ACIT, Ludhiana V. M/s Abhishek Industies Ltd.,

ITA 275/CHANDI/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2358 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-04-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 29-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DR AMA RVEER SINGH
• Keywords: Business income; Earning of tax free income; Question of law; Revised return
• Section: 14A; 139(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NO. 24/CHD/2012 ASSESSMENT YEAR: 2008-09 M/S ABHISHEK INDUSTRIES LTD. VS. THE D.C.I. T- RANGE- I, (NOW TRIDENT LIMITED) LUDHIANA LUDHIANA PAN NO. AABCA4139J & ITA NO. 275/CHD/2012 ASSESSMENT YEAR: 2008-09 THE A.C.I.T VS. M/S ABHISHEK INDUSTRIES LTD., CIRCLE I, LUDHIANA E-212, KITCHLU NAGAR, LUDHIANA PAN NO. AABCA4139J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI KUMAR RESPONDENT BY : DR. AMARVEER SINGH DATE OF HEARING : 11/04/2013 DATE OF PRONOUNCEMENT : 17.4.2013 ORDER PER N.K.SAINI, A.M. THESE CROSS APPEALS BY THE ASSESSEE AND THE DEPARTM ENT ARE DIRECTED AGAINST THE ORDER DATED 13.11.2011 OF CIT(A)-1, LUD HIANA. 2 2. FIRST WE WILL DEAL WITH THE ASSESSEES APPEAL IN ITA NO. 24/CHD/2012. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL:- 1. THAT ORDER PASSED U/S 250(6) IS AGAINST LAW AND FAC TS ON THE FILE IN AS MUCH AS THE LD. CIT(A) WAS NOT JUSTIFIED TO UPHOLD THE ACTION OF THE LD. ASSESSING OFFICER IN TREATING THE SUM OF RS. 11,92,58,999/- AS REVENUE RECEIPTS AS AGAINS T CLAIMED BY THE APPELLANT TO BE CAPITAL IN NATURE. 2. THAT THE LD. ASSESSING OFFICER WAS ALSO NOT JUSTIFI ED TO UPHOLD THE DISALLOWANCE OF RS. 26,75,942/- OUT OF I NTEREST ACCOUNT ON INTEREST-FREE LOANS TO SISTER CONCERNS. 3. THAT THE LD. CIT(A) GRAVELY ERRED IN NOT CONSIDERIN G THE APPLICATION MADE BY THE APPELLANT U/S 158A(1) OF TH E INCOME-TAX ACT, 1961. 4. THAT THE LD. CIT(A) WAS ALSO NOT JUSTIFIED IN NOT T REATING THE REVISED RETURN FILED BY THE APPELLANT ON 15-03- 2010 I.E., WITHIN TIME ALLOWED U/S 139(5) AS A VALID RETURN. 3 . AS REGARDS GROUND NOS.1 & 2 RELATING TO TREATMENT T O THE SUBSIDY OF SALES TAX AND THE DISALLOWANCE OF INTEREST ON ACCOU NT OF INTEREST FREE LOANS TO THE SISTER CONCERN, THE LD. COUNSEL FOR THE ASSESSE E AT THE VERY OUTSET STATED THAT THESE ISSUES ARE PENDING BEFORE THE HON'BLE SU PREME COURT WHERE SLP AGAINST THE ORDER DATED 4.8.2006 PASSED BY THE HON' BLE PUNJAB & HARYANA HIGH COURT IN ITA NO.110/2005 HAD BEEN ADMITTED. T HE ASSESSEE IN THIS CASE 3 HAS MOVED AN APPLICATION DATED 23.4.2012 IN FORM NO .8 U/S 158A(1) OF THE I.T.ACT, 1961, (HEREINAFTER REFERRED TO AS ACT IN SHORT). THE LD. DR DID NOT CONTROVERT THE ABOVE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE. 4. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PA RTIES AND THE MATERIAL ON RECORD IT IS NOTICED THAT FOLLOWING QUESTIONS HA VE BEEN RAISED BY THE ASSESSEE FOR AUTHORITATIVE DECISION OF THE HON'BLE APEX COURT:- (A) WHETHER SALES-TAX EXEMPTION INCENTIVE GRANTED UNDER A STATE GOVERNMENT PACKAGE OF INCENTIVE SCHEME, UPTO 150% OF THE FIXED CAPITAL INVESTMENT MADE BY THE ASSESSEE, CAN BE CONSIDERED TO BE A TAXABLE REVENUE RECEIPT? (B) WHETHER INTEREST PAID ON LOANS TAKEN FOR THE P URPOSE OF BUSINESS, CAN BE DISALLOWED ON THE GROUND THAT THE ASSESSEE HAS M ADE INTEREST FREE LOANS TO THE SISTER CONCERNS ? 5. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE ISSUES PENDING BEFORE THE HON'BLE SUPREME COURT ARE THE SAME AS ARE INVOL VED IN GROUND NOS. 1 & 2 OF THE ASSESSEES APPEAL. THEREFORE, IN VIEW OF TH E ABOVE SAID APPLICATION MOVED BY THE ASSESSEE U/S 158A(1) OF THE ACT IN F ORM NO. 8, THE ISSUES RAISED BY THE ASSESSEE IN GROUND NOS. 1 & 2 ARE DE CIDED AGAINST THE ASSESSEE IN CONSONANCE WITH THE VIEW TAKEN BY THE HON'BLE J URISDICTIONAL HIGH COURT AND THIS BENCH OF THE ITAT WITH THE RIDER THAT THE OUTCOME OF THE FINAL DECISION ON THE QUESTION OF LAW IN THE SLP PENDING BEFORE THE HON'BLE SUPREME COURT IN RESPECT OF THE ASSESSMENT YEAR 199 3-94 SHALL BE APPLICABLE FOR THIS YEAR ALSO. 4 6. AS REGARDS TO THE GROUND NO.3, THE LD. COUNSEL F OR THE ASSESSEE SUBMITTED THAT IT IS TO BE TREATED AS OF ACADEMIC I NTEREST, WE ORDER ACCORDINGLY. 7. AS REGARDS TO THE GROUND NO.4, IT IS NOTICED TH AT THE SAME IS CORRELATED WITH GROUND NOS. 1 & 2, SO, NO SPECIFIC ADJUDICATIO N IS REQUIRED FOR THIS GROUND. 8. NOW WE WILL DEAL WITH THE DEPARTMENTAL APPEAL IN ITA NO. 275/CHD/2012. 9. THE ONLY EFFECTIVE GROUND RAISED IN THIS APPEAL READS AS UNDER:- 1. THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION OF RS. 2,37,67,894/- MADE U/S 14 A READ WI TH RULE 8D ON ACCOUNT OF EXPENSES INCURRED BY THE ASSESSEE FOR MAKING INVESTMENTS IN VARIOUS EQUITY FUNDS AND SHARES OF D IFFERENT COMPANIES AND EARNING TAX FREE INCOME IN THE FORM O F DIVIDENDS WHEREAS THE ASSESSEE HAS TAKEN HUGE LOANS AND ON THE OTHER HAND IS INVESTING INDIRECTLY FROM LOAN FU NDS BUT OTHERWISE FROM COMMON HOTCH-POTCH OF FUNDS IN THE T AX FREE INCOME FUNDS, SO AS TO AVOID THE TAX LIABILITY AND THE LD. CIT(A) FURTHER IGNORED THE FACT THAT THE ASSESSEE H AS NOT BEEN ABLE TO CORRELATE INTEREST PAID WITH DIFFERENT HEAD S OF UTILIZATION OF FUNDS. 5 10. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE TH AT THE ASSESSING OFFICER MADE AN OBSERVATION IN PARA 9.1 OF THE ASSESSMENT O RDER DATED 30.12.2010 THAT THE ASSESSEE HAD TAKEN HUGE LOANS AND ON THE OTHER HAND IS INVESTING INDIRECTLY FROM LOAN FUNDS AS ALL THE FUNDS OF THE ASSESSEE CO MPANY REPRESENTED A COMMON KITTY. THE SUBMISSIONS OF THE ASSESSEE BEFO RE THE ASSESSING OFFICER WAS THAT THE INVESTMENT IN MUTUAL FUNDS AS WELL AS IN SHARES OF SUBSIDIARY COMPANIES WERE FROM SURPLUS PROFITS DERIVED FROM T HE BUSINESS OPERATION. IT WAS FURTHER STATED THAT THE ASSESSEE HAD TAXABLE IN COME FROM THE INVESTMENT IN THE MUTUAL FUND IN THE FORM OF SHORT TERM CAPITAL G AINS OF RS. 3,75,81,163/- IN RESPECT OF EQUITY FUNDS AND RS. 1,39,75,166/- IN RE SPECT OF DEBT FUNDS AND THE TAX FREE DIVIDEND INCOME WAS ONLY RS. 69,08,491/-. IT WAS REITERATED THAT ALL THE INVESTMENTS LEADING TO ABOVE DETAILED TAXABLE A S WELL AS NON TAXABLE INCOME FROM COMPANYS OWN FUNDS AND INTEREST BEARIN G FUNDS WERE NOT USED FOR THE SAME. IT WAS CLAIMED THAT THERE WAS NO NEX US BETWEEN THE EXPENDITURE INCURRED AND THE TAX FREE DIVIDEND INCOME AND DISAL LOWANCE OF RS. 9,08,805/- HAD BEEN MADE IN THE RETURNED INCOME CREDITED BY T HE TAX AUDITORS IN SCHEDULE-X OF THE TAX AUDIT REPORT. THE ASSESSING OFFICER AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE HAD NOT BEEN ABLE TO PROVE AND SUBSTANTIATE THE DIRECT NEXUS BETWEEN THE FUNDS ARISING OUT OF DIFFERENT TYPES OF LOANS AND INTERNAL ACCRUAL ON ON E HAND AND ITS UTILIZATION IN THE FORM OF INVESTMENTS, EXPENSES ETC. ON THE OTHER HAND. THE ASSESSING OFFICER CONCLUDED THAT IT WAS NOT POSSIBLE EITHER F OR THE ASSESSEE OR FOR THE DEPARTMENT TO CORRELATE THE INTEREST PAID WITH DI FFERENT HEADS OF UTILIZATION 6 OF FUNDS. HE, THEREFORE, PROCEEDED TO WORK OUT THE DISALLOWANCE AS PER RULE 8D OF THE I.T. RULES, 1962. THE ASSESSING OFFICER WORKED OUT THE TOTAL DISALLOWANCE AT RS. 2,46,76,699/- WORKING OF WHICH IS GIVEN IN PARA 9.3 OF THE ASSESSMENT ORDER DATED 30.12.2010 AND CONSIDERING T HIS FACT THAT AMOUNT OF RS. 9,08,805/- HAD ALREADY BEEN ADDED BY THE ASSESS EE IN THE TOTAL INCOME IN THE COMPUTATION OF INCOME MADE A DISALLOWANCE OF RS . 2,37,67,894/-. 11. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT( A). THE SUBMISSIONS OF THE ASSESSEE HAS BEEN INCLUDED BY THE LD. CIT(A) IN PARA 7 OF THE IMPUGNED ORDER WHICH READS AS UNDER:- 7. DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E AR OF THE APPELLANT PLACED RELIANCE UPON FOLLOWING JUDGEMENTS OF HON'BL E JURISDICTIONAL PUNJAB & HARYANA:- I) 'COMMISSIONER OF INCOME TAX VS. HERO CYCLES LIMITED WHERE IN IT WAS HELD THAT' DEDUCTION-DISALLOWANCE OF EXPENDITUR E IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME -DIVIDEND INCOME DISALLOWANCE NOT PERMISSIBLE WHERE NO NEXU S BETWEEN EXPENDITURE INCURRED AND INCOME GENERATED -INCOME T AX ACT 1961, SECTION 14A. II) COMMISSIONER OF INCOME TAX VS WINSOME TEXTILE INDUSTRIES LIMITED WHEREIN IT WAS HELD' DEDUCTION- DISALLOWANC E OF EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FO RM PART OF THE TOTAL INCOME - ACQUISITION OF SHARES USING ASSESSEE 'S OWN FUNDS - NO INTEREST EXPENDITURE INCURRED NO CLAIM MADE FOR EXEMPTION - NO DISALLOWANCE WARRANTED UNDER SECTION 14A-INCOME TAX ACT 1961, SECTION 14A.' 7 12. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE DELETED THE IMPUGNED ADDITION BY OBSERVING IN PARA 8 OF THE IMPUGNED ORDER WHICH READS AS UNDER:- 8. I HAVE CONSIDERED THE FACTS OF THE CASE AND IT IS SEEN THAT THE APPELLANT HAS MADE A CATEGORICAL SUBMISSION OF FACT BEFORE TH E AO THAT NO INTEREST BEARING FUNDS HAD BEEN DIVERTED TO MAKE INVESTM ENTS LEADING TO TAX EXEMPT INCOME. THE AO HAS NOT ESTABLISHED AS A MATTER OF F ACT THAT THE CONTENTION PUT FORWARDED BY THE ASSESSEE WAS ERRONEOUS OR MISLEADING. IN FACT THE AO HAS OBSERVED THAT IT WAS NOT POSSIBLE TO DISPROVE T HE CLAIM OF THE ASSESSEE IN THIS REGARD. IT CLEARLY MEANT THAT THE MANDATORY RE QUIREMENT AS STIPULATED BY SECTION 14A WITH REGARD TO THE SATISFACTION THAT CERTAIN EXPENDITURE HAD BEEN INCURRED TO EARN THE TAX EXEMPT INCOME, HAS NO T BEEN FULFILLED. THE HON'BLE PUNJAB &. HARYANA HIGH COURT IN THE CASE OF CIT VS. WINSOME TEXTILE INDUSTRIES LIMITED HAS CLEARLY HELD AS UNDER:- 'ABHISHEK INDUSTRIES LTD. [2006] 286 ITR 1 (P&H) RE LATES TO THE PROVISIONS OF SECTION 36(L)(III) AND SECTION 14A WH ICH HAS BEEN INVOKED IN THIS CASE WHICH STANDS ON A DIFFERENT FOOTING. E VEN IF DEDUCTION UNDER SECTION 36(L) (III) IS ORDINARILY AVAILABLE IN RESP ECT OF BORROWED FUNDS UTILIZED FOR THE PURPOSE OF BUSINESS SECTION 14A CA RVES OUT AN EXCEPTION IN SO FAR AS ANY EXPENDITURE WHICH IS RELATABLE TO THE EARNING OF DIVIDEND INCOME NOT SUBJECT TO TAX IS TO BE DISALLO WED. IT WOULD BE RELEVANT TO POINT OUT THAT THE HON'BLE SUPREME COUR T IN THE CASE OF RAJASTHAN STATE WAREHOUSING CORPORATION V. CIT [200 0] 242 ITR 450 HELD THAT IN THE CASE OF INDIVISIBLE BUSINESS WHERE PART OF BUSINESS INCOME IS EXEMPT THE EXPENDITURE CANNOT BE APPORTIO NED AND PART RELATING TO INCOME IS EXEMPT CANNOT BE DISALLOWED ( JUDGEMENT DATED FEBRUARY 23,2000). HOWEVER, THE FINANCE ACT, 2001, INCORPORATED SECTION 14A WITH EFFECT FROM APRIL 1, 1962, WHICH P ROVIDES FOR DISALLOWANCE OF EXPENDITURE RELATING TO INCOME NOT INCLUDED IN THE 8 GROSS TOTAL INCOME. THEREFORE, IT IS TO BE ASCERTAI NED AS TO WHETHER THE ASSESSEE HAS MADE THE INVESTMENT IN PURCHASE OF SHA RES OUT OF BORROWED FUNDS OR INVESTED ITS OWN FUNDS. IF THE ASSESSEE HA S INVESTED ITS OWN MONEY IN THE PURCHASE OF SHARES THEN THERE IS NO QU ESTION OF ANY DISALLOWANCE IN RESPECT OF INTEREST ON BORROWED FUN DS U/S 14A. HOWEVER, IF THE BORROWED FUNDS HAVE BEEN UTILIZED F OR PURCHASE OF SHARES OF M/S WINSOME YARNS LIMITED, DISALLOWANCE U /S 14A SHALL HAVE TO BE CALCULATED EVEN WHEN INVESTMENT HAS BEEN MADE IN THE COURSE OF BUSINESS OF THE ASSESSEE AND THE ASSESSEE QUALIFIES FOR DEDUCTION U/S 36(L)(III). SO, HOWEVER, SECTION 14A PROVIDES THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE A SSESSEE IN RELATING TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. SO, IT IS, THEREFORE, NECESSARY TO FIND OUT IF ANY EXPENDI TURE INCURRED BY THE ASSESSEE FOR MAKING INVESTMENT IN THE SHARES OF WIN SOME YARNS LIMITED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSEE HAD FURNISHED WRITTEN SUBMISSION IN WHICH IT WAS CLAIMED, VIDE PA RAGRAPH 5 OF THE LETTER THAT INVESTMENT IN THE SHARES OF WINSOME YA RN LIMITED WAS MADE OUT OF THE ASSESSEE'S OWN FUND AND NOT OUT OF ANY B ORROWED FUNDS. BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) ALS O, VIDE LETTER DATED MARCH 15,2007 THE ASSESSEE HAD REITERATED THA T INVESTMENT IN THE PURCHASE OF THE SHARES OF WINSOME YARN LIMITED IN T HE YEAR 1993-94 HAD NO NEXUS WITH THE BORROWED FUNDS. THE ASSESSING OFFICER AS PER THE ASSESSMENT ORDER HAS NOT REFUTED THE CLAIM OF THE A SSESSEE BUT HAS MADE A DISALLOWANCE ON THE GROUND THAT HAD THE SAID INVE STED IN SHARES WERE AVAILABLE WITH THE ASSESSEE, THE ASSESSEE WOULD NOT HAVE BEEN REQUIRED TO RAISE LOANS TO THAT EXTENT AND INCUR EXPENDITURE ON INTEREST ON SUCH LOANS. IN OUR CONSIDERED VIEW, THE DISALLOWANCE HAS GOT TO BE MADE U/S 14A IF ANY EXPENDITURE RELATING TO THE EARNING OF I NCOME WHICH IS NOT CHARGEABLE TO TAX HAS BEEN DEBITED TO THE ACCOUNTS BY THE ASSESSEE. SINCE IN THIS CASE, THE ASSESSEE HAS NOT INCURRED A NY EXPENDITURE FOR MAKING INVESTMENT IN THE PURCHASE OF SHARES OF WINS OME YARN LIMITED, 9 NO DISALLOWANCE IS WARRANTED U/S 14A. WE, THEREFORE , FIND NO JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE CO MMISSIONER OF INCOME TAX (APPEALS) IN HAVING DELETED THE DISALLOWANCE. T HE GROUND OF APPEAL RAISED BY THE REVENUE IN THIS REGARD IN THUS DISMIS SED,' THE PERUSAL OF JUDGEMENT QUOTED ABOVE MAKES IT ABUN DANTLY CLEAR THAT THE MACHINERY AVAILABLE UNDER RULE 8D CAN NOT BE AP PLIED AUTOMATICALLY AND NO DISALLOWANCE COULD BE MADE WITHOUT POINTING OUT A DIRECT CONNECTION BETWEEN THE EXPENDITURE INCURRED AND THE TAX EXEMPT INCOME. AS SUCH THE DISALLOWANCE MADE BY THE AO IS DIRECTED TO BE DELET ED. 13. NOW THE DEPARTMENT IS IN APPEAL. 14. THE LD. DR STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THIS ISSUE IS COVERED AGAINST THE AS SESSEE IN ASSESSEES OWN CASE I.E. CIT VS ABHISHEK INDUSTRIES LTD V CIT VIDE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT REPORTED IN (2006) 286 I TR 1(P&H). 15. IN HIS RIVAL SUBMISSIONS, LD. COUNSEL FOR THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND F URTHER SUBMITTED THAT JUDGMENT OF THE HON'BLE PUNJAB & HARYANA HIGH COURT RELIED UPON BY THE A.O. HAS BEEN DISTINGUISHED BY THE HON'BLE JURISDICTIONA L HIGH COURT IN THE CASE OF CIT V HERO CYCLES LTD (2010) 323 ITR 518 . 16. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, IT APPEARS THAT THE ASSESSING OFFICER MADE THE DISALLOWANCE B Y FOLLOWING THE JUDGMENT 10 OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CA SE OF ABHISHEK INDUSTRIES LTD (2006) 286 ITR 1 (P&H). HOWEVER, THEREAFTER, THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V HERO CYCLES LTD RE PORTED AT (2010) 323 ITR 518(P&H) HAD TAKEN A DIFFERENT VIEW BY FOLLOWING EA RLIER DECISION IN THE CASE OF CIT VS WINSOME TEXTILE INDUSTRIES LTD 319 ITR 2 04 (P&H) AND HELD AS UNDER:- WE HAVE HEARD LEARNED COUNSEL FOR THE PARTIES. THE CONTENTION RAISED ON BEHALF OF THE REVENUE IS T HAT EVEN IF THE ASSESSEE HAD MADE INVESTMENT IN SHARES OUT OF ITS OWN FUNDS, THE ASSESSEE HAD TAKEN LOANS ON WHICH I NTEREST WAS PAID AND ALL THE MONEY AVAILABLE WITH THE ASSESSEE WAS IN COMMON KITTY, AS HELD BY THIS COURT IN CIT V. ABHIS HEK INDUSTRIES LTD. [2006] 286 ITR 1 AND, THEREFORE, DI SALLOWANCE UNDER SECTION 14A WAS JUSTIFIED. WE DO NOT FIND ANY MERIT IN THIS SUBMISSION. THE JU DGMENT OF THIS COURT IN ABHISHEK INDUSTRIES LTD. [2006] 2 86 ITR 1 WAS ON THE ISSUE OF ALLOWABILITY OF INTEREST PAID ON LO ANS GIVEN TO SISTER CONCERNS, WITHOUT INTEREST. IT WAS HELD THA T DEDUCTION FOR INTEREST WAS PERMISSIBLE WHEN LOAN WAS TAKEN FOR B USINESS PURPOSE AND NOT FOR DIVERTING THE SAME TO SISTER CO NCERN WITHOUT HAVING NEXUS WITH THE BUSINESS. THE OBSERVATIONS MA DE THEREIN HAVE TO BE READ IN THAT CONTEXT. IN THE PRESENT CA SE, ADMITTEDLY, THE ASSESSEE DID NOT MAKE ANY CLAIM FOR EXEMPTION. IN SUCH A SITUATION, SECTION 14A COULD HAVE NO APPLICATION. NO SUBSTANTIAL QUESTION OF LAW ARISES. THE APPEAL IS DISMISSED . 11 17. IN THE PRESENT CASE, THE ASSESSING OFFICER IN T HE ASSESSMENT ORDER DATED 30.12.2010 AT PARA 9.2 OBSERVED AS UNDER:- .THUS, IT IS NOT POSSIBLE EITHER FOR THE ASSESSE E OR THE DEPARTMENT TO CORRELATE INTEREST PAID WITH DIFF ERENT HEADS OF UTILIZATION OF FUNDS 18. FROM THE ABOVE OBSERVATION OF THE ASSESSING OFF ICER IT IS CLEAR THAT NO NEXUS WAS ESTABLISHED THAT THE IMPUGNED EXPENSES WE RE INCURRED FOR EARNING EXEMPTED INCOME, THEREFORE, BY KEEPING IN VIEW THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF C IT V HERO CYCLES LTD (SUPRA), WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING THE IMPUGNED ADDITION. IN THAT VIEW OF THE MATTER, WE DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS OF THE LD. CI T(A). 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE AS WE LL AS DEPARTMENT ARE DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17.4.2 013) SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMER DATED : 17 TH APRIL, 2013 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR 12 BY ORDER ASSISTANT REGISTRAR ITAT, CHANDIGARH