TaxTMI 
TaxTMI 
2022 (4) TMI 1123
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....on facts in deleting the addition of Rs. 2,28,23,930/- made by the assessing officer on account of disallowance u/s 14A of the Act even though the assessee company had investment of Rs. 58,72,88,120/- which yielded exempt income and the assessee has debited interest expense of Rs. 3,55,47,224/- on borrowed funds. 3. The Ld CIT(A) has erred in law and on facts in directing the Assessing Officer to delete the disallowance u/s 14A of the Act while computing books profits u/s under section 115JB of the Act." 3. Ground No. 1: Deletion of addition of Rs. 50,47,871 made by the assessing officer on account of disallowance of interest expenses under Section 36(1)(iii) of the Act is under challenge before us since the assessee has given interest free advance to various parties for acquiring immovable properties. 3. At the time of hearing of the instant appeal the representative of the revenue relied upon the order passed by the learned AO whereas the learned counsel appearing for the assessee submitted before us that this ground of appeal is squarely covered in favour of the assessee in assessee's own case for assessment year 2013-14, 2014-15 by the order passed by the Coordin....
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....e funds as against the advances made during the year under consideration and therefore the assesses case is squarely covered by several case laws including that of the jurisdictional High Court in the case of Gujarat State Fertilisers and Chemicals Ltd, reported in 358 ITR 323, CIT vs. Gujarat Narmada Valley Fertilisers Corporation Ltd, reported in 221 taxmann for 79 and CIT vs. Raghubir Synthetics Ltd, reported in 354 ITR 222. Furthermore it was observed that the assessee's case is squarely covered in assessee's own case for Assessment Years 2011-12, 2012-13, 2013-14 and 2014-15 wherein on the same facts the disallowance made by the learned AO has been deleted and on that basis relying upon the same the learned CIT(A) deleted the addition made against the assessee. 8. We have further considered the order passed by the Coordinate Bench in assessee's own case for Assessment Year 2013-14 and 2014-15 whereupon we find that the issue is identical and therefore, in our considered opinion the order passed by the Ld. CIT(A) in deleting the addition made by the Ld. Assessing Officer is just and proper so as to warrant interference. Therefore, the ground of appeal preferred by revenue is....
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....PMZ Developers 33431950 0 6. SKZ Realties 150553597 0 7. Priyal Hydro 787245 0 8. Safal Homes LLP 20913241 73377612 Total 587288119 700048031 2.2 The Ld. AO has not appreciated the fact that from the partnership firms and LLP, where the funds are invested and the company has received interest income of Rs. 172,84,784/- from partnership firms / LLP and share in profit / loss of Rs. 264,93,976/-. 12.3 The Ld. AO has not appreciated the fact that there are ample interest free funds with the appellant company, amounting to Rs. 63,22,59,453/- (Last year Rs. 63,76,88,389/-). The finding of such interest free funds are given on Pg. No. 3 para no. 3.2 of Assessment Order, the same is reproduced hereunder: Particulars Amount balance as on 31-03-201 5 (Rs.) Amount balance as on 31-03-201 4 (Rs.) Share Capital 10,00,000 10.00,000 Reserves 44,42,59,453 41,26,88,389 Interest Free Unsecured Loans 18,70,00,000 22,40,00,000 Total Free Funds 63,22,59,453 63,76,88,389 12.4 During the year, the capital contribution in partnership firms is reduced toRs. 58.72 crore again....
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....appellant also relied on certain judicial pronouncements which are as under: (i) CIT vs. Guiarat Industrial Development Corporation (2013) 218 Taxman 142 (Gui-HC) "Where sufficient interest free funds are available with assesses and when revenue had failed to establish link between borrowed fund and investment made by assessee in equity shares, addition made on account of disallowance by AO was not sustainable." (ii) CIT vs. Suzlon Enemy Ltd. (2013) 215 taxman 272 (Gui-HC) "When interest free own funds of assessee was many time more than investment made and no direct nexus was shown between interest bearing borrowed funds and investment in Indian subsidiaries, no disallowance u/3. 14A can be made out of interest expenditure." (iii) CIT vs. Gujarat Power Corporation (2013) 352ITR 583 (Gui-HC) "When the assessee did not invest borrowed fund for earning interest free income, provision of Section 14A of the Act cannot be applied for taxing interest on such borrowed funds." (iv) CIT vs. Deepak Mittal (2013) 361 ITR 131 (P&H-HC) "The AO had not brought on record any expense having been incurred by the assessee to ear....
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....ng paragraph is reproduced as under- "With respect to ground no.2, relating to disallowance of Rs. 23,14,254/- vis-a-vis the advances given for purchases of immovable property, the appellant has submitted a similar argument that sufficient interest free funds were available, as was observed by the AO himself. The appellant also relied on the following judgment by the Hon'ble Gujarat High Court namely: (a) CIT vs. GSFC Ltd 358ITR 0323 (Guj) (b) CIT vs. Gujarat Narmada Valley Fertilizers Co. Ltd. 221 Taxman 479 (c) CIT vs. Raghuvir Synthetics 354 ITR 222. (d) CIT vs. Reliance Utilities & Power Ltd. 313 ITR 340 4.2 The fundamental principle highlighted in these judgments, as pointed out by appellant, is that if there are funds available, both interest free and overdraft or loans, then the presumption would arise that the investments would be out of interest free funds available with the appellant, if the interest free funds were sufficient to make such investments. Further, it is not evident from the order u/s. 143(3) that such investment in two house properties is out of the interest bearing funds. Since substantial inter....