TaxTMI 
TaxTMI 
2018 (6) TMI 1112
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.... 2. The ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 17,760/- made on account of disallowance u/s.14A of the Act, without properly appreciating the facts of the case and the material brought on record. 3. The ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 23,508/- made on account of capitalization on interest, without properly appreciating the facts of the case and the material brought on record. 4. On the facts and in the circumstances of the case, the ld. CIT(A) ought to have upheld the order of the AO. 5. It is, therefore, prayed that the order of the ld. CIT(A) may be set aside and that of the AO may be restored to the above extent." 3. The first issue raised by the Revenue in ground no.1 is that learned CIT(A) erred in deleting the addition made by the AO for Rs. 44,44,962/- on account of interest on the diversion of the fund. 4. Briefly stated facts are that the assessee is a limited company and engaged in the manufacturing and trading business of POY, FDY, DT, DTEX, Polyester Chips and trading in cloth, etc. The assessee in the year under consideration has shown advances to its sister co....
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....T vs. Reliance Utilities & Power Ltd. reported in 178 Taxman 135. The assessee also submitted that the loans obtained by it have been utilized for the acquiring fixed assets and to meet the working capital requirements of the business. The AO has not proved any nexuses between the borrowed funds and the money advanced to sister concern justifying that advances have been given out of the borrowed funds. Without prejudice to the above, the Assessee also submitted that it has borrowed Term Loan @ 9.75% and Working Capital Loan @ 10.75% per annum whereas the AO has charged interest @ 12% on the money advanced to the sister concern without applying any basis. It was also submitted that the assessee was show-caused for not charging the interest on the advance given to the sister concern as per order sheet entry dated 28-11-2011, but the assessment order was passed u/s 143(3) of the Act vide order dated 25-11-2011. Therefore, it is clear that the AO has not applied his mind and charged the interest on the advances given to the sister concern on a notional basis. The learned CIT(A) after considering the submission of the assessee, deleted the addition made by the AO by observin....
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....e to sister concern. It is an undisputed fact that the owned fund of the assessee exceeds the amount of money advanced to its sister concern as evident from the copy of the balance sheet, which is placed on Page No.7 of the Paper Book. The relevant extract of the balance sheet is reproduced as under: GSL - NOVA PETROCHEMICALS LIMITED (Formally known as Nova Petrochemicals Ltd.) Balance Sheet as at 31st March, 2009 Particulars Sche No. Rs. As at 31- 03-2009 As at 31- 03-2008 Rs. SOURCES OF FUNDS 1. Shareholder's Funds: • Share Capital • Reserves and Surplus 1 2 135000000 Nil 135000000 Nil 135000000 135000000 From the above, there remains no doubt that the owned funds of the assessee exceed the amount of money advanced to its sister concern. Therefore, the presumption can be drawn that the money has been advanced out of its owned fund. In holding so we find support and guidance from the judgment of Hon'ble Bombay High Court in the case of CIT vs. Reliance Utilities & Power Ltd. 178 Taxman 135. T....
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....ue is in the second appeal before us. Both learned AR and DR vehemently supported the order of the order of authorities below as favorable to them. 11. We have heard the rival contentions and perused the material available on record. It is an undisputed fact that the assessee has not earned any dividend income / exempt income from the shares held as an investment. Therefore, in our considered view, no disallowance u/s 14A r.w.r. 8D can be made. In this regard, we find support and guidance from the judgment of Hon'ble Gujarat High Court in the case of CIT vs. Corrtech Energy P. Ltd. reported in 372 ITR 97. The relevant extract of the judgment is reproduced as under: "Section 14A(1) provides that for the purpose of computing total income under chapter IV, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. In the instant case, the Tribunal has recorded the finding of fact that the assessee did not make any claim for exemption of any income from payment of tax. It was on this basis that the Tribunal held that disallowance under section 14A could not be made. In th....