ANUSHAKTI CHEMICALS & DRUGS LTD.(FORMERLY AARTI HEALTHCARE LTD NOW MERGED WITH AARTI INDUSTRIES LIMITED.), MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX 15(1)(2), MUMBAI

ITA 4964/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7418 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 18-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S MICHAEL JERALDLD
• Assessee Lawyers: ANUJ KISNADWALALD
• Keywords: Capital asset; Business income; Depreciation; Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 115JB

Judgement Text

1 ITA NO.4964/MUM/2017 M/S ANUSHAKTI CHEMICALS & DRUGS LTD. ASSESSMENT YEAR-2012-13 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.4964/MUM/2017 ( / ASSESSMENT YEAR:2012-13) ANUSHAKTI CHEMICALS & DRUGS LTD. [FORMERLY AARTI HEALTHCARE LTD. NOW MERGED WITH AARTI INDUSTRIES LTD.] 2 ND FLOOR, UDYOG KSHETRA, MULUND GOREGAON LINK ROAD, MUMBAI-400 080. / VS. A CIT - 15(1)(1) MUMBAI. ./ ./PAN/GIR NO. AAACA-3517-H ( ! /APPELLANT ) : ( '# ! / RESPONDENT ) !% / APPELLANT BY : SHRI ANUJ KISNADWALA - LD.AR '# !% / RESPONDENT BY : SHRI S. MICHAEL JERALD - LD.DR / DATE OF HEARING : 15/10/2019 / DATE OF PRONOUNCEMENT : 15/10/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2012-13 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-24, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-24/ACIT 2 ITA NO.4964/MUM/2017 M/S ANUSHAKTI CHEMICALS & DRUGS LTD. ASSESSMENT YEAR-2012-13 15(1)(1)/IT-217/15-16 ORDER DATED 17/04/2017 ON FOLLOWING GROUNDS OF APPEAL:- 1. THE APPELLANT SUBMITS THE FOLLOWING GROU NDS, WHICH ARE WITHOUT PREJUDICE TO ONE ANOTHER: . 2. RE: DISALLOWANCE U/S. 14A READ WITH RULE 8D OF R S. 31,34,247/-: 2.1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT(A) ERRED IN UPHOLDI NG THE ACTION OF THE ASSESSING OFFICER OF DISALLOWING EXPENSES ATTRIBUTABLE TO EARNING THE DIVIDEND INCOM E U/S. 14A BY INVOKING RULE 8D WITHOUT APPRECIATING T HAT: 1.SECTION 14A WAS NOT APPLICABLE IN INSTANT CASE SI NCE ASSESSING OFFICER FAILED TO ESTABLISH SATISFACT ION AS TO HOW THE CLAIM OF THE APPELLANT WAS INCORRECT; . 2.THE APPELLANT HAD SUFFICIENT INTEREST FREE FUNDS TO CARRY OUT INVESTMENTS AND HENCE NO BORROWED FUND S WERE UTILIZED FOR PURPOSE OF INVESTMENTS; 3.NO DISALLOWANCE OUGHT TO MADE IN RESPECT STRATEGI C INVESTMENTS, NOT ACQUIRED WITH AN INTENTION OF EARNING EXEMPT INCOME. 2.2. THE LEARNED CIT(A) GROSSLY ERRED IN NOT FOLLOW ING THE DECISION PASSED BY THE JURISDICTIONAL BOMBA Y HIGH COURT IN THE CASE OF HDFC BANK LTD. ([2014] 36 6 1TR 505 (BOMBAY) AND WRONGLY RELIED ON THE DECISION OF HIS LEARNED PREDECESSOR FOR AY 2011-12 WHILE DISMISSING THE APPEAL, WITHOUT APPRECIATING T HAT THE PREDECESSOR CIT(A) HAD ALLOWED THE GROUND IN FA VOR OF THE APPELLANT FOR AY 2011-12. 2.3. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT (A) GROSSLY ERRED IN NOT RECTIFYING THE ERRORS IN CALCULATING AMOUNT OF DISALLOWANCE U/S 14A AS PER R ULE 8D. 2.4. WITHOUT PREJUDICE TO THE ABOVE, THE DISALLOWANCE U/S. 14A OUGHT TO BE SUBSTANTIALLY REDUCED. 3. RE: REDUCING DISALLOWANCE MADE U/S. 14A READ WITH RULE 8D WHILE COMPUTING 115JB: 3.1THE CIT(A) FAILED TO APPRECIATE THAT THE PROVISI ONS OF SEC.115JB AND SEC. 14A ARE DEEMING PROVISION S ENACTED UNDER THE INCOME-TAX ACT WHICH HAVE ARE TO BE MADE OPERATIVE ONLY TO THE EXTENT OF THE DEEMING FICTION CREATED THEREIN. THE CIT(A) OUGHT TO HAVE A PPRECIATED THAT BOTH SECTION 115JB AND SECTION 14A ARE MUTUALLY EXCLUSIVE AND THERE OUGHT NOT TO BE AN Y DISALLOWANCE OF AMOUNT DISALLOWED U/S. 14A WHILE COMPUTING THE BOOK PROFIT U/S. 115JB. WITHOUT PREJU DICE TO THE ABOVE, THE LEARNED CIT (A) GROSSLY ERRED IN IMPORTING PROVISIONS OF SUBSECTION (2) AND (3) OF S ECTION 14A INTO EXPLANATION TO SECTION 115JB WITHOU T APPRECIATING THE DECIDED CASE LAWS ON THE SUBJECT. 3.2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN UPHOLDIN G THE ACTION OF THE ASSESSING OFFICER IN MAKING DISAL LOWANCE U/S 14A READ WITH RULE 8D WHILE COMPUTING BOOK PROFIT U/S 115JB, WITHOUT APPRECIATING THAT: . 1 SECTION 14A WAS NOT APPLICABLE IN INSTANT CASE SINCE ASSESSING OFFICER FAILED TO ESTABLISH SATISFA CTION AS TO HOW THE CLAIM OF THE APPELLANT WAS INCORRECT; 2 THE APPELLANT HAD SUFFICIENT INTEREST FREE FUND S TO CARRY OUT INVESTMENTS AND HENCE NO BORROWED FU NDS WERE UTILIZED FOR PURPOSE OF INVESTMENTS; 3 NO DISALLOWANCE OUGHT TO MADE IN RESPECT STRATE GIC INVESTMENTS, NOT ACQUIRED WITH AN INTENTION OF EARNING EXEMPT INCOME 3.3 THE CIT(A) FAILED TO APPRECIATE THAT IN ABSENCE OF DIRECT AND SPECIFIC EXPENDITURE INCURRED FOR EARNIN G THE EXEMPT INCOME NO ADDITION OF THE AMOUNT DISALLO WED U/S. 14A READ WITH RULE 8D TO THE BOOK PROFIT WAS WARRANTED. 4. RE: TREATMENT OF LEASE RENTAL AS INCOME FROM OTH ER SOURCES - RS 3,00,00,000/-: 4.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING THE ST AND OF THE ASSESSING OFFICER THAT THE INCOME FROM LEASE RENTAL OF THE PLANT AND MACHINERY TOGETHER WITH BUILDING IS ASSESSABLE UNDER THE HEAD 'INCOME FROM OTHER SOURCES' WITHOUT APPRECIATING THAT THE APPELLANT CONTINUED TO DEVELOP AND DEPLOY ITS INTEL LECTUAL PROPERTY RIGHTS, ENGAGE A HUGE WORK FORCE O F SCIENTISTS AND ENGINEERS FOR RENDERING OF MANUFACTU RING SERVICES TO THE LESSEE AS A COMPOSITE ARRANGEMENT. 4.2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) GROSSLY ERRED IN UPHOLDING THE STAND OF THE ASSESSING OFFICER THAT S INCE THE APPELLANT HAS LEASED OUT ALL ITS ASSETS 3 ITA NO.4964/MUM/2017 M/S ANUSHAKTI CHEMICALS & DRUGS LTD. ASSESSMENT YEAR-2012-13 THEREFORE THE SAID ASSETS HAVE CEASED TO BE BUSINES S ASSETS, WITHOUT APPRECIATING THE FACT THAT THE SA ID ASSETS ARE THE COMMERCIAL ASSETS OF THE APPELLANT. 4.3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAS ACTIVELY PURSUED BUSINESS OF MANUFACTURE OF CHEMICALS AND THE ALLEGATIONS OF TH E ASSESSING OFFICER THAT THE APPELLANT HAS PRACTICALL Y DISCONTINUED BUSINESS ARE FACTUALLY INCORRECT, HE NCE LEASE INCOME FROM LEASE OF CERTAIN PLANT & MACHINER Y AND BUILDING SHOULD BE TREATED AS BUSINESS INCOME AND NOT AS INCOME FROM OTHER SOURCES. 4.4 WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) FAILED TO APPRECIATE THAT PURSUA NT TO THE SCHEME OF ARRANGEMENT BETWEEN ANUSHAKTI CHEMICALS & DRUGS LTD. AND SPACK CHEMICALS PVT. LTD. AND AARTI HEALTHCARE LTD. APPROVED BY THE HON'BLE HIGH COURT OF MUMBAI VIDE ITS ORDER DATED 10TH AUGUST, 2011, THE MANUFACTURING BUSINESS UNDERTAKING OF ANUSHAKTI CHEMICALS & DRUGS LTD. GOT DEMERGED AND DEMERGED MANUFACTURING BUSINESS UNDERTAKING ALONG W ITH SPACK CHEMICALS PVT. LTD. GOT MERGED SIMULTANEOUSLY INTO AARTI HEALTHCARE LTD. THUS, POS T MERGER OF THE MANUFACTURING BUSINESS, THE CONTENT ION OF THE ASSESSING OFFICER THAT NO BUSINESS IS BEING CARRIED ON BY THE APPELLANT IS GROSSLY INCORRECT. 5. RE: DISALLOWANCE INTEREST U/S. 36(1)(II I) OF RS. 30,82,204/-: 5.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) FAILED TO APPRECI ATE THAT DISALLOWANCE OF INTEREST U/S. 36(1)(III) CAN O NLY BE MADE IN RESPECT OF INTEREST PAID IN RESPECT OF SPECIFIC CAPITAL BORROWED FOR ACQUISITION OF ASSET. 5.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE DISALLOWANCE U /S. 36(1)(III) IS UNWARRANTED AND UNJUSTIFIED SINCE THE APPELLANT HAD MORE THAN SUFFI CIENT OWN / INTEREST FREE FUNDS, AND IN ABSENCE OF ANY ADVERSE NEXUS ESTABLISHED BY THE ASSESSING OFFICER THE ACQUISITION OF CAPITAL ASSETS AND CAPITAL ADVANCES IS DEEMED TO BE MADE OUT OF OWN INTEREST F REE FUNDS. 5.3 WITHOUT PREJUDICE TO THE ABOVE , THE AMOUNT OF INTEREST DISALLOWED AS PER THE PROVI SIONS OF SECTION 14A READ WITH RULE 8D OUGHT TO BE REDUCED. 5.4 WITHOUT PREJUDICE TO THE ABOVE, IF DISALLOWANCE OF INTEREST IS MADE U/S. 36(L)(III ), THE INTEREST OUGHT TO BE CAPITALIZED TO CWIP DEPRECIATION OUGHT TO BE ALL OWED ON THE SAME IN LATER ASSESSMENT YEARS, WHEN ASSETS ARE READY TO BE PUT TO USE. 5.5 WITHOUT PREJUDICE TO THE ABOVE, THE DISALLOWANCE U/S. 36(L)(III) OUGHT TO BE REDUC ED. AS EVIDENT FROM THE GROUNDS, THE ASSESSEE IS AGGRIE VED ON VARIOUS COUNTS VIZ. (I) DISALLOWANCE U/S.14A AND ADJUSTMENT THEREO F U/S 115JB; (II) TREATMENT OF LEASE RENTAL AS INCOME FROM OTHER SOUR CES; (III) INTEREST DISALLOWANCE U/S.36(1)(III). 2.1 FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE STATED TO BE ENGAGED IN MANUFACT URING OF DYES AND LEASING OF MANUFACTURING FACILITIES WAS ASSESSED FO R YEAR UNDER CONSIDERATION U/S 143(3) ON 28/03/2015 WHEREIN THE INCOME UNDER NORMAL PROVISIONS WAS DETERMINED AT RS.37.87 CRORES AFTER CERTAIN ADDITIONS AS AGAINST RETURNED INCOME OF RS.36.80 CRORES E-FILED BY THE ASSESSEE ON 4 ITA NO.4964/MUM/2017 M/S ANUSHAKTI CHEMICALS & DRUGS LTD. ASSESSMENT YEAR-2012-13 29/09/2012. THE BOOK PROFITS U/S 115JB WERE DETERMI NED AT RS.38.85 CRORES AFTER SOLE ADDITION OF DISALLOWANCE U/S 14A FOR RS.31.34 LACS. 2.2 DURING ASSESSMENT PROCEEDINGS IT TRANSPIRED THA T ASSESSEE EARNED EXEMPT INCOME OF RS.15.99 LACS AGAINST INVESTMENTS OF RS.12.50 CRORES BUT DID NOT OFFER ANY DISALLOWANCE U/S 14A. THE ASS ESSEE WAS SHOW-CAUSED AS TO WHY THE DISALLOWANCE U/S 14A READ WITH RULE 8 D WAS NOT TO BE MADE CONSIDERING THE INVESTMENTS SO MADE. HOWEVER, THE A SSESSEE FAILED TO SUBMIT ANY DETAILS. HENCE, NOT SATISFIED, LD. AO, A PPLYING RULE 8D, COMPUTED AGGREGATE DISALLOWANCE OF RS.31.34 LACS WH ICH COMPRISED-OFF OF INTEREST DISALLOWANCE U/R 8D(2)(II) FOR RS.27.12 LA CS AND EXPENSE DISALLOWANCE U/R 8D(2)(III) FOR RS.4.21 LACS. THE S AID DISALLOWANCE WAS ADDED BACK WHILE COMPUTING INCOME UNDER NORMAL PROV ISIONS AS WELL AS WHILE COMPUTING BOOK PROFITS U/S 115JB. 2.3 AS PER STAND TAKEN IN EARLIER YEARS, IT WAS FOU ND THAT THE ASSESSEE LEASED OUT ITS BUILDING AND PLANT & MACHINERY TO AN ENTITY NAMELY AARTI INDUSTRIES LTD. AS PER THE TERMS OF AGREEMENT, THE ASSESSEE PRACTI CALLY DISCONTINUED ITS BUSINESS OPERATIONS SINCE THEN. TH E ASSESSEE OFFERED LEASE RENTAL INCOME OF RS.3 CRORES AS BUSINESS INCOME . HOWEVER, FOLLOWING THE STAND TAKEN IN EARLIER YEARS, THE SAID INCOME W AS BROUGHT TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES . 2.4 THE LAST DISALLOWANCE MADE WAS INTEREST DISALLO WANCE U/S 36(1)(III). THE PERUSAL OF FINANCIAL STATEMENTS REVEALED THAT T HE ASSESSEE HAD CLOSING CAPITAL WORK-IN-PROGRESS (CWIP) FOR RS.302.28 LACS AND GIVEN CAPITAL ADVANCES FOR RS.53.73 LACS. HOWEVER, THE ASSESSEE H AD HUGE BORROWED 5 ITA NO.4964/MUM/2017 M/S ANUSHAKTI CHEMICALS & DRUGS LTD. ASSESSMENT YEAR-2012-13 FUNDS AND WAS PAYING INTEREST ON THE SAME WHICH WAS DEBITED TO PROFIT & LOSS ACCOUNT. THE ASSESSEE SUBMITTED THAT SEC. 36(1 )(III) WAS NOT APPLICABLE SINCE ALL THE ADVANCES WERE IN THE NATUR E OF BUSINESS ADVANCES. HOWEVER, NOT SATISFIED, LD. AO COMPUTED PROPORTIONA TE DISALLOWANCE U/S 36(1)(III) FOR RS.30.82 LACS OUT OF TOTAL INTEREST OF RS.778.07 LACS CLAIMED BY THE ASSESSEE DURING YEAR UNDER CONSIDERATION. AGGRIEVED, THE ASSESSEE CHALLENGED THE QUANTUM ADDI TIONS BEFORE LEARNED FIRST APPELLATE AUTHORITY. 3.1 APROPOS DISALLOWANCE U/S 14A, THE ASSESSEE SUBM ITTED THAT ALTHOUGH NO EXPENSE WAS INCURRED FOR EARNING OF EXEMPT INCOM E, HOWEVER OUT OF ABUNDANT CAUTION, IT HAD OFFERED SUO-MOTO DISALLOWANCE OF RS.61,400/- AS AGAINST THE OBSERVATION OF LD. AO THAT NO DISALLOWA NCE WAS OFFERED. THE ASSESSEE SUBMITTED THAT NO SATISFACTION WAS RECORDE D BY LD. AO BEFORE PROCEEDING TO APPLY RULE 8D AND THEREFORE, DISALLOW ANCE WAS NOT JUSTIFIED. THE ASSESSEE ALSO PLEADED THAT NO FUNDS WERE BORROW ED TO MAKE INVESTMENTS AND ASSESSEES OWN FUNDS IN THE SHAPE O F SHARE CAPITAL AND FREE RESERVES AMOUNTING TO RS.101.62 CRORES WERE SU FFICIENT ENOUGH TO COVER THE INVESTMENTS OF RS.12.85 CRORES MADE BY TH E ASSESSEE. HENCE, NO INTEREST DISALLOWANCE WOULD BE JUSTIFIED IN TERM S OF DECISION OF HONBLE BOMBAY HIGH COURT RENDERED IN HDFC BANK LTD. 366 ITR 505. THE ASSESSEE RAISED VARIOUS OTHER PLEAS VIZ. FEW INVEST MENTS WERE STRATEGIC INVESTMENTS, CERTAIN INVESTMENTS WOULD YIELD TAXABL E INCOME, CERTAIN INVESTMENTS DID NOT YIELD ANY EXEMPT INCOME, THE DI SALLOWANCE SHOULD BE CONSIDERED NET OF INTEREST INCOME, SPECIFIC BORROWI NGS WERE TO BE EXCLUDED 6 ITA NO.4964/MUM/2017 M/S ANUSHAKTI CHEMICALS & DRUGS LTD. ASSESSMENT YEAR-2012-13 ETC. IN SUPPORT OF THE SUBMISSIONS THAT DISALLOWANC E WAS NOT JUSTIFIED. HOWEVER, LD. CIT(A), NOTICING THAT SIMILAR ISSUE WA S DECIDED AGAINST THE ASSESSEE FOR AY 2011-12, DISMISSED THIS GROUND OF A PPEAL. THE PLEA TO EXCLUDE THE SAME WHILE COMPUTING BOOK PROFITS U/S 1 15JB WAS ALSO DISMISSED BY FOLLOWING THE DECISION OF MUMBAI TRIBU NAL IN DABUR INDIA LTD. 145 ITD 175 WHICH HELD THAT DISALLOWANCE U/S 14A WAS COVERED U NDER CLAUSE (F) TO EXPLANATION 1 TO SECTION 115JB(2). 3.2 REGARDING TREATMENT OF LEASE RENTAL, THE ASSES SEE CONTENDED THAT LETTING OUT OF COMMERCIAL ASSETS WAS BUSINESS ACTIV ITY FOR THE ASSESSEE AND THE ASSESSEE WAS ENGAGED IN COMMERCIAL EXPLOITATION OF THE PROPERTY FOR A SET PERIOD OF TIME WITH NO INTENTION OF DISCONTINUI NG ITS NORMAL BUSINESS ACTIVITIES. THE ATTENTION WAS DRAWN TO THE FACT THA T ENTIRE BUSINESS UNIT WAS LET OUT ON AS IS WHERE IS BASIS. HOWEVER, FOLLOWING THE DECISION OF ITS PREDECESSOR FOR AYS 2009-10 TO 2011-12, LD. CIT(A) CONFIRMED THE STAND OF LD. AO ON THIS COUNT. 3.3 REGARDING INTEREST DISALLOWANCE U/S 36(1)(III), IT WAS SUBMITTED THAT NO BORROWINGS WERE MADE TO ACQUIRE THE FIXED ASSETS RA THER THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS TO MAKE CAPITAL ADVA NCES. IN THE ALTERNATIVE, IT WAS POINTED OUT THAT THE DISALLOWANCE WAS TO BE RES TRICTED AS PER THE ACTUAL USAGE OF FUNDS FOR CAPITAL ADVANCES AND CWIP. RELIA NCE WAS PLACED ON THE DECISION OF HONBLE BOMBAY HIGH COURT RENDERED IN RELIANCE UTILITIES 18 DTR 1. THE LD. CIT(A), WHILE CONFIRMING THE APPLICABILITY OF INTEREST DISALLOWANCE U/S 36(1)(III), DIRECTED LD. AO TO COM PUTE THE DISALLOWANCE 7 ITA NO.4964/MUM/2017 M/S ANUSHAKTI CHEMICALS & DRUGS LTD. ASSESSMENT YEAR-2012-13 ONLY FOR THE PERIOD COMMENCING FROM THE DATE OF PAY MENT TILL THE DATE OF CAPITALISATION. 4. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEF ORE US. WE HAVE HEARD AND CONSIDERED RIVAL SUBMISSIONS, PERUSED MAT ERIAL ON RECORD AND DELIBERATED ON JUDICIAL PRONOUNCEMENTS AS CITED BEF ORE US. AFTER APPLYING OUR MIND, OUR ADJUDICATION ON THE STATED ISSUES WOU LD BE AS FOLLOWS. 5.1 THE FIRST ISSUE IS RELATED WITH DISALLOWANCE U/ S 14A AND ADJUSTMENT THEREOF U/S 115JB. THE PERUSAL OF COMPUTATION OF IN COME AS PLACED ON RECORD WOULD SHOW THAT THE ASSESSEE HAS MADE SUO-MO TO DISALLOWANCE OF RS.61,400/- U/S 14A AS AGAINST THE OBSERVATION OF L D. AO THAT NO DISALLOWANCE WAS MADE BY THE ASSESSEE. HOWEVER, THE BASIS OF COMPUTATION WAS NOT FURNISHED BY THE ASSESSEE EITHE R DURING ASSESSMENT PROCEEDINGS NOR DURING APPELLATE PROCEEDINGS. IN FA CT, THE ASSESSEE DID NOT FURNISH ANY EXPLANATION REGARDING THE ADEQUACY OF T HE SAME DURING ASSESSMENT PROCEEDINGS. THEREFORE, WE ARE NOT CONVI NCED WITH THE PLEA THAT LD. AO DID NOT RECORD THE REQUISITE SATISFACTI ON BEFORE PROCEEDING TO APPLY RULE 8D SINCE IT WAS OBLIGATORY ON THE PART O F THE ASSESSEE TO DEMONSTRATE HOW THE SUO-MOTO DISALLOWANCE WORKED OU T WAS FAIR AND REASONABLE. NO SUCH BASIS WAS FURNISHED BY THE ASSE SSEE AND THEREFORE, WE FIND NO FORCE IN THIS PLEA RAISED BY LD. AR BEFO RE US. 5.2 PROCEEDING FURTHER, OUR ATTENTION HAS BEEN BROU GHT TO THE FACT THE LD. FIRST APPELLATE AUTHORITY PROCEEDED ON WRONG ASSUMP TION OF FACTS THAT THE MATTER OF DISALLOWANCE U/S 14A STOOD AGAINST THE AS SESSEE BY APPELLATE ORDER FOR AY 2011-12. WE CONCUR WITH THE SAME SINCE UPON PERUSAL OF THE 8 ITA NO.4964/MUM/2017 M/S ANUSHAKTI CHEMICALS & DRUGS LTD. ASSESSMENT YEAR-2012-13 RELEVANT ORDER FOR AY 2011-12, WE FIND THAT THIS IS SUE HAS, IN FACT, BEEN DECIDED IN ASSESSEES FAVOUR WHICH IS EVIDENT FROM PARA 2.4.3.2 OF THE APPELLATE ORDER DATED 05/02/2016. 5.3 UPON PERUSAL OF FINANCIAL STATEMENTS AS PLACED ON RECORD, IT IS ALSO OBSERVED THAT THE ASSESSEE HAS SUFFICIENT OWN FUNDS IN THE SHAPE OF SHARE CAPITAL & RESERVES AMOUNTING TO RS.101.61 CRORES AS AGAINST INVESTMENT OF RS.12.85 CRORES AND THEREFORE, UNLESS IT IS SHOW N THAT THE INVESTMENTS WERE MADE OUT OF BORROWED FUNDS AND THE NEXUS BETWE EN THE TWO WAS BROUGHT ON RECORD, A PRESUMPTION WAS TO BE DRAWN IN ASSESSEES FAVOUR THAT OWN FUNDS WERE USED TO MAKE THE INVESTMENTS. H OWEVER, NO SUCH EXERCISE EMANATES FROM QUANTUM ASSESSMENT ORDER. 5.4 THEREFORE, UPON CARFUL PERUSAL OF FACTS AND CIR CUMSTANCES, WE FIND THAT MATTER OF DISALLOWANCE U/S 14A HAS NOT BEEN PROPERL Y ADDRESSED BY LOWER AUTHORITIES. THEREFORE, ON THE FACTS AND CIRCUMSTAN CES, WE DEEM IT FIT TO REMIT THE MATTER OF DISALLOWANCE U/S 14A WHILE COMP UTING INCOME UNDER NORMAL PROVISIONS AS WELL AS WHILE COMPUTING BOOK P ROFITS U/S 115JB TO THE FILE OF LD. AO FOR ADJUDICATION DE-NOVO AFTER CONSI DERING THE ISSUE IN CORRECT PERSPECTIVE. THE LD. AO IS DIRECTED TO APPRECIATE T HE SUO-MOTO DISALLOWANCE OFFERED BY THE ASSESSEE AND IF NOT SAT ISFIED, RECOMPUTE THE DISALLOWANCE KEEPING IN VIEW THE RATIO OF BINDING J UDICIAL PRONOUNCEMENTS AND PRINCIPALS LAID DOWN REGARDING THE SAME. THE AD JUSTMENT OF DISALLOWANCE U/S 14A WHILE COMPUTING BOOK PROFITS U /S 115JB, IN TERMS OF CLAUSE (F) TO EXPLANATION-1 TO SEC 115JB(2), WOULD BE ATTRACTED ONLY IN CASE IT IS ESTABLISHED THAT THE ASSESSEE HAS ACTUALLY DE BITED ANY EXPENDITURE IN 9 ITA NO.4964/MUM/2017 M/S ANUSHAKTI CHEMICALS & DRUGS LTD. ASSESSMENT YEAR-2012-13 PROFIT & LOSS ACCOUNT RELATABLE TO EARNING OF ANY E XEMPT. RESULTANTLY, THE GROUND STAND ALLOWED FOR STATISTICAL PURPOSES. 