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TMI Blog2018 (10) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... and the debit due to increase in the provision for leave wages was only Rs. 3,58,268/-, which had already been disallowed by the assessee in the computation. The CIT(A) observed that in the reconciliation of the expenses debited in this account, it was clarified that out of the amount of Rs. 26,19,379/- actually paid during the year, the assessee had already claimed payment of Rs. 8,98,430/- in the assessment year 2007-08 and therefore, the balance allowable would come to Rs. 15,62,681/- whereas the assessee had computed it at Rs. 17,20,949/-. Accordingly, the CIT(A) held that only an amount of Rs. 15,62,681/- would be allowable as deduction during this year and the same was allowed to the assessee and addition to this extent was deleted. The CIT(A) confirmed the balance disallowance of Rs. 13,96,349/-. 5. Against this the assessee is in appeal before us. The Ld. AR submitted that the actual payment made as leave wages during the year was directly debited to profit and loss account without routing through the provisions for leave wages account. It was submitted that the entire amount debited to the profit and loss account will have two components viz. the actual payments made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.26,19,379/- Closing provision as on 31.03.2008 Rs.33,18,960/- Less: Payment made after 31.03.2008 but before filing the return Rs.3,59,930/- Closing balance in the provision account Rs.29,59,030/- The main contention of the assessee was that total amount of Rs. 29,77,647/- was debited towards leave wages in the profit and loss account. It was submitted that the assessee had added back the disallowance at Rs. 3,58,268/- while computing the income of the assessee. According to Ld. AR, there cannot be any further disallowance. It was submitted that the closing balance closing balance in the provisions for leave encashment account at Rs. 29,59,030/- included not only current year's provisions but also included previous year's carry forward provisions. However, there is no bifurcation of the closing balance in the leave wage account. Unless yearwise bifurcation is furnished by the assesseee , it is not possible to disallow the exact amount of provisions for leave wages relating to the assessment year under consideration. The Assessing Officer has to disallow the provisions of leave encashment relating to the assessment year under consideration which shall be reduced by p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR relied on the judgment of the Supreme Court in the case of S.A. Builders vs. CIT & Anr. (206 CTR (SC) 631). 12. On the other hand, the Ld. DR relied on the order of the lower authorities. 13. We have heard the rival submissions and perused the record. The main plea of the Ld. AR is that the amount was advanced to sister concerns in view of the business transactions between the assessee and the sister concerns and it cannot be considered that the assessee had advanced loans to the sister concerns free of interest. In our opinion, the assessee has to establish the commercial expediency to advance money to the sister concerns and the assessee has to furnish details of the business transactions between the assessee and the sister concerns. This exercise has not been done. With this observation, we remit this issue to the file of the Assessing Officer for fresh consideration in accordance with law after giving reasonable opportunity of hearing to the assessee. This ground of appeal of the assessee is allowed for statistical purposes. Thus, the appeal of the assessee in ITA No. 351/Coch/2014 is partly allowed for statistical purposes. 14. The first ground of the assessee in ITA No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investment in capital work in progress. However, the assessee has not established the availability of interest free funds for making investment in capital work in progress. The assessee has to prove the availability of interest free funds on the day of investment in capital work in progress and the funds have to be available with the assessee at the time of making investment and not at the end of the year. Accordingly, we direct the assessee to establish the availability of interest free funds at the time of making investment in capital work in progress. Hence, with this direction, we remit this issue to the file of the Assessing Officer for fresh consideration. Thus, this ground of appeal of the assessee is allowed for statistical purposes. 20. The next ground of appeal in ITA No. 352/Coch/2014 is with regard to disallowance of Rs. 21,51,203/- on account of interest charged on the advances given to sister concern for non-business purposes. 21. We have heard the rival submissions and perused the record. We find that the facts are similar to the facts considered in assessee's appeal in ITA No. 351/Coch/2014. As discussed in para 13 above, we remit this issue to the file of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich yielded exempted income by furnishing cash/Fund flow statement. This was not done by the assessee. Hence, in the interest of justice, we remit this issue to the file of the Assessing Officer for fresh consideration in accordance with law after affording reasonable opportunity of hearing to the assessee. Further, we notice that the Jurisdictional High Court in the case of CIT vs. Catholic Syrian Bank Ltd. & Others (344 ITR 259) has held that disallowance u/s. 14A is to be made despite the fact that the assessees have not maintained separate accounts for the expenditure incurred towards interest paid on funds borrowed for investment in such securities and shares as well as overheads and administrative expenses. However, we make it clear that Rule 8D(iii) is applicable though, the assessee used its own funds in investment which yielded exempted income. This is so, because there was common administrative expenses incurred by the assessee. We also make it clear that if there is no exempt income, then there cannot be any disallowance u/s. 14A r.w. Rule 8D as held by the Supreme Court in the case of Maxopp Investment Ltd. vs. CIT (402 ITR 640). This ground of appeal of the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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