Sh. Jagdeep Singal, Ludhiana V. ITO, Ludhiana

ITA 24/CHANDI/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4517 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 04-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL KUMAR DHIR
• Keywords: Rule of consistency; Earning of tax free income; Reason to believe; Rule 8D; Set aside
• Section: 143(3); 14A; 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A , CHANDIGARH . . , ! ' , # $% BEFORE SHRI N.K. SAINI, VICE PRESIDENT AND SHRI SANJAY GARG, JUDICIAL MEMBER ./ ITA NO.254/CHD/2014 / ASSESSMENT YEAR : 2010-11 SH.JAGDEEP SINGAL, C/O M/S EASTMAN IMPEX INDUSTRIAL AREA-C, SUA ROAD, DHANDARI KALAN, LUDHIANA. THE INCOME TAX OFFICER, WARD-V(2), LUDHIANA. ./ PAN NO.ADVPS 8357 G / APPELLANT / RESPONDENT ./ ITA NO.260/CHD/2015 / ASSESSMENT YEAR : 2011-12 SH.JAGDEEP SINGAL, C/O M/S EASTMAN IMPEX INDUSTRIAL AREA-C, SUA ROAD, DHANDARI KALAN, LUDHIANA. THE A.C.I.T., CIRCLE V, LUDHIANA. ./ PAN NO.ADVPS 8357 G / APPELLANT / RESPONDENT & ./ ITA NO.24/CHD/2017 / ASSESSMENT YEAR : 2012-13 SH.JAGDEEP SINGAL, C/O M/S EASTMAN IMPEX INDUSTRIAL AREA-C, SUA ROAD, DHANDARI KALAN, LUDHIANA. THE INCOME TAX OFFICER, WARD-V(2), LUDHIANA. ITA NO.254/CHD/2014 A.Y.2010-11 ITA NO.260/CHD/2015 A.Y.2011-12 ITA NO.24/CHD/2017 A.Y.2012-13 2 ./ PAN NO.ADVPS 8357 G / APPELLANT / RESPONDENT /ASSESSEE BY : SHRI ASHWANI KUMAR, CA. ! / REVENUE BY : SHRI ANIL KUMAR, DHIR, SR. DR ' # $ /DATE OF HEARING : 13.05.2019 %&'( $ /DATE OF PRONOUNCEMENT: 21.05.2019 /ORDER PER N.K.SAINI, VICE PRESIDENT: THESE THREE APPEALS FILED BY THE SAME ASSESSEE AGAINST THE SEPARATE ORDERS DATED 22.1.2014, 20.1.2 015 AND 11.11.2016 OF LEARNED COMMISSIONER OF INCOME TA X (APPEALS)-2, LUDHIANA [(IN SHORT CIT(A)], RELATIN G TO ASSESSMENT YEARS 2010-11 TO 2012-13 RESPECTIVELY. 2. SINCE THE ISSUES INVOLVED IN ALL THE APPEALS ARE COMMON, SO THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAK E OF CONVENIENCE AND BREVITY. 3. AT THE FIRST INSTANCE, WE MAY DEAL WITH THE APPE AL IN ITA NO.254/CHD/2014 FOR ASSESSMENT YEAR 2010-11. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) ITA NO.254/CHD/2014 A.Y.2010-11 ITA NO.260/CHD/2015 A.Y.2011-12 ITA NO.24/CHD/2017 A.Y.2012-13 3 WAS NOT JUSTIFIED TO ARBITRARILY UPHOLD THE DISALLO WANCE OF INTEREST AMOUNTING TO RS. 7,22.228/- U/S 57 OF T HE INCOME TAX ACT, 1961. 2. THAT HE WAS ALSO NOT JUSTIFIED TO HOLD THAT THE TOTAL DISALLOWANCE OF INTEREST U/S 57 WAS WARRANTED AT RS . 29,19,575/-. 3. THAT THE LD. CIT(A) WAS FURTHER NOT JUSTIFIED TO ARBITRARILY UPHOLD THE ACTION OF THE LD. ASSESSING OFFICER IN DISALLOWING A SUM OF RS. 33,88,018/- U/S 14A OF THE ACT. 4. THE FIRST ISSUE VIDE GROUND NOS.1 & 2 RELATES TO THE SUSTENANCE OF DISALLOWANCE OF INTEREST MADE BY THE A.O. U/S 57 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT). AS REGARDS TO THIS ISSUE, THE LD. COUNSEL FOR ASSESSEE SUBMITTED THAT AN IDENTICAL ISSUE HAVI NG SIMILAR FACTS RELATING TO DISALLOWANCE U/S 57 OF TH E ACT WAS INVOLVED IN THE CASE OF THE ASSESSEES BROTHERS , NAMELY S/SHRI RAJEEV SINGAL AND VINAY SINGAL IN ITA NOS.261 & 262/CHD/2015 FOR ASSESSMENT YEAR 2011-12 AND IN ITA NOS.22 & 23/CHD/2017 FOR ASSESSMENT YEAR 2012-13, BEFORE THE ITAT CHANDIGARH BENCH B, CHANDIGARH, WHEREIN VIDE ORDER DATED 29.3.2019 THE ISSUE HAD BEEN SET ASIDE TO THE FILE OF THE A.O. BY FOLLO WING THE EARLIER ORDER OF THE I.T.A.T. IN THE CASE OF ACIT, CIRCLE-VI, LUDHIANA VS. PAWAN KUMAR GOEL IN ITA NO.1438/CHD/2010 DATED 31.10.2011. COPY OF THE SAID ITA NO.254/CHD/2014 A.Y.2010-11 ITA NO.260/CHD/2015 A.Y.2011-12 ITA NO.24/CHD/2017 A.Y.2012-13 4 ORDER WAS FURNISHED, WHICH IS PLACED ON RECORD. THE AFORESAID CONTENTION OF THE LD. COUNSEL FOR ASSESSE E WAS NOT CONTROVERTED BY THE LD. SR.DR. 5. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PA RTIES AND MATERIAL AVAILABLE ON RECORD, IT IS NOTICED THA T AN IDENTICAL ISSUE HAVING SIMILAR FACTS WAS A SUBJECT MATTER OF THE ASSESSEES APPEAL IN THE AFORESAID REFERRED TO CASES OF S/SHRI RAJEEV SINGAL AND VINAY SINGAL FOR ASSESS MENT YEAR 2011-12 AND 2012-13, WHEREIN IDENTICAL ISSUE H AVING SIMILAR FACTS RELATING TO DISALLOWANCE OF INTEREST U/S 57 OF THE ACT, HAD BEEN RESTORED TO THE FILE OF THE A.O. AND RELEVANT FINDINGS HAVE BEEN IN PARA NOS.6 TO 11 OF THE AFORESAID REFERRED TO ORDER DATED 29.3.2019, WHICH READ AS UNDER: 6. BEFORE US, THE LD. COUNSEL FOR ASSESSEE CONTENDE D THAT THE METHOD EMPLOYED BY THE LD.CIT(A) FOR WORKI NG OUT THE DISALLOWANCE OF INTEREST WAS INCORRECT. IT WAS POINTED OUT THAT THE FACT OF THE MATTER WAS THAT TH ERE WERE MIXED FUNDS AVAILABLE WITH THE ASSESSEE AND IT WAS DIFFICULT, THEREFORE, TO WORK OUT THE DIRECT NE XUS BETWEEN THE BORROWED FUNDS UTILIZED FOR MAKING LOAN S AND ADVANCES. THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT IDENTICAL ISSUE HAD BEEN DEALT WITH BY THE ITAT CHANDIGARH BENCHES IN THE CASE OF ACIT, CIRCLE-VI, LUDHIANA VS. PAWAN KUMAR GOEL IN ITA NO.1438/CHD/2010 DATED 31.10.2011 WHEREIN THE TOTAL AMOUNT OF FUNDS DEPLOYED FOR EARNING INTEREST WAS VIEWED AGAINST THE BORROWED FUNDS AND AFTER ITA NO.254/CHD/2014 A.Y.2010-11 ITA NO.260/CHD/2015 A.Y.2011-12 ITA NO.24/CHD/2017 A.Y.2012-13 5 CONSIDERING THE SAME THE DISALLOWANCE OF INTEREST U /S 57(III) OF THE ACT WAS WORKED OUT. OUR ATTENTION WA S DRAWN TO PARA 4.5 OF THE ORDER AS UNDER: 4. WE HAVE CAREFULLY PERUSED THE FACTS OF THE CASE , RIVAL SUBMISSIONS AND THE CASE LAWS RELIED ON BY BO TH THE PARTIES INCLUDING THE PAPER BOOK. IN THIS CASE THE ASSESSEE SUBMITTED BEFORE THE ID. CIT(A), AS RECORDED AT PAG E 2 OF THE APPELLATE ORDER THAT OWN FUND OF THE ASSESSEE EXCEEDED BORROWED FUNDS, ON WHICH THE INTEREST WAS PAID. IT