TaxTMI 
TaxTMI 
2018 (4) TMI 440
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....ircumstances of the case and in law, the Ld. CIT(A) erred in deleting addition made u/s.14A r.w.s. 8D of Rs. 7,11,527/- in contravention on provisions of CBDT Circular No.5/2014. 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowances of Rs. 58,29,079/- as interest on loan to subsidiary. 4. Whether on the facts and in the circumstances of the case and in law, the LD. CIT(A) erred in deleting addition made on account of bogus purchases of raw materials, to the tune of Rs. 25,12,469/- on account unexplained shortage in production. 5. That the appellant craves leave to add, alter and / or modify, substitute all or any of the grounds of appeal, during the course of hearing." 3.Ground No.1 raised by the Revenue relates to addition of Rs. 7,49,749/- on account of employees' contribution to Provident Fund and ESI fund beyond due date. 3.1.Brief facts apropos this issue are that during the course of assessment proceedings, the Assessing Officer noted that employees contribution to PF amounting to Rs. 66,554/- and ESI fund amounting to Rs. 6,83,195/- have been deposited by the assessee-compa....
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....llowing the decision of the Tribunal in assessee's own case for AY 2008-09. Therefore, we find no reason to interfere in the order of Ld. CIT(A) and same is hereby upheld. This issue of Revenue's appeal is dismissed. 3.4. In the result, appeal filed by Revenue (ground No.1) is dismissed. 4.Ground No.2 raised by the Revenue relates to addition made by Assessing Officer u/s. 14A r.w.r. 8D of the IT Rules, 1962 of Rs. 7,11,527/-. 4.1.The brief facts apropos this issue are that during the course of assessment proceedings the Assessing Officer noted that assessee hadshown in its balance-sheet the amount of investment at the beginning and at the close of the year at Rs. 3,78,47,850/- and Rs. 3,80,97,850/- respectively. The funds were invested in equities of subsidiary company and various other companies. Therefore, Assessing Officer noted that any expenditure relatable to earning of such income is liable to be disallowed u/s14A of the Act. The assessee submitted before the Assessing Officer that it has not earned tax free income during the Assessment Year under consideration,therefore section 14A would not be applicable in his case. However, the Assessing Officer rejected the conte....
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....h Court in G.A.No.3581 of 2013 in the appeal against the order of the Tribunal in the case of REI Agro Ltd. (supra). We also rely of the following judgments, wherein it was held that if there is no dividend income, the disallowance under section 14A should not be made. a) CIT vs. Corrtech Energy Pvt. Ltd. (2014) 45 taxmann.com 116 (Guj) b) ACIT v. M. Bhaskaran (2014) 50 txmann.com 138 (ITAT Chennai) c) CIT vs. Hero Cycles Ltd. ITA No. 331 of 2009 P & H High Court The sum and substances of these judgments are that disallowance cannot be made u/s. 14A r.w.r. Rule 8D of the IT Rules, where the assessee has not earned / received any exempt income during the assessment year under consideration i.e. until and unless there is receipt of exempt income for the concerned assessment year, the disallowance u/s 14A r.w.r. Rule 8D of the IT Rules cannot be invoked. Therefore, we note that since the issue in dispute is squarely covered by the above narrated judgments wherein it has been held that if there is no exempt income, no disallowance should be made under section 14A.Since in the assessee case under consideration, as the assessee had not earned any exempt inco....
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.... CIT And Another (2007) 288 ITR 1 (SC) is applicable to the facts of the assessee's case under consideration. We also note that assessee was having sufficient interest free fund and the Assessing Officer was unable to establish any nexus between borrowed fund and the loan fund to the subsidiary company. Therefore, the ratio laid down of the judgment of Hon'ble Supreme Court in the case of S.A. Builders Ltd. (supra) is squarely application to the case of assessee under consideration and therefore the disallowance for interest on loan to subsidiary u/s 36(1)(iii) by the Assessing Officer is not justified. 5.4 We also note that the said issue is squarely covered by the order of Coordinate Bench of Kolkata Tribunal, in assessee's own case, in ITA No.947/Kol/2009 for Assessment Year 2008-09, wherein it was held as follows:- "17. We have heard the rival submissions. Whenever acheque issued bya party is cleared through a Bank loan account, the dues to the Bank will increase, if the cheque is cleared out of a deposit account, the dues from the Bank will be decreased. This arithmetic by itself will not show that money had gone out of interest bearing funds. Assesseehas clear....
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.... company has received Rs. 30,00,000/- as share application money. The total sales of the company was Rs. 4.10 crores and total purchases of the company was atRs. .4.78 crore. The company has suffered a net loss of Rs. 64,779/- before tax. It was also revealed that the company has earned a net profit before tax for Rs. 5,950/- in the financial year 2009-10. The profit and loss account shows that it has purchased jute for Rs. 1,81,17,699/- and sold jute for an amount of Rs. 1,80,89,257/-. The AO noted that this company was either suffering loss or earning a negligible profit year after year and it was not understandable how the company managed to mobilize Rs. 4.08 crore as share premium on the basis of such dismal performance year after year. Therefore, AO concluded that M/s Kajal Agencies Pvt. Ltd. was an entry operator. So the assessee's claim of purchase of raw jute for an amount of Rs. 13,21,385/- from M/s Kajal Agencies Pvt. Ltd. was rejected. 6.2 The assessee-company has also claimed that it has purchased raw jute for a total amount of Rs. 11,91,084/- from M/s High Growth Vanijya Pvt.Ltd. Shri R.K. Singh AR appeared, before AO, on behalf of M/s High Growth Vanijya Pvt. Ltd. ....
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....99/- crores and sold jute for an amount of Rs. 1,80,89,257/- and the said Company had either suffered loss or had shown negligible profit from year to year. Based on this fact, the Assessing Officer concluded that M/s Kajal Agencies Pvt. Ltd. was an entry operator and rejected the claim of purchase of raw jute amounting to Rs. 13,21,385/-. Similarly, the assessee had also purchased raw jute for Rs. 11,91,084/- from M/s High Growth VanijyaPvt. Ltd. On the basis of enquiry from the AR, Shri R.K. Singh and based on profit and loss account, the Assessing Officer observed that assessee-company had purchased raw jute amounting to Rs. 77,25,786/- and sold the same for Rs. 77,88,253/- and after allowing various expenditure shows a profit of Rs. 900/- only. Based on this fact, Assessing Officer concluded that M/s High Growth VanijyaPvt. Ltd. was also "jamakharchicomapny" and thus rejected the assessee's claim for purchase of raw jute. The Assessing Officer also noted that assessee had shown yield of finished product to the raw jute at 92.46% and was unable to substantiate the claim of shortage and observed that a part of the shortage was attributable to the purchase of raw jute and....