TMI Blog2022 (8) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... eal no.2 and 3 filed by the Revenue. Disallowance u/s 14A - Admission of additional ground - HELD THAT:- The fact that the respondent-assessee company had not earned any exempt income is evident from the material on record, therefore, for adjudication this issue it does not require any verification of fact or enquiry into the facts. Thus, it is crystal clear that it pure question of law requiring no verification of facts. No illegality and perversity in admitting this additional ground of appeal by the ld. CIT(A) as it is in consonance with the settled position of law. Thus, the finding of the ld. CIT(A) that in the absence of any exempt income, resort to the provisions of section 14A cannot be made, cannot be faulted - The fact that the assessee company itself suo moto offered disallowance ipso facto cannot be reason for invoking the provisions of section 14A, as there cannot be estoppel against law. Therefore, we do not find any merits in the grounds of appeal no.4 and 5 raised by the Revenue. Accordingly, these ground of appeal no.4 and 5 raised by the Revenue stand dismissed. - ITA No. 20/PUN/2020 And 21/PUN/2020 And 22/PUN/2020 - - - Dated:- 22-8-2022 - Shri Inturi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer be restored. 7. The above ground of appeal may kindly be allowed to be amended, altered, modified etc. in the interest of natural justice. 5. Briefly, the facts of the case are as under : The respondent-assessee is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of promoters, builders and developers of land. The Return of Income for the assessment year 2013-14 was filed on 30.09.2013 declaring Rs.Nil income. Against the said return of income, the assessment was completed by the Dy. Commissioner of Income Tax, Circle-14, Pune ( the Assessing Officer ) vide order dated 30.03.2016 passed u/s 143(3) of the Income Tax Act, 1961 ( the Act ) at total income of Rs.18,43,46,100/-. While doing so, the Assessing Officer made the following disallowances/additions :- (i) Disallowance of service tax not paid u/s 43B of Rs.49,93,213/-. (ii) Disallowance of interest u/s 36(1)(iii) of Rs.26,31,67,414/- (iii) Addition on account of notional rent on account of completed flats of Rs.1,05,000/-. 6. The factual background leading to the above disallowances/additions is as under : During the course of assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition u/s 36(1)(iii) of Rs.26,31,67,414/- in the absence of any nexus between the interest free share capital and reserves and the loans and advances given to the sister concerns. As regards to the disallowance u/s 14A, he submits that when the assessee company himself offered the disallowance u/s 14A, the ld. CIT(A) ought not to have deleted the addition by entertaining the additional ground of appeal. 10. On the other hand, ld. Counsel for the respondent-assessee taking us through the Paper Book, pages no.38 and 39 submits that no fresh loans and advances were made to the sister concern during the year under consideration similar disallowance made in the earlier assessment years by the Assessing Officer came to be allowed by this Tribunal in assessee s own case vide ITA No.1569/PUN/2017 for A.Y. 2012-13 dated 23.10.2020, ITA Nos.2164 and 2175/PUN/2016 for A.Y. 2011-12 dated 14.08.2019, ITA Nos.39 46/PUN/2015 for A.Y. 2010-11 dated 31.10.2017, ITA Nos.1628 1636/PUN/2013 for A.Y. 2009-10 dated 02.02.2017 and ITA No.66/PUN/2015 for A.Y. 2008-09 dated 28.06.2017. He also filed the copies of the said ITAT s orders in the assessee s own case (supra), wherein this Tribunal ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest free funds in the form of share capital, reserves, surplus and unsecured interest free loans from related parties, the advance from co-owners, advance from customers and advance against development agreement, which stood at Rs.3,95,69,87,520/- and the loans and advances made to the sister concern stood at Rs.1,95,28,56,884/-. Relying on proposition that when the interest free funds available to the respondent-assessee are sufficient to meet the investments with the sister concern, it should be presumed that the investments are made out of the interest free funds. As law laid down by the Hon ble Supreme Court in the case of East India Pharmaceutical Works Ltd. vs. CIT 224 ITR 627 (SC) held that no disallowance of interest is called for relying upon the ratio of the decision of the Hon ble Supreme Court in the case of CIT vs. Reliance Industries Ltd. 410 ITR 466 (SC). The correctness of this finding of the ld. CIT(A) is under challenge before us vide this ground of appeal no.2 and 3. 13. It is an admitted position that the interest free funds available to the respondent-assessee as on 31.03.2013 stood Rs.3,95,69,87,520/- and investments in loans and advances made to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance on the decision of the Hon ble Bombay High Court in the case of CIT vs. Pruthvi Brokers Shareholders 349 ITR 336 (Bombay) admitted the additional ground and proceeded to dispose of the same following the decision of the Hon ble Bombay High Court in the case of CIT vs. Ballarpur Industries Ltd. (ITA No.51/2016 order dated 13.10.2016) and the decision of the Hon ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT 378 ITR 33 (Delhi) and the decision of ITAT in assessee s own case (supra) held that in the absence of any exempt income, the question of disallowance u/s 14A does not arise. The correctness of this finding of the ld. CIT(A) is under challenge before us in the present grounds of appal no.4 and 5 primary on the ground that the claim which has not gone through the process of assessment, cannot be adjudicated by the ld. CIT(A) placing reliance on the decision of the Hon ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT 284 ITR 323 (SC) and on the ground that the assessed income will be lower than the returned income. 16. It is now well settled position of law that prior to the insertion of Explanation 2 of sub-section (3) of section 14A by the Finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y. 2014-15 : 20. The Revenue raised the following grounds of appeal :- 1. The order of the Ld CIT(A) is contrary to law and to the facts and circumstances of the case. 2. The learned Commissioner of Income Tax(Appeals) grossly erred in deleting the addition on account of expenses not related to the business of the assessee of Rs. 3,73,84,490/- instead of confirming the same. 3. The learned Commissioner of Income-Tax (Appeals) grossly erred in appreciating the decision of Supreme Court in the case of Lashmirathan Cotton Mills Co. Ltd Vs. CIT(1969) 73 ITR 634(SC) wherein it was held that in order to claim that an nexus of that expenditure to its business what the assessee has failed to dispose off. 4. Whether on the facts and in the circumstances of the case and in law, the CIT(A) was justified in allowing the additional ground raised by the assessee in respect of reversal of disallowance u/s 14A of Rs.1,28,13,319/- made by the assessee itself in its return of income while computing its income thereby disregarding the judicial pronouncement of the Hon ble Supreme Court in the case of Goetze(India) Ltd. ITR 323? 5. Whether on the facts and in the circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs.1,28,13,994/- by holding that the appellant had not any exempt income. 23. Being aggrieved by the decision of the ld. CIT(A), the Revenue is in appeal before us in the present appeal. 24. Ground of appeal no.1, 6 and 7 are general in nature do not require any adjudication. 25. Ground of appeal no.2 and 3 challenges the correctness of the decision of the ld. CIT(A) in holding that no disallowance of interest u/s 36(1)(iii) of Rs.3,73,84,490/- is warranted. An identical issue was dealt by us in assessee s own case for assessment year 2013-14 in ITA No.20/PUN/2020 in the foregoing paragraphs of this order. It is an admitted position that there is no change of facts in the present year. In the circumstances, on the parity of reasoning given by us in assessee s own case for assessment year 2013-14, we hold that the order of the ld. CIT(A) is in consonance with the wellsettled position of law and we do not find any perversity, illegality in the finding of the ld. CIT(A). Accordingly, the ground of appeal no.2 and 3 filed by the Revenue stands dismissed. 26. Ground of appeal no.4 and 5 challenges the correctness of the decision of the ld. CIT(A) in allowing the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld CIT(A) is contrary to law and to the facts and circumstances of the case. 2. The learned Commissioner of Income Tax(Appeals) grossly erred in deleting the addition on account of expenses not related to the business of the assessee of Rs. 2,70,11,676/- instead of confirming the same. 3. The learned Commissioner of Income-Tax (Appeals) grossly erred in appreciating the decision of Supreme Court in the case of Lashmirathan Cotton Mills Co. Ltd Vs. CIT(1969) 73 ITR 634(SC) wherein it was held that in order to claim that an nexus of that expenditure to its business what the assessee has failed to dispose off. 4. For the facts and such other reasons an may be urged at the time of hearing, the order of the Ld. Commissioner of Income Tax(Appeals)9, Pune may be vacated and that of the Assessing Officer be restored. 5. The above ground of appeal may kindly be allowed to be amended, altered, modified etc. in the interest of natural justice. 30. Briefly, the facts of the case are that the respondent-assessee is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of promoters, builders and developers of land. The ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an admitted position that as extracted by the ld. CIT(A) from the ld. CIT(A) s order at page no.19 para 3.3.1 that interest free funds or own funds far exceeds as on 31.03.2014 stood at Rs.27,90,64,928/- whereas the loans and advances made to the sister concern stood at 23,19,05,317/-. Therefore, it can be safely concluded that the loans and advances are made to the sister concern out of the interest free own funds and, therefore, no disallowance of interest is warranted in the of the settled position of law as settled by the Hon ble Supreme Court in the case of CIT vs. Reliance Industries Ltd. 410 ITR 466 (SC). Similar view has been taken by the Hon ble Supreme Court in the case of South Indian Bank Ltd. vs. CIT, 130 taxmann.com 178 (SC) by holding as under :- 17. In a situation where the assessee has mixed fund (made up partly of interest free funds and partly of interest-bearing funds) and payment is made out of that mixed fund, the investment must be considered to have been made out of the interest free fund. To put it another way, in respect of payment made out of mixed fund, it is the assessee who has such right of appropriation and also the right to assert from what pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia Ltd. [2016] 75 taxmann.com 268/388 ITR 81 (Punj. Har.). Mr. S Ganesh the learned Senior Counsel while citing these cases from the High Courts have further pointed out that those judgments have attained finality. On reading of these judgments, we are of the considered opinion that the High Courts have correctly interpreted the scope of section 14A of the Act in their decisions favouring the assessees. 20. Applying the same logic, the disallowance would be legally impermissible for the investment made by the assessees in bonds/shares using interest free funds, under section 14A of the Act. In other words, if investments in securities is made out of common funds and the assessee has available, non-interest-bearing funds larger than the investments made in tax-free securities then in such cases, disallowance under section 14A cannot be made. 34. Therefore, the decision of the ld. CIT(A) is based on the proper appreciation of material facts on record and in consonance with the well settled position of law, does not require any interference. Thus, we do not find any merit in the grounds of appeal filed by the Revenue. 35. In the result, the appeal filed by the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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