ACIT, New Delhi v. M/s Wave Industries Pvt. Ltd.,, New Delhi

ITA 6607/DEL/2016 | 2013-2014
Pronouncement Date: 08-11-2017 | Result: Dismissed

Appeal Details

RSA Number 660720114 RSA 2016
Assessee PAN AAACW7708G
Bench Delhi
Appeal Number ITA 6607/DEL/2016
Duration Of Justice 10 month(s) 13 day(s)
Appellant ACIT, New Delhi
Respondent M/s Wave Industries Pvt. Ltd.,, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 08-11-2017
Appeal Filed By Department
Tags No record found
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 08-11-2017
Assessment Year 2013-2014
Appeal Filed On 26-12-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES G DELHI .. ! BEFORE SHRI N.K. SAINI ACCOUNTANT MEMBER AND SHRI JOGINDER SINGH JUDICIAL MEMBER ITA NOS.6606 & 6607/DEL/2016 ASSESSMENT YEAR: 2013-14 ACIT CENTRAL CIRCLE-29 ROOM NO.318 3 RD FLOOR ARA CENTRE JHANDEWALAN EXTN. NEW DELHI / VS. M/S WAVE INFRATECH PVT LTD. C-1 SEC-3 NOIDA U.P.-201301 OR M/S WAVE INFRATECH PVT. LTD. MEZZAINE FLOOR M-4 SOUTH EXTENSION PART-II NEW DELHI - 110049 ( / REVENUE) ( &' /ASSESSEE) PAN. NO. AAACW7708G + / DATE OF HEARING : 08/11/2017 + / DATE OF ORDER: 08/11/2017 / REVENUE BY SHRI KAUSHLENDRA TIWARI DR &' / ASSESSEE BY SHRI SANAT KAPOOR ALONG WITH MS. SAUMYA SINGH ITA NOS.6606 & 6607/DEL./2016 WAVE INFRATECH PVT. LTD. 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDERS BOT H DATED 21/10/2016 OF THE LD. FIRST APPELLATE AUTHORI TY NEW DELHI. IN ITA NO.6606/DEL/2016 THE GROUND RAISED PERTAINS TO DELETING THE DISALLOWANCE OF RS.3 13 08 541/- U/ S 14A OF THE INCOME TAX ACT 1961(HEREINAFTER THE ACT) R.W.S 8D OF THE I.T. RULES 1962 (HEREINAFTER THE RULES) HAS BEEN CH ALLENGED. 2. DURING HEARING THE CRUX OF ARGUMENT ADVANCED B Y SHRI KAUSHLENDRA TIWARI LD. SR. DR IS THAT CBDT CI RCULAR NO.5/2014 DATED 11/02/2014 WHICH CLARIFIES RULE-8D OF THE RULES AND SECTION 14A OF THE ACT HAS BEEN IGNORED B Y THE LD. CIT(A). IN REPLY SHRI SANAT KAPOOR ALONG WITH MS. SAUMYA SINGH LD. COUNSEL FOR THE ASSESSEE DEFENDED THE I MPUGNED ORDER BY CONTENDING THAT NO EXEMPT INCOME WAS EARNE D BY THE ASSESSEE DURING THE YEAR THEREFORE NO DISALLO WANCE CAN BE MADE FOR WHICH RELIANCE WAS PLACED UPON THE DE CISION FROM HONBLE JURISDICTIONAL HIGH COURT IN CHEMINVES T LTD. VS CIT 378 ITR 33 (DEL.). ITA NOS.6606 & 6607/DEL./2016 WAVE INFRATECH PVT. LTD. 3 2.1. SO FAR AS ITA NO.6607/DEL/2016 IS CONCERNED THE ARGUMENT ON BEHALF OF THE ASSESSEE IS THAT THE ASSE SSEE ITSELF MADE DISALLOWANCE TO THE EXTENT OF EXEMPT INCOME T HEREFORE NO FURTHER DISALLOWANCE IS PERMISSIBLE FOR WHICH R ELIANCE WAS PLACED UPON THE DECISION JOINT INVESTMENTS PVT. LTD. VS CIT 372 ITR 694 (DEL.). IN REPLY THE LD. SR. DR F ILED WRITTEN SUBMISSION MENTIONING CERTAIN JUDICIAL ORDERS THE SAME IS KEPT ON RECORD. 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE T HAT THE IN THE CASE OF METROPOLITAN EXIM CHEM LTD. (ITA NO.5749/MUM/2014) VIDE ORDER DATED 01/08/2017 MADE AN ELABORATE DISCUSSION ON SECTION 14A OF THE ACT AND THE RATIO LAID DOWN THEREIN COVERS THE CASE OF THE ASSESSEE A LONG WITH OTHER DECISIONS CITED BEFORE US INCLUDING HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS CIT 378 ITR 33(DEL.). THEREFORE WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION FROM THE AFORESAID O RDER OF THE TRIBUNAL DATED 01/08/2017 FOR READY REFERENCE A ND ANALYSIS:- ITA NOS.6606 & 6607/DEL./2016 WAVE INFRATECH PVT. LTD. 4 2. DURING HEARING THE CRUX OF ARGUMENTS ADVANCED BY SHRI SATISH R. MODY IS THAT THE ASSESSEE IS IN T HE BUSINESS OF MANUFACTURING OF CHEMICAL AND EXPORTS B Y CLAIMING THAT THE DIVIDEND INCOME EARNED BY THE ASS ESSEE IS RS.3 93 161/- THEREFORE THE DISALLOWANCE CANNO T BE MORE THAN THE DIVIDEND INCOME. IT WAS ALSO CLAIMED THAT THERE IS NO DIRECT INVESTMENT AND NO DISALLOWANCE W AS MADE IN EARLIER AND LATER YEARS. PLEA WAS ALSO RAIS ED THAT IN SUBSEQUENT YEAR I.E. 2011-12 THE LD. COMMISSIONER OF INCOME TAX (APPEAL) DELETED THE ADDITION AGAINST WH ICH NO APPEAL WAS FILED BY THE ASSESSEE. IT WAS ALSO CLAIM ED THAT THE ISSUE UNDER HAND IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF ZOOM ENTERTAINMENT NETWORK LTD. (ITA NO.3453/MUM/2016) ORDER DATED 21/04/2017. ON THE OTHER HAND SHRI T.A. KHAN LD. DR THOUGH DEFE NDED THE ADDITION BUT DID NOT CONTROVERT THE ASSERTION M ADE BY THE ASSESSEE. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE LI GHT OF THE ABOVE BEFORE ADVERTING FURTHER WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION FROM THE AFORESAID O RDER OF THE TRIBUNAL DATED 21/04/2017 FOR READY REFERENCE A ND ANALYSIS:- THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 29/02/2016 OF THE FIRST APPELLATE AUTHORITY MUMBAI CONFIRMING T HE DISALLOWANCE OF RS.27 19 404/- MADE U/S 14A(2) OF THE INCOME TAX AC T 1961 (HEREINAFTER THE ACT) READ WITH RULE-8D OF THE RULES. 2. DURING HEARING SHRI S. VENKATARAMAN LD. COUNS EL FOR THE ASSESSEE ADVANCED ARGUMENTS WHICH ARE IDENTICAL T O THE GROUND RAISED. THE LD. COUNSEL ALSO RELIED UPON THE DECISION IN TH E CASE OF M/S DAGA GLOBAL CHEMICALS VS ACIT (ITA NO.5592/MUM/2012) OR DER DATED 01/01/2015 NIMBUS COMMUNICATION LTD. VS ACIT (ITA NO.1424/MUM/2014) ORDER DATED 09/02/2016 AND TATA INDUSTRIES LTD. VS ITO (ITA NO.4894/MUM/2008) ORDER DATED 20/07/2016. 2.1. ON THE OTHER HAND THE LD. DR SHRI RAJESH KU MAR YADAV DEFENDED THE ADDITION AND PLACED RELIANCE UPON THE DECISION FROM DELHI BENCH OF THE TRIBUNAL IN THE CASE OF BABA GLOBAL LT D. VS DCIT (ITA NO.1086 TO 1091/DEL./2015) ORDER DATED 05/05/2016. 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. DR MAINLY REL IED UPON THE DECISION FROM DELHI BENCH OF THE TRIBUNAL IN THE CASE OF BAB A GLOBAL LTD. (SUPRA) THEREFORE BEFORE COMING TO ANY CONCLUSION WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION OF THIS ORDER FOR READY REFERE NCE AND ANALYSIS:- ITA NOS.6606 & 6607/DEL./2016 WAVE INFRATECH PVT. LTD. 5 THESE ARE SIX APPEALS FILED BY THE ASSESSEE AGAINS T THE ACTION OF THE LEARNED DRP UPHOLDING THE ORDER PASSED BY THE AO UN DER SECTION 153A READ WITH SECTION 144C OF THE ACT FOR ASSESSMENT YE ARS 2006-07 TO 2010-11 AND UNDER SECTION 143(3) FOR ASSESSMENT YEAR 2011-1 2 CONSEQUENT TO THE DIRECTION ISSUED BY THE LEARNED DISPUTE RESOLUTION PANEL. 2. IN THE APPEAL FILED FOR ASSESSMENT YEARS 2006-0 7 2007-08 AND 2008-09 BESIDES QUESTIONING THE VALIDITY OF ASSESSMENT FRAM ED UNDER SECTION 153A OF THE INCOME-TAX ACT 1961 THE ONLY ISSUE IS THE ADDITION OF AMOUNT OF THE NOTIONAL INTEREST ON FOREIGN CURRENCY LOAN ADVANCED BY THE ASSESSEE COMPANY TO ITS WHOLLY OWNED FOREIGN SUBSIDIARIES. W HEREAS FOR ASSESSMENT YEARS 2009-10 TO 2011-12 BESIDES THE ABOVE ADJUSTM ENT ON ACCOUNT OF THE NOTIONAL INTEREST THE ISSUE ALSO IS THAT OF ADDITI ON UNDER SECTION 14A OF THE INCOME TAX ACT. 3. THE ASSESSEE COMPANY IS ENGAGED IN MANUFACTURING OF FLAVOURED CHEWING TOBACCO KIWAM SCENTED ELAICHI ETC. UNDER THE BRAND NAME BABA AND TULSI AND EXPORTED ITS 100% OF PRODUCTION DUR ING THE YEARS UNDER CONSIDERATION. 4. THE ORIGINAL ASSESSMENTS UNDER SECTION 143(3) WE RE COMPLETED IN RESPECT OF ASSESSMENT YEARS 2006-07 2007-08 AND 2008-09. T HEREAFTER A SEARCH TOOK PLACE ON 21ST JANUARY 2011. 5. THE AO THEREAFTER TOOK UP THE ASSESSMENT BY ISSU ING NOTICE UNDER SECTION 153A. DURING THE COURSE OF THE ASSESSMENT THE AO RE FERRED THE MATTER TO THE TRANSFER PRICING OFFICER. THE LEARNED TPO NOTED THA T THE ASSESSEE COMPANY HAS EXTENDED LOANS TO ITS SUBSIDIARY COMPANIES AND HELD THAT THE ASSESSEE OUGHT TO HAVE CHARGED INTEREST IN RESPECT OF SUCH L OANS AND ACCORDINGLY THE TPO RECOMMEND THAT INTEREST AS PER THE PRIME LENDIN G RATE OF STATE BANK OF INDIA BE ADDED AS INCOME ON ACCOUNT OF ADJUSTMEN T OF ARMS LENGTH PRICE. THEREAFTER THE AO PASSED THE DRAFT ASSESSMENT ORDER MAKING ADDITIONS AS RECOMMENDED BY THE TPO. 6. AGGRIEVED BY THE ORDER OF THE TPO THE ASSESSEE FILED OBJECTION BEFORE THE DISPUTE RESOLUTION PANEL. IT WAS CONTENDED BY T HE ASSESSEE THAT SINCE THE MONEY GIVEN AS LOAN TO ITS SUBSIDIARY COMPANIES WAS OWN MONEY AND HENCE NO ADJUSTMENT IS REQUIRED TO BE MADE. IT WAS FURTHER SUBMITTED THAT ITA NOS.6606 & 6607/DEL./2016 WAVE INFRATECH PVT. LTD. 6 THE RATE OF INTEREST CHARGED CANNOT BE THE PRIME LE NDING RATE OF STATE BANK OF INDIA. THIS MONEY HAS BEEN ADVANCED IN FOREIGN C URRENCY AND AS SUCH INTEREST IS TO BE CHARGED AS PER THE INTEREST RATE IN FOREIGN CURRENCY I.E. LIBOR. 7. THE LEARNED DRP DID NOT AGREE WITH THE CONTENTIO N OF THE ASSESSEE. HOWEVER IT GAVE A PART RELIEF BY HOLDING THAT THE INTEREST RATE BE CHARGED BE ONLY BASE RATE AND FURTHER ADJUSTED BY 150 BASIS PO INT IN TERMS OF SAFE HARBOUR RULES. ON THE ISSUE OF ADDITION UNDER SECTI ON 14A THE LEARNED DRP CONFIRMED THE ACTION OF THE AO. 8. AGGRIEVED BY THE ORDER OF THE LEARNED DRP AND TH E FINAL ASSESSMENT ORDER PASSED BY THE AO THE ASSESSEE IS IN APPEAL BE FORE US. 9. IT WAS CONTENDED BY THE LEARNED AR THAT THE AO WAS NOT JUSTIFIED IN TINKERING WITH THE ASSESSMENT FOR ASSESSMENT YEARS 2006-07 TO 2008-09 AS THESE ASSESSMENTS HAVE NOT ABATED CONSEQUENT TO THE SEARCH. THE SEARCH HAS TAKEN PLACE ON 21ST JANUARY 2011. NO INCRIMINA TING MATERIAL WAS FOUND DURING THE COURSE OF THE SEARCH AS IS EVIDENT FROM THE ASSESSMENT ORDER. IT WAS CONTENDED THAT IN THE ABSENCE OF ANY INCRIMINAT ING MATERIAL THE AO SHOULD NOT HAVE MADE AN ADDITION. IN SUPPORT THEREO F THE LEARNED AR RELIED UPON THE ORDER OF THE JURISDICTIONAL DELHI HIGH COU RT IN THE CASE CIT (CENTRAL) III VERSUS KABUL CHAWLA [2016] 380 ITR 573 (DEL). 10. ON THE ISSUE OF THE MERIT IT WAS CONTENDED BY THE LEARNED AR THAT THE ADDITIONS ARE UNTENABLE AS THE ASSESSEE HAS PAID TH E ADVANCES TO ITS SUBSIDIARY COMPANIES OUT OF EEFC ACCOUNTS. THE EEFC ACCOUNT EVEN OTHERWISE DOES NOT EARN ANY INTEREST. THE ADVANCES GIVEN TO THE SUBSIDIARY COMPANIES WERE IN THE NATURE OF QUASI CAPITAL AND W ERE FOR BUSINESS CONSIDERATION. THE MAIN PURPOSE OF GIVING ADVANCES TO ITS SUBSIDIARY COMPANIES WAS TO PROMOTE ITS EXPORT BUSINESS AND TO HAVE FOOTHOLD IN THESE FOREIGN COUNTRIES. 11. IN THE ALTERNATIVE IT WAS CONTENDED BY THE LEA RNED AR THAT THE RATE OF INTEREST CANNOT BE THAT OF THE INDIAN RUPEES. THE M ONEY HAS BEEN ADVANCED IN FOREIGN CURRENCY AND INTEREST RATE TO B E CHARGED HAS TO BE THE INTEREST RATE OF SUCH FOREIGN CURRENCY. IF THE MONE Y HAS BEEN ADVANCED IN US DOLLAR IT HAS TO BE LIBOR. IN RESPECT OF ADVANCE S IN EURO THE INTEREST ITA NOS.6606 & 6607/DEL./2016 WAVE INFRATECH PVT. LTD. 7 RATE HAS TO BE EUR (LIBOR) AND IN RESPECT OF ADVANC ES GIVEN IN SWISS FRANC THE INTEREST RATE HAS TO BE THAT OF CHF (LIBO R). IN SUPPORT OF ITS CONTENTION THE LEARNED AR RELIED UPON THE JUDGMENT OF THE COORDINATE BENCH OF THE ITAT IN THE CASE OF COTTON NATURAL INDIA PVT . LTD. VS. DCIT CIRCLE 3(1) NEW DELHI 142 ITD (DEL) 662 WHICH HAS ALSO BEEN CON FIRMED BY THE JURISDICTIONAL DELHI HIGH COURT. THE LEARNED AR ALS O RELIED UPON THE FOLLOWING JUDGMENTS OF THE ITAT:- (I) SIVA INDUSTRIES & HOLDINGS LIMITED VS ACIT (20 11) 59 DTR 0182 (II) TATA AUTOCOMP SYSTEMS LIMITED VS ACIT (2012) 7 3 DTR 0220 (III) FOUR SOFT LTD. VS DCIT (2014) 106 DTR 0137(HY D) (IV) AURIONPRO SOLUTIONS LIMITED 12. IT WAS FURTHER CONTENDED THAT THE AMOUNT OF LOA N OUTSTANDING TO ITS SUBSIDIARY COMPANIES HAS BEEN CONVERTED INTO SHARE APPLICATION MONEY IN THE ASSESSMENT YEAR 2011-12. THE SAID LOAN HAVING B ECOME SHARE APPLICATION MONEY THE TPO CANNOT CHANGE THE CHARAC TERISTIC OF THE TRANSACTION SO AS TO TREAT THE SHARE APPLICATION AS LOAN MONEY SO AS TO CHARGE INTEREST THEREON. IN SUPPORT THEREOF THE LE ARNED AR PLACED RELIANCE ON THE JUDGMENT OF THE COORDINATE BENCH OF THE ITAT IN THE CASE OF BHARTI AIRTEL LIMITED VS ACIT ITA NO. 5816/D/2012 DATED 1 1.03.2014. THE LEARNED AR ALSO RELIED UPON THE FOLLOWING JUDGMENTS:- (I) PAN INDIA NETWORK INFRAVEST PRIVATE LIMITED VS ACIT (ITA NO. 7026 & 7025 /MUMBAI/2013 DATED 04.12.2015 (II) CIT VS EKL APPLIANCES ITA NO. 1068/2011 AND 1 070/2011 (III) PARLE BUISCUITS P LTD VS DCIT (ITA NO. 9010/M UM/2010) DATED 11.4.2014 ITAT MUMBAI (IV) ALL CARGO LOGISTICS LTD VS ACIT (2014) 150 IT D 0651 DATED. 10.6.2014 13. ON THE ISSUE OF DISALLOWANCE UNDER SECTION 14A MADE BY THE AO IN ASSESSMENT YEAR 2009-10 TO 2011-12 IT WAS SUBMITTE D BY THE LEARNED AR THAT THE DISALLOWANCE HAS BEEN MADE BY THE AO WITHO UT RECORDING ANY SATISFACTION. THE AO HAS STRAIGHTAWAY INVOKED THE P ROVISIONS OF RULE 8D. IN ITA NOS.6606 & 6607/DEL./2016 WAVE INFRATECH PVT. LTD. 8 SUPPORT THERE OF THE LEARNED AR HAS PLACED RELIANCE ON THE JUDGMENT OF THE JURISDICTIONAL DELHI HIGH COURT IN THE CASE OF CIT VS. TAIKISHA ENGINEERING INDIA LTD. (2015) 370 ITR 0338 (DEL). 14. IT WAS FURTHER SUBMITTED THAT IN ANY CASE THE D ISALLOWANCE UNDER SECTION 14A CANNOT EXCEED THE DIVIDEND INCOME EARNED BY THE ASSESSEE COMPANY. 15. THE LEARNED DR ON THE OTHER HAND SUPPORTED TH E ORDER PASSED BY THE TPO AS MODIFIED BY THE LEARNED DRP. IT WAS CONTENDE D THAT THE ORDER PASSED BY THE TPO AS WELL AS THE LEARNED DRP ON THE ISSUE OF ADJUSTMENT OF INTEREST IS A SPEAKING ORDER. IT WAS FURTHER CON TENDED THAT ONCE THE SEARCH HAS BEEN INITIATED ALL THE ASSESSMENTS GET REOPENED CONSEQUENT TO THE ISSUE OF NOTICE UNDER SECTION 153A AND AS SUCH THE AO IS ENTITLED TO MAKE ADJUSTMENT TO THE INCOME AS PERMISSIBLE UNDER THE L AW. 16. ON THE ISSUE OF RATE OF INTEREST IT WAS CONTEND ED THAT THE RATE OF INTEREST HAS TO BE THAT OF INDIAN RUPEES AS ASSESSEE WOULD H AVE EARNED THE INTEREST IN INDIAN RUPEES HAD IT NOT ADVANCED THE MONEY TO I TS FOREIGN SUBSIDIARY. 17. AS REGARDS CONVERSION OF THE LOAN INTO SHARE AP PLICATION MONEY IN ASSESSMENT YEAR 2011-12 IT WAS CONTENDED THAT THERE IS NO DIFFERENCE BETWEEN THE LOAN AND THE SHARE APPLICATION MONEY AN D HENCE INTEREST HAS TO BE CHARGED FOR THAT YEAR ALSO. 18. ON THE ISSUE OF DISALLOWANCE UNDER SECTION 14A IT WAS CONTENDED THAT THE AO HAS INVOKED THE PROVISIONS OF RULE 8D AND ME RE NOT RECORDING OF SATISFACTION WILL NOT MAKE SUCH DISALLOWANCE UNTENA BLE IN THE EYE OF LAW. 19. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE ORDER PASSED BY THE AUTHORITIES BELOW. THE FIRST ISSUE IS ADDITION MADE BY THE AO IN THE ASSESSMENT YEARS WHICH HAVE NOT ABATED CONSE QUENT TO THE SEARCH I.E. ASSESSMENT YEARS 2006-07 2007-08 AND 2008-09. AS PER THE FACTS ON RECORD THE SEARCH TOOK PLACE ON 21.1.2011. ASSESSM ENTS FOR ALL THESE THREE YEARS HAVE BEEN COMPLETED UNDER SECTION 143(3) OF T HE ACT. NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF THE SEARCH. AS IS EVIDENT FROM THE ASSESSMENT ORDER THE ADDITION HAS BEEN MADE CONSEQUENT TO THE REFERENCE MADE BY THE AO TO TPO. THE ISSUE W HICH ARISES FOR CONSIDERATION IS WHETHER THE AO COULD HAVE MADE ADD ITION IN THESE ITA NOS.6606 & 6607/DEL./2016 WAVE INFRATECH PVT. LTD. 9 ASSESSMENT YEARS WITHOUT THERE BEING ANY INCRIMINAT ING MATERIAL AND IN ABSENCE OF THE ABATEMENT OF ASSESSMENT ORDERS ALREA DY FRAMED. THIS ISSUE IS NOW SQUARELY COVERED BY THE JUDGMENT OF THE JURI SDICTIONAL DELHI HIGH COURT IN THE CASE OF CIT (CENTRAL) III VS. KABUL CHAWLA (SUPRA) WHEREIN THE HONBLE HIGH COURT HAS BEEN PLEASED TO HOLD AS UNDE R:- 37. ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT READ WITH THE PROVISOS THERETO AND IN THE LIGHT OF THE LAW EXPLAINED IN T HE AFOREMENTIONED DECISIONS THE LEGAL POSITION THAT EMERGES IS AS UN DER: I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF T HE ACT NOTICE UNDER SECTION 153 A(1) WILL HAVE TO BE MANDATORILY ISSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR SIX AYS IMMEDIATE LY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE AY IN WHICH THE SEARCH TAKES P LACE. II. ASSESSMENTS AND REASSESSMENTS PENDING ON THE DA TE OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AYS WILL HAVE TO B E COMPUTED BY THE AOS AS A FRESH EXERCISE. III. THE AO WILL EXERCISE NORMAL ASSESSMENT POWERS IN RESPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT AY IN WHICH THE SEAR CH TAKES PLACE. THE AO HAS THE POWER TO ASSESS AND REASSESS THE 'TOTAL INC OME' OF THE AFOREMENTIONED SIX YEARS IN SEPARATE ASSESSMENT ORD ERS FOR EACH OF THE SIX YEARS. IN OTHER WORDS THERE WILL BE ONLY ONE ASSESS MENT ORDER IN RESPECT OF EACH OF THE SIX AYS 'IN WHICH BOTH THE DISCLOSED AN D THE UNDISCLOSED INCOME WOULD BE BROUGHT TO TAX'. IV. ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDITI ONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE O F THE SEARCH OR OTHER POST-SEARCH MATERIAL OR INFORMATION AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE EVIDENCE FOUND IT DOES NOT MEAN THA T THE ASSESSMENT 'CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WI TH THE SEIZED MATERIAL. OBVIOUSLY AN ASSESSMENT HAS TO BE MADE UNDER THIS S ECTION ONLY ON THE BASIS OF SEIZED MATERIAL.' V. IN ABSENCE OF ANY INCRIMINATING MATERIAL THE CO MPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESS MENT CAN BE MADE. THE WORD 'ASSESS' IN SECTION 153 A IS RELATABLE TO ABATED PROCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD ' REASSESS' TO COMPLETED ASSESSMENT PROCEEDINGS. VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED T HE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER SE CTION 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARAT ELY FOR EACH AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER M ATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE AO. VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH B Y THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONLY ON THE BASI S OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR R EQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH WHICH ITA NOS.6606 & 6607/DEL./2016 WAVE INFRATECH PVT. LTD. 10 WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. CONCLUSION 38. THE PRESENT APPEALS CONCERN AYS 2002-03 2005- 06 AND 2006- 07.ON THE DATE OF THE SEARCH THE SAID ASSESSMENTS ALREADY STOOD COMPLETED. SINCE NO INCRIMINATING MATERIAL WAS UNEARTHED DURING THE SEARCH NO ADDITIONS COULD HAVE BEEN MADE TO THE INCOME ALREADY ASSESSED . 39. THE QUESTION FRAMED BY THE COURT IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE ABOVE VIEW HAS BEEN REITERATED BY THE HONBLE D ELHI HIGH COURT IN THE CASE OF CIT-7 VS. RRJ SECURITIES LTD. IN [2016] 380 ITR 612 (DEL) WHERE THE HONBLE COURT HAS BEEN PLEASED TO HOLD AS UNDER:- IN RESPECT OF SUCH ASSESSMENTS WHICH HAVE ABATED THE AO WOULD HAVE THE JURISDICTION TO PROCEED AND MAKE AN ASSESSMENT. HOW EVER IN RESPECT OF CONCLUDED ASSESSMENTS THE AO WOULD ASSUME JURISDIC TION TOREASSESS PROVIDED THAT THE ASSETS/DOCUMENTS RECEIVED BY THE AO REPRESENTOR INDICATE ANY UNDISCLOSED INCOME OR POSSIBILITY OF ANY INCOME THAT MAY HAVE REMAINED UNDISCLOSED IN THE RELEVANT ASSESSMENT YEA RS. THIS COURT IN COMMISSIONER OF INCOME TAX (CENTRAL)-III V. KABUL C HAWLA: ITA707/2014 DECIDED ON 28TH AUGUST 2015 HAS HELD THAT COMPLETE D ASSESSMENTS COULD ONLY BE INTERFERED WITH BY THE AO ON THE BASIS OF A N INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF THE SEARCH OR REQUIS ITION OF THE DOCUMENTS. IN ABSENCE OF ANY INCRIMINATING MATERIAL THE AO DOES NOT HAVE ANY JURISDICTION TO INTERFERE IN CONCLUDED ASSESSMENTS. IN THE PRESENT CASE AS STATED HEREINABOVE THE ADD ITION HAS BEEN MADE WITHOUT THERE BEING ANY INCRIMINATING MATERIAL AND IN ABSENCE OF PENDENCY OF ASSESSMENT. IN THE ABSENCE OF ANY INCRIMINATING MATERIAL AS HELD BY THE HONBLE HIGH COURT THE ADDITION CANNOT BE MADE IN AN ASSESSMENT UNDER SECTION 153A. RESPECTFULLY FOLLOWING THE JUDGMENT O F THE JURISDICTIONAL DELHI HIGH COURT WE HOLD THAT THE AO WAS NOT JUSTIFIED I N MAKING THE ADDITION AND ACCORDINGLY THE ADDITION MADE BY THE AO IN THE ASSE SSMENT YEARS 2006-07 2007-08 AND 2008-09 ARE DIRECTED TO BE DELETED. CON SEQUENTLY THE APPEALS FILED FOR THESE ASSESSMENT YEARS ARE ALLOWED. 20. AS REGARDS ASSESSMENT YEARS 2009-10 AND 2010-11 ARE CONCERNED THE LEARNED DRP HAS CONFIRMED THE ADDITION APPLYING THE BASE RATE OF STATE BANK OFINDIA PLUS 150 BASIS POINTS. IT WAS THE CONT ENTION OF THE LEARNED AR THAT NO ADDITION CAN BE MADE AS THE ADVANCE MADE WA S OUT OF THE EEFC ACCOUNT WHICH CARRIES NO INTEREST. FURTHER AMOUNT A DVANCED WAS FOR PROMOTING ITS BUSINESS. ON THIS ISSUE WE ARE NOT IN AGREEMENT WITH THE CONTENTION OF THE LEARNED AR. THE AMOUNT HAVING BEE N ADVANCED TO AN ASSOCIATED ENTERPRISES THE SAME HAS TO BE EVALUATE D BY APPLYING ARMS LENGTH PRICE. SINCE IT WAS A LOAN DURING THE ASSESS MENT YEARS 2009-10 AND 2010-11 THE ASSESSEE COMPANY OUGHT TO HAVE COMPUTE D THE ARMS LENGTH ITA NOS.6606 & 6607/DEL./2016 WAVE INFRATECH PVT. LTD. 11 PRICE IN RESPECT OF SUCH LOAN ADVANCED TO ITS SUBSI DIARY COMPANIES. HOWEVER AS REGARDS THE INTEREST RATE WE ARE IN AGR EEMENT WITH THE CONTENTION OF THE LEARNED AR THAT THIS CANNOT BE TH E INTEREST RATE APPLICABLE TO INDIAN RUPEES. THESE ADVANCES HAVING BEEN MADE I N THE FOREIGN CURRENCY THE RATE OF INTEREST HAS TO BE WITH REFER ENCE TO THE INTEREST RATE ON LOANS AND ADVANCES IN RESPECT OF FOREIGN CURRENCY. THIS ISSUE IS COVERED BY THE JUDGMENT OF THE JURISDICTIONAL DELHI HIGH COURT IN THE CASE OF CIT VS. COTTON NATURALS (P) P LTD. (2015) 276 CTR 0445 (DEL ) WHEREIN THE HONBLE HIGH COURT HAS BEEN PLEASED TO HOLD AS UNDER:- 39. THE QUESTION WHETHER THE INTEREST RATE PREVAIL ING IN INDIA SHOULD BE APPLIED FOR THE LENDER WAS AN INDIAN COMPANY/ASSES SEE OR THE LENDING RATE PREVALENT IN THE UNITED STATES SHOULD BE APPLIED F OR THE BORROWER WAS A RESIDENT AND AN ASSESSEE OF THE SAID COUNTRY IN OU R CONSIDERED OPINION MUST BE ANSWERED BY ADOPTING AND APPLYING A COMMONS ENSICAL AND PRAGMATIC REASONING. WE HAVE NO HESITATION IN HOLDI NG THAT THE INTEREST RATE SHOULD BE THE MARKET DETERMINED INTEREST RATE APPLI CABLE TO THE CURRENCY CONCERNED IN WHICH THE LOAN HAS TO BE REPAID. INTER EST RATES SHOULD NOT BE COMPUTED ON THE BASIS OF INTEREST PAYABLE ON THE CU RRENCY OR LEGAL TENDER OF THE PLACE OR THE COUNTRY OF RESIDENCE OF EITHER PAR TY. INTEREST RATES APPLICABLE TO LOANS AND DEPOSITS IN THE NATIONAL CURRENCY OF T HE BORROWER OR THE LENDER WOULD VARY AND ARE DEPENDENT UPON THE FISCAL POLICY OF THE CENTRAL BANK MANDATE OF THE GOVERNMENT AND SEVERAL OTHER PARAMET ERS. INTEREST RATES PAYABLE ON CURRENCY SPECIFIC LOANS/ DEPOSITS ARE SI GNIFICANTLY UNIVERSAL AND GLOBALLY APPLICABLE. THE CURRENCY IN WHICH THE LOAN IS TO BE RE-PAID NORMALLY DETERMINES THE RATE OF RETURN ON THE MONEY LENT I. E. THE RATE OF INTEREST. KLAUS VOGEL ON DOUBLE TAXATION CONVENTIONS (THIRD E DITION) UNDER ARTICLE 11 IN PARAGRAPH 115 STATES AS UNDER:- THE EXISTING DIFFERENCES IN THE LEVELS OF INTEREST RATES DO NOT DEPEND ON ANY PLACE BUT RATHER ON THE CURRENCY CONCERNED. THE RAT E OF INTEREST ON A US $ LOAN IS THE SAME IN NEW YORK AS IN FRANKFURT-AT LEA ST WITHIN THE FRAMEWORK OF FREE CAPITAL MARKETS (SUBJECT TO THE ARBITRAGE). IN REGARD TO THE QUESTION AS TO WHETHER THE LEVEL OF INTEREST RATES IN THE LENDERS STATE OR THAT IN THE BORROWERS IS DECISIVE THEREFORE PRIMARILY DEPEND S ON THE CURRENCY AGREED UPON (BFH BST.B1. II 725 (1994) RE. 1 ASTG). A D IFFERENTIATION BETWEEN DEBT-CLAIMS OR DEBTS IN NATIONAL CURRENCY AND THOSE IN FOREIGN CURRENCY IS NORMALLY NO USE BECAUSE FOR INSTANCE A US $ LOAN ADVANCED BY A US LENDER IS TO HIM A DEBT-CLAIM IN NATIONAL CURRENCY WHEREAS TO A GERMAN BORROWER IT IS A FOREIGN CURRENCY DEBT (THE SITUATI ON BEING DIFFERENT HOWEVER WHEN AN AGREEMENT IN A THIRD CURRENCY IS INVOLVED). MOREOVER A DIFFERENCE IN INTEREST LEVELS FREQUENTLY REFLECTS NO MORE THAN DIFFERENT EXPECTATIONS IN REGARD TO RATES OF EXCHANGE RATES OF INFLATION AND OTHER ASPECTS. HENCE THE CHOICE OF ONE PARTICULAR CURRENCY CAN BE JUST AS RE ASONABLE AS THAT OF ANOTHER DESPITE DIFFERENT LEVELS OF INTEREST RATES . AN ECONOMIC CRITERION FOR ONE PARTY MAY BE THAT IT WANTS IF POSSIBLE TO AVO ID EXCHANGE RISKS (FOR EXAMPLE BY MATCHING THE CURRENCY OF THE LOAN WITH THAT OF THE FUNDS ANTICIPATED TO BE AVAILABLE FOR DEBT SERVICE) SUCH AS TAKING OUT A US $ LOAN IF THE PROCEEDS IN US $ ARE EXPECTED TO BECOME AVAILAB LE (SAY FROM EXPORTS). IF AN EXCHANGE RISK WERE TO PROVE INCAPABLE OF BEIN G AVOIDED (SAY BY ITA NOS.6606 & 6607/DEL./2016 WAVE INFRATECH PVT. LTD. 12 FORWARD RATE FIXING) THE APPROPRIATE COURSE WOULD BE TO ATTRIBUTE IT TO THE ECONOMICALLY MORE POWERFUL PARTY. BUT EXACTLY WHER E THERE IS NO SPECIAL RELATIONSHIP THIS WILL FREQUENTLY NOT BE POSSIBLE IN DEALINGS WITH SUCH PARTY. CONSEQUENTLY IT WILL NORMALLY NOT BE POSSIBLE TO R EVIEW AND ADJUST THE INTEREST RATE TO THE EXTENT THAT SUCH RATE DEPENDS ON THE CURRENCY INVOLVED. MOREOVER IT IS QUESTIONABLE WHETHER SUCH AN ADJUST MENT COULD BE BASED ON ART. 11 (6).FOR ART. 11(6) AT LEAST ITS WORDING A LLOWS THE AUTHORITIES TO ELIMINATE HYPOTHETICALLY THE SPECIAL RELATIONSHIPS ONLY IN REGARD TO THE LEVEL OF INTEREST RATES AND NOT IN REGARD TO OTHER CIRCUM STANCES SUCH AS THE CHOICE OF CURRENCY. IF SUCH OTHER CIRCUMSTANCES WERE TO BE INCLUDED IN THE REVIEW THERE WOULD BE DOUBTS AS TO WHERE THE LINE SHOULD B E DRAWN I.E. WHETHER AN EXAMINATION SHOULD BE ALLOWED OF THE QUESTION OF WH ETHER IN THE ABSENCE OF A SPECIAL RELATIONSHIP (I.E. FINANCIAL POWER STRO NG POSITION IN THE MARKET ETC. OF THE FOREIGN CORPORATE GROUP MEMBER) THE BO RROWING COMPANY MIGHT NOT HAVE COMPLETELY REFRAINED FROM MAKING INVESTMEN T FOR WHICH IT BORROWED THE MONEY. THE AFORESAID METHODOLOGY RECOMMENDED BY KLAUS VOGEL APPEALS TO US AND APPEARS TO BE THE REASONABLE AND PROPER PARAMETER TO DECIDE UPON THE QUESTION OF APPLICABILITY OF INTERE ST RATE. THE LOAN IN QUESTION WAS GIVEN IN FOREIGN CURRENCY I.E. US $ AN D WAS ALSO TO BE REPAID IN THE SAME CURRENCY I.E. US $. INTEREST RATE APPLICAB LE TO LOANS GRANTED AND TO BE RETURNED IN INDIAN RUPEES WOULD NOT BE THE RELEV ANT COMPARABLE. EVEN IN INDIA INTEREST RATES ON FCNR ACCOUNTS MAINTAINED I N FOREIGN CURRENCY ARE DIFFERENT AND DEPENDENT UPON THE CURRENCY IN QUESTI ON. THEY ARE NOT DEPENDENT UPON THE PLR RATE WHICH IS APPLICABLE TO LOANS IN INDIAN RUPEE. THE PLR RATE THEREFORE WOULD NOT BE APPLICABLE AN D SHOULD NOT BE APPLIED FOR DETERMINING THE INTEREST RATE IN THE EXTANT CAS E. PLR RATES ARE NOT APPLICABLE TO LOANS TO BE RE-PAID IN FOREIGN CURREN CY. THE INTEREST RATES VARY AND ARE THUS DEPENDENT ON THE FOREIGN CURRENCY IN W HICH THE REPAYMENT IS TO BE MADE. THE SAME PRINCIPLE SHOULD APPLY. 21. ACCORDINGLY THE APPLICABLE RATE OF INTEREST SHA LL BE THE RATE OF INTEREST IN RESPECT OF SUCH FOREIGN CURRENCY IN WHICH THE LOANS HAVE BEEN ADVANCE. AS PER THE DETAILS AVAILABLE ON RECORD DURING THE ASSE SSMENT YEARS 2009-10 AND 2010- 11 ASSESSEE HAS ADVANCED TO ITS SUBSIDIAR Y COMPANIES AS DETAILED BELOW:- XXXXXXXXXXXXXXXX TAKING INTO CONSIDERATION OF THE ABOVE FACTS THE L EARNED AO IS DIRECTED TO VERIFY THE ABOVE INTEREST RATE AND RECOMPUTE THE AD JUSTMENT ON ACCOUNT OF INTEREST BY APPLYING THE RATE OF INTEREST OF THE RE LEVANT CURRENCY IN THE AY 2009-10 & 2010-11. ACCORDINGLY THIS GROUND OF THE A SSESSEE IS PARTLY ALLOWED FOR AY 2009-10 & 2010-11. XXXXXXXXXXXXXXXXX ITA NOS.6606 & 6607/DEL./2016 WAVE INFRATECH PVT. LTD. 13 22. AS REGARDS THE ADDITION ON THIS ACCOUNT IN ASSE SSMENT YEAR 2011-12 THE ADVANCE GIVEN TO ITS SUBSIDIARY COMPANIES STAND CON VERTED INTO SHARE APPLICATION MONEY. ONCE THE LOAN HAS BEEN CONVERTED INTO SHARE APPLICATION MONEY FOR THE ISSUE OF THE SHARE CAPITAL THEN SUC H AMOUNT CANNOT BE CONSIDERED AS LOAN. THE TPO IS NOT PERMITTED UNDER THE LAW TO RE- CHARACTERIZE THE TRANSACTION AND ACCORDINGLY WE ARE OF THE VIEW THAT NO INTEREST ON SUCH SHARE APPLICATION MONEY CAN BE CHA RGED. THE ABOVE VIEW IS SUPPORTED BY THE JUDGMENT OF THE COORDINATE BENCH O F THE ITAT IN THE CASE OF BHARTI AIRTEL LTD. VS. ACIT [2014] 161 TTJ 0283 (DEL) WHEREIN THE ITAT HAS HELD AS UNDER:- 47. WE FIND THAT IN THE PRESENT CASE THE TPO HAS NOT DISPUTED THAT THE IMPUGNED TRANSACTIONS WERE IN THE NATURE OF PAYMENT S FOR SHARE APPLICATION MONEY AND THUS OF CAPITAL CONTRIBUTIONS. THE TPO HAS NOT MADE ANY ADJUSTMENT WITH REGARD TO THE ALP OF THE CAPITAL CO NTRIBUTION. HE HAS HOWEVER TREATED THESE TRANSACTIONS PARTLY AS OF AN INTEREST FREE LOAN FOR THE PERIOD BETWEEN THE DATES OF PAYMENT TILL THE DATE O N WHICH SHARES WERE ACTUALLY ALLOTTED AND PARTLY AS CAPITAL CONTRIBUTI ON I.E. AFTER THE SUBSCRIBED SHARES WERE ALLOTTED BY THE SUBSIDIARIES IN WHICH C APITAL CONTRIBUTIONS WERE MADE. NO DOUBT IF THESE TRANSACTIONS ARE TREATED A S IN THE NATURE OF LENDING OR BORROWING THE TRANSACTIONS CAN BE SUBJECTED TO ALP ADJUSTMENTS AND THE ALP SO COMPUTED CAN BE THE BASIS OF COMPUTING TAXAB LE BUSINESS PROFITS OF THE ASSESSEE BUT THE CORE ISSUE BEFORE US IS WHETH ER SUCH A DEEMING FICTION IS ENVISAGED UNDER THE SCHEME OF THE TRANSFER PRICI NG LEGISLATION OR ON THE FACTS OF THIS CASE. WE DONOT FIND SO. WE DONOT FIND ANY PROVISION IN LAW ENABLING SUCH DEEMING FICTION. IN VIEW OF THE ABOVE FACTS AND THE JUDGMENT OF COOR DINATE BENCH THE AO IS DIRECTED TO VERIFY THE DATE OF CONVERSION OF LOAN T O SHARE APPLICATION MONEY AND NOT TO MAKE ANY ADJUSTMENT ON ACCOUNT OF INTERE ST POST CONVERSION OF LOAN TO SHARE APPLICATION MONEY AND ACCORDINGLY THI S GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 23. AS REGARDS THE DISALLOWANCE UNDER SECTION 14A I N RESPECT OF THE EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME IS C ONCERNED WE NOTE THAT THE ASSESSEE HAS EARNED THE FOLLOWING INCOME IN THE ASSESSMENT YEARS 2009-10 TO 2011-12:- XXXXXXXXXXXXXXXX 25. THE CONTENTION OF THE ASSESSEE IS THAT IN THE A BSENCE OF ANY SATISFACTION BEING RECODED DISALLOWANCE UNDER SECTION 14A CANNOT BE SUSTAINED. THE ALTERNATIVE CONTENTION OF THE LEARNED AR HAS BEEN T HAT THE ADDITION IN ANY CASE CANNOT EXCEED THE EXEMPT INCOME. AS REGARDS FI RST CONTENTION THAT NO SATISFACTION HAS BEEN RECORDED WE NOTE FROM THE ASS ESSMENT ORDER THAT THE ITA NOS.6606 & 6607/DEL./2016 WAVE INFRATECH PVT. LTD. 14 AO HAS CONSIDERED THE EXPLANATION OF THE ASSESSEE A ND AFTER TAKING INTO CONSIDERATION THE EXPLANATION HE HAS INVOKED RULE 8 D. HAVING DONE SO IT CANNOT BE SAID THAT THE AO HAS NOT TAKEN INTO CONSI DERATION THE EXPLANATION OF THE ASSESSEE. 26. HOWEVER AS REGARDS THE SECOND CONTENTION OF TH E LEARNED AR THAT THE DISALLOWANCE CANNOT EXCEED THE EXEMPT INCOME WE AR E IN AGREEMENT WITH THIS CONTENTION. THIS VIEW IS SUPPORTED BY THE JUDG MENT OF THE HONBLE JURISDICTIONAL DELHI HIGH COURT IN THE CASE OF JOIN T INVESTMENTS PVT. LTD. VERSUS COMMISSIONER OF INCOME TAX [2015] 372 ITR 69 4 (DEL). ACCORDINGLY WE DIRECT THE AO TO RESTRICT THE ADDITION TO THE EX EMPT INCOME. ACCORDINGLY THIS GROUND IS PARTLY ALLOWED IN FAVOUR OF THE ASSE SSEE. 27. IN VIEW OF THE ABOVE FINDINGS THE ASSESSEES AP PEALS FOR THE A.Y. 2006- 07 BEING ITA NO. 1086/DEL/2015 A.Y. 2007-08 BEING ITA NO. 1087/DEL/2015 A.Y. 2008-09 BEING ITA NO. 1088/DEL/ 2015 ARE ALLOWED APPEAL FOR A.Y. 2009-10 BEING ITA NO. 1089/DEL/2015 A.Y. 2010-11 BEING ITA NO. 1090/DEL/2015 AND A.Y. 2011-12 BEING ITA NO . 1091/DEL/2015 ARE PARTLY ALLOWED. 2.3. WE FIND THAT IN THE PRESENT APPEAL THE ISSUE RELATES TO DISALLOWANCE OF RS.27 19 404/- MADE U/S 14A(2) OF T HE ACT READ WITH RULE-8D OF THE RULES. CONSIDERING THE TOTALITY OF F ACTS WE ARE OF THE VIEW THAT AT BEST IF ANY DISALLOWANCE COULD BE MADE THA T CANNOT EXCEED THE EXEMPT INCOME. THE TRIBUNAL IN THE CASE OF NIMBUS COMMUNICATION LTD. (SUPRA) HAS MADE AN ELABORATE DISCUSSION AND THEREA FTER REACHED TO A PARTICULAR CONCLUSION THUS THE RATIO LAID DOWN IN THE CASES MENTIONED BY THE LD. COUNSEL FOR THE ASSESSEE CLEARLY SUPPORTS THE CASE OF THE ASSESSEE. SO FAR AS THE CASE OF BABA GLOBAL LTD. VS DCIT (SU PRA) RELIED UPON BY LD. DR IS CONCERNED EVEN IN THAT CASE IN PARA-26 THER E IS CATEGORICAL FINDING THAT THE DISALLOWANCE CANNOT EXCEED THE EXEMPT INCO ME. THE RATIO LAID DOWN IN JOINT INVESTMENT PVT. LTD. VS CIT (2015) 37 2 ITR 694 (DEL.) CLEARLY SUPPORTS THE CASE OF THE ASSESSEE THUS THE CASE RE LIED UPON BY LD. DR IS OF NOT MUCH HELP TO THE REVENUE. THUS THE APPEAL OF T HE ASSESSEE IS ALLOWED. FINALLY THE APPEAL OF THE ASSESSEE IS ALLOWED. 2.2. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER LEADING TO ADDITION MADE TO THE TOTAL INCOME CONCL USION DRAWN IN ITA NOS.6606 & 6607/DEL./2016 WAVE INFRATECH PVT. LTD. 15 THE IMPUGNED ORDER CONCLUSION DRAWN IN THE AFORESA ID ORDER OF THE TRIBUNAL DATED 21/04/2017 MATERIAL AVAILABLE O N RECORD ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL IF K EPT IN JUXTAPOSITION AND ANALYZED WE NOTE THAT THE HON'BL E JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. L TD. 194 TAXMAN 203 HAS CLEARLY HELD THAT RULE -8D OF THE RU LES IS APPLICABLE FROM ASSESSMENT YEAR 2008-09. IN THE PR ESENT APPEAL THE TOTAL DIVIDEND INCOME EARNED BY THE ASSESSEE IS RS.3 93 161/- . THEREFORE IF ANY DISALLOWANCE COULD BE MADE THAT CANNOT EXCEED THE EXEMPT INCOME. THE TRIBUNAL CONSIDERING THE DEC ISION OF NIMBUS COMMUNICATION LTD. HAS MADE AN ELABORATE DIS CUSSION IN THE AFORESAID ORDER DATED 21/04/2017. THE RATIO LA ID DOWN IN JOINT INVESTMENT PVT. LTD. VS CIT (2015) 372 ITR 69 4 (DEL.) ALSO SUPPORTS THE CASE OF THE ASSESSEE. AS AGREED BY TH E LD. COUNSEL FOR THE ASSESSEE THAT THE DISALLOWANCE CANNOT BE MO RE THAN THE DIVIDEND INCOME OF RS.3 93 161/- WE DIRECT THE LD. ASSESSING OFFICER THAT AT BEST THE DISALLOWANCE MAY BE RESTRI CTED TO THE DIVIDEND INCOME EARNED BY THE ASSESSEE. THE APPEAL OF THE ASSESSEE IS ACCORDINGLY DISPOSED OF IN TERMS INDICA TED HEREINABOVE. FINALLY THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED. 2.3. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER CONCLUSION DRAWN IN THE IMPUGNED ORDER RATIO LAID DOWN IN THE AFORESAID CASES INCLUDING CITED BY LD. SR. DR AND MATERIAL FACTS AVAILABLE ON RECORD IF KEPT IN JUXT APOSITION AND ANALYZED WE FIND THAT IN ITA NO.6606/DEL/2016 THERE IS UNCONTROVERTED FINDING BY THE LD. CIT(A) THAT NO EXEMPT INCOME WAS EARNED BY THE ASSESSEE THEREFORE CONSI DERING THE DECISION FROM HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF HOLCIM INDIA PVT. LTD. HONBLE PUNJAB & HA RYANA HIGH COURT IN CIT VS LAKHANI MARKETING AND HONBLE ALLAHABAD HIGH COURT IN CIT VS SHIVAM MOTORS WE AR E OF THE ITA NOS.6606 & 6607/DEL./2016 WAVE INFRATECH PVT. LTD. 16 VIEW WHEN NO EXEMPT INCOME IS EARNED BY THE ASSESSE E DURING THE RELEVANT YEAR NO DISALLOWANCE CAN BE MA DE U/S 14A OF THE ACT R.W.R. 8D OF THE RULES THEREFORE W E FIND NO INFIRMITY IN THE CONCLUSION OF THE LD. FIRST APPELL ATE AUTHORITY. 2.4. SO FAR AS ITA NO.6607/DEL./2016 IS CONCERNED THERE IS UNCONTROVERTED FINDING/ARGUMENT EITHER TH ERE IS NO EXEMPT INCOME AND WHERE THE EXEMPT INCOME WAS EARNE D THE ASSESSEE ITSELF SUO-MOTO MADE DISALLOWANCE TO T HAT EXTENT THEREFORE FOLLOWING THE RATIO LAID DOWN IN THE AFORESAID CASES WE AFFIRM THE CONCLUSION DRAWN BY THE LD. FIRST APPELLATE AUTHORITY RESULTANTLY THE APPEALS OF THE REVENUE ARE DISMISSED. FINALLY THE APPEALS OF THE REVENUE ARE DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF THE LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 08/11/2017. SD/- SD /- (N. K. SAINI) (JOGINDER SINGH) ' / ACCOUNTANT MEMBER # ' /JUDICIAL MEMBER DELHI; DATED : 08/11/2017 F{X~{T? P.S/. .. ITA NOS.6606 & 6607/DEL./2016 WAVE INFRATECH PVT. LTD. 17 $#&' (' / COPY OF THE ORDER FORWARDED TO : 1. / / THE APPELLANT 2. 01/ / THE RESPONDENT. 3. 3 ( ) / THE CIT NEW DELHI. 4. 3 / CIT(A)- DELHI 5. 5 0 / DR ITAT DELHI 6. & / GUARD FILE. / BY ORDER 15 0 //TRUE COPY// / (DY./ASSTT. REGISTRAR) / ITAT DELHI