ALLEN CAREER INSTITUTE, Jaipur V. JCIT, Kota

ITA 620/JPR/2016

• Counselvise Citation: [2022] 107 COUNSELVISE.COM (IT) 0584 (ITAT-JAIPUR)
• Duration Of Justice: 6 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 05-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DEWANG GARGIEYA
• Keywords: Capital asset; Business income; Depreciation; Charitable institution; Rule of consistency; Question of law; Commercial expediency; Revenue expenditure; Capital expenditure; TDS; Rule 8D; Capital Gains
• Section: 37; 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. 620/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2011-12 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 18-03-2016 for the assessment year 2011-12 raising therein following grounds of appeal. 1. The impugned additions and disallowances made in the order dated 31-03-2014 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. 34,21,895/-:The ld. CIT(A) erred in law as well as on the facts of the case in confirming the disallowance of Rs. 34,21,895/- 2 ITA NO. 620/JP/2016 ALLEEN 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. 3.1 Rs.8,812/:- The ld. CIT(A) erred in law as well as on the facts of the case in confirming the disallowance of Rs.8,812/- 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 3.2. Rs.2,45,919/-: The ld. CIT(A) erred in law as well as on the facts of the case in confirming the disallowance of interest of Rs.2,45,919/- made u/s 36(1)(iii) of the Act on account of alleged interest free advances made to the prospective lectures and not incurred for business purpose. The disallowance so made and confirmed by ld. CIT(A), is contrary to the provision of law and hence, kindly be deleted in full. 4. Rs.71,93,839-: The ld. CIT(A) erred in law as well as on the facts of the case in confirming the disallowance of interest of Rs71,93,839/- made out of interest expenses u/s 36(1)(iii) of the Act alleging that the borrowed funds were used on capital expenditure. The disallowance so made and confirmed by ld. CIT(A), is contrary to the provision of law and hence, kindly be deleted in full. 5. Rs.22,23,000/-: The ld. CIT(A) erred in law as well as on the facts of the case in confirming the disallowance of Rs.22,23,000/- 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.1,05,315/-: The ld. CIT(A) erred in law as well as on the facts of the case in confirming the treatment of the expenditure incurred on account of repair and maintenance as a capital expenditure. The expenditure so incurred on batteries & other parts of 3 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA UPS system as replacement are of revenue nature. The disallowance so made and confirmed by the ld. CIT(A) holding it to be a expenditure of capital nature is contrary to the provision of law and hence, kindly be deleted by holding the same to be of revenue in nature. The ld. CIT(A) allowed depreciation on that. 7. Rs.1,90,908/- [Rs.82,000+Rs.1,08,908]: The ld. CIT(A) erred in law as well as on the facts of the case in confirming the disallowances of the following expenses. S.N. Head of expenses Disallowed by AO Sustained by the ld. CIT(A) 7.1 Electricity connection charges Rs.82,000/- Rs.82,000/- 7.2 Re-painting of business premises Rs.1,08,908/- Rs.1,08,908/- Total Rs.1,90,908/- Rs.1,90,908/- The disallowance so made and confirmed by the ld. CIT(A) being totally contrary to the provisions of law and facts of the case, kindly be deleted in full by holding the same to be of revenue in nature. 8.1 Rs.4,26,000/-[Rs.2,75,000+Rs.1,51,000/-]”: The ld. CIT(A) erred in law as well as on the facts of the case in confirming the disallowances made out of the Advertisement and other expenses incurred wholly and exclusively for business purposes alleging the same to be in the nature of donation and non-business purpose. S.N. Head of expenses Disallowed by AO Sustained by the ld. CIT(A) 8.1 Contribution made for water Anicut in Kota District Rs.2,75,000 Rs.2,75,000 8.2 Contribution for establishing police station at same location Rs.1,51,000 Rs.1,51,000/- Total Rs.4,26,000 Rs.4,26,000 4 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA The disallowance so made and confirmed by the ld. CIT(A) being totally contrary to the provisions of law and facts of the case, kindly be deleted in full. 9. Rs.33,000/-: The ld. CIT(A) erred in law as well as on facts of the case in confirming the addition of Rs.33,000/- made on account of the alleged undeclared rental income. The disallowance so made and confirmed by the ld. CIT(A) is contrary to the provisions of law and facts hence, kindly deleted in full. 10. 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.’’ 2.1 During the course of hearing, the ld. AR of the assessee has not pressed the e Ground No. 1. Hence, the same is dismissed being not pressed. 3.1 In Ground No. 2, the assessee has challenged the disallowance of Rs.34,21,895/- 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 CIT(A) also confirmed the disallowance following his findings in AY 2009-10. Hence, this ground. 3.2 Before us the ld. AR made the following submissions with prayer to delete the disallowance. 5 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA “1. Disallowance u/s 36(1)(iii) is bad in law & facts: Firstly, we strongly rely upon the written submissions filed before the ld. CIT (A) (PB 147-170), and those reproduced at pg. 5 to 7 of CIT(A) order and also hereunder: “1. M/s Allen Career Institute is a partnership firm engaged in the coaching of competitive Examination. The coaching fees for the year are received only through bank drafts at the beginning of the courses, while mostly expenses are incurred monthly throughout the year. All types of receipts and payments are made through bank overdraft account and the assessee do not have current account in the bank. 2. If the firm kept fee received in bank current account and make payment of expenses from that account, no interest income could be earned and a handsome amount remain idle in bank current account earning no income. Therefore the assessee firm do not have current account with bank and has only overdraft account against FDRs, at a nominally higher rate of interest (.25 extra). Accordingly, as a prudent businessman and to maximize its earning, assessee firm is in the regular practice to keep the fee received from the students in Bank in FDR’s account and availing overdraft facility on the FDR’s. All types of receipts (including fees) and all types of payments (whether capital or revenue) are made through overdraft account. But it does not mean that every payment made out of borrowed money. This is totally a part of the assesse’s business financial management planning. 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. The net result would have been loss to the revenue. Here it should be clear that fixed term debt fund scheme – FMP (Fixed Maturity Plan) of mutual fund is simply an alternative of Bank FDRs. Bank fixed deposits are managed by banks while FMPs are issued and managed by mutual funds. Bank fixed deposits (FDs) are deposits in bank debt instruments, FMPs are also debt instruments managed by mutual funds in Govt. securities, and corporate debt. That means that fixed maturity plans, typically have no equity component. 6 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA The object behind making investment is getting tax efficient income similar to bank interest. FMP offer better post tax return than Bank FDs due to indexation benefit for a period of greater than one year. In continuation of our earlier submission we have to submit that investment made in Debt (other than equity) mutual fund mutual fund is not tax free investment. These are taxed under the income tax act. The only benefit is that they are tax efficient, this is the reason why assessee preferred this in comparison of bank FDRs. 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. The net result would have been loss to the revenue. The arrangement which benefited the assessee and consequently the revenue cannot be held against the assessee in the manner done by the AO. 3. The assessee firm did not borrow any fresh money during the year and even have no opening borrowed money. Bank overdraft account is not borrowed money, because overdraft account is against the assessee own bank FDRs. It means bank overdraft is assessee own money taken out of FDR account temporarily. Extract of Balance Sheet and Profit and Loss Account for the current year: Opening Investment 1.50 Cr. Closing Investment 7.60 Cr. Interest on Bank FDRs & Others 8.52 Cr Interest to Bank O/D 1.74Cr Net Interest Income 6.78Cr Addition during the year in Fixed Assets 4.76 Cr. Current Year Profit before Allocation to Partners 31.77Cr. The current year profit (before allocation between partners) is 31.77 Cr. and investment in mutual fund fixed term debt fund scheme was made for just 6.1Cr. Investment in mutual fund was made out of capital and reserves (including current year profit). Investment in 7 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA mutual fund was made out of capital and reserves (including current year profits). The current year income from interest on FDR is 8.66 Cr., while interest on bank overdraft is Rs. 1.73Cr., resulting net income of 6.63Cr. This is the reason why the assessee preferred using bank overdraft account against Bank FDR instead of using bank current account. 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. Hence these facts cannot be kept at par with a case where an assessee running short of fund makes borrowing, bearing interest cost and then divert the same for making investment in mutual fund/ capital assets. Therefore, the decision in Abhishek Industries in clearly distinguishable on facts as decided in the order by AO. We believe in the view taken by the Delhi High Court in CIT v. Dalmia Cement (Bharat) Ltd. (2002) 254 ITR 377 (Del) that once it is established that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the assessee itself), the revenue cannot justifiably claim to put itself in the armchair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize its profit. The IT authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own viewpoint but that of a prudent businessman. In another case, where the assessee argued that (a) The advance has been made to sister company out of bank account wherein both its own and borrowed funds were mixed up, so that there was no direct nexus between borrowing and advance: and 8 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA (b) The loan to a sister company which in this case was a subsidiary company is one which should be treated as promoted by commercial expediency, The Supreme Court upheld the argument of the assessee and interest was not disallowed in the case of S.A. Builders Ltd. Vs. CIT (Appeal) (2007) 288 ITR 1 (SC) Also see CIT Vs. Prem Heavy Engg. Works Pvt. Ltd. (2006) 285 ITR 554 (All), CIT Vs. Radico Khaitan Ltd. (2005) 142 Taxman 681 (All.). The copy of case of is enclosed. Reliance is also placed on the decision of the Hon’ble Bombay high court in the case od CIT v. Reliance Utilities and Power Ltd. 313 ITR 340 and Hon’ble Delhi High Court in the case of CIT v. Bharti Televenture Ltd. We are also enclosing herwith the copy of ITAT , Jaipur case of A.C.I.T. V. Sh. Ram Kishan Verma Prop. M/s. Resonance, Kota. The facts of the above case are identical to the case of the assessee.” 2.1 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. 2.2 It is submitted that the assessee has cited various decisions which 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. 2.3 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 funds and also 9 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 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, looses significance/relevance. 2.4 Huge interest free funds available: During the assessment proceedings, it was specifically submitted vide letter dated 18.02.2014 & 28.02.2014 that the assessee was having huge interest free capital. Moreover, to support, copies of the Audited Balance Sheet as on 31.03.2011 (PB 14) were submitted before the authorities below. A perusal therefore, clearly reveals that there was a huge interest free Capital and Reserve & Surplus which stood at Rs.114,72,23,62/- as on 31.03.2011 (A.Y.2011-12) and Rs.74,91,19,817/- as on 31.03.2010 (A.Y.2010-11). The subjected investment in mutual fund stood at Rs.1,50,000,00/- in the preceding year which increased to Rs.7,60,00,000/- this year as shown in the Audited Balance Sheet as against that the assessee was having a huge interest free Capital and Reserve & Surplus of Rs. 114,72,23,62/- (PB 14). The authorities below however, completely failed to disprove the above factual position. Current year’s profit was of Rs. 31.77 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 10 ITA NO. 620/JP/2016 ALLEEN 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 181-186) wherein, the earlier decision in the case of Radhswami Satsang vs CIT (1992) 193 ITR 321 (SC) at Pg-329 has been relied upon. 11 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 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. A charge showing financials is enclosed as Annexure 3 to revised w/s to ITAT dated 1 st February 2021. X X X X 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. 12 ITA NO. 620/JP/2016 ALLEEN 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 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. 13 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 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 revised w/s to ITAT dated 1 st February 2021 filed in ITAT No. 246/JP/15 for A.Y. 10-11. 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 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 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. 14 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 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 Partners’ 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.34.77 Cr. before depreciation and Rs. 31.77 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.6.10 Cr. and capital investment of Rs.3.96 Cr., totaling to Rs. 10.06 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 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 15 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA & 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 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. 16 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 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 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” 17 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 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 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 31.03.2011 (PB 14). 8. Against the concept of real income: It is unfortunate that the department on one hand, happily taxed a huge extra interest income from Bank 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 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 is taxed under the head `Income from other sources` the interest payment should have also been allowed u/s 57(iii). The disallowance may kindly be deleted in full in its entirety.” 18 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 3.3 In Ground No. 3.1, the assessee has challenged the disallowance of Rs.8,812/- the relevant facts in brief are that the AO noticed from Annexure F of Balance Sheet that the assessee had given advance of Rs.1.00 lakh to Akhil Bhatiya Maheshwari Educational Charitable Trust on 01.07.2009 and shown debit balance of 41,000/- in the a/c of Swanand Sewanyas in the earlier years, but no interest was charged on these outstanding amount of advances as on 31.03.2011. Since similar disallowance was made and confirmed in the preceding years also, hence this year also be disallowed interest @ 6.25% on the same as were allegedly paid out of the borrowed funds. The CIT(A) also confirmed the disallowance following his findings in AY 2009-10. Hence, this ground. 3.4 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 ld. CIT(A) (PB 151), and those reproduced at pg 9 of the order of CIT(A). 2. Before the ld. CIT(A) it was submitted that assessee not charged interest from Swanand Sewa Nyas, Kota and Akhil Bhartiya Maheshwari Educational Charitable Trust, because that are charitable organisation and the advance was given for educational and social purpose. Therefore no interest was charged 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. 44 ITR 146 (SC) hence, this disallowance is bad in law. 19 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA Otherwise, there being sufficient funds already available with the assessee as stated in the earlier grounds, it can’t be said that there was borrowing made for this purpose also. Hence the impugned disallowance kindly be deleted in full.” 3.5 In Ground No. 4, the assessee has challenged the disallowance of Rs.71,93,839/-. The relevant facts as noted by the AO are that the appellant has claimed deduction u/s 36(1)(iii) of the Act in respect of interest of Rs.1,73,72,729/- paid on Bank Over-Draft Account with Central Bank of India, Talwandi, Kota. During the course of assessment proceedings, it was observed that the assessee had used funds out of the said Bank Over-Draft Account for acquisition/construction of the capital assets during the year which were either not put to use during the year or were put to use much after the date of incurring expenditure on their acquisition/construction. Therefore, interest payable on borrowed funds from the date of incurring the expenditure to the date when the fixed asset was first put to use is required to be disallowed as per proviso to sec 36(1)(iii). Since similar disallowance was made and confirmed in the preceding years also, hence this year also he disallowed interest of Rs 71,93,839/-. The CIT(A) also confirmed the disallowance following his findings in AY 2009-10.Hence this ground 3.6 Before us the ld. AR made the following submissions with prayer to delete the disallowance. 20 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA “1. Firstly, we rely upon the written submissions filed before the ld. CIT(A) (PB 147-170) and those reproduced hereunder: “Section 36(l)(iii) states “the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession : Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalised in the books of account or not); for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction” Section 36 (i)(iii) is applicable only in case of capital borrowed. As explained to earlier para, there was no borrowed money in the case of the assessee. Simply payment made through bank overdraft account against FDRs, where the assessee have no bank current account and sufficient own funds, could not be mean as capital borrowed for the applicability of section 36 (i)(iii). The assessee firm did not borrow any fresh money during the year and even have no opening borrowed money. Bank overdraft account is not borrowed money, because overdraft account is against the assessee own bank FDRs. It means bank overdraft is assesee own money taken out of FDR account temporarily. As and when the assessee needed funds, instead of encashing FDRs prematurely the assessee took overdraft from the bank at a nominally higher rate of interest (0.25% , more than FDR rate). Alternatively the assessee could have encashed the FDRs and make the payment for fixed assets, then there would have been no question of any such disallowance by the AO. But the income of the assessee would have been still lower because the loss of interest on account of premature encashment of FDRs. would be higher than interest cost on overdraft. 21 ITA NO. 620/JP/2016 ALLEEN 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 direct nexus between the any amount borrowed and capital expenditure as no capital expenditure was made by raising an interest bearing loan. There were sufficient own funds available with the assessee but instead of making capital expenditure by encashing FDRs premature, the assessee chose a better and more beneficial route of taking overdraft at nominally higher rate. The arrangement which benefited the assessee and consequently the Revenue cannot be held against the assessee in the manner done by the AO. The approach of the AO is unjust, inequitable and illogical. Therefore, no disallowance on account of interest on borrowed money should be made.” 2. The submissions made towards GOA 2 are also relied upon and may kindly be considered. 3. This issue is also covered by the said ITAT order Pr. 40. 4. In addition, it is submitted that looking to the very peculiar facts involved in the present case it is a height of imagination that the funds allegedly borrowed from the O/D A/C, must not have been utilized for the acquisition/ investment in the fixed assets but might have been utilized by the partner somewhere else for their personal purposes although admittedly, there was no iota of evidence even whispered, what to talk of bringing the same on record. The AO merely presumed the utilization of the so called borrowed funds although the assessee repeatedly asserted that it was assessee’s own money and it was only a part of financial management but even assuming it was a borrowed fund, it was not a case of interest bearing borrowing which were diverted towards personal use of the partners in as much as the same were below the overall availability of the interest free funds in the shape of capital, reserves & surplus. Thus, by now means, this addition could and 22 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA should have been made by the AO. Hence the ld. CIT (A) was fully justified in deleting the same. The revenue’s appeal be dismissed. 5.1 As regards the disallowances made in respect to interest on the alleged borrowings utilized for capital investment, our contentions can better be understood by referring to the facts involved and the decision rendered in the case of CIT v/s Reliance Utilities & Power Ltd. (2009) 313 ITR 340 (Mum) (DPB 44-49), which is also a case where for making capital investment in the shares of two companies, disallowance was made. It was held that “The facts of that case were that the Assessee viz. M/s Reliance Utilities and Power Ltd. had invested certain amounts in Reliance Gas Ltd. and Reliance Strategic Investments Ltd. It was the case of the Assessee that they themselves were in the business of generation of power and they had earned regular business income therefrom. The investments made by the Assessee in M/s Reliance Gas Ltd. And M/s Reliance Strategic Investments Ltd. were done out of their own funds and were in the regular course of business and therefore no part of the interest could be disallowed. It was also pointed out that the Assessee had borrowed Rs.43.62 crores by way of issue of debentures and the said amount was utilised as capital expenditure and inter-corporate deposit. It was the Assessee's submission that no part of the interest bearing funds (viz. Issue of debentures) had gone into making investments in the said two companies. It was pointed out that the income from the operations of the Assessee was Rs.313.53 crores and with the availability of other interest free funds with the Assessee the amount available for investments out of its own funds were to the tune of Rs.398.19 crores. In view thereof, it was submitted that from the analysis of the balance-sheet, the Assessee had enough interest free funds at its disposal for making the investments. The CIT (Appeals) on examining the said material, agreed with the contention of the Assessee and accordingly deleted the addition made by the Assessing Officer and directed him to allow the same under the provisions of the Income Tax Act, 1961. The Revenue being aggrieved by the order preferred an Appeal before the ITAT who upheld the order of the CIT (Appeals) and dismissed the Appeal of the Revenue. 23 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA From the order of the ITAT, the Revenue approached this Court by way of an Appeal.” On the above factual matrix, the Hon’ble court held as under: “10. If there be interest-free funds available to an assessee sufficient to meet its investments and at the same time the assessee had raised a loan it can be presumed that the investments were from the interest- free funds available. In our opinion the Supreme Court in East India Pharmaceutical Works Ltd. (supra) had the occasion to consider the decision of the Calcutta High Court in Woolcombers of India Ltd. (supra) where a similar issue had arisen. Before the Supreme Court it was argued that it should have been presumed that in essence and true character the taxes were paid out of the profits of the relevant year and not out of the overdraft account for the running of the business and in these circumstances the appellant was entitled to claim the deductions. The Supreme Court noted that the argument had considerable force, but considering the fact that the contention had not been advanced earlier it did not require to be answered. It then noted that in Woolcomber’s case (supra) the Calcutta High Court had come to the conclusion that the profits were sufficient to meet the advance tax liability and the profits were deposited in the overdraft account of the assessee and in such a case it should be presumed that the taxes were paid out of the profits of the year and not out of the overdraft account for the running of the business. It noted that to raise the presumption, there was sufficient material and the assessee had urged the contention before the High Court. The principle therefore would be that if there are funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds were sufficient to meet the investments. In this case this presumption is established considering the finding of fact both by the CIT(A) and Tribunal.” 5.2 Principally, in the instant case also the facts are the same as were obtaining in the case of Reliance Utilities (supra) in as much as in both the cases, the investments were made in capital asset (whether in the shares of 24 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA the two companies as was the case with Reliance Utilities (supra) or investment in the capital asset i.e. plot purchase, construction etc which makes no difference but at both the places, the common contentions of the assessee are that there were no borrowing made as such in as much as the assessee was already having sufficient interest free funds at its disposal therefore, such investment/outgoing on capital account should be treated to have gone out of the availability of interest free funds but not from the interest bearing funds, if any. This way, there was no occasion for the assessee to make a claim of deduction nor for the AO to have made disallowance u/s 36(1)(iii) of the Act. 6.1 it is submitted that the issue is directly covered by the decision of CIT vs Reliance Industries Ltd. (2018) 161 DTR 420 (Bom. HC) (DPB V 199- 2019) wherein it was held as under: “Appeal (High Court)—Substantial question of law—Interest on borrowed capital—Net profit after tax and before depreciation exceeded not only the differential/incremental loan given to subsidiaries during the year but also exceeds the total interest-free loans given to the subsidiaries as on 31st March, 2003—A presumption would arise that the investment would be out of the interest-free funds generated or available with the company—If the Tribunal had allowed deduction and followed the earlier view and on facts, then, there is no perversity when nothing contrary to the factual material was brought on record by the Revenue—No substantial question of law arises from such a view of the Tribunal” - Vide Para-31 “31. The facts were that, the assesse had given interest free loans to its subsidiaries aggregating to the sum specified in Para 7.2 as on 31 st March, 2003 and the corresponding figures of such interest free loans as on 31 st March, 2002 stood at Rs.2988.98 Crores. Thus, the differential loans given to subsidiaries during the year under consideration were worth Rs.3727.14 Crores. The net profit after tax and before depreciation was arrived at by the tribunal and which exceeded not only the differential/incremental loan given to subsidiaries during the year but also exceeds the total interest-free loans of Rs.6716.12 Crores given to the subsidiaries as on 31 st March, 2003. 25 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA Considering these facts, the Tribunal found that the position is not different from the prior asst. year 2002-03.” The above decision stands affirmed by Hon`ble Apex Court in the case of CIT vs. Reliance Industries Ltd. (2019) 410 ITR 466 (SC) / (2019) 175 DTR 1 (SC) 6.2 The case of CIT vs Reliance Industries Ltd. (Supra) squarely fits in the case of the assesse. The profit of Rs.53.02 Crores (before depreciation and Rs.50.76 Cr. after depreciation) is much bigger than the incremental amount incurred on construction/purchase during the year which is merely Rs.17.06 Crores. The profits of the year not only exceeds the incremental amount but also the total amount of Rs.22.56 Crores. Such profits are interest free as were credited at the year end. 7. The profits of the year exceeds the Incremental as well as the closing value of investment and construction not only in this year but in every subsequent year. This position can be depicted by way of a table given below. (InCrores) AY Incremental Investment (a)Construction (b)Total (a+b)Profits 2011-6.1 3.96 10.06 31.47 2012-9.84 1.23 11.07 62.14 2013-2.6 0.93 3.53 107.49 2014-50.07 45.55 95.62 143.08 2015--6.99 49.68 42.69 170.16 2016-0 29.13 29.13 148.7 2017--3 81.95 78.95 260.32 8. Covered Issue: The Hon’ble ITAT in assessee’s own case for AY 2009-10 vide order dated 27.09.2017 has deleted the disallowance (Pages 20-51). Following this decision the Ld. CIT(A) has also deleted the disallowance in AY 2013-14 vide order dated 01.02.2018 The impugned disallowance kindly be deleted in full.” 26 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 3.7 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. 3.8 We have heard the rival contentions and pursued the material available on record. It is noticed that the incremental outgoings in the shape of investment in mutual fund, investment in construction, loans and advances etc. totalling to Rs. 15.30 Crores (Rs 6.10 crores on MF + Rs 4.76 crores on Fixed assets + Rs 1.41 lakhs advances to charitable institutions + Rs 4.42 crores advances to prospective faculties) as also the closing balances of the interest free outgoings up to 31.03.2011, were far below the current year’s profit of Rs. 31.77 Crores and net profit before depreciation at Rs. 34.77 crore. A table submitted by the assesse in its written submission and reproduced somewhere in this order, support this conclusion. These facts are not controverted by the Ld. DR. Further, there is no dispute that the facts and circumstances of the case are similar to the one which we had examined in detail in relation to Grounds of Appeal no. 2, 3 & 4 taken by the assessee in its appeal for AY 2010-11 decided vide order dated 04-08-2022 in ITA NO 246/JP/2015. This is also evident from the orders of the authorities below in relation to all the three grounds, under consideration where they had followed their findings recorded in their respective orders for AY 2009-10. It is also not denied 27 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA that based on similar contentions, identical facts and the controversy, the coordinate bench had decided the issue of allowability or otherwise u/s 14A and/or 36(1)(iii) in that year vide order dated 27.09.2017 in ITA no. 10/JP/2013 [reported in 190 TTJ 823 (JP)], which was followed by us in our order for AY 2009-10 (supra). Hence, our findings and directions contained in the order for AY 2009-10 and 2010-11 shall apply mutatis mutandis to these grounds of appeal this year as well. In the result, the Grounds No. 2, 3.1 and 4 of the assessee’s appeal are allowed. 4.1 In Ground No 3.2, the assessee is aggrieved for disallowance of Rs.2,45,919/-. 4.2 The relevant facts as noted by the AO are that he noticed from Schedule F of Balance Sheet that loans and advances of Rs. 5,43,43,661 were given by the assessee include advances of Rs. 4,42,27,000 to the prospective lecturers. List of prospective lecturers is reproduced in AO order at Page No. 8-10. The assessee submitted that the amount was given to the prospective lecturers, as a security so that both they as well as the institute are bind by the terms and conditions of the contract. In the next year when the terms of contract are fulfilling by both the parties, the amount was returned. Since this transaction is required for both the parties & in terms of security/ surety, therefore there is no question of charging 28 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA interest. The AO also called for the copies of the agreements which were duly submitted to him. The AO however, alleged that, the assessee has failed to prove that there was any commercial expediency for making the above said interest free advances to the prospective lecturers and the assessee has used a part of borrowed capital for making above said interest free advances without any commercial expediency. Hence, he disallowed Rs.2,45,919/-. The CIT(A) also confirmed the disallowance following his findings in AY 2009-10. 4.3 Before us the ld. AR made the following submissions to delete the disallowance confirmed by the ld CIT(A). 1. Firstly, we strongly rely upon the detailed written submissions filed before the ld. CIT(A) (PB 151-152) , and those reproduced at pg 9 of the order of CIT(A). 2. As submitted before ld. CIT (A), coaching is a very highly competitive business and is fully dependent on the skilled, experienced and reputed (among students) lecturers. This line of business has a huge lecturer turnover also. The amount was given to the prospective lecturers, as a security only and upon fulfilling the terms and conditions of the contract by both the parties, the amount was returned by them. In case, their appointment in the institute had not secured by giving them this security money they may not join the institute in the fear of job continuity, even after the signing the contract and there would create very odd situations before the assessee because admission of the students would have done in the institute by highlighting prospective lecturers names. The goodwill of the institute would have been badly affected and may abolish its business. So in order to secure the services of prospective lecturers, such security amount is given. Keeping in mind the above mentioned reasons, such business decision was taken. 29 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 3. The allegation of the AO that the contract between the parties did not provide for granting of interest free funds is nothing but a suspicion. It was for the assessee to run its business in the best possible manner to safeguard its interest and if was of the view that to attract the prospective lectures, granting of interest free fund was a need of the hour, he rightly did so. Which, decision could not have been interfered by the AO. 4. Alternatively and without prejudice to the above, that the amounts have been advanced in course of business, it is submitted that such interest free advances were given out of the huge Interest free funds and capital funds available with the assessee Therefore, no disallowance should be made. ‘’ 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 upheld the addition/disallowance. 4.5 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, in principle, are similar to the one which we have examined in detail in AY 2009-10 and 2010-11 which were decided in favour of assessee . Hence, our findings and directions contained in those years shall apply mutatis mutandis to this ground of appeal of this year as well. Thus, the Grounds No. 3.2 of the assessee’s appeal is allowed. 30 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 5.1 In Ground No. 5, disallowance of Rs. 22,23,000/- out of scholarship expenses alleging the same to be contingent liability which has not become due in the current year is agitated by the assessee. 5.2 The relevant facts as noted by the AO are that the assessee has claimed deduction of Rs. 35,94,000/- on account of Scholarships to students. (AO page 21 Para 2.4.1) The AO asked the assessee, in reply to which assessee vide letter dated 18.02.2014 (AO page 21) stated that as per scheme, the Scholarship is given to the students selected within first 100 ranks in AIPMT/IIT or to students who got selected in AIIMS. Under the scheme Rs. 1000/- per month for the duration of MBBS/IIT (i.e. 4 Years), totalling to Rs. 48000/- per student was to be given. During this year, 57 students (41 of AIPMT, 16 of AIIMS) were selected for scholarship. Accordingly, the assessee provided for Rs.27,36,000/- [Rs.48,000/- *57(41+16)] and out of which Rs.5,13,000/- [57 * Rs.9,000/- (Rs.1,000/- for July to March - 9 months)] was paid during this year. Therefore, the balance of Rs.22,23,000/- was shown as payable at the end of the year, which were paid in subsequent years (i.e. cheques 12 + 12 + 12 + 3 in A.Y.2012-13 To 2014-15) as & when the concerned student got the cheque en-cashed. The AO asked the appellant, who vide his letter dated 18.02.2014 (AO pg 21 onwards), stated that this is a certain liability and did not depend on happening or not happening of an event and 31 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 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. 5.3 Before us the ld. AR made the following submissions with prayer to delete the disallowance confirmed by the ld. CIT(A). 1. Firstly, we strongly rely upon the detailed written submissions filed before the ld. CIT(A), and those reproduced at pg 12 to 13 of the order of 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 & 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.27,36,000/- [Rs.48,000/-*57 (41+16)] was provided this year. Also accordingly, 48 pre- dated cheques (PDI) were given to all the 57 students. This year, Rs.5,13,000/- [57 * Rs.9,000/- (Rs.1,000/- for July to March - 9 months)] 32 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA was paid, based on the cheques already given to the successful students. Therefore, the balance of Rs.22,23,000/- was shown as payable at the end of the year, which were paid in subsequent years (i.e. cheques 12 + 12 + 12 + 3 in A.Y.2012-13 to A.Y. 2014-15) 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 (PB 121), 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), 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.5.13 Lacs could be got en-cashed this year however, balance of Rs.22,23,000/- remained outstanding in its Balance Sheet. Thus, it was nothing but an outstanding 33 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA liability which has been wrongly named as a provision or a contingent liability by the authorities below. Notably, in A.Y.2012-13 to 2015-16, the cheques of entire balance of Rs.22,23,000/- got en-cashed 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. 6A. 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. 6B. 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). 7. Supporting Case Law: See Annexure 2 to revised 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 revised w/s to ITAT dated 1 st February 2021 in A.Y. 10-11 in ITA No. 246/JP/15. 8. No disallowance made in past except AY 10-11: 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 34 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 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/- 2010-11 19,20,000/- 2011-12 22,23,000/- 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 except AY 2010-11. 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 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.” 35 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 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. 9.1 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. 9.2 Thereapart, w.r.t. disallowance of Scholarship Payable, we are submitting herewith an at a glance chart (PB184) showing that the liability created in the subjected years, i.e. A.Y. 2010-11 & 11-12 stood paid off in later years and in some cases where the cheques were not encashed by the awardee-payee, the same stood credited back to the scholarship expenses. Even in the order of the Settlement Commission, there is a categorical finding expressing satisfaction of this factual aspect based on their sample test checking. 9.3 In any case, if it is not held allowable this year, the same has to be allowed in the year of payment, else it will amount to double taxation. Hence, the impugned disallowance kindly be deleted in full. 5.4 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 upheld the addition/disallowance. 5.5 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 36 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 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. 5 taken by the assessee in its appeal for AY 2010-11 decided vide order 04-08-2022 in ITA NO 246/JP/2015. Hence, our findings and directions contained towards Grounds No. 5 shall apply mutatis mutandis to this ground of appeal as well. Thus the Ground No. 5 of the assessee’s appeal is allowed. 6.1 In Ground No. 6 disallowance of Rs.1,05,315/- on account of treating repair & maintenance as a capital expenditure is agitated by the assessee. 6.2 Brief facts of the case are that the assessee claimed Repair & Maintenance (Electrical) of Rs. 1,23,900/- on 21.07.2010. The expenditures were incurred for battery and, therefore revenue in nature. Further assessee submitted vide letter dated 10.03.2014 (AO Pg 28) that if the AO is not satisfied with our contention, please allow depreciation @60% as UPS is also an integral part of computer systems. The AO rejected this contention and made addition of Rs. 1,05,315/- after allowing depreciation @ 15% on Rs. 1,23,900/-. 6.3 In the first appeal, the ld. CIT(A) partly confirmed the disallowance up to Rs1,05,315/, after allowing the depreciation. 37 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 6.4 Before us, the Ld. AR made the following submissions with prayer to delete the disallowance confirmed by the ld. CIT(A): “1. Firstly, we rely upon the written submissions filed before CIT(A) (PB 158) and those reproduced in his order which are as under: “The assessee paid Rs. 1,23,900/- towards purchased for UPS System installed at building. The Assessing Officer disallowed Rs. 1,05,315/- (1,23,900 - 18,585), (after allowing 15% depreciation), treating it as capital expenditure alleging new UPS System is purchased. The copy of the bills is enclosed. The UPS system consists 20 batteries, which is to be replaced every year, therefore theses expenses are revenue in nature, hence should be allowed.” 2. Once the fact that batteries are to be replaced every year is not denied, the subjected expenditure has to be treated as revenue only. Moreover, as held by Delhi High Court that computer accessories and peripherals such as UPS, printers, scanners and servers etc. form an integral part of the computer, hence batteries also were part of the UPES system and therefore, the entire expenditure must have be allowed as revenue only. Hence, the order of the CIT(A) please be modified accordingly.” 6.5 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. 6.6 We have carefully considered the entire facts and the issue involved. Whereas the assessee claimed the subjected expenditure as of revenue nature, the AO considered the same as capital in nature. However, considering the fact that the UPS system consisted of 20 batteries, which has limited life and once it is not 38 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA denied that the same are to be replaced every year such expenditure are certainly of revenue nature, more particularly, when it constitutes a substantial part of UPI system. The Honourable Delhi High Court in the case of CIT V BESE Rajdhani Powers Ltd. (ITA 1266/2010) held that the computer accessories and peripherals such as UPS, printers, scanners and servers etc. form an integral part of the computer, hence batteries are also to be considered as the integral part of the UPES system, and hence, such expenditure is of revenue nature. Therefore, the impugned disallowance is hereby deleted as the subjected expenditure is held of revenue nature. This ground of appeal is therefore decided in favour of the assessee. 7.1 The Grounds No. 7 taken by the assesse consist of two separate grounds against disallowances of some expenses and are being dealt with hereunder issue wise: 7.1.1 In Ground No. 7.1 disallowance of Rs. 82,000/- on Electricity Connection Charges, made as a capital expenditure, is agitated by the assessee. 7.1.2 Brief facts of the case are that the assessee incurred Rs. 82,000/- for new Electricity connection on its building situated at 6, Rajiv Gandhi Nagar. The charges were pertaining to connection charges, electricity lines, supervision charges, CTPT set cost and meter cost. The AO disallowed the entire amount by 39 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA holding that by obtaining new connection for a new building, the assessee has obtained a benefit of enduring nature. 7.1.3 In the first appeal, the ld. CIT(A) confirmed the disallowance. Hence, this Ground by the assessee. 7.1.4 In Ground No. 7.2 disallowance of Rs. 1,08,908/- for Repainting of Business Premises, is agitated by the assessee. 7.1.5 Brief facts of the case are that Repair & Maintenance expenses claimed by the assessee included expenses of Rs. 74,063/- and Rs.34,845/- incurred in respect of paint/white washing of the building “Sabal”. The AO contended that the expenditure should be treated as capital in nature as the building Sabal was commissioned only a few months ago. The assesee vide his letter dated 10.02.2014 replied as: “The assessee incurred Repair & Maintenance Expenses of Building of Rs. 74,063/- and Rs. 34,845/- for repainting. The assessee got constructed the Sabal building from contractor, first time the contractor did paint/ whitewash on the building as per the contract. The building was completed and put to use in July 2010. In the month of Feb-2011, the part of building was got repainted due to leakage in rainy days. These expenses were accounted as revenue expenditure. (PB 118)” Further to above, the assessee had to get whitewash classroom every year, because students usually write something on walls and for the hygienic point of view whitewash of classrooms every year is must. The copy of bill is enclosed.” The ld. AO made the addition by holding that the expenditure incurred on painting/white washing of building (Sabal), which was put to use only on 40 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 10.07.2010 are clearly capital expenditure.In the first appeal, the ld. CIT(A) confirmed the disallowance. Hence, this Ground by the assessee. 7.1.6 Before us, the Ld. AR made the following submissions with prayer to delete the disallowance confirmed by the ld. CIT(A): “1. Firstly, as submitted before CIT (A) the assessee had to get the classroom whitewashed every year, because students usually write something on walls and for the hygienic point of view whitewash of classrooms every year is must. 2. As regards to Electricity connection charges, these expenses were pertaining to connection charges, electricity lines, supervision charges, CTPT set cost and meter cost. This did not create any property on which the assessee had ownership title, therefore expenditure are revenue in u/s 37 or 28. 3. The assessee further submitted that Contribution paid for laying cables and transmission lines is deductible- The contribution paid by the assessee to the government for laying cables and other transmission lines, necessary for installation of its new plant, which remained the property of the Government, would be allowable as a deduction- CIT vs. Gujarat Mineral Development Corpn. (1981) 132 ITR 377 (Guj.) 4. Such expenditure did not bring any new asset/ advantage so as to be termed as capital. Hence the impugned disallowance kindly be deleted in full.Hence this ground by the assessee.” 7.1.7 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. 41 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 7.1.8 We have heard both the parties and perused the materials available on record. The impugned disallowance relates to expenditure of Rs 82,000/- incurred towards the electric connection charges. A similar issue came up before us while deciding the appeal for A.Y. 2010-11 in ITA no. 246/JP/2015 vide ground of appeal no. 6.1 Undisputedly the facts being identical, our finding given in ground of appeal no. 6.1 is followed here also. Further, we find no justification behind the disallowance of Rs.1,08,908/- incurred on repair and maintenance of the building at SABAL inasmuch as no new asset came into existence. Hence, it was a case of revenue expenditure. Therefore, the disallowance as confirmed by the ld. CIT(A) is directed to be deleted. Accordingly, this ground of the assessee is allowed in favour of the assessee. 8.1 In Ground of No. 8.1 disallowance of Rs. 4,26,000/- (Rs.2,75,000/- + Rs. 1,51,000/-) made out of Advertisement & Other expenses incurred wholly and exclusively for business purpose alleging the same to be in the nature of donation & for non-business purpose, is agitated by the assessee. 8.2 Brief facts of the case are that hee assessee debited the Advertisement Expenses of Rs. 2,75,000/- on 09.04.2010 for Anicut expenses. The assessee vide letter dated 18.02.2014 submitted that the assessee have to contribute for social project for maintaining good relations with government department for business 42 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA support. This is not voluntary activity, hence not in the nature of donation. For the same reason assessee made payment of Rs.1,51,000/- for establishment of police station in the same location. The AO disallowed the expenses by holding that Rs.2,75,000/- were paid to Government Department for building water harvesting structure. Thus, the expenditure has not been incurred wholly and exclusively for the purpose of assessee’s business. On the same contention the ld. AO also disallowed the expense of Rs.1,51,000/- paid for establishment of police station in the same location. In the first appeal, the CIT(A) upheld the contention of the AO. 8.3 Before us, the Ld. AR made the following submissions with the prayer to delete the disallowance confirmed by the ld. CIT(A): 1. Firstly, we strongly rely upon the detailed written submissions filed before the ld. CIT(A) (PB 166-167), and those reproduced at Pgs 20 to 21 of the order of CIT(A). “The assessee made Rs. 2,75,000/- , as contribution for water anicat, a social project of Government in Kota district. The Assessing Officer disallowed Rs. 2,75,000/- out of advertisement expenses alleging that this expenditure is a donation and not incurred for the business purpose. The assessee make payment of Rs.1,51,000/- to Police department for establishing the Police Station in the same location, where coaching institute situated, alleging expenditure as a donation and not for business purpose. The assessee have to contribute for social project for maintaining good relations with government department for the business support. These contribution is not voluntary made, hence not in the nature of 43 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA “Donation”. These payments are made during the course of business and in the interest of the business, hence theses are totally business expenses only. The business is benefited by incurring such time of expenses. There is no personal element and these are not in nature of capital expenditure. Corporate Social Responsibility (CSR) is a way of conducting business, by which corporate entities visibly contribute to the social good. Socially responsible organizations use CSR to integrate economic, environmental and social objectives with the company’s operations and growth. Thus CSR is no charity or mere donations. Deduction under income tax act is available if the same is incurred as a good corporate citizen to earn goodwill and create an atmosphere in which business can succeed in a greater measure. In view of the above, the disallowance made by the Assessing Officer to be deleted.” 2. Such expenditure also directly indirectly helps and protects the business interest of the assessee. “For the purpose of the business” used u/s 37(1) which is of wider import. Kindly refer Madhav Prasad Jatia vs CIT [1979] 118 ITR 200 (SC)/ 10 CTR 375 (SC). 3. Also, kindly refer CIT vs Kamal & Co. [1993] 203 ITR 1038 /113 CTR 353 (Raj.)(DPB 187 – 189). The impugned disallowance kindly be deleted in full. 8.4 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 upheld the addition/disallowance. 8.5 We have heard both the parties and perused the materials available on record. Considering the totality of the facts and circumstances, findings recorded by the authorities below and rival contentions, we find no merit in the contentions 44 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA raised by the assessee, hence, no interference is called for. Consequently, the impugned disallowance of Rs 4,26,000/- is upheld and this ground of appeal is decided against the assessee. 9.1 In Ground No. 9 Addition of Rs. 33,000/- made on account of alleged undeclared rental income, is agitated by the assessee.. 9.2 Brief facts of the case are that during the year, the assessee credited rental income of Rs.2,00,000/- from M/s Bajrang Tent House. As per 26AS, the rental income was Rs.2,33,000/- on which TDS of Rs. 23,300/- was deducted by the payer as per the provisions of section 194-I of the Act. The assessee submitted before AO that Rs. 33,000/- were pertaining to A.Y.2009-10 which is shown by M/s Bajrang Tent House in the A.Y. 2011-12 because in the A.Y. 2009-10 TDS was less deducted on rental income. However, the AO made the addition of Rs. 33,000/- by holding that the assessee failed to prove that it had earned rental income of Rs.2,00,000/- only during A.Y. 2011-12. In the first appeal, the CIT(A) also confirmed the addition made by the AO by holding that the assessee failed to file any confirmation from M/s Bajrang Tent House in support of its assertion. Therefore, it was held that the assessee had earned rental income of Rs.2,33,000/- from M/s. Bajarang Tent House during A.Y. 2011-12 as against rental income of Rs.2,00,000/- shown in the books of accounts. Credit of TDS has also been 45 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA claimed by the assessee for A.Y. 2011-12. Therefore, the addition of undeclared rental income Rs. 33,000/- was confirmed. 9.3 Before us, the Ld. AR made the following submissions with the prayer to delete the addition confirmed by the ld. CIT(A). “1. Firstly, we rely upon the detailed written submissions filed before CIT(A) (PB-167) and those reproduced here under: “As per From 26AS, the assesse have rental income of Rs. 2,33,000/- as against Rs. 2,00,000/- as per regular books of account of the assesse. The Assessing Officer made addition of Rs. 33000 (233000- 200000) ignoring the regular and audited books of accounts of the assesse. The copy of Rent account showing credit from Bajrang Tent House for the financial year 2008-09, 2009-10 and 2010-11 is hereby enclosed. Further to above, the copy of rent agreement with Bajrang Tent House is enclosed. (PB 124-132) Details of Rent Income A.Y. As Per Bajrang As Per Allen 2009-10 166996 200000 2010-11 800004 800000 2011-12 233000 200000 Total 1200000 1200000 This reflects that no rental income left untaxed, therefore no addition should be made. The difference is due to that Bajrang Tent House calculated rent on days basis while the assesse i.e. Allen calculated on quarter basis, otherwise there is no difference. 46 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA The learned Assessing Officer made addition ignoring this facts that is to be deleted. “ 2. The authorities below have misread the terms of the contract. In fact Rs. 2,00,000/- was only an advance whereas the actual rent agreed to payed at the rate of Rs. 25,000/- per event (as per clause 4 PB 130) and accordingly, rental income was accounted for. The agreement was already signed by the lessee, hence no confirmation was required and it was for AO to make enquiry, if required. The assessee was bound to claim TDS in this year only since was shown in AS 26 of this year only. 3. As per Section 22, “Annual Letting value” which was available in this case, hence was rightly declared. The impugned disallowance kindly be deleted in full.” 9.4 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. 9.5 We have heard both the parties and perused the materials available on record. The addition of Rs. 33,000/- made on account of alleged undeclared rental income is agitated. After carefully considering the totality of facts and circumstances, submission made by the assessee and the fact that authorities below misread the terms of the contract, which fact remain uncontroverted by the Ld. DR, we are of the opinion that the addition has been wrongly made by the AO. Accordingly, this addition is deleted and this ground of appeal is decided in the favour of assessee. 47 ITA NO. 620/JP/2016 ALLEEN CAREER INSTITUTE VS JCIT, RANGE-2, KOTA 10. Ground No. 10 is 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. 11. 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, Jaipur 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. 620/JP/2016) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asstt. Registrar