Nahar Poly Films Ltd., Ludhiana V. ACIT, C-7, Ludhiana

ITA 1414/CHANDI/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3032 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 05-11-2019

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, B, CHANDIGARH BEFORE SHRI N.K. SAINI, VICE PRESIDENT & SHRI R.L NEGI, JUDICIAL MEMBER ./ ITA NOS. 1414 & 1415/CHD/2019 / ASSESSMENT YEARS : 2011-12 & 2012-13 NAHAR POLY FILMS LIMITED, 376, INDUSTRIAL AREA, LUDHIANA THE ACIT, CIRCLE 7, AAYKAR BHAWAN, RISHI NAGAR, LUDHIANA ./PAN NO: AAACN5708K / APPELLANT /RESPONDENT HEARING THROUGH VIDEO CONFERENCING /ASSESSEE BY : SH. NAVDEEP SHARMA, ADVOCATE / REVENUE BY : SH. ASHOK KHANNA, ADDL. CIT % /DATE OF HEARING : 26.08.2021 % / DATE OF PRONOUNCEMENT : 21.10 .2021 / ORDER PER R.L. NEGI, JUDICIAL MEMBER: THE ASSESSEE HAS FILED THE CAPTIONED APPEALS AGAINS T THE SEPARATE ORDERS BOTH DATED 01.08.2019 PASSED BY COMMISSIONER OF INCOME TAX (APPEALS)-3, LUDHIANA [FOR SHORT THE CIT(A)] FOR THE ASSESSMENT YEARS 2011-12 & 2012-13, VIDE WHICH THE LD. CIT(A) HAS PA RTLY ALLOWED THE APPEALS FILED BY THE ASSESSEE AGAINST THE ASSESSMEN T ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 [FOR SHORT THE ACT]. SINCE THE ASSESSEE HAS TAKEN COMMON GROUNDS IN BOTH THE APPEA LS, THESE APPEALS WERE CLUBBED, HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NOS.1414 & 1415-CHD-2019- NAHAR POLY FILMS LTD., LUDHIANA 2 ITA NO. 1414 /CHD/2019 AY 2011-12 2. BRIEF FACTS OF THE CASE PERTAINING TO THE ASSESS MENT YEAR 2011-12 ARE THAT THE ASSESSEE FILED ITS RETURN FOR THE ASSE SSMENT YEAR UNDER CONSIDERATION DECLARING NIL INCOME UNDER THE NORMAL PROVISIONS OF THE ACT, DECLARING LOSS OF RS. 40,32,77,160 (TO BE CARR IED FORWARD). HOWEVER, THE TAX WAS COMPUTED AND PAID UNDER THE PR OVISIONS OF SECTION 115JB OF THE ACT. THE RETURN WAS PROCESSED U/S 143( 1) OF THE ACT. LATER ON, THE CASE WAS SELECTED FOR SCRUTINY AND THE AO P ASSED ASSESSMENT ORDER U/S 143(3) OF THE ACT AND INTER ALIA MADE ADDITION OF RS. 38,42,911/-ON ACCOUNT OF DISALLOWANCE U/S 14A READ WITH RULE 8D OF THE ACT, ADDITION OF RS. 12,94,605/- ON ACCOUNT OF DISA LLOWANCE U/S 36(1)(III) OF THE ACT AND ADDITION OF RS.2,01,282/- BEING PROPORTIONATE INTEREST @3% LESS CHARGED ON LOAN ADVANCED TO ITS S ISTER CONCERN. FURTHER AO DETERMINED THE NET BOOK PROFIT U/S 155JB AT RS 1,14,10,990/- AS AGAINST THE PROFIT OFFERED BY THE ASSESSEE AMOUN TING TO RS. 73,17,985. IN THE FIRST APPEAL THE LD. CIT(A) HELD THAT DISALL OWANCE U/S 14A READ WITH RULE 8D IS APPLICABLE IN THIS CASE, HOWEVER, D IRECTED THE AO TO RECOMPUTE THE DISALLOWANCE UNDER RULE 8D BY CONSIDE RING ONLY THOSE INVESTMENTS FROM WHERE THE EXEMPT INCOME HAS BEEN R ECEIVED. THE LD. CIT(A) FURTHER CONFIRMED THE ADDITION MADE U/S 36(1 )(III) AND ADDITION ON ACCOUNT OF DISALLOWANCE OF INTEREST ON LOAN GIVE N TO SISTER CONCERN. THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL AGAI NST THE SAID FINDINGS OF THE LD. CIT(A). ITA NOS.1414 & 1415-CHD-2019- NAHAR POLY FILMS LTD., LUDHIANA 3 3. THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER P ASSED BY THE LD. CIT(A) ON THE FOLLOWING GROUNDS: - 1. THAT THE WORTHY CIT(A)-3, LUDHIANA, ERRED IN LA W AND ON FACTS IN NOT DIRECTING THE LD. ASSESSING OFFICER, NOT TO APP LY RULE 8D, IN VIEW OF THE FACT THAT NO DIS-SATISFACTION WITH COGENT RE ASONS WAS RECORDED IN THE ORDER REGARDING THE CORRECTNESS OF THE CLAIM OF EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTA L INCOME. DIRECTIONS BE GIVEN NOT TO APPLY RULE 8D AS THE PRO VISIONS OF SECTION 14A (2) ARE NOT APPLICABLE IN THE CASE HEREIN. 2. THAT THE WORTHY CIT(A)-3, LUDHIANA, ERRED IN LAW AND ON FACTS IN NOT DELETING THE ENTIRE DISALLOWANCE U/S 14A READ W ITH RULE 8D OF THE INCOME TAX ACT OF RS. 21,65,655/-. DIRECTIONS MAY BE GIVEN TO MAKE THE DISALLOWANCE U/ S 14A AS COMPUTED ON PROPORTION BASIS BY THE APPELLANT COMPA NY IN THE RETURN, IN VIEW OF THE DECISION OF VARIOUS APPELLAT E COURTS WHEREIN THE METHOD OF PROPORTION HAS BEEN HELD TO BE A RECO GNIZED METHOD FOR DISALLOWANCE U/S 14A OF THE ACT. 3. THAT THE WORTHY CIT(A)-3, LUDHIANA ERRED IN LAW AND ON FACTS IN NOT DELETING THE DISALLOWANCE OF RS. 12,94,605/-, OUT O F INTEREST PAID ON WORKING CAPITAL LIMIT, ON ACCOUNT OF ADDITION TO FI XED ASSETS (BUILDING) IN SPITE OF THE FACT THE COMPANY HAD ITS OWN SUFFICIENT FUNDS. DIRECTIONS BE GIVEN TO DELETE THE ADDITION OF RS. 1 2,94,605/- MADE OUT OF INTEREST PAID TO BANK ON CC ACCOUNT. 4. THAT THE WORTHY CIT(A)-3, LUDHIANA ERRED IN LAW AND ON FACTS IN NOT DELETING THE ADDITION OF RS.2,01,282/-, BEING PROPO RTIONATE INTEREST @ 3% LESS CHARGED ON LOANS ADVANCED TO SISTER CONCERN . DIRECTIONS BE GIVEN TO DELETE THE DISALLOWANCE OF R S.2,01,282/- AS THE APPELLANT HAD ITS SUFFICIENT OWNED FUNDS IN THE SHA PE OF CAPITAL & RESERVE. 5. THAT THE APPELLANT CRAVES, LEAVE TO ADD, AMEND, ALTER, MODIFY OR SUBSTITUTE ALL OR ANY OF THE ABOVE-MENTIONED GROUND S OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD AND DISPOSED OF. ITA NOS.1414 & 1415-CHD-2019- NAHAR POLY FILMS LTD., LUDHIANA 4 4. VIDE GROUND NO 1&2, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN HOLDING THAT SECTION 14A READ WITH RU LE 8D IS APPLICABLE IN ASSESSEES CASE. THE LD. COUNSEL SUBMITTED BEFOR E US THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE JURISDICTIONAL TRIBUNAL IN GROUP COMPANY CASE OSWAL WOOLEN MILLS LTD. VS. ACIT, ITA NO. 37/CHD/2015 PERTAINING TO THE ASSESSMENT YEAR 2010-11. THE LD. COUNSEL FURTHER SUBMITTED THAT NO NEW INVESTMENT WA S MADE IN THE PREVIOUS YEAR RATHER INVESTMENTS WERE REDUCED TO RS . 95.14 CR. FROM 105.64 CR. IN THE PRECEDING YEAR. THE LD. COUNSEL FURTHER CONTENDED THAT SINCE THE FA CTS AND THE ISSUE INVOLVED IN THE PRESENT CASE ARE SIMILAR TO T HE FACTS OF THE CASE AND ISSUE INVOLVED IN ITS GROUP COMPANY CASE, THIS ISSUE MAY BE DECIDED ACCORDINGLY. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE SUPPORTING THE FINDINGS OF THE LD. CIT(A) SUBMITTED THAT THE LD. C IT(A) HAS RIGHTLY DIRECTED THE AO TO RECOMPUTE THE DISALLOWANCE U/S 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES. SINCE THE FINDINGS OF THE LD. CIT(A) ARE AS PER THE PROVISIONS OF THE ACT AND IN ACCORDANCE WITH THE SE TTLED LAW, THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE. THE LD. DR HOWEVER, ADMITTED THAT THE TRIBUNAL HAS DEALT WITH THE IDENTICAL ISSUE IN THE GROUP COM PANY CASE AFORESAID. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD INCLUDING THE DECISION OF THE TRIBUNAL RENDERED IN THE CASE OF GROUP COMPANY. THE COORDINATE BENCH OF THE TRIBUNAL HAS DEALT WITH THE IDENTICAL ISSUE IN GROUP COMPANY CASE AND DIRECTED THE AO TO RESTRICT THE DI SALLOWANCE TO THE ITA NOS.1414 & 1415-CHD-2019- NAHAR POLY FILMS LTD., LUDHIANA 5 PROPORTIONATE AMOUNT COMPUTED BY THE ASSESSEE AFTER INCLUDING PERSONAL EXPENDITURE AND CERTAIN OTHER EXPENSES. THE FINDING S OF THE COORDINATE BENCH READ AS UNDER:- 6. SO FAR AS THE ADMINISTRATIVE EXPENSES ARE CONCE RNED, THE ASSESSEE HAS GIVEN A SCIENTIFIC FORMULA FOR CAL CULATING THE DISALLOWANCE OUT OF ADMINISTRATIVE EXPENSES. HO WEVER, WE FIND THAT THE ASSESSEE WHILE TAKING THE TOTAL ADMINISTRATIVE EXPENSES HAS NOT CONSIDERED THE PERS ONAL EXPENSES AND OTHER ALLOWANCES. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE, BEFORE US, HAS SUBM ITTED ANOTHER CHART, WHEREIN, THE PERSONNEL EXPENSES AND OTHER ALLOWANCES HAVE BEEN INCLUDED AND THEREBY THE PROPORTIONATE OF DISALLOWANCE OUT OF ADMINISTRATIVE EXPENSES HAS BEEN COMPUTED AS UNDER: - DISALLOWANCE U/S 14A IN CASE OF REGULAR COMPUTATION AMOUNT (IN RS.) 1.AMOUNT OF DIVIDEND INCOME 10656014 2. OPERATING INCOME 6336864325 3 % OF DIVIDEND INCOME 0.00168 4. AMOUNT OF EXPENSES 556724538 5. PROPORTIONATE AMOUNT OF DISALLOWANCE OF EXPENSED TO EARN DIVIDEND 936183 DETAILS OF EXPENSES A. INTEREST PAID TO OTHERS 21202161 B. ADMINISTRATIVE EXPENSES 130240267 C. PERSONAL EXPENSES AND OTHER ALLOWANCES 405282110 556724538 7. NONE OF THE LOWER AUTHORITIES HAVE POINTED OUT A NY DEFECT IN THE COMPUTATION OF PROPORTIONATE DISALLOW ANCE COMPUTED BY THE ASSESSEE EXCEPT THAT CERTAIN PART O F THE ADMINISTRATIVE EXPENSES WERE NOT TAKEN INTO CONSIDE RATION WHICH HAS BEEN TAKEN INTO CONSIDERATION IN THE COMPUTATION MADE ABOVE. ITA NOS.1414 & 1415-CHD-2019- NAHAR POLY FILMS LTD., LUDHIANA 6 EVEN THE ASSESSEE HAS CLAIMED THAT IT HAS NOT INCUR RED ANY ADMINISTRATIVE EXPENSES FOR EARNING OF TAX-EXEMPT I NCOME. THE ASSESSING OFFICER IN THIS RESPECT HAS NOT RECOR DED ANY DISSATISFACTION TAKING INTO CONSIDERATION THE ACCOU NTS OF THE ASSESSEE. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. 328 ITR 81 HA S HELD THAT UNDER SECTION 14A OF THE ACT, RESORT CAN BE MADE TO RULE 8D OF THE INCOME TAX RULES FOR DETERMINING THE AMOUNT OF EXPENDITURE IN RELATION TO EXEMPT INCOME, IF, THE AO IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLA IM MADE BY THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. THE SATISFACTION OF THE ASSESSING OFFICER HAS TO BE ARR IVED AT, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. SUB SECTION (2) DOES NOT IPSO FACTO ENABLE THE ASSESSING OFFICE R TO APPLY THE METHOD PRESCRIBED BY THE RULES STRAIGHTAW AY WITHOUT CONSIDERING WHETHER THE CLAIM MADE BY THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IS CORRECT. THE SATISFACTION OF THE ASSESSING OFFICER MUST BE ARRIV ED AT ON AN OBJECTIVE BASIS. IN A SITUATION WHERE THE ACCOUN TS OF THE ASSESSEE FURNISH AN OBJECTIVE BASIS FOR THE ASSESSI NG OFFICER TO ARRIVE AT A SATISFACTION IN REGARD TO TH E CORRECTNESS OF THE CLAIM OF THE ASSESSEE, THERE WOU LD BE NO WARRANT FOR TAKING RECOURSE TO THE METHOD PRESCRIBE D BY THE RULES. AN OBJECTIVE SATISFACTION CONTEMPLATES A NOTICE TO THE ASSESSEE, AN OPPORTUNITY TO THE ASSESSEE TO PLACE ON RECORD ALL THE RELEVANT FACTS INCLUDING HIS ACCOUNT S AND IN THE EVENT THAT HE COMES TO THE CONCLUSION THAT HE I S NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE. WE MAY F URTHER OBSERVE THAT THE HON'BLE DELHI HIGH COURT IN A RECE NT DECISION HAS FURTHER GIVEN A SIMILAR VIEW IN THE CA SE OF 'CIT VS. TAIKISHA ENGINEERING INDIA LTD.' (SUPRA) A ND HAS HELD THAT THE AO HAVING REGARD TO THE ACCOUNTS OF T HE ASSESSEE IS REQUIRED TO RECORD HIS SATISFACTION THA T THE SELF OR VOLUNTARILY EXPENDITURE OFFERED BY THE ASSESSEE OR CLAIM THAT NO EXPENDITURE HAS BEEN INCURRED BY THE ASSESS EE IN RELATION TO EARNING OF EXEMPT INCOME WAS NOT CORREC T OR THE SAME WAS UNSATISFACTORY ON EXAMINATION OF THE ACCOUNTS OF THE ASSESSEE. WITHOUT RECORDING SUCH A SATISFACTION, HE CANNOT PROCEED TO APPLY RULE 8D FO R THE COMPUTATION OF DISALLOWANCE UNDER SECTION 14A. HOW EVER, AS OBSERVED ABOVE, IN THE CASE IN HAND, THE ASSESSI NG OFFICER HAS NOT FOLLOWED THE GUIDELINES OF OBJECTIV E SATISFACTION AS LAID DOWN BY THE HON'BLE BOMBAY HIG H COURT IN THE CASE OF GODREJ & BOYCE (SUPRA) WHILE MAKING THE DISALLOWANCE. NEITHER THE ASSESSING OFF ICER NOR THE LD. CIT(A) HAS POINTED OUT ANY DEFECT IN TH E WORKING GIVEN BY THE ASSESSEE IN COMPUTING SUO MOTU DISALLOWANCE EXCEPT THAT A CERTAIN PART OF TAX RELA TING TO THE PERSONNEL EXPENDITURE AND OTHER ALLOWANCES WERE NOT ITA NOS.1414 & 1415-CHD-2019- NAHAR POLY FILMS LTD., LUDHIANA 7 TAKEN INTO CONSIDERATION. IN THE WORKING GIVEN BEFO RE US, AS REPRODUCED ABOVE, WHEREBY, THE PROPORTIONATE AMO UNT OF DISALLOWANCE OF EXPENDITURE TO EARN DIVIDEND INC OME HAS BEEN COMPUTED AT RS. 9,36,183/- BY INCLUDING TH E PERSONNEL EXPENDITURE AND CERTAIN OTHER EXPENSES, A S NOTED ABOVE. IN VIEW OF THIS, THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES IS RESTRICTED TO RS. 9,36,1 83/-. HOWEVER, THE ASSESSEE WILL GET THE BENEFIT / SET OF F AT THE SUO MOTU DISALLOWANCE OFFERED BY THE ASSESSEE IN TH E RETURN OF INCOME AT RS. 1,33,928/- AND ACCORDINGLY THE ADDITION IS RESTRICTED TO RS. 8,02,255/-. 7. IN THE SAID CASE THE AO HAD NOT RECORDED ANY DIS SATISFACTION TAKING INTO CONSIDERATION THE ACCOUNTS OF THE ASSESSEE. IN THE PRESENT CASE ALSO THE CONTENTION OF THE LD. COUNSEL IS THAT SINCE THE AO HAD COMPUTED THE DISALLOWANCE IN A MECHANICAL MANNER, THE LD. CIT(A) OUGHT TO HAVE DELETED THE ADDITION MADE BY THE AO. SINCE THE COORDINATE BENCH HAS ALREADY DEALT WITH THE IDENTICAL ISSUE IN THE SIMILAR SET OF FACTS, WE DO NOT FIND ANY REASON TO TAKE A DIFFERENT VIEW. HENCE, RESPECTFULLY FOLLOWING THE O RDER DATED 03.07.2019 PASSED BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF OSWAL WOOLEN MILLS LTD. VS. ACIT (SUPRA) SET ASIDE THE FINDINGS OF THE LD. CIT(A) A ND SEND THE ISSUE BACK TO THE AO TO DECIDE THE ISSUE AFRESH IN TERMS OF THE AFORESAID ORDER AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING H EARD TO THE APPELLANT/ASSESSEE. 8. VIDE GROUND NO 3 THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS. 12,94, 605/- MADE BY THE AO OUT OF THE INTEREST PAID ON WORKING CAPITAL LIMIT ON CC ACCOUNT, IGNORING THE FACT THAT THE COMPANY HAD ITS OWN SUFFICIENT FUNDS. THE LD. COUNSEL SUBMITTED BEFORE US THAT THIS ISSUE IS COVERED IN FAVOUR OF T HE ASSESSEE BY THE DECISION OF THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF GROUP COMPANY M/S MONTE ITA NOS.1414 & 1415-CHD-2019- NAHAR POLY FILMS LTD., LUDHIANA 8 CARLO FASHION LTD. ITA NO 1341/CHD/2016. THE LD. COUNSEL FURTHER RELIED ON THE FOLLOWING CASES TO SUBSTANTIATE HIS CONTENTION: - 1. ACIT VS. JANAK GLOBAL RESOURCES PVT. LTD 175 IT D 365 (CHD) 2. BRIGHT ENTERPRISES (P) LTD. VS. CIT 381 ITR 107 (PB.) 3. CIT VS. KAPSON ASSOCIATES 381 ITR 204 (PB) 4. CIT VS. MAX INDIA 398 ITR 209 (PB) 5. CIT VS. RELIANCE INDIA LTD 410 ITR 466 (SC) 6. GODREJ & BOYCE MANUFACTURING CO LTD. VS. DCIT 3 94 ITR 449 (SC) 9. ON THE OTHER HAND, THE LD. DR VEHEMENTLY SUPPORT ED THE ORDER PASSED BY THE LD. CIT(A) AND SUBMITTED THAT THERE IS NO LEGAL OR FACTUAL INFIRMITY IN THE FINDINGS OF THE LD. CIT(A) TO INTERFERE WITH THE SA ME. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PART IES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE CASES RELIED UPON BY THE LD. COUNSEL. AS POINTED OUT BY THE LD. COUNSEL, THIS ISSUE IS COVER ED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNA L IN M/S MONTE CARLO FASHIONS LTD . RELIED UPON BY THE LD. COUNSEL. THE OPERATIVE PAR T OF THE ORDER READS AS UNDER: - 11. IT IS ALSO TO BE NOTED THAT THE FINANCE ACT 200 3 HAS AMENDED SECTION 36(1)(III) BY INSERTING A PROVISO T O THE EXISTING PROVISION W.E.F 01.04.2004 RELEVANT TO ASS ESSMENT YEAR 2004-05. THE PROVISO INSERTED TO THE EXISTING PROVISION OF SECTION 36(1)(III) IS REPRODUCED AS UN DER: PROVIDED THAT ANY AMOUNT OF THE INTEREST PAID, IN RESPECT OF CAPITAL BORROWED FOR ACQUISITION OF AN ASSET FOR EX TENSION OF EXISTING BUSINESS OR PROFESSION (WHETHER CAPITALIZE D IN THE BOOKS OF ACCOUNT OR NOT); FOR ANY PERIOD BEGINNING FROM THE DATE ON WHICH THE CAPITAL WAS BORROWED FOR ACQUISIT ION OF THE ASSET TILL THE DATE ON WHICH SUCH ASSET WAS FIRST P UT TO USE, SHALL NOT BE ALLOWED AS DEDUCTION. ITA NOS.1414 & 1415-CHD-2019- NAHAR POLY FILMS LTD., LUDHIANA 9 THE JUDGMENT OF VARIOUS COURTS IN THE CASE OF HERO CYCLES (P) LTD. VS. CIT, LUDHIANA C.A. NO. 514 OF 2008 DT. 05/11/2015, BRIGHT ENTERPRISES PVT. LTD. VS. CIT, JALANDHAR (2016) 381 ITR 107 (P&H) HELD THAT NO DISALLOWANCE OF INTEREST IS CALLED FOR WHERE THE AS SESSEE HAS GOT SUFFICIENT OWN FUNDS. THE ASSESSING OFFICER IS DIRECTED TO GO THROUGH THE FUND POSITION NAMELY CAP ITAL AND INTEREST FREE ADVANCES, RESERVES AND SURPLUS TO DETERMINE WHETHER ANY BORROWED FUNDS HAVE BEEN UTIL IZED MORE THAN AVAILABLE OWN FUNDS AND TAKE A DECISION K EEPING IN VIEW THE DECISIONS RENDERED ABOVE. IF SUFFICIENT OWN FUNDS ARE AVAILABLE, NO DISALLOWANCE IS CALLED FOR. THIS GROUND MAY BE TREATED AS SET ASIDE TO THE FILE OF A SSESSING OFFICER. 11. THE COORDINATE BENCH OF THE TRIBUNAL HAS DEALT WITH THE IDENTICAL ISSUE IN THE SIMILAR FACTS OF THE CASE IN GROUP COMPANY CASE AFORESAID. HENCE, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINA TE BENCH, WE SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND SEND THE ISSUE BACK TO THE AO FOR DECIDING THE SAME IN TERMS OF ORDER DATED 12.10.2017 PASSED IN T HE CASE OF MONTE CARLO FASHION (SUPRA). 12. VIDE GROUND NO 4 THE ASSESSEE HAS CHALLENGED TH E ACTION OF THE LD. CIT(A) IN CONFIRMING DISALLOWANCE OF RS 2,01,282/- MADE BY THE AO ON PROPORTIONATE BASIS ON LOAN GIVEN TO ITS SISTER CON CERN. THE LD. COUNSEL SUBMITTED BEFORE US THAT THIS ISSUE IS COVERED IN F AVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE ITA NO 1340/CHD/2016 FOR THE ASSESSMENT YEAR 2010-11. THE LD. COUNSEL ACCORDINGLY SUBMITTED THAT SINCE TH E FINDINGS OF THE LD. CIT(A) ARE CONTRARY TO THE DECISION OF THE TRIBUNAL, THE S AME MAY BE SET ASIDE. 13. ON THE OTHER HAND, THE LD. DR FAIRLY ADMITTED T HAT THE TRIBUNAL HAS ALREADY DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSE E IN ASSESSEES OWN CASE ITA NOS.1414 & 1415-CHD-2019- NAHAR POLY FILMS LTD., LUDHIANA 10 REFERRED BY THE LD. COUNSEL HOWEVER, THE LD. DR SUP PORTED THE DECISION OF THE LD. CIT(A). 14. AS POINTED OUT BY THE LD. COUNSEL, THE TRIBUNAL HAS ALREADY DEALT WITH THIS ISSUE AND HAS DECIDED THE SAME IN FAVOUR OF TH E ASSESSEE IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010-11. THE RELEVANT PARA OF THE ORDER DATED 15.05.2018 PASSED BY THE COORDINATE BENCH READS AS UNDER:- 7. WE HAVE GONE THROUGH THE BALANCE SHEET PRODUCED BY THE ASSESSEE WHICH SHOWS A RESERVE AND SURPLUS OF RS. 1 42.47 CRORES. THE ADVANCE AMOUNT AGAINST THE SAID RESERVES AND SURPLU SES WAS RS. 3 CRORE ONLY, THAT TOO, WAS ADVANCED BY THE ASSESSEE ON AN INTEREST OF 8% WHICH THE ASSESSEE CLAIMED WAS OF BUSINESS EXPED IENCY. WE FIND THAT THE CASE OF THE ASSESSEE IS THUS SQUARELY COVE RED BY THE AFORESAID DECISIONS OF THE HON'BLE SUPREME COURT IN THE CASE OF HERO CYCLE P.LTD. VS. CIT (SC) AND OF THE HON'BLE PUNJAB & HAR YANA HIGH COURT IN THE CASE OF BRIGHT ENTERPRISES PVT. LTD VS. CIT (SUPRA) AND OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE U TILITIES AND POWER LTD (SUPRA) WHEREIN THE HON'BLE COURTS HAVE H ELD THAT WHERE THE OWN FUNDS OF THE ASSESSEE WERE SUFFICIENT TO ME ET THE INTEREST FREE ADVANCES GIVEN DURING THE YEAR, THEN THE PRESUMPTIO N WOULD ARISE THAT SUCH ADVANCES OR INVESTMENTS HAD BEEN MADE OUT OF T HE OWN FUNDS OF THE ASSESSEE. HENCE, RESPECTFULLY FOLLOWING THE AFO RESAID DECISIONS, AND IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE C ASE, WE DO NOT FIND ANY JUSTIFICATION ON THE PART OF THE LOWER AUTHORIT IES IN MAKING THE DISALLOWANCE ON THIS ISSUE. THE DISALLOWANCE MADE O N THIS ISSUE, THEREFORE, IS ORDERED TO BE DELETED. 15. SINCE, THIS ISSUE IS COVERED IN FAVOUR OF THE A SSESSEE BY THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE ITA NO 1304 /CHD/2016 (SUPRA) WE FIND NO REASON TO TAKE A DIFFERENT VIEW. HENCE, RES PECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH, WE ALLOW THIS GRO UND OF APPEAL AND SET ASIDE THE FINDINGS OF THE LD. CIT(A). ITA NOS.1414 & 1415-CHD-2019- NAHAR POLY FILMS LTD., LUDHIANA 11 ITA NO. 1415/CHD/2019 AY 2012-13 IN THE PRESENT CASE THE ASSESSEE FILED ITS RETURN F OR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME OF RS. 9 ,35,01,130/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE AO COMPLETED ASSESSME NT UNDER SECTION 143(3) OF THE ACT AND DETERMINED THE TOTAL INCOME AT RS. 9,80 ,25,690/- UNDER THE NORMAL PROVISIONS OF THE ACT INTER ALIA MAKING ADDITION OF RS. 41,58,517/- U/S 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES A ND RS. 3,66,039/- U/S 36(1)(III) OF THE ACT. IN THE FIRST APPEAL THE LD. CIT(A) HELD THAT DISALLOWANCE U/S 14A READ WITH RULE 8D IS APPLICABL E IN THIS CASE, HOWEVER, DIRECTED THE AO TO RECOMPUTE THE DISALLOWA NCE UNDER RULE 8D BY CONSIDERING ONLY THOSE INVESTMENTS FROM WHERE TH E EXEMPT INCOME HAS BEEN RECEIVED. THE LD. CIT(A) FURTHER CONFIRMED THE ADDITION MADE U/S 36(1)(III). THE ASSESSEE IS IN APPEAL BEFORE TH IS TRIBUNAL AGAINST THE SAID FINDINGS OF THE LD. CIT(A). 2. THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER P ASSED BY THE LD. CIT(A) ON THE FOLLOWING GROUNDS: - 1. THAT THE WORTHY CIT(A)-3, LUDHIANA, ERRED IN LAW AN D ON FACTS IN NOT DIRECTING THE LD. ASSESSING OFFICER, NOT TO APPLY R ULE 8D, IN VIEW OF THE FACT THAT NO DIS-SATISFACTION WITH COGENT REASONS W AS RECORDED IN THE ORDER REGARDING THE CORRECTNESS OF THE CLAIM OF EXP ENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. DIRECTIONS BE GIVEN NOT TO APPLY RULE 8D AS THE PRO VISIONS OF SECTION 14A (2) ARE NOT APPLICABLE IN THE CASE HEREIN. ITA NOS.1414 & 1415-CHD-2019- NAHAR POLY FILMS LTD., LUDHIANA 12 2. THAT THE WORTHY CIT(A)-3, LUDHIANA, ERRED IN LAW AN D ON FACTS IN NOT DELETING THE ADDITIONAL DISALLOWANCE U/S 14A READ W ITH RULE 8D OF THE INCOME TAX ACT OF RS. 41,58,517/-. DIRECTIONS MAY BE GIVEN TO MAKE THE DISALLOWANCE U/ S 14A AS COMPUTED ON PROPORTION BASIS BY THE APPELLANT COMPA NY IN THE RETURN, IN VIEW OF THE DECISION OF VARIOUS APPELLATE COURTS WHEREIN THE METHOD OF PROPORTION HAS BEEN HELD TO BE A RECOGNIZED METH OD FOR DISALLOWANCE U/S 14A OF THE ACT. 3. THAT THE WORTHY CIT(A)-3, LUDHIANA ERRED IN LAW AND ON FACTS IN NOT DELETING THE DISALLOWANCE OF RS.3,66,039/-, OUT OF INTEREST PAID ON WORKING CAPITAL LIMIT, ON ACCOUNT OF ADDITION TO FI XED ASSETS (BUILDING) INSPIRE OF THE FACT THE COMPANY HAD ITS OWN SUFFICI ENT FUNDS. DIRECTIONS BE GIVEN TO DELETE THE ADDITION OF RS.3, 66,039/- MADE OUT OF INTEREST PAID TO BANK ON CC ACCOUNT. 4. THAT THE APPELLANT CRAVES, LEAVE TO ADD, AMEND, ALT ER, MODIFY OR SUBSTITUTE ALL OR ANY OF THE ABOVE-MENTIONED GROUND S OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD AND DISPOSED OF. 3. GROUND NO.1 &2 OF THIS APPEAL ARE IDENTICAL TO T HE GROUND NO 1&2 OF THE ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 20 11-12 DISCUSSED AND DECIDED ABOVE. WE HAVE SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND SEND T HE IDENTICAL ISSUE BACK TO THE AO TO DECIDE THE SAME A FRESH IN TERMS OF THE ORDER PASSED BY THE COORDINATE BENCH OF THE TRIBUNAL IN OSWAL WOOLEN MILLS LTD. VS. ACIT (SUPRA) AFTER AFFORDING A REASONABLE OPPORTUNITY O F BEING HEARD TO THE APPELLANT/ASSESSEE. FURTHER, THERE IS NO MATERIAL C HANGE IN THE FACTS OF THE PRESENT CASE. WE THEREFORE, CONSISTENT WITH OUR SAI D FINDINGS SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE AO TO DEC IDE THE ISSUE IN TERMS OF THE ORDER PASSED BY THE COORDINATE BENCH IN THE CASE OF OSWAL WOOLEN MILLS LTD. VS. ACIT (SUPRA). ITA NOS.1414 & 1415-CHD-2019- NAHAR POLY FILMS LTD., LUDHIANA 13 4. SIMILARLY, GROUND NO 3&4 OF THE PRESENT APPEAL A RE IDENTICAL TO GROUND NO 3 OF THE ASSESSEES APPEAL FOR THE ASSESS MENT YEAR 2011-12 DISCUSSED AND DECIDED ABOVE. WE HAVE SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND SEND THE ISSUE BACK TO THE AO FOR DECIDI NG THE SAME IN TERMS OF ORDER DATED 12.10.2017 PASSED IN THE CASE OF MONTE CARLO FASHION (SUPRA). FURTHER, THERE IS NO MATERIAL CHANGE IN THE FACTS O F THE PRESENT CASE. WE THEREFORE, CONSISTENT WITH OUR SAID FINDINGS SET AS IDE THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) AND DIRECT THE AO TO DECIDE THE I SSUE IN TERMS OF THE ORDER PASSED BY THE COORDINATE BENCH IN THE CASE OF MONTE CARLO FASHION (SUPRA). (SUPRA). IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE AR E PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 21 ST OCT.,2021 SD/- SD/- ( N.K. SAINI) (R.L.NEGI) / VICE PRESIDENT / JUDICIAL MEMBER DATED : 21.10.2021 .. ,-.- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. / / CIT 4. / ( )/ THE CIT(A) 5. - 2 , %2 , 4 / DR, ITAT, CHANDIGARH 6. / GUARD FILE / BY ORDER, / ASSISTANT REGISTRAR