ACIT, New Delhi V. M/s Powerlinks Transmission Ltd., New Delhi

ITA 1809/DEL/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4471 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 06-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: DIPANSHU MUTREJA S; MANONEET DALAL SHRI VISHU GOEL
• Keywords: Depreciation; Earning of tax free income; Proportionate interest; Question of law; Commercial expediency; Revised return; Unabsorbed depreciation; Revenue expenditure
• Section: 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.1809/DEL/2016 ASSESSMENT YEAR : 2012-13 ACIT, CIRCLE 20(1), NEW DELHI. VS. POWERLINKS TRANSMISSION LTD., 10 TH FLOOR, DLF TOWER-A, DISTT. CENTRE, JASOLA, NEW DELHI. PAN: AABCT7775M (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MANONEET DALAL, SHRI VISHU GOEL & SHRI DIPANSHU MUTREJA, ADVOCATES REVENUE BY : SHRI SURENDER PAL, SR. DR DATE OF HEARING : 06.02.2019 DATE OF PRONOUNCEMENT: 08.02.2019 ORDER PER R.K. PANDA, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 20 TH JANUARY, 2016 OF THE CIT(A)-7, NEW DELHI, RELATING TO ASSES SMENT YEAR 2012-13. 2. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF TRANSMISSION OF ELECTRICITY. IT FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.28,76,36,810/-. SUBSEQUENTLY, THE ASS ESSEE FILED ITS REVISED RETURN ON 28 TH SEPTEMBER, 2012 DECLARING NIL INCOME AFTER CLAIMIN G UNABSORBED DEPRECIATION. ITA NO.1809/DEL/2016 2 THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES U/S 143(2)/142(1) WERE ISSUED. THE ASSESSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASKED THE ASSESSEE TO EXPLAIN THE CLAIM OF DEDUCTION U/S 36(1)(III) ON AC COUNT OF INTEREST AND TO FURNISH THE INFORMATION REGARDING DETAILS OF INVESTMENTS MADE A S ON 31.03.2011 AND 31.03.2012 AMOUNTING TO RS.1655.62 LAKHS AND RS.3210.00 LAKHS RESPECTIVELY. FROM THE DETAILS FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER NO TED THAT THE AVERAGE INVESTMENT WORKED OUT TO RS.2,432.81 LAKHS. HOWEVER, NO INCOM E WAS GENERATED ON THESE INVESTMENTS ALTHOUGH THE ASSESSEE HAS INCURRED EXPE NSES ON ACCOUNT OF ADMINISTRATION AND OTHER COSTS AND PAID SUBSTANTIAL INTEREST ON TH E FUNDS RAISED AS LOANS. HE NOTED THAT THE ASSESSEE COMPANY IS INTO THE BUSINESS OF TRANSM ISSION OF POWER AND INVESTMENT IS NOT THE BUSINESS OF THE COMPANY, THE COMPANY HAD RA ISED SUBSTANTIAL LOANS WHICH REMAINED UNPAID DURING THE YEAR AND HUGE INTEREST W AS PAID OR ACCRUED ON SUCH LOANS. HE ANALYSED THE DETAILS OF LOANS AND INTEREST EXPEN DITURE WHICH ARE AS UNDER:- OPENING BALANCE OF LOANS AS ON 01.04.2011 RS.63240. 10 LAKHS CLOSING BALANCE OF LOANS AS ON 31.03.2012 RS.55830. 11 LAKHS AVERAGE OF LOANS FOR THE YEAR 2010-11 RS.59535.105 LAKHS TOTAL INTEREST PAID ON LOANS RS.6170.49 LAKHS FROM THE BALANCE SHEET AS AT 31.03.2012 FOLLOWING I NVESTMENTS ARE TAKEN TO NOTE: OPENING BALANCE RS.1655.62 LAKHS CLOSING INVESTMENTS RS.3210.00 LAKHS AVERAGE INVESTMENTS RS.2432.81 LAKHS 3. SINCE THERE WAS NO DISALLOWANCE MADE BY THE ASSE SSEE U/S 14A, THEREFORE, HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY DISALLOWANC E U/S 36(1)(III) SHOULD NOT BE MADE SINCE THE ASSESSEE HAS PAID HUGE INTEREST OF RS.617 0.49 LAKHS ON VARIOUS LOANS AND DID ITA NO.1809/DEL/2016 3 NOT EARN ANY EXEMPT INCOME DURING THE YEAR FROM INV ESTMENTS MADE AND THE FUNDS SO INVESTED TOWARDS SHARES COULD HAVE BEEN UTILIZED FO R REPAYMENT OF LOANS AND SUBSTANTIAL AMOUNT COULD HAVE BEEN SAVED, THE ASSES SING OFFICER ALSO ANALYSED THE PROVISIONS OF SECTION 28 AND HELD THAT THE PAYMENT OF INTEREST CANNOT BE ALLOWED AS AN EXPENDITURE SINCE THE FUNDS ARE UTILIZED FOR THE PU RPOSES OTHER THAN THE BUSINESS OF THE ASSESSEE COMPANY. THE FUNDS KEPT IN INVESTMENTS IS NOT THE BUSINESS OF THE ASSESSEE COMPANY. HE, THEREFORE, HELD THAT PAYMENT OF INTERE ST TO THE EXTENT OF FUNDS UTILIZED AS INVESTMENTS DOES NOT QUALIFY FOR ELIGIBLE EXPENSES WITHIN THE PROVISIONS OF LAW AND IS LIABLE TO BE DISALLOWED. REJECTING THE VARIOUS EXP LANATIONS GIVEN BY THE ASSESSEE AND OBSERVING THAT THE ASSESSEE COMPANY USED SUBSTANTIA L AMOUNT OF FUNDS AS INVESTMENTS FOR A PURPOSE OTHER THAN ITS BUSINESS, HE DISALLOWE D AN AMOUNT OF RS.9,07,57,000/- U/S 36(1)(III) OF THE IT ACT. WHILE DOING SO, HE ALSO R ELIED ON VARIOUS DECISIONS. 4. BEFORE THE CIT(A), IT WAS ARGUED THAT UNDER IDEN TICAL CIRCUMSTANCES THE CIT(A) IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2007-08 AND 2010-11 HAS DELETED SUCH DISALLOWANCES. IT WAS ARGUED THAT THE INVESTMENTS IN MUTUAL FUNDS AND FDRS WERE FROM OWN FUNDS AND NOT FROM ANY BORROWED FUNDS. RE LYING ON VARIOUS DECISIONS INCLUDING THE DECISION OF THE HON'BLE BOMBAY HIGH C OURT IN THE CASE OF CIT VS. RELIANCE UTILITY & POWER LTD., 313 ITR 340 (BOM), IT WAS ARGUED THAT IF THERE ARE FUNDS AVAILABLE WITH THE ASSESSEE IN THE FORM OF OV ERDRAFT/LOANS THEN PRESUMPTION WOULD ARISE THAT INVESTMENT IS OUT OF INTEREST FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPANY, IF INTEREST FREE FUNDS WERE SUFFICIENT TO MAKE INVESTMENT. IT WAS ITA NO.1809/DEL/2016 4 SUBSTANTIATED BEFORE THE CIT(A) THAT THE OWN CAPITA L AND FREE RESERVES AT RS.50,583.66 LAKHS AS ON 31.03.2012 IS MUCH HIGHER THAN THE TOTA L INVESTMENT OF RS.12,924.00 LAKHS AS ON 31.03.2012. THE ASSESSEE FURTHER ARGUED THAT THE INVESTMENTS IN FDRS, ETC. SHOULD BE VIEWED FROM THE POINT OF VIEW OF COMMERCI AL EXPEDIENCY. RELYING ON VARIOUS DECISIONS, IT WAS ARGUED THAT NO DISALLOWAN CE U/S 36(1)(III) OF THE IT ACT IS CALLED FOR. THE ASSESSEE, RELYING ON VARIOUS DECIS IONS, FURTHER ARGUED THAT AS PER THE PROVISIONS OF SECTION 36(1)(III) OF THE ACT, WHEN T HE CAPITAL IS BORROWED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS OR PROFESSION AND INTEREST ON SUCH BORROWED CAPITAL HAS TO BE PAID BY THE ASSESSEE, THEN, NO DI SALLOWANCE U/S 36(1)(III) OF THE IT ACT CAN BE MADE. RELYING ON VARIOUS DECISIONS, IT WAS ARGUED THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING DISALLOWANCE U/S 36(1)(III) OF THE ACT. 4.1 BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE AND FOLLOWING HIS ORDER FOR ASSESSMENT YEAR 2010-11, THE LD.CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER:- 3.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, ORDER OF THE AO AND SUBMISSIONS MADE BY THE AR OF THE APPELLANT COMPANY . I FIND THAT AN IDENTICAL ISSUE HAS BEEN DECIDED BY MY PREDECESSOR IN FAVOUR OF THE APPELLANT FOR A. Y. 2010-11 VIDE ORDER DATED 09.04.2014 IN APPEAL NO. 9 8/12-13. THE CIT(APPEALS) HAD HELD AS UNDER: '6. GROUND NO. 2 IS IN RESPECT OF DISALLOWANCE UNDE R SECTION 36 (1)(III). 6.1. THE AO HELD THAT THE APPELLANT COMPANY USED SUBSTANTIAL AM OUNT OF FUNDS WHICH WERE BORROWED AS INVESTMENTS, WHICH WAS NOT THE BUSINESS OF THE COMPANY. THEREFORE, THE AO DISALLO WED PROPORTIONATE INTEREST PAID ON ACCOUNT OF FUNDS UTILIZED AS INVES TMENTS STATING THAT IT WAS FOR NON BUSINESS PURPOSES. 6.2. THE APPELLANT ON THE OTHER HAND STATED THAT T HE LOANS BORROWED AND THE UTILIZATION OF FUNDS WAS PURELY FOR BUSINES S PURPOSES. A PART OF THE LOANS WAS UTILIZED FOR INVESTMENT IN DEBT OR IENTED FUNDS. THESE ITA NO.1809/DEL/2016 5 FUNDS WERE THE APPELLANT'S OWN FUNDS. THE BALANCE F UNDS WERE USED FOR INVESTMENTS IN BANKS. THE APPELLANT STATED THAT IT HAD ENTERED INTO A LOANS AGREEMENT WITH THE LENDERS OF CAPITAL. AS PER THE AGREEMENT, THE APPELLANT WAS COMPULSORILY TO KEEP A DEPOSIT IN THE BANK AND NOT WITHDRAW IT. 6.3. THE APPELLANT HAS QUOTED THE CASE OF THE HON'BLE S UPREME COURT IN MADHAV PRASAD JATIA VS. CIT AIR 1979 SC 12 91: 118ITR 200, 208. 6.4. THE JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF C IT V RELIANCE UTILITY & POWER LTD. AS WELL AS WOOLCOMBER S OF INDIA LTD. AND OF THE APEX COURT IN THE CASE OF EAST INDIA PHA RMACEUTICALS LTD. HAS HELD THAT IF THERE ARE FUNDS AVAILABLE WITH THE APPELLANT THEN THE PRESUMPTION WOULD ARISE THAT INVESTMENT WOULD BE OU T OF INTEREST FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPANY, IF T HE INTEREST FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENT. THE J UDGMENT OF S A BUILDERS LTD. V CIT HELD THAT WHAT IS RELEVANT IS W HETHER THE AMOUNT WAS ADVANCED AS A MEASURE OF COMMERCIAL EXPEDIENCY. THE JUDGMENT OF THE HON 'BLE DELHI HIGH COURT IN THE CASE OF CIT V DALMIA CEMENT LTD. HAS HELD THAT IT SHOULD BE ESTABLISHED THAT TH ERE WAS NEXUS BETWEEN THE EXPENDITURE AND PURPOSE OF THE BUSINESS . 6.5. AS PER SECTION 36(L)(III) THE CLAUSE ENVISAGES THE FULFILLMENT, OF THREE CONDITIONS BEFORE INTEREST CAN BE ALLOWED AS A DEDUCTION: (1) THERE SHOULD A BORROWING; (2) CAPITAL MUST HAVE BEEN BORROWED FOR BUSINESS PURPOS ES; AND (3) INTEREST SHOULD HAVE BEEN PAID OR PAYABLE IN RESPEC TTHEREOF. 6.6. BORROWAL IMPLIES A CONSENSUAL ACT: THE WORD 'BORRO W' HAS NOT BEEN DEFINED IN THE STATUTE AND, THEREFORE, ITS DICTIONARY MEANING HAS TO BE LOOKED UP. THE MEANING OF THE WORD 'BORRO W' AS GIVEN IN THE SHORTER OXFORD DICTIONARY IS TO TAKE (A THING) ON S ECURITY GIVEN FOR ITS SAFE RETURN. SINCE BORROWING IMPLIES A CONSENSUAL A CT BY A DEBTORS RECEIVING MONEY FROM A CREDITOR, IT WOULD NOT COVER A CASE OF ANY AND EVERY LIABILITY. BORROWING MONEY AND PAYMENT OR INT EREST IS A MERE COMMERCIAL TRANSACTION. WHERE THE APPELLANT, A PUBL IC LIMITED COMPANY, CARRYING ON THE BUSINESS IN MANUFACTURE OF SUGAR, OWNING ABOUT 2000 ACRES OF LAND ON WHICH IT GREW SUGARCANE , BORROWED A CERTAIN SUM WHICH WAS CREDITED TO THE AGRICULTURAL SECTION OF THE APPELLANT, IT WAS HELD THAT THE INTEREST PAYABLE ON THE BORROWINGS CREDITED TO THE AGRICULTURAL SECTION WAS AN ADMISSI BLE DEDUCTION. THE BORROWING MUST BE A GENUINE BORROWING AND NOT A BOG US ONE. THE BORROWING MAY BE ON A PERMANENT FOOTING SUCH AS BY WAY OF DEBENTURE LOAN OR A SPASMODIC ONE SUCH AS FROM YEAR TO YEAR, OR FOR ITA NO.1809/DEL/2016 6 SHORT TERM SUCH AS BY WAY OF OVERDRAFTS FROM BANKS, OR LOANS FROM TIME TO TIME. 6.7 THE AMOUNT SHOULD BE BORROWED FOR THE PURPOSES OF THE BUSINESS. THE MONEYS SHOULD BE BORROWED BY THE APPE LLANT FOR PURPOSES OF THE APPELLANT'S BUSINESS. FURTHER, THE EXPRESSION FOR THE PURPOSE OF THE BUSINESS' MAY TAKE INTO ACCOUNT NOT ONLY THE DAY TO DAY RUNNING OF A BUSINESS BUT SEVERAL OTHER MATTERS. A BORROWING DIVERTED FROM BUSINESS WOULD CEASE TO BE A BORROWING FOR PUR POSE OF BUSINESS, SO THAT THE INTEREST PROPORTIONATE TO SUCH DIVERTED FUNDS IS LIABLE FOR DISALLOWANCE. IN ORDER TO BE ALLOWABLE AS EXPENSES, IT SHOULD BE IN RESPECT OF BUSINESS WHICH WAS CARRIED ON BY THE APP ELLANT AND THE PROFITS OF WHICH ARE COMPUTED AND ASSESSED, AND SHO ULD BE INCURRED AFTER THE BUSINESS IS SET UP. WHERE THE EXPENSES WE RE IN CONNECTION WITH OR RELATED TO A BUSINESS WHICH WAS YET TO COMM ENCE, THE DECISION OF THE TRIBUNAL IN DISALLOWING THE DEDUCTION CLAIME D BY THE APPELLANT WAS CORRECT. INTEREST ON MONEY BORROWED FOR INVESTM ENT IN A JOINT VENTURE COMPANY COULD BE TREATED AS ONE BORROWED FO R APPELLANT'S BUSINESS AND THEREFORE DEDUCTIBLE. WHERE AN APPELLA NT BORROWS MONEY FOR EXPANSION OF ITS EXISTING BUSINESS, THE INTERES T PAID THEREON IS ALLOWABLE. 6.8 IN STATE OF MADRAS VS. COELHO (GJ), THE SUPREME COU RT HAS HELD THAT, IN ORDINARY COMMERCIAL PRACTICE, PAYMENT OF INTEREST IS TAKEN A S A REVENUE EXPENDITURE. THE MONEY BORROWED MUST BE FOR THE PUR POSES OF THE APPELLANT'S BUSINESS OR PROFESSION THAT IS CARRIED ON DURING THE YEAR OF ACCOUNT. 6.9 IN RESPECT OF INTEREST PAID, DEDUCTION PERMISSIBLE UNDER THIS CLAUSE IS IN RESPECT OF INTEREST AS DISTINGUISHED F ROM OTHER KINDS OF COMPENSATION. INTEREST IS A PERMISSIBLE DEDUCTION U NDER THIS CLAUSE ONLY IF IT HAS BEEN 'PAID'. IT NEED NOT HAVE BEEN A CTUALLY PAID IN CASH. IT MAY HAVE BEEN PAID BY WAY OF ADJUSTMENT IN ACCOUNTS BY ANY EQUIVALENT MODE WHEN THE ACCOUNTS ARE MAINTAINED ON THE MERCANTILE BASIS. INTEREST ON BORROWED CAPITAL IS ALLOWABLE UN DER THIS CLAUSE. 6.10 THE ISSUE WHETHER BORROWED CAPITAL HAD BEEN ACTUAL LY USED FOR BUSINESS IS ONE RELATING TO FACTS AND DOES NOT GIVE RISE TO A QUESTION OF LAW. EVEN IF IT WERE A QUESTION OF LAW, IT MAY NOT GIVE RISE TO A SUBSTANTIAL QUESTION OF LAW WHERE THE APPELLAN T AGREES TO PAY INTEREST ON LOAN ORIGINALLY TREATED AS INTEREST FRE E. THE INFERENCE THAT BORROWING IS FOR NON-BUSINESS PURPOSES ON THE PARTI CULAR FACTS OF THE CASE MAY BE A QUESTION OF FACT. BUT IT MAY GIVE RIS E TO A QUESTION OF LAW WHERE THE INFERENCE DOES NOT FOLLOW THE FACTS O F THE CASE. ITA NO.1809/DEL/2016 7 6.11 IT IS QUITE APPARENT THAT THE APPELLANT IS NOT INCU RRING ANY SUCH EXPENDITURE WHICH IS NOT A BUSINESS EXPENDITUR E. ALL EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE OF BUSINESS. THE APPELLANT HAD BORROWED FUNDS WHICH WAS FOR BUSINESS PURPOSES AND WAS PAYING INTEREST ON THESE FUNDS. IN VIEW THEREOF, THE ADDIT ION OF RS. 6,45,21,521/- IS DELETED. THE GROUND OF APPEAL IS R ULED IN FAVOUR OF THE APPELLANT. ' 3.4. SINCE THE FACTS ARE SIMILAR IN THE PRESENT APPEAL, FOLLOWING THE ABOVE DECISION, DISALLOWANCE OF RS.9,07,57,000/- U/S 36(1 )(III) OF THE ACT MADE BY THE AO IS ORDERED TO BE DELETED. THE GROUND OF APPEAL I S RULED IN FAVOUR OF THE APPELLANT. 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE REV ENUE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.9,07,57,000/- MADE B Y THE A.O. U/S 36(1)(III) OF THE ACT ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENDIT URE, BY NOT APPRECIATING THE FACT THAT THE ASSESSEE COMPANY HAS USED THE BORROWE D FUNDS FOR NON-BUSINESS PURPOSE. 2. ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN DELETING THE ABOVE ADDITION U/S 36(1)(III) OF THE ACT BY NOT APPRECIATING THE FACT THAT THE A.O. HAS MENTIONED DETAILED REASO NS OF DISALLOWANCES IN THE ASSESSMENT ORDER ITSELF. 6. WE HAVE HEARD THE RIVAL ARGUMENTS MADE BY BOTH T HE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO CONSI DERED VARIOUS DECISIONS RELIED ON BY BOTH THE SIDES. WE FIND THE ASSESSING OFFICER D ISALLOWED AN AMOUNT OF RS.9,07,57,000/- ON THE GROUND THAT THE ASSESSEE HA S PAID SUBSTANTIAL INTEREST ON BORROWED FUNDS WHICH HAVE BEEN UTILIZED IN MUTUAL F UNDS AND OTHER DEPOSITS AND THE BORROWED FUNDS ARE NOT UTILIZED FOR BUSINESS PURPOS ES. WE FIND THE LD.CIT(A), FOLLOWING HIS ORDER FOR ASSESSMENT YEAR 2010-11 DEL ETED THE ADDITION, THE REASONS FOR ITA NO.1809/DEL/2016 8 WHICH HAVE ALREADY BEEN REPRODUCED IN THE PRECEDING PARAGRAPHS. WE FIND THE ORDER OF THE CIT(A) FOR ASSESSMENT YEARS 2007-08 AND 2010 -11 WERE CHALLENGED BEFORE THE TRIBUNAL BY THE REVENUE AND THE TRIBUNAL VIDE ITA N O.3869 & 3870/DEL/2014, ORDER DATED 21.12.2018 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND DISMISSED THE APPEAL FILED BY THE REVENUE BY HOLDING AS UNDER:- 4) WE HAVE HEARD BOTH SIDES PATIENTLY AND WE HAVE PERUSED THE MATERIALS ON RECORD, INCLUDING THE PAPER BOOK, SYNOPSIS ETC. FIL ED IN THE COURSE OF APPELLATE PROCEEDINGS IN ITAT, CAREFULLY. WE HAVE ALSO CONSID ERED THE JUDICIAL PRECEDENTS REFERRED TO IN THE RECORD AND ALSO THE PRECEDENTS B ROUGHT TO OUR ATTENTION, AT THE TIME OF HEARING BEFORE US. (4.1) THE COMMON ISSUE INVOLVED IN BOTH THE APPEALS FILED BY REVENUE IS REGARDING DISALLOWANCE OF INTEREST U/S 36(1)(III) O F I.T. ACT. AS MENTIONED EARLIER, THE LD. DR DID NOT DISPUTE THE FACTS CONTE NDED BY THE LD. COUNSEL FOR ASSESSEE. THE RELEVANT FACTS ARE NOT IN DISPUTE. IT IS NOT IN DISPUTE THAT THE INVESTMENTS IN MUTUAL FUNDS HAD NOT STARTED TILL TH E TIME, THE ASSESSEE STARTED EARNING OPERATING INCOME FROM TRANSMISSION OF ELECT RICITY. IT IS ALSO NOT IN DISPUTE THAT THE BORROWED FUNDS WERE ENTIRELY USED BY THE A SSESSEE FOR INVESTMENT IN FIXED ASSETS FOR THE PURPOSES OF BUSINESS. IT IS FU RTHER NOT IN DISPUTE THAT THE ASSESSEE HAD ADEQUATE INTEREST FREE FUNDS OF ITS OW N FOR MAKING INVESTMENTS IN MUTUAL FUNDS. IT IS, FURTHERMORE, NOT IN DISPUTE TH AT THERE WERE CONTRACTUAL RESTRICTIONS IMPOSED ON ASSESSEE IN RESPECT OF UTIL IZATION OF BORROWED FUNDS; AND ALSO, THE ASSESSEE WAS LIABLE FOR PAYMENT OF SUBSTA NTIAL AMOUNTS OF LIQUIDATION DAMAGES/PRE-PAYMENT CHARGES IN CASE THE ASSESSEE MA DE PRE-PAYMENT OF LOAN REPAYMENTS. THUS, IT IS ALSO NOT IN DISPUTE THAT DU E TO CONTRACTUAL RESTRICTIONS AND LIQUIDATION DAMAGES/PRE-PAYMENT CHARGES, AS AFORESA ID; IT WAS NEITHER PRUDENT FOR THE ASSESSEE TO DIVERT ANY PART OF BORROWED FUNDS F OR NON-BUSINESS PURPOSES; NOR WAS IT PRUDENT TO MAKE PRE-PAYMENT OF LOAN REPAYMEN TS EVEN IF THE ASSESSEE HAD ITS OWN INTEREST FREE FUNDS. IN THESE SPECIFIC AND PECULIAR FACTS AND CIRCUMSTANCES, THERE IS NO CASE FOR ANY DISALLOWANCE OF INTEREST U /S 36(1)(III) OF I.T. ACT. MOREOVER, LD. DR FAILED TO BRING ANY MATERIAL FACTS TO OUR NOTICE TO DISTINGUISH THE FACTS OF THE ASSESSEE WITH THE FACTS OF THE JUD ICIAL PRECEDENTS ON WHICH THE LD. CIT(A) RELIED UPON AND ON WHICH THE LD. COUNSEL FOR ASSESSEE RELIED UPON DURING APPELLATE PROCEEDINGS IN ITAT. THE LD. DR THUS FAIL ED TO MAKE ANY CASE FOR ANY INTERFERENCE BY US WITH THE ORDER OF LD. CIT(A) ON THIS ISSUE. (4.2) IN VIEW OF THE AFORESAID SPECIFIC AND PECUL IAR FACTS AND CIRCUMSTANCES OF THE CASE, AND IN VIEW OF THE FOREGOING DISCUSSION, WE DECLINE TO INTERFERE WITH THE DECISION OF LD. CIT(A) ON THE ISSUE OF DISALLOWANCE OF INTEREST U/S 36(1)(III) OF ITA NO.1809/DEL/2016 9 I.T. ACT, ON MERITS. ACCORDINGLY, BOTH THE APPEALS FILED BY THE REVENUE ARE DISMISSED. 7. SINCE THE FACTS OF THE INSTANT CASE ARE IDENTICA L TO THE FACTS OF THE CASE DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSME NT YEARS 2007-08 AND 2010-11, THEREFORE, IN ABSENCE OF ANY CONTRARY MATERIAL BROU GHT TO OUR NOTICE AGAINST THE ORDER OF THE TRIBUNAL AND CONSIDERING THE FACT THAT THE O WN CAPITAL AND FREE RESERVES ARE SUBSTANTIALLY HIGHER THAN THE INVESTMENTS, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE DISALLOWANCE MADE BY THE ASSESS ING OFFICER U/S 36(1)(III). WE, THEREFORE, UPHOLD THE ORDER OF THE CIT(A) AND THE G ROUNDS RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE REV ENUE IS DISMISSED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 0 8.02.2019. SD/- SD/- (SUCHITRA KAMBLE) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMFBER DATED: 08 TH FEBRUARY, 2019 DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI