M/s Ascent Electrification Engineers, Jamnagar V. Asstt. Commr. of Income Tax, Circle-2, Jamnagar

ITA 92/RJT/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 9924 (ITAT-RAJKOT)
• Duration Of Justice: 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 09-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: USHA N SHROTE SR D R
• Assessee Lawyers: DS VARIA
• Keywords: Proportionate interest
• Section: 14A; 28

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT LKOZJH LKOZJH LKOZJH LKOZJH OLHE OLHE OLHE OLHE VGEN] YS[KK LNL; ,O EK/ VGEN] YS[KK LNL; ,O EK/ VGEN] YS[KK LNL; ,O EK/ VGEN] YS[KK LNL; ,O EK/KQFERK KQFERK KQFERK KQFERK JKW;] U; JKW;] U; JKW;] U; JKW;] U;KF KFKF KF;D LNL; DS LE{KA ;D LNL; DS LE{KA ;D LNL; DS LE{KA ;D LNL; DS LE{KA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SMT MADHUMITA ROY, JUDICIAL MEMBER ITA NO.92/RJT/2018) ( / ASSESSMENT YEAR : 2012-13) M/S. ASCENT ELECTRIFICATION ENGINEERS, OFFICE NO.8, SARJU CHAMBERS, K. V. ROAD, OPP. INDIAN BANK, JAMNAGAR 361 001 / VS. THE ACIT, CIRCLE 2, JAMNAGAR. ./ ./ PAN/GIR NO. : AAOFA 2574 R ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI D.S. VARIA, A.R. ! / RESPONDENT BY : SMT USHA N. SHROTE, SR. D.R. ' #$ % ! & / DATE OF HEARING 03/07/2018 '( ! & / DATE OF PRONOUNCEMENT 26/09/2018 )* / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) JAMNAGAR [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)/JA M/55/15-16 DATED 01-12-2017 ARISING IN THE MATTER OF ASSESSMENT ORDE R PASSED UNDER S.143(3) OF THE INCOME TAX ACT, 1961(HERE-IN-AFTER REFERRED TO AS 'THE ACT') DATED 11-03-2015 RELEVANT TO ASSESSMENT YEAR (AY) 2012-13. ITA NO.92/RJT/2018 ASCENT ELECTRIFICATION ENGINEERS VS. ACIT ASST.YEAR 2012-13 - 2 - 2. THE ASSESSEE HAS RAISED FOLLOWING GROUND OF APPE AL: 01. THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2/ JAM AS WELL AS THE HON. COMMISSIONER OF INCOME TAX (APPEAL S)/JAM HAS ERRED IN LAW AS WELL AS ON FACTS BY MAKING ADDITION IN TO TAL INCOME FOR A SUM OF RS.3,06,395/- TOWARDS EMPLOYEES' CONTRIBUTION TO WARDS P. F. ON ACCOUNT OF DELAYED PAYMENT THEREOF UNDER THE P. F. ACT. 02. THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX,CI RCLE-2/ JAM AS WELL AS THE HON. COMMISSIONER OF INCOME TAX (APPEAL S)/JAM HAS ERRED IN LAW AS WELL AS ON FACTS BY DISALLOWING INTEREST EXPENSES OF RS. 6,61,763/- ON THE ALLEGED GROUND OF INTEREST BEARIN G FUND GIVEN WITHOUT INTEREST TO SISTER CONCERN M/S. RYB ENGINEERING. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR WITHDRAW ANY ONE OR MORE OR ALL GROUNDS OF APPEAL. 3. THE FIRST ISSUE RAISED BY THE ASSESSEE IN THIS A PPEAL IS THAT LD CIT(A) ERRED IN DISALLOWING THE EMPLOYEES CONTRIBUT ION TOWARDS PF FOR RS. 3,06,395/- ON ACCOUNT OF DELAYED PAYMENT. 4. THE AO DURING ASSESSMENT PROCEEDINGS OBSERVED TH AT THE ASSESSEE FAILED TO DEPOSIT THE EMPLOYEE'S CONTRIBUTION TO PF /ESI WITHIN THE DUE DATE AS SPECIFIED UNDER THE RELEVANT ACT, RULE OR N OTIFICATION ISSUED THEREUNDER. THEREFORE, THE AO DISALLOWED THE SAME A FTER HAVING A RELIANCE ON THE JUDGMENT OF HONBLE GUJARAT HIGH CO URT, IN THE CASE OF CIT VS. GSRTC REPORTED IN 41 TAXMANN.COM 100 AND AD DED TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO.92/RJT/2018 ASCENT ELECTRIFICATION ENGINEERS VS. ACIT ASST.YEAR 2012-13 - 3 - 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. C IT(A) WHO CONFIRMED THE ORDER OF AO. BEING AGGRIEVED BY ORDER OF LD. CIT(A) ASSESSEE IS IN THE SECOND APPEAL BEFORE US. 6. THE LD. AR BEFORE US CONCEDED THE FACT THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE HONBLE GUJARAT HIGH CO URT IN THE CASE OF CIT VS. GSTRC REPORTED IN 41 TAXMANN.COM 100. HOWEV ER, THE LD. AR BEFORE US FURTHER SUBMITTED THAT THE DUE DATE FOR T HE DEPOSITING THE AMOUNT OF EMPLOYEES CONTRIBUTION TOWARDS PF/ESI IS TO BE SEEN FROM THE RELEVANT MONTH, IN WHICH SALARY WAS PAID TO THE EMP LOYEES AND NOT FROM THE MONTH IN WHICH SALARY BECAME DUE. THE LD. AR IN SUPPORT OF HIS CLAIM RELIED ON THE ORDER OF THIS JURISDICTIONAL TR IBUNAL IN THE CASE OF SUZLON ENERGY LTD. VS. DCIT REPORTED IN 764 & 765/A HD/2018 VIDE ORDER DATED 27.06.2018, WHEREIN IT WAS HELD AS UNDER: WE MAY, HOWEVER, ADD THAT A CO-ORDINATE BENCH OF T HIS TRIBUNAL, IN THE CASE OF RAJJRATNA METAL INDUSTRIES LTD VS. ACIT (IT A NO.940/AHD/2015; ORDER DATED 22.09.2017), HAS OBSERVED AS FOLLOWS:- '3. ASSESSEE'S LATTER SUBSTANTIVE GROUND CHALLENGE S CORRECTNESS OF BOTH THE LOWER AUTHORITIES' ACTION DISALLOWING/ADDING A SUM OF RS.3,85,810/- U/S. 36(1 )(VA) R.W.S. 2(24) OF THE ACT ON ACCOUNT LATE PAYMENT OF EMPLOYE ES' CONTRIBUTION TO PF & ESI IN QUESTION. THERE IS NO D ISPUTE THAT HON'BLE JURISDICTIONAL HIGH COURT'S DECISION IN CIT VS. GUJARAT STATE ROAD TRANSPORT CORPORATION (2014) 366 ITR 170 (GUJ) UPHOLDS SUCH A DISALLOWANCE IN PRINCIPLE. THE ASSES SEE'S CASE HOWEVER IS THAT RELEVANT DUE DATE HAS TO BE SEEN NO T FROM THE RELEVANT MONTH OF SALARY BUT THE ONE PERTAINING TO ITS PAYMENT. ITA NO.92/RJT/2018 ASCENT ELECTRIFICATION ENGINEERS VS. ACIT ASST.YEAR 2012-13 - 4 - HE THEN FILES A COMPUTATION CHART INDICATING IT TO HAVE PAID ABOVE EMPLOYEES' PF/ESI CONTRIBUTIONS ON 22.05.2009 AND 28.05.2009 AS AGAINST THE DUE DATES THEREOF FOLLOWI NG ON 20.06.2009. THE REVENUE FAILS TO DISPUTE THIS FACTU AL POSITION. WE THEREFORE QUOTE THIS TRIBUNAL'S CO-ORDINATE BENCH D ECISION IN KANOI PAPER & INDUSTRIES LTD. VS. ACIT 75 TTJ 448 T HAT THE RELEVANT DATE IN SUCH CASE IS THAT OF MONTH OF THE ACTUAL PAYMENT OF WAGES/SALARIES. WE THEREFORE RELY ON THE ABOVE C O-ORDINATE BENCH DECISION AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE AS WELL. 4. IN EFFECT THUS WHILE ANY DELAYED DEPOSIT OF PF/ ESI IS TO BE DISALLOWED, IN TERMS OF HON'BLE GUJARAT HIGH COURT' S JUDGMENT IN THE CASE OF GUJARAT STATE ROAD TRANSPORT CORPORA TION (SUPRA), THE QUESTION AS TO WHETHER THERE IS A DELA Y OR NOT MAY BE DECIDED BY THE ASSESSING OFFICER IN THE LIGHT OF AB OVE OBSERVATIONS BY THE COORDINATE BENCH. THE ASSESSEE WILL GET RELIEF, IF FOUND ADMISSIBLE, ON THAT BASIS. 5. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALL OWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT TODAY ON THE 27 TH JUNE, 2018. 6.1 IN VIEW OF THE ABOVE, THE AR FOR THE ASSESSEE B EFORE US SUBMITTED THAT THE MATTER COULD BE RESTORED BACK TO THE FILE OF AO FOR FRESH ADJUDICATION IN TERMS OF THE ABOVE. 7. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THE JURISDICTIONAL ITAT IN THE CASE OF SUZLON ENERGY LTD. (SUPRA) HAS RELIED ON THE ORDER OF HONBLE ITAT, KOLKATA BENCHES IN THE CASE OF KANOI PAPER & INDUSTRIES LTD. VS. ACIT REPORTED IN 75 TTJ 448, WHEREIN, THE ISSUE WAS DECIDED ABOUT EMPLOYEES PROVIDENT FUND. AS SUCH, THERE WAS NO ISSUE ABOUT THE ITA NO.92/RJT/2018 ASCENT ELECTRIFICATION ENGINEERS VS. ACIT ASST.YEAR 2012-13 - 5 - PAYMENT OF EMPLOYEES CONTRIBUTION TOWARDS ESI. THE REFORE, THE DISALLOWANCE OF THE CONTRIBUTION TOWARDS ESI SHOULD BE SEEN FROM THE MONTH IN WHICH IT BECAME DUE. THEREFORE, THE CLAIM OF THE ASSESSEE IN THE CASE OF DELAY IN THE PAYMENT OF EMPLOYEES CONTRIBU TION TOWARDS ESI, CANNOT BE DECIDED/ ALLOWED BY THE DATE OF PAYMENT. 7.1 THE LD DR FURTHER SUBMITTED THAT THE PAYMENT OF WAGES ACT, 1936 REQUIRES THAT THE PAYMENT SHOULD BE MADE BEFORE THE EXPIRY OF THE 7 TH DAY FROM THE LAST DAY OF THE WAGE PERIOD, WHERE THE SAL ARY IS LESS THAN THOUSAND RUPEES AND IN OTHER CASES, IT SHOULD BE TH E 10 TH DAY. THE PAYMENT OF WAGES ACT REQUIRES THAT THE PAYMENT SHOU LD BE MADE WITHIN THE PERIOD AS SPECIFIED. THUS, IF THE ASSESSEE IS A LLOWED FOR THE DEDUCTION FOR THE CLAIM OF THE EMPLOYEES CONTRIBUTION TOWARD S PF/ESI ON PAYMENT BASIS, THEN THERE IS A POSSIBILITY THAT THE ASSESSE E MAY DELAY IN THE PAYMENT OF WAGES TO THE WORKERS. THUS, IF THE DEDUC TION FOR CONTRIBUTION TOWARDS PF/ ESI IS ALLOWED TO THE ASSESSEE ON THE B ASIS OF DATE OF PAYMENT FOR CONTRIBUTION TOWARDS PF / ESI, THEN THE PURPOSE OF WAGE ACT, 1936 WILL BE DEFEATED. 8. THE LD. AR IN HIS REJOINDER SUBMITTED THAT NO RE FERENCE SHOULD BE MADE TO THE PAYMENT OF WAGES ACT WHILE DECIDING THE ISSUE UNDER THE INCOME TAX ACT. ITA NO.92/RJT/2018 ASCENT ELECTRIFICATION ENGINEERS VS. ACIT ASST.YEAR 2012-13 - 6 - 8.1 THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMIT TED THAT THE GRACE PERIOD HAD BEEN PROVIDED UNDER THE RELEVANT ACT OF FIVE DAYS FOR MAKING THE PAYMENT WHICH SHOULD BE TAKEN UNDER CONSIDERATI ON BEFORE MAKING THE DISALLOWANCE U/S 36(1)(VA) R.W.S. 2(24)(X) OF T HE ACT. 8.2 THE LD. AR IN SUPPORT OF HIS CLAIM RELIED ON TH E JUDGMENT OF HONBLE MUMBAI HIGH COURT IN THE CASE OF PCIT VS. H IND FILTER LTD. REPORTED IN 90 TAXMANN.COM 51. THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED BELOW: 11. IN OUR VIEW THE DECISION OF THE TRIBUNAL IN UPHOLD ING THE ORDER OF THE CIT (A) IN THE CASE AT HAND CANNOT BE FAULTED. THE ASSESSEE WAS FOUND TO HAVE DEPOSITED THE AMOUNT WITHIN GRACE PER IOD AND HENCE THERE IS NO SUBSTANCE IN THE GRIEVANCE OF THE REVENUE. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSES SEE HAS DELAYED IN THE PAYMENT OF EMPLOYEES CONTRIBUTION OF PF/ ESI AS SP ECIFIED UNDER THE RELEVANT ACT. THEREFORE, THE DISALLOWANCE WAS MADE BY THE AO U/S 36(1)(VA) R.W.S. 2(24)(X) OF THE ACT. THE LD CIT-A SUBSEQUENTLY CONFIRMED THE VIEW TAKEN BY THE AO. 9.1 THE LD. AR BEFORE US HAS NOT CHALLENGED THE PRO POSITION LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CI T VS. GSRTC (SUPRA), WHEREIN IT WAS HELD AS UNDER: IN VIEW OF THE ABOVE AND FOR THE REASONS STATED AB OVE, AND CONSIDERING SECTION 36(1)(VA) OF THE INCOME TAX ACT, 1961 READ WITH SUB-CLAUSE (X) ITA NO.92/RJT/2018 ASCENT ELECTRIFICATION ENGINEERS VS. ACIT ASST.YEAR 2012-13 - 7 - OF CLAUSE 24 OF SECTION 2, IT IS HELD THAT WITH RES PECT TO THE SUM RECEIVED BY THE ASSESSEE FROM ANY OF HIS EMPLOYEES TO WHICH PROVISIONS OF SUB- CLAUSE (X) OF CLAUSE (24) OF SECTION (2) APPLIES, T HE ASSESSEE SHALL BE ENTITLED TO DEDUCTION IN COMPUTING THE INCOME REFER RED TO IN SECTION 28 WITH RESPECT TO SUCH SUM CREDITED BY THE ASSESSEE T O THE EMPLOYEES' ACCOUNT IN THE RELEVANT FUND OR FUNDS ON OR BEFORE THE 'DUE DATE' MENTIONED IN EXPLANATION TO SECTION 36(1)(VA). CONS EQUENTLY, IT IS HELD THAT THE LEARNED TRIBUNAL HAS ERRED IN DELETING RES PECTIVE DISALLOWANCES BEING EMPLOYEES' CONTRIBUTION TO PF ACCOUNT / ESI A CCOUNT MADE BY THE AO AS, AS SUCH, SUCH SUMS WERE NOT CREDITED BY THE RESPECTIVE ASSESSEE TO THE EMPLOYEES' ACCOUNTS IN THE RELEVANT FUND OR FUNDS (IN THE PRESENT CASE PROVIDENT FUND AND/OR ESI FUND ON OR BEFORE TH E DUE DATE AS PER THE EXPLANATION TO SECTION 36(1)(VA) OF THE ACT I.E . DATE BY WHICH THE CONCERNED ASSESSEE WAS REQUIRED AS AN EMPLOYER TO C REDIT EMPLOYEES' CONTRIBUTION TO THE EMPLOYEES' ACCOUNT IN THE PROVI DENT FUND UNDER THE PROVIDENT FUND ACT AND/OR IN THE ESI FUND UNDER THE ESI ACT. 9.2 HOWEVER, THE LD. AR BEFORE US HAS SUBMITTED THA T THE DUE DATE FOR DEPOSITING THE EMPLOYEES CONTRIBUTION TOWARDS PF/E SI SHOULD BE SEEN FROM THE DATE OF THE PAYMENT AND NOT FROM THE DUE D ATE. IN THIS REGARD, WE NOTE THAT THE JURISDICTIONAL TRIBUNAL IN THE IDE NTICAL FACTS AND CIRCUMSTANCE IN THE CASE OF SUZLON ENERGY LTD.(SUPRA) HAS RESTORED THIS ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION. THEREFORE, RESPECTFULLY FOLLOWING THE SAME WE ARE INCLINED TO RESTORE THE I SSUE ON HAND TO THE FILE OF AO FOR FRESH ADJUDICATION IN ACCORDANCE TO THE P ROVISION OF LAW AS WELL AS AFTER CONSIDERING THE ORDER OF THIS TRIBUNAL IN THE CASE OF SUZLON ENERGY LTD. (SUPRA). THUS, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ITA NO.92/RJT/2018 ASCENT ELECTRIFICATION ENGINEERS VS. ACIT ASST.YEAR 2012-13 - 8 - 10. THE SECOND GROUND OF APPEAL RAISED BY THE ASSES SEE IS THAT LD CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 6,61,763/- ON ACCOUNT OF INTEREST EXPENSES. 11. THE AO DURING THE ASSESSMENT PROCEEDING OBSERVE D THAT THE ASSESSEE HAD DIVERTED INTEREST-BEARING LOAN TO ITS SISTER CONCERN M/S RYB ENGINEERING FOR RS. 55,14,694/- ONLY. ACCORDINGLY, THE AO WORKED OUT THE PROPORTIONATE INTEREST OF RS. 6,61,763/- AND DI SALLOWED UNDER THE PROVISION OF SECTION 36(1)(III) OF THE ACT. THE DIS ALLOWANCE MADE WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 11.1 AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. CIT(A) WHO DELETED THE ADDITION MADE BY THE AO IN PART BY OBSERVING AS UNDER: 5.1 THE GROUND OF THE APPEAL NO. 2 OF THE APPELLAN T IS THAT THE AO HAS ERRED IN LAW AS WELL AS ON FACTS BY DISALLOWING INTEREST EXPENSE OF RS.6,61,763/- ON THE ALLEGED GROUND OF INTEREST BEA RING FUND GIVEN WITHOUT INTEREST TO SISTER CONCERN I.E. IS M/S RYB ENGINEERING. THE PLEA OF THE APPELLANT IS THAT IT HAS NOT GIVEN ANY INTER EST BEARING BORROWED FUND TO ITS SISTER CONCERN AND TEMPORARY ADVANCES G IVEN TO SISTER CONCERN WAS OUT OF AMOUNT RECEIVED FROM THE DEBTORS . THE APPELLANT HAS FURNISHED LEDGER ACCOUNT OF THE SISTER CONCERN. BUT IT IS NOT CLEAR AS TO WHETHER THE LOANS ADVANCED BY THE APPELLANT TO ITS SISTER CONCERN WERE OUT OF PROFIT GENERATED AS THERE IS NO CLEAR NEXUS BETWEEN THE AMOUNTS RECEIPTS FROM DEBTORS AND LOAN ADVANCED TO THE SIST ER CONCERN. THE APPELLANT HAS NOT FURNISHED THE RELEVANT PART OF BA NK ACCOUNT FROM WHERE IT COULD BE SEEN THAT THE AMOUNTS REALIZED FR OM THE DEBTORS HAVE BEEN ADVANCED AS LOAN TO THE SISTER CONCERN. THE AP PELLANT HAS ARGUED THAT IT HAD TRANSACTIONS RELATING TO PURCHASES AND SALES WITH THE SISTER CONCERN AND THE FUND WAS TRANSFERRED FOR MAKING PAY MENT FOR GOODS AS ADVANCED ALSO. BUT THERE IS A CONTRADICTION BETWEEN THE TWO STATEMENTS OF THE APPELLANT. AT ONE PLACE OF ITS STATEMENT DAT ED 26/09/2017 THE ITA NO.92/RJT/2018 ASCENT ELECTRIFICATION ENGINEERS VS. ACIT ASST.YEAR 2012-13 - 9 - APPELLANT HAS ARGUED THAT IT HAD ADVANCED LOAN TO T HE SISTER CONCERN AND SUCH LOAN IS ALSO REFLECTED TO THE ASSET SIDE O F THE BALANCE SHEET. HOWEVER, AT ANOTHER PLACE OF THE SUBMISSION DATED 2 6/09/2017, THE APPELLANT HAS FURTHER ARGUED THAT THE AMOUNTS TEMPO RARILY ACCOMMODATED TO THE SISTER CONCERN WERE FOR THE PUR POSE OF ADVANCEMENT OF ITS BUSINESS. THUS THESE TWO STATEME NTS ARE CONTRARY TO EACH OTHER AND THEREFORE, THE SAME ARE NOT ACCEPTAB LE. CONSIDERING ALL THESE FACTS IT IS HELD THAT THE AO OF HAS CORRECTLY DISALLOWED THE INTEREST. ANOTHER CONTENTION THE APPELLANT IS THAT THE DISALL OWANCE OF INTEREST SHOULD BE CALCULATED ON ACTUAL BALANCE UTILIZED ON DAY TO DAY BASIS AND IF THE INTEREST IS WORKED OUT ON DAILY BASIS OF THE FUND UTILIZED, THE INTEREST THEREOF WOULD BE RS. 6,14,068/- AND NOT RS .6,61,763/-. THE AO IS DIRECTED TO VERIFY THE CORRECTNESS OF WORKING OF INTEREST AS CALCULATED ON THE LOAN ON DAY TO DAY BASIS AND ON VERIFICATION IF THE CLAIM OF THE APPELLANT THAT INTEREST WOULD BE RS.6,14,068/- IS F OUND TO BE CORRECT THEN HE IS DIRECTED TO DELETE THE BALANCE ADDITION OF INTEREST OF RS.47,695/- (I.E. RS. 6,61,763- RS. 6,14,068./-). T HUS THE DISALLOWANCE OF INTEREST OF RS.6,61,068/- OUT OF TOTAL INTEREST PAI D BY THE APPELLANT IS HEREBY CONFIRMED SUBJECT TO THIS DIRECTION. THUS, T HE GROUND OF APPEAL OF NO.2 OF THE APPELLANT IS PARTLY ALLOWED. BEING AGGRIEVED BY THE ORDER OF LD CIT(A) THE ASSES SEE IS IN THE SECOND APPEAL BEFORE US. 12. THE LD AR FILED A PAPER BOOK RUNNING FROM PAGES 1-44 AND SUBMITTED THAT ITS FUNDS EXCEED THE AMOUNT OF INTER EST-FREE LOANS AND ADVANCES GIVEN TO RYP ENGINEERING. THE LD AR FOR TH E ASSESSEE IN SUPPORT OF HIS CLAIM FILED A COPY OF THE BALANCE SH EET AS ON 31 ST MARCH, 2012 AND DEMONSTRATED THAT THE OWN FUND EXCEEDS THE AMOUNT OF INTEREST- FREE LOAN AND ADVANCES GIVEN TO RYB ENGINEERING. TH E COPY OF THE BALANCE SHEET IS PLACED ON PAGE 25 OF THE PAPER BOO K. ITA NO.92/RJT/2018 ASCENT ELECTRIFICATION ENGINEERS VS. ACIT ASST.YEAR 2012-13 - 10 - 13. ON THE OTHER HAND THE LD. DR SUPPORTED THE ORDE R OF AUTHORITIES BELOW. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE NOTE THAT TH E OWN FUND OF THE ASSESSEE AS ON 31 ST MARCH, 2012 IS OF RS.11,852,210/- AS EVIDENT UNDER : BALANCE SHEET AS ON 31 ST MARCH, 2012 LIABILITIES AMOUNT AMOUNT PARTNERS CAPITAL:- (AS PER ANNEXURE A) 11,852,210.34 14.1 THUS, THE PRESUMPTION CAN BE DRAWN THAT THE AS SESSEE HAS GIVEN INTEREST-FREE LOANS AND ADVANCES TO ITS SISTER CONC ERN OUT OF ITS FUND. IN HOLDING SO, WE FIND SUPPORT AND GUIDANCE FROM THE J UDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. REPORTED IN 313 ITR 340 WHEREIN IT WAS HELD AS UNDE R:- THE PRINCIPLE THEREFORE WOULD BE THAT IF THERE ARE FUNDS AVAILABLE BOTH INTEREST-FREE AND OVERDRAFT AND/OR LOANS TAKEN, THE N A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE IN TEREST-FREE FUND GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INT EREST-FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. IN THIS CASE TH IS PRESUMPTION IS ESTABLISHED CONSIDERING THE FINDING OF FACT BOTH BY THE CIT(A) AND TRIBUNAL 14.2 SIMILARLY, WE ALSO RELY ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS HDFC BANK LTD REPORTED IN 366 ITR 505 (BOM). THE RELEVANT EXTRACT OF THE ORDER IS REP RODUCED BELOW:- ITA NO.92/RJT/2018 ASCENT ELECTRIFICATION ENGINEERS VS. ACIT ASST.YEAR 2012-13 - 11 - WHERE ASSESSEE'S CAPITAL, PROFIT RESERVES, SURPLUS AND CURRENT ACCOUNT DEPOSITS WERE HIGHER THAN THE INVESTMENT IN TAX-FRE E SECURITIES, IT WOULD HAVE TO BE PRESUMED THAT INVESTMENT MADE BY THE ASS ESSEE WOULD BE OUT OF THE INTEREST-FREE FUNDS AVAILABLE WITH ASSESSEE AND NO DISALLOWANCE WAS WARRANTED U/S 14A. 14.3 SIMILARLY, WE ALSO FIND SUPPORT FROM THE JUDGM ENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF UTI BANK LTD. REP ORTED IN 32 TAXMANN.COM 370 WHERE THE HEADNOTE READS AS UNDER : IF THERE ARE SUFFICIENT INTEREST FREE FUNDS TO MEE T TAX FREE INVESTMENTS, THEY ARE PRESUMED TO BE MADE FROM INTEREST FREE FUN DS AND NOT LOANED FUNDS AND NO DISALLOWANCE CAN BE MADE UNDER SECTION 14A 14.4 IN VIEW OF THE ABOVE PROPOSITION, WE HOLD THAT NO DISALLOWANCE OF INTEREST EXPENSE CLAIMED BY THE ASSESSEE CAN BE MAD E ON ACCOUNT OF DIVERSION OF THE FUND. HENCE, WE REVERSE THE ORDER OF THE AUTHORITIES BELOW. THE AO IS DIRECTED TO DELETE THE ADDITION MA DE BY HIM. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 15. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATITICAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COURT ON 26/09/2018 SD/- SD/- E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN U;KF;D LNL; YK S[KK LNL; U;KF;D LNL; YK S[KK LNL; U;KF;D LNL; YK S[KK LNL; U;KF;D LNL; YK S[KK LNL; (MADHUMITA ROY) (WASEEM AHMED ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 26/09/2018 PRITI YADAV, SR.PS ITA NO.92/RJT/2018 ASCENT ELECTRIFICATION ENGINEERS VS. ACIT ASST.YEAR 2012-13 - 12 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. + & ' ,& / CONCERNED CIT 4. ' ,& ( ) / THE CIT(A)- JAMNAGAR. 5. -$. / 0&0# , , /DR,ITAT, RAJKOT 6. / 12 3 % / GUARD FILE. / BY ORDER, -& 0& //TRUE COPY// / ! '#$ ( DY./ASSTT.REGISTRAR) ! $%! & , / ITAT, RAJKOT 1. DATE OF DICTATION 30/07/2018 (DICTATION PAGES -2) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 24/09/2018 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 26/09/2018 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER