DCIT, CHENNAI v. Indo Pacific Housing Finance Ltd. (Formerly known as AIG Home Finance India Ltd.), CHENNAI

ITA 313/CHNY/2013 | misc
Pronouncement Date: 31-07-2015

Appeal Details

RSA Number 31321714 RSA 2013
Assessee PAN AAACW1328G
Bench Chennai
Appeal Number ITA 313/CHNY/2013
Duration Of Justice 2 year(s) 5 month(s) 9 day(s)
Appellant DCIT, CHENNAI
Respondent Indo Pacific Housing Finance Ltd. (Formerly known as AIG Home Finance India Ltd.), CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2015
Appeal Filed By Department
Bench Allotted C
Date Of Final Hearing 08-06-2015
Next Hearing Date 08-06-2015
Assessment Year misc
Appeal Filed On 19-02-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH CHENNAI . !' # $% BEFORE SHRI CHANDRA POOJARI ACCOUNTANT MEMBER AND SHRI V. DURGA RAO JUDICIAL MEMBER ./ ITA NO. 328/MDS/2013 / ASSESSMENT YEAR : 2007-08 L & T HOUSING FINANCE LTD. (FORMERLY KNOWN AS INDO PACIFIC HOUSING FINANCE LIMITED) UNIT NO.205 & 206 2 ND FLOOR CAPITAL TOWERS KODAMBAKKAM HIGH ROAD NUNGAMBAKKAM CHENNAI 600 034. PAN AAACW1328G. APPELLANT) V. THE DEPUTY COMMISSIONER OF INCOME-TAX COMPANY CIRCLE-1(1) CHENNAI 34. RESPONDENT) RESPONDENT) ./ ITA NO. 313/MDS/2013 / ASSESSMENT YEAR : 2007-08 THE DEPUTY COMMISSIONER L & T HOUSING FINANCE LT D. OF INCOME-TAX (FORMERLY KNOWN AS INDO COMPANY CIRCLE-1(1) V. PACIFIC HOUSING FINANCE LIMITED) CHENNAI 34. CHENNAI - 34. APPELLANT) RESPONDENT) / APPELLANT BY : SHRI R. VENKATESAN CA / RESPONDENT BY : SHRI A.V.SREEKANTH JCIT ! / DATE OF HEARING : 08.06.2015 '# ! / DATE OF PRONOUNCEMENT: 31.07.2015 -2- ITA 328 & 313/13 & / O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE COMMI SSIONER OF INCOME-TAX(APPEALS) DATED 20.11.2012. 2. THE FIRST COMMON GROUND RAISED IN THESE CROSS APPEALS IS WITH REGARD TO SUSTAINING OF DISALLOWANC E OF ` 20 LAKHS OUT OF ` 25 36 790/- U/S.14A OF THE IT ACT MADE BY THE ASSESSING OFFICER. 3. THE FACTS OF THE CASE ARE THAT DURING THE ASSESS MENT YEAR 2007-08 THE ASSESSEE HAD EARNED DIVIDEND INCO ME AMOUNTING TO ` 49 102/- WHICH WAS CLAIMED AS EXEMPT UNDER SEC.10(34) OF THE ACT. THE ASSESSING OFFICE R FOUND THAT THE ASSESSEE HAS MADE INVESTMENTS IN EQUITY S HARES OF VARIOUS COMPANIES INCLUDING ITS SUBSIDIARY AND IN T HE MUTUAL FUNDS TOTALING TO ` 4 05 01 000/- AS ON 31.3.2007 AND ` 2 00 35 380/- AS ON 31.3.2006. SINCE THE ENTIRE DI VIDEND HAS BEEN CLAIMED AS EXEMPT AND NO EXPENDITURE WAS ATTRIBUTED TOWARDS THE SAME THE ASSESSING OFFICER HAS -3- ITA 328 & 313/13 APPLIED PROVISIONS OF RULE 8D AND DISALLOWED ` 25 36 790/- U/S.14A. THE ASSESSING OFFICER ALSO OBSERVED THAT FUNDS FOR A COMPANY COME IN A COMMON KITTY. THEY COMPROMIS E OF BORROWED FUNDS SHARE CAPITAL AND RETAINED EARNINGS (RESERVES AND SURPLUS). THEREFORE RELYING ON THE DECISION OF THE ITAT SPECIAL BENCH IN THE CASES OF CIT V. DAGA CAPITAL MANAGEMENT P. LTD. (ITA NO.1372/DELHI/2005) MAXOPP INVESTMENTS LTD. V. ACIT(ITA NO.183/DELHI/2005) AND CHEMINREST LTD. V. DCIT (ITA NO.2048/DEL/2005) THE ASSESSING OFFICER APPLIED RULE 8D AND DISALLOWED A SUM OF ` 25 36 790/-. AGAINST THIS THE ASSESSEE WENT IN AP PEAL BEFORE THE COMMISSIONER OF INCOME-TAX(APPEALS). 4. ON APPEAL THE COMMISSIONER OF INCOME-TAX(APPEAL S) OBSERVED THAT THE ASSESSING OFFICER APPLIED RULE 8D FOR THE ABOVE DISALLOWANCE BECAUSE THE FUNDS FOR THE ASSESS EE CAME IN A COMMON KITTY AND HE COULD SHOW INCURRENCE OF EXCESS INTEREST AFTER IDENTIFYING THE INTEREST. HO WEVER THE ID.AR HAS STATED THAT THE ASSESSEE HAD MADE INVEST MENT IN EQUITY SHARES OF VARIOUS COMPANIES INCLUDING ITS SU BSIDIARY A ND IN THE MUTUAL FUNDS TOTALLING TO ` 4 05 01 000/- AS ON -4- ITA 328 & 313/13 31.3.2007. THE FUNDS WERE NOT REQUIRED IMMEDIATELY DURING THE YEAR FOR THE BUSINESS AND HENCE THE SAME WERE I NVESTED IN CASH MANAGEMENT FUNDS. THE BOMBAY HIGH COURT IN THE CASE OF M/S. GODREJ BOYCE MANUFACTURING CO. LTD V. DCIT 328 ITR 81 (BOM.) HAS CLEARLY HELD THAT THE PROVISI ONS OF RULE 8D HAVE BEEN NOTIFIED W.E.F. 24.03.2008 AND HE NCE SHALL APPLY FROM AY 2008-09 ONWARDS. SINCE THE YEAR UNDER CONSIDERATION IS AY. 2007-08 PROVISIONS OF RULE 8D CANNOT BE APPLIED. HENCE THE ACTION OF THE AO TO THIS EXT ENT IS NOT CORRECT. HAVING HELD AS ABOVE THE HIGH COURT FURTH ER HELD THAT PRIOR TO AY 2008-09 WHEN RULE 8D WAS NOT APPLICABLE THE AO HAS TO ENFORCE PROVISIONS OF SECTION 14A(1). FOR THAT PURPOSE THE AO IS OBLIGED TO ASCERTAIN THE EXPENDI TURE WHICH HAD BEEN INCURRED TO EARN THE TAX-FREE INCOME . HE MUST ADOPT A REASONABLE BASIS CONSISTENT WITH THE R ELEVANT FACTS AND CIRCUMSTANCES OF THE CASE. IN THIS REGAR D IT IS TO BE SEEN WHETHER THE ASSESSEE HAS INCURRED INTEREST AND COMMON EXPENDITURE FOR RECEIVING DIVIDEND INCOME. T HE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND -5- ITA 328 & 313/13 POWER LTD. (ITA NO.1398 OF 2008) VIDE ORDER DATED 9 .1.2009 HAS ALSO HELD AS FOLLOWS: IF THERE BE INTEREST FREE FUNDS AVAILABLE TO AN ASSESSEE SUFFICIENT TO MEET ITS INVESTMENTS AND AT THE SAME TIME THE ASSESSEE HAD RAISED A LOAN IT CAN BE PRESUMED THAT THE INVESTMENTS WERE MADE FROM THE INTEREST FREE FUNDS AVAILABLE. THE INVESTMENT IN EQUITY SHARES OF VARIOUS COMPANIE S INCLUDING ITS SUBSIDIARIES AND MUTUAL FUNDS AS ON 3 1.3.2006 AND 31.3.2007 WERE ` 2 00 35 380/- AND ` 4 05 01 000/- RESPECTIVELY. 4.1. THE CONTENTION OF THE ASSESSEE THAT NO COMMON OR ADMINISTRATIVE EXPENDITURE INCURRED IN RELATION TO THE EXEMPT INCOME CANNOT HOWEVER BE ACCEPTED. THE ASSESSEE H AS DEFINITELY INCURRED. EXPENDITURE IN EARNING DIVIDEN D INCOME OF ` 49 102/- AND INVESTMENT OF ` 2 CRORES INASMUCH AS THE EFFORTS OF THE EMPLOYEES GO IN TRACKING THE INVESTM ENT PURCHASE AND SALE OF CASH MANAGEMENT FUNDS DEPOSIT OF THE DIVIDEND WARRANTS PORTFOLIO MANAGEMENT ETC. THE AS SESSEE HAS ALMOST DOUBLED ITS INVESTMENTS DURING THE YEAR WHICH ARE LIKELY TO GENERATE EXEMPT INCOMES IN THE FUTURE YEA RS. THE ASSESSEE HAS NOT SPECIFIED THE SOURCES FOR THESE IN VESTMENTS. -6- ITA 328 & 313/13 THE ASSESSEE'S CONTENTION THAT THE DISALLOWANCE MAD E IN ACCORDANCE WITH SEC 14A(1) R.W.RULE 8D CANNOT EXCEE D THE AMOUNT OF EXEMPT INCOME EARNED DURING THE YEAR IS N OT ACCEPTABLE IN VIEW OF THE DECISION OF THE DELHI TR IBUNAL SPECIAL BENCH IN CHEMINVEST LTD V. ITO (2009) 121 I TD 318/ 124 TTJ 577 (SB) WHEREIN IT WAS HELD: ' D ISA LLOWANCE UNDER SECTION 14A CAN BE MADE EVEN IN A YEAR IN WHI C H NO E X EMPT INCOME HAS BEEN EARNED OR RECEIVED BY ASSESSEE ; THUS PROPORT I ONATE INTEREST P E RTAINING TO INVESTMENT FOR EARNING OF DIVIDEND WAS DISALLOWABLE EVEN THOUGH EXEMPT INCOME (DIVIDEND) WAS NOT EARNED DURING THE YEAR .' REFERENCE MAY ALSO BE MADE TO SANCHAYITA MERCANTILE (P) LTD V. ACIT (2008) 25 SOT 57 (MUM.-TRIB.) WHEREIN I T WAS HELD AS BELOW: 'THERE IS NOTHING IN PROVISIONS OF SECTION 14A TO EFFECT THAT EXPENDITURE DISALLOWED SHOULD NOT EXCEED INCOM E WHICH IS NOT CHARGEABLE TO TAX; THEREFORE AS LONG AS THERE IS IDENTIFICATION OF INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME AMOUNT SO IDENTIFIED HAS TO BE DISALLOWED. THE INTEREST EXPENSES OF THE ASSESSEE DURING THE YE AR ARE ` 25 28 91 275 /- . INCREASE IN THE VALUE OF INVESTMENTS YIELDING EXEMPT INCOME IS ABOUT ` 2 CRORES. KEEPING IN VIEW THE -7- ITA 328 & 313/13 FACTS AND CIRCUMSTANCES OF THE CASE AND LEGAL POSIT ION AS DISCUSSED ABOVE THE CIT(APPEALS) OBSERVED THAT A SUM OF ` 20 00 000/ - IS HELD AS REASONABLE AS THE AMOUNT OF EXPENDITURE WHICH HAD BEEN INCURRED TO EARN THE EXE MPT INCOME. ACCORDINGLY THE CIT(APPEALS) HAS GIVEN A R ELIEF OF ` 5 36 790/- ON THIS ACCOUNT AND PARTLY ALLOWED THE A PPEAL. AGAINST THIS THE ASSESSEE AS WELL AS THE REVENUE I S IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE AO DISALLOWED ` 25 36 790/- BY INVOKING THE PROVISIONS OF SEC.14A READ WITH RULE 8 D. RULE 8D WAS INSERTED BY THE IT (FIFTH AMDT.) RULES 2008 W.E.F. 24.3.2008. SINCE RULE 8D HAS NO RETROSPECTIVE EFF ECT IT CANNOT BE APPLIED FOR THE ASSESSMENT YEAR 2007-08. FURTHER THERE IS EVERY CHANCE OF INCURRING EXPENDI TURE TOWARDS MAINTAINING OF INVESTMENT WHICH YIELDS EXEM PT INCOME AND THIS CANNOT BE RULED OUT. THEREFORE WE DIRECT THE AO TO ALLOW ` 10 LAKHS OF EXPENDITURE ATTRIBUTABLE TOWARDS EXEMPTED INCOME. THE LD. AR RELIED ON THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 20 08-09 WHICH IS FOR THE SUBSEQUENT YEAR AND IT CANNOT BE A PPLIED FOR THIS ASSESSMENT YEAR. ACCORDINGLY THE APPEAL OF T HE ASSESSEE ON THIS GROUND IS PARTLY ALLOWED AND THE A PPEAL OF -8- ITA 328 & 313/13 THE REVENUE ON THIS GROUND IS DISMISSED. 6. THE NEXT GROUND IN ITA NO.313/MDS/2013 IS THAT T HE CIT(APPEALS) ERRED IN DELETING THE DISALLOWANCE OF ` 58 49 022/- ON ACCOUNT OF SYNDICATION CHARGES/GUARANTEE FEE PAID TO M/S. WEIZMAN LTD. MAD E U/S.40A(2)(B) OF THE ACT. 6.1. THE FACTS OF THIS ISSUE ARE THAT DURING THE YE AR UNDER CONSIDERATION M/S. WEIZMANN LTD. HAS BEEN TH E HOLDING COMPANY OF THE ASSESSEE. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING LONG TERM HOUS ING FINANCE. FOR THE SAID PURPOSE THE ASSESSEE BORROW S FUNDS FROM VARIOUS BANKS AND FINANCIAL INSTITUTIONS . SYNDICATION CHARGES HAVE BEEN PAID FOR FACILITATING/ARRANGING LOANS FROM DIFFERENT FINANCI AL INSTITUTIONS. IT WAS SUBMITTED THAT M/S. WEIZMANN LTD. PROMOTER OF THE ASSESSEE HAS BEEN RENDERING SERVIC ES TO THE ASSESSEE IN THIS REGARD FOR FACILITATING AND ARRANGING LOANS FOR NEGOTIATIONS AND FOLLOW UP ETC . M/S. WEIZMANN LTD. ALSO STOOD AS THE GUARANTOR FOR SUCH LOANS TAKEN FROM BANKS AND FINANCIAL INSTITUTI ONS. -9- ITA 328 & 313/13 FOR ALL THE AFORESAID SERVICES THE ASSESSEE PAID COMMISSION TO M/S. WEIZMANN LTD. @ 0.50% WHICH WAS COMPUTED AT ` 58 49 022/-. 6.2. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE AO ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY SUCH COMMISSION PAID TO M/S. WEIZMANN LTD. BE NOT DISALL OWED U/S 40A(2)(B). THE ASSESSEE FILED SUBMISSIONS IN RE SPONSE TO THE SHOW CAUSE NOTICE. THE AO PROCEEDED TO DISAL LOW THE SAID PAYMENT OF ` 58 49 022/- U/S. 40A(2)(B). THE AO HELD THAT SINCE M/S. WEIZMANN LTD. WAS THE PROMOTER OF T HE ASSESSEE IT SHOULD HAVE PROVIDED THE SERVICES FRE E OF COST TO THE ASSESSEE. THE AO ALSO OBSERVED THAT OTHER LE ADING BANKS AND FINANCIAL INSTITUTIONS WERE SHAREHOLDERS OF THE ASSESSEE AND SINCE THE ASSESSEE ITSELF WAS A BANKIN G COMPANY IT COULD HAVE RAISED THE LOANS DIRECTLY FR OM BANKS. CONSIDERING THE CAPACITY OF THE ASSESSEE COMPANY IN RAISING FINANCE DIRECTLY THROUGH LOANS FROM FINANCIAL INSTI TUTIONS AND FOR THE DETAILED REASONS MENTIONED IN THE SCRUTINY ASSESSMENT ORDER PASSED FOR ASSESSMENT YEAR 2005-0 6 THE AO DISALLOWED A SUM OF RS.58 49 022/- U/S 40A(2)(B) BEING -10- ITA 328 & 313/13 SYNDICATION CHARGES PAID TO THE HOLDING COMPANY. A GAINST THIS THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(AP PEALS). 6.3. ON APPEAL THE CIT(APPEALS) OBSERVED THAT THE ISSUE IN THIS CASE IS WHETHER THE PAYMENTS MADE TO A RELA TED PARTY VIZ. THE ERSTWHILE PROMOTER M/S. WEIZMANN LTD. CA N BE DISALLOWED CONSIDERING THE FACTS OF THE CASE. HE F URTHER OBSERVED THAT THE PROVISIONS OF SEC.40A(2)(B) ARE A PPLICABLE TO A CASE WHERE EXCESSIVE OR UNREASONABLE PAYMENTS ARE MADE TO RELATED PARTY AND THE SAME HAS BEEN EXPLAIN ED IN THE CBDT CIRCULAR NO.6P(LXXVI-66) OF 1968 WHICH WA S RELIED ON BY THE LD. AR OF THE ASSESSEE. FURTHER THE CIT(APPEALS) HAS GONE THROUGH THE PREDECESSORS ORD ER IN ASSESSEES OWN CASE WHICH WAS ALLOWED BY HIM VIDE ORDER DATED 30.9.2010 IN ITA NO.4/2010-11A.III AND THE MA TTER WAS CARRIED BY THE REVENUE BEFORE THE TRIBUNAL. T HE TRIBUNAL VIDE ITS ORDER DATED 5.5.2011 IN ITA NO.2167/MDS/2010 UPHELD THE ORDER OF THE CIT(A)-II I DATED 30.9.2010 AND HELD THAT THE SYNDICATION CHARGES PAI D TO WEIZMANN LTD. ARE NOT EXCESSIVE OR UNREASONABLE BUT IS WELL WITHIN THE RANGE THAT WOULD TYPICALLY BE CHARGED BY A THIRD -11- ITA 328 & 313/13 PARTY AND HENCE CANNOT BE DISALLOWED UNDER SEC.40A( 2) OF THE ACT. ACCORDINGLY THE CIT(APPEALS) ALLOWED THI S GROUND OF APPEAL. AGAINST THIS THE REVENUE IS IN APPEAL BEFORE US. 7. AFTER HEARING BOTH THE SIDES WE FIND THAT SIMIL AR ISSUE WAS CONSIDERED BY THE TRIBUNAL IN THE CASE OF M/S. AIG HOME FINANCE INDIA LTD. IN ITA NO.2167/MDS/2010 DATED 5.5.2011 FOR THE ASSESSMENT YEAR 2005-06 WHEREIN IT WAS HELD AS UNDER: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERUSAL OF PROVISIONS OF SECTION 40A(2)(B) OF THE ACT SHOWS THAT THIS PROVISION IS APPLICABLE WHERE AN A.O. IS OF THE OPINION THAT THE PAYMENT IS EXCESSIVE OR UNREASONABLE WHEN SUCH PAYMENTS HAD BEEN MADE TO RELATED PARTIES. HERE THE A.O. HAS NOT SHOWN HOW THE PAYMENT MADE BY THE ASSESSEE TO M/S WEIZMANN LTD. WAS UNREASONABLE OR EXCESSIVE. IN FACT A PERUSAL OF THE ORDER OF THE LD. CIT(APPEALS) CLEARLY SHOWS THAT HE HAS TAKEN INTO CONSIDERATION THAT THE NATIONAL HOUSING BOARD WHICH IS THE ACCREDITION AUTHORITY FOR FINANCE COMPANIES DOING THE BUSINESS OF LONG TERM HOUSING FINANCE HAS PERMITTED 0.75% OF GUARANTEE FEE FOR PROVIDING LOANS AVAILED BY HOUSING FINANCE COMPANIES. PUBLIC SECTOR BANKS ARE ALSO CHARGING 1.5% FOR PROVIDING GUARANTEE COVER. IT IS ALSO NOTICED THAT THE LD. CIT(APPEALS) HAS TAKEN INTO CONSIDERATION THE FACT THAT THE A.O. HAS NOT DOUBTED THE FEES PAID TO THIRD PARTIES FOR PROVIDING IDENTICAL RANGE OF SERVICES ESPECIALLY WHEN SUCH FEE WAS BETWEEN -12- ITA 328 & 313/13 0.5% TO 1%. IN THE CIRCUMSTANCES WE ARE OF THE VIEW THAT 0.5% OF GUARANTEE FEE PAID TO M/S. WEIZMANN LTD. BY THE ASSESSEE IS NOT EXCESSIVE OR UNREASONABLE BUT IS WELL WITHIN THE RANGE AS PAID BY THE ASSESSEE TO THIRD PARTIES AND MUCH LOWER THAN THE PERCENTAGE FIXED BY NATIONAL HOUSING BOARD WHICH ITSELF IS AN UNDERTAKING PROMOTED BY RESERVE BANK OF INDIA. THEREFORE WE ARE OF THE VIEW THAT THE FINDINGS OF THE LD. CIT(APPEALS) ON THIS ISSUE IN DELETING THE DISALLOWANCE IS ON RIGHT FOOTING. HENCE THE SAME IS UPHELD. THUS GROUND NOS.2 TO 2.4 ARE DISMISSED. RESPECTFULLY FOLLOWING THE SAME WE ARE INCLINED TO UPHOLD THE ORDER OF THE CIT(APPEALS) AND THIS GROUN D OF APPEAL OF THE REVENUE IS DISMISSED. 8. THE NEXT GROUND IN ITA NO.313/MDS/2013 IS THAT T HE CIT(APPEALS) ERRED IN DELETING THE DISALLOWANCE OF A SUM OF ` 9 14 264/- MADE UNDER SEC.36(1)(VIII) OF THE ACT. 8.1. THE FACTS OF THIS ISSUE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING LONG TERM HOUS ING FINANCE AND IS ACCORDINGLY ELIGIBLE FOR DEDUCTION U/S.36(1)(VIII). AS PER SEC.36(1)(VIII) DEDUCTION UPTO 40% OF THE PROFITS FROM LONG TERM HOUSING FINANCE BUSINESS IS ALLOWABLE SUBJECT TO TRANSFER OF THE SAID PROFITS T O A SPECIAL -13- ITA 328 & 313/13 RESERVE ACCOUNT. THE ASSESSEE HAD CREDITED AN AMOU NT OF ` 41 00 000/- (BEING 40% OF THE PRO0FITS DERIVED FROM THE BUSINESS OF PROVIDING LONG TERM HOUSING FINANCE) TO A SPECIAL RESERVE AND CLAIMED THE SAME AS A DEDUCTION U/S.36( 1)(VIII). THE AO HELD THAT THE PROCESSING AND OTHER ADMINISTR ATIVE CHARGES AMOUNTING TO ` 1 79 06 298/- WERE NOT PART OF INCOME ATTRIBUTABLE TO THE BUSINESS OF PROVIDING LO NG TERM HOUSING FINANCE AND ACCORDINGLY CANNOT BE CONSIDERE D FOR THE PURPOSE OF COMPUTING THE DEDUCTION U/S.36(1)(VI II). ACCORDINGLY THE AO RESTRICTED THE DEDUCTION U/S.36 (1)(VIII) TO ` 31 87 536/- DISALLOWING A SUM OF ` 9 14 264/- AS NOT ELIGIBLE FOR DEDUCTION U/S.36(1)(VIII). AGAINST TH IS THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(APPEALS). 8.2. ON APPEAL THE CIT(APPEALS) OBSERVED THAT THE TRIBUNAL BANGALORE BENCH IN ASSESSEES OWN CASE FO R THE ASSESSMENT YEAR 1998-99 HAS DECIDED THE ISSUE OF EXCLUSION OF PROCESSING FEES AND OTHER MISCELLANEOU S INCOME IN FAVOUR OF THE ASSESSEE VIDE ITA NO.1513/BANG/2003 DATED 30.12.2005. THE CIT(APPEAL S) FURTHER OBSERVED THAT CHENNAI BENCH OF THE TRIBUNAL IN -14- ITA 328 & 313/13 ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 IN ITA NO.2167/MDS/2010 DATED 5/5/2011 HELD THAT THE SECURITIZATION INCOME IS AN INCOME FROM THE BUSINES S OF LONG TERM HOUSING FINANCE AND HENCE IS ELIGIBLE FOR DEDU CTION U/S.36(1)(VIII). CONSIDERING THE JUDICIAL PRECEDEN TS RELIED ON BY THE ASSESSEE AND THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(APPEALS) HELD THAT THE PROCESSING FEE S AND OTHER CHARGES SHOULD BE TAKEN AS SUBJECT MATTER OF DEDUCTION U/S.36(1)(VIII) OF THE ACT AND ALLOWED TH E GROUND OF APPEAL. AGGRIEVED BY THIS THE REVENUE IS IN APPEA L BEFORE US. 9. AFTER HEARING BOTH THE SIDES WE FIND THAT SIMIL AR ISSUE WAS CONSIDERED BY THE TRIBUNAL IN THE CASE OF M/S. AIG HOME FINANCE INDIA LTD. IN ITA NO.2167/MDS/2010 DATED 5.5.2011 FOR THE ASSESSMENT YEAR 2005-06 WHEREIN IT WAS HELD AS UNDER: 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS PER EXPLANATION (A) TO SECTION 36(1)(VIII) OF THE ACT THE ASSESSEE IS A HOUSING FINANCE COMPANY. THE ASSESSEE HAS ALSO BEEN ACCREDITED UNDER ACCREDITION AUTHORITY BEING THE -15- ITA 328 & 313/13 NATIONAL HOUSING BOARD. AS PER THE PROVISIONS OF EXPLANATION (B) AND (C) TO SECTION 36(1)(VIII) O F THE ACT ELIGIBLE BUSINESS MEANS THE BUSINESS OF PROVIDING LONG TERM FINANCE FOR THE CONSTRUCTION OR PURCHASE OF HOUSES IN INDIA FOR RESIDENTIAL PURPOSES. IT IS AN UNDISPUTED FACT THAT THE SECURITIZATION IS OF THE LONG TERM HOUSING LOAN IN THE PROCESS OF SECURITIZATION THE FUTURE RECEIVABLES FOR A PERIOD OF TEN YEARS ARE DISCOUNTED WITH BANKS AND THE BANKS PAY THE NET PRESENT VALUE OF FUTURE RECEIVABLES TO THE ASSESSEE AS PART OF SECURITIZATION ARRANGEMENT. WHAT IS TO BE UNDERSTOOD IS THAT THE LONG TERM HOUSING LOAN GRANTED BY THE ASSESSEE TO THE BORROWERS IS DISCOUNTED WITH THIRD PARTY BANKS. THE RISK CONTINUES TO REMAIN WITH THE ASSESSEE AS IN THE EVENT OF DEFAULT BY THE BORROWERS THE ASSESSEE IS RESPONSIBLE TO MAKE GOOD TO DEFAULT TO BANKS. THE NET PRESENT VALUE AT WHICH THE LONG TERM HOUSING LOANS ARE DISCOUNTED HAD NOTHING BUT THE FUTURE INTEREST INCOME DISCOUNTED TO THE PRESENT VALUE. THUS THE SECURITIZATION AMOUNT IS NOTHING BUT THE INTEREST ON THE HOUSING LOAN WHICH IS DISCOUNTED TO THE PRESENT NET VALUE. THIS AMOUNT WOULD OBVIOUSLY BE THE INCOME OF THE ASSESSEE FROM THE LONG TERM HOUSING LOAN DISBURSED BY THE ASSESSEE. IN THE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE SECURITIZATION INCOME IS AN INCOME FROM BUSINESS OF LONG TERM HOUSING FINANCE. WE ARE OF THE VIEW THAT THE SAME IS ELIGIBLE FOR DEDUCTION UNDER SECTION 36(1)(VIII) OF THE ACT. THEREFORE WE UPHOLD THE FINDING OF THE LD. CIT(APPEALS) IN DELETING THE DISALLOWANCE OF THE CLAIM OF DEDUCTION UNDER SECTION 36(1)(VIII) OF THE ACT WHICH IS ON RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. THUS GROUND NOS. 5 TO 5.4 STAND DISMISSED. -16- ITA 328 & 313/13 RESPECTFULLY FOLLOWING THE SAME WE ARE INCLINED TO UPHOLD THE ORDER OF THE CIT(APPEALS) AND THIS GROUN D OF APPEAL OF THE REVENUE IS DISMISSED. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON FRIDAY THE 31 ST OF JULY 2015 AT CHENNAI. SD/- SD/- ( . $ % ) ( & ' ( ) ) *+ -./01023 45067.082290.:3 ; $< /JUDICIAL MEMBER ! $<=>>2-6?06?@ABCA. &; /CHENNAI D$ /DATED THE 31 ST JULY 2015. MPO* $E FGHG /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. I3 /CIT(A) 4. I /CIT 5. GJ% K /DR 6. %LM /GF.