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2020 (9) TMI 488
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....Assessee Company is available with Interest free shareholder funds of Rs. 3422.25 Lac. 2. That the Ld. CIT(A) has erred on facts in stating that no agreement or receipt etc was furnished to evidence the advance against property. 3. That the Ld. AO has erred in law in making addition of Rs. 10.59 Lac u/s 14A r.w.s. Rule 8D without establishing the proximate cause between exempt income and expenses incurred to earn such income. 4. That the explanations filed and the material available on record has not been properly considered and legally interpreted. The addition made cannot be justified by any material on record. 5. That in view of the facts and circumstances of the case the observations made are illegal, bad in law and unwarranted and cannot be justified by any material on record." ADDITIONAL GROUNDS Ground 7: That in view of the facts and circumstances of the case, the disallowance made by the Assessing Officer u/s 14A read with Rule 8D is illegal, bad in law and without jurisdiction and is also highly excessive. The Commissioner of Income Tax (Appeals) has erred on facts and in law in upholding the same. Ground 8: Th....
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....ered and legally interpreted. The addition made cannot be justified by any material on record. 5. That in view of the facts and circumstances of the case the observations made are illegal, bad in law and unwarranted and cannot be justified by any material on record." ADDITIONAL GROUNDS Ground 7: That in view of the facts and circumstances of the case, the disallowance made by the Assessing Officer u/s 14A read with Rule 8D is illegal, bad in law and without jurisdiction and is also highly excessive. The Commissioner of Income Tax (Appeals) has erred on facts and in law in upholding the same. Ground 8: That in view of the facts and circumstances of the case, no satisfaction has been recorded by the Assessing Officer for making disallowance u/s 14A read with Rule 8D and therefore, the same is without jurisdiction. 3. Firstly, we are taking up the Assessee's appeal being ITA No. 2428/Del/2014 for Assessment Year 2008-09. The assessee is a Non-Banking Financial Company (NBFC) and is registered with the Reserve Bank of India (RBI). The assessee filed its return of income on 30/09/2008 declaring total income of Rs. 2,88,57,381/-. The assessee further revi....
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.... by the Assessee. Therefore, the stand of the Assessing Officer as well as that of the CIT(A) that the said sum was not advanced during the ordinary course of business is without any basis. Furthermore, the Assessing Officer as well as the CIT(A) have erred on facts and in law in not appreciating that the assessee had sufficient interest free fund available with it and therefore, no disallowance of interest can be made as the presumption would be that the money was advanced out of the said interest free funds. This fact was mentioned by the CIT(A) in para 10.3 in the order. The Ld. AR relied upon the following decisions: a. CIT vs. Reliance Utilities & Power Ltd. (2009) 178 Taxman 135 (Bom HC) b. CIT vs. Reliance Industries Ltd. (2019) 410 ITR 466 (SC) 6. The Ld. DR submitted that the assessee on one hand was paying interest to the tune of Rs. 1,46,26,712/- on the loan raised by it in conducting the business, at the same time, it had advanced funds to the tune of Rs. 6.37 crores without charging any interest on such huge amount. Before the Assessing Officer, the Assessee claimed that the assessee company had advanced this amount against the property. Before ....
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....ceipt showing that the advance was meant for buying the property. In fact, in none of the cases, the purchase of property got materialized. The Ld. AR submitted that the assessee company had advanced Rs. 6.37 crores towards purchase of property out of which Rs. 17 lacs had been paid in A.Y. 2007-08. These advances were received back in the subsequent assessment years (A.Y. 2009-10 and 2010-11) as the deal could not be materialized and the amount advanced towards it was received back. This aspect was not looked into by the Assessing Officer as well as the CIT(A) and needs to be looked into in its entirety. Therefore, it will be appropriate to remand back this issue to the file of the Assessing Officer for proper adjudication. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Ground Nos. 1 and 2 are partly allowed for statistical purpose. 8. As regards to Ground Nos. 3 as well as additional grounds no. 7 & 8 of assessee's appeal relating to disallowance u/s 14A r.w. Rule 8D amounting to Rs. 10,58,926/-, the Ld. AR submitted that during the year under consideration, the assessee company received dividend amounting to Rs. 2,86,....
