BHANSALI BRIGHT BARAS P.LTD, MUMBAI V. ACIT 5(1), MUMBAI

ITA 3976/MUM/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8991 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 06-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Proportionate interest
• Section: 14A; 28

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.3976/MUM/2012 ASSESSMENT YEAR: 2009-10 M/S BHANSALI BRIGHT BARS PVT. LTD. 150, MADHAV BHAVAN, NANUBHAI DESAI ROAD, MUMBAI-400004 / VS. ACIT-5(1), MUMBAI ( ! /ASSESSEE) ( ' / REVENUE) PAN. N O. AABCB1544N ! / ASSESSEE BY SHRI DARSHAK SHAH ' / REVENUE BY SHRI SUMAN KUMAR-DR # '$ % ! & / DATE OF HEARING : 11/01/2017 % ! & / DATE OF ORDER: 11/01/2017 ITA NO.3976/MUM/2012 M/S BHANSALI BRIGHT BARAS PVT. LTD. 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 09/04/2012 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, ON THE GROUND WHETHER THE LD. COMMISSIONER OF INCOME T AX (APPEAL) WAS RIGHT IN CONFIRMING THE ADDITION OF RS.19,35,050/- UNDER THE PROVISO TO SECTION 36(1)(I II) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) ON ACCOU NT OF DISALLOWANCE OF INTEREST, DEBITED TO PROFIT AND LOS S ACCOUNT, BY DEEMING THE SAME AS PROPORTIONATE INTEREST ATTRI BUTABLE TO CAPITAL WORK IN PROGRESS. THROUGH ALTERNATIVE GROU ND, THE ASSESSEE HAS CONTENDED THAT THE DISALLOWANCE SHOULD NOT EXCEED RS.2,33,428/-, TABULATED IN ANNEXURE-A. 2. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSE E, SHRI DARSHAK SHAH, INVITED OUR ATTENTION TO PAGE-5 OF THE ASSESSMENT ORDER AND ALSO PAGE-4 OF THE IMPUGNED OR DER ALONG WITH PAGES 10 & 11 OF THE PAPER BOOK BY EXPLA INING THAT THE ASSESSEE RECEIVED INTEREST FREE FUNDS AND FILED CASH FLOW STATEMENT ALONG WITH SOURCE OF UTILIZATION OF RS.2 CRORES. THE CRUX OF THE ARGUMENT IS THAT SUFFICIENT FUNDS W ERE AVAILABLE WITH THE ASSESSEE. ON THE OTHER HAND, THE LD. DR, SHRI SUMAN KUMAR, CONTENDED THAT NO NEXUS WAS PROVE D BY THE ASSESSEE, THUS, THE CONCLUSION DRAWN IN THE IMP UGNED ORDER WAS DEFENDED. ITA NO.3976/MUM/2012 M/S BHANSALI BRIGHT BARAS PVT. LTD. 3 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE DECLARED TOTAL INCOME OF RS.3 4,04,610/- IN ITS RETURN FILED ON 29/09/2009. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. THE LD. ASSESSING OFFICE R DISALLOWED RS.19,35,020/- BY DEEMING THE SAME AS PROPORTIONATE INTEREST ATTRIBUTABLE TO CAPITAL WIP AND ALSO CONSI DERING THE TOTAL INTEREST FOR THE ENTIRE YEAR. THE DISALLOWAN CE WAS MADE BY THE ASSESSING OFFICER IN TERMS OF SECTION 36(I)( III) BY ADDING RESERVE FUND TO BORROWED CAPITAL TO DETERMINE THE A VERAGE RATE OF INTEREST. THE STAND OF THE ASSESSEE, DURING ASSESSMENT PROCEEDINGS, WAS THAT THE TOTAL FUNDING OF THIS CAP ITA WIP WAS DONE THROUGH INTERNAL SOURCES, WHEREIN, SURPLUS FUNDS WERE GENERATED FROM OPERATIONS DURING THE YEAR AND WAS USED FOR EXPANSION. HOWEVER, THE LD. ASSESSING OFFI CER DID NOT AGREE WITH THE EXPLANATION OF THE ASSESSEE AND MADE THE DISALLOWANCE. 2.2. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INC OME TAX (APPEAL), THE FACTUAL MATRIX WAS CONSIDERED AND THE STAND TAKEN IN THE ASSESSMENT ORDER WITH RESPECT TO THE DISALLOWANCE OF RS.19,35,020/-, MADE BY THE ASSESSI NG OFFICER, WAS CONFIRMED. THE ASSESSEE IS IN FURTHER APPEAL BEFORE THIS TRIBUNAL. 2.3. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ITA NO.3976/MUM/2012 M/S BHANSALI BRIGHT BARAS PVT. LTD. 4 ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, WE FIND THAT THE ASSESS EE COMPANY, DURING THE RELEVANT TIME, WAS ENGAGED IN T HE BUSINESS OF MANUFACTURER AND EXPORT OF STAINLESS ST EEL BARS, HEXAGONS, SQUARES, WIRES AND FLANGES, SHOWING TOTAL TURNOVER OF RS.151.39 CRORES SHOWING PROFIT, BEFORE TAXATION , AT RS.31.78 LAKHS. FROM THE DETAILS, SUBMITTED BY THE ASSESSEE, IT WAS FOUND THAT THE ASSESSEE CLAIMED INTEREST EXP ENDITURE OF RS.4.06 CROROES ON SECURED AND UNSECURED LOANS. THE ASSESSEE ALSO SHOWED CAPITAL WORK IN PROGRESS (CWIP ) OF RS.200,10,551/-, THE DETAILS OF WHICH/WORKING CAPIT AL/WORK IN PROGRESS, WERE FILED. THE STAND OF THE REVENUE W AS THAT THE ASSESSEE HAS NOT CAPITALIZED INTEREST ON THE SAME. BEFORE COMING TO ANY CONCLUSION, WE ARE REPRODUCING HEREUN DER THE RELEVANT PROVISION OF SECTION 36(1)(III) OF THE ACT FOR READY REFERENCE AND ANALYSIS:- 36. (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING C LAUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREI N, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 (I) THE AMOUNT OF ANY PREMIUM PAID IN RESPECT OF I NSURANCE AGAINST RISK OF DAMAGE OR DESTRUCTION OF STOCKS OR STORES USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION; (IA) THE AMOUNT OF ANY PREMIUM PAID BY A FEDERAL MI LK CO-OPERATIVE SOCIETY TO EFFECT OR TO KEEP IN FORCE AN INSURANCE ON THE LIFE OF THE CATTLE OWNED BY A MEMBER OF A CO-OPERATIVE SOCIETY, BEING A PRIMARY SOCIETY ENGAGED IN SUPPLYING MILK RAISED BY ITS MEM BERS TO SUCH FEDERAL MILK CO-OPERATIVE SOCIETY; (IB) THE AMOUNT OF ANY PREMIUM PAID BY ANY MODE OF PAYMENT OTHER THAN CASH BY THE ASSESSEE AS AN EMPLOYER TO EFFECT OR TO KEEP IN FORCE AN INSURANCE ON THE HEALTH OF HIS EMPLOYEES UNDER A SC HEME FRAMED IN THIS BEHALF BY (A) THE GENERAL INSURANCE CORPORATION OF INDIA FOR MED UNDER SECTION 9 OF THE GENERAL INSURANCE BUSINESS (NATIONALISATION) AC T, 1972 (57 OF 1972) AND APPROVED BY THE CENTRAL GOVERNMENT; OR ITA NO.3976/MUM/2012 M/S BHANSALI BRIGHT BARAS PVT. LTD. 5 (B) ANY OTHER INSURER AND APPROVED BY THE INSURANC E REGULATORY AND DEVELOPMENT AUTHORITY ESTABLISHED UNDER SUB-SECTION (1) OF SECTION 3 OF THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORI TY ACT, 1999 (41 OF 1999); (II) ANY SUM PAID TO AN EMPLOYEE AS BONUS OR COMMI SSION FOR SERVICES RENDERED, WHERE SUCH SUM WOULD NOT HAVE BEEN PAYABL E TO HIM AS PROFITS OR DIVIDEND IF IT HAD NOT BEEN PAID AS BONU S OR COMMISSION; (IIA) [OMITTED BY THE FINANCE ACT, 1999, W.E.F. 1-4 -2000.] (III) THE AMOUNT OF THE INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION : PROVIDED THAT ANY AMOUNT OF THE INTEREST PAID, IN R ESPECT OF CAPITAL BORROWED FOR ACQUISITION OF AN ASSET 91 [***] (WHETHER CAPITALISED IN THE BOOKS OF ACCOUNT OR NOT); FOR ANY PERIOD BEGINN ING FROM THE DATE ON WHICH THE CAPITAL WAS BORROWED FOR ACQUISITION O F THE ASSET TILL THE DATE ON WHICH SUCH ASSET WAS FIRST PUT TO USE, SHAL L NOT BE ALLOWED AS DEDUCTION. EXPLANATION.RECURRING SUBSCRIPTIONS PAID PERIODICA LLY BY SHAREHOLDERS, OR SUBSCRIBERS IN MUTUAL BENEFIT SOCI ETIES WHICH FULFIL SUCH CONDITIONS AS MAY BE PRESCRIBED, SHALL BE DEEM ED TO BE CAPITAL BORROWED WITHIN THE MEANING OF THIS CLAUSE; 2.4. THE AFORESAID SECTION STATES THAT THE AMOUNT OF INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR TH E PURPOSES OF BUSINESS OR PROFESSION, PROVIDED THAT ANY AMOUN T OF INTEREST PAID, IN RESPECT OF CAPITAL BORROWED FOR A CQUISITION OF ASSET FOR EXTENSION OF EXISTING BUSINESS OR PROFESS ION (WHETHER CAPITALIZED IN THE BOOKS OF ACCOUNTS OR NOT) FOR AN Y PERIOD BEGINNING FROM THE DATE ON WHICH THE CAPITAL WAS BO RROWED FOR ACQUISITION OF ASSET TILL THE DATE ON WHICH SUC H ASSET WAS FIRST PUT TO USE, SHALL NOT BE ALLOWED AS DEDUCTION . WE FIND THAT, UNDER THE MATERIAL FACTS AVAILABLE ON RECORD, THERE IS REPAYMENT OF SECURED LOANS TO THE EXTENT OF RS.10,52,64,744/- AND BORROWING OF MONEY TO THE TUN E OF RS.84,25,000/- IS BY WAY OF INTEREST FREE UNSECURED LOANS, THEREFORE, IN OUR VIEW, CALCULATION ON PROPORTIONAT E BASIS, IS NOT JUSTIFIED. THE RATIO LAID DOWN BY HON'BLE JURIS DICTIONAL ITA NO.3976/MUM/2012 M/S BHANSALI BRIGHT BARAS PVT. LTD. 6 HIGH COURT IN CIT VS RELIANCE UTILITIES AND POWER L TD. (2009) 313 ITR 340 (BOM.) SUPPORTS OUR VIEW, WHEREIN, AVAI LABILITY OF INTEREST FREE FUNDS WAS DETERMINED BY COMPARING THE SHARE CAPITAL AND RESERVES AGAINST INVESTMENT. THE ANALYS IS OF THE BALANCE SHEET AS ON 31/03/2009 IS AS UNDER:- PARTICULARS AMOUNT (IN RS.) SHARE CAPITAL 2,10,40,000 RESERVES & SURPLUS 11,61,33,149 DEPRECIATION FUND 2,17,79,530 TOTAL INTEREST FREE FUNDS 15,89,52,679 LESS: - FIXED ASSETS 7,41,98,782 INTEREST FREE FUNDS AVAILABLE 8,47,53,897 THE AFORESAID BALANCE SHEET CLEARLY SHOWS THAT THER E WERE INTEREST FREE FUNDS OF RS.8,47,53,897/-, AVAIL ABLE WITH THE ASSESSEE. WHEREAS, THE REASON FOR MAKING THE DISALLOWANCE BY THE LD. ASSESSING OFFICER WAS THAT THE ASSESSEE DID NOT HAVE SUFFICIENT INTEREST FREE RESE RVES AT ITS DISPOSAL FOR MAKING LOAN REPAYMENT TO THE TUNE OF RS.12,79,07,744/- AS WELL AS TO FINANCE ITS WORKING CAPITAL IN PROGRESS OF RS.2,00,10,551/-. THIS OBSERVATION OF THE LD. ASSESSING OFFICER IS NOT CORRECT AS THE ASSESSEE WA S HAVING INTEREST FREE RESERVES AND CASH WAS GENERATED BY TH E ASSESSEE FROM OPERATION, DURING THE YEAR AND WAS USED TO REP AY THE BORROWING. THE FOLLOWING PICTURE FURTHER CLARIFIES THAT THE ITA NO.3976/MUM/2012 M/S BHANSALI BRIGHT BARAS PVT. LTD. 7 INTEREST BEARING UNSECURED LOANS WERE ALSO REPLACED WITH INTEREST FREE FUNDS, WHICH ARE SUMMARIZED AS UNDER: - PARTICULARS OP. BAL. ADDITIONS REPAYMENTS CLOSING NET INCREASE/ DECREASE INT. BEARING FUNDS 1,53,95,000 58,60,263 1,69,85,563 42,70,000 (1,11,25,000) INT. FREE FUNDS 1,07,00,000 2,65,50,000 70,00,000 3,02,50,000 1,95,50,000 2,60,95,000 3,24,10,263 2,39,85,263 3,45,20,000 84,25,000 2.5. CONSIDERING THE TOTALITY OF FACTS, ADMITTEDLY ANY AND EVERY PAYMENT, IN THE GARB OF INTEREST, IN EXCE SS OF WHAT CAN BE REALLY TERMED AS INTEREST, IS NOT ALLOWABLE. AT THE SAME TIME THE DEDUCTION IS NOT DEPENDENT ON WHETHER RESU LTING PROFIT IS TAXABLE OR NOT. THE WORD BORROWED AND PAID IN SECTION 36(1)(III) CLEARLY POSTULATE TWO DIFFERENT ENTITIES, ONE WHICH LENDS CAPITAL AND THE OTHER WHICH BORROWS AND PAYS INTEREST. WHAT SECTION 36(1)(III) EMPHASIZES ON IT S USER OF CAPITAL AND NOT USER OF ASSET, WHICH COMES INTO EXI STENCE AS A RESULT OF BORROWED CAPITAL, UNLIKE SECTION 37(1), W HICH EXPRESSLY EXCLUDE AND EXPENSE OF A CAPITAL NATURE. LEGISLATURE HAS, THEREFORE, MADE NO DISTINCTION IN SECTION 36(1)(III) BETWEEN CAPITAL BORROWED FOR REVENUE PU RPOSES AND CAPITAL BORROWED FOR CAPITAL PURPOSES AND AN ASSE SSEE IS ENTITLED TO CLAIM INTEREST PAID ON BORROWED CAPITAL PROVIDED THAT CAPITAL IS USED FOR BUSINESS PURPOSES IRRESPEC TIVE OF WHAT MAY BE RESULT OF USING SUCH BORROWED CAPITAL. OUR V IEW FIND SUPPORT FROM THE RATIO LAID DOWN IN DCIT VS CORE HE ALTH CARE LTD. (2008) 167 TAXMAN 206 (SC), CIT VS MONNET INDU STRIES ITA NO.3976/MUM/2012 M/S BHANSALI BRIGHT BARAS PVT. LTD. 8 LTD. (2012) 210 TAXMAN 264 (SC), VARDHMAN POLYTEX L TD. VS CIT 210 TAXMAN 261 (SC), CIT VS ANAND TECHNOLOGY RESOURCES PARK P. LTD. (2011) 202 TAXMAN 654. HONB LE M.P. HIGH COURT IN BIRLA GWALIOR PVT. LTD. 44 ITR 847 (M .P.) HOLDING THAT IT IS NOT NECESSARY TO SHOW FOR THE PU RPOSES OF DEDUCTION UNDER CLAUSE (III) THAT THE MONEY BORROWE D WAS UTILIZED FOR A PARTICULAR BRANCH OF ASSESSEES BUSI NESS. IDENTICAL RATIO WAS LAID DOWN BY HONBLE JURISDICTI ONAL HIGH COURT IN CIT VS BOMBAY SAMACHAR LTD 74 ITR 723 (BOM .) AND AMMA BAI HAJEE ISSA VS CIT 51 ITR 835 (MAD.) 2.6. THE EXPRESSION FOR THE PURPOSES ON BUSINESS IS WIDER IN SCOPE THAN FOR THE PURPOSES OF EARNING IN COME (MADHAV PRASAD JATIA VS CIT (118 ITR 200)(SC) AND L .M. THAPPAR VS CIT 173 ITR 577 (CAL.). INTEREST ON BORR OWAL IS ALLOWABLE AS DEDUCTION ONLY WHEN THE BORROWALS ARE USED FOR THE PURPOSE OF BUSINESS. IN S.A. BUILDERS LTD. VS C IT (SUPRA), WHERE HOLDING COMPANY HAD A DEEP INTEREST IN ITS SU BSIDIARY AND THE HOLDING COMPANY ADVANCES BORROWED MONEY TO ITS SUBSIDIARY, THE SAME WAS USED BY THE SUBSIDIARY FOR BUSINESS PURPOSES, THE HOLDING COMPANY WAS HELD TO BE ENTITL ED TO DEDUCTION OF INTEREST ON ITS BORROWED LOANS. THE O NLY CONDITION IS THAT IT SHOULD BE USED FOR BUSINESS PU RPOSES. THE RATIO LAID DOWN IN CIT VS MOTOR GENERAL FINANCE LTD. 272 ITR 550 (DEL.) SUPPORTS THE CASE OF THE ASSESSEE. WE FIND THAT THE RATIO LAID DOWN IN CIT VS RELIANCE UTILITI ES AND POWER LTD (2009) 313 ITR 340 (BOM.), WHEREIN, THE ASSESSE E WAS HAVING SUFFICIENT INTEREST FREE FUNDS OF ITS OWN AN D APART FROM ITA NO.3976/MUM/2012 M/S BHANSALI BRIGHT BARAS PVT. LTD. 9 SUBSTANTIAL SHARE HOLDER FUNDS, IT IS PRESUMED THAT INVESTMENT IN SISTER CONCERN WERE MADE BY THE ASSES SEE OUT OF INTEREST FREE FUNDS, THUS, NO PART OF INTEREST O N BORROWINGS CAN BE DISALLOWED ON THE BASIS THAT INVESTMENT WERE MADE OUT OF INTEREST BEARING FUNDS, SUPPORTS THE CASE OF THE ASSESSEE. LIKEWISE, HONBLE HIGH COURT IN CIT VS H DFC BANK LTD. (366 ITR 505) (BOM.), TOOK IDENTICAL VIEW . IT IS NOTEWORTHY THAT WHILE COMING TO A PARTICULAR CONCLU SION, THE HONBLE JURISDICTIONAL HIGH COURT, DULY CONSIDERED THE DECISION IN RELIANCE UTILITIES AND POWER LTD. (SUPR A) ALONG WITH THE CASE OF AMERICAN EXPRESS INTERNATIONAL BAN KING CORPORATION VS CIT (2002) 258 ITR 601, CIT VS M/S L ORD KRISHNA BANK LTD. (NOW MERGE WITH HDFC BANK LTD.) O RDER DATED 04/07/2014 (ITA NO.1079 OF 2012). IDENTICALL Y, THE HONBLE HIGH COURT IN HDFC BANK LTD. VS DCIT (W.P. NO.1753 OF 2016) ORDER DATED 25/02/2016 IN PARA 11 (A) OBSERVED AS UNDER:- ONE MORE ASPECT WHICH NEEDS TO BE ADVERTED TO AND T HAT IS A DECISION WOULD BE CONSIDERED TO BE A BINDING PRECEDENT ONLY IF IT DEA LS WITH/DECIDES AN ISSUE WHICH IS SUBJECT MATTER OF CONSIDERATION/DECISION BEFORE A COORDINATE OR SUBORDINATE COURT. IT IS AXIOMATIC THAT A DECISION CANNOT BE RE LIED UPON IN SUPPORT OF THE PROPOSITION THAT IT DID NOT DECIDE. (MITTAL ENGINEE RING V. COLL,OF CENTRAL EXCISE 1997 (1)SCC 203).THEREFORE IT IS ONLY THE RATIO DEC IDENDI I.E. THE PRINCIPLE OF LAW THAT DECIDES THE DISPUTE WHICH CAN BE RELIED UPON A S PRECEDENT AND NOT ANY OBITER DICTUM OR CASUAL OBSERVATIONS. (GIRNAR TEA V S. STATE OF MAHARASHTRA 2007(7) SCC 555 AND SHIN ESTU CHEMICAL CO. LTD V. A KSH OPTICFIBRE LTD. 2005 (7) SCC 234). KEEPING THE AFORESAID POSITION OF LAW IN MIND, WE S HALL NOW EXAMINE THE IMPUGNED ORDER OF THE TRIBUNAL. THE ISSUE BEFORE TH E TRIBUNAL AS RAISED BY THE PETITIONER WAS THAT SECTION 14A WOULD HAVE NO APPLI CATION TO DISALLOW INTEREST EXPENDITURE ON FUND BORROWED IN RESPECT OF THE TAX FREE RETURNS ON THE SECURITIES FOR THE FOLLOWING TWO REASONS: THE PETITIONER POSSE SSED OF SUFFICIENT INTEREST FREE ITA NO.3976/MUM/2012 M/S BHANSALI BRIGHT BARAS PVT. LTD. 10 FUNDS OF RS.2153 CRORES AGAINST THE INVESTMENT IN T AX FREE SECURITIES OF RS. 52.05 CRORES. CONSEQUENTLY, THERE IS A PRESUMPTION THAT T HE INVESTMENT WHICH HAS BEEN MADE IN THE TAX FREE SECURITIES HAS COME OUT O F THE INTEREST FREE FUNDS AVAILABLE WITH THE PETITIONER. THIS IS SO AS IT BEE N HELD BY THIS COURT IN THE PETITIONERS OWN CASE FOR AN EARLIER AY BEING HDFC BANK LTD. IN ANY EVENT, THE TAX FREE INVESTMENTS IN SECURITIES WERE THE PETITIO NERS STOCK IN TRADE. CONSEQUENTLY, THERE WOULD BE NO OCCASION TO INVOKE SECTION 14A AS HELD BY THIS COURT IN INDIA ADVANTAGE SECURITIES LTD. WHEREIN TH E REVENUES APPEAL FROM THE ORDER OF THE TRIBUNAL WAS DISMISSED, TO CONTEND THA T NO DISALLOWANCE CAN BE UNDER SECTION 14A IN RESPECT OF EXEMPTED INCOME ARI SING FROM STOCK IN TRADE. ONE MORE FACT WHICH MUST BE EMPHASIZED IS THAT MERE LY BECAUSE A DECISION HAS BEEN CITED BEFORE THE COURT AND A REFERENCE TO THAT HAS BEEN MADE IN THE ORDER OF THE COURT SUCH AS IN THE CASE OF GODREJ AND BOYC E MANUFACTURING CO. LTD. REFERENCE WAS MADE TO CIT VS. RELIANCE UTILITIES AN D POWER LTD. 313 ITR 340 BY ITSELF WOULD NOT LEAD TO THE CONCLUSION THAT RELIAN CE UTILITIES AND POWER LTD. BEEN CONSIDERED AND THE OPINION ON THE SAME BEEN RENDERE D IN THE CASE OF GODREJ AND BOYCE MANUFACTURING CO. LTD. THE TEST TO DECIDE WHETHER OR NOT TWO DECISIONS ARE IN CONFLICT WITH EACH OTHER IS TO FIR ST DETERMINE THE RATIO OF BOTH THE CASES AND IF THE RATIO IN BOTH CASES ARE IN CONFLIC T TO EACH OTHER, THEN ALONE, CAN IT BE SAID THAT THE TWO DECISIONS ARE IN CONFLICT. WE FIND THAT NO SUCH EXERCISE HAS BEEN DONE IN CURRENT CASE. IT IS CLEAR THAT FOR THE FIRST TIME IN THE CASE OF HDFC BANK LTD., THIS COURT TOOK A VIEW THAT THE PRESUMPTION WHICH HAS BEEN LAID DOWN IN RELIANCE UTILITIES AND POWER LTD. WITH REGARD TO INVESTMENT IN TAX FREE SE CURITIES COMING OUT OF ASSESSEES OWN FUNDS IN CASE THE SAME ARE IN EXCESS OF THE INVESTMENT MADE IN THE SECURITIES APPLIES, WHEN APPLYING SEC.14A. THUS DECISION OF THIS COURT IN HDFC BANK LTD. FOR THE FIRST TIME ON 23 RD JULY,2014 HAS SETTLED THE ISSUE BY HOLDING THAT THE TEST OR PRESUMPTION AS HELD BY THE COURT IN RELIANCE UTILITIES AND POWER LTD. WOULD APPLY WHILE CONSIDERING THE APPLIC ATION OF SEC.14A. THE ABOVE DECISION HAS ALSO BEEN ACCEPTED BY THE REVENUE INAS MUCH NO APPEAL HAS BEEN FILED AGAINST THIS ORDER IN APEX COURT. THEREFORE THE ISSUE WHICH AROSE FOR CONSIDERATION BEFORE THE TRIBUNAL HAD NOT BEEN DECIDED BY THIS COURT IN GODREJ AND BOYCE MANUFACTURING LTD . 328 ITR 81. IT AROSE AND WAS SO DECIDED FOR THE FIRST TIME BY THIS COURT IN HDFC BANK LTD. THUS THERE IS NO CONFLICT AS SOUGHT TO BE MADE OUT OF THE ORDER. THUS THE ORDER OF TRIBUNAL HAS PROCEEDED ON A FUNDAMENTALLY ERRONEOUS BASIS. CONSIDERING THE FACTUAL MATRIX AND IN THE LIGHT OF THE FOREGOING DISCUSSION, WE FOUND THAT THE ASSESSEE WA S HAVING SUFFICIENT FUNDS, WHICH WERE UTILIZED FOR BUSINESS PURPOSES FOR MAKING INVESTMENT. THE ASSESSEE GENERATED SURPL US FUNDS FROM OPERATION DURING THE YEAR AND THE SAME W ERE ITA NO.3976/MUM/2012 M/S BHANSALI BRIGHT BARAS PVT. LTD. 11 USED FOR EXPANSION OF BUSINESS AND WERE ACCOUNTED F OR. NO FUNDS WERE RAISED ON SHORT TERM BASIS, WHICH WERE U TILIZED FOR MAKING LONG TERM INVESTMENT AS THE ASSESSEE EITHER WAS HAVING OR GENERATED SURPLUS FUNDS, THUS, WE ALLOW T HE APPEAL OF THE ASSESSEE. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES OF BOTH SIDES AT TH E CONCLUSION OF THE HEARING ON 11/01/2017. SD/- SD/- ( ASHWANI TANEJA ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER # $ MUMBAI; ' DATED :11/01/2017 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. )*+, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. / / # 0! ( )* ) / THE CIT, MUMBAI. 4. / / # 0! / CIT(A)- , MUMBAI 5. 2'3 -! , / )*& ) 4 , # $ / DR, ITAT, MUMBAI 6. 5 6$ / GUARD FILE. / BY ORDER, .2*! -! //TRUE COPY// / (DY./ASSTT. REGISTRAR) , # $ / ITAT, MUMBAI