Dy. CIT, Circle-2, Jalgaon v. Shri Ashok Bhavarlal Jain, Jalgaon

ITA 779/PUN/2013 | 2009-2010
Pronouncement Date: 28-11-2014 | Result: Dismissed

Appeal Details

RSA Number 77924514 RSA 2013
Assessee PAN AALPJ3436A
Bench Pune
Appeal Number ITA 779/PUN/2013
Duration Of Justice 1 year(s) 7 month(s) 24 day(s)
Appellant Dy. CIT, Circle-2, Jalgaon
Respondent Shri Ashok Bhavarlal Jain, Jalgaon
Appeal Type Income Tax Appeal
Pronouncement Date 28-11-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 28-11-2014
Date Of Final Hearing 13-11-2014
Next Hearing Date 13-11-2014
Assessment Year 2009-2010
Appeal Filed On 03-04-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE MS. SUSHMA CHOWLA JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 735/PN/2013 (ASSESSMENT YEAR : 2009-10) SHRI BHAVARLAL HIRALAL JAIN C/O. JAIN IRRIGATION SYSTEM LTD. PLASTIC PARK N.H. NO.6 POST BOX NO.72 BHAMBHORI JALGAON-425 001 PAN NO.AALPJ3436A .. APPELLANT VS. DY.CIT RANGE-I JALGAON .. RESPONDENT ITA NO. 736/PN/2013 (ASSESSMENT YEAR : 2009-10) SHRI ATUL BHAVARLAL JAIN C/O. JAIN IRRIGATION SYSTEM LTD. PLASTIC PARK N.H. NO.6 POST BOX NO.72 BHAMBHORI JALGAON-425 001 PAN NO.AALPJ3440J .. APPELLANT VS. DY.CIT RANGE-I JALGAON .. RESPONDENT ITA NO. 780/PN/2013 (ASSESSMENT YEAR : 2009-10) DY.CIT RANGE-I JALGAON .. RESPONDENT VS. SHRI ATUL BHAVARLAL JAIN C/O. JAIN IRRIGATION SYSTEM LTD. PLASTIC PARK N.H. NO.6 POST BOX NO.72 BHAMBHORI JALGAON-425 001 PAN NO. AALPJ3440J .. RESPONDENT 2 ITA NO. 737/PN/2013 (ASSESSMENT YEAR : 2009-10) SHRI ASHOK BHAVARLAL JAIN C/O. JAIN IRRIGATION SYSTEM LTD. PLASTIC PARK N.H. NO.6 POST BOX NO.72 BHAMBHORI JALGAON-425 001 PAN NO.AALPJ3437B .. APPELLANT VS. DY.CIT RANGE-I JALGAON .. RESPONDENT ITA NO. 779/PN/2013 (ASSESSMENT YEAR : 2009-10) DY.CIT RANGE-I JALGAON .. RESPONDENT VS. SHRI ASHOK BHAVARLAL JAIN C/O. JAIN IRRIGATION SYSTEM LTD. PLASTIC PARK N.H. NO.6 POST BOX NO.72 BHAMBHORI JALGAON-425 001 PAN NO.AALPJ3437B .. RESPONDENT ITA NO. 738/PN/2013 (ASSESSMENT YEAR : 2009-10) SHRI AJIT BHAVARLAL JAIN C/O. JAIN IRRIGATION SYSTEM LTD. PLASTIC PARK N.H. NO.6 POST BOX NO.72 BHAMBHORI JALGAON-425 001 PAN NO.AALPJ3439R .. APPELLANT VS. DY.CIT RANGE-I JALGAON .. RESPONDENT ITA NO. 778/PN/2013 (ASSESSMENT YEAR : 2009-10) DY.CIT RANGE-I JALGAON .. APPELLANT VS. SHRI AJIT BHAVARLAL JAIN C/O. JAIN IRRIGATION SYSTEM LTD. PLASTIC PARK N.H. NO.6 POST BOX NO.72 BHAMBHORI JALGAON-425 001 PAN NO.AALPJ3439R .. RESPONDENT 3 ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : SHRI RAJESH DAMOR DATE OF HEARING : 13-11-2014 DATE OF PRONOUNCEMENT : 28-11-2014 ORDER PER BENCH : THESE ARE BATCH OF 7 APPEALS. ITA NO.735/PN/2013 I S FILED BY THE ASSESSEE WHEREAS THE REMAINING 3 ARE CROSS APPE ALS. THE CROSS APPEALS AS WELL AS THE APPEAL OF THE ASSESSEE ARE D IRECTED AGAINST THE SEPARATE ORDERS DATED 31-01-2013 OF THE CIT(A)-II NASHIK RELATING TO ASSESSMENT YEAR 2009-10. FOR THE SAKE OF CONVENIEN CE THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO MMON ORDER. ITA NO.735/PN/2013 (BHAVARLAL HIRALAL JAIN): 2. GROUND OF APPEAL NO.1 BY THE ASSESSEE READS AS U NDER : 1. ADDITION OF RS.10 000/- - ALLEGED PERQUISITE 1.1 THE LEARNED CIT (A) ERRED IN CONFIRMING T HE ADDITION OF RS. 10 000 ON ACCOUNT OF ALLEGED PERQUISITE ON ACCOUNT O F SERVICES RENDERED BY CA SHRI. WHORA B.A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE SA ID ADDITION BE CANCELLED. 1.2 THE LEARNED CIT (A) FAILED TO APPRECIATE T HAT JAIN IRRIGATION SYSTEMS LTD. (JISL) HAD PAID PROFESSIONAL CHARGES OF RS. 2 79 000 TO SAID MR. B. A. WHORA ONLY FOR RENDERING SERVICES TO TH E SAID COMPANY AND NO PART OF SUCH PAYMENT COULD BE TREATED AS PERQU ISITE IN THE HANDS OF THE APPELLANT ON ACCOUNT OF HONORARY SERVICE S RENDERED BY MR. WOHRA TO THE APPELLANT. 1.3 ALTERNATIVELY THE VALUE OF ALLEGED PERQUISITE B E RESTRICTED TO A NOMINAL AMOUNT AS AGAINST THE ADDITION OF RS. 10 000 W HICH IS EXCESSIVE. 4 2.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSES SEE IS AN INDIVIDUAL AND DERIVES INCOME FROM RENT AND OTHER SOURCES. DU RING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT ONE SHRI B.A. WOHRA CHARTERED ACCOUNTANT FILED THE RETURNS OF GROUP CASES OF 5 GENTS AND 4 LADIES OF THE FAMILY AS WELL AS JAIN IRRIGATION SYSTEM LTD. THE SERVICES OF TWO EMPLOYEES OF THE COMPANY ARE ALSO UTILISED FOR THIS PURPOSE. THE TOTAL NUMBER OF GROUP CASES ARE 30 WHERE ALL THE SONS OF THE ASSESSEE ARE HAVING SUBSTANTIAL INTERES T. SHRI B.A. WOHRA ALSO ATTENDS THE SCRUTINY PROCEEDINGS IN CASE OF TH E ASSESSEE AS WELL AS THE OTHER FAMILY MEMBERS. THE ASSESSING OFFICER NO TED THAT THE TOTAL SALARY OF 2 EMPLOYEES I.E. MR. P.M. NARAYANAN RS. 30 733/- AND MR. RAJESH SHANTILAL SHARMA RS.59 643 COMES TO RS.90 37 6. SIMILARLY SHRI B.A. WOHRA IS ALSO PAID REMUNERATION OF RS.2 7 9 000/-. THE AO CONSIDERED 25% OF SUCH REMUNERATION AS BELONGING TO JISL AND THE REST AS PERQUISITE IN THE HANDS OF DIFFERENT FAMILY MEMBERS. HE ACCORDINGLY MADE ADDITION OF RS.10 000/- TO THE TOT AL INCOME OF THE ASSESSEE ON ACCOUNT OF PERQUISITE. 3. IN APPEAL THE LD.CIT(A) CONFIRMED THE ADDITION B Y OBSERVING AS UNDER: 8. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER SUBMISSIONS OF THE APPELLANT AND THE MATERIAL ON RECORD . I FIND THAT SHRI. WOHRA WHO ACCORDING TO THE APPELLANT IS WORKI NG AS CONSULTANT WAS PAID 7 2 79 000/- BY JISL. THERE IS NO DISPUTE THA T SHRI. WOHRA HAD REPRESENTED THE APPELLANT DURING THE ASSESSMENT PROC EEDINGS AS WELL AS THE APPELLATE PROCEEDINGS. NO PROFESSIONAL WILL PROVIDE HIS SERVICES FREE OF COST. IN THIS CASE THE COMPANY (JISL) H AD BORNE THE EXPENSES AND MADE PAYMENT TO SHRI. WOHRA EVEN FOR HIS SERVICES TO THE DIRECTORS OF THE COMPANY. THERE IS NOTHING ON REC ORD TO SUGGEST THAT THE APPELLANT HIMSELF MADE PAYMENT OF ANY PROF ESSIONAL CHARGES TO SHRI. WOHRA. IN VIEW OF THE ABOVE AN ADDITION O F RS. 10 000/- ON ACCOUNT OF PERQUISITE SEEMS TO BE FAIR JUSTIFIED AND R ATIONAL. THE SAME IS THEREFORE CONFIRMED. 5 3.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE IS NO MATERIAL ON RECORD TO SUGGEST THAT THE SAID COMPANY HAS PAID ANY SUM TO SHRI B.A. WOHRA ON ACCOUNT OF RENDERING SERVICES TO THE ASSESSEE. FURTHER THERE IS NO BAR ON THE PART OF ANYBODY REN DERING VOLUNTARY SERVICES. HE ACCORDINGLY SUBMITTED THAT THE ADDITI ON MADE BY THE AO AND UPHELD BY THE CIT(A) BE DELETED. IN HIS ALTERN ATE ARGUMENT HE SUBMITTED THAT THE ADDITION SO SUSTAINED BY THE CIT (A) BEING ON THE HIGHER SIDE BE RESTRICTED TO SOME NOMINAL AMOUNT. 5. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THERE IS NO DISPUTE TO THE FACT THAT SHRI B.A. WOHRA IS GETTING HUGE PROFESSIONAL FESS OF RS.2 79 000/- FROM JAIN IRRIGATION SYSTEM LTD. (JISL). AT THE SAME TIME THERE IS ALSO NO DISPUTE TO THE FACT THAT SHRI B.A. WOHRA IS ATTENDI NG TO THE INDIVIDUAL TAX MATTERS OF THE ASSESSEE AND VARIOUS FAMILY MEMB ERS AND HAVE NOT CHARGED ANYTHING SEPARATELY FROM THEM. IT IS THE C ASE OF THE REVENUE THAT A PART OF THE REMUNERATION PAID BY JISL SHOULD BE ATTRIBUTABLE IN THE HANDS OF THE ASSESSEE AS PERQUISITE FOR WHICH T HE AO MADE ADDITION OF RS.10 000/- IN THE HANDS OF THE ASSESSE E AND THE SAME HAS BEEN UPHELD BY THE CIT(A). IT IS THE CASE OF THE L D. COUNSEL FOR THE ASSESSEE THAT THERE IS NO BAR FOR ANYBODY RENDERING VOLUNTARY SERVICES. 6 FURTHER THERE IS ALSO NO MATERIAL ON RECORD TO SUG GEST THAT THE COMPANY HAS PAID ANY SUM TO THE CONSULTANT ON BEHAL F OF THE ASSESSEE FOR RENDERING PROFESSIONAL SERVICES. WE FIND MERIT IN THE ABOVE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE. IT IS NOT MANDATORY OR COMPULSORY FOR ANY PROFESSIONAL TO CHARGE FOR THE P ROFESSIONAL SERVICES RENDERED TO ANY DIRECTOR OR RELATIVE OF A DIRECTOR OR CLOSE FAMILY MEMBERS OF DIRECTORS WHEN HE IS GETTING FEES FOR RENDERING SERVICES TO A COMPANY. HE MAY DO IT VOLUNTARILY AN D FREE OF COST ALSO. FURTHER THERE IS ALSO NO MATERIAL ON RECORD TO SHO W THAT THE COMPANY HAS PAID ANY AMOUNT TO THE CONSULTANT ON BEHALF OF THE ASSESSEE. IN THIS VIEW OF THE MATTER WE SET-ASIDE THE ORDER OF THE C IT(A) AND DIRECT THE AO TO DELETE THE ADDITION. GROUND OF APPEAL NO.1 B Y THE ASSESSEE IS ACCORDINGLY ALLOWED. 7. GROUND OF APPEAL NO.2 BY THE ASSESSEE READS AS U NDER : 2. ADDITIONAL OF NOTIONAL INTEREST U/S.2(24)(IV) 2.1 THE LEARNED AO ERRED IN CONFIRMING THE AD DITION OF RS. 16 48 208 AND FURTHER ENHANCING THE SAME BY RS. 3 06 000. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE A PPELLANT PRAYS FOR THE DELETION/CANCELLATION OF THE ADDITION OF RS. 19 54 208 MADE U/S. 2 (24) (IV) OF THE ACT. 2.2 THE LEARNED CIT (A) ERRONEOUSLY CONCLUDED THAT THE NOTIONAL INTEREST ON THE SECURITY DEPOSIT WAS TAXABLE U/S. 2 (24) (IV) OF THE ACT. 2.3 THE LEARNED CIT (A) FAILED TO APPRECIATE THAT ONLY REAL INCOME COULD BE BROUGHT TO TAX AND NOT A NOTIONAL ONE. 2.4 THE LEARNED CIT (A) OUGHT TO HAVE DELETED THE ADDITION OF RS. 16 48 208 MADE BY THE AO IN THE ABSENCE OF ANY NEXUS BEING ESTABLISHED BETWEEN THE INTEREST BEARING BORROWED FUND S AND INTEREST FREE RENT DEPOSIT IN THE CASE OF JAIN IRRIGATION SYSTE MS LTD. AND FOR THE SAME REASON SHOULD NOT HAVE ENHANCED THE SAME BY RS. 3 0 6 000. 7 7.1 FACTS OF THE CASE IN BRIEF ARE THAT THE AO DU RING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAS ENTERED INTO AN AGREEMENT WITH THE COMPANY JAIN IRRIGATION SYSTEM L TD. ON 20-08- 2002 FOR LETTING OUT AN AGRICULTURAL LAND ADMEASURI NG 2H 89R OWNED BY HIM FOR A PERIOD OF 12 YEARS. AS PER THE SAID A GREEMENT THE RENT IS RS.25 50 000/- NET OF TAXES AND DEPOSIT OF RS.3.06 CRORES. COST OF PLOT IS ONLY RS.4 64 171/- + STAMP DUTY. SIMILARLY THE MARKET VALUE OF THE AGRICULTURAL LAND WAS RS.32 80 817/- IN THE YEAR 2002. ACTUAL RENT RECEIVED IS RS.31 14 104/- FOR 12 YEARS FROM 2 0-08-2002. THUS THE RENT AND DEPOSIT RECEIVED ACCORDING TO THE AO ARE VERY VERY EXCESSIVE. FURTHER THE RENT IS REQUIRED TO BE ADJU STED FROM THE DEPOSITS ALREADY TAKEN BY THE ASSESSEE. HE THEREFORE ASKE D THE ASSESSEE TO EXPLAIN AS TO WHY INTEREST @12% SHOULD NOT BE CHARG ED OVER THE DEPOSIT OUTSTANDING AS ON 31-03-2009 AND ADDED TOWA RDS THE INCOME OF THE ASSESSEE U/S.2(24)(IV) OF THE I.T. ACT. 7.2 IT WAS SUBMITTED BY THE ASSESSEE THAT THERE IS NO JUSTIFICATION FOR MAKING THE ADDITION ON THIS ACCOUNT. IT WAS SUBMIT TED THAT IT IS NOT UNUSUAL FOR PROPERTY OWNERS TO COLLECT INTEREST FRE E DEPOSITS. RELYING ON VARIOUS DECISIONS IT WAS SUBMITTED THAT UNDER TH E I.T. ACT ONLY THE REAL INCOME COULD BE BROUGHT TO TAX UNLESS THERE IS A SPECIFIC PROVISION TO THE CONTRARY. THE ASSESSEE FURTHER SUBMITTED TH AT PROVISIONS OF SECTION 28 DEALS WITH INCOME FROM BUSINESS OR PROFE SSION AND THE RENT FROM LETTING OUT IS TAXABLE. IT WAS FURTHER SUBMIT TED THAT NO SUCH ADDITION HAS BEEN MADE IN THE PRECEDING ASSESSMENT YEARS ON THIS ACCOUNT. 8 7.3 HOWEVER THE AO WAS NOT SATISFIED WITH THE EXPL ANATION GIVEN BY THE ASSESSEE. SO FAR AS THE ARGUMENT OF THE ASS ESSEE THAT NO ADDITION HAS BEEN MADE IN THE PRECEDING ASSESSMENT YEARS HE HELD THAT EACH ASSESSMENT YEAR IS A SEPARATE AND INDEPENDENT ASSESSMENT YEAR. DISTINGUISHING THE VARIOUS DECISIONS CITED BY THE A SSESSEE BEFORE HIM HE MADE ADDITION OF RS.16 48 208/- TO THE TOTAL INC OME OF THE ASSESSEE U/S.2(24)(IV) OF THE I.T. ACT. WHILE DOING SO HE OBSERVED THAT SUCH A HUGE RENT AND HUGE SECURITY DEPOSIT HAS BEEN GIVEN TO THE ASSESSEE SIMPLY BECAUSE THE ASSESSEE AND HIS FAMILY MEMBERS ARE HOLDING KEY POSITION IN THE COMPANY. ACCORDING TO HIM NORMALL Y THE RENTAL INCOME OF THE PROPERTY IS AROUND 20% OF THE LAND CO ST BUT HERE IT IS EXORBITANT. THE COMPANYS FUNDS HAVE BEEN UTILIZED FOR THE PERSONAL BENEFIT OF THE ASSESSEE ON ONE HAND AND THE COMPANY IS PAYING HUGE INTEREST ON BORROWINGS ON THE OTHER HAND. THUS AP ART FROM HUGE RENT WHICH IS BEING DEDUCTED FROM THE SECURITY DEPOSIT THE ASSESSEE IS ENJOYING THE CAPITAL OF THE COMPANY WITHOUT ANY INT EREST WHICH FALLS U/S.2(24)(IV) OF THE I.T. ACT. HE ACCORDINGLY MADE ADDITION OF RS.16 48 208 U/S.2(24)(IV) OF THE I.T. ACT BEING 12 % INTEREST ON THE OUTSTANDING BALANCE OF RS.1 37 35 067/- AS ON 31-03 -2009. 8. BEFORE THE CIT(A) THE ASSESSEE AGAIN REITERATED THAT IT IS NOT UNUSUAL FOR THE PROPERTY OWNERS TO COLLECT INTEREST FREE DEPOSIT. REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIG H COURT IN THE CASE OF CIT VS. J.K. INVESTORS (BOMBAY) LTD. REPOR TED IN 248 ITR 723 IT WAS ARGUED THAT NO ADDITION CAN BE MADE ON A CCOUNT OF NOTIONAL INTEREST ON INTEREST FROM DEPOSIT. REFERRING TO TH E DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ASI AN HOTELS LTD. 9 REPORTED IN 323 ITR 490 IT WAS ARGUED THAT NOTIONAL INTEREST ON REFUNDABLE SECURITY WAS NEITHER TAXABLE AS PROFIT O R GAIN FROM BUSINESS OR PROFESSION U/S.28(IV) NOR INCOME FROM HOUSE PROP ERTY U/S.23(I)(A) OF THE I.T. ACT. THE FOLLOWING DECISIONS WERE ALSO RELIED UPON : 1. INDERSONS LEATHERS PVT. LTD. VS. ADDL.CIT 295 ITR ( AT) 295 (AMRISTAR) 2. CIT VS. M. RATANCHAND CHORDIYA 228 ITR 626 (MADR AS) 3. MANVAH STEEL (P) LTD. VS. DY.CIT 3 SOT 339 (MUM BAI) 4. CIT VS. SATYA CO. LTD. 140 CTR 569 8.1 IT WAS FURTHER SUBMITTED THAT NO SUCH ADDITION WAS MADE IN THE PAST ASSESSMENT YEARS I.E. 2006-07 TO 2008-09 WHIC H WERE COMPLETED U/S.143(3). THE ASSESSEE IN A WITHOUT PREJUDICE SU BMISSION SUBMITTED THAT THERE WERE SUBSTANTIAL OWN FUNDS WITH JISL AND THEREFORE IN ABSENCE OF ANY NEXUS BEING ESTABLISHED BETWEEN THE INTEREST BEARING BORROWED FUNDS AND INTEREST FREE RENT DEPOSIT IT C ANNOT BE PRESUMED THAT BORROWED FUNDS WERE UTILIZED FOR THE PURPOSE O F GIVING INTEREST FREE DEPOSIT. FOR THE ABOVE PROPOSITION THE ASSES SEE RELIED ON THE DECISION OF HONBLE ANDHRA PRADESH HIGH COURT IN TH E CASE OF CIT VS. GOPIKRISHNA MURLIDHAR 47 ITR 469 THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SHREE DIGVIJAY CE MENT VS. CIT 138 ITR 45 (GUJARAT) AND THE DECISION OF HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF BIRLA GWALIOR PVT. LTD. VS. C IT 44 ITR 847 (MP). 9. HOWEVER THE LD.CIT(A) WAS ALSO NOT SATISFIED WI TH THE EXPLANATION GIVEN BY THE ASSESSEE. INSTEAD OF GIVI NG ANY RELIEF THE LD.CIT(A) ENHANCED THE ADDITION TO RS.19 54 208/- B Y OBSERVING AS UNDER : 10 10. I HAVE GONE THROUGH THE DETAILS FILED AND SUBMISSI ONS MADE BESIDES THE REASONS FOR ADDITION AS STATED BY THE AO IN HIS ORDER. I FIND THAT THE INTEREST FREE DEPOSIT OF RS.3.06 CRORE TO THE APPELLANT FOR HIRING THE LAND WAS TOTALLY DISPROPORTIONATE TO THE M ARKET PRACTICE AND THE VALUE OF THE PROPERTY. BESIDES THE COMPANY W AS PAYING A HEFTY YEARLY RENT OF RS. 25 50 000/- (NET OF TDS) T O THE APPELLANT WHICH ALSO SEEMS TO BE DISPROPORTIONATE TO THE MARKET R ENT. AS MENTIONED EARLIER I FIND THAT THE INTEREST FREE DE POSIT RECEIVED IS HIGHLY EXCESSIVE AND DISPROPORTIONATE TO THE VALUE OF THE PROPERTY AND THE AMOUNT OF RENT CHARGED. I AM THEREFORE OF THE CONSI DERED VIEW THAT AO WAS JUSTIFIED IN TREATING THE NOTIONAL INTEREST ON SECU RITY DEPOSIT U/S 2(24)(IV) OF THE ACT AS PERQUISITE. THE AO HAS CALCULA TED INTEREST @ 12% ON CLOSING BALANCE OF THE SECURITY DEPOSIT. SINCE THE RENT WAS ADJUSTED ON 31/03/2009 I AM OF THE OPINION THAT INT EREST ON OPENING BALANCE SHOULD HAVE BEEN ADDED. INTEREST 12% ON RS.1 6 2 85 067/- COMES TO RS.19 54 208/-. AO HAS ALREADY ADDED RS.16 48 208/-. THE INCOME IS THEREFORE ENHANCED BY DIFFERENCE OF RS.3 0 6 000/-. CONSEQUENTLY THE INCOME OF THE APPELLANT UNDER SECTI ON 2(24)(IV) OF THE ACT APPELLANT WAS GIVEN AN ENHANCEMENT NOTICE IN THIS REGARD ON 23/10/2012. APPELLANT'S CONTENTION IN RESPONSE TO THE SAID ENHANCEMENT NOTICE IS NOT FOUND TO BE TENABLE AND H ENCE REJECTED. AO IS DIRECTED ACCORDINGLY. 9.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 10. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SAME ARGUMENTS AS MADE BEFORE THE AO AND THE CIT(A). HE SUBMITTED THAT GRANTING OF INTEREST FREE LOAN BY COMPANY TO ITS DIRECTORS IS N OT A PERQUISITE OR BENEFIT UNDER THE PROVISIONS OF SECTION 2(24)(IV). HE DREW THE ATTENTION OF THE BENCH TO THE PROVISIONS OF SECTION 2(24)(IV) WHICH READS AS UNDER : 2(24) INCOME INCLUDES : (I) . . . . . . (II) . . . . . . (III) . . . . . . (IV) THE VALUE OF ANY BENEFIT OR PERQUISITE WHETHER CONVERTIBLE INTO MONEY OR NOT OBTAINED FROM A COMPANY EITHER BY A D IRECTOR OR BY A PERSON WHO HAS A SUBSTANTIAL INTEREST IN THE COMPANY OR BY A RELATIVE OF THE DIRECTOR OR SUCH PERSON AND ANY SUM PAID BY AN Y SUCH COMPANY IN RESPECT OF ANY OBLIGATION WHICH BUT FOR SUCH PAYM ENT WOULD HAVE BEEN PAYABLE BY THE DIRECTOR OR OTHER PERSON AFORESAI D; HE SUBMITTED THAT PROVISIONS OF SECTION 17 OF THE I .T. ACT DEALS WITH TAXATION ON PERQUISITES. REFERRING TO THE DECISION OF THE HONBLE 11 PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MADHU GUPTA REPORTED IN 205 TAXMANN 303 (P&H) HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT INTER EST ON INTEREST FREE LOANS OBTAINED FROM THE COMPANY IN WHICH EITHER THE ASSESSEE OR HIS/HER SPOUSE IS A DIRECTOR CANNOT BE TREATED AS D EEMED INCOME OF ASSESSEE IN TERMS OF SECTION 2(24)(IV) OF THE I.T. ACT. REFERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F V.M. SALGAOCAR AND BROS. PVT. LTD. VS. CIT REPORTED IN 243 ITR 383 HE SUBMITTED THAT NON-CHARGING OF INTEREST ON THE DEBIT BALANCE IN RU NNING ACCOUNT OF THE DIRECTORS WOULD NOT CONSTITUTE PERQUISITE FOR THE P URPOSE OF SECTION 40A(5). SIMILARLY REFERRING TO THE SAID DECISION HE SUBMITTED THAT IT HAS FURTHER BEEN HELD THAT NON-CHARGING OF INTEREST ON ADVANCES TO DIRECTORS WOULD NOT CONSTITUTE PERQUISITE U/S.17(2) OF THE I.T. ACT. REFERRING TO THE DECISION OF THE HONBLE CALCUTTA H IGH COURT IN THE CASE OF CIT VS. P.R.S. OBEROI REPORTED IN 183 ITR 1 03 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HA S HELD THAT INTEREST FREE LOAN OBTAINED BY A DIRECTOR OF A COMPANY IS NO T TO BE REGARDED AS BENEFIT PROVIDED BY THE COMPANY WITHIN THE MEANING OF SECTION 2(24)(IV) OF THE I.T. ACT. HE ACCORDINGLY SUBMITTE D THAT THE ORDER OF THE CIT(A) BE SET-ASIDE AND THE ADDITION BE DELETED . 11. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE DREW THE ATT ENTION OF THE BENCH TO PAGE 8 OF THE ASSESSMENT ORDER AND SUBMITTED THA T THE AO HAS CATEGORICALLY GIVEN A FINDING THAT THIS IS ONLY A P APER TRANSACTION AND THE DIRECTORS HAVE AVAILED UNDUE ADVANTAGE FROM THE COMPANY WHO HAS BORROWED MONEY BY PAYING HUGE INTEREST AND DIVE RTED THE SAME TO 12 THE DIRECTORS FREE OF INTEREST. HE ACCORDINGLY SUB MITTED THAT THE ORDER OF THE CIT(A) BE UPHELD. 12. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAV E ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS LET OUT AN AGRICULTURAL LAND ADMEASURING 2H 89R TO JISL FOR A PERIOD OF 12 YEARS UNDER AN AGREEMENT DATED 20-08-2002 ACCORDING TO WHICH THE COMPANY PAYS YEARLY RENT OF RS.25 50 000/- NET OF TDS OF RS.5 22 104/-. THUS GROSS RENT COME S TO RS.30 66 104/. FURTHER THE COMPANY HAS ALSO GIVEN INTEREST FREE D EPOSIT OF RS.3.06 CRORES TO THE ASSESSEE. ACCORDING TO THE AO SINCE THE COST OF LAND WAS ONLY RS.4 64 371/- + STAMP DUTY AND ITS MARKET VALU E DURING 2002 WAS ONLY RS.32 80 817/- THEREFORE THE RENT AND DEPOSIT PAID BY THE COMPANY TO THE ASSESSEE ARE VERY VERY EXCESSIVE. T HE AO THEREFORE CALCULATED INTEREST @12% ON THE OUTSTANDING BALANCE OF RS.1 37 35 067/- AS ON 31-03-2009 AND ADDED THE SAM E U/S.2(24)(IV) OF THE I.T. ACT TO THE TOTAL INCOME OF THE ASSESSEE . WHILE DOING SO HE HELD THAT THE INTEREST BEARING FUNDS OF THE COMPANY HAVE BEEN UTILISED FOR THE PERSONAL BENEFIT OF THE ASSESSEE. WE FIND THE LD.CIT(A) HELD THAT THE ASSESSING OFFICER INSTEAD OF CALCULATING THE INTEREST ON THE CLOSING BALANCE SHOULD HAVE CALCULATED THE INTERES T ON THE OPENING BALANCE @12% OF RS.1 62 85 067/- WHICH COMES TO RS. 19 54 208/-. HE ACCORDINGLY ENHANCED THE ADDITION BY RS.3 06 000 /- I.E. DIFFERENCE BETWEEN RS.19 54 208/- - RS.16 48 208/. IT IS THE CASE OF THE LD. COUNSEL FOR THE ASSESSEE THAT IN VIEW OF THE VARIOU S DECISIONS CITED BY 13 HIM NO DISALLOWANCE UNDER THIS HEAD IS CALLED FOR. WE FIND MERIT IN THE ABOVE SUBMISSION OF THE LD. COUNSEL FOR THE ASS ESSEE. WE FIND AN IDENTICAL ISSUE HAD COME BEFORE THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS. MADHU GUPTA (SUPRA). IN THAT CASE THE ASSESSEE HAD AVAILED INTEREST FREE LOAN OF RS.2 25 000/- FROM M/S. VARINDA AGRO PRODUCTS PVT. LTD. RS.7 82 000/- FROM M/S. PASUPATI ENTERPRISES PVT. LTD. AND RS.10 07 000/- FROM HIMA LAYA AYURVEDIC AND AGRO RESEARCH CENTRE LTD. REJECTING THE EXPLAN ATION GIVEN BY THE ASSESSEE THE AO BROUGHT TO TAX INTEREST @20% O N ACCOUNT OF DEEMED BENEFIT U/S.2(24)(IV) OF THE I.T. ACT. THE CIT(A) UPHELD THE ADDITION MADE BY THE AO. HOWEVER THE TRIBUNAL FOL LOWING THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. P.R.S. OBEROI REPORTED IN 183 ITR 103 DELETED THE ADDITION . WHEN THE MATTER TRAVELLED TO THE HIGH COURT THE HONBLE HIGH COURT DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE B Y OBSERVING AS UNDER : 5. BEFORE CONSIDERING THE ARGUMENTS RAISED BY THE LEA RNED COUNSEL FOR THE PARTIES THE PROVISIONS OF LAW AS IT EXISTED RELEV ANT FOR THE ASSESSMENT YEARS IN QUESTION READS AS UNDER: '2. IN THIS ACT UNLESS THE CONTEXT OTHERWISE REQUIRES - XXX XXX XXX 24. 'INCOME' INCLUDES -XXX XXX XXX (IV) THE VALUE OF ANY BENEFIT OR PERQUISITE WHETHER CONVERTIBLE INTO MONEY OR NOT OBTAINED FROM A COMPANY EITHER BY A D IRECTOR OR BY A PERSON WHO HAS A SUBSTANTIAL INTEREST IN THE COMPANY O R BY A RELATIVE OF THE DIRECTOR OR SUCH PERSON AND ANY SUM PAID BY AN Y SUCH COMPANY IN RESPECT OF ANY OBLIGATION WHICH BUT FOR SUCH PAYM ENT WOULD HAVE BEEN PAYABLE BY THE DIRECTOR OR OTHER PERSON AFORESAI D; 6. LEARNED COUNSEL FOR THE APPELLANT HAS RELIED UPON TWO JUDGMENTS OF MADRAS HIGH COURT REPORTED AS ADDITIONAL COMMISSIONER O F INCOME TAX VS. LATE A.K.LAKSHMI & OTHERS (BY LRS) 113 ITR 368 AND COMMISSIONER OF INCOME TAX MADRAS VS. S.S.M.LINGAPPAN 129 ITR 597. IN A.K.LAKSHMI'S CASE (SUPRA) IT WAS HELD THAT GRA NT OF AMOUNT 14 BY THE COMPANY FOR THE PERSONAL USE OF ITS EMPLOYEES WI THOUT CHARGING INTEREST IS A BENEFIT GRANTED BY THE COMPANY . THE COURT HELD TO THE FOLLOWING EFFECT: '.....WE HAVE NO DOUBT THAT HIS SECTION IS NOT INTENDE D TO RESTRICT THE DISCRETION OF THE RIGHT OF THE COMPANY TO ADVANCE AM OUNTS TO ITS EMPLOYEES WITH OR WITHOUT INTEREST OR AT ANY SPECIFIED RATE OF INTEREST. BUT THE QUESTION WOULD STILL ARISE WHETHER GRANTING AM OUNTS OF THE COMPANY FOR THE PERSONAL USE OF ITS EMPLOYEES WITHOUT C HARGING INTEREST WOULD BE THE GRANT OF ANY BENEFIT. OUR ANSWE R HERE MUST BE IN THE AFFIRMATIVE. IT IS WELL KNOWN THAT IT IS DIFFICUL T IF NOT IMPOSSIBLE TO BORROW AMOUNTS FOR ONE'S OWN USE WITHOUT HAVING ANY LI ABILITY TO PAY INTEREST. PUTTING IT POSITIVELY ORDINARILY BORROWING CAN BE HAD ONLY BY INCURRING AN OBLIGATION TO PAY INTEREST. WHAT WOULD BE THE AMOUNT OF INTEREST WILL BE UNLESS THERE ARE STATUTORY PROVISIONS GOVERNING THE MATTER A MATTER OF AGREEMENT BETWEEN THE LENDER TH E BORROWER. BUT IF EITHER DUE TO MAGNANIMITY OR WITH A VIEW TO HELP AN EMPLOYEE ANY AMOUNTS ARE ADVANCED BY AN EMPLOYER TO AN EMPLOYEE W ITHOUT AN OBLIGATION TO PAY ANY INTEREST WE HAVE NO HESITATION IN THAT HE GETS THE USE OF THE MONIES BELONGING TO THE COMPANY OR ANY OTHER EMPLOYER WITHOUT HAVING ANY LIABILITY TO PAY INTERE ST....' 7. SUCH VIEW WAS REITERATED BY THE MADRAS HIGH COURT IN ITS LATER JUDGMENT IN S.S.M.LINGAPPAN'S CASE (SUPRA). LEARNED C OUNSEL FOR THE APPELLANT HAS ALSO RELIED UPON A JUDGMENT OF DELHI HI GH COURT REPORTED AS COMMISSIONER OF INCOME TAX VS. TARA SINGH 2 33 ITR 669 WHEREIN BOTH THE AFORESAID JUDGMENTS OF MADRAS HIGH CO URT WERE RELIED UPON. 8. IN VARINDER GUPTA'S CASE (SUPRA) THE TRIBUNAL HAS R ELIED UPON THE JUDGMENT OF CALCUTTA HIGH COURT IN P.R.S.OBEROI'S CA SE (SUPRA). THE CALCUTTA HIGH COURT WAS SEIZED OF THE PROVISIONS OF SEC TIONS 2 (24)(IV) 17 (2)(III) AND 40A(5) OF THE ACT. THE COURT ALSO C ONSIDERED THE FACT OF AMENDMENT IN THE INCOME TAX ACT 1961 BY TAXATION L AWS (AMENDMENT) ACT 1984 AND ITS SUBSEQUENT REPEAL BY FIN ANCE ACT 1985. BY THE AMENDING ACT OF 1984 IT WAS PROVIDED T HAT WHERE THE EMPLOYER HAS ADVANCED ANY LOAN TO AN EMPLOYEE FOR TH E PURPOSE OF BUILDING A HOUSE OR PURCHASING A SITE OR A HOUSE AND A SITE OR FOR PURCHASING A MOTOR CAR AND EITHER NO INTEREST IS CHARG ED BY THE EMPLOYER ON THE AMOUNT OF SUCH LOAN OR INTEREST IS CHA RGED AT A RATE LOWER THAN THE RATE OF INTEREST WHICH THE CENTRAL G OVERNMENT MAY HAVING REGARD TO THE RATE OF INTEREST CHARGED BY IT FROM ITS EMPLOYEES ON LOANS FOR SUCH PURPOSE GRANTED TO THEM SUCH BENEFIT WILL BE REGARDED AS 'PERQUISITE'. BUT SUCH AMENDMENT WAS REPEAL ED IN THE VERY NEXT YEAR. IN VIEW OF THE SAID AMENDMENT THE C OURT HELD TO THE FOLLOWING EFFECT: '.......THE QUESTION THEREFORE ARISES WHETHER THE ENJO YMENT BY THE ASSESSEE OF INTEREST-FREE CREDIT AN BE TREATED AS A 'BENE FIT OR PERQUISITE' WITHIN THE MEANING OF SECTION 2(24) (IV) OF THE INCOME- TAX ACT 1961. THE INTENTION OF THE LEGISLATURE SEEMS TO B E VERY CLEAR THAT THE EXPRESSIONS 'BENEFIT' AND/OR 'PERQUISITE' DID NOT I NCLUDE THE ENJOYMENT OF LOAN OR CREDIT FREE OF INTEREST OR AT A CONCESSIONAL RATE. THIS ASPECT HAS BEEN RECOGNIZED BY THE STATUTE ITSELF AN D TO BRING SUCH ITEMS IN /THE NET OF TAXATION THE LAW WAS AMENDED BY THE TAXATION LAWS (AMENDMENT) ACT 1984. BY THIS AMENDMENT AS ALRE ADY INDICATED A NEW SUB-CLAUSE (VI) WAS INSERTED IN SECTIO N 17 (2) AND SIMILARLY ANOTHER SUB-CLAUSE (VI) WAS I WAS INSERTED IN CLAUSE (B) OF EXPLANATION 2 TO SECTION 40A (5). THE EFFECT OF THE SE AMENDMENTS 15 WHICH WERE MADE EFFECTIVE FROM APRIL 1 1985 WAS TO ENSURE TREATMENT AND TAXATION IN A CASE WHERE AN EMPLOYEE R ECEIVES LOAN FOR CERTAIN PRESCRIBED PURPOSES EITHER FREE OF INTEREST OR AT A RATE WHICH WAS LOWER THAN THE SPECIFIED RATE. HOWEVER SUBSEQUENT LY THE FINANCE ACT 1985 OMITTED THE AFORESAID AMENDMENTS MADE BY T HE TAXATION LAWS (AMENDMENT) ACT 1984 WITH EFFECT FROM THE DAT E OF ITS INSERTION NAMELY APRIL 1 1985 WITH A VIEW TO PROV IDE RELIEF TO SALARIED TAXPAYERS. THE VERY FACT THAT THE STATUTE HAD TO BE AMENDED AT THE FIRST INSTANCE TO BRING THE SAID ITEM WITHIN THE P URVIEW OF THE EXPRESSION 'PERQUISITE ' AND IT LATER SOUGHT TO DELETE THE SAME FROM THE DATE OF ITS INSERTION CLEARLY SHOWS THAT PARLIAMENT DOES NOT INTEND TO TREAT INTEREST-FREE LOAN OR LOAN AT A CONCESSIONAL RATE AS ANY BENEFIT OR PERQUISITE GRANTED OR PROVIDED BY THE LENDER-COMP ANY TO THE DIRECTOR OR EMPLOYEE AS THE CASE MAY BE. (EMPHASIS SUPP LIED) XXX XXX XXX THE QUESTION HOWEVER REMAINS AS TO WHETHER NON-CHARG ING OF INTEREST WILL ALSO FALL WITHIN THE PURVIEW OF SECTION 2(24)(IV) OF THE ACT. FOR THE PURPOSES OF APPLYING SECTION 2(24) (IV) O F THE ACT THE SAME TEST AS TO WHAT CONSTITUTES A BENEFIT OR A PERQUISIT E HAS TO BE APPLIED. IF THE LOAN GRANTED TO AN EMPLOYEE OR A DI RECTOR OR A PERSON WHO HAS A SUBSTANTIAL INTEREST IN THE COMPANY WITHOUT C HARGING ANY INTEREST OR AT A SUBSTANTIAL INTEREST IN THE COMPANY WI THOUT CHARGING ANY INTEREST OR AT A CONCESSIONAL RATE OF INTEREST DOES NOT CONSTITUTE ANY BENEFIT FOR THE PURPOSES OF EXPLANATION 2(B) (III ) TO SECTION 40A (5) OR SECTION 17(2)(III) OF THE ACT BY THE SAME YAR DSTICK SUCH LOAN CANNOT ALSO BE CONSTRUED AS BENEFIT OR A PERQUISITE FO R THE PURPOSES OF SECTION 2(24)(IV) OF THE ACT. IN THAT VIEW OF THE MATTER WE HAVE NO HESITATION IN HOLDING THAT SECTION 2(24)(IV) CANNOT BE PRESSED INTO SERVICE OR ON THE FACTS AND IN THE CIRCUMSTANCES OF THIS CASE.' 9. LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE JUDGMENTS OF CALCUTTA HIGH COURT AS ALSO OF MADRAS HIGH COURT REFER RED TO BY THE COUNSEL FOR THE REVENUE HAVE BEEN CONSIDERED BY THE H ON'BLE SUPREME COURT IN V.M.SALGAOCAR AND BROS PVT. LTD. VS. COMMISSIONER OF INCOME TAX 243 ITR 383. THE HON'BLE SUPREME COUR T HAS APPROVED THE VIEW OF CALCUTTA HIGH COURT AND ALSO NOTICED THA T THE JUDGMENTS OF MADRAS HIGH COURT ARE PRIOR TO AMENDMENT CARRIED OUT BY THE TAXATION LAWS (AMENDMENT) ACT 1984 AND CONSEQUENT RE PEAL BY THE FINANCIAL ACT 1985. SUCH INTERVENTION MAKES THE INT ENTION OF THE LEGISLATURE CLEAR THAT HAD THE EXISTING PROVISIONS BEE N SUFFICIENT TO TREAT THE BENEFIT OF INTEREST FREE LOAN AS DEEMED IN COME THE SAME WOULD NOT HAVE BEEN INCORPORATED BY WAY OF AMENDMEN T AND SUBSEQUENT REPEALED. IN THE AFORESAID CASE THE ASSESSEE WA S IN APPEAL AGGRIEVED AGAINST THE JUDGMENT OF KARNATAKA HIGH COU RT WHEREIN RELIANCE WAS PLACED UPON JUDGMENTS OF MADRAS HIGH COUR T AS MENTIONED ABOVE. THE HON'BLE SUPREME COURT HAS ALSO Q UOTED WITH APPROVAL THE PASSAGE FROM THE JUDGMENT OF P.R.S. OBE ROI'S CASE (SUPRA). IT OBSERVED: '......THE AMENDMENT MADE BY THE 1984 AMENDING ACT WAS BOTH TO SECTION 17(2) AND SECTION 40A (5). IN THE IMPUGNED JUDGMENT REFERENCE IN FACT HAD BEEN MADE TO INCLUSION OF SUB CLAUSE (VI) IN CLAUSE (2) OF SECTION 17. MOREOVER THE HIGH COURT I N THE IMPUGNED JUDGMENT DID NOT CONSIDER THE AMENDMENTS MADE BY THE AMENDING ACT 1984 ON THE GROUND ' IT IS DIFFICULT TO SEE HOW THIS AMENDMENT CAN 16 HAVE ANY BEARING UPON THE INTERPRETATION OF THE THE N EXISTING PROVISIONS OF THE ACT.'. WE DO NOT THINK THIS APPROACH WAS ALSO CORRECT. AN AMENDING PROVISION CAN CERTAINLY GIVE GUIDANCE TO INTERPRETATION OF THE EXISTING PROVISIONS. THE JUDGMENTS OF THE MADRAS HIGH COURT WHICH WERE RELIED UPON BY THE HIGH COURT IN THE IMP UGNED JUDGMENT WERE FOR THE PERIOD PRIOR TO THE 1984 AMENDMENT AND THE MADRAS HIGH COURT HAD NO OCCASION TO CONSIDER THE IMPACT OF THE AMENDMENTS TO SECTION 17(2) AND SECTION 40A(5) OF THE ACT. XXX XXX XXX THE HIGH COURT IN THE IMPUGNED JUDGMENT COULD NOT H AVE BRUSHED ASIDE THE CONSIDERATION OF THE AMENDING ACT 1984 AND ITS SUBSEQUENT REPEAL BY THE FINANCE ACT 1985 BY TERMING THEM OF NO CONSEQUENCE.......' 10. AT THIS STAGE WE MAY NOTICE THAT SECTION 17 FALL ING IN CHAPTER IV DEALS COMPUTATION OF INCOME UNDER THE HEAD 'SALARY '. SECTION 17(2) DEFINES 'PERQUISITE' FOR THE PURPOSES OF SECTIONS 15 & 16 AND FOR THE PURPOSES OF SECTION 17 WHEREAS SECTION 40A CO NTEMPLATES THAT THE COMPUTATION OF INCOME UNDER THE HEAD 'PROF ITS AND GAINS OF BUSINESS OR PROFESSION'. SECTION 2(24)(IV) DOES NOT DE FINE THE EXPRESSION 'ANY BENEFIT OR PERQUISITE'. THE 'PERQUISITE ' HAS BEEN DEFINED IN SECTION 17(2) AND ALSO WERE DEFINED IN SE CTION 40A(5) PRIOR TO ITS OMISSION BY DIRECT TAX LAWS (AMENDMENT) AC T 1987. THE PROVISIONS OF SECTION 40A(5) PRIOR TO ITS OMISSION DEAL WITH EXPENDITURE RESULTING DIRECTLY OR INDIRECTLY IN THE PROVISION OF ANY PERQUISITE WHETHER CONVERTIBLE INTO MONEY OR NOT I.E . THE CONVERSE OF SECTION 2 (24)(IV). THEREFORE THE INTERPRETATIO N IN V.M.SALGAOCAR AND BROS PVT. LTD.' CASE (SUPRA) INTERPR ETING SECTION 17(2) AND EFFECT OF AMENDMENT IN SECTION 40A(5) WOU LD BE APPLICABLE TO THE EXPRESSION 'BENEFIT AND PERQUISITE' APPEARING IN SECTION 2 (24)(IV) AS WELL AS IS OBSERVED BY CALCUTTA H IGH COURT. THE JUDGMENT OF CALCUTTA HIGH COURT IN P.R.S. OBERO I'S CASE (SUPRA) CONSIDERING THE BENEFIT OF PERQUISITE APPEARIN G IN SECTION 2(24)(IV) OF THE ACT HAS BEEN APPROVED BY THE HON'B LE SUPREME COURT. 11. IN VIEW OF THE AFORESAID JUDGMENTS WE ARE OF THE OPINION THAT INTEREST ON INTEREST FREE LOANS ADVANCED TO THE ASSESSEE B Y THE COMPANY CANNOT BE TREATED AS DEEMED INCOME IN TERMS O F SECTION 2(24)(IV) OF THE ACT. 12.1 WE FIND THE HONBLE SUPREME COURT IN THE CASE OF V.M. SALGAOCAR AND BROS. PVT. LTD. VS. CIT(SUPRA) HAS H ELD THAT INSERTION OF CLAUSE (VI) IN SECTIONS 17(2) AND 40A(5) BY TAXA TION LAWS (AMENDMENT) ACT 1984 AND ITS SUBSEQUENT REPEAL BY FINANCE ACT 1985 PROVIDE A CLEAR DIRECTION TO INTERPRET THE PRO VISIONS OF SECTION 17(2) AND 40A(5) BEFORE INSERTION OF CLAUSE (VI). THEREFORE WHEN A COMPANY OBTAINS LOAN BY PAYING INTEREST AND ADVANCE S THE SAME TO 17 DIRECTORS WITHOUT CHARGING ANY INTEREST THE INTERE ST ATTRIBUTABLE TO THE AMOUNTS ADVANCED TO DIRECTORS COULD NOT BE TREATED AS PERQUISITE. 12.2 WE FURTHER FIND THAT THE LD. DEPARTMENTAL REPR ESENTATIVE COULD NOT CONTROVERT THE SUBMISSION OF THE LD. COUNSEL FO R THE ASSESSEE THAT NO SUCH DISALLOWANCE WAS MADE IN SCRUTINY ASSESSMEN TS IN THE PAST AND NO 263 PROCEEDINGS OR 148 PROCEEDINGS WERE INIT IATED AFTER COMPLETION OF THE ASSESSMENT. IN VIEW OF THE ABOVE DISCUSSION WE ARE OF THE CONSIDERED OPINION THAT NO ADDITION ON ACCOU NT OF INTEREST U/S.2(24)(IV) IS REQUIRED ON INTEREST FREE DEPOSIT ADVANCED TO THE ASSESSEE. GROUND RAISED BY THE ASSESSEE IS ACCORDI NGLY ALLOWED. 13. GROUND OF APPEAL NO.3 BY THE ASSESSEE READS AS UNDER : 3. ADDITION/ENHANCEMENT U/S.14A OF THE ACT. 3.1 THE LD.CIT(A) ERRED IN ENHANCING THE ASSESSMENT BY WAY OF DISALLOWANCE U/S.14A OF RS.88 921/-. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE DISALLOWANCE U/S.14A BE CANCELLED. 3.2 THE LD.CIT(A) ERRED IN MAKING ENHANCEMENT ON TH E GROUND NOT MENTIONED IN THE ASSESSMENT ORDER AND CONSEQUENTLY THE A DDITION OF RS.88 921/- COULD NOT BE SUSTAINED. 13.1 FACTS OF THE CASE IN BRIEF ARE THAT THE LD.C IT(A) DURING THE COURSE OF APPEAL PROCEEDINGS NOTICED THAT THE ASSES SEE HAD RECEIVED DIVIDEND OF RS.65 03 530/- FROM M/S. JISL. HE THE REFORE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE PROVISIONS OF SEC TION 14A R.W. RULE 8D OF THE ACT SHOULD NOT BE INVOKED. THE ENHANCEME NT NOTICE WAS ALSO ISSUED TO THE ASSESSEE PROPOSING DISALLOWANCE OF A SUM OF RS.7 88 921/- R.W. RULE 8D. THE ASSESSEE FURNISHED A DETAILED WORKING OF DISALLOWANCE OF RS.88 921/- U/S.14A R.W. RULE 8D. SINCE 18 THE ASSESSEE DID NOT PRODUCE HIS PERSONAL BALANCE S HEET STATING THAT THE SAME IS NOT BEING MAINTAINED BY HIM THE LD.CIT(A) CONSIDERED THE WORKING PROVIDED BY THE ASSESSEE WHICH WAS SUPPORTE D BY STATEMENT OF NET WEALTH AS ON 31-03-2009. THE WORKING OF SUC H DISALLOWANCE AS FURNISHED BEFORE THE LD.CIT(A) WAS AS UNDER : SR NO PARTICULARS AMOUNT (RS.) AMOUNT (RS.) WORKING OF DISALLOWANCE U/S 14 A 1 AMOUNT OF INTEREST EXPENDITURE INCURRED NIL 2 COMPUTATION OF DISALLOWANCE A) INTEREST AMOUNT PAID NIL B) AVERAGE VALUE OF INVESTMENT FROM WHICH INCOME IS EXEMPT 1 77 84 141 C) AVERAGE VALUE OF TOTAL ASSETS 6 50 78 776 3 DISALLOWANCE = A*B C (30.17 336*10.38.59.559 NIL 26 49 12 434 4 0.5 % OF THE AVERAGE VALUE OF INVESTMENT INCOME FROM WHICH IS EXEMPT AS ON 31.03.2008 2 97 75 346 AS ON 3 1.03.2009 57 92 935 TOTAL 3 55 68 281 AVERAGE 1 77 84 141 0.5 % OF THE AVERAGE 88 921 TOTAL 88 921 13.2 ACCORDING TO THE LD.CIT(A) PROVISIONS OF SECTI ON 14A ARE MANDATORY SINCE THE ASSESSEE HAS RECEIVED SUBSTANTI AL DIVIDEND AND THE ASSESSEE HAS MADE INVESTMENT IN INSTRUMENTS WHICH A RE EXEMPT INCOME. THE LD.CIT(A) ENHANCED THE INCOME OF THE A SSESSEE BY RS.88 921/- BEING DISALLOWANCE U/S.14A R.W. RULE 8D . 13.3 AGGRIEVED WITH SUCH ORDER OF THE LD.CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 19 14. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO P AGES 10 TO 14 OF THE PAPER BOOK DREW THE ATTENTION OF THE BENCH TO T HE COMPUTATION OF INCOME AND SUBMITTED THAT THE ASSESSEE HAS NOT CLAI MED ANY EXPENDITURE FROM THE DIVIDEND INCOME. REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. M/S. MAGARPATTA TOWNSHIP DEVELOPMENT AND CONSTRUCTION CO MPANY PVT. LTD. VIDE ITA NO.2114/PN/2012 ORDER DATED 27-05-20 14 FOR A.Y. 2009-10 HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HAS HELD THAT NO DISALLOWANCE U/S.14A R.W. RULE 8D IS REQUIR ED WHEN THERE IS NO DIRECT OR INDIRECT EXPENDITURE INCURRED BY THE A SSESSEE IN RELATION TO EARNING EXEMPT INCOME. HE ALSO RELIED ON THE DECIS ION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE U TILITIES AND POWER LTD. REPORTED IN 313 ITR 340 AND THE DECISIO N OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF DHARMVEER SAMB HAJI URBAN CO- OP. BANK LTD. VS. ADL.CIT VIDE ITA NO.1287/PN/2012 ORDER DATED 20-09-2013 FOR A.Y. 2008-09. 15. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED TH AT THE ASSESSEE HIMSELF HAS CALCULATED THE DISALLOWANCE U/S.14A R.W . RULE 8D WHICH HAS BEEN ACCEPTED BY THE LD.CIT(A). UNDER THESE CI RCUMSTANCES NO FURTHER RELIEF SHOULD BE GRANTED TO THE ASSESSEE. 16. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. FROM THE COMPUTATION STATEMENT FURNISHED BY THE ASSESSEE PLACED AT PAGES 10 TO 14 OF THE 20 PAPER BOOK WE FIND THE ASSESSEE HAS NOT CLAIMED AN Y EXPENDITURE FROM THE DIVIDEND INCOME OF RS.65 03 530/-. NEITHE R ANY REVENUE EXPENDITURE NOR ANY INTEREST EXPENDITURE HAS BEEN C LAIMED BY THE ASSESSEE. THERE WAS NO DISALLOWANCE BY THE AO. THE LD.CIT(A) ENHANCED THE INCOME BY APPLYING THE PROVISIONS OF S ECTION 14A R.W. RULE 8D. WE FIND THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF MAGARPATTA TOWNSHIP DEVELOPMENT AND CONSTRUCTION CO . PVT. LTD. (SUPRA) WHILE DECIDING AN IDENTICAL ISSUE HAS OBSER VED AS UNDER : 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IN SO FAR AS THE PROVISIONS OF SECTION 14A OF THE ACT IS CONCERNED IT CONTEMPLATES THAT FOR THE PURPOSES OF COMPUTING TOTAL INCOME NO DE DUCTION IS TO BE ALLOWED IN RESPECT OF ANY EXPENDITURE INCURRED IN RE LATION TO AN INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IN THE PRESENT CASE ASSESSEE WAS FOUND TO HAVE EARNED EXEMP T INCOME BY WAY OF DIVIDEND ON INVESTMENTS MADE IN THE MUTUAL FUNDS. THE EXISTENCE OF SUCH EXEMPT INCOME PROMPTED THE ASSESSING OF FICER TO INVOKE SECTION 14A OF THE ACT WHILE COMPUTING THE TO TAL INCOME OF THE ASSESSEE. FURTHER THE ASSESSING OFFICER INVOKED RULE 8D O F THE RULES TO COMPUTE THE DISALLOWANCE. OSTENSIBLY SUB-SECTION (2) O F SECTION 14A OF THE ACT ENABLES THE ASSESSING OFFICER TO INVOKE RULE 8D OF THE RULES SO AS TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO AN INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCO ME. HOWEVER THE PHRASEOLOGY OF SUB- SECTION (2) OF SECTION 14A OF THE A CT ITSELF BRINGS OUT THAT THE POWER OF THE ASSESSING OFFICER TO INVOKE R ULE 8D OF THE RULES IS SUBJECT TO THE CONDITION THAT THE ASSESSING OFFIC ER HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE IS NOT SATISFIED WI TH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXP ENDITURE INCURRED IN RELATION TO THE INCOME WHICH DOES NOT FO RM PART OF THE TOTAL INCOME I.E. EXEMPT INCOME. IT IS NO LONGER RES INTEGRA THAT INVOKING OF RULE 8D OF THE RULES IN ORDER TO COMPUTE THE DISALLOWANCE U/S 14A OF THE ACT IS NEITHER AUTOMATIC AND NOR IS DEP ENDENT MERELY ON THE EXISTENCE OF AN EXEMPT INCOME IN THE HANDS OF THE ASSESSEE. IN SUPPORT OF THE AFORESAID PROPOSITION A.Y. 2009-10 A G AINFUL REFERENCE CAN BE MADE TO THE JUDGEMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. (SUPRA) AS WELL AS THE JUDGEMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF MAXOP P INVESTMENT LTD. & ORS. VS. CIT (2012) 247 CTR 162 (DEL). THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF KALYANI STEELS LTD. (SUPRA) HA S ALSO CONSIDERED THE AFORESAID JUDGEMENTS AND CONCLUDED THAT SECTION 14 A(2) OF THE ACT ENVISAGES A CONDITION PRECEDENT FOR INVOKING RULE 8D OF THE RULES AND COMPUTING DISALLOWANCE; AND SUCH CONDITION BEING THA T THE ASSESSING OFFICER RECORDS THAT HE IS NOT SATISFIED WITH THE CORRE CTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. NOTABLY THE AFORESAID PRECEDENTS ALSO BRING OUT THAT THE SATISFACTION WHICH I S MANDATED IN TERMS OF SECTION 14A(2) OF THE ACT MUST BE BASED ON REA SONS AND ON RELEVANT CONSIDERATION. IN OTHER WORDS THE INVOKING OF RULE 8D OF THE 21 RULES IN ORDER TO COMPUTE THE DISALLOWANCE U/S 14A OF THE ACT IS TO BE UNDERSTOOD AS BEING CONDITIONAL ON RECORDING OF AN OB JECTIVE SATISFACTION BY THE ASSESSING OFFICER WITH REGARD TO THE INCORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE IN RELATION TO THE EXEMPT INCOME HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. IN OUR CONSIDERED OPINION THE AFORESAID PARITY OF REASONING IN RELATION TO INVOKING OF RULE 8D OF THE RULES READ WITH SECTION 14 A OF THE ACT APPLIES TO THE FACT OF THE PRESENT CASE. 8. IN THE BACKGROUND OF THE AFORESAID DISCUSSION WE M AY NOW EXAMINE THE FACTS OF THE PRESENT CASE. AS NOTED EARLIE R ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 2 75 483/- ON INVESTMEN T IN MUTUAL FUNDS. IN THE COURSE OF PROCEEDINGS BEFORE THE LOWER A UTHORITIES APART FROM OTHER ASSERTIONS ASSESSEE CLAIMED THAT NO EXPENDITUR E WAS INCURRED IN RELATION TO EARNING OF SUCH INCOME. FIRST LY IT WAS POINTED OUT THAT THE DIVIDEND ON MUTUAL FUNDS WAS EARNED ON I NVESTMENT MADE FOR ABOUT TWO MONTHS ONLY I.E. JANUARY AND A.Y. 2009-10 FEBRUARY 2009 (AS FOUND FROM EXTRACT OF ASSESSEE'S SUBMISSI ONS TO THE CIT(A) REPRODUCED IN PARA 3.1 OF HIS IMPUGNED OR DER). ON THE SAID BASIS THE CASE SETUP BY THE ASSESSEE IS THAT THE FUNDS WERE PARKED IN MUTUAL FUND BY THE BANK FOR A TEMPORARY PERIOD; AND THAT IT HAD MORE THAN ENOUGH NON- INTEREST BEARING FUNDS BY WAY OF SHAR E CAPITAL AND ACCUMULATED PROFITS TO COVER THE IMPUGNED INVESTMENT. THUS NO INTEREST WAS INCURRED IN RELATION TO THE INVESTMENT IN MUTUAL FUNDS WHICH YIELDED THE IMPUGNED INCOME. SECONDLY IT WAS POINTED OUT THAT THE DIVIDEND WAS CREDITED TO THE BANK ACCOUNT DIRECT LY BY THE BANK I.E. HDFC AND IT HAS ALSO BEEN ASSERTED THAT THE INVESTMENT I N THE MUTUAL FUNDS WERE ALSO MADE BY THE SAME BANK. IT WAS THEREFORE CONTENDED THAT THERE WAS NO DIRECT OR INDIRECT EXPENDITURE INC URRED IN RELATION TO EARNING OF THE IMPUGNED EXEMPT INCOME. 9. IN PARA 4.2 OF THE IMPUGNED ORDER THE CIT(A) N OTES THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE AVAILABILITY OF I NTEREST-FREE FUNDS AND THE INVESTMENTS MADE BY THE ASSESSEE IN THE MUTU AL FUNDS DURING THE YEAR. THE CIT(A) FURTHER NOTES THAT THE A SSESSING OFFICER CONSIDERED INTEREST EXPENDITURE OF RS.3 00 19 761/- AS EXPENDITURE NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT AND SUBJECTED THE SAME TO DISALLOWANCE AS PER CLAUSE (II) OF SUB-RULE (2) OF RULE 8D OF THE RULES. AS PER THE CIT(A) THE MANNER A ND THE WORKING FOR CONSIDERING RS.3 00 19 761/- FOR THE PURPOSES OF CL AUSE (II) OF SUB- RULE (2) OF RULE 8D OF THE RULES HAS NOT BEEN RECORDE D BY THE ASSESSING OFFICER IN HIS ORDER. THE CIT(A) FURTHER RECORDS THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE ACCOUNTS OF THE ASSESSEE SO AS TO ARRIVE AT A SATISFACTION AND FINDING REGARDING INCURRENCE OF DI RECT OR INDIRECT EXPENSES IN CONNECTION WITH EARNING OF THE EXEMPT INC OME AS REQUIRED BY SUB-SECTION (2) OF SECTION 14A OF THE ACT. THE CIT(A) ALSO OBSERVED THAT ASSESSEE HAS MADE THE INVESTMENT FROM OWN FU NDS AND THEREFORE QUESTION OF ANY EXPENSE ON ACCOUNT OF INTER EST FOR EARNING OF IMPUGNED EXEMPT INCOME 'IN THE GIVEN SET OF FACTS AN D CIRCUMSTANCES OF THE CASE DOES NOT ARISE'. 10. PERTINENTLY WE FIND NO SUCH REASONS TO DISTRACT F ROM THE AFORESAID FINDINGS OF THE CIT(A) WHICH ARE CLEARLY BO RNE OUT BY THE MATERIAL ON RECORD. IN-FACT DISCUSSION IN THE ASSESSMENT ORDER WHICH HAS BEEN REFERRED TO BY THE LEARNED CIT-DR BEFORE US DOES NOT SHOW AS TO HOW THE CATEGORICAL ASSERTIONS OF THE CIT(A) ARE WR ONG. THOUGH THE ASSESSING OFFICER DOES SAY THAT HE IS 'NOT SATISFIED WITH T HE CORRECTNESS OF THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE' SO HO WEVER THE SAME IS MERELY A BALD ASSERTION DEVOID OF ANY OBJECTIV E ANALYSIS OF THE 22 ACCOUNTS MAINTAINED BY THE ASSESSEE A MANDATORY REQUIRE MENT OF SUB-SECTION (2) OF SECTION 14A OF THE ACT. THEREFORE IN THE ABSENCE OF ADHERENCE TO THE REQUIREMENTS OF SECTION 14A(2) OF TH E ACT THE ASSESSING OFFICER COULD NOT HAVE PROCEEDED TO INVOKE RU LE 8D OF THE RULES AND SUBJECT THE IMPUGNED INTEREST EXPENDITURE FO R DISALLOWANCE AS PER CLAUSE (II) OF RULE 8D OF THE RULES. SIMILARLY THE CIT(A) RECORDS ANOTHER FINDING WHICH IS TO THE EFFECT THAT THE DIVI DEND RECEIPT HAS BEEN DIRECTLY CREDITED INTO THE BANK ACCOUNT OF THE ASSESSEE THUS 'LEAVING NO SCOPE FOR INCURRING ANY OTHER EXPENSES FOR EARNING EXEMPT INCOME' BY THE ASSESSEE. FOR THE SAID REASON THE INDIREC T EXPENDITURE SOUGHT TO BE DISALLOWED BY INVOKING CLAUSE (III) TO SUB - RULE (2) OF RULE 8D OF THE RULES HAS ALSO BEEN FAULTED BY THE CIT(A). O N THIS ASPECT WE ARE IN AGREEMENT WITH THE CIT(A) THAT UNDER THE GIV EN FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICER WAS NOT JU STIFIED IN INVOKING RULE 8D OF THE RULES IN ORDER TO COMPUTE TH E DISALLOWANCE U/S 14A(1) OF THE ACT. IN VIEW OF THE AFORESAID DISCUSSI ON WE HEREBY AFFIRM THE ACTION OF THE CIT(A) IN DELETING THE DISA LLOWANCE OF RS.20 66 011/- MADE BY THE ASSESSING OFFICER INVOKING SEC TION 14A OF THE ACT. THUS ON THIS ASPECT REVENUE FAILS AND ACCORD INGLY THE GROUNDS OF APPEAL NO.1 TO 3 ARE DISMISSED. 16.1 SINCE THE ASSESSEE HAS NEITHER PAID ANY INTERE ST NOR CLAIMED ANY OTHER EXPENDITURE THEREFORE RESPECTFULLY FOLLOWIN G THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL WE HOLD THAT NO DI SALLOWANCE U/S.14A OF THE I.T. ACT IS CALLED FOR IN THE INSTAN T CASE. WE ACCORDINGLY SET-ASIDE THE ORDER OF THE CIT(A) AND D IRECT THE AO TO DELETE THE ADDITION. GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 17. GROUND OF APPEAL NO.4 BEING GENERAL IN NATURE I S DISMISSED. ITA NO.736/PN/2013 (SHRI ATUL BHAVARLAL JAIN): 18. GROUND OF APPEAL NO.1 BY THE ASSESSEE READS AS UNDER : 1. ADDITION OF RS.62 406/- - ALLEGED PERQUISITE 1.1 THE LEARNED CIT (A) ERRED IN CONFIRMING THE AD DITION OF RS. 62 406 ON ACCOUNT OF ALLEGED PERQUISITE ON ACCOUNT OF SERVIC ES RENDERED BY CA SHRI. WHORA B.A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE SA ID ADDITION BE CANCELLED. 1.2 THE LEARNED CIT (A) FAILED TO APPRECIATE THAT JAIN IRRIGATION SYSTEMS LTD. (JISL) HAD PAID PROFESSIONAL CHARGES OF RS. 2 79 000 TO SAID MR. B. A. WHORA ONLY FOR RENDERING SERVICES TO TH E SAID COMPANY AND NO PART OF SUCH PAYMENT COULD BE TREATED AS PERQU ISITE IN THE 23 HANDS OF THE APPELLANT ON ACCOUNT OF HONORARY SERVICE S RENDERED BY MR. WOHRA TO THE APPELLANT. 1.3 ALTERNATIVELY THE VALUE OF ALLEGED PERQUISITE BE RESTRICTED TO A NOMINAL AMOUNT AS AGAINST THE ADDITION OF RS. 62 406 W HICH IS EXCESSIVE. 18.1 AFTER HEARING BOTH THE SIDES WE FIND THE ABOV E GROUND IS IDENTICAL TO GROUND OF APPEAL NO.1 IN ITA NO.735/PN /2013. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUND RAISED BY THE ASSESSEE HAS BEEN ALLOWED. FOLLOWING THE RATIO THIS GROUND BY THE ASSESSEE IS ALLOWED. 19. GROUND OF APPEAL NO.2 BY THE ASSESSEE READS AS UNDER : 2. ENHANCEMENT BY RS.25 41 694/- U/S.14A 2.1 THE LEARNED CIT (A) ERRED IN ENHANCING THE ASSE SSMENT BY WAY OF DISALLOWANCE U/S. 14A OF RS. 25 31 694. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE DISALLOWANCE U/S. 14A BE CANCELLED. 2.2 THE LEARNED CIT (A) ERRED IN MAKING ENHANCEME NT ON THE GROUND NOT MENTIONED IN THE ASSESSMENT ORDER AND CONSEQUENTLY THE ADDITION OF RS. 25 31 694 COULD NOT BE SUSTAINED. 2.3 THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED THAT DEDUCTION IN RESPECT OF INTEREST PAID IS CLAIMED ONLY TO THE EXTENT OF INTEREST RECEIVED WHICH IS OFFERED TO TAX AND IGNORING THE C LAIM FOR EXCESS PAYMENT. 2.4 THE LEARNED CIT (A) ERRED IN IGNORING THE FAC T THAT THE INVESTMENT IN SHARES OF THE COMPANY (DIVIDEND FROM WHICH BEING E XEMPT) WAS MADE LONG AGO AND THAT TOO OUT OF OWNED/NON INTEREST BEARING FUNDS. 2.5 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT I N THE ABSENCE OF ANY NEXUS BETWEEN THE BORROWED FUNDS AND INVESTMENT IN SHARES OF THE COMPANY INCOME ON WHICH WAS EXEMPT INTEREST PAYM ENT OF RS.68 96 925/- OUGHT TO HAVE BEEN IGNORED WHILE CALC ULATING DISALLOWANCE U/S.14A R.W.R. 8D. 2.6 WITHOUT PREJUDICE THE DISALLOWANCE U/S.14A R.W. R. 8D SHOULD BE RESTRICTED TO RS.3 48 028/-. 24 19.1 AFTER HEARING BOTH THE SIDES WE FIND THAT THE RE WAS NO DISCUSSION ON THIS ISSUE BY THE AO. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS THE LD.CIT(A) NOTED THAT THE ASSESSEE H AD RECEIVED DIVIDEND OF RS.8 15 941/- FROM JISL. THE ASSESSEE HAS ALSO PAID INTEREST OF RS.68 96 925/- ON BORROWED FUNDS. IN V IEW OF THE ABOVE HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY PROVISIO NS OF SECTION 14A R.W. RULE 8D SHOULD NOT BE INVOKED. SINCE THE ASSE SSEE HAD STATED THAT HE DOES NOT MAINTAIN THE BALANCE SHEET IN HIS PERSO NAL CAPACITY THE LD. CIT(A) PROPOSED DISALLOWANCE OF RS.25 92 444/- U/S.14A R.W. RULE 8D ON THE BASIS OF WORKING PROVIDED BY THE ASS ESSEE VIDE ENHANCEMENT NOTICE DATED 18-12-2012. THE ASSESSEE IN HIS REPLY FILED A REVISED WORKING OF DISALLOWANCE AT RS.25 31 694/- U/S.14A R.W. RULE 8D. THE LD.CIT(A) ACCORDINGLY ENHANCED THE INCOME O F THE ASSESSEE BY RS.25 31 694/- BEING DISALLOWANCE U/S.14A R.W. R ULE 8D ON THE BASIS OF THE FOLLOWING CALCULATION : SR NO PARTICULARS AMOUNT (RS.) AMOUNT (RS.) WORKING OF DISALLOWANCE U/S 14 A 1 AMOUNT OF INTEREST EXPENDITURE INCURRED 68 96 925 2 COMPUTATION OF DISALLOWANCE A) INTEREST AMOUNT PAID 68 96 925 B) AVERAGE VALUE OF INVESTMENT FROM WHICH INCOME IS EXEMPT 6 96 05 606 C) AVERAGE VALUE OF TOTAL ASSETS 21 98 43 410 3 DISALLOWANCE = A*B C 68.96.925*69605606 21 83 666 21 98 43 410 4 0.5 % OF THE AVERAGE VALUE OF INVESTMENT INCOME FROM WHICH IS EXEMPT AS ON 31.03.2008 13 39 25 086 AS ON 31.03.2009 52 86 127 TOTAL 13 92 11 213 AVERAGE 6 96 05 606 0.5 % OF THE AVERAGE 3 48 028 TOTAL 25 31 694 25 20. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS NOT CLAIMED ANY ADMINISTRATIVE EXPENSES. HE SUBMIT TED THAT AS AGAINST INTEREST EXPENDITURE OF RS.68 96 925/- INCURRED BY THE ASSESSEE HE HAS CLAIMED DEDUCTION OF ONLY RS.56 16 040/- I.E. TO T HE EXTENT OF INTEREST INCOME. THUS HE HAS NOT CLAIMED BALANCE INTEREST OF RS.12 80 885/-. HE ACCORDINGLY SUBMITTED THAT FROM THE DISALLOWANCE OF RS.21 83 666/- COMPUTED BY THE LD.CIT(A) BENEFIT OF RS.12 80 885/- SHOULD BE GIVEN AND ONLY THE BALANCE AMOUNT MAY BE DISALLOWED. SO FAR AS THE ADMINISTRATIVE EXPENSES IS CONCERNED HE SUBMITTED THAT SINCE THE ASSESSEE HAS NEITHER CLAIMED NOR INCURRED ANY A DMINISTRATIVE EXPENSES NO DISALLOWANCE IS CALLED FOR. HE ACCORD INGLY SUBMITTED THAT THE DISALLOWANCE U/S.14A R.W. RULE 8D SHOULD B E CONFINED TO RS.9 02 781/- (I.E. RS.21 83 666 - RS.12 80 885). 21. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 22. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THERE IS NO DISPUTE TO THE FACT THAT AS AGAINST RECEIPT OF DIVIDEND INCOME OF RS.8 15 941/- THE ASSESSEE HAS NOT DISALLOWED ANY EXPENDITURE U/S.14A R.W. RULE 8D FOR WHICH THE LD.CIT(A) ENHANCED THE INCOME OF THE ASSE SSEE BY DISALLOWING RS.25 31 694/- U/S.14A R.W. RULE 8D. TH E CALCULATION OF SUCH DISALLOWANCE IS ALREADY REPRODUCED AT PARA 19. 1 OF THIS ORDER. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESS EE THAT IN ABSENCE OF ANY EXPENDITURE ON ACCOUNT OF ADMINISTRATIVE EXPEND ITURE ONLY THE 26 PROPORTIONATE INTEREST EXPENDITURE ATTRIBUTABLE TO EARNING SUCH EXEMPT INCOME HAS TO BE DISALLOWED. ACCORDING TO HIM AS AGAINST THE INTEREST PAYMENT OF RS.68 96 925/- THE ASSESSEE HAS RESTRICTED SUCH DEDUCTION TO RS.56 16 040/- BEING THE INTEREST INCO ME AND AN AMOUNT OF RS.12 80 885/- WAS NOT CLAIMED. THEREFORE THIS BENEFIT SHOULD BE GIVEN TO THE ASSESSEE AND THE DISALLOWANCE SHOULD B E RESTRICTED TO RS.9 02 781/- (I.E. 21 83 666 12 80 885). 23. WE FIND SOME FORCE IN THE ABOVE SUBMISSION OF T HE LD. COUNSEL FOR THE ASSESSEE. ADMITTEDLY THE ASSESSEE HAS BORR OWED FUNDS FROM DIFFERENT PARTIES WHICH WAS INVESTED IN FIXED DEPOS ITS WITH BANKS/COMPANIES AND SHARES OF A COOPERATIVE BANK. AS AGAINST THE INTEREST EARNED AT RS.56 16 040/- THE ASSESSEE HAS PAID INTEREST OF RS.68 96 925/-. SINCE THE INTEREST EXPENDITURE WA S HIGHER THAN THE CORRESPONDING INTEREST INCOME THE ASSESSEE HAD RES TRICTED THE DEDUCTION TO RS.56 16 040/- THUS EXCLUDING THE EXCE SS INTEREST OF RS.12 80 885/-. THEREFORE IN OUR OPINION THE DIS ALLOWANCE U/S.14A R.W. RULE 8D SHOULD BE RECOMPUTED BY TAKING THE INT EREST EXPENDITURE AT RS.56 16 040/- AND NOT RS.68 96 925/- FOR WORKIN G OUT THE DISALLOWANCE U/S.14A R.W. RULE 8D(1)(II) SINCE THE ASSESSEE IS NOT IN APPEAL AGAINST THE DISALLOWANCE OF THE ADMINISTRATI VE EXPENSES UNDER RULE 8D(1)(III). WE THEREFORE RESTORE THIS ISSUE T O THE FILE OF THE ASSESSING OFFICER FOR RECOMPUTING THE DISALLOWANCE U/S.14A R.W. RULE8D AFTER GIVING DUE OPPORTUNITY OF HEARING TO T HE ASSESSEE AS PER LAW. THIS GROUND BY THE ASSESSEE IS ACCORDINGLY PA RTLY ALLOWED FOR STATISTICAL PURPOSES. 27 24. GROUND OF APPEAL NO.3 BEING GENERAL IN NATURE I S DISMISSED. ITA NO.780/PN/2013 (BY REVENUE) (SHRI ATUL B. JAIN) : 25. GROUND OF APPEAL NO.1 BY THE REVENUE READS AS U NDER : (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.4 80 0 9 600/- WHILE IN PARA-8 OF HIS ORDER HE HIMSELF HELD THAT THE TRANSACTION OF GIFT OF SHARES TO A PRIVATE LIMITED COMPANY AS A DEBATABLE ISSUE. THUS THE LD.CIT(A) HAS ERRED IN NOT CONSIDERI NG THE PROVISIONS OF SECTION 28(IV) WHICH DOES NOT SPEAK T HAT THERE SHOULD BE TWO PERSONS AND IT SPEAKS ONLY 'FROM BUSI NESS OR PROFESSION'. 25.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE WAS THE PROPRIETOR OF M/S. JAIN AND SONS INVESTMENTS CORPOR ATION. THE ASSESSEE WAS HOLDING 181208 SHARES OF JAIN IRRIGATI ON SYSTEM LTD. AS STOCK IN TRADE. THE COST OF ACQUISITION OF SUCH SHA RES IS RS.46 97 998/- WHICH WAS SHOWN IN THE BALANCE SHEET. THE ASSESSEE GIFTED 180000 SHARES VALUED AT RS.46 66 675/- TO JISL BY PASSING A JOURNAL ENTRY IN THE BOOKS OF ACCOUNT OF THE PROPRIETARY CONCERN BY DEBITING CAPITAL ACCOUNT AND CREDITING SHARE ACCOUNT. THE DONEE COM PANY CREDITED THE CAPITAL RESERVE ACCOUNT AND DEBITED THE QUOTED INVE STMENT ACCOUNT IN ITS BALANCE SHEET AT MARKET VALUE OF SHARES. THE A O HOWEVER TREATED THE SAID ACCOUNTING ENTRY AS INVOLVING TRANSFER THO UGH NO TWO PARTIES WERE INVOLVED AND WORKED OUT THE VALUE OF BENEFIT T O THE ASSESSEE U/S.28(IV) AT RS.4 80 09 600/- AND ADDED THE SAME T O THE TOTAL INCOME OF THE ASSESSEE. THE DETAILS OF SUCH CALCULATION W AS AS UNDER : MARKET PRICE OF JISL 292.70 ON 07-11-2008 RATE PER SHARE ON AVERAGE BASIS 25.92 ALLEGED BENEFIT PER SHARE 266.78 VALUE OF 1 80 000 SHARES (RS.266.68 X 1 80 000) RS.4 80 09 600/- 28 25.2 THE REASONS GIVEN BY THE AO WHILE MAKING THE A DDITION ARE AS UNDER : I HAVE CONSIDERED THE SUBMISSION OF THE ASSESSEE QUITE CAREFULLY. THE TRANSFER OF SHARES IS DONE FROM THE PROPRIETARY CONCE RN TO THE ASSESSEE INDIVIDUAL IN THE PROPRIETARY CONCERN THE BUSINESS IN TRADING/ INVESTMENTS OF SHARES WERE CARRIED OUT IN PAST AND TH E SHARES WERE PURCHASED/ALLOTTED LONG TIME AGO. IT IS A FACT THAT NO TWO PERSONS ARE INVOLVED BUT IT IS ALSO A FACT THAT 'HAD THE ASSESSEE WAS NOT CARRYING OUT THE BUSINESS IN SHARES' HE SHOULD HAVE PURCHASED THE SHARE ON THE DATE OF TRANSFER AT MARKET RATE AND NOT ON COST PRI CE. THUS ASSESSEE HAS BEEN ABLE TO GET THE SHARES ON COST PRICE ONLY BECA USE OF HE WAS TRADER IN SHARES IN PAST AND SHARES WERE BUSINESS ASSET OF THE PROPRIETARY CONCERN AND JUST BECAUSE OF STOCK EXCHANGE RESTRICT ION HE COULD NOT TRADE AND KEPT BUSINESS CLOSED AND THUS THESE SHARES WE RE LYING IN STOCK AND ULTIMATELY GOT TRANSFERRED ON COST PRICE. AS THE ABOVE GAIN HAS OCCURRED ON ACCOUNT OF ASSESSEE'S OWN BUSINESS T HE SAME IS LIABLE FOR TAX AS BUSINESS INCOME U/S. 28 (IV). THE LANGUAGE OF THE S ECTION IS PLAIN WHICH READS AS UNDER THE VALUE OF ANY BENEFIT OR PERQUISITE WHETHER CONVERTIB LE INTO MONEY OR NOT ARISING FROM BUSINESS OR THE EXERCISE OF A PROFESSION'. THE SECTION DOES NOT SPEAK THAT THERE SHOULD BE TWO PERSONS. THE SECTION SPEAKS ONLY 'FROM BUSINESS OR PROFESSION' A S MENTIONED ABOVE. THIS CLEARLY ATTRACTS THE PROVISIONS OF SECTION 28 (IV) OF THE INCOME TAX ACT 1961 AND I HEREBY HOLD THE DIFFERENCE OF AMOUNT O F SHARES TRANSFERRED AT THE MARKET RATE AND COST PRICE AS THE ASSES SEE'S INCOME. THIS WORKS OUT TO RS. 1 80 000 X 266.72 = RS.4 80 09 600/-. 25.3 BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE SH ARES IN QUESTION WERE NOT SOLD DURING THE YEAR. THE ASSESSEE HAD ON LY PASSED AN ACCOUNTING ENTRY BY TRANSFERRING SHARES ACCOUNT IN HIS OWN CAPITAL ACCOUNT IN HIS BOOKS OF ACCOUNT WITHOUT INVOLVING A NY OTHER PERSON. IT WAS SUBMITTED THAT THE ASSESSEE HAS NOT RECEIVED AN Y BENEFIT IN KIND OR OTHERWISE WHICH COULD BE BROUGHT TO TAX U/S.28(IV) OF THE I.T. ACT. VARIOUS DECISIONS WERE CITED BEFORE THE LD.CIT(A) A ND IT WAS SUBMITTED THAT ONLY THE REAL INCOME CAN BE BROUGHT TO TAX UNDER THE I.T. ACT. THEREFORE THE TRANSACTION WHICH REALLY INVOLVES TRANSFER OF 29 FUNDS OR ASSETS FROM ONE POCKET TO A DIFFERENT POCK ET OF THE SAME INDIVIDUAL DOES NOT SPELL ANY INCOME EVEN THOUGH IT MAY BE REFLECTED IN BOOK ENTRIES OF WHAT APPEAR TO BE OF TWO DIFFERE NT ASSESSEES. 26. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. AFTER CONFRONTING THE SAME TO THE ASSESSEE THE LD.CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER : 8. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT OR DER SUBMISSION OF THE APPELLANT AND THE MATERIAL AVAILABLE ON RECO RD. I HAVE ALSO GONE THROUGH THE AUDITED FINANCIAL STATEMENTS OF THE DONEE COMPANY AND THE ASSESSMENT ORDER PASSED IN ITS CASE FOR THE A. Y . 2009-10. THE UNDISPUTED FACTS OF THE CASE INDICATE THAT THE APPELLA NT WAS AN OWNER OF 17 79 280 EQUITY SHARES OF JAIN IRRIGATION SYSTEMS LTD (JISL) OF WHICH 1 81 208 SHARES APPEARED AS 'INVESTMENT' IN THE BALA NCE SHEET OF HIS PROPRIETARY CONCERN CALLED JAIN SONS INVESTMENT CORPO RATION. OF THE TOTAL SHARES NUMBERING 17 79 280 THE APPELLANT DUR ING AY 2009-10 GIFTED 17 49 000 SHARES TO JAIN INVESTMENTS PVT. LTD . OF WHICH HE IS ONE OF THE DIRECTORS. THE GIFTED SHARES INCLUDED 1 80 000 SHARES (OUT OF 1 81 208 SHARES APPEARING IN THE SAID BALANCE SHEET) W HICH WERE RECORDED BY PASSING AN ACCOUNTING ENTRY IN THE BOOKS O F THE PROPRIETARY CONCERN DEBITING CAPITAL ACCOUNT AND CREDI TING SHARE ACCOUNT. THE DONEE COMPANY HAS CREDITED THE CAPITAL RESERVE A/C AND DEBITED THE QUOTED INVESTMENT A/C IN ITS BALANCE SHEET AT MARKET VALUE OF THE SHARES. THERE IS NO EVIDENCE ON RECORD THAT TH E APPELLANT HAS RECEIVED ANY CONSIDERATION DIRECTLY OR INDIRECTLY FROM TH E DONE COMPANY IN LIEU OF THE GIFTED SHARES. THE GIFT DEED DT . 7/11/2008 INTERALIA MENTIONS THAT THE GIFT OF SHARES HAS BEEN MAD E WITHOUT ANY MONETARY CONSIDERATION. THE AO HAS HOWEVER WORKED OU T THE DIFFERENCE BETWEEN THE MARKET VALUE AS ON 07/11/2008 AND THE COST OF 1 80 000 SHARES ONLY (OUT OF THE GIFTED SHARES OF 1 81 208) AND MADE A CONSEQUENTIAL ADDITION OF RS. 4 80 09 600/- TO THE INCOME RETURNED APPLYING THE PROVISIONS OF SEC. 28 (IV) OF THE ACT. THE PRESENT SETTLED LEGAL POSITION IS THAT 'GIFT' DOES NOT CONSTITUTE AN INCO ME IN THE HANDS OF THE DONOR. THE GIFT TAX ACT 1958 HAS SINCE BEEN ABOL ISHED W.E.F. 01/10/1998. SIMILARLY THE PROVISIONS OF SEC. 56 (2) (VII) ARE ALSO NOT APPLICABLE IN THIS CASE. THE APPELLANT HAS GIFTED 17 49 000 SHARES OF JISL OUT OF 17 79 280 SHARES OWNED BY HIM. HOWEVER THE AO HAS BROUGHT TO TAX THE SO CALLED VALUE OF 1 80 000 SHARES ONLY TH E COST OF WHICH WAS TRANSFERRED TO CAPITAL ACCOUNT. FURTHER THE APPELLA NT HAS MADE A GIFT OF SHARES TO A PRIVATE LIMITED COMPANY WHICH IS A LEGA L ENTITY. EVEN IF THE GIFT OF SHARES TO A PRIVATE LIMITED COMPANY IS A DEBATABLE ISSUE UNDER THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE SE C. 28 (IV) OF THE ACT PER SE HAS NO APPLICATION AS THERE BEING NO EVIDENCE OF APPELLANT DERIVING ANY BENEFIT OR PERQUISITE. THE APPELLANT VIDE LETTER S DT. 7/12/2011 HAS REPLIED THAT THE GIFT OF SHARES TO JALGAON INVESTMEN T (P) LTD WAS UNCONDITIONAL AND IRREVOCABLE. THE DONEE COMPANY WAS AUTHORIZED TO ACCEPT THE GIFT AS PER ITS MEMORANDUM OF ASSOCIATIO N AND ARTICLE OF ASSOCIATION. FURTHER THE APPELLANT HAS STATED THAT SEC.25 OF INDIAN 30 CONTRACT ACT DOES NOT INVALIDATE THE GIFT OF SHARES M ADE TO THE ABOVE COMPANY. THE APPELLANT VIDE LETTER DT.3/12/2012 HAS STATED THAT THE PROVISIONS OF SEC. 47(III) OF THE ACT ALSO DO NOT A PPLY IN HIS CASE. THERE IS NOTHING ON RECORD TO PROVE THAT ANY CONSIDERATION OR BENEFIT HAS BEEN PASSED ON TO THE APPELLANT. IN SHORT THE ADDITION OF RS.4 80 09 600/- CANNOT BE JUSTIFIED EITHER ON FACTS OR IN LAW THERE BE ING NO INCOME ACCRUING TO THE APPELLANT WITHIN THE MEANING OF SEC. 28 (IV) OF THE ACT. THE SAME IS DELETED. 26.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE US. 27. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY OP POSED THE ORDER OF THE CIT(A). REFERRING TO PARA 8 OF THE OR DER OF THE CIT(A) HE SUBMITTED THAT THE LD.CIT(A) IN THE SAID DECISION H AS OBSERVED THAT THE GIFT OF SHARES TO PVT. LTD. COMPANY IS A DEBAT ABLE ISSUE. THIS SHOWS THAT THE LD.CIT(A) HIMSELF WAS DOUBTFUL ABOUT THE ALLEGED TRANSACTION. ALTHOUGH IT IS A FACT THAT NO 2 PERSO NS ARE INVOLVED BUT THIS IS ALSO A FACT THAT HAD THE ASSESSEE NOT CARRI ED OUT THE BUSINESS IN SHARES HE WOULD HAVE PURCHASED THE SHARES ON THE DA TE OF TRANSFER AT MARKET RATE AND NOT ON COST PRICE. THUS THE ASSES SEE HAS BEEN ABLE TO GET SHARES ON COST PRICE ONLY BECAUSE HE WAS TRADER IN SHARES IN PAST AND SHARES WERE DISCLOSED ASSETS OF THE PROPRIETARY CONCERN. JUST BECAUSE OF STOCK EXCHANGE RESTRICTION ASSESSEE COUL D NOT TRADE AND KEPT BUSINESS CLOSED. THEREFORE THESE SHARES WERE LYING IN STOCK AND ULTIMATELY GOT TRANSFERRED ON COST PRICE. HE SUBMI TTED THAT ON A PLAIN READING OF SECTION 28(IV) IT REVEALS THAT SECTION D OES NOT SPEAK THAT THERE SHOULD BE TWO PERSONS. THE SECTION SPEAKS ON LY FROM BUSINESS OR PROFESSION. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BE SET-ASIDE AND THAT OF THE AO BE RESTORED. 31 28. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER H AND STRONGLY SUPPORTED THE ORDER OF THE CIT(A). HE SUBMITTED TH AT AO HAS NO PROBLEM FOR THE TRANSFER. HE ONLY SAYS THAT THE BE NEFIT HAS ACCRUED DUE TO TRANSFER OF THE SHARES FROM THE PROPRIETARY CONC ERN. REFERRING TO PROVISIONS OF SECTION 28(IV) HE SUBMITTED THAT VALU E OF ANY BENEFIT OR PERQUISITE WHETHER CONVERTIBLE INTO MONEY OR NOT AR ISING FROM BUSINESS OR THE EXERCISE OF A PROFESSION SHALL BE C HARGEABLE TO INCOME- TAX UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION. HE SUBMITTED THAT THE ASSESSEE IS NOT CARRYING OUT ANY BUSINESS OR PROFESSION. IT IS A MERE TRANSFER FROM PROPRIETARY CONCERN TO INDIVIDUAL ACCOUNT. REFERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SIR KIKABHAI PREMCHAND VS. CIT REPORTED IN 24 ITR 506 HE SUBMITTED THAT THE HONBLE SUPREME COURT IN THE SAID DECISION HAS HELD THAT WITHDRAWAL OF STOCK IN TRADE FOR NON BUSI NESS PURPOSE DOES NOT RESULT IN INCOME AND IT CAN BE VALUED ON COST P RICE WHERE ASSESSEE NORMALLY VALUED ITS STOCK AT COST PRICE. REFERRING TO THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. DHANUKA & SONS REPORTED IN 124 ITR 24 HE SUBMITTED THAT THE HONBL E HIGH COURT IN THE SAID DECISION HAS HELD THAT LOSS CLAIMED ON MER E TRANSFER OF SHARES FROM THE ASSESSEE SHARE ACCOUNT TO ITS INVESTMENT A CCOUNT IS NOT ALLOWABLE. HE SUBMITTED THAT GOING ON BY THE REVER SE WAY NO PROFIT ALSO SHOULD BE TAXED. HE ACCORDINGLY SUBMITTED THA T THE ORDER OF THE CIT(A) BEING IN CONSONANCE WITH LAW SHOULD BE UPHEL D AND THE GROUND RAISED BY THE REVENUE SHOULD BE DISMISSED. 29. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE 32 PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAV E ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. IN THE INST ANT CASE WE FIND THE ASSESSEE IS THE PROPRIETOR OF M/S. JAIN AND SONS IN VESTMENTS CORPORATION JALGAON. IT WAS HOLDING 181208 SHARES OF JISL. COST OF ACQUISITION OF SUCH SHARES WAS RS.46 98 998/-. THE ASSESSEE GIFTED 180000 SHARES VALUED AT RS.46 66 675/- TO JISL BY P ASSING AN ACCOUNTING ENTRY IN THE BOOKS OF THE PROPRIETARY CO NCERN DEBITING CAPITAL ACCOUNT AND CREDITING SHARE ACCOUNT. THE A O INVOKING THE PROVISIONS OF SECTION 28(IV) MADE ADDITION OF RS.4 80 09 600/- BEING THE DIFFERENCE BETWEEN THE MARKET VALUE AS ON 07-11 -2008 AND THE COST OF 180000 SHARES. WE FIND THE LD.CIT(A) DELETED TH E ADDITION BY HOLDING THAT THERE IS NO EVIDENCE ON RECORD THAT TH E ASSESSEE RECEIVED ANY CONSIDERATION DIRECTLY OR INDIRECTLY FROM THE D ONEE COMPANY IN VIEW OF THE GIFTED SHARES. THE GIFT DEED DATED 07- 11-2008 INTER ALIA MENTIONS THAT THE GIFT OF SHARES HAS BEEN MADE WITH OUT ANY MONETARY CONSIDERATION. HE FURTHER HELD THAT THE ASSESSEE M ADE THE GIFT OF SHARES TO A PVT. LTD. COMPANY WHICH IS A LEGAL ENTI TY. EVEN IF GIFT OF SHARES TO PVT. LTD. COMPANY IS A DEBATABLE ISSUE H E HELD THAT THE PROVISIONS OF SECTION 28(IV) PER SE HAS NO APPLICAT ION AS THERE BEING NO QUESTION OF ASSESSEE DERIVING ANY BENEFIT OR PERQUI SITE WHICH COULD BE TAXED U/S.28(IV) OF THE I.T. ACT. THERE IS NOTHING ON RECORD TO PROVE THAT ANY CONSIDERATION OR BENEFIT HAS BEEN PASSED O N TO THE ASSESSEE. WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE. AS PER THE PROVISIONS OF SECTION 28(IV) THE VALUE OF ANY BENEFIT OR PERQUISITE WHETHER CONVERTIBLE INTO MONEY OR NOT ARISING FROM BUSINESS OR THE EXERCISE OF A PROFESSION SHALL BE CHARGEABLE TO INC OME-TAX UNDER THE 33 HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. HERE THE ASSESSEE IS NOT CARRYING OUT ANY BUSINESS OR PROFESSION. TH EREFORE THE PROVISIONS OF SECTION 28(IV) ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THIS VIEW OF THE MATTER AND IN VI EW OF THE DETAILED REASONING GIVEN BY THE LD.CIT(A) WE FIND NO INFIRM ITY IN THE SAME. ACCORDINGLY THE SAME IS UPHELD AND THE GROUND RAIS ED BY THE REVENUE IS DISMISSED. 30. GROUND OF APPEAL NO.2 BY THE REVENUE READS AS U NDER : (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.56 16 040/ -. THE LD. CIT(A) HAS TOTALLY IGNORED THE FACT THAT DURING THE YEAR THERE IS NO BUSINESS ACTIVITY. THIS FACT IS ALSO ACCEPTED BY ASSESSEE BY NOT CLAIMING LOSS FROM BUSINESS. 30.1 FACTS OF THE CASE IN BRIEF ARE THAT THE AO D URING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED FROM THE REVISED RE TURN OF INCOME THAT THE ASSESSEE HAS CLAIMED THAT THERE WAS NO BUS INESS DURING THE RELEVANT ASSESSMENT YEAR AND THE LOSS OF RS.3 92 94 6/- FROM JAIN AND SONS INVESTMENT CORPORATION HAS NOT BEEN CLAIMED. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE HE OBSERVED THAT THE ASSESSEE HAS SHOWN INVESTMENT IN IMMOVABLE PROPERTY AT RS.1 53 0 5 394/- AND INVESTMENT IN SHARES AT RS.95 20 941/-. THE ASSESS EE HAD NOT GIVEN THE DETAILS OF UTILISATION OF BORROWED FUNDS. HE THEREFORE WAS OF THE OPINION THAT BORROWED FUNDS MUST HAVE BEEN UTILIZED FOR PURCHASE OF SHARES AS WELL AS PURCHASE OF IMMOVABLE PROPERTIES. HE OBSERVED THAT THE ASSESSEE PAID INTEREST OF RS.68 96 925/- ON BOR ROWED FUNDS IN THE PAST. SIMILARLY THE ASSESSEE HAS EARNED INTEREST OF RS.56 16 040/- FOR INVESTMENT MADE IN FDS WITH BANK/COMPANIES AND SHAR ES OF 34 COOPERATIVE BANK. SINCE THE INTEREST PAID ON BORRO WED FUNDS WAS HIGHER THAN THE INTEREST EARNED THE ASSESSEE RESTRI CTED THE DEDUCTION TO THE INTEREST PAID TO RS.56 16 040/- EXCLUDING THE E XCESS INTEREST PAID ON RS.12 80 885/-. SINCE THERE WAS NO BUSINESS ACT IVITY DURING THE YEAR THE AO WAS OF THE OPINION THAT ALLOWING INTERE ST PAID ON BORROWINGS DOES NOT ARISE. THE INCOME FROM INTERES T ON FDS/DIVIDEND AND OTHER INCOME HAS TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES. SINCE THE ASSESSEE DI D NOT FURNISH ANY EVIDENCE OF UTILIZATION OF BORROWED FUNDS TOWARDS E ARNING OF INTEREST AND DID NOT FURNISH THE BALANCE SHEET AND CAPITAL A CCOUNT THE AO ADDED AN AMOUNT OF RS.56 16 040/- BEING INTEREST EA RNED ON INVESTMENT UNDER THE HEAD INCOME FROM OTHER SOURCES . 31. IN APPEAL THE LD.CIT(A) DELETED THE ADDITION BY HOLDING THAT THE FACT OF EXISTENCE OF BORROWINGS COULD NOT BE DENIED . THE ASSESSEE HIMSELF HAS RESTRICTED THE CLAIM OF DEDUCTION OF IN TEREST TO THE EXTENT OF RECEIPT OF INTEREST. FURTHER IN THE PAST ALSO THE DEPARTMENT AND ASSESSEE HAVE ACCEPTED THE CLAIM FOR DEDUCTION BUT LIMITING THE SAME TO THE AMOUNTS OF INTEREST RECEIPT ONLY. ACCORDING LY THE LD.CIT(A) DELETED THE ADDITION MADE BY THE AO. 31.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE US. 32. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SU PPORTED THE ORDER OF THE AO. HE SUBMITTED THAT WHEN THERE IS N O BUSINESS ACTIVITY THE QUESTION OF ALLOWING INTEREST PAID ON BORROWING S DOES NOT ARISE. 35 THEREFORE THE CIT(A) WAS NOT JUSTIFIED IN DISALLOW ING THE DISALLOWANCE. 33. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER H AND STRONGLY SUPPORTED THE ORDER OF THE CIT(A). REFERRING TO TH E COPIES OF ASSESSMENT ORDERS FOR A.YRS. 2006-07 TO 2008-09 HE SUBMITTED THAT THERE IS NO SUCH DISALLOWANCE IN THE SCRUTINY ASSES SMENTS IN THE PAST. THE AO IN THESE ASSESSMENTS HAS RESTRICTED THE INTE REST EXPENDITURE TO THE EXTENT OF INTEREST INCOME. THEREFORE THERE IS NO JUSTIFICATION FOR DEVIATING FROM THE SETTLED PRINCIPLE. HE ACCORDING LY SUBMITTED THAT THE ORDER OF THE CIT(A) BE UPHELD AND THE GROUND RA ISED BY THE REVENUE SHOULD BE DISMISSED. 34. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THERE IS NO DISPUTE TO THE FACT THAT BOTH THE BORROWINGS AS WELL AS THE INVEST MENTS WERE MADE IN THE PAST. ACCORDING TO THE AO SINCE THE ASSESSEE H AS NOT GIVEN THE DETAILS OF UTILISATION OF BORROWED FUNDS THEREFORE HE WAS OF THE OPINION THAT SUCH BORROWED FUNDS MIGHT HAVE BEEN UT ILISED TOWARDS PURCHASE OF IMMOVABLE PROPERTIES JEWELLERIES ETC. HOWEVER FROM THE COPIES OF THE ASSESSMENT ORDERS FOR A.YRS. 2006-07 TO 2008-09 WHICH ARE PLACED AT PAPER BOOK PAGES 4 TO 21 WE FIND NO SUCH DISALLOWANCE HAS BEEN MADE. THE AO HAS ONLY RESTRICTED THE INTE REST EXPENDITURE TO THE EXTENT OF INTEREST INCOME. THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR HAS ALSO RESTRICTED THE CLAIM OF SU CH INTEREST PAYMENT TO THE EXTENT OF INTEREST RECEIVED. THEREFORE WE DO NOT FIND ANY 36 INFIRMITY IN THE ORDER OF THE LD.CIT(A) DELETING TH E DISALLOWANCE OF INTEREST TO THE EXTENT OF RS.56 16 040/- FROM THE I NTEREST EXPENDITURE. GROUND RAISED BY THE REVENUE IS ACCORDINGLY DISMISS ED. ITA NO.737/PN/2013 (SHRI ASHOK BHAVARLAL JAIN) : 35. GROUND OF APPEAL NO.1 BY THE ASSESSEE READS AS UNDER : 1. ADDITION OF RS.62 406/- - ALLEGED PERQUISITE 1.1 THE LEARNED CIT (A) ERRED IN CONFIRMING THE AD DITION OF RS. 62 406 ON ACCOUNT OF ALLEGED PERQUISITE ON ACCOUNT OF SERVIC ES RENDERED BY CA SHRI. WHORA B.A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE SA ID ADDITION BE CANCELLED. 1.2 THE LEARNED CIT (A) FAILED TO APPRECIATE THAT JAIN IRRIGATION SYSTEMS LTD. (JISL) HAD PAID PROFESSIONAL CHARGES OF RS. 2 79 000 TO SAID MR. B. A. WHORA ONLY FOR RENDERING SERVICES TO TH E SAID COMPANY AND NO PART OF SUCH PAYMENT COULD BE TREATED AS PERQU ISITE IN THE HANDS OF THE APPELLANT ON ACCOUNT OF HONORARY SERVICE S RENDERED BY MR. WOHRA TO THE APPELLANT. 1.3 ALTERNATIVELY THE VALUE OF ALLEGED PERQUISITE BE RESTRICTED TO A NOMINAL AMOUNT AS AGAINST THE ADDITION OF RS. 62 406 W HICH IS EXCESSIVE. 35.1 AFTER HEARING BOTH THE SIDES WE FIND THE ABOV E GROUND IS IDENTICAL TO GROUND OF APPEAL NO.1 IN ITA NO.735/PN /2013 IN THE CASE OF SHRI BHAVARLAL HIRALAL JAIN. WE HAVE ALREA DY DECIDED THE ISSUE AND THE GROUND RAISED BY THE ASSESSEE HAS BEEN DISM ISSED. FOLLOWING THE SAME RATIO THIS GROUND BY THE ASSESSEE IS DISM ISSED. 36. GROUND OF APPEAL NO.2 BY THE ASSESSEE READS AS UNDER : 2. ADDITION OF NOTIONAL INTEREST RS.7 31 870/-. 2.1 THE LEARNED CIT (A) ERRED IN ENHANCING INCOME FROM HOUSE PROPERTY BE ADDING NOTIONAL INTEREST @ 12% ON THE UN ADJUSTED OPENING BALANCE OF INTEREST FREE DEPOSIT. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE INCOME FROM HOUSE PROPERTY AS DECLARED IN THE RETURN OF INCOME AT RS. 8 05 375 BE ACCEPTED AND THE ADDITION OF RS. 5 12 310 CONSEQUENT TO ENHANCEMENT OF AV BE DELETED. 37 2.2 THE LEARNED CIT (A) ERRED IN IGNORING SEVERAL J UDICIAL DECISIONS HOLDING THAT THE AV COULD BE INCREASED BY CALCULATIN G NOTIONAL INTEREST ON INTEREST FREE DEPOSIT. 36.1 AFTER HEARING BOTH THE SIDES WE FIND THE ASSE SSEE IS THE OWNER OF A BUNGALOW WHICH WAS LET OUT TO JAIN IRRIGATION SYSTEM LTD. FOR AN ANNUAL RENT OF RS.11 50 536/- NET OF TDS IN TERMS O F AN AGREEMENT DULY EXECUTED IN 2002. THE SAID TERMS WERE AGAIN R EVISED BY A LEASE DEED DATED 20-08-2002 UNDER WHICH THE ASSESSEE WAS TO RECEIVE YEARLY RENT OF RS.9 50 000/- AND HAS CREDITED INTEREST FRE E DEPOSIT OF RS.1 14 60 000/-. THE BALANCE OF UNADJUSTED DEPOSI T AS ON 31-03-2009 WAS RS.51 43 912/-. THE AO CALCULATED INTEREST @12 % ON THE SAID SUM OF RS.51 43 912/- AND MADE ADDITION OF RS.6 17 270/- U/S.2(24)(IV) OF THE I.T. ACT TO THE TOTAL INCOME O F THE ASSESSEE. 37. IN APPEAL THE LD.CIT(A) ENHANCED SUCH NOTIONAL INTEREST TO RS.7 31 870/- BY DIRECTING THE AO TO ADD NOTIONAL I NTEREST @12% ON THE UNADJUSTED OPENING BALANCE OF INTEREST FREE DEP OSIT. 38. AFTER HEARING BOTH THE SIDES WE FIND THE ABOVE GROUND IS IDENTICAL TO THE GROUND OF APPEAL NO.2 IN ITA NO.73 5/PN/2013. IN THAT CASE NOTIONAL INTEREST WAS ADDED ON ACCOUNT OF INTEREST FREE ADVANCE GIVEN FOR LET OUT OF AGRICULTURAL LAND. WE HAVE DISCUSSED THE ISSUE AND HAVE DIRECTED THE AO TO DELETE THE ADDITI ON. FOLLOWING THE SAME RATIO WE DIRECT THE AO TO DELETE THE ADDITION ON ACCOUNT OF NOTIONAL INTEREST ON INTEREST FREE ADVANCE GIVEN TO THE DIRECTOR ON ACCOUNT OF LETTING OUT OF HIS BUNGALOW. THIS GROUN D BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 38 39. GROUND OF APPEAL NO.3 BY THE ASSESSEE READS AS UNDER : 3. ADDITION OF RS.48 38 931/- U/S.14A OF THE ACT. 3.1 THE LEARNED CIT (A) ERRED IN ENHANCING THE ASSESSM ENT BY WAY OF DISALLOWANCE U/S. 14A OF RS. 48 38 931. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE DISALLOWANCE U/S. 14A BE CANCELLED. 3.2 THE LEARNED CIT (A) ERRED IN MAKING ENHANCEME NT ON THE GROUND NOT MENTIONED IN THE ASSESSMENT ORDER AND CONSEQUEN TLY THE ADDITION OF RS. 48 38 931 COULD NOT BE SUSTAINED. 3.3 THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED THAT DEDUCTION IN RESPECT OF INTEREST PAID IS CLAIMED ONLY TO THE EXTENT OF INTEREST RECEIVED WHICH IS OFFERED TO TAX AND IGNORING THE C LAIM FOR EXCESS PAYMENT. 3.4 THE LEARNED CIT (A) ERRED IN IGNORING THE FAC T THAT THE INVESTMENT IN SHARES OF THE COMPANY (DIVIDEND FROM WHICH BEING EX EMPT) WAS MADE LONG AGO AND THAT TOO OUT OF OWNED/NON INTEREST BEARING FUNDS. 3.5 THE LEARNED CIT (A) FAILED TO APPRECIATE THAT IN THE ABSENCE OF ANY NEXUS BETWEEN THE BORROWED FUNDS AND INVESTMENT IN SHA RES OF THE COMPANY INCOME ON WHICH WAS EXEMPT INTEREST PAYMENT OF RS. 1 10 18 000 OUGHT O HAVE BEEN IGNORED WHILE CALCULA TING DISALLOWANCE U/S. 14A R.W.R. 8D. 3.6 WITHOUT PREJUDICE THE DISALLOWANCE U/S. 14A R.W.R. 8D SHOULD BE RESTRICTED TO RS. 5 19 298. 39.1 FACTS OF THE CASE IN BRIEF ARE THAT THE LD.C IT(A) DURING APPEAL PROCEEDINGS OBSERVED THAT ASSESSEE HAS RECEIVED DIV IDEND OF RS.16 05 568/- FROM M/S. JAIN IRRIGATION SYSTEM LTD . THE ASSESSEE HAS ALSO PAID INTEREST OF RS.10 18 000/- ON BORROWE D FUNDS. HE THEREFORE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY PROVISIONS OF SECTION 14A R.W. RULE 8D SHOULD NOT BE INVOKED. IN RESPONS E TO THE SAME THE ASSESSEE FURNISHED A REVISED WORKING OF DISALLOWANC E OF RS.48 38 931/- U/S.14A R.W. RULE8D WHICH IS AS UNDE R : 39 SR . NO PARTICULARS AMOUNT (RS. ) AMOUNT (RS. ) WORKING OF DISALLOWANCE U/S 14 A 1 AMOUNT OF INTEREST EXPENDITURE INCURRED 1 10 18 000 2 COMPUTATION OF DISALLOWANCE A) INTEREST AMOUNT PAID 1 10 18 000 B) AVERAGE VALUE OF INVESTMENT FROM WHICH INCOME IS EXEMPT 10 38 59 559 C) AVERAGE VALUE OF TOTAL ASSETS 26 49 12 434 3 DISALLOWANCE = A*B C 60 17 336*10 38 59 559 43 19 633 26 49 12 434 4 0.5 % OF THE AVERAGE VALUE OF INVESTMENT INCOME FROM WHICH IS EXEMPT AS ON 3 1.03. 2008 14 72 44527 AS ON 3 1.03. 2009 6 04 74 591 TOTAL 20 77 19 118 AVERAGE 10 38 59 559 0.5 % OF THE AVERAGE 5 19 298 TOTAL 48 38 931 39.2 THE LD.CIT(A) THEREFORE ISSUED AN ENHANCEMENT NOTICE TO THE ASSESSEE AND MADE ADDITION OF RS.48 38 931/- TO THE TOTAL INCOME OF THE ASSESSEE. 39.3 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE AS SESSEE IS IN APPEAL BEFORE US. 40. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT THE ASSESSEE IN THE PAST HAD BORROWED FUNDS FROM CERTAI N PARTIES AND PAID INTEREST OF RS.1 10 18 000/- FOR THE IMPUGNED ASSES SMENT YEAR. THE SAID BORROWED FUNDS WERE INVESTED IN FIXED DEPOSITS WITH BANKS/COMPANIES AND SHARES OF A COOPERATIVE BANK AN D THE ASSESSEE HAS EARNED INTEREST INCOME OF RS.60 17 336/-. SINC E THE INTEREST PAID 40 WAS HIGHER THAN THE CORRESPONDING INCOME THE ASSES SEE RESTRICTED THE DEDUCTION TO RS.60 17 336/- IGNORING THE EXCESS INT EREST PAID AT RS.50 00 664/-. HE SUBMITTED THAT THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THE FACTS IN THE CASE OF SHRI ATUL BHA VARLAL JAIN. SINCE THE TOTAL DISALLOWANCE OF RS.48 38 931/- AS PER SECTION 14A R.W. RULE 8D IS LESS THAN THE INTEREST FOREGONE BY THE ASSESSEE BY NOT CLAIMING THE EXCESS INTEREST PAID THEREFORE NO ADDITION IS CAL LED FOR. 41. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND SUPPORTED THE ORDER OF THE CIT(A). HE SUBMITTED TH AT AS PER THE OWN CALCULATION OF THE ASSESSEE THE DISALLOWANCE U/S.14 A R.W. RULE 8D IS RS.48 38 931/- THEREFORE NO RELIEF SHOULD BE GRAN TED TO THE ASSESSEE AND THE ORDER OF THE CIT(A) BE UPHELD. 42. WE HAVE HEARD THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES. ADMITTEDLY THE ASSESSEE HAD EARNED INTEREST INCOME OF RS.60 17 336/- AND PAID INTEREST OF RS.1 10 18 000/- AND HAS NOT C LAIMED THE EXCESS INTEREST PAID TO THE EXTENT OF RS.50 00 664/-. WE HAVE DECIDED AN IDENTICAL ISSUE IN THE CASE OF SHRI ATUL BHAVARLAL JAIN AT PARA 19 TO 23 OF THE ORDER AND THE ARGUMENTS OF THE ASSESSEE HAVE BEEN PARTIALLY ACCEPTED. FOLLOWING THE SAME RATIO WE DIRECT THE AO TO RECOMPUTE THE DISALLOWANCE U/S.14A R.W. RULE 8D AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS PER LAW. THIS GROUND BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 43. GROUND OF APPEAL NO.4 BEING GENERAL IN NATURE I S DISMISSED. 41 ITA NO.779/PN/2013 (SHRI ASHOK BHAVARLAL JAIN) (BY REVENUE) : 44. GROUND OF APPEAL NO.1 BY THE REVENUE READS AS U NDER : (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.13 95 53 921/- WHILE IN PARA-8 OF HIS ORDER HE HIMSELF HELD THE T RANSACTION OF GIFT OF SHARES TO A PRIVATE LIMITED COMPANY AS A DE BATABLE ISSUE. THUS THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING T HE PROVISIONS OF SECTION 28(IV) WHICH DOES NOT SPEAK THA T THERE SHOULD BE TWO PERSONS AND IT SPEAKS ONLY 'FROM BUSI NESS OR PROFESSION'. 44.1 AFTER HEARING BOTH THE SIDES WE FIND THE ABOV E GROUND IS IDENTICAL TO GROUND OF APPEAL NO.1 BY THE REVENUE I N ITA NO.780/PN/2013. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUND RAISED BY THE REVENUE HAS BEEN DISMISSED. F OLLOWING THE SAME RATIO THIS GROUND BY THE REVENUE IS DISMIS SED. 45. GROUND OF APPEAL NO.2 BY THE REVENUE READS AS U NDER : (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.60 17 336/ -. THE LD. CIT(A) HAS TOTALLY IGNORED THE FACT THAT DURING THE YEAR THERE IS NO BUSINESS ACTIVITY. THIS FACT IS ALSO ACCEPTED BY ASSESSEE BY NOT CLAIMING LOSS FROM BUSINESS. 45.1 AFTER HEARING BOTH THE SIDES WE FIND THE ABOV E GROUND IS IDENTICAL TO GROUND OF APPEAL NO.2 IN ITA NO.780/PN /2013. WE HAVE ALREADY DECIDED THE ISSUE AT PARA 30 TO 34 OF THIS ORDER AND THE GROUND RAISED BY THE REVENUE HAS BEEN DISMISSED. FOLLOWIN G THE SAME RATIO THIS GROUND BY THE REVENUE IS DISMISSED. 46. GROUND OF APPEAL NO.3 BY THE REVENUE READS AS U NDER : (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE CIT(A) HAS ERRED IN TREATING THE AMOUNT OF RS.6 17 270/- AS INCOME FROM HOUSE PROPERTY. THE LD. CIX(A) HAS NOT CONSIDERED THE FACT OF THE CASE THAT THE COMPANY WAS NOT THE O WNER OF THE PROPERTY WHICH WAS THEN TRANSFERRED TO FIRM AND THE N THE 42 ASSESSEE AND AFTER TRANSFER HAS TAKEN THE SAID PRO PERTY ON EXORBITANT RENT AND DEPOSIT AND GIVE BENEFIT TO THE ASSESSEE. 46.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE HAS LET OUT HIS PREMISES TO JAIN IRRIGATION SYSTEM LTD. JALGAON FO R AN ANNUAL RENT OF RS.11 50 536/- (NET OF TDS). THE ASSESSEE HAS ALSO OBTAINED THE INTEREST FREE DEPOSIT OF RS.1 14 60 000/- FROM THE TENANT. DURING THE ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSES SEE IS HOLDING KEY POSITION IN THE COMPANY JISL. HE HAS GIVEN HIS PRO PERTY INCLUDING FURNITURE FIXTURES AND SURROUNDING LAND ON RENT TO THE COMPANY AT EXORBITANT RENT OF RS.11 50 536/- AND OBTAINED INTE REST FREE DEPOSIT OF RS.1 14 60 000/- TO BE ADJUSTED TOWARDS RENT IN 12 YEARS. THE COST PRICE OF THE PROPERTY IS ONLY RS.14 95 470/- WHICH WAS THE PROPERTY OF THE COMPANY AND SOLD TO JAIN ENTERPRISES A FIRM WH ERE THE ASSESSEE WAS PARTNER AND LATER ON ASSESSEES NAME WAS MADE O N 26-07-1999. ACCORDING TO THE AO THE ASSESSEE WAS NOT OWNER OF THE PROPERTY ON THE DATE OF EXECUTION OF RENT DEED. HE FURTHER OBS ERVED THAT WHEN THE COMPANY WAS THE OWNER OF THE PROPERTY THEN WHY IT S OLD ITS PROPERTY TO THE FIRM AND LATER ON TAKEN OUT THE PROPERTY ON EXORBITANT RENT PLUS DEPOSIT. ACCORDING TO THE AO IT CLEARLY SHOWS THE INTENTION WAS TO GIVE BENEFIT TO THE ASSESSEE WHO IS HOLDING KEY POS ITION IN THE COMPANY AND THE COMPANY FUNDS HAVE BEEN UTILIZED FO R THE PERSONAL BENEFIT OF THE ASSESSEE ON ONE HAND AND ON THE OTHE R HAND THE COMPANY IS ALSO PAYING HUGE AMOUNT OF INTEREST FOR ABOVE CAPITAL. HE THEREFORE BROUGHT TO TAX AN AMOUNT OF RS.6 17 270/ - U/S.2(24)(IV) OF THE I.T. ACT BEING INTEREST @12% ON THE OUTSTANDING BALANCE OF RS.51 43 912/- AS ON 31-03-2009. RELYING ON VARIOU S DECISIONS THE 43 LD.CIT(A) DELETED THE ADDITION BY HOLDING THAT NOTI ONAL INTEREST ON SUCH INCOME SHOULD BE TREATED AS INCOME FROM HOUSE PROPERTY. HE HOWEVER DIRECTED THE AO TO CALCULATE SUCH NOTIONAL INCOME @12% ON THE OPENING BALANCE OF RS.60 98 915/- WHICH COMES T O RS.7 31 870/-. THUS HE ENHANCED THE INCOME FROM HOUSE PROPERTY TO RS.13 17 685/- AS AGAINST RS.8 05 375/- DETERMINED BY THE AO. THE RELEVANT OBSERVATION OF THE CIT(A) AT PARA 12 OF THE ORDER R EADS AS UNDER : 12. I HAVE GONE THROUGH THE DETAILS FILED AND SUBMISSI ONS MADE BESIDES THE REASONS FOR ADDITION AS STATED BY THE AO IN HIS ORDER. I FIND THAT THE INTEREST FREE DEPOSIT OF RS. 1 14 60 000/- TO THE APPELLANT FOR HIRING THE PREMISES WAS TOTALLY DISPROPORTIONATE TO TH E MARKET PRACTICE AND THE VALUE OF THE PROPERTY. BESIDES TH E COMPANY WAS PAYING A HEFTY YEARLY RENT OF RS. 11 50 536/- (NET OF TDS) TO THE APPELLANT WHICH ALSO SEEMS TO BE DISPROPORTIONATE TO TH E MARKET RENT. AS MENTIONED EARLIER I FIND THAT THE INTEREST FREE D EPOSIT RECEIVED IS HIGHLY EXCESSIVE AND DISPROPORTIONATE TO THE VALUE OF THE PROPERTY AND THE AMOUNT OF RENT CHARGED. IN CIT V. K. STRETLITE ELECT. CORPN. (2011) 336 ITR 348 IT HAS BEEN HELD THAT NOTIONAL INTEREST ON SUCH DEPOSIT COULD BE TREATED AS INCOME FROM HOUSE PROPERTY. SIMILAR VI EW IS TAKEN IN THE CASE OF ITO V. BAKER TECHNICAL SERVICES PVT. LTD. (201) 126 TTJ 455 MUMBAI ITAT. IN VIEW OF THE ABOVE THE AV WILL BE I NCREASED BY RS.7 31 870/- BEING THE AMOUNT OF NOTIONAL INTEREST @ 12 % P.A. CALCULATED ON THE OPENING BALANCE OF RS. 60 98 915/ - AS THE RENT HAS BEEN DEBITED ON 31/03/2009. IN SHORT THE INCOME FR OM HOUSE PROPERTY WILL BE TAKEN AT RS.13 17 685/- (AS AGAINST RS.8 05 375 /-DECLARED IN THE RETURN OF INCOME) AS SHOWN BELOW : RENT RECEIVED 11 50 536 ADD : NOTIONAL INTEREST 7 31 870 A.V. 18 82 406 LESS : DEDUCTION OF 30% 5 64 721 13 17 685 CONSEQUENTLY THE INCOME OF THE APPELLANT UNDER THE HEAD INCOME FROM HOUSE PROPERTY IS ENHANCED BY RS. 5 12 310/- (I.E. R S. 13 17 685 RS.8 05 375). THE APPELLANT WAS GIVEN AN ENHANCEMENT NOTICE IN TH IS REGARD ON 23/10/2012. APPELLANT'S CONTENTION IN RES PONSE TO THE SAID ENHANCEMENT NOTICE IS NOT FOUND TO BE TENABLE AND HE NCE REJECTED. AO IS DIRECTED ACCORDINGLY. HOWEVER AO'S ACTION IN TREATING NOTIONAL INTEREST (RS. 6 17 270) ON SECURITY DEPOSIT AS PERQ UISITE U/S 2(24)(IV) OF THE ACT IS NOT FOUND TO BE IN ORDER. THE NOTIONAL IN TEREST HAS BEEN ENHANCED TO RS.7 31 870/- BUT INCLUDED IN THE ANNUA L VALUE OF THE PROPERTY FOR THE PURPOSE OF DETERMINING INCOME FROM HOUSE PROPERTY. IN VIEW OF THE ABOVE INCOME FROM HOUSE PROPERTY STA NDS ENHANCED BY RS.5 12 310/- I.E. FROM RS.8 05 375/- TO RS.13 17 68 5/-. AO'S ACTION IN 44 TREATING THE INCOME FROM HOUSE PROPERTY AS INCOME FRO M OTHER SOURCES IS ALSO NOT FOUND TO BE JUSTIFIED. THIS ISSUE HAS BEEN DISCUSSED IN DETAIL IN PARAS 13 AND 14 BELOW. 46.2 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE US. 47. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED T HE ORDER OF THE AO. 48. WE HAVE HEARD THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES. WE FIND IN THE ASSESSEES APPEAL WHILE DECIDING GROUND NO.2 WE HAVE SET- ASIDE THE ORDER OF THE CIT(A) AND DIRECTED THE AO T O DELETE THE ADDITION OF NOTIONAL INTEREST ON INTEREST FREE DEPO SIT GIVEN TO THE ASSESSEE ON ACCOUNT OF LETTING OUT OF THE BUNGALOW. THEREFORE THIS GROUND BY THE REVENUE BECOMES INFRUCTUOUS. ACCORDI NGLY THE SAME IS DISMISSED. ITA NO.738/PN/2013 (SHRI AJIT BHAVARLAL JAIN) : 49. GROUND OF APPEAL NO.1 BY THE ASSESSEE READS AS UNDER : 1. ADDITION OF RS.62 406/- ALLEGED PERQUISITE 1.1 THE LEARNED CIT (A) ERRED IN CONFIRMING THE A DDITION OF RS. 62 406 ON ACCOUNT OF ALLEGED PERQUISITE ON ACCOUNT OF SERVIC ES RENDERED BY CA SHRI. WHORA B.A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE SA ID ADDITION BE CANCELLED. 1.2 THE LEARNED CIT (A) FAILED TO APPRECIATE THAT JAIN IRRIGATION SYSTEMS LTD. (JISL) HAD PAID PROFESSIONAL CHARGES OF RS. 2 79 000 TO SAID MR. B. A. WHORA ONLY FOR RENDERING SERVICES TO TH E SAID COMPANY AND NO PART OF SUCH PAYMENT COULD BE TREATED AS PERQU ISITE IN THE HANDS OF THE APPELLANT ON ACCOUNT OF HONORARY SERVICE S RENDERED BY MR. WOHRA TO THE APPELLANT. 1.3 ALTERNATIVELY THE VALUE OF ALLEGED PERQUISITE BE RESTRICTED TO A NOMINAL AMOUNT AS AGAINST THE ADDITION OF RS. 62 406 W HICH IS EXCESSIVE. 45 49.1 AFTER HEARING BOTH THE SIDES WE FIND THE ABOV E GROUND IS IDENTICAL TO GROUND OF APPEAL NO.1 IN ITA NO.735/PN /2013. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUND RAISED BY THE ASSESSEE HAS BEEN ALLOWED. FOLLOWING THE SAME RATIO THIS GROUN D BY THE ASSESSEE IS ALLOWED. 50. GROUND OF APPEAL NO.2 BY THE ASSESSEE READS AS UNDER : 2. ADDITION OF NOTIONAL INTEREST RS.11 64 861/-. 2.1 THE LEARNED CIT (A) ERRED IN ENHANCING INCOME FROM HOUSE PROPERTY BE ADDING NOTIONAL INTEREST @ 12% ON THE UN ADJUSTED OPENING BALANCE OF INTEREST FREE DEPOSIT. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE INCOME FROM HOUSE PROPERTY AS DECLARED IN THE RETURN OF INCOME AT RS. 12 81 851 BE ACCEPTED AND THE ADDITION OF RS.11 64 861 CONSEQUE NT TO ENHANCEMENT OF AV BE DELETED. 2.2 THE LEARNED CIT (A) ERRED IN IGNORING SEVERAL JUDICIAL DECISIONS HOLDING THAT THE AV COULD BE INCREASED BY CALCULATIN G NOTIONAL INTEREST ON INTEREST FREE DEPOSIT. 50.1 AFTER HEARING BOTH THE SIDE WE FIND THE ABOVE GROUND IS IDENTICAL TO GROUND OF APPEAL NO.2 VIDE ITA NO.737/ PN/2013. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUND RAISE D BY THE ASSESSEE HAS BEEN ALLOWED. FOLLOWING THE SAME RATIO THIS GR OUND BY THE ASSESSEE IS ALLOWED. 51. GROUND OF APPEAL NO.3 BY THE ASSESSEE READS AS UNDER : 3. ADDITION OF RS. 43 72 666 - U/S. 14A OF THE A CT. 3.1 THE LEARNED CIT (A) ERRED IN ENHANCING THE ASSESSM ENT BY WAY OF DISALLOWANCE U/S. 14A OF RS. 43 72 666. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE DISALLOWANCE U/S. 14A BE CANCELLED. 3.2 THE LEARNED CIT (A) ERRED IN MAKING ENHANCEME NT ON THE GROUND NOT MENTIONED IN THE ASSESSMENT ORDER AND CONSEQUENTLY THE ADDITION OF RS. 43 72 666 COULD NOT BE SUSTAINED. 46 3.3 THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED THAT DEDUCTION IN RESPECT OF INTEREST PAID IS CLAIMED ONLY TO THE EXTENT OF INTEREST RECEIVED WHICH IS OFFERED TO TAX AND IGNORING THE C LAIM FOR EXCESS PAYMENT. 3.4 THE LEARNED CIT (A) ERRED IN IGNORING THE FAC T THAT THE INVESTMENT IN SHARES OF THE COMPANY (DIVIDEND FROM WHICH BEING E XEMPT) WAS MADE LONG AGO AND THAT TOO OUT OF OWNED/NON INTEREST BEARING FUNDS. 3.5 THE LEARNED CIT (A) FAILED TO APPRECIATE THAT IN THE ABSENCE OF ANY NEXUS BETWEEN THE BORROWED FUNDS AND INVESTMENT IN SHA RES OF THE COMPANY INCOME ON WHICH WAS EXEMPT INTEREST PAYMENT OF RS.70 32 427 OUGHT TO HAVE BEEN IGNORED WHILE CALCUL ATING DISALLOWANCE U/S. 14A R.W.R. 8D. 3.6 WITHOUT PREJUDICE THE DISALLOWANCE U/S. 14A R.W.R. 8D SHOULD BE RESTRICTED TO RS. 7 49 195. 51.1 FACTS OF THE CASE IN BRIEF ARE THAT DURING T HE COURSE OF APPEAL PROCEEDINGS THE LD.CIT(A) NOTED THAT THE ASSESSEE H AS RECEIVED DIVIDEND OF RS.49 01 113/- FROM JAIN IRRIGATION SYS TEM LTD. THE ASSESSEE HAS ALSO PAID INTEREST OF RS.70 32 427/- O N BORROWED FUNDS. HE THEREFORE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE PROVISIONS OF SECTION 14A R.W. RULE 8D SHOULD NOT BE INVOKED. HE CALCULATED SUCH DISALLOWANCE AT RS.46 72 667/-. THE ASSESSEE FILED A REVISED COMPUTATION ACCORDING TO WHICH SUCH DISALLOWANCE CO MES TO RS.43 72 666/-. THE LD.CIT(A) ACCORDINGLY ISSUED A N ENHANCEMENT NOTICE AND MADE ADDITION OF RS.43 72 666/- AS PER T HE CALCULATION GIVEN BY THE ASSESSEE AND WHICH READS AS UNDER : SR . NO PARTICULARS AMOUNT (RS.) AMOUNT (RS.) WORKING OF DISALLOWANCE U/S 14 A 1 AMOUNT OF INTEREST EXPENDITURE INCURRED 70 32 427 2 COMPUTATION OF DISALLOWANCE A) INTEREST AMOUNT PAID 70 32 427 B) AVERAGE VALUE OF INVESTMENT FROM WHICH INCOME IS EXEMPT 14 98 38 940 C) AVERAGE VALUE OF TOTAL ASSETS 29 08 07 167 3 DISALLOWANCE = A*B 47 C 70 32 427*14 98 38 940 36 23 471 29 08 07 167 4 0.5 % OF THE AVERAGE VALUE OF INVESTMENT INCOME FROM WHICH IS EXEMPT AS ON 3 1.03. 2008 15 84 37 189 AS ON 3 1.03. 2009 14 12 40 690 TOTAL 29 96 77 879 AVERAGE 14 98 38 940 0.5 % OF THE AVERAGE 7 49 195 TOTAL 43 72 666 51.2 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE AS SESSEE IS IN APPEAL BEFORE US. 52. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS BORROWED MONEY FROM VARIOUS PARTIES WHICH WAS INVES TED IN FIXED DEPOSITS WITH BANKS/COMPANIES AND SHARES OF A COOPE RATIVE BANK. AS AGAINST INTEREST PAYMENT OF RS.70 32 427/- THE A SSESSEE HAS EARNED INTEREST INCOME OF RS.53 99 347/-. SINCE THE INTER EST PAID WAS HIGHER THAN THE CORRESPONDING INTEREST INCOME THE ASSESSEE RESTRICTED SUCH DEDUCTION TO RS.53 99 347/- ONLY IGNORING THE EXCES S OF RS.16 33 080/-. HE ACCORDINGLY SUBMITTED THAT THE DISALLOWANCE U/S.14A R.W. RULE 8D SHOULD BE RESTRICTED TO THE DI FFERENCE BETWEEN THE INTEREST OF RS.36 23 471/- CALCULATED AT PARA 4 8 AND THE INTEREST FOREGONE TO THE EXTENT OF RS.16 33 080/-. 53. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND SUPPORTED THE ORDER OF THE CIT(A). 54. AFTER HEARING BOTH THE SIDES WE FIND THE ABOVE GROUND IS IDENTICAL TO GROUND OF APPEAL NO.2 IN THE CASE OF S HRI ATUL BHAVARLAL 48 JAIN VIDE ITA NO.736/PN/2013 WHEREIN WE HAVE PARTLY ACCEPTED SUCH PLEA OF THE ASSESSEE AND RESTORED THE ISSUE TO THE FILE OF THE AO FOR RECOMPUTING THE DISALLOWANCE U/S.14A R.W. RULE 8D. FOLLOWING THE SAME RATIO WE RESTORE THE ISSUE TO THE FILE OF THE AO FOR RECOMPUTING THE DISALLOWANCE IN THE LIGHT OF OUR DIRECTION THE REIN. THIS GROUND BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 55. GROUND OF APPEAL NO.4 BEING GENERAL IN NATURE I S DISMISSED. ITA NO.778/PN/2013 (BY REVENUE) : 56. GROUND OF APPEAL NO.1 BY THE REVENUE READS AS U NDER : (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.8 4 2 21 366/- WHILE IN PARA-8 OF HIS ORDER HE HIMSELF HELD THE T RANSACTION OF GIFT OF SHARES TO A PRIVATE LIMITED COMPANY AS A DE BATABLE ISSUE. THUS THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING T HE PROVISIONS OF SECTION 28(IV) WHICH DOES NOT SPEAK THA T THERE SHOULD BE TWO PERSONS AND IT SPEAKS ONLY 'FROM BUSI NESS OR PROFESSION'. 56.1 AFTER HEARING BOTH THE SIDES WE FIND THE ABOV E GROUND IS IDENTICAL TO GROUND OF APPEAL NO.1 IN ITA NO.780/PN /2013. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUND RAISED BY THE REVENUE HAS BEEN DISMISSED. FOLLOWING THE SAME RATIO THIS GRO UND BY THE REVENUE IS DISMISSED. 57. GROUND OF APPEAL NO.2 BY THE REVENUE READS AS U NDER : (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.53 99 347/ -. THE LD. CIT(A) HAS TOTALLY IGNORED THE FACT THAT DURING THE YEAR THERE IS NO BUSINESS ACTIVITY. THIS FACT IS ALSO ACCEPTED BY ASSESSEE BY NOT CLAIMING LOSS FROM BUSINESS. 57.1 AFTER HEARING BOTH THE SIDES WE FIND THE ABOV E GROUND IS IDENTICAL TO GROUND OF APPEAL NO.2 IN ITA NO.780/PN /2013. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUND RAISED BY THE REVENUE HAS 49 BEEN DISMISSED. FOLLOWING THE SAME RATIO THIS GRO UND BY THE REVENUE IS DISMISSED. 58. GROUND OF APPEAL NO.3 BY THE REVENUE READS AS UNDER : (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE CIT(A) HAS ERRED IN TREATING THE AMOUNT OF RS.9 82 461/- AS INCOME FROM HOUSE PROPERTY. THE LD. CIT(A) HAS NOT CONSIDERED THE FACT OF THE CASE THAT THE COMPANY WA S NOT THE OWNER OF THE PROPERTY WHICH WAS THEN TRANSFERRED TO FIRM AND THEN THE ASSESSEE AND AFTER TRANSFER HAS TAKEN THE SAID PROPERTY ON EXORBITANT RENT AND DEPOSIT AND GIVE BEN EFIT TO THE ASSESSEE. 58.1 AFTER HEARING BOTH THE SIDES THIS GROUND IS C ORRELATED TO GROUND OF APPEAL NO.2 IN ASSESSEES APPEAL. WE HAVE ALREA DY DELETED THE NOTIONAL INTEREST ON INTEREST FREE ADVANCES GIVEN T O THE ASSESSEE FOR LETTING OUT OF HIS BUNGALOW. THEREFORE THERE IS N O JUSTIFICATION FOR TREATING THE NOTIONAL INTEREST ON SUCH INTEREST FRE E DEPOSIT AS INCOME FROM HOUSE PROPERTY. THUS GROUND RAISED BY REVENU E BECOMES INFRUCTUOUS AND IS DISMISSED. 59. IN THE RESULT ALL THE THREE APPEALS FILED BY T HE REVENUE ARE DISMISSED. ITA NO.735/PN/2013 FILED BY THE ASSESSE E IS ALLOWED AND THE REMAINING THREE APPEALS FILED BY THE RESPECTIVE ASSESSEES ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 28-11-2014. SD/- SD/- (SUSHMA CHOWLA) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEM BER PUNE DATED: 28 TH NOVEMBER 2014 SATISH 50 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-II NASHIK 4. THE CIT-II NASHIK 5. THE D.R A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT PUNE BENCHES PUNE