The Dy. CIT, Circle-1(1)(2), Ahmedabad V. M/s. Chiripal Industries Ltd., Ahmedabad

ITA 2743/AHD/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1409 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 06-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APARNA A GARWAL
• Assessee Lawyers: GAURAV NAHATA
• Keywords: Depreciation; Earning of tax free income; Proportionate interest; Bad and doubtful debts; Scheme of amalgamation; Capital expenditure; Rule 8D
• Section: 143(3); 142(1); 14A; 143(1); 80IA; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT & MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. NO.2743/AHD/2017 (ASSESSMENT YEAR : 2013-14) DCIT, CIRCLE 1(1)(2), AHMEDABAD. VS. M/S. CHIRIPAL INDUSTRIES LTD., SURVEY NO.199/200/1, 2 SAIJPUR GOPALPUR PIRANA ROAD PIPLIRJ AHMEDABAD 382 405. [PAN NO. AAACC 8513 B] ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : MS. APARNA AGARWAL, CIT-D.R. RESPONDENT BY : SHRI GAURAV NAHATA, A.R. DATE OF HEARING 13.03.2019 DATE OF PRONOUNCEMENT 06.06.2019 O R D E R PER MS. MADHUMITA ROY - JM: THE INSTANT APPEAL FILED BY THE REVENUE IS DIRECTE D AGAINST THE ORDER DATED 28.09.2017 PASSED BY THE COMMISSIONER OF INCO ME TAX (APPEALS)-1, AHMEDABAD UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) ARISING OUT OF THE ORDER DATED 23.03.2016 PAS SED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1(1)(2), AHMED ABAD FOR THE ASSESSMENT YEAR 2013-14 WITH THE FOLLOWING GROUNDS: I. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE DISALLOWANCE U/S 14A OF RS.44,78,261/- TO RS.1,50,0 00/-. II. THAT THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF INTEREST OF RS.5,02,548/- U/S 36(1) (III) OF THE I.T. ACT, 1961. III. THAT THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE U/S 80IA OF RS.6,15,58,478/-. ITA NO.2743/AHD/2017 DCIT VS. CHIRIPAL INDUSTRIES LTD. ASST.YEAR 2013-14 - 2 - IV. THE APPELLANT CRAVES, TO LEAVE, TO AMEND AND/OR TO ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. ASSESSEE FILED ITS RETURN OF INCOME ON 29.11.20 13 THROUGH ELECTRONIC MEDIA DECLARING TOTAL INCOME AT RS.8,22,04,010/- AF TER CLAIMING DEDUCTION OF RS.6,15,58,478/- U/S 80IA OF THE ACT, WHICH WAS PRO CESSED U/S 143(1) OF THE ACT. UPON SCRUTINY NOTICE DATED 04.09.2014 U/S 143( 2) WAS SERVED FOLLOWED BY A FURTHER NOTICE DATED 27.05.2015 U/S 142(1) CALLIN G FOR PRELIMINARY DETAILS AND ULTIMATELY NOTICE U/S 142(1) DATED 11.06.2015 AND 0 3.08.2015 ALONG WITH THE DETAILED QUESTIONNAIRE WAS ISSUED UPON THE ASSESSEE . 3. GROUND NO.1: DURING THE COURSE OF ASSESSMENT PROCEEDING, IT WAS FOUND UPON VERIFICATION OF THE BALANCE SHEET THAT T HE ASSESSEE COMPANY HAD MADE HUGE INVESTMENT IN SHARES, THE INCOME FROM WHI CH IS EXEMPT FROM TAX. THE ASSESSEE HAS EARNED RS.1,18,62,026/- AS DIVIDEN D INCOME IN THE YEAR UNDER CONSIDERATION. IT ALSO APPEARS THAT THE ASSESSEE HA S CLAIMED INTEREST PAYMENTS TO THE LOANS AND INCURRED OTHER EXPENSES. HOWEVER, THE ASSESSEE HAS NOT DEDUCTED SUCH INTEREST PAYMENT AND EXPENSES RELATING TO THE INVESTMENT IN SHARES FOR EARNING INTEREST. ACCORDING TO THE LEARNED AO, THE EXPENDITURE RELATABLE TO INVESTMENT IN SHARES AND SECURITIES IS REQUIRED TO BE DISALLOWED U/S 14A OF THE ACT R.W. RULE 8D OF THE INCOME TAX RULES, 1962 AND ULTIMATELY MADE DISALLOWANCE OF RS.44,78,261/- INVOKING THE PROVISI ON OF SECTION 14A. THE CASE OF THE ASSESSEE WAS THIS THAT NO BORROWED FUND WAS USED FOR MAKING INVESTMENT IN SHARES/MUTUAL FUNDS AND THEREFORE NO DISALLOWANCE WAS REQUIRED TO BE MADE. THE ASSESSEE HAD HUGE BALANCE IN SHARE CAPITAL AND RESERVE AND SURPLUS AND THEREFORE TO THAT EXTEND IF FUNDS ARE I NVESTED, NO DISALLOWANCE WAS REQUIRED TO BE MADE. FURTHER THAT, THESE INVESTMENT S IN SHARES WAS MUCH MORE THEN SHARE CAPITAL AND RESERVE AND SURPLUS. IT WAS FURTHER THE CASE OF THE ITA NO.2743/AHD/2017 DCIT VS. CHIRIPAL INDUSTRIES LTD. ASST.YEAR 2013-14 - 3 - ASSESSEE THAT THE INVESTMENT IN SHARES OF NANDAN EX IM LTD. WAS MADE TO COMPLY WITH THE STATUTORY PROVISION AS PRESCRIBED U NDER ELECTRICITY RULES, 2005 TO BE ELIGIBLE TO USE CAPTIVE POWER PLANT OF NANDAM EXIM LTD. AND THEREFORE SUCH INVESTMENT IN SHARES WAS NOT MADE TO EARN ANY EXEMPT INCOME BUT THE SAME WAS DONE WHOLLY AND EXCLUSIVELY FOR THE BUSINE SS PURPOSE WHICH IS OUTSIDE THE PURVIEW OF SECTION 14A. SINCE NO DISALLOWANCE U/S 14A CAN BE MADE WHEN THE ASSESSEE IS HAVING AMPLE INTEREST FREE FUNDS AS HELD BY THE HONBLE