ACIT,, CHENNAI vs. M/S. SUNDARAM FASTERNERS LTD.,, CHENNAI

आदेश / O R D E R

PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER

These are appeals and cross appeals filed by assessee and

Revenue respectively for the assessment years 2006-07, 2007-08 and

2008-2009 directed against the orders of the Commissioner of Income

Tax (Appeals) for the impugned assessment years. Cross appeals of

the assessee and Revenue for the assessment year 2006-2007 are

taken up first for disposal in that order.

Assessee in its appeal has taken altogether thirteen grounds 2.

of which Grounds No. 1 & 13 are general in nature needing no specific

adjudication.

Through its Ground Nos.2 to 4, the assessee is aggrieved by 3.

a disallowance of software expenditure of �15,61,995/-.

The ld. Counsel for the assessee submitted that the 4.

software which were acquired by the assessee did not result in any

enduring benefit to it. As per the ld. Authorised Representative these

were payments for renewing software licenses and for antivirus for

ITA Nos.591 & 675/12, 1165, :- 3 -: 1166, 1171 & 1172/13. disaster recovery system and for internet usage tracker. The ld.

Authorised Representative submitted that the ld. Assessing Officer

erroneously held it to be acquisition of capital asset and disallowed the

claim. As per the ld. Authorised Representative, the ld. Commissioner

of Income Tax (Appeals) confirmed the treatment without properly

appreciating the facts relying on the judgment of Hon’ble Delhi High

Court in the case of CIT vs. Asahi India Safety Glass (346 ITR 329).

The ld. Authorised Representative submitted that the expenditure

incurred for acquiring software which did not give enduring benefit

could only be considered as Revenue expenditure.

Per contra, the ld. DR strongly supported the orders of the 5.

authorities below.

orders of the authorities below. It is not disputed by the Revenue that

type of software acquired had maximum life of two to three years only.

These were not system software but application software. In view of

the judgment of Hon’ble Delhi High Court in the case of Asahi India

Safety Glass (supra) we are of the opinion that claim had to be

allowed. We therefore, delete the disallowance of �15,61,995/-

ITA Nos.591 & 675/12, 1165, :- 4 -: 1166, 1171 & 1172/13. 8. Vide its ground Nos. 5 to 8, the grievance raised by the

assessee is that upfront lease rent of �5,96,80,000/- was disallowed

by the lower authorities as capital expenditure.

lease rent advance was paid for obtaining leasehold land at Mahindra

SEZ Chennai. As per ld. Authorised Representative payment of the

lease advance gave it a right over the land for 99 years for setting up

a manufacturing facility. The ld. Authorised Representative submitted

that lower authorities erroneously considered it to be capital outgo for

a reason that commercial production from the manufacturing facility

setup in the leased land started only in September, 2007. As per the

ld. Authorised Representative the ld. Commissioner of Income Tax

(Appeals) had confirmed the findings of the ld. Assessing Officer

without expressing any specific reasons why he was rejecting the

contention taken by the assessee. As per the ld. Authorised

Representative by virtue of judgment of jurisdictional High Court in

the cases of CIT vs. Gemini Arts Pvt. Ltd. 254 ITR 201 and CIT vs.

Rane (Madras) Ltd 293 ITR 459 such lease advance payment could

only be considered as Revenue in nature.

ITA Nos.591 & 675/12, 1165, :- 5 -: 1166, 1171 & 1172/13. Enterprising Enterprises vs. DCIT 293 ITR 437(SC) submitted that

payment for acquiring leasehold rights was capital expenditure.

We have considered the rival contentions and perused the 11.

orders of the authorities below. It is not disputed that by virtue of

upfront lease rent of �5,96,80,000/- paid, assessee had obtained

lease right for 99 years over 14.92 acres of land. Assessee has started

manufacturing facility over the said land in September, 2007. No

doubt, the jurisdictional High Court in the case of Gemini Arts Pvt. Ltd

(supra) relied on by the ld. Authorised Representative had held that

lumpsum lease rent payments, which gave no other advantage than

relief from paying annual rent, could not be considered as capital

outgo but only as Revenue expenditure, allowable in the year in which it was paid. The above judgment is dated 1st August, 2001. In the

case of Rane (Madras) Ltd (supra) their lordship had held that

expenditure incurred for setting up new factory which resulted in

extension of an existing unit could only be considered as Revenue

expenditure. We find that judgment in the case of Gemini Arts Pvt. Ltd

(supra) was pronounced much earlier to the judgment of Hon’ble Apex

Court in the case of Enterprising Enterprises (supra). In the last

mentioned case, the Hon’ble Apex Court had clearly held that

irrespective of whether lease money was paid as slumpsum or

installment it was nothing but capital expenditure. As for the reliance

ITA Nos.591 & 675/12, 1165, :- 6 -: 1166, 1171 & 1172/13. placed by the ld. Authorised Representative on Rane (Madra) Ltd

(supra) the issue there was the nature of expenditure incurred for

setting up a new factory which was extension of an existing unit.

Here on the other hand, the facts show that the assessee had obtained

leasehold right for 99 years over the land which was definitely in the

nature of acquisition of a capital asset. Therefore, we are of the

opinion that the disallowance was righty done by the lower authorities.

No interference is required. Ground Nos. 5 to 8 of the assessee stand

dismissed.

assessee is on failure on the ld. Assessing Officer to give credit for TDS

and TCS claimed in the Return of income.

was correctly made by the assessee is the issue need to be examined

afresh by the ld. Assessing Officer. If the assessee is able to show

evidence for TDS/TCS of �28,81,980/-, the ld. Assessing Officer is

directed to give such credit. Accordingly, ground Nos. 9 to 12 of the

assessee is treated as allowed for statistical purpose.

ITA Nos.591 & 675/12, 1165, :- 7 -: 1166, 1171 & 1172/13. 14. In the result, the appeal of the assessee in ITA

No.591/Mds/2012 of assessment year 2006-07 is partly allowed for

statistical purpose.

No.675/Mds/2012 of assessment year 2006-2007:- The Revenue has

altogether raised five grounds of which ground No.1 & 5 are general in

nature needing no specific adjudication.

Vides its ground No.2, the grievance of the Revenue is that 16.

the ld. Commissioner of Income Tax (Appeals) restricted disallowance

u/s.14A of the Act to 2% of the dividend income.

Before us, the ld. Departmental Representative submitted 17.

that original disallowance made by the ld. Assessing Officer was

�27,46,264/- applying Rule 8D of the Act. Further as per ld.

Departmental Representative the ld. Commissioner of Income Tax

(Appeals) unfairly curtailed disallowance to 2% of the exempted

income.

judgment of Hon’ble Bombay High Court in the case of Godrej and

Boyce Mfg. Co. Ltd vs. DCIT and another 328 ITR 81.

ITA Nos.591 & 675/12, 1165, :- 8 -: 1166, 1171 & 1172/13. 19. We have considered the rival contentions and perused the

orders of the authorities below. By virtue of judgment of Bombay High

Court in the case of Godrej and Boyce Mfg. Co. Ltd (supra) Rule 8D

cannot be applied for the impugned assessment year. However,

Sec.14A of the Act was very much there in statute for the impugned

assessment year. Hence, disallowance under the said section could be

made dehorse the rules. Co-ordinate Benches of the Tribunal are

taking consistent view that disallowance of 2% of the exempt income

would suffice for the years were Rule 8D were not applicable. Hence,

we find no error in the order of the ld. Commissioner of Income Tax

(Appeals) in restricting disallowance 2% of the dividend income

claimed by the assessee as exempt. Accordingly, we dismiss the

ground No.2 of the Revenue.

that the ld. Commissioner of Income Tax (Appeals) deleted a

disallowance of notional interest working out to �2,70,52,088/-, as

relatable to interest free loans granted by the assessee to its

subsidiary.

that assessee could not show commercial expediency for the loans

given to its subsidiaries. As per ld. Departmental Representative, the

ITA Nos.591 & 675/12, 1165, :- 9 -: 1166, 1171 & 1172/13. assessee had borrowed �43,860/- lakhs of which it had given free

interest loan of �3,379/- lakhs. Ld. Departmental Representative

submitted that interest of �2,958/- lakhs was paid by the assessee on

the loans taken by it. As per ld. Departmental Representative the

amount of interest free loans were utilized by Sundaram Fasteners

Investment Ltd (SFIL) which in turn gave loans to certain other

companies. Thus, as per ld. Departmental Representative assessee

could not demonstrate how the loans given were commercially

expedient.

