TaxTMI 
TaxTMI 
2021 (3) TMI 668
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....ed an appeal before the Ld. CIT(A) who was pleased to delete the same. 5. Aggrieved the Revenue is before us. 6. We have heard both the parties and perused the records. At the outset, it was brought to our notice that similar issue cropped up before this Tribunal in earlier years and this issue is covered in favour of the assessee by order dated 25.01.2008 in ITA Nos. 724 &725/Kol/2007 for AY 2002-03 & 2003-04; and assessment order dated 22.12.2006 for AY 2001-02. The Ld. A.R. of the assessee Shri A.K. Gupta brought to our notice that the assessee has not earned any exempt income therefore no disallowance u/s 14A of the Income Tax Act, 1961 (hereinafter referred to as the Act) is legally permitted and for that proposition he relied on the decision of Hon'ble Delhi High Court in Chem Invest Ltd. vs. CIT reported in 378 ITR 33 (Del). The Ld. A.R drew our attention to page 28 of PB from which it is noted that the assessee has not earned any exempt income and relying on the decision of Hon'ble Delhi High Court in Chem Invest Ltd. (supra) as well as the decision of Hon'ble Delhi High Court in the case of CIT vs. GVK Project & Technical Services Ltd. [2019] 106 taxmann.com 180 (Del)] w....
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....to its subsidiary company on which the assessee had paid interest of Rs. 7,54,86,434/- on the entire borrowed fund. Accordingly, proportionate interest on interest free advances was computed by AO at Rs. 1,96,26,473/- being 26% of the total interest paid on borrowed and cash credit account and this amount was disallowed. 9. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who was pleased to delete the same. 10. Aggrieved the revenue is before us. 11. We have heard both the parties and perused the records. At the outset, the Ld. A.R of the assessee submitted that this issue is also covered in favour of the assessee by the Tribunal's order for AY 2002-03 and AY 2003-04 which is discernible from paper book pg nos. 10 to 15 and 17 respectively. We note that the Ld. CIT(A) has noted that the advance were out of its own funds and it was given to its own subsidiary company which is in the same line of hotel business. According to assessee, advances to its subsidiary was done as a measure of commercial expediency and which fact was accepted by the Ld CIT(A) and we note that the Ld. CIT(A) has given the decision in favour of the assessee by relying on the decision of Hon'....
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....ferent. In coming to this conclusion, the Hon'ble High Court had relied on a plethora of decisions held by the same Court earlier, such as, in 132 ITR 219, 135 ITR 698, 147 ITR 392 & 161 ITR 820. It was argued by the AR that the advances were made out of mixed bank accounts where the receipts out of current sales were credited. The AR had also submitted that apart from showing the years in which the advances were made, which were earlier to the previous year relevant to the assessment year under appeal it was submitted that such advances were made out of own funds. In fact the Revenue never raised this issue in the past while holding that the opening balance has been funded out of the borrowed funds and that too without any analysis and ignoring the principles laid down by the Hon'ble High Court." Hence, following the decision of the Hon'ble jurisdictional High Court, the AR argued that the advance against share capital made to the sister concern did not call for any disallowance out of the total interest claim of the assessee. 21. At the time of hearing, the AR of the assessee company had further contended that the amount advanced was to a subsidiary company of the assessee and....
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....ew of commercial expediency from the point of view whether the amount was advanced for earning profits. According to the AR, the assessee company had advanced the money out of borrowed funds but from its own sources for which no interest was claimed as a deduction. Even assuming but not admitting that a part of the advance against the share capital was made out of borrowed funds, it is beyond doubt that such introduction of funds were made out of commercial expediency and following the decision of the Supreme Court, no disallowance out of the interest claim should be called for. 23. At this point, the Hon'ble Bench had directed the AR to prove that the advance was made as a measure of commercial expediency, since, in the said decision, the Hon'ble Supreme Court had also said that it is not the case that in each & every issue, interest on borrowed loan should be allowed, if advances are made to a sister concern. For instance, if directors of a sister concern utilized the amount advanced to it by the assessee for their personal benefit, obviously, it cannot be said that such money was advanced as a measure of commercial expediency. The AR of the assessee had again relied on the sa....
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....hat till 31st March, 2002 (page 39 of the Paper Book) the financial figures were as under : Position of mobilization and deployment of funds (Amount in Rs. 000) Total liabilities 687.062 Total Assets 687.062 Sources of Funds Paid up Capital 128,500 Advance against issue of shares 198,150 Reserve & surplus 15,273 Secured loans 314,944 Applications of Funds Net Fixed Assets 453.626 Investments NIL Net Current Assets 453.626 Investments NIL Net Current Assets 23,508 Miscellaneous Expenditure NIL Accumulated Losses 179,733 27. On a perusal, it is apparent that the sister concern to which the funds were introduced had huge accumulated loss and was dependent on the holding company for its day to day operations and to pay interest on substantial amount of secured loans. 28. Considering the sizeable investments made, the assessee company had not other option but to make additional investment in order to protect its financial interest. There is no finding by the lower authorities that any fund was siphoned off by the sister concern. Moreover, from the annual accounts of the sister concern, it is evident....
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....ly furnished details in respect of the Agra and Udaipur unit, but no details have been furnished in respect of Jaipur Unit. According to AO, the assessee has debited Rs. 89,80,273/- under this head. And since the assessee has not furnished complete details as called for, the AO was pleased to make disallowance of 10% of total expenditure credited and disallowed Rs. 8,98,027/-. 15. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who was pleased to delete the same. 16. Aggrieved the revenue is before us. 17. We have heard both the parties and perused the records. At the outset it has been brought to our notice that the Tribunal in assessee's own case for AY 2002-03 has restricted the disallowance at 2% of the estimate. We note that in assessee's own case for AY 2003-04 the Tribunal has decided the issue as under: "38. In this ground the assessee had challenged the ad hoc disallowance of Rs. 7,78,744/- being 10% on advertising expenses. This ground is more or less similar to the ground no. 8 of the earlier year, i.e. ITA No. 724/Kol/2007. The AO had made the disallowance on the allegation that full details were not provided by the assessee while A.R had contended....