DCIT, CIR-36, KOLKATA, Kolkata V. Sri Satya Prakash Sharma, Kolkata

ITA 281/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0870 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 20-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAVID Z CHAWNGTHU ADD L
• Keywords: Earning of tax free income; Commercial expediency
• Section: 14A

Judgement Text

ITA NO.281/KOL/2015 SHRI SATYA PRAKASH SHARMA A.Y.2 010-11 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI M.BA LAGANESH, AM] I.T.A NO.281/KOL/2015 ASSESSMENT YEAR : 2010-11 D.C.I.T., CIRCLE-36, -VS.- SHRI SATYA PR AKASH SHARMA KOLKATA KOLKATA [PAN : ALSP 5479 C] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI DAVID Z.CHAWNGTHU, A DDL. CIT, SR.DR FOR THE RESPONDENT : NONE DATE OF HEARING : 29.11.2017. DATE OF PRONOUNCEMENT : 01.12.2017. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED.31.12.2014 OF C.I.T.(A)-10, KOLKATA RELATING TO A.Y.2010-11. 2. GROUND NO.1 RAISED BY THE REVENUE READS AS FOLLO WS :- 1. ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE OF INTEREST E XPENSE TO THE TUNE OF RS. 78,000/- OUT OF TOTAL DISALLOWANCE OF RS. 43,24,193 / - U/S 40A(2)(B) OF THE I. T. ACT 1961. 3. THE ASSESSEE IS AN INDIVIDUAL. THE ASSESSEE IS A PROPRIETOR OF PROPRIETORSHIP CONCERN 'M/ S SPECIAL STEEL STORES' WHICH IS ENGAGE D IN THE BUSINESS OF 'TRADING IN ALLOY STEEL, CARBON STEEL AND ASSORTED PIECES' HAVI NG OFFICE AT 37, N. S. ROAD, 2ND FLOOR, KOLKATA -700 001 AND ALSO AT T-22, MIDC BHOS ARI, TELCO ROAD, PUNE- 411 026. 4. THE ASSESSEE HAD FILED HIS RETURN OF THE INCOME U/S 139(1) ON 12-10-2010 FOR THE ASST. YEAR 2010 - 2011, SHOWING A TOTAL INCOME OF R S. 1,30,49,975/- (ONE CRORE ITA NO.281/KOL/2015 SHRI SATYA PRAKASH SHARMA A.Y.2 010-11 2 THIRTY LACS FORTY NINE THOUSAND NINE HUNDRED AND SE VENTY FIVE ONLY). THE ASSESSING OFFICER DISALLOWED A SUM OF RS. 43,24,19 3/- (RS. FORTY THREE LAC TWENTY FOUR THOUSAND ONE HUNDRED NINETY THREE ONLY) ON ACC OUNT OF INTEREST ON THE BASIS OF FOLLOWING CONTENTION:- ~ THAT THE ASSESSEE RECEIVED INTEREST ON DEPOSITS A T AN AVERAGE RATE OF 8.16% WHILE PAID INTEREST ON BORROWED LOAN AT AN AVERAGE RATE O F 13%. ~ THAT THE INTEREST INCOME IS NOT COMMENSURATE TO T HE EXPENSE MADE. ~ THAT THE EXPENSE MADE ON BORROWED FUND USED FOR P URPOSE OF INVESTMENT IS NOT A BUSINESS EXPENSE. FURTHER AS PER THE ASSESSING OFFI CER, THE FUNDS HAVE BEEN USED IN INVESTMENT IN BANK DEPOSITS AS WELL AS IN HOUSING C OOPERATIVES, SHARES IN BANKS AND PURCHASE OF MUTUAL FUNDS. ACCORDINGLY, THE ASSESSIN G OFFICER WAS OF THE VIEW THAT THE EXPENDITURE IS MADE WITH NO BUSINESS EXPEDIENCY. ~ IN THE OPINION OF THE ASSESSING OFFICER MORE THA N 50% OF THE UNSECURED LOAN OUTSTANDING IS TAKEN FROM A RELATED PARTY, 'SATYA P RAKASH SHARMA (HUF), WHICH IS COVERED U/ S 40A(2)(B) OF THE IT ACT, 1961 AND THER EFORE IT IS A SELF IMPOSED LIABILITY. ACCORDING TO THE ASSESSING OFFICER THERE IS A WILF UL ATTEMPT ON THE PART OF THE ASSESSEE TO REDUCE HIS TAXABLE INCOME BY INCREASING INTEREST EXPENSE. HENCE, BASED ON HER ABOVE CONTENTIONS THE LD. AO AD DED BACK MRS.43,24,193/- TO THE TOTAL INCOME OF THE ASSESEE U/S 36(1)(III) OF THE I .T.ACT, 19061 (ACT.). 5. BEFORE CIT(A) THE ASSESSEE CONTENDED THAT THE A DDITION MADE BY THE AO ON ACCOUNT OF DIFFERENT BETWEEN RATE OF INTEREST PAID AND INTEREST RECEIVED WAS IGNORING THE COMMERCIAL EXPEDIENCY OF THE INTEREST EXPENSE S INCURRED. THE ASSESSEE POINTED OUT THAT THE DISALLOWANCE WAS MADE ON INVESTMENTS & DEPOSITS OF RS.8,22,19,776/-. THE BREAK-UP OF THIS INVESTMENT WAS AS UNDER :- SL.NO. PARTICULARS AMOUNT IN (RS.) 1. INVESTMENT IN FIXED DEPOSITS 4,96,71,936/- 2. INVESTMENT IN RECURRING DEPOSITS 2,82,74,040/- 3. INVESTMENT IN HOUSING SOCIETY 41,00,000/- 4. SHARES IN BANKS 1,73,800/- ITA NO.281/KOL/2015 SHRI SATYA PRAKASH SHARMA A.Y.2 010-11 3 TOTAL 8,22,19,776/- THE COMMERCIAL EXPEDIENCY/NECESSITY OF THE ABOVE IN VESTMENTS WAS EXPLAINED BY THE ASSESSEE AS FOLLOWS :- I) INVESTMENT IN FIXED DEPOSITS AND RECURRING DEPOS ITS ARE MOSTLY MADE OUT OF RECURRING SAVINGS OF ASSESSEES PROPRIETARY FIRM ' SPECIAL STEEL STORES' TO KEEP THE SAVINGS SECURE AND INTACT. AS A MATTER OF KEEPING T HIS BALANCE SECURE, DIFFERENT FIXED DEPOSITS AND RECURRING DEPOSITS ARE CREATED PERIODI CALLY FROM ASSESSEES BUSINESS SAVINGS AND ARE AGAIN REINVESTED AT THE TIME OF MAT URITY IN THE MOST CONVENIENT MANNER. THE INVESTMENT IN FIXED DEPOSITS WAS DONE W ITH A VIEW OF EARNING PROFITS ON ASSESSEES PLOUGHED BACK PROFITS. II) FURTHER, INVESTMENT IN FIXED DEPOSITS AND IN SH ARES OF BANKS IS DONE FOR THE PURPOSE OF AVAILING SECURED LOANS FROM BANKS IN THE FORM OF OVERDRAFT FACILITIES FOR AUGMENTING WORKING CAPITAL REQUIREMENTS OF THE FIRM . SINCE IT IS CONSIDERED MANDATORY TO MAINTAIN SECURITY MARGIN EITHER BY FIX ED DEPOSITS WITH BANKS OR BY PURCHASING A CERTAIN SHARES OF THE BANK FOR AVAIIIN G VARIOUS CREDIT FACILITIES. DUE TO THE HIGH VOLATILITY OF METAL MARKET VIS A VIS REQUI REMENT OF FUNDS FOR BUYING MATERIALS, THE FIRM TENDS TO MAINTAIN FIXED DEPOSITS WHICH CAN BE UTILIZED FOR PLEDGING AT THE TIME AVAILING WORKING CAPITAL FACILITIES FROM SCHED ULED BANKS. HENCE, QUESTION OF EARNING HIGHER INTEREST INCOME APPEARS IMMATERIAL A S THE PRIMARY OBJECTIVE OF THE CONCERN IS TO AVAIL WORKING CAPITAL FINANCE FROM TH E BANK TO CONTINUE ASSESSEES BUSINESS OPERATIONS WITHOUT ANY HINDRANCES. III) FURTHER , INVESTMENT IN HOUSING SOCIETY WAS MA DE IN THE NATURE OF ADVANCE WITH A VIEW OF PURCHASING THE LAND FROM SHRI GURU DUTTA CO OPERATIVE SOCIETY FOR EXPANSION OF BUSINESS. HENCE THE INVESTMENT WAS MAD E FOR THE LONG-TERM BENEFITS FOR THE BUSINESS RATHER THAN EARNING ANY IMMEDIATE RETU RN. 6. THE ASSESSEE ALSO POINTED OUT THAT THE ABOVE IN VESTMENTS WERE SUBSTANTIALLY MADE OUT OF ASSESSEE OWN FUNDS AND OR ARE INCIDENTAL TO THE SMOOTH FUNCTIONING OF THE ITA NO.281/KOL/2015 SHRI SATYA PRAKASH SHARMA A.Y.2 010-11 4 BUSINESS AND IN ACCORDANCE OF COMMERCIAL EXPEDIENCY OF THE BUSINESS. IT WAS ARGUED THAT THE ASSESSING OFFICER IS BAD IN LAW AS WELL AS IN FACTS BECAUSE:- I. THE INVESTMENTS ARE SUBSTANTIALLY MADE FROM OWN FUNDS. II. WHERE EVER BORROWED FUND IS USED FOR INVESTMENT S, IT IS MADE FOR SMOOTH FUNCTIONING OF THE BUSINESS AND IN ACCORDANCE OF' C OMMERCIAL EXPEDIENCY OF THE BUSINESS. RELIANCE WAS ALSO PLACED ON THE JUDGMENT OF HON'BLE SUPREME COURT OF INDIA IN THE CASE OF S.A. BUILDERS LIMITED V. COMMISSIONER OF IN COME-TAX (APPEALS), CHANDIGARH ON DECEMBER 14, 2006 WHEREIN IN WAS HELD THAT INTE REST FREE LOANS GIVEN OUT OF BORROWED FUNDS ON WHICH INTEREST IS PAID, IF IT IS OWING TO COMMERCIAL EXPEDIENCY, NO DISALLOWANCE OF INTEREST CAN BE MADE. 7. THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSI NG OFFICER ERRED IN CONCLUDING THAT MORE THAN 50% OF THE UNSECURED LOAN OUTSTANDING WAS TAKEN FROM A RELATED PARTY, SATYA PRAKASH SHARMA (HUF), WHICH IS COVERED U/S 40 A(2)(B) OF THE IT ACT, 1961 AND THEREFORE IT IS A SELF IMPOSED LIABILITY. IT WAS SU BMITTED THAT THE AO WRONGLY OBSERVED THAT THE ASSESSEE WILFULLY ATTEMPTED TO REDUCE THE TAXABLE INCOME BY INCREASING INTEREST EXPENSE. THE ASSESSEE POINTED OUT THAT THE ASSESSEE HAD TAKEN UNSECURED LOAN OF RS. 39,00,000/- FROM SATYA PRAKASH SHARMA(HUF) BEARING INTEREST @ 12% PER ANNUM AMOUNTING TO RS. 4,68,000/- IN THE ORDINARY COURSE OF BUSINESS. APART FROM SATYA PRAKASH SHARMA (HUF), SIMILARLY THE FIRM HAS ALSO T AKEN UNSECURED LOANS FROM 9 (NINE) OTHER INDIVIDUALS, FIRMS AND HUF AT THE SAME INTEREST RATE DURING THE FINANCIAL YEAR 2009 - 2010. THAT MEANS THAT E FIRM HAS BORROW ED FUNDS AT THE RATE OF 12% ACROSS THE BOARD FROM ALL INDIVIDUALS, FIRMS AND HUF. SO, IT IS APPARENTLY VERY CLEAR THAT LOAN FROM OUTSIDE PARTY IS EQUALLY EXPENSIVE AS THAT FR OM RELATIVE. MOREOVER, THERE WAS IDLE FUND IN THE HANDS OF SATYA PRAKASH SHARMA (HUF ). THUS, THERE WAS NO POINT OF BORROWING FUND FROM OUTSIDE WHEN IT CAN BE BORROWED FROM PERSONS COVERED U/S 40A(2)(B) AT THE SAME RATE OF INTEREST. MERE FACTS THAT MORE THAN 50% OF UNSECURED LOAN OUTSTANDING IS TAKEN FROM A RELATED PARTY DOES NO IPSO FACTO INDICATE A SELF - IMPOSED LIABILITY. THUS, THERE WAS NO ATTEMPT OF IN CREASING INTEREST EXPENSE BUT AN ITA NO.281/KOL/2015 SHRI SATYA PRAKASH SHARMA A.Y.2 010-11 5 ATTEMPT WAS MADE FOR PROPER UTILIZATION OF FUNDS OF RELATED PARTY AND REDUCING THE PROPRIETORSHIP FIRM'S OUTSIDE LIABILITY. MOREOVER, SINCE THE INTEREST RATE IS IDENTICAL WITH NINE OTHER PARTIES, THERE IS NO EXCESSIVE PAYM ENT MADE BY US TO PERSONS COVERED U/S 40A(2)(B). THE ASSESSEE ALSO POINTED OUT THAT T HE ASSESSING OFFICER HAS ERRED IN FACTS BY STATING THAT MORE THAN 50% OF THE UNSECURE D LOANS WERE BORROWED FROM SATYA PRAKASH SHARMA (HUF) ONLY. HOWEVER, DURING THE YEAR UNDER CONSIDERATION, THE FIRM HAD TOTAL UNSECURED LOANS OF RS. 81,45,725/- BEARIN G INTEREST RATE OF 12 % PER ANNUM. THUS, LOAN FROM SATYA PRAKASH SHARMA (HUF) WAS 47.8 8% (APPROX.). 8. WITHOUT PREJUDICE TO ABOVE, THE ASSESSEE SUBMIT TED THAT FOR THE PURPOSE OF COMPUTATION OF AVERAGE RATE OF INTEREST, ONLY UNSEC URED LOAN CAN BE CONSIDERED. THIS IS BECAUSE SECURED LOANS CONSIST OF THE SUM BORROWE D FROM BANKS BY ME IN THE NAME OF MY PROPRIETORSHIP FIRM SPECIAL STEEL STORES FOR SPECIFIED BUSINESS PURPOSES AND IS NOT ALLOWED TO BE DIVERTED FROM BUSINESS USE. HENCE THE SAME SHOULD NOT BE TAKEN FOR THE PURPOSE OF COMPUTING AVERAGE RATE OF RETURN. FU RTHER, SINCE THE SAME CAN BE USED ONLY FOR SPECIFIED BUSINESS PURPOSES, THESE SECURED LOANS CANNOT BE UTILIZED FOR THE PURPOSE OF GRANTING LOAN OR ADVANCE OR DEPOSIT TO ANY THIRD PARTY OR FOR THE PURPOSE OF INVESTMENTS DUE TO RIGID BANK NORMS AS T HE SAME CAN ONLY BE USED FOR WORKING CAPITAL REQUIREMENTS, I.E. BUYING MATERIALS , PAYING OFF TRADE CREDITORS, ETC. THEREFORE, BY NO STRETCH OF IMAGINATION, THE RATE O F INTEREST ON SECURED LOAN CANNOT BE COMPARED WITH THE RATE OF INTEREST ON DEPOSITS. FURTHER, UNSECURED LOANS WERE BORROWED AT THE RATE OF 9% TO THE EXTENT OF RS. 8,1 0,00,000/- (RS. EIGHT CRORE AND TEN LACS ONLY) AND AT THE RATE OF 12% TO THE EXTENT OF RS. 84,50,000/- (RS. EIGHTY FOUR LACS AND FIFTY THOUSAND ONLY) DURING THE FINANCIAL YEAR 2009 - 2010. THUS, THE AVERAGE RATE OF INTEREST ON BORROWED FUNDS FOR THE FINANCIAL YEAR 2009 - 2010 IS RS. 9.28% ONLY. 9. THE CIT(A) ACCEPTED THE CONTENTIONS OF THE ASSE SSEE. FIRSTLY HE HELD THAT HE DEPOSITS IN THE BANK CANNOT SAID TO BE NOT FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. IN COMING TO THE AFORESAID CONCLUSION THE CT(A) ACCEPTED THE SUBMISSION OF ITA NO.281/KOL/2015 SHRI SATYA PRAKASH SHARMA A.Y.2 010-11 6 THE ASSESSEE THAT THE DEPOSITS IN FIXED DEPOSITS WE RE MADE FOR PURCHASING CERTAIN SHARES OF THE BANK FOR AVAILING WORKING CAPITAL FIN ANCE FROM THE BANK TO CONTINUE BUSINESS OPERATIONS WITHOUT HINDRANCE. SECONDLY THE CIT(A) ALSO HELD THAT THE AO FAILED TO CONSIDER THE AVAILABILITY OF OWN FUNDS O F THE ASSESSEE. THIRDLY HE HELD THAT THE ASSESSEES AVERAGE RATE OF INTEREST OF AVAILING LOAN HAS BEEN ARBITRARILY AND EXCESSIVELY FIXED BY THE AO THAT THE COST OF BORROW ING WOULD BE ONLY 6.5%. CIT(A) HOWEVER SUSTAINED ADDITION MADE BY THE AO TO THE EX TENT OF RS.75,000/- BY INVOKING THE PROVISION OF SECTION 40A(2)(B) OF THE ACT. THE FOLLOWING ARE THE RELEVANT OBSERVATIONS OF CIT(A) : 3.2.6. THE GROUND IS ALLOWED SUBJECT TO SOME DISAL LOWANCE OF INTEREST PAYMENT TO SATYA PRAKASH SHARMA, HUF, WHICH WAS PAID AT 12% . I RESTRICT THE ALLOWABLE INTEREST TO 10% HAVING REGARD TO BORROWING RATES FR OM UNCOONECTED PARTIES. THUS 2% OF RS.39,00,000 = RS.78,000 IS DISALLOWED U/S 40 A(2)(B) OF THE I.T.ACT. WE ARE NOT AWARE AS TO WHETHER THE ASSESSEE HAS FIL ED THE APPEAL AGAINST THIS. IN THIS PROCEEDINGS NONE APPEARED ON BEHALF OF THE ASSESSEE AND THEREFORE THIS APPEAL IS BEING DECIDED ON MERITS EX PARTE. WE MAKE IT CLEAR THAT I F THE ASSESSEE CHALLENGES THE AFORESAID ADDITION OF RS.78,000/- THE VIEW WHICH WE MAY TAKE IN THIS APPEAL SHOULD NOT BE CONSIDERED AS DECISIVE IN THE MATTER. 10. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR, W HO RELIED ON THE ORDER OF AO. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR AND T HE ORDER OF AO AND ARE OF THE VIEW THAT ORDER OF THE AO SUFFERS FROM FACTUAL ERRO RS. ONE SUCH ERROR WOULD BE THAT SECURED LOANS HAVE BEEN CONSIDERED AS HAVING BEEN D IVERTED BY THE ASSESSEE FOR NON BUSINESS PURPOSES. SECURED LOANS WERE TAKEN FROM TH E BANK FOR SPECIFIED BUSINESS PURPOSES AND BECAUSE OF THE RIGID NORM OF THE BANK THEY CANNOT BE DIVERTED FOR ANY OTHER PURPOSE. THIS ASPECT HAS BEEN OVER LOOKED BY THE AO. BESIDES THE ABOVE THE AO HAS MADE DISALLOWANCE ON IMAGINARY AVERAGE RATE OF INTEREST ON BORROWINGS AND INVESTMENTS. CIT(A), IN OUR VIEW, RIGHTLY CONSIDERE D THE ACTION OF THE AO AS NOT PROPER. WE THEREFORE CONFIRM THE ORDER OF CIT(A) AN D DISMISS GROUND NO.1 RAISED BY THE REVENUE. 11. GROUND NO.2 RAISED BY THE REVENUE READS AS FOL LOWS :- ITA NO.281/KOL/2015 SHRI SATYA PRAKASH SHARMA A.Y.2 010-11 7 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED N RESTRICTING DISALLOWANCE TO RS.15,500/- OUT OF TOTA L DISALLOWANCE OF RS.2,34,525/- MADE U/S 14A RULE 8D(2)(III) OF THE I.T.ACT, 1961. 12. THE AO MADE A DISALLOWANCE OF EXPENSES BY INVO KING THE PROVISION OF SECTION 14A OF THE ACT. IN THE COMPUTATION OF INCOME, ASSES SEE HAD ADDED BACK RS.9857/- AS DISALLOWANCE U/S 14A. THE AO CALLED UPON THE ASSESS EE FURNISH THE COMPUTATION OF THE SAME. THE ASSESSEE FURNISHED THE FOLLOWING :- INVESTMENT AS ON 01/04/2009 RS.1981481/- INVESTMENT AS ON 31/03/2010 RS.1961332/- AVERAGE INVESTMENT RS.1971407/- 0.5% OF AVERAGE INVESTMENT RS. 9857/- THE AO ON PERUSAL OF THE DETAILS WAS OF THE VIEW TH AT THE ASSESSEE HAD TAKEN ONLY THOSE INVESTMENTS WHICH WERE IN THE PERSONAL BALANC E SHEET. HOWEVER IN THE BALANCE SHEET OF M/S SPECIAL STEEL STORES ALSO, FOLLOWING D IVIDEND YIELDING INVESTMENTS WERE THERE: NAME OF THE SCRIP INVESTMENT AS ON 31.03.2009 INVESTMENT AS ON 31.03.2010 UTI MUTUAL FUND RS. 1600000/- RS. 1600000/- MF- RELIANCE NATURAL RESOURCE FUND RS. 1500000/- RS. 1500000/- TOTAL RS. 3100000/- RS. 3100000/- THE AO THEREFORE RECALCULATED DISALLOWANCE U/S.14A AS UNDER: INTEREST EXPENSE IN P&L A/C - RS.L,69,15,562.75/- AVERAGE INVESTMENT- RS.31 ,00,000/- ASSET AS ON 31.03.2009- RS. 241751324.78/- ASSET AS ON 31.03.2010- RS. 237081680.57 AVERAGE ASSET- RS. 239416502.67/- 8D(II) RS.1,69,15,562. 75 X RS.31 ,00,000 = RS.219025.18/- RS. 23,94,16,502.67/- ITA NO.281/KOL/2015 SHRI SATYA PRAKASH SHARMA A.Y.2 010-11 8 8D(III) 0.5% OF AVERAGE INVESTMENT= RS. 15,500/- HENCE TOTAL DISALLOWANCE U/S 14A READ WITH RULE 8D IN THE BOOKS OF M/S SPECIAL STEEL STORE WAS ARRIVED AT BY THE AO AT RS. 2,34,525/- I N ADDITION TO THE DISALLOWANCE MADE BY THE ASSESSEE. 13. ON APPEAL BY THE ASSESSEE, THE CIT(A) RESTRICT ED THE DISALLOWANCE TO RS.15,500/- UNDER RULE 8D(2)(III). CIT(A) DELETED THE DISALLOWA NCE ON INTEREST EXPENSES UNDER RULE 8D(2)(II) OF IT RULES ON THE BASIS OF THE FIND ING THAT ASSESSEE HAD SUFFICIENT OWN FUNDS WHICH WERE MORE THAN THE INVESTMENTS IN SHARE S WHICH ARE LIKELY TO YIELD EXEMPT INCOME UNDER RULE 8D(2)(III) WAS HOWEVER CON FIRMED. THE FOLLOWING WERE THE RELEVANT OBSERVATIONS OF CIT(A) :- THE APPELLANT CLAIMS THAT 31 LACS OF INVESTMENT IS OUT OF OWN. FUND, WHICH IS RS. 7 .08 CRORES [31.03.10], RS. 7 .29 CRORES [31.0 3.09], RS.6.48 CRORES [31.03.08] AND RS.5.61 CRORES [31.03.07] ON ENDS OF RESPECTIVE YEARS. RS.31 LACS IS MUCH LOWER THAN VALUE OF OWN FUNDS AND THEREFORE APPELLA NT'S CLAIM THAT RS.31 LACS WAS NOT OUT OF BORROWINGS, MAY BE ACCEPTED. THUS, THE A DDITION UNDER RULE 8D(2)(II) IS DELETED. ADDITION UNDER RULE 8D(2)(III) OF RS.15,50 0/ - IS HOWEVER CONFIRMED '. 14. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE H AS RAISED GROUND NO.2 BEFORE THE TRIBUNAL. HERE ALSO, WE MAKE IT CLEAR THAT THE FIN DING WILL BE CONFINED TO THE GROUNDS OF APPEAL BY THE REVENUE. IN THE SUBMISSIONS MADE B Y THE ASSESSEE BEFORE CIT(A) THE ASSESSEE HAS TAKEN A STAND THAT THERE CANNOT BE ANY DISALLOWANCE U/S 14A OF THE ACT BECAUSE THE ASSESEE HAD NOT EARNED ANY TAX FREE INC OME DURING THE PREVIOUS YEAR. THIS SUBMISSION IS NOT BEING CONSIDERED IN THIS APPEAL B Y THE REVENUE. WE MAKE IT CLEAR THAT THE CONCLUSION IN THIS APPEAL ARE CONFINED TO THE GROUNDS RAISED BY THE REVENUE ON THE FACTUAL DETAILS GIVEN BY CIT(A) WHICH REMAINED UNCONTROVERTED . WE ARE OF THE VIEW THAT THE DISALLOWANCE ON INTEREST EXPENSES MAD E BY CIT(A) WAS JUST AND PROPER AND CALLS FOR NO INTERFERENCE. CONSEQUENTLY GROUND NO.2 RAISED BY THE REVENUE IS ALSO DISMISSED. ITA NO.281/KOL/2015 SHRI SATYA PRAKASH SHARMA A.Y.2 010-11 9 15. IN THE RESULT THE APPEAL BY THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE COURT ON 01.12.2017. SD/- SD/- [M.BALAGANESH] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 01.12.2017. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1.SHRI SATYA PRAKASH SHARMA, 37, N.S.ROAD, 2 ND FLOOR, KOLKATA-700001. 2. D.C.I.T., CIRCLE-36, KOLKATA. 3. C.I.T.(A)- 10, KOLKATA 4. C.I.T-12, KO LKATA. 5..CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SR. PRIVA TE SECRETARY HEAD OF OFFICE/DDO,, ITAT, KOLKATA BENCHES