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.... b. CIT vs. Reliance Utilities & Power Ltd., (2009) 178 Taxman 135 (Bom.) c. CIT vs. Reliance Industries Ltd. (2019) 410 ITR 640 (SC) Without prejudice, the disallowance made by the Assessing Officer is high/ excessive as the assessee has only earned exempt income to the tune of Rs. 2,86,370/- whereas the Assessing Officer has made disallowance amounting to Rs. 10,58,926/-. It is trite law that the disallowance u/s 14A cannot exceed the amount of exempt income earned. The Ld. AR relied upon the following decisions: a. Cheminvest Ltd. vs. CIT (2015) 378 ITR 33 (Del. HC) b. Maxopp Investment Ltd. vs. CIT (2018) 402 ITR 640 (SC) 9. The Ld. DR submitted that the assessee earned dividend income of Rs. 2,86,370/- during the year and no expenditure pertaining to earning of such exempt income has been disclosed by the assessee in his accounts. The Assessing Officer after considering all the relevant aspects of the case concluded that the assessee's case is fit for the share capital funds as well as interest bearing funds as mentioned in para 13.3 of CIT(A)'s order. Besides utilizing the capital funds in creation of fixed assets, the assessee has invested ....
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.... Rs. 5,86,86,639/- totaling Rs. 10,57,35,892/- and has debited an interest of Rs. 1,46,26,712/- excluding bank charges of Rs. 1,25,682/-. As per details filed by the assessee, it has given loans and advances Rs. 23.39 crores out of which the assessee has given loans and advances under the nomenclature of share application money to its associates companies namely Global State Developers Pvt. Ltd. (Rs. 20 lakhs), Shanra India Pvt. Ltd. (Rs. 77 lakhs), and Garuda Resorts Pvt. Ltd. (Rs. 80,01,866/-). The assessee company has not proved that it has been issued share certificates. It has failed to file copies of the share certificates from these companies. The Assessee company was asked to explain as to why not Section 2(22)(e) be invoked in those associate companies and Proportionate interest be disallowed on the amount of advances given to the non-associates companies where as it has claimed interest on borrowed funds in the P & L account. In so far as amounts remaining as advance are concerned, the fall into the category of Trade Advances or advances taken during the normal course of business which in any way assessee may have to enter into such obligation. But the advances given by t....
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....tion amounting to Rs. 1,57,01,866/- u/s 2(22)(e) of the Act. The CIT(A) deleted the said addition holding that the Assessing Officer's case is based on presumption that the share application money was a misnomer and the same was given in the shape of loan or advance, however the said contention is not supported by any evidence on record and also accepted the contention of the Assessee that the provisions of Section 2(22)(e) are not applicable in the facts of the present case. The Ld. AR submitted that in view of the facts of the present case, provisions of Section 2(22)(e) cannot be applied as in the present case, the assessee has given the money in question and not received the share application money, therefore provisions of Section 2(22)(e) cannot be applied. Section 2(22)(e) of the Act is attracted only when a shareholder having shares not less than 10% receives any advance or loan from a company or any concern, any advance or loan from that company in which such shareholder has substantial interest, i.e. 20% shareholding. Apart from the fact that the assessee is the payer in the present case, the Ld. AR submitted that the assessee is not holding any shares in the companies to ....
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....assessee company is registered with stock exchange and fulfill all the conditions of Section 2(18) which is definition of "company in which public is substantially interested." Thus, the submissions of the Ld. AR are acceptable and are supported by the decisions of the Tribunal in cases of DCIT vs. M/s Sindu Realtors Pvt. Ltd. (ITA No. 2768/Del/2012 order dated 11.12.2015). In this case also Section 2(22)(e) of the Act is not applicable and as rightly deleted the addition by the CIT(A). Further, the Assessing Officer has also failed to substantiate as to how the amount in question is in the shape of a loan/advance received by the assessee company. Ground No. 1 of the Revenue's appeal is dismissed. 14. As regards to Ground No. 2 of the Revenue's appeal relating to deletion of interest disallowance on share application money investment made in M/s Global Estate Developers Pvt. Ltd. amounting to Rs. 3,60,000/-, the Ld. DR submitted that as per the details filed by the assessee company, it has been found that the assessee company has given loans and advances to the tune of Rs. 23,39,02,212/- out of which an amount of Rs. 20,00,000/- has been expressly shown as loans and advances in ....
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....l disallowance was made by the Assessing Officer in that assessment year. The Ld. AR submitted that in view of the fact that the assessee company had sufficient interest free fund, no disallowance of interest can be made as the presumption would be that the money was advanced out of the said interest free funds. The Ld. AR relied upon the following decisions: a. CIT vs. Reliance Utilities & Power Ltd. (2009) 178 Taxman 135 (Bom. HC) b. CIT vs. Reliance Industries Ltd. (2019) 410 ITR 466 (SC) Furthermore, it is incorrect to say that the amount given is not share application money as the CIT(A) has rightly held that money has been given by the assessee in the ordinary course of its business and therefore, no notional interest thereupon can be disallowed. Admittedly, this investment in share application money was done in the last assessment year and no disallowance has been made by the Assessing Officer in the last year when the assessment for the said assessment year was completed by the same Assessing Officer who has done the assessment for the assessment year under consideration. The Ld. AR relied upon the decision of CIT vs. Sridev Enterprises, (1991) 192 ITR ....
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....done. Thus, the Assessing Officer rightly made addition of Rs. 25,84,841/- as interest income on accrual basis. 18. The Ld. AR submitted that the Assessing Officer made an addition of Rs. 25,84,841/- in respect of un-matured interest charges treating the same as interest income for the year under consideration. The CIT(A) deleted the said addition holding that the said addition was made by the Assessing Officer without properly appreciating the facts of the present case and accounting principles adopted by the assessee. The Ld. AR submitted that the un-matured interest represent the amount of income pertaining to the next financial years included in the amount of trading advance. The Ld. AR relied upon the decision of the Hon'ble Apex Court in case of CIT vs. Excel Industries Ltd. (2013) 38 taxmann.com 100 (SC). 19. We have heard both the parties and perused all the relevant material available on record. It is seen that the Assessing Officer made an addition of Rs. 25,84,841/- in respect of un-matured interest charges treating the same as interest income for the year under consideration. The CIT(A) deleted the said addition holding that the said addition was made by the Asses....
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.... investment u/s 69 of the Act. 24. The Ld. AR submitted that the assessee company had purchased land at Tifra Bilaspur for Rs. 55,44,800/- including stamp duty and registration charges of Rs. 7,06,705/-. The Assessing Officer issued a show cause notice to the assessee to state as to why the difference between value of land declared and that adopted for payment of stamp duty should not be added as unexplained investment. In response thereto the assessee submitted a detailed reply, however, the same was rejected by the Assessing Officer and the Assessing Officer made addition on account of unexplained investment in property amounting to Rs. 28,44,800/- on the basis of difference between value of land declared and that adopted for payment of stamp duty. The Assessing Officer has followed his own order of earlier years. The CIT(A) deleted the said addition by holding that similar additions were made in the earlier assessment years and the same have been decided in favour of the assessee by the CIT(A) in the earlier assessment years, i.e., A.Y. 2004-05, 2005-06 and 2007-08. The Ld. AR submitted that the case of the assessee is covered in its favour by the orders of the Tribunal in as....