Appeal Details
Counselvise Citation
[2018] 112 COUNSELVISE.COM (IT) 5168 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
4 year(s) 4 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
03-10-2018
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Assessment Year
2011-2012
Appeal Filed On
29-09-2014
Judgement Text
, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A , MUMBAI , . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.6031/MUM/2014 ASSESSMENT YEAR 2011-12 DCIT, CIRCLE-6(1), R. NO.506, 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020 / VS. M/S ALOK INFRASTRUCTURE PVT. LTD. 2 ND GROUND FLOOR, PENINSULA TOWERS, G. K. MARG, LOWER PAREL, MUMBAI-400013 ( / REVENUE) ( !' /ASSESSEE) P.A. NO. AAGCA1949P C.O. NO.44/MUM/2015 (ARISING OUT OF ITA NO.6031/MUM/2014 ASSESSMENT YEAR 2011-12 M/S ALOK INFRASTRUCTURE PVT. LTD. 2 ND GROUND FLOOR, PENINSULA TOWERS, G. K. MARG, LOWER PAREL, MUMBAI-400013 / VS. DCIT, CIRCLE-6(1), R. NO.506, 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020 ( !' /ASSESSEE) ( / REVENUE) P.A. NO. AAGCA1949P ITA. NO.6031/MUM/2014, CO. NO.44/MUM/2015, ITA NO.6136/MUM/2014, ITA NO.646/MUM/2017 CO. NO.121/MUM/2018 ALOK INFRASTRUCTURE LTD. 2 ITA NO.6136/MUM/2014 ASSESSMENT YEAR 2011-12 M/S ALOK INFRASTR UCTURE PVT. LTD. 2 ND GROUND FLOOR, PENINSULA TOWERS, G. K. MARG, LOWER PAREL, MUMBAI-400013 / VS. DCIT, CIRCLE-6(1), R. NO.506, 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020 ( !' /ASSESSEE) ( / REVENUE) P.A. NO. AAGCA1949P ITA NO.646/MUM/2014 ASSESSMENT YEAR 2012-13 DCIT, CIRCLE-6(1), R. NO.506, 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020 / VS. M/S ALOK INFRASTRUCTURE PVT. LTD. 2 ND GROUND FLOOR, PENINSULA TOWERS, G. K. MARG, LOWER PAREL, MUMBAI-400013 ( / REVENUE) ( !' /ASSESSEE) P.A. NO. AAGCA1949P C.O. NO.121/MUM/2018 (ARISING OUT OF ITA NO.646/MUM/2017 ASSESSMENT YEAR 2012-13 M/S ALOK INFRASTRUCTURE PVT. LTD. 2 ND GROUND FLOOR, PENINSULA TOWERS, G. K. MARG, LOWER PAREL, MUMBAI-400013 / VS. DCIT, CIRCLE-6(1), R. NO.506, 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020 ( !' /ASSESSEE) ( / REVENUE) P.A. NO. AAGCA1949P ITA. NO.6031/MUM/2014, CO. NO.44/MUM/2015, ITA NO.6136/MUM/2014, ITA NO.646/MUM/2017 CO. NO.121/MUM/2018 ALOK INFRASTRUCTURE LTD. 3 !' / ASSESSEE BY SHRI DHARAN GANDHI / REVENUE BY SHRI SATISHCHANDRA RAJORA-DR # $ % '& / DATE OF HEARING : 03/10/2018 % '& / DATE OF PRONOUNCEMENT 03/10/2018 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE AS WELL AS THE ASSESSEE IS IN APPEAL AN D CROSS OBJECTIONS BY THE ASSESSEE. FIRST, WE SHALL T AKE UP THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2011 -12 (ITA NO.6136/MUM/2014), WHEREIN, THE FIRST GROUND R AISED PERTAINS TO PARTLY CONFIRMING THE DISALLOWANCE OF I NTEREST UNDER SECTION 36(1)(III) OF THE INCOME TAX ACT, 196 1 (HEREINAFTER THE ACT) ON THE INVESTMENT MADE BY THE ASSESSEE IN GROUP CONCERNS (OTHER THAN ASHFORT INFO TECH PVT. LTD.). 2. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSE E, SHRI DHARAN GANDHI, CLAIMED THAT THE IMPUGNED ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF T HE TRIBUNAL FOR ASSESSMENT YEAR 2010-11 (ITA NO.2135/MUM/2014), ORDER DATED 26/07/2017. THE LD. ITA. NO.6031/MUM/2014, CO. NO.44/MUM/2015, ITA NO.6136/MUM/2014, ITA NO.646/MUM/2017 CO. NO.121/MUM/2018 ALOK INFRASTRUCTURE LTD. 4 COUNSEL ALSO FILED THE COPY OF THE AFORESAID ORDER OF THE TRIBUNAL DATED 26/07/2017. THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY THE LD. DR, SHRI SATISHCHANDRA RAJO RA. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION FROM THE AFORESAID ORDER OF THE TRIBUNAL:- AFORESAID CROSS APPEALS BY THE ASSESSEE AND THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARE AGA INST COMMON ORDER DATED 23 RD JANUARY 2014, PASSED BY THE LEARNED COMMISSIONER (APPEALS)14, MUMBAI, FOR THE ASSESSMENT YEAR 201011. ITA NO.2304/MUM./2014 ASSESSEE APPEAL 2. GROUND NO.1, IS AGAINST DIRECTION OF THE LEARNED COMMISSIONER (APPEALS) TO DISALLOW PART OF THE INTE REST EXPENDITURE UNDER SECTION 36(1)(III) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ). 3. BRIEF FACTS ARE, THE ASSESSEE IS A COMPANY. AS OBSE RVED BY THE ASSESSING OFFICER, IT IS ENGAGED IN CONSTRUC TION ACTIVITIES. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 15 TH OCTOBER 2010, DECLARING TOTAL INCOME OF ` 3,50,53,120. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ING THAT IN THE EARLIER ASSESSMENT YEAR, INTEREST PAID TO L& T INFRASTRUCTURE FINANCE CO. LTD., WAS DISALLOWED UND ER SECTION 36(1)(III) ON THE REASONING THAT BORROWED FUNDS WER E UTILISED FOR NONBUSINESS ACTIVITIES, PROCEEDED TO APPLY THE SAME REASONING TO THE IMPUGNED ASSESSMENT YEAR AS WELL. HE OBSERVED, AS PER THE ANNUAL ACCOUNTS, THE ASSESSEE HAS SHOWN BORROWED FUNDS OF ` 275 CRORE AS ON 31 ST MARCH 2010, COMPARED TO ` 243 CRORE AS ON 31 ST MARCH 2009. HE OBSERVED, IN THE RELEVANT PREVIOUS YEAR, THE ASSESS EE HAS REPAID THE LOAN OF ` 234 CRORE BY AVAILING FRESH LOANS OF ` ITA. NO.6031/MUM/2014, CO. NO.44/MUM/2015, ITA NO.6136/MUM/2014, ITA NO.646/MUM/2017 CO. NO.121/MUM/2018 ALOK INFRASTRUCTURE LTD. 5 275 CRORE. THUS, STATING THAT BORROWED FUNDS WERE A PPLIED FOR NONBUSINESS PURPOSE, THE ASSESSING OFFICER DIS ALLOWED INTEREST EXPENDITURE OF ` 3,24,64,466 UNDER SECTION 36(1)(III) OF THE ACT BEING INTEREST PAID TO L&T INFRASTRUCTUR E FINANCE CO. LTD. THE ASSESSING OFFICER HELD THAT SINCE THE LOAN AVAILED FROM L&T INFRASTRUCTURE FINANCE CO. LTD. WA S UTILISED FOR NONBUSINESS PURPOSE, THE INTEREST ON LOAN AVAI LED FROM AXIS BANK WHICH WAS UTILISED FOR REPAYING THE LOAN TO L&T INFRASTRUCTURE FINANCE CO. LTD. CANNOT BE ALLOWED A S BUSINESS EXPENDITURE IN TERMS OF SECTION 36(1)(III) OF THE ACT. ACCORDINGLY, HE DISALLOWED INTEREST PAID TO AXIS BA NK AMOUNTING TO ` 3,35,07,885. BEING AGGRIEVED OF SUCH DISALLOWANCES, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. THE LEARNED COMMISSIONER (APPEALS), AFTER EXAMINING THE DETAILS FILED BEFORE HIM FOUND THAT THE ASSESSE E HAS MADE INVESTMENT IN EQUITY SHARES AND SHARE APPLICAT ION MONEY AS UNDER: SR.NO. NAME OF INVESTMENT COMPANY EQUITY SHARES SHARE APPLI CATION MONEY 1. ALSPUN INFRASTRUCTURE LTD. 750000.00 159950000.0 0 2. ASHFORD INFOTECH PVT. LTD. 500000.00 679350000.0 0 3. KESHAM DEVELOPERS & INFOTECH P. LTD. 540000000.00 130000000.00 4. SPRINGDALE INFORMATION AND TECH. P. LTD. 575000000.00 4500000.00 5. ALOK REALTORS P. LTD. 175000000.00 2951309000.00 6. ALOK HB HOTELS PVT. LTD. 500000.00 7. ALOK HB PROPERTIES P. LTD. 500000.00 5. THE LEARNED COMMISSIONER (APPEALS) OBSERVED, INVESTMENT MADE IN EQUITY SHARES AND SHARE APPLICAT ION MONEY OF ASHFORD INFOTECH PVT. LTD., IS FOR THE PURPOSE O F ASSESSEES BUSINESS, HENCE, INTEREST PAYMENT RELATING TO THE F UND UTILISED FOR SUCH ACTIVITY IS ALLOWABLE AS BUSINESS EXPENDIT URE. HOWEVER, AS FAR AS INVESTMENT MADE IN OTHER COMPANIES ARE CO NCERNED, THE LEARNED COMMISSIONER (APPEALS) OBSERVED THAT TH E ASSESSEE FAILED TO DEMONSTRATE THAT THAT IT HAD DER IVED ANY COMMERCIAL BENEFIT OUT OF SUCH INVESTMENTS IN SUBSI DIARIES. HE, THEREFORE, HELD THAT INTEREST ATTRIBUTABLE TO THE F UND UTILISED FOR ITA. NO.6031/MUM/2014, CO. NO.44/MUM/2015, ITA NO.6136/MUM/2014, ITA NO.646/MUM/2017 CO. NO.121/MUM/2018 ALOK INFRASTRUCTURE LTD. 6 SUCH INVESTMENT ACTIVITY HAS TO BE DISALLOWED UNDER SECTION 36(1)(III). 6. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED, LO AN AVAILED FROM L&T INFRASTRUCTURE FINANCE CO. LTD. WA S FULLY UTILISED FOR BUSINESS PURPOSE, HENCE, THE ASSESSING OFFICER WAS WRONG IN CONCLUDING THAT LOAN AVAILED FROM L&T INFR ASTRUCTURE FINANCE CO. LTD. WAS UTILISED FOR INVESTMENT ACTIVI TY. HE SUBMITTED, SIMILAR DISALLOWANCE WAS MADE BY THE ASS ESSING OFFICER IN ASSESSMENT YEAR 200809 AND 200910, HOW EVER, THE TRIBUNAL UPHELD ASSESSEES CLAIM OF DEDUCTION I N RESPECT OF INTEREST EXPENDITURE ON LOAN AVAILED FROM L&T INFRA STRUCTURE FINANCE CO. LTD. IN THIS CONTEXT, HE DREW OUT ATTEN TION TO THE ORDERS PASSED BY THE TRIBUNAL FOR ASSESSMENT YEARS 200809 AND 200910. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED, SINCE THE LOAN AVAILED FROM L&T INFRASTR UCTURE FINANCE CO. LTD. HAS BEEN HELD TO BE FOR THE PURPOS E OF BUSINESS THE INTEREST PAID TO AXIS BANK ON THE LOAN AVAILED FROM AXIS BANK TO REPAY THE LOAN LIABILITY OF L&T I NFRASTRUCTURE FINANCE CO. LTD. ALSO HAS TO BE REGARDED TO BE FOR BUSINESS PURPOSE. HE, THEREFORE, SUBMITTED THAT DISALLOWANCE OF INTEREST EXPENDITURE MADE BY THE ASSESSING OFFICER HAS TO BE DELETED FULLY. 7. LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND SUBMITTED, THE ASSESSEE HAVING FAILED TO CONCL USIVELY PROVE THAT NO BORROWED FUNDS HAVE BEEN UTILISED FOR INVESTMENT ACTIVITIES, DISALLOWANCE OF INTEREST EXPENDITURE MA DE BY THE ASSESSING OFFICER SHOULD BE RESTORED. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS EVIDENT FROM TH E FACTS DISCUSSED BY THE ASSESSING OFFICER IN THE ASSESSMEN T ORDER THAT IN THE RELEVANT PREVIOUS YEAR ASSESSEE HAD LOAN LIA BILITIES OF ` 43 CRORE AND ` 200 CRORE FROM L&T INFRASTRUCTURE FINANCE CO. LTD. AND AXIS BANK RESPECTIVELY. HE HAS ALSO NOTED THAT THE AFORESAID LOAN LIABILITY WAS REPAID BY THE ASSESSEE BY AVAILING FRESH LOAN OF ` 75 CRORE FROM INDIA BULLS AND ` 200 CRORE FROM J&K BANK. THE ASSESSING OFFICER HAS DISALLOWED INTE REST PAID TO L&T INFRASTRUCTURE FINANCE CO. LTD. AND AXIS BANK O N THE REASONING THAT THE BORROWED FUNDS AVAILED FROM L&T INFRASTRUCTURE FINANCE CO. LTD. WAS UTILISED FOR IN VESTMENT ACTIVITIES. IN OTHER WORDS, SUCH LOAN WAS UTILISED FOR NON BUSINESS PURPOSE. IT IS ALSO EVIDENT THE ASSESSING OFFICER HAS COME TO SUCH CONCLUSION BY RELYING UPON SIMILAR DIS ALLOWANCE MADE IN THE EARLIER ASSESSMENT YEARS. NOTABLY, IN A SSESSMENT YEAR 200809, THE ASSESSING OFFICER DISALLOWED INTE REST EXPENDITURE ON BORROWINGS OF ` 43 CRORE FROM L&T ITA. NO.6031/MUM/2014, CO. NO.44/MUM/2015, ITA NO.6136/MUM/2014, ITA NO.646/MUM/2017 CO. NO.121/MUM/2018 ALOK INFRASTRUCTURE LTD. 7 INFRASTRUCTURE FINANCE CO. LTD. HOWEVER, WHEN THE V ALIDITY OF SUCH DISALLOWANCE CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN AN APPEAL FILED BY THE REVENUE, THE TRI BUNAL WHILE DECIDING THE ISSUE IN ORDER DATED 29 TH JULY 2016, IN ITA NO.818/MUM./2012 AND ITA NO.1651/MUM./2012, HELD AS UNDER: 12. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE HAS PRIMARILY RELIED UPON THE ORDER OF THE ASSESSING OFFICER IN S UPPORT OF THE CASE OF THE REVENUE, WITHOUT CONTROVERTING ANY OF THE FA CTUAL MATRIX BROUGHT OUT BY THE CIT(A). NOTABLY, THE CIT(A) IN P ARA 3.9 OF HIS ORDER HAS REFERRED TO THE FUND FLOW STATEMENT FURNI SHED BY THE ASSESSEE WHEREBY, ASSESSEE HAD OWNED INTEREST FREE FUNDS OF RS.193.70 CRORES AND INVESTMENT IN SUBSIDIARY WAS R S.135.00 CRORES. ON THIS BASIS, THE CIT(A) HAS CONCLUDED THAT ASSESS EE HAD SUFFICIENT OWN FUNDS AND , THEREFORE, FOLLOWING THE JUDGMENT O F HON'BLE BOMBAY HIGH COURT IN THE CASE RELIANCE UTILITIES AND POWER LIMITED(SUPRA), IT CAN BE PRESUMED THAT NO BORROWED FUNDS WERE USED TO MAKE SUCH INVESTMENTS. AS PER HON'BLE BOMBAY HIGH COURT, THE PRINCIPLE IS THAT, IF THERE ARE FUNDS AVAILABLE BOTH INTEREST FREE AND INTEREST BEARING, THEN A PRESUMPTION CAN BE DRAWN THAT INVESTMENTS AR E MADE OUT OF INTEREST FREE FUNDS, SO LONG AS SUCH INTEREST FREE FUNDS ARE SUFFICIENT TO MEET THE INVESTMENTS. IN OUR CONSIDERED OPINION, HAVING REGARD TO THE FACT POSITION BROUGHT OUT BY THE CIT(A), THE PR OPOSITION LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF REL IANCE UTILITIES AND POWER LIMITED(SUPRA) IS FULLY ATTRACTED IN THE PRESENT CASE. SUCH FACT-SITUATION HAS BEEN ENUMERATED BY THE CIT(A) IN PARA 3.4 OF HIS ORDER, WHICH DEPICTS THE SUMMARIZED FUND FLOW POSIT ION OF THE ASSESSEE, AND THE SAME HAS NOT BEEN CONTROVERTED BY THE REVENUE BEFORE US, RATHER THE SAME IS ALSO BORNE OUT OF THE MATERIAL PLACED IN THE PAPER BOOK FILED BEFORE US. THEREFORE, ON THIS COUNT ITSELF, WE FIND NO REASON TO INTERFERE WITH THE ULTIMATE CONCLUSION OF THE CIT(A) IN DELETING THE ADDITION OF RS.62,56,945/- WHICH WE HE REBY AFFIRM. THUS, ON THIS ASPECT ALSO REVENUE FAILS. 9. SIMILAR VIEW WAS AGAIN EXPRESSED BY THE TRIBUNAL WH ILE DECIDING CROSS APPEALS FOR ASSESSMENT YEAR 200910 IN ASSESSEES OWN CASE VIDE ITA NO.4843/MUM./2013 AND C.O. NO.198/MUM./2014, DATED 6 TH OCTOBER 2016. THUS, AS FAR AS THE NATURE OF UTILISATION OF LOAN AVAILED OF ` 43 CRORE FROM L&T INFRASTRUCTURE FINANCE CO. LTD. IS CONCERNED, THE I SSUE IS SETTLED IN FAVOUR OF THE ASSESSEE BY THE DECISIONS OF THE TRIBUNAL REFERRED TO ABOVE, WHEREIN, IT HAS BEEN HE LD THAT SUCH LOAN AVAILED WAS FOR BUSINESS PURPOSE. THAT BEING T HE CASE, THE INTEREST PAID TO L&T INFRASTRUCTURE FINANCE CO. LTD . FOR AVAILING SUCH LOAN CANNOT BE DISALLOWED UNDER SECTION 36(1)( III) OF THE ACT. AS FAR AS THE LOAN AVAILED FROM AXIS BANK IS C ONCERNED, THE ASSESSING OFFICER HIMSELF HAS STATED THAT IT WAS UT ILISED FOR REPAYMENT OF LOAN LIABILITY OF L&T INFRASTRUCTURE F INANCE CO. LTD. THUS, WHEN THE LOAN AVAILED FROM L&T INFRASTRU CTURE ITA. NO.6031/MUM/2014, CO. NO.44/MUM/2015, ITA NO.6136/MUM/2014, ITA NO.646/MUM/2017 CO. NO.121/MUM/2018 ALOK INFRASTRUCTURE LTD. 8 FINANCE CO. LTD. HAS BEEN HELD TO BE FOR THE PURPOS E OF BUSINESS INTEREST PAID ON LOAN AVAILED FOR DISCHARG ING THE SAID LIABILITY WOULD ALSO BE FOR BUSINESS PURPOSE. THERE FORE, NO DISALLOWANCE OF THE INTEREST EXPENDITURE IN TERMS O F SECTION 36(1)(III) OF THE ACT CAN BE MADE. IN OUR VIEW, THE LEARNED COMMISSIONER (APPEALS) WITHOUT PROPERLY APPRECIATIN G THE FACT HAS CONFIRMED DISALLOWANCE OF INTEREST UNDER SECTIO N 36(1)(III) BARRING INVESTMENTS MADE IN ASHFORD INFOTECH PVT. L TD. THERE IS NO MATERIAL BEFORE THE DEPARTMENTAL AUTHORITIES TO CONCLUDE THAT THE INTEREST DISALLOWED BY THE ASSESSING OFFIC ER PERTAINED TO UTILISATION OF BORROWED FUND FOR INVESTMENT ACTI VITIES. ON THE CONTRARY, THE TRIBUNAL IN EARLIER ASSESSMENT YEARS HELD THAT THE LOAN AVAILED FROM L&T INFRASTRUCTURE LTD. WAS FOR B USINESS PURPOSE. THAT BEING THE CASE, THERE CANNOT BE ANY I NTEREST DISALLOWANCE ON THAT ACCOUNT. ACCORDINGLY, WE DELET E THE ADDITION. THIS GROUND IS ALLOWED. 2.2. WE FIND THAT IN THE AFORESAID ORDER, THE TRIB UNAL DULY CONSIDERED THE FACTUAL MATRIX AND ANOTHER DECI SION OF THE TRIBUNAL DATED 29/07/2016 (ITA NO.818 AND 1651/MUM/2012), WHEREIN, IT WAS HELD THAT THE LOAN AVAILED FORM L & T INFRASTRUCTURE LTD. WAS FOR BUSI NESS PURPOSES, THEREFORE, THERE CANNOT BE ANY INTEREST DISALLOWANCE ON THAT ACCOUNT. CONSEQUENTLY, THE ADD ITION WAS DIRECTED TO BE DELETED. FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL AND IN THE ABSENCE OF ANY CONTRARY MAT ERIAL BROUGHT TO OUR NOTICE, THIS GROUND OF THE ASSESSEE IS ALLOWED. 3. THE NEXT GROUNDS I.E. 4 TO 10, RAISED BY THE ASSESSEE, PERTAINS TO CONFIRMING THE DISALLOWANCE U NDER ITA. NO.6031/MUM/2014, CO. NO.44/MUM/2015, ITA NO.6136/MUM/2014, ITA NO.646/MUM/2017 CO. NO.121/MUM/2018 ALOK INFRASTRUCTURE LTD. 9 SECTION 14A OF THE INCOME TAX ACT, 1961 (HEREINAFTE R THE ACT) R.W.R 8D OF THE RULES. THE CRUX OF ARGUMENT ON BEHALF OF THE ASSESSEE IS THAT NO EXEMPT INCOME WAS EARNED BY THE ASSESSEE. IT WAS CLAIMED THAT THIS ISSUE IS ALSO CO VERED BY THE AFORESAID DECISION OF THE TRIBUNAL. 3.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE LI GHT OF THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION FROM THE AFORESAID ORDER OF THE TRIBUNAL FOR READY REFERENCE AND ANALYSIS:- 10. THE NEXT ISSUE AS RAISED IN GROUNDS NO.2 TO 8 RELAT ES TO DISALLOWANCE MADE UNDER SECTION 14A R/W RULE 8D. 11. BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICING THAT THE ASSESSEE HAS IN VESTED IN SHARES WHICH WOULD YIELD EXEMPT INCOME PROCEEDED TO MAKE DISALLOWANCE OF AN AMOUNT OF ` 71,31,290 UNDER SECTION 14A R/W RULE 8D. 12. THE LEARNED COMMISSIONER (APPEALS) ALSO CONFIRMED THE DISALLOWANCE UNDER SECTION 14A WITH PARTIAL MODIFICATION. 13. LEARNED AUTHORISED REPRESENTATIVE SUBMITTED, IN THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE HAS NOT EARN ED ANY EXEMPT INCOME, THEREFORE, NO DISALLOWANCE UNDER SEC TION 14A R/W RULE 8D CAN BE MADE. 14. LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND THE LEARN ED COMMISSIONER (APPEALS). ITA. NO.6031/MUM/2014, CO. NO.44/MUM/2015, ITA NO.6136/MUM/2014, ITA NO.646/MUM/2017 CO. NO.121/MUM/2018 ALOK INFRASTRUCTURE LTD. 10 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A PERUSAL OF THE ASSESSMENT ORDER, IT IS EVIDENT, THE ASSESSING OFFI CER HAS MADE DISALLOWANCE UNDER SECTION 14A R/W RULE 8D ON THE REASONING THAT INVESTMENT MADE BY THE ASSESSEE IN S HARES WOULD YIELD EXEMPT INCOME. HOWEVER, THERE IS NOTHIN G ON RECORD TO SUGGEST THAT IN THE RELEVANT PREVIOUS YEA R ASSESSEE EARNED ANY EXEMPT INCOME BY WAY OF DIVIDEN D. IN FACT, THE COMPUTATION OF INCOME FILED BY THE ASSESS EE FOR THE IMPUGNED ASSESSMENT YEAR DEMONSTRATES THAT ASSE SSEE HAS NOT EARNED ANY EXEMPT INCOME DURING THE RELEVAN T PREVIOUS YEAR. IN ASSESSEES OWN CASE, FOR ASSESSME NT YEAR 200809 AND 200910, TRIBUNAL, IN ORDERS REFERRED T O HEREIN BEFORE, HAS HELD THAT IN THE ABSENCE OF ANY EXEMPT INCOME EARNED BY THE ASSESSEE NO DISALLOWANCE UNDER SECTION 14A R/W RULE 8D CAN BE MADE. FOLLOWING THE CONSISTENT VIEW OF THE TRIBUNAL IN ASSESSEES OWN C ASE, WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER. 16. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. SINCE, NO EXEMPT INCOME WAS EARNED BY THE ASSESSEE AND THE ASSESSEE SUO-MOTO DISALLOWANCE OF RS.4,68,8 11/- AND HAVING NEXUS WITH THE BUSINESS OF THE ASSESSEE, THEREFORE, FOLLOWING THE AFORESAID ORDER OF THE TRI BUNAL, THESE GROUNDS OF THE ASSESSEE IS ALSO ALLOWED. 4. NOW, WE SHALL TAKE UP THE APPEAL OF THE REVENUE (ITA NO.6031/MUM/2014), WHEREIN, GROUND NO.1 IS WIT H RESPECT TO DELETE THE ADDITION MADE UNDER SECTION 3 6(1)(III) OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE CLAIME D THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL. THE LD. DR DID NOT CONTRO VERT THE ITA. NO.6031/MUM/2014, CO. NO.44/MUM/2015, ITA NO.6136/MUM/2014, ITA NO.646/MUM/2017 CO. NO.121/MUM/2018 ALOK INFRASTRUCTURE LTD. 11 CLAIM OF THE ASSESSEE. WE HAVE DEALT WITH THIS ISSU E WHILE DEALING WITH IDENTICAL ISSUE IN ITA NO.6136/MUM/201 4 ((SUPRA)), THEREFORE, ON THE SAME REASONING AND FOL LOWING THE AFORESAID ORDER OF THE TRIBUNAL, THIS GROUND OF THE REVENUE IS HAVING NO MERIT, RESULTANTLY, DISMISSED. 5. THE GROUNDS NO. 2 & 3 PERTAINS TO DIRECTING THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESS EE IN RESPECT OF ISSUE OF LOAN OBTAINED FROM INDIA BULLS UTILIZED FOR GIVING INTER-CORPORATE DEPOSITS TO ITS SUBSIDIA RIES, AGAINST WHICH INTEREST INCOME HAS BEEN EARNED. THE LD. COUNSEL FOR THE ASSESSEE CLAIMED THAT THIS ISSUE IS COVERED BY THE DECISION DATED 26/07/2017 (ITA NO.2135 & 2304/MUM/2014). THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY THE LD. DR. 5.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION FROM THE AFORESAID ORDER OF THE TRIBUNAL DATED 26/07/2017:- ITA. NO.6031/MUM/2014, CO. NO.44/MUM/2015, ITA NO.6136/MUM/2014, ITA NO.646/MUM/2017 CO. NO.121/MUM/2018 ALOK INFRASTRUCTURE LTD. 12 19. IN GROUND NO.2 AND 3, THE REVENUE HAS CHALLENGED CERTAIN DIRECTIONS ISSUED BY THE LEARNED COMMISSION ER (APPEALS) IN RELATION TO ALLOWABILITY OF INTEREST E XPENDITURE. 20. BEFORE THE FIRST APPELLATE AUTHORITY, IT WAS CONTEN DED BY THE ASSESSEE THAT LOAN OF ` 75 CRORE OBTAINED FROM INDIA BULLS WAS UTILISED FOR GIVING INTERCORPORATE DEPOSITS TO ITS SUBSIDIARY ALOK REALTORS PVT. LTD., AGAINST WHICH THE ASSESSEE HAS EARNED INTEREST INCOME. AFTER CONSIDERING THE AFORESAID SU BMISSION OF THE ASSESSEE, THE LEARNED COMMISSIONER (APPEALS) DI RECTED THE ASSESSING OFFICER TO VERIFY ASSESSEES CLAIM AND IF A NEXUS IS ESTABLISHED BETWEEN THE INTEREST EARNED AND INTERES T PAID THEN TO GIVE CONSEQUENTIAL RELIEF TO THE ASSESSEE. THE G RIEVANCE OF THE DEPARTMENT AGAINST THE AFORESAID DIRECTION IS, THE COMMISSIONER (APPEALS) HAS NO POWER TO SET ASIDE TH E ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSE SSING OFFICER. 21. THE LEARNED AUTHORISED REPRESENTATIVE ON THE OTHER HAND SUPPORTED THE ORDER OF THE LEARNED COMMISSIONE R (APPEALS). 22. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS COULD BE SEEN FROM THE SUBMISSIONS MADE BY THE ASSESSEE IN THE COURSE OF A SSESSMENT PROCEEDINGS, THE ASSESSEE HAS FURNISHED ALL THE DET AILS RELATING TO THE LOAN AVAILED AS WELL AS THE PURPOSE FOR WHIC H SUCH BORROWED FUNDS WAS UTILISED. BEFORE THE ASSESSING O FFICER HIMSELF, THE ASSESSEE HAD EXPLAINED THAT THE LOAN R ECEIVED FROM INDIA BULLS IS UTILISED FOR PROVIDING INTERCO RPORATE DEPOSIT TO ONE OF ITS SUBSIDIARY AND ON SUCH DEPOSITS ASSES SEE HAS RECEIVED INTEREST. IT IS RELEVANT TO OBSERVE, IN SP ITE OF SUCH DETAILS FURNISHED BY THE ASSESSEE, THE ASSESSING OF FICER HAS NEITHER EXAMINED THE ISSUE IN DETAIL NOR HAS MADE A NY DISCUSSION IN THE ASSESSMENT ORDER IN THAT REGARD. IN THE AFORESAID CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMI TY IN THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) TO UPSE T THE SAME. ACCORDINGLY, GROUNDS RAISED ARE DISMISSED. 23. IN THE RESULT, REVENUES APPEAL IS DISMISSED. WE FIND THAT IN THE AFORESAID CASE ALSO SIMILAR DIR ECTIONS WERE GIVEN TO THE LD. ASSESSING OFFICER BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL) TO VERIFY THE C LAIM OF THE ASSESSEE WITH RESPECT TO INTEREST EARNED AND IN TEREST ITA. NO.6031/MUM/2014, CO. NO.44/MUM/2015, ITA NO.6136/MUM/2014, ITA NO.646/MUM/2017 CO. NO.121/MUM/2018 ALOK INFRASTRUCTURE LTD. 13 PAID AND CONSEQUENT NEXUS. FOLLOWING THE AFORESAID DECISION OF THE TRIBUNAL, WE FIND NO MERIT IN THE G ROUND OF THE REVENUE. THUS, THE APPEAL OF THE REVENUE IS DISMISSED. 6. NOW, WE SHALL TAKE UP THE CROSS OBJECTION NO.44/MUM/2015 (ARISING OUT OF ITA NO.6031/MUM/2014). THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT IF THE APPEAL OF THE REVENUE IS DISM ISSED, THE CROSS OBJECTION WILL BECOME IN-FRUCTUOUS. SINCE , WE HAVE DISMISSED THE APPEAL OF THE REVENUE, THE GROUN D RAISED IN THIS CROSS OBJECTION HAVE BECOME IN-FRUCT UOUS. CONSEQUENTLY, DISMISSED AS IN-FRUCTUOUS. 7. NOW, WE SHALL TAKE UP THE APPEAL OF THE REVENUE (ITA NO.646/MUM/2017), WHEREIN, THE FIRST GROUND PERTAINS TO DELETING THE ADDITION MADE UNDER SECTIO N 36(1)(III) OF THE ACT AND THE SECOND GROUND PERTAIN S TO DELETE THE DISALLOWANCE MADE UNDER SECTION 14A OF T HE ACT R.W.R 8D OF THE RULES. THE LD. COUNSEL FOR THE ASSE SSEE AS WELL AS THE LD. DR CLAIMED THAT IT WILL BE DEPENDEN T UPON ITA. NO.6031/MUM/2014, CO. NO.44/MUM/2015, ITA NO.6136/MUM/2014, ITA NO.646/MUM/2017 CO. NO.121/MUM/2018 ALOK INFRASTRUCTURE LTD. 14 THE OUTCOME OF THE EARLIER APPEALS. SINCE, WE HAVE DECIDED THESE ISSUES IN FAVOUR OF THE ASSESSEE, THEREFORE, THIS APPEAL OF THE REVENUE IS DISMISSED. 8. SO FAR AS, CROSS OBJECTION NO.121/MUM/2018 (ARISING OUT OF ITA NO.646/MUM/2017) IS CONCERNED, IN VIEW OF OUR ABOVE ORDER, THIS CROSS OBJECTION HAVE BECOME IN-FRUCTUOUS, CONSEQUENTLY, DISMISSED. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED, THE APPEALS OF THE REVENUE AS WELL AS THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 03/10/2018. SD/- (G. MANJUNATHA) SD/- (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER # $ MUMBAI; + DATED : 09 /10/2018 F{X~{T? P.S/. . . , %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. ,-./ / THE APPELLANT ITA. NO.6031/MUM/2014, CO. NO.44/MUM/2015, ITA NO.6136/MUM/2014, ITA NO.646/MUM/2017 CO. NO.121/MUM/2018 ALOK INFRASTRUCTURE LTD. 15 2. 01./ / THE RESPONDENT. 3. 2 2 # 3' , ( ,- ) / THE CIT, MUMBAI. 4. 2 2 # 3' / CIT(A)- , MUMBAI 5. 56 0' , 2 ,-& , , # $ / DR, ITAT, MUMBAI 6. 7 8$ / GUARD FILE. / BY ORDER, / (DY./ASSTT. REGISTRAR) , # $ / ITAT, MUMBAI
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