TMI Blog2013 (8) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... ufficient interest free funds and hence no inference could be drawn that these investments were made out of borrowed funds - Commissioner of Income Tax (A) has decided the issue by restricting the addition u/s. 14A to ₹ 20,000/- which is the total value of investment, the income from which is exempt from tax. No contrary decision to the above has been shown - Decided against Assessee. - I.T.A. No. 113/Del/2012, I.T.A. No. 400/Del/2012 - - - Dated:- 31-7-2013 - Shri I. C. Sudhir And Shri Shamim Yahya,JJ. For the Petitioner : Sh. Sanjeev Kwatra, CA For the Respondent : Sh. Sameer Sharma, Sr. D.R. ORDER Per Shamim Yahya : AM. These cross appeals by the Revenue and Assessee emanate out of order of the Ld. Commissioner of Income Tax (Appeals)-IX, New Delhi dated 25.10.2011 and pertain to assessment year 2008-09. ASSESSEE'S APPEAL 2. The issue raised in this appeal is that Ld. Commissioner of Income Tax (A) was not justified in upholding the disallowance of 20,000/- u/s. 14A of the I.T. Act on account of alleged proportionate expenses for earning exempt income. 3. Ld. Counsel of the assessee submitted that he shall not be pressing for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Land - G. Noida 7,65,842/- RLKC Trust 67,32,219/- Sunhill Welfare Trust 13,00,890/- Sunhill Hospital 13,10,014/- Sunhill Pharma 6,69,807/- Total = 1,27,77,099/ The Assessing Officer then made a proportionate disallowance of interest of ₹ 45,38,908/- on the said advances aggregating to ₹ 16,62,06,019/-, in the ratio of own funds and borrowed funds i.e 35.25% : 64.48%. 6. Before the Ld. Commissioner of Income Tax (A) assessee made elaborate submissions. Considering the same, Ld. Commissioner of Income Tax (A) held as under:- I have considered the submissions of the appellant, the findings of the Assessing Officer and the facts on record. It is seen from the above that the basis of addition adopted by the Assessing Officer as well as the arguments of the Ld. Authorised Representative are the same as were in the appeal no. 137/09-10 for the A.Y. 2007-08 before me in the appellant's own case. As per my order in the said appeal, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Others 3,00,00,001/- 29,07,68,766/- Total : 53,67,98,094/- 10. It is common knowledge that loans granted by banks for specific purposes such as working capital or term loan are to be utilized for an agreed specified purpose and that the utilization is monitored by the Bank and that the quantum of working capital advance limit depends on the level of stocks and sundry debtors of the organization taking the loans and that term loans are disbursed only on acquiring of specified assets. The working capital limits vary in direct proportion to the net current assets. Similarly term loans granted are tied up for specific purposes and the Banker insists on bills etc. to monitor utilization. The presumption in such cases should be that the Banker have monitored the disbursements and that the loans granted by the banker have been utilized only for the purpose for which they have been granted. This presumption is a rebuttable presumption and the A.O. should have some evidence or material on record to hold otherwise. There is no such evidence in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized by the assessee in its own business, but had been advanced as interest free loan to its sister concern. However, in our opinion, that fact is not really relevant. What is relevant is whether the assessee advanced such amount to its sister concern as a measure of commercial expediency. 35. We agree with the view taken by the Delhi High Court in CIT v. Dalmia Cement (B.) Ltd. [2002] 254 ITR 377 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 arm-chair 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 his profit. The income-tax 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 view point but that of a prudent businessman. As already stated above, we have to see the transfer of the borrowed funds to a sister concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. For all these reasons, we uphold the order of the Commissioner of Income Tax (Appeals) and dismiss this appeal of the Revenue. 10. We find that both the counsel fairly agreed that the facts of the present case are identical to one dealt with by the Tribunal as above. Accordingly, respectfully following the precedent as above, we uphold the order of the Ld. Commissioner of Income Tax (A) and decide the issue in favour of the assessee. 11. Apropos disallowance u/s. 14A 12. In this case Assessing Officer made the addition of ₹ 4,06,439/- by invoking the provisions of Section 14A and computed the disallowance under Rule 8D of the I.T. Rules, 1962. 13. Before the Ld. Commissioner of Income Tax (A) assessee made the submissions as under:- it is submitted that opening Investment of ₹ 53,10,000/- and closing investment of ₹ 82,00,000/- were towards the close ended mutual funds and there is no dividend payout under this scheme. The Mutual Funds are redeemed at the closing NAV upon completion of the scheme period or alternatively the said Mutual Funds can be sold in the open market. The resultant gain or loss is treated as capital gain/loss, which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as well as the arguments of the Ld. Authorised Representative are the same as were in the appeal no. 137/09-10 for the A.Y. 2007-08 before me in the appellant's own case. As per my order in the said appeal, this issue was partly decided in favour of the appellant on the basis of detailed reasons given therein. Following my own order in the appellant's case for the aforesaid assessment year in appeal no. 137/09-10 this issue is decided partly in favour of the appellant by restricting the addition u/s. 14A to ₹ 20,000/- which is the total value of the investment, the income from which is exempt from tax. Accordingly, the addition made is restricted to ₹ 20,000/- and the ground no. 3 is partly allowed to the appellant. 15. Against the above order the Revenue is in appeal before us. 16. We have heard both the counsel and perused the records. We find that assessee has submitted before the Ld. Commissioner of Income Tax (A) that there is no material on record to show that interest bearing funds were used in mutual funds aggregating to ₹ 82 lacs as on 31.3.2008. The assessee has sufficient interest free funds and hence no inference could be drawn that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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