt income. 50. We have carefully considered the rival contentions and perused the orders of the lower authorities. The issue is identical to the issue decided by us in assessment year 2005 – 06 in ground number one of the appeal of the AO. We have upheld the order of the learned Commissioner of income tax upholding the disallowance only to the extent of ₹ 10 lakhs out of administrative expenditure. Therefore, for the similar reasons, we uphold the order of the learned CIT – A this year also. Accordingly, ground number 2 is dismissed. 51. Ground number 3 is with respect to the levy of interest u/s 234C of the act. In the assessment order, the assessing officer directed to charge the interest u/s 234C for short payment/deferment of the advance tax. The assessee challenged the same before the learned Commissioner of income tax (A) as per ground number 5 (paragraph number 6 of the order). Page 20 of 43

and events which could not have been envisaged or anticipated in advance leading to shortfall in the position of advance tax on the part of the assessee he decided the issue in favour of the assessee. 54. The learned departmental representative vehemently submitted that the provisions of Section 234C provides for mandatory charging of the interest for shortfall of advance tax. The learned Commissioner of income tax appeals without citing any provision of the act has deleted the above interest. 55. The learned authorised representative vehemently supported the order of the learned CIT – A and reiterated the submissions made before him as Under:- 1. Section 234C of the IT Act contains different provisions stipulating interest to be levied in case of delay in payment of advance tax beyond certain dates. The said section provides two exceptions with regard to non-payment advance tax namely „capital gains‟ and „income referred to in Section 2(24)(ix) of the IT Act. 2. The provisions pertaining to payment of advance tax are provided in Section 207 to Section 210 of the IT Act. Section 207 of the IT Act stipulates that advance tax is payable during any financial year in respect of „total income‟ which would be chargeable to tax for the assessment year immediately following that financial year. Under section 207 of the IT Act, the term „total income‟ has been equated to the expression „current income‟. 3. Section 2(45) of the IT Act defines „total income‟ as total amount of income referred to in section 5, computed in the manner laid down in this Act. The manner of computation of „total income‟ is provided in Page 22 of 43

Section 145 of the IT Act which provides that income under the head „Profits and Gains from business and profession‟ and „income from other sources‟ to be computed in accordance with either cash or mercantile system of accounting. 4. It is submitted that the Respondent assessee maintains its books of accounts as per mercantile system of accounting i.e on accrual basis. It is submitted that the income in question on which interest is sought to be levied for non-payment of advance tax has not yet been accrued in the books of the respondent assessee and hence no advance tax is payable on the same. Accordingly, the question of interest being levied on the non-payment of the same does not arise. 5. Further, the respondent assessee submits that the business of the respondent assessee was unexpectedly high in the last quarter and due to non- receipt of requisite approvals from SEBI and RBI with respect to transfer of shares, the documentation could not have been possible by 15th March 2007 (deadline for payment of advance tax as stipulated in section 234C of the IT Act). The documentation with respect to transfer of shares was completed on 31/03/2007 and thereafter, the respondent assessee made up for the deficiency in payments on 31st March 2007. 6. It is submitted that action of Ld. AO, rightly deleted by CIT(A), of penalizing the respondent assessee by charging interest for non-payment of advance tax is bad in law.

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infirmity in the order of the learned CIT – A – and ground number 3 of the appeal of the learned assessing officer. 57. In the result, appeal of the learned assessing officer for assessment year 2007 – 08 in ITA number 1631/del/2011 is dismissed. ITA number 2062/del/2012 (by AO) And ITA number 1984/del/2012 (by assessee) Assessment year 2008 – 09 58. These are the cross appeals filed by the parties against the order of the Commissioner of income tax (appeals) – XV, New Delhi dated 21/2/2012 for assessment year 2008 – 09. 59. The learned assessing officer has preferred following grounds of appeal 01 on the facts and circumstances of the case and in law, the learned CIT (A) has erred in deleting the addition of ₹ 2,15,65,389/– made on account of disallowance of depreciation on plant and machinery lease to various authorities 02 on the facts and circumstances of the case and in law, the learned and CIT (A) has erred in restricting the addition of ₹ 110,831,000/– to the extent of ₹ 4.40 crores made u/s 14 A read with rule 8D of the income tax rules, 1962 03 on the facts and circumstances of the case and in law, the learned CIT (A) has erred in deleting the addition of ₹ 110,831,000 made by the invoking rule 8D read with Section 14 A for the purpose of computation of book profits u/s 115JB of the income tax act 04 on the facts and circumstances of the case and in law, the learned CIT – A has erred in allowing the deduction of ₹ 7,999,069/– being the fringe benefit tax in competition of book profits u/s 115JB of the act Page 25 of 43

on 31st of March 2010 changing the amount of set-off of brought forward losses. The assessee has also shown book profit u/s 115JB of Rs 1 308192655/–. The assessment u/s 143 (3) of the act was passed on 24th of December 2010 the learned assessing officer made a disallowance u/s 14 A of the act of Rs 110,831,000 and also disallowed depreciation on the finance lease assets of ₹ 21,565, 389/- . Consequently the gross total income of the assessee was determined at Rs 7,867,796,919/– against which the brought forward losses or set off to the extent of ₹ 7,283,446,620/– resulting into the total assessed income of ₹ 584,350,299/–. While computing book profit u/s 115JB of the act, AO further increase date by disallowance u/s 14 A of the act. 62. Assessee carried the matter before the learned Commissioner of income tax appeals who deleted the disallowance on account of depreciation on plant and machinery leased to various authorities. With respect to disallowance u/s 14 A of the act, he upheld the disallowance to the extent of 0.5% of the average value of investment resulting at ₹ 4.40 crores. With respect to the adjustment of the book profit by disallowance u/s 14 A, he deleted the same. He also deleted the adjustment of the book profit of the fringe benefit tax of ₹ 7,999,069 following the decision of the coordinate bench in assessee‟s own case for assessment year 1999 2000. Therefore, assessee is in appeal with respect to the disallowance of ₹ 4.4 crores upheld by the learned CIT – A u/s 14 A of the income tax act and the learned assessing officer is in appeal with respect to the other disallowance deleted including partial disallowance u/s 14 A of the act. 63. We firstly with the appeal of the learned assessing officer. 64. Coming to the first ground of appeal with respect to the disallowance of depreciation on plant and machinery leased to various authorities, both the parties confirmed that identical issue has been Page 27 of 43

decided in case of the assessee for assessment year 1999 2000 and 2000 – 2001. Their arguments are same as the facts of the case are also similar. On careful consideration of the rival submissions and the facts on record, in absence of any change in those facts compared to the facts of the case for assessment year 1999 – 2000 2000 – 2001, for similar reasons as given in ITA number 1200 and 1201/del/2005 of even date, we confirm the action of the learned CIT – A and dismiss ground number 1 of the appeal of the AO. 65. Ground number 2 and 3 relates to the computation of disallowance u/s 14 A of the act. The assessee has earned dividend income of ₹ 238,145,137 and income from tax free bonds of Rs. 140,33,171 which is claimed as exempt u/s 10 (34) and 10 (15) of the income tax act. Therefore the assessee was questioned about the disallowance u/s 14 A of the act. The assessee submitted a general reply. However the learned assessing officer rejected the contentions of the assessee and stated that no evidence of been furnished by the assessee to establish that no expenses has been incurred by it for earning of exempt income, he computed the disallowance working out same as per provisions of rule 8D of the income tax rules 1962. He computed the disallowance to the extent of administrative expenditure only by computing the aggregate of opening and closing value of the investment and applying the standard multiplying factor of 0.5% in computed the disallowance at ₹ 11.1031 crores. On appeal before CIT – A, the assessee challenged that no satisfaction has been recorded by the assessing officer with respect to the correctness of the claim of the assessee, the learned CIT – A held that as the learned assessing hours invoke the rule 8D therefore it is thus implied that he was not satisfied with the correctness of the claim of the appellant. He further held that the powers of the Commissioner appeals are coterminous with that of the assessing officer and therefore appellant was given another opportunity to justify non-disallowance of expenditure u/s Page 28 of 43

14 A of the act. However, he accepted the submission of the assessee that certain investments from which taxable income is arising should not have been considered for working of disallowance. The learned CIT – A accepted the same and applied the multiplying factor of 0.5% on those assets which could have resulted into earning of taxable income and computed disallowance at ₹ 4.40 crore. 66. The learned authorised representative submitted as Under:- i. The shares were held by Appellant Assessee as stock-in-trade and as such no disallowance under section 14A of the IT Act was called for. ii. No satisfaction was recorded by the Respondent Revenue for invocation of section 14A(2) read with Rule 8D(1).

a. One of the essential requirements for invoking section 14A of IT Act read with Rule 8D of the Income-tax Rules,1962 (“Rules”)is that the Assessing Officer is required to record its satisfaction having reference to the accounts of the assessee, that the disallowance made by the assessee was unreasonable or unsatisfactory. Reference in this regard can be made to the decision of Supreme Court in the case of Godrej & Boyce Manufacturing Company Ltd. [2017] 81 taxmann.com 111 (SC) in which it was held that only after recording of satisfaction by assessing officer, the provisions of section 14A(2) and rule 8D would become applicable. Same conclusion was also reached in the decision of High Court of Delhi in the case of CIT vs. Taikisha Engineering India Ltd [2015] 54 taxmann.com 109 (Delhi). However, in the assessment order no such satisfaction having reference to accounts of the Appellant Assessee was recorded by the Respondent Revenue for rejecting suo-moto disallowance of Rs. 10,00,000 made by the Appellant Assessee.

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b. Reference in this regard can also be made to the decision of the decision of High Court of Delhi in the case of Maxopp Investment Ltd. vs. CIT [2011] 15 Taxmann.com 390 (Delhi) wherein it was held that only on recording of such satisfaction, the Assessing officer gets jurisdiction to determine the amount of expenditure under section 14A of the IT Act read with Rule 8D of the Rules. The Court also categorically mentioned that while rejecting claim of suo-moto disallowance made by the assessee, the assessing officer would have to indicate cogent reasons. c. A perusal of reasons of passive investment, well co-ordinated management decisions, telephone expenses, follow up being embedded in indirect expenses etc as given in assessment order will show that the Respondent Revenue had failed to record dissatisfaction with respect to the claim made by the Appellant Assessee of Rs. 10,00,000 being allocated for earning dividend income. The reasons given by the Respondent Revenue were too generic and had no reference to accounts of the Appellant Assessee which is a pre-requisite for invoking Rule 8D. d. Reference in this regard can be made to the decision of the High Court of Delhi in the case of H.T. Media Ltd. vs. Pr. CIT [2017] 85 taxmann.com 113 (Delhi) wherein the assessing officer had given same reasons of passive investment, well co- ordinated management decisions, telephone expenses and follow up being embedded in indirect expenses for disallowance of administrative expenses under 14A of the IT Act. However, the Hon‟ble Court deleted the disallowance on the part of the failure of the assessing officer to comply with mandatory requirement of recording satisfaction as required by section 14A(2) of IT Act read with Rule 8D(1) of the Rules. Page 30 of 43

iii. No cogent reasons were given by the Respondent Revenue for rejecting suo-moto disallowance made by the Appellant Assessee. a. The reason as given by the Respondent Revenue that invocation of section 14A of IT Act is automatic and comes into operation as soon as dividend income is claimed as exempt was untenable and bad in law. Reference in this regard can be made to the decision of High Court of Delhiin the case of CIT vs. I.P. Support Services India (P.) Ltd. [2017] 88 taxmann.com 418 (Delhi)wherein the Hon‟ble Court held that assessing officer proceeded on the erroneous premise that the invocation of section 14A of IT Act was automatic and comes into operation as soon as dividend income is claimed exempt. Further, relying upon its earlier decision in the case of Maxopp Investment Ltd. (supra) and CIT vs. Taikisha Engineering India Limited (supra), the Hon‟ble Court dismissed the appeal by holding that assessing officer had failed to comply with the mandatory requirement of law with regard to recording of satisfaction as to why disallowance made by assessee was unreasonable. b. Also, the reasons as given by the Respondent Revenue with regard to double benefit on account of loss on sale of shares/bonds being exempt due to the transaction of dividend stripping (reduction in redemption value due to declaration of dividend) was wrong in the light of the decision of Apex Court in the case of CIT vs Walfort Share & Stock Brokers (P.) Ltd. [2010] 192 Taxman 211 (SC), the loss on saleof units in a dividend stripping transaction, cannot be considered as an „expenditure‟ for disallowance under section 14A of the IT Act. Further, it is submitted that there was no loss on sale of

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shares/bonds which was claimed as exempt during the year under consideration and no contrary finding to that effect was given by the Respondent Revenue. Further, income/loss from sale of shares in assisted concerns was consistently shown as business income/loss by the Appellant Assessee. iv. Reliance by Respondent Revenue on United General Trust case was incorrecton the ground that though the question framed contained a reference to „proportionate management expenses‟ but the controversy was that whether deduction is allowable from gross dividend or net dividend under section 80M of the IT Act and section 14A of the IT Act does not deal with this issue. v. No actual expenditure was incurred by the Appellant Assesseeto earn the dividend income. No actual expenditure was incurred on its collection. Also, no follow-up was made for the same. Further, the Appellant Assessee had entered into an agreement with Stock Holding Corporation of India Ltd. wherein latter was to look after (including collection of dividends) all the securities (whether generating tax free income or taxable income) owned by the Appellant Assessee for an amount of Rs. 2,00,000. Yet, suo-moto disallowance of Rs. 10,00,000/- was made by the Appellant Assesseewhich was just and reasonable based on consistent practice followed by CIT(A) in earlier years. vi. Burden of proof is on the Revenue to show that expenses were actually incurred to earn exempt income and the Respondent Revenue had not brought anything on record to show that interest/administrative expenses were incurred to earn dividend income.

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vii. There was no nexus between interest/ administrative expenditure incurred and the dividend income. Merely because exempt income is earned, it does not mean that disallowance under section 14A of the IT Act must necessarily be called for.

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Court in Maxoop investments Ltd versus CIT [ 2018] 91 taxmann.com 154 (SC)/[2018] 254 Taxman 325 (SC)/[2018] 402 ITR 640 (SC)/[2018] 301 CTR 489 (SC) has held that having regard to the language of section 14A(2), read with rule 8D of the Rules, it is also made clear that before applying the theory of apportionment, the Assessing Officer needs to record satisfaction that having regard to the kind of the assessee, suo motu disallowance under section 14A was not correct. It will be in those cases where the assessee in his return has himself apportioned but the Assessing Officer was not accepting the said apportionment. In that eventuality, it will have to record its satisfaction to this effect. Further, while recording such a satisfaction, nature of loan taken by the assessee for purchasing the shares/making the investment in shares is to be examined by the Assessing Officer. In the present case, we do not find any such satisfaction recorded by the assessing officer with respect to the disallowance made by assessee on its own. In view of this, we hold that no disallowance u/s 14 A can be made in absence of proper satsifaction. Accordingly, ground number 2 of the appeal of the assessing officer is dismissed. 69. With respect to ground number 3 of the appeal of the assessing officer which is against the order of the learned CIT – A deleting the disallowance are while computing the book profit of the assessee with respect to the disallowance made in the original computation of the income u/s 14 A of the act. The find that the issue is squarely covered in favour of the assessee by the decision of the special bench of the ITAT in the Asst Commissioner of Income Tax Versus Vireet investments private limited [2017] 82 taxmann.com 415 (Delhi - Trib.) (SB)/[2017] 58 ITR(T) 313 (Delhi - Trib.) (SB)/[2017] 165 ITD 27 (Delhi - Trib.) (SB)/[2017] 188 TTJ 1 (Delhi - Trib.) (SB) wherein it has been held that holding that the computation under clause (f) of Explanation 1 to section 115JB(2). is to be made without resorting to Page 34 of 43

the computation as contemplated u/s 14A read with Rule 8D of the Income-tax Rules, 1962.. Accordingly we restore this ground of appeal back to the file of the learned assessing officer to decide the issue without resorting to the rule 8D of the income tax rules for disallowing expenditure in relation to the exempt income by working out the book profit. Thus, ground number 3 of the appeal is allowed with above direction. 70. Ground number 4 is with respect to the disallowance of ₹ 7,999,069 of the fringe benefit tax credit to the book profit u/s 115JB of the act by the learned assessing officer deleted by him following the decision of the coordinate bench in assessee‟s own case for assessment year 1999 – 2000 dated 31st of October 2008 in ITA number 870/del/2004. Therefore, we do not find any infirmity in the order of the learned Commissioner of income tax appeals to that extent. Accordingly, ground number 4 is dismissed. 71. In the result, appeal of the learned assessing officer is partly allowed. 72. Now we come to the appeal of the assessee which is only against the disallowance u/s 14 A of the income tax act. While deciding ground number 2 of the appeal of the AO we have held that assessing officer has not recorded proper satisfaction in terms of provisions of subsection (2) of the act of Section 14 A of the act and therefore the disallowance under that Section cannot be made. In view of our that finding, the ground number 1 & 2 of the appeal of the assessee in ITA number 1984/Del/2012 are allowed. 73. Accordingly ITA number 1984/del/2012 filed by the assessee is allowed. 74. In the result ITA number 2062/del/2012 filed by the learned assessing officer is partly allowed and appeal of the assessee in ITA number 1984/del/2012 for assessment year 2008 - 09 is allowed. ITA number 2473/del/2014 (by Assessee)

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and ITA number 5381/del/2012 (by assessee) Assessment year 2009 – 10 75. These are the 2 appeals filed by the assessee the same assessment year. ITA number 2473/del/2014 is filed against the order of Commissioner of Income Tax (Appeals) –XVIII, New Delhi dated 29th of January 2014 passed in appeal filed by the assessee against the order of the Deputy Commissioner Of Income Tax, Circle – 11 (1), New Delhi for assessment year 2009 – 10. Briefly stated the facts show that the assessee filed its return of income on 30 September 2009 showing total income of ₹ 511,664,579/– and book profit u/s 115 JB of the income tax act was computed at Rs 9 830080853/–. Assessee revised return of income on 30th of March 2011 at ₹ 531,060,593/– the book profit was also revised at ₹ 359,931,876/–. The assessment order u/s 143 (3) of the act was passed on 19th of December 2011 by the learned assessing officer wherein he made a disallowance of depreciation on assets given on finance lease of Rs. 183,30,580. He further make a disallowance u/s 14 A of the income tax act of Rs 165,73,432/–. He further made the adjustment of disallowance u/s 14 A of the income tax act or the book profit of the assessee also. 76. Aggrieved by the order of the learned assessing officer assessee preferred an appeal before the learned CIT – A, he confirmed the disallowance Under Section 14 A of the income tax act of Rs. 165,73,432/–. He also confirmed the disallowance of depreciation on lease assets of Rs 18330580/- . Therefore, assessee is in appeal on both these issue before us. This issue is challenged by the assessee in ITA number 2473/del/2014. 77. The first ground of appeal filed by the assessee is general in nature and therefore it is dismissed. Page 36 of 43

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number 9.1 of his order held that AO has correctly recorded the finding and therefore the disallowance was confirmed. 80. Both the parties submitted that the facts in this case are identical to the facts in the case of assessee for assessment year 2008 – 09 wherein the disallowance u/s 14 A was partially deleted by the learned CIT – A. They submitted that their arguments are also the same. 81. We have carefully considered the rival contention and perused the orders of the learned assessing officer wherein we find that the learned assessing officer has not recorded any said satisfaction with respect to the correctness of the claim of the assessee of incurring only ₹ 10 lakhs as an expenditure for earning of exempt income. Therefore for the reasons given by us while deciding the appeal of both the parties for assessment year 2008 – 09, which is on identical facts, we also for this year direct the learned assessing officer to delete the disallowance u/s 14 A of the act in absence of proper satisfaction about the correctness of the claim of the assessee. Accordingly, ground number 3 of the appeal of assessee is allowed. 82. Ground number 4 of appeal is with respect to the disallowance u/s 14 A while computing the book profit which is similar to ground number 3 in the appeal of the learned assessing officer for assessment year 2008 – 09 wherein following the decision of the special bench in case of CIT versus Vireet investments private limited (supra) we have set aside the issue back to the file of the learned assessing officer. Therefore, for similar reasons this ground of appeal is also thus sent back to the file of the learned assessing officer with similar direction. Accordingly, ground number 4 of the appeal is allowed accordingly. 83. In the result ITA number 2473/del/2014 filed by the assessee for assessment year 2009 – 10 is partly allowed.

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70,89,47,660/- comprising of prepaid taxes Rs. 69,50,46,725/- and interest u/s 244A at Rs. 1,39,00,935/-. ii. The Ld. AO had allowed an interest of Rs. 1,39,00,935/- starting from 1st April 2011 to July 31st, 2011 and not for the period starting from the date of filing the original return on the premise that delay is attributable to the Appellant in terms of provision of Section 244(A)(2) of the IT Act. iii. It is submitted that the interest u/s 244A of the IT Act is allowable from the date of filing the original return being the first return filed for the relevant assessment year and the act of filing the revised return under no circumstances can put the Appellant in a dis-advantageous position of limiting the interest on refund to be computed from the date of filing the revised return. For this purposes, the Appellant wishes to place reliance on the provisions of section 139(5) of the IT Act which states that only return filed under 139(1) or 139(4) can be revised under this section. Thus, one may read it to understand that only once the assessee has filed the return under section 139(1) of the IT Act, the assessee has an option to revise the return at later point in time and such revision of return is taken as a return filed in compliance with section 139(1) of the IT Act. Thus, the act of stepping into the shoes of original return is self sufficient to claim that since the revised return takes the status of original return filed there in, therefore the interest on refund should also be calculated from such date onwards. iv. For the above proposition, the Appellant intends to rely on the following case which deals with the interpretation of the provisions of section 139(1) and section 139(5) of the IT Act. v. The following is the decision which supports the claim of the Appellant: Page 40 of 43

a. In CIT v. Periyar District Co-operative Mik Producers Union Ltd (2004) 266 ITR 705 , it was held as follows: vi. “7. A bare perusal of the aforesaid two provisions, more particularly the provision contained in section 139(3), makes it clear that a return of loss filed under section 139(3) may be filed within the time allowed under section 139(1). Once such a return is filed, all the provisions of the Income-tax Act shall apply as if such return has been filed under section 139(1). This position is clear from the expression ". . . all the provisions of this Act shall apply as if it were a return under sub-section (1)". In other words, a return filed under section 139(3) is deemed to be a return filed under section 139(1). The provision contained in section 139(3) makes it clear that all the provisions of this Act shall apply to such a return as if it were a return under section 139(1). In view of such a specific provision, there is no reason to exclude the applicability of section 139(5) to a return filed under section 139(3).”

vii. Based on the above submission the Appellant assessee humbly submits that the Ld. CIT(A) erred in holding that AO has rightly calculated the interest on refund. The interest on refund amount should be calculated from the date of filing original return and not from the date of filing the revised return.

case where the assessee did not care to claim the refund in the original return but revised return for this reason only. Therefore the delay is on part of the assessee. He therefore submitted that the order of the learned CIT – A is required to be upheld. 90. We have carefully considered the rival contention and perused the orders of the lower authorities. In the present case, the assessee filed original return in time without claiming any refund. Subsequently on 31st of March 2011, the assessee revised return after two years and claimed the substantial refund. In the revised return, the assessee submitted the details of the certificate as well as the claim were made. Therefore, it is apparent that the delay of claim of the refund is on account of the assessee and therefore the revenue is not obliged to grant interest to the assessee for this period. In view of this, we do not find any infirmity in the order of the learned CIT – A in refusing to grant interest to the assessee as claimed by it. In the result, appeal of the assessee is dismissed. 91. Thus, ITA number 5381/del/2012 for assessment year 2009 – 10 is dismissed. Order pronounced in the open court on 31/08/2020. -Sd/- -Sd/- (SUCHITRA KAMBLE) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 31/08/2020 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi

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