P.D. Cotton Pvt. Ltd., Ahmedabad V. The Addl. CIT, Range-5, ( Now ACIT, Circle-3(1)(1), ), Ahmedabad

ITA 1453/AHD/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5881 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 21-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MAHESH JIWADE
• Keywords: Transactions in derivatives; Earning of tax free income; Commercial expediency; Revenue expenditure
• Section: 14A; 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE, SHRI N. K. BILLAIYA , ACCOUNTANT MEMBER AND SHRI S. S. GODARA, JUDICIAL MEMBER ITA NO. 1453/AHD/2015 (ASSESSMENT YEAR : 2011-12) P.D.COTTON PVT. LTD., 30, ADARSH SOCIETY, SWASTIK CHAR RASTA, C. G. ROAD, NAVARANGPURA, AHMEDABAD-380009 APPELLANT VS. ACIT, CIRCLE 3(1)(1), AHMEDABAD RESPONDENT PAN: AAECP4051B / BY ASSESSEE : SHRI PRITESH SHAH, A.R. / BY REVENUE : SHRI MAHESH JIWADE, SR. D.R. /DATE OF HEARING : 15.03.2018 /DATE OF PRONOUNCEMENT : 23.03.2018 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2011-12 ARISES AGAINST THE CIT(A)-9, AHMEDABADS ORDER DATED 11.03.2015, IN C ASE NO. CIT(A)- XI/441/ADDL.CITR-5/13-14, IN PROCEEDINGS U/S. 143(3 ) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. ITA NO. 1453/AHD/15 [P.D.COTTON PVT. LTD. VS. ACIT ] A.Y. 2011-12 - 2 - HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE ASSESSEES FIRST SUBSTANTIVE GROUND SEEKS TO REVERSE BOTH THE LOWER AUTHORITIES ACTION DISALLOWING ITS COMMISSION EXPE NDITURE OF RS.14 LACS FOR PURCHASE OF COTTON BALES SINCE IT TRADES IN COTTON BALES AND COMMISSION BUSINESS. THE ASSESSEE HAD PAID RS.2LACS AND RS.4LACS EACH TO FOUR HUFS ASHISH R. TRIVEDI, DAXSHESH J. PATEL, JAYANTILAL N. PATEL AND BHAVESH J. PATEL; RESPECTIVELY. IT THEREFORE RAISED THE IMPUGNED REVENUE EXPENDITURE C LAIM QUA ALL FOUR SUMS TOTALING TO 14LACS. THE ASSESSING OFFICER OBSERVED IN ASSES SMENT ORDER THAT THAT THE ASSESSEE FIRST OF ALL COULD NOT FURNISH ANY COGENT REPLY THE RELEVANT SERVICE RENDERED. HE THEREAFTER DOUBTED GENUINENESS OF THE IMPUGNED CLAI M ON THE GROUND THAT IT IS NOT UNDERSTANDABLE AS TO HOW AN HUF COULD RENDER SUCH C OMMISSION SERVICES. THE CIT(A) AFFIRMED THE IMPUGNED DISALLOWANCE AS FOLLOW S: 2.2 I HAVE CAREFULLY CONSIDERED THE CONTENTIONS A S WELL AS THE CASE LAWS RELIED UPON BY THE APPELLANT. I AM UNABLE TO CONVINCE MYSE LF ABOUT THE ALLOWABILITY OF COMMISSION EXPENDITURE. APPARENTLY THERE WERE NO WR ITTEN -AGREEMENT WITH THE COMMISSION AGENTS, NONE OF THE AGENTS WERE PRODUCED BEFORE THE ASSESSING OFFICER. EXCEPT FOR PROCURING PURCHASE OF COTTON 'BALES AS P ER APPELLANT PLEA THIS YEAR, THE AGENTS HAVE NOT RENDERED ANY SERVICES TO THE APPELL ANT AND MORE IMPORTANTLY, NO EVIDENCE WHATSOEVER HAS BEEN PRODUCED BEFORE AO IN THIS REGARD. BEFORE ME ALSO, THE APPELLANT COULD NEITHER PRODUCE ANY WRITTEN AGR EEMENT NOR WERE THE COMMISSION AGENTS PRODUCED BEFORE ME. EVEN THE PROO F OF ANY SERVICES BEING RENDERED BY THE AGENTS TO THE APPELLANT WAS NOT PRO DUCED BEFORE ME. UNDER THE CIRCUMSTANCES, THE APPELLANT IS UNABLE TO ESTABLISH THAT THE COMMISSION EXPENDITURE IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OF THE APPELLANT. APPARENTLY THERE IS NO REASONABIIITY OF PAYING SO M UCH COMMISSION UNLIKE LAST YEARS . IN THE SIMILAR CIRCUMSTANCES DIFFERENT COUR TS HAVE UPHELD THE ADDITION, RELIANCE IS PLACED ON THE CASE AS DISCUSSED HEREBEL OW:- IN THE CASE OF LACHRNINARAYAN MADAN LAL V. CIT [197 2] 86 ITR 439 (SC), HON'BLE APEX COURT HAS HELD AS UNDER:- '... ITO CAN EXAMINE WHETHER COMMISSION IS PROPERLY DEDUCTIBLE, EVEN IF IT IS PAID UNDER AGREEMENT - THE MERE EXISTENCE OF AN AGREEMENT BETWEEN THE ASSESSEE AND ITS SELLING AGENTS OR PAYMENT OF CERTA IN AMOUNTS AS COMMISSION, DOES NOT BIND THE ITO TO HOLD THAT THE PAYMENT WAS MADE EXCLUSIVELY AND WHOLLY FOR THE PURPOSE OF THE ASSES SEE'S BUSINESS. IT IS STILL OPEN TO THE ITO TO CONSIDER THE RELEVANT FACTS.AND DETERMINE FOR HIMSELF WHETHER THE COMMISSION SAID TO HAVE BEEN PAID TO TH E SELLING AGENTS OR ANY PART THEREOF IS PROPERLY DEDUCTIBLE UNDER SECTION 3 7(1) OF THE ACT....' ITA NO. 1453/AHD/15 [P.D.COTTON PVT. LTD. VS. ACIT ] A.Y. 2011-12 - 3 - HOWEVER, IN THE INSTANT CASE THERE ARE NO WRITTEN A GREEMENTS BETWEEN APPELLANT AND OTHER PARTIES. IN THE SIMILAR CIRCUMS TANCES THE HON'BLE DELHI HIGH COURT, IN THE CASE OF SCHNEIDER ELECTRIC INDIA LTD, VS. CIT - 304 ITR 360 (DEL.), HAS HELD THAT 'ON THE OTHER HAND, THE MATERIAL AGAINST THE ASSESS EE WAS THAT THERE WERE, ABSOLUTELY NO DETAILS OF ANY SERVICES RENDERED BY ' R' IN THE FORM OF SALE ORDERS, ETC. THERE WAS NO CONFIRMATION OF ANY ARRAN GEMENT BETWEEN THE PARTIES AND THERE WAS CONSIDERABLE DOUBT THAT IN TH E NORMAL COURSE OF BUSINESS DEALINGS, SUCH A TRANSACTION COULD BE ENTE RED INTO ON THE BASIS OF AN ORAL UNDERSTANDING, PARTICULARLY WHEN THERE WAS NOTHING TO SUGGEST THAT THE ASSESSEE AND 'R' HAD ANY LONG STANDING RELATION SHIP. [PARA 10] THE TRIBUNAL WAS RIGHT IN HOLDING THAT THERE WAS AB SOLUTELY NO MATERIAL ON RECORD TO SUGGEST THAT 'R' HAD PROCURED ANY SALE OR DERS FOR THE ASSESSEE. THE PRODUCTION, OF A FEW BILLS OR PAYMENTS HAVING B EEN MADE BY ACCOUNT- PAYEE CHEQUES COULD NOT, BY ITSELF, SHOW THAT 'JR' HAD PROCURED SALE ORDERS FOR THE ASSESSEE. APART FROM AN INTERNAL NOTE, THER E WAS NO EVIDENCE OF ARTY CORRESPONDENCE OR ANY PERSONAL MEETINGS, ETC., BETW EEN THE ASSESSEE AND 'R' TO SUGGEST THAT THERE WAS ANY RELATIONSHIP ON THE B ASIS OF WHICH 'R' PROCURED, SOME ORDERS FOR