The DCIT, Circle-11,, Ahmedabad v. M/s. Shree Laxmi Bidi Trading Co.,, Ahmedabad

ITA 2908/AHD/2014 | 2011-2012
Pronouncement Date: 30-04-2015 | Result: Dismissed

Appeal Details

RSA Number 290820514 RSA 2014
Assessee PAN AAFFS5299C
Bench Ahmedabad
Appeal Number ITA 2908/AHD/2014
Duration Of Justice 5 month(s) 27 day(s)
Appellant The DCIT, Circle-11,, Ahmedabad
Respondent M/s. Shree Laxmi Bidi Trading Co.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2015
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 30-04-2015
Assessment Year 2011-2012
Appeal Filed On 03-11-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE SHRI SHAILEND RA K UMAR YADAV JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI ACCOUNTANT MEMBER . ITA. NO S . 2 662 & 2908 /AHD/20 1 4 (ASSESSMENT YEAR: 20 1 0 - 11 & 2011 - 12 ) DEPUTY COMMISSIONER OF INCOME - TAX CIRCLE - 11 AHMEDABAD APPELLANT VS. M/S. SHREE LAXMI BIDI TRADING CO. CEMENT CHAWL GOMTIPUR ROAD GOMTIPUR AHMEDABAD - 3800 21 RESPONDENT & C.O. NO S . 315 & 316 /AHD/201 4 (ASSESSMENT YEAR: 2010 - 11 & 2011 - 12 ) M/S. SHREE LAXMI BIDI TRADING CO. CEMENT CHAWL GOMTIPUR ROAD GOMTIPUR AHMEDABAD - 380021 APPELLANT VS. I T A. NO S . 2662 & 2908 /AHD/1 4 & C.O. NO S . 315 & 316 /AHD/1 4 FOR A.Y. 2010 - 11 & 2011 - 12 (ACI T VS. M/S. SHREE LAXMI BIDI TRADING CO . ) PAGE 2 DEPUTY COMMISSIONER OF INCOME - TAX CIRCLE - 11 AHMEDABAD RESPONDENT PAN: A A FFS5299C / BY REVENUE :SHRI ROOPCHAND SR . D.R. / BY ASSESSEE : SHRI S. N. SOPARKAR A.R. / DATE OF HEARING : 0 7 . 0 4 .201 5 / DATE OF PRONOUNCEMENT : 30 . 0 4 .201 5 ORDER PER SHAILENDRA KUMAR YADAV J . M: SINCE BOTH THESE REVENUE S APPEAL S AND ASSESSEE S CROSS OBJECTION S ARE PERTAINED TO SAME ASSESSEE AND ARISING OUT FROM THE ORDER OF CIT(A) - X VI AHMEDABAD DATE D JULY 24 TH 2014 FOR A.Y. 2010 - 11 & DATED AUGUST 12 TH 2014 FOR A.Y. 2011 - 12 S O THEY ARE BEING DISPOSED OF BY WAY OF COMMON ORDER FOR SAKE OF CONVENIENCE. 2. IN ITA NO. 2 662 /AHD/20 1 4 FOR A.Y. 20 1 0 - 11 REVENUE HAS FILED THE APPEAL ON THE FOLLOWING GROUND S : 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOW ING THE APPEAL ON THE ISSUE REGARDING THE DISALLOWANCE OF INTEREST OF RS. 2 06 12 163 / - MADE BY AO U/S 36(1)(III) OF THE ACT AND THEREBY ALLOWING RELIEF TO THE AMOUNT OF I T A. NO S . 2662 & 2908 /AHD/1 4 & C.O. NO S . 315 & 316 /AHD/1 4 FOR A.Y. 2010 - 11 & 2011 - 12 (ACI T VS. M/S. SHREE LAXMI BIDI TRADING CO . ) PAGE 3 RS.2 06 12 163/ - WITHOUT P ROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE A.O. 2. 1 IN CROSS OBJECTION NO. 315 /AHD/20 1 4 FOR A.Y. 20 10 - 1 1 ASSESSE E HAS FILED THE CROSS OBJECTION ON THE FOLLOWING GROUND S : 1. T HE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.4 41 9 63 / - U/S. 14A WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE. 2. IT IS THEREFORE PRAYED THAT THE LEARNED CIT OUGHT TO HAVE DELETED THIS DISALLOWANCE OF RS.4 41 963/ - ALSO. 3. ASSESSING OFFICER M ADE DISALLOWANCE OF INTEREST U/S. 36(I)(III) OF RS.2 06 12 163/ - . MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF ASSESSEE WHO HAS ALLOWED ASSESSEES APPEAL BY FOLLOWING ITAT AHMEDABAD B BE NCH DECISION IN ITA NOS. 414 TO 417 & 1952/AHD/2009 & 2461/AHD/2010 DATED 29.11.2013 WHEREIN SIMILAR ISSUE HAS BEEN DECIDED BY ITAT BY OBSERVING AS UNDER: 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE LESSEE HAS HUGE TU RNOVER DURING THE YEARS. IT IS TRUE THAT THERE IS A MARGINAL INCREASE IN THE BORROWING FROM THE SPECIFIED PERSONS EITHER BY WAY OF THE FRESH LOAN OR THE CREDIT OF INTEREST. THE ASSESSEE HAS DEDUCTED TDS AND PAID TO THE GOVERNMENT EXCHEQUER. THE RATE OF INT EREST PAID WAS 1 8% AND INTEREST RECEIVED ON TDS WAS AT LOWER RATES BUT MONEY WAS NOT ADVANCED TO THE OUTSIDER. THEREFORE THIS IS NOT A CASE OF DIVERSION OF I T A. NO S . 2662 & 2908 /AHD/1 4 & C.O. NO S . 315 & 316 /AHD/1 4 FOR A.Y. 2010 - 11 & 2011 - 12 (ACI T VS. M/S. SHREE LAXMI BIDI TRADING CO . ) PAGE 4 INCOME. IF RATE OF INTEREST PAID TO SPECIFIED PERSONS IN COMPARED WITH RATE ON UNSECURED LOAN ARE MORE OR LESS ARE SAME BESIDES THIS VARIOUS FORMALITIES ARE REQUIRED TO AVAIL THE FINANCE FROM THE BANK. I T IS ALSO SETTELED LAW THAT HO W THE BUSINESS SHOULD BE CARRIED ON IS THE PREROGATIVE O F THE ASSESSEE AND THE ASSESSING OFFICER CANNOT DICTATE THE TE RMS AS TO HOW THE BUSINESS SHOULD BE CARRIED ON. WHILE CONSIDERING THE CLAIM U/S. 36(L)(III) WHAT IS TO BE REQUIRED TO JUDGE IS WHETHER THE AMOUNT IS BORROWED FOR THE PURPOSE OF BUSINESS OR NOT. SINCE THE AMOUNT HAS BEEN BORROWED IN EARLIER YEARS AS WELL A S DURING THE YEAR AT A STIPULATED RATE OF INTEREST AND WHICH HAS BEEN STILL UTILISED FOR THE PURPOSE OF BUSINESS THE INTEREST RATE COULD NOT HAVE BEEN RE - NEGOTIATED FOR EARLIER YEAR. THEREFORE RATE OF INTEREST PAID BY THE ASSESSEE IS QUITE REASONABLE HA VING REGARD TO THE FAIR MARKET VALUE OF SUCH SERVICES THEREFORE THE CIT(A) WAS INCORRECT IN RESTRICTING THE INTEREST PAYABLE TO THE EXTENT OF 15% OR 14% WHICH IS SUPPORTED BY VARIOUS DECISIONS MENTIONED IN THE ORDER IN PRECEDING YEARS. SINCE THE INTEREST R ATE PAID BY THE ASSESSEE IS REASONABLE THE ORDER OF THE CIT(A) IS REVERSED AND ADDITION IS DELETED. THUS ASSESSES APPEALS ARE ALLOWED AND REVENUE'S APPEAL ARE DISMISSED ON THIS GROUND . 4 . LEARNED AUTHORIZED REPRESENTATIVE ALSO SUBMITTED THE ORDER OF I TAT IN CASE OF ASSESSEE FOR A.Y. 2009 - 10 IN ITA NO. 1209 & 1398 /AHD/2013 DATED 28.11.2014 WHEREIN TRIBUNAL HAS HELD AS UNDER: 7. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW. IN THE INSTANT CASE WE FIND THAT THE LD.CIT(A) HAS DECIDED THIS ISSUE BY FOLLOWING THE EARLIER DECISION PERTAINING TO AYS 20 07 - 08 & 2008 - 09 BY OBSERVING AS UNDER: - 4.3 IT HAS BEEN NOTED THAT THERE IS NO MATERIAL CHANGE IN THE FACTS OF THE CA SE OF THE PRESENT APPEAL AS COMPARED TO I T A. NO S . 2662 & 2908 /AHD/1 4 & C.O. NO S . 