IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD ‘D’ BENCH, AHMEDABAD [Coram: Justice P P Bhatt, President and Pramod Kumar, Vice President]

ITA No.630/Ahd/2017 Assessment Year: 2011-12 Zaveri & Co. Pvt. Ltd., ..…………….. Appellant Swagat Building, C.G. Road, Ahmedabad. [PAN: AAACZ 2014 N]

vs.

Deputy Commissioner of Income Tax, Circle – 8, Ahmedabad. …………......Respondent ITA No.864/Ahd/2017 Assessment Year: 2011-12 Deputy Commissioner of Income Tax, Circle – 4(1)(2), Ahmedabad. ...…………......Appellant Vs.

Zaveri & Co. Pvt. Ltd., …………......Respondent Swagat Building, C.G. Road, Ahmedabad. [PAN: AAACZ 2014 N]

Appearances by M.K. Patel for the Assessee Subhash Bains for the Revenue Date of concluding the hearing : 06.12.2018 Date of pronouncement : 04.03.2019

O R D E R

Per Pramod Kumar, Vice President:

1. These cross appeals are directed against the order dated 10^th January, 2017 passed by the learned CIT(A) in the matter of assessment under section 143(3) of the Income-tax Act, 1961, for the assessment year 2011-12.

2. We will first take up the appeal filed by the assessee.

3. In ground nos.1 to 3, which we will take up together, grievances raised by the assessee are as follows :-

“1. That on facts, and in law, the learned CIT(A) has grievously erred in partly confirming the addition of Rs.36,83,567/- out of addition of Rs.6,23,83,485/-

made u/s.14A of the Act.

2. That on facts, and in law, it ought to have been held that the provisions of section 14A of the Act are not applicable as the appellant is carrying on the business of dealing/trading in shares and securities.

3. That on facts, evidence on record, and in law, the entire addition u/s.14A of the Act ought to have been deleted as prayed for.”

4. We have noted that the learned CIT(A) has restricted the disallowance to Rs.36,83,567/-, i.e. the total tax exempt income, and that is all that the assessee had prayed for. As regards application of rule 8D, there is no dispute that it is applicable in the present year. When it was put to the learned counsel, he did not have much to say. We, therefore, confirm the action of the learned CIT(A) and decline to interfere in the matter.

5. Ground nos.1 to 3 are thus dismissed.

6. In ground no.4, the assessee has raised the following grievance:

“4. That on facts, and in law, the learned CIT(A) has grievously erred in confirming the disallowance of Rs.13,629/- in respect of employee’s contribution to PF/ESIC.”

7. Learned Representatives fairly agree that this issue is covered against the assessee by Hon’ble jurisdictional High Court’s judgement in the case of CIT vs. Gujarat State Road Transport Corporation, 366 ITR 170 (Guj.). We, therefore, confirm the action of the learned CIT(A) on this point as well, and decline to interfere in the matter.

8. Ground no.4 is dismissed.

9. In the result, appeal of the assessee is dismissed.

10. We now take up the appeal filed by the Assessing Officer.

11. In ground nos.1 and 4, which we will take up together, the Assessing Officer has raised the following grievances:

“1. Whether the Ld. CIT(A) is right in law and on facts in deleting the disallowance of deduction of Rs.45,73,98,923/- made on account of u/s.10AA of the Act.

4. Whether the Ld. CIT(A) is right in law and on facts in deleting the disallowance made on account of deduction u/.s.10AA on the interest income.”

12. So far as this grievance is concerned, the relevant material facts are like this. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has claimed deduction under section 10AA amounting to Rs.45,73,98,923/-. The Assessing Officer also noted that the assessee has earned net interest income of Rs.291.08 crores which is included in eligible business profits of the assessee. The Assessing Officer was of the view that this income is required to be taxed as income from other sources and not business income. Accordingly, it was concluded as follows :-

“3.41 From the above facts and circumstances and commercial and legal pro