Appeal details
Counselvise Citation
[2017] 127 COUNSELVISE.COM (IT) 8239 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 9 month(s) 12 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
15-11-2017
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Assessment Year
2004-2005
Appeal Filed On
03-02-2015
Judgement Text
I.T.A. NO S . 264 & 97 /AHD/201 5 A.Y. 20 04 - 05 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.264/AHD/2015 ASSESSMENT YEAR: 2004 - 05 WELSPUN PROJECTS LIMITED VS. DY. COMMISSIONER OF INCOM E TAX, (FORMERLY KNOWN AS MSK PROJECTS CIRCLE 1(2), AHMEDABAD. (INDIA) LI MITED ), 707 708, STERLING CENTRE, R.C. DUTT ROAD, ALKAPURI, BARODA 390 007 . [PAN AABCM 4107 C] ITA NO.97/AHD/2015 ASSESSMENT YEAR: 2004 - 05 DY. COMMISSIONER OF INCO ME TAX, VS. WELSPUN PROJECTS LIMITED CIRCLE 1(2), AHMEDABAD. (FORMERLY KNOWN AS MSK PROJECTS (INDIA) LIMITED), 707 708, STERLING CENTRE, R.C. DUTT ROAD, ALKAPURI, BARODA 390 007. [PAN AABCM 4107 C] (APPELLANT S ) (RESPONDENT S ) A SS ESSEE BY : SHRI V.R. CHOKSI, A.R. RE VENUE BY : SHRI T. SHANKAR, SR. D.R. DATE OF HEARING : 1 3 . 11 .201 7 DATE OF PRONOUNCEMENT : 15 .11 .201 7 O R D E R PER KUL BHARAT, J.M. 1. THESE TWO CROSS APPEALS, ONE BY THE ASSESSEE AND ANOTHER BY THE REVENUE , ARE DIRECT E D AGAINST T HE ORDER OF LEARNED CIT(A) - III, BA R ODA DATED 16 TH OCTOBER , 2014 FOR THE ASSESSMENT YEAR 2004 - 05. 2. FIR S T WE TAKE UP ASSESSEE S APPEAL IT A NO. 264/AHD/2 0 15. THE ASSESS E E HAS RAISED T H E FOLLOWING GROUNDS OF A PP E AL : - I.T.A. NO S . 264 & 97 /AHD/201 5 A.Y. 20 04 - 05 PAGE 2 OF 5 1. IN LAW AND IN FACTS AND IN THE CIRCUMSTANCE S OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT INVESTMENT IN THE FOLLOWING SHARES HAVE BEEN MADE FROM BORROWED FUNDS. A) MSK INFRASTRUCTURE & TOLL BRIDGE PVT. LTD. - RS.1,23,52,800/ - B) MSK H IGHWAYS LTD. - RS. 25,01,800/ - C) MSK FINANCE L TD. - RS. 50,000/ - CONSEQUENTLY INTEREST DISALLOWANCE U/S.14A IS UNCALLED FOR AND IS REQUIRED TO BE DELETED. 2. WITHOUT PREJUDICE TO THE ABOVE, EVEN IF THE BORROWED FUND S ARE UTILISED IN MAK ING INVESTMENTS, INTEREST DISALLOWANCE U/S.14A N E EDS TO BE RESTRICTED ONLY TO THE PERIOD FOR WHICH SUCH BOR ROWE D FUNDS ARE UTILISED FOR MAKING INVESTMENT DURING THE YEAR UNDER CONSIDERATION. 3. IN LAW AND IN FACTS AND IN THE CI R CUMS T ANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS.74,250/ - OUT OF INTEREST EXPENSES ON ACCOUNT OF INTEREST FREE A DVANCES MADE TO ASSOCIATE CONCERN. 4. THE RESPONDENT CRAVES LEAVE TO ADD, ALTER, AMEND AND /OR WITHDR A W ANY GROUND OR GROUNDS OF CROSS OB JECTIONS EITHER BEFORE OR DURING THE COU R SE OF HEARING OF T HE SAME. 3. AT THE TIME OF HEARING , LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT HE DO E S NO T WISH TO PRESS G ROUND NO.3. GROUND NO.3 IS , THEREFORE , DISMISS E D AS NOT PRESSED. 4. BRIEFLY STATE D F ACTS ARE THAT THIS IS SECOND ROUND OF LITIGATION. IN EARLIER ROUND , THE TRIBUNAL IN ITA NOS. 2139 & 2140/AHD./2009 WAS PLEAS E D TO RE S TORE THE ISSUE TO THE LEARNED CIT (A) W I TH THE FOLLOWING DIRECTIONS: - 5.3 AS ALREADY POINTED OUT, SINCE THE LD. CIT(A) HAV E NOT CARED TO ASCERTAIN AS TO WHETHER OR NOT BORROWED FUNDS HAVE INDEED BEEN UTILISED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AND WERE NOT UTILISED IN ACQUIRING THE AFORESAID SHARES NOR THE LD. CIT(A) RECORDED HIS SPECIFIC FINDINGS ON THE APPLICABILIT Y OF PROVISIONS OF THE SEC. 14A OF THE ACT AND ALSO DID NOT HAVE THE BENEFIT OF THE VIEW TAKEN IN THE AFORESAID DECISIONS WHILE THE LD. AR HAS NOW TAKEN A PLEA BEFORE US THAT THE ENTIRE BORROWINGS WERE UTILISED IN THEIR BUSINESS, WE CONSIDER IT FAIR AND AP PROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO HIS FILE FOR DECIDING THE ISSUE OF DISALLOWANCE OF INTEREST RAISED IN THE GROUND NO.1 IN THE APPEAL OF THE REVENUE FOR THE AY 2004 - 05 IN RELATION TO INVESTMENTS IN EQUITY SHARES O F MSK INFRASTRUCTURE & TOLL BRIDGE PRIVATE LTD., MSK HIGHWAYS LTD.& MSK FINANCE LTD, AFRESH IN ACCORDANCE WITH LAW IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS, INCLUDING THOSE REFERRED TO ABOVE, AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES . NEEDLESS TO SAY THAT WHILE REDECIDING THE ISSUE, THE LEARNED CIT(A) SHALL PASS A SPEAKING ORDER, KEEPING IN MIND, INTER ALIA, THE MANDATE OF PROVISIONS OF SEC. 250(6) OF THE ACT, BRINGING OUT CLEARLY AS TO WHETHER OR NOT BORROWED FUNDS HAD INDEED BEEN UT ILISED IN INVESTMENT IN SHARES FOR I.T.A. NO S . 264 & 97 /AHD/201 5 A.Y. 20 04 - 05 PAGE 3 OF 5 EARNING EXEMPT INCOME. WITH THESE OBSERVATIONS, GROUND NO.1 IN THE APPEAL OF THE APPEAL OF THE REVENUE FOR THE AY 2004 - 05 IS DISPOSED OF. 5. IN PURSUANCE TO THAT , BY WAY OF THE IMPUGN E D ORDE R , THE LEARNED CI T(A) PARTLY A LLOWED THE APPEAL OF THE ASSESSEE. AG G RIEVED BY T HIS, BOTH THE ASSESSEE AND R EVENUE ARE IN APPEAL. 6. APROPOS GROUND NOS .1 & 2, LD. C OUNSEL FOR THE ASSESS E E VEHEMENTLY A R GUED THAT THE LD . CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT TH E INVESTMENT WAS MADE FR OM THE BORROW E D FUNDS . LD. COUNSEL FOR THE ASSESSEE SUBMITTED T HAT IN REMAND REPORT THE ASSESSING O FFICER HAS STA TED THAT OUT OF TOTAL INVESTMENT OF RS.2 ,48,52,800/ - , INVESTMENT OF RS.1, 25,00,00 0/ - IS MADE ON 13.03.2003 FROM CITIBANK C URRENT A CCOUNT. THU S THERE W A S BALANCE IN THAT ACCOUNT. L D . C OUNSEL FURTHER SUBMITTED THAT TH E AMOUNT WAS DEPOSITED IN FIXED DEPOSIT AND THE LOAN W A S AVAILED ON THE SAID FIX ED DEPOSIT FOR MAKING INVESTMENT. LD . C OUNSEL SUBMITTED THAT THE ASSESS E E HAS PAID INTEREST ON THE L OAN SO AVAIL E D . TH E REFORE, THE DISALLOWANCE NEEDS TO BE RESTRICTED AND BENEFIT OF NE T TING OFF SHOULD BE GRANTED. 