315 & 316 /AHD/1 4 FOR A.Y. 2010 - 11 & 2011 - 12 (ACI T VS. M/S. SHREE LAXMI BIDI TRADING CO . ) PAGE 5 APPELLANTS CASE FOR AY 2007 - 08 & 2008 - 09. THE FINDING GIVEN IN ABOVE ORDERS ARE REASONABLE ENOUGH AND GIVEN AFTER CONSIDERING THE LEGITIMATE NEED OF THE BORROWED FUNDS AND UTILIZATION THEREOF. IT IS PERTINENT TO BE N OTED HERE THAT THE ASSESSING OFFICER HAD NOT PROPERLY EXAMINED THE CASE. HE HAS DISALLOWED THE INTEREST EXPENSES WHICH WERE FAR IN EXCESS THAN THE INTEREST PAID TO THE RELATIVES AND FAMILY MEMBERS OF THE PARTNERS OF THE FIRM. THE APPELLANT HAS RAISED NEW F UNDS OF RS.4 87 53 200/ - AGAINST WHICH AO HAS DISALLOWED INTEREST OF RS.315 09 824/ - . THE AO AT BEST OUGHT TO HAVE DISALLOWED INTEREST ON NEW LOANS. HAVING SAID THAT THERE IS NO DENYING THE FACT THAT THE APPELLANT CANNOT CLAIM INTEREST U/S 36(1)(III) IN RE SPECT OF ANY BORROWED FUNDS UNLESS HE IS ABLE TO ESTABLISH A CLEAR NEXUS BETWEEN SUCH BORROWED FUNDS AND THEIR IMMEDIATE DEPLOYMENT / UTILISATION FOR THE PURPOSE OF BUSINESS. PERUSAL OF THE DETAILS OF BANK ACCOUNTS FILED BY THE APPELLANT HOWEVER INDICATE T HAT THERE WERE OCCASIONS WHEN THE APPELLANT WAS HAVING ITS OWN FUNDS AND WAS NOT IN NEED OF ANY BORROWINGS. CONSEQUENTLY THE APPELLANT CANNOT BE ALLOWED INTEREST ON THOSE BORROWED FUNDS WHICH WERE OBTAINED AT A TIME WHEN THE APPELLANT WAS HAVING ITS OWN F UNDS. ACCORDINGLY AN EFFORT WAS MADE TO IDENTIFY THE FACTUAL POSITION OF THE RECEIPT OF FUNDS INTEREST PAID UPON IT WHICH WAS NOT UTILISED BY THE APPELLANT FOR ITS BUSINESS WITH REFERENCE TO THE BANK STATEMENTS OF THE APPELLANT OPERATED DURING THE YEAR. D URING THE YEAR THE APPELLANT HAS OBTAINED UNSECURED LOANS OF RS.4 87 53 200/ - FROM DIFFERENT PARTIES ON DIFFERENT DATES WHICH WAS DEPOSITED IN BANK ACCOUNTS OF THE APPELLANT MAINTAINED WITH UNION BANK OF INDIA AND CORPORATION BANK. PERUSAL OF THE BANK S TATEMENT SHOW THAT ON EVERY OCCASION WHEN THE UNSECURED LOAN WAS OBTAINED BY THE APPELLANT SUFFICIENT FUNDS OF ITS OWN WERE AVAILABLE IN ITS BANK ACCOUNT AT THAT POINT OF TIME. IT GOES ON TO INDICATE THAT THERE WAS NO ACTUAL BUSINESS NEED TO BORROW FUNDS. THUS THE ARGUMENT OF THE APPELLANT THAT THE BORROWED FUNDS WERE UTILISED FOR THE PURPOSES OF BUSINESS DOES NOT GETS VINDICATED. A CHART INDICATING BORROWINGS MADE BY THE APPELLANT FROM PARTIES ON DIFFERENT DATES PERIOD OF HOLDING RATE OF INTEREST ASSUM ING BANK RATE OF 14% ETC IS REPRODUCED HEREUNDER: - I T A. NO S . 2662 & 2908 /AHD/1 4 & C.O. NO S . 315 & 316 /AHD/1 4 FOR A.Y. 2010 - 11 & 2011 - 12 (ACI T VS. M/S. SHREE LAXMI BIDI TRADING CO . ) PAGE 6 NAME OF DEPOSITOR NAME OF BANK DATE OF DEPOSIT AMOUNT INTEREST DAYS UP TO 3/31/2009 14% INTEREST AMT. UP TO 3/31/2009 SHREE ARBUDA TRANSPORT COMP A N Y UBI 1 2.04.2008 7500000 353 10 15479 SHREE JAYLAXMI TRANSPORT COMPANY UB1 12.04. 2008 2500000 353 338493 PARBHUDAS KISHORD AS HUF UBI 18.04.2008 325000 347 43256 JASVCANJLUL PARBHUDAS HUF UBI 18.04.2008 650000 347 86512 10975000 PARBHUDAS KISHORDAS HUF UBI 28.05.2008 1300000 30 7 153079 1300000 PARBHUDAS KISHORDAS HUF UBI 14.06.2008 1300000 290 144603 1300000 SHREE ARBUDA TRANSPORT COMPANV UBI 08.08.2008 1000000 235 270411 PARHHUDAS KISHORDAS HUF UBI 19.08.2008 200000 224 17184 JASWUNTLAL PARBHUDAS HUF UBI 19 .08.2008 500000 224 42959 3700000 JUSUANTLAL PARBHUDAS HUF UBI 23.09.2008 1050000 189 761 I8 105000 SHREE JAYLAXMI TRANSPORT COMPANY UBI 03.10.2008 3000000 179 205973 RAJNIKANT P PATEL HUF UBI 08.10.2008 283200 174 18901 PRAHLADBHAI PARBHUDAS HUF UBI 08.10 2008 250000 174 16685 JASWANILAL PARBHUDAS HUF UBI 08.10.2008 325000 174 21690 M/S. PARBHUDAS KISHORDAS UBI 25.10.200S 3500000 157 210767 JASWANTIAT PARBHUDAS HUF UBI 25.10.2008 400000 157 24088 7758200 SHREE ARBUDA TRANSP ORT COMPANY CORP BANK 27.11.2008 6000000 124 28 5370 SHREE JAYL AXMI TRA NSPO RT COMPANY CORP BANK 27.11.2008 4000000 124 190247 10000000 BHARATKUMAR P PATEL CORP BA NK 08.01.2009 70000 82 2202 70000 PRAHLADBHAI PARBHUDAS HUF UBI 15 .01.2009 900000 75 25890 900000 I T A. NO S . 2662 & 2908 /AHD/1 4 & C.O. NO S . 315 & 316 /AHD/1 4 FOR A.Y. 2010 - 11 & 2011 - 12 (ACI T VS. M/S. SHREE LAXMI BIDI TRADING CO . ) PAGE 7 JASWANTLAL PARBHUDAS UBI 1602.2009 950000 43 15668 HUF 950000 PRUHLADBHAI PARBHUIIAF HUF UBL 04.03.2009 550000 27 5696 DEVAII G JAGDISHBLIAI UBI 18.03.2009 200000 13 997 750000 KALINDIBEN RAJNIKANT CORP BA NK 26.03.2009 5000000 5 9589 KALINDIBEN RAJNIKANT CORP BUNK 26.03.2009 5000000 5 95 8 9 10000000 48753200 32314461 4.4 A PERUSAL OF THE ABOVE SHOWS THAT OUT OF THE TOTAL AMOUNT OF RS.4 87 53 200/ - BORROWED BY THE APPELLANT ON DIFFERENT DATES AND PAID INTEREST THE INADMISSIBLE RATE OF INTEREST WHICH REQUIRES TO BE ADDED TO APPELLANTS INCOME COMES TO RS.32 31 486/ - . THE HYPOTHESIS TAKEN IS INSYNC WITH REASONING TAKEN IN EARLIER APPELLATE ORDERS AS WELL. THE ARGUMENT OF THE APPELLANT OF GIVING HIM A BENEFIT OF NOTIONAL INTEREST OF RS.20 77 358/ - HAS BEEN FOUND TO BE BEREFT OF ANY MERIT. ACCORDINGLY THE ADDITION MADE BY THE LD AO IS CONFIRMED TO THE EXTENT OF RS.32 31 486/ - ONLY AND THE BALANCE IS DELETED. THE SECOND GROUND OF APPEAL RAISED IS THEREFORE PARTLY ALLOWED. 7.1. THE COORDINATE BENCH OF THIS TRIBUNAL (ITAT BENCH 'B' AHMEDABAD) IN ITA NO.2325/AHD/2012 FOR AY 2008 - 09 IN ASSESSEE'S OWN CASE VIDE ORDER DATED 31/10/2014 HAS DECIDED THIS ISSUE IN PARAS - 17 AND 18 BY OBSERVING AS UNDER: - '17. FURTHER IN RESPECT OF THE RETENTION OF DISALLOWANCE OF INTEREST OF RS. 10 71 797/ - WE FIND THAT THE C IT(A) UPHELD THE DISALLOWANCE ON HIS FINDINGS THAT BORROWED FUNDS WERE NOT REQUIRED FOR IMMEDIATE BUSI NESS NEEDS. IN OUR CONSIDERED VIEW THE NEED OF BUSINESS IS TO BE JUDGED FROM THE P OINT OF VIEW OF BUSINESSMEN. THE ASSESSEE IS HAVING BUSINESS TURNOVER OF OVER 211 CRORES DURING T HE YEAR UNDER CONSIDERATION. THE AMOUNT WHICH THE ASSESSEE MAY NEED FOR H IS BUSINESS MAY NOT BE AVAIL ABLE ALWAYS TO I T A. NO S . 2662 & 2908 /AHD/1 4 & C.O. NO S . 315 & 316 /AHD/1 4 FOR A.Y. 2010 - 11 & 2011 - 12 (ACI T VS. M/S. SHREE LAXMI BIDI TRADING CO . ) PAGE 8 THE ASSESSEE. THEREFORE THE ASSESSEE HAS TO AVAIL THE LOAN AMOUNT WHEN IT IS AVAILABLE BY KEEPING IN VIEW THE FUTURE NEEDS WHICH MAY ARISE IN THE COURSE OF BUSINESS. THEREFORE MERELY AS BECAUSE THE ASSESSEE HAD SUFFICIENT OWN FUNDS ON THE DATE OF THE BORROWINGS IT CANNOT BE CONCLUDED THAT BORROWINGS IT CANNOT BE CONCLUDED THAT BORROWINGS WERE NOT FOR THE PURPOSE OF BUSINESS. 18. IN THE INSTANT CASE WE FIND THAT IT IS NOT THE CASE OF THE REVENUE THAT THE BORROWE D FUNDS WERE DIVERTED AND ACTUALLY UTILIZED FOR ANY NON - BUSINESS PURPOSES OF THE ASSESSEE. THUS IN OUR CONSIDERED VIEW THE DISALLOWANCE OF INTEREST OF RS.10 71 797/ - UPHELD BY THE CIT(A) IS NOT SUSTAINABLE.' 7.2. THE HON'BLE JURISDICTIONAL HIGH COURT HAS IN ASSESSEE'S OWN CASE AN IDENTICAL ISSUE DECIDED BY OBSERVING AS UNDER: - '10. EXAMINING SHE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE ABOVE DECISION THE COMMISSIONER (APPEALS) IN HIS ORDER HAS OBSERVED THAT THERE IS NO DISPUTE THAT THE ASSESS EE REQUIRES HUGE FUNDS FOR THE PURPOSE OF ITS BUSINESS. FOR MAKING PURCHASES OF BIDI THE ASSESSEE HAS TO MAKE ADVANCE PAYMENTS. THE VOLUME OF PURCHASES IS RS. 160 CRORES OR MORE IN ONE YEAR. FOR THIS PURPOSE THE ASSESSEE HAS TO BORROW MONEY FROM DIFFERENT PERSONS. SINCE IT IS NOT CERTAIN AS TO EXACTLY WHEN SUCH PAYMENT WILL BE REQUIRED TO BE MADE AND IT MAY NOT BE POSSIBLE TO SECURE SUCH LOANS IMMEDIATELY WHEN PAYMENT IS REQUIRED TO BE MADE FOR SMOOTH RUNNING OF THE BUSINESS THE ASSESSEE HAS TO BORROW S UCH FUNDS IN ADVANCE AND KEEP THE SAME READY AT ITS DISPOSAL. UNDER THE CIRCUMSTANCES INSTEAD OF KEEPING SUCH FUNDS IDLE THE ASSESSEE PARKED THE SAME IN SHORT TERM FIXED DEPOSITS WHICH IN TURN WERE USED FOR MAKING PAYMENT AGAINST PURCHASE OF BIDIS. MOREO VER AS NOTICED HEREINABOVE OBTAINING LOANS FROM BANKS IS A CUMBERSOME PROCESS AND THE INTEREST RATE IS ALSO HIGH HENCE THE ASSESSEE HAS OBTAINED UNSECURED I T A. NO S . 2662 & 2908 /AHD/1 4 & C.O. NO S . 315 & 316 /AHD/1 4 FOR A.Y. 2010 - 11 & 2011 - 12 (ACI T VS. M/S. SHREE LAXMI BIDI TRADING CO . ) PAGE 9 LOANS FROM RELATIVES OF PARTNERS AT THE RATE OF 18%. THE COMMISSIONER (APPEALS) HAS HELD THAT TO KEEP THE FUNDS IN FIXED DEPOSITS IS PART AND PARCEL OF THE BUSINESS EXPEDIENCY OF THE ASSESSEE. HE HAS ALSO HELD THAT INTEREST PAYMENT TO RELATIVES OF PARTNERS IS AN ALLOWABLE EXPENDITURE BUT HAS DISALLOWED THE SAME TO THE EXTENT THE SAME EXCEEDED THE INTE REST PAID TO TRANSPORTERS AND AGAINST 'GOODS DEPOSITS'. THE TRIBUNAL HAS NOTED THAT THE AMOUNT HAS BEEN BORROWED IN EARLIER YEARS AS WELL AS DURING THE YEARS UNDER CONSIDERATION AT A STIPULATED RATE OF INTEREST AND WHICH HAS BEEN UTILISED FOR THE PURPOSE O F BUSINESS; THE INTEREST RATE COULD NOT HAVE BEEN RENEGOTIATED FROM THE EARLIER YEAR. THEREFORE THE RATE OF INTEREST PAID BY THE ASSESSES IS QUITE REASONABLE. CONSIDERING THE FACTS OF THE CASE IN THEIR TOTALITY IT IS APPARENT THAT THE ASSESSES HAS BORROW ED FUNDS AND USED THE SAME FOR IFS BUSINESS PURPOSES. BOTH THE COMMISSIONER (APPEALS) AS WELL AS THE TRIBUNAL HAVE CONCURRENTLY FOUND THAT THE BORROWED FUNDS HAVE BEEN USED FOR BUSINESS PURPOSES AND HAVE HELD THAT INTEREST ON SUCH BORROWED FUNDS IS AN ALL OWABLE EXPENDITURE. THE ONLY DIFFERENCE IN OPINION IS TO THE EXTENT OF INTEREST ALLOWABLE ON SUCH BORROWED FUNDS. THE COMMISSIONER (APPEALS) HAS RESTRICTED SUCH ALLOWANCE TO THE INTEREST PAID TO TRANSPORTERS AND TOWARDS 'GOODS DEPOSITS' WHEREAS THE TRIBUNA L HAS HELD THE INTEREST PAID AT THE RATE OF 18% TO BE REASONABLE. HAVING REGARD TO THE FINDINGS RECORDED BY THE TRIBUNAL FOR HOLDING THE RATE OF INTEREST AT 18% TO BE REASONABLE IT IS NOT POSSIBLE TO STATE THAT THERE IS ANY LEGAL INFIRMITY IN THE CONCLUSI ON ARRIVED AT BY THE TRIBUNAL SO AS TO GIVE RISE TO A QUESTION OF LAW MUCH LESS A SUBSTANTIAL QUESTION OF LAW WARRANTING INTERFERENCE. ' 7.3. THE REVENUE HAS NOT PLACED ANY CONTRARY MATERIAL ON RECORD SUAEESTINA THAT THE FACTS AND CIRCUMSTANCES IN THE YEAR ARE DIFFERENT. THEREFORE FOLLOWING THE JUDGEMENT OF HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEE'S OWN CASE IN TAX APPEAL NOS.851 TO 856 OF 2014 VIDE ORDER DATED 01/09/2014 AND THE DECISION OF COORDINATE BENCH OF THIS I T A. NO S . 2662 & 2908 /AHD/1 4 & C.O. NO S . 315 & 316 /AHD/1 4 FOR A.Y. 2010 - 11 & 2011 - 12 (ACI T VS. M/S. SHREE LAXMI BIDI TRADING CO . ) PAGE 10 TRIBUNAL IN ITA NO.2325/AHD/201 2 FOR AY 2008 - 09 WE ARE OF THE CONSIDERED VIEW THAT THE ID.CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE AMOUNTING TO RS 32 31.486/ - AND HEREBY DIRECTED TO DELETE THE SAME. THUS THIS GROUND OF ASSESSEE'S APPEAL IS ALLOWED. 4 . 1 NOTHING CONTRAR Y HAS BEEN BROUGHT TO OUR KNOWLEDGE. FACTS BEING SIMILAR SO FOLLOWING SAME REASONING WE ARE NOT INCLINED TO INTERFERE IN THE FINDING OF CIT(A) WHO HAS ALLOWED THE APPEAL ON THE ISS U E DISALLOWANCE OF INTEREST OF RS.2 06 12 163/ - MADE BY ASSESSING OFFICER U/S.36(1)(III) OF THE ACT. SAME IS UPHELD. 5 . ASSESSEE IN CROSS OBJECTION HAS OPPOSED THE CONFIRMATION OF DISALLOWANCE OF RS.4 41 963/ - U/S.14A CONFIRMED BY CIT(A). STAND OF ASSESSEE HAS BEEN THAT CIT(A) CONFIRMED THE DISALLOWANCE IN QUESTION WITHOUT P ROPERLY APPRECIATING THE FACTS OF THE CASE. IN THIS REGARD LEARNED AUTHORIZED REPRESENTATIVE POINTED OUT THAT SIMILAR ISSUE AROSE IN CASE OF ASSESSEE IN ITA NOS. 414 TO 417 & 1952/AHD/2009 & 2461/AHD/2010 DATED 29.11.2013 WHEREIN TRIBUNAL HAS DECIDED TH E ISSUE IN FAVOUR OF ASSESSEE BY PLACING RELIANCE ON THE ORDER OF CO - ORDINATE BENCH IN CASE OF CHUDGAR RANCHODLAL JETHALAL BEING INCOME TAX ACT NO. 245/AHD/2013 FOR THE PROPOSITION THAT DISALLOWANCE U/S. 14A R.W. RULE 8D THOUGH IS MANDATORY FROM A.Y. 200 8 - 09 UNDER NO CIRCUMSTANCES SHOULD EXCEED QUANTUM OF EXEMPT INCOME AS HELD IN CHUDGAR RANCHODLAL JETHALAL (SUPRA) AS UNDER: I T A. NO S . 2662 & 2908 /AHD/1 4 & C.O. NO S . 315 & 316 /AHD/1 4 FOR A.Y. 2010 - 11 & 2011 - 12 (ACI T VS. M/S. SHREE LAXMI BIDI TRADING CO . ) PAGE 11 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ON PERUSING THE BALANCE SHEET WE FIND THAT THERE IS NO CHANGE IN INVESTMENTS AT THE YEAR UNDER AS AT 31 ST MARCH 2007 AND AS AT 31 ST MARCH 2008 MEANING THEREBY THAT PRIMA FACIE NO NEW INVESTMENTS HAVE BEEN MADE BY THE ASSESSEE DURING THE YEAR. FURTHER ON PERUSING THE BALANCES SHEET AS AT 31 ST MARCH 2008 W E FIND THAT THE SHARE HOLDERS FUND COMPRISING OF SHARE CAPITAL AND RESERVES AND SURPLUS WERE TO THE EXTENT OF RS.1.49 CRORES AND DURING THE YEAR ASSESSEE HAS ALSO EARNED PROFIT AFTER LAX OF RS. 60.39 LACS MEANING THAT THE AVAILABILITY OF INTEREST FREE FUND S WITH ASSESSEE AT THE YEAR END WERE IN EXCESS OF INVESTMENTS. FROM THE DETAILS OF OTHER INCOME PLACED ON RECORD IT IS SEEN THAT DURING THE YEAR DIVIDEND EARNED BY THE ASSESSEE IS OF RS. 20 498/ - AND THE DISALLOWANCE MADE BY A.O U/S 14A IS OF RS. 1 02 007 / - AND THUS THE DISALLOWANCE U/S. 14A WORKED OUT BY A.O IS MORE THAN THE TAX FREE INCOME. BEFORE US LD. D.R. HAS NOT BROUGHT ANY DECISION OF TRIBUNAL OR HIGH COURT ON RECORD TO CONTROVERT THE SUBMISSIONS MADE BY LD. A.R THAT DISALLOWANCE U/S. 14A CANNOT H E MORE THAN TAX FREE INCOME. ON THE OTHER HAND WHILE DICTATING THE ORDER WE HAVE COME ACROSS THE DECISION OF HON'BLE DELHI HIGH COURT IN THE EASE OF JOINT INVESTMENT PVT. LTD. VS. CIT ITA NO. 117 OF 2015 DECIDED ON 25.02.2015 WHEREIN THE HON'BLE HIGH COU RT HAS HELD AS UNDER: - '9. IN THE PRESENT CASE T HE AO HAS NOT FIRSTLY DISCLOSED WHY THE APPELLAN T/ASSES S E E'S CLAIM FOR ATTRIBUTING RS . 2 97 440/ - A S A DISALLOWANCE UNDER SECTION 14 A HAD TO B E REJECTED. TAIKISHA SAYS THAT THE JURISDICTION TO PROCEED F U RTH ER AND DETERMINE AMOUNTS IS DERIVED AFTER EXAMINATION OF THE ACCOUNTS AND REJECTION IF ANY OF THE ASSESSE E 'S CLAIM OR EXPLANATION. THE SECOND ASPECT IS THERE APPEARS TO HA V E BEEN NO SCRUTINY OF T HE ACCOUNTS B Y T HE AO - AN ASPEC T WHICH IS COMPL ETELY UN NOTI C E D BY THE CIT(A) AND THE IT AT. THE THIRD AND IN T HE OPINION O F THIS CO URT IMPORTANT ANOMAL Y WHI CH WE CANNOT BE UNMINDFUL IS THAT WHEREAS THE ENTIRE TAX EXEMPT INCOME IS RS. 48 90 000 / - T HE DISALLOWANCE ULTIMATELY DIRECTED WORKS OUT TO NEARLY 110% OF T HA T SUM. I.E. RS. 52 56 197/ - . B Y NO STRE TCH OF IMAGINATION CAN SECTION 1 4A OR RULE 8D B E INTERPRETED SO AS I T A. NO S . 2662 & 2908 /AHD/1 4 & C.O. NO S . 315 & 316 /AHD/1 4 FOR A.Y. 2010 - 11 & 2011 - 12 (ACI T VS. M/S. SHREE LAXMI BIDI TRADING CO . ) PAGE 12 TO MEAN THAT T HE ENTIRE T AX EXEMPT INCOME IS TO BE DISALLOWED. THE WINDOW FOR DISALL OWANCE IS INDICATED IN SECTION 1 4A AND IS ONLY TO T HE EXTENT O F DISALLOWING EXPENDITURE 'INCURR ED BY THE ASSESSEE IN RELATION TO THE TAX EXEMPT INCOME' . THIS PROPORTION OR PORTION OF THE TAX EXEMPT INCOME SURELY CANNOT SWALLOW THE ENTIRE AMOUNT A S HAS HAPPENED IN THIS CASE .' 13. CONSIDERING THE TOTALITY OF THE FACT S AND IN VIEW OF THE FACT THAT THE PROVISIONS OF RULE 8D ARE APPLICABLE FOR THE YEAR UNDER CONSIDERATION AND IN THE LIGHT OF THE AFORESAID DECISION OF DELHI HIGH COURT CITED HEREINABOVE AND IN VIEW OF THE FACT THAT THE DISALLOWANCE WORKED OUT BY A.O. U/S.1 4A IS MORE THAN THE EXEMPT INCOME AND CONSIDERING THE ALTERNATE SUBMISSION OF LD. A.R. TO MAKE A REASONABLE DISALLOWANCE U/S.14A AS DEEMED FIT WE ARE OF THE VIEW THAT DISALLOWANCE OF RS.5 000/ - IF MADE IN THE PRESENT CASE WILL MEET THE ENDS OF JUSTICE. W E THUS DIRECT ACCORDINGLY. 5 .1 IN VIEW OF ABOVE ASSESSING OFFICER IS DIRECTED TO RESTRICT THE DISALLOWANCE U/S. 14A R.W. RULE 8D SHOULD NOT EXCEED QUANTUM OF EXEMPT INCOME. AS FAR AS DISALLOWANCE OF ADMINISTRATIVE EXPENSES IS CONCERNED IN ABSENCE OF DE TAILS OF INVESTMENTS MADE DURING THE YEAR NUMBER OF TRANSACTIONS IN THOSE INVESTMENTS ETC THIS ISSUE NEEDS TO BE RE - LOOKED BY ASSESSING OFFICER. SO IN THE INTEREST OF JUSTICE WE RESTORE THIS ISSUE TO HIM WITH DIRECTION TO DECIDE IN VIEW OF ABOVE DISCU SSION AND IN ACCORDANCE WITH LAW AFTER PROVIDING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. 6 . IN ITA NO. 2662 /AHD/20 14 FOR A.Y. 2011 - 12 REVENUE HAS FILED THE APPEAL ON THE FOLLOWING GROUND S : I T A. NO S . 2662 & 2908 /AHD/1 4 & C.O. NO S . 315 & 316 /AHD/1 4 FOR A.Y. 2010 - 11 & 2011 - 12 (ACI T VS. M/S. SHREE LAXMI BIDI TRADING CO . ) PAGE 13 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOW ING THE APPEAL ON THE ISSUE REGARDING THE DISALLOWANCE OF INTEREST OF RS. 2 59 61 548 / - MADE BY AO U/S 36(1)(III) OF THE ACT AND THEREBY ALLOWING RELIEF TO THE AMOUNT OF RS. 2 59 61 548 / - WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROU GHT ON RECORD BY THE A.O. 6 . 1 IN CROSS OBJECTION NO. 315 /AHD/20 14 FOR A.Y. 2011 - 12 ASSESSE E HAS FILED THE APPEAL ON THE FOLLOWING GROUND S : 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS. 2 56 576 / - U/S. 14A WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE. 2. IT IS THEREFORE PRAYED THAT THE LEARNED CIT OUGHT TO HAVE DELETED THIS DISALLOWANCE OF RS. 2 56 576 / - ALSO. 7 . THE ISSUE IN REVENUES APPEAL FOR A.Y. 2011 - 12 IS WITH REGARDS TO DISALLOWANCE OF INTEREST OF RS.2 59 61 548/ - MADE BY ASSESSING OFFICER U/S.36(1)(III) LEVIED WHICH HAS BEEN DELETED BY CIT(A) AND SAME WAS OPPOSED BEFORE US INTER ALIA SUBMITTED BY LEARNED DEPARTMENTAL REPRESENTATIVE THAT CIT(A) ERRED IN ALLOWING THE APPEAL OF ASSESSEE ON THE ISSUE REGARDING DISALLOWANCE OF RS.2 59 61 548/ - MADE BY ASSESSING OFFICER U/S.36(1)(III) AND SHAME SHOULD BE SET ASIDE AND THAT OF ASSESSING OFFICER ON ISSUE BE RESTORED. ON OTHER HAND LEARNED AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF CIT(A) AND MADE T HE SUBMISSION ON THE LINE OF SIMILAR ISSUE IN A.Y. 2010 - 11. WE FIND THAT ISSUE IN REVENUES APPEAL IS SIMILAR THAT OF A.Y. 2010 - 11 WHICH HAS BEEN DISCUSSED AND DECIDED BY US I T A. NO S . 2662 & 2908 /AHD/1 4 & C.O. NO S . 315 & 316 /AHD/1 4 FOR A.Y. 2010 - 11 & 2011 - 12 (ACI T VS. M/S. SHREE LAXMI BIDI TRADING CO . ) PAGE 14 VIDE PARA 4.1 O F THIS ORDER. FACTS BEING SIMILAR SO FOLLOWING THE SAME REASONI NG WE ARE NOT INCLINED TO INTERFERE IN THE FINDING OF CIT(A) WHO HAS ALLOWED THE APPEAL ON THE ISSUE REGARDING DISALLOWANCE OF INTEREST OF RS.2 59 61 548/ - . SAME IS UPHELD. 8 . ISSUE RAISED IN CROSS OBJECTION FOR A.Y. 2011 - 12 IS AGAINST CONFIRMATION OF D ISALLOWANCE OF RS.2 56 576/ - U/S. 14A. SIMILAR ISSUE AROSE IN CROSS OBJECTION FOR A.Y. 2010 - 11 WHICH HAS BEEN DISCUSSED AND DECIDED BY US VIDE PARA 5 OF THIS ORDER. FACTS BEING SIMILAR SO FOLLOWING SAME REASONING MATTER IS RESTORED TO ASSESSING OFFICE R WITH SIMILAR DIRECT ION ON BOTH ISSUES. 9 . IN RESULT BOTH REVENUE S APPEALS ARE DISMISSED AND ASSESSEES CROSS OBJECTION S IN BOTH YEARS ARE PARTLY ALLOWED AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE 30 TH DAY OF APRIL 201 5 . SD/ - SD/ - ( ANIL CHATURVEDI ) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 30 /0 4 /2015 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO: - 1. / REVENUE 2. / ASSESSEE 3. / CONCERNED CIT 4. - / CIT (A) 5. / DR ITAT AHMEDABAD I T A. NO S . 2662 & 2908 /AHD/1 4 & C.O. NO S . 315 & 316 /AHD/1 4 FOR A.Y. 2010 - 11 & 2011 - 12 (ACI T VS. M/S. SHREE LAXMI BIDI TRADING CO . ) PAGE 15 6. / GUARD FILE. BY ORDER / /