6. SO FAR AS THE TREATMENT OF LEASE RENTAL INCOME I S CONCERNED, BOTH REPRESENTATIVES CONVERGE ON THE POINT THAT THE MATT ER MAY BE RESTORED BACK TO THE FILE OF LD. AO ON SAME LINES AS DONE BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2011-12, ITA NO. 3629/MUM/2016 ORDE R DATED 25/05/2018, A COPY OF WHICH HAS BEEN PLACED ON RECO RD. THEREFORE, FOLLOWING THE EARLIER VIEW OF TRIBUNAL FOR AY 2011- 12, THIS MATTER STAND RESTORED BACK TO THE FILE OF LD. AO FOR FRESH ADJUD ICATION ON SIMILAR LINES AS DIRECTED BY TRIBUNAL VIDE PARAS 4 TO 6 OF THE STATE D ORDER. THIS GROUND ALSO STAND ALLOWED FOR STATISTICAL PURPOSES. 7. THE LAST GROUND PERTAINS TO INTEREST DISALLOWANC E U/S 36(1)(III). FOR THIS THE LD. AR HAS RELIED UPON THE RECENT DECISION OF H ONBLE SUPREME COURT RENDERED IN CIT V/S RELIANCE INDUSTRIES LTD. [410 ITR 466 02/01 /2019] FOR THE SUBMISSION THAT IN CASE OF MIXED USE OF FUNDS, A PRESUMPTION WAS TO BE DRAWN THAT CAPITAL ADVANCES WERE OUT OF FREE FUNDS AVAILABLE WITH THE ASSESSEE. THE LD. CIT(A) HAS DIRECTED LD. AO TO REC OMPUTE THE DISALLOWANCE BASED ON NUMBER OF DAYS FOR WHICH FUND S WERE ACTUALLY UTILIZED FOR CAPITAL ADVANCES. HOWEVER, RESPECTFULL Y FOLLOWING THE CITED DECISION, WE MODIFY THE DIRECTIONS BY DIRECTING LD. AO TO ASCERTAIN THE NEXUS OF BORROWED FUNDS VIS--VIS CAPITAL ADVANCES MADE BY THE ASSESSEE AND UNTIL NEXUS IS ESTABLISHED BETWEEN THE TWO, A P RESUMPTION WOULD BE DRAWN IN ASSESSEES FAVOUR THAT CAPITAL ADVANCES WE RE OUT OF FREE FUNDS AVAILABLE WITH THE ASSESSEE AS PER THE CITED DECISI ON OF HONBLE SUPREME 10 ITA NO.4964/MUM/2017 M/S ANUSHAKTI CHEMICALS & DRUGS LTD. ASSESSMENT YEAR-2012-13 COURT AS WELL AS THE DECISION OF JURISDICTIONAL HIG H COURT RENDERED IN CIT VS. RELIANCE UTILITIES & POWER LTD. [313 ITR 340]. THIS GROUND ALSO STAND ALLOWED FOR STATISTICAL PURPOSES. 8. THE APPEAL STANDS ALLOWED FOR STATISTICAL PURPOS ES. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH OCTOBER, 2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 15/10/2019 SR.PS:-JAISY VARGHESE => ?> / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. I J ' K , K , / DR, ITAT, MUMBAI 6. J LMN / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.