ACIT, CIRCLE- 31(1), NEW DELHI V. IFFCO LTD., NEW DELHI

ITA 6083/DEL/2017

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 6342 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 28-09-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER IT A NO. 6083 /DEL/20 1 7 ASSESSMENT YEAR 2011-12 ACIT, CIRCLE-31(1), NEW DELHI. VS. IFFCO LTD., SADAN, C-1, DISTT. CENTRE, SAKET PALACE, NEW DELHI. TAN/PAN: AAAA10050M (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI RAJESH KUMAR, SR.D.R. RESPONDENT BY: SHRI TARANDEEP SINGH, ADV. DATE OF HEARING: 25 01 2021 DATE OF PRONOUNCEMENT: 25 01 2021 O R D E R PER AMIT SHUKLA, JUDICIAL MEMBER: THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE IMPUGNED ORDER DATED 30.06.2017 PASSED BY CIT(A)-XXXI, NEW DELHI FOR THE QUANTUM OF ASSESSMEN T PASSED U/S.143(3) FOR THE ASSESSMENT YEAR 2011-12 O N FOLLOWING GROUNDS:- 1. WHETHER LD. CIT(A) WAS JUSTIFIED IN DELETING TH E DISALLOWANCE OF RS.18.17 CRORE AS PER RULE 8D(2)(II ) WHEN THE FACTS OF THE CASE RELIED UPON BY LD. CIT(A) IN THE CASE OF BHARTI OVERSEAS PVT. LTD., ARE DIFFERENT AS THIS CASE IS R ELATED TO THE INTEREST ON BORROWINGS TAKEN FOR BUSINESS PURPOSES LIKE CASH CREDIT AND SHORT TERM LOANS WHICH IS NOT IN THE CAS E OF M/S. IFFCO. ITAS NO.6083/DEL/2017 2 2. THE BRIEF FACTS QUA THE ISSUE INVOLVED ARE THAT THE ASSESSEE IS A MULTI-STATE COOPERATIVE SOCIETY AND H AD SHOWN DIVIDEND INCOME FROM VARIOUS COMPANIES AS WELL FROM JOINT VENTURE WITH M/S. OMIFCO AT OMAN FOR SUMS AMOUNTING TO RS.165,20,92,522/-. THE ASSESSING OFFICER AFTER DET AILED DISCUSSION COMPUTED THE DISALLOWANCE UNDER RULE 8D AT RS.20.49 CRORE. SINCE, THE REVENUE HAS CHALLENGED T HE DISALLOWANCE OF INTEREST UNDER RULE 8D(2)(II) ONLY, THE RELEVANT OBSERVATION AND THE FINDING OF THE LD. CIT(A) IN TH IS REGARD ARE THAT, AT THE END OF THE FINANCIAL YEAR 2010-11, THE SOCIETYS TOTAL BORROWINGS WAS AT RS.11,352 CRORE, WHEREAS TH E FUND REQUIRED FOR MAKING CAPITAL AND FIXED ASSETS STOOD AT RS.19,791 CRORE. FURTHER, THE BANK HAS IMPOSED STRI NGENT END USE CONDITION AND LIMITS WHILE SANCTIONING THE LOANS WHICH WERE ONLY FOR THE SPECIFIC PURPOSES. THERE WA S SPECIFIC PROHIBITION FOR THE USE OF THE FUNDS FOR INVESTMENT IN SHARES OF OTHER COMPANIES AND CAPITAL MARKETS. SO THE BORR OWED FUNDS COULD NOT HAVE UTILISED FOR THE INVESTMENT PU RPOSES. IT HAS BEEN FURTHER NOTED THAT THERE WAS HUGE AVAILABI LITY OF ASSESSEES OWN SURPLUS FUNDS, THE DETAILS OF WHICH WERE FURNISHED BY THE ASSESSEE. IN THESE CIRCUMSTANCES I T HAS BEEN HELD THAT NO DISALLOWANCE OF INTEREST COULD HAVE BE EN MADE. THE RELEVANT OBSERVATION AND THE CONCLUSION DRAWN B Y THE LD. CIT (A) IN THIS REGARD READS AS UNDER: 5.4.1 THE LD. AR SUBMITTED