JU RISDICTIONAL HIGH COURT IN THE MATTER OF HITACHI HOME & LIFE SOLUTIONS (I) LTD . REPORTED IN 221 TAXMAN 109, THE LEARNED CIT(A) IN APPEAL DIRECTED THE LEAR NED AO TO DELETE THE ADDITION ON INTEREST OF RS.26,40,992/-. HOWEVER, SO FAR AS THE ADMINISTRATIVE EXPENDITURE DEBITED IN THE PROFIT AND LOSS INCLUDES DIFFERENT EXPENDITURE, THE LEARNED CIT(A) FURTHER OBSERVED THAT APPELLANT HAS MADE INVESTMENT IN SHARES FOR WHICH VARIOUS ADMINISTRATIVE EXPENDITURE IS BOU ND TO INCUR. HOWEVER, THE DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE TO THE T UNE OF RS.18,37,269/- AS DONE BY THE LEARNED AO HAS BEEN DIRECTED TO RESTRIC T TO THE LUMP SUM OF RS.1,50,000/- AS ADMINISTRATIVE EXPENSES INCURRED T O EARN EXEMPT INCOME. HENCE, THE INSTANT APPEAL BEFORE US. 4. AT THE TIME OF HEARING OF THE INSTANT APPEAL THE LEARNED ADVOCATE APPEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE ASSESSEES SHARE CAPITAL AND RESERVE AND SURPLUS STOOD AT RS.246.64 CRORES W HEREAS INVESTMENT IN SHARE WAS ONLY AT RS.39.39 CRORES WHICH AGAIN INCLUDED A SUM OF RS.28.79 CRORES IN RESPECT OF STRATEGIC INVESTMENT IN NANDAN EXIM LTD. , WHICH IS PRACTICALLY AND LEGALLY OUTSIDE THE PURVIEW OF SECTION 14A OF THE A CT. IN THAT VIEW OF THE MATTER, ORDER PASSED BY THE LEARNED CIT(A) IN DELET ING THE ADDITION OF INTEREST ITA NO.2743/AHD/2017 DCIT VS. CHIRIPAL INDUSTRIES LTD. ASST.YEAR 2013-14 - 4 - OF RS.26,40,992/- AS DISALLOWED U/S 14A IS JUSTIFIA BLE. SO FAR AS THE ADMINISTRATIVE EXPENDITURE IS CONCERNED, HE RELIED UPON THE JUDGMENT PASSED BY THE CO-ORDINATE BENCH IN THE CASE OF CHUDGAR RAN CHODIAL JETHALAL TRADE PVT. LTD. IN ITA NO.245/AHD/2013, WHEREIN RELYING U PON THE JUDGMENT PASSED BY THE DELHI HIGH COURT IN THE CASE OF JOINT INVEST MENT PVT. LTD.-VS-CIT IN ITA NO.117 OF 2015 THAT THE WINDOW FOR DISALLOWANCE IS INDICATED IN SECTION 14A, AND IS ONLY TO THE EXTENT OF DISALLOWING EXPEN DITURE INCURRED BY THE ASSESSEE IN RELATION TO THE TAX EXEMPT INCOME. AN D GMM PFAUDLER LTD.- VS-JCIT PASSED BY THIS CO-ORDINATE BENCH AND BY GUJ ARAT HIGH COURT IN THE CASE OF PCIT-VS-SINTEX INDUSTRIES LTD. REPORTED IN [2017] 82 TAXMANN.COM 71 (GUJARAT) WHERE IT WAS HELD THAT WHEN THE ASSESSEE IS HAVING ITS OWN SURPLUS FUND AGAINST WHICH MINOR INVESTMENT WAS MADE, NO QU ESTION OF MAKING ANY DISALLOWANCE OF EXPENDITURE IN RESPECT OF INTEREST AND ADMINISTRATIVE EXPENSES U/S 14A AROSE AND, THEREFORE, THERE WAS NO QUESTION OF ANY ESTIMATION OF EXPENDITURE IN RESPECT OF INTEREST AND ADMINISTRATI VE EXPENSES UNDER RULE 8D. IT WAS FURTHER SUBMITTED THAT THE SIMILAR ISSUE WAS AL READY DECIDED IN ASSESSEES OWN CASE BY HONBLE ITAT FOR A.Y. 2011-12 & 2012-13 ALSO; COPY WHEREOF IS ALSO BEEN PART OF THE PAPER BOOK BEFORE US. HOWEVER , LEARNED DR RELIED UPON THE ORDER PASSED BY THE LEARNED AO. 5. HEARD THE REPRESENTATIVE OF THE RESPECTIVE PARTI ES, PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD. THE LEARNED AO WHILE MAKING ADDITION OBSERVED AS FOLLOWS: 3.1. THE FINDING OF THE ASSESSING OFFICER IN THIS REGARD IS AS UNDER: I. ON VERIFICATION OF THE BALANCE SHEET, IT IS SEEN TH AT THE ASSESSEE COMPANY HAD MADE HUGE INVESTMENT IN SHARES, THE INC OME FROM WHICH IS EXEMPT FROM TAX. FURTHER, AS PER THE P & L A/C. THE ASSESSEE HAS CLAIMED INTEREST PAYMENT TO THE LOANS AND INCURRED OTHER EXPENSES. HOWEVER, THE ASSESSEE HAS NOT DEDUCTED SUCH INTERES T ITA NO.2743/AHD/2017 DCIT VS. CHIRIPAL INDUSTRIES LTD. ASST.YEAR 2013-14 - 5 - PAYMENT/EXPENSES RELATING TO THE INVESTMENT IN SHAR ES FOR EARNING INTEREST. THEREFORE, EXPENDITURE REFUTABLE TO INVES TMENT IN SHARES AND SECURITIES IS REQUIRED TO BE DISALLOWED U/S. 14A OF THE ACT R. W. RULE 8D OF THE INCOME TAX RULE- 1962. AS SUCH, VIDE POIN T NO. 6 OF NOTICE U/S. 142(1) DATED 11/06/2015, THE ASSESSEE WAS REQU ESTED TO FURNISH WORKING OF DISALLOWANCE U/S.14A OF THE ACT AND ALSO SHOW-CAUSE AS TO WHY DISALLOWANCE U/S. 14A OF THE ACT SHOULD NOT BE WORKED OUT INVOKING RULE 8D OF I. T. RULES, 1962. IN RESPONSE THERETO, THE ASSESSEE VIDE LETTER DATED 21/12/2015 STATED THAT WE HEREBY CONFIRM THAT WE HAVE NOT CLAIMED ANY EXPENDITURE RELATING T O INVESTMENT SHOWN IN THE BALANCE SHEET THEREFORE, THE DISALLOWA NCE U/S. 14A R.W.R. 8D OF IT RULES NOT APPLICABLE. II. THE SUBMISSION OF THE ASSESSEE THAT IT HAS NOT CLAI MED ANY EXPENDITURE RELATING TO INVESTMENT IN BALANCE SHEET IS FOUND TO BE DEVOID OF ANY MERIT. THE INVESTMENT IN SHARES IS AN INDIVISIBLE P ART OF THE ASSESSEE'S BUSINESS WHICH IS EVIDENT FROM THE BALANCE SHEET IN ASMUCH AS IT HAS MADE INVESTMENT IN QUOTED AND UNQUOTED SHARES IN LA RGE AMOUNT. A PRUDENT BUSINESS DOES NOT LEAVE THE INVESTMENT MADE BY HIM WITHOUT CHECKING ITS UPS AND DOWNS. WHEN THE ASSESSEE HAS M ADE A HANDSOME AMOUNT IN SHARES, IT HAS TO KEEP TRACK ON IT FOR WH ICH THE ASSESSEE HAS TO INCUR SOME EXPENDITURE. IN VIEW OF THE ABOVE, TH E ASSESSEE'S SUBMISSION THAT IT HAS NOT INCURRED ANY EXPENDITURE IN INVESTMENT IN SHARES IS FOUND TO BE NOT, ACCEPTABLE. THERE IS NO DENYING THE FACT THAT THE ASSESSEE HAS MADE INVESTMENT IN SHARES AND SECU RITIES INCOME FROM WHICH IS EXEMPT FROM TAX. EQUALLY, IT IS ALSO A FAC T THAT THE ASSESSES HAS TAKEN UNSECURED LOAN AND ON WHICH IT IS PAYING LARGE SUM OF MONEY AS INTEREST THE MOTIVE OF THE ASSESSEE IN INV ESTING IN SHARES AND SECURITIES IS AMPLY CLEAR THAT IT SHOULD EARN DIVID END INCOME FROM WHICH IS EXEMPT FROM TAX. THE ASSESSEE ALSO FAILED TO SUBSTANTIATE WITH EVIDENCE FOR ITS CLAIM THAT IT HAS NOT INCURRED ANY EXPENDITURE IN THE INVESTMENT ACTIVITY. AS STATED ABOVE, THE ASSESSEE HAS MADE INVESTMENT IN SHARES AND SECURITIES ONLY FOR THE PURPOSE OF EA RNING DIVIDEND. III. IT IS PERTINENT TO NOTE HERE THAT A SIMILAR ISSUE W AS BEFORE THE HON'BLE BOMBAY HIGH COURT IN THE CASE GODREJ & BOYCE MFG. C O. LTD. MUMBAI VS. DCIT AND SIMILAR CONTENTIONS INCLUDING T HE RATIO LAID DOWN BY VARIOUS COURTS AS RELIED UPON BY THE ASSESS EE HAS BEEN DULY DEALT BY THE HON'BLE COURT AND DECIDED THE MATTER I N THE FAVOUR OF REVENUE. SECTION 14A CLEARLY STIPULATES AS UNDER: ITA NO.2743/AHD/2017 DCIT VS. CHIRIPAL INDUSTRIES LTD. ASST.YEAR 2013-14 - 6 - [EXPENDITURE INCLINED IN RELATION TO INCOME NOT INC LUDIBLE IN TOTAL INCOME . 14A. [(1)] FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME UNDER THIS CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT O F EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHI CH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT.] [(2) THE ASSESSING OFFICER SHALL DETERMINE THE AMOU NT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED, IF THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS A CT. (3) THE PROVISIONS OF SUB-SECTION (2) SHALL ALSO AP PLY IN RELATION TO A CASE WHERE AN ASSESSEE CLAIMS THAT NO EXPENDITURE H AS BEEN INCURRED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PA RT OF THE TOTAL INCOME UNDER THIS ACT. IV. FURTHER THE ASSESSEE MUST HAVE INCURRED ADMINI STRATIVE EXPENSES SUCH AS DOCUMENTATION, SALARIES OF EMPLOYEES, HANDLING T HE INVESTMENT PORT FOLIO, ADMINISTRATIVE OVERHEADS LIKE STATIONERY, TE LEPHONE, COMPUTER, OFFICE EQUIPMENTS, VEHICLES ETC. EVERY YEAR, A PART OF WHICH CAN BE ATTRIBUTED TO THE INVESTMENT PORT FOLIO. THIS VIEW FINDS SUPPORT FROM THE FOLLOWING CASE LAWS. (1) RAJASTHAN STATE WAREHOUSING CORP. LTD V/S. CIT (242 ITR 450) (RAJ.) (2) MARUTI UDYOG LTD. VS. DEP. COMM. (DELHI) 92 TT J 987 (3) WIPRO INFORMATION TECHNOLOGY VS. DEP. GIT (BAN G) 88 TTJ 378 (4) DEP. COMM. OF I. TAX VS. SHREE SYNTHETICS LTD. (INDORE) 88 TTJ 717. (5) HARISH K BHATT VS. ITO 85 TTJ 872 V. IT IS ALSO TO BENOTED THAT THE MATTER HAS BEEN E XTENSIVELY COVERED AND DECIDED IN FAVOUR OF THE REVENUE IN THE CASE OF ITO VS. M/S. DAGA CAPITAL MANAGEMENT PVT. LTD. VIDE ITA NO.8057/MUM/0 3 FOR A.Y. 2001-02, BY HONBLE MUMBAI ITAT (SB). IT IS ALSO TO BE NOTED THAT S.14A DISALLOWS EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME AND IN ORDER FOR THE EXP ENDITURE TO BE DISALLOWED, ACTUAL INCOME NEED NOT BE EARNED. THIS VIEW HAS BEEN CONFIRMED IN THE CASE OF CHEMINVEST LTD. VS. ITO(IT AT, DELHI (SB)) IN ITA NO.87/DEL/2008. VI. IN VIEW OF THE DISCUSSION MADE ABOVE AND THE PO SITION OF LAW WITH REGARD TO THE APPLICABILITY OF PROVISIONS OF SECTIO N 14A R.W.R. 8D OF ITA NO.2743/AHD/2017 DCIT VS. CHIRIPAL INDUSTRIES LTD. ASST.YEAR 2013-14 - 7 - I.T. RULE AS INTERPRETED BY VARIOUS HONBLE HIGH CO URTS, I AM NOT SATISFIED WITH REGARDS TO THE ACCOUNTS OF THE ASSES SEE COMPANY IN RELATION TO EARNING INCOME THAT DOES NOT FORM PART OF THE TOTAL INCOME OF THE ASSESSEE- COMPANY. VII. IN VIEW OF THE ABOVE, THE PROVISIONS OF SECTIO N 14A R.W.R. 8D IS CLEARLY APPLICABLE IN THE ASSESSEES CASE. ACCORDINGLY, DIS ALLOWANCE U/S 14A R.W.R. 8D IS WORKED AS UNDER: (I) THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME; 0 (II) IN A CASE WHERE THE ASSESSEE HAS INCURRED EXPE NDITURE BY WAY OF INTEREST DURING THE PREVIOUS YEAR WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR R ECEIPT, AN AMOUNT COMPUTED IN ACCORDANCE WITH THE F OLLOWING FORMULA, NAMELY A X B/C - WHERE (A) AMOUNT OF EXPENDITURE BY WAY OF INTEREST OTHER THAN THE AMOUNT OF INTEREST INCLUDED IN CLAUSE (I) INCURRED DURING THE PREVIOUS YEAR; 43019854 2640992 (B) THE AVERAGE OF VALUE OF INVESTMENT, INCOME FRO M WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE-SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS DAY P.Y. INVEST. 395546202 C.Y. INVEST. 339361262 TOTAL 734907464 2 367453732 PY+CY (C) THE AVERAGE OF TOTAL ASSETS AS APPEARING IN TH E BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS DAY. P.Y. INVEST. 6104397603 C.Y. INVEST. 5866714339 TOTAL 11971111942 2 5985555971 PY+CY (A) (B) (C) AXB/C INTEREST EXP. (A) 43019854 AVG. INVEST. (B) 367453732 AVG. ASSETS (C) 5985555971 TOTAL AXB/C 2640992 (III) AN AMOUNT EQUAL TO ONE-HALF PERCENT OF THE AV ERAGE OF THE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY OF THE PREVIOUS YEAR. AVG. INVESTMENT 367453732 05 100 1837269 1837269 AGGREGATE OF (I) + (II) + (III) 4478261 THEREFORE, AN AMOUNT OF RS.4478261/- IS DISALLOWED U/S 14A R.W.R. 8D AS WORKED OUT AS ABOVE. IT APPEARS THAT THE SIMILAR ISSUE WAS DECIDED BY TH E CO-ORDINATE BENCH IN AN APPEAL PREFERRED BY THE ASSESSEE IN ITA NO.83 3/AHD/2016 FOR A.Y. 2011- 12; THE RELEVANT PORTION THEREOF IS AS FOLLOWS: 16. THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF RS. 52,23,911/- AFTER INVOKING THE PROVISION OF SECTION 14A ON THE GROUND THAT ASSESSEE HAS NOT DISALLOWED INTEREST AND ADMINISTRATIVE EXPENSES U/S . 14A FOR EARNING EXEMPT INCOME. IN THIS CONNECTION THE HAS ASSESSEE HAS STA TED THAT NO BORROWED FUNDS WERE USED FOR MAKING INVESTMENT IN SHARES/MUTUAL FU ND THEREFORE NO DISALLOWANCE WAS REQUIRED TO BE MADE. IT IS NOTICED THAT THE ASSESSEE WAS HAVING HUGE INTEREST FREE FUND IN THE FORM AND SHAR E CAPITAL AND RESERVES FUNDS TO THE AMOUNT OF RS. 174.74 CRORES WHEREAS TH E INVESTMENT WAS MADE TO THE AMOUNT OF RS. 18.90 CRORES ONLY. IT IS ALSO NOT ICED THAT ASSESSEE HAS CLAIMED EXEMPT DIVIDEND INCOME TO THE AMOUNT OF RS. 13,951/- ONLY DURING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER HAS MADE ADDITION TO THE AMOUNT OF RS. 52,23,911/- WHICH WAS MUCH MORE THAN EXEMPT INCOME EARNED ITA NO.2743/AHD/2017 DCIT VS. CHIRIPAL INDUSTRIES LTD. ASST.YEAR 2013-14 - 8 - BY THE ASSESSEE DURING THE YEAR CONSIDERATION. HOWE VER, THE LD. CIT(A) HAS DELETED THE PROPORTIONATE INTEREST DISALLOWANCE MAD E BY THE ASSESSING OFFICER TO THE AMOUNT OF RS. 44,68,770/- AND CONFIRMED THE ADDITION TO THE AMOUNT OF RS. 7,55,141/- BY REFERRING AMOUNT TO BE DISALLOWED FOR ADMINISTRATIVE EXPENSES. WE HAVE ALSO CONSIDERED THAT CO-ORDINATE BENCH OF THE ITAT AHMEDABAD IN THE CASE OF JIVRAJ TEA LTD. VS. DCIT I TA NO. 886/AHD/2012 ORDER DATED 28TH AUGUST, 2014 RELATED TO ASSESSMENT YEAR 2008-09 RESTRICTING THE DISALLOWANCE TO THE EXTENT OF EXEMPT AFTER PERU SAL OF THE FACTS, WE ARE OF THE VIEW THAT DISALLOWANCE IN THE CASE OF THE ASSES SEE AFTER REFERRING THE NUMBER OF DECISION OF CO-ORDINATE BENCHES CANNOT EX CEED THE AMOUNT OF EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE YEA R UNDER CONSIDERATION, THEREFORE, WE RESTRICT THE DISALLOWANCE U/S. 14A TO THE AMOUNT OF RS. 13,951/- EXEMPT INCOME EARNED BY THE ASSESSEE. THEREFORE, TH E APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THE FACTS OF THE CASE IS SLIGHTLY DIFFERENT FROM TH E EARLIER YEAR. IN THIS YEAR THE ASSESSEE EARNED DIVIDEND INCOME OF RS.1,15 ,62,026/- I.E. MUCH HIGHER THAN THE EARLIER YEAR WHICH IS WHY TAKING INTO CONS IDERATION THE ENTIRE GAMUT OF THE MATTER, THE LEARNED AO APPLIED THE PROVISION OF SECTION 14A R.W.R. 8D OF THE ACT. HOWEVER, WE FIND FROM RECORDS THAT THE INT EREST TO THE TUNE OF RS.26,40,992/- NEEDS TO BE DELETED IN VIEW OF THE P ARTICULAR FACT THAT THE OWN FUND OF THE ASSESSEE EXCEEDS INVESTMENT. THEREFORE, A PRESUMPTION CAN BE DRAWN THAT SUCH INVESTMENT WAS MADE OUT OF THE OWN FUND OF THE ASSESSEE. SO FAR AS THE ADMINISTRATIVE EXPENSES IS CONCERNED THE ASSESSING OFFICER HAS CALCULATED DISALLOWANCE OF ADMINISTRATIVE EXPEN DITURE TO THE TUNE OF RS.18,37,269/- BUT IT WAS REPEATEDLY ARGUED AND THE CASE MADE OUT BY THE ASSESSEE THAT NO SUCH EXPENDITURE HAS BEEN INCURRED . IT IS ALSO A FACT THAT THE ASSESSEE HAS SUFFICIENT PROFITS GENERATED IN CURREN T ASSESSMENT YEAR AND IT HAD MIXED FUNDS. ON THE OTHER HAND, LEARNED AO WHILE CA LCULATING THE DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE AS MENTI ONED HEREINABOVE FAILED TO ESTABLISH THE NEXUS AS TO WHETHER INVESTMENT WAS MA DE OUT OF THE INTEREST BEARING FUNDS OF THE ASSESSEE. IN THIS ASPECT, THE LEARNED AR RELIED UPON THE ITA NO.2743/AHD/2017 DCIT VS. CHIRIPAL INDUSTRIES LTD. ASST.YEAR 2013-14 - 9 - JUDGMENT PASSED BY THE CO-ORDINATE BENCH IN ITA NO. 2627/AHD/2008, 2923/AHD/2008 & 3280/AHD/2010 IN THE MATTER OF GMM PFAUDLER LTD.-VS- JCIT. THE RATIO LAID DOWN IN THE SAID JUDGMENT IS I N FAVOUR OF THE ASSESSEE TO THIS EFFECT THAT UNDER THE SPECIFIC CIRCUMSTANCES W HEN THE AO HAS FAILED TO ESTABLISH THE NEXUS THAT INVESTMENT WAS MADE OUT ON INTEREST BEARING FUNDS DISALLOWANCE TOWARDS ADMINISTRATIVE EXPENDITURE IS NOT PERMISSIBLE. WE FIND THE FACT OF THE CASE BEFORE US AND THAT OF THE JUDG MENT CITED UPON IS SIMILARLY SITUATED AND IN THE ABSENCE OF ANY CHANGED FACTS OF THE CASE, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE SAME IN CONFIRMING THE E STIMATED DISALLOWANCE TO THE TUNE OF RS.1,50,000/- AS MADE BY THE LEARNED CI T(A) WHICH IS NOT PERMISSIBLE AND THEREFORE, BAD IN LAW. THUS THE SAM E IS LIABLE TO BE QUASHED. HENCE, WE DELETE SUCH ADDITION MADE BY THE LEARNED CIT(A). THE ASSESSEES APPEAL IS THUS ALLOWED. 6. GROUND NO.2: UPON VERIFICATION OF DETAILS FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING, IT WAS SEEN TH AT THE ASSESSEE DEBITED AN AMOUNT OF RS.21,04,633/- BEING INTEREST PAID ON SHO RT TERM FUNDS AND INTEREST ON OTHERS. IT WAS FURTHER OBSERVED THAT IT HAS GIVE N INTEREST FREE ADVANCES TO THE PARTIES. BY AND UNDER A SHOW-CAUSE DATED 29.02.2016 , THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY PROPORTIONATE INTEREST SHOULD NOT DISALLOWED. THE EXPLANATION RENDERED BY THE ASSESSEE WAS NOT FOUND SUITABLE AND THE LEARNED AO, THEREFORE, DISALLOWED OF RS.5,02,548/- OUT OF I NTEREST ON THE GROUND THAT THE APPELLANT HAD GIVEN INTEREST FREE ADVANCES TOTA LING TO RS.41,87,900/- TO THREE PARTIES ON WHICH NO INTEREST WAS CHARGED. SUC H DISALLOWANCE WAS MADE UPON CALCULATION OF INTEREST @12%. THE LEARNED CIT( A), HOWEVER, DELETED THE SAME RELYING UPON THE ORDER PASSED BY HIS PREDECESS OR IN ASSESSEES OWN CASE FOR A.Y. 2011-12 AND 2012-13. ITA NO.2743/AHD/2017 DCIT VS. CHIRIPAL INDUSTRIES LTD. ASST.YEAR 2013-14 - 10 - AT THE VERY OUTSET OF PROCEEDING, THE LEARNED COUNS EL SUBMITTED BEFORE US THAT ISSUE IS ENTIRELY COVERED IN ASSESSEES OWN CASE BY THE LEARNED TRIBUNAL IN ITA NO.1547/AHD/2016 FOR A.Y. 2012-13 IN REVENUE S APPEAL. ON THE CONTRARY, THE LEARNED DR FAILED TO CONTRADICT THE S UBMISSIONS MADE BY THE LEARNED AR. 7. HEARD THE REPRESENTATIVE OF THE RESPECTIVE PARTI ES, PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD. IT APPEARS THAT THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE IN ITA NO.1547/AHD/2016 FOR A.Y . 2012-13 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY CONFIRMING THE D ELETION OF ADDITION MADE BY THE LEARNED AO ON INTEREST IN THE A.Y. 2012-13. THE RELEVANT PORTION THEREOF IS AS FOLLOWS: 32. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE ASSESSING OFFICER HAS DISALLOWED A SUM OF RS. 2,74,548 OUT OF INTEREST ON THE GROUND THAT ASSESSE HAD GIVEN INTEREST FREE ADVANCES TOTALING TO RS. 22 ,87,900/- TO THREE PARTIES ON WHICH NO INTEREST WAS CHARGED. IN THIS CONNECTION, WE HAVE NOTICED THAT ASSESSEE HAS EXPLAINED THAT THE ADVANCES WERE GIVEN IN THE ORDINARY COURSE OF BUSINESS AND THE SAME WAS NOT IN THE NATURE OF LOAN . IN THIS CONNECTION, WE HAVE NOTICED THAT ASSESSEE WAS HAVING INTEREST FREE FUND IN THE FORM OF SHARE CAPITAL AND RESERVES AND SURPLUS TO THE AMOUNT OF R S. 233.93 CRORES AND AS THE INTEREST FREE FUND ENJOYED BY THE ASSESSEE WERE FAR IN EXCESS OF THE INTEREST FREE FUND MADE BY THE ASSESSEE, THEREFORE, NO DISAL LOWANCE U/S. 36(1)(III) CAN BE MADE AS ADJUDICATED IN THE DECISION OF TORRENT F INANCE VS. ACIT TTJ 624. LD. CIT(A) HAS DELETED THE ADDITION. RELEVANT PART OF THE DECISION OF LD. CIT(A) IS REPRODUCED AS UNDER:- 4.3. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT OR DER AND SUBMISSION FILED BY THE APPELLANT. THE ASSESSING OF FICER HAS OBSERVED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 2,92 ,57,770/- BEING INTEREST PAID ON SHORT TERM FUNDS AND INTEREST ON O THERS AND' IT IS NOTICED THAT THE ASSESSEE HAS NOT CHARGED INTEREST FROM THE PERSONS/PARTIES TO WHOM IT HAS GIVEN ADVANCE. IT IS OBSERVED THAT THE ASSESSEE HAS ADVANCED INTEREST FREE LOAN TO VRAJ IN TEGRATED TEXTILE PARK OF RS. 10,00,000/-, VRAJ MEGA FOOD PARK PVT. L TD. OF RS. 10,00,000/- AND HIRABHAI S. BHARWARD OF RS. 2,87,90 0/- TOTALING OF RS. ITA NO.2743/AHD/2017 DCIT VS. CHIRIPAL INDUSTRIES LTD. ASST.YEAR 2013-14 - 11 - 22,87,900/-. THE ASSESSEE ON THE ONE HAND PAYING HE AVY INTEREST ON SECURED AND UNSECURED LOANS AND ON THE OTHER HAND I T HAS DIVERTED SUCH INTEREST BEARING FUND TO INTEREST FREE ADVANCE S TO OTHERS. THE EXPENDITURE U/S. 36(1))(HI) OF THE ACT IS ALLOWABLE IF THE BORROWED FUND ARE UTILIZED FOR THE PURPOSE OF BUSINESS. THE ASSES SEE HAS NOT UTILIZED THE INTEREST BEARING FUND FOR ITS BUSINESS PURPOSE BUT ADVANCED THE SAME AS INTEREST FREE. IN VIEW OF THE ABOVE, PROPOR TIONATE @12%ON ADVANCE OF RS. 22,87,9007- WHICH WORKS OUT TO RS 2, 74,548/- IS DISALLOWED U/S. 36(1) (HI) OF THE I. T. ACT, TREATI NG THE SAME IS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE APPELLANT HAS SUBMITTED THAT ASSESSING OFFICER HAS FAILED TO APPRECIATE THAT THE ADVANCES WERE GIVEN IN THE O RDINARY COURSE OF BUSINESS AND THE SAME WERE NOT IN THE NATURE OF ANY LOAN. THEREFORE, THE APPELLANT CANNOT BE EXPECTED TO CHARGE INTEREST WHICH IS NOT RECEIVABLE. IT WAS NOT A CASE WHERE ANY INTEREST FR EE ADVANCE WAS GIVEN TO ANY RELATED PARTY, HERE OUT OF THE BUSINES S COMPULSION THE ADVANCE WAS GIVEN AND IT WAS NOT POSSIBLE FOR THE C OMPANY TO CHARGE INTEREST ON IT. IT IS SUBMITTED THAT THE FUNDS BORR OWED BY THE APPELLANT COMPANY HAVE BEEN USED BY IT IN ITS BUSINESS ONLY A ND HENCE THE INTEREST EXPENDITURE INCURRED FOR SUCH BORROWINGS W AS INVARIABLY ALLOWABLE U/S. 36(1)(III) OF THE ACT-THE APPELLANT FURTHER SUBMITS THAT IT HAD SUFFICIENT FUND AVAILABLE IN FORM OF SHARE CAPI TAL, RESERVE AND SURPLUS FOR GIVING THE LOANS AND ADVANCES AND THERE FORE INTEREST ON BORROWED FUNDS CANNOT BE DISALLOWED. IT HAS SHARE C APITAL, RESERVE AND SURPLUS OF RS.232,93,95,958/-. AS THE INTEREST FREE FUNDS ENJOYED BY THE APPELLANT ARE FAR IN EXCESS OF THE INTEREST FREE ADVANCES MADE BY APPELLANT, NO DISALLOWANCE U/S 36(I)(III) CAN BE MA DE IN CASE OF APPELLANT. IN THIS CONNECTION THE APPELLANT RELIES ON THE DECISION OF TORRENT VS. ACIT 73 TTJ 624(AHD). THE ENTIRE INTEREST-FREE FUNDS INCLUDE OWNER'S OWN CAPITAL, ACCUMULATED PROFITS AND OTHER INTEREST-FRE E CREDITORS AND LOANS, IF TOTAL INTEREST-FREE ADVANCES INCLUDIN G DEBIT BALANCES OF PARTNERS DO NOT EXCEED THE TOTAL INTERE ST-FREE FUNDS AVAILABLE WITH THE ASSESSES, NO INTEREST IS DISALLO WABLE ON ACCOUNT OF UTILISATION OF FUNDS FOR NON-BUSINESS PU RPOSES. EVEN THE CIT VS. & RELIANCE UTILITIES & POWER LTD. 435 221 HAS HELD THAT INVESTMENT OF INTEREST BEARING FU NDS IN SISTER CONCERNS - TRIBUNAL HAVING RECORDED A CLEAR FINDING THAT THE ASSESSEE POSSESSED SUFFICIENT INTEREST FREE FUNDS O F ITS OWN WHICH WERE GENERATED IN THE COURSE OF THE RELEVANT FINANCIAL YEAR, APART FROM SUBSTANTIAL SHAREHOLDERS FUND, PRE SUMPTION ITA NO.2743/AHD/2017 DCIT VS. CHIRIPAL INDUSTRIES LTD. ASST.YEAR 2013-14 - 12 - STANDS ESTABLISHED THAT THE INVESTMENTS IN SISTER C ONCERNS WERE MADE BY THE ASSESSEE OUT OF INTEREST-FREE FUNDS AND THEREFORE NO PART OF INTEREST ON BORROWINGS CAN BE DISALLOWED ON THE BASIS THAT THE INVESTMENTS WERE MADE OUT OF INTERES T BEARING FUNDS. IN VIEW OF THE FACTS OF THE CASE AND JUDICIAL RATIO S (SUPRA), AND ALSO FOLLOWING ORDER OF MY PREDECESSORS FOR EARLIER YEARS, THE ADDITION MADE BY THE AO IS DIRECTED TO BE DELETED. THE GROUN D OF THE APPELLANT IS ALLOWED. IN VIEW OF THE DETAILED FINDING AS ELABORATED IN T HE DECISION OF LD. CIT(A), THAT THE INTEREST FREE FUNDS ENJOYED BY THE ASSESSE E WERE FAR IN EXCESS OF THE INTEREST FREE ADVANCES MADE BY ASSESSEE AND AFTER C ONSIDERING THE DECSION OF CIT VS. & RELIANCE UTILITIES & POWER LTD. WE DO NOT FIND ANY ERROR IN THE DECISION OF LD.CIT(A). THEREFORE, THE APPEAL OF THE REVENUE ON THIS ISSUE IS DISMISSED. RESPECTFULLY RELYING UPON THE ABOVE JUDGMENT PASSED BY THE HONBLE CO-ORDINATE BENCH, WE FIND NO INFIRMITY IN THE ORDE R IMPUGNED PASSED BY THE FIRST APPELLATE AUTHORITY SO FAR AS TO WARRANT INTE RFERENCE. THE QUESTION IS ACCORDINGLY ANSWERED IN THE AFFIRMATIVE, I.E. IN FA VOUR OF THE ASSESSEE AND AGAINST THE REVENUE. CONSEQUENTLY, THE APPEALS FAIL S AND ACCORDINGLY DISMISSED. 8. GROUND NO.3 : THIS GROUND OF APPEAL RELATES TO THE ORDER PASSED B Y THE LEARNED CIT(A) IN DELETING DISALLOWANCE U/S 80IA OF THE ACT TO THE TUNE OF RS.6,15,58,478/-. 9. UPON VERIFICATION OF THE COMPUTATION OF INCOME, IT WAS FOUND THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.6,15,58,478/- U/S 80IA OF THE ACT, 1961. IT WAS FURTHER FOUND THAT THE ASSESSEE HAS SHOWN AC TIVITY OF POWER GENERATION AND THE TOTAL VALUE OF MACHINERY AND PLANT USED FOR THE SAID ACTIVITY SHOWN AT RS.766.44 LACS. ACCORDING TO THE LEARNED AO, THE AS SESSEE CLAIMED DEDUCTION U/S 80IA OF THE ACT ON A MUCH HIGHER AMOUNT THAN IT S CLAIM OF DEDUCTION U/S ITA NO.2743/AHD/2017 DCIT VS. CHIRIPAL INDUSTRIES LTD. ASST.YEAR 2013-14 - 13 - 80IA OF THE ACT AS COMPARED TO EARLIER YEARS, AND U LTIMATELY FINALIZED THE ISSUE BY MAKING ADDITION OF THE ENTIRE AMOUNT OF RS.6,15, 58,478/- U/S 80IA OF THE ACT. IN APPEAL, THE SAME WAS DELETED BY THE LEARNED CIT(A) RELYING ON THE DECISION MADE BY HIS PREDECESSOR IN ASSESSEES APPE AL FOR A.Y. 2012-13. HENCE, THE INSTANT APPEAL BEFORE US. 10. AT THE VERY OUTSET OF THE PROCEEDING, THE LEARN ED AR SUBMITTED BEFORE US THAT THE ISSUE IS SQUARELY COVERED BY THE CO-ORD INATE BENCH IN ASSESSEES OWN CASE; COPY OF THE ORDER PASSED BY THE CO-ORDINA TE BENCH IN ITA NOS.2092/AHD/2015, 900 & 1547/AHD/2016 FOR A.YS. 20 10-11 TO 2012-13 HAS BEEN HANDED OVER TO US BY THE LEARNED AR. HOWEVER, THE LEARNED DR FAILED TO CONTROVERT THE CONTENTIONS MADE BY THE ASSESSEE. 11. HEARD THE REPRESENTATIVE OF THE RESPECTIVE PART IES, PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD. WE HAVE ALSO CAREFUL LY CONSIDERED THE JUDGMENT PASSED BY THE HONBLE CO-ORDINATE BENCH IN ASSESSEE S OWN CASE AS RELIED UPON BY THE LEARNED AR. THE RELEVANT PORTION THEREO F IS AS FOLLOWS: 25. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE M ATERIAL ON RECORD CAREFULLY. IT WAS UNDISPUTED FACT THAT THAT ENTIRE PLANT WAS NEW ONE AND MACHINERY WERE PURCHASED BY SHANTI PROCESSOR LTD WH ICH WAS AMALGAMATING COMPANY AND SINCE THE SAME WERE NOT USED PRIOR TO 0 1/04/2005 AND IN THE ASSESSMENT ORDER U/S. 143(3) FOR A.Y.2009-10 & A.Y. 2010-11 THE ASSESSING OFFICER HAD ALLOWED THE DEDUCTION ON IDENTICAL ISSU E AND SIMILAR FACTS. THE ASSESSEE HAS STARTED THE GENERATION OF ENERGY IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2006-07 AND STARTED CLAIMING DEDUC TION U/S. 80IA(4) OF THE ACT FROM ASSESSMENT YEAR 2009-10, WHICH WAS FIRST Y EAR OF ITS CLAIMED AND THE SAME WAS ALLOWED MEANING THEREBY THE A.O. WAS SATIS FIED THAT THE ASSESSEET HAD FULFILLED ALL THE CONDITIONS. IT IS ALSO NOTICE D THAT THE ASSESSEE HAS EXPLAINED ITS ENTITLEMENT FOR THE IMPUGNED CLAIM OF DEDUCTION UNDER SECTION 80IA(12) AS UNDER:- ITA NO.2743/AHD/2017 DCIT VS. CHIRIPAL INDUSTRIES LTD. ASST.YEAR 2013-14 - 14 - 'THE POWER PLANT, IN QUESTION, WAS TRANSFERRED TO A SSESSEE COMPANY UNDER THE SCHEME OF AMALGAMATION OF TWO COMPANIES VIZ SHANTI PROCESSORS LTD & CHIRIPAL PETRO CHEMICALS LTD. M/S SHANTI PROCESSORS LTD. WAS AMALGAMATING COMPANY & CHIRIPAL PETRO CHEMICALS LTD. WAS AMALGAM ATED COMPANY UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. THE SCHE ME OF AMALGAMATION WAS APPROVED BY HON'BLE HIGH COURT OF GUJARAT, VIDE ITS ORDER DATED 31/03/2006 W.E.F. 01/04/2005. IT IS ALSO ADDED THAT NAME OF TH E COMPANY CHIRIPAL PETRO CHEMICALS LTD. WAS CHANGED TO CHIRIPAL INDUSTRIES L TD. AS PER APPROVAL OF REGISTRAR OF COMPANIES OF GUJARAT (A COPY OF BOTH T HE ORDERS ARE ENCLOSED HEREWITH FOR YOUR HONOUR'S KIND PERUSAL AND RECORD PURPOSE.) AT THIS POINT, THE ASSESSEE COMPANY WOULD LIKE TO SUBMIT THE DEFIN ITION OF AMALGAMATION , TAX CONCESSIONS AVAILABLE TO AMALGAMATED COMPANY AN D OTHER PROVISIONS, FOR YOUR HONOURS KIND PERUSAL AS UNDER: A. DEFINITION OF AMALGAMATION : ACCORDING TO SECTION 2(1B) OF THE INCOME-TAX ACT, 1 961 (HEREINAFTER REFERRED TO AS THE ACT), AMALGAMATION IN RELATION TO COMPANI ES MEANS THE MERGER OF ONE OR MORE COMPANIES WITH ANOTHER COMPANY OR THE M ERGER OF TWO OR MORE COMPANIES TO FORM ONE COMPANY (THE COMPANY OR COMPA NIES WHICH SO MERGE BEING REFERRED TO AS THE AMALGAMATING COMPANY OR CO MPANIES AND THE COMPANY WITH WHICH THEY MERGE OR WHICH IS FORMED AS A RESULT OF THE MERGER, AS THE AMALGAMATED COMPANY) IN SUCH A MANNER THAT:- A. ALL THE PROPERTY OF THE AMALGAMATING COMPANY OR COMPANIES IMMEDIATELY BEFORE THE AMALGAMATION BECOMES THE PROPERTY OF THE AMALGAMATED COMPANY BY VIRTUE OF AMALGAMATION. B. ALL THE LIABILITIES OF THE AMALGAMATING COMPANY OR COMPANIES IMMEDIATELY BEFORE THE AMALGAMATION BECOME THE LIABILITIES OF T HE AMALGAMATED COMPANY BY VIRTUE OF AMALGAMATION. SHAREHOLDERS HOLDING NOT LESS THAN 3/4TH IN VALUE O F THE SHARES IN AMALGAMATING COMPANY OR COMPANIES (OTHER THAN SHARE S HELD THERE IS IMMEDIATELY BEFORE THE AMALGAMATION OR BY A NOMINEE FOR THE AMALGAMATED COMPANY OR ITS SUBSIDIARY) BECOME SHAREHOLDERS OF T HE AMALGAMATED COMPANY BY VIRTUE OF THE AMALGAMATION, OTHERWISE TH AN AS A RESULT OF THE ACQUISITION OF THE PROPERTY ONE COMPANY BY ANOTHER COMPANY PURSUANT TO THE PURCHASE OF SUCH PROPERTY BY THE OTHER COMPANY AS A RESULT OF DISTRIBUTION OF SUCH PROPERTY TO THE OTHER COMPANY AFTER THE WINDIN G UP OF FIRST MENTIONED COMPANY. B. TAX CONCESSIONS TO THE AMALGAMATED COMPANY: ITA NO.2743/AHD/2017 DCIT VS. CHIRIPAL INDUSTRIES LTD. ASST.YEAR 2013-14 - 15 - THE AMALGAMATED COMPANY SHALL BE ELIGIBLE FOR TAX C ONCESSIONS ONLY IF THE FOLLOWING TWO CONDITIONS ARE SATISFIED: I. THE AMALGAMATION SATISFIES ALL THE THREE CONDITIONS LAID DOWN IN SECTION2(IB) AND II. THE AMALGAMATED COMPANY IS AN INDIAN COMPANY. IF TH E ABOVE CONDITIONS ARE SATISFIED THE AMALGAMATED COMPANY SH ALL BE ELIGIBLE FOR FOLLOWING TAX CONCESSIONS: (A) EXPENDITURE ON SCIENTIFIC RESEARCH SECTION 35( 5): (B) EXPENDITURE ON ACQUISITION OF PATENT RIGHTS OR COPY RIGHTS SECTION 35A(6): (C) EXPENDITURE OF KNOW-HOW SECTION 35AB(3): (D) TREATMENT OF PRELIMINARY EXPENSES SECTION 35D( 5): (E) AMORTIZATION OF EXPENDITURE IN CASE OF AMALGAM ATION SECTION 35DD (F) TREATMENT OF CAPITAL EXPENDITURE ON FAMILY PLA NNING SECTION 36(1)(IX): (G) TREATMENT OF BAD DEBTS SECTION 36(1)(VII): (H) DEDUCTION AVAILABLE U/S 80IA & 80IB: (I) CARRY FORWARD AND SET OFF BUSINESS LOSSES & UN ABSORBED DEPRECIATION OF THE AMALGAMATING COMPANY. 'WE OBSERVE THE ASSESSING OFFICER HAS NOT DISPROVED THESE MATERIAL FACTS AND DISALLOWED THE CLAIM OF DEDUCTION ON PRES UMPTION BASIS WITHOUT CONSIDERING THE RELEVANT LEGAL PROVISION AS ELABORA TED IN THE FINDINGS OF THE LD.CIT(A). THE RELEVANT LEGAL PROVISION HAS ALREADY BEEN ELABORATED BY THE LD. CIT(A) IN HIS FINDINGS THAT AS PER THE PROVISIO NS OF SECTION 80IA(12) WHEN ANY UNDERTAKING OF AN INDIAN COMPANY WHICH IS ENTIT LED TO DEDUCTION UNDER THIS SECTION IS TRANSFERRED BEFORE THE EXPIRY OF TH E PERIOD SPECIFIED IN THIS SECTION TO ANOTHER INDIAN COMPANY THEN AS PER CLAUS E (B) THE PROVISION OF THIS SECTION SHALL APPLY TO THE AMALGAMATED COMPANY AS T HEY WOULD HAVE APPLIED TO THE AMALGAMATING COMPANY IF THE AMALGAMATION HAD NOT TAKEN PLACE AND THE PROVISIONS OF SUBSECTION (12) WOULD ONLY APPLY IF THE AMALGAMATING COMPANY WAS ELIGIBLE FOR CLAIMING DEDUCTION U/S 80I A. IT IS DEMONSTRATED FROM THE ABOVE FACTS AND CIRCUMSTANCES THAT THE ASS ESSING OFFICER HAS DISALLOWED THE CLAIM OF THE ASSESSEE ON PRESUMPTION BASIS THAT ADDITION OF RS. 71,12,34,167- WAS OLD PLANT AND MACHINERY WITHOUT B RINGING ON RECORD EVIDENCE TO SUBSTANTIATE THAT SPECIFIED MACHINERY W AS PURCHASED BY SHANTI PROCESSOR LTD AND THE ASSESSING OFFICER HAS ALSO FA ILED TO DISPROVED THE MATERIAL FACT THAT SIMILAR CLAIM WAS ALLOWED TO THE ASSESSEE IN THE ASSESSMENT YEAR 2009-10 ON FULFILLING OF ALL THE CONDITIONS. ITA NO.2743/AHD/2017 DCIT VS. CHIRIPAL INDUSTRIES LTD. ASST.YEAR 2013-14 - 16 - IN THE LIGHT OF THE ABOVE FACTS, LEGAL FINDINGS AND ELABORATED FINDINGS OF THE LD.CIT(A) AS SUPRA IN THIS ORDER WE DO NOT F IND ANY ERROR IN THE DECISION OF THE LD.CIT(A),THEREFORE THE APPEAL OF T HE REVENUE IS DISMISSED. RESPECTFULLY RELYING UPON THE JUDGMENT PASSED BY TH E HONBLE CO- ORDINATE BENCH, WE FIND NO INFIRMITY IN THE ORDER I MPUGNED PASSED BY THE FIRST APPELLATE AUTHORITY SO FAR AS TO WARRANT INTERFEREN CE. THE QUESTION IS ACCORDINGLY ANSWERED IN THE AFFIRMATIVE, I.E. IN FA VOUR OF THE ASSESSEE AND AGAINST THE REVENUE. CONSEQUENTLY, THE APPEAL FAILS AND ACCORDINGLY DISMISSED. 12. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLOW ED. THIS ORDER PRONOUNCED IN OPEN COURT ON 06/06/2019 SD/- SD /- ( PRAMOD KUMAR ) ( M S. MADHUMITA ROY ) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD; DATED 06/06/2019 PRITI YADAV, SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. () / THE CIT(A)-1, AHMEDABAD. 5. , ! ', #$%% / DR, ITAT, AHMEDABAD 6. &' () / GUARD FILE. / BY ORDER , //TRUE COPY// / (DY./ASSTT.REGISTRAR) !, #$ / ITAT, AHMEDABAD