L & T FINANCE LTD,MUMBAI vs. DCIT CIR 2(2), MUMBAI

Per Bench

ITA Nos.3980-3982 &4459/Mum/2013 L & T Finance Limited Assessment Years 2005-06 to 2007-2008 the assessing officer to treat the gain arising on sale of equity shares and mutual funds as business income instead of short term capital gain. 2. The Assessing Officer erred in indulging in double taxation in respect of gain on securitization which had already been taxed by him (as confirmed by the Tribunal for earlier years) as under: Assessment Year Amount(Rs.) 2003-04 4,75,04,976 2004-05 88,53,915 3. The Assessing Officer failed to consider that the Appellant had itself offered income in the current year, out of the amounts mentioned in Additional Ground No.1 above, on a spread-over basis in its Return of Income. 4. Both the lower authorities erred in disallowing interest expenditure of Rs.23,72,000/- under section 14A of the Income-tax Act. 5. Both the lower authorities failed to appreciate that the own funds of the Appellant were more than the investments made by the Appellant, and therefore interest expenditure could not be disallowed under section 14A. 6. Both the lower authorities erred in disallowing interest expenditure of Rs.23,72,000/- under section 14A for the purpose of computing book profit under section 115JB of the Income-tax Act. 7. The Commissioner Of Income-tax (Appeals) erred in confirming the disallowance under section 40(a)(ia) to the extent of Rs.8,50,107/-. 8. Without prejudice to the Original Ground of Appeal No.1, in case it is held that the gain arising on sale of equity shares and mutual funds is taxable as business income, then the Appellant should be granted rebate under section 88E in respect of the securities transaction tax (STT) paid on purchase and sale of shares and mutual funds.

3.1 Facts qua the issues are that the assessee being resident corporate assessee engaged as Non-Banking Finance Company [NBFC] in the business of leasing, Hire purchase and other financial activities was assessed u/s 143(3) at Rs.7,42,58,740/- under normal provisions after certain adjustments / disallowances as against returned income of Rs.1,81,27,820/- filed by the assessee on 28/10/2005. 3.2 The first issue relates with treatment of certain Short Term Capital Gains [in short ‘STCG’] on sale of Shares / Mutual Fund. During assessment proceedings, it was noted that the assessee earned STCG on

ITA Nos.3980-3982 &4459/Mum/2013 L & T Finance Limited Assessment Years 2005-06 to 2007-2008 sale of shares / mutual fund for Rs.1,37,35,373/-. Keeping in view the frequency and volume, Ld. AO opined that the same was chargeable to tax under Business Income and hence, taxable at higher rate of 35% as against concessional rate of 10% as claimed by the assessee. After considering assessee’s submissions, not convinced, the said income was treated as Business Income instead of Capital Gains as claimed by the assessee. Being aggrieved by confirmation of stand of Ld. AO by Ld. CIT(A), the assessee has raised Ground No.1 before us. Ground No. 8 is an alternative ground which pleads for allowance of rebate u/s 88E against Securities Transaction Tax [STT] being paid by the assessee, in case the stand of revenue in this regard gets confirmed before us. 3.3 Ground Numbers 2 & 3 are related with gains on securitization of certain assets. The Ld. AO noted that the assessee reduced an amount of Rs.6,13,49,875/- towards gain on securitization in its computation of income. The assessee contended that it was mere notional income and that too, capital in nature and tax could be levied only on real income earned by the assessee. However, not convinced, Ld. AO added net amount of Rs.6,07,74,768/- to the income of the assessee. Upon further appeal, Ld. CIT(A) while concurring with the stand of Ld. AO granted partial relief to the extent of income already offered by the assessee from such securitization from AYs 2005-06 to 2008-09. Still aggrieved, the assessee is in further appeal before us.

ITA Nos.3980-3982 &4459/Mum/2013 L & T Finance Limited Assessment Years 2005-06 to 2007-2008 3.4 Ground Numbers 4 to 6 pertains to disallowance u/s 14A. The assessee earned exempt dividend income from shares and mutual funds amounting to Rs.1,52,20,378/- and contended that the investments were made out of own interest free funds and therefore, no such disallowance was required to be made. However, Ld. AO noted that the investments were made out of common pool of funds and therefore, interest disallowance was required to be made. Finally, Ld. AO computed the interest disallowance on the basis of proportion of loan funds vis-à-vis total funds and arrived at disallowance of Rs.23.72 Lacs u/s 14A. The said adjustment was made while arriving at income under normal provisions as well while computing ‘Book Profits’ for the purpose of Minimum Alternative Tax [MAT] u/s 115JB. Upon further appeal, Ld. CIT(A) confirmed the stand of Ld. AO against which the assessee is in further appeal before us. 3.5 Ground No.7 is related with disallowance of Rs.8,50,107/- u/s 40(a)(ia). After perusal of Tax Audit Report, the Ld. AO made disallowance of Rs.11,24,935/- u/s 40(a)(ia) on account of delayed payment of Tax deducted at Source [TDS] beyond due date. The Ld. CIT(A), after considering, factual matrix, reduced the same to Rs.8,50,107/-. 4. The Ld. Counsel for Assessee [AR], vehemently argued the various grounds of appeal by drawing our attention to various documents placed in the paper-book whereas Ld. Departmental Representative [DR] supported the stand taken by the revenue.

ITA Nos.3980-3982 &4459/Mum/2013 L & T Finance Limited Assessment Years 2005-06 to 2007-2008 5.1 We have carefully heard the rival contentions and perused relevant material on record. Ground No.1 is related with treatment of STCG on sale of shares / mutual fund whereas Ground No. 8 is alternative ground qua rebate u/s 88E for STT paid by the assessee. During hearing before us, Ld. AR fairly conceded that the amount of STCG earned by the assessee included certain intra-day gains / losses which were in the nature of speculation and hence were required to be excluded while arriving at figures of STCG. Therefore, at the outset, we direct Ld. AO to exclude the same from the figures of STCG and treat the same as speculation in nature. The assessee is directed to provide the relevant details thereof to the Ld. AO. The assessee’s ground of appeal to that extent stand dismissed. 5.2 Proceeding further, the assessee has placed on record working of various ratios to assert that the investment activity by the assessee constituted insignificant proportion vis-à-vis total business activities carried out by the assessee. The Ld. AR has further contended that the assessee has been treated as investor right from AYs 1998-99 to AY 2004-05 and even in the impugned AY, the revenue has not disturbed the head of Long Term Capital Gains [LTCG] claimed as ‘exempt’ by the assessee. Our attention is further drawn to the fact that Ld.CIT(A), on similar facts, in AYs 2010-11 & 2011-12 concurred with the stand of the assessee against which revenue is in further appeal before the Tribunal. Reliance has been placed on various judicial pronouncement and CBDT circular to support the stand of the assessee. Upon perusal, It is evident from the ratios worked out by

ITA Nos.3980-3982 &4459/Mum/2013 L & T Finance Limited Assessment Years 2005-06 to 2007-2008 the assessee that profit on sale of investments constituted less than 2% of total revenue generated by the assessee. Further the ratio of average investment (except investment in group concerns) to average total assets was less than 2% and more than 92% of assessee’s total assets were deployed in the business of financing. The said facts could not be controverted by the revenue. Further, a perusal of various assessment orders for earlier years as placed on record give strength to assessee’s contention that the assessee has been treated as investor in the past with respect to Short Term Capital Gains on Shares and the same has been assessed under the head Capital Gains only. Further, the assessee has added back the provision for diminution in value of investments in the computation of income for impugned AY as evident from Page-19 of the paper-book which reflects the intention of the assessee to hold the said investments as an investor. Although we are conscious of the fact that principle of res-judicata do not apply to Income Tax Proceedings yet in view of rule of consistency, in our opinion, the revenue is debarred from taking flickering stands on similar facts in different assessment years. Our aforesaid view is duly supported by the decision of this Tribunal rendered in Gopal Purohit Vs. JCIT [29 SOT 117] as confirmed by Hon’ble Bombay High Court in CIT Vs. Gopal Purohit [336 ITR 287]. Further the SLP of the department against the same has been dismissed by Hon’ble Apex Court vide order dated 15/11/2010. The relevant portion of Tribunal’s order is extracted below for ease of reference:-

ITA Nos.3980-3982 &4459/Mum/2013 L & T Finance Limited Assessment Years 2005-06 to 2007-2008 8.1 Thus, the nature of activities, modus operandi of the assessee, manner of keeping records and presentation of shares as investment at the year end is same in all the years, hence; apparently, there appears no reason as to why the claims made by the assessee should not be accepted. However, the Revenue Authorities have taken a different view in the year under consideration by holding that principle of res judicata is not applicable to the assessment proceedings. There cannot be, in our view, any dispute on this aspect but there is also another judicial thought, that there should be uniformity in treatment and consistency under the same facts and circumstances and we have already found that facts and circumstances are identical, even though a different stand has been taken by the Revenue Authorities. This action of the Revenue Authorities has led us to ask ourselves that in this year why it has been done so. In the process to find the answer, we noted that there was a change in the scheme of taxation relating to short-term capital gains and long-term capital gains. Through the Finance Act, 2004, the Legislature imposed securities transaction tax on the sale and purchase of shares and other derivative transactions and, simultaneously, the Legislature exempted long-term capital gain under section 10(38) of the Act from the levy of tax and on short-term capital gain, a concessional rate of tax i.e., 10 per cent has been levied subject to the condition that transactions resulting into this type of gain must have suffered securities transaction tax. This is the first year of such change and, having regard to the quantum of gains, this scheme of taxation only, in our view, has prompted the Revenue Authorities to take a different view on the same types of transactions entered into by the assessee in earlier years. At this stage, we consider it fit to state that there is no dispute before us that assessee has claimed exemption under section 10(38) and/or has paid tax under section 111A at concessional rate on the transactions, where securities transaction tax has not been. It is also noted that the assessee has paid tax on short-term capital gains at normal rates on share transactions executed in the period prior to imposition of securities transactions tax. In our view, the legislative change of this nature, whereby no change has been made in respect of nature and modus operandi of such share transactions, resulting into any advantage cannot be taken away by the Revenue Authorities in this manner and in these circumstances, we are of the view that, principle of consistency, though it is an exception to the principle of res judicata must be applied here. It is further so because the payment of securities transaction tax is mandatory i.e., whether an assessee earns the profit or not or suffers a loss and by imposition of such tax, the Legislature has not given any benefit to a class of transactions as a whole though it may result into an apparent benefit to individual(s) entering into those transactions. Thus, in our view, in the facts and circumstances of the case, on the basis of principle of consistency alone, the action of the Revenue Authorities is liable to be quashed. We order accordingly and direct the Assessing Officer to accept the claims of assessee in regard to short-term capital gain and long- term capital gain.

ITA Nos.3980-3982 &4459/Mum/2013 L & T Finance Limited Assessment Years 2005-06 to 2007-2008 Therefore, on the facts and circumstances of the case, we concur with the stand of Ld. AR that the short term capital gains earned by the assessee was assessable under the head Capital Gains only subject to adjustment as envisaged by us in Paragraph 5.1 above. Resultantly, Ground No. 1 of assessee’s appeal stands partly allowed which makes Ground No. 8 infructuous. 5.3 Ground Numbers 2 & 3 are related with gains on securitization of certain assets. In this regard, the Ld. AR drew attention to the fact that this matter stood against the assessee by the orders of the Tribunal from AYs 2000-2001 to 2004-05. However, the Ld. AR contended that a proportion of this amount has already been offered to tax by the assessee on spread over basis and therefore, the same amount could not be taxed twice and therefore, the relief to that extent should be granted to the assessee. Upon perusal of paragraph 3.2 of the order of Ld. first appellate authority, we find that relief of spread over amounts already offered to tax by the assessee starting from AYs 2005-06 to 2008-09 has already been provided by Ld. CIT(A) to the assessee. Further, the income from securitization has accrued to the assessee in the impugned AY only and we fail to understand how this income was already offered to tax on spread over basis in earlier AYs 2003- 04 & 2004-05. Prima facie, it appears that the assessee is seeking relief with respect to spread over amount offered to tax by him in the impugned AY against securitization income for AY 2003-04 & 2004-05 which is held to be fully taxable by the Tribunal in those Assessment Years. Upon perusal of

ITA Nos.3980-3982 &4459/Mum/2013 L & T Finance Limited Assessment Years 2005-06 to 2007-2008 order of the Tribunal for AY 2004-05, we find that the assessee had raised issue of double taxation of Rs.88.54 Lacs in that year also where the matter was remanded back to the file of Ld. AO to grant consequential relief to the assessee in view of the fact that entire gains on securitization were held to be taxable in that year only. It is altogether a new claim and therefore, while admitting the same, it is remitted back to the file of Ld. AO for consideration with a direction to the assessee to substantiate the same by providing details adequate details / explanation thereof for various assessment years failing which Ld. AO shall be at liberty to adjudicate the same on the basis of material available on record. Needless to add that addition on account of gain on securitization amounting to Rs.6,13,49,875/- stands confirmed by us following the decision of this Tribunal in earlier years. The relief to the extent of income which is already offered to tax by the assessee in various assessment years shall be granted in respective assessment years only so as to avoid the double taxation of the same income. Resultantly, this ground stands allowed for statistical purposes. 5.4 Ground Numbers 4 to 6 are related with disallowance u/s 14A. Ground No. 6 contests adjustment of 14A disallowance against Book Profits for the purpose of computation of Minimum Alternative Tax [MAT] u/s 115JB. So far as the adjustment of disallowance u/s 14A in computation of book profit u/s 115JB is concerned, we find that the matter stood squarely in assessee’s favour by the decision of Delhi Tribunal (Special Bench) rendered in ACIT Vs. Vireet Investment (P.) Ltd. [82 Taxmann.com 415].

ITA Nos.3980-3982 &4459/Mum/2013 L & T Finance Limited Assessment Years 2005-06 to 2007-2008 Upon perusal of the same, we find that Special Bench, after considering two contrary decision of Hon’ble Delhi High Court titled as CIT Vs. Goetze (India) Ltd. [2014 361 ITR 505] & PCIT Vs. Bhushan Steel Ltd. [ITA 593/2015 dated 29/09/2015], took the view favorable to the assessee in terms of ratio of decision of Hon’ble Supreme Court rendered in CIT Vs. Vegetable Products Limited [1973 88 ITR 192]. The decision in PCIT Vs. Bhushan Steel Ltd., in turn, placed reliance on the decision of Hon’ble Supreme Court rendered in Apollo Tyres Ltd. Vs. CIT [255 ITR 273] which held that the Assessing Officer did not have the jurisdiction to go behind the net profit shown in the Profit & Loss Account except to the extent provided in Explanation to Section 115J. Similar view has been expressed by our jurisdictional Bombay High Court rendered in CIT Vs. JSW Energy Limited [2015 60 Taxmann.com 303], CIT v. Essar Teleholdings Ltd. [ITA No. 438 of 2012, dated 07/08/2014] & CIT Vs. Bengal Finance & Investments Pvt. Limited [ITA No. 337 of 2013 dated 10/02/2015]. Therefore, respectfully following the catena of judgment in assessee’s favour, we, at the outset, hold that adjustment of disallowance u/s 14A was not required to be made in Book Profits for the purpose of Section 115JB. Resultantly, Ground No. 6 stands allowed. 5.5 So far as the quantum disallowance u/s 14A as raised in Ground Numbers 3 & 4 is concerned, the primary contention of Ld. AR is that the assessee had sufficient interest free own funds to make the investments and therefore, a presumption had to be drawn that investments were out of

ITA Nos.3980-3982 &4459/Mum/2013 L & T Finance Limited Assessment Years 2005-06 to 2007-2008 interest free funds as against interest bearing loans unless a nexus between the investment and interest bearing loans is clearly established. Upon perusal of Tribunal’s order for AY 2004-05, ITA No. 980/Mum/2012 13/12/2017, we find that disallowance u/s 14A for Rs.39.84 Lacs was deleted by the Tribunal upon noticing that owned funds far exceeded the investments made by the assessee and therefore, decided the matter in assessee’s favor by following the ratio of the decision of Hon’ble Bombay High Court rendered in CIT Vs. HDFC Ltd. 366 ITR 505]. In the impugned AY, from perusal of financial statements, it has been noted that assessee’s Share Capital and Reserves stood at Rs.133.96 Crores as against investment of Rs.62.35 Crores. Although, it is further noted that there was increase in investment to the tune of Rs.21.70 crores in the impugned AY as against increase of Rs.14.23 Crores in the Share Capital & free reserves, we find that the revenue has nowhere established the nexus between borrowed funds and investments but straightway computed the disallowance which was not fair and justified. Therefore, following the Tribunal’s order for earlier years, since aggregate interest free owned funds far exceeded aggregate investment, drawing the presumption in assessee’s favor, we delete the impugned addition. Resultantly, this ground of assessee’s appeal succeeds. 5.6 Ground Number 7 is related with disallowance u/s 40(a)(ia) on account of delayed payment of TDS. The Ld. AR has placed reliance on the amendment to Section 40(a)(ia) made by the Finance Act, 2010 and

ITA Nos.3980-3982 &4459/Mum/2013 L & T Finance Limited Assessment Years 2005-06 to 2007-2008 contended that the matter stood covered in assessee’s favour by the judgment of Hon’ble Delhi High Court rendered in CIT Vs. Naresh Kumar [362 ITR 256] . It is evident from paragraph 6.2 of the order of Ld. CIT(A) that although the TDS has been deposited by the assessee beyond due date but it is well before the due date of filing of return of income by the assessee. The facts of the issue are squarely covered by the ratio of cited decision of Hon’ble Delhi High Court where it has been held that the provisions of Section 40(a)(ia) were to be interpreted liberally and equitably keeping in mind the object and purpose behind the same so that the assessee do not suffer unintended and deleterious consequences and therefore the amendment to Section 40(a)(ia) as made by Finance Act, 2010 was retrospective in nature and therefore the amount of TDS which is deposited late but before due date of filing of return of income enables the assessee to claim the deduction of the expenditure in the concerned year itself. Respectfully following the same, by deleting the impugned addition, we allow this ground of assessee’s appeal. 6. Resultantly, the assessee’s appeal stands partly allowed in terms of our above order. ITA No. 3981/Mum/2013 for AY 2006-07-Assessee’s Appeal 7. The assessee, in this year has raised identical worded original grounds of appeal as well as additional grounds of appeal which may be summed up in the following manner:- 1. On the facts and circumstances of the case and in law, the learned Commissioner of Income tax (Appeals) erred in confirming the action of the

ITA Nos.3980-3982 &4459/Mum/2013 L & T Finance Limited Assessment Years 2005-06 to 2007-2008 assessing officer to treat the gain arising on sale of equity shares and mutual funds as business income instead of short term capital gain. 2. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in confirming the disallowance of depreciation in respect of motor cars given under finance lease by the appellant company. 3. The Assessing Officer erred in indulging in double taxation in respect of gain on securitization which had already been taxed by him (as confirmed by the Tribunal for earlier years) as under: Assessment Year Amount(Rs.) 2003-04 4,75,04,976 2004-05 88,53,915 4. The Assessing Officer failed to consider that the Appellant had itself offered income in the current year, out of the amounts mentioned in Additional Ground No.1 above, on a spread-over basis in its Return of Income 5. Both the lower authorities erred in disallowing expenditure amounting to Rs.18.49 lakhs by applying Rule 8D(2)(iii). 6. Both the lower authorities erred in applying Rule 8D for computing disallowance under section 14A for Assessment Year 2006-07. 7. Without prejudice to Ground Nos.3 and 4, the Appellant submits that the disallowance under section 14A does not lie in respect of those investments in respect of which dividend was not earned. 8. Having regard to the facts and circumstances of the case, the disallowance of expenditure under section 14A is highly excessive and needs to be reduced substantially. 9. Both the lower authorities erred in disallowing expenditure of Rs.18.49 lakhs under section 14A for the purpose of computing book profit under section 115JB of the Income-tax Act. 10. Without prejudice to the Original Ground of Appeal No.1, in case it is held that the gain arising on sale of equity shares is taxable business income, then the Appellant should be granted rebate under section 88E in respect of the securities transaction tax (STT) paid on purchase and sale of shares. We find that Ground Numbers 1,3,4,9 & 10 has already been decided by us in assessee’s appeal for AY 2005-06 and the facts are pari-materia the same. Therefore, taking the same view, Ground No.1 stands allowed in assessee’s favour subject to adjustment of intra-day gains which makes Ground No. 10 infructuous. Ground No. 9 viz. adjustment of disallowance u/s 14A in Section 115JB stands allowed in assessee’s favour whereas Ground Numbers 3 & 4 raises new claims by the assessee and therefore,

ITA Nos.3980-3982 &4459/Mum/2013 L & T Finance Limited Assessment Years 2005-06 to 2007-2008 remitted back to the file of Ld. AO on similar lines. Hence, the same stands allowed for statistical purposes. 8.1 Ground No. 2 is related with allowance of depreciation on motors cars given on finance lease basis. Facts related to the same are that the assessee claimed depreciation of Rs.50.81 Lacs on vehicles claimed to be given on lease. The Ld. AO opined that the same were mere financing in nature and the borrowers were the actual owner. Relying on the decision of Hon’ble Supreme Court rendered in Asea Brown Boveri Ltd. Vs. IFCI [154 Taxman 512], Ld. AO denied depreciation to the extent of Rs.50.81 Lacs and allowed consequential relief to the extent of Rs.31.43 Lacs, being capital recovery of loans included in the lease rentals. The Ld. CIT(A) after perusal of various clauses of agreement confirmed the stand of Ld. AO that the transactions were mere ‘granting of loans’ in the nature of finance lease and the lessees were the real owner of the vehicles and therefore, the depreciation could not be allowed to the assessee. Aggrieved, the assessee is in further appeal before us. 8.2 The Ld. AR, placing reliance on the judgment of Apex Court rendered in I.C.D.S. Ltd. Vs. CIT [350 ITR 527], drew attention to the fact that the matter was decided by the Tribunal against the assessee from AYs. 1995- 96 to 1999-2000 vide ITA Nos. 2574-76/Mum/2010 & 4345-46/Mum/2010 but the same were later on recalled in view of cited decision of Hon’ble Supreme Court and the issue was decided in favour of the assessee. The copies of the orders have been placed before us. It has been further

ITA Nos.3980-3982 &4459/Mum/2013 L & T Finance Limited Assessment Years 2005-06 to 2007-2008 pointed out that the issue has again been decided by Tribunal in assessee’s favour right from AYs 2000-01 to 2003-04 vide ITA Nos. 6991- 94/Mum/2011 dated 05/05/2015 and also for AY 2004-05 ITA No.980/Mum/2012 dated 13/12/2017. Per Contra, Ld. DR vehemently opposed the same and contended that the transactions were merely in the nature of loans only and the lessees were the actual owner of the vehicles and hence, depreciation could not be allowed to the assessee. Upon perusal of sample agreements and other documents produced before us, we, prima-facie agrees with the stand of the revenue that the transactions were primarily in the nature of finance lease. However, be that as the case may be, the issue has consistently been decided by the Tribunal right from AYs 1995-06 onwards in assessee’s favor and depreciation has been allowed to the assessee. The said orders have mainly relied upon the cited judgment of Hon’ble Apex Court. The revenue is not able to point out any differentiating facts in the impugned AY vis-à-vis facts of the earlier years. Therefore, we see no reason to deviate from the stand taken by several co- ordinate bench of this Tribunal and accordingly, adjudicate the matter in assessee’s favour. The benefit of capital recovery or any other corresponding benefit granted by Ld. AO to the assessee shall stand withdrawn. The Ld. AO is directed to re-compute the same. Accordingly, this ground stands allowed in assessee’s favour. 8.3 Ground Numbers 5 to 8 are related with disallowance u/s 14A. In this year, Ld. AO has computed aggregate disallowance of Rs.240.06 Lacs u/s

ITA Nos.3980-3982 &4459/Mum/2013 L & T Finance Limited Assessment Years 2005-06 to 2007-2008 14A in terms of Rule 8D which comprised of interest disallowance of Rs.221.57 Lacs u/r 8D(2)(ii) and expense disallowance of Rs.18.49 Lacs u/r 8D(2)(iii). The Ld. CIT(A) deleted the interest disallowance upon perusal of factual matrix but confirmed the expense disallowance for Rs.18.49 Lacs against which the assessee is in further appeal before us. The Ld. AR has made tow fold submissions to contend that Rule 8D was not applicable in this year and further the investments which did not yield any exempt income during the year would not enter into the computations thereof. Upon perusal, we concur with the stand of Ld. AR that Rule 8D was not applicable during the impugned AY and therefore, disallowance, if any, was required to be made only on an estimated basis. We find that the assessee has earned exempt income of Rs.281.06 Lacs in the impugned AY and therefore, upon factual matrix, we estimate the same @2% of the exempt income which comes to Rs.5.62 Lacs. The assessee gets partial relief for the balance addition. Accordingly, these grounds stands partly allowed. In nutshell, the assessee’s appeal stands partly allowed. ITA No. 3982/Mum/2013 for AY 2007-08-Assessee’s Appeal 9. The original grounds as well as additional grounds raised by the assessee may be summed up in the following manner:- 1. On the facts and circumstances of the case and in law, the learned Commissioner of Income tax (Appeals) erred in confirming the action of the assessing officer to treat the gain arising on sale of equity shares and mutual funds as business income instead of short term capital gain. 2. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in confirming the disallowance of depreciation in respect of motor cars given under finance lease by the appellant company.

ITA Nos.3980-3982 &4459/Mum/2013 L & T Finance Limited Assessment Years 2005-06 to 2007-2008 3. The Assessing Officer erred in indulging in double taxation in respect of gain on securitization which had already been taxed by him (as confirmed by the Tribunal for earlier years) as under: Assessment Year Amount(Rs.) 2003-04 4,75,04,976 2004-05 88,53,915 4. The Assessing Officer failed to consider that the Appellant had itself offered income in the current year, out of the amounts mentioned in Additional Ground No.1 above, on a spread-over basis in its Return of Income 5. Both the lower authorities erred in disallowing expenditure amounting to Rs.14.33 lakhs by applying Rule 8D(2)(iii). 6. Both the lower authorities erred in applying Rule 8D for computing disallowance under section 14A for Assessment Year 2007-08. 7. Without prejudice to Ground Nos.3 and 4, the Appellant submits that the disallowance under section 14A does not lie in respect of those investments in respect of which dividend was not earned. 8. Having regard to the facts and circumstances of the case, the disallowance of expenditure under section 14A is highly excessive and needs to be reduced substantially. 9. Both the lower authorities erred in disallowing expenditure of Rs.14.33 lakhs under section 14A for the purpose of computing book profit under section 115JB of the Income-tax Act. 10. Without prejudice to the Original Ground of Appeal No.1, in case it is held that the gain arising on sale of equity shares is taxable business income, then the Appellant should be granted rebate under section 88E in respect of the securities transaction tax (STT) paid on purchase and sale of shares.

10.1 We find that all the issues as raised above have already been adjudicated by us in AYs 2005-06 & 2006-07. The facts are pari-materia the same. Therefore, taking the same stand, Ground No. 1 stands partly allowed in assessee’s favour subject to adjustment of intra-day gains. Ground No. 2 stands allowed subject to withdrawal of corresponding benefit granted by the revenue to the assessee whereas Ground No. 9 stands allowed. Ground No. 10 is treated as dismissed being infructuous since Ground No. 1 has been held in assessee’s favour. Ground Numbers 3 & 4 raises new claims by the assessee and therefore, remitted back to the file

ITA Nos.3980-3982 &4459/Mum/2013 L & T Finance Limited Assessment Years 2005-06 to 2007-2008 of Ld. AO on similar lines. Hence, the same stands allowed for statistical purposes. 10.2 Ground Numbers 5 to 8 are related with disallowance u/s 14A. The assessee earned exempt income of Rs.138.37 Lacs during the year and during proceedings before Ld. AO, furnished disallowance in terms of Rule 8D at Rs.185.66 Lacs which has been confirmed by Ld. AO. The Ld. CIT(A), upon factual matrix, restricted the same to Rs.14.33 Lacs u/r 8D(2)(iii) against which the assessee is in further appeal before us. Since we have already estimated the same @2% in AY 2006-07, taking the same stand, we restrict the same to 2% of exempt income which comes to Rs.2.76 Lacs. The assessee gets partial relief for the balance addition and therefore, these grounds stands partly allowed. Resultantly, the assessee’s appeal stands partly allowed. ITA No. 4459/Mum/2013 for AY 2006-07 – Revenue’s Appeal 11. The revenue has raised the following effective grounds of appeal vide revised Form 36 dated 20/05/2016:- The order of the CIT(A) is opposed to law and facts of the case. 1. 2. On the facts and in the circumstances of the case and law, the Ld. CIT(A) has erred in allowing and accepting the claim of the assessee directly during the appeal proceeding, without giving opportunity to the AO to be heard. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in accepting the claim of assesse overlooking the provision of section139(1) and 139(4) of the I.T. Act,1961 which states that revised return is required to be filed within one year from of the end of the relevant assessment year or before the completion of assessment, whichever is earlier.

ITA Nos.3980-3982 &4459/Mum/2013 L & T Finance Limited Assessment Years 2005-06 to 2007-2008 income but claimed the same during assessment proceedings before Ld. AO. The Ld. AO relying on the decision of Hon’ble Supreme Court rendered in Goetz (India) Ltd. Vs. CIT [284 ITR 323] opined that the same could be claimed only by filing the revised return of income. The Ld. CIT(A) allowed the same by following the decision of this Tribunal rendered in Balmukund Acharya [310 ITR 310] which was rendered after considering the several judicial pronouncements of higher judicial authorities. Aggrieved, the revenue is in further appeal before us. The Ld. DR contended that the Ld. CIT(A) erred in granting relief to the assessee without confronting the same to Ld. AO and moreover, the factual matrix was nowhere examined by Ld. AO. The Ld. AR contended that, in all fairness, the legitimate claims were allowed to the assessee. After hearing, we concur with the proposition that legitimate claims could not be denied to the assessee and further, there was no bar on appellate authorities to entertain new claims which were not made in the return of income in terms of decision of Hon’ble Bombay High Court rendered in CIT Vs. Pruthvi Brokers and Shareholders Private Ltd. [349 ITR 336]. However, it appears from the order of Ld. first appellate authority that the factual matrix has not been verified by the lower authorities. Therefore, we concur with the stand of Ld. CIT(A) subject to verification of factual matrix by Ld. AO. Therefore, the matter is remitted back to the file of Ld. AO for verification of factual matrix with a direction to the assessee to provide necessary details thereof to substantiate his claim.

ITA Nos.3980-3982 &4459/Mum/2013 L & T Finance Limited Assessment Years 2005-06 to 2007-2008 Resultantly, the department’s appeal stands allowed for statistical purposes. Conclusion 13. ITA Nos. 3980 to 3982/Mum/2013 stands partly allowed whereas ITA No. 4459/Mum/2013 stands allowed for statistical purposes.

Order pronounced in the open court on 24th January, 2018.

Sd/- Sd/- (Saktijit Dey) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member

मुंबई Mumbai; िदनांक Dated : 24.01.2018 Sr.PS:- Thirumalesh आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��थ� / The Respondent 2. आयकर आयु�(अपील) / The CIT(A) 3. आयकर आयु� / CIT – concerned 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai 5. गाड� फाईल / Guard File 6.

आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, मुंबई / ITAT, Mumbai