Shri Vimal Ramniklal Ambani, Ahmedabad V. The ITO, Ward-4(1)(1), Ahmedabad

ITA 2499/AHD/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6790 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 13-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Earning of tax free income; Commercial expediency; Rule 8D
• Section: 143(3); 14A; 37

Judgement Text

PAGE 1 OF 10 , IN THE INCOME TAX APPELLATE TRIBUNAL , A BENCH, AHMEDABAD BEFORE , SHR I A.D. JAIN , VICE PRESIDENT AND SHRI WASEEM AHMED , ACCOUNTANT MEMBER ./ ITA NO S.2499 - 2500/AHD/2017 / ASSTT. YEAR S : 2012 - 2013 & 2013 - 14 VIMAL RAMNIKLAL AMBANI, VIMAL HOUSE, NAVRANGPURA, AHMEDABAD. PAN: AADPA7562Q VS . INCOME TAX OFFICER , WARD - 4(1)(1) , AHMEDABAD . (APPLICANT) ( RESPON D ENT ) ASSESSEE BY : SHRI S.N. SOPARKAR , A.R REVENUE BY : SMT. SOMOGYAN PAL , SR . DR / DATE OF HEARING : 20 / 06 / 201 9 / DATE OF PRONOUNCEMENT: 18 /07 /2 01 9 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL S HAVE BEEN FILED AT THE INSTANCE OF THE AS SESSEE AGAINST THE ORDER S OF THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) - 8 , AHMEDABAD [ LD. CIT (A) IN SHORT] , OF EVEN DATED 03 / 10 / 2017 ARISING IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER S. 143 (3) OF THE INCOME TAX ACT, 1961 ( HERE - IN - AFTER REFERRED TO AS 'THE ACT') DATED 02 / 03 / 201 5 & 31/12/2015 RELEVANT TO ASSESSMENT YEAR (A . Y S ) 2012 - 13 & 20 13 - 14 RESPECTIVELY . ITA NO S.2499 - 2500/AHD/2017 ASSTT. YEAR S 2012 - 13 & 2013 - 14 PAGE 2 OF 10 FIRST , WE TAKE ITA NO.2499/AHD/2017 FOR A.Y. 2012 - 13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT (A) HAS ERRED IN LAW AND ON FACTS IN PARTLY CONFIRMING THE ASSESSMENT AX ORDER PASSED BY THE ASSESSING OFFICER U \ S. 143(3) OF THE ACT. 2. THE LEARNED CIT (A) HAS ERRED IN LAW AND ON FACTS IN THE UPHOLDING ORDER OF THE ASSESSING OFFICER ON ISSUE OF DISALLOWA NCE UNDER SECTION MA - BY - FOL LOWING HIS EARLIER YEARS APPELLATE ORDER WITHOUT GIVING ANY FINDING FOR THE YEAR UNDER APPEAL. THE FACT THAT THE A.O DID NOT RECORD AND COMMUNICATE HIS DISSATISFACTION ABOUT THE CLAIM OF THE ASSESSEE FOR THE EXPENDITURE INCURRED IN EARNING EXEMPT INCOME HAS LOST SIGHT OF LD.CIT(A). THE AO HAD NOT DISCHARGED THE ONUS THAT LAY UPON HIM. THE ADDITION SUSTAINED BY THE LD. CIT(A) SUFFERS FROM LEGAL INFIRMITY. THE SAME MAY KINDLY BE DELETED. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS BY WRONGLY ENHANCING THE DISALLOWANCE U/S IA - TOY RS.2,20,878/ - WITHOUT CONSIDERING THE FACT THAT AN ADDITION OF RS. 15, 16,0367 - IS ALREADY MADE U/S 14A AND WHICH IS CALCULATED ACCORDING TO THE FORMULA LAID DOWN IN RULE 8D OF THE ACT. HENCE THERE BE ING DOUBLE DISALLOWANCE THE SAME MAY KINDLY BE DELETED. 4. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 46,93,5357 - U/S 36(1)(III) OF THE ACT ON THE PRESUMPTION THAT THE ASSESSEE HAS CLAIMED INTEREST EXPENSES ON FUNDS WHICH ARE NOT USED FOR THE PURPOSE OF BUSINESS. THE FACT IS THAT THE APPELLANT HAS USED THE FUNDS FOR THE PURPOSE OF BUSINESS AND OUT OF COMMERCIAL EXPEDIENCY. HENCE THE SAME ADDITION IS PRAYED TO BE DELETED. 5. THE APPELLANT HUMBLY REQUESTS THAT COST BE AWARDED IN THIS APPEA L ON ACCOUNT OF ARBITRARY MANNER IN WHICH THE ORDER IS PASSED BY THE DEPARTMENT. 6. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, EDIT, DELETE, MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEAL AT THE TIME OF OR BEFORE THE HEARING OF APPEAL. 2. T HE I SSUE S RAISED IN GROUND NO. 1, 5 & 6 BY THE ASSESSEE ARE GENERAL , AND THEREFORE NO SEPARATE ADJUDICATION IS REQUIRED. ACCORDINGLY , WE DISMISS THE SAME AS INFRUCTUOUS. ITA NO S.2499 - 2500/AHD/2017 ASSTT. YEAR S 2012 - 13 & 2013 - 14 PAGE 3 OF 10 3. THE ISSUE RAISED BY THE ASSESSEE IN GROUND NO. 2 AND 3 IS THAT THE LEARNED CIT (A) ER RED IN CONFIRMING AND ENHANCING THE ADDITION MADE BY THE AO UNDER SECTION 14 A READ WITH RULE 8D OF I NCOME T AX R ULE. 4. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF INVESTMENT & TRADING IN SECURITIES AND THE REAL ESTATES. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS CLAIMED DIVIDEND INCOME OF RS. 4 8 , 78 , 560 .00 WHICH WAS CLAIMED AS EXEMPT UNDER SECTION 10 ( 34 ) OF THE ACT. THE ASSESSEE AGAINST SUCH INCOME CLAIMED THAT IT HA D NOT INCURRED ANY EXPENDITURE. HOWEVER , THE AO WAS NOT SATISFIED WITH THE CONTENTION OF THE ASSESSEE AND ACCORDINGLY MADE THE DISALLOWANCE ON ACCOUNT OF THE ADMINISTRATIVE EXPENSES UNDER RULE 8D(2) (III) OF THE RULES AT 15 , 16 , 036.00 ONLY. ACCORDINGLY , THE AO A DDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 5. THE A GGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT (A). THE ASSESSEE BEFORE THE LEARNED CIT (A) SUBMITTED THAT HE HA D NOT INCURRED ANY EXPENDITURE IN CONNECTION WITH THE DIVIDEND INCOME. THEREFORE THERE IS NO QUESTION OF MAKING THE DISALLOWANCE UNDER SECTION 14 A READ WITH RULE 8D OF I NCOME TAX R ULE. 6. HOWEVER, THE LEARNED CIT (A) BEING DISSATISFIED H ELD THAT THE DISAL LOWANCE HAS ALSO BEEN MADE IN THE CASE OF THE ASSESSEE UNDER SECTION 14 A READ WITH RULE 8D OF INCOME TAX RULE IN THE EARLIER ASSESSMENT YEARS WHICH HAS ALSO BEEN UPHELD BY THE HON BLE ITAT. 7. THE LEARNED CIT (A) FURTHER OBSERVED THAT THE ASSESSEE HAS A LSO CLAIMED TRAV ELLING EXPENSES AMOUNTING TO 7, 98 , 677 .00 ONLY , WHICH HAS NO CONNECTION ITA NO S.2499 - 2500/AHD/2017 ASSTT. YEAR S 2012 - 13 & 2013 - 14 PAGE 4 OF 10 WITH THE BUSINESS OF THE ASSESSEE. ACCORDINGLY, THE LEARNED CIT (A) ISSUED THE ENHANCEMENT NOTICE TO THE ASSESSEE. THUS THE LEARNE D CIT (A) ENHANCE D THE DISALLOWANCE UNDER SECTION 14 A READ WITH RULE 8 D BY OBSERVING AS UNDER: FROM THE COPY OF ACCOUNT OF TRAVEL EXPENSE, IT IS SEEN THAT RS.1,90,249/ - IS INCURRED FOR DOMESTIC TRAVEL WHILE RS.6,08,428/ - IS INCURRED ON FOREIGN TRAVEL. IN THE SUBMISSIONS F ILED IT IS NOT EXPLAINED HOW THESE TRAVELLING WAS CONNECTED TO THE BUSINESS OF THE SSSESSEE IN SHARE DEALING. IT IS ALSO TO BE NOTED THAT IN ASSESSMENT YEAR 2013 - 14, IN THE COMPUTATION OF INCOME TRAVELLING EXPENSES WEREJDJSAHOWED BY THEAPPELLANT; HIMSELF'. IN VIEW OF THESE FACTS, I DO NOT FIND ANY JUSTIFICATION FOR ALLOWING TRAVELLING EXPENSES AS CLAIMED BY THE APPELLANT AND ENHANCEMENT IS MADE BY DISALLOWING THE ENTIRE TRAVELLING EXPENSES AT RS. 7,98,6777 - . AS THE APPELLANT CLAIMED THE TRAVELLING EXPENSE W RONGLY AND THUS FURNISHED INACCURATE PARTICULARS OF INCOME, THE PENALTY PROCEEDINGS UNDER SECTION 271(1 )(C) IS INITIATED. 7.9. SINCE SECTION 14A READ WITH RULE 8D IS CLEARLY APPLICABLE, THE DISALLOWANCE UNDER SECTION 14A WILL BE RESTRICTED TO TOTAL CLAIM OF ADMINISTRATIVE EXPENSES AFTER EXCLUDING THE ABOVE SUM OF RUPEES 7,98,6777 - . THERE WJJL BE NET ENHANCEMENT BY RUPEES 1736914 - 1516036=RS. 2,20,878/ - . B EING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. 8. THE LEAR NED AR BEFORE US FILED A PAPER BOOK RUNNING FROM PAGES 1 TO 197 AND SUBMITTED THAT THE DISALLOWANCES ON ACCOUNT OF THE ADMINISTRATIVE EXPENSES UNDER RULE 8 D (2) (III) OF THE RULES C OULD BE MADE AS PER THE FORMULA PROVIDED THEREIN. THEREFORE, THERE CANNOT BE ANY DISALLOWANCE OVER AND ABOVE THE AMOUNT CALCULATED UNDER THE SAID RULE UNDER 14A OF THE ACT . 8.1 THE LEARNED AR FURTHER SUBMITTED THAT THE DISALLOWANCES UNDER RULE 8D (2) (III) C OULD BE MADE CONSIDERING THE INVESTMENTS WHICH HAVE YIELDED THE DIVIDEND IN COME TO THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. AS SUCH , ALL THE INVESTMENTS CANNOT BE CONSIDERED WHILE WORKING OUT THE DISALLOWANCE UNDER THE SAID RULE. ITA NO S.2499 - 2500/AHD/2017 ASSTT. YEAR S 2012 - 13 & 2013 - 14 PAGE 5 OF 10 9. ON THE OTHER HAND, THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 10. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THE CASE ON HAND RELATES TO TWO DISPUTES. FIRSTLY, WHETHER THE DISALLOWANCE UNDER RULE 8 D OF THE INCOME TAX RULES CAN BE ENHANCED OVER AND ABOVE THE AMOUNT CALCULATED THEREIN. SECONDLY, WHETHER THE INVESTMENT S WHICH HAVE YIELDED THE DIVIDEND INCOME IN THE YEAR UNDER CONSIDERATION SHOULD ONLY BE CONSIDERED FOR THE PURPOSE OF THE DISALLOWANCE UNDER RULE 8D (2) (III) OF THE RULES . 10.1 REGARDING THE 1 ST QUESTION, WE ARE OF THE VIEW THAT ONCE THE AO HAS INVOKED THE PROVISIONS OF RULE 8D FOR THE DISALLOWANCE OF THE EXPENSES INCURRED BY THE ASSESSEE IN RELATION TO EXEMPTED INCOME, THEN THE SAME HAS TO BE MADE WITHIN THE PARAM ETERS AS SPECIF IED UNDER RULE 8D( 2 ) (III) OF THE I NCOME T AX RULES . AS SUCH THE PROVISIONS OF THE LAW REQUIRE DISALLOWANCE BEING AN AMOUNT EQUAL TO % OF THE AVERAGE OF THE VALUE OF INVESTMENT. THE AO HAS MADE THE DISALLOWANCE IN ACCORDANCE WITH THE PROVISION OF LAW. T HUS IN OUR CONSIDERED VIEW , THE DISALLOWANCE CANNOT EXCEED THE AMOUNT CALCULATED IN THE MANNER AS DESCRIBED ABOVE. 10.2 IN CASE THE REVENUE WAS OF THE VIEW THAT THE ASSESSEE HAS INCURRED TRAVELING EXPENSES , NOT FOR THE BUSINESS THAN IT CAN MAKE THE DISALLOWA NCE UNDER THE PROVISIONS OF SECTION 37 ( 1 ) OF THE ACT. AS SUCH , THESE EXPENSES , I.E. TRAVELING CANNOT BE DISALLOWED UNDER THE PROVISIONS OF SECTION 14 A READ WITH RULE 8D OF I NCOME T AX R ULE DESPITE THE FACT THESE EXPENSES WERE NOT INCURRED IN CONNECTION WITH THE BUSINESS. ITA NO S.2499 - 2500/AHD/2017 ASSTT. YEAR S 2012 - 13 & 2013 - 14 PAGE 6 OF 10 10.3 REGARDING THE 2 ND QUESTION, WE NOTE THAT THE DISALLOWANCE UNDER RULE 8D CAN BE MADE ONLY AFTER CONSIDERING THE INVESTMENT S WHICH HAVE YIELDED DIVIDEND INCOME TO T HE ASSESSEE IN THE YEAR UN DER CONSIDERATION. IN THIS REGARD WE FIND SUPPORT AND GUIDANCE FROM THE ORDER OF COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF REI AGRO LTD. V . DY. CIT [2013] 35 TAXMANN.COM 404/144 ITD 141 (KOL.) WHICH WAS ALSO AFFIRMED BY THE HON'BLE CALCUTTA HIGH COURT VIDE ORDER DATED 09.04.2014 IN GA NO. 3581 OF 2013 , WHEREIN IT WAS HELD THAT THE DISALLOWANCE AS PER RULE 8D SHALL BE MADE BY TAKING INTO CONSIDERATION ONLY THOSE SHARES, WHICH HAVE YIELDED DIVIDEND INCOME IN THE YEAR UNDER CONSIDERATION. THEREFORE WE DIRECT THE AO TO MAKE THE DISALLOWANCE UNDER RULE 8D AFTER CONSIDERING THE INVESTMENTS WHICH HAVE YIELDED THE DIVIDEND INCOME DURING THE YEAR. I N VIEW OF THE ABOVE , WE HOLD THAT THE LEARNED CIT - A CANNOT ENHANCE THE DISALLOWANCE MADE BY THE AO AS PER RULE 8D OF THE RULES . ACCORDINGLY , WE DIRECT THE AO TO DELETE THE ADDITION FOR THE ENHANCED DISALLOWANCE MADE BY THE LEARNE D C IT - A. WE FURTHER DIRECT THAT THE AO SHALL MAKE THE DISALLOWANCE UNDER RULE 8D OF THE RULES CONSIDERING ONLY THOSE INVESTMENTS WHICH HAVE YIELDED THE DIVIDEND INCOME IN THE YEAR UNDER CONSIDERATION. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 10.4 THE 2 ND ISSUE RAISED BY THE ASSESSEE IN GROUND NO. 4 IS THAT THE LEARNED CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 4 6 , 93 , 535 .00 UNDER SECTION 36 ( 1 ) (III) OF THE ACT. 10.5 THE AO DURING THE ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE HAS DIVERTED THE LOAN TAKEN FROM THE BAJAJ FINANCE LTD FOR NON - BUSINESS PURPOSES BY WAY O F GIVING THE LOAN/ADVANCE OF 1 7 , 79 , 71 , 345 .00 HIS ASSOCIATED PARTIES. ITA NO S.2499 - 2500/AHD/2017 ASSTT. YEAR S 2012 - 13 & 2013 - 14 PAGE 7 OF 10 ACCORDINGLY , THE AO WAS OF THE VIEW THA T THE INTEREST EXPENSES CLAIMED BY THE ASSESSEE AGAINST THE LOAN TAKEN FROM THE BAJAJ FINANCE LTD AMOUNTING TO RS. 4 6 , 93 , 535 .00 HAS NOT BEEN INCURRED IN CONNECTION WITH THE BUSINESS . T HUS THE AO DISALLOWED THE SAME AND ADDED TO THE TOTAL INCOME OF THE ASSE SSEE. 11. THE A GGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT (A) THE ASSESSEE BEFORE THE LEARNED CIT (A) SUBMITTED THAT HIS OWN INTEREST - FREE FUND OF 55 , 76 , 96 , 912 .00 EXCEEDS THE AMOUNT OF SUCH LOANS AND ADVANCES. THEREFORE THERE CANNOT BE ANY DISALLOWANCE ON ACCOUNT OF SUCH INTEREST EXPENSES. 11.1 THE ASSESSEE ALSO CLAIMED THAT THE ADVANCES HA D BEEN GIVEN TO THE ASSOCIATED CONCERN AS A MATTER OF COMMERCIAL EXPEDIENCY. THEREFORE THERE CANNOT BE ANY DISALLOWANCE OF INTEREST EXPENSES. 11.2 HOWEVER THE LEARNER CIT (A) DISREGARDED THE CONTENTION OF THE ASSESSEE BY OBSERVING AS UNDER: 8.4 IN THE PRESENT CASE, IT IS SEEN THAT CLEAR NEXUS HAS BEEN ESTABLISHED OF THE LOANS TAKEN DURING THE YEAR AND ITS UTILIZATION WHICH WAS NOT EXISTING IN THE C ASE LAWS CITED BY THE APPELLANT. LOAN TAKEN HAS BEEN DIRECTLY UTILIZED TO REPAY THE LOAN OBTAINED EARLIER BY ANOTHER ENTIY NAMELY. TOWER OVERSEAS LIMITED. IT IS TO BE NOTED THAT BUSINESS OF THE APPELLANT IS NOT TO GIVE GUARANTEE ON LOANS AND NOT TO REPAY T HE LOANS TAKEN BY THE 3 RD PARTIES EVEN THOUGH SAME (PARTIES) MAY BE RELATED. THE BUSINESS OF THE APPELLANT CONSISTS OF DEALING IN SHARES. THE AMOUNT OF LOAN WHICH HAS B EEN RAISED DURING THE YEAR WAS UTILIZED ENTRY WISE FOR THE PURPOSE OF REPAYMENT OF LOANI .WHICH WAS TAKEN BY TOWER OVERSEAS LTD. IT IS ALREADY NOTED THAT IT IS NOT THE BUSINESS OF THE APPELLANT TO GUARANTEE ON LOANS TAKEN BY OTHER ENTITIES OR SAFEGUARD THE INTEREST OF 3 RD PARTIES. THE CONTENTION THAT T'HEHARES COULD HAVE BEEN AUCTIORIEBY THE BANK AND THESE WERE TRADING STOCK IS NOT ACCEPTABLE. THE APPELLANT HAS BEEN HAVING LONG - TERM INTEREST IN THIS COMPANY THAT'S WHY IT HAD CHOSEN TO GIVE GUARANTEE ON THE IOAN TAKEN BY THIS PARTICULAR ENTITY. BEING A LONG TERM INVESTMENT INCOME FROM THE SALE OF SHARES WILL BE CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAIN ONLY. AS THERE WAS NO COMMERCIAL EXPEDIENCY AND NO CONNECTION WITH THE BUSINESS OF THE APPELLANT OF THE INTEREST PAID WHERE THE ASSESSING OFFICER ITA NO S.2499 - 2500/AHD/2017 ASSTT. YEAR S 2012 - 13 & 2013 - 14 PAGE 8 OF 10 HAS BEEN ABLE TO ESTABLISH THE CLEAR NEXUS OF THE LEAN TAKEN AND ITS UTILIZATION WHICH CLEARLY SHOWS NO BUSINESS CONNECTION WITH THE BUSINESS OF THE APPELLANT. THE INTEREST DISALLOWANCE HAS RIGHTLY BEEN MADE BY THE ASSESSING OFFICER AND THE SAME IS HEREBY CONFIRMED. THE GROUND IS DISMISSED. B EING A GGRIEVED BY THE ORDER OF THE LEARNED CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. 12. THE LEARNED AR BEFORE US REITERATED THE SUBMISSIONS AS MADE BEFORE THE AUTHORITIES BELOW. 13. ON THE OTHER HAND , THE LEARNER DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 14. WE HAVE THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET , WE NOTE THAT THE ASSESSEE HAS SHOWN LOAN FROM BAJAJ FINANCE LTD AS ON 31 ST 2012 IN ITS BALANCE SHEET AT 3, 54 , 50 , 000 ONLY WHEREAS THE INTEREST - FREE CAPITAL STANDS AT RS. 4 2 , 25 , 33 , 483 .00 ONLY. THIS FACT CAN BE VERIFIED FROM THE BALANCE SHEET OF THE ASSESSEE PLACED ON PAGE 137 OF THE PAPER BOOK. THIS FACT WAS UNDISPUTED BY ANY OF THE AUTHO RITIES BELOW. 14.1 IT IS A SETTLED LAW THERE CANNOT BE ANY DISALLOWANCE OF INTEREST EXPENSES IN A SITUATION WHERE THE OWN FUND OF THE ASSESSEE EXCEEDS THE AMOUNT OF THE LOANS AND ADVANCES DIVERTED FOR NONBUSINESS PURPOSES. IN THIS REGARD WE FIND SUPPORT A ND GUIDANCE FROM THE JUDGMENT OF H ON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VERSUS RUGBY SYNTHETICS LTD REPORTED IN 36 TAXMAN N .COM 275 WHEREIN IT WAS HELD AS UNDER: IT FOUND THAT THE INTEREST - FREE FUNDS AVAILABLE WITH THE ASSESSEE WAS FAR GREATER THAN THE LOAN ADVANCED TO THE SISTER CONCERNS AND AS A COROLLARY TO THAT, IT CONCLUDED THAT THE BORROWED MONEY WAS NOT UTILIZED FOR THE PURPOSE OF ADVANCE TO THE SISTER CONCERNS, AS HAD BEEN NOTED BY THE ASSESSING OFFICER. ITA NO S.2499 - 2500/AHD/2017 ASSTT. YEAR S 2012 - 13 & 2013 - 14 PAGE 9 OF 10 14.2 T HERE IS NO DISPUTE TO THE FA CT THAT THE OWN FUND OF THE ASSESSEE EXCEEDS THE AMOUNT OF LOAN AND ADVANCES GIVEN TO THE ASSOCIATED CONCERN WHICH HAS BEEN ELABORATED IN THE PRECEDING PARAGRAPH. THEREFORE, WE ARE NOT INCLINED TO UPHOLD THE ORDER OF THE AUTHORITIES BELOW. ACCORDINGLY , WE DIRECT THE AO TO DELETE THE ADDITION MADE BY HIM ON ACCOUNT OF THE DISALLOWANCE OF INTEREST EXPENSES CLAIMED BY THE ASSESSEE. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. IN THE RESULT , THE APPEAL OF THE ASSESSEE IS ALLOWED. NOW C OMING TO THE ITA 2500/ AHD/2017 FOR A.Y.2013 - 14. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL. 1. THE LEARNED CIT (A) HAS ERRED IN LAW AND ON FACTS IN PARTLY CONFIRMING THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U \ S. 143(3) OF THE ACT. 2. THE LEARNED CIT (A) HAS ERRED IN LAW AND ON FACTS IN THE UPHOLDING ORDER OF THE ASSESSING OFFICER ON ISSUE OF DISALLOWANCE OF RS.13,60,5317 - UNDER SECTION 14A BY FOLLOWING HIS EARLIER YEARS APPELLATE ORDER WITHOUT GIVING ANY FINDING FOR THE YEAR UNDER APPEAL. THE FACT THAT THE A.O DID NOT RECORD AND COMMUNICATE HIS DISSATISFACTION ABOUT THE CLAIM OF THE ASSESSEE FOR THE EXPENDITURE INCURRED IN EARNING EXEMPT INCOME HAS LOST SIGHT OF LD. CIT (A). THE AO HAD NOT DISCHARGED THE ONUS THAT LAY UPON HIM. THE ADDITION SUSTAINED BY THE LD. CIT (A) SUFFERS FROM LEGAL INFIRMITY. THE SAME MAY KINDLY BE DELETED. 3. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 32,18,1967 - U/S 36(1)(III) OF THE ACT ON THE PRESUMPTION THAT THE ASSESSEE HAS CLAIMED INTER EST EXPENSES ON FUNDS WHICH ARE NOT USED FOR THE PURPOSE OF BUSINESS. THE FACT IS THAT THE APPELLANT HAS USED THE FUNDS FOR THE PURPOSE OF BUSINESS AND OUT OF COMMERCIAL EXPEDIENCY. HENCE THE SAME ADDITION IS PRAYED TO BE DELETED. 4. THE APPELLANT HUMBLY REQUESTS THAT COST BE AWARDED IN THIS APPEAL ON ACCOUNT OF ARBITRARY MANNER IN WHICH THE ORDER IS PASSED BY THE DEPARTMENT. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, EDIT, DELETE, MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEAL AT THE TIME OF OR BEFORE THE HEARING OF APPEAL. ITA NO S.2499 - 2500/AHD/2017 ASSTT. YEAR S 2012 - 13 & 2013 - 14 PAGE 10 OF 10 15. A T THE OUTSET, WE NOTE THAT TH E ISSUE RAISED BY THE ASSESSEE IS IDENTICAL TO THE ISSUE RAISED BY THE ASSESSEE IN ITA 2499 /AHD/2017 EXCEPT THE AMOUNT INVOLVED IN RESPECT OF THE DISALLOWANC E MADE BY THE LEARNED CIT (A ). T HEREFORE RESPECTFULLY FOLLOWING THE SAME WE REVERSE THE ORDER OF THE AUTHORITIES BELOW AND DIRECT THE AO TO DELETE THE ADDITION MADE BY HIM. HENCE THE APPEAL OF THE ASSESSEE IS ALLOWED. IN THE RESULT , THE APPEAL OF THE ASSESSEE IS ALLOWED. 16. IN THE COMBINED RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. O RDER PRONOUNCED IN THE COURT ON 18 /07 / 2019 AT AHMEDABAD. - SD - - SD - (A.D. JAIN ) (WASEEM AHMED) VICE PRESIDENT ACCOUNTANT MEMBER (TRUE COPY) A HMEDABAD; DATED 18 / 07 /2019 M ANISH