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TMI Blog2022 (12) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... m time to time. Finally, the Ld. AO passed order of assessment u/s 143(3) at a total income of Rs. 2,32,69,355/- after making certain disallowances. Being aggrieved, the assessee filed appeal to Ld. CIT(A), who allowed part-relief. Now, both revenue and assessee, being aggrieved by the order of Ld. CIT(A), are before us. 3. The revenue has raised following substantive grounds in its Appeal: "1. Whether in the facts and in circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,50,22,016/- made on account of sales commission expenses u/s 37 of the Income Tax Act without appreciating the factual position of the issue. 2. Whether in the facts and in the circumstances of the case, Ld. CIT(A) has erred in law in restricting the disallowance made u/s 14A of the Income Tax Act in respect of interest expenses incurred for investment in subsidiaries and administrative expenses." Further, the assessee has raised following grounds in its Cross-Objection: "1. On the facts and circumstances of the case and in law the learned Commissioner of Income Tax (Appeal)-II erred in confirming the disallowance of interest expenses under section 40A(2)(b) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llate Tribunal Indore Bench on the identical issue. The impugned reopening was made pursuant to assessment order for A.Y.2011-12 wherein the disallowance on the issue of commission was made. The said disallowance in order of AO for A.Y.2011-12 which forms the very basis of instant reopening and consequent disallowance of commission had been deleted by order of Ld. CIT(A) for A.Y.2011-12 and 2012-13. Further the order of Ld. CIT(A) deleting the disallowance for AY 2011-12 had been upheld by the I.T.A.T. following decision of jurisdiction HC in case of Pure Pharma (MP). Copy of I.T.A.T. order has been submitted by the appellant during the course of appellant proceedings. 3.2 The appellant has also relied on the decisions of CIT vs. Gobald Motor Services P. Ltd. (100 ITR 240) (Mad) and Amarjothi Pictures v. CIT [1968] (69 ITR 755)(Mad) in support his case. After carefully gone through the findings of the case, it is clear that this issue on commission has been covered by the order of I.T.A.T. Bench. Hence I don't find any basis for sustainability of the disallowance of Rs.1,50,22,016/- on account of expenses under the head of commission and this ground of appeal is allowed." 8. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the order of Ld. CIT(A) and submitted that as on 31.03.2013, the capital of assessee stood at Rs. 2,67,08,233/- and the investment in shares was just Rs. 1,17,99,007/-, which shows that the own capital of assessee is more than double of the investment in shares. Ld. AR submitted that these figures clearly establish that the assessee has not utilized borrowed funds for making investment in shares. According to Ld. AR, when the investments are not made out of borrowed funds, there is no justification in making disallowance on account of interest-component even while applying Rule 8D. Ld. AR also submitted that identical issue came up in assessee's own case in preceding AY 2012- 13, ITA No. 1356/Ind/2016 order dated 12.07.2018 (supra), where the ITAT held as under: "7. We, therefore, in the given facts and circumstances of the case and also the revenue being unable to controvert the findings of the learned Commission of Income-tax (Appeals), are of the considered view that no interest disallowance was called for u/s 14A of the Act as the assessee had sufficient interest-free funds in the shape of share capital to cover up the investment in equity shares and accordingly are not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons and as such there cannot be a blind comparison. Ld. AR also submitted that at the relevant time, the assessee was having credit facility from bank @12% interest rate and that too on providing security to the bank. Further, the bank was recovering several charges from assessee such as processing charges, inspection charges, renewal charges, etc. Further, several formalities had to be done for taking loan from bank. On the other hand, neither there is any security offered nor any formality or charges in the case of loans taken from specified persons. Ld. AR submitted that due to these material differences, the assessee was justified in paying 15% interest to specified persons. Ld. DR placed a strong reliance upon the order of Ld. AO and argued that the Ld. AO has rightly disallowed 3% excess interest. 19. We have considered rival submission of both sides. Relevant portion of section 40A(2) reads as under: "(2)(a) Where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in clause (b) of this sub-section, and the Assessing Officer is of the opinion that such expenditure is excessive or unreasonable having regard t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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