TaxTMI 
TaxTMI 
2016 (6) TMI 1410
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....s erred in deleting the addition made by the learned Assessing Officer under section 40A(3) of the Act for cash payments made by the assessee exceeding Rs. 20,000/- per day to individuals. ii) The learned Commissioner of Income Tax (Appeals) has erred in directing the learned Assessing Officer to re-compute the disallowance under section 14A r.w.r 8D by reducing the amounts invested in the subsidiary companies. iii) The learned Commissioner of Income Tax (Appeals) has erred in deleting the addition made by the learned Assessing Officer under section 68 of the Act being unexplained cash credits. C.O.Nos.125 to 128/Mds/2015 (A.Y.2008-09 to 2011-12): 3. The only common ground raised by the assessee in its cross objections is that:- "The learned Commissioner of Income Tax (Appeals) ought to have held that deduction under section 80IA has to be granted on the income derived from the undertaking after all disallowances and including interest from customers." 4. At the time of hearing, the assessee raised an additional ground in its cross objection No.126/Mds/2015 challenging the reopening of assessment by the learned Assessing Officer under section 147 of the Act. 5. Brief fac....
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....0A(3) of the Act to discourage cash payment to any single person exceeding Rs. 20,000/- per day towards expenditure. Therefore, invoking the provisions of section 40A(3) of the Act, the learned Assessing Officer made addition in the case of the assessee for the all three relevant assessment years. 6.3 Before the learned Commissioner of Income Tax (Appeals), the learned Authorized Representative explained that the transporters delivered the materials at the gate of the factory and collect freight charges by cash and this cash payment did not exceed Rs. 20,000/- on any day given to a single transporter. It was further submitted that these payments were made to the lorry drivers of the transporter. It was also explained that payment towards the supply of raw materials were made by cheque to the suppliers. The learned Authorized Representative further clarified that an average of 800 to 1000 metric tons of biomass was brought in by the lorry drivers from different places and delivered at the gate of the factory. There were about 40 to 60 trucks delivering such materials regularly on daily basis and none of the payments made to such individual transporters exceeded Rs. 20,000/- on any....
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....n cash not exceeding Rs. 20,000 /-. In the present case, the payment towards the truckers by way of routine and prevailing trade practice, which was paid directly to the truckers separately, at the gate of the factory was for the delivery of raw materials like biomass / agricultural waste as stated earlier, and in order to enable the truckers to incur the expenses on diesel, toll charges other operational expenses like refreshment, fines/penalties imposed by local police for over speeding, over loading, jumping red lights, excise / octroi taxes / meals, etc. on real time basis on an average of 10 to 60 truckers on a daily basis and none of the individual payments made to these truckers exceeded Rs. 20,000 /- on any given day, as was seen from the vouchers and trip sheets produced at the time of appellate proceedings. Therefore in the facts and context of the case each trucker to whom the payment was made would be construed as "a person" in terms of Section 40A(3) and since cash paid directly to them individually at the factory gates in a day undisputedly did not exceed Rs. 20,000/-, the conditions for attracting Section 40A(3) were not satisfied to bring them within its ambit. 7.....
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....7.14 As can be seen from the above cited observations of the Hon'ble Court, the stress is on the genuineness of the transactions between the parties which the AO has not doubted or disputed in the instant case, duly taking into consideration of business expediency explained supra and without enmeshing in technicalities but striking a balance between the mandate of the law vis-a-vis hardship to the assessee. 7.15 In view of the above discussion particularly seen in the background of the unique facts obtaining the instant case as details above the additions made u/s.40A(3) is directed to be deleted." 6.5 The learned Departmental Representative vehemently argued in support of the order of the learned Assessing Officer by reiterating the views of the learned Assessing Officer, while as the learned Authorized Representative relied on the order of the learned Commissioner of Income Tax (Appeals). 6.6 We have heard the rival submissions and carefully perused the materials available on record. From the facts of the case and the arguments advanced by the learned Authorized Representative, we find merit in the order of the learned Commissioner of Income Tax (Appeals). In the case of ....
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....by the Chennai Bench of the Tribunal in ITA No.2083/Mds/2011. However, at the outset, we find that subsequently the Chennai Bench of the Tribunal has held that where investments are made by the assessee in its sister concerns or associate concerns for strategic purposes out of non-interest bearing funds, then there could be no presumption of any expenses incurred by the assessee for making such investments. The gist of the relevant decision is reproduced herein below for reference:- "In the case of Rane Holdings Ltd. Vs. ACIT in ITA No.115/Mds/2015 vide order dated 06.01.2016, extracted herein below, we have held that where investments are made in sister concerns for strategic reasons, no expenses can be inferred to have been incurred if such investments are made out of non-interest bearing funds of the assessee. The gist of the relevant order in ITA No.115/Mds/2015 dated 06.01.2016 of this Tribunal is reproduced herein below for reference:- "5. We have heard both the parties and carefully perused the materials available on record. On the identical issue as pointed out by the Ld. A.R. the Chennai bench of the Tribunal in ITA No.156/Mds/2013 vide order dated 20/08/13 for the ass....
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....ay of share capital and reserves and there was no nexus between the borrowals of assessee and the advances given, no disallowance for interest was called for." (vi) CIT Vs. Reliance Utilities & Power Ltd., reported in (2009) 313 ITR 0340(Bom.) has held as follows:- "Tribunal having recorded a clear finding that the assessee possessed sufficient interest-free funds of its own which were generated in the course of the relevant financial year, apart from substantial shareholders fund, presumption stands established that the investments in sister concerns were made by the assessee out of interest free funds and therefore no part of interest on borrowings can be disallowed on the basis that the investments were made out of interest bearing funds." (vii) EIH Associated Hotels Ltd Vs. DCIT reported in 2013- TIOL-796-ITAT-MAD ".... The investments made by the assessee in the subsidiary company are not on account of investment for earning capital gains or dividend income. Such investments have been made by the assessee to promote subsidiary company into the hotel industry. The assessee is not intothe business of investment and the investments made by the assessee are on account of b....
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.... said reasons, we hereby hold that in the case of the assessee the provisions of Section 14A read with Rule 8D will not be applicable in regard to investments made for acquiring the shares of the assessee's sister concerns. Accordingly we restrain ourselves from interfering with the Order of the Ld.CIT(A) on this regard." Therefore, following the aforesaid decision of the Tribunal, we hereby direct the learned Assessing Officer to delete the addition made by invoking the provisions of section 14A r.w. Rule 8D of the Act, subject to verification that investments are made by the assessee in its sister concerns only and from its interest free funds." 7.3 Following the aforesaid decision, we hereby remit the issue back to the file of the learned Assessing Officer to verify as to whether the assessee had invested out of its noninterest bearing funds in its sister concerns or associate concerns for strategic reasons and if found so delete the addition made on that regard, however if found otherwise, pass appropriate orders as per merit & law, after affording sufficient opportunity of being heard to the assessee. It is ordered accordingly for all the relevant assessment years. Ground ....
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....d to the land owners and therefore it is possible for the Revenue to make enquiries from them to find out the genuiness of the transaction which they have failed to do so. viii) The amount paid to the farmers were meager, who are illiterate and do not have bank accounts or PAN No.. These facts could have been verified by the Revenue based on the statements from the coordinators. 8.4. We find merit in these findings of the learned Commissioner of Income Tax (Appeals. The source of advances is established in the case of the assessee. The advances are made to petty land owners for purchase of land from them. Since the assessee was not agreeable to the price determined by the State Govt., for acquiring those lands, the project was dropped and the advances made were returned and the same was re-deposited in the assessee's bank account. The names & address of the intermediaries are also furnished by the assessee. All these facts could have been easily verified by the Revenue by examining the coordinators and the land owners of that area. The Revenue has miserably failed to make any enquiries even at the preliminary level. Thus, the Revenue has failed to prove the onus caste upon it fo....