New User   Login      
Tax Management India .com TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2017 (3) TMI 266 - ITAT MUMBAI

2017 (3) TMI 266 - ITAT MUMBAI - TMI - Disallowance u/s 14A - as per assessee as in preceding years, accepted the suo-moto disallowance therefore, in the present Assessment Year also, the same has to be followed - Held that:- We find that the Tribunal for Assessment Year 2009-10, followed the decision of the Tribunal in the case of assessee itself for Assessment Year 2008-09 with respect to disallowance made by the Assessing Officer under rule-8D(2)(ii) and 8D(2)(iii) of the Rules along with the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

atisfied with such reasoning because the rule of consistency applies to both sides and since, the Tribunal for Assessment Year 2008-09, 2009-10, being on identical facts, directed the Assessing Officer to restrict the disallowance as contained in the order of the Tribunal dated 27/03/2015 (for Assessment Year 2009-10), for the present Assessment Year also, the disallowance is directed to be restricted to ₹ 10 lakh under section 14A of the Act r.w.r. 8D(2)(iii), against the claim of the ass .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the issue of consistency has already been discussed by us in preceding paras of this order. Thus, the Ld. Assessing Officer is directed to follow the ratio laid down in theorder of the Tribunal in assessee's own case and hold that the funds were utilized for business purposes as the same were advanced by the assessee for the business exigencies of the assessee. - ITA No.3053/Mum/2015 - Dated:- 3-3-2017 - Shri Joginder Singh, Judicial Member, and Shri Manoj Kumar Aggarwal, Accountant Member For T .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er the Rules). The crux of the argument on behalf of the assessee, Ld. counsel, Shri Chetan Kariya, is identical to the ground raised. On the other hand, Ms. Vidisha Kalra, ld. CIT-DR, explained that sufficient opportunity was provided to the assessee, therefore, there is no substance in the ground raised by the assessee. 2.1. We have considered the rival submissions and perused the material available on record. We find that the assessment order was framed u/s 143(3) of the Act, whereas, as is e .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ead with Rule 8D(2)(ii) at ₹ 60,04,84,033/- as against the disallowance computed by the assessee at ₹ 1,09,16417/- accepted by the ld. Assessing Officer and consequent disallowance u/s 14A of the Act r.w.r 8D(2)(iii) at ₹ 4,63,71,213/- as against the disallowance computed by the assessee at ₹ 1 lakh is concerned, the crux of argument, on behalf of the assessee, before us, is that own funds substantially covers the investment made by the assessee as per settled position of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

icer and further enhanced by the Ld. Commissioner of Income Tax (Appeal). It was also contended that each year is independent, therefore, addition/disallowance was rightly made by the Assessing Officer. It was also contended that rule of consistency is not applicable in the present case. 3.2. We have considered the rival submissions and perused the material available on record. We find that the Tribunal vide order dated 09/12/2015 ITA No. 4418 /Mum/ 2012, for Assessment Year 2008-09 on identical .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Year 2009-10 (ITA No.202 and 207/Mum/2013), the Tribunal, vide order dated 27/03/2015, on the issue of disallowance made under rule-8D(2)(iii) of the Rules, considered the decisions from Hon'ble jurisdictional High Court in Godrej & Boyce Co. Ltd. vs DCIT (328 ITR 81)(Bom.) and dismissed the appeal of the Revenue. If all these cases are kept in juxtaposition with the facts of the present appeal, we find that the assessee company made investment by reflecting the same in the balance-sheet .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r of Income Tax (Appeal) as well as by the Tribunal and decided the issue in favour of the assessee. The assessee has identified and quantified specific amount of interest expenses and also the investment with borrowed funds in the past and the investments have been co-related. It is also noted that even the Ld. Assessing Officer, as in the past, allowed the interest. The Assessing Officer was satisfied with the disallowances, suo-moto made by the assessee. It is noted that in all the earlier ye .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of disallowance out of expenses. The Ld. Commissioner of Income Tax (Appeal) issued enhancement notice dated 20/02/2015, asking the assessee to file the reply. The assessee requested for adjournment but the request was denied and order was passed by the Ld. CIT (Appeal) applying Rule-8D(ii) in respect of disallowance of interest. Considering the totality of facts, we find that so far as the disallowance out of indirect expenses is concerned, as claimed by the assessee, the issue is covered by th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nvestment are more than own funds, the Ld. CIT (Appeal) has not pointed any error in the working of the assessee. Hon'ble Delhi High Court in the case of CIT vs. Taikisha Engineering India Ltd. (2015) 370 ITR 338 (Del.) clearly held that Rule-8D can only be applied if the objective reasons are given for rejection of method, adopted by the assessee. From pages 103 to 129 (copy of balance sheet and investment) it is evidently clear that the investment are very old and no much time and energy w .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

East India Pharmaceutical Works Ltd. vs CIT (224 ITR 624)(SC) and Gujarat High Court in CIT vs Suzlon Energy Ltd. (354 ITR 630)(Guj.) and also by Hon'ble Delhi High Court in COMMISSIONER OF INCOME TAX vs. TAIKISHA ENGINEERING INDIA LTD.(2015) 275 CTR 0316 (Del) : (2015) 114 DTR 0316 (Del) : (2015) 370 ITR 0338 (Delhi) : (2015) 229 TAXMAN 0143 (Delhi), the relevant portion of the order is reproduced hereunder for ready reference and analysis:- 8. The Income Tax Appellate Tribunal ( Tribunal , .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nvestments yielding exempt income. At the threshold it needs to be determined as to whether any interest expenditure can be attributed to the securities on which such exempt income was earned. The question of disallowance of such interest u/s 14A would arise only if some expenditure is said to have been incurred in relation to investment in such securities. In this regard, it is observed that the assessee made total investment of [Rs.] 6.33 crore in shares or securities resulting into exempt inc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

vs. Reliance Utilities and Power Ltd. [2009] 313 ITR 340 (Bom.) had similarly held that when sufficient non interest funds were available for investment then no disallowance of interest should be made. The Bombay High Court had placed reliance on the decision of East India Pharmaceutical Works Ltd. vs. CIT [1997] 224 ITR 624 (SC) to the effect that if the assessee had sufficient non interest funds, then investment made in shares and securities resulting in exempt income should not lead to disall .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he findings recorded by the CIT(A) and the Tribunal are appropriate and relevant. The clear findings are that the assessee had sufficient funds for making investments in shares and mutual funds. The said findings coupled with the failure of the Assessing Officer to hold and record his satisfaction clinches the issue in favour of the respondent assessee and against the Revenue. The self or voluntary deductions made by the assessee were not rejected and held to be unsatisfactory, on examination of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Works Ltd. (supra) could not be now applicable, if we apply and compute the disallowance under Rule 8D of the Rules. The said Rule in sub Rule (2) specifically prescribes the mode and method for computing the disallowance under Section 14A of the Act. Thus, the interpretation of clause (ii) to sub Rule (2) to Rule 8D of the Rules by the CIT(A) and the Tribunal is not sustainable. The said clause expressly states that where the assessee has incurred expenditure by way of interest in the previous .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n the interest on loan amount to this extent or in entirety as the case may be, has to be excluded for making computation as per the formula prescribed. Pertinently, the amount to be disallowed as expenditure relatable to exempt income, under sub Rule (2) is the aggregate of the amount under clause (i), clause (ii) and clause (iii). Clause (i) relates to direct expenditure relating to income forming part of the total income and under clause (iii) an amount equal to 0.5% of the average amount of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nreasonable and unsatisfactory. We do not find any such satisfaction recorded in the present case by the Assessing Officer, before he invoked sub Rule (2) to Rule 8D of the Rules and made the re-computation. Therefore, the respondent assessee would succeed and the appeal should be dismissed. 3.4. In the aforesaid decision, Hon'ble High Court duly analyzed section 14A of the Act r.w.r 8D of the Rules. Reference was also made to the decision from Hon'ble Delhi High Court in CIT vs Tin Box .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

#39;ble Apex Court in East India Pharmaceutical Works Ltd. vs CIT (1997) 224 ITR 624 (SC) to the effect that if the assessee had sufficient non-interest bearing funds, then investment made in shares and securities resulting in exempt income should not lead to disallowance of interest expenditure as there was no question of attributing any interest to such investment. Reference can also be made to the decision from Hon'ble Gujarat High Court in CIT vs Suzlon Energy Ltd. (2013) 354 ITR 630 to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. (3) The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hat no deduction shall be allowed in respect of expenditure incurred by an assessee in relation to income which does not form part of the total income under the Act. Under sub Section (2) to Section 14A of the Act, the Assessing Officer is required to examine the accounts of the assessee and only when he is not satisfied with the correctness of the claim of the assessee in respect of expenditure in relation to exempt income, he can determine the amount of expenditure which should be disallowed i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is not attracted and applicable to assessee who have exempt income and it is not compulsory and necessary that an assessee must voluntarily compute disallowance as per Rule 8D of the Rules. Where the disallowance or nil disallowance made by the assessee is found to be unsatisfactory on examination of accounts, the assessing officer is entitled and authorised to compute the deduction under Rule 8D of the Rules. This pre-condition and stipulation as noticed below is also mandated in sub Rule (1) t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e the amount of expenditure in relation to such income in accordance with the provisions of sub-rule (2). The expenditure in relation to income which does not form part of the total income shall be the aggregate of following amounts, namely:- (i) the amount of expenditure directly relating to income which does not form part of total income; (ii) in a case where the assessee has incurred expenditure by way of interest during the previous year which is not directly attributable to any particular i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

aring in the balance sheet of the assessee, on the first day and the last day of the previous year ; (iii) an amount equal to one-half per cent of the average of the value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year. (3) For the purposes of this rule, the total assets shall mean, total assets as appearing in the balance sheet excluding the increase o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

2) to Rule 8D of the Rules. Sub Rule (2) will not come into operation until and unless the specific pre-condition in sub Rule (1) is satisfied. Thus, Section 14A(2) of the Act and Rule 8D(1) in unison and affirmatively record that the computation or disallowance made by the assessee or claim that no expenditure was incurred to earn exempt income must be examined with reference to the accounts, and only and when the explanation/claim of the assessee is not satisfactory, computation under sub Rule .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under the said Act. In other words, the requirement of the Assessing Officer, embarking upon a determination of the amount of expenditure incurred in relation to exempt income would be triggered only if the Assessing Officer returns a finding that he is not satisfied .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

plies to cases where the assessee claims that no expenditure has been incurred in relation to income which does not form part of the total income under the said Act. In other words, sub-section (2) deals with cases where the assessee specifies a positive amount of expenditure in relation to income which does not form part of the total income under the said Act and sub-section (3) applies to cases where the assessee asserts that no expenditure had been incurred in relation to exempt income. In bo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to determine the amount of expenditure incurred in relation to such income which does not form part of the total income under the said Act in accordance with the prescribed method. The prescribed method being the method stipulated in Rule 8D of the said Rules. While rejecting the claim of the assessee with regard to the expenditure or no expenditure, as the case may be, in relation to exempt income, the Assessing Officer would have to indicate cogent reasons for the same. 3.8. Rule 8D, as we hav .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

unts of the assessee of a previous year, is not satisfied with (a) the correctness of the claim of expenditure made by the asses see; or (b) the claim made by the assessee that no expenditure has been incurred in relation to income which does not form part of the total income under the said Act for such previous year. The Assessing Officer shall determine the amount of the expenditure in relation to such income in accordance with the provisions of sub-rule (2) of Rule 8D. 3.9. We may observe tha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

urred. It is only when this condition precedent is satisfied that the Assessing Officer is required to determine the amount of expenditure in relation to income not includable in total income in the manner indicated in sub-rule (2) of Rule 8D of the said Rules. It is, therefore, clear that determination of the amount of expenditure in relation to exempt income under Rule 8D would only come into play when the Assessing Officer rejects the claim of the assessee in this regard. If one examines sub- .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y apportions the amount of expenditure by way of interest (other than the amount of interest included in clause (i)) incurred during the previous year in the ratio of the average value of investment, income from which does not or shall not form part of the total income, to the average of the total assets of the assessee. iii. The third component is an artificial figure - one half percent of the average value of the investment, income from which does not or shall not form part of the total income .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

into account by virtue of clause (i) of sub-rule (2) of Rule 8D. and (b) The indirect expenditure, where it is by way of interest, is computed through the principle of apportionment, as indicated above. And, in cases where the indirect expenditure is not by way of interest, a rule of thumb figure of one half percent of the average value of the investment, income from which does not or shall not form part of the total income, is taken. 3.10. Even earlier the Bombay High Court in Godrej and Boyce .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

be prescribed by rules made under the Act. What merits emphasis is that the jurisdiction of the Assessing Officer to determine the expenditure incurred in relation to such income which does not form part of the total income, in accordance with the prescribed method, arises if the Assessing Officer is not satisfied with the correctness of the claim of the assessee in respect of the expenditure which the assessee claims to have incurred in relation to income which does not part of the total income .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e claim of the assessee in that regard is correct and the determination must be made having regard to the accounts of the assessee. The satisfaction of the Assessing Officer must be arrived at on an objective basis. It is only when the Assessing Officer is not satisfied with the claim of the assessee, that the Legislature directs him to follow the method that may be prescribed. In a situation where the accounts of the assessee furnish an objective basis for the Assessing Officer to arrive at a s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

where the assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under the Act. Under the proviso, it has been stipulated that nothing in the section will empower the Assessing Officer, for an assessment year beginning on or before April 1, 2001, either to reassess under section 147 or pass an order enhancing the assessment or reducing the refund already made or otherwise increasing the liability of the assessee under sect .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

vided by way of section 14A(2)/(3) and rule 8D. 3.12. More important and relevant for us are the observations in Godrej and Boyce Mfg. Co. Ltd. (supra) on requirement and stipulation of satisfaction being recorded by the Assessing Officer with reference to the accounts under Section 14(2) of the Act and Rule 8D(1) of the Rules. It was observed:- Parliament has provided an adequate safeguard to the invocation of the power to determine the expenditure incurred in relation to the earning of non-tax .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he exercise of the power is predicated". (M. A. Rasheed v. State of Kerala [1974] AIR 1974 SC 2249*). A decision by the Assessing Officer has to be arrived at in good faith on relevant considerations. The Assessing Officer must furnish to the assessee a reasonable opportunity to show cause on the correctness of the claim made by him. In the event that the Assessing Officer is not satisfied with the correctness of the claim made by the assessee, he must record reasons for his conclusion. The .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sion is that section 14A of the Act postulates and states that no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income, which does not form part of the total income under the Act. Under sub-section (2) of Section 14A of the Act, the Assessing Officer is required to examine the accounts of the assessee and only when he is not satisfied with the correctness of the claim of the assessee in respect of expenditure in relation to exempt income, the Assess .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

prescribed under Rule-8D of the Rules, thus, Rule-8D is not attracted and applicable in a situation, where, the assessee has voluntarily computed the disallowance as per Rule-8D of the Rules. 3.14. So far as the argument of the assessee with respect to rule of consistency is concerned, we note that in the previous and subsequent assessment years, the Assessing Officer treated the assessee as an investor, therefore, we are of the view that unless and until contrary facts are brought on record by .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

garh ITAT) vii. Union of India vs Kumudini N. Dalal 249 ITR 219 (SC) viii. Union of India vs Satish Pannalal Shah 249 ITR 221 ix. B.F.Varghese vs State of Kerala 72 ITR 726 (Ker.) x. CIT vs Narendra Doshi 254 ITR 606 (SC) xi. CIT vs Shivsagar Estate 257 ITR 59 (SC) xii. Pradip Ramanlal Seth vs UOI 204 ITR 866 (Guj.) xiii. Radhaswamy Satsang vs CIT 193 ITR 321 (SC) xiv. Aggarwal warehousing & Leasing Ltd. 257 ITR 235 (MP) 3.15. The sum and substance of the aforesaid judicial pronouncements is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

High Court in the case of CIT vs A.R.J. Security Printers 264 ITR 276(Del.) held as under:- True that each assessment year being independent of the other, as a general rule, the principle of res judicata or estoppel by record, which applies to civil Courts, does not apply to income-tax proceedings but, yet for the sake of consistency and for the purpose of finality in all litigations, including litigation arising out of fiscal statutes, earlier decisions on the same question should not be reope .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t similar claim had been disallowed in earlier years. No fresh material has been brought on record by the lower authorities, warranting fresh consideration. Admittedly, order of the Tribunal for asst. yr. 1992-93 has not been challenged by the Revenue. Similarly, orders of the Tribunal on the issue, pertaining to asst. yrs. 1995-96 and 1997-98 have attained finality. In the aforenoted factual background, one fails to appreciate as to how, when there is no change in the business of the assessee, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he issue raised, the appeals are not entertained. (Paras 7, 8 & 10) Conclusion : Having accepted in three assessment years that the assessee s business activity of printing lottery tickets fall within the ambit of s. 80-I, the Revenue cannot be allowed to turn around and contend that deduction under the said section is not allowable in respect of assessment years in question; appeal not entertained. 3.16. In the case of CIT vs Neo Polypack Pvt. Ltd. 245 ITR 492 (Del.), the Hon'ble Delhi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rs, unless there is some material change in the facts. In the present case, counsel for the Revenue has not been able to point out even a single distinguishing feature in respect of the assessment year in question which could have prompted the AO to take a view different from the earlier assessment years, in which the same income was brought to tax as income from business. The petition is accordingly dismissed. (Para 3) Conclusion : Since rental income derived by assessee was assessed as busines .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

We are aware that the doctrine of res-judicata does not strictly apply to the Income Tax Proceedings, however, where the Department had been taking consistent stand in a particular way (in the case of the present assessee in its favour) and the Department has not pin pointed any distinguished facts, therefore, U-turn is not permitted. More specifically, when in earlier and later years, the identical issue was decided in favour of the assessee. Respectfully following the ratio laid down in the af .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rmining total income at ₹ 143,97,49,493/- vide assessment order dated 17/02/2014, as book profit u/s 115JB of the Act after making certain disallowances and adjustment. Thus, the assessee suffered the disallowance of ₹ 4,62,71,213/- u/s 14A of the Act. The Assessing Officer noted that the assessee earned exempt income as per the following details:- Sr. No. Particulars Amount (Rs.) 1 Dividend 14,76,49,893 2 Income from Partnership Firm 63,05,233 3 Long Term Capital Gain 128,78,88,114 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

res. The Ld. Assessing Officer made disallowance of administrative expenses under Rule- 8D(2)(iii) of the rules and worked out the disallowance of ₹ 4,62,71,213/- in the following manner:- Balance Sheet as on 31.03.2010 Rs. In Shares of Companies 736,94,53,407 In Partnership Firms 6,78,57,677 In Shares of Co-Op. Banks/Soc. 1,24,477 Current Invest: In shares of Companies 11,54,66,296 755,29,01,857 Balance Sheet as on 31.03.2011 In shares of companies 1092,35,46,038 In Partnership Firms 7,19 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

uo-moto disallowance made by the assessee, therefore, in the present Assessment Year also, the same has to be followed. However, we find that instead of following the rule of consistency, the Ld. Commissioner of Income Tax (Appeal) enhanced the disallowance under Rule-8D(2)(ii) for an amount of ₹ 60,04,84,033/-, which is under challenge before us. We find that the Tribunal vide order dated 27/03/2015 (ITA No. 202/Mum/2013 and 207/Mum /2013) for Assessment Year 2009-10, followed the decisio .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t the claim of ₹ 1 lakh by the assessee. So far as, the contention of the ld. counsel for the assessee that the disallowance may be restricted to ₹ 1 lakh only, is concerned, we are not satisfied with such reasoning because the rule of consistency applies to both sides and since, the Tribunal for Assessment Year 2008-09, 2009-10, being on identical facts, directed the Assessing Officer to restrict the disallowance as contained in the order of the Tribunal dated 27/03/2015 (for Assess .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed disallowance of interest of ₹ 19.74 crores on the alleged basis that borrowed funds were utilized for non-business purposes, more specifically when in preceding years, the Tribunal has held that the funds were advanced for the purposes of the business of the assessee. Before us, the ld. counsel for the assessee, contended that some advances were given to Mr. Thakur. Our attention was invited to page-1 to 79 of the paper book, where the facts are identical. It was explained that for Asse .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

#39;ble High Court, wherein, the money was ordered to be refunded to the assessee. It was empathetically argued that in earlier and later years, the Tribunal, identically, examined the factual matrix and held the same as business advances. The ld. CIT-DR, though defended the addition but did not controvert the factual matrix explained by the assessee. 4.1. We have considered the rival submissions and perused the material available on record. Without going into much deliberation, we are reproduci .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rief, are that the assessee declared income of ₹ 188,50,28,066/- in its return filed on 29/09/2008 which was processed on 27/07/2009, u/s 143(1) of the Act. Since the case was selected for scrutiny notice u/s 143(2) of the Act was issued to the assessee on 04/08/2009. The Assessing Officer vide order dated 27/12/2010, framed u/s 143(3) of the Act, determining the total income at ₹ 191,99,06,040/-(Assessment Year 2008- 09). The Assessing Officer received information from ITO- 25(1)(4) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ficer made enquiries with the assessee company and found that the assessee company made substantial payments to M/s PRS Developers. There was also information with the Assessing Officer that M/s PRS developers had no business activity/capacity to acquire land on behalf of the assessee company besides the assessee is having its own machinery of legal/technical/marketing/financial persons for doing the job i.e. for acquisition of land. The ITO raised serious doubts about the genuineness of the tra .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n taken by M/s. SPCL 2.4. It was also found that the assessee made the huge payments to Shri Nilesh J. Thakur without entering into any agreement for acquisition of land, meaning thereby, the assessee doled out interest bearing funds for non-business purposes under the garb of advances and further the assessee claimed interest and financial cost in his accounts as the element of interest bearing funds were siphoned off for non-business purposes having direct impact or the profit of the assessee .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed to the assessee on 06/12/2012. The assessee also objected reopening u/s 148/147 of the Act vide letter dated 07/01/2013. 2.5. Now question arises whether the ld. Commissioner of Income Tax (Appeals) was justified in holding the reassessment proceedings, initiated u/s 148 of the Act, as invalid and further whether a new material was available with the Assessing Officer for reopening the assessment? 2.6. We have perused the assessment order, reasons recorded, information provided by the ITO of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

at by the ITO of Shri Nilesh Thakur and it can be said it was a merely borrowed satisfaction. In a landmark decision the Hon'ble Apex Court in Kelvinator of India Ltd (2010) 320 ITR 561 has evolved a broad principle as under what circumstances reassessment can be framed. Likewise in Green World Corporation vs ITO (2009) 314 ITR 81 (SC), the Hon'ble Apex Court held that the order passed by the Assessing Officer at the dictate of the CIT is 'nullity'. Likewise the Hon'ble High .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

was made by the Assessing Officer of the present assessee rather he reopened the assessment merely on the information received from ITO of another party. We further find that there is no new tangible material came to the light of the Assessing Officer and he acted merely on the borrowed satisfaction/information. The Assessing Officer merely says that there was no documentary evidence regarding payment of huge amount rather a decree from the Hon'ble High Court was already with him. Confirmati .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t bearing 2576 of 2011 was filed before the Hon'ble Bombay High Court and in terms of the consent terms, a decree was passed in favour of the assessee by Hon'ble High Court, the facts of payments were duly mentioned in the suit/plaint filed before the Hon'ble High Court. The assessee was having common pool of funds i.e. own fund and borrowed funds and at the time of advancing excess funds were available in comparison to advanced money. The assessee gets the benefit of the decision fr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eserve and surplus) and as on 31/03/2009, total ₹ 621,01,17,406/-. The totality of facts clearly indicates that the notice u/s 148 was solely issued on the basis of information received from ITO 25(1)(4), having jurisdiction upon Shri Nilesh Thakur. The basic requirement section 148 is that the Assessing Officer should have reason to believe that income chargeable to tax has escaped assessment, thus, the law does not permit such a action. The following decisions supports our view:- 1) CIT .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

58 ITR 126 (Gauhati) 10) CIT vs Sambhar Salt ltd. (2003) 262 ITR 675 (Raj.) We find that there was no new tangible material with the Assessing Officer to form a belief that income chargeable to tax had escaped assessment, thus, in view of the decision from Hon'ble Rajasthan High Court (supra) reopening is not permissible on the basis of borrowed satisfaction rather there should be live link with the formation of belief and conclusion for escapement of income. The ratio laid down by Hon'b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nt for that year, income chargeable to tax had escaped assessment for that year, or (b) the ITO had in consequence of information in his possession had reason to believe that income chargeable to tax has escaped assessment for any assessment year. The fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 with effect from 01/04/1989 those conditions are given go-by and only one condition has remained where the Assess .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Court in CIT vs Bhanji Lavaji 79 ITR 582 (SC) held that mere change of opinion cannot form the basis of reassessment. In Shri Krishna Pvt. Ltd. Vs ITO 221 ITR 538 (SC), it was held that the power conferred upon the ITO by section 147 and 148 are not unbridled one. Identical ratio was laid down in Sirpur Paper Mills Ltd. Vs ITO 114 ITR 404 (AP) supports our view. The Hon ble Calcutta High Court in S.P. Agrawal vs ITO 140 ITR 1010 held that statement by third parties cannot form the basis for reo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

for reopening and reassessment order passed u/s 143(3) r.w.s.147 of the Act was rightly held to be unsustainable in law. The existence of tangible material is necessary to ensure against an arbitrary exercise of power, thus, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income tax (Appeals). This ground of the Revenue is, therefore, dismissed. 3. So far as, deleting the disallowance of ₹ 34,01,095/-, u/s 36(1)(iii) of the Act is concerned, we are reproducing here .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d the records and documents it is seen that the appellant, by its letter of appointment dated 16.7.2007, had appointed Shri Nilesh Thakur for land aggregation in Panvel, Aligabh, Pen and Raigad areas. The said Letter of appointment was accepted by Shri Nilesh Janardhan Thakur/PRS Enterprises by letter dated 19th July, 2007. In terms of the said letteragreement, the appellant has provided funds to Shri Nilesh Thakur, by way of advances for purchase of lands. The payments to Shri Nilesh Thakur hav .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ets of the appellant as 'Advances/or land'. Shri Nilesh Janardhan Thakur by his letter dated 22nd March 2010, informed the appellant that the payment received was used for acquiring properties and that the surplus funds had been kept in fixed deposit and that the properties would be transferred in favour of the appellant as soon as possible. However thereafter, Shri Nilesh Janardhan Thakur, neither refunded the monies nor transferred the properties to the appellant. In these circumstance .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in favour of the appellant. 13.3. Having regard to the above admitted facts recorded in the suit filed by the appellant before the Hon'ble Bombay High Court which are duly supported by records and documents filed as annexure before the Hon'ble Bombay High Court, the amounts advanced by the appellant are only for acquisition of lands in the Project areas of Panvel, Alibaugh, Pen and Raigad district. The appellant has produced records and documents in support of the transactions entered i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

i Nilesh Thakur, during the course of his assessment proceedings for A.Y.2008-09 and 2009- 10 had explained that he had received amounts towards the development of project at Samata Nogar, Kandivali (E) Mumbai and (or development of World Trade City at Garodia Nagar, Goregaon. Mumbai is clearly borne from the findings recorded in his assessment order for A. Y 2008-09 and 2009-10. But it is equally relevant note that Shri Nilesh Thakur could not produce/furnish any evidence in support of the said .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

unds from the appellant company for land aggregation. He has also admitted that the record and documents furnished by the appellant company before the Hon'ble Bombay High Court depicted the true nature transaction in between them. Thus it is seen that Shri Nilesh Thakur has taken a diametrically opposite stand on the nature and purpose of advances given by the appellant 10 him as compared to the stand taken by him during the course of assessment proceedings for A. Y 2008-09 and 2009-10. In c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

at Alibaug, Pen, Panvel and other areas in and around Raigad district, which is explicitly evident from the 'letter of appointment issued by the appellant company dated 16/07/2007 in favour of Shri Nilesh J Thakur and subsequent acceptance fetter dated 19/07/2007given by Shri Nilesh J. Thakur to the appellant. The land acquisition in project areas is during the course of the regular business activity of the appellant. The funds advanced by the appellant to Shri Nilesh Janardhan Thakur are t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

was submitted that the funds in the bank account were fungible and merely because there was negative balance in the current account on a particular date, it cannot be inferred that the payments made was out of borrowed fund It was also submitted that the factum that the funds were fungible has been accepted by the AD himself in so far as the AD has restricted the disallowance of interest only till the date when there was positive balance in the current account maintained with the bank. The appel .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and 31.3.2008 were as under: As on 31.3.2007 As on 31.3.2008 Share Capital 82,00,000 203,02,00,000 Reserves & Surplus 171,45,01,507 297,79,91,248 Total 172,27,01,507 500,81,91,248 13.7 I also find that the net profit for the year is ₹ 126,19,01,513/-. The profits of the year are also included in the current overdraft account maintained with the banks. Thus the funds in the bank account are fungible. The appellant has not made any specific borrowing for the purposes of advancing funds .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

105/2012) it was held as under: "5.1. The A 0 has slated that assessee has advanced interest free loans to its subsidiary companies. The AD has stated that assessee was asked to prove the nexus between source of funds out of which advances were given to its subsidiary companies and interest free or own funds available with the assessee. The assessee filed details and stated that the assessee had given loans and advances of ₹ 2988.98 crores to its subsidiaries as on 3110312002, out its .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of the interest free loans given to its subsidiaries: It was contended that as per audited accounts .. assessee's own funds as on 31/3/2002 stood at ₹ 25, 136.76 crores and, therefore, interest free loans given to its subsidiaries should be considered as having been given out of its own funds. It was contended that assessee had' not taken any specific interest bearing loans for advancing interest free loans to its subsidiaries. It was submitted that in view of the fungibility of th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

₹ 2988.98 crores given to the subsidiaries as on 31/3/2002. It was also contended that in the absence of any nexus between the interest bearing borrowed funds and the interest free loans given to subsidiaries and considering the fungibility of funds and the fact that own funds far' exceeded such loans, it has to be presumed that such interest free loans had been given out of own funds. 5.3 The ld. CIT(A) after considering the submissions of the assessee and cases relied upon on behalf .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

as were made before the first appellate authority that the assessee had its own funds far more than the interest free loans and advances given to its subsidiary company. The Id. A.R relying Oil the decision of the Hon'ble Bombay High Court in the case of Reliance Utilities & Power Ltd., vs. CIT 313 ITR 340 submitted that no disallowance out of interest expenditure is to be made if interest free funds were sufficient to meet the investment made. He further submitted that the Hon 'ble .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tives of the parties and orders of the authorities below. We have also considered the cases relied upon by the authorities below as well as the cases cited by ld. A.R (supra). There is no dispute to the fact that the assessee's own funds are far in excess of the interest free loans and advances given by the assessee to its subsidiary companies. The Hon'ble Bombay High Court has held in the case of Reliance Utilities & Power Ltd. (supra) that if there were funds available both interes .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ta High Court in Wool Combers of India Ltd., J 34 ITR 219 (Cal) s wherein it was held that if there were sufficient profits available to meet the advance fax liability and the profits were deposited in the overdraft account of the assessee,' in such a case it should be presumed that the taxes were paid out of profits of the year and not out of the overdraft account for the running of the business. Considering subsequent decision of the Hon'ble Jurisdictional High Court in the case of Rel .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

terest free to its subsidiaries, we hold that the disallowance of interest is not justified. Therefore, interest is allowable under section 36(1)(iii) of the Act. Hence, ground No.2 of the appeal taken by the assessee is allowed. " 13.8 Thus, having taken note of the entire facts available on record and also after taking note of appellant's own fund availability, which is evident from the appellant's Balance Sheet, the appellant's own fund was ₹ 500.81 crores, which consis .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

0] & also the jurisdictional ITA T, Mumbai in the case of Reliance Industries Ltd. v DCIT (ITA No. 30821Muml2006 dated 28105/2012), I consider it proper and appropriate to hold that the disallowance made by the A.O. U/S 36(1)(iii) of the Act of ₹ 34,01,095/- in the given facts of the case is completely unjustified and incorrect. In view of the same, the addition so made by the A. O. is deleted. Thus, this ground of appeal is allowed. 3.4 In view of my decision in appeal for A.Y-08- 09, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

wed. " 3.1. If the observation made In the assessment order, conclusion drawn in the impugned order, material available on record, assertion made by the ld. respective counsel, if kept in juxtaposition and analyzed, we find that the assessee was having 500.81 crores consisting of capital and reserves as on 31/03/2008, whereas, the assessee advanced ₹ 43.50 crores to Nilesh Thakur for aggregating land in terms of appointment letter dated 16/07/2007, thus, we find no infirmity in the co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

orded by the ld. Commissioner of Income Tax (Appeals) is reproduced hereunder for ready reference and analysis:- 13.1. As held by me hereinabove, the order passed by the AO is not sustainable since the notice issued for reopening of assessment was invalid. However, the issue raised in ground of appeal no.3 is also adjudicated hereunder since the A.R. s have made detailed submissions on merits of the case also. On merits of the case also, I find that the AO has computed disallowance of interest f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

.Y. 2008-09 in case of Shri Nilesh Thakur and the appellate order passed by the CIT(A) for A.Y. 2008-09 in case of Shri Nilesh Thakur. Based on the above, the AO in para 5 has held as under:- a. Para 5.1 In the balance-sheet of the assessee as on 31-03-2008 under the head 'current assets' an amount of ₹ 43.50 crore has been shown as advance towards land purchase. The said amount has been paid by the company to M/s. PRS Enterprises, a proprietorship concern of one Shri N.J. Thakur. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er in the case of Shri N.J. Thakur in the A.Y.2008-09. Exhaustive submissions have been made by both the assessee as well as Shri N.J. Thakur with respect to these transactions. The same are discussed hereunder: d. Para 5.4 At this point it may be noted that the assessee has not debited such amount of ₹ 43.50 crore in his profit and loss account as expenses nor has he included this amount in his work-in-progress. It is an admitted fact that these amounts stands as 'advance for land pur .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he amounts were received towards the development of project at Samata Nagar, Kandivali (E), Mumbai and for development of World Trade City at Garodia Nagar, Goregaon, Mumbai. Further light on the .nature of these transactions is thrown by the findings of the ITO-25(1)(4), Mumbai and C!T(A)-35, Mumbai in the individual assessments of Shri N.J Thakur for the A.Y.2008-09. This is discussed hereunder: f. Para 5.4.7 From the above it is clear that Shri NJ Thakur claimed to be a partner with my assess .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he has undertaken on behalf of my assessee. Based on the above findings, the AO of Shri N. J. Thakur proceeded to assess the amounts received by his proprietorship concern viz., PRS Enterprises u/s.56(2)(vi) as an amount received without consideration. The AO of Shri N. J. Thakur has clearly given the findings that there is no business relation between Shri NJ Thakur and my assessee. g. Para 5.5 From the detailed facts narrated above it is very clear that there is a clear contradiction between t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ri NJ Thakur and his concerns and also that in no other companies, it has released such payments without invoices. h. Para 5.6 My assessee has stated that there is no written agreement with Shri NJ Thakur before or after advancing these funds. This action on my part of the assessee clearly goes against commercial logic. Shri NJ Thakur has admitted on oath before his AO that he has not acquired any land/right/asset on behalf of my assessee. In light of these facts the series of doubts cast over t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng into any partnership agreement or project development with Shri N. J. Thakur as partner/director. j. Para 5.8 In view of the above discussion it is amply clear that the sum paid by SPCL to PRS Enterprises and Ace Card Infrasol Pvt. Ltd., allegedly for the purpose of business being land aggregation is not for the stated purposes. There is no evidence brought out on record either by my assessee or Shri N. J. Thakur to show what is the business purpose between them. It is therefore held that the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in as to why proportionate disallowance for the interest bearing funds utilized for non business purposes should not be disallowed for which the assessee simply stated that the payments are wholly and exclusively for the purpose of business. The submission of the assessee has been considered, however the same is not acceptable in absence of any evidences. Accordingly, the interest disallowance on such payments is discussed hereunder; 13.2 Amid appellate proceedings, the appellant's AIR has s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eas"). 3. The lands proposed to be acquired in the project areas were wholly and exclusively for the purposes of our business activities. 4. We had appointed Shri Nilesh Janardhan Thakur 10 acquire the lands in the project areas, vide our letter of appointment dated 16July, 2007 (copy enclosed at pages 279 to 282 of paper book). 5. Shri Nilesh Janardhan Thakur/FRS Enterprises accepted the appointment letter vide his letter dated 19July, 2007 and agreed to acquire the lands in the project or .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ad Advances/or land'. 8. As Shri Nilesh Janardhan Thakur did not perform in terms of the appointment letter, a suit bearing No. 2576 of 2011 was filed by us before the Hon'ble Bombay High Court. 9. The Hon ble Bombay High Court in terms of the consent terms arrived (It in between Shri Niles" Janardhan Thakur and us, passed a decree in our favour. 10. The entire set of facts in relation to the transaction in between Shri Nilesh Janardlian Thakur arc set out in the suit plaint and the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

was wholly and exclusively for the purposes of our business. The entire amount of advance was reflected in the Balance sheet under the head Current Assets-Advance for land. 1.The appellant has a common pool of funds i.e. own funds and borrowed funds and the own funds, as on the date of advancing funds to Shri Nilesh Janardhan Thakur, were in excess of the amounts lent. We rely on the decisions in cases of Hon ble Supreme Court in the case of Munjal Sales Corporation vs CIT and Hon ble Bombay Hig .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

or the previous year the net profit of the appellant company was ₹ 126,19,01,513/- which is in excess of the amounts given to Shri Nilesh J. Thakur of ₹ 43.50 crores. 3. It is further submitted that the AO has not established any nexus in between the borrowed funds and tile amounts given to Shri Nilcsh J. Thakur for land aggregation. The AO has merely computed the disallowance on the basis of the entries in the 'Over draft Account' maintained by the appellant with its bankers .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ered the A.O.'s order as well as the appellant's A/R submission. Further 1 have perused the matter in its entirety and the aforesaid findings of the AO, J have also perused the copy of the plaint along with the records and documents filed before the Hon'ble Bombay High Court in Suit No. 2576 of 2011 and the order of Hon'ble Bombay High Court. On perusal of the plaint and the records and documents it is seen that the appellant, by its letter of appointment dated 16.7.2007, had app .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

de payments 0/ on aggregate amount of ₹ 141. 50 crores from time to time (i.e. between July 2007 and mid 2009, A.Y.-08- 09-Rs.43.50 crores,A.Y-09-10- ₹ 53.00 crores, A.Y.-10- 11-Rs.45.00 crores) by account payee cheques to Shri Nilesh Janardhan Tahkur's concerns i.e. PRS Enterprises and Acecard Infrasol Pvt. Ltd. The said amounts have been reflected in the Balance Sheets of the appellant as 'Advances/or land'. Shri Nilesh Janardhan Thakur by his letter dated 22ndMarch 201 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

September 2011. Subsequent thereto Shri Nilesh Janardhan Thakur agreed to settle the matter by trans/erring all the moveable and immoveable assets in favour of the appellant. The Hon'ble Bombay High Court passed an order dated 19thOctober 2011 in the aforesaid Suit and decreed the monies, assets and properties, illegally misappropriated by Shri Janardhan Thakur and his entities in favour of the appellant . 13.3 Having regard to the above admitted facts recorded in the suit filed by the appe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

veal that the appellant had provided funds to Shri Nilesh Thakur for land acquisition in the project areas. In vievv of the same, any contrary submissions/explanations given by Shri Nilesh Thakur during the course of his assessment and appellate proceedings cannot be considered as a foundation for arriving at any negative inference in the case of the appellant . The fact that Shri Nilesh Thakur, during the course of his assessment proceedings for A. Y 2008-09 and 2009-10 had explained that he ha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

stand that the advances were given for land aggregation in the project areas. The claim of the appellant is supported by the various records and documents. Credence cannot be given 10 explanations given by Shri Nilesh Thakur during his assessment proceedings for A. Y. 2008-09 and 2009-10 since he himself, in the appellate proceedings for A. Y 2009-10, has admitted to having received the funds from the appellant company for land aggregation. J-Je has also admitted that the record and documents f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

there is no contradiction in between the explanation given as regards the nature and purpose of advances given by the appellant to Shri Nilesh Thakur. The admitted stand of Shri Nilesh Thakur in the appellate proceedings for A. Y 2009-10 is duly supported by the records. Hence, the only inevitable conclusion that can be inferred is that the appellant had advanced monies for acquisition of lands at Alibaug, Pen, Panvel and other areas in and around Raigad district, which is explicitly evident fr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

puted out of claim of deduction of interest u/s. 36(J)(iil) was not called for In the aforesaid facts. 13.5. Even further to the afore-stated facts, the appellant's A.R's have also submitted that the appellant has a common pool of funds i.e. own funds and borrowed funds and that the appellant had sufficient own funds as on the date of advancing funds to Shri Nilesh Janardhan Thakur. It was submitted that the funds in the bank account were fungible and merely because there was negative ba .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

case of Munjal Sales Corporation v CIT (supra) and Hon'ble Bombay High Court in CIT v Reliance Utilities and Power Ltd. (supra) wherein it was held that where the capital and profits are more than the interest free funds advanced, then it has to be presumed that such interest free advance were given out of interest free capital available. 13.6 I find that the appellants own funds as on 31.3.2007 and 31.3.2008 here as under: As on 31.3.2007 As on 31.3.2008 Share Capital 82,00,000 203,02,00,0 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Hon'ble Supreme Court in case of Munjal Sales Corporation (supra) and Hon'ble Bombay High Court in the case of CIT v Reliance Utilities and Power Ltd. (supra), the advances given to Shri Nilesh J. Thakur are presumed to be from the Interest free own funds of the appellant. In the recent decision of the Hon'ble ITAT in the case 0/ Reliance Industries Ltd. v DCIT (ITA No. 3082/Mum/2006 dated 28/05/2012) it was held as under: "5.1. The A 0 has slated that assessee has advanced int .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of Hon'ble Kerala High Court in the case of V.I. Baby &: Company, 254 ITR 248 and decision of the Hon'ble Bombay High Court in the case of Phalton Sugar Works Lid, 208 ITR 989 disallowed the said interest of ₹ 11,19,382/-. Being aggrieved the assessee filed appeal before the first appellate authority. 5.2 It was contended on behalf of the assessee that assessee's own funds were far in excess of the interest free loans given to its subsidiaries: It was contended that as per .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n to the subsidiaries had been given out of own funds of the assessee company deployed in the business. It was also contended that the net profit after tax and before depreciation during the year stood at ₹ 7054.84 crores. Thus, the net profit for the year under consideration exceeded not only the incremental loans given to the subsidiaries during the year but even exceeded the total interest free loans of ₹ 2988. 98 crores given to the subsidiaries as on 31/3/2002. It was also conte .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

funds to the extent of ₹ 9.89 crores was actually utilized for advancing interest free advances to subsidiaries. Therefore, ld C1T(A) confirmed the action of the 110 in disallowing interest on account of diversion of funds for non-business purposes, which comes to ₹ 11,19,382/- Hence, the assessee is in appeal before the Tribunal. 5.4 During the course of hearing the Id. A.R reiterated the submissions as were made before the first appellate authority that the assessee had its own fu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n loan to its subsidiary is given in the course and for the purpose of business of its business, no disallowance of interest has to be made. He submitted that in view of above decisions, the disallowance of interest is not justified and the same should be deleted. 5.5 On the other hand, ld. D.R relied on the orders of the authorities below. 5.6 We have carefully considered the submissions of the ld. representatives of the parties and orders of the authorities below. We have also considered the c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ld be out of interest free funds generated or available with the company. It was held that if interest free funds were sufficient 10 meet the investments mode, in that case a presumption is established that the borrowed capital was used for the purpose of business and the interest expenditure is deductible under section 36(1)(iii) of the Act. The similar view has also been considered by the Hon ble Calcutta High Court in Wool Combers of India Ltd., 134 ITR 219 (Cal), wherein it was held that if .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ee funds available to an assessee is sufficient to meet its investment, it can be presumed that the investments were made from the interest free funds available with the assessee. Therefore, considering the fact that the assessee had its own funds more than the loans given to its subsidiaries and also in the absence of any nexus establishing that the interest bearing 'borrowed funds were given us interest free to its subsidiaries, we hold that the disallowance of interest is not justified. T .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ppellant has advanced ₹ 43.50 crores to Shri Nilesh J Thakur for the purpose of aggregating land in terms of appointment letter dated 16/07/2007. In view of the same and also keeping reliance on the decision of Apex Court in the case of Munjal Sales Corporation v CIT (298 ITR 298) and the decision of the Hon'ble Bombay High Court in the case of CIT v Reliance Utilities and Power Ltd. [313 ITR 340] & also the jurisdictional ITA T, Mumbai in the case of Reliance Industries Ltd. v DCI .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ing of assessment in annulled and the disallowance of interest of ₹ 2,46,16,438/- is deleted in the year under consideration for the reasons stated in my appellate order For A.Y.2008-09. Thus, taking note of all the factual position of the case, I consider in proper and appropriate to hold that the A.O. was not justified in his action. Accordingly the appellant's these grounds of appeal are allowed. 4.1. If the factual finding recorded by the ld. Commissioner of Income Tax (Appeals), w .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y opposite stands on the nature of purpose of advances. The admitted stand of Nilesh Thakur in appellate proceeding for AY 2009-10 is duly supported by the record, which is further supported by the letter of the assessee company dated 16/07/2007 and subsequent acceptance vide letter dated 19/07/2007 given by Shri Thakur to the assessee company. In para 13.6 (page- 45) of the impugned order the ld. Commissioner of Income Tax (Appeals) has duly examined the availability of own funds as on 31/03/20 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

iance Industries Ltd. vs DCIT (ITA No.3082/Mum/2006) order dated 28/05/2012. In para 13.8 (page-48), there is a finding that the own funds of the assessee were to the tune of ₹ 500.81 crores which is consisting of capital and reserves as on 31/03/2008 and the assessee advanced ₹ 43.50 crores to Shri Nilesh Thakur for aggregating the land. We further note that the ld. Commissioner of Income Tax (Appeals) while deliberating upon the issues has duly met with the observation made in the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d. Commissioner of Income Tax (Appeal) as well as the Tribunal found that the advances were given to Mr. Thakur for land aggregation and Mr. Thakur admitted of having received the funds from the assessee company. It is also noted that the assessee filed recovery proceedings before the Hon'ble High Court, wherein, the money was ordered to be refunded to the assessee. In the aforesaid order, the Ld. Commissioner of Income Tax (Appeal) as well as the Tribunal held that the amounts were given by .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version