TMI Blog2019 (2) TMI 1866X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the assessee in this regard the same was not addressed by the CIT(A). Fact of interest free funds from the current account of the assessee being used for making the impugned advances, by transferring them to the cash credit account before the giving of advance ,as shown by the Ld.Counsel for the assessee before us, needs verification and examination. We therefore consider it fit to restore the issue back to the CIT(A) to examine, verify and consider the contention of the assessee and thereafter to decide the issue in accordance with law. Ground of appeal No.2 therefore is allowed for statistical purposes. Disallowance u/s 14A - disallowance of expenses made u/s 14A purportedly incurred for the purpose of earning exempt income - HELD THAT:- Disallowance of interest expenses and administrative and other expenses incurred in relation to earning of exempt income u/s 14A read with Rule 8D(2)(ii) 8D(2)(iii) of the Income Tax Rules,1962(in short referred to as Rules ), respectively. No arguments have been made before us vis a vis disallowance of expenses made as per Rule 8D(2)(iii) of the Rules. The same is therefore upheld. As for the disallowance of interest as per Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefrom that the advance had been made out of Cash Credit bank account of the assessee. The assessee was confronted as to why disallowance should not be confirmed, to which the assessee contended that all types of funds including interest free funds in the shape of share capital, sale proceeds of goods, collection of debtors, etc. had been credited to this account and, therefore had been utilized for making the impugned advances. The Ld.CIT(A) was not convinced with the explanation of the assessee and stated that since the advance was given for non business purpose out of interest bearing Cash Credit account, it was evident that the borrowed funds had been used for non business purposes and accordingly, upheld the disallowance of interest made by the A.O. The relevant findings of the Ld.CIT(A) at para 5.6 of his order are as under: 5.6 I have carefully considered the appellant s submissions. It is evident from the facts recorded above that the advance was given for non business purpose without charging any interest. Further, it is also evident from the submissions of the appellant that the advance was given from CC account which is an interest bearing account. At n stage was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the same were used for the purpose of making the investment warranting no disallowance of interest u/s 36(1)(iii) of the Act. The Ld.Counsel for the assessee relied upon the decision of the Hon'ble Apex Court in the case of Munjal Sales Corporation Vs. CIT Anr. Reported in 298 ITR 298 in support of its above contentions. The Ld. counsel for assessee further relied upon the recent decision of the ITAT Chandigarh Bench in the case of ACIT Vs. M/s Janak Global Resources Pvt. Ltd. in ITA No.470/Chd/2018 in support of its contention that in the light of availability of own funds, the presumption was that non business interest free investments have been made out of the same. The Ld. counsel for assessee pointed out that in the said decision the I.T.A.T. had dealt with the decision of the Hon'ble Jurisdictional High Court in the case of Avon Cycles Ltd. Vs. CIT in ITA No.227 of 20913 dated 20.8.2014, wherein it had been held that where mixed funds were available with the assessee, the disallowance of interest was warranted and had distinguished the same stating that the decision of the Hon'ble Apex Court in the case of Hero Cycles (P) Ltd. Vs. CIT in Civil Appeal No.514 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s below and also gone through various decisions relied upon by both the parties. The issue before us pertains to disallowance of interest u/s 36(1)(iii) of the Act and the fact that the assessee had made investment of ₹ 2,06,39,953/- by way of advance for purchase of plots/flats is not disputed. Also not disputed is the fact that the advances had been made out of the interest bearing Cash Credit account of the assessee. The Ld. counsel for assessee has raised no arguments against the findings of the lower authorities that the advance had no business purpose. Therefore, it is an admitted fact that there was no business purpose for making the impugned advance for purchase of plots/flats. Admittedly, no interest had been charged on the impugned advance also. We find that the assessee s sole contention and argument against the disallowance is that it had used its own interest free funds for making the advances. The assessee had raised this argument before the Ld.CIT(A) and before us has also demonstrated this fact by pointing out that it had made profits to the tune of ₹ 4 crores during the year while the advances made amounted to only ₹ 2.06 crores. The assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs. Sun Engineering Works Pvt. Ltd., 198 ITR 297 has held that the judgments have to be considered in the context in which they are made and in the light of question that was there before the Court. In the case of Goodyear India Ltld. Other Vs. State of Haryana Another reported in 188 ITR 402 (1991) the Hon'ble Apex Court has held that a decision on a question that has not been argued cannot be treated as a precedent. The Hon'ble Kerala High Court in the case of CIT Vs. K. Rama Krishana (1993) 202 ITR 997 has held that a precedent is an authority only for what it actually decides and not for what cannot remotely or even logically follow from it. In view of the same, we have not hesitation in holding that the proposition laid down by the Hon'ble Apex Court in the case of Avon Cycles Ltd. (supra) will not apply. On the contrary the decision of the Hon'ble Apex Court in the case of Hero Cycles (supra) categorically laying down that where sufficient own funds are available, the presumption is that the same have been utilized for the purpose of making the advance will hold fort. The argument of the Ld.DR against the decision of the ITAT in the case of Janak Globa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 3. That on law, facts and circumstances of the case, the Worthy CIT(A) was not justified in partly regarding disallowance made u/s 14A even when the disallowance should have been totally deleted. 13. The assessee in the above ground has challenged the disallowance of expenses made u/s 14A purportedly incurred for the purpose of earning exempt income. 14. Brief facts relevant to the issue are that during assessment proceedings, the A.O. noted that the assessee had made investment of ₹ 2,97,66,540/- in mutual funds, income from which was exempt. The A.O. further noted that the assessee had earned exempt income of ₹ 3,47,582/- during the year. The A.O. asked the assessee to explain why the expenditure incurred in relation to earning of exempt income should not be disallowed u/s 14A of the Act. After considering the assessee s submissions on this issue, the A.O. held the assessee the expenditure incurred in relation to earning the exempt income was required to be disallowed u/s 14A of the Act. The A.O. computed the disallowance under Rule 8D(ii) of the Income Tax Rules, 1962 @ ₹ 66,013/- and under Rule 8D(iii) of the Rules @ ₹ 1,48,768/-. The total d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the disallowance. It is not the appellant s case that no administrative expenses was incurred in maintaining the investment, and in the process of dividend income and long term capital gains which are exempt for tax. Such activities do not involve decision making and other related activities. Keeping in view the aforesaid facts, the disallowance made by the AO under rule 8D(ii) is confirmed. 4.4 Further, as per the appellants submissions, investment of ₹ 5 lakhs on 20/01/2013 was made out of CC account which has only borrowed funds as there was a debit balance in the CC account. The interest incurred on investment of ₹ 5 lakhs is therefore direct expenditure incurred for earning exempt income. The proportionate interest on this investment is required to be disallowed under rule 8D(i). The AO is directed to recompute the disallowance accordingly. This ground of appeal is partly allowed. 16. Before us, the Ld. counsel for assessee reiterated his contention made vis- -vis the disallowance of interest u/s 36(1)(iii) of the Act in ground No.2 above that there were sufficient own funds available warranting no disallowance. 17. The Ld. DR, on the other hand, reite ..... X X X X Extracts X X X X X X X X Extracts X X X X
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