WAS, FURTHER, DEMONSTRATED IN THE FORM OF SUBMISSION FIELD BEFORE THE ID. CIT(A) THAT THROUGH OUT THE YEAR BORROWED FUND IS ON THE LOWER SIDE AS COMPARED TO FUND GIVEN ON INTEREST. AS SUCH IT WAS CONTENDED TH AT NO DISALLOWANCE ON THIS COUNT IS CALLED FOR. THE RELEV ANT DATA IN THE MATTER IS EXTRACTED FROM THE ORDER OF ID. CI T(A) AND IS REPRODUCED HEREUNDER:- 4.1 THE ID. C1T(A) IN HIS FINDINGS CLEARLY HELD THA T THE ASSESSEE HAD GIVEN RS. 4,25.86,325/~, ON INTEREST TO DIFFERENT PARTIES. THE ASSESSEE HAS TAKEN AN AMOUNT OF RS. 3,48,27,666/-, ON INTEREST. IN VIEW OF THIS, IT WAS HELD BY THE ID. G1T(A) THAT THE FUNDS FOR EARNING INTEREST IS HIGHER THAN THE AMOUNT OF BORROWED FUNDS. THER EFORE, IN THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF T HE CASE, IT IS EVIDENT THAT THE BORROWED FUNDS HAD NOT BEEN USED ITA NO.254/CHD/2014 A.Y.2010-11 ITA NO.260/CHD/2015 A.Y.2011-12 ITA NO.24/CHD/2017 A.Y.2012-13 6 FOR OTHER PURPOSES THAN EARNING INTEREST. REFERENC E MADE BY THE ID. 'AR', TO THE CONTENTS OF TABLE 3 AND 4 HAS FORCE. DEPLOYED FUNDS FOR INTEREST IS ALWAYS HIGHER THAN THE BORROWED FUNDS EXCEPT FOR THE MONTH OF DECEMBER , 2006. IN VIEWS OF THIS, THE DECISION OF H ON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF ABHISHEK INDUSTRIES RELIED UPON BY THE ID. 'AR 1 IS NOT APPLICABLE TO FACTS OF THE CASE. SIRNILARY, THE DECISION IN THE C ASE OF PADMMAVATI JAYKRISHNA V. C1T, 131 ITR 653 (GUJ) DO ES NOT SUPPORT THE CASE OF THE REVENUE HAVING REGARD T O THE FACTS OF THE CASE. 4.2 THE FINDINGS OF THE ID. CIT(A) ARE GIVEN HEREUNDER: '1 HAVE CAREFULLY CONSIDERED THE CONTENTION OF THE LD. COUNSEL FOR THE APPELLANT AND PERUSED THE RELEVA NT RECORD. THE ASSESSEE HAS GIVEN RS. 4,25,86,3257- TO DIFFERENT PARTIES ON INTEREST. SIMILARLY THE ASSE SSEE HAS TAKEN RS.3,48,27,666/- ON INTEREST. SINCE FUND_ DEP LOYED FOR EARNING INTEREST IS HIGHER THAN THE AMOUNT OF BORRO WED FUND HENCE IN TOTALITY IT SEEMS THAT BORROWED FUND HAS NOT USED FOR ASSESSEE HAS ALSO POINT OUT THAT DISAL LOWANCE OF INTEREST EXPENDITURE AT THE RATIO OF 36.81 IS AG AINST THE FACT OF THE CASE. THE ID. COUNSEL FOR THE ASSESSEE HAS FURTHER SUBMITTED THAT AS PER TABLE 3 PREPARED BY T HE AO DEPLOYED FUND FOR INTEREST IS ALWAYS HIGHER THA N THE BORROWED FUND EXCEPT FOR THE MONTH OF DECEMBER, 200 6. THE LD. COUNSEL IN HIS SUBMISSION HAS SUBMITTED THAT TABLE 4 AS CALCULATED BY THE AO HAS BEEN TAKEN AS A BASIS FOR CALCULATING THE AMOUNT OF INTEREST NOT UTILIZED WHO LLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING OF INTER EST. CONCLUSION OF FUND DEPLOYMENT AS PER TABLE 4 DOES N OT IN ACCORDANCE WITH A CONCLUSION OF FUND DEPLOYED AS PER BALANCE SHEET. THE ARGUMENT PUT FORTH BY THE ID. CO UNSEL HAS STRONG REASON TO BELIEVE THAT THE RATIO TAKEN B Y THE DY. COMMISSIONER FOR DISALLOWING INTEREST EXPENDITURE I S NOT CORRECT. IN VIEW OF THE ABOVE DISCUSSION THE EXPEND ITURE OF RS.17,32,8117- IS DIRECTED TO BE CONSIDERED AS EXPENDITURE. THIS GROUND OF APPEAL IS THEREFORE, ALLOWED.' 4.3 THE DECISION RELIED UPON BY THE LD. 'AR' IN THE CASE OF APPOLLO TRADE LINKS V. ITO, B-WARD, 204 ITR (AT) 78 SUPPORTS THE CASE OF THE ASSESSEE. ITA NO.254/CHD/2014 A.Y.2010-11 ITA NO.260/CHD/2015 A.Y.2011-12 ITA NO.24/CHD/2017 A.Y.2012-13 7 5. IN VIEW OF THE ABOVE DETAILED LEGAL AND FACTUAL DISCUSSIONS, IT IS EVIDENT THAT BORROWED FUNDS W ERE NOT USED FOR ADVANCING LOANS. HOWEVER, THE ASSESSEE U SED HIS SURPLUS FUNDS FOR EARNING THE INTEREST. CONSE QUENTLY, DISALLOWANCE OF INTEREST BY THE AO UNDER SUCH FACT- SITUATION IS NOT JUSTIFIED, THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE ID. C1T(A) AND, HENCE, THE SAME ARE UPHELD. 7. IT WAS POINTED OUT THAT THIS DECISION OF THE I.T .A.T. WAS FOLLOWED IN THE SUBSEQUENT YEAR IN THE CASE OF PAWAN KUMAR GOEL VS. ACIT IN ITA NO.528/CHD/2013 DATED 11.7.2014. FURTHER THE LD. COUNSEL FOR ASSESS EE POINTED OUT THAT FOLLOWING THESE DECISIONS THE A.O. HAD WORKED OUT DISALLOWANCE OF INTEREST U/S 57(3) OF TH E ACT IN THE CASE OF THE ASSESSEE ITSELF IN SUBSEQUEN T YEARS .E. ASSESSMENT YEAR 2013-14 AND ASSESSMENT YEAR 2014-15. COPIES OF ALL THE ABOVE ORDERS WERE PLACED BEFORE US. OUR ATTENTION WAS DRAWN TO PAGES 3 TO 5 OF THE ASSESSMENT ORDER FOR A.Y 2013-14, POIN TING OUT THEREFROM THAT FOLLOWING DECISION OF THE I.T.A. T. IN THE CASE OF PAWAN KUMAR GOEL IN ITA NO.1438/CHD/2010 ON NOTING THAT THE FACTS WERE IDENTICAL IN THE SAID CASE WITH THAT OF THE ASSESSE E, THE A.O. HAD WORKED OUT DISALLOWANCE OF INTEREST BY WORKING OUT MONTHWISE EXCESS INTEREST BEARING FUNDS AVAILABLE WITH THE ASSESSEE AS COMPARED TO THE INTE REST EARNING ADVANCES DISALLOWING INTEREST RELATING TO T HE SAME AS UNDER: INTEREST BEARING FUNDS INTEREST EARNING ADVANCES INTEREST BEARING FUNDS INVESTED IN NON-INTEREST EARNING ADVANCES INTEREST DISALLOWANCE U/S 57(1) APRIL- 2012 238813515 226219957.14 12593557.86 125935.58 MAY- 2012 236404560 282969957.14 JUNE- 2012 238863723 290669957.14 JULY- 2012 238158189 289669957.14 AUGUST- 2012 243135079 290819957.14 SEP- 2012 252273184 300169957.14 OCT- 268233343 303069957.14 ITA NO.254/CHD/2014 A.Y.2010-11 ITA NO.260/CHD/2015 A.Y.2011-12 ITA NO.24/CHD/2017 A.Y.2012-13 8 2012 NOV- 2012 272047764 310599957.14 DEC- 2012 241306970 307499957.14 JAN- 2013 235013297 311999957.14 FEB- 2013 242933362 315499957.14 MARCH- 2013 279709033 313364589.14 TOTAL 1,25,935.58 THUS, AN AMOUNT OF RS.1,25,936/- IS DISALLOWED U/S 57 AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 8. OUR ATTENTION WAS DRAWN TO THE IDENTICAL CALCULATION OF INTEREST FOR ASSESSMENT YEAR 2014-15 PLACED AT PAPER BOOK PAGE NO.30 POINTING THEREFROM THAT THERE WERE NO SURPLUS INTEREST BEARING FUNDS I N THAT YEAR AND ACCORDINGLY, NO DISALLOWANCE OF INTEREST WAS MADE IN THE ASSESSMENT FRAMED U/S 143(3) OF THE ACT VIDE ORDER DATED 17.8.2016 WHICH WAS PLACED AT PAPER BOOK PAGE NO.34. OUR ATTENTION WAS ALSO DRAWN TO IDENTICAL MONTHWISE WISE DETAIL O F INTEREST BEARING BORROWINGS AND INTEREST BEARING ADVANCES FOR ASSESSMENT YEAR 2015-16 PLACED AT PAPER BOOK PAGE NO.36 POINTING OUT THEREFROM THAT THE CALCULATION OF INTEREST DISALLOWANCE U/S 57(III ) AMOUNTED TO RS.1,92,766/- WHICH WAS ACCORDINGLY SHOWN TO HAVE BEEN DISALLOWED BY THE ASSESSEE IN IT S COMPUTATION OF INCOME, PLACED AT PAPER BOOK PAGE NO.38 AND WHICH WAS ACCEPTED IN ASSESSMENT FRAMED U/S 143(3) OF THE ACT, COPY OF ORDER OF WHIC H WAS PLACED AT PAPER BOOK PAGE NO.40. THUS IT WAS CONTENDED BY THE LD. COUNSEL FOR ASSESSEE THAT FOLLOWING THE PRINCIPLE OF CONSISTENCY, THE DISALLOWANCE OF INTEREST IN THE IMPUGNED YEAR OUGHT TO BE WORKED OUT IN AN IDENTICAL MANNER. MONTHWISE DETAILS OF INTEREST BEARING BORROWINGS AND INTEREST BEARING ADVANCES FOR THE IMPUGNED YEAR WERE PLACED BEFORE US AND IT WAS PLEADED THAT THE MATTER BE RESTORED BACK TO BE ALLOWED IN THE LIGHT OF THE DECISION OF THE I.T.A.T. IN THE CASE OF PAWAN KUMAR GOEL (SUPRA) FOLLOWED BY THE A.O. IN THE CASE OF TH E ASSESSEE FOR SUBSEQUENT YEARS AS DETAILED ABOVE. ITA NO.254/CHD/2014 A.Y.2010-11 ITA NO.260/CHD/2015 A.Y.2011-12 ITA NO.24/CHD/2017 A.Y.2012-13 9 9. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE CIT(A) POINTING THEREFROM THAT IT HAD MADE DETAILED EXERCISE OF WORKING OUT THE AMOUNT OF BORROWED FUNDS UTILIZED FOR THE PURPOSE OF MAKING INTEREST EARNING LOANS AND ADVANCES AND, THEREFORE, THE DISALLOWANCE OF INTEREST WORKED OUT BY HIM, IT WAS CONTENDED, WAS RIGHTLY MADE. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE IN THE PRESENT GROUND BEFORE US RELATES TO DISALLOWANCE OF INTEREST EXPENSES AS PER THE PROVISIONS OF SECTION 57(III) OF THE ACT. IT IS AN UNDISPUTED FACT THAT THE FUNDS AVAILABLE WITH THE ASSESSEE WERE MIXED FUNDS AND SOME OF THE INTEREST BEARING ADVANCES HAD BEEN MADE IN THE PRECEDING YEARS AND IT WAS DIFFICULT TO WORK OUT THE EXACT NE XUS BETWEEN THE INTEREST BEARING FUNDS AND INTEREST BEARING ADVANCES. NONE OF THE AUTHORITIES BELOW WE FIND, HAVE BEEN ABLE TO ESTABLISH DIRECTLY THE ABSE NCE OF ANY SUCH NEXUS WHILE WORKING OUT THE AMOUNT DISALLOWABLE U/S 57(III) OF THE ACT. THE AO WE FIND REASONED THAT MAJORLY INTEREST WAS EARNED BY THE ASSESSEE FROM ONE M/S JANPATH ESTATES AND SCRUTINIZING THE LEDGER ACCOUNT OF THE SAID PARTY, WORKED OUT THE ADVANCES MADE TO IT DURING THE YEAR ON THE BASIS OF DIFFERENCE IN THE OPENING AND CLOSI NG BALANCE. THEREAFTER HE DERIVED FROM THE BANK STATEMENT OF THE ASSESSEE THAT MAJOR AMOUNT WAS RECEIVED BY THE ASSESSEE FROM M/S EASTMAN IMPEX WHICH WAS NON INTEREST BEARING. HE THEREFORE DEDUCED THAT THIS NON INTEREST BEARING FUND HAD BEE N ADVANCED FOR EARNING MAJOR PORTION OF INTEREST DURI NG THE YEAR AND ACCORDINGLY DISALLOWED ENTIRE INTEREST CLAIMED BY THE ASSESSEE. THE LD.CIT(A), WE FIND, ADOPTED A TOTALLY DIFFERENT BASIS FOR CALCULATING T HE DISALLOWANCE EXTRACTING FIGURES FROM THE STATEMENT OF AFFAIRS FILED BY THE ASSESSEE AND FINDING THAT TOTA L BORROWINGS BEARING INTEREST DURING THE YEAR WERE RS.22.35 CRORES WHILE AMOUNT ADVANCED FOR EARNING INTEREST WAS ONLY 11.55 CRORES, WHICH HE HELD COULD AT BEST BE TREATED AS MADE FROM INTEREST BEARING FUNDS. THE REST OF THE INTEREST PAID WAS ACCORDINGL Y DISALLOWED BY THE LD.CIT(A).THUS THE DISALLOWANCE O F ITA NO.254/CHD/2014 A.Y.2010-11 ITA NO.260/CHD/2015 A.Y.2011-12 ITA NO.24/CHD/2017 A.Y.2012-13 10 INTEREST U/S 57(III) OF THE ACT, MADE BY THE REVEN UE AUTHORITIES, WE FIND, WAS NOT ON THE BASIS OF DIREC T NEXUS BETWEEN NON INTEREST BEARING FUNDS DEPLOYED FOR MAKING INVESTMENTS EARNING INTEREST. 11. IDENTICAL FACT SITUATION, WE FIND, WAS DEALT WITH BY THE I.T.A.T. IN THE CASE OF PAWAN KUMAR GOE L (SUPRA) WHEREIN QUANTUM OF DISALLOWANCE U/S 57(III) WAS WORKED OUT BY CALCULATING THE MONTHLY DIFFERENCE OF INTEREST BEARING FUNDS AND INTEREST EARNING ADVANCES AND DISALLOWING INTEREST RELATING TO THE SURPLUS OF INTEREST BEARING FUNDS RAISED ,ON THE PRESUMPTION THAT THE INTEREST BEARING FUNDS HAD BEEN DEPLOYED FOR MAKING THESE ADVANCES AND THE SURPLUS IF ANY WAS THEREFORE DEPLOYED FOR PURPOSES OTHER THAN EARNING INTEREST INCOME. MOREOVER, WE FIND, THAT IN THE CASE OF THE ASSESSEE IN THE SUBSEQUENT YEARS DISALLOWANCE OF INTEREST U/S 57(I II) WAS MADE ON THIS BASIS FOLLOWING THE DECISION OF TH E ITAT IN THE CASE OF PAWAN GOEL(SUPRA) . CONSIDERING THE SAME, WE HOLD THAT THE DISALLOWANCE U/S 57(III) OF THE ACT IN THE PRESENT CASE ALSO SHOULD BE WORKED O UT ACCORDINGLY AS PRESCRIBED BY THE ITAT IN THE CASE OF PAWAN GOEL(SUPRA) AND WHICH WAS FOLLOWED IN THE CASE OF THE ASSESSEE IN SUBSEQUENT YEARS. THE ISSUE IS ACCORDINGLY RESTORED BACK TO THE A.O. TO WORK OU T DISALLOWANCE OF INTEREST AS ABOVE. THIS GROUND OF APPEAL BY THE ASSESSEE IS, THEREFORE, ALLOWED FOR STATISTICAL PURPOSES. 6. SO RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DATED 29.3.2019 IN ITA NOS. 261 & 262/CHD/201 5 FOR ASSESSMENT YEAR 2011-12 AND IN ITA NOS.22 & 23/CHD/2017 FOR ASSESSMENT YEAR 2012-13, THIS ISSUE IS SET ASIDE TO THE FILE OF THE A.O. TO BE ADJUDICATED AFRESH IN ACCORDANCE WITH LAW, AS HAS BEEN DIRECTED IN THE AF ORESAID REFERRED TO ORDER DATED 29.3.2019. ITA NO.254/CHD/2014 A.Y.2010-11 ITA NO.260/CHD/2015 A.Y.2011-12 ITA NO.24/CHD/2017 A.Y.2012-13 11 7. THE NEXT ISSUE VIDE GROUND NO.3 RELATES TO THE SUSTENANCE OF DISALLOWANCE MADE BY THE A.O. U/S 14A OF THE ACT. AS REGARDS TO THIS ISSUE, THE LD. COUNSEL FOR ASSESSEE SUBMITTED THAT AN IDENTICAL ISSUE WAS A SU BJECT MATTER OF THE ASSESSEES APPEAL IN THE AFORESAID RE FERRED TO CASES OF S/SHRI RAJEEV SINGAL AND VINAY SINGAL F OR ASSESSMENT YEARS 2011-12 AND 2012-13, WHEREIN THE I SSUE HAD BEEN SET ASIDE TO THE FILE OF THE A.O. VIDE AFO RESAID REFERRED TO ORDER DATED 29.3.2019 AND THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA NOS.13 TO 17 OF TH E SAID ORDER. 8. IN HIS RIVAL SUBMISSION, THE LD. SR.DR ALTHOUGH SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW BUT C OULD NOT CONTROVERT THE AFORESAID CONTENTION OF THE LD. COUNSEL FOR ASSESSEE. 9. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PA RTIES AND MATERIAL AVAILABLE ON RECORD, IT IS NOTICED THA T AN IDENTICAL ISSUE HAVING SIMILAR FACTS WAS A SUBJECT MATTER OF THE ASSESSEES APPEAL IN THE CASES OF S/SHRI RAJ EEV SINGAL AND VINAY SINGAL IN ITA NOS.261 & 262/CHD/20 15 FOR ASSESSMENT YEAR 2011-12 AND IN ITA NOS.22 & ITA NO.254/CHD/2014 A.Y.2010-11 ITA NO.260/CHD/2015 A.Y.2011-12 ITA NO.24/CHD/2017 A.Y.2012-13 12 23/CHD/2017 FOR ASSESSMENT YEAR 2012-13 (SUPRA), WHEREIN VIDE ORDER DATED 29.3.2019 THE RELEVANT FIN DINGS HAD BEEN GIVEN IN PARA NOS.13 TO 17, WHICH READ AS UNDER: 13. THIS GROUND RELATES TO DISALLOWANCE OF EXPENSES MADE U/S 14A OF THE ACT RELATING TO THOSE INCURRED FOR THE PURPOSE OF EARNING EXEMPT INCOME. 14. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAD SHOWN INVESTMENT OF RS. 25,36,52,818/- AND RS.16,15,53,614/- AS ON 31.03.2011 AND 31.03.2010 RESPECTIVELY IN THE BALANCE SHEET. THE INCOME FROM THESE INVESTMENTS DOES NOT FORM PART OF THE TOTAL INCOME. THE A.O. FURTHER NOTED THAT THE ASSESSEE HAD INCURRED INTEREST EXPENDITURE OF RS.1,49,62,428/-. THE A.O. ASKED THE ASSESSEE TO EXPLAIN WHY PROVISIONS OF SECTION 14A MAY NOT BE APPLIED IN THE ASSESSEES CASE. AFTER CONSIDERING THE ASSESSEES SUBMISSIONS ON THIS ISSUE, THE A.O. HELD THAT PROVISIONS OF SECTION 14 A WERE ATTRACTED IN THE CASE. THE A.O. COMPUTED DISALLOWANCE UNDER RULE 8D(II) AT RS. 74,34,992/- AND UNDER RULE 8D(III) AT RS.10,38,016/-. THE TOTAL DISALLOWANCE OF RS.84,37,008/- WAS MADE. HOWEVER, AS THE WHOLE OF INTEREST EXPENDITURE OF RS.1,49,62,428/- WAS DISALLOWED BY THE A.O. U/S 57 OF THE ACT, NO FURTHE R DISALLOWANCE ON THIS ACCOUNT WAS MADE. 15. THE LD.CIT(A) ON FINDING THAT OUT OF THE TOTAL INTEREST EXPENDITURE OF RS.1,49,62,428/- CLAIMED BY THE ASSESSEE AN AMOUNT OF RS.95,73,276/- HAD BEEN DISALLOWED U/S 57 OF THE ACT AND THE REMAINING HAD BEEN HELD AS INCURRED DIRECTLY FOR THE PURPOSE OF EARNING INTEREST INCOME AND HELD THAT NO FURTHER DISALLOWANCE WAS TO BE MADE OUT OF THE EXPENDITURE HELD TO HAVE BEEN INCURRED FOR THE PURPOSE OF EARNING INTEREST INCOME. ACCORDINGLY, HE TELESCOPED THE DISALLOWANCE MADE BY THE ASSESSEE OF RS.74,34,922/- U/S 14A IN THE TOTAL ITA NO.254/CHD/2014 A.Y.2010-11 ITA NO.260/CHD/2015 A.Y.2011-12 ITA NO.24/CHD/2017 A.Y.2012-13 13 DISALLOWANCE OF INTEREST OF RS.95,73,276/- MADE U/S 57 OF THE ACT. 16. BEFORE US, THE LD. COUNSEL FOR ASSESSEE RELIED ON THE FINDINGS OF THE LD.CIT(A) THAT ONCE THE TOTA L INTEREST EXPENDITURE IS BIFURCATED FOR THE PURPOSE OF SECTION 57 AS INCURRED FOR THE PURPOSE OF EARNIN G INTEREST INCOME AND OTHERWISE AND THE LATER PORTION IS DISALLOWED, NO FURTHER DISALLOWANCE U/S 14A CAN BE MADE SINCE THE BALANCE CLEARLY RELATED FOR THE PURPOSE OF EARNING TAXABLE INTEREST INCOME. 17. WE FIND MERIT IN THE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE. THE DISALLOWANCE, IF ANY, U/S 14A IS TO BE MADE OUT OF THE BALANCE AMOUNT REMAINING AFTER MAKING DISALLOWANCE OF INTEREST U/S 57 OF THE ACT. THIS BALANCE AMOUNT WHICH IS ALLOWED U/S 57 OF THE ACT IS ON THE GROUND THAT IT HAS BEEN INCURRED FOR EARNING TAXABLE INTEREST INCOME. THEREFORE, THIS INTEREST EXPENSES CANNOT NOW BE HELD TO HAVE BEEN INCURRED FOR EARNING EXEMPT INCOME FOR THE PURPOSE OF SECTION 14A OF THE ACT AND HENCE, WE AGREE WITH THE LD. COUNSEL FOR ASSESSEE THAT AFTER THE EXERCISE OF DISALLOWANCE OF INTEREST U/S 57 OF THE ACT IS COMPLETED VIS--VIS ENTIRE INTEREST EXPENDITURE INCURRED BY THE ASSESSEE, NO FURTHER DISALLOWANCE OF INTEREST IS WARRANTED U/S 14A OF THE ACT. THIS GROUND OF APPEAL, IS, THEREFORE, ALLOWED. THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 10. SO RESPECTFULLY FOLLOWING THE AFORESAID REFERRE D TO ORDER, THIS ISSUE IS ALSO SET ASIDE TO THE FILE OF THE A.O. FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE, AS HAS BEEN DIRECTED IN THE AFORESAID REF ERRED TO ORDER DATED 29.3.2019 (SUPRA). ITA NO.254/CHD/2014 A.Y.2010-11 ITA NO.260/CHD/2015 A.Y.2011-12 ITA NO.24/CHD/2017 A.Y.2012-13 14 THE APPEAL OF THE ASSESSEE IN ITA NO.254/CHD/2014 IS ALLOWED FOR STATISTICAL PURPOSES. 11. THE FACTS IN ITA NO.260/CHD/2015 FOR ASSESSMENT YEAR 2011-12 AND ITA NO.24/CHD/2017 FOR ASSESSMENT YEAR 2012-13 ARE SIMILAR AS INVOLVED IN ITA NO.254/CHD/2014 FOR ASSESSMENT YEAR 2010-11, WHICH WE HAVE ALREADY ADJUDICATED IN THE FORMER PART OF THIS ORDER. THEREFORE, OUR FINDINGS GIVEN THEREIN SHALL APPLY M UTATIS MUTANDIS TO THESE APPEALS ALSO. THE APPEALS IN ITA NO.260/CHD/2015 & ITA NO.24/CHD/2017 ARE ALSO ALLOWED FOR STATISTICAL PUR POSES. 12. IN THE RESULT, ALL THE THREE APPEALS OF THE ASSESSE E STAND ALLOWED FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT ON 21.05.2019). SD/- SD/- !' . . (SANJAY GARG ) (N.K. SAINI # $% / JUDICIAL MEMBER / VICE PRESIDENT '$ /DATED: 21 ST MAY, 2019 * * &) *+,+ / COPY OF THE ORDER FORWARDED TO : ITA NO.254/CHD/2014 A.Y.2010-11 ITA NO.260/CHD/2015 A.Y.2011-12 ITA NO.24/CHD/2017 A.Y.2012-13 15 1. / THE APPELLANT 2. / THE RESPONDENT 3. ' - / CIT 4. ' - ( )/ THE CIT(A) 5. +./ 0 , $0 , 123/4 / DR, ITAT, CHANDIGARH 6. /35# / GUARD FILE &) ' / BY ORDER, / ASSISTANT REGISTRAR