THAT AT THE END OF THE FINANCIAL YEAR 2010-11, THE SOCIETYS TOTAL BORROWINGS AMOUNT ED TO RS. 11,352/- CRORES WHEREAS, THE FUNDS REQUIRED FOR WOR KING CAPITAL ITAS NO.6083/DEL/2017 3 BY THE SOCIETY AND FIXED ASSETS STOOD AT RS.19,791/ - CRORES. IN THIS REGARD, TO FURTHER FORTIFY THE ABOVE, APPELLAN T SUBMITTED THAT THE BANKS IMPOSE STRINGENT END USE CONDITIONS WHILE SANCTIONING THESE LOANS AND LIMITS WHICH INCLUDE US E FOR THE BUSINESS PURPOSE ONLY AND SPECIFICALLY PROHIBIT USE OF THE FUNDS FOR INVESTMENT IN THE SHARES OF OTHER COMPANIES OR CAPITAL MARKETS. IT WAS SUBMITTED THAT SIMILAR RESTRICTIONS ARE ALSO CONTAINED IN THE RBIS ECB GUIDELINES. A COPY OF SU CH TERMS IN CASH CREDIT AND SHORT TERM LOANS WAS FILED. IT WAS FURTHER SUBMITTED THAT THE BANKS MONITOR COMPLIANCE OF THES E CONDITIONS THROUGH MONTHLY SUBMISSIONS OF STOCK STATEMENTS AND INDEPENDENT STATUTORY AUDITOR'S CERTIFICATE AS PER RBI GUIDELINES. A COPY OF STATUTORY AUDITOR'S CERTIFICA TE EVIDENCING COMPLIANCE WAS ALSO FILED. THE ID. AR AFFIRMED THAT DURING THE PREVIOUS YEAR 2010-11, RELEVANT TO ASSESSMENT YEAR 2011-12, THERE HAS BEEN NO INSTANCE OF LEVY OF A PENAL INTER EST OR RECALL OF THE LOAN FOR VIOLATION OF THE END USE CONDITIONS. H E, THEREFORE, SUMMED UP HIS ARGUMENTS PLEADING THAT IN VIEW OF TH E ABOVE CITED LEGAL POSITION AND THE FACTS, DISALLOWANCE OF INTEREST UNDER RULE 8D2(II) CANNOT BE MADE IN TERMS OF SECTION 14A . 5.4.2. I HAVE CONSIDERED THE FINDINGS RECORDED BY T HE ID. AO AS PER THE ASSESSMENT ORDER, THE SUBMISSION MADE BY TH E APPELLANT, THE POSITION OF THE LAW AND THE FACTS OF THE CASE ON RECORD. IT IS SEEN THAT THIS ISSUE CAME UP FOR CONS IDERATION BEFORE THE CIT (A) -11, NEW DELHI IN ASSESSMENT YEAR 2010- 11 I.E. THE IMMEDIATELY PRECEDING YEAR AND BEFORE THE CIT(A), XXIII, NEW DELHI, IN THE ASSESSMENT YEAR 2009-10. THE TWO CSLT (A) IN THE AFORESAID ORDERS, ALLOWED THIS GROUND OF THE APPELL ANT BASED ON THE FACTUAL POSITION AND HAVE QUASHED THE DISALLOWA NCE UNDER ITAS NO.6083/DEL/2017 4 RULE 8D2(II) FOR THE AFORESAID TWO YEARS. THE YEAR WISE CHART OF THE AVAILABILITY OF OWN FUNDS FURNISHED BY THE APPE LLANT SHOWS THAT THE FACTUAL POSITION IS SIMILAR TO THE ONE IN THE EARLIER YEARS. ON THE JURISPRUDENCE, THE JUDGMENT OF THE JURISDICT IONAL HIGH COURT IN THE CASE OF BHARTI OVERSEAS (SUPRA) IS IN FAVOUR OF THE PLEA OF THE APPELLANT. ACCORDINGLY, RESPECTFULLY FO LLOWING THE JUDGMENT OF HON'BLE DELHI HIGH COURT AND THE CIT(A) 'S ORDERS IN THE PRECEDING TWO YEARS, THE ADDITION OF RS.18.17 C RORES IS DIRECTED TO BE DELETED. THUS, THE GROUND NO. 4 IS A LLOWED TO THE APPELLANT. 3. FURTHER, IT HAS BEEN POINTED OUT BY THE LD. COUN SEL THAT IN ASSESSMENT YEAR 2009-10, THE TRIBUNAL HAS CONFIR MED THE SIMILAR FINDING OF THE LD. CIT (A) WHILE DELETING T HE INTEREST DISALLOWANCE IN ITA NO.4490 AND 4168/DEL/2014. 4. ON THE OTHER HAND, LD. DR HAS RELIED UPON THE OR DER OF THE ASSESSING OFFICER. 5. AFTER CONSIDERING THE RELEVANT FACTS AND MATERIA L ON RECORD, IT IS QUITE EVIDENT THAT, FIRSTLY, ASSESSEE HAD OWN SUBSTANTIAL FUND FOR MAKING THE INVESTMENT; AND SEC ONDLY, THE ASSESSEE HAD DULY EXPLAINED AND DEMONSTRATED TH AT THE LOAN FUNDS COULD NOT HAVE BEEN UTILIZED FOR THE PUR POSE OF INVESTMENT. UNDER THESE CIRCUMSTANCES, THE DISALLOW ANCE OF INTEREST UNDER RULE 8D (2)(II) CANNOT BE MADE AND H AS BEEN DELETED BY THE LD. CIT(A). THE TRIBUNAL IN ASSESSEE S OWN CASE FOR ASSESSMENT YEAR 2009-10 HAS OBSERVED AND HELD A S UNDER: ITAS NO.6083/DEL/2017 5 12. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOT H THE SIDES IN THE LIGHT OF RECORDS PLACED BEFORE US. ON PERUSAL OF CATEGORICAL OBSERVATIONS BY LD. CIT(A) WHICH HAS BE EN REPRODUCED HEREINABOVE, IT IS OBSERVED THAT REVENUE HAS NOT BEEN ABLE TO ESTABLISH BY WAY OF DOCUMENTARY EVIDEN CES THAT THE INTEREST BEARING FUNDS WERE UTILISED FOR THE PU RPOSES OF INVESTMENTS. THE CERTIFICATE ISSUED BY THE AUDITORS WHICH WAS VERIFIED BY LD. CIT(A) HAS NOT BEEN FOUND FAULT WIT H BY REVENUE. EVEN THOUGH ASSESSEE HAS KEPT ALL THE FUNDS IN ONE COMMON POOL, THE PRESUMPTION THAT THE INVESTMENT HAS BEEN MADE FROM INTEREST BEARING FUNDS CANNOT BE APPRECIATED, SINCE FOR THE YEAR UNDER CONSIDERATION ASSESSEE HAS SUBSTANTIALLY DEMO NSTRATED BEFORE LD.CIT(A) REGARDING SUFFICIENT FUNDS BEING A VAILABLE FOR INVESTMENT PURPOSES OTHER THAN THE INTEREST/BEARING FUNDS WHICH HAS NOT BEEN REFUTED BY LD. CIT-D.R. LD.CIT(A ) HAS OBSERVED THAT THE FUNDS ARE TO BE STRICTLY UTILISED BY ASSESSEE AS PER GUIDELINES ISSUED BY RBI. FURTHER WE HAVE VERIF IED RECORDS IN THE CONTEXT OF BOTH ORDERS DT. 30.09.2016 AS WEL L AS 05.04.2018 AND ARE CONVINCED WITH THE SUBMISSIONS A DVANCED BY LD. COUNSEL REGARDING THERE BEING NO DETAILS THA T WAS FILED BY ASSESSEE IN ORDER TO DEMONSTRATE THE NON-UTILISA TION OF INTEREST BEARING FUNDS FOR THE PURPOSE OF INVESTMEN TS THAT COULD YIELD DIVIDEND INCOME. CONSIDERING THE TOTALITY OF FACTS, WE DO NOT FIND ANY INFIRMITY IN LD. CIT(A) DELETING DISAL LOWANCE COMPUTED BY LD.AO UNDER RULE 8(111). WE THEREFORE U PHOLD THE ORDER OF LD. CIT(A) ON THIS GROUND. 13. ACCORDINGLY, APPEAL FILED BY THE REVENUE STAND S DISMISSED. ITAS NO.6083/DEL/2017 6 6. THUS, RESPECTFULLY FOLLOWING THE AFORESAID PRINC IPLE, WE ARE DISMISSING THE APPEAL OF THE REVENUE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JANUARY, 2021 SD/- SD/- [N.K. BILLAIYA] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25 TH JANUARY, 2021 PKK