DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-6, Jaipur V. M/S. ANAMIKA CONDUCTORS LTD., Jaipur

ITA 612/JPR/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1948 (ITAT-JAIPUR)
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 27-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S NEHRA
• Assessee Lawyers: G M MEHTA
• Keywords: Depreciation; Business expenditure; Earning of tax free income
• Section: 43B; 143(3); 14A; 194C; 201(1)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA- @ ITA NO. 612/JP/2017 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2012-13 THE DCIT, CIRCLE-6, JAIPUR. CUKE VS. M/S ANAMIKA CONDUCTORS LTD., B-129 RAJENDRA MARG, BAPU NAGAR, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABCA5681P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA- @ CO NO. 32/JP/2017 (ARISING OUT OF ITA NO. 612/JP/2017) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2012-13 M/S ANAMIKA CONDUCTORS LTD., B-129 RAJENDRA MARG, BAPU NAGAR, JAIPUR. CUKE VS. THE DCIT, CIRCLE-6, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AACCA9996N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI G.M. MEHTA (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SMT. A.S. NEHRA (ADDL.CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 24/10/2017 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 26/10/2017 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS THE APPEAL BY THE REVENUE AND THE CROSS OB JECTION FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-II, JAIPUR DATED ITA NO. 612/JP/17 & CO NO. 32/JP/2017 DCIT VS. M/S ANAMIKA CONDUCTORS LTD., JAIPUR 2 23.05.2017 FOR A.Y. 2012-13 WHEREIN THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL:- (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION MADE BY THE AO BY WAY OF DISALLOWANCE OF DEPRECIATI ON CLAIMED ON WIND MILL FOR RS. 29,68,289/- BY HOLDING THAT DE PRECIATION @ 80% HAS TO BE ALLOWED ON COMPLETE WIND MILL WITHOUT SEGREGATING INVESTMENT ON BUILDING PART AND ON ELECTRIC ITEM WI THOUT APPRECIATING THAT DEPRECIATION 80% IS ALLOWABLE ONL Y ON WIND MILL PLANT NOT ON THE OTHER ELECTRICAL FITTING AND BUILD ING ETC. (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 27,94,439/- MADE ON ACCOUNT OF DISALLOWANCE U/S 4 0(A)(IA) WITHOUT APPRECIATING THE FACT THAT THE SECOND PROVI SO TO THIS SECTION WAS INSERTED W.E.F. 01.04.2013 AND IT APPL ICABLE IN RELATION TO THE AY 2013-14 AND SUBSEQUENT AYRS. (III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 21,250/- MADE BY THE AO FOR DEPOSITING THE EM PLOYEES CONTRIBUTION TO PF & ESI BEYOND THE PRESCRIBED TIME LIMIT PROVIDED IN RESPECTIVE ACTS. (IV) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(APPEALS) HAS ERRED IN HOLDING T HAT EMPLOYEES CONTRIBUTION TO PF & ESI ARE GOVERNED BY THE PROVIS IONS OF SECTION 43B AND NOT BY SECTION 36(1) (VA) R.W.S. 2(24)(X) O F THE ACT. (V) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE CIT(APPEALS) HAS ERRED IN RESTRICTING THE DISALLOWANCE MADE U/S 14A BY CONSIDERING THE INVESTMENT IN EQUIT Y SHARES OF RS. 40,00,000/- ONLY. ITA NO. 612/JP/17 & CO NO. 32/JP/2017 DCIT VS. M/S ANAMIKA CONDUCTORS LTD., JAIPUR 3 GROUND OF APPEAL IN ASSESSEES CROSS-OBJECTION ARE AS UNDER: (1) THAT LD. CIT(A), AFTER APPRECIATING THE FACTS OF THE CASE AND THE LAW LAID DOWN BY HONBLE JURISDICTIONAL HIGH CO URT { CIT VS. MEHRU ELECTRICALS & MECHANICAL ENGG. (P) LTD. (2016 ) 388 ITR 169 (RAJ)} WAS LEGALLY CORRECT IN DELETING THE ADDITION OF RS. 29,68,289/- ON ACCOUNT OF DEPRECIATION ALLOWABLE @ 80% ON CIVIL CONSTRUCTION AND ELECTRIC INSTALLATION ON THE WIND MILLS, WHICH THE LD. AO BY AVOIDING IT, RAISED GROUND BEFORE THIS HO NBLE ITAT. (2) THAT LD. CIT(A) WAS JUSTIFIED IN DELETING FOLLO WING ADDITIONS FOR WHICH LD. AO, WITHOUT APPRECIATING THE LEGALITY OF ISSUE, PREFERRED APPEAL BEFORE THIS HONBLE ITAT: (I) RS. 27,94,439/- U/S 40(A)(IA) OF IT ACT WHEN TH E ASSESSEE COMPANY IS NOT IN DEFAULT AND HAS SUBMITTED FORM 26 A AS PER PROVISIONS OF SECTION 201(1) OF IT ACT; (II) RS. 21,250/- ON ACCOUNT OF PAYMENT OF PF/ESI { (2017) 393 ITR 421 (RAJ); (3) LD. CIT(A) ERRED IN LAW AND ON FACTS IN SUSTAIN ING ADDITION OF RS. 2,82,352/- U/S 14A OF IT ACT. (4) LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING ADDI TION OF RS. 29,350/- FOR BUSINESS EXP. IGNORING THE FACT THAT T HE ASSESSEE COMPANY. 2. REGARDING GROUND NO. 1 OF THE REVENUES APPEAL A ND THE GROUND NO. 1 OF THE ASSESSEES CROSS OBJECTION, THE LD. AR SUBMITTED THAT IN APPELLANTS OWN CASE FOR EARLIER YEARS, DEPRECIATIO N @ 80% ON WIND MILL, ITS CIVIL CONSTRUCTION AND ELECTRICAL INSTALL ATION WAS FOUND TO BE ALLOWABLE BY THIS HONBLE TRIBUNAL. FURTHER, THE HO NBLE RAJASTHAN HIGH ITA NO. 612/JP/17 & CO NO. 32/JP/2017 DCIT VS. M/S ANAMIKA CONDUCTORS LTD., JAIPUR 4 COURT IN CASE OF CIT VS. MEHRU ELECTRICALS & MECHAN ICAL ENGG. (P) LTD. REPORTED IN 388 ITR 169 HAS HELD THAT ASSESSEE WA S ENTITLED TO DEPRECIATION ON A ROOM CONSTRUCTION ALONG WITH THE COST OF ERECTION AND INSTALLATION OF ELECTRICAL ITEMS COVERED UNDER PL ANT AND MACHINERY FOR A WIND MILL, ENTITLED FOR DEPRECIATION AT THE SAME RATE AS APPLICABLE TO THE WIND MILL. 3. IN THIS REGARD, THE RELEVANT FINDING OF THE LD. CIT(A) AS CONTAINED AT PARA 2.3 OF HIS ORDER IS REPRODUCED AS UNDER:- 2.3 I HAVE PERUSED THE FACTS OF THE CASE, THE ASSE SSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THIS ISSUE HA D ARISEN IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2010-1 1 IN APPEAL NO. 138/13-14 ALSO WHEREIN IT WAS HELD AS FOLLOWS: 2.3 I HAVE PERUSED THE FACTS OF THE CASE, THE ASSE SSMENT ORDER AND THE SUBMISSION OF THE APPELLANT. THIS IS A CASE WHERE THE ASSESSING OFFICER HAS NOT ALLOWED DEPRECIATION @ 80 % ON FOUNDATION AND INSTALLATION CIVIL WORK (CONSIDERED AS A BUILDING) AND ON ELECTRICAL ITEMS AND INTERNAL/EXTERNAL LINES (CONSIDERED AS ORDINARY PLANT & AND MACHINERY) ON THE NEW WINDMILL PURCHASED DURING THE YEAR AS WELL AS ON THE OPENING WDV OF TH E WINDMILLS. THE FACTS OF THIS CASE ARE SIMILAR TO THE FACTS IN THE APPELLANTS CASE IN THE PRECEDING YEARS WHERE THE CIT(A) AND IT AT HAVE DECIDED THE MATTER IN APPELLANTS FAVOUR. IN A.Y. 2 005-06, THE ITAT (IN ITA NO. 852/JP/2009) HAS HELD THAT- AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF T HE RECORDS, WE FIND THAT SUCH ISSUE HAS ALREADY BEEN DECIDED BY TH IS BENCH VIDE ITS ORDER DATED 18.07.2008 IN THE CROSS APPEAL IN I .T.A. NO. 745/JP/07 VIJAY INDUSTRIES VS. I.T.O. AND IN I.T.A. NO. 731/JP07- ACIT VS. M/S VIJAY INDUSTRIES FOR THE ASSESSMENT YE AR 2003-04. THE LD. CIT(A) HAS FOLLOWING THE ORDER OF THIS BENC H IN THE CASE OF ITA NO. 612/JP/17 & CO NO. 32/JP/2017 DCIT VS. M/S ANAMIKA CONDUCTORS LTD., JAIPUR 5 VIJAY INDUSTRIES, SUPRA, WHEREIN FACTS OF CASE ARE IDENTICAL TO THE FACTS OF THE PRESENT CASE AND WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). THUS GROUND NO. 1 AND 2 OF THE REVE NUE ARE DISMISSED. THIS DECISION HAS BEEN FOLLOWED BY THE ITAT IN A.Y. 2007-08 TO 2009-10 AND BY THE CIT(A)-II IN SUBSEQUENT ASSESSME NT YEARS. RESPECTIVELY, FOLLOWING THE ABOVE ORDERS, DEPRECIAT ION IS DIRECTED TO BE ALLOWED @ 80% ON FOUNDATION AND INSTALLATION CIVIL WORK AND ELECTRICAL ITEMS AND INTERNAL/EXTERNAL LINES. T HE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS DIRECTED TO BE DEL ETED. THIS GROUND IS ALLOWED. IN VIEW OF THE ABOVE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS DELETED. THE GROUND OF APPEAL IS ALLOWED . 4. IN CASE OF CIT VS. MEHRU ELECTRICALS & MECHANICA L ENGG. (P) LTD (SUPRA), THE HONBLE RAJASTHAN HIGH COURT HAS HELD AS UNDER:- 8. THE FIRST ISSUE IS REGARDING DEPRECIATION CLAIM ED ON CIVIL FOUNDATION AS WELL AS ON ELECTRIC TURBINE GENERATOR FOR THE WINDMILL. THE COMMISSION HAS MADE A REFERENCE TO TH E JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF HI TECH ARA I LTD. (SUPRA) AS THE ORDER PASSED BY THE TRIBUNAL AT DELHI. THE O BSERVATIONS ARE HOWEVER THAT THE DEPARTMENT HAS NOT ACCEPTED TH E VERDICT OF THE HIGH COURT, THOUGH THE JUDGMENT OF THE MADRAS H IGH COURT IN THE CASE OF HI TECH ARAI LTD. (SUPRA) HAS BEEN AFFI RMED BY THE APEX COURT. IN VIEW OF THE ABOVE, LEARNED COUNSEL F OR THE REVENUE COULD NOT CONTEST THE ISSUE IN REGARD TO TH E ADMISSIBILITY OF DEPRECIATION. THE ISSUE BEFORE THE MADRAS HIGH C OURT WAS AGAIN OF A WIND WILL WHERE DEPRECIATION ON POWER GE NERATION WAS CLAIMED. IT WAS FOUND THAT MAIN BUSINESS OF THE ASS ESSEE WAS NOT OF PRODUCING OR GENERATING ELECTRICITY AND THUS, TH E MADRAS HIGH COURT DECIDED THE ISSUE IN FAVOUR OF THE ASSESEE AN D AGAINST THE REVENUE. THE ISSUE HAVING BEEN CONFIRMED BY THE APE X COURT ON ITA NO. 612/JP/17 & CO NO. 32/JP/2017 DCIT VS. M/S ANAMIKA CONDUCTORS LTD., JAIPUR 6 DISMISSAL OF APPEAL, WE ARE UNABLE TO TAKE A DIFFER ENT VIEW AS HAS BEEN TAKEN BY THE MADRAS HIGH COURT AND HAS TO BE A PPLIED HEREIN ALSO. 9. THE OTHER ISSUE IS REGARDING THE RATE OF DEPRECI ATION. 10 ACCORDING TO THE REVENUE, RATE OF DEPRECIATION C LAIMED BY THE ASSESSEE SUBMITTED NOT HAVE BEEN ALLOWED. THE ISSUE AFORESAID HAS NOT BEEN DECIDED BY THE TRIBUNAL PROPERLY. 11. WE FIND THAT WHEN THE CIVIL WORK AND ELECTRIC GENERATOR ARE TAKEN TO BE A PART OF THE WIND MILL, RATE AS IS APPLICABLE FOR THE DEPRECIATION FOR THE WIND MIL L WOULD APPLY TO THE PRESENT CASE ALSO. 12. IN THE BACKGROUND AFORESAID, WE DO NOT FIND THA T EVEN A DISPUTE CAN BE RAISED REGARDING THE RATE OF DEPRECI ATION ADMISSIBLE TO THE ASSESSEE. IN OUR OPINION, THE TRI BUNAL HAS RIGHTLY ALLOWED THE APPEAL. FINDING NO ILLEGALITY T HEREIN, WE ARE UNABLE TO CAUSE INTERFERENCE IN THE ORDER PASSED BY THE TRIBUNAL. 5. IN LIGHT OF ABOVE, RESPECTFULLY FOLLOWING THE D ECISION OF THE HONBLE RAJASTHAN HIGH COURT IN CASE OF MEHRU ELECT RICALS & MECHANICAL ENGG. (P) LTD. (SUPRA) AND THE CONSISTENT VIEW TAKE N BY THE CO-ORDINATE BENCHES IN ASSESSEES OWN CASE IN THE EARLIER YEARS , WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A), HENCE, TH E SAME IS CONFIRMED. THE GROUND OF APPEAL TAKEN BY THE REVENUE IS DISMIS SED AND THE CROSS OBJECTION WHICH IS IN SUPPORT OF THE LD. CIT(A) OR DER IS ALLOWED. 6. REGARDING GROUND NO. 2 OF THE REVENUES APPEAL A ND THE CROSS OBJECTION NO. 2(II) OF THE ASSESSEES CROSS OBJECTI ON, THE LD AR SUBMITTED THAT THE ISSUE IS COVERED IN ASSESSEES OWN CASE BY THE HONBLE TRIBUNAL ITA NO. 612/JP/17 & CO NO. 32/JP/2017 DCIT VS. M/S ANAMIKA CONDUCTORS LTD., JAIPUR 7 DECISION FOR A.Y. 2011-12 AND THERE IS NO INFIRMITY IN THE ORDER OF THE LD CIT(A) WHO HAS FOLLOWED THE SAME AND REMANDED THE M ATTER TO THE AO TO VERIFY THE CERTIFICATES GIVEN BY THE PAYEES EVID ENCING REPORTING OF INCOME AND PAYMENT OF TAXES THEREON. 7. THE RELEVANT FINDING OF THE LD. CIT(A) IS CONTAI NED AT PARA 3.3 WHICH IS REPRODUCED AS UNDER:- I HAVE PERUSED THE FACTS OF THE CASE, THE ASSESSM ENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. AN AMOUNT TO RS. 29,18,171/- WAS DISALLOWED IN TERMS OF SECTION 40(A)(IA) ON WHI CH PROVISIONS OF SECTION 194A, 194J AND 194C WERE APPLICABLE. IN THE PRESENT PROCEEDINGS, THE AUTHORIZED REPRESENTATIVE STATED THAT IN THE APPELLANTS OWN CASE FOR THE ASSESSMENT YEAR 2011-12 , THE ISSUE HAS BEEN DECIDED BY THE ITAT, JAIPUR IN ITA NO. 818 /JP/2014 DATED 22.08.2016 WHEREIN IT WAS HELD AS UNDER:- WE HAVE ALSO GONE THROUGH JUDGMENT IN THE CASE OF CIT VS. ANSAL PLAZA MARK TOWNSHIP P. LTD (SUPRA), IN FACT T HE ASSESSEE HAS NOT RAISED THIS ISSUE BEFORE THE LD. ASSESSING OFFICER AS WELL AS BEFORE THE LD. CIT(A). THIS ISSUE HAS A FACTUAL DETERMINATION AND VERIFICATION, THEREFORE, IT WILL BE IN THE INTE REST OF JUSTICE TO REMAND THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE TRUTHFULNESS ON THE SUBMISSIONS MADE BY THE LD. AR WHEREBY IT WAS CONTENDED THAT THE CREDITORS HAD ALR EADY DEPOSITED THE TAX ON INTEREST AMOUNT. IN THE LIGHT OF THE FACT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES ONLY. IT IS MADE CLEAR THAT IF THE CREDITORS HAVE DEPOSITED THE TAX ON THE INTEREST ACCRUED IN THEIR FAVOUR AFTER HAVING RECEIVED FROM THE ASSESSEE, WHICH WAS NOT DEDUCTED BY THE ASSESSEE, IN THAT EVE NTUALITY BENEFIT BE EXTENDED TO THE ASSESSEE IN TERMS OF AME NDED SECTION 40(A)(IA) OF THE ACT. THE ASSESSEE ALSO FILED CERTIFICATES FROM TATA CAPI TAL LIMITED, BAJAJ FINANCE LTD. MAGAM FINCORP LTD. AND RELIANCE CAPITAL LTD. ITA NO. 612/JP/17 & CO NO. 32/JP/2017 DCIT VS. M/S ANAMIKA CONDUCTORS LTD., JAIPUR 8 THESE CERTIFICATES WERE NOT BEFORE THE ASSESSING OF FICER AND IN THE CASE OF INDIABULLS FINANCIAL SERVICES LTD. THE CERTIFICATE IN THE PRESCRIBED FORMAT HAS NOT BEEN FILED. IN VIEW OF TH E DIRECTIONS OF THE HONBLE ITAT THE ASSESSING OFFICER TO VERIFY TH E SAME IN THE LIGHT OF THE DIRECTIONS AS ABOVE. WITH REGARD TO AN AMOUNT OF RS. 1,23,732/- RELATING TESTING CHARGES PAID TO SHRI RAMESH KUMAR AND TAG CORPORATI ON, THE AUTHORIZED REPRESENTATIVE RELYING ON THE DECISION O F HONBLE ALLAHABAD HIGH COURT 357 ITR 642 FOR THE FACT THAT THESE AMOUNTS HAD BEEN PAID DURING THE YEAR AND HENCE, TH E PROVISIONS OF SECTION 40(A)(IA) WERE NOT APPLICABLE. HOWEVER, IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F PALAM GAS SERVICE 81 TAXMAN.COM 43 (SC) HAS HELD THAT SECTION 40(A)(IA) COVERS NOT ONLY THOSE CASES WHERE THE AMOUNT IS PAY ABLE BUT ALSO WHEN IT IS PAID AND THE DECISION OF THE ALLAHA BAD HIGH COURT RELIED ON BY THE ASSESSEE HAS BEEN OVER RULED. IN V IEW OF THE ABOVE DISCUSSION, THE DISALLOWANCE WITH REGARD TO T HE TESTING CHARGES IS UPHELD. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE LD. CIT(A) HA S FOLLOWED THE DIRECTIONS OF THE CO-ORDINATE BENCH IN ASSESSEES O WN CASE FOR A.Y. 2011-12 AND HAS REMANDED THE MATTER BACK TO THE ASS ESSING OFFICER TO VERIFY THE CERTIFICATES FROM VARIOUS NBFCS TO WHOM THE ASSESSEE HAS PAID INTEREST DURING THE YEAR IN ORDER TO VERIFY WH ERE THEY HAVE OFFERED THE SAME IN THEIR RETURN OF INCOME AND DEPOSITED TA XES THEREON. FURTHER IN RESPECT OF TESTING CHARGES OF RS. 1,83,732/-, TH E LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE ON ACCOUNT OF NON-DEDUCT ION OF TDS FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF PALAM GAS SERVICE AND IN RESPECT OF WHICH THERE IS NO DIS PUTE. WE ACCORDINGLY ITA NO. 612/JP/17 & CO NO. 32/JP/2017 DCIT VS. M/S ANAMIKA CONDUCTORS LTD., JAIPUR 9 DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE LD. CI T(A) HENCE, THE SAME IS CONFIRMED. THE GROUND OF APPEAL TAKEN BY THE REV ENUE IS DISMISSED AND THE CROSS OBJECTION WHICH IS IN SUPPORT OF THE LD. CIT(A) ORDER IS ALLOWED. 9. REGARDING GROUND NO. 3 AND 4 OF THE REVENUES AP PEAL AND THE GROUND NO. 2(II) OF THE ASSESSEES CROSS OBJECTION WHICH RELATES TO DISALLOWANCE OF CONTRIBUTION TO PF & ESI BEYOND T HE PRESCRIBED TIME LIMIT. THE LD. CIT(A) HAS GIVEN A FINDING THAT THE CONTRIBUTION TO PF & ESI HAS BEEN PAID BY THE APPELLANT BEFORE DUE DATE OF FILING THE RETURN OF INCOME U/S 139(1) AND THE SAID FINDING REMAINED UNCONTROVERTED BEFORE US. FURTHER, THE ISSUES IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN CA SE OF CIT VS. STATE BANK OF BIKANER & JAIPUR AND OTHER CASES WHICH HAS RIGHTLY BEEN FOLLOWED BY THE LD. CIT(A). WE ACCORDINGLY DO NOT S EE ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) HENCE, THE SAME IS CONF IRMED. THE GROUND OF APPEAL TAKEN BY THE REVENUE IS DISMISSED AND THE CR OSS OBJECTION WHICH IS IN SUPPORT OF THE LD. CIT(A) ORDER IS ALLOWED. 10. REGARDING GROUND NO. 5 OF THE REVENUES APPEAL AND GROUND NO. 3 OF THE CROSS OBJECTION FILED BY THE ASSESSEE WHIC H RELATES TO DISALLOWANCE U/S 14A, THE RELEVANT FACTS AND FINDIN GS OF THE LD. CIT(A) ARE CONTAINED AT PARA 5.3 OF HIS ORDER WHICH IS REP RODUCED AS UNDER:- I HAVE PERUSED THE FACTS OF THE CASE, THE ASSESSME NT ORDER AND THE SUBMISSIONS OF THE APPELLANT. A DISALLOWANCE OF RS. 6,00,493/- WAS MADE UNDER SECTION 14A AS THE ASSESSEE HAD MADE INVESTMENTS IN EQUITY SHARES. NO REPLY HAD BEEN FIL ED DURING THE ASSESSMENT PROCEEDINGS, ON THIS ISSUE AND THE ASSES SING OFFICER ITA NO. 612/JP/17 & CO NO. 32/JP/2017 DCIT VS. M/S ANAMIKA CONDUCTORS LTD., JAIPUR 10 AFTER RECORDING HIS SATISFACTION HAD ADDED THE ABOV E AMOUNT. IN THE PRESENT PROCEEDINGS, IT IS SUBMITTED THAT AN AM OUNT OF RS. 45,07,000/- HAD BEEN INVESTED AS ON 31.03.2011 AND RS. 40,00,000/- AS ON 31.03.2012. IT WAS FURTHER CONTEN DED THAT NO DIVIDEND WAS RECEIVED FROM EQUITY SHARES OF ANAMIKA OIL PVT. LTD. AND ALSO THAT THE ASSESSMENT FOR THE A.Y. 2011-12 H AD BEEN MADE UNDER SECTION 143(3) AND THE ISSUE OF INVESTME NT HAD BEEN EXAMINED BY THE ASSESSING OFFICER AND NO DISALLOWAN CE UNDER THIS SECTION HAD BEEN MADE FOR THE ASSESSMENT YEAR 2011- 12. IN THE PRESENT YEAR ALSO IT WAS CLAIMED THAT THE INVESTMEN TS HAS BEEN MADE FROM INTEREST FREE FUNDS AVAILABLE WITH THE A SSESSEE COMPANY AND NO INTEREST BEARING FUNDS HAD BEEN USED FOR THE SAME. HOWEVER, A PERUSAL OF THE BALANCE SHEET OF TH E ASSESSEE SHOWS THAT INTEREST FREE FUNDS WERE NOT AVAILABLE F OR THE INVESTMENT MADE BY THE ASSESSEE. HOWEVER, THE ALTER NATIVE CLAIM OF THE ASSESSEE THAT THE DISALLOWANCE BE RESTRICTED TO INVESTMENT OF RS. 40,00,000/- MADE DURING THE YEAR IS REASONAB LE. CONSIDERING THE SAME PROPORTIONATE DEDUCTION WOULD COME TO RS. 2,82,352/- WHICH IS CONFIRMED. 11. DURING THE COURSE OF HEARING, THE LD AR SUBMIT TED THAT THE INVESTMENTS IN EQUITY SHARES OF M/S ANAMIKA OIL PVT . LTD. WERE MADE AS UNDER: EQUITY SHARES 31.03.2011 31.03.2012 TOTAL (31.03.2 012) ANAMIKA OIL PVT. LTD. 45,07,000 40,00,000 85,07,000 NEW EQUITY SHARES OF RS. 40,00,000/- OF M/S ANAMIKA OIL PVT. LTD. WERE PURCHASED BY THE ASSESSEE COMPANY ON 29 TH MARCH 2012. HOWEVER LD. CIT(A) SUSTAINED ADDITION OF RS. 2,82,352/- ON PROP ORTIONATE BASIS BUT OF RS. 6,00,493/- WITHOUT CONSIDERING FOLLOWING FAC TS: ITA NO. 612/JP/17 & CO NO. 32/JP/2017 DCIT VS. M/S ANAMIKA CONDUCTORS LTD., JAIPUR 11 (I) THE ASSESSMENT FOR THE A.Y. 2011-12 WAS COMPLET ED U/S 143(3) OF IT ACT ON 23 RD DECEMBER 2011 IN WHICH PURCHASE OF EQUITY SHARES O F RS. 45,07,000/- OF M/S ANAMIKA OIL PVT. LTD. WAS CONSID ERED AS MADE OUT OF INTEREST FREE FUNDS OF THE ASSESSEE COMPANY. THE QU ESTION BECOMING FINAL IN PRECEDING YEAR (CIT VS. AVENTIS PHARMA LTD . (2017) 396 ITR 688 (PAT). (II) NO NEXUS WAS ESTABLISHED BY LD. AO IN BETWEEN INTEREST BEARING LOANS AND INVESTMENTS IN EQUITY SHARES OF ANAMIKA OIL PVT. LTD. (III) THE INTEREST FREE FUNDS AVAILABLE WITH THE AS SESSEE COMPANY AS ON 31.03.2011 AND 31.03.2012 WERE AS UNDER: INTEREST FREE FUNDS 31.03.2011 31.03.2012 SHARE CAPITAL 2,68,31,610 2,95,31,610 RESERVES AND SURPLUS 15,50,93,619 18,59,20,100 SECURITIES PREMIUM 2,18,42,240 4,26,42,240 TOTAL INTEREST FREE FUNDS 20,37,67,469 25,80,93,950 DURING THE YEAR, THERE WAS INCREASE IN INTEREST FRE E FUNDS F RS. 5,43,26,481/-, THE PRESUMPTION IS THAT NEW SHARES W ERE PURCHASED OUT OF INTEREST FREE FUNDS UNLESS NEXUS OF INTEREST BEA RING LOANS IS PROVED BY LD. AO. (IV) NO DIVIDEND OR EXEMPT INCOME WAS RECEIVED FROM EQUITY SHARES OF ANAMIKA OIL PVT. LTD. THEREFORE IN ABSENCE OF EXEMP T INCOME, NO DISALLOWANCE CAN BE MADE. RELIANCE IS PLACED ON FOL LOWING JUDGMENTS: (A) CIT VS. LAKHANI MARKETING INDUSTRIES (2014) 272 CTR (P&H) 265: IN ABSENCE OF DIVIDEND INCOME FOR SHARES, DEDUCTION OF INTEREST LIABILITY OUT OF OTHER INCOME CANNOT BE DISALLOWED UNDER SECTION 14A. ITA NO. 612/JP/17 & CO NO. 32/JP/2017 DCIT VS. M/S ANAMIKA CONDUCTORS LTD., JAIPUR 12 (B) CIT VS. HOLCIM INDIA PVT. LTD. (2014) 272 CTR ( DEL) 282: WHEN THERE IS NO DIVIDEND INCOME DURING THE YEAR, SECTIO N 14A CANNOT BE INVOKED. (C) CIT VS. SHIVAM MOTORS PVT. LTD. (2014) 272 CTR (ALL) 277: WHAT SECTION 14A PROVIDES IS THAT IF THERE IS ANY INCOME WHICH DOES NOT FORM PART OF THE INCOME UNDER THE ACT, THE EXPENDITURE W HICH IS INCURRED FOR EARNING THE INCOME IS NOT AN ALLOWABLE DEDUCTION. I N ABSENCE OF ANY TAX FREE INCOME, THE CORRESPONDING EXPENDITURE COULD NO T BE WORKED OUT FOR DISALLOWANCE. (D) CIT VS. CORRTECH ENGERY PVT. LTD. (2015) 376 IT R 97(GUJ): DISALLOWANCE OF EXPENDITURE RELATING TO NON-TAXABLE INCOME. NO CLAIM FOR EXEMPTION-EXPENDITURE RELATING TO SUCH AMOUNT C ANNOT BE DISALLOWED. (V) THE CIRCULAR OF CBDT REFERRED TO BY THE LD. AO IN ORDER U/S 143(3) IS AGAINST THE LAW LAID DOWN BY VARIOUS HIGH COURTS. ON THE FACTS AND CONSIDERING THE LAW POSITION, LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING DISALLOWANCE OF RS. 2,82,35 2/- APPLYING PROVISIONS OF SECTION 14A OF IT ACT AND THAT TOO ON PROPORTION ATE BASIS WHEN SHARES OF ANAMIKA OIL PVT. LTD. WERE PURCHASED ON FAKE END OF YEAR ON 29.03.2012. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOTED THAT THE INVESTMEN T WORTH RS. 45.07 LACS IN EQUITY SHARES OF M/S ANAMIKA OIL PVT. LTD. HAVE BEEN MADE BY THE ASSESSEE IN THE EARLIER YEARS AND FURTHER, FRESH IN VESTMENT WORTH RS 40 LACS HAVE BEEN MADE ON 29.03.2012. IF WE CONSIDER T HE AVAILABILITY OF ITA NO. 612/JP/17 & CO NO. 32/JP/2017 DCIT VS. M/S ANAMIKA CONDUCTORS LTD., JAIPUR 13 INTEREST FREE FUNDS DURING THE YEAR, IT IS NOTED TH AT INTEREST FREE FUNDS AT THE BEGINNING OF THE YEAR STOOD AT RS 20.38 CRORES AND AT THE END OF THE YEAR STOOD AT RS 25.81 CR. A PRESUMPTION WILL THERE FORE ARISE THAT THE INVESTMENT WERE MADE OUT OF INTEREST FREE FUNDS AND NOT OUT OF THE BORROWED FUNDS ESPECIALLY IN VIEW OF THE FACT THAT NO NEXUS HAS BEEN ESTABLISHED BETWEEN THE BORROWED FUNDS AND THE INVE STMENT IN THE EQUITY SHARES BY THE AO. IN LIGHT OF ABOVE, NO DIS ALLOWANCE UNDER SECTION 14A IS CALLED FOR IN THE INSTANT CASE. THE REVENUES GROUND OF APPEAL IS DISMISSED AND THE ASSESSEES CROSS OBJECT ION IS ALLOWED. 13. REGARDING GROUND NO. 4 OF THE ASSESSEES CROSS OBJECTION WHEREIN THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. C IT(A) IN SUSTAINING ADDITION OF RS. 29,350/- FOR BUSINESS EXPENSES, IT IS NOTED THAT THE ASSESSING OFFICER HAS DISALLOWED 10% OF THE CONVEYA NCE AND TELEPHONE HOLDING THAT THE EXPENSES ARE NOT OPEN FOR VERIFICA TION AND THE ELEMENT OF PERSONAL USE CANNOT BE IGNORED, WHICH HAS BEEN C ONFIRMED BY THE LD. CIT(A). THERE IS NO BASIS FOR ADHOC DISALLOWANCE I N THE EYES OF LAW. HENCE, THE DISALLOWANCE SO MADE BY THE AO AND CONFI RMED BY THE LD CIT(A) IS HEREBY DELETED. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED A ND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/10/2017. SD/- SD/- DQY HKKJR FOE FLAG ;KNO (KUL BHARAT) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER ITA NO. 612/JP/17 & CO NO. 32/JP/2017 DCIT VS. M/S ANAMIKA CONDUCTORS LTD., JAIPUR 14 TK;IQJ@ JAIPUR FNUKAD@ DATED:- 26/10/2017. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- DCIT, CIRCLE-6, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- M/S ANAMIKA CONDUCTORS LTD., B-129 RAJENDRA MARG, BAPU NAGAR, JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 612/JP/2017, CO NO. 32/JP/2017} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR