Nahar Spinning Mills Ltd., Ludhiana v. ACIT, C-7, Ludhiana

ITA 1160/CHANDI/2019 | 2014-2015
Pronouncement Date: 06-05-2021 | Result: Allowed

Appeal Details

RSA Number 116021514 RSA 2019
Assessee PAN AAACN5710D
Bench Chandigarh
Appeal Number ITA 1160/CHANDI/2019
Duration Of Justice 1 year(s) 8 month(s) 14 day(s)
Appellant Nahar Spinning Mills Ltd., Ludhiana
Respondent ACIT, C-7, Ludhiana
Appeal Type Income Tax Appeal
Pronouncement Date 06-05-2021
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 06-05-2021
Date Of Final Hearing 09-02-2021
Next Hearing Date 09-02-2021
Last Hearing Date 27-01-2021
First Hearing Date 16-12-2020
Assessment Year 2014-2015
Appeal Filed On 22-08-2019
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH B CHANDIGARH BEFORE SHRI N.K. SAINI VICE PRESIDENT & SHRI R.L. NEGI JUDICIAL MEMBER ./ ITA NOS. 1160/CHD/2019 / ASSESSMENT YEAR : 2014-15 NAHAR SPINNING MILLS LTD. 373 INDUSTRIAL AREA-A LUDHIANA. ASSTT. COMMISSIONER INCOME TAX CIRCLE-7 AAYAKAR BHAWAN RISHI NAGAR LUDHIANA. ./PAN NO: AAACN5710D /APPELLANT /RESPONDENT HEARING THROUGH VIDEO CONFERENCING /ASSESSEE BY : SHRI NAVDEEP SHARMA ADVOCATE ! / REVENUE BY SH. ASHOK KUMAR ADDL. CIT ' # $ /DATE OF HEARING : 09.02.2021 %&'( $ /DATE OF PRONOUNCEMENT : 06.05.2021 /ORDER PERR.L. NEGI JUDICIAL MEMBER: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST T HE ORDER DATED 01/06/2019 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL)-3 (HEREINAFTER REFERRED TO AS THE LD. CIT( A) WHEREBY THE LD. CIT(A) PARTLY ALLOWED THE APPEAL FILED BY THE ASSES SEE AGAINST THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE INCOME TA X ACT 1961 (FOR SHORT THE ACT) FOR THE ASSESSMENT YEAR2014-1 5. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE EN GAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF COTTON/ BL ENDED YARN CLOTH AND GARMENTS FILED ITS RETURN OF INCOME FOR THE YE AR UNDER 2 ITA NO. 1160/CHD/2019 ASSESSMENT YEAR 2014-15 CONSIDERATION DECLARING TOTAL INCOME OF RS. 137 51 95 480/-. THE CASE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY THE A.O. PASSED ASSESSMENT ORDER U/S 143(3) OF THE ACT DETERMINING TOTAL INCOME OF THE ASSESSEE AT RS. 138 36 88 165/- UNDER THE NORMA L PROVISIONS OF THE ACT AFTER MAKING ADDITION OF RS. 22 44 117/- O N ACCOUNT OF DISALLOWANCE U/S 14A READ WITH RULE 8D OF THE INCOM E TAX RULES 1962 (IN SHORT THE RULES) ADDITION OF RS. 57 26 9 85/- ON ACCOUNT OF DISALLOWANCE U/S 36(1)(III) OF THE ACT AND ADDITION OF RS. 5 21 583/- ON ACCOUNT OF DISALLOWANCE ON UNPAID COMMISSION. FU RTHER THE A.O. DETERMINED THE BOOK PROFIT OF THE ASSESSEE AT RS. 2 05 33 02 260/-. 3. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEF ORE THE LD. CIT(A). THE LD. CIT(A) RESTRICTED THE ADDITION ON A CCOUNT OF DISALLOWANCE U/S 14A READ WITH RULE 8D OF THE RULES TO THE AMOUNT CLAIMED AS EXEMPT U/S 10(34) OF THE ACT CONFIRMED THE ADDITION OF RS. 57 26 985/- U/S 36(1)(III) OF THE ACT. STILL AG GRIEVED THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 4. THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER P ASSED BY THE LD. CIT(A) ON THE FOLLOWING GROUNDS: 1. A) THAT THE WORTHY CIT(A)-3 LUDHIANA ERRED IN L AW AND ON FACTS IN UPHOLDING THE APPLICABILITY OF RULE 8D IN SPITE OF FACT THAT THE APPELLANT ITSELF COMPUTED THE DISALLOWANCE ON PROPORTIONATE BASIS U/S 14A OF THE ACT. DIRECTIONS MAY BE GIVEN TO COMPUTE THE DISALLOWANCE U/S 14A ON PROPORTIONATE BASIS AS HELD IN APPELLANT OWN CASE I N ASSESSMENT YEAR 2010-11. 3 ITA NO. 1160/CHD/2019 ASSESSMENT YEAR 2014-15 B) WITHOUT PREJUDICE & IN ALTERNATIVE WORTHY CIT(A )-3 LUDHIANA I) FURTHER ERRED IN LAW AND ON FACTS IN NOT GIVING DIRECTIONS TO COMPUTE THE DISALLOWANCE BY TAKING THE AVERAGE TOTAL INVEST MENT OF RS. 2 60 58 554/- ON WHICH THE DIVIDEND EXEMPT INCOME A CCRUED INSTEAD OF TOTAL AVERAGE INVESTMENTS OF RS. 6 85 93 500/-. DIRECTIONS BE GIVEN TO COMPUTE THE DISALLOWANCE BY CONSIDERING ONLY THOSE INVESTMENTS ON WHICH EXEMPT INCOME IS EARNED AS HELD BY HON'BLE ITAT SPECIAL BENCH IN VIREET INVESTMENT LTD ...165 ITD 0027 (SB). II)FURTHER ERRED IN LAW AND ON FACTS IN NOT GIVING DIRECTIONS TO COMPUTE THE DISALLOWANCE U/S 14A READ WITH RULE 8D BY EXCL UDING INTEREST PAID ON TERM LOAN OF RS 27 51 22 000/- INTEREST ON WORK ING CAPITAL LOAN OF RS. 36 23 57 000/- AS WELL AS OTHER BORROWING COST OF RS. 67 42 000/- AND INTEREST PAID TO PARTIES RS 5 05 000/- FOR BUSI NESS PURPOSES WHICH ARE DIRECTLY ATTRIBUTABLE TO BUSINESS RECEIPTS SUBJ ECTED TO TAX. DIRECTIONS BE GIVEN TO COMPUTE THE DISALLOWANCE BY EXCLUDING THE ABOVE-MENTIONED INTEREST EXPENSES WHILE COMPUTING D ISALLOWANCE U/S 14A READ WITH RULE 8D. III) FURTHER ERRED IN LAW AND ON FACTS IN NOT GIVI NG DIRECTIONS TO COMPUTE THE DISALLOWANCE U/S 14A READ WITH RULE 8D BY EXCLUDING PROPORTIONATE ADMINISTRATIVE EXPENSES OR TOWARDS EX PENSES DIRECTLY RELATABLE TO EARN THE EXEMPT INCOME. DIRECTIONS BE GIVEN NOT TO ALLOCATE ANY ADMINISTRAT IVE EXPENSES TOWARDS EXPENSES DIRECTLY RELATABLE TO EARN THE EXE MPT INCOME SINCE 0.5% OF THE TOTAL INVESTMENTS HAVE ALREADY BEEN CON SIDERED FOR COMPUTING DISALLOWANCE U/S 14A R.W.R.8D. 2. THAT THE WORTHY CIT(A)-3 LUDHIANA ERRED IN LAW AND ON FACTS IN UPHOLDING THE ADDITION/DISALLOWANCE OF RS. 57 26 985 BEING DI SALLOWANCE OF CC ACCOUNT FOR PURCHASE OF FIXED ASSETS. DIRECTIONS BE GIVEN TO DELETE THE SAID DISALLOWANCE AS THE APPELLANT HAS SUFFICIENT OWN FUNDS IN THE SHAPE OF CAPITAL AND RE SERVES. 5. AT THE OUTSET THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS COVERED IN FAV OUR OF THE ASSESSEE BY THE DECISION OF THE ITAT CHANDIGARH BENCH RENDER ED IN THE CASE OF OSWAL WOOLEN MILLS VS ACIT ITA NO. 37/CHD/2015 FOR THE A.Y. 4 ITA NO. 1160/CHD/2019 ASSESSMENT YEAR 2014-15 2010-11. IN THE SAID CASE THE AUTHORITIES BELOW HA D MADE ADDITION ON ACCOUNT OF DISALLOWANCE U/S 14A COMPUTED APPLYIN G RULE 8D. DURING THE COURSE OF ARGUMENTS THE ASSESSEE FURNIS HED THE WORKING OF THE DISALLOWANCE U/S 14A READ WITH RULE 8D OF TH E RULES ON PROPORTIONATE BASIS CONTENDING THAT THE AO HAS WRON GLY APPLIED THE RULE 8D.THE TRIBUNAL AFTER HEARING THE RIVAL CONTEN TIONS OF THE PARTIES SET ASIDE THE ORDER PASSED BY THE LD. CIT( A) CONFIRMING THE ADDITION ON ACCOUNT OF DISALLOWANCE COMPUTED BY THE AO U/S 14A READ WITH RULE 8D AND DIRECTED THE AO TO RESTRICT T HE ADDITION TO THE WORKING GIVEN BY THE ASSESSEE ON PROPORTIONATE BASI S. THE LD. COUNSEL FURTHER SUBMITTED THAT SINCE THE FACTS OF T HE CASE AND THE ISSUES INVOLVED IN THE AFORESAID CASE ARE IDENTICAL TO THE FACTS AND THE ISSUES INVOLVED IN THE PRESENT CASE THE FINDING S OF THE LD. CIT(A) ARE CONTRARY TO THE DECISION OF THE JURISDICTIONAL TRIBUNAL. THEREFORE THE IMPUGNED ORDER IS LIABLE TO BE SET ASIDE. THE L D. COUNSEL INVITED OUR ATTENTION TO THE WORKING OF DISALLOWANCE PLACED ON RECORD IN THE PRESENT CASE AND SUBMITTED THAT SINCE THE WORKING I S IN ACCORDANCE WITH THE DIRECTIONS GIVEN BY THE TRIBUNAL ON IDENTI CAL SET OF FACTS IN THE CASE OF OSWAL WOOLEN MILLS VS ACIT AFORESAID THE IMPUGNED ORDER MAY BE SET ASIDE AND THE AO MAY BE DIRECTED T O RESTRICT THE ADDITION TO THE AMOUNT COMPUTED BY THE ASSESSEE IN ITS WORKING. WITHOUT PREJUDICE THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DISALLOWANCE SHOULD HAVE BEEN COMPUTED BY TAKIN G AVERAGE 5 ITA NO. 1160/CHD/2019 ASSESSMENT YEAR 2014-15 INVESTMENT ON WHICH DIVIDEND INCOME ACCRUED INSTEAD OF AVERAGE OF THE TOTAL INVESTMENT. THE LD. COUNSEL RELIED ON THE DECISION OF SPECIAL BENCH OF DELHI TRIBUNAL IN THE CASE OF ACIT VS VIREET INVESTMENT LTD. ITA NO. 165 ITD 07 (SPECIAL BENCH) DECISION OF CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF RAMESH SOFT SOLUTIONS PVT. LTD. VS ACIT ITA NO. 477/CHD/2015 DATED 14/08/2015 (CHANDIGARH) AND NAHAR POLYFILS LTD. ITA NO. 76/CHD/2017. THE LD. COUNSEL FURTHER CONTENDED THAT THE DISALLOWANCE SHO ULD HAVE BEEN COMPUTED AFTER EXCLUDING INTEREST ON WORKING CAPITA L AND TERMED LOANS. TO SUBSTANTIATE HIS CONTENTION THE LD. COUN SEL RELIED ON THE JUDGMENTS OF THE HON'BLE SUPREME COURT IN THE CASE OF IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO LTD. VS. DCIT 394 I TR 449 (SC) JUDGMENT OF THE HONBLE HIGH COURT OF PUNJAB AND HARYANA IN THE CAS E OF CIT VS. MAX INDIA LTD. 388 ITR 81 (PB. & HARYANA.) DECISIONS OF THE MUMBAI BENCHES OF THE TRIBUNAL IN THE CASE OF BENNETT COLEMAN & CO LTD. VS. ADDL. CIT 168 ITD 631 (MUM) AND HIGH TECH ENGG. VS. ITO 164 ITD 94 (MUM.) AND THE DECISION OF THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. AVON CYCLES ITA NO. 931/CHD/2013 . 6. ON THE OTHER HAND THE LD. DEPARTMENTAL REPRESEN TATIVE (DR) SUPPORTING THE ORDER PASSED BY THE LD. CIT(A) SUBMI TTED THAT SINCE THE AO HAD COMPUTED THE DISALLOWANCE IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THE RULES THE LD. CIT HA S RIGHTLY UPHELD THE ADDITION MADE BY THE AO. HOWEVER THE LD. DR AD MITTED THAT IN THE CASE OF OSWAL WOOLEN MILLS LTD. VS. ACIT (SUPRA) THE 6 ITA NO. 1160/CHD/2019 ASSESSMENT YEAR 2014-15 JURISDICTIONAL TRIBUNAL HAS SET ASIDE THE ORDER PAS SED BY THE LD. CIT(A) UPHOLDING THE DISALLOWANCE COMPUTED UNDER SE CTION 14A READ WITH RULE 8D IN THE SIMILAR SET OF FACTS AND DIRECT ED THE AO TO RESTRICT THE DISALLOWANCE TO THE AMOUNT COMPUTED BY THE ASSESSEE ON PROPORTIONATE BASIS. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND GONE THROUGH THE MATERIAL ON RECORD INCLUDING THE CASES RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE AND THE LD. D.R. AS POINTED OUT BY THE LD. COUNSEL THE COORDINATE BENCH OF THE TRIBUNAL HAS DEALT WITH THE IDENTICAL ISSUE IN CASE OF OSWAL WOOLEN MILLS LTD. VS. ACIT (SUPRA)AND DIRECTED THE AO TO RESTRICT THE DISALLO WANCE U/S 14A OF THE ACT TO PROPORTIONATE AMOUNT COMPUTED BY THE AS SESSEE. THE FINDINGS OF THE COORDINATE BENCH READ AS UNDER: - 4. BEING AGGRIEVED BY THE ABOVE ORDER OF THE ASSES SING OFFICER THE ASSESSEE PREFERRED APPEAL BEFORE THE L D. CIT(A). IT WAS PLEADED BEFORE THE LD. CIT(A) THAT THE FUNDS FR OM WHICH THE INVESTMENTS WERE MADE WERE MIXED FUNDS. THAT THE AS SESSEE WAS POSSESSED OF SUFFICIENT OWN / INTEREST FREE FUNDS T O MEET THE INVESTMENT IN QUESTION. THAT AS PER LAW LAID DOWN B Y THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF BRIGHT EN TERPRISES LTD. VS CIT (ITA NO. 224 OF 2013) DATED 24.7.2015 (SUPRA) WHEREIN IT HAS BEEN HELD THAT IF THERE ARE INTEREST FREE FUNDS AVAILABLE TO MEET THE INVESTMENT A PRESUMPTION WOULD ARISE THAT INVESTMENT HAD BEEN MADE OUT OF THE INTEREST FREE FUNDS GENERA TED OR AVAILABLE WITH THE COMPANY THEREFORE NO INTEREST DISALLOWANCE WAS ATTRACTED. IT WAS ALSO PLEADED THAT THE ASSESSE E HAD NOT INCURRED ANY EXPENSES OUT OF THE ADMINISTRATIVE EXP ENDITURE FOR THE INVESTMENT YIELDING DIVIDEND INCOME. THAT THE ASSES SEE MADE SUO MOTU DISALLOWANCE OF ADMINISTRATIVE EXPENSES INCURR ED VIS-A-VIS TOTAL INCOME EARNED BY THE ASSESSEE. HOWEVER THE LD. CIT(A) DID NOT AGREE WITH THE ABOVE CONTENTION OF THE ASSESSEE AND UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 5. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED A CHART TO SHOW THAT THE ASSESSEE WAS HAV ING SUFFICIENT INTEREST FREE OWN FUNDS IN THE SHAPE OF CAPITAL RE SERVES & SURPLUS 7 ITA NO. 1160/CHD/2019 ASSESSMENT YEAR 2014-15 AND CASH ACCRUAL TO MEET THE INVESTMENTS IN QUESTIO N. A PERUSAL OF THE SAID CHART REVELS THAT THE TOTAL CAPITAL RESERV ES AND SURPLUS OF THE ASSESSEE DURING THE FINANCIAL YEAR UNDER CONSID ERATION 2009-10 WERE AT RS. 19405.71 LACS AND THE TOTAL CASH ACCRUA LS OF THE ASSESSEE DURING THE YEAR WERE AT RS. 11071.90 LACS. THE TOTAL INVESTMENT DURING THE YEAR INCLUDING THE OWN OLD IN VESTMENTS WERE ONLY AT RS. 5809.29 LACS WHICH SHOWS THAT THE OWN / INTEREST FREE FUNDS OF THE ASSESSEE WERE SUFFICIENT TO MEET THE I NVESTMENTS. THE ISSUE IS THUS COVERED BY THE VARIOUS DECISION S OF THE HON'BLE HIGH COURTS INCLUDING THAT OF THE HON'BLEJURISDICTI ONAL HIGH COURT IN BRIGHT ENTERPRISES LTD VS CIT (ITA NO. 224 OF 2013) DATED 24.7.2015 WHEREIN IT HAS BEEN HELD THAT IF ASSESS EE HAS FUNDS / INTEREST FREE FUNDS AVAILABLE WITH IT TO MAKE INVES TMENT THE PRESUMPTION WILL BE THAT INVESTMENT MADE BY THE ASS ESSEE IS OUT OF OWN FUNDS. THE ISSUE IS ALSO SQUARELY COVERED BY THE RECENT DECISION OF THE HON'BLE SUPREME COURT IN CIT (LTU) VS. RELIANCE INDUSTRIES LTD. [2019] 410 ITR 466 (SC). WE THER EFORE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) O N THIS ISSUE. IN VIEW OF THE ABOVE NO DISALLOWANCE OF INTEREST E XPENDITURE IS ATTRACTED IN THIS CASE. 6. SO FAR AS THE ADMINISTRATIVE EXPENSES ARE CONCER NED THE ASSESSEE HAS GIVEN A SCIENTIFIC FORMULA FOR CAL CULATING THE DISALLOWANCE OUT OF ADMINISTRATIVE EXPENSES. HOWEVE R WE FIND THAT THE ASSESSEE WHILE TAKING THE TOTAL ADMINISTRATIVE EXPENSES HAS NOT CONSIDERED THE PERSONAL EXPENSES AND OTHER ALLOWANC ES. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE BEFORE U S HAS SUBMITTED ANOTHER CHART WHEREIN THE PERSONNEL EXP ENSES AND OTHER ALLOWANCES HAVE BEEN INCLUDED AND THEREBY THE PROPORTIONATE OF DISALLOWANCE OUT OF ADMINISTRATIVE EXPENSES HAS BEEN COMPUTED AS UNDER: - DISALLOWANCE U/S 14A INCASE OF REGULAR COMPUTATION AMOUNT (IN RS.) 1.AMOUNT OF DIVIDEND INCOME 1065 6014 2. OPERATING INCOME 6336 864325 3 % OF DIVIDEND INCOME 0.00168 4. AMOUNT OF EXPENSES 556724538 5. PROPORTIONATE AMOUNT OFDISALLOWANCE OF EXPENSED TO EARN DIVIDEND 936183 DETAILS OF EXPENSES A . INTEREST PAID TO 21202161 8 ITA NO. 1160/CHD/2019 ASSESSMENT YEAR 2014-15 OTHERS B . ADMINISTRATIVE EXPENSES 130240267 C . PERSONAL EXPENSES AND OTHER ALLOWANCES 405282110 556724538 7. NONE OF THE LOWER AUTHORITIES HAVE POINTED OUT A NY DEFECT IN THE COMPUTATION OF PROPORTIONATE DISALLOW ANCE COMPUTED BY THE ASSESSEE EXCEPT THAT CERTAIN PART OF THE ADM INISTRATIVE EXPENSES WERE NOT TAKEN INTO CONSIDERATION WHICH HA S BEEN TAKEN INTO CONSIDERATION IN THE COMPUTATION MADE ABOVE. EVEN THE ASSESSEE HAS CLAIMED THAT IT HAS NOT INCUR RED ANY ADMINISTRATIVE EXPENSES FOR EARNING OF TAX-EXEMPT I NCOME. THE ASSESSING OFFICER IN THIS RESPECT HAS NOT RECORDED ANY DISSATISFACTION TAKING INTO CONSIDERATION THE ACCOU NTS OF THE ASSESSEE. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. 328 ITR 81 HAS HELD THAT U NDER SECTION 14A OF THE ACT RESORT CAN BE MADE TO RULE 8D OF TH E INCOME TAX RULES FOR DETERMINING THE AMOUNT OF EXPENDITURE IN RELATION TO EXEMPT INCOME IF THE AO IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE IN RESPECT OF SUCH E XPENDITURE. THE SATISFACTION OF THE ASSESSING OFFICER HAS TO BE ARRIVED AT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. SUB SECTION (2) DOES NOT IPSO FACTO ENABLE THE ASSESSING OFFICER TO APPLY THE METHOD PRESCRIBED BY THE RULES STRAIGHTAWAY WITHOUT CONSIDERING WHETHER THE CLAIM MADE BY THE ASSESSEE IN RESPECT O F SUCH EXPENDITURE IS CORRECT. THE SATISFACTION OF THE ASS ESSING OFFICER MUST BE ARRIVED AT ON AN OBJECTIVE BASIS. IN A SITU ATION WHERE THE ACCOUNTS OF THE ASSESSEE FURNISH AN OBJECTIVE BASIS FOR THE ASSESSING OFFICER TO ARRIVE AT A SATISFACTION IN RE GARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE THERE WOU LD BE NO WARRANT FOR TAKING RECOURSE TO THE METHOD PRESCRIBE D BY THE RULES. AN OBJECTIVE SATISFACTION CONTEMPLATES A NOTICE TO THE ASSESSEE AN OPPORTUNITY TO THE ASSESSEE TO PLACE ON RECORD ALL THE RELEVANT FACTS INCLUDING HIS ACCOUNTS AND IN THE EVENT THAT HE COMES TO THE CONCLUSION THAT HE IS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE. WE MAY FURTHER OBSERVE THAT THE HON'BLE DELHI HIGH COURT IN A RECENT DECISION HAS FURTHER GIVEN A SIMILAR VIEW IN THE CASE OF 'CIT VS. TAIKISHA ENGINEERING INDIA LTD.' (SUPRA) AND HA S HELD THAT THE AO HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE IS REQUIRED TO RECORD HIS SATISFACTION THAT THE SELF OR VOLUNTARIL Y EXPENDITURE OFFERED BY THE ASSESSEE OR CLAIM THAT NO EXPENDITUR E HAS BEEN INCURRED BY THE ASSESSEE IN RELATION TO EARNING OF EXEMPT INCOME WAS NOT CORRECT OR THE SAME WAS UNSATISFACTORY ON E XAMINATION OF THE ACCOUNTS OF THE ASSESSEE. WITHOUT RECORDING SUC H A SATISFACTION HE CANNOT PROCEED TO APPLY RULE 8D FO R THE COMPUTATION OF DISALLOWANCE UNDER SECTION 14A. HOW EVER AS 9 ITA NO. 1160/CHD/2019 ASSESSMENT YEAR 2014-15 OBSERVED ABOVE IN THE CASE IN HAND THE ASSESSING OFFICER HAS NOT FOLLOWED THE GUIDELINES OF OBJECTIVE SATISFACTION A S LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODRE J & BOYCE (SUPRA) WHILE MAKING THE DISALLOWANCE. NEITHER THE ASSESSING OFFICER NOR THE LD. CIT(A) HAS POINTED OUT ANY DEFE CT IN THE WORKING GIVEN BY THE ASSESSEE IN COMPUTING SUO MOTU DISALLOWANCE EXCEPT THAT A CERTAIN PART OF TAX RELATING TO THE P ERSONNEL EXPENDITURE AND OTHER ALLOWANCES WERE NOT TAKEN INT O CONSIDERATION. IN THE WORKING GIVEN BEFORE US AS R EPRODUCED ABOVE WHEREBY THE PROPORTIONATE AMOUNT OF DISALLO WANCE OF EXPENDITURE TO EARN DIVIDEND INCOME HAS BEEN COMPUT ED AT RS. 9 36 183/- BY INCLUDING THE PERSONNEL EXPENDITURE A ND CERTAIN OTHER EXPENSES AS NOTED ABOVE. IN VIEW OF THIS TH E DISALLOWANCE OF ADMINISTRATIVE EXPENSES IS RESTRICTED TO RS. 9 3 6 183/-. HOWEVER THE ASSESSEE WILL GET THE BENEFIT / SET OF F AT THE SUO MOTU DISALLOWANCE OFFERED BY THE ASSESSEE IN THE RETURN OF INCOME AT RS. 1 33 928/- AND ACCORDINGLY THE ADDITION IS RESTRICT ED TO RS. 8 02 255/-. 8. IN THE SAID CASE ASSESSEE HAD RAISED THE IDENTICA L GROUND IN ITS APPEAL BEFORE THE TRIBUNAL AS THE LD. CIT(A) HAD CONFIRMED THE DI SALLOWANCE U/S 14A OF THE ACT COMPUTED BY THE AO UNDER RULE 8D OF THE RULES. IN R ESPECT OF DISALLOWANCE UNDER RULE 8D(II) THE CONTENTION OF THE ASSESSEE WAS THA T IT HAD SUFFICIENT OWN INTEREST FREE FUNDS TO MEET THE INVESTMENT IN QUESTION. CONT ENTION OF THE ASSESSEE IN RESPECT OF DISALLOWANCE UNDER RULE 8D(III) WAS THAT IT HAD NOT INCURRED ANY ADMINISTRATIVE EXPENSES FOR EARNING EXEMPT INCOME. SINCE THE AO HA D NOT RECORDED ANY DISSATISFACTION TAKING INTO CONSIDERATION THE ACCOU NTS OF THE ASSESSEE THE COORDINATE BENCH DIRECTED THE AO TO RESTRICT THE DISALLOWANCE TO THE PROPORTIONATE AMOUNT COMPUTED BY THE ASSESSEE AFTER INCLUDING THE PERSON AL EXPENDITURE AND CERTAIN OTHER EXPENSES. IN THE PRESENT CASE ALSO THE CONTENTION OF THE LD. COUNSEL IS THAT THERE IS NO CHANGE IN THE FACTS OF THE PRESENT CASE AND THE ASSESSEE HAS SUBMITTED THE WORKING IN THIS CASE IN ACCORDANCE WITH THE ORDER P ASSED BY THE TRIBUNAL IN THE CASE DISCUSSEDABOVE. 10 ITA NO. 1160/CHD/2019 ASSESSMENT YEAR 2014-15 9. THE LD. DR DID NOT CONTROVERT THE CONTENTION OF THE LD. COUNSEL THAT THERE IS NO MATERIAL CHANGE IN THE FACTS OF THE PRESENT CASE . HOWEVER DURING THE COURSE OF ARGUMENTS THE LD. DR SUBMITTED THAT EVEN IF THE DI SALLOWANCE IS TO BE COMPUTED AS PER THE ORDER OF THE TRIBUNAL RENDERED IN THE CASE OF OSWAL WOOLEN MILLS (SUPRA) THE WORKING SUBMITTED BY THE ASSESSEE CANNOT BE ACC EPTED AS CORRECT WITHOUT VERIFYING THE SAME BY THE AO. ACCORDINGLY THE LD. DR SUBMITTED THAT THE ISSUE MAY BE SENT BACK TO THE AO FOR DETERMINING THE DISALLOW ANCE CONSIDERING THE PLEA OF THE ASSESSEE THAT THE ISSUE INVOLVED IS COVERED BY THE ORDER OF THE TRIBUNAL. THE ASSESSEE HAS PLACED ON RECORD THE WORKING OF PROPOR TIONATE DISALLOWANCE AFTER INCLUDING THE PERSONAL EXPENDITURE. UNDER THESE CIR CUMSTANCES WE DO NOT FIND ANY REASON TO TAKE A DIFFERENT VIEW IN THIS ASSESSMENT YEAR. HENCE RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH RENDERED IN AS SESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010-11 WE SEND THIS ISSUE BACK TO THE AO FOR DETERMINING THE DISALLOWANCE ON PROPORTIONATE BASIS IN ACCORDANCE W ITH THE DIRECTION GIVEN BY THE COORDINATE BENCH IN THE CASE OF OSWAL WOOLEN MILLS LTD. VS. ACIT (SUPRA) OR TO RESTRICT THE DISALLOWANCE TO THE AMOUNT COMPUTED IN WORKING FURNISHED BY THE ASSESSEE IF FOUND IN ACCORDANCE WITH THE ORDER OF T HE TRIBUNAL. 10. SINCE WE HAVE ALLOWED THE MAIN GROUND OF THE A PPEAL OF THE ASSESSEE FOR STATISTICAL PURPOSES AND SEND THE ISSUE BACK TO THE AO FOR FURTHER NECESSARY ACTION THE GROUNDS RAISED BY THE ASSESSEE WITHOUT PREJUDI CE TO THE MAIN GROUND DO NOT REQUIRE ADJUDICATION. 11. VIDE GROUND NO. 2 THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN AFFIRMING THE DISALLOWANCE OF INTEREST AMOUNTING TO RS. 57 26 985/-OUT OF CC 11 ITA NO. 1160/CHD/2019 ASSESSMENT YEAR 2014-15 ACCOUNT FOR PURCHASE OF FIXED ASSETS. THE LD. COUNS EL SUBMITTED THAT SINCE THE ASSESSEE HAD OWN SUFFICIENT FUNDS IN THE SHAPE OF CAPITAL AND RESERVES AND INTERNAL ACCRUALS THE LD. CIT(A) HAS W RONGLY CONFIRMED THE SAID ADDITION. THE LD. COUNSEL RELIED ON THE JU DGMENTS OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE IND. LTD. 410 ITR 466 (SC) AND GODREJ & BOYCE MANUFACTURING CO. LTD VS. DCIT 394 ITR 449 JUDGMENTS OF THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF BRIGHT ENTERPRISE (P) LTD. VS. CIT 381 ITR 107 (PB.) CIT VS. KAPSON ASSOCIATES 381 ITR 204 (PB.) CIT VS. MAX INDIA LTD. 398 ITR 209 (PB.) CIT VS. MAX INDIA LTD 388 ITR 81 (P&H) AND THE DECISIONS OF THE CHANDIGARH BENCH OF THE TRIBUN AL IN THE CASE OF GROUP COMPANY M/S MONTE CARLO FASHION LTD. ITANO.1341/CHD/2016 AY 2012-13. TO SUBSTANTIATE HIS CONTENTION. 12. ON THE OTHER HAND THE LD. DR SUPPORTING THE AC TION OF THE LD. CIT(A) SUBMITTED THAT THE ASSESSEE HAD MADE ADDITIO N TO FIXED ASSETS AMOUNTING TO RS. 186.80 CRORE INCLUDING PLAN TS AND MACHINERY AND HAD CAPITAL WORK IN PROGRESS AMOUNTING TO RS. 6 1.47 CRORE. FURTHER THE ASSESSEE HAD CAPITALIZED INTEREST OF R S. 226.73 LACS ON ASSETS CAPITALIZED. HENCE THE AO DISALLOWED THE IN TEREST OF RS. 95 44 976/- AND AFTER APPLYING THE DEBT EQUITY RATI O OF 60:40 COMPUTED INTEREST DISALLOWANCE RIGHTLY HOLDING THA T THE DISALLOWANCE IS TO BE MADE IN ABOVE RATIO OUT OF THE INTEREST PA ID ON WORKING 12 ITA NO. 1160/CHD/2019 ASSESSMENT YEAR 2014-15 CAPITAL LOAN. THE LD. DR FURTHER SUBMITTED THATTHE LD. CIT(A) HAS RIGHTLY CONFIRMED THE ACTION OF THE AO. 13. WE HAVE PERUSED THE MATERIAL ON RECORD INCLUDIN G THE CASES RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE AND THE AUTHORITIES BELOW. THE CONTENTION OF THE ASSESSEE IS THAT IT HA D SUFFICIENT FUNDS IN THE SHAPE OF CAPITAL RESERVE AND SURPLUS THEREF ORE THE FINDINGS OF THE LD. CIT(A) ARE CONTRARY TO THE SETTLED PRINCIPL ES OF LAW. WE NOTICE THAT THE AUTHORITIES BELOW HAVE NOT REBUTTED THE CONTENTION OF THE ASSESSEE THAT IT HAD SUFFICIENT FUNDS FOR ACQUI RING ASSETS IN QUESTION. AS POINTED OUT BY THE LD. COUNSEL THE CO ORDINATE BENCH HAS DEALT WITH THE IDENTICAL ISSUE THE CASE OF MONT E CARLO FASHIONS VS. AICT (SUPRA) AND SET ASIDE TO THE FILE OF THE A O HOLDING THAT: THE JUDGMENT OF VARIOUS COURTS IN THE CASE OF HERO CYCLES(P) LTD. VS. CIT LUDHIANA C.A.NO 514 OF 2008 DT. 05/11/2015. BRIGHT ENTERPRISES PVT LTD. VS. CIT JA LANDHAR (2016)381 ITR 107(P&H) HELD THAT NO DISALLOWANCE OF INTEREST IS CALLED FOR WHERE THE ASSESSEE HAS GOT SUFFICIENT OW N FUNDS. THE ASSESSING OFFICER IS DIRECTED TO GO THROUGH THE FUN D POSITION NAMELY CAPITAL AND INTEREST FREE ADVANCES RESERVES AND SURPLUS TO DETERMINE WHETHER ANY BORROWED FUNDS HAVE BEEN U TILIZED MORE THAN AVAILABLE OWN FUNDS AND TAKE A DECISION K EEPING IN VIEW THE DECISIONS RENDERED ABOVE. IF THE SUFFICIEN T OWN FUNDS ARE AVAILABLE NO DISALLOWANCE IS CALLED FOR. THIS GROUND MAY BE TREATED AS SET ASIDE TO THE FILE OF ASSESSING OFFIC ER. 14. THE COORDINATE BENCH HAS DEALT WITH THE IDENTIC AL ISSUE IN THE CASE OF ASSESSEES GROUP COMPANY M/S MONTE CARLO FASHIONS LTD (SUPRA). FURTHER THE FACTS OF THE SAID CASE ARE SI MILAR TO THE FACTS OF THE PRESENT CASE. THEREFORE WE FIND MERIT IN THE C ONTENTION OF THE 13 ITA NO. 1160/CHD/2019 ASSESSMENT YEAR 2014-15 LD. COUNSEL FOR THE ASSESSEE. HENCE RESPECTFULLY F OLLOWING THE DECISION OF THE COORDINATE BENCH IN THE AFORESAID C ASE WE SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND SEND THIS ISSUE BACK TO THE AO FOR DECIDING THE ISSUE AFRESH IN ACCORDANCE WITH THE DI RECTION GIVEN BY THE COORDINATE BENCH IN THE CASE DISCUSSED ABOVE A FTER GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2014- 15 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 06/05/2021. SD/- SD/- (N.K. SAINI) (R.L. NEGI) /VICE PRESIDENT / JUDICIAL MEMBER DATED: 06/05/2021 *RANJAN &. /0 10 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ' 2 / CIT 4. ' 2 ( )/ THE CIT(A) 5. 034 5 $ 5 67849 / DR ITAT CHANDIGARH 6. 48:# / GUARD FILE &. ' / BY ORDER ; ! / ASSISTANT REGISTRAR