THE ASSESSEE FOR WHICH IT WAS ENTITLED TO RECEIVE COMMISSION. MOREOVER, THE UNDERSTANDING BETWEEN THE PARTIES WAS AN ORAL UNDERSTANDING AND IT APPEARED TO BE DOUBTFUL THAT S UCH AN ORAL UNDERSTANDING COULD BE ARRIVED AT WITHOUT ANY LONG STANDING RELATIONSHIP HAVING BEEN ESTABLISHED BETWEEN THE ASSESSEE AND 'R ', IT SEEMED TO BE A BIT OUT OF PLACE THAT THE PARTIES HAD ENTERED INTO AN O RAL BUSINESS RELATIONSHIP INVOLVING SUCH HUGE AMOUNTS OF MONEY OVER A PERIOD OF TIME, [PARA 13] THEREFORE, THE TRIBUNAL WAS JUSTIFIED IN DISALLOWIN G THE ASSESSEE'S CLAIM, [PARA 14]...' IN THE CASE OF APPELLANT, THE APPELLANT HAS PAID CO MMISSION TO RELATED PARTIES WITHOUT HAVING ANY WRITTEN, AGREEMENT AND H AS MISERABLY FAILED TO PRODUCE ANY EVIDENCE TO CORROBORATE THE SAME WITH ANY COGEN T EVIDENCE. THE HON'BLE GAUHATI HIGH COURT IN THE CASE OF ASSAM PESTICIDES & AGRO CHEMICALS VS. CIT - 145 CTR 213 (GAU), HAS HELD THAT '...THE TRIBUNAL TOOK INTO CONSIDERATION THE FINDIN G OF THE ASSESSING OFFICER THAT NO SERVICES WERE EVER RENDERED BY THE SISTER C ONCERN OR BY ITS PARTNERS CONSTITUTING THE FIRM WHICH REMAINED, UNDISTURBED I N THE ORDER OF THE COMMISSIONER (APPEALS). MERE PAYMENT BY ITSELF WOULD NOT ENTITLE AN ASSESSEE FOR DEDUCTION OF THE SAID EXPENDITURE UNLE SS THE SAME WAS PROVED TO BE PAID FOR COMMERCIAL CONSIDERATION. THE ONUS O F PROOF AT ALL RELEVANT TIME RESTED UPON THE ASSESSEE. IN THE ABSENCE OF AN Y SERVICES RENDERED BY THE AGENT, THERE COULD NOT BE ANY VALID REASON FROM COMMERCIAL POINT OF VIEW IN MAKING SUCH PAYMENT OF COMMISSION/DISCOUNT. THE INCREASE OF THE VOLUME OF BUSINESS BY ITSELF WITHOUT ANYTHING M ORE DID NOT IPSO FACTO LEAD TO THE CONCLUSION THAT THE SAID INCREASE WAS R ELATABLE TO THE SERVICE RENDERED BY SISTER CONCERN. THE CONCERNED AUTHORITY ON APPRAISAL OF FACT REACHED ITS CONCLUSION WHICH COULD NOT BE SAID TO B E PERVERSE. THE LAW DOES ITA NO. 1453/AHD/15 [P.D.COTTON PVT. LTD. VS. ACIT ] A.Y. 2011-12 - 4 - NOT PRESCRIBE ANY QUANTITATIVE TEST TO FIND OUT WHE THER THE ONUS IN A PARTICULAR CASE HAS BEEN DULY DISCHARGED. IT ALL DE PENDS ON THE FACTS AND. SITUATIONS OF THE CASE. A DECISION OF THE FINAL FAC T FINDING AUTHORITY IS CONCLUSIVE AND BINDING. THEREFORE, THE DISCOUNT /CO MMISSION PAID BY THE ASSESSEE TO ITS SISTER CONCERN WAS WITHOUT ANY COMM ERCIAL CONSIDERATION OR BUSINESS EXPEDIENCY AND WITHOUT ANY SERVICES RENDER ED BY THE SISTER CONCERN AND- THE AGREEMENT IN QUESTION WAS SHAM AND ONLY A DEVICE TO REDUCE THE INCOME OF THE FAMILY BY APPLYING TO THE OTHER MEMBERS OF \ FAMILY...' (EMPHASISPROVIDED). IN THE CASE OF CIT V. CALCUTTA AGENCY LIMITED - 19 ITR 191 (SC.), THE HON'BLE SUPREME COURT HAS HELD THAT IN ORDER TO CLAIM, THAT AN EXPENDITURE FALLS U/S.37(L), THE BURDEN OF PROVI NG THE NECESSARY FACTS IN THAT CONNECTION IS ON THE ASSESSEE. IN THE CASE OF CIT VS. CHANDRAVILAS HOTEL - 164 ITR 102 (GUJ.), THE HON'BLE COURT HAS HELD THAT '... THE ITO HAD, IN THE COURSE OF ASSESSMENT PROCE EDINGS, DOUBTED THE GENUINENESS OF THE PAYMENT OF COMMISSION TO R. THE ONLY EVIDENCE WHICH COULD ESTABLISH THE CLAIM OF THE ASSESSEE WAS THE S TATEMENT OF R AND IF HIS STATEMENT WAS TO HE DISBELIEVED, THERE WAS NO EVIDE NCE ON RECORD TO PROVE PAYMENT OF COMMISSION TO HIM, MERE PRODUCTION OF VO UCHERS SIGNED BY HIM WOULD NOT PROVE CLAIM MADE BY THE ASSESSEE. IT WAS ITS DUTY TO PROVE PAYMENT TO R SPECIALLY WHEN THE, ITO DOUBTED GENUIN ENESS THEREOF. BUT SINCE THE ASSESSEE DID NOT LEAD ANY EVIDENCE TO PRO VE SUCH PAYMENT AND THE STATEMENT MADE BY R WENT UNCHALLENGED, THERE WAS NO REASON TO DISBELIEVE R. THUS THE TRIBUNAL WAS NOT JUSTIFIED IN ALLOWING SUCH DEDUCTION OF THE AMOUNT OF COMMISSION CLAIMED AS BUSINESS EXPENDITUR E...' IN VIEW OF THE FACTS OF THE CASE AND JUDICIAL PRONO UNCEMENTS, I AM OF THE OPINION THAT THE A.O HAS RIGHTLY MADE THE ADDITION AND HIS ACTION IS UPHELD, ACCORDINGLY, THIS GROUND OF APPEAL IS DISMISSED. 3. HEARD RIVAL CONTENTIONS. LEARNED AUTHORIZED REP RESENTATIVE VEHEMENTLY CONTENDS THAT THE ASSESSEE HAS NOT PAID IMPUGNED PU RCHASE COMMISSION. HE TAKES US TO THE RELEVANT COMMISSION PAYMENT DETAILS IN PA PER BOOK TO SUBMIT THAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AS WELL AS ON F ACTS IN DISALLOWING THE IMPUGNED COMMISSION EXPENSES. HE MAKES IT CLEAR THAT ALL TH E PAYMENT TRANSACTIONS HAVE TAKEN PLACE THROUGH BANKING CHANNEL. THE PAYEES / FOUR HUFS ALREADY STAND ASSESSED QUA THE SAME. IT HIGHLIGHTS THE FACT TO H AVE DEDUCTED TDS UPON THE IMPUGNED PAYMENT AS WELL. MR. SHAH SUBMITS THAT TH IS TRIBUNALS CO-ORDINATE BENCHS DECISION HAVE ALREADY HELD THAT AN HUF CAN PERFORM SUCH COMMISSION ITA NO. 1453/AHD/15 [P.D.COTTON PVT. LTD. VS. ACIT ] A.Y. 2011-12 - 5 - SERVICES AS WELL. HE FURTHER EMPHASIZES THAT THE A SSESSEE HAD MADE SIMILAR PAYMENTS IN PRECEDING ASSESSMENT YEAR AS WELL WHERE IN NO DISALLOWANCE WAS MADE. THE REVENUE STRONGLY SUPPORTS BOTH THE LOWER AUTHOR ITIES ACTION DISALLOWING THE IMPUGNED COMMISSION EXPENDITURE. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO ABOVE RIVAL CONTENTION. WE FIND NO REASON TO AGREE WITH THE ASSESSEES PRECEDING ARGUMENTS. IT HAS COME ON RECORD THAT BOTH THE LOW ER AUTHORITIES HAVE MADE THE IMPUGNED DISALLOWANCE ON ACCOUNT OF ASSESSEES FAIL URE IN PROVING THE FOUR HUFS IN QUESTION TO HAVE RENDERED ALLEGED COMMISSION SERVIC ES. THE ASSESSEE HAS ADMITTEDLY NOT PRODUCED KARTA OF ANY SUCH HUFS TO B UTTRESS ITS COMMISSION PAYMENT CASE. WE RATHER FIND THAT THERE WERE TWO P AYEE HUFS IN PRECEDING ASSESSMENT YEAR WHICH ARE DIFFERENT FROM THE FOUR B EFORE US IN THE IMPUGNED ASSESSMENT YEAR. WE THEREFORE CONCLUDE THAT IT IS A CASE OF NOT PROVING SERVICES RENDERED BY THESE FOUR HUFS THAN A CASE OF A LEGAL DISPUTE AS ALLEGED BY THE ASSESSEE. WE ACCORDINGLY AFFIRM BOTH THE LOWER AUT HORITIES ACTION IN MAKING THE IMPUGNED DISALLOWANCE OF COMMISSION PAYMENT OF RS.1 4LACS. 4. THE ASSESSEES SECOND SUBSTANTIVE GROUND IS THAT THE ASSESSING OFFICER AS WELL AS CIT(A) HAVE ERRED IN LAW AS WELL AS ON FACT S IN DISALLOWING ITS LOSS CLAIM OF RS.8,86,470/- BY INVOKING SECTION 43(5) OF THE ACT THEREBY CONCLUDING THAT THE LOSS IS SPECULATIVE IN NATURE. LEARNED COUNSEL TAKES US TO ASSESSMENT FINDINGS THAT THE ASSESSEE WAS ENGAGED IN DERIVATIVE TRANSACTIONS OF COMMODITY THAN IN SPECULATIVE ONE. WE FIND THAT THERE IS NO DISCUSSION AS TO WHE THER THE SAID TRANSACTIONS ARE ENTERED IN F&O SEGMENT (FORWARD AND OPTION). LEARN ED COUNSEL HIMSELF IS VERY FAIR IN SUBMITTING THAT LARGER INTEREST OF JUSTICE WOULD BE MET IN CASE THE ISSUE IS REMITTED BACK TO THE ASSESSING OFFICER FOR RELEVANT FACTUAL VERIFICATION. THE REVENUE IS FAIR ENOUGH IN NOT OPPOSING THE SAME. WE THEREFORE REST ORE THE INSTANT SECOND SUBSTANTIVE ISSUE BACK TO THE ASSESSING OFFICER FOR CARRYING OUT NECESSARY FACTUAL VERIFICATION AS PER LAW AFTER AFFORDING ADEQUATE OP PORTUNITY OF HEARING TO THE ASSESSEE. ITA NO. 1453/AHD/15 [P.D.COTTON PVT. LTD. VS. ACIT ] A.Y. 2011-12 - 6 - 5. THE ASSESSEES THIRD SUBSTANTIVE GROUND CHALLENG ES CORRECTNESS OF BOTH THE LOWER AUTHORITIES ACTION DISALLOWING INTEREST EXPE NSES OF RS.8,78,982/-. THE CIT(A)S FINDINGS UNDER CHALLENGE DISCUSS AT LENGTH ENTIRE FACTS WHILST GRANTING PART RELIEF AS UNDER: 4.2 I HAVE CAREFULLY CONSIDERED THE CONTENTION OF THE APPELLANT. I AM NOT INCLINED TO AGREE WITH THE CONTENTION OF A.O FOR TH E DISALLOWANCE OF INTEREST ON THE PAYMENT OF FLAT. THE APPELLANT HAS GIVEN ADVANCE OF RS. 91,00,000/- FOR FLAT DURING THE YEAR, THE TITLE OF WHICH REMAINED YET TO BE ACQ UIRED DURING THE YEAR. THE LD. A.O. HAS ALLOWED INTEREST AT THE RATE OF 12% OF RS. 1,55,802/-. I AM IN AGREEMENT WITH THE CONTENTION OF THE APPELLANT WITH REGARD TO ADDITION ON THE ADVANCE GIVEN ON FLAT. CONSIDERING THE CASE LAWS RELIED UPON BY T HE APPELLANT, THE INITIAL PAYMENT ON ACCOUNT OF INTEREST AT THE RATE OF 12% ON THE AD VANCE GIVEN FOR FLAT IS DELETED. HOWEVER, I AM NOT CONVINCED WITH THE CONTENTION OF THE APPELLANT ON THE DISALLOWANCE ON ACCOUNT OF INTEREST DISALLOWANCE RS .8,78,982/- ON THE ADVANCE GIVEN TO GODIJI REALTY PVT. LTD. WHICH IS THE SISTE R CONCERN OF THE APPELLANT COMPANY. THE APPELLANT COMPANY HAS GIVEN AMOUNT OF RS. 12,50,40,980/- GODIJI REALITY PRIVATE LIMITED ON WHICH IT HAS CHARGED INT EREST AT THE RATE OF 6 % ONLY. I FIND NO INFIRMITY IN THE ACTION OF ID. A.O IN CHARG ING INTEREST AT THE RATE OF 12%. THERE IS NO FORCE IN THE CONTENTION OF APPELLANT WI TH REGARD TO THE ADDITION ON ACCOUNT OF CHARGING INTEREST AT THE RATE OF 12%. TH E BURDEN OF PROVING, THAT THE MONEYS BORROWED HAS NOT BEEN UTILIZED FOR NON BUSIN ESS PURPOSE AND THE LENDING HAS ALL INGREDIENTS OF 'COMMERCIAL EXPEDIENCY', IS ON THE ASSESSEE. THERE ARE VARIOUS CASE LAWS WHICH SUPPORTS THIS CONTENTION VI Z. CIT VS. COIMBATORE SALEM TRANSPORT P. LTD.61 ITR 480 (MAD), INDIAN METALS & FERRO ALLOYS LTD. VS. CIT.193 ITR 344 (ORI), CIT VS ABHISHEK IND (P&H) 286 ITR 1. IN THE CASE OF R. DALMIA VS. CIT 133 ITR 169 (DEI.) THE HON'BLE HIGH COURT DECID ED THAT 'WHERE THE INTEREST PAID CONCERNS THE BORROWED MONEY FOR BUSINESS AS WE LL AS NON BUSINESS PURPOSES, THE CLAIM MAY BE DISALLOWED IN ITS ENTIRETY IF NO A DEQUATE MATERIAL IS ADDUCED BY THE ASSESSEE TO DETERMINE THAT PORTION OF INTEREST WHICH PERTAINS TO BUSINESS PURPOSES'. THE LAW ON THIS ISSUE IS SETTLED, AFTER THE HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF S. A. BUILDERS LTD. V. CIT (APPEALS) [2007] 288 ITR 1 (SC), IN WHICH THE CONCEPT OF 'COMMERCIAL EXPEDIENCY' WAS USED. TH US, WHERE THE FUNDS OF THE BUSINESS, ARE DIVERTED FOR INTEREST FREE LOANS THE MAIN CRITERIA FOR INTEREST FREE LOANS THE MAIN CRITERIA FOR PERMISSIBILITY OF INTEREST, O N THOSE FUNDS ARE BASED ON WHETHER IT WAS FOR COMMERCIAL EXPEDIENCY OR NOT. THE ISSUE HAS BEEN DISCUSSED IN THE CASE PUNJAB STAINLESS STEEL LTD. 324 ITR. 396 (DELHI HIG H COURT). IN THIS CASE THE HON'BLE HIGH COURT HAS GIVEN A FINDING WHICH IS IN FAVOUR OF REVENUE AND HAS CLEARLY DISTINGUISHED MUNJAL SALES CORP VS CIT (SC) 298 ITR 298. IN FACT, THE AHMEDABAD BENCH OF ITAT HAS ALSO FOLLOWED THIS PRIN CIPLE IN INAMULHAQ S. IRAKI VS. ADDL. CIT, RANGE-2, AHMEDABAD IN ITA NO. 243/AH D/2011 FOR A.Y. 2007-08 DATED 31.01.2012. IN THIS JUDGMENT THE HON'BLE ITAT HAS SQUARELY FOLLOWED HON'BLE DELHI HIGH COURT DECISION PUNJAB STAINLESS STEEL LT D. 324 ITR 396, THE RELEVANT PARA (11) IS REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE. ITA NO. 1453/AHD/15 [P.D.COTTON PVT. LTD. VS. ACIT ] A.Y. 2011-12 - 7 - 'WE FIND THAT AS PER THIS JUDGMENT OF HON'BLE DELHI HIGH COURT, WHERE MIXED FUNDS ARE USED FOR THE PURPOSE OF GIVIN G INTEREST FREE ADVANCES, THE ONLY RELEVANT TEST IS AS TO WHETHER SUCH INTERE ST FREE ADVANCES ARE DUE TO COMMERCIAL EXPEDIENCY OR NOT. IN THE PRESENT CASE A /SO, THE FUNDS ARE MIXED FUNDS AND THE ASSESSES COULD NOT ESTABLISH ANY COMM ERCIAL EXPEDIENCY AND HENCE, IN OUR CONSIDERED OPINION, THIS ISSUE IS SQU ARELY COVERED AGAINST THE ASSESSES BY THIS JUDGMENT OF HON'BLE DELHI HIGH COU RT AND RESPECTFULLY FOLLOWING THE SAME, THIS ISSUE IS DECIDED AGAINST T HE ASSESSES.' IN THE CASE OF APPELLANT THE A.O HAS ALSO OBSERVED THAT THE ASSESSEE HAS FAILED TO PROVE ANY BUSINESS EXPEDIENCY AND HAS RIG HTLY HELD THAT THE FUNDS OF ASSESSEE HAVE BEEN DIVERTED TO NON BUSINESS ACTIVIT IES. I AM OF THE OPINION THAT THE ASSESSEE HAS ALSO FAILED TO PROVE THAT THE INVESTME NT WAS OUT OF INTEREST FREE FUNDS. IN VIEW OF THIS, DISALLOWANCE OF RS.8,78,982/- IS ORDERED TO BE CONFIRMED. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 6. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL SUBMISSIONS. THERE IS NO DISPUTE ABOUT THE ASSESSEE HAVING ADVANCE AMOUNT OF RS.12,50,40,980/- TO ITS SISTER CONCERNED M/S. GODIJI REALTY PVT. LTD. A PE RUSAL OF THE CASE FILE SUGGESTS THAT THE ASSESSEE WAS HAVING TOTAL INTEREST FREE FUNDS O F RS.36,89,66,462/- IN THE NATURE OF SHARE CAPITAL, RESERVES AND SURPLUS AND UNSECURE D LOAN OF RS.10CRORE, RS.2,00,21,514/-, RS.33,89,44,948/-; RESPECTIVELY W HEREAS ITS ADVANCE FUNDS ARE ONLY RS.13,41,40,980/-. THE SAME IS SUFFICIENT FOR US TO CONCLUDE THAT A SAFE PRESUMPTION CAN BE DRAWN THAT THE ASSESSEE HAD GIVE N THE IMPUGNED ADVANCE FROM ITS NON INTEREST BEARING FUNDS ONLY AS PER HONBLE BOMBAY HIGH COURTS JUDGMENT IN CIT VS. RELIANCE UTILITIES AND POWER LTD. (2009) 31 3 ITR 340 (BOM.). WE THUS ACCEPT ASSESSEES INSTANT SUBSTANTIVE GROUND IN PRI NCIPLE. ALL ITS FACTUAL ARGUMENTS QUA THE INSTANT ISSUE ARE THEREFORE RENDERED ACADEM IC. 7. THE ASSESSEES LAST SUBSTANTIVE GROUND IS THAT B OTH THE LOWER AUTHORITIES HAVE ERRED IN INVOKING SECTION 14A DISALLOWANCE OF RS.4, 01,089/- EVEN IN ABSENCE OF ANY SUCH CORRESPONDING EXEMPT INCOME. WE AFFORDED AMPL E OPPORTUNITY TO THE DEPARTMENT TO PINPOINT ANY SUCH EXEMPT INCOME. IT FAILS TO TAKE US TO SUCH AN EXEMPT INCOME DERIVED IN THE IMPUGNED ASSESSMENT YE AR. WE THUS DRAW SUPPORT FROM HONBLE JURISDICTIONAL HIGH COURTS JUDGMENT I N CIT VS. CORRTECH ENERGY (P.) LTD. (2015) 372 ITR 97 (GUJ) THAT THE IMPUGNED SECT ION 14A DISALLOWANCE IS ONLY ITA NO. 1453/AHD/15 [P.D.COTTON PVT. LTD. VS. ACIT ] A.Y. 2011-12 - 8 - IN RELATION TO ANY EXEMPT INCOME DERIVED IN A PARTI CULAR ASSESSMENT YEAR THAN IN ITS ABSENCE. WE THEREFORE ACCEPT ASSESSEES INSTANT LA ST SUBSTANTIVE GRIEVANCE. 8. THIS ASSESSEES APPEAL IS PARTLY ALLOWED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 23 RD DAY OF MARCH, 2018.] SD/- SD/- ( N. K. BILLAIYA ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIA L MEMBER AHMEDABAD: DATED 23/03/2018 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )* + ,--. . / DR, ITAT, AHMEDABAD 1 + 23 4 5 / GUARD FILE. BY ORDER / . / .