DCIT, CIRCLE-2, JAIPUR V. M/S. MAHINDRA WORD CITY (JAIPUR) LTD., JAIPUR

ITA 1240/JPR/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7393 (ITAT-JAIPUR)
• Duration Of Justice: 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 01-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C GUPTA
• Assessee Lawyers: RAJIV SOGANI CAS DH RKJ
• Keywords: Business income; Earning of tax free income; Retrospective amendment; Additional evidence; Rule 8D; Set aside
• Section: 14A; 13; 2

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES A, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA -@ ITA NO. 1240/JP/2019 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2009-10 D.C.I.T., CIRCLE-2, JAIPUR. CUKE VS. M/S MAHINDRA WORLD CITY (JAIPUR) LTD., 411, NEELKANTH TOWER, BHAWANI SINGH MARG, C-SCHEME, JAIPUR. PAN NO.: AAECM 4950 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA -@ ITA NO. 1242/JP/2019 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2009-10 M/S MAHINDRA WORLD CITY (JAIPUR) LTD., 411, NEELKANTH TOWER, BHAWANI SINGH MARG, C-SCHEME, JAIPUR. CUKE VS. A.C.I.T., RANGE-2, JAIPUR. PAN NO.: AAECM 4950 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI K.C. GUPTA (JCIT) FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI ROHAN SOGANI & SHRI RAJIV SOGANI (CAS) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 30/01/2020 MN?KKS 'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 31/01/2020 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 14/08/2019 OF LD. CIT(A)-I, JAIPUR FOR THE A.Y. 2009-10. ITA 1240 & 1242/JP/2019_ DCIT VS M/S MAHINDRA WORLD CITY (JAIPUR) LTD. 2 2. THIS IS SECOND ROUND OF APPEAL AS THE DISPUTE REGARDING DISALLOWANCE MADE BY THE A.O. U/S 36(1)(III) AS WELL AS U/S 14A OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) IN RESPECT OF INVESTMENT MADE BY THE ASSESSEE IN MUTUAL FUNDS WAS DELETED BY THE LD. CIT(A) IN THE FIRST ROUND AND ON SUBSEQUENT APPEAL, THIS TRIBUNAL VIDE ORDER DATED 03/12/2015 RESTORED THE MATTER BACK TO THE FILE OF THE LD.CIT(A) FOR DECIDING THE SAME AFRESH AFTER GIVING ADEQUATE OPPORTUNITY TO THE A.O. TO CONSIDER THE EVIDENCE PRODUCED BY ASSESSEE BEFORE THE LD.CIT(A). THE LD.CIT(A) WHILE PASSING THE IMPUGNED ORDER IN THE SET ASIDE PROCEEDINGS HAS SUSTAINED A PARTIAL DISALLOWANCE MADE BY THE A.O. U/S 36(1)(III) AS WELL AS U/S 14A OF THE ACT, THEREFORE, BOTH THE REVENUE AS WELL AS THE ASSESSEE HAVE FILED THESE CROSS APPEALS AND RAISED FOLLOWING GROUNDS: GROUNDS OF REVENUES APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE FROM RS. 2,76,51,752/- TO RS. 16,51,186/- MADE BY A.O. U/S 14A OF I.T. ACT, 1961? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE FROM RS. 4,52,338/- TO RS. 49,197/- MADE BY A.O. U/S 36(1)(III)? GROUNDS OF ASSESSEES APPEAL: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDITION TO THE EXTENT OF RS. 49,197/- MADE BY THE LD AO U/S 36(I)(III) OF THE INCOME TAX ACT, 1961. THE ACTION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY DELETING ENTIRE SUCH ADDITION, MADE BY LD. AO, SUSTAINED BY LD. CIT(A). ITA 1240 & 1242/JP/2019_ DCIT VS M/S MAHINDRA WORLD CITY (JAIPUR) LTD. 3 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDITION TO THE EXTENT OF RS. 16,51,186/- MADE BY THE LD. AO U/S 14A OF THE INCOME TAX ACT, 1961. THE ACTION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY DELETING ENTIRE SUCH ADDITION, MADE BY LD. AO, SUSTAINED BY THE LD. CIT(A). 3. THE APPELLANT COMPANY CRAVES ITS RIGHT TO ADD, AMEND OR ALTER ANY OF THE GROUNDS ON OR BEFORE THE HEARING. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE FROM RS. 4,52,338/- TO RS. 49,197/- MADE BY A.O. U/S 36(1)(III)? 3. IN THE CROSS APPEALS, THE REVENUE AS WELL AS THE ASSESSEE HAS RAISED COMMON ISSUES AS PART RELIEF WAS GRANTED BY THE LD. CIT(A). GROUND NO. 1 OF THE REVENUES APPEAL AND GROUND NO. 2 OF THE ASSESSEES APPEAL ARE REGARDING DISALLOWANCE MADE BY THE A.O. U/S 14A OF THE ACT OF RS. 2,76,51,752/- WAS RESTRICTED TO RS. 16,51,186/-. THE REVENUE IS AGGRIEVED AGAINST THE RELIEF OF ABOUT 2.60 CRORES GRANTED BY THE LD. CIT(A) WHEREAS THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE SUSTAINED TO THE EXTENT OF RS. 16,51,186/-. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE PRODUCED ALL RELEVANT MATERIAL AND DETAILS BEFORE THE A.O. AS WELL AS THE LD. CIT(A) WHICH WAS ALSO SENT BY THE LD. CIT(A) TO THE A.O. FOR EXAMINATION AND CALLED A REMAND REPORT. THE A.O. HAS NOT POINTED OUT ANY MISTAKE OR DEFECT IN THE RECORD PRODUCED BY THE ASSESSEE SHOWING SUFFICIENCY OF ASSESSEES OWN FUND FOR MAKING INVESTMENT IN THE MUTUAL FUNDS TO THE TUNE OF RS. 60.20 CRORES FOR THE A.Y. 2008-09 WHICH WAS ITA 1240 & 1242/JP/2019_ DCIT VS M/S MAHINDRA WORLD CITY (JAIPUR) LTD. 4 REDUCED TO RS. 11.95 CRORES FOR THE A.Y. UNDER CONSIDERATION. HE HAS SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS RECEIVED FRESH SHARE CAPITAL OF RS. 25.00 CRORES WHEREAS IN THE F.Y. 2007- 08, THE ASSESSEE RECEIVED FRESH SHARE CAPITAL OF RS.110 CRORES. THUS, THE LD AR HAS SUBMITTED THAT THE ASSESSEE HAS RECEIVED RS. 135 CRORES AS SHARE CAPITAL DURING THE TWO YEARS WHEREAS THE INVESTMENT IN MUTUAL FUNDS WERE MADE ONLY TO THE TUNE OF RS. 60.20 CRORES DURING THE F.Y. 2007-08 WHICH WAS REDUCED TO 11.95 CRORES DURING THE F.Y. 2008-09 RELEVANT TO THE A.Y. UNDER CONSIDERATION. THEREFORE, THERE IS NO INCREASE IN THE INVESTMENT IN MUTUAL FUNDS FOR THE YEAR UNDER CONSIDERATION AND THE ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE FUNDS FOR MAKING THE INVESTMENT DURING THE F.Y. 2007-08. HE HAS FURTHER CONTENDED THAT THE ASSESSEE WAS HAVING RS. 145 CRORES AS ITS OWN FUND AS AGAINST THE INVESTMENT OF RS. 60.20 CRORES IN THE MUTUAL FUNDS, THEREFORE, THE ASSESSEE WAS HAVING ENOUGH SURPLUS FUND AND HENCE NO DISALLOWANCE IS CALLED FOR ON ACCOUNT OF INTEREST EXPENDITURE U/S 14A OF THE ACT. HE HAS FURTHER CONTENDED THAT EVEN DURING THE SET ASIDE PROCEEDINGS, THE A.O. HAS NOT GIVEN A FINDING THAT THE ASSESSEE WAS NOT HAVING ITS OWN SUFFICIENT FUND BUT THE A.O. HAS JUST REPEATED THE OBSERVATION AS MADE IN THE ASSESSMENT ORDER WITHOUT GIVING THE FINDINGS ON THE FACTS OF THE ITA 1240 & 1242/JP/2019_ DCIT VS M/S MAHINDRA WORLD CITY (JAIPUR) LTD. 5 AVAILABILITY OF OWN FUNDS. THEREFORE, THE LD AR HAS SUBMITTED THAT THE ADDITION SUSTAINED BY THE LD. CIT(A) MAY BE DELETED. 4. ON THE OTHER HAND, THE LD DR HAS SUBMITTED THAT THE ASSESSEE HAS NOT PRODUCED RELEVANT RECORD TO SHOW THAT THE ASSESSEES OWN FUND WAS USED FOR THE PURPOSE OF INVESTMENT IN MUTUAL FUNDS. HE HAS REFERRED TO THE ASSESSMENT ORDER AS WELL AS THE REMAND REPORT AND SUBMITTED THAT THE A.O. HAS SPECIFICALLY STATED THAT THE ASSESSEE HAS FAILED TO PRODUCE THE EVIDENCE TO ESTABLISH THE LINK THAT THE ASSESSEES OWN FUND WAS INVESTED IN MUTUAL FUNDS AND NOT IN THE BORROWED FUND. THE A.O. HAS GIVEN THE FINDING THAT THE ASSESSEE HAS USED ITS OVER DRAFT ACCOUNT (OD ACCOUNT) FOR MAKING INVESTMENT IN MUTUAL FUNDS, THEREFORE, THE FUNDS FROM THE OD ACCOUNT CLEARLY BORROWED FUNDS USED BY THE ASSESSEE. SUBSEQUENTLY THE ASSESSEE HAS TRANSFERRED THE FUNDS IN THE OD ACCOUNT AND SOURCE OF WHICH WAS NOT EXPLAINED PROPERLY. HE HAS RELIED UPON THE ORDER OF THE A.O. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THOUGH, THE A.O. HAS STATED IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS INVESTED RS. 290.14 CRORES IN PURCHASING OF MUTUAL FUNDS, HOWEVER, AS PER THE BALANCE SHEET AS ON 31/03/2008 AS WELL AS ON 31/03/2009 WE FIND THAT THE INVESTMENT IN MUTUAL FUNDS IS SHOWN AT RS. ITA 1240 & 1242/JP/2019_ DCIT VS M/S MAHINDRA WORLD CITY (JAIPUR) LTD. 6 60.20 CRORES AND RS. 11.94 CRORES RESPECTIVELY. THEREFORE, THE CLOSING BALANCE OF INVESTMENT AS ON 31/3/2008 WAS AS RS. 60.20 CRORES WHICH WAS REDUCED TO RS. 11.94 CRORES AS ON 31/3/2009. THESE DETAILS AS STATED IN THE BALANCE SHEET ARE NOT DISPUTED BY THE REVENUE, THUS IT IS CLEAR THAT DURING THE YEAR UNDER CONSIDERATION, THERE IS NO INCREASE IN THE INVESTMENT IN MUTUAL FUNDS BUT THERE IS A SUBSTANTIAL DECREASE IN THE INVESTMENT IN MUTUAL FUNDS. THE A.O. IN THE REMAND REPORT HAS NOT GIVEN ANY FACTUAL FINDING AND HAS STATED THAT THE DOCUMENTARY EVIDENCE PRODUCED BY THE ASSESSEE WAS CONSIDERED BY THE A.O. DURING THE ASSESSMENT PROCEEDINGS AND CONSEQUENTLY HE DOES NOT FIND ANYTHING CONTRARY TO THE ORDER OF THE A.O.. 6. AS REGARDS THE DISALLOWANCE MADE ON ACCOUNT OF ADMINISTRATIVE EXPENSES, THE A.O. HAS DISCUSSED THE LAW AND EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE RELEVANT PART OF THE REMAND REPORT DATED 31/01/2017 IS AS UNDER: AS REGARDS, THE CONTENTION OF THE ASSESSEE THAT THE DISALLOWANCE MADE BY THE AO IN TERMS OF SECTION 14 READ WITH RULE 8D IS NOT VALID, IS NOT ACCEPTED PER SE. ALL THE FACTS AND DOCUMENTARY EVIDENCES PRODUCED BY THE A/R ON THE ISSUE HAS BEEN CONSIDERED AND WERE DISCUSSED AT LENGTH IN THE ASSESSMENT ORDER DATED 26.12.2011 (IN PARA 4 TO 4.4). HENCE, I DO NOT FIND ANYTHING CONTRARY TO THE ORDER OF THE AO. AS SUCH, THE ASSESSEE ITSELF ACCEPTED THAT RS. 16,51,186/- HAS BEEN EARNED DURING THE A.Y. 2009-10 AS DIVIDEND INCOME (EXEMPT INCOME), SUCH INCOME CANNOT BE EARNED IN ITA 1240 & 1242/JP/2019_ DCIT VS M/S MAHINDRA WORLD CITY (JAIPUR) LTD. 7 A VACUUM AND CERTAIN PERCENTAGE OF ADMINISTRATIVE AND OTHER FINANCIAL EXPENSES INCURRED BY THE ASSESSEE HAVE TO BE ATTRIBUTED TOWARDS EARNING THIS INCOME. THEREFORE, THE CONTENTION OF THE ASSESSEE THAT NO OTHER EXPENDITURE WAS INCURRED BY IT AGAINST THE EXEMPT INCOME HOLDS NO GROUND AS IT IS SQUARELY COVERED BY THE PROVISIONS OF SEC 14A(3) WHEREIN IT IS CLEARLY STATED THAT THE PROVISIONS OF SUB - SECTION (2) (WHICH MADE REFERENCE TO RULE 8D FOR CALCULATING DISALLOWANCE U/S 14A) SHALL APPLY. EVEN IF, FOR ONCE, THE CONTENTION OF THE ASSESSEE THAT NO OTHER EXPENDITURE WAS INCURRED BY IT AGAINST THE EXEMPT INCOME WAS ACCEPTED TO BE TRUE, STILL THIS WOULD HOLD NO GROUND AS IT IS SQUARELY COVERED BY THE PROVISIONS OF SEC 14A(3) WHEREIN, IT IS DEARLY STATED THAT THE PROVISIONS OF SUB SECTION (2) (WHICH MAKE REFERENCE TO RULE 8D FOR CALCULATING DISALLOWANCE U/S 14A SHALL APPLY EVEN TO A CASE WHERE AN ASSESSEE CLAIMS NO EXPENDITURE AGAINST THE EXEMPT INCOME. THE FINANCE ACT, 2001, WHICH HAS, INTRODUCED A NEW SECTION 14A WITH RETROSPECTIVE EFFECT FROM 01.04.1962, CLARIFIES THAT NO DEDUCTION SHALL BE ALLOWED TO THE ASSESSEE IN RESPECT OF THE EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME, WHICH DOES NET FORM PART OF TOTAL INCOME. THE ADMINISTRATIVE AND OTHER EXPENSES INCURRED BY THE ASSESSEE, WHICH FACILITATED IN EARNING THE DIVIDEND CANNOT BE RULED OUT. IN THIS CONNECTION, RELIANCE IS PLACED ON THE DECISION OF HON'BLE ITAT, MUMBAI IN THE CASE OF M/S GHERZI EASTERN LIMITED (ITA NO. 6562/BOM/94 DATED 23 RD SEPTEMBER 2002) WHEREIN THE HON'BLE TRIBUNAL HAS MADE THE FOLLOWING REMARKS: 'HAVING HEARD BOTH THE PARTIES WE ARE OF THE OPINION THAT IT CANNOT BE DENIED THAT SOME ADMINISTRATIVE EXPENDITURE WAS DEFINITELY ATTRIBUTED TOWARDS EARNING OF THIS DIVIDEND INCOME AND THAT HAD TO BE DEDUCTED WHILE ALLOWING DEDUCTION UNDER SECTION 80M.' HENCE, I DO NOT FIND ANY MERIT IN THE AVERN4NT MADE BY THE ASSESSEE IN ADDITIONAL EVIDENCE PRODUCED BEFORE THE LD. CIT(A) AS WELL AS BEFORE THIS OFFICE AND ACCORDINGLY, THE ADDITION MADE BY THE AO IS CORRECT. ITA 1240 & 1242/JP/2019_ DCIT VS M/S MAHINDRA WORLD CITY (JAIPUR) LTD. 8 DESPITE THE MATTER WAS REMANDED BY THE TRIBUNAL TO THE RECORD OF THE LD. CIT(A) FOR CONFRONTING THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE TO THE A.O.. THE A.O. IN THE REMAND REPORT HAS NOT GIVEN ANY FINDING ON THE FACTS AND THE EVIDENCE PRODUCED BY THE ASSESSEE BUT SIMPLY STATED THAT I DO NOT FIND ANYTHING CONTRARY TO THE ORDER OF THE A.O. SUCH REMAND REPORT WOULD NOT SERVE ANY PURPOSE AND PARTICULARLY WHEN THE MATTER WAS SPECIFICALLY REMANDED TO THE RECORD OF THE LD. CIT(A) FOR GIVING THE A.O. AN OPPORTUNITY TO EXAMINE THE EVIDENCE FILED BY THE ASSESSEE. HENCE, IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY ERROR IN THE IMPUGNED ORDER OF THE LD. CIT(A) TO THE EXTENT OF SUFFICIENCY OF THE ASSESSEES OWN FUNDS FOR MAKING INVESTMENT IN THE MUTUAL FUNDS. 7. AS REGARDS THE GRIEVANCE OF THE ASSESSEE REGARDING DISALLOWANCE SUSTAINED BY THE LD. CIT(A) TOWARDS THE ADMINISTRATIVE EXPENSES AS PER RULE 8D(2)(III) OF THE RULES, THE LD. CIT(A) HAS RESTRICTED THE SAID DISALLOWANCE TO THE AMOUNT OF DIVIDEND INCOME. AT THE OUTSET WE NOTE THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2010-11 VIDE ORDER DATED 04/2/2019 IN ITA NO. 697/JP/2018 IN PARA 12 AS UNDER: 12. THE DISALLOWANCE ON ACCOUNT OF COMMON/INDIRECT ADMINISTRATIVE EXPENDITURE BEING 0.5% OF THE AVERAGE INVESTMENT AS PER RULE 8D(2)(III) OF THE RULES. SINCE THE DIVIDEND INCOME DURING THE YEAR ITA 1240 & 1242/JP/2019_ DCIT VS M/S MAHINDRA WORLD CITY (JAIPUR) LTD. 9 IS ONLY RS. 1,81,392/-, THEREFORE, IN VIEW OF THE BINDING PRECEDENTS ON THIS ISSUE, THE DISALLOWANCE MADE U/S 14A READ WITH RULE 8D(2)(III) OF THE RULES, CANNOT BE MORE THAN THE EXEMPT INCOME. THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. V. COMMISSIONER OF INCOME-TAX-IV 378 ITR 33 HAS HELD THAT IF THERE IS NO EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE YEAR, NO DISALLOWANCE CAN BE MADE ON ACCOUNT OF ADMINISTRATIVE EXPENDITURE, THEREFORE, WE FIND THAT THE DISALLOWANCE RESTRICTED BY THE LD. CIT(A) TO THE EXTENT OF EXEMPT INCOME IS PROPER AND JUSTIFIED. THE LD. CIT(A) HAS ALSO FOLLOWED THE ORDER OF THE TRIBUNAL WHILE RESTRICTING THE DISALLOWANCE U/S 14A READ WITH RULE 8D(2)(III) OF THE RULES AND HENCE WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE LD. CIT(A) QUA THIS ISSUE. CONSEQUENTLY, GROUND NO. 1 OF THE REVENUES APPEAL AND GROUND NO. 2 OF THE ASSESSEES APPEAL STAND DISMISSED. 8. GROUND NO. 2 OF THE REVENUES APPEAL AND GROUND NO. 1 OF THE ASSESSEES APPEAL IS REGARDING DISALLOWANCE MADE BY THE A.O. U/S 36(1)(III) OF THE ACT ON ACCOUNT OF INTEREST EXPENDITURE IN RESPECT OF OD ACCOUNT. THE A.O. MADE TOTAL DISALLOWANCE OF RS. 4,52,338/- BY APPLYING INTEREST @ 10% ON THE TOTAL OVER DRAFT AMOUNT OF RS. 45,23,383/-. THE LD. CIT(A) AFTER CONSIDERING THE REMAND REPORT OF THE A.O., RESTRICTED THE DISALLOWANCE TO RS. 49,197/- ON THE GROUND THAT THE INTEREST EXPENDITURE ON THE OVER DRAFT FACILITY IS ONLY RS. 49,197/- AND THEREFORE, THE ITA 1240 & 1242/JP/2019_ DCIT VS M/S MAHINDRA WORLD CITY (JAIPUR) LTD. 10 DISALLOWANCE CANNOT BE MORE THAN THE ACTUAL EXPENDITURE INCURRED ON ACCOUNT OF INTEREST ON THE OD ACCOUNT. 9. WE HAVE HEARD THE LD DR AS WELL AS THE LD AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT WHEN THE ASSESSEE WAS HAVING ITS OWN SUFFICIENT FUNDS FOR MAKING INVESTMENT IN THE MUTUAL FUNDS THEN THE INTEREST EXPENDITURE INCURRED IN RESPECT OF OVER DRAFT FACILITY AVAILED FROM THE BANK CANNOT BE ATTRIBUTED TO THE INVESTMENT MADE IN THE MUTUAL FUNDS. HE HAS REPEATED ITS CONTENTION AS RAISED IN RESPECT OF DISALLOWANCE OF INTEREST U/S 14A OF THE ACT. HE HAS ALSO RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE INDUSTRIES LIMITED 410 ITR 466. THE LD DR HAS RELIED UPON THE ORDER OF THE A.O. AND REMAND REPORT. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. IN THE SET ASIDE PROCEEDINGS, THE LD. CIT(A) HAS CALLED A REMAND REPOT FROM THE A.O. AFTER EXAMINATION OF THE RECORD AND EVIDENCE FILED BY THE ASSESSEE TO SHOW THAT THE ASSESSEE WAS HAVING ITS OWN SUFFICIENT FUNDS AND NO BORROWED FUNDS WERE USED FOR THE PURPOSE OF INVESTMENT IN THE MUTUAL FUNDS. THE A.O. IN THE REMAND REPORT HAS STATED AS UNDER: THE ASSESSEE CONTENDED THAT EXPENSES OF RS. 49,197/- WERE INCURRED AS INTEREST ON OVERDRAFT FACILITIES AS AGAINST RS. 4,52,338/- I.E. ADDITION MADE BY THE AO. HOWEVER, NO ITA 1240 & 1242/JP/2019_ DCIT VS M/S MAHINDRA WORLD CITY (JAIPUR) LTD. 11 SPECIFIC DETAILS THAT CAN BE MATCHED WITH THE BANK A/C STATEMENTS WERE PROVIDED BY THE ASSESSEE. EVEN, THE ASSESSEE DID NOT PROVIDE ANY SUCH DETAILS DURING THE ASSESSMENT PROCEEDINGS. HENCE, IN THE ABSENCE OF SPECIFIC DETAILS I.E. BANK ACCOUNT STATEMENTS REFLECTING SUCH ENTRIES OF BANK INTEREST ON OVERDRAFT, THE CONTENTION THAT IT HAD INCURRED ONLY THE EXPENSES TO THE TUNE OF RS, 49,197/- IS NOT ACCEPTED AND HENCE DENIED. HENCE, THE ADDITION MADE BY THE AO IS CORRECT. THIS STATEMENT OF THE A.O. IN THE REMAND REPORT DOES NOT SERVE ANY PURPOSE FOR WHICH THE MATTER WAS REMANDED BY THE TRIBUNAL TO THE RECORD OF THE LD. CIT(A), THEREFORE, IN ABSENCE OF ANY FACTUAL FINDING BY THE A.O. AND EXAMINATION OF THE RECORD AND EVIDENCES PRODUCED BY THE ASSESSEE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) GIVING A FINDING THAT THE ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE IN RESPECT OF OD ACCOUNT IS ONLY RS. 49,197/-. THE SAID FINDING OF THE LD. CIT(A) IS REPRODUCED AS UNDER: (VII) I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. THE APPELLANT HAS PROVIDED DETAILED CHART REGARDING DEBIT AND CREDIT ENTRIES IN VARIOUS BANK ACCOUNTS. THE APPELLANT ALSO SUBMITTED THE DATE WISE CHART OF INVESTMENT MADE IN MUTUAL FUNDS. AS PER SUMMARY PROVIDED, THE APPELLANT HAS RECEIVED BUSINESS RECEIPTS OF RS.64,78,14,595/, THE REDEMPTION OF MUTUAL FUNDS TO RS. 2,41,04,98,908/, MATURITY OF FIXED DEPOSITS RS. 31,31,07,444/-, SHARE CAPITAL RS. 25,00,00,000/-. IN OTHER WORDS, THE APPELLANT HAS CLAIMED TO RECEIVE TOTAL FUNDS OF RS. 3,62,14,20,947/-. AGAINST THE ABOVE FUNDS, THE INVESTMENT IN MUTUAL FUNDS DURING THE YEAR WAS TO THE EXTENT ITA 1240 & 1242/JP/2019_ DCIT VS M/S MAHINDRA WORLD CITY (JAIPUR) LTD. 12 OF RS. 1,90,40,72,698/-. THUS, THE APPELLANT HAS CLAIMED THAT WHOLE OF THE INVESTMENT IN MUTUAL FUNDS WAS FROM BUSINESS RECEIPTS. HOWEVER, NO SPECIFIC CLARIFICATION WAS FILED ON THE OBSERVATION OF THE AO THAT INVESTMENT IN MUTUAL FUNDS HAS RESULTED IN DEBIT BALANCE IN OVERDRAFT ACCOUNT. THEREFORE, IT IS HELD THAT THE DEBIT BALANCE OF RS. 45,23,383/- HAS OCCURRED DUE TO INVESTMENT IN MUTUAL FUNDS. THE AO HAS CALCULATED THE INTEREST BY APPLYING FLAT RATE OF 10% ON THE OUTSTANDING BALANCE WITHOUT CONSIDERING THE DURATION OF THE DEBIT BALANCE. THE APPELLANT HAS PROVIDED DETAILED WORKING OF SUCH DEBIT BALANCES EXISTING IN OVERDRAFT ACCOUNT WHICH WAS ALSO REPRODUCED BY THE LD. CIT(A) IN ITS APPELLATE ORDER IN FIRST ROUND OF APPEAL. AS PER THE ABOVE WORKING, TOTAL INTEREST EXPENSES ON SUCH OVERDRAFT ACCOUNTS WAS RS. 49,197/-. CONSIDERING THE OVERALL FUND FLOW POSITION SUBMITTED BY THE APPELLANT, THE MAXIMUM DISALLOWANCE ON ACCOUNT OF DIVERSION OF FUNDS TOWARDS INVESTMENT IN MUTUAL FUNDS CAN BE TO THE EXTENT OF INTEREST PAID ON DEBIT BALANCES IN THE ACCOUNT THROUGH WHICH INVESTMENT IN MUTUAL FUNDS WAS MADE. CONSIDERING THIS, THE DISALLOWANCE MADE BY THE AO IS RESTRICTED TO RS. 49,197/-. THUS, IT IS CLEAR THAT THE LD. CIT(A) HAS CONSIDERED THE FUND FLOW POSITION OF THE ASSESSEE AND THEREBY COME TO THE CONCLUSION THAT THE TOTAL INTEREST EXPENSES ON OD ACCOUNT WAS RS. 49,197/-. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE WHEN THE A.O. HAS NOT GIVEN ANY FINDING IN THE REMAND REPORT, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE LD. CIT(A) QUA THIS ISSUE. HENCE, GROUND NO. 2 OF THE ITA 1240 & 1242/JP/2019_ DCIT VS M/S MAHINDRA WORLD CITY (JAIPUR) LTD. 13 REVENUES APPEAL AND GROUND NO. 1 OF THE ASSESSEES APPEAL STAND DISMISSED. 11. IN THE RESULT, BOTH THE APPEALS I.E. APPEAL OF THE REVENUE AND APPEAL OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY, 2020. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 31 ST JANUARY, 2020 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE D.C.I.T., CIRCLE-2/ACIT, RANGE-2, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- M/S MAHINDRA WORLD CITY (JAIPUR) LTD., JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 1240 & 1242/JP/2019) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR