DCIT, Alwar V. VIJAY SOLVEX LIMITED, Alwar

ITA 202/JPR/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5086 (ITAT-JAIPUR)
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2006-2007
• Appeal Filed On: 03-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P C PARWAL CA DHK
• Keywords: Proportionate interest
• Section: 14A; 37(1)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH HKKXPUN] YS[KK LNL; ,OA JH DQY HKKJR] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM AND SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NO. 202/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07. THE DEPUTY COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE, ALWAR. CUKE VS. M/S. VIJAY SOLVEX LIMITED, BHAGWATI SADAN, SWAMI DAYANAND MARG, ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAACV 6864 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAGHUVIR SINGH DAGUR (ADDL. CIT ) (ADJOURNMENT APPLICATION REJECTED) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (C.A) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 07.09.2016. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 23/09/2016. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF LD. CIT (APPEALS), ALWAR DATED 03.12.2015 PERTAINING TO ASS ESSMENT YEAR 2006-07. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE CIT (A) WAS RIGHT IN DELETING THE ADDITION OF RS. 89,64,336 /- WITHOUT APPRECIATING THE FACTS THAT THE INVESTMENT IN SHARE S OF OTHER COMPANY IS NOT THE PART OF THE BUSINESS OF THE ASSESSEE AND THERE IS NO PROFIT TO THE BUSINESS OF THE ASSESSEE FROM SUCH INVESTMENT. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE CIT (A) WAS RIGHT IN DELETING THE ADDITION OF RS. 89,64,336 /- WITHOUT APPRECIATING THE FACTS THAT AS PER THE PROVISIONS O F SECTION 14A R.W. GENERAL PRINCIPLES OF SECTION 37(1) OF THE I.T. ACT , THE EXPENDITURE EXPENDED WHOLLY OR EXCLUSIVELY FOR THE PURPOSE OF B USINESS OR PROFESSION SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSI ON. 2 ITA NO. 202/JP/2016 M/S. VIJAY SOLVES LIMITED 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH IS IS SECOND ROUND OF LITIGATION. IN THE EARLIER ROUND OF LITIGATION IN ITA NO. 557/J P/2011 ON THE ISSUE OF DISALLOWANCE MADE UNDER SECTION 14A READ WITH RULE 8D, THE TRIBU NAL DIRECTED THE AO VIDE PARA 37 & 38 OF ITS ORDER TO CONSIDER THE ISSUE AFRESH I N THE LIGHT OF OBSERVATIONS GIVEN BY THE TRIBUNAL. IN PURSUANCE TO THE ABOVE DIRECTION, THE AO PASSED THE IMPUGNED ORDER DATED 28 TH MARCH, 2013 THEREBY THE AO MADE DISALLOWANCE OF RS . 89,64,336/- BY INVOKING PROVISIONS OF SECTION 14A. THE ASSESSE E AGGRIEVED BY THIS ORDER, PREFERRED AN APPEAL BEFORE LD. CIT (A), WHO AFTER C ONSIDERING THE SUBMISSIONS ALLOWED THE APPEAL AND DIRECTED THE ASSESSING OFFIC ER TO DELETE THE DISALLOWANCE OF RS. 89,64,336/-. 3. NOW THE REVENUE IS IN APPEAL BEFORE US. BOTH THE SE GROUNDS ARE INTER-RELATED, THEREFORE, THEY ARE TAKEN UP TOGETHER. 4. THE LD. D/R VEHEMENTLY ARGUED THAT THE LD. CIT ( A) WAS NOT JUSTIFIED IN DELETING THE DISALLOWANCE. HE STRONGLY SUPPORTED TH E ORDER OF AO. 4.1. ON THE CONTRARY, THE LD. COUNSEL FOR THE ASSES SEE HAS REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN BRIEF. THE LD. C OUNSEL SUBMITTED THAT THE HONBLE TRIBUNAL HAD GIVEN A FINDING THAT THE FACTS OF THE ASSESSEES CASE ARE SIMILAR TO THAT OF M/S. DEEPAK VEGPRO PVT. LTD. IN THAT CASE THE H ONBLE TRIBUNAL OBSERVED THAT INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE ARE MUCH MORE THAN THE INVESTMENT IN SHARES WHICH IS NOT CONTROVERTED BY THE LD. D/R BY BRINGING ANY POSITIVE MATERIAL ON RECORD. THEREFORE, NO DISALLOWANCE UNDER SECTIO N 14A IS POSSIBLE. HE FURTHER SUBMITTED THAT THE MATTER WAS SET ASIDE TO THE AO W ITH THE DIRECTION THAT AO IS FREE TO EXAMINE THE ISSUE AFRESH, IF IN HIS MIND INVESTM ENT MADE IN SHARES ARE NOT OUT OF 3 ITA NO. 202/JP/2016 M/S. VIJAY SOLVES LIMITED INTEREST FREE FUNDS/RESERVES AVAILABLE WITH THE ASS ESSEE. THE LD. COUNSEL SUBMITTED THAT IN THE SET ASIDE ASSESSMENT PROCEEDINGS, THE A O HAS NOT GIVEN ANY FINDING THAT INVESTMENT IN SHARES IS MADE FROM THE BORROWED FUND S AND NOT OUT OF INTEREST FREE FUNDS AVAILABLE WITH IT. HE OBSERVED THAT IF THE AS SESSEE WOULD NOT HAVE MADE THE ABOVE INVESTMENT IN SHARES, IT WOULD HAVE SAVED THE AMOUNT OF INTEREST PAID ON LOANS. FURTHER, AS PER SECTION 14A READ WITH SECTI ON 37(1), EXPENSES ATTRIBUTABLE TO CURRENT YEAR TAXABLE INCOME ARE ALLOWABLE AND THERE FORE HE AGAIN DISALLOWED INTEREST EXPENSES OF RS. 1,06,76,964/- BY APPLYING INTEREST @ 13.5% ON THE INVESTMENT IN SHARES OF RS. 7,90,88,623/-. THUS, FROM THE ORDER OF THE AO IT IS EVIDENT THAT HE HAS NOT FOLLOWED THE DIRECTION OF HONBLE ITAT AND, THE REFORE, THE DISALLOWANCE OF INTEREST MADE BY HIM BE DIRECTED TO BE DELETED. 4.2. THE LD. COUNSEL FURTHER SUBMITTED THAT INTERES T EXPENSES OF RS. 2,48,02,877/- IS INCURRED ON WORKING CAPITAL LIMITS TAKEN FROM BA NK AND OTHERS AGAINST HYPOTHECATION OF STOCK AND DEBTORS AND TERM LOAN TA KEN AGAINST PLANT & MACHINERY. THE TOTAL WORKING CAPITAL LOAN OUTSTANDING AS ON 31 .03.2006 IS RS. 2384.84 LACS AGAINST WHICH INVESTMENT IN STOCK & DEBTORS IS RS. 5459.51 LACS. SIMILARLY, THE OUTSTANDING TERM LOAN IS RS. 145.93 LACS WHEREAS TH E INVESTMENT IN PLANT & MACHINERY IS OF 1852.90 LACS UNDER THE WDV AS ON 31 .03.2006 FOR THE PURPOSE OF BUSINESS. THIS IS NOT DISPUTED BY THE AO. HE FURT HER SUBMITTED THAT INVESTMENT IN SHARES WAS MADE OUT OF INTEREST FREE FUNDS IN EARLI ER YEARS. IN EARLIER YEARS NO SUCH DISALLOWANCE WAS MADE. FROM THE BALANCE SHEET, IT IS EVIDENT THAT THE ASSESSEE COMPANY IS HAVING SHARE CAPITAL AND SURPLUS OF RS. 3960.49 WHEREAS INVESTMENT IN SHARES IS ONLY RS. 829.10 LACS. THIS APART, THE PR OFIT FOR THE YEAR AT RS. 2.46 CRORES IS MORE THAN THE INVESTMENT OF RS. 2.19 CRORES MADE DURING THE YEAR. THIS FACT IS 4 ITA NO. 202/JP/2016 M/S. VIJAY SOLVES LIMITED NOT CONTROVERTED BY THE AO. THE LD. COUNSEL FURTHE R SUBMITTED THAT SIMILAR ISSUE CAME BEFORE THE HONBLE ITAT FOR THE ASSESSMENT YEA R 2006-07 IN THE CASE OF M/S. VIJAY INDUSTRIES IN ITA NO. 673/JP/2015 WHEREIN THE DISALLOWANCE OF INTEREST MADE WAS SET ASIDE, BUT AGAIN THE AO MADE THE DISALLOWAN CE WHICH IS CONFIRMED BY LD. CIT (A) BUT CONSIDERING THE FACT THAT ASSESSEE HAS SUFF ICIENT RESERVE AND SURPLUS TO MAKE INVESTMENT IN SHARES AND IN THE ABSENCE OF DIRECT N EXUS BETWEEN INTEREST BEARING FUNDS AND INVESTMENT IN SHARES, THE DISALLOWANCE MA DE BY THE LOWER AUTHORITIES WAS DELETED BY PLACING RELIANCE ON THE JUDGMENT OF HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES AND POWER LTD. 3 13 ITR 340 (BOMBAY). 4.3. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. THE AO IN THE ASSESSMENT HAS AGAIN DISALLO WED THE INTEREST ON THE FOLLOWING GROUNDS :- 1. THE BUSINESS OF THE ASSESSEE COMPANY IS CRUSHING AN D EXTRACTING OF OIL FROM OIL SEEDS, REFINING OF OIL, PRODUCTION OF VEGETABLE OIL, MANUFACTURING OF BONE CHINA CROCKERY, INSULATORS AN D GENERATION OF ELECTRICITY TO EARN PROFIT FROM SUCH ACTIVITIES. IN VESTMENT IN SHARE IS NOT THE PART OF BUSINESS OF THE ASSESSEE, AND THERE IS NO PROFIT TO THE BUSINESS OF THE ASSESSEE FROM SUCH INVESTMENT. THEREFORE, THE AMOUNT OF CAPITAL OF THE ASSESSEE COMPANY REMAINED INVESTED IN SHARES IS NOT REASONABLE. 2. IF THE ASSESSEE COMPANY WOULD NOT HAVE MADE THE ABO VE INVESTMENT IN SHARES IT WOULD HAVE SAVED THE AMOUNT OF INTEREST PAID ON LOAN. HENCE THE INVESTMENT MADE BY THE ASSE SSEE COMPANY WAS NOT REASONABLE AND IT WAS DETORIATING TO THE IN TEREST OF COMPANY, THEREFORE, IT IS NOT ALLOWABLE. 3. AS PER THE PROVISIONS OF SECTION 14A R.W. GENERAL P RINCIPAL OF SECTION 37(1) THE EXPENSES WHICH CAN ATTRIBUTABLE TO THE CU RRENT YEARS TAXABLE INCOME ARE ONLY ALLOWABLE AND THEREFORE, TH E INTEREST AS WELL AS OTHER ESTABLISHED COST UPTO THE PROPORTIONA TE EXTENT TO THE FUNDS DIVERTED IS REQUIRED TO BE DISALLOWED. 5 ITA NO. 202/JP/2016 M/S. VIJAY SOLVES LIMITED HOWEVER, LD. CIT (A) HAS GIVEN A FINDING OF FACT IN PARA 4.5 TO 4.16 OF HIS ORDER AS UNDER :- 4.5. I HAVE PERUSED THE ASSESSMENT ORDER AS WELL AS REMAND REPORT OF THE AO, SUBMISSIONS MADE INCLUDING JUDICIAL CITATIONS A ND CROSS REPLY OF THE APPELLANT AND FIND THAT A DISALLOWANCE OF RS. 89,64 ,336/- HAS BEEN MADE BY THE AO ON ACCOUNT OF INTEREST AND OTHER EXPENSES CL AIMED BY THE APPELLANT. AO HAS MADE DISALLOWANCE OF INTEREST @ 13.5% OF THE FUNDS, WHICH HAVE BEEN DIVERTED FOR MAKING INVESTMENTS IN SHARES. THE DISALLOWANCE WAS MADE ON THE GROUND THAT APPELLANT HAS CLAIMED INTEREST E XPENSES OF RS. 2,48,02,877/- AND ON THE OTHER HAND HAVE MADE INVES TMENTS OF FUNDS IN NON INTEREST EARNING INVESTMENTS OF RS. 7,90,88,623/-. IT WAS HELD BY THE AO THAT INTEREST EXPENSES TO THE EXTENT OF 13.5% ON THE NON INTEREST BEARING INVESTMENTS MAY BE DISALLOWED U/S 14A OF THE IT ACT . 4.6. HONBLE ITAT HAD VIDE ORDER DATED 20.01.2012 I N ITA NO. 557/JP/2011 AND ITA NO. 676/JP/2011, IN PARA 37 OF THE ORDER ON PAGE 46, REPRODUCED THE FINDING GIVEN BY THE ITAT IN ANOTHER CASE ON SIMILA R FACTS THEREFORE IN OUR CONSIDERED VIEW NO DISALLOWANCE U/S 14A IS POSSIBLE . HOWEVER, AO IS FREE TO EXAMINE THIS ISSUE A FRESH, IF IN HIS MIND THE INVE STMENT MADE IN SHARES WAS NOT OUT OF INTEREST FREE FUNDS/RESERVES AVAILABLE W ITH THE ASSESSEE. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE DISPOSE OFF THE G ROUNDS OF THE ASSESSEE AND DEPARTMENT AS ABOVE. IN PARA 38 OF THE ORDER, IT IS STATED THAT THEREFORE WE DIRECT THE AO TO CONSIDER THE ISSUE A FRESH IN THE LIGHT OF OBSERVATIONS GIVEN BY THE TRIBUNAL IN ANOTHER CASE. 4.7. AO HAS ACCORDINGLY ANALYZED THE POSITION OF FU NDS AND HELD THAT A DISALLOWANCE OF RS. 1,06,76,964/- @ 13.5% OF THE FU NDS PARKED IN NON INTEREST BEARING INVESTMENTS OF RS. 7,90,88,623/- I S TO BE ADDED TO THE INCOME OF THE APPELLANT. IT IS FURTHER STATED THAT CIT (A), ALWAR HAD EARLIER RESTRICTED THE ADDITION TO RS. 17,12,628/- AND GIVE N A RELIEF OF RS. 89,64,336/- AND WHICH HAS BEEN SET ASIDE BY THE ITAT TO THE FIL E OF THE AO FOR A FRESH EXAMINATION. AS AN AMOUNT OF RS. 17,12,628/- HAS RE MAINED ADDED TO THE INCOME OF THE APPELLANT, THEREFORE THE ADDITION MAD E WAS RESTRICTED BY ENHANCING THE INCOME OF THE APPELLANT BY THE BALANC E AMOUNT OF RS. 89,64,336/-. 4.8. THE APPELLANT HAS STATED THAT AO HAS MADE THE DISALLOWANCE ON THE GROUND THAT THE COMPANY HAS INCURRED THE EXPENSES I N RELATION TO THE EARNING OF THE TAX FREE DIVIDEND INCOME, WHICH IS DISALLOWE D U/S 14A OF THE IT ACT. IT IS STATED THAT INCOME-TAX APPELLATE TRIBUNAL, BENCH -JAIPUR, HAS DIRECTED THE AO TO ESTABLISH THE AVAILABILITY OF INTEREST FREE F UNDS AND THEN ITS INVESTMENT IN SHARES. IN OTHER WORDS, TO ESTABLISH THE NEXUS B ETWEEN THE BORROWED FUNDS AND INVESTMENT IN SHARES, THE POSITION OF BORROWED FUNDS AND ITS INVESTMENT UNDER VARIOUS HEADS IS AS UNDER 6 ITA NO. 202/JP/2016 M/S. VIJAY SOLVES LIMITED PARTICULARS AS ON 31.03.2005 AS ON 31.03.2006 BORROWED FUNDS IN THE FORM OF :- BANK LOAN-CC BANK LOAN TERM LOAN UNSECURED LOAN 1772.81 145.00 375.65 2384.84 145.93 401.87 TOTAL 2293.46 2932.64 INVESTMENT IN: - STOCK IN TRADE DEBTORS FIXED ASSETS 1712.45 1906.57 145.00 3043.13 2416.38 145/93 TOTAL 3764.02 5605.44 THUS, IT MAY BE SEEN THAT THERE IS NO NEXUS BETWEEN BORROWED FUNDS AND ITS INVESTMENT IN THE SHARES, HENCE NO AMOUNT CAN BE DI SALLOWED UNDER THE PROVISION OF SECTION 14A OF THE INCOME TAX ACT, 196 1. 4.9. THE APPELLANT HAS INVESTED A SUM OF RUPEES 218 .47 LACS OUT OF THE PROFIT OF RUPEES 245.30 EARNED DURING THE YEAR UNDE R CONSIDERATION AND THEREFORE THERE IS NO QUESTION OF APPLICATION OF PR OVISIONS OF SECTION 14A OF THE IT ACT. THE COMPANY HAS INVESTED THE AMOUNT OF NON-INTEREST BEARING FUNDS IN THE ACQUISITION OF SHARES. IN OTHER WORDS, THE PROFITS EARNED BY THE COMPANY WHICH HAVE REMAINED IN THE HANDS OF THE COM PANY WERE INVESTED IN THE SHARES. FOR EXAMINATION OF AVAILABILITY OF INTE REST FREE FUNDS AN ANALYSIS OF THE BALANCE SHEET AS ON 31.03.2006, HAS BEEN FILED. IT IS OBSERVED THAT RESERVE AND SURPLUS OF RUPEES 3640.31 LAKH, WHICH A RE NON-INTEREST BEARING FUNDS ARE AVAILABLE WITH THE ASSESSEE COMPANY AS A SOURCE OF INVESTMENT IN THE SHARES OF RUPEES 829.10 LAKH. THE ASSESSEE COMP ANY HAS NOT INCURRED ANY EXPENSES IN RELATION TO THE INVESTMENT IN SHARE S, HENCE NO QUESTION ARISES FOR DISALLOWING ANY EXPENSES IN RELATION TO SUCH SH ARES OF RUPEES 829.10 LAKH AND CONSEQUENTLY THE QUESTION OF INVOKING OF THE PR OVISION OF SECTION 14A OF THE INCOME TAX ACT, 1961 DOES NOT ARISE IN THE CASE . 4.10. IT IS STATED THAT UNDER THESE CIRCUMSTANCES, THE LOGICAL CONCLUSION FLOWS, WHEN THE ASSESSEE COMPANY IS HAVING INTEREST FREE FUNDS AVAILABLE OUT OF PROFITS OF EARLIER YEARS, CURRENT YEAR AND OTHER INTEREST FREE FUNDS ETC. ARE FAR IN EXCESS OF THE INTEREST FREE INVESTMENT MADE, THEN THE PRESUMPTION HAS TO BE DRAWN THAT THE SUCH INVESTMENT IN SHARES WERE NOT FROM BORROWED FUNDS, BUT FROM SUCH PROFITS AND SURPLUS ETC. THIS HAS BEEN HELD BY THE HONOURABLE MADRAS HIGH COURT IN THE CASE OF COMMISS IONER OF INCOME TAX VS. HOTEL SAVERA (1999) 239 ITR 795 (MAD.). 7 ITA NO. 202/JP/2016 M/S. VIJAY SOLVES LIMITED 4.11. THE ISSUE OF DISALLOWANCE OF INTEREST ALSO CA ME UP INTO THE CONSIDERATION OF HONBLE COMMISSIONER OF INCOME TAX (APPEALS), IN THE ASSESSEE OWN CASE FOR THE ASSESSMENT YEAR 2007-08 A ND WHILE DEALING WITH THE SAID GROUND OF APPEAL HONBLE COMMISSIONER OF I NCOME TAX (APPEALS), ALWAR HAS DELETED THE ADDITION OF RUPEES 27,53,062/ - MADE U/S 14A OF THE IT ACT. 4.12. THE APPELLANT HAS EXPLAINED THAT THE INTEREST EXPENSES OF RUPEES 87,29,446/- IS INCURRED ON WORKING CAPITAL LIMITS & TERM LOAN TAKEN FROM SBBJ AGAINST HYPOTHECATION OF STOCK, DEBTORS & PLANT AND MACHINERY. THE TOTAL WORKING CAPITAL LOAN OUTSTANDING AS ON 31.3.2006 IS RS. 900.21 LACS AGAINST WHICH INVESTMENT IN STOCK AND DEBTORS IS RS. 2057.3 8 LACS. SIMILARLY, THE OUTSTANDING TERM LOAN IS RS. 90.58 LACS WHEREAS THE INVESTMENT IN PLANT AND MACHINERY IS OF RS. 529.38 LACS. THUS, THE ENTIRE L OAN FROM SBBJ IS UTILIZED FOR THE PURPOSE OF THE BUSINESS. THERE IS NO FINDING EI THER BY THE AO OR BY THE LD. CIT (A) THAT THIS WAS NOT UTILIZED FOR THE PURPOSE OF BUSINESS. IN EARLIER YEAR NO SUCH DISALLOWANCE WAS MADE. IT HAS BEEN STATED THAT FROM THE BALANCE SHEET IT CAN BE NOTED THAT THE ASSESSEE COMPANY IS HAVING SHARE CAPITAL AND RESERVE AND SURPLUS OF RS. 1190.08 LACS WHEREAS INV ESTMENT IN SHARES IS ONLY RS. 688.45 LACS. THUS INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE ARE MUCH MORE THAN THE INVESTMENT IN SHARES. 4.13. FURTHER, IT IS SUBMITTED THAT A YEAR WISE BRE AK UP OF APPLICATION OF INTEREST FREE FUNDS AVAILABLE WITH THE COMPANY (PAG E NUMBER 38), AND AT THE END OF THE FINANCIAL YEAR 2005-06 RELEVANT TO THE A SSESSMENT YEAR 2006-07, THAT AFTER THE INVESTMENT IN THE SHARES, THERE REMA INS A CUMULATIVE INTEREST FREE FUNDS WITH THE ASSESSEE COMPANY OF RUPEES 2176 .59 LAKH. IT IS STATED BY THE APPELLANT THAT THESE WORKINGS WERE GIVEN TO THE AO DURING THE COURSE OF SET ASIDE ASSESSMENT PROCEEDINGS, AND THEY AGAIN RE MAIN UNCONTROVERTED. 4.14. HAVING CONSIDERED THE DETAILED SUBMISSIONS MA DE ON THIS ISSUE, I FIND THAT THE QUESTION FOR CONSIDERATION IN THIS CASE IS AS TO WHETHER INTEREST BEARING FUNDS HAVE BEEN USED BY THE COMPANY FOR MAK ING INVESTMENTS IN SHARES QUOTED AND UNQUOTED AND IF YES, WHETHER DI SALLOWANCE OF PROPORTIONATE INTEREST COULD BE MADE OR NOT. HONBL E ITAT IN ITS ORDER DATED 20.01.2012 HAS CATEGORICALLY SET ASIDE THIS ISSUE F OR THE AO TO GIVE A FINDING WITH REGARD TO THE UTILIZATION OF FUNDS FOR MAKING INVESTMENTS IN SHARES. AFTER CONSIDERING THE MATERIAL PLACED ON RECORD IN THE FO RM OF AUDITED ANNUAL ACCOUNTS FOR THE YEAR ENDING ON 31.03.2005 AND ON 3 1.03.2006, IT IS FOUND THAT SHARE CAPITAL OF RS. 3.14 CRORES AND RESERVES & SURPLUS TO BE TUNE OF RS. 34.02 CRORES ARE AVAILABLE AS ON 31.03.2005 AND HAV E INCREASED TO RS. 3.20 CRORES AND TO RS. 36.40 CRORES RESPECTIVELY AS ON 3 1.03.2006. THE AMOUNT OF INVESTMENTS IN SHARES WAS OF RS. 6.10 CRORES AS ON 31.03.2005 AND OF RS. 8.29 CRORES AS ON 31.03.2006. THE INCREASE IN THE AMOUNT OF INVESTMENTS OF RS. 2.19 CRORES IN THE CURRENT YEAR UNDER CONSIDERA TION IS MATCHED BY THE INCREASE IN THE RESERVES & SURPLUS OF RS. 2.46 CROR ES. 8 ITA NO. 202/JP/2016 M/S. VIJAY SOLVES LIMITED 2.15. FURTHER, AO HAS WHILE MAKING THE DISALLOWANCE OF INTEREST FAILED TO BRING ANY ADVERSE MATERIAL ON RECORD TO SUBSTANTIAT E THE CONTENTION THAT INTEREST BEARING FUNDS HAVE BEEN DIVERTED FOR THE P URPOSES OF MAKING INVESTMENTS IN SHARES. I FIND THAT THIS ISSUE HAS B EEN EXAMINED IN DETAIL BY THE LD. CIT (A)-II, JAIPUR IN THE CASE OF THE APPEL LANT IN THE SUBSEQUENT YEAR I.E. 2007-08 & AFTER CONSIDERING THE AVAILABILITY O F TOTAL INTEREST FREE FUNDS AND INVESTMENTS IN SHARES, HAS DELETED THE ADDITION MAD E BY THE AO U/S 14A OF THE IT ACT, VIDE ORDER DATED 31.01.2012. 2.16. THUS, FOLLOWING THE SAME ORDER, AND CONSIDERI NG THE FINANCIAL DETAILS AS PER THE AUDITED ANNUAL ACCOUNTS, I FIND THAT THERE IS NO JUSTIFICATION IN THE ACTION OF THE AO IN HOLDING THAT INTEREST BEARING F UNDS HAVE BEEN DEPLOYED FOR MAKING INVESTMENTS IN SHARES. ACCORDINGLY, I DELETE THE DISALLOWANCE OF RS. 89,64,336/- MADE BY THE AO UNDER THIS HEAD. THE ABOVE FINDING OF FACT AND THE LAW IS NOT CONTRO VERTED BY THE REVENUE BY PLACING ANY CONTRARY MATERIAL ON RECORD. THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT (A), SAME IS HEREBY AFFIRMED. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER IS PRONOUNCED IN THE OPEN COURT ON 23/09/2 016. SD/- SD/- ( HKKXPUN ( DQY HKKJR ) ( BHAGCHAND) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 23/09/2016. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE DCIT, CENTRAL CIRCLE, ALWAR. 2. THE RESPONDENT M/S. VIJAY SOLVEX LTD., ALWAR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 202/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 9 ITA NO. 202/JP/2016 M/S. VIJAY SOLVES LIMITED