TMI Blog2020 (10) TMI 1168X X X X Extracts X X X X X X X X Extracts X X X X ..... comes applicable? - HELD THAT:- In The 'CIT VS. RELIANCE UTILITIES AND POWER LTD.', [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] has held that where interest free funds exceed the value of investments, it can safely be inferred that investments have been made out of interest free funds and no disallowance under Section 14A towards any interest expenditure can be made. Similar view was taken in CIT VS. HDFC BANK LTD., [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] On perusal of the balance sheet the finding has been recorded that assessee has received an amount of ₹ 146.52 Crores as advances from customers, which are interest free and the reserves and surpluses are to the tune of ₹ 882,67 Crores. Thus, it has been held that all the aforesaid amounts are interest free funds and are sufficient to make tax free investments and therefore, the finding of the Assessing Officer that overdraft facility was directly used for making tax exempt investments have been reversed. The tribunal has affirmed the aforesaid finding. Thus, concurrent findings of fact have been recorded on the aforesaid issue, which could not be demonstrated to be perverse. Therefore, no interference is called ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were in the normal course of business, for business purposes without appreciating that as the funds from the overdraft account were utilized to make interest - free advances for acquiring lands, property advances? (iii) Whether the tribunal was right in holding that the assessee is eligible for deduction under Section 10B without appreciating that the assessee have not satisfied the requirements as laid down in clause (a) to (d) of Section 80IB(10)? (iv) Whether the tribunal was correct in allowing proportionate deduction under Section 80IB(10) in respect of the individual units measuring 1500 sq.ft. or less without appreciating that the decision was contrary to the provision of Section 80IB(10) as the section contemplates fulfillment of condition of area of 1500 sq.ft. or less in respect of all units in a project are not in respect of individual units under the same project? (v) The tribunal committed an error in holding that the Assessing Officer has not satisfied himself in invoking the provisions of Section 14A of the Act, when the Assessing Officer as clearly mentioned in his order that the company had availed overdraft facility in earlier years which continued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue of shares. Therefore, it cannot be held that funds from overdraft account from which interest has been paid has been invested in mutual funds which yields income which is exempt from tax. Thus, deletion of disallowance under Section 14A read with Rule 8D(2)(ii) of the Rules to the tune of ₹ 15,27,310/- was upheld. The disallowance of interest expenditure under Section 36(1)(iii) was made on the ground that advances and deposits have been made from the bank overdraft facilities and the advances and deposits were non business advances and capital advances. Thus, it was held that disallowance of interest amounting to ₹ 76,638/- was rightly deleted by the Commissioner of Income Tax (Appeals). Accordingly, the appeal preferred by the revenue was dismissed and the cross objections filed by the assessee were partly allowed. In the aforesaid factual background, the revenue has filed this appeal. 5. Learned counsel for the revenue submitted that the tribunal grossly erred in holding that the Assessing Officer did not record satisfaction with regard to incorrectness of the claim of the assessee that tax free investments were not out of borrowed funds. Even otherwise, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that assessee had sufficient funds as well as covering loans and advances made to its Directors and sister concerns rightly allowed deduction of interest on loan. It is also pointed out that the Assessing Officer has failed to establish the nexus of interest bearing funds with interest free advances. In support of aforesaid submissions, reliance has been placed on decisions in 'GOLDMAN SACHS SERVICES 409 ITR 268 KAR, 'MAXOPP INVESTMENT LTD. VS. CIT', (2018) 402 ITR 640 and 'CIT VS. BRINDAVAN BEVERAGES (P.) LTD (2017) 393 ITR 261 (KARNTAKA). 8. We have considered the submissions made by learned counsel for the parties and have perused the record. For the reasons assigned by us in the judgment dated 22.09.2020 in Commissioner of Income Tax. Vs. M/s Brigade Enterprises in I.T.A.No.54/2013 and 55/2013, the substantial question of law Nos.3 and 4 are answered against the revenue and in favour of the assessee. Now we may deal with the substantial question of law No.5. The Assessing Officer in his order dated 28.12.2011 while dealing with the claim of the assessee under Section 14A of the Act after recording the submission made by the assessee in para 12 has recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 been incurred by him in relation to income which does not form part of the total income under this Act : Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year beginning on or before the 1st day of April, 2001. Rule 8D(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 the 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 income or receipt, an amount computed in accordance with the following formula, namely:- A x B/C Where A = amount of expenditure by way of interest other than the amount of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been recorded on the aforesaid issue, which could not be demonstrated to be perverse. Therefore, no interference is called with the aforesaid concurrent findings of fact in this appeal under Section 260A of the Act. [SEE: SYEDA RAHIMUNNISA VS. MALAN BI BY L.RS. AND ORS. (2016)10 SCC 315 and PRINCIPAL COMMISSIONER OF INCOME TAX, BANGALORE ORS. VS. SOFTBRANDS INDIA P. LTD., (2018) 406 ITR 513]. 12. Thus, the first substantial question of law is also answered against the revenue and in favour of the assessee. 13. This takes us to the second substantial question of law. The Supreme Court in MUNJAL SALES Corpn. VS. COMMISSIONER OF INCOME-TAX, LUDHIANA, has held that where the assessee had sufficient funds and has given loan to sister concern out of its own funds, the assessee is entitled to deduction of interest on loan. Similar view has been taken by this court in BRINDAVAN BEVERAGES PVT. LTD. supra. The Commissioner of Income Tax (Appeals) in para 5.6 has held that the subsidiaries of the assessee are special purpose vehicle companies and as the assessee is involved in the real estate business, the advances were paid in the normal course of business. The assessee had to pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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