Multiplex Capital Ltd., New Delhi vs Assessee

BEFORE SHRI G. C. GUPTA, HON'BLE VICE PRESIDENT AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. No. 571/Del/2013 Assessment year : 2009-10 Multiplex Capital Ltd., Vs. ITO, Ward 5(4), 100/28, Keshav Tower, New Delhi Rajapur Market, Sector 9, Rohini, New Delhi. GIR / PAN:AAACM1761B (Appellant) (Respondent)

Appellant by : Shri Ajay Wadhvwa, Adv. Respondent by : Shri P. Dam Kanunjha, Sr. DR

Date of hearing : 11.03.2015 Date of pronouncement : 25.03.2015

ORDER

PER T.S. KAPOOR, AM:

This is an appeal filed by assessee against the order of Ld. CIT(A) dated 19.12.2012. The grounds of appeal taken by assessee are reproduced below:

"1. The order of Ld. CIT(A), New Delhi dated 19.12.2012 is bad in law and on facts.

2. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in confirming the disallowance a sum of Rs.

60,09,848/- under provisions of section 14A r.w. rule-8D of the Income-tax Rules, 1962 on dividend income of Rs. 9,12,563/- claimed exempt u/s 10(34) of the Income-tax Act, 1961."

2 ITA No.571/Del/2013 2. At the outset, Ld. A.R. submitted that A.O. had made disallowance of Rs.60,09,848/- against dividend income of Rs.9,12,563/-. He submitted that there was no satisfaction recorded by A.O. and in this respect, the provisions of Section 14A were read. Ld. A.R. submitted that the case of the assessee is fully covered by the order of Hon'ble Delhi High Court in the case of CIT Vs Taikisha Engineering India Ltd. 54 Taxman.com 109 and filed a copy of the same. Ld. A.R. invited our attention to para 4 of the said order to highlight the facts of that case. Ld. A.R. also took us to para 10 of the said order and submitted that in the present case also, the A.O. has not recorded his objective satisfaction and without recording any satisfaction, he has proceeded to make disallowance as per Rule 8D. Ld. A.R. submitted that above order of Hon'ble Deli High Court was followed by another order of Hon'ble Delhi High Court in the case of Joint Investments Pvt. Ltd. Vs CIT vide order dated 25.02.2015 in I.T.A. No. 117/Del/2015. Therefore, in view of above, Ld. A.R. submitted that the case of assessee is fully covered in its favour. Without prejudice to the above submissions, Ld. A.R. submitted that the assessee was engaged as registered broker and was registered with SEBI and was dealing in equity and F & O Market on behalf of the clients and on its own and the investment in shares has been declared as stock in trade and in this respect, our attention was invited to paper book page 13 where the said investment was clarified as stock in trade in the balance sheet of the assessee. Ld. A.R. submitted that in a case where the shares are held in stock in trade, no disallowance can be made u/s 14A and in this respect, our attention was invited to the decision of ITAT Kolkata Bench in the case of DCIT Vs Baljit Securities Pvt. Ltd. placed at paper book pages 7-17.

3 ITA No.571/Del/2013 3. Ld. D.R. on the other hand argued that non recording of satisfaction by A.O. cannot nullify the addition u/s 14A as the addition u/s 14A is a mandatory disallowance which has to be made in a case where the assessee had earned exempt income. Ld. D.R. heavily placed his reliance on the orders of authorities below.

4. We have heard rival parties and have gone through the material placed on record. We find that the assessee was engaged in the business of share broking and filed its return of income declaring an income of Rs.5,48,588/-. During assessment proceedings, the A.O. observed that the assessee had earned exempt income. Therefore, assessee was required to explain as to why the deduction u/s 14A read with Rule 8D be not made. In reply, the assessee submitted that the assessee was engaged in the business of trading and broking of shares and the dividend received by it is incidental to its main business and no expenses have been incurred for earning the dividend income. It was submitted that assessee held shares as stock in trade. The A.O. was not satisfied with the reply of assessee and without recording any objective satisfaction regarding assessee's submission that no expenses were incurred, he proceeded to make disallowance as per the provisions of Rule 8D. We find that Delhi Hon'ble High Court in the case of CIT Vs Taikisha Engineering India Ltd. under similar facts and circumstances, has decided the issue in favour of assessee by holding as under:

10. Having heard the Counsel for the parties, we feel that the respondent assessee is entitled to succeed on somewhat different grounds and reasons, than those elucidated by the Tribunal.

11. Section 14A of the Act is relevant and reproduced below:-

―14A. (1) For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. (2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this 4 ITA No.571/Del/2013

Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. (3) The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act.

Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year beginning on or before the 1st day of April, 2001.‖ Section 14A of the Act postulates and states that no deduction shall be allowed in respect of expenditure incurred by an assessee in relation to income which does not form part of the total income under the Act. Under sub Section (2) to Section 14A of the Act, the Assessing Officer is required to examine the accounts of the assessee and only when he is not satisfied with the correctness of the claim of the assessee in respect of expenditure in relation to exempt income, the Assessing Officer can determine the amount of expenditure which should be disallowed in accordance with such method as prescribed, i.e. Rule 8D of the Rules (quoted and elucidated below).

Therefore, the Assessing Officer at the first instance must examine the disallowance made by the assessee or the claim of the assessee that no expenditure was incurred to earn the exempt income. If and only if the Assessing Officer is not satisfied on this count after making reference to the accounts, that he is entitled to adopt the method as prescribed i.e. Rule 8D of the Rules. Thus, Rule 8D is not attracted and applicable to all assessee who have exempt income and it is not compulsory and necessary that an assessee must voluntarily compute disallowance as per Rule 8D of the Rules. Where the disallowance or nil' disallowance made by the assessee is found to be unsatisfactory on examination of accounts, the assessing officer is entitled and authorised to compute the deduction under Rule 8D of the Rules. This pre-condition and stipulation as noticed below is also mandated in sub Rule (1) to Rule 8D of the Rules.

12. Rule 8D of the Rules, again for the sake of convenience, is reproduced below:-

―8D. (1) Where the Assessing Officer, having regard to the accounts of the assessee of a previous year, is not satisfied with-- (a) the correctness of the claim of expenditure made by the assessee; or (b) the claim made by the assessee that no expenditure has been incurred, in relation to income which does not form part of the total income under the Act for such previous year, he shall determine the amount of expenditure in relation to such income in accordance with the provisions of sub-rule (2). (2) The expenditure in relation to income which does not form part of the total income shall be the aggregate of following amounts, namely:-- (i) the amount of expenditure directly relating to income which does not form part of total income; (ii) in a case where the assessee has incurred expenditure by way of interest during the previous year which is not directly 5 ITA No.571/Del/2013

attributable to any particular income or receipt, an amount computed in accordance with the following formula, namely :-- A × B/C Where A = amount of expenditure by way of interest other than the amount of interest included in clause (i) incurred during the previous year ; B = the average of value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year ; C = the average of total assets as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year ; (iii) an amount equal to one-half per cent of the average of the value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year. (3) For the purposes of this rule, the ―total assets‖ shall mean, total assets as appearing in the balance sheet excluding the increase on account of revaluation of assets but including the decrease on account of revaluation of assets.‖ Sub Rule (1) categorically and significantly states that the Assessing Officer having regard to the account of the assessee and on not being satisfied with the correctness of the claim of expenditure made by the assessee or claim that no expenditure was incurred in relation to income which does not form part of the total income under the Act, can go on to determine the disallowance under sub Rule (2) to Rule 8D of the Rules. Sub Rule (2) will not come into operation until and unless the specific pre-condition in sub Rule (1) is satisfied. Thus, Section 14A(2) of the Act and Rule 8D(1) in unison and affirmatively record that the computation or disallowance made by the assessee or claim that no expenditure was incurred to earn exempt income must be examined with reference to the accounts, and only and when the explanation/claim of the assessee is not satisfactory, computation under sub Rule (2) to Rule 8D of the Rules is to be made.

13. We need not, therefore, go on to sub Rule (2) to Rule 8D of the Rules until and unless the Assessing Officer has first recorded the satisfaction, which is mandated by sub Section (2) to Section 14A of the Act and sub Rule (1) to Rule 8D of the Rules.

14. The view and legal ratio expressed above is not being elucidated for the first time. The Delhi High Court in Maxopp Investment Ltd. vs. Commissioner of Income Tax [2012] 347 ITR 272, has observed:-

―Scope of sub-sections (2) and (3) of Section 14A Sub-section (2) of Section 14 A of the said Act provides the manner in which the Assessing Officer is to determine the amount of expenditure incurred in relation to income which does not form part of the total income. However, if we examine the provision carefully, we would find that the Assessing Officer is required to determine the amount of such expenditure only if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under the said Act. In other words, the requirement of the Assessing Officer embarking upon a determination of the amount of expenditure incurred in relation to exempt income would be triggered only if the Assessing Officer returns 6 ITA No.571/Del/2013

a finding that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Therefore, the condition precedent for the Assessing Officer entering upon a determination of the amount of the expenditure incurred in relation to exempt income is that the Assessing Officer must record that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Sub-section (3) is nothing but an offshoot of sub-section (2) of Section 14A. Sub-section (3) applies to cases where the assessee claims that no expenditure has been incurred in relation to income which does not form part of the total income under the said Act. In other words, sub-section (2) deals with cases where the assessee specifies a positive amount of expenditure in relation to income which does not form part of the total income under the said Act and sub- section (3) applies to cases where the assessee asserts that no expenditure had been incurred in relation to exempt income. In both cases, the Assessing Officer, if satisfied with the correctness of the claim of the assessee in respect of such expenditure or no expenditure, as the case may be, cannot embark upon a determination of the amount of expenditure in accordance with any prescribed method, as mentioned in sub-section (2) of Section 14A of the said Act. It is only if the Assessing Officer is not satisfied with the correctness of the claim of the assessee, in both cases, that the Assessing Officer gets jurisdiction to determine the amount of expenditure incurred in relation to such income which does not form part of the total income under the said Act in accordance with the prescribed method. The prescribed method being the method stipulated in Rule 8D of the said Rules. While rejecting the claim of the assessee with regard to the expenditure or no expenditure, as the case may be, in relation to exempt income, the Assessing Officer would have to indicate cogent reasons for the same.

Rule 8D As we have already noticed, sub-section (2) of Section 14A of the said Act refers to the method of determination of the amount of expenditure incurred in relation to exempt income. The expression used is - ―such method as may be prescribed‖. We have already mentioned above that by virtue of Notification No.45 of 2008, dated March 24, 2008, the Central Board of Direct Taxes introduced Rule 8D in the said Rules. The said Rule 8D also makes it clear that where the Assessing Officer, having regard to the accounts of the assessee of a previous year, is not satisfied with (a) the correctness of the claim of expenditure made by the asses see; or (b) the claim made by the assessee that no expenditure has been incurred in relation to income which does not form part of the total income under the said Act for such previous year, the Assessing Officer shall determine the amount of the expenditure in relation to such income in accordance with the provisions of sub-rule (2) of Rule 8D. We may observe that Rule 8D(1) places the provisions of Section 14A(2) and (3) in the correct perspective. As we have already seen, while discussing the provisions of Subsections (2) and (3) of Section 14A, the condition precedent for the Assessing Officer to himself determine the amount of expenditure is that he must record his dissatisfaction with the correctness of the claim of expenditure made by the assessee or with the correctness of the claim made by the assessee that no expenditure has been incurred. It is only when this condition precedent is satisfied that the Assessing Officer is required to determine the amount of expenditure in relation to income 7 ITA No.571/Del/2013

not includable in total income in the manner indicated in sub-rule (2) of Rule 8D of the said Rules.

It is, therefore, clear that determination of the amount of expenditure in relation to exempt income under Rule 8D would only come into play when the Assessing Officer rejects the claim of the assessee in this regard. If one examines sub-rule (2) of Rule 8D, we find that the method for determining the expenditure in relation to exempt income has three components. The first component being the amount of expenditure directly relating to income which does not form part of the total income. The second component being computed on the basis of the formula given therein in a case where the assessee incurs expenditure by way of interest which is not directly attributable to any particular income or receipt. The formula essentially apportions the amount of expenditure by way of interest (other than the amount of interest included in clause (i)) incurred during the previous year in the ratio of the average value of investment, income from which does not or shall not form part of the total income, to the average of the total assets of the assessee.

The third component is an artificial figure - one half percent of the average value of the investment, income from which does not or shall not form part of the total income, as appearing in the balance sheets of the assessee, on the first day and the last day of the previous year. It is the aggregate of these three components which would constitute the expenditure in relation to exempt income and it is this amount of expenditure which would be disallowed under Section 14A of the said Act. It is, therefore, clear that in terms of the said Rule, the amount of expenditure in relation to exempt income has two aspects - (a) direct and (b) indirect. The direct expenditure is straightaway taken into account by virtue of clause (i) of sub-rule (2) of Rule 8D. The indirect expenditure, where it is by way of interest, is computed through the principle of apportionment, as indicated above. And, in cases where the indirect expenditure is not by way of interest, a rule of thumb figure of one half percent of the average value of the investment, income from which does not or shall not form part of the total income, is taken.‖

15. Even earlier the Bombay High Court in Godrej and Boyce Mfg. Co. Ltd. versus Deputy Commissioner of Income Tax (2010) 328 ITR 81 (Bom.) had referred to Section 14(2) of the Act and observed:-

―Under sub-section (2), the Assessing Officer is required to determine the amount of expenditure incurred by an assessee in relation to such income which does not form part of the total income under the Act in accordance with such method as may be prescribed. The method, having regard to the meaning of the expression "prescribed" in section 2(33), must be prescribed by rules made under the Act. What merits emphasis is that the jurisdiction of the Assessing Officer to determine the expenditure incurred in relation to such income which does not form part of the total income, in accordance with the prescribed method, arises if the Assessing Officer is not satisfied with the correctness of the claim of the assessee in respect of the expenditure which the assessee claims to have incurred in relation to income which does not part of the total income. Moreover, the satisfaction of the Assessing Officer has to be arrived at, having regard to the accounts of the assessee. Hence, sub-section (2) does not ipso facto enable the Assessing Officer to apply the method prescribed by the rules straightaway 8 ITA No.571/Del/2013

without considering whether the claim made by the assessee in respect of the expenditure incurred in relation to income which does not form part of the total income is correct. The Assessing Officer must, in the first instance, determine whether the claim of the assessee in that regard is correct and the determination must be made having regard to the accounts of the assessee. The satisfaction of the Assessing Officer must be arrived at on an objective basis. It is only when the Assessing Officer is not satisfied with the claim of the assessee, that the Legislature directs him to follow the method that may be prescribed. In a situation where the accounts of the assessee furnish an objective basis for the Assessing Officer to arrive at a satisfaction in regard to the correctness of the claim of the assessee of the expenditure which has been incurred in relation to income which does not form part of the total income, there would be no warrant for taking recourse to the method prescribed by the rules. For, it is only in the event of the Assessing Officer not being so satisfied that recourse to the prescribed method is mandated by law. Sub-section (3) of section 14A provides for the application of sub-section (2) also to a situation where the assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under the Act. Under the proviso, it has been stipulated that nothing in the section will empower the Assessing Officer, for an assessment year beginning on or before April 1, 2001, either to reassess under section 147 or pass an order enhancing the assessment or reducing the refund already made or otherwise increasing the liability of the assessee under section 154.‖

16. Equally illuminating are the following observations in Godrej and Boyce Mfg. Co. Ltd. (supra) ―... However, if the assessee does not maintain separate accounts, it would be necessary for the Assessing Officer to deter-mine the proportion of expenditure incurred in relation to the dividend business (i.e., earning exempt income). It is for exactly such situations that a machinery/method for computing the proportion of expenditure incurred in relation to the dividend business has been provided by way of section 14A(2)/(3) and rule 8D.‖

17. More important and relevant for us are the observations in Godrej and Boyce Mfg. Co. Ltd. (supra) on requirement and stipulation of satisfaction being recorded by the Assessing Officer with reference to the accounts under Section 14(2) of the Act and Rule 8D(1) of the Rules. It was observed:-

―Parliament has provided an adequate safeguard to the invocation of the power to determine the expenditure incurred in relation to the earning of non-taxable income by adoption of the prescribed method. The invocation of the power is made conditional on the objective satisfaction of the Assessing Officer in regard to the correctness of the claim of the assessee, having regard to the accounts of the assessee. When a statute postulates the satisfaction of the Assessing Officer "Courts will not readily defer to the conclusiveness of an executive authority's opinion as to the existence of a matter of law or fact upon which the validity of the exercise of the power is predicated". (M. A. Rasheed v. State of Kerala [1974] AIR 1974 SC 2249*). A decision by the Assessing Officer has to be arrived at in good faith on relevant considerations. The Assessing Officer must furnish to the assessee a reasonable opportunity to show cause on the correctness of the claim made by him. In the event that the Assessing Officer is not satisfied with the 9 ITA No.571/Del/2013

correctness of the claim made by the assessee, he must record reasons for his conclusion. These safeguards which are implicit in the requirements of fairness and fair procedure under article 14 must be observed by the Assessing Officer when he arrives at his satisfaction under sub-section (2) of section 14A. As we shall note shortly hereafter, sub-rule (1) of rule 8D has also incorporated the essential requirements of sub-section (2) of section 14A before the Assessing Officer proceeds to apply the method prescribed under sub-rule (2).‖

18. It is in this context we feel that the findings recorded by the CIT(A) and the Tribunal are appropriate and relevant. The clear findings are that the assessee had sufficient funds for making investments in shares and mutual funds. The said findings coupled with the failure of the Assessing Officer to hold and record his satisfaction clinches the issue in favour of the respondent assessee and against the Revenue. The self or voluntary deductions made by the assessee were not rejected and held to be unsatisfactory, on examination of accounts. Judgments in Tin Box Co. (supra), Reliance Utilities and Power Ltd. (supra), Suzlon Energy Ltd. (supra) and East India Pharmaceutical Works Ltd. (supra) would be relevant if the satisfaction of the Assessing Officer is in issue, and such question of satisfaction is with reference to the accounts.

19. However, the decisions relied upon by the Tribunal in the case of Tin Box Co. (supra), Reliance Utilities and Power Ltd. (supra), Suzlon Energy Ltd. (supra) and East India Pharmaceutical Works Ltd. (supra) could not be now applicable, if we apply and compute the disallowance under Rule 8D of the Rules. The said Rule in sub Rule (2) specifically prescribes the mode and method for computing the disallowance under Section 14A of the Act.

Thus, the interpretation of clause (ii) to sub Rule (2) to Rule 8D of the Rules by the CIT(A) and the Tribunal is not sustainable. The said clause expressly states that where the assessee has incurred expenditure by way of interest in the previous year and the interest paid is not directly attributable to any particular income or receipt then the formula prescribed would apply. Under clause (ii) to Rule 8D(2) of the Rules, the Assessing Officer is required to examine whether the assessee has incurred expenditure by way of interest in the previous year and secondly whether the interest paid was directly attributable to particular income or receipt. In case the interest paid was directly attributable to any particular income or receipt, then the interest on loan amount to this extent or in entirety as the case may be, has to be excluded for making computation as per the formula prescribed. Pertinently, the amount to be disallowed as expenditure relatable to exempt income, under sub Rule (2) is the aggregate of the amount under clause

(i), clause (ii) and clause (iii). Clause (i) relates to direct expenditure relating to income forming part of the total income and under clause (iii) an amount equal to 0.5% of the average amount of value of investment, appearing in the balance sheet on the first day and the last day of the assessee has to be disallowed.

20. However, in the present case we need not refer to sub Rule (2) to Rule 8D of the Rules as conditions mentioned in sub Section (2) to Section 14A of the Act read with sub Rule (1) to Rule 8D of the Rules were not satisfied and the Assessing Officer erred in invoking sub Rule (2), without elucidating and 10 ITA No.571/Del/2013

explaining why the voluntary disallowance made by the assessee was unreasonable and unsatisfactory. We do not find any such satisfaction recorded in the present case by the Assessing Officer, before he invoked sub Rule (2) to Rule 8D of the Rules and made the re-computation.

Therefore, the respondent assessee would succeed and the appeal should be dismissed."

5. We find that Hon'ble Delhi High Court has held that sub-rule 2 of Rule 8D cannot be invoked without recording explanation by A.O. as to why voluntary disallowance made by assessee was not satisfactory. The A.O. has made disallowance by holding as under:

"On perusal of details filed by the assessee assessment record and computation of income filed along with return of income, it was found that the assessee has claimed Rs.9,12,563/- as dividend Income exempted u/s 10(34). The proportionate administrative expenses attributable to earning of the dividend income were not disallowed & added to the declared income as per provisions of Section 14A read with rule 8D. In reply of the Specific query raises by this office, assessee company has submitted vide letter dated'- 16.09.2011 that the assessee company is doing the busine.ss of trading and broking and company earns dividend Income In normal course of business. As per list of dividend income and quantum of dividend itself clear that company has not done any dividend swapping. Expenditure of the company was remaining the same, even if the other company has not declared or paid the dividend. There is no relation between expenditure of the company and dividend income. The expenses incurred in relation to earning of dividend are an inconsequential amount. It was further submitted that the assessee holds the shares in stock in trade and income from which is taxable as business income. The same facts was narrated by the assessee company vide letter dated 11.10.2011.

Reply of the assessee is considered but not acceptable as the section 14A specifically mentioned the proportionate disallowance of expenses and the calculation of disallowance is mentioned in rule 8D. Since the assessee has earned divided income of shares whether held as stock in trade or investment, requires disallowance U/s 14 A read With rule 80D."

11 ITA No.571/Del/2013 5.1 We find from the above findings that no effort has been made by A.O. to record his findings as to why the claim of assessee that no expenditure was incurred was not correct. He has made disallowance just by holding that some expenditure must have been incurred. Therefore, the Hon'ble Delhi High Court order as cited above, is applicable to the assessee and no disallowance u/s 14A was warranted. Moreover, we find that the assessee was holding shares as stock in trade and not as investments as is apparent from balance sheet of assessee and, therefore, also disallowance u/s 14A was not warranted as held in the case of DCIT Vs Baljit Securities Pvt. Ltd. (supra).

6. In view of above, appeal filed by assessee is allowed.

7. Order pronounced in the open court on 25th March, 2015.

Sd./- Sd./- ( G. C. GUPTA) (T.S. KAPOOR) VICE PRESIDENT ACCOUNTANT MEMBER Date: 25.03.2015 2015 Sp

Copy forwarded to:- 1. The appellant 2. The respondent 3. The CIT 4. The CIT (A)-, New Delhi.

5. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi. True copy.

By Order

(ITAT, New Delhi).

12 ITA No.571/Del/2013 S.No. Details Date Initials Designation 1 Draft dictated on 12/3 Sr. PS/PS 2 Draft placed before author 13,23, Sr. PS/PS Draft proposed & placed before the 3 JM/AM Second Member Draft discussed/approved by Second 4 AM/AM Member 5 Approved Draft comes to the Sr. PS/PS 25/3 Sr. PS/PS 6 Kept for pronouncement 25/3 Sr. PS/PS 7 File sent to Bench Clerk 25/3 Sr. PS/PS Date on which the file goes to Head 8 Clerk 9 Date on which file goes to A.R. 10 Date of Dispatch of order