D.C.I.T Cir - 3,kolata, Kolkata V. M/s Surya Alloys Industries Ltd., Kolkata

ITA 2253/KOL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4650 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 03-08-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 14-08-2013
• Court: TRIBUNAL
• Department Lawyers: NIRAJ KUMAR
• Assessee Lawyers: D S DAMLE
• Keywords: Earning of tax free income; Source of fund; Wholly owned subsidiary; Onus to prove
• Section: 43B; 143(3); 14A; 115JB; 133(6); 80G; 68; 6; 263

Judgement Text

1 ITA NO.2253/KOL/2013 SURYA ALLOYS INDUSTRIES LTD., AY 2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI M. BALAGANESH, AM & SHRI K. NARASIMHA CHARY, JM] I.T.A NO. 2253/KOL/2013 ASSESSMENT YEAR: 2010-11 DEPUTY COMMISSIONER OF INCOME-TAX, VS. M/S. SURYA ALLOYS INDUSTRIES LTD. CIRCLE-3, KOLKATA. (PAN: AADCS5890E) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 03.08.2016 DATE OF PRONOUNCEMENT: 10.08.2016 FOR THE APPELLANT: SHRI NIRAJ KUMAR, CIT, DR FOR THE RESPONDENT: SHRI D. S. DAMLE, FCA ORDER PER SHRI M. BALAGANESH, AM: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-I, KOLKATA VIDE APPEAL NO. 321/CIT(A)/C-3/12-13 DATED 01.05.2013. ASSESSMENT W AS FRAMED BY ADDL.CIT, RANGE-3, KOLKATA U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR AY 2010-11 VIDE HIS ORDER DATED 22.01.2013. 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE ADDITION U/S 68 OF THE ACT COULD BE MADE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSE SSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN MANUFACTURING OF RAILWAY TRACK MATERIAL, RE-ROLL ABLE PRODUCTS AND STEEL INGOTS. THE ASSESSEE HAS 4 UNITS AT BARJORIA I & II , BARJORIA IV (HEAVY ROLLING MILL) AT MEGHALAYA, AND AT DURGAPUR. THE LD AO OBSERVED THAT THE ASSESSEE HAD SHOWN SHARE APPLICATION MONEY PENDING ALLOTMENT AS ON 31.3.2010 TO THE EXTENT OF RS. 12.05 CRORES. THE LD AO CALLED FOR THE FOLLOWING DETAILS FROM THE ASSESSEE IN THIS REG ARD :- DETAILS OF SHARE APPLICATION MONEY AND DETAILS AND DOCUMENTS RELATING TO FRESH SHARE CAPITAL RECEIVED DURING THE YEAR, ALONG WITH COPY OF ACKNOW LEDGEMENT OF FILING RETURN OF INCOME, PROFIT & LOSS ACCOUNT, BALANCE SHEET OF THE SHAREHO LDERS AND CONFIRMATION OF SHARE APPLICATION MONEY OF THE SHAREHOLDERS. THE LD AO OBSERVED AT PARA 8.2 OF HIS ORDER THAT TH E ASSESSEE HAD REPLIED AS FOLLOWS:- 8.2. THE DETAILS OF SHARE APPLICATION MONEY FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING ON 12.10.2012 IS AS UNDER: 2 ITA NO.2253/KOL/2013 SURYA ALLOYS INDUSTRIES LTD., AY 2010-11 SL. NO. NAME & ADDRESS OF THE PARTY CHEQUE NO. DATE AMOUNT (RS.) TOTAL AMOUNT (RS.) 1 2 TULSIYAN & SONS PVT. LTD. 1/1 CAMAC STREET, KOLKATA-700 016 863711 863734 863735 863736 863738 863739 863742 31.03.2010 31.03.2010 31.03.2010 31.03.2010 31.03.2010 31.03.2010 31.03.2010 31.03.2010 31.03.2010 31.03.2010 31.03.2010 20000000 10000000 10000000 14000000 10000000 5000000 15000000 6000000 7500000 13000000 10000000 8,40,00,000 3,65,00,000 12,05,00,000 WHITE STONE CONSULTANTS PVT. LTD. 1/1, CAMAC STREET, KOLKATA-700 016 860918 860919 860921 860922 THE ASSESSEE FURNISHED THE FOLLOWING DETAILS OF THE SHARE APPLICANTS VIZ TULSIYAN & SONS PVT LTD AND WHITE STONE CONSULTANTS PVT LTD :- NAME AND THEIR ADDRESS PAN INCOME TAX ASSESSMENT PARTICULARS BALANCE SHEET AS ON 31.3.2010 BANK STATEMENTS OF SHARE APPLICANTS RETURN OF INCOME OF SHARE APPLICANTS SOURCE FOR MAKING INVESTMENTS IN THE ASSESSEE COMPA NY THE LD AO FORWARDED THE AFORESAID DETAILS TO THE AO OF THE SHARE APPLICANTS FOR CROSS VERIFICATION FROM THEIR RECORDS AND FOR NECESSARY A CTION. THE LD AO ALSO OBTAINED THE INFORMATION FROM THE SHARE APPLICANTS BY ISSUING NO TICES U/S 133(6) OF THE ACT. ALL THE DETAILS CALLED FOR BY THE LD AO U/S 133(6) WERE FIL ED BY THE RESPECTIVE SHARE APPLICANTS VIDE THEIR LETTER DATED 4.1.2013 SUBMITTED BEFORE THE LD AO ON 7.1.2013. THE LD AO ALSO OBSERVED FROM THE BALANCE SHEET OF THE RESPECTIVE SHARE APPL ICANTS THAT THEIR PRINCIPAL ACTIVITY IS INVESTMENT WHICH IS DULY REFLECTED IN THE BALANC E SHEET IN PART IV OF SCHEDULE VI OF COMPANIES ACT, 1956. IT WAS ALSO OBSERVED THAT IN THE SAID BALANCE SHEET, THE AMOUNTS PAID TO ASSESSEE WERE DULY REFLECTED UNDER LOANS AND AD VANCES SHARE APPLICATION PAID WITH THEIR RESPECTIVE AMOUNTS. THE LD AO OBSERVED THAT THE RESPECTIVE SHARE APPLICANTS WERE GROUP CONCERNS OF THE ASSESSEE AS REFLECTED IN THEI R NOTES ON ACCOUNTS ATTACHED TO THE BALANCE SHEET UNDER THE HEAD RELATED PARTY DISCLOS URE. THE LD AO OBSERVED THAT THE RESPECTIVE SHARE APPLICANTS HAD GIVEN THE CHEQUE TO THE ASSESSEE ON 31.3.2010 TOWARDS SHARE APPLICATION MONEY , BUT THE SOURCE FOR THE SAME HAS BEEN OBTAINED BY THE SHARE APPLICANTS OUT OF SALE PROCEEDS OF CERTAIN INVESTMENTS HELD BY THEM IN MAY 2010 AND ACCORDINGLY 3 ITA NO.2253/KOL/2013 SURYA ALLOYS INDUSTRIES LTD., AY 2010-11 CONCLUDED THAT THE SHARE APPLICANTS DID NOT CREDITW ORTHINESS ON THE DATE OF ISSUANCE OF CHEQUE TO THE ASSESSEE. HE HELD THAT EVEN THOUGH T HE IDENTITY OF THE SHARE APPLICANTS AND GENUINENESS OF THE TRANSACTIONS WERE PROVED BY THE ASSESSEE, THE CREDITWORTHINESS OF THE SHARE APPLICANTS WERE NOT PROVED BY THE ASSESSEE IN VIEW OF THE FACT THAT THE SOURCE FOR HONOURING THE CHEQUE ISSUED TO ASSESSEE WAS OBTAINE D BY THEM ONLY IN THE MONTH OF MAY 2010. ACCORDINGLY HE INVOKED THE PROVISIONS OF SEC TION 68 OF THE ACT AND BROUGHT THE SHARE APPLICATION MONEY OF RS. 12.05 CRORES AS INCOME OF THE ASSESSEE. 2.2. ON APPEAL, THE LD CITA OBSERVED THAT THE ASSE SSEE HAD DISCLOSED THE SUM OF RS. 12.05 CRORES AS SHARE APPLICATION MONEY PENDING ALLOTMEN T IN ITS BALANCE SHEET AND CORRESPONDINGLY HAD SHOWN UNDER CASH AND BANK BALA NCES AS CHEQUES ON HAND FOR RS. 12.05 CRORES BEING THE CHEQUES RECEIVED FROM THE SH ARE APPLICANTS PENDING ENCASHMENT. HE OBSERVED THAT INVESTMENT WAS MADE BY BOTH THE SHARE APPLICANT COMPANIES OUT OF THEIR EXISTING OWN FUNDS. THE IMMEDIATE SOURCE OF FUNDS FOR MAKING PAYMENTS OF APPLICATION MONEY WAS REALIZATION MADE FROM SALE OF THEIR EXIST ING INVESTMENTS. THE EXPLANATION OFFERED BY THE APPLICANTS ABOUT IMMEDIATE SOURCE OF MAKING PAYMENTS HAS NEITHER BEEN DISPUTED BY THE AO NOT BY THEIR RESPECTIVE JURISDIC TIONAL ASSESSING OFFICERS. HE CONCLUDED THAT THE DOCUMENTS AND FACTS PLACED ON RECORD THERE FORE ESTABLISHED THE CREDITWORTHINESS OF THE SHARE APPLICANTS. THE LD CITA DULY APPRECIATED THE FACT THAT THE ASSESSEE HAD DULY COMPLIED WITH ALL THE STATUTORY FORMALITIES BY FILI NG FORM NO.2 EVIDENCING THE ALLOTMENT OF SHARES WITH REGISTRAR OF COMPANIES, AMONG OTHERS AN D THE FUNDS HAD ACTUALLY FLOWN INTO THE KITTY OF THE ASSESSEE IN THE NEXT FINANCIAL YEAR (I .E FY 2010-11) AND THEREAFTER THE SHARES WERE ALLOTTED TO THE SHARE APPLICANTS. BASED ON DUE APPRECIATION OF EVIDENCES FILED ON RECORD, THE LD CITA DELETED THE ADDITION MADE U/S 6 8 OF THE ACT. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- (I) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, LD. CIT (A) ERRED IN DELETING THE ADDITION OF RS. 12.05 CRORES MADE U/S. 68 OF THE I. T. ACT, 1961 WITHOUT APPRECIATING THE FACT THAT THE CREDITWORTHINESS OF THE SHARE APPLICANTS W AS NOT PROVED. (II) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, LD. CIT (A) ERRED IN DELETING THE ADDITION OF RS. 12.05 CRORES MADE U/S. 68 OF THE I. T. ACT, 1961 WITHOUT APPRECIATING THE FACT THAT AS ON 31-03-2010 THE SHARE APPLICANTS DID NOT HAVE THE MONEY TO SUBSCRIBE THE SHARES OF ASSESSEE COMPANY AND THUS THE TRANSACTIONS WERE MER E PAPER TRANSACTION AND CREDITWORTHINESS OF THE PARTIES DID NOT EXIST. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE DETAILED PAPER BOOK FILED BY THE ASSE SSEE ANNEXING THE VARIOUS DOCUMENTS 4 ITA NO.2253/KOL/2013 SURYA ALLOYS INDUSTRIES LTD., AY 2010-11 RELIED UPON BY THE LD AO IN HIS ASSESSMENT ORDER , AMONG OTHERS VIDE PAGES 1 TO 270 OF THE PAPER BOOK. WE FIND THAT THE LD AO WANTED THE ASSE SSEE TO FURNISH THE COMPLETE DETAILS OF THE SHARE APPLICANTS ALONG WITH THEIR NAMES, ADDRES SES, PAN, BANK STATEMENTS, INCOME TAX ASSESSMENT PARTICULARS, BALANCE SHEET, INCOME TAX R ETURN ACKNOWLEDGEMENTS, SOURCE OF SOURCE OF SHARE APPLICATION MONEY RECEIVED AND IT I S NOT DISPUTED BY THE LD AO THAT ALL THESE DETAILS WERE DULY FILED BY THE ASSESSEE BEFORE HIM. CERTAIN DETAILS WERE ALSO OBTAINED DIRECTLY BY THE LD AO BY ISSUING NOTICES U/S 133(6) OF THE ACT WHICH WERE ALSO DULY COMPLIED WITH BY THE SHARE APPLICANTS. THIS FACT I S ALSO MENTIONED BY THE LD AO IN HIS ORDER. INFACT THE DETAILS FILED BY THE ASSESSEE AN D / OR OBTAINED BY THE LD AO U/S 133(6) OF THE ACT WERE FORWARDED TO THE ASSESSING OFFICERS OF THE RESPECTIVE SHARE APPLICANTS BY THE LD AO FOR CROSS VERIFICATION AND NECESSARY ACTION IN T HEIR HANDS. ADMITTEDLY, NO ADVERSE COMMENTS WERE RECEIVED BY THE LD AO FROM THE ASSESS ING OFFICERS OF THE RESPECTIVE SHARE APPLICANTS PURSUANT TO THE VERIFICATION OF THESE TR ANSACTIONS. 3.1. IT IS PERTINENT TO NOTE THAT THE TWO SHARE AP PLICANTS WERE ALREADY HOLDING SHARES IN THE ASSESSEE COMPANY AND THE DETAILS OF SHARES HELD BY THEM AS ON 31.3.2009 ARE AS BELOW:- TULSYAN & SONS PVT LTD 1894000 SHARES WHITESTONE CONSULTANTS PVT LTD 1527000 SHARES THE EXISTENCE OF THESE SHAREHOLDING IN THE ASSESSEE COMPANY BY THE RESPECTIVE SHARE APPLICANTS WAS NOT DISPUTED BY THE LD AO. 3.2. IT IS NOT IN DISPUTE THAT THE LD AO HAD NOT D OUBTED THE IDENTITY OF THE SHARE APPLICANTS AND THE GENUINENESS OF THE ENTIRE TRANSACTIONS. TH E ONLY GROUND ON WHICH THE ADDITION U/S 68 OF THE ACT WAS MADE IS THAT ACCORDING TO LD AO, THE SHARE APPLICANTS DID NOT POSSESS SUFFICIENT CASH AND BANK BALANCES ON THE DATE OF IS SUING THE CHEQUES TOWARDS SHARE APPLICATION MONEY ON 31.3.2010 AND THOSE CHEQUES WE RE ULTIMATELY CLEARED ONLY IN THE MONTH OF MAY 2010 OUT OF MONIES AVAILABLE IN THE BA NK DUE TO SALE OF SHARES OF CERTAIN COMPANIES. HENCE THE LD AO CONCLUDED THAT THE CRED ITWORTHINESS OF THE SHARE APPLICANTS WAS NOT PROVED BY THE ASSESSEE IN THE INSTANT CASE. IN THIS REGARD, WE FIND THAT THE CREDITWORTHINESS OF THE SHARE APPLICANTS TO HONOUR THE CHEQUES GIVEN BY THEM TOWARDS SHARE APPLICATION MONEY SHOULD BE VIEWED ONLY ON THE DATE OF ENCASHMENT IN MAY 2010 AND NOT ON THE DATE OF ISSUANCE OF THE CHEQUES ON 31.3.2010 . EVEN OTHERWISE, IT IS NOT THAT THE SHARE APPLICANTS WERE NOT HAVING ANY ASSETS IN THEIR BALA NCE SHEET SO AS TO SAY THAT THEY ARE NOT 5 ITA NO.2253/KOL/2013 SURYA ALLOYS INDUSTRIES LTD., AY 2010-11 CREDITWORTHY. THEY HAD SUFFICIENT INVESTMENTS IN THEIR BALANCE SHEET WHICH WERE LIQUIDATED IN MAY 2010 AND MONIES REALIZED THEREON WERE UTILIZ ED FOR HONOURING THE CHEQUES GIVEN ON 31.3.2010. THE LD CITA OBSERVED THAT THE NET WORTH OF TULSYAN & SONS PVT LTD AS ON 31.3.2010 WAS RS. 29.81 CRORES AND THAT OF M/S WHIT E STONE CONSULTANTS PVT LTD AS ON 31.3.2010 WAS RS, 11.33 CRORES. SINCE THE ASSESSEE AND THE SHARE APPLICANTS ARE GROUP COMPANIES WHICH IS NOT DISPUTED, IT CANNOT BE RULE D OUT THAT THE SHARE APPLICANTS HAD REQUESTED THE ASSESSEE NOT TO DEPOSIT THE SHARE APP LICATION MONEY CHEQUES ON 31.3.2010. THE LD DR VEHEMENTLY ARGUED THAT THE REGISTERED OFF ICE OF THE SHARE APPLICANTS WAS LOCATED AT THE SAME PLACE WHERE THE ASSESSEES REGISTERED O FFICE WAS SITUATED AND THEY WERE HAVING COMMON DIRECTORS AND HENCE THE CORPORATE VEIL HAD T O BE LIFTED. WE FIND THAT THE TRANSACTIONS CARRIED OUT BY THE ASSESSEE COULD AT B EST BE CONSTRUED AS A BONA FIDE UNDERSTANDING BETWEEN THE PARTIES IN ASST YEAR 2010 -11 PROBABLY TO STRENGTHEN THE RESPECTIVE BALANCE SHEETS WITHOUT ACTUAL FLOW OF FU NDS. BUT THAT DOES NOT MEAN THAT THE ENTIRE UNDERSTANDING / ARRANGEMENT IS A SHAM WARRAN TING TO LIFT THE CORPORATE VEIL. THERE IS NOTHING TO LIFT THE VEIL IN ORDER TO IDENTIFY ANY R EAL BENEFICIARY WHO IS BEHIND THE SCENE. WE FIND THAT THE ENTIRE ARRANGEMENT HAS BEEN DONE ONLY FOR THE LIMITED PURPOSE OF WINDOW DRESSING THE BALANCE SHEETS OF THE ASSESSEE AS WELL AS THE RESPECTIVE SHARE APPLICANTS WITH SOME CONNIVANCE TO IMPROVE THE DEBT EQUITY RATIOS. EVEN THIS CONNIVANCE COULD BE POSSIBLE ONLY WITH THE GROUP CONCERNS AND COULD NOT BE CARRI ED OUT WITH STRANGERS. IN ANY CASE, THERE IS NO LOSS OF REVENUE TO THE INCOME TAX DEPARTMENT ON THESE TRANSACTIONS AND WE FAIL TO UNDERSTAND AS TO HOW THE SAME IS OF ANY RELEVANCE T O JUSTIFY THE ADDITION U/S 68 OF THE ACT. THE LD CITA HAD OBSERVED THAT THE LD AO ALLEGED THA T THE SHARE APPLICATION MONEY WAS RECEIVED TO INFLATE CAPITAL BASE SO AS TO REDUCE IN TEREST BURDEN. THE LD CITA HAD OBSERVED THAT THIS ACT WOULD ONLY RESULT IN HIGHER REPORTABL E PROFITS BY REDUCED INTEREST COSTS AND IT CANNOT BE CONSTRUED AS A TAX AVOIDANCE ARRANGEMENT. WE FIND FROM THE PAPER BOOK THAT THE LD AO HAD MADE EXTENSIVE VERIFICATION OF THE SHARE APPLICANTS IN THE IMMEDIATELY SUCCEEDING ASSESSMENT YEAR I.E ASST YEAR 2011-12 DU RING THE SCRUTINY ASSESSMENT PROCEEDINGS OF THE ASSESSEE, WHEREIN THE ENTIRE FUN DS HAD ACTUALLY FLOWN FROM THE SHARE APPLICANTS TO THE ASSESSEE. THESE DETAILS ARE AVA ILABLE IN PAGES 98 TO 209 IN THE CASE OF M/S TULSYAN & SONS PVT LTD AND IN PAGES 210 TO 255 IN T HE CASE OF M/S WHITE STONE CONSULTANTS PVT LTD WHICH CONTAINS THE QUERIES RAISED BY THE LD AO AND THE VARIOUS REPLIES GIVEN BY THE SHARE APPLICANTS TOGETHER WITH ALL THE SUPPORTING E VIDENCES INCLUDING THE SOURCES FOR MAKING INVESTMENTS IN THE ASSESSEE COMPANY. AFTER DULY APP RECIATING THOSE EVIDENCES BY EXAMINING 6 ITA NO.2253/KOL/2013 SURYA ALLOYS INDUSTRIES LTD., AY 2010-11 THE SOURCES AND ON ARRIVING AT A CONSCIOUS CONCLUSI ON THAT THE THREE INGREDIENTS OF SECTION 68 OF THE ACT VIZ., IDENTITY OF THE PARTIES, GENUINENE SS OF TRANSACTIONS AND CREDITWORTHINESS OF THE PARTIES , WERE DULY SATISFIED BY THE ASSESSEE, THE LD AO CHOSE NOT TO MAKE ANY ADDITION TOWARDS THE SAME IN THE SCRUTINY ASSESSMENT PROCEED INGS COMPLETED IN THE HANDS OF THE ASSESSEE U/S 143(3) ON 5.3.2014 FOR THE ASST YEAR 2 011-12. ON A SPECIFIC QUERY FROM THE BENCH WITH REGARD TO INITIATION OF ANY REVISION PRO CEEDINGS U/S 263 OF THE ACT FOR THE ASST YEAR 2011-12, THE LD AR STATED THAT NO SUCH PROCEED ING WAS INITIATED ON THE ASSESSEE. THIS FACT WAS ALSO NOT DISPUTED BY THE LD DR BEFORE US. IT IS NOT IN DISPUTE THAT THESE SHARE APPLICANTS WERE ALREADY HOLDING CERTAIN SHARES IN T HE ASSESSEE COMPANY AND NO ADVERSE INFERENCES WERE DRAWN IN RESPECT OF THEIR TRANSACTI ONS WITH THE ASSESSEE BY THE LD AO IN THE SCRUTINY ASSESSMENT PROCEEDINGS OF THE EARLIER YEA RS IN THE HANDS OF THE ASSESSEE AS COULD BE EVIDENT FROM THE ASSESSMENT ORDER U/S 143(3) DATED 9.5.2011 FRAMED FOR THE ASST YEAR 2009- 10 (PAGES 260 TO 263 OF THE PAPER BOOK). 3.3. IT IS NOT THE CASE OF THE LD AO THAT THOUGH T HE CHEQUES FOR SHARE APPLICATION MONIES WERE GIVEN BY THE SHARE APPLICANTS TO THE ASSESSEE ON 31.3.2010 AND THE SAME WERE ENCASHED OUT OF UNDISCLOSED SOURCES OF THE ASSESSEE ROUTED T HROUGH THESE SHARE APPLICANTS. IT IS NOT IN DISPUTE THAT THOSE CHEQUES WERE ENCASHED ONLY IN MA Y 2010 OUT OF SALE PROCEEDS OF CERTAIN SHARES. THE LD DR ARGUED THAT THE SHARES SOLD BY T HE SHARE APPLICANTS WERE MERELY PAPER COMPANIES AND RELIED ON THE DECISION OF THIS TRIBUN AL IN THE GROUP OF CASES IN ITA NO. 1702/KOL/2013 FOR AY 2008-09 DATED 30.10.2015. WE FIND THAT THIS DECISION WAS RENDERED IN THE CONTEXT OF VALIDITY OF REVISION PROCEEDINGS INITIATED U/S 263 OF THE ACT AND HENCE THE SAID DECISION IS NOT RELEVANT FOR THE FACTS OF THE INSTANT CASE. IN ANY EVENT, IF AT ALL, THERE IS ANY ALLEGATION THAT THE SHARES SOLD BY THE SHARE AP PLICANTS ARE MERE PAPER COMPANIES, THEN IT IS FOR THE ASSESSING OFFICER OF THE SHARE APPLICANT S TO CARRY OUT NECESSARY ENQUIRES IN THEIR HANDS TO VERIFY THE VERACITY OF THE REALIZATION OF SHARE PROCEEDS. THE ASSESSEE IN THE INSTANT CASE HAD DULY EXPLAINED THE SOURCE OF SOURCE. NO THING BETTER COULD BE EXPECTED FROM THE SIDE OF THE ASSESSEE AND WE HOLD THAT THE ASSESSEE HAD DULY DISCHARGED ITS ENTIRE ONUS ON THE SUBJECT MENTIONED TRANSACTIONS. 3.4. WE FIND THAT THE LD AR RAISED A PRELIMINARY O BJECTION AS TO WHETHER THE PROVISIONS OF SECTION 68 OF THE ACT AT ALL COULD BE INVOKED IN TH E YEAR UNDER APPEAL. HE ARGUED THAT SECTION 68 OF THE ACT USES THE EXPRESSION WHERE AN Y SUM IS FOUND CREDITED IN THE BOOKS OF 7 ITA NO.2253/KOL/2013 SURYA ALLOYS INDUSTRIES LTD., AY 2010-11 AN ASSESSEE . IN THE INSTANT CASE, THE ASSESS EE HAD NOT RECEIVED ANY PHYSICAL SUM DURING THE YEAR UNDER APPEAL AND HAD ADMITTEDLY REC EIVED ONLY IN THE NEXT FINANCIAL YEAR. HE PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF H.H.SRI RAMA VERMA VS CIT REPORTED IN (1991) 187 ITR 308 (S C) WHEREIN IN THE CONTEXT OF PROVISIONS OF SECTION 80G OF THE ACT, THE HONBLE A PEX COURT HAD HELD THAT THE EXPRESSION ANY SUMS PAID CONTEMPLATES PAYMENT OF AN AMOUNT O F MONEY. ONE OF THE DICTIONARY MEANINGS OF THE EXPRESSION SUM MEANS ANY INDEFINI TE AMOUNT OF MONEY. ACCORDINGLY IT HELD THAT IN ORDER TO CLAIM DEDUCTION U/S 80G OF TH E ACT, THERE MUST BE A CLEAR PAYMENT OF MONEY AND HENCE THE SAID DEDUCTION IS NOT APPLICABL E FOR DONATIONS IN KIND. WE FIND IN THE INSTANT CASE, THE ASSESSEE ON ONE HAND HAD CREDITED THE SHARE APPLICATION MONEY PENDING ALLOTMENT AND ON THE OTHER HAND HAD SHOWN CHEQUES ON HAND IN THE ASSET SIDE OF THE BALANCE SHEET. THIS GOES TO PROVE THAT THE ASSESSE E HAD NOT RECEIVED THE SUM OF MONEY TOWARDS SHARE APPLICATION MONEY IN THE YEAR UNDER A PPEAL AND HENCE THE PROVISIONS OF SECTION 68 OF THE ACT CANNOT BE MADE APPLICABLE IN THE YEAR UNDER APPEAL. IT IS WELL SETTLED THAT MERELY ON AN ENTRY PASSED IN THE BOOKS, THE PR OVISIONS OF SECTION 68 OF THE ACT CANNOT BE INVOKED. WE ALSO FIND LOT OF FORCE IN THE ARG UMENT OF THE LD AR THAT IF THE ARGUMENT OF THE LD AO IS TO BE ACCEPTED THAT THE BOOK ENTRY PAS SED IN THE BOOKS OF THE ASSESSEE IS BOGUS AND SHAM, THEN ALSO THE PROVISIONS OF SECTION 68 OF THE ACT COULD NOT BE INVOKED. WE ALSO FIND THAT THE LD AO HAD NOT BROUGHT ANY COGENT MATE RIAL ON RECORD TO PROVE THAT THE TRANSACTIONS WERE BOGUS AND SHAM. THE LD AO HAD DU LY CONTROVERTED HIS OWN STATEMENT BY SAYING ON ONE HAND THAT THE SHARE APPLICATION WAS M ERE A BOOK ENTRY BUT ON THE OTHER HAND ADMITS THAT THE SHARE APPLICATION CHEQUES WERE ACTU ALLY ENCASHED BY THE ASSESSEE IN THE SUBSEQUENT FINANCIAL YEAR. 3.5. WE FIND THAT THE VARIOUS DECISIONS RELIED UPO N BY THE LD AO ARE NOT AT ALL APPLICABLE TO THE FACTS OF THE INSTANT CASE IN AS MUCH AS THE ENTIRE DETAILS OF THE SHARE APPLICANTS WERE DULY PRODUCED BY THE ASSESSEE AND WERE ALSO CONFIRM ED BY THEM BEFORE THE LD AO IN RESPONSE TO NOTICES ISSUED U/S 133(6) OF THE ACT AN D EXTENSIVE VERIFICATION OF THOSE DETAILS WERE ALSO CARRIED OUT BY THE LD AO DURING THE COURS E OF SCRUTINY ASSESSMENT PROCEEDINGS COMPLETED FOR ASST YEAR 2011-12. WE FIND THAT NONE OF THE DOCUMENTARY EVIDENCES FILED BY THE ASSESSEE OR BY THE SHARE APPLICANTS WERE TREATE D BY THE LD AO AS INGENUINE OR THE APPLICANTS WERE NON-CREDITWORTHY. WE DO NOT DEEM I T FIT AND APPROPRIATE TO GET INTO ANY CASE LAWS ON THE IMPUGNED SUBJECT AS THE FACTS ARE STARING ON US WHEREIN THE EXTENSIVE 8 ITA NO.2253/KOL/2013 SURYA ALLOYS INDUSTRIES LTD., AY 2010-11 VERIFICATIONS WERE DULY CARRIED OUT BY THE LD AO AN D NO ADVERSE INFERENCES WERE DRAWN BY HIM. ACCORDINGLY, THE GROUND NOS. 1 & 2 RAISED BY THE REVENUE ARE DISMISSED. 4. THE NEXT GROUND TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE DISALLOWANCE U/S 14A OF THE ACT COULD BE MADE IN THE FACTS AND CIRCU MSTANCES OF THE CASE. 4.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASS ESSEE HELD ONLY SINGLE INVESTMENT IN ITS WHOLLY OWNED SUBSIDIARY M/S PARTH ISPAT INDIA PVT L TD FOR RS. 597 LACS WHICH WAS ACQUIRED BY THE ASSESSEE IN FINANCIAL YEAR 2008-09. NO DIVI DEND WAS EARNED FROM THE SAID INVESTMENT DURING THE RELEVANT YEAR UNDER APPEAL. THE LD AO SOUGHT TO MAKE DISALLOWANCE U/S 14A OF THE ACT BY INVOKING RULE 8D. THE ASSESS EE CLAIMED THAT NO EXPENDITURE WAS INCURRED BY THE ASSESSEE TOWARDS MAKING INVESTMENTS AND THE INVESTMENTS WERE MADE ONLY OUT OF OWN FUNDS OF THE ASSESSEE. THE LD AO BY APP LYING THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF DHANUKA & SONS V S CIT REPORTED IN (2011) 201 TAXMAN 105 (CAL) AND THE DECISION OF SPECIAL BENCH OF DELH I TRIBUNAL IN THE CASE OF CHEMINVEST LTD VS ITO REPORTED IN (2009) 121 ITD 318 (DEL) (SB ) HELD THAT EVEN IF NO DIVIDEND INCOME WAS DERIVED , DISALLOWANCE U/S 14A OF THE ACT COULD BE MADE BY INVOKING RULE 8D. THE LD AO ACCORDINGLY MADE DISALLOWANCE BY INVOKING RULE 8 D(2)(II) IN THE SUM OF RS. 25,36,401/- AND RULE 8D(2)(III) IN THE SUM OF RS. 2 ,98,500/-. 4.2. BEFORE THE LD CITA , THE ASSESSEE OBJECTED T O THE NON-RECORDING OF PRIMARY SATISFACTION BY THE LD AO IN TERMS OF SECTION 14A(2 ) OF THE ACT AND RULE 8D(1) OF THE RULES BY STATING THAT THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDITURE WAS INCURRED BY THE ASSESSEE IS INCORRECT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. IT WAS ARGUED THAT IT WAS ONLY WHEN THE LD AO RECORDS AN OBJECTIVE SATISFACTI ON AS TO WHY THE CLAIM OF THE ASSESSEE IS INCORRECT ONLY THEN HE COULD PROCEED TO APPLY RULE 8D. THE LD CITA OBSERVED THAT THE LD AO HAD GIVEN A CATEGORICAL FINDING IN THE SCRUTINY ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT FOR THE ASST YEAR 2009-10 THAT THE INVESTMENTS IN M/S PARTH ISPAT INDIA PVT LTD TO THE TUNE OF RS. 597 LACS WAS MADE OUT OF OWN FUNDS OF T HE ASSESSEE AND NOT OUT OF BORROWED FUNDS AND ACCORDINGLY DELETED THE DISALLOWANCE MADE U/S 14A OF THE ACT UNDER RULE 8D(2)(II) OF THE RULES IN THE SUM OF RS. 25,36,401/ -. IN RESPECT OF DISALLOWANCE BY INVOKING RULE 8D(2)(III) OF THE RULES, THE LD CITA OBSERVED THAT SIMILAR DISALLOWANCE WAS MADE IN ASST YEAR 2009-10 WHICH WERE NOT CONTESTED BY THE A SSESSEE AND SINCE THE VERY SAME INVESTMENT IS CONTINUED BY THE ASSESSEE DURING THE YEAR UNDER APPEAL ALSO, THE DISALLOWANCE 9 ITA NO.2253/KOL/2013 SURYA ALLOYS INDUSTRIES LTD., AY 2010-11 BY INVOKING RULE 8D(2)(III) IN THE SUM OF RS. 2,98, 500/- WAS UPHELD. NO APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE US AGAINST THIS CO NFIRMATION OF DISALLOWANCE. HOWEVER, THE REVENUE HAD PREFERRED AN APPEAL BEFORE US AGAINST T HE RELIEF GRANTED BY THE LD CITA ON THE FOLLOWING GROUND:- III) THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, LD. CIT (A) ERRED IN DELETING THE ADDITION OF RS. 25.36 LACS MADE U/S. 14A R.W. RULE 8D WITHOU T APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO DISCHARGE THE BURDEN OF PROOF THAT NO AMO UNT OF INTEREST BEARING FUNDS WERE UTILIZED FOR MAKING THE INVESTMENTS FETCHING EXEMPT INCOME. 4.3. THE LD DR VEHEMENTLY RELIED ON THE ORDER OF T HE LD AO. IN RESPONSE TO THIS, THE LD AR REITERATED THE SUBMISSIONS MADE BEFORE THE LD CI TA AND FURTHER ARGUED THAT THE INVESTMENT MADE IN SUBSIDIARY COMPANY SHOULD BE CON SIDERED AS STRATEGIC INVESTMENTS AND IN ANY CASE NO DISALLOWANCE U/S 14A OF THE ACT AT A LL SHOULD BE INVOKED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIALS AVAILABLE ON RECORD. THE FACTS STATED HEREINABOVE REMAIN UNDISPUTED AND HENCE THE SAME ARE NOT REITERATED HEREIN FOR THE SAKE OF BREVITY. WE FIND THAT THE LD AO HA D GIVEN A CATEGORICAL FINDING IN THE SCRUTINY ASSESSMENT PROCEEDINGS U/S 143(3) OF THE A CT FOR THE ASST YEAR 2009-10 DATED 9.5.2011 (ENCLOSED IN PAGES 260 TO 263 OF THE PAPER BOOK) THAT THE INVESTMENTS IN M/S PARTH ISPAT INDIA PVT LTD TO THE TUNE OF RS. 597 LACS WER E MADE OUT OF OWN FUNDS OF THE ASSESSEE AND NOT OUT OF BORROWED FUNDS OF THE ASSESSEE. WE FIND THAT THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF DHANUKA & SONS R ELIED UPON BY THE LD AO IS ACTUALLY IN FAVOUR OF THE ASSESSEE IN THE INSTANT CASE AS THE A SSESSEE HAD DULY PROVED THAT THE INVESTMENTS IN THE EARLIER YEAR WERE MADE OUT OF OW N FUNDS AND NOT OUT OF BORROWED FUNDS. HENCE WE FIND THAT THE LD CITA HAD RIGHTLY DELETED THE DISALLOWANCE MADE BY INVOKING RULE 8D(2)(II) OF THE RULES. WE FIND THAT THE DECISION OF SPECIAL BENCH OF DELHI TRIBUNAL IN THE CASE OF CHEMINVEST LTD VS ITO SUPRA HAD BEEN REVERS ED BY THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE SAME CASE AND HENCE THE RAT IO LAID DOWN BY THE SPECIAL BENCH IS NOT APPLICABLE AS ON DATE. WE HOLD THAT THE INVESTMENT MADE BY THE ASSESSEE IN ITS WHOLLY OWNED SUBSIDIARY COMPANY SHOULD BE CONSTRUED ONLY A S STRATEGIC INVESTMENTS AND HENCE NO DISALLOWANCE U/S 14A OF THE ACT SHOULD BE MADE ON T HE SAME. HOWEVER, WE FIND THAT THE ASSESSEE HAD NOT PREFERRED ANY APPEAL BEFORE US FOR THE DISALLOWANCE SUSTAINED BY THE LD CITA UNDER RULE 8D(2)(III) OF THE RULES. 10 ITA NO.2253/KOL/2013 SURYA ALLOYS INDUSTRIES LTD., AY 2010-11 ACCORDINGLY, THE GROUND NO. 3 RAISED BY THE REVENUE IS DISMISSED. 5. THE NEXT GROUND TO BE DECIDED IN THIS APPEAL I S AS TO WHETHER THE DISALLOWANCE MADE U/S 14A OF THE ACT COULD ALSO BE IMPUTED IN THE COM PUTATION OF BOOK PROFITS U/S 115JB OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 5.1. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIN D LOT OF FORCE IN THE ARGUMENT OF THE LEARNED AR THAT COMPUTATION OF DISALLOWANCE UNDER R ULE 8D CAN BE USED ONLY FOR COMPUTATION OF INCOME UNDER NORMAL PROVISIONS OF TH E ACT AND NOT FOR BOOK PROFITS U/S 115JB OF THE ACT. UNLESS AN ITEM IS DEBITED IN THE PROFIT AND LOSS ACCOUNT, THE SAME CANNOT BE THE SUBJECT MATTER OF ADDITION TO BOOK PROFITS U NDER CLAUSE (F) OF EXPLANATION TO SECTION 115JB OF THE ACT. SECTION 115JB OF THE ACT IS A DE EMING PROVISION AND ITS PROVISIONS ARE TO BE STRICTLY CONSTRUED. THE SCOPE OF CLAUSE (F) CAN NOT BE ENLARGED TO BRING WITHIN ITS AMBIT THE PROVISIONS OF SECTION 14A(2) AND 14A(3) OF THE ACT THEREBY ALSO ENCOMPASSING THE PROVISIONS OF RULE 8D BY WHICH DISALLOWANCE IS MADE ON SUBJECTIVE APPLICATION OF A MATHEMATICAL FORMULA CONTAINED IN THE RULE. THE DI SALLOWANCE MADE U/S 14A OF THE ACT READ WITH RULE 8D IS ONLY ARTIFICIAL DISALLOWANCE A ND OBVIOUSLY THE SAME IS NOT DEBITED IN THE PROFIT AND LOSS ACCOUNT AND THE SAME CANNOT BE IMPORTED INTO CLAUSE (F) OF EXPLANATION TO SECTION 115JB OF THE ACT. WE PLACE RELIANCE ON TH E FOLLOWING DECISIONS IN SUPPORT OF OUR PROPOSITION:- CADILA HEALTHCARE LTD VS ADDL CIT (2012) 21 TAXMANN .COM 483 (URO) (AHD- TRIB) RELIANCE INDUSTRIAL INFRASTRUCTURE LTD (ITA NOS. 69 & 70 (MUM) OF 2009 DATED 5.4.2013) ESSAR TELEHOLDINGS LTD (ITA NO. 3850 (MUM) OF 2010 DATED 29.7.2011) J.K.PAPER LTD (ITA NOS. 979 (AHD) OF 2006 & 4027 & 4080 (AHD.) OF 2008) NATIONAL COMMODITY DERIVATIVES EXCHANGE LTD (ITA NO . 2923 (MUM) OF 2010 DATED 26.8.2011) QUIPPO TELECOM INFRASTRUCTURE LTD (ITA NO. 4931 (DE LHI) OF 2010 DATED 18.2.2011) RESPECTFULLY FOLLOWING THE SAME, WE DISMISS THE GROUND NO. 4 RAISED BY THE REVENUE . 6. THE NEXT GROUND TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT COULD BE MADE IN THE SUM OF RS. 44.29 LACS IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 11 ITA NO.2253/KOL/2013 SURYA ALLOYS INDUSTRIES LTD., AY 2010-11 6.1. DURING THE YEAR UNDER CONSIDERATION THE ASSESS EE HAD INCURRED INTEREST EXPENDITURE OF RS.11,05,27,000/-. THE SAID INTEREST PERTAINS TO TH E LOAN FUNDS OBTAINED FROM VARIOUS BANKS/FINANCIAL INSTITUTIONS FOR THE PURPOSES OF TH E BUSINESS. THE STATEMENT GIVING DIVISION WISE BREAK-UP OF THE LOANS OBTAINED FROM VARIOUS FI NANCIAL INSTITUTIONS / BANKS VIS-A-VIS THE LOANS REFLECTED IN THE BALANCE SHEET AS ON 31.03.20 10 WERE PLACED ON LD AO'S RECORD. THE INTEREST OF RS.10,35,472/- PAID ON LOANS OBTAINED F OR NEW FERRO DIVISION UNDER CONSTRUCTION WAS CAPITALIZED TO THE COST OF WORK-IN-PROGRESS. IT WAS SUBMITTED THAT SUCH INTEREST COST WAS NOT CLAIMED AS DEDUCTION FROM THE PROFITS OF THE BU SINESS. COMPLETE DETAILS OF INTEREST CAPITALIZED TO FERRO DIVISION WERE ALSO PLACED ON R ECORD. THE LD AO HOWEVER IGNORING THE SUBMISSIONS AND STATEMENTS PLACED ON RECORD, MECHA NICALLY COMPUTED DISALLOWANCE OF RS. 44,29,172/- OF THE INCOME-TAX ACT, 1961 WITHOUT ASS IGNING ANY COGENT REASONS WHATSOEVER. 6.2. THE LD CITA IN HIS ORDER AT PARA 5.3 OBSERVE D AS UNDER:- I HAVE GONE THROUGH THE SUBMISSIONS OF THE APPELL ANT AND THE FINDINGS OF THE AO IN THE ASSESSMENT ORDER. ON CAREFUL SCRUTINY OF DETAILS PL ACED ON RECORD, I FIND THAT THE APPELLANT HAS FOUR FULLY OPERATIONAL UNITS NAMELY, BARJORA I & 11, DURGAPUR, MEGHALAYA & PHASE IV. THE APPELLANT WAS IN THE PROCESS OF COMMISSIONING O F NEW FERRO INGOT PLANT UNDER THE NAME, FERRO DIVISION AT BARJORA. BEFORE THE AO I NOTE THA T THE ASSESSEE HAD FILED UNIT-WISE BREAK- UP OF THE LOANS OBTAINED BY EACH OF THE FIVE UNITS FROM VARIOUS FINANCIAL INSTITUTIONS / BANKS AND WHICH WERE EXCLUSIVELY UTILIZED BY THE SAID UNI TS. THE ASSESSEE ALSO SUBMITTED SEPARATE STATEMENT SHOWING CALCULATION OF THE INTEREST PAID ON THE LOANS OBTAINED FOR THE FERRO DIVISION WHICH TO RS.10,35,742/-. SIMILAR STATEMENT S SHOWING THE INTEREST COSTS INCURRED THE OTHER FOUR OPERATING UNITS WERE ALSO PLACED ON RECO RD. THE FACT THAT ALL THE UNITS WERE INDEPENDENT OF EACH OTHER HAS NOT BEEN DISPUTED BY THE AO. NO FALSITY OR INFIRMITY HAS BEEN POINTED OUT BY THE AO IN THE UNIT-WISE ACCOUNTS AND STATEMENTS FURNISHED BY THE APPELLANT. THE APPELLANT SUBMITTED THAT THE RESPECTIVE FINANCE , ACCOUNTS, PRODUCTION, SALES ETC ARE MAINTAINED AND MANAGED AT THE RESPECTIVE UNITS AND THE HEAD OFFICE AT KOLKATA ACTS AS A CONTROLLING AND OVERSEEING AUTHORITY. THE LOANS OBT AINED BY THE FERRO DIVISION WERE SOLELY UTILIZED TO MEET ITS COST OF CONSTRUCTION AND THE BALANCE AMOUNT WAS FUNDED OUT OF INTERNAL ACCRUALS OF THE COMPANY. IT WAS THEREFORE CONTENDE D THAT THE SOURCE OF FUNDS FOR CAPITAL WORK- IN-PROGRESS WAS FULLY EXPLAINED. THE LD CITA ALSO OBSERVED THAT THE ASSESSEE IN COMP LIANCE WITH ACCOUNTING STANDARD 16 BORROWING COSTS ISSUED BY THE INSTITUTE OF CHARTER ED ACCOUNTANTS OF INDIA WHICH PROVIDES THAT THE BORROWING COSTS THAT ARE DIRECTLY ATTRIBUT ABLE TO THE ACQUISITION, CONSTRUCTION OR PRODUCTION OF A QUALIFYING ASSET SHOULD BE CAPITALI ZED AS PART OF THE COST OF THAT ASSET, HAD DULY CAPITALIZED THE INTEREST COST OF THESE LOANS W HICH WERE SPECIFICALLY OBTAINED AND UTILISED FOR THE FERRO UNIT AND ADDED TO ITS COST OF THE PRO JECT. ACCORDINGLY HE CONCLUDED THAT THE ASSESSEE HAD RIGHTLY ALLOCATED INTEREST AMOUNTING T O RS. 10,35,742/- TO THE FERRO UNIT BY NOT CHARGING THE SAME TO PROFIT AND LOSS ACCOUNT. 12 ITA NO.2253/KOL/2013 SURYA ALLOYS INDUSTRIES LTD., AY 2010-11 BEFORE THE AO AS WELL AS BEFORE ME THE A/R OF THE ASSESSEE FURNISHED THE DETAILS OF LOANS WHICH THE ASSESSEE HAD OBTAINED IN CONNECTION WITH FUNDING OF EACH OF THE FOUR OPERATING UNITS AS WELL AS THE UNIT WHICH WAS IN THE PROCESS OF BEING SET-UP. THE LOANS WHICH WERE SPECIFICALLY OBTAINED IN CONNECTION WITH FOUR OPERA TING UNITS WERE TAKEN AND UTILIZED BY THE ASSESSEE EVEN PRIOR TO DATE ON WHICH THE FERRO UNIT WAS BEING SETUP. IN THE IMPUGNED ORDER THE AO HAS NOT POINTED OUT ANY INFIRMITY OR FALSIT Y IN THE ASSESSEE'S WORKING OF INTEREST PAID ON LOANS TAKEN AND WHICH WERE UTILIZED BY DIFFERENT OPERATIONAL UNITS OF THE APPELLANT. EACH OF THE UNIT MAINTAINED ITS SEPARATE BOOKS OF ACCOUN TS IN WHICH THE INTEREST ALLOCATED AMONGST THESE UNITS WAS ACCOUNTED FOR. THE AO HAS NOT POINT ED OUT ANY INACCURACY OR INFIRMITY IN THE UNIT- WISE ACCOUNTS MAINTAINED BY THE ASSESSEE OR T HE ALLOCATION OF INTEREST COST AS MADE BY THE ASSESSEE INTER-SE AMONGST THE UNITS. ON THE CON TRARY THE ASSESSEE HAD IDENTIFIED THE SPECIFIC SOURCES OF FUNDS USED FOR MEETING THE COST OF CAPITAL W/I/P IN RESPECT OF FERRO UNIT AND INTEREST PAID ON THE LOANS UTILIZED IN MEETING THE COST OF CAPITAL W/I/P WAS CAPITALIZED IN THE BOOKS. THE AO DID NOT BRING ON MATERIAL ANY SPE CIFIC MATERIAL WHICH IN ANY MANNER PROVED THAT IN ADDITION TO THE BORROWED FUNDS IDENT IFIED BY THE ASSESSEE ANY ADDITIONAL BORROWED FUNDS WERE UTILIZED IN MEETING COST OF CAP ITAL W/I/P. IN ABSENCE OF ANY MATERIAL BROUGHT ON RECORD BY THE AO WHICH CONCLUSIVELY ESTA BLISHED THAT BORROWED FUNDS WERE ADDITIONALLY INVESTED TO MEET COST OF CAPITAL W/I/P , THE AO WAS NOT JUSTIFIED IN ALLOCATING ADDITIONAL INTEREST COST OF RS.44,29,172/- TOWARDS CAPITAL W/I/P AND THEREBY DISALLOWING THE SAME IN AY 2010-11 SIMPLY ON SOME THEORETICAL PRESU MPTIONS. THE AO IS ACCORDINGLY DIRECTED TO DELETE THE INTEREST DISALLOWANCE OF RS. 44,29,172/-. THESE GROUNDS OF APPEAL ARE ACCORDINGLY ALLOWED. 6.3. AGGRIEVED, THE REVENUE HAD PREFERRED AN APPEA L BEFORE US ON THE FOLLOWING GROUND:- V) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, LD. CIT (A) ERRED IN DELETING THE ADDITION OF RS. 44.29 LACS MADE U/S. 36( L)(III) OF THE I. T . ACT, 1961 WITHOUT APPRECIATING THE FACT THAT ASSESSEE COMPANY APPARENTLY FAILED TO ADDUCE MATERI AL ON RECORDS TO PROVE THAT NO LOAN FUNDS WERE DEPLOYED FOR MEETING THE COST OF CAPITAL WORK IN PROGRESS. 6.4. THE LD DR VEHEMENTLY RELIED ON THE ORDER OF T HE LD AO. IN RESPONSE TO THIS, THE LD AR REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND VEHEMENTLY RELIED ON THE ORDER OF THE LD CITA AND TOOK US TO THE RELEVAN T PAGES OF THE PAPER BOOK CONTAINING THE DETAILS OF LOANS BORROWED FOR VARIOUS PROJECTS. 6.5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK FILED IN THIS REGARD. FRO M THE CATEGORICAL FINDINGS GIVEN BY THE LD CITA IN HIS ORDER WHICH HAD NOT BEEN CONTROVERTED B Y THE REVENUE BEFORE US, WE FIND NO INFIRMITY IN THE ORDER OF THE LD CITA IN THIS REGAR D. ACCORDINGLY, THE GROUND NO. 5 RAISED BY THE REVENUE IS DISMISSED. 7. THE NEXT GROUND TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA IS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS. 5.65 LACS MADE U/S 43B OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 13 ITA NO.2253/KOL/2013 SURYA ALLOYS INDUSTRIES LTD., AY 2010-11 7.1. THE LD AO OBSERVED THAT AS PER CLAUSE 21B(B) OF THE TAX AUDIT REPORT , AN AMOUNT OF RS. 5,65,847/- WAS STATED AS LEAVE NOT PAID, WHICH WAS NOT ADDED BACK IN THE COMPUTATION OF INCOME BY THE ASSESSEE AND ACCORDINGLY THE SAME WAS ADDED BY THE LD AO. THE ASSESSEE EXPLAINED THAT THE PROVISION OF RS.5,64,847/-, INTE R ALIA, FORMED PART OF THE OUTSTANDING PROVISIONS BROUGHT FORWARD FROM THE IMMEDIATE PRECE DING FINANCIAL YEAR. IT WAS EXPLAINED THAT THE AFORESAID AMOUNT WAS SIMPLY BROUGHT FORWAR D FROM THE EARLIER YEAR AND CARRIED FORWARD TO THE NEXT YEAR. THE SUM OF RS.5,64,847/- IN QUESTION WAS DEBITED TO THE PROFIT & LOSS ACCOUNT FOR FY 2009-10 NOR CLAIMED AS DEDUCTIO N FROM THE PROFITS OF THE BUSINESS. ACCORDINGLY THE QUESTION OF DISALLOWANCE UNDER SECT ION 43B IN AY 2010-11 DID NOT ARISE. THE ASSESSEE HAD ALSO FILED DETAILED SUBMISSION BEF ORE THE LD AO EXPLAINING THE TREATMENT METED OUT TO PROVISION FOR LEAVE ENCASHMENT IN ITS LETTER DATED 07.01.2013. THE ASSESSEE SUBMITTED THAT THE PROVISION BROUGHT FORWARD FROM T HE EARLIER YEARS TOTALED TO RS.13.02 LACS AND OUT OF THE SAID PROVISION RS.5.66 LACS WAS PAID AND THE REMAINING BALANCE OF RS.5.66 LACS WAS CARRIED FORWARD TO THE NEXT YEAR. HE ALSO FOUND THAT THE FACTUAL POSITION IS EVIDENT FROM SCHEDULE 14B TO THE BALANCE SHEET FOR THE FY 2 009-10 AND CLAUSE 21 OF THE TAX AUDIT REPORT FOR THE YEAR ENDED 31ST MARCH 2010. THE ASSE SSEE SUBMITTED THAT THE PROVISION OF RS.13.02 LACS BROUGHT FORWARD HAD BEEN ALREADY DISA LLOWED IN THE EARLIER YEARS UNDER SECTION 43B AND, THEREFORE, THE DISALLOWANCE OF THE OUTSTANDING BALANCE AS ON 31.03.2010 OF RS. 5.66 LACS WAS UNJUSTIFIED AND TANTAMOUNT TO DOU BLE DISALLOWANCE. 7.2. THE LD CITA VIDE PARA 7.2 OF HIS ORDER HAS O BSERVED AS UNDER:- I FIND FORCE IN THE SUBMISSIONS OF THE APPELLANT A ND NOTE THAT THE PROVISION OF RS.5,64,847/- FORMED PART OF THE OPENING PROVISION OF RS.13.02 LA CS BROUGHT FORWARD FROM EARLIER YEARS AND WAS NEVER DEBITED TO THE PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31.03.2010. IN THE YEAR UNDER CONSIDERATION THE APPELLANT PAID RS.5.66 LACS AND THE REMAINING PROVISION OF RS.5,64,847/- WAS CARRIED FORWARD TO THE SUBSEQUENT YEAR. I NOTE THAT THE AO MISTOOK THE OUTSTANDING PROVISION OF RS.5,64,847/- AS PROVISION CREATED DURING THE YEAR WHICH HAD REMAINED OUTSTANDING AND ACCORDINGLY DISALLOWED THE SAME UNDER SECTION 43B OF THE INCOME- TAX ACT, 1961. THE FACT, HOWEVER, WAS THAT SUCH PRO VISION WAS BROUGHT FORWARD FROM EARLIER YEAR AND WAS NOT CLAIMED AS DEDUCTION IN AY 2010-11 . I THEREFORE HOLD THAT THE ADDITION OF R 5,65,847/- MADE BY THE AO WAS UNJUSTIFIED AS IT RES ULTED IN DOUBLE DISALLOWANCE BECAUSE THE BROUGHT FORWARD PROVISION WAS ALREADY DISALLOWED IN THE EARLIER YEARS. ON THE FACTS AND CIRCUMSTANCES, I THEREFORE DIRECT THE AO TO DELETE THE DISALLOWANCE OF RS.5,64,847/- . THIS GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 7.3. AGGRIEVED, THE REVENUE HAD PREFERRED AN APPEA L BEFORE US ON THE FOLLOWING GROUND:- VI) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.5.65 LACS MADE U/S. 43B OF THE I. T. ACT, 196 1 IN RESPECT OF PROVISION FOR LEAVE ENCASHMENT WITHOUT REMANDING THE MATTER TO THE A.O. FOR VERIFICATION. 14 ITA NO.2253/KOL/2013 SURYA ALLOYS INDUSTRIES LTD., AY 2010-11 7.4. THE LD DR VEHEMENTLY RELIED ON THE ORDER OF T HE LD AO. IN RESPONSE TO THIS, THE LD AR VEHEMENTLY RELIED ON THE ORDER OF THE LD CITA. 7.5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK FILED IN THIS REGARD. FRO M THE CATEGORICAL FINDINGS GIVEN BY THE LD CITA IN HIS ORDER WHICH HAD NOT BEEN CONTROVERTED B Y THE REVENUE BEFORE US, WE FIND NO INFIRMITY IN THE ORDER OF THE LD CITA IN THIS REGAR D. ACCORDINGLY, THE GROUND NO. 6 RAISED BY THE REVENUE IS DISMISSED. 8. THE LAST GROUND TO BE DECIDED IN THIS APPEAL I S AS TO WHETHER THE ADDITION U/S 2(24(X) R.W.S. 36(1)(VA) OF THE ACT COULD BE MADE IN THE SU M OF RS. 1,49,497/- IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 8.1. THE LD AO MADE DISALLOWANCE OF DELAYED DEPOSIT OF EMPLOYEES CONTRIBUTION TO PF AMOUNTING TO RS. 1,49,497/- BASED ON THE DISCLOSURE MADE IN THE TAX AUDIT REPORT. THE LD CITA BY PLACING RELIANCE ON THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS VIJAY SHREE LIMITED IN ITA NO. 245 O F 2011 DATED 6.9.2011 AND ALSO BY VERIFICATION FOUND THAT THE EMPLOYEES CONTRIBUTION TO PF WERE REMITTED WITHIN THE DUE DATE FOR FILING THE RETURN OF INCOME BY THE ASSESSEE AND HENCE THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 36(1)(VA) OF THE ACT. 8.2. AGGRIEVED, THE REVENUE HAD PREFERRED AN APPEA L BEFORE US ON THE FOLLOWING GROUND:- VII) THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, LD. CIT(A) ERRED IN DELETING DISALLOWANCE OF RS.1,49,497/- U/S. 2(24)(X) R.W.S. 36(1)(VA). 8.3. THE LD DR VEHEMENTLY RELIED ON THE ORDER OF T HE LD AO. IN RESPONSE TO THIS, THE LD AR VEHEMENTLY RELIED ON THE ORDER OF THE LD CITA. THE LD AR ALSO PLACED ON RECORD A RECENT DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF AKZO NOBEL INDIA LTD VS CIT IN ITA NO. 110 OF 2011 DATED 14.6.2016 ON THE I MPUGNED ISSUE. 8.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOU R OF THE ASSESSEE BY THE FOLLOWING DECISIONS:- AKZO NOBEL INDIA LTD VS CIT IN ITA NO. 110 OF 2011 DATED 14.6.2016 (CAL HC) CIT VS VIJAY SHREE LIMITED IN ITA NO. 245 OF 2011 D ATED 6.9.2011 (CAL HC) 15 ITA NO.2253/KOL/2013 SURYA ALLOYS INDUSTRIES LTD., AY 2010-11 CIT VS P.M.ELECTRONICS LTD REPORTED IN (2008) 220 C TR 635 (DEL) CIT VS SABARI ENTERPRISES REPORTED IN (2008) 298 IT R 141 (KAR) CIT VS ALOM EXTRUSIONS LTD REPORTED IN (2009) 319 I TR 306 (SC) CIT VS NEXUS COMPUTER P LTD REPORTED IN (2008) 219 CTR 54 (MAD) CIT VS VINAY CEMENT LTD REPORTED IN (2007) 213 CTR 268 (SC) CIT VS AIMIL LTD REPORTED IN 2010-TIOL-125-HC-DEL-I T CIT VS DHARMENDRA SHARMA REPORTED IN 297 ITR 320 (D EL) RESPECTFULLY FOLLOWING THE AFORESAID JUDICIAL PRECE DENTS, WE DISMISS THE GROUND NO. 7 RAISED BY THE REVENUE. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.08.2016. SD/- SD/- (K. NARASIMHA CHARY) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED : 10TH AUGUST, 2016 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT DCIT, CIRCLE-3, KOLKATA 2 RESPONDENT M/S. SURYA ALLOYS INDUSTRIES LTD., 1/1, CAMAC STREET, 3 RD FLOOR, KOLKATA-16. 3 . THE ACIT, KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .