TaxTMI 
TaxTMI 
2019 (6) TMI 1760
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd turnkey erection of power transmission power lines. For Assessment Year 2011-12, the assessee filed its original return of income on 30.09.2011 declaring income of Rs.57,07,59,831/-, which was later revised to Rs. 77,70,52,980/- vide return filed on 23.02.2012. Similarly, for Assessment Year 2012-13, the assessee had filed its original return of income on 28.09.2012 declaring income of Rs. 28,92,22,000/- which was later revised to Rs.66,29,86,760/- vide return filed on 30.03.2013. The assessee's case for both these Assessment Years was selected for scrutiny. The assessments were concluded under section 143(3) of the Income Tax Act, 1962 (in short 'the Act') vide order dated 30.01.2014 for Assessment Year 2011-12, wherein the assessee's income was determined at Rs.81,58,61,394/- and for Assessment Year 2012-13 under section 143(3) of the Act vide order dated 13.02.2015 wherein the assessee's income was determined at Rs.71,31,44,382/-; consequent to certain additions / disallowances made by the Assessing Officer (AO). 2.2 Aggrieved by the orders of assessment dated 30.01.2014 for Assessment Year 2011-12 and dated 13.02.2015 for Assessment Year 2012-13, the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rovisions of sec. 14A of the Act were inapplicable to the facts of the appellant's case and therefore, the impugned disallowance made deserves to be deleted. 3. The learned CIT[A] is not justified in upholding a part of the disallowance made to the extent of the fresh advances made during the year to certain parties in terms of section 36[1][iii] rws 37 of the Act under the facts and in the circumstances of the appellant's case. 4. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies itself liable to be charged to interest u/s 234-B of the Act, which under the facts and in the circumstances of the appellant's case and the levy deserves to be cancelled. 5. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs. 3.2 We have heard the rival contentions of the learned AR for the assessee and the learned DR for Revenue; perused the material on record; in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... funds; far in excess of the aggregate value of investments made in subsidiaries and interest free loans given, and therefore, the ratio of the decision of the earlier Assessment Year 2010-11 (supra) would be applicable and consequently no disallowance u/R 8D(2)(ii) of the Rules was warranted. It was also argued that the disallowance u/Rule 8D(2)(iii), if any, ought to be restricted to the extent of exempt dividend income received on investments made, in terms of the decision of the Hon'ble Madras High Court in the case of Reddington (India) Ltd., reported in (2017) 77 taxmann.com 257 (Madras). The learned AR submitted that in view of the above reasons; the disallowance under section 14A of the Act r.w.r. 8D should be deleted. 7.2 Per contra, the learned DR vehemently placed reliance on the decision of the Hon'ble Apex Court in the case of Maxopp Investment Ltd., in 91 taxmann.com 154 (SC) and contended that the disallowance made by the AO needs to be upheld since, even in the case of the assessee, there was mixed funds and it cannot be conclusively established that the assessee has not used interest bearing funds for making investment. 7.3.1 In Rejoinder, the learned....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of CIT v. Raghuvir Synthetics Ltd (2013) 36 taxmann.com 275, wherein the High Court held that where huge funds were available without any interest liability with assessee and there was no evidence to hold that borrowed money was utilized for purposes of advance to its sister concerns, no disallowance of interest was warranted. We heard the rival submissions. We hold that section 14A is applicable even where the motive in acquiring the shares was to obtain controlling interest in the companies. The question in this case is whether interest bearing borrowings was utilized to acquire shares in the company and in making the advances etc. The assessee's share capital as on 31.3 2010 was at Rs.9.16 crores (Last year (Ly)Rs.9.16 crores) . Its Reserves & surplus as on 31.3.2010 was at Rs.469.71 crores (Ly Rs.429.2416 crores). Thus, it has Rs.478.87 crores of non- interest bearing funds. The impugned investments in the subsidiary during the year was at Rs14.00 crores, the increase in the closing work- in- progress was at Rs. 10,08,07,321 and the loan and advances given to associated concerns was at Rs. 17.96 crores. Thus, the total of them was at Rs 42.04crores only, which is m....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... income and therefore, where there is no exempt income earned in a year, there cannot be a disallowance of expenditure in relation to an assumed income. Respectfully following the aforesaid decision of the Hon'ble Madras High Court in the case of Redington (India) Ltd., we delete the disallowances made by the AO under section 14A r.w. Rule 8D(2)(iii) of the Rules since the assessee has not earned any exempt income during these two Assessment Years 2011-12 and 2012-13. Consequently, the grounds raised by the assessee are allowed. 8. Ground No.3 for Assessment Years 2011-12 and 2012-13 - Disallowance under section 36(1)(iii) of the Act 8.1 In this ground for Assessment Years 2011-12 and 2012-13 (supra), the assessee assails the orders of the CIT(A) in partly upholding the disallowances made to the extent of fresh advances made during the year to certain parties in terms of section 36(1)(iii) of the Act. In this regard, it was submitted by the learned AR that the assessee has sufficient interest free funds and hence no disallowance was called for. According to the learned AR, the CIT(A) held that advances given by the assessee to M/s. Brindavan Hydro Power Pvt. Ltd., M/s. Su....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... extent of advances made on which disallowances are made as under: 31.03.2011 (Rs.) 31.03.2012 (Rs.) Share Capital 91,69,23,000/- 91,69,23,000/- Reserves & Surplus 4,15,75,24,203/- 4,55,32,58,958/- Total Interest Free Funds 5,07,44,47,203/- 5,47,01,81,958/- Interest Free Loans to Related Parties 25,48,30,171/- 39,33,17,901/- 8.3.3 As can be seen from the above details, the assessee has interest free funds of Rs.5,07,44,47,203/- as on 31.03.2011 and the extent of interest free advances made to related / associated enterprises is Rs.25,48,30,171/-. The CIT(A) has deleted the interest disallowances on old advances given, which are covered by the decision of the Co-ordinate Bench of this Tribunal for Assessment Year 2010-11 (supra). We find that the very same related /associate enterprises are present for Assessment Year 2011-12 and therefore following the decision of the Co-ordinate Bench of the Tribunal in the assessee's own case for Assessment Year 2010-11 (supra), the entire interest disallowance made to the extent sustained by the CIT(A) is deleted for Assessment Year 2011-12. 8.3.4 For Assessment Year 2012-13, it is....