TaxTMI 
TaxTMI 
2025 (7) TMI 605
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....Amendment of Certain Provisions) Act (for short 'the TOLA')] issued under Section 148 of the Income Tax Act, 1961 (for short 'the Act') for re-opening of the Assessment Year 2013-14. 4. The brief facts of the case are as under: 4.1. The petitioner is a Private Limited Company engaged in providing security personnel and other security services and filed its return of income declaring total income at Rs. 12,98,81,890/- on 30th September, 2013 for Assessment Year 2013-14. 4.2. The case of the petitioner was selected for scrutiny and order under Section 143(3) of the Act was passed on 23rd March, 2016 determining total income of Rs.35,70,83,784/-. Being aggrieved, the petitioner had also preferred an Appeal before the CIT (Appeals). 4.3. The respondent-Assessing Officer thereafter issued a notice dated 06.04.2021 under Section 148 of the Act to re-open the assessment for Assessment Year 2013-14 under the provisions of the TOLA. 4.4. Thereafter, in view of the decision of the Hon'ble Supreme Court in case of Union of India Versus Ashish Agarwal & Others decided on 04.05.2022 and the directions issued under Article 142 of the Constitution of India, the respondent-Assessing....
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....uted the disallowance considering the Clause 3 of the Rule 8D(2) of the Income Tax Rules, 1962 (for short 'the Rules') and thereby, an amount of Rs. 7,92,023/- is computed being one half percent of the total investment pertaining to the expenses other than the interest expenses and therefore, at least there is an escapement to that extent. 6.2. It was submitted that the Assessing Officer has also come to the conclusion that the dis-allowance under Section 14A of the Act is required to be made as the mixed-up funds are being used for the business and investment activity. However, learned Senior Standing Counsel Mr. Karan Sanghani fairly submitted that the respondent-Assessing Officer has not taken into consideration the settled legal position as held by the Hon'ble Apex Court in case of the South Indian Bank Limited (Supra). 7. Having heard the learned advocates for the respective parties and considering the facts of the case, it would be germane to refer to the reasons recorded by the respondent-Assessing Officer as under : "Annexure-A Scrutiny of Balance Sheet, P/L 3CD report and computation of income revealed that assessee has not computed any disallowance....
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....43,33,050/- in shares of Haritasa Checkmate Electronics Pvt Ltd. Rs. 1,81,58,620/- in partnership Firm Checkmate Security Services. Rs. 3,37,38,280/-in partnership Firm Checkmate Apparels. The assessee has paid interest of Rs. 8,73,52,360/- during the year under consideration. As per balance sheet, assessee has total assets of Rs. 211,83,05,630 as on 31.03.2013. The foregoing para makes it clear that the company has borrowed funds, which is interest bearing. Though certain funds might been have taken for specific purposes by the assessee company but as the funds come to common pool or account, the same is used for the business and the investment purpose. In the case of the assessee, the mixed-up funds are being used for the business and the investment activities. Therefore, in case any interest-bearing fund is utilized for the investment purpose, the proportionate interest needs to be disallowed. Accordingly disallowance u/s 14A r.w.r., 8D of the Act of Rs. 80,27,304/- (as per supra) escaped taxation." 8. After considering the reply of the assessee, the Assessing Officer has also observed as under while passing the order under Section 148A(d) of the Act : ....
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....t is held as under : "17. In a situation where the assessee has mixed fund (made up partly of interest free funds and partly of interest-bearing funds) and payment is made out of that mixed fund, the investment must be considered to have been made out of the interest free fund. To put it another way, in respect of payment made out of mixed fund, it is the assessee who has such right of appropriation and also the right to assert from what part of the fund a particular investment is made and it may not be permissible for the Revenue to make an estimation of a proportionate figure. For accepting such a proposition, it would be helpful to refer to the decision of the Bombay High Court in Pr. CIT v. Bombay Dyeing & Mfg. Co. Ltd. [IT Appeal No. 1225 of 2015, dated 28-11-2017], where the answer was in favour of the assessee on the question, whether the tribunal was justified in deleting the disallowance under section 80M of the Act on the presumption that when the funds available to the assessee were both interest free and loans, the investments made would be out of the interest free funds available with the assessee, provided the interest free funds were sufficient to meet the i....