1 TXA No.23 of 2012 and batch IN HIGH COURT OF BOMBAY AT GOA TAX APPEALS NO.23 & 25 OF 2012 & 69 to 74 OF 2014 Commissioner of Income Tax, Aaykar Bhavan , Patto, Panaji, Goa. .Appellant V/s M/s. Sociedade De Fomento Industrial Pvt. Ltd., Villa Flores Da Silva, Erasmo Carvalho Street, P.O. Box No.31, Margao-Goa. PAN No.AABCS8860Q . Respondent Ms. Susan Linhares, Standing Counsel for Appellant. Shri S.S. Kantak, Senior Advocate with Ms. Vinita Palyekar, Shri Nishant Thakkar & Shri P. Talaulikar, Advocates for Respondent. Coram :- M.S. SONAK & DAMA SESHADRI NAIDU, JJ. Reserved on : 30 September 2020 Pronounced on : 22 October 2020 JUDGMENT : (Per Dama Seshadri Naidu, J.) Introduction: All these appeals are at Revenue s behest. In this batch, identical question of law calls for consideration. That concerns exemption under section 10B of Income Tax Act ( IT Act ). In couple of appeals, additional issue has arisen, though. So we have taken up Tax Appeal No.23 of 2012 for discussion and applied decision in that case to other appeals, too, where question under section 10B of IT Act is common. additional issue about disallowance under section 14A of IT Act read with Rule 8D of Income Tax Rules ( IT Rules ) has been dealt with separately. 2 TXA No.23 of 2012 and batch (I) Tax Appeal No.25 of 2012: Facts: 2. Respondent-Assessee has set up 100% Export Oriented Unit (EOU) with approval of all ministries and departments concerned. It was in 1985. company claimed exemption under section 10B of IT Act from Assessment Year (AY) 1990-91 onwards. This company has been engaged in business of extraction, processing, and sale of iron ore. For AY 2006-2007, company claimed tax exemption on income of 90,75,14,396/-. So it declared total income of 43,05,76,415/- through its return of income. 3. After that, in March 2008, Assessee filed its revised return of income, declaring total income of 51,07,81,675/-. But later, case was selected for scrutiny assessment. In December 2008, assessment was completed under section 143(3) of IT Act, on total income of 141,87,780,771/- 4. Assessing Authority disallowed deductions under these heads of expenditure: (a) expenditure of 64,000 incurred on repairs to bungalow; (b) donations and charities of 312,700/-; (c) claim for deduction under section 10B amounting to 90,75,14,396/-. 5. Aggrieved, Assessee appealed to Commissioner of Income Tax (Appeal). That authority has partly allowed Assessee s appeal. Not fully satisfied, Assessee approached Income Tax Appellate Tribunal ( Tribunal ). In April 2011, Tribunal allowed ITA No. 42/PNJ/2010 (AY 2006-2007) in Assessee s favour. So Revenue has filed Tax Appeal before this Court. Substantial Questions of Law: 6. On 22 March 2012, this Court admitted appeal after framing these substantial questions of law: (1) Has ITAT been justified in allowing deduction of 3 TXA No.23 of 2012 and batch 90,74,14,396/- under section 10B of IT Act, though Assessee Company has expanded its existing processing capacity with new plant and machinery installed in factory? (2) Has ITAT been right in holding that requirement of explanation to section 10B (7) of IT Act [originally mentioned as "explanation 2(iv) of section 10B"] has been satisfied and that no separate approval of Board appointed by Central Government, in exercise of powers conferred by section 14 of Industrial (Development and Regulation) Act 1951 and Rules made thereunder, needs to be obtained or granted? 7. Heard Ms. Susan Linhares, learned Standing Counsel for Revenue, and Shri Sudin Usgaonkar, learned Senior Counsel for Assessee. Discussion: Scrutiny Assessment: 8. Assessee company initially filed its return of income for AY 2006-2007 on 30/10/2006, declaring total income of 43,05,76,415/- Later, Assessee filed its revised return of income on 31/03/2008, reporting total income of 51,07,81,675/-. same year, case was selected for scrutiny assessment, which was completed in December 2008 under section 143 (3) of IT Act. Assessing Officer held total income as 1,41,87,780,771/-, by making these additions: (a) Disallowance of 64,000/-, said to have been expenditure incurred on repairs to bungalow. (b) Disallowance of retainer fee of 1,08,000/- (c) Disallowance of 3,12,700/- out of Donations and charities. (d) Disallowance of 90,75,14,396, claimed as deduction 4 TXA No.23 of 2012 and batch under section 10B. Statutory Appeal: Aggrieved by assessment order, dated 30/12/2008, Assessee appealed to CIT (A), who has dismissed appeal. Findings of CIT (A): Disallowance (a): On disallowance of 64,000/- said to be expenditure incurred on repairs to bungalow, CIT (A) has upheld AO's view. addition was sustained. Disallowance (b): On question of retainer fee 1,08,000/-, addition was upheld. Disallowance (c): On question of donations and charities of 3,12,700/-, again addition was upheld. Disallowance (d): On question of exemption of 90,75,14,396/- under section 10B of IT Act, CIT (A) concurred with AO. appellate authority split this question into three issues and answered all against Assessee. So, further, aggrieved, Assessee has filed second appeal before ITAT. Before ITAT: Disallowance (a): On disallowance of 64,000/-, expenditure incurred on repairs to bungalow, Tribunal has noted that earlier it considered 5 TXA No.23 of 2012 and batch similar issue in Assessee s own case for AYs 2001-02 and 2002-03. It has further noted that on 21 January 2011, by order in appeals for AYs, 21-1-2011, it set aside order of CIT (A) and remitted matter to assessing authority "for making necessary inquiries and reach independent findings of fact concerning ownership as well as use of building named Samudra Darshan . Tribunal followed same course in this appeal, too. It remanded that issue to AO with similar observation. Disallowance (b): On question of retainer fee 1,08,000/-, Tribunal has noted in all previous years, Assessee paid retainership fees to one Smt. Timblo for work done . For those years, Tribunal allowed deductions. So it has not found any good reason to depart from earlier settled position without any just and reasonable cause . Disallowance (c): On question of donations and charities of 3,12,700/-, Tribunal has concluded that Assessee made those contributions for commercial expediency and thus are allowable as business expenditure . To conclude thus, Tribunal relied on judgments of two of High Courts: Madras and Karnataka. Disallowance (d): On question of exemption of 90,75,14,396/- under section 10B of IT Act, Tribunal has held that Assessee set up new unit in 1999-2000. Assessee has also, according to Tribunal, secured all necessary approvals required under section 10B of Act. So, to conclude, Tribunal has held that Assessee is entitled to benefit under that provision for next ten years from year Assessee s new unit began its manufacturing. As result, on last and substantial issue of exemption under section 10B of IT Act, too, findings went against Revenue. 6 TXA No.23 of 2012 and batch Under above circumstances, Revenue has filed this Tax Appeal before this Court. Appeal before This Court: 9. As we have already noted, before us there are two substantial questions of law. According to Revenue, Assessee merely expanded capacity of existing unit; it has installed new plant and machinery". Then, can Assessee be allowed deduction of 90,74,14,396/- under section 10B of IT Act? 10. And for second substantial question of law, Revenue relies on explanation to section 10B (7) of IT Act. It insists that Assessee did not secure separate approval from Board appointed by Central Government. Then, has approval from official amounted to approval from Central-Government appointed Board under section 14 of Industrial (Development and Regulation) Act 1951 and Rules made thereunder? First Substantial Question of Law: 11. Simply stated, has Assessee increased production capacity of existing unit or as he established new unit? We reckon answer to this question is factual. Let us see how Tribunal dealt with this issue. Undisputed is fact that Assessee set up 100% EOU in 1985-86. Ministry of Industry, Department of Industrial Development approved that EOU through licence, dt.26.12.1985. It was for ten years. Assessee claimed exemption under section 10B of IT Act from AY 1990-91 onwards. 12. Since quality of ore deteriorated and was not saleable, Assessee decided to set up new unit ; so it applied for modernization and substantial expansion of undertaking with initial investment of 20 crore. It wanted to increase annual production capacity to 15 lakh tons. In November 1994, Ministry of Industry approved proposal, and that led to agreement between Assessee and Government 7 TXA No.23 of 2012 and batch of India in June 1995. Assessee is said to have spent additional 5 crore for importing state-of-the-art capital goods. 13. In essence, Ministry of Industry acceded to Assessee s request and communicated extension of 100% EOU status to new unit under same industrial license of 1985 making it valid up to 31 March 2001 . That means Assessee was permitted to set up new unit with 100% EOU initially up to March 2001, with total capital cost of 25.25 crore. export obligation was to commence from date it would commence commercial production in new unit and would continue for next five years. 14. As matter of fact, Tribunal has found that Assessee set up new unit adjacent to old one with cost of over 30 crore. Assessee has, in fact, raised annual production capacity to 15 lakh tons from previous 2 lakh tons. But throughout, Revenue has contended that Assessee established no new unit but increased capacity. In face of Revenue s contention, Tribunal recorded finding that "the Assessee was permitted to set up new unit which was approved as 100% EOU". Besides, Department of Industrial Policy and Promotion, through letter, dated 5 October 2001, extended exemption for five more years. Eventually, through another communication, dated 20 April 2006, Ministry extended period once again by five more years. That is, totally ten years: from 1999-2000 to 2008-09. 15. After referring to certain precedents, ITAT has observed that, to be deprived of benefit, new undertaking must have been simple reconstructed old unit, with at least 20% of assets from old unit transferred to new unit. But Assessee did not face any allegation of transferring assets from old unit to new unit. It did construct new unit adjacent to old unit. And Tribunal refused to accept Revenue's contention that adjacent unit should 8 TXA No.23 of 2012 and batch be termed expanded old unit. 16. We find no reason to disagree. We reckon Tribunal's findings are in accord with established industrial practice. In fact, Revenue argued that Assessee has installed "new plant and machinery". Regrettably, plant and machinery are not synonymous; plant is where machinery is installed. And plant is erected, not installed. In end, whether new plant erected and new machinery installed amounts to adding to existing unit or amounts to separate unit on its own is matter of fact. On that, Tribunal supplied cogent reasons and concluded in particular way: unit is separate, distinct, and new. old unit has not been expanded; new unit was established. We agree. Second Substantial Question of Law: Has approval from official amounted to approval from Central-Government appointed Board under section 14 of Industrial (Development and Regulation) Act 1951 and Rules made thereunder? 17. First, let us examine section 10B of IT Act, to extent relevant for us. That provision, as it was existing then, reads thus: 10B. Special Provision in respect of newly established hundred per cent export-oriented undertakings. (1) Subject to provisions of this section, any profits and gains derived by Assessee from hundred per cent export-oriented undertaking (hereafter in this section referred to as undertaking) to which this section applies shall not be included in total income of Assessee. (2) This section applies to any undertaking which fulfills all following conditions, namely: (i) it manufactures or produces any article or thing; (ii) it is not formed by splitting up, or reconstruction, of business already in existence: Provided that this condition shall not apply in respect of any industrial undertaking which is formed as result of re- establishment, reconstruction or revival by Assessee of business of any such industrial undertaking as is referred to in section 33B, in circumstances and within period specified in that section; 9 TXA No.23 of 2012 and batch (iii) it is not formed by transfer to new business of machinery or plant previously used for any purpose. Explanation. provisions of Explanation 1 and Explanation 2 to sub-section (2) of section 80-I shall apply for purposes of clause (iii) of this sub-section as they apply for purposes of clause (ii) of that sub-section. (3) profits and gains referred to in sub-section (1) shall not be included in total income of Assessee in respect of any five consecutive assessment years, falling within period of eight years beginning with assessment year relevant to previous year in which undertaking begins to manufacture or produce articles or things, specified by Assessee at his option : Provided that nothing in this sub-section shall be construed to extend aforesaid five assessment years to cover any period after expiry of said period of eight years. (4) (5) (6) (7) Notwithstanding anything contained in foregoing provisions of this section, where Assessee, before due date for furnishing return of his income under sub-section (1) of section 139, furnishes to Assessing Officer declaration in writing that provisions of this section may not be made applicable to him, provisions of this section shall not apply to him for any of relevant assessment years. Explanation: For purposes of this section, (i) "hundred per cent export-oriented undertaking" means undertaking which has been approved as hundred per cent export-oriented undertaking by Board appointed in this behalf by Central Government in exercise of powers conferred by s action 14 of Industries (Development and Regulation) Act, 1951 (65 of 1951), and rules made under that Act; (ii) relevant assessment years means five consecutive assessment years specified by Assessee at his option under sub- section (3) or sub-section (5), as case may be; (iii) manufacture includes any (a) process, or (b) assembling, or (c) recording of programmes on any disc, tape, perforated media or other information storage device. (italics supplied) 18. If we keep scope of this appeal in view, from Section 10B of IT Act, following aspects emerge: 10 TXA No.23 of 2012 and batch (a) It is special provision that applies to newly established 100% export-oriented undertaking ; (b) undertaking must be (i) manufacturing or producing article or thing and (ii) must not have formed by splitting up or by reconstructing existing business; (c) undertaking must not have been formed by transfer to new business of machinery or plant previously used for any purpose; (d) profits and gains shall not be included in total income of Assessee for any five consecutive assessment years, falling within first eight years beginning with assessment year when undertaking begins to manufacture or produce articles or things, specified by Assessee at his option; (e) period beyond first eight years should not be covered; (f) if Assessee, before due date for furnishing return of his income, declares to Assessing Officer that this section may not be made applicable to him, then it shall not apply to him for that assessment year; (g) this 100% export-oriented undertaking must have had its undertaking approved by Board appointed by Central Government under section 14 of Industries (Development and Regulation) Act, 1951 (65 of 1951), and its Rules. 19. In second substantial question of law, only point (g) mentioned above requires to be considered. In this case, admittedly, Board did not approve; instead, Development Commissioner approved. Both in October 2001 and in April 2006, approval was by same Development Commissioner. In fact, as seen from Clause No. 9.37 of Handbook of Procedures, Board of Approval delegated its powers to Development Commissioner. CIT (A) has considered approval by that delegated authority as improper. On other hand, Tribunal has held that delegate has all powers of delegator. It has reasoned that agent has no independent power but exercises powers of his principal. So act done by delegate is nothing but Act of principal. 11 TXA No.23 of 2012 and batch 20. In Roop Chand v. State of Punjab1, section 42 of Act 50 of 1948 allows State Government to call for and examine records of any case from officer to satisfy itself as to legality or propriety of any order passed by that officer under that Act. It is revisional power. Similarly, section 21 (4) of Act confers appellate powers on Government. But Government delegated this appellate power to officer. Once that officer passed order in appeal under section 21 (4), Government wanted to exercise its revisional powers under section 42 of Act. In that context, Supreme Court by majority (3:2) has held that when Government delegated its appellate power under section 21 (4) to officer, order passed by that delegate-officer is order passed by State Government itself. It is not "order passed by any officer under this Act" within meaning of section 42. In other words, order contemplated by section 42 is order passed by officer in his own right and not as delegate. 21. In above context, Roop Chand has held that word 'delegate' means little more than agent. agent exercises no powers of his but only powers of his principal. Therefore, order passed by officer on delegation to him is order by principal himself. 22. Here, under statutory scheme, Development Commissioner, on his own, has no power to act but for power delegated to him by Board or Government. Thus, Development Commissioner has acted as Board s delegate. Once we have accepted that Assessee established new unit and secured all permissions from competent authority, then section 10B of IT Act springs into operation on its own. 23. If we summarise, Assessee, to begin with, had approval in December 1985 as 100% EOU to claim deduction under section 10B of Act. That approval held field from 1990-91 to 1994-95. After that, 1AIR 1963 SC 1503 12 TXA No.23 of 2012 and batch Assessee had approval renewed, and period stood extended by five more years up to March 2001. Finally, in October 2001, Assessee had approval renewed once again for another five years. Tribunal has held that though it was termed "a renewal", benefit was applied to new unit. And Ministry has been well aware of that. Within given window of extended period, Assessee claimed exemption for first time in AY 2002-03. 24. In above context, Tribunal has quoted with approval its own earlier ruling that it is not statutory requirement that there has to be separate permission for each unit. Just because Government granted permission by amending original permission letter, it does not affect eligibility for deduction under section 10B in any manner. In our considered opinion, Tribunal's conclusions that (1) unit is new, (2) permission has been duly granted, and (3) period of exemption has still been subsisting call for no interference. 25. We, therefore, find no merit in Revenue s appeal. Accordingly, we dismiss it. No order on costs. (II) Tax Appeal No.71 of 2014 (AY 2002-03): 26. Assessee filed its return of income in October 2002 for AY 2002-03, declaring its income of 15,25,960/-. In March 2003, AO completed assessment under section 143(3) of Act and determined total income as 15,25,960/-. But, later in May 2006, AO passed order under section 154, withdrawing excess deduction claimed. Finally, he assessed income as 27,71,710/-, thus raising demand of 6,63,743/-. 27. AO, in April 2008, issued notice under section 148 and, in response, Assessee filed revised return for 27,71,710/-. In October 2010, Assessee objected to reopening, but AO rejected objections and completed assessment on total income of 13 TXA No.23 of 2012 and batch 3,40,76,813/-. On appeal, CIT(A), through order, dated 27.09.2013, partly allowed appeal. Still aggrieved, in March 2014, both Assessee and Revenue filed appeals before ITAT. Tribunal, through its order, dated 28 March 2014, dismissed Revenue's appeal and allowed Assessee s appeal in part. So Revenue has filed this Tax Appeal. While admitting Tax Appeal, this Court has noted thus: [W]e find it appropriate to defer hearing of above appeal on admission as appeals in connection with other Assessment Years of respondents have been admitted. 2. above appeal shall as such be considered for admission only after said appeals are decided. 3. To be placed along with Tax Appeal Nos. 69, 70, 73 and 74 of 2014. 28. In view of judgment in Tax Appeal No.25 of 2012, we need not adjudicate separately issues raised in this Tax Appeal. (III) Tax Appeal No.72 of 2014 (AY 2002-03): same as above. (IV) Tax Appeal No.23 of 2012 (AYs 2003-04 to 2005-06): 29. This appeal covers three AYs: 2003-04, 2004-05, and 2005-06. If we briefly note facts, Commissioner of Income Tax called and examined records of Assessee for these three years. In February 2008, he noticed, as record reveals, that AO had allowed exemption under section 10B of Act without examining allowability . 30. exemption for AY 2003-04 was 6,02,76,566/-; for AY 2004-05, 28,27,75,770/-; and for AY 2005-06, 54,46,45,124/-. Commissioner of Income Tax prima facie felt that AO s assessment orders for all these three years were erroneous and prejudicial to Revenue s interest. So, in February 2008, he issued notices to Assessee 14 TXA No.23 of 2012 and batch asking it to show cause why exemption should not be disallowed. 31. After hearing Assessee, Commissioner of Income Tax set aside assessment orders and directed AO to consider all issues afresh and pass assessment orders in accordance with law. Aggrieved, Assessee appealed to Tribunal. Then, through impugned judgment, dated 24 March 2011, Tribunal allowed appeal. According to it, for Commissioner of Income Tax to exercise powers under section 263 (1) of Act, twin conditions laid in provision have not been satisfied. According to it, mere change of opinion cannot be ground for Commissioner to invoke that provision. Under these circumstances, Revenue has filed appeal before this Court. While admitting Tax Appeal, this Court framed following issue: In facts and circumstances, has ITAT been justified in holding that essentials for invoking jurisdiction under section 263 (1) were not found satisfied and, as such, Commissioner of Income Tax could not have quashed order of Assessing Officer for AYs 2003-04 to 2005-06? 32. In fact, in this Tax Appeal alone, invocation of section 263(1) of IT Act comes into play. It presents threshold issue. And its adjudication, we reckon, stands obviated because we have already held that Assessee has been entitled to benefit under section 10B of Act for certain window of time decade to be precise. And assessment year in this appeal falls within that period. Simply stated, once issue has been decided on merits, threshold technical issue renders itself academic and calls for no specific adjudication. (V) Tax Appeal No.70 of 2014 (2007-08): 33. Assessee filed its return of income in October 2007 for AY 2007-08, declaring its income of 57,26,22,760/-. Assessee 15 TXA No.23 of 2012 and batch claimed exemption of 131,18,76,592/- under section 10B of Act. Besides, it also claimed exemption over 5,13,22,125/- said to be income from dividends from other companies and mutual funds. In February 2009, assessment was processed under section 143(1), but no assessment was made under section 143(3) of Act. Yet AO felt that certain income chargeable to tax escaped assessment. So he initiated proceedings under section 147 of Act and issued notice under section 148. It was in January 2012. 34. In February 2012, Assessee requested AO to treat its return of income filed in September 2008 as one submitted in response to notice under section 148. It has also objected to reopening of assessment. In March 2012, AO rejected objections and completed assessment. He disallowed following exemptions: 131,18,76,592/- under section 10B and 1,02,64,234/- expenses under section 14A read with Rule 8D. 35. Aggrieved, Assessee appeal to CIT (A). Through order, dated 27 September 2013, appellate authority partly allowed appeal. Still aggrieved, in March 2014, both Assessee and Revenue filed appeals before ITAT. Tribunal, through its order, dated 28 March 2014, dismissed Revenue s appeal and allowed Assessee s in part. So Revenue has filed this Tax Appeal. 36. While admitting Tax Appeal, this Court framed following issues: "1. Has ITAT been justified in allowing deduction under Section 10B of IT Act, particularly, in light of fact that Assessee Company has expanded its existing processing capacity with new plant and machinery installed in factory? 2. Was ITAT right in holding that requirement of explanation 2(iv) of Section l0B of Act has been satisfied and no separate approval of Board appointed by Central 16 TXA No.23 of 2012 and batch Government, in exercise of powers conferred by Section 14 of Industrial (Development and Regulation ) Act 1951 and Rules made thereunder, needs to be obtained or granted? As we have already noted, these issues stand squarely answered in Tax Appeal No.25 of 2012. (VI) Tax Appeal No.73 of 2014 (2007-08): same as above. (VII) Tax Appeal No.69 of 2014 (AY 2008-09): 37. Assessee filed its return of income in September 2008 for AY 2008-09, declaring its income of 14,58,88,120/-. Assessee claimed exemption of 272,29,91,220/- under section 10B of Act. Besides, it also claimed exemption over 11,03,36,341/- said to be income from dividends from other companies and mutual funds. assessment was processed under section 143(1), but no assessment was made under section 143(3) of Act. Yet AO felt that certain income chargeable to tax escaped assessment. So he initiated proceedings under section 147 of Act and issued notice under section 148. It was in January 2012. 38. In February 2012, Assessee requested AO to treat its written of income filed in September 2008 as written in response to notice under section 148. It has also objected to reopening of assessment. In March 2012, AO rejected objections and completed assessment. He disallowed following exemptions: 272,29,91,220/- under section 10B and 1,28,75,357/- expenses under section 14A read with Rule 8D. 39. Aggrieved, Assessee appeal to CIT (A). Through order, dated 27 September 2013, appellate authority partly allowed appeal. Still aggrieved, in March 2014, both Assessee and Revenue filed appeals before ITAT. Tribunal, through its order, dated 20 March 2014, dismissed Revenue s appeal and allowed Assessee s in 17 TXA No.23 of 2012 and batch part. So Revenue has filed this Tax Appeal. 40. While admitting Tax Appeal, this Court framed following issues: 1. In facts and circumstances, has ITAT been correct in deleting disallowance made under section 14A of IT Act in accordance with Rule 8D of IT Rules, as provided by decision by Income Tax Appellate Tribunal (the Mumbai Special Bench) in ITO v. Daga Capital Management Capital Pvt. Ltd.2? 2. Has ITAT been justified in allowing deduction under Section 10B of IT Act, particularly, in light of fact that Assessee Company has expanded its existing processing capacity with new plant and machinery installed in factory? 3. Was ITAT right in holding that requirement of explanation 2(iv) of Section l0B of Act has been satisfied and no separate approval of Board appointed by Central Government, in exercise of powers conferred by Section 14 of Industrial (Development and Regulation ) Act 1951 and Rules made thereunder, needs to be obtained or granted? 41. This Tax Appeal presents additional substantial question of law, besides those under section 10B of IT Act. So we will address it. Among other things, Assessee claimed exemption over 11,03,36,341/- said to be income from dividends from other companies and mutual funds. 42. To rule in Assessee s favour, Tribunal has relied on Daga Capital Management Capital Pvt. Ltd. In that case, Special Bench of Tribunal at Mumbai was asked to consider whether section 14A applies to dividends earned by Assessee trading in 2(2009) 117 ITD 169 18 TXA No.23 of 2012 and batch shares and holding shares as stock-in-trade. In answer, Special Bench, by majority, has held that section 14A has overriding effect and applies to all expenditure in relation to exempt income even though such expenditure would have been allowable under other provisions such as 36 (1) (iii). It has also held that sub-sections (2) and (3) of s. 14A, though inserted by F. A. 2006 w.e.f. 1.4.2007, read with Rule 8D, are procedural and clarificatory. So they apply even to pending matters. 43. In process, Daga Capital Management Capital Pvt. Ltd. has observed that words "in relation to" in s. 14A encompass not only direct expense but also indirect expense, which has any relation to exempt income. argument that words contemplate "direct and immediate connection" between expenditure and exempt income cannot be accepted. Accordingly, argument that s. 14A cannot apply to shares held as stock-in-trade cannot be accepted. fact that dividend income is "incidental" to purchase of shares is also irrelevant. question as to whether onus is on Assessee or AO for bringing item of expenditure within s. 14A is also irrelevant because of Rule 8D. 44. If we peruse ITAT s Order, dt.28.03.2014, it is order that runs into 148 pages and covers these AYs: 2002-03, 2007-08, and 2008-09. 45. Before we appreciate Tribunal s reasoning, we may note down certain facts. During previous year relevant to assessment year under consideration, Assessee has earned exempted income under section 10(35) of IT act. That was 11,03,36,341/- from investments made in mutual funds. Assessee has not disallowed any expenses under section 14 of IT Act. As on 31 March 2008, Assessee s investments in various mutual funds was 353,64,17,461/-; and as on 31 March 31 2007, it 19 TXA No.23 of 2012 and batch was 161,37,25,618/-. True, Assessee has not disallowed any common indirect expenditure to earn such exempted income as required under section 14 read with Rule 8D of IT Rules, 1962. 46. In above context, AO has called for Assessee s objections why portion of common indirect expenditure should not be disallowed as per principal provided in Rule 8 D. Assessee replied. It has contended that during year under reference, Assessee had received dividend income of 13,85,03,376/- from various mutual funds. Assessee has, indeed, stressed that it earned dividend by investing surplus money on advice of various mutual fund managers who are normally attached to banks with whom Assessee deals. It has also maintained that said mutual fund officials/managers used to come to doorstep of our company and do all required formalities and also used to collect cheques for purpose of such investments . Besides, dividend amounts received from various mutual funds were said to have been directly credited to Assessee s bank account. 47. As seen from record, Assessee has also filed working of expenditure disallowable under section 14 of IT Act. As for Assessee, these elements of expenses under section 14 of IT Act read with Rule 8D of IT Rules come to 3,552,524/-. But AO rejected Assessee s contentions. He has disallowed 1,28,75,357/- under sub-rule (2) of Rule 8 D of IT Rule. 48. Undisputed are facts that Assessee invested certain funds in exempted categories such as mutual funds; it has earned income. During assessment year, income from such sources stood exempted under section 10(35) of IT Act. only issue is whether Assessee incurred any expenditure while earning that exempted income and whether he included that expenditure in common indirect expenditure of its own. First, AO noted, rather guessed, that Assessee 20 TXA No.23 of 2012 and batch borrowed funds to invest and that there ought to be interest element. But Assessee asserts that it utilized its surplus funds. We reckon there is no material for AO to conclude that Assessee borrowed funds. Second, given volume of investment, Assessee is said to have received charge-free services from managers of banks and other financial institutions with whom they have invested. So Assessee has insisted that it has not incurred any expenditure. 49. On contrary, AO reasons that whenever those managers of banks and other financial institutions came to Assessee company, its personnel must have spent time with them, in assisting them. According to him, at least that amounts to indirect expenditure in relation to exempted income. We are afraid reasoning is far-fetched. 50. In CIT v. Calcutta Knitwears3, Supreme Court has observed that language of taxing statute should ordinarily be read and understood in sense in which it is harmonious with object of statute to effectuate legislative animation. taxing statute should be strictly construed; common-sense approach, equity, logic, ethics and morality have no role to play. Nothing is to be read in; nothing is to be implied; one can only look fairly at language used and nothing more and nothing less. In fact, Calcutta Knitwears echoes King s Bench decision in Cape Brandy Syndicate v. IRC4, which has felicitously held that in taxing statute, one has to look at what is clearly said. There is no room for any internment. There is no equity about tax. There is no presumption as to tax. 51. So, in face of above facts and in light of above- quoted judicial dicta, we reckon Tribunal has correctly held that Assessee has been entitled to exemption under section 14A of IT Act, read with Rule 8D of IT Rules, as well. 3(2014) 6 SCC 444 4(1921) 1 KB 64 21 TXA No.23 of 2012 and batch (VIII) Tax Appeal No.74 of 2014 (AY 2008-09): same as above. Result: 52. For reasons mentioned above, we answer all substantial questions of law in Assessee s favour and against Revenue. As result, all appeals are dismissed. No order on costs. DAMA SESHADRI NAIDU, J. M.S. SONAK, J. NH Commissioner of Income-tax, Panaji v. Sociedade De Fomento Industrial Pvt. Ltd