Shell & Pearl Ceramics Limited,, Ahmedabad v. The Deputy Commissioner of Income Tax, Circle-8,, Ahmedabad

ITA 66/AHD/2017 | 2011-2012
Pronouncement Date: 29-11-2019 | Result: Partly Allowed

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Appeal Details

RSA Number 6620514 RSA 2017
Assessee PAN AAGCS5293B
Bench Ahmedabad
Appeal Number ITA 66/AHD/2017
Duration Of Justice 2 year(s) 10 month(s) 20 day(s)
Appellant Shell & Pearl Ceramics Limited,, Ahmedabad
Respondent The Deputy Commissioner of Income Tax, Circle-8,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 29-11-2019
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 29-11-2019
Date Of Final Hearing 24-09-2019
Next Hearing Date 24-09-2019
Last Hearing Date 24-09-2019
First Hearing Date 31-07-2019
Assessment Year 2011-2012
Appeal Filed On 09-01-2017
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI PRADIP KUMAR KEDIA ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD JUDICIAL MEMBER) ITA. NO: 66/AHD/2017 (ASSESSMENT YEAR: 2011-12) SHELL & PEARL CERAMICS LTD. ( NOW NAMED AS SHELL & PEARL PORCELLANO LTD.) 207 SARTHIK-II OPP. RAJPATH CLUB S.G. HIGHWAY AHMEDABAD V/S DCIT CIRCLE-8 AHMEDABAD [NOW CIRCLE4(1)(1) AHMEDABAD] (APPELLANT) (RESPONDENT) PAN: AAGCS 5293B APPELLANT BY : SHRI S. N. SHAH A.R. RESPONDENT BY : SHRI L. P. JAIN SR. D.R. ( )/ ORDER DATE OF HEARING : 24 -09-201 9 DATE OF PRONOUNCEMENT : 29 -11-2019 PER MAHAVIR PRASAD JUDICIAL MEMBER 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A)-7 AHMEDABAD DATED 21.10.2016 PERTAINING TO A.Y. 2011-12 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: ITA NO. 66/A HD/2017 . A.Y. 2011-12 2 1) THE HO'NABLE CIT-A WITHOUT CONSIDERING THE PROVISIO NS OF SECTION 40A(3) R.W.R. 6DD (G) FACTS OF THE MATTER CIRCUMSTANCES OF THE PAYMENT LOCATION FROM WHICH PAYMENTS MADE PAYMENT BEING MADE TO THE DRIVERS DE LIVERING THE GOODS AND DOCUMENTS & JUSTIFICATIONS PROVIDED AND NATURE OF P AYMENT CONFIRMED THE DISALLOWANCE OF TRANSPORTATION EXPENSES OF RS. 16 2 6 033/- AND HENCE THE SAME ADDITION TO TOTAL INCOME BE DELETED NOW. 2) THE HO'NABLE CIT-A GROSSLY NEGLECTED IN INTERPRETAT ION OF LAW AND TREATMENT AS PER THE ACCOUNTING STANDARDS AND CONFIRMED ADDITION OF INTEREST INCOME OF RS.16 86 286/- EARNED ON TEMPORARY DEPOSITS WITH TH E BANKS DURING PERIOD OF CONSTRUCTION/ACQUISITION OF FIXED ASSETS AS INCOME OF THE YEAR. THE ADDITION OF RS. 16 86 286/- SO CONFIRMED BEING CONTRARY TO THE PROV ISIONS OF INCOME TAX LAW AND 9W ACCOUNTING TREATMENT TO BE FOLLOWED AS PER THE C OMPANIES ACT 1956 BE SET ASIDE NOW AND NOT TO BE TREATED AS INCOME OF THE YE AR AND ALLOWED BE ADJUSTED TO THE COST OF RESPECTIVE FIXED ASSETS FOR WHICH SU CH DEPOSITS WERE MADE. 3) THE HO'NABLE CIT-A CONTRARY TO THE PROVISIONS OF SE CTION 43B CONFIRMED DISALLOWANCE OF EMPLOYER PF CONTRIBUTION OF RS. 1 4 5 777/- THOUGH PAID ON OR BEFORE THE DATE OF FILLING OF RETURN OF INCOME. AS THE SAID EXPENSES ARE ALLOWABLE AS PER THE PROVISION OF SECTION 43B YOUR APPELLANT PLEADS TO ALLOW THE SAME NOW. 4) THE HO'NABLE CIT-A CONTRARY TO THE PROVISIONS OF S ECTION 115JB PROVISIONS OF SECTION 14A AND OTHER APPLICABLE PROVISIONS OF THE INCOME TAX ACT 1961 THE FACTS OF THE CASE AND THE JUDICIAL POSITION IN THIS REGARD CONFIRMED DISALLOWANCE U/S.14A AMOUNTING TO RS. 5 64 385/- TO BOOK PROFIT U/S. 115JB AND SUCH ADDITION BEING CONTRARY TO THE PROVISIONS OF SECTION 115JB N OW BE DELETED FROM THE BOOK PROFIT AS COMPUTED BY THE LD A.O. 2. FACTS OF THE CASE ARE THAT THE ASSESSEE IS IN THE B USINESS OF MANUFACTURING OF VITRIFIED TILES & CERAMICS TILES AND TRADING OF MAC HINERY & ITS PARTS . DURING THE YEAR UNDER CONSIDERATION ASSESSEE HAS MADE CAS H PAYMENT VARIOUS PARTIES AGGREGATING TO RS. 1626033/- IN CASH. THEREAFTER LD . A.O. ISSUED A NOTICE AS TO WHY PAYMENT EXCEEDING RS. 35 000/- CASH AS PER ANNE XURE-3 SHOULD NOT BE DISALLOWED U/S. 40A(3). 3. IN ITS REPLY ASSESSEE STATED THAT CASH PAYMENT ABO VE RS. 35 000/- WAS MADE TO DIFFERENT PARTIES AS COMMERCIAL PRODUCTION COMPANY WAS STARTED FROM ITA NO. 66/A HD/2017 . A.Y. 2011-12 3 01.03.2011. THE COMPANY HAS STARTED PROCURING MATER IAL FIRST TIME FROM VARIOUS SUPPLIERS FROM THE MONTH OF JAN-2011. THIS IS BEING THE FIRST TIME TRANSACTIONS WERE MADE TO VARIOUS TRANSPORTERS FOR RAW MATERIAL FREIGHT. THE COMPANY HAS ALSO MADE CASH PAYMENT TO GTA AS PER THE SERVICE TA X ACT AND DUE TO INITIAL TRANSACTION THE COMPANY HAS MADE PAYMENT IN CASH A S TRANSPORTER AND NOT ACCEPTING OTHER THAN CASH. BUT LD. A.O. WAS NOT AGR EE WITH THE CONTENTION OF THE ASSESSEE AND MADE ADDITION OF RS. 1626033/- U/S . 40A(3). 4. THEREAFTER ASSESSEE PREFERRED FIRST STATUTORY APPEA L BEFORE THE LD. CIT(A) LD. CIT(A) CONFIRMED THE ACTION OF THE LD. A.O. HOLDING THAT APPELLANT COULD HAVE MADE PAYMENTS TO THE CONTRACTORS BY CHEQUE SINCE A PERUSAL OF THE VOUCHERS SHOW THAT THE PAYMENTS HAVE NOT BEEN MADE TO TRANSP ORT CONTRACTORS. 5. NOW ASSESSEE HAS COME BEFORE US AGAINST THE ORDER O F THE LOWER AUTHORITIES. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE RELEVANT RECORD. ASSESSEE IS IN THE BUSINESS OF MANUFACTURING OF TILES AND TR ADING CERAMICS TILES MACHINERY AND ITS PARTS ETC. ASSESSEE COMPANY STARTED ITS ACT IVITIES IN THE MONTH OF JAN- 2011 AND STARTED PRODUCTION OF TILES IN THE MONTH O F MARCH-2011. IN ORDER TO START A NEW BUSINESS ONE CAN MAKE PAYMENT IN CASH BECAUSE UNKNOWN PERSONS GENERALLY DO NOT TRUST. 7. AND WE DRAW SUPPORT FROM THE ORDER OF THE JURISDICT IONAL HIGH COURT IN THE MATTER OF CIT VS. SHREE VALLABH GLASS WORKS LTD. WH EREIN IN SIMILAR FACTS AND CIRCUMSTANCES WHERE CASH PAYMENT WAS MADE TO TRANSP ORTER WAS ALLOWED BY THE HONBLE GUJARAT HIGH COURT WITH FOLLOWING OBSERVATI ON: ITA NO. 66/A HD/2017 . A.Y. 2011-12 4 DCIT [68 TTJ 53] WHEREIN THE PAYMENT OF FREIGHT CH ARGES IN CASH COULD NOT BE DISALLOWED U/S. 40A(3) AS IT IS A GENERAL PRACTICE THAT TRANSPORTERS DO NOT ACCEPT PAYMENTS OTHERWISE THAN IN CASE. ... DCIT REPORTED IN 68 TTJ 53 BY DELHI BENCH OF ITAT BY HOLDING AS UNDER: PAYMENT OF FREIGHT CHA RGES IN CASH COULD NOT BE DISALLOWED US. 40A(3) AS IT IS A GENERAL PRACTICE T HAT TRANSPORTERS DO NOT ACCEPT PAYMENTS OTHERWISE THAN IN CASH. ... IN VIEW OF ABO VE FOLLOWING THE ABOVE DECISIONS CASH PAYMENTS IN RESPECT OF FREIGHT CHAR GES ARE TO BE TREATED AS COVERED UNDER RULE 6DD(J) AND THE DISALLOWANCE MADE ARE DELETED. 8. RESPECTFULLY FOLLOWING THE AFORESAID JURISDICTIONAL HIGH COURT JUDGMENT WE ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 9. NOW WE COME TO GROUND NO. 2 IS AGAINST THE ADDITION OF RS. 16 86 286/- ON ACCOUNT OF DIFFERENCE BETWEEN THE INCOME AS PER THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND THE TDS CERTIFICATE. DURING THE ASSESS MENT PROCEEDINGS THE LD. A.O. NOTED THAT THE APPELLANT HAD RECEIVED AN AMOUN T OF RS. 16 86 286/- AS INTEREST INCOME FROM DIFFERENT BANKS WHICH HAD NOT BEEN DISCLOSED BY THE ASSESSEE. IN THE INTEREST OF JUSTICE WE SET ASIDE THIS MATTER TO LD. A.O. TO GRANT APPROPRIATE RELIEF TO ASSESSEE ON FURNISHING SATISF ACTORY EXPLANATION BY IT TOWARDS INCLUSION OF SUCH INCOME IN OTHER YEARS AS CLAIMED. 10. BUT DURING THE COURSE OF APPELLATE PROCEEDINGS ASS ESSEE GIVEN HIS SUBMISSION AS FOLLOWS: 'AS STATED ABOVE COMPANY HAD COMMENCED COMMERCIAL P RODUCTION FOR THE FIRST TIME FROM 01.03.2011AND BEFORE THAT PLAN OF THE COM PANY WAS UNDER CONSTRUCTION/ACQUISITION. DURING THE CONSTRUCTION P ERIOD THE COMPANY HAD MADE FIXED DEPOSITS AS SECURITY TO OPEN LINE OF CREDIT ( LC) FOR PROCURING MACHINERIES FOR THE LIMITED PURPOSE AND PERIOD UPTO WHICH SUCH MACH INERIES WERE ACQUIRED AND LC LIABILITIES TO BANK HONOURED. THE COMPANY HAD TO KEEP SUCH AMOUNT AS FOR AS ITA NO. 66/A HD/2017 . A.Y. 2011-12 5 MARGIN WITH THE BANKS FOR THE PERIOD AND PURPOSES S PECIFIED ABOVE. DURING THE FINANCIAL YEAR 2010-11 THE BANKS HAVE CREDITED INT EREST INCOME OF RS. 13 04 383 ON SUCH FDRS AND ISSUED TDS CERTIFICATES IN FORM 16 A AND SUCH DETAILS WERE REFLECTED IN FORM 26AS. HOWEVER THE INTEREST INCOM E OF RS. 8 78 703/- RELATING TO AND FOR THE PERIOD FOR WHICH MACHINERIES WERE UNDER ACQUISITION WERE CONSIDERED AS PART OF RECOVERY OF COST OF FINANCE FOR ACQUIRIN G THE RESPECTIVE FIXED ASSETS FOR WHICH LC CHARGES I.E. INTEREST WERE INCURRED AND DE BITED TO COST OF ACQUISITION OF THE ASSETS AND HENCE SUCH INTEREST INCOME OF RS. 8 78 703/- WAS REDUCED FROM THE INTEREST EXPENSES WHICH WERE CAPITALISED TO FIXED A SSETS AND SUCH NET INTEREST EXPENSES WERE CAPITALISED TO THE FIXED ASSETS. THE ID AO GROSSLY NEGLECTED IN INTERPRETATION OF LA W AND TREATMENT AS PER THE ACCOUNTING STANDARDS AND CONSIDERED INTEREST INCOME OF RS. 8 78 703/- ON TEMPORARY DEPOSITS WITH THE BANKS DURING PERIOD OF CONSTRUCTION/ACQUISITION AFFIXED ASSETS AS INCOME OF THE YEAR. THE LD A.O. A LSO ADDED INTEREST BALANCE INTEREST INCOME OF RS. 8 07 583/- EVEN THOUGH THE S AME INCLUDED IN THE INCOME .THE ADDITION OF RS. 16 86 286/- BEING CONTRARY TO THE PROVISIONS OF INCOME TAX LAW AND ACCOUNTING TREATMENT TO BE FOLLOWED AS PER THE COMPANIES ACT 1956 BE SET ASIDE NOW AND NOT TO BE TREATED AS INCOME OF TH E YEAR AND ALLOWED BE ADJUSTED TO THE COST OF RESPECTIVE FIXED ASSETS FOR WHICH SUCH DEPOSITS WERE MADE ' 11. LD. CIT(A) DISMISSED THE GROUND OF THE ASSESSEE AS ASSESSEE COULD NOT SUBSTANTIATE HIS CLAIM WITH ANY DOCUMENTARY EVIDENC E. 12. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSEE DID NOT FIND ANY DOCUMENTARY EVI DENCE IN SUPPORT OF ITS CONTENTION BEFORE THE LOWER AUTHORITIES AND EVEN BE FORE US NO DOCUMENTARY EVIDENCE WAS FURNISHED BY THE ASSESSEE. THEREFORE IN THE ABSENCE OF ITA NO. 66/A HD/2017 . A.Y. 2011-12 6 DOCUMENTARY PROOF IN SUPPORT OF ITS CONTENTION OF T HE ASSESSEE WE DISMISS THIS GROUND OF APPEAL. 13. NOW WE COME TO GROUND NO. 3 RELATING TO DISALLOWANC E OF RS. 1 45 777/- ON ACCOUNT OF CONTRIBUTION TO PF/ESIC. 14. LD. CIT(A) REJECTED THE CLAIM OF THE ASSESSEE ON TH E GROUND THAT ASSESSEE HAS NOT MADE ANY SUBMISSION AND IN VIEW OF THE JURISDIC TIONAL HIGH COURT JUDGMENT IN THE MATTER OF CIT VS. GSRTC (2014) 41 T AXMANN.COM 100 (GUJ.) WHEREIN IT IS HELD THAT THE EMPLOYEES CONTRIBUTION TO THE EMPLOYEES PROVIDENT FUND (EPF/EMPLOYEES STATE INSURANCE CORPORATION (E SIC) DEPOSITED BEYOND THE DUE DATE PRESCRIBED UNDER SECTION 36(1)(VA) OF THE INCOME-TAX ACT WOULD NOT BE ELIGIBLE FOR DEDUCTION UNDER SECTION 43B. 15. EVEN BEFORE US NO DETAILS SUPPORTED BY DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE. THEREFORE IN THE ABSENCE OF ANY DOCUMENT ARY EVIDENCE WE DISMISS THIS GROUND OF APPEAL. 16. NOW WE COME GROUND NO. 4 RELATING TO ADDITION OF RS . 5 64 385/- U/S. 14A OF THE ACT WHEREAS APPELLANT CONTENDED THAT THIS AMOUN T COULD NOT BE ADDED WHILE COMPUTING BOOK PROFIT U/S. 115JB. 17. AND BEFORE THE LD. CIT(A) ASSESSEE SUBMITTED AS F OLLOWS: 1. THE COMPANY HAD NOT EARNED ANY EXEMPT INCOME FRO M ANY SOURCE DURING THE FINANCIAL YEAR 2010-11 (AY. 2011-12). 2. THE COMPANY HAD INTRODUCED NEW CAPITAL OFRS. 21 63 85 330/- DURING THE FINANCIAL YEAR 2010-11 RELEVANT TO A. Y. 2011-12. T HE PAID UP CAPITAL OF THE COMPANY AS AT 31 ST MARCH 2011 WAS RS. 46 26 59 290/-WHILE IT WAS RS. 24 62 73 960 '/- AS AT 31 ST MARCH 2010. ITA NO. 66/A HD/2017 . A.Y. 2011-12 7 3. THE COMPANY HAD ACCUMULATED BALANCE OF PROFITS O FRS. 2 77 79 822 AS AT 31 ST MARCH 2011 AND RS. 2 62 32 125 AS AT 31 ST MARCH 2010. 4. THE COMPANY HAD INVESTMENTS OFRS. 3 58 62 500/- AS AT 31 ST MARCH 2011 AND RS. 2 75 02 500/- AS AT 31 ST MARCH 2010. 5. THE COMPANY HAD AVAILABLE INTEREST FREE AMOUNTS OF SHARE CAPITAL OF RS. 46 26 59 290/- AND ACCUMULATED BALANCES OF PROFITS OF RS. 2 77 79 822/-BESIDES INTEREST FREE DEPOSITS BY THE DIRECTORS OF THE APPE LLANT COMPANY. THE TOTAL INTEREST FREE FUNDS AVAILABLE WITH THE COMPANY WITH OUT CONSIDERING INTEREST FREE UNSECURED LOANS BY THE DIRECTORS WAS RS. 49 04 39 1 12/-. OUT OF WHICH THE COMPANY HAD MADE INVESTMENTS OFRS. 3 58 62 500/- ON LY WHICH IS 7.31% OF THE INTEREST FREE FUNDS AVAILABLE WITH THE COMPANY. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS YOU R APPELLANT HAD EXPLAINED TO THE ID AO THAT COMPANY HAD MADE INVESTMENTS IN THE SHARES OUT OF INTEREST FREE FUNDS OUT OF EQUITY SHARE CAPITAL AND ACCUMULATED B ALANCE OF PROFITS. YOUR APPELLANT HAD AVAILED TERM LOANS AND WORKING CAPITA L LOANS FROM BANKS/FINANCIAL INSTITUTIONS FOR BUSINESS PURPOSES. THE TERM LOANS/ WORKING CAPITAL LOAN ACCOUNTS ON WHICH INTEREST IS PAID ARE BANK MONITORED ACCOUN T WHICH DO NOT ALLOW TRANSACTION WHICH HAVE NOT BEEN SANCTIONED BY THE B ANKS WHILE ALLOWING CREDIT FACILITIES AND HENCE SUCH TRANSACTION ARE USUALLY N OT POSSIBLE FROM SUCH ACCOUNTS. THE APPELLANT COMPANY HAD AVAILED TERMS LOANS FROM BANK FOR PURCHASE OF FIXED ASSETS AND WORKING CAPITAL FOR ITS BUSINESS OPERATI ON AND HENCE IT WAS NOT POSSIBLE THAT SUCH FUND COULD HAVE BEEN APPLIED FOR OTHER PURPOSES I.E. FOR PURCHASE OF SHARE. THE SUMMARY OF OUTSTANDING BALAN CES OF LOANS AVAILED VIS-A- VIS FIXED ASSETS PURCHASED AND WORKING CAPITAL EMPL OYED AS AT 31 ST MARCH 2011 HAS BEEN GIVEN AS UNDER: SR. NO. PARTICULARS AMOUNT (RS.) 1. NET BLOCK OF FIXED ASSETS 1 15 05 45 247 2. NET WORKING CAPITAL 27 62 42 586 TOTAL APPLICATION OF FUNDS WHICH WAS FINANCED FROM BANK LOANS 3. LOANS FROM BANKS ON WHICH INTEREST WAS PAID (SECURED LOANS) 93 75 21 213 4. SHORTFALL OF LOANS OVER FUNDS APPLIED FOR PURCHASE OF ASSETS AND IN WORKING CAPITAL 48 92 66 620 SO IN FACT THERE WERE NO SURPLUS LOANS (INTEREST B EARING FUNDS) AVAILABLE WITH THE COMPANY WHICH COULD HAVE BEEN APPLIED FOR INVESTMEN T THE SHARES. IT IS APPARENT FROM THE ABOVE DETAILS THAT THE BALANCE AMOUNTS FOR PURCHASE OF FIXED ASSETS AND WORKING CAPITAL REQUIREMENTS WERE FINANCED IN VARIO US PROPORTIONS AT VARIOUS ITA NO. 66/A HD/2017 . A.Y. 2011-12 8 TIMES AS PER THE REQUIREMENTS FROM SHARE CAPITAL I NTEREST FREE LOANS BY DIRECTORS & THEIR ASSOCIATES AND ACCUMULATED PROFITS OF THE C OMPANY. 1. ADDITIONS MADE ON ASSUMPTION BASIS WITHOUT VERIFYIN G THE BASIC FACTS: THE ID AO WITHOUT FACTUALLY GOING INTO THE DETAILS OF THE TRANSACTIONS SUBMISSION MADE BEFORE HIM AND APPARENT VIEW OF THE FINANCIAL STATEMENTS SIMPLY ASSUMED AND WITHOUT ANY BASIS HELD THAT THERE WAS INTERMING LING OF OWN FUNDS AND BORROWED FUNDS AND HENCE BORROWED FUNDS WERE UTILIS ED FOR MAKING INVESTMENTS IN THE SHARES. EVEN THOUGH IF WE ACCEPT THAT THERE WAS INTERMINGLING OF FUNDS FROM THE FACTS OF THE CASE AND DETAILS GIVEN ABOVE IT IS VERY MUCH CLEAR THAT THE COMPANY DID NOT AT ALL HAD ANY BALANCE OF INTEREST BEARING FUNDS WHICH IT COULD HAVE APPLIED FOR MAKING INVESTMENTS IN THE SHARES. 2. JUDICIAL POSITION AS TO SECTION 14A VIS-A-VIS INCOM E OTHER THAN SECTION 115JB INCOME: YOUR APPELLANT HAD SHORTFALL OF INTEREST BEARING LO ANS OVER ASSETS APPLIED IN THE BUSINESS AND PART WAS FINANCED FROM INTEREST FREE F UNDS AS DISCUSSED ABOVE AND SURPLUS OF INTEREST FREE FUNDS WHICH WERE APPLIED F OR MAKING INVESTMENT IN THE SHARES. WHERE THERE WAS NO APPLICATION OF INTEREST PAID FUNDS FOR INVESTMENTS IN SHARES THE QUESTION OF APPLYING PROVISIONS OF SECT ION 14A R.W.R. 8D TO SUCH TRANSACTIONS DOES NOT ARISE. IF THERE ARE FUNDS AVA ILABLE BOTH OWN AND BORROWED AND IF THE OWN FUNDS ARE SUFFICIENT TO MEET THE AMO UNT OF INVESTMENT YIELDING THE EXEMPT INCOME THEN A PRESUMPTION WOULD ARISE THAT THE INVESTMENT WAS MADE OUT OF THE OWN FUNDS AVAILABLE WITH THE ASSESSEE THE HO'NABLE ITAT MUMBAI BENCH 'B' IN CASE OF DEPUT Y COMMISSIONER OF INCOME- TAX V. MAHENDRA BROTHERS EXPORTS (P.) LTD MAHENDRA BROTHERS EXPORTS (P.) LTD HAS HELD THAT WHERE THAT ASSESSEE HADSURPLUS FUNDS IT COULD BE SAFELY PRESUMED THAT INVESTMENTS HAD BEEN MADE FROM SURPLUS FUNDS EVEN T HOUGH THERE IS COMMON POOL OF FUNDS AND COMPOSITE BOOKS OF ACCOUNT AND HE NCE NO DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D(2)(II)~ COULD BE MADE . 18. BUT LD. CIT(A) WAS NOT CONVINCED WITH THE CONTENTIO N OF THE ASSESSEE AND CONFIRMED THE ADDITION OF RS. 5 64 385/-. 19. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED FACTS AND CIRCUMSTANCES OF THE CASE. AS WE CAN SEE FROM THE IMPUGNED ORDER ASSESS EE HAS CONTENDED THAT IT HAS NOT EARNED ANY EXEMPT INCOME THEREFORE PROVIS IONS OF SECTION 14A HAS NO APPLICABILITY AT THE THRESHOLD. IN VIEW OF THE ABO VE WE DIRECT A.O. TO DELETE ITA NO. 66/A HD/2017 . A.Y. 2011-12 9 ADDITION OF RS. 5 64 385/-. THUS THIS GROUND OF A PPEAL OF THE ASSESSEE IS ALLOWED. 20. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 29 - 11- 2019 SD/- SD/- (PRADIP KUMAR KEDIA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 29/11/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT AHME DABAD