AEGIS LTD, MUMBAI V. ITO 6(1)(4), MUMBAI

ITA 962/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0687 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2011-2012
• Appeal Filed On: 26-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESHPANDE
• Keywords: Transfer pricing; International transaction; Notional interest; Commercial expediency
• Section: 143(3); 244A; 234B

Judgement Text

1 AEGIS LTD IN THE INCOME TAX APPELLATE TRIBUNNAL MUMBAI BENCH K, MUMBAI BEFORE SHRI C.N. PRASAD (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.(TP)A.NO.962/MUM/2016 - AY 2011-12 I.T(TP) A.NO1556/MUM/2016 - AY 2012-13 AEGIS LTD EQUINOX BUSINESS PARK TOWER 1, OFF BKC, LBS MARG KURLA (W), MUMBAI ITO 6(1)(4)/6(1)(1), MUMBAI PAN : AACE8354Q APPELLANT RESPONDENT APPELLANT BY SHRI RAJAN VORA SHRI HEMEN CHANDARIYA SHRI PRANAY GANDHI RESPONDENT BY SHRI SAURABH DESHPANDE DATE OF HEARING 20.4.2017 DATE OF ORDER 12.05.2017 O R D E R PER ASHWANI TANEJA, AM:- THESE APPEALS OF THE ASSESSEE PERTAIN TO DIFFERENT ASSESSMENT YEARS INVOLVING IDENTICAL ISSUE, THEREFORE, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER. 2. FIRST, WE SHALL TAKE UP APPEAL FOR AY 2008-09 FILED AGAINST THE ORDER U/S 143(3) R.W.S. 144C(13) OF THE INCOME-TAX ACT, 1961 DATED 30-02-2016 PASSED IN 2 AEGIS LTD PURSUANCE TO THE DIRECTIONS ISSUED BY DISPUTE RESO LUTION PANEL-I, MUMBAI VIDE ORDER DATED 04-11-2015 FOR ASSESSMENT YEAR 2011-12 ON THE FOLLOWING GROUNDS:- 1. THE LEARNED ASSESSING OFFICER ('AO') HAS ERRED IN COMPLETING THE ASSESSMENT OF APPELLANT AT INR 1,89, 51,31,260 (AS AGAINST RETURNED INCOME OF INR 74,45,20,825) VI DE ASSESSMENT ORDER UNDER SECTION 143(3) R.W.S 144 OF THE INCOME-TAX ACT, 1961 ('THE ACT') AFTER CONSIDERING THE ADJUSTMENTS MADE BY LEARNED TRANSFER PRICING OFFICE R ('TPO') IN HIS ORDER PASSED UNDER SECTION 920A(3) OF THE AC T AND SUBSEQUENTLY CONFIRMED BY THE LEARNED DISPUTE RESOL UTION PANEL ('DRP'). 2. THE LEARNED AO/DRP HAS ERRED IN VIOLATING THE PRINCIPLES OF JUDICIAL DISCIPLINE DISREGARDING THE DECISION OF THE HON'BLE TRIBUNAL IN APPELLANT'S OWN CASE FOR AY 2009-10 WHEREIN SIMILAR ISSUES HAVE BEEN DECIDED IN FAVOUR OF THE APPELLANT IN SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE. GROUNDS RELATING TO TRANSFER PRICING MATTERS: 3. THE LEARNED TPO I AO / DRP HAVE ERRED IN MAKING AN ADDITION OF INR 1,02,69,10,730 TO THE TOT AL INCOME (AS DETAILED BELOW) OF THE APPELLANT IN RESP ECT OF TWO INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE APPELLANT WITH ITS ASSOCIATED ENTERPRISES ('AE') (HEREINAFTER REFERRED TO AS 'IMPUGNED TRANSACTIONS'): S.NO. PARTICULARS AMOUNT (INR) 1 ADJUSTMENT IN RESPECT OF GUARANTEE COMMISSION ON INTRA-GROUP GUARANTEES EXTENDED BY THE APPELLANT 31,03,25,000 2 ADJUSTMENT IN RESPECT OF SUBSCRIPTION AND REDEMPTION OF PREFERENCE SHARE CAPITAL 71 65,85,730 TOTAL 1,02,69,10,730 3 AEGIS LTD 4. THE LEARNED TPO / AO I DRP HAVE ERRED IN NOT ACCEPTING THE ECONOMIC ANALYSIS UNDERTAKEN BY THE A PPELLANT IN RESPECT OF THE IMPUGNED TRANSACTIONS ENTERED INT O BY THE APPELLANT WITH ITS AES IN ACCORDANCE WITH PROVISION S OF THE ACT AND MODIFYING THE ECONOMIC ANALYSIS FOR DETERMINATI ON OF ARM'S LENGTH PRICE ('ALP') OF THE SAID TRANSACTIONS TO HOLD THAT THE SAME ARE NOT AT ARM'S LENGTH. ADJUSTMENT IN RESPECT OF CORPORATE GUARANTEE OF INR 31,03,25,000: 5. THE LEARNED TPO I AO I DRIP HAVE ERRED IN DETER MINING THE ARM S 4ENGTH COMPENSATION AT 2.5% FOR CORPORATE GUA RANTEES EXTENDED BY APPELLANT ON BEHALF OF ITS AES AND CONF IRMING AN ADJUSTMENT OF INR 31,03,25,000 ON THIS ACCOUNT. 6. WITHOUT PREJUDICE TO ABOVE , THE LEARNED TPO I AO I DRP HAVE ERRED IN COMPUTING THE AMOUNT OF GUARANTEE COMMISSI ON FOR THE ENTIRE YEAR (INSTEAD OF RESTRICTING IT FROM THE DAT E OF ISSUE OF GUARANTEE TILL 31 MARCH 2011). ADJUSTMENT IN RESPECT OF ISSUE AND REDEMPTION OF PREFERENCE SHARES OF INR 71,65,85,730: 7. THE LEARNED TROI AO I DRP HAVE ERRED IN RE-DETE RMINING THE ARM'S LENGTH COMPENSATION PERTAINING TO SUBSCRIPTIO N AND REDEMPTION OF PREFERENCE SHARE CAPITAL BY RE-CHARAC TERIZING THE SAME AS INTEREST-FREE LOAN AND THEREBY IMPUTING NOTIONAL INTEREST THEREON. 8. WITHOUT PREJUDICE TO ABOVE , THE LEARNED TPOI AO/ DRP HAVE ERRED IN IMPUTING NOTIONAL INTEREST ON ALLEGED LOAN S ON AN ARBITRARY BASIS IN RESPECT OF LOANS GIVEN TO FOREIGN AES. 9. WITHOUT PREJUDICE TO ABOVE, THE LEARNED TPO I A O HAVE CONTRAVENED THE PROVISIONS OF SECTION 144C(10) OF T HE ACT IN NOT ADHERING TO THE DIRECTIONS OF THE HON'BLE DRP FOR C ONSIDERING LIBOR+300 BPS AS RATE OF INTEREST BUT INSTEAD APPLIED INDIAN BOND RATES FOR THE PURPOSE OF COMPUTING INTEREST ON THE ALLEGED LOAN. GROUNDS RELATING TO CORPORATE TAX MATTERS: 10. THE LEARNED AO I DRP HAVE ERRED IN GIVING CONS EQUENTIAL EFFECT OF NOT ALLOWING CARRY FORWARD OF CURRENT YEAR CAPIT AL LOSS OF INR 4 AEGIS LTD 29,45,15,762 ON ACCOUNT OF REDEMPTION OF PREFERENCE SHARES. A. THE LEARNED AO I DRP HAS FAILED TO GIVE DUE REGARD TO THE EXPRESS SCHEME OF SECTION 920 / CHAPTER X-B OF THE ACT, WHEREBY NO POWER IS VESTED IN THE LEARNED AO TO ENH ANCE OR MODIFY THE FINDINGS OF THE LEARNED TPO. B. T HE LEARNED AO / DRP HAS TRAVELLED BEYOND THE PROVIS IONS OF THE ACT IN SEEKING TO RE-CHARACTERIZE LAWFULLY CONSUMMA TED TRANSACTION(S), WHERE NO SUCH POWER, EXPRESS OR IMP LIED, IS CONFERRED UNDER THE ACT. 11. THE LEARNED AO I DRP HAVE ERRED ON FACTS AND I N LAW IN DISALLOWING INTEREST EXPENSE, AMOUNTING TO INR 2,30 ,46,251, CLAIMED BY THE APPELLANT BY HOLDING THAT THE APPELL ANT HAS NOT ESTABLISHED THE COMMERCIAL EXPEDIENCY FOR ADVANCING INTEREST FREE LOANS TO SISTER CONCERNS I SUBSIDIARIES AND WITHOUT APPRECIATING THE FACT THAT ADVANCES TO SUBSIDIARY COMPANIES WERE MADE FROM OWN SURPLUS FUNDS AND NO PORTION OF THE BORROWED FU NDS WAS USED FOR THE SAME. 12. THE LEARNED AG / DRP HAVE ERRED IN CHARGING INT EREST UNDER SECTION 234B OF ACT AMOUNTING TO INR 15,90,86,399 A ND SECTION 234D OF THE ACT AMOUNTING TO INR 7,69,43,968. 13 THE LEARNED AG I DRP HAS ERRED IN LEVYING THE IN TEREST UNDER SECTION 244A OF THE ACT AMOUNTING TO INR 5,20,98,98 1. 14 THE LEARNED AG HAS ERRED IN INITIATING PENALTY P ROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. 3. GROUNDS 1 TO 4 ARE GENERAL, THEREFORE, THESE ARE DI SMISSED. 4. GROUNDS 5 & 6: IN THESE GROUNDS, ASSESSEE IS AGGRIEVED BY THE ACTI ON OF THE LOWER AUTHORITIES IN DETERMINING THE ARMS LENG TH COMPENSATION PAID @2.5% ON ACCOUNT OF CORPORATE GUARANTEES EXTENDED B Y THE ASSESSEE COMPANY ON BEHALF OF ITS ASSOCIATED ENTERPRISES AND RESULTA NTLY MAKING AN ADJUSTMENT OF 5 AEGIS LTD RS.31,03,25,000 ON THIS ACCOUNT. 5. DURING THE COURSE OF HEARING, IT WAS STATED AT THE OUTSET BY THE LD. COUNSEL OF THE ASSESSEE THAT IDENTICAL ISSUE HAD COME UP BE FORE THE TRIBUNAL FOR AYS 2009-10 & 2010-11, WHEREIN THE TRIBUNAL VIDE ITS OR DER IN ITA NOS 1213/MUM/2014 DATED 27-07-2015 (2009-10) AND IN ITA NO.7694/MUM/2014 (AY 2010-11) DECIDED THIS ISSUE IN FAVOUR OF THE AS SESSEE BY HOLDING THAT ADDITION CAN BE MADE @1% AS AGAINST 2.5% PROPOSED B Y THE AO / TPO. HE DREW OUR ATTENTION UPON THE ORDER OF THE TRIBUNAL A ND ALSO PLACED BEFORE US COPY OF CHART SHOWING THAT ASSESSEE HAS MADE VOLUNT ARY ADDITION @1% IN ITS PROFIT & LOSS ACCOUNT FOR THE FINANCIAL YEAR ENDING ON 31-03-2012 WHEREIN CREDIT ENTRY ON ACCOUNT OF INCOME HAS BEEN PASSED F OR AYS 2008-09, 2009-10, 2010-11, 2011-12 AND 2012-13 FOR AN AGGREGATE AMOUN T OF RS.29,42,12,863 AS PER DETAILS GIVEN BELOW:- ASSESSMENT YEAR GUARANTEE FEES @1% ON OUTSTANDING A MOUNT AY 2008-09 47,79,801 2009-10 3,23,31,592 2010-11 633,88,653 2011-12 6,92,34,700 2012-13 12,44,78,118 TOTAL 29,42,12,863 6. OUR ATTENTION WAS DRAWN ON THE PROFIT & LOSS ACCOUNT OF FY 2011-12 TO SHOW THAT CREDIT ENTRY FOR THE AFORESAID AMOUNT HAS BEEN MADE ON THE INCOME SIDE OF THE PROFIT & LOSS ACCOUNT. IT WAS SUBMITTE D THAT SINCE TRIBUNAL HAS ALREADY DECIDED THIS ISSUE ACCEPTING THE CLAIM OF T HE ASSESSEE FOR AYS 2009-10 & 2010-11, THIS ISSUE IS COVERED IN FAVOUR OF THE A SSESSEE, AS ON DATE. 6 AEGIS LTD 7. PER CONTRA, LD. DR DID NOT DISPUTE THE FACTUAL SUBM ISSIONS MADE BY THE LD. COUNSEL OF THE ASSESSEE. HOWEVER, IT WAS REQUE STED BY HIM THAT THIS ISSUE SHOULD BE SENT BACK TO THE FILE OF THE AO FOR MAKIN G FRESH STUDY OF COMPARABLES AND BENCHMARKING OF THE TRANSACTION ACCORDINGLY. I T WAS FURTHER SUBMITTED THAT RATE OF 1% SHOULD NOT BE FROZEN IN THE MANNER AS HA S BEEN DONE BY THE TRIBUNAL. 8. WE HAVE GONE THROUGH THE ORDERS PASSED BY LOWER AUT HORITIES AND ALSO BY THE TRIBUNAL IN EARLIER YEARS. IT IS NOTED THAT THE TRIBUNAL IN AYS 2009-10 & 2010-11 HAS ALREADY DECIDED THIS ISSUE BY ACCEPTING THE ADJUSTMENT @1% AS HAS BEEN VOLUNTARILY ADDED BY THE ASSESSEE IN ITS I NCOME. RELEVANT FINDINGS OF THE TRIBUNAL AS GIVEN IN THE ORDER FOR AYS 2009-10 & 2010-11 ARE REPRODUCED BELOW:- 22. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. THE ASSESSEE HA S GIVEN CORPORATE GUARANTEE ON BEHALF AEGIS USA AMOUNTING TO RS. 666, 46,80,000/- AND ON BEHALF OF ESSAR SERVICES, MAURITIUS FOR RS. 75,7 3,50,000/-. BEFORE US, THE LD. COUNSEL HAD SUBMITTED THAT IN THE SUBSE QUENT YEARS THE ASSESSEE HAS SUO MOTO ENTERED INTO GUARANTEE AGREEM ENTS WITH ITS AE PURSUANT TO WHICH IT HAS CHARGED GUARANTEE COMMI SSION OF 1% FROM ITS AE, W.E.F. FINANCIAL YEAR 2007-08 FOR A PE RIOD OF FIVE YEARS. THE SAID GUARANTEE COMMISSION RECOVERED BY THE ASSE SSEE HAS BEEN RECOGNIZED IN THE FINANCIAL STATEMENT BY THE ASSESS EE FOR THE ASSESSMENT YEAR 2012-13 AND HAS ALSO BEEN OFFERED F OR TAX IN THAT YEAR. IN WAKE OF THESE FACTS AND WITHOUT GOING INTO THE OTHER ARGUMENTS OF THE ASSESSEE AND ALSO LOOKING TO THE F ACT THAT THE TRIBUNAL IN VARIOUS CASES HAS ACCEPTED GUARANTEE CO MMISSION CHARGEABLE BETWEEN 0.5% TO 1%, WE HOLD THAT GUARANT EE COMMISSION OF 1% SHOULD BE CHARGEABLE. HERE IN THIS CASE, ASSE SSEE ITSELF HAS AGREED TO CHARGE GUARANTEE COMMISSION @ 1% OF THE O UTSTANDING GUARANTEED AMOUNT, ACCORDINGLY, WE ALSO HOLD THAT A GUARANTEE 7 AEGIS LTD COMMISSION SHOULD BE BENCHMARK BY TAKING THE RATE O F 1% OF THE OUTSTANDING GUARANTEED AMOUNT IN LINE WITH THE CONS ISTENT VIEWS TAKEN BY THE COORDINATE BENCHES, FROM ITS AE AND AD JUSTMENTS SHOULD BE MADE ACCORDINGLY. THUS, GROUNDS 12 & 13 AS RAIS ED BY THE ASSESSEE ARE TREATED AS PARTLY ALLOWED. 9. IT IS FURTHER BROUGHT TO OUR NOTICE BY THE LD. COUN SEL OF THE ASSESSEE THAT THE AO HAD MADE THE ADDITION PURELY ON AD-HOC BASIS WITHOUT MAKING ANY STUDY OF COMPARABLES WHEREAS ASSESSEE HAS CARRIED OUT PRO PER TRANSFER PRICING STUDY AND HAD ARRIVED AT THE BENCHMARKING VALUE AT NIL. OUR ATTENTION WAS ALSO DRAWN ON THE TRANSFER PRICING STUDY REPORT SUBMITTE D BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES. ACCORDING TO THE LD. COUNSE L, NO ADDITION WAS REQUIRED TO BE MADE AS PER THE TRANSFER PRICING STUDY REPORT . THUS, THE ADDITION @1% HAS BEEN MADE BY THE ASSESSEE VOLUNTARILY WITH A VI EW TO CURTAIL THE LITIGATION. UNDER THESE CIRCUMSTANCES, HONBLE ITAT HAS ACCEPTE D THE CLAIM O THE ASSESSEE IN RIGHT SPIRIT AND AS A MATTER OF CONSISTENCY; THE SAME VIEW SHOULD BE ALLOWED TO BE ADOPTED IN THIS YEAR ALSO. WE AGREE WITH THE SUBMISSIONS OF THE LD. COUNSEL SINCE A VIEW HAS ALREADY BEEN TAKEN BY THE TRIBUNAL AFTER PROPER DELIBERATIONS AND ANALYSIS OF FACTS OF THIS CASE. THUS, AS A MATTER OF CONSISTENCY, WE HEREBY FOLLOW THE VIEW TAKEN BY THE TRIBUNAL FOR AYS 2009-10 2010-11 AND DIRECT THE AO TO ACCEPT THE ADDITION @1 % AS HAS BEEN PROPOSED BY THE ASSESSEE. THE AO IS DIRECTED TO FOLLOW THE ORDER OF THE TRIBUNAL FOR AYS 2009-10 & 2010-11. THUS, WITH THESE DIRECTIONS GRO UNDS 5 & 6 ARE ALLOWED. 10. GROUNDS 7-9: IN THESE GROUNDS, THE ASSESSEE IS AGGRIEVED BY TH E ACTION OF THE LOWER AUTHORITIES IN DETERMINING THE ARMS LENGTH PRICE PERTAINING TO SUBSCRIPTION AND REDEMPTION OF PREFERENCE SHARE CAPITAL BY RE-CHARACTERISING THE SAME AS INTEREST FROM LOAN AND THEREBY COMPUTIN G NOTIONAL INTEREST THEREON. 8 AEGIS LTD 11. DURING THE COURSE OF HEARING, BOTH THE PARTIES JOIN TLY STATED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE TRIBUNAL PASSED IN ASSESSEES OWN CASE FOR AYS 2009-10 & 2010-11. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE LOWER AUTHORITIES AND BY THE T RIBUNAL FOR AYS 2009-10 & 2010-11. IT IS NOTED THAT THE TRIBUNAL DECIDED THI S ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER:- 27 WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PER USED THE RELEVANT FINDINGS IN THIS REGARD IN THE IMPUGNED OR DERS. THE ASSESSEE HAS SUBSCRIBED TO REDEEMABLE PREFERENC E SHARES OF ITS AE, ESSAR SERVICES, MAURITIUS AND HAS ALSO REDEEMED SOME OF THESE SHARES AT PAR. THE TPO HAS REDEEMED SOME OF T HESE SHARES AT PAR. HE TPO HAS RE-CHARACTERIZED THE SAID TRANSACTION OF SUBSCRIPTION OF SHARES INTO ADVANCING OF UNSECURED LOAN BY TERMING IT AS AN EXCEPTIONAL CIRCUMSTANCE AND HAS CHARGED/I MPUTED INTEREST, ON THE REASONING THAT IN AN UNCONTROLLED THIRD PARTY SITUATION, INTEREST WOULD HAVE BEEN CHARGED. WE ARE UNABLE TO APPRECIATE SUCH AN APPROACH OF TPO AND UNDER WHAT C IRCUMSTANCES, LEAVE ABOVE ANY EXCEPTIONAL CIRCUMSTANCES, A TRANSA CTION OF SUBSCRIPTION OF SHARES CAN BE RE-CHARACTERIZED AS L OAN TRANSACTION. THE TPO /ASSESSING OFFICER CANNOT DISREGARD ANY APP ARENT TRANSACTION AND SUBSTITUTE IT, WITHOUT ANY MATERIAL OF EXCEPTIONAL CIRCUMSTANCE HIGHLIGHTING THAT ASSESSEE HAS TRIED TO CONCEAL THE REAL TRANSACTION OR SOME SHAM TRANSACTI ON HAS BEEN UNEARTHED. THE TPO CANNOT QUESTION THE COMMERCIAL E XPEDIENCY OF THE TRANSACTION ENTERED INTO BY THE ASSESSEE UNLESS THERE ARE EVIDENCE AND CIRCUMSTANCES TO DOUBT. HERE IT IS A C ASE OF INVESTMENT IN SHARES AND IT CANNOT BE GIVEN DIFFERE NT COLOUR SO AS TO EXPAND THE SCOPE OF TRANSFER PRICING ADJUSTMENTS BY RE- CHARACTERIZING IT AS INTEREST FREE LOAN. NOW, WHETH ER IN A THIRD PARTY SCENARIO, IF AN INDEPENDENT ENTERPRISE SUBSCRIBES T O A SHARE, CAN IT BE CHARACTERIZED AS LOAN. IF NOT, THEN THIS TRANSAC TION ALSO CANNOT BE INFERRED AS LOAN. THE CONTENTION OF THE LD. COUN SEL IS ALSO SUPPORTED BY THE HONB1E JURISDICTIONAL HIGH COURT I N THE CASE OF DEXISKIER DHBOAL SA, ITA NO. 776 OF 2011 ORDER DATE D 30 TH AUGUST, 2012 AND BY VARIOUS OTHER DECISIONS, AS CIT ED BY HIM. THE CO-ORDINATE BENCHES OF THE TRIBUNAL HAVE B EEN CONSISTENTLY HOLDING THAT SUBSCRIPTION OF SHARES CA NNOT BE H 9 AEGIS LTD CHARACTERIZED AS LOAN AND THEREFORE NO INTEREST SHO ULD BE IMPUTED BY TREATING IT AS A LOAN. ACCORDINGLY, ON T HIS GROUND ALONE, WE DELETE THE ADJUSTMENT OF INTEREST MADE BY ASSESSING OFFICER. THUS, GROUND NO. 14 IS TREATED A S ALLOWED. SINCE NO DISTINCTION HAS BEEN MADE ON LAW OR ON FAC TS, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL, THESE GROUNDS ARE ALLOWE D IN FAVOUR OF THE ASSESSEE. THE AO IS DIRECTED TO FOLLOW THE ORDER OF THE TRIBU NAL FOR AYS 2009-10 & 2010- 11. 12. GROUND 10 IS CONSEQUENTIAL TO GROUNDS 7 & 8. IN TH IS GROUND ASSESSEE IS AGGRIEVED BY THE ACTION OF THE LOWER AUTHORITIES IN DENYING THE BENEFIT OF CARRY FORWARD OF CURRENT YEARS CAPITAL LOSS ON ACCOUNT O F PREFERENCE SHARES. THIS GROUND IS CONSEQUENTIAL TO THE ISSUE OF CHARACTERIZ ATION OF PREFERENTIAL SHARES AS INTEREST FREE LOANS. THEREFORE, THIS GROUND IS RESTORED BACK TO THE FILE OF THE AO WITH THE DIRECTION TO VERIFY THE FACTS AND FOLLO W THE AFORESAID ORDER OF THE TRIBUNAL FOR AYS 2009-10 & 2010-11. THIS GROUND MA Y BE TREATED AS ALLOWED, FOR STATISTICAL PURPOSE. 13. GROUND 11: IN THIS GROUND, ASSESSEE IS AGGRIEVED BY THE ACTION OF THE LOWER AUTHORITIES IN MAKING DISALLOWANCE OF INTERES T U/S 36(1)(III). DURING THE COURSE OF HEARING IT WAS JOINTLY STATED THAT THIS I SSUE IS COVERED IN FAVOUR OF THE ASSESSEE ON THE BASIS OF DECISION OF THE TRIBUNAL F OR AYS 2009-10 & 2010-11. 14. DURING THE COURSE OF HEARING OUR ATTENTION WAS DRAW N UPON THE DETAILS SUBMITTED BEFORE US SHOWING THAT NO FRESH LOANS HAV E BEEN RECEIVED DURING THE YEAR. RATHER, THE LOANS HAVE BEEN REPAID. OUR ATT ENTION WAS ALSO DRAWN ON THE BALANCE-SHEET AND OTHER FINANCIAL STATEMENT OF THE ASSESSEE SHOWING THAT OWN FUNDS OF THE ASSESSEE ARE MUCH MORE THAN THE LOANS AND ADVANCES. 15. IT IS NOTED THAT THE TRIBUNAL DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE FOR AYS 2009-10 & 2010-11 BY OBSERVING AS UNDER:- 10 AEGIS LTD 57. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ON PERUSAL OF THE RELEVANT MATERIAL ON RECORD, IT IS SEEN THAT THE AD VANCE GIVEN TO THE SUBSIDIARY WAS 1.32 CRORES AS ON 01.04.2008 AND AS ON 31.03.2009 IT STOOD AT RS. 6,13,19,000/-. AS AGAINST THAT, THE ASSESSEE HAD OWN FUNDS TO THE TUNE OF RS. 346.19 CR ORES IN THE FORM OF SHARE CAPITAL AND SHARE PREMIUM AND DURING THE YEAR IT HAS RAISED SHARES OF 279.93 CRORES OUT OF WHICH 4.8 1 CRORES HAD BEEN LENT TO THE SISTER CONCERN. IN SUCH A SITUATIO N, WHERE THE ASSESSEE HAS SUBSTANTIAL OWN FUNDS, THEN PRESUMPTION IS THAT ASSESSEE HAS GIVEN ADVANCE TO ITS SISTER CONCERN FROM ITS OWN FU NDS. THUS, FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE JURISD ICTIONAL HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER L TD (SUPRA) WHICH HAVE BEEN FOLLOWED IN VARIOUS OTHER DECISIONS, WE H OLD THAT NO DISALLOWANCE OF INTEREST IS CALLED FOR. ACCORDINGL Y, GROUND NO22 IS TREATED AS ALLOWED. AS STATED BY US IN EARLIER PART OF OUR ORDER, THE F ACTS ARE IDENTICAL IN THIS YEAR ALSO. THE VIEW TAKEN BY THE TRIBUNAL IS APPLICABLE ON THE FACTS OF THIS YEAR AS WELL. THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL, THIS GROUND IS ALLOWED IN FAVOUR OF THE ASSESSEE AND THE AO IS DIR ECTED TO DELETE THE DISALLOWANCE ON ACCOUNT OF INTEREST. 16. GROUNDS 12-14 ARE CONSEQUENTIAL, THEREFORE, DISMISS ED. 17. AS A RESULT, APPEAL IS PARTLY ALLOWED. 18. NOW, WE SHALL TAKE UP APPEAL FOR AY 2012-12 IN IT(T P)A NO.1556/MUM/2017. 19. GROUNDS 1-14 ARE IDENTICAL TO GROUNDS IN AY 2011-12. THE AO IS DIRECTED TO FOLLOW OUR ORDER FOR AY 2011-12. 20. THE ASSESSEE HAS ALSO RAISED AN ISSUE WITH REGARD T O SHORT CREDIT OF TDS AMOUNTING TO RS.85,51,088. IT WAS SUBMITTED THAT T HE AO SHOULD BE DIRECTED TO GRANT ADDITIONAL TDS CREDIT OF THE SAID AMOUNT AS P ER FORM 26-AS FILED BY THE ASSESSEE ALONG WITH RECTIFICATION APPLICATION DATE 23-03-2017. WE FIND FORCE IN THE REQUEST OF THE ASSESSEE AND, THEREFORE, DIRECT THE AO TO VERIFY THE FACTS AND 11 AEGIS LTD GRANT THE BENEFIT OF TDS, AS PER LAW. THE AO SHOUL D ALSO DISPOSE OF THE RECTIFICATION APPLICATION PENDING IN THIS REGARD. 21. AS A RESULT, THIS APPEAL IS ALSO PARTLY ALLOWED. 22. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESS EE ARE PARTLY ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE CONCL USION OF THE HEARING IN THE PRESENCE OF REPRESENTATIVES OF BOTH THE PARTIES . SD/- SD/- (C.N. PRASAD) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 12.05.2017 PK/- COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , K, BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES