TMI Blog2016 (4) TMI 1382X X X X Extracts X X X X X X X X Extracts X X X X ..... ct ion of the learned CIT (Appeals) in deleting the disallowance made by the Assessing Officer under sect ion 14A of the Act is confirmed. Disallowance of interest u/s 36(l)(iii) on investment in shares - shares were actually allocated much later and the money was not actually used by assessee for business purpose - HELD THAT:- From the perusal of record and submissions given by the learned counsel for the assessee, there is no dispute to the fact that the assessee is having more than sufficient owned funds much larger than the total investments made in the share capital of the subsidiary companies. Therefore, we are in agreement with the arguments of the learned counsel for the assessee in view of the judgment of the Jurisdictional High Court in the case of Bright Enterprises [ 2015 (11) TMI 342 - PUNJAB HARYANA HIGH COURT ] and Kapsons Associates Investments P. Ltd. [ 2015 (8) TMI 1277 - PUNJAB AND HARYANA HIGH COURT ] we can very easily presumed that the investments have been made out of the non interest bearing funds. Therefore, no disallowance under sect ion 36(1) (iii) of the Act can be made. Since it is held that the investments were made out of non interest beari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mittal, DR Respondent by: Shri Subhash Aggarwal ORDER RANO JAIN, J. These three appeals filed by the Revenue are directed against the separate orders of learned Commissioner of Income Tax (Appeals) -1, Ludhiana dated 11.1.2015, 22.1.2015, 22.1.2015 for assessment years 2008-09, 2009-10 and 2010-11 respectively. 2. Since the facts and circumstances are identical in al l the appeals, the same were heard together and are being disposed off by this consolidated order for the sake of convenience. We will first take the appeal of the Revenue in ITA No.372/Chd/2015. ITA No.372/Chd/2015: 3. The ground Nos.1 and 2 raised by the Revenue read as follow: 1. That the Ld CIT(A) erred in deleting the disallowance of ₹ 1,87,19,975/- u/s 14A r.w. Rule 8D relying on the decision of Hon'ble Punjab and Haryana High Court in the case CIT Vs. Winsome Textile Industries Ltd in I.T.A. No. 504 of 2008 dated 25.08.2009 by ignoring [sec. 14A(3) of I.T. Act, 1961] and that sec. 14A r.w. Rule 8D is applicable for Assessment year under consideration. 2. That the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... borrowed funds have never been used since incept ion. Copies of cash flow statements highlighting the availability of surplus funds for financial years 2005-06 and 2006-07 were filed before the learned CIT (Appeals). Reliance was placed on a number of judgments of various High Courts. After considering the submissions of the assessee, the learned CIT (Appeals) on perusal of cash flow statements filed by the assessee, held that the assessee had cash or cash equivalent as on 31.3.2008 to the tune of ₹ 1971.12 lacs. The learned CIT (Appeals) further deal t with the judgment of the Hon'ble Punjab Haryana High Court in the case of Abhishek Industries Ltd. (supra) relied on by the Assessing Officer. In view of another judgment of Punjab Haryana High Court in the case of CIT Vs. Winsome Textile Industries Ltd. (2009) 319 ITR 204 (P H), the learned CIT (Appeals) held that Rule 8D cannot be applied automatically and no disallowance could be made without pointing out a direct connect ion between the expenditure incur red and the tax free income. In this way, the learned CIT (Appeals) allowed the ground raised by the assessee. 6. Aggrieved by this, the Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copy of Balance Sheet to show these figures was also placed on record. it was pleaded before us that in view of the fact that the assessee is having owned funds more than the investments, the presumption has to be taken that the investments have been made out of owned funds and no borrowed funds have been utilized for that purpose. For this, reliance was placed on the judgment of Punjab Haryana High Court in the case of CIT Vs. Kapsons Associates Investment P. Ltd. in ITA No.354 of 2013 (O M) (P H). For the expenditure part reliance was placed on the judgment of Punjab Haryana High Court in the case of CIT Vs. Deepak Mittal (2013) 361 ITR 131(P H). 8. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. As pointed out by y the learned counsel for the assessee, from the perusal of record, we observe that the assessee has more than sufficient owned funds to make investments. Since it is having huge owned funds and in comparison to that investments are of a very lesser amount, in view of the judgment of the Jurisdictional High Court in the case of Kapsons Associa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue or dispute arises as to the computation of amount of expenses incurred in relation to exempt income only. Second case relied on by the learned D.R. is that of Special Bench of I.T.A.T. Delhi in Cheminvest Ltd. (supra). We would like to state here that the said order of the Special Bench of I.T.A.T. Delhi has been reversed by the Hon'ble Delhi High Court in ITA No. 749 of 2014 dated 2.9.2015, whereby it has been held very categorically that disallowance under section 14A of the Act cannot be made in the year in which no exempt income has been earned or received by the assessee. In all the orders of the I.T.A.T., Chandigarh Bench relied on by the learned D.R., we find that the benefit of the judgments of Jurisdictional Punjab Haryana High Court in the case of Kapsons Associates Investments P. Ltd. (supra) and Bright Enterprises P. Ltd. (supra) to the effect that in the presence of sufficient owned funds, presumption can be raised that the investments were made out of owned funds, was not available to the Coordinate Benches of the I.T.A.T. 11. The ground No.3 raised by the Revenue reads as under: 3. That the order of the Ld CIT(A) erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Another argument raised before the learned CIT (Appeals) was that the assessee company had interest free funds to the tune of ₹ 1065.75 lacs in the share capital, ₹ 14769.10 lacs in the reserves and surplus and ₹ 2525.30 lacs as cash prof it. The long term borrowings or the working capital facilities had been invested in the purchase of fixed assets, stock and book debts, as is evident from the cash flow statement. In view of this, it was prayed that there is no merit in the disallowance made by the Assessing Officer on account of interest expenditure considering the fact that the borrowed funds have not been diver ted for non-business consideration. 15. After considering the submissions of the assessee, the CIT (Appeals) held that the investments were made into the share capital of subsidiary companies out of non-borrowed funds for which the cash flow statement has been filed by the assessee. The Assessing Officer has not brought on record any evidence to show that the borrowed funds have been specifically used for making the impugned investments. it is only by indirect inference relying on the judgment of Abhishek Industries Ltd. (supra) that pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erusal of record and submissions given by the learned counsel for the assessee, there is no dispute to the fact that the assessee is having more than sufficient owned funds much larger than the total investments made in the share capital of the subsidiary companies. Therefore, we are in agreement with the arguments of the learned counsel for the assessee in view of the judgment of the Jurisdictional High Court in the case of Bright Enterprises (supra) and Kapsons Associates Investments P. Ltd. (supra), we can very easily presumed that the investments have been made out of the non interest bearing funds. Therefore, no disallowance under sect ion 36(1) (iii) of the Act can be made. Since it is held that the investments were made out of non interest bearing funds, it is automatically presumed that with regard to these investments the assessee had not made any claim of interest under sect ion 36(1) (ii) of the Act. Therefore, there is no need for the assessee to prove that the funds were lent for business purposes or not. In view of this, we do not find any need to interfere in the order of the learned CIT (Appeals) in this respect. The ground of appeal No.3 raised by the Revenue is di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. Therefore, there is no need to disallow the interest expenditure. With regards to last advance given to Rana Oil Mills, since it was for acquisition of capital asset was however, confirmed by the learned CIT (Appeals). 23. Aggrieved by this, the Department has come up in appeal. The learned D.R. relied on the order of the CIT (Appeals). 24. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The finding of the CIT (Appeals) on the said issue is recorded at page 36, para 13, which reads as under: 13. I have considered the basis of the disallowance made by the AO in the arguments of the AR on the issue. It is apparent from the perusal of the assessment order that the Assessing Officer after calling for the details of interest capitalized proceeded to make the disallowance as the assessee company did not furnish any reply on the query of the AO on the issue. It is seen that the amount of ₹ 50 lacs given as advance is meant for purchase of generator which is a capital asset to be acquired and therefore the interest portion- need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), while the learned D.R. relied on the order of the Assessing Officer and further stated that the CIT (Appeals) does not possess the power to set aside the issue to the file of the Assessing Officer. 30. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the mater ialavailable on record. The issue raised by the Department in this ground of appeal is that since the learned CIT (Appeals) has no power under sect ion 251(1) (a) of the Act to remand back the issue to the Assessing Officer. The direct ion given by the learned CIT (Appeals) to the Assessing Officer is bad in law. On perusal of the provisions of sect ion 115JB of the Act and the Explanation appended thereto, we are in agreement with the argument of the assessee that the only amount to be added back for calculating the book prof it under sect ion 115JB is that of income tax. Since the assessee had omitted to exclude wealth tax out of computation of book prof it, the Assessing Officer also did not do the same and had discussed the weal tax provision, we are also in agreement with the content ion of the Department that the CIT (Appeals) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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