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Income Tax Appellate Tribunal, DELHI BENCH “E” NEW DELHI
Before: SHRI CHALLA NAGENDRA PRASAD & SHRI ANADEE NATH MISSHRA
सुनवाईक�तारीख/ Date of hearing: 29.06.2022 12.07.2022 उ�ोषणाक�तारीख/Pronouncement on आदेश /O R D E R PER C.N. PRASAD, J.M.
This appeal is filed by the assessee against the order of Ld. CIT(Appeals), Faridabad dated 18.01.2017 for the AY 2013-14. The assessee in its appeal raised the following effective grounds: 1. “That the order passed by the Ld. Commissioner of Income Tax (Appeals) Faridabad is bad in law and on facts.
2. That Ld. CIT(A) erred in confirming the disallowance of other expenditures of Rs.4,57,481/- u/s 14A as per rule 8D(2)(iii) of the Income-tax Rules.
I.T.A.No.2139/Del/2017
3. That the Ld. CIT(A) has erred in confirming the disallowance of proportionate interest of Rs.6,00,000/- on account of advances given despite of the fact that advances were given in the ordinary course of business.”
The notice issued by the Registry through speed post with acknowledgment due returned un-served with the endorsement of postal authorities that addressee left without instruction. From the record it is noticed that several opportunities were given to the assessee from 11.01.2021 till 29.06.2022. But the assessee did not appear nor adjournment was sought. Several notices were issued to the assessee through RPAD with acknowledgement due. The notice issued fixing the date of hearing on 29.06.2022 returned un-served. Therefore, we proceed to dispose of this appeal on merits on hearing the Ld. DR.
The Ld. DR submits that appeal for the AY 2012-13 were identical issues were raised by the assessee is decided by the Tribunal in dated 07.06.2022 dismissing the grounds raised by the assessee on merits. The same order may be followed for the assessment year under consideration i.e. 2013-14.
Heard Ld. DR, perused the order of the Tribunal in assessee’s own case for the AY 2012-13 in dated 07.06.2022. We notice that the identical grounds were decided against the assessee by I.T.A.No.2139/Del/2017 the Tribunal while deciding the above identical grounds observed as under: -
“2. The assessee has raised the following effective grounds of appeal:- “
2. That Ld. CIT(A) erred in confirming the disallowance of other expenditures of Rs.4,73,121/- under Section 14A as per rule 8D(2)(iii) of the Income Tax Rules;
3. That the Ld. CIT(A) has erred in confirming the disallowance of proportionate interest of Rs,6,00,000/- on account of advances given despite of the fact that advances were given in the ordinary course of business. “
3. In spite of issue of several notices to the assessee none appeared on behalf of the assessee nor any adjournment was moved. Therefore, we dispose of this appeal on hearing the ld. DR.
4. The ld. DR submits that while completing the assessment under Section 143(3) of the Income Tax Act, 1961 (the Act) on 30.01.2015 the Assessing Officer noticed that the assessee made investments which are capable of earning income and such income is exempt under Section 10(34) of the Act. The ld. DR submits that the Assessing Officer computed the disallowance under Section 14A of the Act at Rs.42,78,563/- comprising of interest disallowance of Rs.38,05,442/- under Rule 8D(2)(ii) and Rs.4,73,420/- in terms of Rule 8D(2)(iii) being 0.5% of average investments. On appeal the ld. CIT (Appeals) deleted the interest disallowance made under Rule 8D(2)(ii) and sustained the disallowance of Rs.4,73,420/- made
I.T.A.No.2139/Del/2017 under Rule 8D(2)(iii). The ld. DR placed reliance on the orders of the authorities below.
5. We have heard the ld. DR and perused the orders of the authorities below. We notice from the assessment order that the Assessing Officer disallowed Rs.38,05,442/- under Rule 8D(2)(iii) towards interest expenditure and Rs.4,73,420/- towards administrative expenses being 0.5% of the average investment. The ld. CIT (Appeals) deleted the interest expenditure observing that the assessee had reserves and surplus to the tune of Rs.4.55 crores at the beginning of the year and Rs.4.56 crores at the end of the year. The ld. CIT (Appeals) also observed that the assessee had interest free funds available in the form of sundry creditors and un-secured loans to the tune of Rs.34.36 crores at the beginning of the year and Rs.14.54 crores at the close of the year and there were no secured loans at the beginning and close of the year. Therefore, the ld. CIT (Appeals) held that assessee was able to substantiate that most of the interest free funds were utilized in making investments in respect of which no dividend income had been earned by the assessee. In so far as disallowance of Rs.4,73,420/- is concerned the ld. CIT (Appeals) held that the Assessing Officer has correctly applied the provisions of Rule 8D(2)(iii) and made the disallowance. These findings have not been controverted by the assessee. In the circumstances we do not see any valid reason to interfere with the findings of the ld. CIT (Appeals). We sustain the order of the ld. CIT (Appeals) and reject ground No. 2 raised by the assessee.
I.T.A.No.2139/Del/2017
6. Coming to ground No. 2 i.e. disallowance of proportionate interest of Rs.6 lakhs on the advances given the ld. DR submits that the Assessing Officer while completing the assessment noticed that the assessee company debited interest in its profit and loss account and further the assessee had given advances to various parties. Therefore, the assessee was required to explain as to why proportionate interest on interest free advances should not be disallowed. The ld. DR submits that assessee contended that it had advanced moneys for the purpose of import of trading items for construction line. However, due to some dispute terms could not be finally agreed upon and part amounts had already been received back by the assessee. It was also contended by the assessee that no specific borrowing was made for the purpose of advances and assessee has earned the profits during the current year as well as in earlier years when advances were given. Not convinced with the submissions of the assessee the Assessing Officer disallowed proportionate interest applying the rate of 12% per annum on Rs.1.51 crores of advances made by the assessee and accordingly an amount of Rs.18,12,000/- was disallowed. The ld. CIT (Appeals) in so far as the interest of Rs.12,12,000/- on advances with M/s. Lakhani India Ltd. is concerned deleted holding that it is only an advance against purchases and this position has been accepted by the Assessing Officer in earlier assessments. However, in so far as the advance standing in the name of D. R. Builders & Promoters Pvt. Ltd., the ld. CIT (Appeals) sustained the interest to the extent of Rs.6 lakhs following the order of his predecessor for the I.T.A.No.2139/Del/2017
assessment years 2010-11 and 2011-12. The ld. DR placed reliance on the order of the ld. CIT (Appeals).
On hearing the ld. DR and perusing the orders of the authorities below, we find that the Assessing Officer disallowed proportionate interest of Rs.6 lakhs at 12% per annum on the advances made by the assessee to D. R. Builders & Promoters Pvt. Ltd. and the ld. CIT (Appeals) sustained the said disallowance following his predecessor’s order for the assessment years 2010-11 and 2011-12. It was also observed by the ld. CIT (Appeals) that the facts in the assessment years 2010-11 and 2011-12 remain identical to the facts for the present assessment year. The ld. CIT (Appeals) observed that the decision of the Bombay High Court in the case of Reliance Powers relied on by the assessee is distinguishable on the facts of the assessee’s case. None of the above findings of the ld. CIT (Appeals) have been rebutted by the assessee before us. Thus, we sustain the order of the ld. CIT (Appeals) and dismiss ground No. 3 of the grounds of appeal of the assessee.”
Facts being identical. Respectfully following the said decision, we dismissed both ground 2 & 3 of the assessee for the assessment year under consideration i.e. 2013-14.
In the result, the appeal of the assessee is dismissed.
Order pronounced in the open court on 17/07/2022