Sundaram Fasteners Limited, CHENNAI v. ACIT, CHENNAI

ITA 1165/CHNY/2013 | 2007-2008
Pronouncement Date: 30-09-2016 | Result: Partly Allowed

Appeal Details

RSA Number 116521714 RSA 2013
Assessee PAN AAACS8779D
Bench Chennai
Appeal Number ITA 1165/CHNY/2013
Duration Of Justice 3 year(s) 4 month(s) 3 day(s)
Appellant Sundaram Fasteners Limited, CHENNAI
Respondent ACIT, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 30-09-2016
Date Of Final Hearing 15-09-2016
Next Hearing Date 15-09-2016
Assessment Year 2007-2008
Appeal Filed On 27-05-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . !' . #$#% & '' ( [ BEFORE SHRI N.R.S. GANESAN JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER ] ./ I.T.A. NO.591/MDS/2012. / ASSESSMENT YEARS : 2006-07. SUNDRAM FASTENERS LIMITED 98-A 7 TH FLOOR DR. RADHAKRISHNAN SALAI MYLAPORE CHENNAI 600 004. VS. THE ADDIT IONAL COMMISSIONER OF INCOME TAX COMPANY RANGE VI CHENNAI 600 034. ./ I.T.A. NOS.1165 & 1166/MDS/2013. /ASSESSMENT YEARS : 2007-08 & 2008-2009 SUNDRAM FASTENERS LIMITED 98-A 7 TH FLOOR DR. RADHAKRISHNAN SALAI MYLAPORE CHENNAI 600 004. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX COMPANY RANGE VI(4) CHENNAI 600 034. ./ I.T.A. NOS.675/MDS/2012 1171 & 1172/MDS/2013. /ASSESSMENT YEARS : 2006-07 2007-08 & 2008-2 009 THE ASSISTANT COMMISSIONER OF INCOME TAX COMPANY RANGE VI(4) CHENNAI 600 034. ( )* / APPELLANT) VS. SUNDRAM FASTENERS LIMITED 98-A 7 TH FLOOR DR. RADHAKRISHNAN SALAI MYLAPORE CHENNAI 600 004. [PAN AAACS 8779D] ( + )* /RESPONDENT) ASSESSEE BY : SHRI. R. VIJAYARAGHAVAN ADV. DEPARTMENT BY : DR. MILIND MADHUKAR BHUSANI CIT. ITA NOS.591 & 675/12 1165 1166 1171 & 1172/13. :- 2 -: / DATE OF HEARING : 15 - 0 9 - 2016 / DATE OF PRONOUNCEMENT : 30 - 0 9 - 2016 / O R D E R PER ABRAHAM P. GEORGE ACCOUNTANT MEMBER THESE ARE APPEALS AND CROSS APPEALS FILED BY ASS ESSEE AND REVENUE RESPECTIVELY FOR THE ASSESSMENT YEARS 2006- 07 2007-08 AND 2008-2009 DIRECTED AGAINST THE ORDERS OF THE COMMIS SIONER OF INCOME TAX (APPEALS) FOR THE IMPUGNED ASSESSMENT YEARS. C ROSS APPEALS OF THE ASSESSEE AND REVENUE FOR THE ASSESSMENT YEAR 20 06-2007 ARE TAKEN UP FIRST FOR DISPOSAL IN THAT ORDER. 2. ASSESSEE IN ITS APPEAL HAS TAKEN ALTOGETHER THIRTE EN GROUNDS OF WHICH GROUNDS NO. 1 & 13 ARE GENERAL IN NATURE NEEDING NO SPECIFIC ADJUDICATION. 3. THROUGH ITS GROUND NOS.2 TO 4 THE ASSESSEE IS AGG RIEVED BY A DISALLOWANCE OF SOFTWARE EXPENDITURE OF B15 61 99 5/-. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT TH E SOFTWARE WHICH WERE ACQUIRED BY THE ASSESSEE DID NO T 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 1166 1171 & 1172/13. :- 3 -: DISASTER RECOVERY SYSTEM AND FOR INTERNET USAGE TRA CKER. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE LD. AS SESSING OFFICER ERRONEOUSLY HELD IT TO BE ACQUISITION OF CAPITAL AS SET AND DISALLOWED THE CLAIM. AS PER THE LD. AUTHORISED REPRESENTATIVE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE TREATMENT WIT HOUT PROPERLY APPRECIATING THE FACTS RELYING ON THE JUDGMENT OF H ONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ASAHI INDIA SAFETY GLASS (346 ITR 329). THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT TH E EXPENDITURE INCURRED FOR ACQUIRING SOFTWARE WHICH DID NOT GIVE ENDURING BENEFIT COULD ONLY BE CONSIDERED AS REVENUE EXPENDITURE. 5. PER CONTRA THE LD. DR STRONGLY SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUS ED THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT DISPUTED BY THE REVENUE THAT TYPE OF SOFTWARE ACQUIRED HAD MAXIMUM LIFE OF TWO T O THREE YEARS ONLY. THESE WERE NOT SYSTEM SOFTWARE BUT APPLICATION SOF TWARE. IN VIEW OF THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CAS E OF ASAHI INDIA SAFETY GLASS (SUPRA) WE ARE OF THE OPINION THAT CLAIM HAD TO BE ALLOWED. WE THEREFORE DELETE THE DISALLOWANCE OF B 15 61 995/- 7. GROUND NOS. 2 TO 4 STAND ALLOWED. ITA NOS.591 & 675/12 1165 1166 1171 & 1172/13. :- 4 -: 8. VIDE ITS GROUND NOS. 5 TO 8 THE GRIEVANCE RAISED B Y THE ASSESSEE IS THAT UPFRONT LEASE RENT OF B5 96 80 00 0/- WAS DISALLOWED BY THE LOWER AUTHORITIES AS CAPITAL EXPENDITURE. 9. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ABOVE 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 REPRE SENTATIVE SUBMITTED THAT LOWER AUTHORITIES ERRONEOUSLY CONSIDERED IT TO BE CAPITAL OUTGO FOR A REASON THAT COMMERCIAL PRODUCTION FROM THE MANUFA CTURING 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. ASS ESSING OFFICER WITHOUT EXPRESSING ANY SPECIFIC REASONS WHY HE WAS REJECTING THE CONTENTION TAKEN BY THE ASSESSEE. AS PER THE LD. AU THORISED REPRESENTATIVE BY VIRTUE OF JUDGMENT OF JURISDICT IONAL HIGH COURT IN THE CASES OF CIT VS. GEMINI ARTS PVT. LTD. 254 ITR 201 AND CIT V S. RANE (MADRAS) LTD 293 ITR 459 SUCH LEASE ADVANCE PAYMENT COULD ONLY BE CONSIDERED AS REVENUE IN NATURE. 10. PER CONTRA THE LD. DEPARTMENTAL REPRESENTATIVE R ELYING ON THE JUDGMENT DATED 4 TH DECEMBER 2006 OF APEX COURT IN THE ITA NOS.591 & 675/12 1165 1166 1171 & 1172/13. :- 5 -: ENTERPRISING ENTERPRISES VS. DCIT 293 ITR 437(SC) SUBMITTED THAT PAYMENT FOR ACQUIRING LEASEHOLD RIGHTS WAS CAPITAL EXPENDITURE. 11. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT DISPUTE D THAT BY VIRTUE OF UPFRONT LEASE RENT OF B5 96 80 000/- PAID ASSESSE E HAD OBTAINED LEASE RIGHT FOR 99 YEARS OVER 14.92 ACRES OF LAND. ASSESSEE HAS STARTED MANUFACTURING FACILITY OVER THE SAID LAND IN SEPTEM BER 2007. NO DOUBT THE JURISDICTIONAL HIGH COURT IN THE CASE OF GEMINI ARTS PVT. LTD (SUPRA) RELIED ON BY THE LD. AUTHORISED REPRESENTATIVE HA D HELD THAT LUMPSUM LEASE RENT PAYMENTS WHICH GAVE NO OTHER A DVANTAGE THAN RELIEF FROM PAYING ANNUAL RENT COULD NOT BE CONSID ERED AS CAPITAL OUTGO BUT ONLY AS REVENUE EXPENDITURE ALLOWABLE IN THE YEAR IN WHICH IT WAS PAID. THE ABOVE JUDGMENT IS DATED 1 ST AUGUST 2001. IN THE CASE OF RANE (MADRAS) LTD (SUPRA) THEIR LORDSHIP HAD HELD THAT EXPENDITURE INCURRED FOR SETTING UP NEW FACTORY WHI CH RESULTED IN EXTENSION OF AN EXISTING UNIT COULD ONLY BE CONSIDE RED 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 HONBLE APEX COURT HAD CLEARLY HELD THAT IRRESPECTIVE OF WHETHER LEASE MONEY WAS PAID AS SLU MPSUM OR INSTALLMENT IT WAS NOTHING BUT CAPITAL EXPENDITURE. AS FOR THE RELIANCE ITA NOS.591 & 675/12 1165 1166 1171 & 1172/13. :- 6 -: 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 ASS ESSEE HAD OBTAINED LEASEHOLD RIGHT FOR 99 YEARS OVER THE LAND WHICH WA S DEFINITELY IN THE NATURE OF ACQUISITION OF A CAPITAL ASSET. THEREFOR E WE ARE OF THE OPINION THAT THE DISALLOWANCE WAS RIGHTY DONE BY TH E LOWER AUTHORITIES. NO INTERFERENCE IS REQUIRED. GROUND NOS. 5 TO 8 OF THE ASSESSEE STAND DISMISSED. 12. VIDE ITS GROUND NOS. 9 TO 12 THE GRIEVANCE RAISED BY THE ASSESSEE IS ON FAILURE ON THE LD. ASSESSING OFFICER TO GIVE CREDIT FOR TDS AND TCS CLAIMED IN THE RETURN OF INCOME. 13. WE ARE OF THE OPINION THAT WHETHER THE CLAIM FOR T AX CREDIT WAS CORRECTLY MADE BY THE ASSESSEE IS THE ISSUE NEE D TO BE EXAMINED AFRESH BY THE LD. ASSESSING OFFICER. IF THE ASSESS EE IS ABLE TO SHOW EVIDENCE FOR TDS/TCS OF B28 81 980/- THE LD. ASSES SING OFFICER IS DIRECTED TO GIVE SUCH CREDIT. ACCORDINGLY GROUND NOS. 9 TO 12 OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURP OSE. ITA NOS.591 & 675/12 1165 1166 1171 & 1172/13. :- 7 -: 14. IN THE RESULT THE APPEAL OF THE ASSESSEE IN ITA NO.591/MDS/2012 OF ASSESSMENT YEAR 2006-07 IS PART LY ALLOWED FOR STATISTICAL PURPOSE. 15. NOW WE TAKE UP APPEAL OF THE REVENUE IN ITA 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. 16. VIDES ITS GROUND NO.2 THE GRIEVANCE OF THE REVENUE IS THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) RESTRI CTED DISALLOWANCE U/S.14A OF THE ACT TO 2% OF THE DIVIDEND INCOME. 17. BEFORE US THE LD. DEPARTMENTAL REPRESENTATIVE SUB MITTED THAT ORIGINAL DISALLOWANCE MADE BY THE LD. ASSESSIN G OFFICER WAS B27 46 264/- APPLYING RULE 8D OF THE ACT. FURTHER AS PER LD. DEPARTMENTAL REPRESENTATIVE THE LD. COMMISSIONER O F INCOME TAX (APPEALS) UNFAIRLY CURTAILED DISALLOWANCE TO 2% OF THE EXEMPTED INCOME. 18. PER CONTRA THE LD. AUTHORISED REPRESENTATIVE RELI ED ON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE O F GODREJ AND BOYCE MFG. CO. LTD VS. DCIT AND ANOTHER 328 ITR 81. ITA NOS.591 & 675/12 1165 1166 1171 & 1172/13. :- 8 -: 19. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. BY VIRTUE OF JUDGM ENT 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 A PPLICABLE. HENCE WE FIND NO ERROR IN THE ORDER OF THE LD. COMMISSION ER OF INCOME TAX (APPEALS) IN RESTRICTING DISALLOWANCE 2% OF THE DIV IDEND INCOME CLAIMED BY THE ASSESSEE AS EXEMPT. ACCORDINGLY WE DISMISS THE GROUND NO.2 OF THE REVENUE. 20. VIDE ITS GROUND NO. 3 THE GRIEVANCE RAISED BY THE REVENUE IS THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) D ELETED A DISALLOWANCE OF NOTIONAL INTEREST WORKING OUT TO B 2 70 52 088/- AS RELATABLE TO INTEREST FREE LOANS GRANTED BY THE AS SESSEE TO ITS SUBSIDIARY. 21. BEFORE US THE LD. DEPARTMENTAL REPRESENTATIVE SUB MITTED 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 1166 1171 & 1172/13. :- 9 -: ASSESSEE HAD BORROWED B43 860/- LAKHS OF WHICH IT H AD GIVEN FREE INTEREST LOAN OF B3 379/- LAKHS. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT INTEREST OF B2 958/- LAKHS WAS PAID BY THE ASSESSEE ON THE LOANS TAKEN BY IT. AS PER LD. DEPARTMENTAL REP RESENTATIVE THE AMOUNT OF INTEREST FREE LOANS WERE UTILIZED BY SUN DARAM FASTENERS INVESTMENT LTD (SFIL) WHICH IN TURN GAVE LOANS TO CERTAIN OTHER COMPANIES. THUS AS PER LD. DEPARTMENTAL REPRESENT ATIVE ASSESSEE COULD NOT DEMONSTRATE HOW THE LOANS GIVEN WERE COMM ERCIALLY EXPEDIENT. 22. PER CONTRA THE LD. AUTHORISED REPRESENTATIVE SUPPO RTED THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND SUBMITTED THAT BY VIRTUE OF JUDGMENT OF APEX COURT IN THE CA SE 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 IN TER CORPORATE LOANS TO ITS SUBSIDIARIES IN CHINA SINCE ASSESSEE C OULD NOT DIRECTLY INVEST IN A SUBSIDIARY IN CHINA. FURTHER AS PER T HE LD. AUTHORISED REPRESENTATIVE IN REVENUES APPEAL FOR ASSESSMENT Y EAR 2005-06 SAME ISSUE HAD COME UP BEFORE AND TRIBUNAL IN ITA NO.1011/MDS/2011 VIDE ORDER DATED 15.07.2016 DELETE D SUCH INTEREST DISALLOWANCE. ITA NOS.591 & 675/12 1165 1166 1171 & 1172/13. :- 10 -: 23. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. NO DOUBT THE ISSU E WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THIS TRIBUNAL FOR THE ASS ESSMENT YEAR 2005- 06 ON REVENUE APPEAL. HOWEVER IN THE SAID ORDER T HE ASSESSEE COULD DEMONSTRATE THAT THE AMOUNTS LOANED TO THE SUBSIDI ARY COMPANIES WAS MUCH LESS THAN ITS NET WORTH. AS FOR AS THE REL IANCE 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 TH E SISTER CONCERN WAS AS A MEASURE OF COMMERCIAL EXPEDIENCY. THEIR LORDS HIP TOOK A VIEW THAT ONCE NEXUS WAS ESTABLISHED BETWEEN THE EXPENDI TURE AND THE PURPOSE OF THE BUSINESS WHICH NEED NOT NECESSARY B E BUSINESS OF THE ASSESSEE ITSELF REVENUE COULD NOT DISALLOW THE CLA IM ASSUMING WHAT WAS REASONABLE. CONSIDERING THE FACTS AND CIRCUMS TANCES OF THE CASE WE ARE OF THE OPINION THAT LOWER AUTHORITIES FAILED TO VERIFY WHETHER LOANS GIVEN BY THE ASSESSEE TO ITS SUBSIDIARIES WER E COMMERCIALLY EXPEDIENT. THE AMOUNT THAT WERE GIVEN AS LOANS WAS NOT STAGNANT. THEREFORE WE SET ASIDE THE ORDER OF THE LOWER AUT HORITIES AND REMIT THE ISSUE REGARDING ALLOWABILITY OF PRO-RATA INTERE ST ON INTEREST FREE LOANS GRANTED TO SUBSIDIARIES BACK TO THE FILE OF THE LD. ASSESSING OFFICER FOR CONSIDERATION OF FRESH IN ACCORDANCE WI TH LAW. GROUND NO.3 OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. ITA NOS.591 & 675/12 1165 1166 1171 & 1172/13. :- 11 -: 24. VIDE ITS GROUND NO.4 THE GROUND RAISED BY THE REVE NUE IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) DELET ED DISALLOWANCE OF B3 04 36 000/- MADE BY THE LD. ASSESSING OFFICER FO R WANT OF DEDUCTION TAX OF SOURCE RELYING ON SEC. 40(A)(IA) OF THE ACT. 25. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE 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 N EED FOR DEDUCTING TAX AT SOURCE THEN IT SHOULD HAVE OBTAINED A CERTIF ICATE FROM THE LD. ASSESSING OFFICER AS STIPULATED U/S.195(2) OF THE A CT. FURTHER AS PER LD. DEPARTMENTAL REPRESENTATIVE BY VIRTUE OF EXPLA NATION ADDED BELOW SEC. 9 OF THE ACT THROUGH FINANCE ACT 2010 WITH RE TROSPECTIVE EFFECT FROM 01.06.1976 THERE WAS NO REQUIREMENT OF RESIDE NCY OF A NON RESIDENT OR PLACE OF BUSINESS OR BUSINESS CONNECTIO N IN INDIA NOR IT WAS NECESSARY FOR THE NON RESIDENT TO RENDER SERVIC ES IN INDIA 26. PER CONTRA THE LD. AUTHORISED REPRESENTATIVE SUBMI TTED THAT NON RESIDENT PERSON TO WHOM SALE COMMISSION WAS PAI D WAS CANVASSING SALES FOR THE ASSESSEE ABROAD AND NO PA RT OF THEIR SERVICES WERE RENDERED IN INDIA. AS PER LD. AUTHORISED REPRE SENTATIVE NON- RESIDENT AGENT WAS PROVIDING WAREHOUSING SERVICES I N FOREIGN SOIL. ITA NOS.591 & 675/12 1165 1166 1171 & 1172/13. :- 12 -: ACCORDING TO HIM NO PART OF INCOME COULD ARISE IN I NDIA SINCE NON- RESIDENT WAS DOING BUSINESS EXCLUSIVELY OUTSIDE IND IA. 27. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. WE FIND LD. COMMI SSIONER 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 JUD GMENT. 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 R ENDERED 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 BUSI NESS CONNECTION IN INDIA FOR BEING FASTENED WITH A TAX LIABILITY IN IN DIA. HOWEVER THE SAID EXPLANATION APPLIES ONLY TO INCOME BY WAY OF INTERE ST 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 IN DIA ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE ON PAYMENTS MADE T O THEM. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. COMMISSIONER ITA NOS.591 & 675/12 1165 1166 1171 & 1172/13. :- 13 -: OF INCOME TAX (APPEALS). GROUND NO.4 OF THE REVENU E STAND DISMISSED. 28. IN THE RESULT THE APPEAL OF THE REVENUE IN ITA NO.675/MDS/2012 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 29. NOW WE TAKE UP ASSESSEE APPEAL IN ITA NO.1166/MDS/2013 OF ASSESSMENT YEAR 2008-2009:- T HE ASSESSEE IN ITS APPEAL HAS TAKEN ALTOGETHER SEVEN GROUNDS OF W HICH GROUND NOS. 1 & 7 ARE GENERAL IN NATURE NEEDING NO SPECIFIC ADJU DICATION. 30. IN GROUND NO.2 THE ASSESSEE IS AGGRIEVED BY THE DISALLOWANCE OF SOFTWARE EXPENDITURE OF B51 82 081/ -. 31. WE FIND THAT SIMILAR ISSUE WAS RAISED BY THE ASSESS EE IN ITS APPEAL FOR THE ASSESSMENT YEAR 2006-2007 ALSO. SOF TWARE 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 T HE CLAIM. THE GROUND NO. 2 IS THEREFORE TREATED AS ALLOWED. 32. VIDE GROUND NO.3 THE GRIEVANCE RAISED BY THE ASS ESSEE IS ON DISALLOWANCE OF ADDITIONAL DEPRECIATION. ITA NOS.591 & 675/12 1165 1166 1171 & 1172/13. :- 14 -: 33. BEFORE US THE LD. AUTHORISED REPRESENTATIVE SUBMIT TED ADDITIONAL DEPRECIATION OF B99 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 WH ICH NEW PLANT AND MACHINERY WAS PUT TO USE. AS PER LD. AUTHORISED RE PRESENTATIVE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRONEOUSL Y CONFIRMED THIS VIEW OF THE LD. ASSESSING OFFICER DISREGARDING THE ARGUMENTS OF THE ASSESSEE THAT MACHINERY ON WHICH ADDITIONAL DEPRECI ATION WAS CLAIMED WAS ACQUIRED DURING THE SECOND HALF OF FINANCIAL YE AR 2006-07 AND THEREFORE BALANCE OF THE ADDITIONAL DEPRECIATION W HICH WAS RESTRICTED TO 50% OF THE ELIGIBLE AMOUNT HAD TO BE ALLOWED IN THE IMPUGNED ASSESSMENT YEAR. IN SUPPORT OF THIS LD. AUTHORI SED REPRESENTATIVE PLACED RELIANCE ON JUDGMENT OF KARNATAKA HIGH COURT IN THE CASE OF CIT VS. RITTAL INDIA PVT. LTD 380 ITR 428. 34. PER CONTRA THE LD. DR STRONGLY SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW. 35. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. THERE IS NO DISPUT E THAT THE ADDITIONAL DEPRECIATION CLAIMED BY THE ASSESSEE WA S BALANCE OF WHAT REMAINED OUT OF SUCH DEPRECIATION CLAIMED IN THE I MMEDIATE PRECEDING YEAR. THERE IS ALSO NO DISPUTE THAT SUCH CLAIM WA S RESTRICTED TO ITA NOS.591 & 675/12 1165 1166 1171 & 1172/13. :- 15 -: 50% OF THE ELIGIBLE AMOUNT FOR USE LESS THAN 180 DAYS. THE ISSUE WHETH ER SUCH ADDITIONAL DEPRECIATION TO THE EXTENT NOT ALLOWED DUE TO RESTR ICTION PLACED ON ACCOUNT OF USAGE FOR A PERIOD LESS THAN 180 DAYS C OULD 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 HONBLE HIGH COURT HAD HELD IN FAVOUR OF THE ASSESSEE. ACCORDIN GLY WE ARE OF THE OPINION THAT CLAIM OF ADDITIONAL DEPRECIATION OF B 99 57 900/- HAS TO BE ALLOWED. DISALLOWANCE OF THE CLAIM IS DELETED. GR OUND 3 OF THE ASSESSEE IS ALLOWED. 36. THROUGH GROUND NO.4 ASSESSEE IS AGGRIEVED BY LEVY OF INTEREST U/S.234D OF THE ACT. 37. BEFORE US THE LD. AUTHORISED REPRESENTATIVE SUBMI TTED THAT SUCH INTEREST SHOULD BE COMPUTED ON TAX THAT REMAIN ED 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 RE FUND ISSUED. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT SIMILA R ISSUE WAS ADJUDICATED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 IN ITA NO.1109/MDS/2011 DATED 15.07.2 016. ITA NOS.591 & 675/12 1165 1166 1171 & 1172/13. :- 16 -: 38. PER CONTRA THE LD. DR STRONGLY SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW. 39. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT SIMIL AR ISSUE CAME UP BEFORE TRIBUNAL IN REVENUE APPEAL FOR THE ASSESSMEN T 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 T O BE DECIDED IN FAVOUR OF THE REVENUE IN VIEW OF THE SUBSEQUENT JUDGMENT OF THE HON'BLE MADRAS HIGH COUR T 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 DA TE OF ASSESSMENT IS RELEVANT AND NOT THE YEAR OF ASSESSME NT 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 LIABL E TO PAY INTEREST ON THE REFUNDED AMOUNT AS CONTEMPLATED U/S 234D OF THE ACT. 4. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CI TED JUDGMENT OF THE HON'BLE MADRAS HIGH COURT IN THE CA SE OF INFRASTRUCTURE DEVELOPMENT FINANCE CO. LTD (SUPR A) WE ARE OF THE OPINION ITA NOS.591 & 675/12 1165 1166 1171 & 1172/13. :- 17 -: THAT THE DECISION TAKEN BY THE CIT (A) VIDE PARA 5. 3 OF THE IMPUGNED ORDER IS REQUIRED TO BE REVERSED ON TH IS ISSUE. CONSIDERING THE SAME THE SECOND ISSUE RAISE D BY THE REVENUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ACCORDINGLY WE ARE OF THE OPINION THAT CLAIM OF TH E 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 . 40. VIDE GROUND NO.5 THE ASSESSEE IS AGGRIEVED ON DISALLOWANCE OF LONG TERM CAPITAL LOSS ON REDEMPTI ON OF UNITS OF ICICI VENTURE CAPITAL FUND AND VIDE GROUND NO.6 AS SESSEE IS AGGRIEVED ON DISALLOWANCE OF UPFRONT LEASE RENT OF B27 80 596/-. 41. BEFORE US THE LD. COUNSEL FOR ASSESSEE SUBMITTED T HAT LOWER AUTHORITIES RELYING ON THE DECISION OF APEX COURT I N THE CASE OF GOETZE (INDIA) LTD VS. CIT (2006) 284 ITR 323 REFUSED TO CONSIDER ABOVE CLAIMS. AS PER LD. AUTHORISED REPRESENTATIVE LONG T ERM CAPITAL LOSS WAS CLAIMED BY THE ASSESSEE DURING THE COURSE OF ASSESS MENT PROCEEDING THROUGH LETTER DATED 5.4.2010 ADDRESSED TO THE LD. ASSESSING OFFICER. AS FOR UPFRONT LEASE RENT THE LD. AUTHORISED REPRE SENTATIVE SUBMITTED IT HAD MADE THE CLAIM FIRST TIME MADE BEFORE THE C OMMISSIONER OF INCOME TAX (APPEALS). ACCORDING TO LD. AUTHORISED R EPRESENTATIVE JUDGMENT OF APEX COURT IN THE CASE OF GOETZE (INDIA) LTD (SUPRA ) ONLY ITA NOS.591 & 675/12 1165 1166 1171 & 1172/13. :- 18 -: RESTRICTED THE POWERS OF THE LD. ASSESSING OFFICER AND DID NOT IMPINGE ON THE POWERS OF THE LD. APPELLATE AUTHORITY TO GIV E RELIEF. 42. PER CONTRA THE LD. DR STRONGLY SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW. 43. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. IT IS TRUE THAT AS SESSEE DID NOT FILE REVISE ITS RETURN EITHER FOR CLAIMING LONG TERM CAP ITAL 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.COMM ISSIONER OF INCOME TAX (APPEALS) FOR CLAIMING UPFRONT LEASE RENT. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) RELYING ON THE APEX COURT JUDG MENT 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. HONBLE APEX COURT IN T HE CASE OF GOETZE INDIA LIMITED (SUPRA) ONLY LIMITED THE POWERS OF THE LD. ASSESSING OFFICER. WE ARE THEREFORE OF THE OPINION THAT LD. C OMMISSIONER OF INCOME TAX (APPEALS) FELL IN ERROR IN NOT CONSIDERI NG 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 1166 1171 & 1172/13. :- 19 -: CLAIM OF LONG TERM CAPITAL LOSS AND UPFRONT LEASE R ENT BACK TO THE FILE OF LD. COMMISSIONER OF INCOME TAX (APPEALS) FOR CO NSIDERATION A FRESH IN ACCORDANCE WITH LAW. GROUND NOS. 5 & 6 ARE PART LY ALLOWED FOR STATISTICAL PURPOSE. 44. IN THE RESULT APPEAL OF THE ASSESSEE IN ITA NO.1166/MDS/2013 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 45. WE TAKE UP APPEAL OF THE REVENUE IN ITA NO.1172/MDS /2013 FOR ASSESSMENT YEAR 2008-2009. THE REVENUE HAS ALT OGETHER RAISED FOUR GROUNDS OF WHICH 1 & 4 ARE GENERAL IN NATURE N EEDING NO SPECIFIC ADJUDICATION. 46. VIDE GROUND NO.2 THE REVENUE IS AGGRIEVED ON DELET ION OF NOTIONAL INTEREST OF B61 31 769/- ATTRIBUTED TO INT EREST FREE LOANS GIVEN BY THE ASSESSEE TO ITS SUBSIDIARY SFIL. 47. WE FIND THAT SIMILAR ISSUE HAS COME UP BEFORE THIS TRIBUNAL IN REVENUES APPEAL FOR THE ASSESSMENT YEAR 2006-2007. WE HAVE HELD THAT AT PARA 23 THAT THE MATTER REQUIRES AFRESH CON SIDERATION BY THE LD. ASSESSING OFFICER FOR VERIFYING COMMERCIAL EXPEDIEN CY. FOR THE IMPUGNED ASSESSMENT YEAR ALSO SIMILAR DIRECTION IS GIVEN. GROUND NO. 2 IS ALLOWED FOR STATISTICAL PURPOSE. ITA NOS.591 & 675/12 1165 1166 1171 & 1172/13. :- 20 -: 48. VIDE GROUND NO.3 THE REVENUE IS AGGRIEVED ON DELET ION OF DISALLOWANCE MADE BY THE LD. ASSESSING OFFICER U/S .40(A)(IA) OF THE ACT FOR EXPORT COMMISSION PAID TO NON-RESIDENT PERSON. 49. WE FIND THAT SIMILAR ISSUE HAS BEEN RAISED BY THE R EVENUE IN ITS APPEAL FOR THE ASSESSMENT YEAR 2006-2007. WE HA VE AT PARA 27 HELD THAT DISALLOWANCE WAS RIGHTLY DELETED BY THE L D. 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. 50. THE APPEAL OF THE REVENUE IN ITA NO.1172/MDS/2013 O F ASSESSMENT YEAR IS PARTLY ALLOWED FOR STATISTICAL P URPOSE. 51. NOW WE TAKE UP CROSS-APPEALS FOR ASSESSMENT YEAR 2 007- 2008:- ASSESSEE IN ITS APPEAL HAS ALTOGETHER RAISED FIVE GROUNDS OF WHICH 1 & 5 ARE GENERAL IN NATURE NEEDING NO SPECIF IC ADJUDICATION. 52. VIDE GROUND NO.2 THE GRIEVANCE OF THE ASSESSEE IS ON DISALLOWANCE OF EXPENDITURE INCURRED ON SOFTWARE WH ICH WAS CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 53. WE FIND THAT SIMILAR GROUND WAS RAISED BY THE ASSE SSEE IN ITS APPEAL FOR THE ASSESSMENT YEAR 2006-2007. WE H AVE HELD AT PARA 6 ITA NOS.591 & 675/12 1165 1166 1171 & 1172/13. :- 21 -: THAT SOFTWARE EXPENDITURE BEING IN THE NATURE OF RE NEWAL OF LICENSE AND ACQUISITION OF APPLICATION OF SOFTWARE NOT HAVING L IFE OF MORE THAN TWO TO THREE YEARS COULD ONLY BE CONSIDERED A REVENUE O UTGO. FACT SITUATION BEING SAME WE DELETE THE DISALLOWANCE OF B42 87 180/-. ACCORDINGLY GROUND NO.2 OF THE ASSESSEE IS DELETED . 54. VIDE AT GROUND NO.3 THE GRIEVANCE OF THE ASSESSEE IS THAT PRIOR PERIOD EXPENDITURE OF B1 08 868/- WAS DISALLO WED BY THE LD. ASSESSING OFFICER AND SUCH DISALLOWANCE WAS CONFIR MED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 55. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE BILLS FOR EXPENDITURE WAS RECEIVED BY ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2009-2010. SUCH E XPENDITURE 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. 56. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT ASSESSEE WAS NOT ABLE TO SHOW WHAT THE TYPE OF EXPE NDITURE WAS AND HOW THE BILLS WERE RAISED IN SUCCEEDING YEARS. ACC ORDING TO HIM DISALLOWANCE IS RIGHTLY MADE. ITA NOS.591 & 675/12 1165 1166 1171 & 1172/13. :- 22 -: 57. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. THE CLAIM OF THE A SSESSEE THAT BILLS FOR THE EXPENDITURE CLAIMED AS PRIOR PERIOD WAS RECEIVE D BY THE ASSESSEE ONLY IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YE AR 2009-2010. THE ASSESSMENT YEAR 2009-2010 IS SUBSEQUENT TO THE IMPU GNED 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 PER IOD OF EXPENDITURE. WE ARE THEREFORE OF THE OPINION THAT ASSESSEE FAIL ED TO JUSTIFY ITS CLAIM AND IT WAS RIGHTLY DISALLOWED BY THE LOWER AUTHORITIES. GROUND NO.3 STAND DISMISSED. 58. VIDE NO. 4 ASSESSEE IS AGGRIEVED ON DISALLOWANCE OF LONG TERM CAPITAL LOSS OF B90 188/- ON REDEMPTION OF UN ITS OF ICICI AND INCLUSION OF TAX FREE INTEREST INCOME OF B1 26 765/ - RECEIVED FROM UTI. 59. THE LD. COUNSEL FOR ASSESSEE SUBMITTED THAT THESE C LAIM WERE PREFERRED BY THE ASSESSEE FOR THE FIRST TIME BEFOR E LD. COMMISSIONER OF INCOME TAX (APPEALS). AS PER LD. AUTHORISED REPRE SENTATIVE LD. COMMISSIONER OF INCOME TAX (APPEALS) RELYING ON THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF GOETZE (INDIA) LT D (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 1166 1171 & 1172/13. :- 23 -: NATIONAL THERMAL POWER CORPORATION (SUPRA) APPELLA TE AUTHORITY HAD AMPLE POWERS TO CONSIDER SUCH A CLAIM. 60. PER CONTRA THE LD. DR STRONGLY SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW. 61. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT SIMI LAR 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 C ONSIDERED ON MERITS BY THE LD. COMMISSIONER OF INCOME TAX (APPEA LS). FOR THE IMPUGNED ASSESSMENT YEAR ALSO REMIT THE ISSUE RELAT ING CLAIM OF LONG TERM CAPITAL LOSS AND CLAIM FOR EXCLUSION OF TAX FR OM INTEREST INCOME BACK TO THE FILE OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FOR CONSIDERATION AFRESH IN ACCORDANCE WITH MERITS OF T HE ISSUE. ACCORDINGLY GROUND NO.4 IS ALLOWED FOR STATISTICAL PURPOSE. 62. IN THE RESULT THE APPEAL OF THE ASSESSEE IN ITA NO.1165/MDS/2013 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 63. NOW WE TAKE UP REVENUE APPEAL IN ITA NO.1171/MDS/2 013 OF ASSESSMENT YEAR 2007-2008:- THE REVENUE HAS ALT OGETHER RAISED FIVE GROUNDS OF WHICH 1 & 5 ARE GENERAL IN NATURE NEEDING NO SPECIFIC ADJUDICATION. ITA NOS.591 & 675/12 1165 1166 1171 & 1172/13. :- 24 -: 64. GROUND NO.2 RAISED BY THE REVENUE IS SIMILAR TO ITS GROUND NO.2 FOR THE ASSESSMENT YEAR 2006-2007. 65. WE HAVE UPHELD THE ORDER OF THE LD. COMMISSIONER OF INCOME 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. 66. GROUND NO.3 RAISED BY THE REVENUE IS SIMILAR TO GRO UND NO.3 IN ITS APPEAL FOR THE ASSESSMENT YEAR 2006-2007. WE HAD REMITTED THE ISSUE REGARDING DISALLOWANCE OF INTEREST EXPENDITUR E ATTRIBUTABLE TO INTEREST FREE LOANS GIVEN TO ITS SUBSIDIARIES BACK TO THE FILE OF THE LD. ASSESSING OFFICER FOR CONSIDERING THE COMMERCIAL EX PEDIENCY AT PARA 23 ABOVE. SIMILAR DIRECTIONS ARE GIVEN HERE ALSO. G ROUND 3 OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. 67. GROUND NO.4 RAISED BY THE REVENUE IS SIMILAR TO GRO UND NO.4 FOR THE ASSESSMENT YEAR 2006-2007. 68. FOR THE VERY SAME REASONS AS MENTIONED BY US IN PAR A 27 IN ABOVE IN RELATION TO REVENUES APPEAL FOR THE ASSES SMENT YEAR 2006- 07 WE UPHOLD THE ORDER OF LD. COMMISSIONER OF INCO ME TAX (APPEALS) ITA NOS.591 & 675/12 1165 1166 1171 & 1172/13. :- 25 -: DELETING THE DISALLOWANCE MADE U/S.40(A)(IA) OF THE ACT. GROUND 4 RAISED BY THE REVENUE IS THEREFORE DISMISSED. 69. IN THE RESULT THE APPEALS OF THE ASSESSEE IN ITA NOS.591/MDS/2012 1165 &1166/MDS/2013 ARE PARTLY AL LOWED FOR STATISTICAL PURPOSE AND AND REVENUE APPEALS IN ITA NOS.675/2012 1171 & 1172/2013 ARE ALSO PARTLY ALLOWED FOR STATIS TICAL PURPOSE. ORDER PRONOUNCED ON FRIDAY THE 30 TH DAY OF SEPTEMBER 2016 AT CHENNAI. SD/- SD/- ( . . . ) ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( !' . #$#% ) (ABRAHAM P. GEORGE) & / ACCOUNTANT MEMBER / CHENNAI ! / DATED: 30TH SEPTEMBER 2016 KV !' # $% &% / COPY TO: 1 . '( / APPELLANT 3. ) () / CIT(A) 5. %+ # - / DR 2. #.'( / RESPONDENT 4. ) / CIT 6. / 0 / GF