Appeal details
Counselvise Citation
[2019] 116 COUNSELVISE.COM (IT) 0446 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 6 month(s) 4 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
12-09-2019
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
B
Next Hearing Date
05-03-2019
Assessment Year
2012-2013
Appeal Filed On
08-03-2017
Judgement Text
] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.565/PUN/2017 / ASSESSMENT YEAR : 2012-13 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 2, JALGAON. . / APPELLANT. V/S TAPI PRESTRESSED PRODUCTS LIMITED, ANJALE SHIVAR, TAL: YAWAL, JALGAON 425 201. PAN : AAACT6669D. . / RESPONDENT ASSESSEE BY : SHRI SANKET JOSHI. REVENUE BY : SHRI VODAL RAJ SINGH. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE REVENUE IS EMANATING OUT OF THE O RDER OF COMMISSIONER OF INCOME TAX (A) 2, NASHIK DATED 29.12.201 6 FOR THE ASSESSMENT YEAR 2012-13. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS A COMPANY ENGAGED AS CIVIL CONTRACTOR. ASSES SEE FILED ITS ORIGINAL RETURN OF INCOME FOR A.Y. 2012-13 ON 30.09.2012 DECLARING TOTAL INCOME OF RS.5,97,32,548/-. SUBSEQUENTLY, ASSESSEE R EVISED THE RETURN OF INCOME ON 31.03.2014 WHEREIN THE TOTAL INCOME WA S REVISED TO / DATE OF HEARING : 02.08.2019 / DATE OF PRONOUNCEMENT: 12.09.2019 2 RS1,33,62,455/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER D T.27.03.2015 AND THE TOTAL INCOME WAS DETERMINED AT RS.10,12,60,322/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.29.12.2016 (IN APPEAL NO.NSK/CIT(A)-2/186/15- 16) GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISE D THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, TH LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 69 R 37,663 U/S14 R.W.RUE 8D BY RELYING ON THE DECISION OF CIT VS HDF C BANK (2014) 16 DTR 140, WHICH HAS NOT BECOME FINAL. FURTHER, TH E ASSESSEE HA INVESTMENT IN THE COMPANIES, WHOSE INCOME WILL/SHAL L FORM PART OF THE EXEMPT INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LOW, THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 10,62,382/- U/S 36(1)(III) WITHOUT APPRECIATING THE FACT THAT THE A SSESSEE HAS FAILED TO PROVE THE BUSINESS NEXUS OF THE LOANS GIVEN TO THE SISTER CONCERN. 3. THE ORDER OF THE LD.CIT(A)-2, NASHIK BE CANCELLE D ON THE ABOVE ISSUES AND THAT OF THE A.O BE RESTORED. 3. FIRST GROUND IS WITH RESPECT TO DISALLOWANCE U/S 14A OF THE ACT. 3.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOT ICED THAT ASSESSEE HAD INVESTMENTS TO THE TUNE OF 10.88 CRORES (ROUNDED OFF). ASSESSEE WAS ASKED TO FILE THE WORKING OF THE DISALLOWANCE U/S 14A OF THE ACT WHICH WAS WORKED OUT AT RS.40,307/-. THE WORK ING OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE AO. AO THERE AFTER WORKED OUT THE DISALLOWANCE U/S 14A R.W. 8D OF I.T. RULES AT RS.6 9,37,663/- AND MADE ITS ADDITION. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO DELETED THE DISALLOWANCE MADE BY THE AO BY NOTING THE FACT THAT ASSESSEE WAS HAVING SUFFICIENT INT EREST FREE FUNDS AND THEREFORE NO INTEREST EXPENDITURE CAN BE SAID TO H AVE INCURRED IN RESPECT OF INVESTMENT IN THE SHARES OF THE COMPANIES AN D FOR WHICH 3 RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LIMITED (2014) 160 DTR 1 40. LD.CIT(A) ALSO NOTED THAT ASSESSEE HAD NOT EARNED ANY EX EMPT INCOME IN RESPECT OF THE INVESTMENT IN SHARES AND THAT IN THE AB SENCE OF EXEMPT INCOME, NO DISALLOWANCE U/S 14A OF THE ACT IS CALLED FOR. HE THUS DELETED THE ADDITION MADE BY THE AO. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPE AL BEFORE US. 4. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF AO. LD.A.R. O N THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE AO AN D LD.CIT(A) AND FURTHER SUBMITTED THAT SINCE ASSESSEE HAS NOT EARN ED ANY EXEMPT INCOME, NO DISALLOWANCE U/S 14A OF THE ACT IS CALLED FOR. H E THUS SUPPORTED THE ORDER OF LD.CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPEC T TO DISALLOWANCE U/S 14A OF THE ACT. IT IS ASSESSEES CONTENTION THAT N O EXEMPT INCOME HAS BEEN EARNED BY THE ASSESSEE AND THAT THE ASSESS EE HAS SUFFICIENT INTEREST FREE FUNDS AND THEREFORE NO DISALLOWANCE ON ACCOU NT OF INTEREST EXPENSES CAN BE MADE. THE AFORESAID CONTENTIONS OF THE ASSESSEE HAVE BEEN ACCEPTED BY THE LD.CIT(A) AND IT IS NOT IN DISPUTE. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LIMITED (SUPRA ) HAS HELD THAT WHEN THE OWN FUNDS ARE MORE THAN INVESTMENTS THE N NO DISALLOWANCE OF INTEREST U/S 14A OF THE ACT IS CALLED FOR. B EFORE US, REVENUE HAS NOT PLACED ANY CONTRARY BINDING DECISION IN ITS SUPPORT . AS FAR AS THE DISALLOWANCE U/S 14A OF THE ACT WHEN NO EXEMP T INCOME IS EARNED BY ASSESSEE IS CONCERNED, WE FIND THAT HONBLE APEX COURT IN THE 4 CASE OF PCIT VS. OIL INDUSTRY DEVELOPMENT BOARD REPORTE D IN (2019) 103 TAXMANN.COM 326 (SC) HAD DISMISSED THE SLP FILED BY THE DE PARTMENT AGAINST THE HON'BLE HIGH COURTS DECISION WHICH HAD UPHELD TRIBUNALS ORDER THAT IN THE ABSENCE OF ANY EXEMPT INCOME, DISALLOWAN CE U/S 14A OF ANY AMOUNT WAS NOT PERMISSIBLE. CONSIDERING THE AFORESA ID FACTS AND IN THE LIGHT OF THE DECISIONS CITED HEREINABOVE, WE FIND NO R EASON TO INTERFERE WITH THE ORDER OF LD.CIT(A). THUS, THE GROUND NO.1 OF REVENUE IS DISMISSED. 6. 2 ND GROUND IS WITH RESPECT TO DISALLOWANCE U/S 36(1)(III) OF THE ACT. 6.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO HAS NOTED THAT ASSESSEE HAS GIVEN INTEREST FREE ADVANCE OF RS.54,28,625 /- TO ITS RELATED PARTIES NAMELY, M/S. M.K. KOTECHA ENGG AND CONTRACTOR AN D M/S. M.K. KOTECHA PRESTRESSED PRODUCTS PVT. LTD. AO ALSO NOTICE D THAT ASSESSEE HAD DEBITED INTEREST PAYMENT ON LOANS OF RS.12 CRORES (ROUNDED OFF). AO THEREAFTER WORKED OUT THE AVERAGE RATE OF INTEREST ON THE BORROWINGS AT RS.19.5%. APPLYING THE AFORESAID RATE ON THE AMOUNT ADV ANCED INTEREST FREE BY THE ASSESSEE TO ITS RELATED PARTIES, HE WORKED OUT THE DISALLOWANCE AT RS.10,62,382/- AND MADE ITS ADDITION. AGGRIE VED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO AFTER NOTING THE FACT THAT SHARE CAPITAL OF THE ASSESSEE WAS R S.4.42 CRORES AND RESERVES AND SURPLUS WAS RS.85.94 CRORES AND HAD D URING THE YEAR EARNED NET PROFITS OF RS.5.85 CRORES CONCLUDED THAT THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE WERE MUCH MORE THAN AM OUNT ADVANCED OF RS.54.28 LAKHS. HE THEREFORE RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANC E UTILITIES & POWER LIMITED REPORTED IN (2009) 313 ITR 340 (BOM), DELETED THE ADDITION. 5 AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPE AL BEFORE US. 7. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF AO. LD.A.R. ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE LOWER AUTHORITIES AND SUBMITTED THAT ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVES AND SURPLUS, WHICH ARE MUCH MORE THAN THE AMOUNTS ADVANCED BY THE ASSESSEE TO ITS RELATED PART IES AND IN SUCH A CASE, PRESUMPTION IS THAT THE AMOUNTS ADVANC ED ARE FROM INTEREST FREE FUNDS AND NOT FROM BORROWED FUNDS AND THER EFORE NO DISALLOWANCE IS CALLED FOR IN THE PRESENT CASE. HE THUS SUP PORTED THE ORDER OF LD.CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPECT TO THE DISALLOWANCE U/S 36(1)(III) OF THE ACT. BEFORE US, IT IS ASSESSE ES CONTENTION THAT THE AVAILABILITY OF INTEREST FREE FUNDS IN THE FORM OF SHAR E CAPITAL, RESERVES AND SURPLUS ARE MUCH MORE THAN THE AM OUNT ADVANCED BY THE ASSESSEE TO ITS RELATED PARTIES. THE AFORESAID CONTENTION IS NOT DISPUTED BY REVENUE. WE FIND THAT LD.C IT(A) RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES (SUPRA) HELD THAT WHEN INTEREST FREE FUNDS ARE MOR E THAN THE AMOUNT ADVANCED, THEN THE PRESUMPTION IS THAT THE AMOU NT ADVANCED ARE OUT OF INTEREST FREE FUNDS. BEFORE US, REVENUE HAS NE ITHER POINTED OUT ANY CONTRARY BINDING DECISION IN ITS SUPPORT NOR PLACE D ANY MATERIAL TO CONTROVERT THE FINDINGS OF LD.CIT(A). CONSIDERING THE TOT ALITY OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORD ER OF LD.CIT(A), AND THUS, THE GROUND NO.2 OF THE REVENUE IS DISMISSED. 6 9. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON 12 TH DAY OF SEPTEMBER, 2019. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 12 TH SEPTEMBER, 2019. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-2, NASHIK. PR. CIT-2, NASHIK. '#$ %%&',) &', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER // TRUE COPY // -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.
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