7. ON THE CONTRARY, LD . DEPARTMENT A L REPRESENTATIVE OPPOSED THE SUBMISSION AND SUPPORT E D TH E ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE H EA RD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE ORDERS O F THE AUTHORITIES BELOW. THERE IS NO DISPUTE WITH REGA R D TO TH E FACT THAT ADMITTEDLY INVESTMENT S HAVE BEEN MADE IN RESPECT OF AMOUNT OF RS.1,75, 60,000/ - AND RS.62 ,00,000/ - . T HIS AMOUNT WAS DEPOSITED I N FIXED DEPOSIT AND LO A N W A S AVAILED ON SUCH FIXED DEPOSIT OUT OF WHICH TH E INVESTMENTS HAVE BEEN MADE. IT IS ARGUED THAT THE BENEFIT OF NETTING OF F MAY BE GIVEN. WE FIND FORCE IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. AS PER SECTION 14 A OF THE ACT, THE EXPENDITURE RELATED TO EARNING OF EXEMPT INCOME CAN BE DISALLOWED. WHERE AN ASSESSEE HAS APPLIED HIS OWN FUNDS FOR MAKING INVESTMENT , INTEREST EXPENDITURE CANNOT BE DISALLOWED. THE ASSESSING O FFICER IS REQUIRED TO DEMONSTRATE THAT THE I NVESTMENT SO MADE IS OUT OF BORROW E D FUN D S, AND INTEREST SO PAID IS CLAIMED A S EXPENDITURE RELATED TO OTHER TAXABLE INCOME. THEREFORE , WE HEREBY DIRECT THE ASSESSING OF F ICE R TO GIVE BENEFIT OF NETTING O F F AS PR A Y E D FOR BY TH E ASSESSEE AND RECOM P UT E THE DI SALLOWANCE ACCO RDINGLY. GROUND NO S. 1 & 2 OF THE ASSESS E E S APP E AL ARE ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NO S . 264 & 97 /AHD/201 5 A.Y. 20 04 - 05 PAGE 4 OF 5 9. GROUND NO.4 IS GENE R AL IN NATURE WHICH REQUIRES NO ADJUDICATION. 10. APPEAL OF THE ASSESSE E IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 11. WE NO W T A KE UP R EVENUE S APPEAL ITA NO.97/AHD/2015. 12. THE SOLITARY GROUND TAKEN IN THIS APPEAL READ S AS UNDER : - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN FACTS AND IN LAW IN DELETING THE DISALLOWANCE OF INTEREST MADE U/S.14A OF THE ACT ON ACCOUNT OF INVESTMENT OF RS.1,25,00,000/ - IN THE SHARE OF MSK INFR & TOLL PVT. LTD., IGNORING THE F A CT THAT MONEY COMES IN A COMMON KI T TY AND THUS INTEREST IS ATTRIBUTABLE TO EXEMPT INCOME EARNING INVESTMENTS ALSO ON PROPORTIONATE BAS IS. 13. LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORD ER OF THE ASSESSING OFFICER. ON THE CONTRARY , LD . COUNSEL FOR THE ASSESSEE SUBMITTED THAT DURING THE REMAND PROCEEDINGS THE A SSESSING OFFICER HAS SUBMITTED TH E REMAND REPORT WHEREIN THE F A CT THAT T HE INVESTMENT WAS MADE OUT OF OWN FUNDS HAS BEEN ADMITTED. IN SUPPORT , HE DREW OU R ATTENTION TO THE REMAND REPORT. W E FIND THAT THE A SSESSING OFFICER IN REMAND REPORT AT P A GE NO. 81 OF THE PAPER BOOK HAS STATED THAT OUT OF TOTAL INVESTMENT OF RS.2,48,52,8 00/ - , INVESTMENT O F RS.1,25,00,000/ - IS MADE OUT OF CITIB ANK C URRENT ACCOUNT IN WHICH THER E WAS BALANCE . U NDER THESE UNDISPUTED FACTS, WE DO NOT SEE ANY REASON TO INTERFERE IN T HE FINDING O F THE LEARNED CIT(A). GROUND RAISED BY THE REVENUE IS THUS DISMIS SED. 14. APPEAL OF THE REVENUE IS DISMISSED. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND APPEAL OF THE REVENUE IS DISMISSED. OR DER PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF NOVEMBER, 2017 . SD/ - SD/ - MANISH BORAD KUL BHARAT ( ACCOUNTANT MEMBER ) ( JUDICIAL MEMBER ) AHMEDABAD, THE 15 TH DAY OF NOVEMBER , 2017 PBN/* I.T.A. NO S . 264 & 97 /AHD/201 5 A.Y. 20 04 - 05 PAGE 5 OF 5 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) C IT (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER UE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD
