TMI Blog2016 (6) TMI 1410X X X X Extracts X X X X X X X X Extracts X X X X ..... as deleted the additions made under section 40A(3). Disallowance under section 14A r.w.r 8D - investments made for acquiring the shares of the assessee s sister concerns - HELD THAT:- As relying on LAKSHMI RING TRAVELLERS, COIMBATORE [ 2012 (3) TMI 464 - ITAT CHENNAI] we remit the issue back to the file of the learned Assessing Officer to verify as to whether the assessee had invested out of its non-interest bearing funds in its sister concerns or associate concerns for strategic reasons and if found so delete the addition made on that regard, however if found otherwise, pass appropriate orders as per merit law, after affording sufficient opportunity of being heard to the assessee. It is ordered accordingly for all the relevant assessment years. Addition u/s. 68 being unexplained cash credits - HELD THAT:- The source of advances is established in the case of the assessee. The advances are made to petty land owners for purchase of land from them. Since the assessee was not agreeable to the price determined by the State Govt., for acquiring those lands, the project was dropped and the advances made were returned and the same was re-deposited in the assessee s bank accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )-3, Chennai dated 30.03.2015 in ITA No.203 to 205/14-15 819/13-14 passed under section 143(3) r.w.s 147 / 143(3) 250(6) of the Act. Since the issues in all these appeals cross objections are identical, they are heard together and disposed off by this common order for the sake of convenience. ITA Nos.1864 to 1867 /Mds/2015: (A.Y.2008-09 to 2011-12) 2. The Revenue has raised several common grounds in its appeals, however the cruxes of the issues are as follows:- i) The learned Commissioner of Income Tax (Appeals) has erred in deleting the addition made by the learned Assessing Officer under section 40A(3) of the Act for cash payments made by the assessee exceeding ₹ 20,000/- per day to individuals. ii) The learned Commissioner of Income Tax (Appeals) has erred in directing the learned Assessing Officer to re-compute the disallowance under section 14A r.w.r 8D by reducing the amounts invested in the subsidiary companies. iii) The learned Commissioner of Income Tax (Appeals) has erred in deleting the addition made by the learned Assessing Officer under section 68 of the Act being unexplained cash credits. C.O.Nos.125 to 128/Mds/2015 (A.Y.2008-09 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was entitled to the benefit of 80IA of the Act, even if additions are made invoking the provisions of section 40A(3) of the Act deduction has to be granted under section 80IA of the Act. However, the learned Assessing Officer rejected the submission of the assessee by stating that the benefit under section 80IA of the Act cannot be extended for the violation of provision 40A(3) of the Act because the very purpose of introducing section 40A(3) of the Act would become redundant. Further, the learned Assessing Officer opined that the legislature in its wisdom had enacted section 40A(3) of the Act to discourage cash payment to any single person exceeding ₹ 20,000/- per day towards expenditure. Therefore, invoking the provisions of section 40A(3) of the Act, the learned Assessing Officer made addition in the case of the assessee for the all three relevant assessment years. 6.3 Before the learned Commissioner of Income Tax (Appeals), the learned Authorized Representative explained that the transporters delivered the materials at the gate of the factory and collect freight charges by cash and this cash payment did not exceed ₹ 20,000/- on any day given to a single tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that the AO made the impugned additions on a erroneous understanding of Section 40A(3) which states very clearly that where the assessee incurs any expenditure in respect of payments or aggregate of payments made to a person in a day otherwise than by an amount by cheque drawn on a bank or account payee bank draft exceeds ₹ 20,000/-, no deduction shall be allowed in respect of such expenditure. 7.10 A plain reading of the aforesaid section indicates clearly that the emphasis is on two aspects, namely, the payment or aggregate of payments made and secondly it had to be to a person in a day in cash not exceeding ₹ 20,000 /-. In the present case, the payment towards the truckers by way of routine and prevailing trade practice, which was paid directly to the truckers separately, at the gate of the factory was for the delivery of raw materials like biomass / agricultural waste as stated earlier, and in order to enable the truckers to incur the expenses on diesel, toll charges other operational expenses like refreshment, fines/penalties imposed by local police for over speeding, over loading, jumping red lights, excise / octroi taxes / meals, etc. on real time basis on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer has to take into account the surrounding circumstances, considerations of business expediency and the facts of each particular case in exercising his discretion either in favour or against the assessee. There may be an oral agreement between the assessee and the seller for payment in cash. A seller may not be willing to accept cheques; cash payment may be made at the request of the payee who is a/so an assessee and a certificate to that effect filed; absence of banking facilities in places where cash payments are made. All such cases- would come within the purview of exceptional or unavoidable circumstances. 7.14 As can be seen from the above cited observations of the Hon'ble Court, the stress is on the genuineness of the transactions between the parties which the AO has not doubted or disputed in the instant case, duly taking into consideration of business expediency explained supra and without enmeshing in technicalities but striking a balance between the mandate of the law vis-a-vis hardship to the assessee. 7.15 In view of the above discussion particularly seen in the background of the unique facts obtaining the instant case as details above the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,07,60,770 95,46,250 2009-10 31.03.2009 26,15,70,270 95,46,250 2010-11 31.03.2011 95,53,70,270 95,46,250 2011-12 31.03.2012 95,62,38,405 - 7.2 The learned Assessing Officer was of the view that in such situation provisions of section 14A of the Act r.w.r.8D of the Rules would be attracted. Accordingly, he made additions in the hands of the assessee for ₹ 21,82,790/-, ₹ 64,98,064/- and ₹ 1,57,14,532/- for the assessment year 2008-09, 2009-10 and 2011-12 respectively. On appeal, the learned Commissioner of Income Tax (Appeals) partly gave relief to the assessee by directing the learned Assessing Officer to re-compute the expenditure incurred for earning exempt dividend under Rule 8D of the Rules following the ratio laid down by the Chennai Bench of the Tribunal in ITA No.2083/Mds/2011. However, at the outset, we find that subsequently the Chennai Bench of the Tribunal has held that where investments are made by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestment has to be excluded for purpose of arriving at disallowance under Rule 8D(iii). iv) M/s.JM Financial Ltd., Vs. ACIT reported in 2014- TIOL-202-ITAT-MUM held as follows: the department has not disputed this fact out of the total investment about 98% of the investment are in subsidiary companies of the assessee and, therefore, the purpose of investment is not for earning the dividend income but having control and business purpose and consideration. The assessee has brought out a case to show that no expenditure has been incurred for maintaining the 98% of the investment made in the subsidiary companies, therefore, in the absence of any finding that any expenditure has been incurred for earning the exempt income, the disallowance made by the Assessing Officer is not justified, accordingly the same is deleted. (v) CIT Vs. Bharti Televenture Ltd. reported in (2011) 331 ITR 0502. Where the assessee was found to be having adequate noninterest bearing fund by way of share capital and reserves and there was no nexus between the borrowals of assessee and the advances given, no disallowance for interest was called for. (vi) CIT Vs. Reliance Utilities Power Ltd., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subsidiary company are not on account of investment for earning capital gains or dividend income. Such investments have been made by the assessee to promote subsidiary company into the hotel industry. A perusal of the order of the CIT(Appeals) shows that out of total investment of ₹ 64,18,19,775/-, ₹ 63,31,25,715/- is invested in wholly owned subsidiary. This fact supports the case of the assessee that the assessee is not into the business of investment and the investments made by the assessee are on account of business expediency. Any dividend earned by the assessee from investment in subsidiary company is purely incidental. Therefore, the investments made by the assessee in its subsidiary are not to be reckoned for disallowance U/s. 14A r.w.r. 8D. The Assessing Officer is directed to re-compute the average value of investment under the provisions of Rule 8D after deleting investments made by the assessee in subsidiary company Decided in favour of assessee. For the above said reasons, we hereby hold that in the case of the assessee the provisions of Section 14A read with Rule 8D will not be applicable in regard to investments made for acquiring the shares of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was evident that on 17.11.2009, 21.08.2009 and 01.12.2009 cash were withdrawn for the purchase of land. ii) There were disputes with respect to the cost of acquisition of land due to which the purchase transactions could not be completed. iii) The amount paid for advance of land was reflected in the balance sheet of the assessee for the financial year 2009-10 as advances . iv) It was also evident from the records that the Government had fixed higher rates for the purchase of land as against the price agreed by the assessee. v) Thus, the source of advance and re-deposit in the bank is proved to be genuine. vi) Reliance was placed in the decision of CIT Vs. Kamadenu Steel Alloys Ltd. reported in 361 ITR 220(Del), wherein it was held that the initial burden is upon the assessee to prove the source of fund thereafter, the onus shifts to the Revenue to refute the same. vii) The assessee had given names addresses of the coordinators who are basically Panchayat village elders through whom advances were paid to the land owners and therefore it is possible for the Revenue to make enquiries from them to find out the genuiness of the transaction which they have failed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion with fiction by which the benefit of deduction is granted towards the income earned by the assessee. Hence, for the purpose of computing deduction under section 80IA of the Act, section 40A(3) and 14A cannot be given effect. Therefore, to that extent the deduction will not be available to the assessee. Further, section 68 provides that any sum which is credited to the books of the assessee against which no explanation is satisfactorily offered, such sum so credited, will be charged to income tax as the income of the assessee. Thus the statute clearly provides that irrespective of any other factors this amount will be brought into the ambit of tax as a distinct income which is not disclosed. Further Section 68 of the Act is also provision with legal fiction, wherein the unexplained credit in the books of accounts of the assessee is deemed to be the unexplained income of the assessee. Therefore, we do not find any merit in this ground raised by the learned Authorized Representative. Accordingly, this ground raised by the assessee is hereby dismissed. Additional Ground in C.O.No.126/Mds/2015 (A.Y.2008-2009 2009-10): Challenging the reopening of assessment by the learned Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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