DCIT, C-4, Ludhiana V. M/s Aarti Steels Limited, Ludhiana

ITA 96/CHANDI/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0029 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 26-02-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 31-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA KANTA; ASHISH GUPTA
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Earning of tax free income; Notional interest; Rule 8D
• Section: 143(3); 14A; 115JB; 80IA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A, CHANDIGARH . . , , BEFORE SHRI N.K. SAINI, VICE PRESIDENT & SHRI SANJAY GARG, JUDICIAL MEMBER ./ ITA NO. 96/CHD/2018 ! / ASSESSMENT YEAR : 2011-12 THE DCIT, CIRCLE-4, CHANDIGARH VS. '# M/S AARTI STEELS LTD.,G.T.ROAD, MILLER GANJ, LUDHIANA $ % ./ PAN NO: AABCA4455D $&/ APPELLANT ()$& / RESPONDENT APPEAL AGAINST THE ORDER OF CIT(A)-2, LUDHIANA DA TED 31.3.2016 ./ ITA NO. 97/CHD/2018 ! / ASSESSMENT YEAR : 2012-13 THE DCIT, CIRCLE-4, CHANDIGARH VS. '# M/S AARTI STEELS LTD.,G.T.ROAD, MILLER GANJ, LUDHIANA $ % ./ PAN NO: AABCA4455D $&/ APPELLANT ()$& / RESPONDENT APPEAL AGAINST THE ORDER OF CIT(A)-2, LUDHIANA DA TED 23.3.2015 & ./ ITA NO. 1521/CHD/2017 ! / ASSESSMENT YEAR : 2013-14 THE DCIT, CIRCLE-4, CHANDIGARH VS. '# M/S AARTI STEELS LTD.,G.T.ROAD, MILLER GANJ, LUDHIANA $ % ./ PAN NO: AABCA4455D $&/ APPELLANT ()$& / RESPONDENT APPEAL AGAINST THE ORDER OF CIT(A)-2, LUDHIANA DA TED 18.04.2016 ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 2 +, - . / ASSESSEE BY : SH. SUBHASH AGGARWAL, ADVOCATE - . / REVENUE BY : SH. ASHISH GUPTA, CIT DR & SMT.CHANDRAKANTA, SR.DR / 0 - ,1% / DATE OF HEARING : 26.02.2019 23! - ,1% / DATE OF PRONOUNCEMENT : 24.05.2019 / ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEALS BY REVENUE HAVE BEEN PREFERRED AGAINST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX ( APPEALS)-2, LUDHIANA [HEREINAFTER REFERRED TO AS CIT(A)]. 2. FIRST, WE SHALL TAKE UP THE APPEAL FOR THE ASSES SMENT YEAR 2011-12 IN ITA NO , ITA NO. 96/CHD/2018, WHEREIN, FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENUE :- ITA NO. 96/CHD/2018 I. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) HAS ERRED IN DELETING THE ADDITION M ADE ON ACCOUNT OF DEDUCTION CLAIMED OF RS. 25,72,43,366/- U/S 80IA OF THE ACT, BY RELYING ON HIS DECISION FOR THE A.Y. 2010-11 WITHOUT APPRECIATING THAT ALLOCATION OF EXP ENSES WAS NOT PROPER AND PROFIT SHOWN IN POWER GENERATING UNIT WAS UNREASONABLE AND EXCESSIVE. II. WHETHER ON THE FACTS AND CIRCUMSTANCE OF THE CASE A ND IN LAW THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITI ON OF RS. 26,28,364/- U/S 14A OF THE ACT, WHILE FAILING T O ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 3 APPRECIATE THE GROUNDS OF APPEAL FOR A.Y. 2008-09 F ILED IN THE HON'BLE PUNJAB & HARYANA HIGH COURT, CHANDIGAR H IN THE CASE OF THE ASSESSEE. III. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) HAS ERRED IN DELETING AN ADDITION OF RS. 1,16,84,195/- U/S 36(L)(III) OF THE ACT, BY RELYING ON THE DECISION IN ITA NO. 268/CHD/2015 DATED 30.11.2015 F OR THE A.Y. 2009-10 IN THE CASE OF THE ASSESSEE WITHOUT APPRECIATING THAT THE ISSUE U/S 36(L}(III) WAS NEVE R A PART OF THAT ORDER. 3. GROUND. NO.1 : THE BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINE SS OF MANUFACTURING OF IRON & STEEL PRODUCTS, FERRO ALLOY S & GENERATION AND DISTRIBUTION OF POWER, FILED ITS RET URN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 29.09.2011 DECL ARING THEREIN AN INCOME OF RS.11,89,054/-. AS THE TAX PAYABLE BY THE ASSESSEE COMPANY UNDER THE PROVISIONS OF SECTION 115JB OF TH E ACT WAS MORE THAN THE TAX PAYABLE UNDER NORMAL PROVISIONS O F THE ACT, THE ASSESSEE COMPANY PAID TAX ON BOOK PROFITS OF RS.59, 29,95,259/- UNDER SECTION 115JB OF THE ACT. DURING THE COURSE O F ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER EXAMINED THE PRO FIT & LOSS ACCOUNT OF THE 40MW POWER PLANT UNIT OF THE ASSESSE E COMPANY WHICH WAS CLAIMING DEDUCTION UNDER SECTION 80IA OF THE ACT AND NOTICED THAT THE PROFITS SHOWN BY THIS UNIT WERE QU ITE EXCESSIVE. THE ASSESSING OFFICER WAS OF THE OPINION THAT THIS REFLECTION OF EXCESSIVE PROFITS BY THE ASSESSEE COMPANY WAS RESUL TING IN THE ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 4 ABNORMALLY HIGH CLAIM OF DEDUCTION UNDER SECTION 80 IA OF THE ACT. ACCORDINGLY, THE ASSESSING OFFICER VIDE HIS OFFICE LETTER DATED 11.02.2014 ASKED THE ASSESSEE COMPANY TO JUSTIFY IT S EXCESSIVE AND UNREASONABLE PROFITS SHOWN FROM RUNNING OF THE 40 M W POWER PLANT UNIT IN ORISSA AS WELL AS THE EXCESSIVE AND U NREASONABLE CLAIM IN RESPECT OF DEDUCTION UNDER SECTION 80IA OF THE ACT WHICH WAS CLAIMED ON THE BASIS OF AUDIT REPORT IN FORM NO . 10C. IN RESPONSE TO THIS, THE ASSESSEE COMPANY SUBMITTED RE PLY VIDE ITS LETTER DATED 20.02.2014 JUSTIFYING THE PROFITS OF T HE UNIT AND ITS CLAIM OF DEDUCTION. THE ASSESSING OFFICER VIDE HIS OFFICE LETTER DATED 25.02.2014 ALSO MADE ENQUIRIES FROM THE AUDIT OR OF THE ASSESSEE COMPANY NAMELY N.K. BECTOR, CA, ASKING HI M TO EXPLAIN CERTAIN ISSUES WITH REGARD TO THE CLAIM OF THE ASSE SSEE COMPANY UNDER SECTION 80IA OF THE ACT. IN RESPONSE TO THIS, SH. N.K. BECTOR, CA SUBMITTED HIS REPLY VIDE LETTER DATED 03 .03.2014 REAFFIRMING HIS AUDIT REPORT. HOWEVER, THE REPLY FU RNISHED BY THE ASSESSEE COMPANY AS WELL AS BY SH. N.K. BECTOR, CA WITH REGARD TO CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT WAS NOT FOUND TO BE SATISFACTORY BY THE ASSESSING OFFICER. THE AS SESSING OFFICER, THEREFORE, DENIED ENTIRE CLAIM OF DEDUCTION OF RS, 25,60,54,312/- CLAIMED BY THE ASSESSEE COMPANY UNDER SECTION 80IA OF THE ACT AND MADE AN ADDITION TO THE SAME EXTENT TO THE RETU RNED INCOME OF THE ASSESSEE COMPANY AS HE WAS OF THE OPINION THAT THE ASSESSEE ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 5 COMPANY COULD NOT JUSTIFY EXCESSIVE AND UNREASONABL E PROFITS SHOWN FROM THE RUNNING OF 40MW POWER PLANT UNIT. BEING AGGRIEVED BY THE ABOVE ADDITIONS MADE BY THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BE FORE THE CIT(A). 4. THE LD. CIT(A), HOWEVER, DELETED THE ADDITIONS S O MADE BY THE ASSESSING OFFICER, OBSERVING AS UNDER:- '5.2 I HAVE CONSIDERED THE OBSERVATIONS OF THE ASSE SSING OFFICER AS MADE BY HIM IN THE ASSESSMENT ORDER WHIL E DENYING ENTIRE CLAIM OF DEDUCTION CLAIMED BY THE ASSESSEE COMPANY UNDER SECTION 8OIA OF THE ACT. I H AVE ALSO CONSIDERED WRITTEN SUBMISSIONS FILED BY THE ASSESSEE COMPANY THROUGH ITS LEARNED AR VIDE LETTER S DATED 09.09.2017 AND 02.11.2017 ON THE ISSUE UNDER REFERENCE. I HAVE FURTHER CONSIDERED VARIOUS JUDICI AL PRONOUNCEMENTS RELIED UPON BY THE LEARNED AR OF THE ASSESSEE COMPANY AS WELL AS OTHER MATERIAL PLACED B Y HIM ON RECORD. ON CAREFUL CONSIDERATION OF THE ASSESSMENT ORDER, IT HAS BEEN NOTICED THAT THE ASSE SSING OFFICER HAS DENIED ENTIRE CLAIM OF DEDUCTION CLAIME D BY THE ASSESSEE COMPANY UNDER SECTION 8OIA OF THE ACT BASICALLY ON THE GROUND THAT THE ASSESSEE COMPANY I N HIS OPINION HAS SHOWN EXCESSIVE AND UNREASONABLE PROFIT S FROM RUNNING OF ITS 40MW POWER PLANT UNIT, THE PROF ITS OF WHICH ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 8 OIA OF THE ACT. THE ASSESSING OFFICER IS OF THE OPINION THAT THE ASSESSEE COMPANY HAS NOT PROPERLY ALLOCATED THE EXPENSES TO ITS 40MW POWER PLANT UNIT WHICH RESULTE D IN EXCESSIVE AND UNREASONABLE PROFITS OF ITS 40MW POWER PLANT UNIT WHICH ARE EXEMPT UNDER SECTION 80I A OF THE ACT. THE MAIN REASONS FOR DENYING ENTIRE CLA IM OF DEDUCTION CLAIMED BY THE ASSESSEE COMPANY UNDER SECTION 80IA OF THE ACT WHICH HAVE BEEN CULLED OUT FROM THE ASSESSMENT ORDER ARE AS UNDER:- ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 6 (A). THE ASSESSEE COMPANY HAS NOT BEEN ABLE TO JUSTIFY THE EXCESSIVE AND UNREASONABLE PROFITS AS SHOWN FROM THE 40MW POWER PLANT UNIT WHICH ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. (B) THE ASSESSEE COMPANY HAS MERELY SUBMITTED THAT IT WAS GETTING COAL SUPPLY FROM MAHANADI COAL FIELDS LIMITED AND THAT THE SAID COST OF COAL WAS MUCH LOWER THAN THE COST OF AUCTIONED COAL. (C) THE ASSESSEE COMPANY HAS ALSO NOT SUBMITTED THE FINANCIAL STATEMENT OF ANY COMPARATIVE UNIT OF ANY OTHER COMPANY WHICH WAS GENERATING SIMILAR EXCESSIVE PROFITS. (D) REGARDING THE CLOSE CONNECTION BETWEEN THE DIFFERENT UNITS OF THE ASSESSEE COMPANY WHICH INCLUDE TWO STEEL MANUFACTURING UNITS AND A POWER PLANT UNIT, THE ASSESSEE COMPANY HAS NOT JUSTIFIED THAT AS TO WHY THE HUGE AMOUNT OF FUNDS HAVE BEEN INVESTED FROM M/S AARTI STEEL LIMITED TO ITS POWER PLANT UNIT, WHICH WAS CLAIMING DEDUCTION UNDER SECTION 801A OF THE ACT WITHOUT ANY INTEREST OR CONSIDERATION. (E) THERE IS NO WORKING AND ALLOCATION OF INTEREST EXPENSES ON SECURED/UNSECURED LOANS TO THE ELIGIBLE UNIT I.E. 40MW POWER PLANT UNIT. (F) ALTHOUGH THE SALE OF ELECTRICITY BY THE ELIGIBL E UNIT TO THE STEEL PLANTS OF THE ASSESSEE COMPANY AT ODISHA HAS BEEN DONE AT MARKET PRICE BUT THE TRANSFER OF FUNDS FROM THE PARENT UNIT TO THE ELIGIBLE UNIT I.E. 40MW POWER PLANT UNIT AT ODISHA HAVE NOT BEEN DONE AS PER THE SAID PRINCIPLE. ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 7 (G) THE INTEREST EXPENSES WHICH SHOULD HAVE BEEN ALLOCATED AS PER THE MARKET RATE OF BORROWING FOR THE ELIGIBLE UNIT (HAD THE ELIGIBLE UNIT BORROWED THE SAID FUNDS DIRECTLY FROM THE MARKET WITHOUT APPROACHING HEAD OFFICE) HAS NOT BEEN DONE IN CASE OF THE ASSESSEE COMPANY. (H) INSPITE OF THE OPPORTUNITY BEEN PROVIDED TO THE ASSESSEE COMPANY TO ESTABLISH THE ALLOCATION OF THE INTEREST EXPENSES FROM THE PARENT UNIT TO THE ELIGIBLE UNIT NEITHER ANY JUSTIFIABLE REPLY HAS BEE N SUBMITTED NOR THE WORKING OF ALLOCATION OF INTEREST EXPENSES BY THE CA HAS BEEN SUBMITTED WHICH MEANS THAT THE ALLOCATION OF INTEREST EXPENSES TO ELIGIBLE UNIT HAS NOT BEEN PROPERLY DONE WHICH RESULTED IN REDUCTION OF ACTUAL EXPENSES OF THE ELIGIBLE UNIT. (I) THE ASSESSEE COMPANY HAS ALSO NOT ALLOCATED ANY NOTIONAL AMOUNT OF INTEREST FOR THE FUNDS UTILIZED FOR SETTING UP THE POWER PLANT WHICH WERE TAKEN FROM OTHER UNITS OF THE ASSESSEE COMPANY WHICH WAS REQUIRED TO BE DONE AS PER PROVISIONS OF SECTION 80IA(8) OF THE ACT. (J) THE ASSESSEE COMPANY HAS NOT PROPERLY ALLOCATED OTHER EXPENSES TO ELIGIBLE UNIT THEREBY ENHANCING ITS PROFITS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. (K) THE AUDITOR HAS NOT SUBMITTED WORKING SHEETS ON THE BASIS OF WHICH PROFITS OF THE ELIGIBLE UNIT AS WELL AS DEDUCTION UNDER SECTION 80IA OF THE ACT HAVE BEEN COMPUTED. (L) THE AUDITOR HAS NOT SUBMITTED HIS REPLY WITH REGARD TO ALLOCATION OF INTEREST EXPENSES. (M) THE CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT IS WITHOUT ANY JUSTIFICATION. ON THE OTHER ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 8 HAND, THE LEARNED AR OF THE ASSESSEE COMPANY THROUGH ITS LEARNED AR HAD SUBMITTED THAT THE ASSESSING OFFICER HAS DENIED THE ENTIRE CLAIM OF DEDUCTION CLAIMED BY THE ASSESSEE COMPANY UNDER SECTION 80IA OF THE ACT WITHOUT APPRECIATING THE SUBMISSIONS OF THE APPELLANT COMPANY AND ITS AUDITOR WHICH WERE MADE DURING ASSESSMENT PROCEEDINGS. IT HAS ALSO BEEN SUBMITTED THAT THE ASSESSEE COMPANY'S INCOME FOR THE A.Y. 2010-11 WAS ASSESSED UNDER SECTION 143(3) OF THE ACT AND THE DEDUCTION UNDER SECTION 80IA OF THE ACT WAS ALLOWED WITH MINOR ADJUSTMENTS ON ACCOUNT OF ALLOCATION OF CERTAIN EXPENSES AND DISALLOWANCE OF EXPENSES UNDER SECTION 14A OF THE ACT. IT HAS FURTHER BEEN SUBMITTED THAT THE LEARNED ASSESSING OFFICER WHILE FRAMING THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION HAD COMPLETELY DENIED THE DEDUCTION CLAIMED BY THE ASSE_3SEPINPANY UNDER SECTION 80IA OF THE ACT DISREGARDING THE FACT THAT HE HAD ALREADY ACCEPTED AND ALLOWED DEDUCTION TO THE ASSESSEE COMPANY IN A.Y. 2010-11. IT HAS AGAIN BEEN SUBMITTED THAT THE ASSESSEE COMPANY HAD ACTUALLY CLAIMED DEDUCTION UNDER SECTION 80IA OF THE ACT AT RS.59,29,94,2I2/- WHICH WAS RESTRICTED TO RS.25,72,43,366/- AS THE ASSESSEE COMPANY WAS NOT HAVING SUFFICIENT PROFITS TO CLAIM ITS ENTIRE CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT. IT HAS AGAIN BEEN SUBMITTED THAT THE ALLEGATIONS OF THE ASSESSING OFFICER WITH REGARD TO ENHANCING PROFITS OF ELIGIBLE UNIT ARE TOTALLY BASELESS AS TH E ASSESSEE COMPANY WAS NOT HAVING EVEN SUFFICIENT PROFITS TO CLAIM ENTIRE DEDUCTION UNDER SECTION 80IA OF THE ACT. IT HAS AGAIN BEEN SUBMITTED THAT THERE SEEMS TO BE NO LOGIC IN ARTIFICIALLY ENHANCIN G THE PROFITS OF ELIGIBLE UNIT WHEN ENTIRE DEDUCTION CANNOT BE CLAIMED IN VIEW OF INSUFFICIENT PROFITS. IT HAS AGAIN BEEN SUBMITTED THAT THE EXCESSIVE PROFITS IN THE POWER PLANT WERE ON ACCOUNT OF CHEAPER RATE OF COAL SUPPLIES FROM M/S MAHANADI ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 9 COALFIELDS LIMITED. IT HAS AGAIN BEEN SUBMITTED THAT THE AUDITOR OF THE ASSESSEE COMPANY HAS SUBMITTED PROPER REPLY TO EACH AND EVERY QUERY OF THE ASSESSING OFFICER AND IT IS INCORRECT ON THE PART OF THE ASSESSING OFFICER TO SAY THAT THE AUDITOR OF THE ASSESSEE COMPANY HAS NOT SUBMITTED ANY REPLY. IT HAS AGAIN BEEN SUBMITTED THAT THE ALLOCATION OF INTEREST EXPENSES HAS BEEN DONE ON ACTUAL BASIS AND NOT ON NOTIONAL BASIS. IT HAS AGAIN BEEN SUBMITTED THAT THE ASSESSING OFFICER HAS NOT TAKEN ANY COGNIZANCE OF VARIOUS ALLEGATIONS LEVELED BY HIM AGAINST THE ASSESSEE COMPANY BUT PROCEEDED TO DISALLOW THE ENTIRE CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT WITH PREDETERMINED MIND AND PROPER JUSTIFICATION. IT HAS AGAIN BEEN SUBMITTED THAT IF THE METHOD ADOPTED BY THE ASSESSING OFFICER IN A.Y. 2010-11 FOR ALLOCATION OF VARIOUS EXPENSES IS APPLIED IN A.Y. 2011-12 TOO THAN THE ASSESSEE COMPANY WILL BE ELIGIBLE FOR MORE DEDUCTION TO THE CLAIM ACTUALLY MADE BY IT. IT HAS AGAIN BEEN SUBMITTED THAT THIS FACT HAS INDIRECTLY BEEN ADMITTED BY THE ASSESSING OFFICER AS HE HAS NOT EVEN TRIED TO REALLOCATE THE EXPENSES ON THE BASIS ADOPTED BY HIM IN A.Y. 2010-11. IT HAS AGAIN BEEN SUBMITTED THAT THE CLAIM IN RESPECT OF DEDUCTION, UNDER SECTION 80IA OF THE ACT MAY BE MORE OR LESS BUT THE ASSESSING OFFICER CANNOT DENY ENTIRE DEDUCTION TO THE ASSESSEE COMPANY CLAIMED BY IT UNDER SECTION 80IA OF THE ACT AS THE ASSESSEE COMPANY FULFILLS AL L THE NECESSARY CONDITIONS FOR CLAIMING SUCH DEDUCTION. ON CAREFUL CONSIDERATION OF THE RIVAL CONTENTIONS, I AM OF THE OPINION THAT THERE IS LOT FORCE IN THE ARGUMENTS OF THE LEARNED AR OF THE ASSESSEE COMPANY. I AM ALSO OF THE OPINION THAT THERE IS NO PRESCRIBED FORMULA TO ALLOCATE THE COMMON EXPENSES INCURRED BY THE ASSESSEE COMPANY BUT THE EXPENSES ARE REQUIRED TO BE ALLOCATED TO ELIGIBLE UNIT ON REASONABLE BASIS. I A M ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 10 FURTHER OF THE OPINION THAT THE ASSESSEE COMPANY IS ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IA OF THE ACT AS IT FULFILLS ALL THE NECESSARY CONDITIONS FOR CLAIM OF SUCH DEDUCTION. I AM AGAIN OF THE OPINION THAT THE CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT CAN BE REDUCED BY REALLOCATING THE EXPENSES IF FOUND NOT DONE PROPERLY BY THE ASSESSEE COMPANY BUT ITS ENTIRE CLAIM OF DEDUCTION CANNOT BE DENIED UNLESS AND UNTIL IT IS ESTABLISHED THAT THE ASSESSEE COMPANY DO NOT FULFILL THE NECESSARY CONDITIONS FOR CLAIM OF SUCH DEDUCTION AND IS NOT ENTITLED FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. IN MY OPINION, THE ASSESSING OFFICER HAS ABSOLUTELY FAILED IN THIS REGARD. IT HA S AGAIN BEEN NOTICED THAT THE SAME ASSESSING OFFICER HAS ALLOWED DEDUCTION TO THE ASSESSEE COMPANY IN A.Y. 2010-11 WITH MINOR VARIATION UNDER IDENTICAL FACTS AND THERE IS NO CHANGE OF FACTS IN THE YEAR UNDER CONSIDERATION. THE OBSERVATIONS OF THE ASSESSING OFFICER FOR DENYING DEDUCTION UNDER SECTION 80IA OF THE ACT ARE OF GENERAL NATURE AND IN MY CONSIDERED OPINION DEDUCTION UNDER SECTION 80IA OF THE ACT CANNOT BE DENIED TO THE ASSESSEE COMPANY ON THE BASIS OF SUCH OBSERVATIONS. IT HAS AGAIN BEEN NOTICED THAT IF REALLOCATION OF EXPENSES IS DONE ON THE BASIS ADOPTED BY THE ASSESSING OFFICER IN A.Y. 2010-11 THEN THE ASSESSEE COMPANY WILL BE ELIGIBLE FOR MORE DEDUCTION WHICH HAS ALSO BEEN ACCEPTED BY THE ASSESSING OFFICER. IT HAS ALSO NOT BEEN ESTABLISHED ON RECORD THAT THE ASSESSEE COMPANY IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT AND AS SUCH DEDUCTION UNDER THIS SECTION CANNOT BE DENIED TO THE ASSESSEE COMPANY. IN MY OPINION, THE ASSESSEE COMPANY HAS ALSO FILED PROPER JUSTIFICATION FOR ITS CLAIM WITH REGARD TO DEDUCTION UNDER SECTION 80IA OF THE ACT. IT HAS AGAIN BEEN NOTICED THAT THE ASSESSEE COMPANY HAS CLAIMED DEDUCTION UNDER SECTION 80IA OF THE ACT ONLY TO THE EXTENT OF RS.25,72,43,366/- ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 11 IN VIEW OF INSUFFICIENT PROFITS AS AGAINST ITS TOTA L CLAIM OF DEDUCTION AT RS.59,29,94,212- WHICH MEANS THAT MINOR VARIATION IN DEDUCTION WILL NOT ADVERSELY AFFECT THE ASSESSEE COMPANY. THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE LEARNED AR OF THE ASSESSEE COMPANY ALSO SUPPORT ITS CASE. UNDER SUCH CIRCUMSTANCES, THE ACTION OF THE ASSESSING OFFICER IN DENYING ENTIRE CLAIM OF DEDUCTION CLAIMED BY THE ASSESSING OFFICER UNDER SECTION 80TA OF THE ACT CANNOT BE SAID TO BE JUSTIFIED. THE ASSESSING OFFICER IS, THEREFORE, DIRECTED TO ALLOW DEDUCTION TO THE ASSESSEE COMPANY AS CLAIMED BY IT UNDER SECTION 80IA OF THE ACT. IN THE RESULT, THE GROUNDS NO. 1 AND 2 OF APPEAL TAKEN BY THE ASSESSEE COMPANY ARE ALLOWED. 5. BEING AGGRIEVED BY THE ABOVE FINDINGS OF THE CIT (A), THE REV HAS COME IN APPEAL BEFORE US. 6. AFTER HEARING THE LD. REPRESENTATIVES OF BOTH TH E PARTIES, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE CIT(A) ON THE ABOVE ISSUE. THE LD. CIT(A) RIGHTLY HELD THAT T HERE WAS NO JUSTIFICATION ON THE PART OF THE ASSESSING OFFICER TO DISALLOW THE ENTIRE CLAIM OF DEDUCTION CLAIMED BY THE ASSESSEE. IF THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAD EXAG GERATED THE PROFITS OF THE UNITS ELIGIBLE FOR DEDUCTION U/S 80 IA OF THE ACT, AT THE MOST, HE COULD HAVE ALLOCATED SOME PART OF THE PROFITS TO NON- ELIGIBLE UNITS BUT WITHOUT MAKING ANY SUCH EXERCISE , HE DISALLOWED THE ENTIRE CLAIM OF DEDUCTION. THE LD. CIT(A) HAS ALSO OBSERVED ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 12 THAT EVEN OTHERWISE THOUGH THE PROFITS OF THE ELIGI BLE UNITS WERE AT 59.29 CRORES, HOWEVER, SINCE THE GROSS INCOME OF T HE ASSESSEE FROM ALL UNITS WAS AT 25.60 CRORES, THE CLAIM WAS RESTRICTED TO THAT EXTENT. THE LD. CIT(A) OBSERVED THAT ANY MINO R VARIATION IN THE PROFITS OF THE ELIGIBLE UNITS WOULD NOT MAKE AN Y DIFFERENCE. EVEN OTHERWISE, IF THE PROFITS OF THE ELIGIBLE UNIT S ARE TO BE COMPUTED ON TURN OVER BASIS, THE RESULTANT EFFECT W ILL BE THE ENHANCEMENT OF THE PROFITS THAN THAT HAS BEEN DECLA RED BY THE ASSESSEE. IN VIEW OF THIS, WE DO NOT FIND ANY MERIT IN GROUND NO.1 OF THE APPEAL OF THE REVENUE AND THE SAME IS ACCORDING LY DISMISSED. 7. GROUND NO.2 : VIDE GROUND NO.2, THE REVENUE HAS AGITATED THE ACTION OF THE CIT(A) IN DELETING THE ADDITION O F 26,28,364/- MADE BY THE ASSESSING OFFICER U/S 14A READ WITH RUL E 8D OF THE INCOME TAX RULES IN RESPECT OF DISALLOWANCE OF NOTI ONAL EXPENDITURE SUPPOSED TO HAVE BEEN INCURRED FOR EARN ING OF TAX EXEMPT DIVIDEND INCOME. 8. THE ASSESSING OFFICER NOTED THAT DURING THE YEAR THE ASSESSEE HAD EARNED TAX EXEMPT INCOME OF 1,04,836/-. HE INVOKING THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF THE INCOME TAX RULES AND COMPUTED THE DISALLOWANCE OF EXPENDITURE AT ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 13 27,33,200/-. THE LD. CIT(A), HOWEVER, RESTRICTED TH E DISALLOWANCE U/S 14A TO THE EXTENT OF TAX EXEMPT INCOME EARNED B Y THE ASSESSEE I.E. AT 1 ,04,836/-. THE ISSUE IS NOW SQUARELY COVERED BY THE VARIOUS DE CISIONS OF THE HON'BLE HIGH COURTS INCLUDING THAT OF THE JURISDICT IONAL HIGH COURT OF PUNJAB AND HARYANA IN THE CASE OF CIT VS. WINSOME TEXTILES (2009) 319 ITR 204 (P&H) AND HON'BLE DELHI HIGH COURT IN T HE CASE OF CHEMINVEST LTD VS. ITO (2015) 378 ITR 33 (DELHI) AND OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CORRTE CH ENERGY P. LTD. (2014) 45 TAXMAN.COM 116 AND FURTHER OF THE HON'BL E ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. M/S SHIVAM MOTORS (P ) LTD (2014) 272 CTR (ALL) 277 AND VARIOUS OTHER CASE LAWS. IN ALL THE ABOVE REFERRED TO CASE LAWS, THE HON'BLE HIGH COURTS HAVE BEEN UNANIM OUS TO HOLD THAT DISALLOWANCE U/S 14A CANNOT EXCEED THE TAX EXEMPT I NCOME EARNED BY THE ASSESSEE. WE THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE LD. CIT(A) ON THIS ISSUE ALSO. 9. GROUND NO.3 : VIDE THIS GROUND THE REVENUE HAS AGITATED THE ACTION OF THE CIT(A) IN DELETING THE DISALLOWANCE OF NOTIONAL INTEREST OF 1,16,84,195/- CALCULATED ON THE INVESTMENT MADE ON CAPITAL WORK IN PROGRESS (CWIP) BY WAY OF INVOKING THE ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 14 PROVISIONS OF SECTION 36(1)(III) OF THE ACT. 10. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN HUGE ASSETS UNDER CAPITAL WORK IN PROGRESS (CWIP) A ND HAD ALSO GIVEN CAPITAL ADVANCES ALLEGEDLY OUT OF BORROWED FU NDS. IN VIEW OF THE OPINION OF THE ASSESSING OFFICER, THE INTEREST EXPENSES ON FUNDS UTILIZED FOR THE ACQUISITION OF ASSETS WHICH WERE YET TO BE USED FOR BUSINESS PURPOSES WERE NEEDED TO BE CAPITA LIZED IN VIEW OF PROVISIONS OF SECTION 36(L)(III)OF THE ACT. HE, ACCORDINGLY, MADE THE IMPUGNED ADDITION INTO THE INCOME OF THE ASSES SEE. 11. THE ASSESSEE AGITATED THE AFORESAID ADDITION MA DE BY THE ASSESSING OFFICER BEFORE THE LD. CIT(A). 12. THE LD. CIT(A) DELETED THE ADDITIONS SO MADE BY THE ASSESSING OFFICER ON THIS ISSUE, OBSERVING AS UNDER :- 8.2 I HAVE CONSIDERED THE OBSERVATIONS OF THE ASSESSING OFFICER AS MADE BY HIM IN THE ASSESSMENT ORDER WHILE MAKING THE IMPUGNED ADDITION. I HAVE ALSO CONSIDERED WRITTEN SUBMISSIONS FILED BY THE ASSESSEE COMPANY THROUGH ITS LEARNED AR VIDE LETTER DATED 09.09.2017 ON THE ISSUE UNDER REFERENCE. I HAVE FURTHER CONSIDERED VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE LEARNED AR OF THE ASSESSEE COMPANY AS WELL AS OTHER MATERIAL PLACED BY HIM ON RECORD MORE PARTICULARLY, THE DECISION OF THE HONOURABLE ITAT, CHANDIGARH IN ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 15 1TA NO. 268/CHD./2015 DATED 30.11.2015 FOR THE A.Y. 2009-10 IN THE CASE OF THE ASSESSEE COMPANY ITSELF VIDE WHICH THE DISALLOWANCE UNDER SECTION 36(L)(III) OF THE ACT WAS DELETED UNDER IDENTICAL FACTS. ON CAREFUL CONSIDERATION OF THE RIVAL CONTENTIONS, IT HAS BEEN NOTICED THAT THE FACTS OF THE CASE OF THE ASSESSEE COMPANY FOR THE YEAR UNDER CONSIDERATION ARE IDENTICAL TO THE FACTS OF THE CASE OF THE ASSESSEE COMPANY FOR THE A.Y. 2009-10. SO, RESPECTFULLY FOLLOWING THE DECISION OF HONOURABLE ITAT, CHANDIGARH IN ITA NO. 268/CHD./2015 DATED 30.11.2015 FOR THE A.Y. 2009-10 IN THE CASE OF THE ASSESSEE COMPANY ITSELF, THE DISALLOWANCE OF RS.1,16,84,195/- MADE BY THE ASSESSING OFFICER BY INVOKING PROVISIONS OF SECTION 36(L)(III) OF THE ACT IN THIS CASE IS DIREC TED TO BE DELETED AS THE ASSESSEE COMPANY IS HAVING SUFFICIENT OWN FUNDS IN INVEST IN ASSETS UNDER CONSIDERATION. IN THE RESULT, THE GROUND NO. 6 OF APPEAL TAKEN BY THE ASSESSEE COMPANY IS ALLOWED. 13. BEFORE US, LD. DR HAS SUBMITTED THAT THE CIT(A ) HAS DELETED THE DISALLOWANCE APPLYING THE PRESUMPTION THEORY OF OWN FUNDS TO SAY THAT IF THE ASSESSEE IS POSSESSED OF SUFFICIENT OWN FUNDS TO MEET THE INVESTMENTS, THEN THE PRESUMPTION WILL BE THAT THE INVESTMENTS HAVE BEEN MADE OUT OF OWN FUNDS OF THE ASSESSEE. THE LD. DR POINTED OUT THAT THE PRESUMPTION THEORY HAD NOW BEEN OVERRULED BY THE HON'BLE APEX COURT IN ITS DECISION IN GROUP OF CASES WITH THE LEAD CASE BEING MAXOPP INVESTMENT LTD. VS . CIT (2018) 402 ITR 640 (SC), WHEREIN IN THE CONTEXT OF SECTION 14A, THE DECISION OF THE HON'BLE JURISDICTIONAL PUNJAB & HARYANA HIGH COURT IN THE CASE ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 16 OF AVON CYCLES LTD. VS. CIT IN ITA NO.277 OF 2013 WAS ALSO UNDER CONSIDERATION WHEREIN THE HON'BLE JURISDICTIONAL HI GH COURT HAD UPHELD THE DISALLOWANCE OF INTEREST U/S 14A WHERE M IXED FUNDS WERE DEPLOYED BY THE ASSESSEE, AND THIS PROPOSITION HAS BEEN AFFIRMED BY THE HON'BLE APEX COURT. SHE HAS FURTHER SUBMITTED THAT IF THE PRESUMPTION T HEORY IS APPLIED, THE REVERSE OF THE SAME WILL ALSO BE APPLI CABLE TO PRESUME THAT THE INVESTMENT IN WORK IN PROGRESS HAS BEEN MA DE BY THE ASSESSEE ONLY OUT OF THE BORROWED FUNDS. 14. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE HAS RELIED UPON THE RECENT DECISION OF THE HON'BLE SUPREME COU RT IN THE CASE OF CIT (LTU) VS. RELIANCE INDUSTRIES LTD. [2019] 410 ITR 466 (SC). 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES. A PERUSAL OF THE DE TAILS SUBMITTED BY THE ASSESSEE REVEALS THAT THE OPENING BALANCE OF THE INVESTMENT IN BUILDING WAS 2.20 CRORES AND THE INVESTMENT DURING THE YEAR WAS AT 1.95 CRORES AND THE CLOSING BALANCE OF INVESTMENT IN BUILDING WAS AT 4.15 CRORES. THE OPENING BALANCE IN INVE STMENT IN PLANT & MACHINERY WAS AT 24.74 CORES AND INVESTMENTS DURING THE YEAR WERE AT 42.55 CRORES. THE CLOSING BALANCE OF INVESTMENT ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 17 IN PLANT & MACHINERY WAS AT 67.29 CORES. THE OPENING BALANCE OF THE CAPITAL ADVANCE WAS AT 16.37 CRORES WHICH IS REDUCED TO 4.89 CRORES AT THE END OF THE YEAR. THE ASSESSING O FFICER COMPUTED THE TOTAL DISALLOWANCE UNDER THE PROVISIONS OF SECT ION 36(1)(III) OF THE ACT AT 3.49 CRORES, OUT OF WHICH THE ASSESSEE HAS ALREADY CAPITALIZED THE INTEREST EXPENDITURE OF 2.32 CR ORES IN RESPECT OF TERM LOANS. THE ASSESSING OFFICER, THEREFORE, HAS M ADE THE ADDITION OF 1.16 CRORES. THE CASE OF THE ASSESSEE IS THAT THE ASSESSEE HAS ALREADY CAPITALIZED THE INTEREST EXPE NDITURE ON TERM LOAN AND THAT THE INVESTMENT ON CAPITAL IN WORK IN PROGRESS AND CAPITAL ADVANCES WERE OUT OF OWN FUNDS OF THE ASSES SEE. WE FIND FROM THE CHART THAT IN THE YEAR UNDER CONSIDERATI ON THE PAID UP CAPITAL OF THE ASSESSEE FOR THE YEAR UNDER CONSIDER ATION WAS AT 10.42 CRORES, RESERVES AND SURPLUS AT 297 CRORES AND APART FORM THAT PROFIT DURING THE YEAR WAS OF 101 CRORES TOTALLING 408 CRORES. APART FROM THE AFORESAID WORK IN PROGRESS, THE TOTAL INVESTMENTS OF THE ASSESSEE AT THE END OF THE YEAR WAS AT 6.36 CRORES. IN VIEW OF THE ABOVE, THE TOTAL AMOUNT INCU RRED BY THE ASSESSEE ON INVESTMENTS AS WELL AS CAPITAL WORK IN PROGRESS IS A MEAGER AMOUNT AS COMPARED TO THE OWN FUNDS AVAILABL E WITH THE ASSESSEE. 16. THE ISSUE IS NOW SQUARELY COVERED BY THE VARIOU S DECISIONS OF THE HIGH COURTS INCLUDING THAT OF THE DECISION OF THE H ON'BLE JURISDICTIONAL ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 18 HIGH COURT IN THE CASE OF BRIGHT ENTERPRISES PVT. LTD VS. CIT, JALANDHAR (SUPRA), CIT VS. KAPSONS ASSOCIATES (2 016) 381 ITR 204 (P&H) AND THE LATEST DECISION OF THE COORDINATE BEN CH OF THE TRIBUNAL IN THE CASE OF ACIT VS. JANAK GLOBAL RESOURCES PVT LT D ITA NO. 470/CHD/2018 ORDER DATED 16.10.2018, HOLDING THAT T HAT IF THE ASSESSEE IS POSSESSED OF SUFFICIENT OWN INTEREST FREE FUNDS TO MEET THE INVESTMENTS / INTEREST FREE ADVANCES, THEN, UNDER THE CIRCUMSTANCES, PRESUMPTION WILL BE THAT INTEREST FREE ADVANCES / I NVESTMENTS HAVE BEEN MADE BY THE ASSESSEE OUT OF OWN FUNDS / INTEREST FR EE FUNDS. RELIANCE IN THIS RESPECT CAN ALSO BE PLACED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF HERO CYCLES (P) LTD VS. CIT 379 ITR 347 (SC) AND ALSO ON THE LATEST DECISION OF THE HON'BLE SUP REME COURT IN THE CASE OF CIT (LTU) VS. RELIANCE INDUSTRIES LTD. [2019] 410 ITR 466 (SC). 17. HOWEVER, WE DEEM IT APPROPRIATE TO SPECIFICALLY DEAL WITH THE ARGUMENTS OF THE LD. DR. SO FAR AS THE CONTENTION O F THE LD. DR THAT THE REVERSE OF THE PRESUMPTION THEORY IS TO BE APPLIED, WE DO NOT FIND ANY FORCE IN THE ABOVE CONTENTION OF THE L D. DR. THERE IS NO BASIS TO APPLY THE PRESUMPTION THAT THE ASSESSEE MIGHT HAVE USED THE BORROWED FUNDS FOR CWIP, WHEN AS NOTED ABO VE, THE ASSESSEE WAS POSSESSED SUFFICIENT OWN FUNDS. 18. SO FAR AS THE RELIANCE OF LD. DR ON THE DECISIO N OF THE HON'BLE SUPREME COURT IN CASE OF AVON CYCLES LTD. VS. CIT (SUPRA) AND ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 19 HERO CYCLES VS. CIT,(SUPRA) IS CONCERNED, WE FIN D THAT THE AFORESAID DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F AVON CYCLES LTD VS. CIT (SUPRA) WITH THE LEAD CASE BEING MAXOPPP INVESTMENT LTD VS. CIT (SUPRA) HAS COME INTO CONSIDERATION BEFORE TH E COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. JANAK GLOB AL RESOURCES PVT LTD ITA NO. 470/CHD/2018 ORDER DATED 16.10.2018, W HEREIN, THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE ALSO CON SIDERING THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF HERO CYCL ES VS. CIT 379 ITR 347 (SC) . EVEN OTHERWISE THE ISSUE IS SQUARELY COVERED BY THE RECENT DECISION OF THE HON'BLE SUPREME COURT IN C IT (LTU) VS. RELIANCE INDUSTRIES LTD. [2019] 410 ITR 466 (SC). 19. THE LD. DR, HOWEVER, HAS ARGUED THAT THE DECISI ON ARRIVED AT BY THIS TRIBUNAL IN THE CASE OF ACIT VS. JANAK GLO BAL RESOURCES PVT LTD IS NOT A CORRECT DECISION AND FURTHER THAT THE PROPOSITION OF LAW LAID DOWN IN THE LATEST DECISION OF THE HON 'BLE SUPREME COURT IN THE CASE OF CIT (LTU) VS. RELIANCE INDU STRIES LTD. (SUPRA) CANNOT BE APPLIED AS THE HON'BLE SUPREME CO URT HAS NOT FINALLY DECIDED THE MATTER AS ON SOME OTHER ISSUES AND THAT, THE MATTER HAS BEEN REMANDED BACK TO THE HON'BLE HIGH C OURT. WE ARE NOT CONVINCED BY THE ABOVE ARGUMENTS OF THE LD. DR. IF THE DEPARTMENT IS NOT SATISFIED WITH THE DECISIO N OF THIS TRIBUNAL IN THE CASE OF ACIT VS. JANAK GLOBAL RESOURCES PVT LTD (SUPRA), ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 20 IT IS OPEN TO THE DEPARTMENT TO FILE AN APPEAL BEFO RE THE HON'BLE HIGH COURT AGAINST THE SAID DECISION. SO FAR AS THE PROPOSITION OF LAW SAID DOWN BY THE HON'BLE SUPREME COURT IN THE C ASE OF RELIANCE INDUSTRIES LTD. (SUPRA) IS CONCERNED, W E FIND THAT THE ISSUE HAS BEEN FINALLY SETTLED BY THE HON'BLE SUPRE ME COURT IN CLEAR TERMS VIDE PARA 7 & 8 OF THE ORDER WHICH READ S AS UNDER:- 7. IN SO FAR AS THE FIRST QUESTION IS CONCERNED, THE ISSUE RAISES A PURE QUESTION OF FACT. THE HIGH COURT HAS NOTED THE FINDING OF THE TRIBUNAL THAT THE INTEREST FREE FUNDS AVAILABLE TO THE ASSESSEE WERE SUFFICIENT TO MEET ITS INVESTMENT. HENCE, IF COULD BE PRESUMED THAT THE INVESTMENTS WERE MADE FROM THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. THE TRIBUNAL HAS ALSO FOLLOWED ITS OWN ORDER FOR ASSESSMENT YEAR 2002-03. 8. IN VIEW OF THE ABOVE FINDINGS, WE FIND NO REASON TO INTERFERE WITH THE JUDGEMENT OF THE HIGH COURT IN REGARD TO THE FIRST QUESTION. ACCORDINGLY, THE APPEALS ARE DISMISSED IN REGARD TO THE FIRST QUESTION. 20. A PERUSAL OF THE ABOVE FINDINGS REVEALS THAT T HE HON'BLE SUPREME COURT HAS AFFIRMED THE PROPOSITION AS GIVE N IN THE CASE OF JANAK GLOBAL RESOURCES PVT LTD (SUPRA). THUS, THE ABOVE ARGUMENTS OF THE LD. DR ON THIS ISSUE ARE MISCONCEI VED. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE SA ME IS ACCORDINGLY UPHELD. ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 21 IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ITA NO.97/CHD/2018 (A.Y. 2012-13): 21. IN THIS APPEAL, THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- I. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) HAS ERRED IN DELETING THE ADDITION M ADE ON ACCOUNT OF DEDUCTION CLAIMED OF RS. 127,76,82,177/- U/S 80IA OF THE ACT, BY RELYING ON HIS DECISION FOR THE A.Y. 2010-11 WITHOUT APPRECIATING THAT ALLOCATION OF EXP ENSES WAS NOT PROPER AND PROFIT SHOWN IN POWER GENERATING UNIT WAS UNREASONABLE AND EXCESSIVE. II. WHETHER ON THE FACTS AND CIRCUMSTANCE OF THE CASE A ND IN LAW THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITI ON OF RS. 36,47,905/- U/S 14A OF THE ACT, WHILE FAILING T O APPRECIATE THE GROUNDS OF APPEAL FOR A.Y. 2008-09 F ILED IN THE HON'BLE PUNJAB & HARYANA HIGH COURT, CHANDIGAR H IN THE CASE OF THE ASSESSEE. III. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) HAS ERRED IN DELETING AN ADDITION OF RS. 90,24,421/- U/S 36(L)(III) OF THE ACT, BY RELYING O N THE DECISION IN ITA NO. 268/CHD/2015 DATED 30.11.2015 F OR THE A.Y. 2009-10 IN THE CASE OF THE ASSESSEE WITHOUT APPRECIATING THAT THE ISSUE U/S 36(L)(III) WAS NEVE R A PART OF THAT ORDER. 22. GROUND NO. 1: VIDE GROUND NO.1, THE REVENUE HAS AGITATED THE ACTION OF THE CIT(A) IN DELETING THE DISALLOWANCE O F DEDUCTION U/S 80IA OF THE ACT. THE FACTS OF THE CASE AND ISSUE INVOLVE D ARE IDENTICAL TO THAT HAVE BEEN RAISED VIDE GROUND NO. 1 OF THE REVENUE S APPEAL IN ITA NO. 96/CHD/2018 RELATING TO ASSESSMENT YEAR 2011-12. HENCE, OUR FINDINGS ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 22 GIVEN ABOVE IN GROUND NO.1 OF THE REVENUE APPEAL OF ASSESSMENT YEAR 2011-12 WILL APPLY MUTATIS-MUTANDIS ON THIS ISSUE A ND ACCORDINGLY THE GROUND NO.1 OF THE APPEAL IS DISMISSED. 23. GROUND NO. 2: VIDE GROUND NO.2, THE REVENUE HAS AGITATED THE ACTION OF THE CIT(A) IN DELETING THE ADDITION OF 36,47,905/- U/S 14A OF THE ACT. THE FACTS OF THE CASE AND ISSUE INVOL VED ARE IDENTICAL TO THAT HAVE BEEN RAISED VIDE GROUND NO. 2 OF THE REVE NUES APPEAL IN ITA NO. 96/CHD/2018 RELATING TO ASSESSMENT YEAR 2011-1 2. HENCE, OUR FINDINGS GIVEN ABOVE IN GROUND NO.2 OF THE REVENUE APPEAL OF ASSESSMENT YEAR 2011-12 WILL APPLY MUTATIS-MUTAND IS ON THIS ISSUE AND ACCORDINGLY THE GROUND NO.2 OF THE APPEAL IS DISMIS SED. 24. GROUND NO.3 : THIS GROUND IS RELATING TO THE DISALLOWANCE OF INTEREST OF 90,94,421/- U/S 36(1)(III) ON INVESTMENT IN WORK I N PROGRESS. THE ISSUE IS IDENTICAL TO THAT HAS BE EN RAISED BY THE REVENUE VIDE GROUND NO. 3 IN ITS APPEAL RELATING TO ASSESS MENT YEAR 2011-12 IN ITA NO. 96/CHD/2018 AND HAS BEEN ADJUDICATED BY US IN THE EARLIER PART OF OUR ORDER. HENCE, OUR FINDINGS ARRIVED AS ABOVE WILL APPLY MUTATIS- MUTANDIS. IN THE RESULT, THE APPEAL OF THE REVENUE IS HEREBY DISMISSED. ITA NO. 1521/CHD/2017 25. FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENU E:- ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 23 (I) WHETHER UPON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) AS JUSTIFIED IN DELETING THE DISALLOWANCE U/S 14A OF THE INCOME-TAX ACT, 1961, R .W. RULE 8D(II)? (II) WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW, THE CIT(A) HAS ERRED IN DELETING THE DISAL LOWANCE U/S 36(1)(III) OF THE ACT WHILE IGNORING THE FACT T HAT INTEREST FREE LOAN GRANTED TO VARIOUS PARTIES WERE NOT FOR ANY COMMERCIAL / BUSINESS PURPOSE. 26. GROUND NO.1: VIDE GROUND NO.1, THE REVENUE HAS AGITATED THE ACTION OF THE CIT(A) IN DELETING THE ADDITION OF 41,40,767/- MADE BY THE ASSESSING OFFICER U/S 14A READ WITH RULE 8D OF THE INCOME TAX RULES IN RESPECT OF EXPENDITURE INCURRED ON EARNIN G OF TAX EXEMPT INCOME. 27. THE LD. CIT(A) HELD THAT SINCE THE ASSESSEE WAS POSSESSED OF OWN SUFFICIENT FUNDS TO MEET THE INVESTMENTS, HENCE, NO DISALLOWANCE OF INTEREST EXPENDITURE UNDER RULE 8D IS ATTRACTED. SO FAR AS THE DISALLOWANCE UNDER RULE 8D(II) IN RESPECT OF ADMINI STRATIVE EXPENDITURE IS CONCERNED, THE LD. CIT(A) HELD THAT THE SAME IS TO BE WORKED OUT BY TAKING ONLY AVERAGE OF INVESTMENTS WHICH YIELDED TA X EXEMPT INCOME. THE RELEVANT PART OF THE FINDINGS OF THE LD. CIT(A) IS REPRODUCED AS UNDER:- I HAVE CONSIDERED THE OBSERVATIONS OF THE ASSESSING OFFICER AS MADE BY HIM IN THE ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 24 ASSESSMENT ORDER WHILE MAKING THE IMPUGNED ADDITION. 1 HAVE ALSO CONSIDERED WRITTEN SUBMISSIONS FILED BY THE ASSESSEE COMPANY THROUGH ITS LEARNED AR VIDE LETTER DATED 03.08.2017 IN CONNECTION WITH THE ISSUE UNDER REFERENCE. I HAVE FURTHER CONSIDERED VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE LEARNED AR OF THE ASSESSEE COMPANY AS WELL AS OTHER MATERIAL PLACED BY HIM ON RECORD. ON CAREFUL CONSIDERATION OF THE ASSESSMENT ORDER, IT HAS BEEN NOTICED THAT THE ASSESSING OFFICER HAS MADE THE IMPUGNED ADDITION BY INVOKING PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 AS THE ASSESSEE COMPANY HAS EARNED DIVIDEND INCOME OF RS.4,65,682/- FROM INVESTMENT IN SHARE/MUTUAL FUNDS WHICH HAS BEEN CLAIMED AS EXEMPT FROM TAX UNDER SECTION 10 OF THE ACT. IN THE OPINION OF THE ASSESSING OFFICER, THE EXPENSES INCURRED BY THE ASSESSEE COMPANY FOR EARNING OF DIVIDEND INCOME CANNOT BE ALLOWED IN VIEW OF THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES, 1962. ON THE OTHER HAND, THE LEARNED AR OF THE ASSESSEE COMPANY HAS SUBMITTED THAT THE REPLY FURNISHED BY THE ASSESSEE COMPANY DURING ASSESSMENT PROCEEDINGS VIDE LETTERS DATED 09.12.2015 AND 07.03.2016 HAS NOT BEEN CONSIDERED ON ITS MERITS. IT HAS ALSO BEEN SUBMITTED THAT THE ASSESSING OFFICER STRAIGHTWAY EMBARKED UPON COMPUTING THE DISALLOWANCE BY REFERRING TO THE PROVISIONS OF SECTION 14A OF THE ACT WITHOUT CONSIDERING CONTENTIONS OF THE ASSESSEE COMPANY WITH REGARD TO INVESTMENT MADE BY THE ASSESSEE COMPANY IN SHARES/MUTUAL FUNDS. IT HAS FURTHER BEEN SUBMITTED THAT THE ASSESSEE COMPANY WAS HAVING SUFFICIENT INTEREST FREE FUNDS OF ITS OWN IN THE FORM OF SHARE CAPITAL, RESERVES AND SURPLUS AND OTHER CASH ACCRUALS WHICH FAR EXCEED THE INVESTMENT MADE IN SHARES/MUTUAL ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 25 FUNDS. IN OTHER WORDS, IT HAS BEEN SUBMITTED THAT THE ASSESSEE COMPANY HAS NOT USED ANY BORROWED FUNDS IN MAKING INVESTMENT IN SHARES/MUTUAL FUNDS. IT HAS AGAIN BEEN SUBMITTED THAT AS THE INTEREST FREE FUNDS AVAILABLE WITH THE COMPANY FAR EXCEEDS THE INVESTMENT IN SHARES/MUTUAL FUNDS UNDER CONSIDERATION, NO DISALLOWANCE SHOULD HAVE BEEN MADE OUT OF INTEREST EXPENSES. IT HAS AGAIN BEEN SUBMITTED THAT THE DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D(2)(III) OF THE INCOME TAX RULES. 1962 IS REQUIRED TO BE MADE ON AVERAGE OF INVESTMENTS YIELDING EXEMPT INCOME. IN SUPPORT OF THIS CONTENTION, THE LEARNED AR OF THE ASSESSEE COMPANY HAS RELIED UPON THE DECISION OF THE HONORABLE ITAT, CHANDIGARH IN THE CASE OF SH. SHIV PARSHAD AGGARWAL [A.Y. 2011-12]. IT HAS AGAIN BEEN SUBMITTED THAT THE ISSUE OF DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 STAND DECIDED BY THE HONOURABLE ITAT, CHANDIGARH IN ASSESSEE'S OWN CASE FOR THE A.Y. 2009-10 VIDE ORDER DATED 30.11.2015 WHEREIN IT HAS BEEN HELD THAT IF THE AVAILABILITY OF OWN FUNDS IS MORE THAN THE INVESTMENT IN SHARES/MUTUAL FUNDS, NO DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D(2)(II) OF THE INCOME TAX RULES, 1962 IS CALLED FOR. IT HAS AGAIN BEEN SUBMITTED THAT THE INVESTMENTS MADE BY THE ASSESSEE COMPANY WERE OLD ONE AND NO NEW INVESTMENT HAS BEEN MADE DURING THE YEAR UNDER CONSIDERATION. ON CAREFUL CONSIDERATION OF THE RIVAL CONTENTIONS, 1 FIND A LO T OF FORCE IN THE CONTENTIONS OF THE LEARNED AR OF THE ASSESSEE COMPANY THAT THE ASSESSEE COMPANY HAS SUFFICIENT INTEREST FREE FUNDS TO MAKE INVESTMENT IN SHARES/MUTUAL FUNDS WHICH YIELD EXEMPT INCOME. KEEPING IN VIEW THIS PECULIAR FACT, NO DISALLOWANCE OUT OF INTEREST EXPENSES IN MY CONSIDERED OPINION CAN BE MADE IN THIS CASE BY INVOKING RULE 8D(2)(II) OF THE INCOME TAX RULES, ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 26 1962. 1 AM ALSO OF THE OPINION THAT THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF INCOME TAX RULES, 1962 ARE CLEARLY ATTRACTED IN THE CASE OF THE ASSESSEE COMPANY AS IT CANNOT BE SAID THAT THE ASSESSEE COMPANY HAS NOT INCURRED ANY EXPENSES FOR EARNING DIVIDEND INCOME. MOREOVER, THE ASSESSEE COMPANY HAS ITSELF ADMITTED THAT EXPENSES TO THE EXTENT OF RS. 12,000/- HAVE BEEN INCURRED BY IT FOR EARNING DIVIDEND INCOME. I ALSO AGREE WITH THE INION OF THE LEARNED AR OF THE ASSESSEE COMPANY THAT THE DISALLOWANCE UNDER RULE 8D(2)(III) OF THE INCOME TAX RULES, 1961 SHOULD ALSO BE MADE ON THE AVERAGE OF INVESTMENTS YIELDING EXEMPT INCOME. THIS CONTENTION OF THE LEARNED AR OF THE ASSESSEE COMPANY FIND SUPPORT FROM THE DECISION OF HONOURABLE ITAT, CHANDIGARH IN THE CASE OF SH. SHIV PARSHAD AGGARWAL FOR THE A.Y. 2011-12 WHICH HAS BEEN WORKED OUT BY THE ASSESSEE COMPANY AT RS.5,421/- ONLY [0.5% OF AVERAGE INVESTMENT OF RS.10,84,167/-]. SO, RESPECTFULLY FOLLOWING THE DECISION OF HONOURABLE ITAT, CHANDIGARH IN THE CASE OF SH. SHIV PARSHAD AGGARWAL FOR THE A.Y. 2011-12, THE DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D(2)(III) OF INCOME TAX RULES, 1962 MADE BY THE ASSESSING OFFICER IN THIS CASE IS RESTRICTED TO RS.5,421/-. HOWEVER, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OUT OF INTEREST EXPENSES BY INVOKING PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D(2)(II) OF THE INCOME TAX RULES, 1962 IS DIRECTED TO BE DELETED. IN NUTSHELL, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IN THIS CASE BY INVOKING PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 IS RESTRICTED TO RS.17,421/- [RS.12,000/- BEING DIRECT EXPENSES + RS.5,421/-] AND BALANCE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS DIRECTED TO BE DELETED. IN THE RESULT, T HE ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 27 GROUNDS NO. 1 AND 2 OF APPEAL TAKEN BY THE ASSESSEE COMPANY ARE PARTLY ALLOWED. 28. SO FAR AS THE DISALLOWANCE IN RESPECT OF INTERE ST EXPENDITURE UNDER SECTION 14A READ WITH RULE 8D(2)(II) IS CONCERNED, SINCE THE ASSESSEE WAS POSSESSED OF SUFFICIENT OWN FUNDS TO MEET THE I NVESTMENT, HENCE, THE ISSUE IS COVERED BY THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. JANAK GLOBAL RESO URCES PVT LTD ITA NO. 470/CHD/2018 ORDER DATED 16.10.2018. THIS ISSU E IS ALSO NOW SQUARELY COVERED BY THE LATEST DECISION OF THE HON' BLE SUPREME COURT IN THE CASE OF CIT (LTU) VS. RELIANCE INDUSTRIES L TD. [2019] 410 ITR 466 (SC), WHEREIN, THE HON'BLE SUPREME COURT HA S REITERATED THE PROPOSITION THAT IF THERE ARE INTEREST FUNDS AVAILA BLE WITH THE ASSESSEE, WHICH ARE SUFFICIENT TO MEET THE INVESTME NT, IT CAN BE PRESUMED THAT THE INVESTMENTS ARE MADE FROM THE INT EREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. SO FAR AS THE ACTION OF THE CIT(A) IN DIRECTING TO CALCULATE THE DISALLOWANCE UNDER RULE 8D(2)(III) IN RESPECT OF AD MINISTRATIVE EXPENDITURE INCURRED ON EARNING OF TAX EXEMPT INCO ME IS CONCERNED, THE LD. CIT(A) HAS FOLLOWED THE DECISION OF THE CHANDIG ARH BENCH OF THE TRIBUNAL IN THE CASE OF SHIV PARSAD AGGARWAL (SUP RA). NO CONTRARY DECISION HAS BEEN CITED BEFORE US. WE, THEREFORE, D O NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE. IN THE RESULT, THE GROUND OF THE REVENUE IS HEREBY DISMISSED ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 28 29. GROUND NO.2 : THE REVENUE VIDE THIS GROUND HAS AGITATED THE ACTION OF THE CIT(A) IN DELETING THE DISALLOWANCE M ADE BY U/S 36(1)(III) OF THE ACT. THE LD. CIT(A) HAS DELETED THE AFORESAI D DISALLOWANCE OBSERVING THAT THE ASSESSEE WAS POSSESSED OF SUFFI CIENT OWN FUNDS TO MAKE THE INTEREST FREE ADVANCES TO THE PARTIES. AS NOTED ABOVE, THE ISSUE IS SQUARELY COVERED BY THE RECENT DECISION OF THE H ON'BLE SUPREME COURT IN CIT (LTU) VS. RELIANCE INDUSTRIES LTD. [2019] 410 ITR 466 (SC). WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORD ER OF THE CIT(A) ON THIS ISSUE. THIS GROUND OF THE REVENUE IS THEREFORE , DISMISSED. THIS APPEAL OF THE REVENUE IS HEREBY DISMISSED. IN THE RESULT, ALL THE APPEALS OF THE REVENUE ARE D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.5.2019 SD/- SD/- ( . . / N.K. SAINI) ( ! / SANJAY GARG) '#$ / VICE PRESIDENT % & / JUDICIAL MEMBER DATED : 24.05.2019 .. 4 - (,56 76!, / COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. ()$& / THE RESPONDENT 3. / 8, / CIT 4. / 8, ( )/ THE CIT(A) 5. 69 (,: , 1 : , ;<=> / DR, ITAT, CHANDIGARH 6. = ?0 / GUARD FILE 4 / / BY ORDER, @ / ASSISTANT REGISTRAR ITA NOS. 1521-C-17, 96 & 97-C-18 M/S AARTI STEELS LTD, LUDHIANA 29