Per contra, the ld. Authorised Representative supported the 22.

orders of the Commissioner of Income Tax (Appeals) and submitted

that by virtue of judgment of Apex Court in the case of S.A. Builders

Ltd vs. CIT (A) and Another (2007) 288 ITR 1(SC) loans given to

subsidiary were always deemed commercial expedient. According to

him, M/s. SFIL was making investments and giving inter corporate

loans to its subsidiaries in China since assessee could not directly

invest in a subsidiary in China. Further, as per the ld. Authorised

Representative in Revenue’s appeal for assessment year 2005-06,

same issue had come up before and Tribunal in ITA

No.1011/Mds/2011 vide order dated 15.07.2016 deleted such interest

disallowance.

ITA Nos.591 & 675/12, 1165, :- 10 -: 1166, 1171 & 1172/13. 23. We have considered the rival contentions and perused the

orders of the authorities below. No doubt the issue was decided in

favour of the assessee by this Tribunal for the assessment year 2005-

06 on Revenue appeal. However, in the said order, the assessee could

demonstrate that the amounts loaned to the subsidiary companies

was much less than its net worth. As for as the reliance placed by the

assessee on the judgment of Apex Court in the case of S.A. Builders

Ltd (supra), the lordship had remitted the matter back to the Tribunal

for enquiry whether interest loans were given to the sister concern was

as a measure of commercial expediency. Their lordship took a view

that once nexus was established between the expenditure and the

purpose of the business, which need not necessary be business of the

assessee itself, Revenue could not disallow the claim assuming what

was reasonable. Considering, the facts and circumstances of the case,

we are of the opinion that lower authorities failed to verify whether

loans given by the assessee to its subsidiaries were commercially

expedient. The amount that were given as loans was not stagnant.

Therefore, we set aside the order of the lower authorities and remit

the issue regarding allowability of pro-rata interest on interest free

loans granted to subsidiaries, back to the file of the ld. Assessing

Officer for consideration of fresh in accordance with law. Ground No.3

of the Revenue is allowed for statistical purpose.

ITA Nos.591 & 675/12, 1165, :- 11 -: 1166, 1171 & 1172/13. 24. Vide its ground No.4, the ground raised by the Revenue is

that ld. Commissioner of Income Tax (Appeals) deleted disallowance of

�3,04,36,000/- made by the ld. Assessing Officer for want of deduction

tax of source relying on Sec. 40(a)(ia) of the Act.

The ld. Departmental Representative submitted that the 25.

export commissions paid to Non Resident Agents fell within the ambit

of Sec. 195(1) of the Act. As per ld. Departmental Representative if

the assessee was of the opinion that there was no need for deducting

tax at source then it should have obtained a certificate from the ld.

Assessing Officer as stipulated u/s.195(2) of the Act. Further, as per

ld. Departmental Representative by virtue of explanation added below

Sec. 9 of the Act through Finance Act, 2010 with retrospective effect

from 01.06.1976 there was no requirement of residency of a Non

Resident or place of business or business connection in India, nor it

was necessary for the non resident to render services in India

Per contra, the ld. Authorised Representative submitted that 26.

Non Resident person to whom sale commission was paid was

canvassing sales for the assessee abroad and no part of their services

were rendered in India. As per ld. Authorised Representative non-

resident agent was providing warehousing services in foreign soil.

ITA Nos.591 & 675/12, 1165, :- 12 -: 1166, 1171 & 1172/13. According to him no part of income could arise in India since non-

resident was doing business exclusively outside India.

We have considered the rival contentions and perused the 27.

orders of the authorities below. We find ld. Commissioner of Income

Tax (Appeals) had relied on the judgment of GE Technology Centre vs.

CIT (327 ITR 456) (SC) for giving relief to the assessee and had

extensively extracted the relevant paras of the judgment. The ld.

Commissioner of Income Tax (Appeals) held that Sec. 195(2) of the

Act, applied only for composite payments. Here on the other hand,

commission was paid to foreign agent for services rendered outside

India. It is true that by virtue of Explanation to Section 9, substituted

by Finance Act, 2010 with retrospective effect, it was not necessary for

a non-resident to have a place of business or business connection in

India for being fastened with a tax liability in India. However, the said

Explanation applies only to income by way of interest, income by way

of Royalty and income by way of fees for technical services. There is

no case for the Revenue that earning of the foreign agent fell in any

of these three categories. In such a situation, we are of the opinion

that agent having rendered services only outside India, assessee was

required to deduct tax at source on payments made to them. We do

not find any reason to interfere with the order of the ld. Commissioner

ITA Nos.591 & 675/12, 1165, :- 13 -: 1166, 1171 & 1172/13. of Income Tax (Appeals). Ground No.4 of the Revenue stand

dismissed.

In the result, the appeal of the Revenue in ITA 28.

No.675/Mds/2012 is partly allowed for statistical purpose.

No.1166/Mds/2013, of assessment year 2008-2009:- The assessee in

its appeal has taken altogether seven grounds of which Ground Nos. 1

& 7 are general in nature needing no specific adjudication.

In Ground No.2, the assessee is aggrieved by the 30.

disallowance of software expenditure of �51,82,081/-.

We find that similar issue was raised by the assessee in its 31.

appeal for the assessment year 2006-2007 also. Software purchased

and the payment was made for relevant previous year were also

similar. It consisted of application software and user licenses. For the

reasons by us at para 6, we are of the opinion that ld. Commissioner

of Income Tax (Appeals) was justified in allowing the claim. The

ground No. 2 is therefore treated as allowed.

on disallowance of additional depreciation.

ITA Nos.591 & 675/12, 1165, :- 14 -: 1166, 1171 & 1172/13. 33. Before us, the ld. Authorised Representative submitted

additional depreciation of �99,57,900/- claimed by the assessee was

disallowed by the ld. Assessing Officer on a ground that such

depreciation was admissible only in the year in which new plant and

machinery was put to use. As per ld. Authorised Representative, the

ld. Commissioner of Income Tax (Appeals) erroneously confirmed this

view of the ld. Assessing Officer disregarding the arguments of the

assessee that machinery on which additional depreciation was claimed

was acquired during the second half of financial year 2006-07 and

therefore balance of the additional depreciation which was restricted

to 50% of the eligible amount had to be allowed in the impugned

assessment year. In support of this, ld. Authorised Representative

placed reliance on judgment of Karnataka High Court in the case of

CIT vs. Rittal India Pvt. Ltd 380 ITR 428.

Per contra, the ld. DR strongly supported the orders of the 34.

authorities below.

orders of the authorities below. There is no dispute, that the

additional depreciation claimed by the assessee was balance of what

remained out of such depreciation claimed in the immediate preceding

year. There is also no dispute that such claim was restricted to

ITA Nos.591 & 675/12, 1165, :- 15 -: 1166, 1171 & 1172/13. 50% of the eligible

amount for use less than 180 days. The issue whether such additional

depreciation to the extent not allowed due to restriction placed on

account of usage for a period less than 180 days could be allowed in

the succeeding year had come up for hearing before Jurisdictional High

Court in the case of Rittal India Pvt. Ltd (supra), and Hon’ble High

Court had held in favour of the assessee. Accordingly, we are of the

opinion that claim of additional depreciation of �99,57,900/- has to be

allowed. Disallowance of the claim is deleted. Ground 3 of the

assessee is allowed.

Through ground No.4, assessee is aggrieved by levy of 36.

interest u/s.234D of the Act.

Before us, the ld. Authorised Representative submitted that 37.

such interest should be computed on tax that remained payable from

the date of grant of refund to the date of regular assessment. As per

ld. Authorised Representative interest could not be charged on interest

allowed to the assessee u/s.244(A) of the Act on refund issued. The

ld. Authorised Representative submitted that similar issue was

adjudicated by the Tribunal in assessee’s own case for the assessment

year 2003-04 in ITA No.1109/Mds/2011, dated 15.07.2016.

ITA Nos.591 & 675/12, 1165, :- 16 -: 1166, 1171 & 1172/13.

authorities below.

We have considered the rival contentions and perused the 39.

orders of the authorities below. We find that similar issue came up

before Tribunal in Revenue appeal for the assessment year 2003-2004

and relevant part of the decision dated 15.07.2016 is reproduced

hereunder:-

‘’3. Regarding the second issue, relating to the levy of interest u/s 234D of the Act, Ld Counsel for the assessee fairly submitted that the said issue has to be decided in favour of the Revenue in view of the subsequent judgment of the Hon'ble Madras High Court in the case of CIT vs. Infrastructure Development Finance Co. Ltd [2012] 340 ITR 580 ( Mad.), which is relevant for the proposition that for the applicability of provisions of section 234D, the date of assessment is relevant and not the year of assessment therefore/ when once the regular assessment is completed after the amended proviso of law (i. e 1.6.2003) came into operation the assessee is liable to pay interest on the refunded amount as contemplated u/s 234D of the Act.

ITA Nos.591 & 675/12, 1165, :- 17 -: 1166, 1171 & 1172/13. that the decision taken by the CIT (A) vide para 5.3 of the impugned order is required to be reversed on this issue. Considering the same, the second issue raised by the Revenue is decided in favour of the assessee and against the Revenue’’.

Accordingly, we are of the opinion that claim of the assessee has to

be allowed. The ld. Assessing Officer is directed to rework interest

levied u/s.234D of the Act. Ground No.4 is allowed.

Vide ground No.5, the assessee is aggrieved on 40.

disallowance of Long Term Capital Loss on redemption of units of

ICICI Venture Capital Fund and vide ground no.6 assessee is

aggrieved on disallowance of upfront lease rent of �27,80,596/-.

authorities relying on the decision of Apex Court in the case of Goetze

(India) Ltd vs. CIT (2006) 284 ITR 323 refused to consider above

claims. As per ld. Authorised Representative long term capital loss was

claimed by the assessee during the course of assessment proceeding

through letter dated 5.4.2010 addressed to the ld. Assessing Officer.

As for upfront lease rent, the ld. Authorised Representative submitted

it had made the claim first time made before the Commissioner of

Income Tax (Appeals). According to ld. Authorised Representative

judgment of Apex Court in the case of Goetze (India) Ltd (supra) only

ITA Nos.591 & 675/12, 1165, :- 18 -: 1166, 1171 & 1172/13. restricted the powers of the ld. Assessing Officer and did not impinge

on the powers of the ld. Appellate Authority to give relief.

Per contra, the ld. DR strongly supported the orders of the 42.

authorities below.

We have considered the rival contentions and perused the 43.

orders of the authorities below. It is true that assessee did not file

revise its return either for claiming long term capital loss or for

claiming the upfront lease rent. Nevertheless, the assessee has filed

letter before ld. Assessing Officer making a claim for long term capital

loss and had filed additional ground before ld.Commissioner of Income

Tax (Appeals) for claiming upfront lease rent. The ld. Commissioner of

Income Tax (Appeals) relying on the Apex Court judgment of Goetze

India Limited (supra) dismissed both these claim. In our opinion by

virtue of judgment of Apex Court in the case of National Thermal

Power Corporation vs. CIT 229 ITR 383 (SC) the Appellate authorities

could consider such claims. Hon’ble Apex Court in the case of Goetze

India Limited (supra) only limited the powers of the ld. Assessing

Officer. We are therefore of the opinion that ld. Commissioner of

Income Tax (Appeals) fell in error in not considering both these

grounds on merit. We therefore, set aside the order of the ld.

Commissioner of Income Tax (Appeals) and remit the issue regarding

ITA Nos.591 & 675/12, 1165, :- 19 -: 1166, 1171 & 1172/13. claim of Long Term Capital Loss and upfront lease rent back to the file

of ld. Commissioner of Income Tax (Appeals) for consideration a fresh

in accordance with law. Ground Nos. 5 & 6 are partly allowed for

statistical purpose.

In the result, appeal of the assessee in ITA 44.

No.1166/Mds/2013 is partly allowed for statistical purpose.

for assessment year 2008-2009. The Revenue has altogether raised

four grounds of which 1 & 4 are general in nature needing no specific

adjudication.

Vide ground no.2, the Revenue is aggrieved on deletion of 46.

notional interest of �61,31,769/- attributed to interest free loans given

by the assessee to its subsidiary SFIL.

Revenue’s appeal for the assessment year 2006-2007. We have held

that at para 23 that the matter requires afresh consideration by the ld.

Assessing Officer for verifying commercial expediency. For the

impugned assessment year also similar direction is given. Ground No.

2 is allowed for statistical purpose.

ITA Nos.591 & 675/12, 1165, :- 20 -: 1166, 1171 & 1172/13. 48. Vide ground No.3, the Revenue is aggrieved on deletion of

disallowance made by the ld. Assessing Officer u/s.40(a)(ia) of the Act

for export commission paid to non-resident person.

its appeal for the assessment year 2006-2007. We have at para 27

held that disallowance was rightly deleted by the ld. Commissioner of

Income Tax (Appeals). The fact situation being the same, we do not

find any reason to interfere with the order of the Commissioner of

Income Tax (Appeals) on this issue for the impugned assessment year

also. Accordingly, ground no.3 stand dismissed.

The appeal of the Revenue in ITA No.1172/Mds/2013 of 50.

assessment year is partly allowed for statistical purpose.

Now, we take up Cross-Appeals for assessment year 2007- 51.

2008:- Assessee in its appeal has altogether raised five grounds of

which 1 & 5 are general in nature needing no specific adjudication.

Vide ground no.2, the grievance of the assessee is on 52.

disallowance of expenditure incurred on software which was confirmed

by the ld. Commissioner of Income Tax (Appeals).

its appeal for the assessment year 2006-2007. We have held at para 6

ITA Nos.591 & 675/12, 1165, :- 21 -: 1166, 1171 & 1172/13. that software expenditure being in the nature of renewal of license and

acquisition of application of software not having life of more than two

to three years could only be considered a Revenue outgo. Fact

situation being same, we delete the disallowance of �42,87,180/-.

Accordingly, ground no.2 of the assessee is deleted.

prior period expenditure of �1,08,868/- was disallowed by the ld.

Assessing Officer and such disallowance was confirmed by the ld.

Commissioner of Income Tax (Appeals).

Before us, the ld. Counsel for the assessee submitted that 55.

the bills for expenditure was received by assessee during the previous

year relevant to assessment year 2009-2010. Such expenditure as per

ld. Authorised Representative was added back in the return in the said

assessment year. Submission of the ld. Authorised Representative

was that sum was correctly claimed as prior period expenditure during

the impugned assessment year when it was incurred. Thus, according

to him the claim was unfavorably disallowed.

Per contra, ld. Departmental Representative submitted that 56.

assessee was not able to show what the type of expenditure was and

how the bills were raised in succeeding years. According to him,

disallowance is rightly made.

ITA Nos.591 & 675/12, 1165, :- 22 -: 1166, 1171 & 1172/13. 57. We have considered the rival contentions and perused the

orders of the authorities below. The claim of the assessee that bills for

the expenditure claimed as prior period was received by the assessee

only in the previous year relevant to assessment year 2009-2010. The

assessment year 2009-2010 is subsequent to the impugned

assessment year. If the expenditure was incurred in the previous year

relevant to the impugned assessment year, assessee ought have

shown it only as a provision and not as prior period of expenditure.

We are, therefore of the opinion that assessee failed to justify its

claim, and it was rightly disallowed by the lower authorities. Ground

No.3 stand dismissed.

term capital loss of �90,188/- on redemption of units of ICICI and

inclusion of tax free interest income of �1,26,765/- received from UTI.

The ld. Counsel for assessee submitted that these claim were 59.

preferred by the assessee for the first time before ld. Commissioner of

Income Tax (Appeals). As per ld. Authorised Representative, ld.

Commissioner of Income Tax (Appeals) relying on the judgment of

Hon’ble Apex Court in the case of Goetze (India) Ltd (supra) had

refused to consider the claim. However, as per the ld. Authorised

Representative by virtue of judgment of Apex Court in the case of

ITA Nos.591 & 675/12, 1165, :- 23 -: 1166, 1171 & 1172/13. National Thermal Power Corporation (supra) appellate authority had

ample powers to consider such a claim.

Per contra, the ld. DR strongly supported the orders of the 60.

authorities below.

We have considered the rival contentions and perused the 61.

orders of the authorities below. We find that similar issue has been

raised by the assessee in its appeal in assessment year 2008-2009.

We had held at para 43, that the claims had to be considered on

merits by the ld. Commissioner of Income Tax (Appeals). For the

impugned assessment year also remit the issue relating claim of long

term capital loss and claim for exclusion of tax from interest income

back to the file of the ld. Commissioner of Income Tax (Appeals) for

consideration afresh in accordance with merits of the issue.

Accordingly, ground no.4 is allowed for statistical purpose.

No.1165/Mds/2013 is partly allowed for statistical purpose.

Now, we take up Revenue appeal in ITA no.1171/Mds/2013 63.

of assessment year 2007-2008:- The Revenue has altogether raised

five grounds of which 1 & 5 are general in nature needing no specific

adjudication.

ITA Nos.591 & 675/12, 1165, :- 24 -: 1166, 1171 & 1172/13. 64. Ground no.2 raised by the Revenue is similar to its ground

no.2 for the assessment year 2006-2007.

We have upheld the order of the ld. Commissioner of Income 65.

Tax (Appeals) restricting disallowance to 2% of the exempt income.

For the very same reasons which as mentioned by us at para 19, we

are of the opinion that ld. Commissioner of Income Tax (Appeals) was

justified in restricting the addition to 2% of the exempt income. Hence

ground No.2 of the Revenue is dismissed.

in its appeal for the assessment year 2006-2007. We had remitted the

issue regarding disallowance of interest expenditure attributable to

interest free loans given to its subsidiaries back to the file of the ld.

Assessing Officer for considering the commercial expediency at para 23

above. Similar directions are given here also. Ground 3 of the

Revenue is allowed for statistical purpose.

Ground No.4 raised by the Revenue is similar to ground No.4 67.

for the assessment year 2006-2007.

For the very same reasons as mentioned by us in para 27 in 68.

above in relation to Revenue’s appeal for the assessment year 2006-

07, we uphold the order of ld. Commissioner of Income Tax (Appeals)

ITA Nos.591 & 675/12, 1165, :- 25 -: 1166, 1171 & 1172/13. deleting the disallowance made u/s.40(a)(ia) of the Act. Ground 4

raised by the Revenue is therefore dismissed.

In the result, the appeals of the assessee in ITA 69.

Nos.591/Mds/2012, 1165 &1166/Mds/2013 are partly allowed for

statistical purpose and and Revenue appeals in ITA Nos.675/2012,

1171 & 1172/2013 are also partly allowed for statistical purpose.

Order pronounced on Friday, the 30th day of September, 2016, at

Chennai.

Sd/- Sd/- (एन.आर.एस. गणेशन)) (अ�ाहम पी. जॉज�) (N.R.S. GANESAN) (ABRAHAM P. GEORGE) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER चे�नई/Chennai �दनांक/Dated: 30th September, 2016 KV आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 3. आयकर आयु�त (अपील)/CIT(A) 5. �वभागीय ��त�न�ध/DR 2. ��यथ�/Respondent 4. आयकर आयु�त/CIT 6. गाड� फाईल/GF