TaxTMI 
TaxTMI 
2025 (7) TMI 1494
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.... "On 27th June 2024, we have received the order of the Commissioner (Appeal) - NFAC in our case for the assessment year 2011-12. Being aggrieved by the said order we requested our tax department to prefer an appeal to the Hon'ble Appellate Tribunal. It undertook to do the needful soon after the rush of work of filing return of income and finalisation of audited accounts of the company. Our accounts got finalised and signed on 27th August 2024. A affidavit detailing the above facts is enclosed. These may kindly placed before the Hon'ble Appellate Tribunal for condonation of the short delay in submission of the appeal." 1.2. Considering the application for condonation of delay and the reasons stated therein, we are satisfied that the assessee had a reasonable and sufficient cause and was prevented from filing the instant appeal within statutory time limit. We, therefore, condone the delay and admit the appeal for A.Y. 2011-12 for adjudication. 2. Since the issues in all the appeals are common except for an additional issue in A.Y. 2011-12, all the appeals were heard together and are being decided vide this common order for the sake of convenience and brevit....
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....t of Rs.1,02,203/- as per section 115JB of the Act. The case was then processed u/s 143(1) of the Act on 25.05.2011 by the CPC, Bengaluru, Bengaluru on the same amount of income. Subsequently, the case of the assessee was selected for scrutiny through CASS and statutory notices u/s 143(2) and 142(1) of the Act were served upon the assessee. the Assessing Officer (hereinafter referred to as Ld. 'AO') completed the assessment vide order u/s 143(3) of the Act on 21.03.2013, assessing the total income at 'Nil' after allowing set off of brought forward losses of AY 2009-10 and determining the book profits u/s 115JB of the Act at Rs.96,77,083/- after making following disallowances/additions to the total income of the assessee: a) Disallowance of expenditure under section 14A r.w.r 8D of the I.T. Rules, 1962 : Rs. 95,85,590/- b) Disallowance u/s 40a(ia) of the Act : Rs. 2,13,270/- c) Addition u/s 2(24)(x) r.w.s 36(1)(va) of the Act : Rs. 35,905/- d) Disallowance of Donation expenses : Rs. 4,09,601/- 4. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A), who deleted the disallowance u/s 14A of t....
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........." Such law has been accepted by the Ld. CIT(A) as well at page 16 of his order. However, he denies such relief by relying on amendment brought in by Finance Act, 2022 to section 14A stating that even in case of no exempt income, section 14A disallowance is to be considered as per Rule 8D. 3.1.3 That the Hon'ble Calcutta High Court in case of Principal Commissioner of Income-tax (Central) v. Avantha Realty Ltd. [2024] 164 taxmann.com 376 (Calcutta) following the Hon'ble Delhi High Court in case of Pr. CIT (Central) v. Era Infrastructure (India) Ltd. [2022] 141 taxmann.com 289/288 Taxman 384/448 ITR 674 (Delhi) (para 14) has dismissed the appeal filed by the Revenue and held that the Explanation inserted to Section 14A by Finance Act, 2022 will be applicable prospectively. The operative portion of the decision in Avantha Realty Ltd. (supra) reads as under: "Substantial questions Nos. D & E pertain to the deletion of the disallowance made under Section 14A of the Act. The learned Tribunal took note of the decision of the High Court of Delhi in Era Infrastructure (India) Ltd. (supra), which had taken note of the decision in the case of C....
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....ration. We find no error in such conclusion arrived at by the learned Tribunal." 7. We have considered the submissions made, gone through the facts of the case and perused the record and the order of the Ld. CIT(A). Respectfully following the decision of the Hon'ble Jurisdictional High Court in the case of Shalimar Pellet Feeds Ltd. (supra) and Avantha Realty Ltd. (supra), we reverse the finding of the Ld. CIT(A) in para 7.11 that the disallowance under Rule 8D(2)(iii) shall be @0.5% of average value of all equity investments irrespective of the fact whether these investments actually yielded any exempt income or not during the year and direct the Ld. AO to consider only the investments which yielded exempt income and delete the rest of the disallowance. The assessee shall file the relevant details before the Ld. AO in this regard. Hence, Ground Nos. 1 & 2 of the appeal for A.Y. 2010-11 are allowed. 8. Since the Ground of appeals for A.Y. 2013-14 are also similar to the grounds of appeal for A.Y. 2010-11, the Ld. AO is directed to follow the directions in para 7 of this order and allow the consequential relief to the assessee. 9. In the result the appeals of the assessee f....
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.... presumption would arise that investments would be out of interest free funds generated or available with the company." Further support may be drawn from: * J.K. Industries Ltd. v. CIT [1999] 238 ITR 820 (Cal.)- Hon'ble Calcutta HC * S.P. Jaiswal Estates (P.) Ltd. vs. ACIT [2013] 140 ITD 19 (Kolkata Trib.) (TM) Therefore, in the absence of any nexus established by the AO between the borrowed funds and the advances, the presumption must operate in assessee's favour. 2. Loans Taken Were Not Used for the Advances It is respectfully submitted that the term loan of Rs.2.74 crores and working capital loan of Rs.7.95 crores were taken specifically for export financing purposes. The nature of these borrowings and their restricted end-use prohibits their deployment for interest-free advances. Thus, the borrowed funds were exclusively used for business purposes, and not for any alleged diversion. This is evident from the assessee's balance sheet and audited financials, which clearly demonstrate the purpose and usage of such funds. Hence, no disallowance can be made under section 36(1)(iii) as: ....