ALLEN CAREER INSTITUTE, Kota V. JCIT, Jaipur

ITA 54/JPR/2017

• Counselvise Citation: [2022] 107 COUNSELVISE.COM (IT) 0583 (ITAT-JAIPUR)
• Duration Of Justice: 5 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 15-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DEWANG GARGIEYA
• Keywords: Business income; Depreciation; Charitable institution; Rule of consistency; Question of law; Notional interest; Commercial expediency; Capital expenditure; Rule 8D; Capital Gains
• Section: 143(3); 244A; 40(b); 14A; 37(1); 274; 48; 73; 13

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, ‘’A” JAIPUR Jh laanhi xkslkbZ] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 54/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2012-13 Allen Career Institute CP-6, Indra Nagar Kotas cuke Vs. The JCIT Range-2 Kota LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAEFA 3972 B vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Mahendra Gargieya, Advocate & Shri Dewang Gargieya, Advocate jktLo dh vksj ls@ Revenue by: Shri A.S. Nehra, Addl. CIT lquokbZ dh rkjh[k@ Date of Hearing : 05/05/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 4/08/2022 vkns'k@ ORDER PER: SANDEEP GOSAIN, JM This appeal of the assessee is directed against the order of the ld. CIT(A), Kota dated 25-11-2016 for the assessment year 2012-13 raising therein following grounds of appeal. 1. The impugned additions and disallowances made in the order dated 30-02-2015 u/s 143(3) of the Act, bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence, the same kindly be deleted. 2. Rs. 87,47,332/-:The ld. CIT(A) erred in law as well as on the facts of the case in confirming the disallowance of Rs. 87,47,332/- 2 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA made u/s 36(i)(iii) of the Act out of the claimed interest expenses, alleging not incurred for business purposes. The disallowance so made and confirmed by the ld. CIT(A), is contrary to the provision of law and hence, kindly be deleted in full. 3. Rs.4,332/:- The ld. CIT(A) erred in law as well as on the facts of the case in confirming the disallowance of Rs.4,332/- made u/s 36(1)(iii) of the Act made on account of the alleged interest free advances made to charitable trust and not incurred for business purpose. The disallowance so made and confirmed by the ld. CIT(A) is contrary to the provision of law and hence, kindly be deleted in full 4. Rs.23,64,158/-: The ld. CIT(A) erred in law as well as on the facts of the case in confirming the disallowance of Rs.23,64,158/- made out of interest expenses u/s 36(1)(iii) alleging incurred on capital expenditure. The disallowance so made and confirmed by the ld. CIT(A), is contrary to the provision of law and hence, kindly be deleted in full. 5. Rs.15,21,000/-: The ld. CIT(A) erred in law as well as on the facts of the case in confirming the disallowance of Rs.15,21,000/- made u/s 37(1) on account of scholarship expenses, alleging the same to be contingent liability and which has not become due in the current year. The disallowance so made and confirmed by the ld. CIT(A), is contrary to the provision of law and hence, kindly be deleted in full. 6. Rs.1,82, 418/-: The ld. CIT(A) erred in law as well as on the facts of the case in confirming the disallowance of electricity connection charges Rs.1,82,418/- out of electricity expenses. The disallowance so made and confirmed by the ld. CIT(A), is contrary to the provision of law and hence, kindly be deleted in full. 7. The AO further erred in law as well as on the facts of the case in charging interest u/s 234A, 234B, 234C & 234D of the Act and as also in withdrawing interest u/s 244A of the Act. The appellant totally denies its liability of charging and withdrawal of any such interest. The interest so charged/withdrawn, being contrary to the provisions of law and facts, kindly be deleted in full. 3 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 2.1 The Ground No.1 of the assessee is general in nature which does not require any adjudication by us. Hence, the same is dismissed. 3.1 In Ground No. 2, the assessee has challenged the disallowance of Rs. 87,47,332/- out of interest expenses incurred by the assessee on availing the bank overdraft facility which was debited in the profit and loss account and claimed in the return of income. The facts as noted by the AOs in the assessment order are as under: “2.1.1 In the P&L account, the assessee has claimed deduction of Rs. 1,66,72,289/ - being interest on Bank Over-Draft Account with Central Bank of India, Talwandi, Kota. The details filed by the assessee show that out of this Over-Draft Account, investments totalling Rs. 16,84,72,000/- were made by the assessee for purchase of Mutual Fund Units during the year as per details at Page 125 of assessee's letter dated 03.02.2015.During the year the assessee sold investments costing Rs.7.00 crore as per detail filed at page no.226 of letter dated 13/02/2015. 2.1.2 During the course of assessment proceedings u/s 143(3) of the Act in the case of the assessee for the year relevant to A.Y. 2009-10, A.Y. 2010-11 & 2011-12 also, it was found that the assessee had made investments in units of mutual funds amounting to Rs. 3.00 crore and Rs. 1.50 Crore respectively out of the same Over-Draft Account. Due to reasons mentioned in assessment order dated 29.12.2011 for A.Y. 2009-10 and assessment order dated 20.03.2013 for A.Y. 2010-11, disallowance of Rs. 20,45,751/- Rs. 10,83,901/- & Rs. 34,21,895/- respectively was made out of interest paid by the assessee in respect of Bank Over-Draft Account by holding that the interest-bearing borrowed funds had been used by the assessee for making investment in Mutual Fund Units. The disallowance made for A.Y. 2009-10 has since been confirmed by ld. Commissioner of Income-tax(Appeals), Kota vide his order dated 26.11.2012 in Appeal 4 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA No. 783 /2011-12, thereby dismissing the assessee's appeal against the above-said disallowance. Therefore, the assessee was asked vide para 1 of order sheet entry dated 27.02.2015 to explain why similar disallowance being interest on borrowed funds used for making above-said investment in Mutual Fund Units be not made for the period from date of their purchase or 01.04.2011 whichever is later to the date of their redemption or 31.03.2012, whichever is earlier. 3.2 In reply to the show cause notice, the assessee submitted a detailed reply (reproduced at AO Pg-2 & 3). The relevant extract are as under:- “There was no borrowing made to meet financial requirement and on the contrary there were assessee' own funds which have been utilized even for the subjected investment. Hence, these facts cannot be kept at par with a case where an assessee running short of fund makes borrowing, bear interest cost and then divert the same / part thereof to non-interest bearing advances. As a matter of fact, it cannot be denied that the assessee certainly acted as a prudent business by earning interest income from bank of Rs. 14.53 Cr. against which paid Rs. 1.67 Cr. only to bank and thus earned 12.86 Cr. This is an extra income which the assessee could have generated by financial management of its own business. Needless to say by not investing in FDRs the assessee of course would not have incurred interest cost but at the same time would not have earned interest income. The net result would have been loss to the revenue. The object behind making investment in Mutual Fund is getting tax efficient income similar to bank interest. The income from mutual fund is not tax free. Investment in mutual fund simply alternative of Bank FDRs for getting tax efficient income. The firm is accumulating its profit for its expansion plan and not taking any loan for the expansion plan. For the time being, the firm is keeping its money in bank FDRs/ Mutual fund FMPs as a better option for maximize the utilization of funds and consequently earnings. But the firm is not having any surplus fund, because the firm would be need of huge funds for branch opening in its expansion plan. 5 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA It is very clear from the balance sheet that the assessee firm has sufficient fund of its own and need not to borrow any money. Bank overdraft against FDRs is just for better utilization of Funds of the business. There is no nexus between the any amount borrowed and investment in the mutual fund made, as no amount was invested by raising an interest bearing loan. Therefore no disallowance on account of interest on borrowed money should be made. In the present case, entire receipts were deposited into overdraft account and all the payments are made out of that overdraft account. The amount of construction work in progress, purchase of plot and investment in mutual fund) are less than current year profits. Therefore no disallowance should be made out of interest." The AO however did not feel satisfied. He relied upon the decision in CIT v/s Abhishek Industries Ltd. (2006) 286 ITR 1 (P&H) and distinguished the decisions cited by the assessee. Finally, the AO computed interest paid at the rate of 6.36% in relation to the investment made in the mutual funds and made disallowance. 3.3 In the first appeal, the ld. CIT (A) confirmed the same vide order dated 25.11.2016 in Appeal No. 93/15-16, holding as under (Page No. 18 & 19):- “I have dealt with the same issue in the appellant’s case while deciding the appeal no 140/14-15 for AY 2011-12 vide order dated 18/03/2016, whereby on this issue I have relied on my predecessor’s order for AY 2010-11, whereby he has held that- The assessee also claimed that the income from mutual fund was not tax free. Therefore, the disallowance of corresponding interest was not justified. I have gone through the scheme of mutual fund and it was seen that the income received from the units of mutual fund was exempt in the hands of unit holder, only capital gain on sale of these units was taxable. 6 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA From the above, it is clear that any additional sum received on redemption of these units was exempt in the hands of the assessee and this plea of the assessee is therefore rejected. The assessee’s plea that overdraft is it’s own money is not acceptable as FDRs were used as security for over draft and the source of investment was over draft and not its own money. He had dismissed this Ground of the assessee. Following the same view in the instant appeal, the facts being similar to earlier year, I decide the issue against the appellant. The addition of Rs. 87,47,332/- is confirmed. This ground of appeal is dismissed” 3.4 Before us the ld. AR made the following submissions praying therein that the ld. CIT(A) has erred in confirming the action of the AO.. “1. The law is well settled that where assessee is having mixed i.e. interest free/interest bearing funds both, but the interest free funds are larger than the interest free advances than there will a presumption that the interest free advances were given out of the interest free funds (but not out of interest bearing fund/OD) and hence, no interest can be disallowed (as was not claimed). 2. It is submitted that the cited decisions strongly supports the contentions raised by the assessee. These decisions relate to disallowance of the interest expenditure incurred on the loan amount used for payment of income tax/investment in the securities/capital expenditure etc. or for giving interest free advances to its sister concerns etc. sourced out of the loan/OD a/c. The Hon’ble Courts in similar factual matrix (as available in this case) has taken a view in favour of the assessee. 3. However, the lower authorities proceeded on misconception & misreading of the judicial guidelines provided through various decisions which were in the context that where there are borrowed 7 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA funds and also interest free funds both, discretion lies with the assessee for the utilization of the funds in whatever manner it wants. What has been held is that where there are funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that interest free loans & advances would be out of interest free fund generated or available with the assessee, if the interest-free funds were sufficient to meet the investments and in such situation the specific nexus between utilization being of interest bearing bank overdraft towards interest free advances, loses significance/relevance. 4. Huge interest free funds available: During the assessment proceedings, it was specifically submitted that the assessee was having huge interest free capital. Moreover to support, copies of the Audited Balance Sheet as on 31.03.2012 (PB 3-13) were submitted before the authorities below. A perusal thereof, clearly reveal that there was a huge interest free Capital, Reserve & Surplus of Rs.1,43,15,25,029/- as on 31.03.2012 (A.Y.2012-13) (PB-3). The subjected investment in mutual fund stood at Rs.7,60,00,000/- in the preceding year and Rs.17,44,72,000/- (increased to Rs.9,84,72,000/-) this year as shown in the Audited Balance Sheet (PB-3) as against that the assessee was having a huge interest free Capital and Reserve & Surplus of Rs.143 Cr. (PB 3). The authorities below however, completely failed to disprove the above factual position. Notably current year’s profit, itself was of Rs. 34.61 crores. 3. Covered Matter: 3.1 At the outset, the controversy involved in the present case is directly covered by the recent ITAT order dated 27.09.2017 in ITA no. 10/JP/13 [190 TTJ 823 (JP)] is assessee’s own case for AY 99-00 on exactly identical facts (DPB 149-180). The relevant extracts are reproduced hereunder: “24................It also proves the fact that the assessee was having mixed funds both in form of business receipts and borrowings in the form of overraft from the bank from time to time. However, there is nothing which has been brought on record to prove that the investments have been made at the relevant point in time out of the borrowed funds. In absence of establishing the necessary nexus being between the borrowings and the investments in the mutual funds, it 8 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA can safely be concluded that the investments in the mutual fund units have been made out of mixed funds. 25. ............The funds in the FDRs accounts clearly reflect the interest free funds which are available with the assessee which is far in excess of the amount of investments which has been made in the Mutual Funds units amounting to Rs. 3 Cr. Accordingly, on appreciation of the said facts and in absence of anything to the contrary, as per the settled legal proposition, a presumption can be drawn that the investments in the mutual fund units have been made out of interest- free funds and not out of interest bearing funds......” 26. Lastly, coming to the contention of the learned CIT(A) that provisions of s. 14A are applicable as income from the Mutual Funds are exempt, we find that the said finding is contrary to the facts on record. The appellant has invested in the fixed maturity plans of the various Mutual Funds which are basically fixed-term debt funds schemes. Where the amount is invested in such funds for less than a year, the maturity proceeds are taxable as short-term capital gain @ 30 per cent and where the amount is invested in such funds for the period exceeding one year, the maturity proceeds are taxable @ 10 per cent with the indexation benefit and @ 20 per cent without indexation benefits. In other words, the investments in Mutual Funds schemes are not tax-free investments. In support of its contentions, the learned Authorised Representative has also submitted a copy of the computation of income for the subsequent asst. yr. 2010-11 wherein the maturity proceeds amounting to Rs. 3,32,35,500 of all these Mutual Funds units wherein the assessee has invested Rs. 3,00,00,000 during the impugned assessment year have been offered to tax as long-term capital gains. In light of the same, we do not think that the learned CIT(A) was correct in invoking provisions of s. 14A of the Act.” The Rule of Consistency mandatorily requires that in absence of any material change in the facts and circumstances, the earlier decision rendered by the ITAT in the case of the same assessee must be followed. Kindly refer para-38 of Godrej & Boyce Manufacturing Co. Ltd. v/s DCIT & Anr. (2017) 151 DTR 0089 (SC) (DPBIII 181- 9 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 186) wherein, the earlier decision in the case of Radhswami Satsang vs CIT (1992) 193 ITR 321 (SC) at Pg-329 has been relied upon. The authorities below themselves have admitted that the facts of this year are identical with those in A.Y. 2009-10 hence there is no reason why the Hon`ble ITAT order of A.Y. 2009-10 should not be applied in this case. 3.2 Also, in the case of ACIT v/s Ram Kishan Verma (2012) 143 TTJ 1 (Jp) (DPB - I 10-22), wherein the factual matrix is also the same. In fact, the cited case also of a coaching institute of Kota itself and there also the assessee used to receive the entire fees at the beginning of the year/session whereas it had to incur recurring expenditure on monthly basis. As a part of financial management/planning and to maximize its income, that assessee also used to deposit the entire fees in the FDRs and got OD A/c from which funds were utilized as per need. This way, it was claimed that it was assessee’s own money only who did not borrow any fresh money. The disallowance made by the AO u/s 36(i)(iii) was fully deleted by holding that “10.4 We have heard both the parties. The assessee is having sufficient capital. If there are mixed funds then non-interest-bearing funds are to be considered as utilized for non-interest-bearing advances. It is the assessee who has to take a business decision. Fees is generally received at the beginning and surpluses are used for making fixed deposits as receipts are in advances while expenses are spread out throughout the year. Since interest-free advances are less than the capital and the AO has not brought on record any nexus of interest-bearing loans used the AO could not have disallowed the interest. There is no onus on the assessee to establish that interest- free advances are out of interest-bearing advances if non-interest- bearing funds are more. Reliance is placed on the decision of the Hon’ble Bombay High Court in the case of CIT vs. Reliance Utilities & Power Ltd. (2009) 221 CTR (Bom) 435 : (2009) 18 DTR (Bom) 1 : (2009) 313 ITR 340 (Bom) and Hon’ble Delhi High Court in the case of CIT vs. Bharti Televenture Ltd. (2011) 51 DTR (Del) 98 : 2010- TIOL-51-HC-Del. There is no provision in the Act which may compel an assessee to earn income. 10 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 11.1 x--------------x--------------x--------------x--------------x-------------- x--------------x 11.2 After considering the facts as above, we feel that the AO was not justified in making any disallowance. Hence, disallowance is deleted.” 3.3 The Hon`ble Rajasthan High Court has also affirmed the above orders vide para 12 & 14 in the case of CIT v/s Ram Kishan Verma (2016) 132 DTR 107 (Raj.) (DPB 1-11) holding as under: “12. As far as the disallowance of interest is concerned, admittedly the assessee had an opening capital of Rs. 5,70,74,967/- of his own and the advances, if at all, being interest free, is to the extent of Rs. 98,93,950/- which is far below the capital of the assessee and, therefore, the tribunal has rightly come to the conclusion that to the extent of his own capital the assessee could advance money without interest for business expediency or/and relatives, and none can be forced to charge interest. It is also noticed by the lower authorities that assessee earned bank interest to the extent of Rs. 24,48,843/- out of which he paid total amount of Rs. 10,99,099/- to the bank against loan and over draft, and it is out of the amount which has been paid by the assessee at 10,99,099/- that the AO has disallowed the interest. 13. Taking into consideration the fact as noticed hereinabove, in our view as well, when there was no agreement to charge interest from the persons to whom the assessee advance short term loan/advance, the AO could not disallow part of interest. It is also an admitted fact, as observed by the tribunal, that the AO was not able to pin pointedly come to a definite conclusion that how interest bearing loans has been diverted towards interest free advances and since the AO was not able to prove nexus between interest bearing loans vis- à-vis interest free loans/advances, therefore, in our view as well, once the AO was not able to come to a definite conclusion as to nexus having been established about interest bearing loans having been diverted towards interest free loans/advances, and such being a finding of fact based on application of evidence, in our view no substantial question of law arise on this question as well. It can be observed that this court in similar circumstances and on identical facts, when the capital of the partner/proprietor being more than the 11 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA interest free short term advances, has in the case of CIT v/s M/s. Vijay Solvex Ltd. (2015) 274 CRT (Raj.) 384 while relying on the judgments rendered in (a) S.A. Builders Ltd. V/s CIT (2007) 288 ITR 0001 (SC); (b) Munjal Sales Corporation v/s CIT (2008) 298 ITR 298 (SC) ; (c) CIT V/s Radico Khaitan Ltd. (2005) 274 ITR 354; (d) CIT v/s Dalmia Cement (Pvt.) Ltd. (2002) 254 ITR 377; (e) CIT v/s Britannia Industries Ltd. (2006) 280 ITR 525; and (f) CIT v/s Motors Sales Ltd. (2008) 304 ITR 123 (Allahabad), held as under:- x---------------x----------------x----------------x-------------------x---------x 14. Therefore, the finding reached by the Tribunal is essentially a finding of fact based on the appreciation of the evidence, and we find no perversity or infirmity in the order impugned, and no question of law arises out of the order of ITAT.” 3.4 For various other case laws, kindly refer Annexure 1 to w/s to ITAT dated 1 ST February 2021 in A.Y. 10-11 in ITA No. 246/JP/15. 3.5 Further the case of Abhishek Industries has already been impliedly overruled in Munjal sales (supra) and was also so considered in the case of Ram Kishan Verma by ITAT Jaipur. 4. Settlement Commission: The issue involved is otherwise also covered. A search was carried out in the case of assessee group and the matter reached to the Hon’ble Income Tax Settlement Commission, New Delhi. The issue of disallowance u/s 36(1)(iii) and the claim of liability towards the Scholarship payable have also been a subject matter of their consideration. These issues have been decided in the favour of the assessee in pr. 53.2 vide order dated 26.04.2018 (III PB176-183 of A.Y 2010-11). Though the assessment years involved are different, however, the said order fully support the contention of the assessee, in principal. 5. The AO un-wantedly stressed over the alleged absence of the commercial expediency behind giving of the subjected loans & advances in as much as, such a consideration was relevant only in a case where the interest free funds were given out of the interest bearing funds only and there was admittedly no availability of the interest free funds. In our case, such facts are not available and even otherwise the utilization of the funds was for commercial expediency 12 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA in as much as the major utilization of the funds was towards capital investment in building for coaching, and partly in the mutual funds but income from both were duly taxed. It was not the case of AO that assessee diverted the funds to relatives etc. for personal purposes. In the case of SA Builders also, the decision was rendered in the context of diversion of the interest bearing funds to the interest free advances. The Hon’ble Rajasthan High Court in Ram Kishan Verma (Supra) has also taken a note and interpreted the decision of SA Builder (Supra) in the same manner and therefore, held that to the conclusion that to the extent of his own capital the assessee could advance money without interest for business expediency or/and relatives, and none can be forced to charge interest. In DCIT v/s Gujarat Narmada Valley Fertilizers Co. Ltd. (2014) 31 ITR (Trib) 668 (Ahd) at page 671, it is held that “.............., the decision of the Supreme Court in the case of S.A. Builders Ltd. v. CIT(Appeals) [2007] 288 ITR 1 (SC) would not be applicable to the facts of the present case.......” 6.1 No Interest paid on Partner`s Capital on current year profits: Its factually wrong that appellant paid interest on their capital. Factually there was no interest paid w.r.t. huge net-profits of Rs.38.27 Cr. before depreciation and Rs. 34.61 Cr. after depreciation, of this year in as much as such interest was credited at the end of the year. In other words, no interest at all was paid on the partners’ capital at least to the extent of the current year`s profit because profit was distributed at the end of the year and such interest, of course, was paid in the subsequent year. The current year profit is otherwise much bigger than the investment made in mutual fund this year of Rs.16.85 Cr. or the total investment at the close of the year Rs. 9.85 Cr. 6.2.1 Interest on capital of partners: Even assuming some interest has been paid by the assessee to the partners to their respective capital yet however such interest is not a charge on the profit and not being an expenditure, it is nothing but an appropriation of profits and such payment of interest cannot be kept 13 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA at par as any interest paid / claimed u/s 36(1)(iii) of the Act. It is submitted that the payment of interest (only on the capital), salary, bonus etc., are nothing but distribution (or appropriation out) of the profits earned by the partners collectively as partnership firm and such payment is nothing but a mode of distribution of such profits. This was and is a settled law. The payment of salary and interest to the partner were not allowable prior to the amendment made w.e.f. A.Y. 1993-94 but now a limit has been put u/s 40(b) of the Act. It is only for the limited purpose, to avoid double taxation, interest and salary are now being allowed (only u/s 40(b) (v), to be computed in a prescribed manner, w.r.t. the amount of “book profit”, as defined under Explanation 3 ( to mean the net profit as shown in the profit & loss account for the relevant previous year, computed in the manner laid down......).This is based on the principle that the firm is not a separate legal entity but is a compendium of persons hence, a partner is not a separate person from the firm. 6.2.2 Kindly refer CIT v/s R.N.Chidambaram 106 ITR 292 (SC), holding that "A firm is not a legal person, even though it has some attributes of personality. In Income-tax law, a firm is a unit of assessment, by special provisions, but it is not a full person. Since a contract of employment requires two distinct persons, viz., the employer and the employee, there cannot be a contract of service, in strict law, between a firm and one of its partners. Payment of salary to a partner represents a special share of the profits. Salary paid to a partner retains the same character of the income of the firm. Held accordingly, the salary paid to a partner by a firm which grows and sells tea, is exempt from tax, under rule 24 of the Indian Income-tax Rules, 1922, to the extent of 60 per cent thereof, representing agricultural income and is liable to tax only to the extent of 40 per cent." Further, in the case of CIT v. Ramniklal Kothari (1969) 74 ITR 57 (SC), it is held that the business of the firm is business of the partners of the firm and, hence, salary, interest and profits received by the partner from the firm is business income and, therefore, expenses incurred by the partners for the purpose of earning this income from the firm are admissible as deduction from such share 14 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA income from the firm in which he is partner. Section 4 of the Indian Partnership Act 1932 also support this contention. Thus, the 'partnership firm' and partners have been collectively seen and the distinction between the two was removed in the judicial precedents even for taxation purposes. 6.2.3 On the other hand, interest paid on borrowed capital u/s 36(1)(iii) presupposes a transaction between two independent entities, which is not the case here. Capital of a partner is not a borrowing and therefore, the Act does not cover interest on capital of partner u/s 36(1)(iii) but it’s limit of allowability has been prescribed u/s 40(b) only as appropriation out of profits. 6.2.4 Sec 13 of the Indian Partnership Act, 1932 contains the mutual rights and liabilities of the partners. Sec 13(c) of the Indian Partnership Act, 1932 reads as under: “ 13. Subject to contract between the partners – (c) where a partner is entitled to interest on the capital subscribed by him, such interest shall be payable only out of profits;” From above it is clear that interest on capital can be paid only out of profits, which implies that interest on capital is an appropriation and not an expense. It means if in any particular year there are no profits, no interest on capital will be paid. This happens only in case of appropriations. However, in case a where partner has given loan to the firm over and above his capital, the interest thereon being an expense is payable even if there are no profits. This is the reason interest on such loan is debited in the Profit & Loss A/c and not in the Profit and Loss Appropriation A/c. 6.3 Supporting case laws: 6.3.1 Kindly refer Quality Industries vs. JCIT, (2016) 73 taxmann.com 363 (Pune Trib.) (DPB-IV 187-192). It was held as under: “11.5................ Consequently interest paid to its partners cannot be treated at par with the other interest payable to outside 15 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA parties. Thus, in absence, the revenue is not adversely affected at all by the claim of interest on capital employed with the firm by the partnership firm and partners put together. Thus, capital diverted in the mutual funds to generate alleged tax free income does not lead to any loss in revenue by this action of the assesse. In view of the inherent mutuality, when the partnership firm and its partners are seen holistically and in a combined manner with costs towards interest eliminated in contra, the investment in mutual funds generating tax free income bears the same characteristics of and attributable to its own capital where no disallowance under S. 14A read with Rule 8D is warranted. Consequently, the plea of the assesse is merited in so far as interest attributable to partners. However, the interest payable to parties other than partners, in our view, would be subjected to provisions of Rule 8D(2)(ii) of the Rules. Similarly, in the absence of any specific plea from assesse towards disallowance under Rule 8D(3), we hold it sustainable in view of express mandate of law. The matter is accordingly remanded back to the file of the Assessing Officer for re-computation of disallowance under Rule 8D r.w.s. 14A of the Act in terms of our opinion expressed herein above ” 6.3.2 The above decision was followed in M/s Syntholab Chemicals & Research vs. ACIT in ITA No. 4156/Mum/2015 dated 19.04.2017 (DPB-IV 193-198). 6.4 It is also pertinent to note that in A.Y.2009-10 also, the assessee made payment of interest on partner’s capital a/c yet however, the contention of the assessee of availability of the interest free funds in the shape of partner’s capital of Rs. 70.65 Cr., was accepted and disallowance made u/s 36(1)(iii) was completely deleted vide para 24 of the ITAT order dated 27.09.2017 in ITA No. 10/JP/2013 (DPB-III 149-180). In the later years also similar facts prevailed but contention of the assessee was accepted by the Settlement Commission also. There being no change in the facts and circumstances, the decision taken by this Hon’ble Bench & Commission in the earlier/other year/s, is binding upon it and as a rule of consistency a similar view has to be adapted these years also. 7. The ld.AO completely failed to deny and disprove the facts as argued although vide last para at pg 6, he alleged that the assessee 16 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA had used a part of the borrowed funds available in the OD a/c and worked out the disallowable amount of the interest yet however, he completely failed to prove/ to bring contrary material to disprove that the assessee was having sufficient interest free funds, as aforesaid. He wrongly confused the OD a/c with an interest bearing loan/borrowings. Admittedly the assessee neither took any such loan in the past nor in this year, as evident from the Audited Balance Sheet as on 31.03.2010 (PB 3). The disallowance may kindly be deleted in full in its entirety.” 3.5 During the course of hearing, the ld. DR strongly relied upon the findings recorded by the authorities below and justified the additions made and confirmed by the ld. CIT(A) and prayed to uphold the addition/disallowance. 3.6 In Ground No. 3, disallowance of Rs. 4,332/- out of interest payment on account of alleged notional interest on interest free advances, is agitated. 3.7 The relevant facts in brief are that the AO observed that the assessee has given advance of Rs.1.00 lakh to Akhil Bhatiya Maheshwari Educational Charitable Trust in F.Y. 2009-10 (i.e. on 01.07.2009) without charging any interest and recovered the same on 08.07.2011. Similarly, an amount of Rs. 41,000/- has given advance to Swanand Sewanyas in the earlier years without charging any interest, which has been recovered on 30.03.2012 (A.Y. 2012-13) hence, he disallowed interest @ 6.25% on this advance as was paid out of the borrowed funds. 17 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 3.8 In the first appeal, the ld. CIT (A) also confirmed the same, following his finding in earlier year that the assessee failed to submit any evidence to show that amount was advanced for any business purpose. The funds were advanced from the Overdraft Account. 3.9 Before us, the Ld. AR made the following submissions praying therein that the ld. CIT(A) has erred in confirming the disallowance: “1. Before the ld. CIT(A) it was submitted that Akhil Bhatiya Maheshwari Educational Charitable Trust and Swanand Sewanyas no interest was chargeable on such advances. However, it appears that the ld. CIT(A) has not at all paid any attention to the submission. It is submitted that there can’t be any notional interest as held in the case of Shoorji Ballabh Das & Co. (1962) 46 ITR 144 (SC), and Rajasthan High Court in R. K. Verma (Supra) hence, this disallowance is bad in law. 2. Otherwise, there being sufficient interest free funds already available with the assessee as stated in the grounds no. 2 & 4, it can’t be said that there was borrowing made for this purpose also. Hence the impugned disallowance kindly be deleted in full.” 3.10 On the other hand, the ld. DR strongly relied upon the findings recorded by the authorities below and justified the additions made and confirmed by the ld. CIT(A) and prayed to uphold the addition/disallowance. 3.11 In Ground No. 4 (wrongly numbered as 3 in appeal memo), disallowance of Rs.23,64,158/- out of interest expenses incurred on capital expenditure, is agitated. 18 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 3.12 The relevant facts as noted by AO are that in the past disallowance of Rs. 3,34,688/-, & Rs.7,89,593/- was made u/s 36(1)(iii) by holding that the plot of land was not put to use during F.Y. 2010-11 & 2011-12 and that there is no change in the facts during the year under consideration and hence Rs.8,05,691/- on account of purchase of Plot. No.1, Rajiv Gandhi Nagar, Kota and Construction (WIP) SAFALYA-1 of Rs. 18,918/-, Rs.10,51,054/- on Plot No.6, Rajiv Gandhi Nagar, Kota and Construction (WIP) SAKAAR of Rs.4,88,495/- totalling to Rs. 23,64,158/-, was disallowed. Since similar disallowance was made and confirmed in the preceding years also, hence this year also be disallowed interest of Rs 71,93,839/-. The CIT(A) also confirmed the disallowance following his findings in AY 2011-12. 3.13 Before us, the Ld. AR made the following submissions with prayer to delete the disallowance: “1. Our detailed submissions made towards GOA 2 and various case laws are also relied upon and may kindly be considered. 2. When asked by the AO (vide para 3 of order sheet at the date 27.02.2015), the assessee filed a detail explanation vide letter dated 20.03.2015 reproduced at pages 12 & 13 of the Assessment Order wherein the above facts were clearly mentioned. Amongst other things it was stated the assessee was having more than sufficient own interest free funds, the assessee did not at all make any borrowing of fresh money during the year and did not have any opening balance on that account to be utilized towards the investment in the towards the capital investment being purchase of plots and/or construction etc. 19 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA The AO completely failed to deny and disprove these facts although vide para 2.3.4 at Pg-11 and para 2.3.6 at Pg-13, he alleged that the assessee had used a part of the borrowed funds available in the OD a/c and worked out the disallowable amount of the interest based on the withdrawal made out of the OD A/c yet however, he completely failed to disprove/ to bring contrary material to the contention that the assessee was having sufficient interest free funds as aforesaid. 3.1 The above submissions have been made on the basis that once the assessee was having sufficient interest free funds and did not borrow hence there was no question of paying any interest nor making any claim thereof. Thus, when in the view of the facts and submissions made above, there was no claim made by the assessee u/s 36(i)(iii), there was no question of allowing or disallowing the same and consequently even the discussion made by the AO in the light of the proviso to Sec.36(i)(iii) is also irrelevant. 3.2 Covered Issue: Similar disallowance was made in A.Y. 2009-10 also on identical facts and circumstances and even the authorities below have referred to the findings recorded in that year and the matter reached to the stage of Hon`ble ITAT. Which was decided completely in favour of the assessee by recording finding that the assessee was having sufficient interest free funds out of which investments in the purchase / construction of the assets was made and hence there was no claim having been made u/s Sec. 36(i)(iii), its proviso was not applicable vide its order dated 27.09.2017 in ITA no. 10/JP/13 [190 TTJ 823 (JP)] (DPB III 149-180) The relevant extracts are reproduced hereunder: “40. We have heard the rival contentions and perused the material available on record. The facts and circumstances of the case are similar to the one which we have examined in detail in ground No. 2 above. Our findings and directions contained in ground No. 2 shall mutatis mutandis apply to this ground of appeal as well. In the result, the ground No. 3 of the assessee’s appeal is allowed.” The relevant discussion in the Hon`ble ITAT order starts from internal Pg-20 (DPBIII 171). Also kindly refer our detailed submission-III dated 03.10.2018 filed in A.Y. 2010-11 in ITA No. 246/JP/2015. 20 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 4. Asset were put to use this Year- S.36 (1) (iii) proviso not applicable: However, alternatively and without prejudice to the above basic contention, even considering the claim on merits, the AO has wrongly considered the facts and alleged that the asset were not put to use in this year. With regard to the user of the plot no 1 at Rajeev Gandhi Nagar as a cycle stand put to use this year, w.r.t. “observation” and allegation of the AO contained in para 2.3.2, 2.3.3 and 2.3.5, it is submitted that our submissions made vide letter dated 20.03.2015, reproduced at Pg 10-11 is strongly relied upon which has adequately answered the allegations made. Despite these submissions, the AO and ld. CIT(A) both continued repeating the same factual allegation with blind eyes. They did not appreciate that the matter pertained to F.Y.2009-10 whereas inspector made the enquiries in February, 2013 i.e. after a lapse of period of almost 3 years by which time, on the vacant plot also, building stood constructed and the evidences furnished by the assessee being the electricity bill (PB10-11 104) further proved the use of the plot as a parking place Pg 40-41 before the AO (A.Y. 2010- 11 PB 104-105) were completely ignored. Therefore, it has to be admitted that the said plot was put to use as a cycle stand in the relevant year only and hence otherwise on merits also, the claim of interest made u/s 36(1)(iii) was not hit by its proviso. The allegation of the AO that it was a costly plot to be used as cycle stand, is nothing more than a suspicion which is not permissible for making a valid assessment as held in the case of Dhakeshwari Cotton Mills Ltd 26 ITR 26 ITR 0775 (SC). Common Submission for GOA-2 & 3 5. Against the concept of real income: It is unfortunate that the department on one hand, happily taxed a huge extra interest income of Rs.14,69,88,665/- [Interest from Bank of Rs.14,53,17,483/- + Rs.16,71,182/- from staff & others) (PB 4) earned by the assessee because of its financial management but unfortunately deduction of the interest paid is disallowed. It can`t be denied that had the assessee did not put the funds into the FDR it could not have earned and paid substantial extra tax to the department and also it would not have incurred the cost of interest payment which, the department is now 21 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA denying. Such an approach of the department is completely against the concept of real income. The department must have seen the substance instead of going into the form. Therefore, if extra interest income of Rs.14,69,88,665/- is taxed under the head `Income from other sources` the interest payment should have also been allowed u/s 57(iii). 6. No Interest paid on Partner`s Capital on current year profits: Another important aspect is that even if some interest has been paid by the assessee to the partners to their respective capital yet however, Firstly, such interest is not a charge on the profit and not being an expenditure, it is nothing but an appropriation of profits and such payment of interest cannot be kept at par as any interest paid / claimed u/s 36(1)(iii) of the Act. Kindly refer our detailed submission- II dated 31.12.2018 filed in A.Y. 2010-11 in ITA No. 246/JP/2015. Secondly, otherwise also factually there was no interest paid w.r.t. huge profits of Rs.38.27 Cr. before depreciation and Rs. 34.61 Cr. after depreciation, of this year in as much as such interest was credited at the end of the year. In other words, no interest at all was paid on the partners’ capital at least to the extent of the current year`s profit because profit was distributed at the end of the year and such interest, of course, was paid in the subsequent year. The current year profit is otherwise much bigger than the investment made in mutual fund this year of Rs.16.85 Cr. or the total investment at the close of the year of Rs.9.85 Cr. Hence, the impugned disallowance kindly be deleted in full.” 3.14 On the other hand, the ld. DR strongly relied upon the findings recorded by the authorities below and justified the additions made and confirmed by the ld. CIT(A) and prayed to upheld the addition/disallowance. 3.15 We have heard the rival contentions and pursued the material available on record. Undisputedly, the facts and circumstances of the case are similar to the one 22 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA which we have examined in detail in Ground no. 2, ,3 and 4 taken by the assessee in its appeal for A.Y. 2010-11 in ITA no. 246/JP/2015 wherein the similar disallowances were made, agitated and were deleted vide our order 04-08-2022 following the findings and directions contained towards Grounds No. 2 and 3 in AY 2009-10 vide order dated 27.09.2017 in ITA no. 10/JP/2013 [reported in 190 TTJ 823 (JP)]. Hence, our findings and directions contained in our order, shall apply mutatis mutandis in Grounds of appeal No. 2, 3 and 4 this year as well. Thus Grounds No. 2, 3 and 4 (wrongly numbered as 3 in appeal memo) of the assessee’s appeal are allowed. 4.1 In Ground No 5 (wrongly numbered as 4 in appeal memo) disallowance of Scholarship Expenses of Rs. 15,21,000/-, is agitated. 4.2 The relevant facts as noted by the AO are that the assessee has claimed deduction of Rs.43.53 lakhs in respect to Scholarship to the Students. Out of which Rs.15.21 Lakh was payable at the end of the year which was to be paid in next year/s as per Scholarship Scheme. When asked, the assessee submitted that as per scheme, the scholarship is given to the students selected within first 100 Ranks in AIPMT/IIT or to the students who got selected in AIIMS. Under the scheme Rs. 1,000/- per month for the duration of MBBS/IIT (i.e. 4 years), totalling to Rs.48,000/- per student was to be given. During this year, 39 students (24 of 23 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA AIPMT, 15 of AIIMS) were selected for scholarship. Accordingly, the assessee provided for Rs.18,72,000/- [Rs. 48,000/-*39 (24+15)] and out of which Rs.3,51,000/- [39 * Rs.9,000/- (Rs.1,000/- for July to March * 9 months)] was paid during this year. Therefore, the balance of Rs.15,21,000/- was shown as payable at the end of the year, which were paid in subsequent years as & when the concerned student got the cheque en-cashed. The assessee further stated that this is a certain liability and did not depend on happening or not happening of an event and the amount payable is also certain therefore, it is not a contingent liability. However, the AO feeling dissatisfied, concluded that the subjected scholarship amounts payable, is a contingent & is an unascertained liability and deduction on account of provisions & contingent liabilities was disallowable. In the first appeal, the ld. CIT(A) also summarily confirmed the disallowance saying that AO rightly rejected the assessee’s contention as the liability had not become due in the current year. Hence this ground by the assessee. 4.3 Before us the ld. AR made the following submissions with prayer to delete the disallowance. “1. Firstly, we strongly rely upon the detailed written submissions filed before the AO as well before the ld. CIT(A). 2. It is submitted that the assessee is one of the most popular coaching institute of the Country, imparting coaching to the students preparing for entrance examinations. With a view to encourage the successful & 24 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA intelligent students and to provide them with a financial support (which is otherwise, a part of its Advertisement - Promotional Schemes), the assessee has been floating scholarship schemes in the past. As per the scholarship scheme, for selection of the eligible candidates (who got coaching from the assessee’s institute), selection is made of those students, who are amongst the first 100 Ranks in AIPMT/IIT or the students who got selected in AIIMS, total amount of Rs.48,000/- per student is given. The assessee used to organize a big level function in the honour of the successful students, during the course of which they are honoured by giving them the certificates along with the cheques. Accordingly, the entire amount of Rs.18,72,000/- [Rs.48,000/-* 39 (24 + 15)] was provided this year. Also accordingly, 48 pre-dated cheques (PDI) were given to all the 49 students. This year, Rs.3,51,000/- [39 * Rs.9,000/- (Rs.1,000/- for July to March -* 9 months)] was paid, based on the cheques already given to the successful students. Therefore, the balance of Rs.15,21,000/- was shown as payable at the end of the year, which were paid in subsequent years as & when the concerned student got the cheque en-cashed. The bonafidies and allowabilities u/s 37(1) is not disputed. 3. It is submitted that the authorities below entertained factual and legal misconception by saying that the liability was not existent/ascertained or contingent for the simple reason that the liability relating to the subjected amount, was not only fully ascertained & existed but was even quantified on the very day, when the result of the Scholarship Scheme, selecting the eligible candidates was announced and in the award function they were tendered 48 cheques each. In terms of the Scheme, the assessee, of course, by its own admission, was liable to make payment of the scholarship amount to the selected candidates for the period of four years as agreed. 4. Such liability was assumed and admitted by the assessee without any condition as to the selected candidate must complete the course selected that to for the entire period of four years. The AO wrongly alleged that such a liability was conditional in as much as in the prospectus, no condition at all, was imposed. The student was free to continue/discontinue the course/to continue in the same institution or to change. Since the courses were for a period of four years hence, the assessee based this for the quantification of the amount of award/scholarship. The assessee therefore, committed itself from the moment the candidates were selected for the scholarship scheme. Whether all or part of the students continue or not (for whatsoever reason), 25 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA the liability which has already accrued, could not have been stopped or could not be termed as contingent. The assessee could not have assumed that some of the students may not be willing or may not be able to complete the full term of four years, which otherwise was not a condition of granting scholarship. 5.1 The authorities below therefore, proceeded on a misconception by considering the subjected expenditure as a provision only whereas, it was a liability in praesenti, as stated above, out of which Rs.3.51 Lacs could be got en-cashed this year however, balance of Rs.15,21,000/- remained outstanding in its Balance Sheet. Thus, it was nothing but an outstanding liability which has been wrongly named as a provision or a contingent liability by the authorities below. Notably, in subsequent years, the cheques of entire balance of Rs.15,21,000/- got encashed and thus, stood paid. Such liability was certain as did not depend on happening of any event. There was no uncertain future event. 5.2 For better appreciation the meaning of the relevant terms are: Outstanding Liability: Expenses relating to current year but actual payment to be incurred in the next financial years is outstanding expenses. Provision: Provision is a present liability of uncertain amount, which can be measured reliably by using a substantial degree of estimation. Contingent Liability: It is a possible obligation which may or may not be arise depending on happening or not happening of an uncertain future event. 6.1 No Loss to Revenue: After the valid creation of liability, if a part of the scholarship cheques is not en-cashed, the related amount shall be written back and in the scheme of income tax, Sec.41(1) fully takes care and such amount is deemed to be an income in the year in which it is credited back. Thus, the liability relating to subjected amount stood ascertained and crystallized in the subjected year itself and is fully allowable. 6.2 Accounting entries are not decisive of true nature of transaction. Kindly refer Kedarnath Jute Mfg. Co. Ltd. v/s CIT (1971) 82 ITR 0363 (SC) and Sutlej Cotton Mills Ltd. v/s CIT (1979) 116 ITR 0001 (SC). 26 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 7.1 Supporting Case Law: See Annexure 2 to w/s to ITAT dated 1 ST February 2021 in A.Y. 10-11 in ITA No. 246/JP/15. 7.2 Cases cited by Revenue are completely distinguishable: See Annexure 2 to w/s to ITAT dated 1 st February 2021. 8. No disallowance made in past: 8.1 It is pertinent to note that although the appellant has been making similar claims in the past based on the similarly floated schemes for the encouragement of the students in similar manner & method. Details of some years is an under: Scholarship to students : Asst. Year Amount(Rs.) 2006-07 8,16,000/- 2007-08 16,80,000/- 20008-09 17,76,000/- 2009-10 20,16,000/- No disallowance were made in the earlier years. Even the assessments of some of the years were completed under scrutiny u/s 143(3) (i.e. A.Y.2002-03 & onwards) yet however, no similar disallowance had been made in the past. It is, for the first time, the AO has made this disallowance despite there being no change in the fact & circumstances of the case. There were no special reason as to why the AO should have taken a departure from the settled position of law & facts between the parties. Although the doctrine of res judicata do not apply in the income tax proceedings yet however, in absence of any change in the facts & circumstances of the case, the doctrine has been applied by the Courts. 8.2 In the case of CIT v/s Excel Industries Ltd. (2013) 358 ITR 295 (SC), it was held that “Secondly, as noted by the Tribunal, a consistent view had been taken in favour of the assessee, starting with the AY 1992-93, that the benefits under the advance licences or under the duty entitlement pass book do not 27 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA represent the real income of the assessee. Consequently, there was no reason to take a different view unless there are very convincing reasons, none of which had been pointed out by the Revenue. In Radhasoami Satsang Saomi Bagh v. Commissioner of Income Tax, [1992] 193 ITR 321 (SC) Court did not think it appropriate to allow the reconsideration of an issue for a subsequent AY if the same "fundamental aspect" permeates in different AYs. It appears from the record that in several AYs, the Revenue accepted the order of the Tribunal in favour of the assessee and did not pursue the matter any further but in respect of some AYs the matter was taken up in appeal before the High Court but without any success. That being so, the Revenue could not be allowed to flip-flop on the issue further.” 8.3 Sardar Kehar Singh v/s CIT (1991) 92 CTR 88/195 ITR 769 (Raj) 8.4 Although specific submissions were made before the ld. CIT(A) and his attention was drawn to this fact yet however, he completely remained silent. 9. Covered by Settlement Commission Order: Pertinently, a search was carried out in the case of assessee group and in relation thereto, the matter was taken to the Hon’ble Income Tax Settlement Commission, New Delhi. The issue of disallowance u/s 36(1)(iii) has been a subject matter of their consideration, which has been decided in the favour of the assessee in Pr- 53.2 of the order dated 26.04.2018 (PB 179-180 of A.Y. 2010-11) Though the assessment years involved are different, however, the said order, support the contention of the assessee, in principal. The impugned disallowance kindly be deleted in full.” 4.4 On the other hand, the ld. DR strongly relied upon the findings recorded by the authorities below and justified the additions made and confirmed by the ld. CIT(A) and prayed to uphold the addition/disallowance. 4.5 We have heard the rival contentions and pursued the material available on record. Undisputedly, the facts and circumstances of the case are similar to the one 28 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA which we have examined in detail in Ground no. 5 taken by the assessee in its appeal for A.Y. 2010-11 in ITA no. 246/JP/2015 where in the similar disallowance was made, agitated and was deleted vide our order ?. Hence, our findings and directions contained in our order, shall apply mutatis mutandis in Grounds of appeal No. 5 this year as well. Thus Grounds No. 5 of the assessee’s appeal is allowed. 5.1 In Ground No. 6 (wrongly numbered as Ground No. 5 in Appeal Memo), disallowance of Rs. 1,82,418/- made relating to the claim on account of electric connection charges, is agitated. 5.2 The relevant facts in brief are that the AO noted that the assessee had claimed expenditure of Rs. 1,000/-, Rs. 7,225/- & Rs.1,74,193/- for New electricity connection charges. When asked the assessee stated that the charges so paid were for connection charges, electricity lines, supervision charges, CTPT set cost and meter cost but did not create any property. The AO however, feeling dissatisfied, disallowed entire amount of Rs.1,82,418/- mainly on the ground that it is clearly a capital expenditure, which resulted into benefit of enduring nature. He placed reliance on Assam Bengal Cement Co. Ltd. v/s CIT (1955) 27 ITR 0034 (SC). 29 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 5.3 In the first appeal, the detailed submissions were filed before the ld. CIT(A) and reproduced at Pg-29 & 30 of the order of ld. CIT(A). However, the CIT(A) also confirmed the same. Hence this ground. 5.4 Before us, the Ld. AR made the following submissions with prayer to delete the disallowance. “1. Firstly, we strongly rely upon the detailed written submissions filed before the AO as well as before the ld. CIT(A). 2. The AO has not established that such expenditure resulted into creation of a new property or the assessee got an advantage of an endeavouring nature and hence, such a disallowance was wrongly made. The impugned disallowance may kindly be deleted in full.” Hence this ground by the assessee”. 5.5 On the other hand, the ld. DR strongly relied upon the findings recorded by the authorities below and justified the additions made and confirmed by the ld. CIT(A) and prayed to upheld the addition/disallowance. 5.6 We have carefully considered the finding recorded in the impugned orders, the rival contentions raised by both the parties as also the material placed on record and have also gone through the judicial pronouncements cited by the parties. The facts and circumstances of the case, are similar to the one which we have examined in detail in relation to Ground of Appeal no. 6.1 taken by the assessee in its appeal 30 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA for AY 2010-11 decided vide order 4-08-2022 in ITA NO 246/JP/2015, holding as under: “A careful perusal of the facts and the material on record shows that the claimed expenditure of Rs. 2,37,076/- with, AO was on account of connection charges, electricity lines, supervision charges, CTPT set cost and meter cost as contended, (which is evident from the copies of invoices etc. APB 61 &104) such expenditure did not create any new asset and the facts as stated, remaining uncontroverted by the revenue, no disallowance was called for. The authorities below were not justified in making the disallowance hence, the same is hereby is deleted.” Hence, our findings and directions contained towards Grounds No. 6 shall apply mutatis mutandis to this ground of appeal this year as well. In the result, the Grounds No. 6 (wrongly numbered as Ground No. 5 in Appeal Memo) of the assessee’s appeal is allowed. 6.1 In Ground No. 7 (wrongly numbered as Ground No. 6 in Appeal Memo) relating to charging of interest u/s 234A, 234B, 234C & 234D and withdrawal of interest u/s 244A of the Act, the levy and withdrawal of interest being consequential in nature, hence the AO is directed to act accordingly. 31 ITA NO.54/JP/2017 ALLEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 7. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 4 /08/2022. Sd/- Sd/- ¼ jkBksM deys'k t;UrHkkbZ ½ ¼lanhi xkslkbZ½ (Rathod Kamlesh Jayantbhai) (Sandeep Gosain) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 4/08/2022 *Mishra vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The Appellant- M/s. Alllen Career Institute, Kota 2. izR;FkhZ@ The Respondent- JCIT, Range-2, Kota 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZ QkbZy@ Guard File (ITA No. 54/JP/2017) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asstt. Registrar