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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: SH. B.R. BASKARAN & SH. N.K.CHOUDHRY
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. B.R. BASKARAN, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA No.646(Asr)/2017 Assessment Year:2014-15
Asst. CIT, Vs. M/s Khyber Industries Pvt. Ltd. Circle-3, Srinagar Khayam Building Nowpora Srinagar [PAN:AAACK 7457J] (Appellant) (Respondent)
Appellant by : Sh. Amar Pal Meena (Ld. DR) Respondent by: Sh. P. K. Mishra (Ld. CA)
Date of hearing: 29.08.2019 Date of pronouncement: 09.10.2019
ORDER PER N.K. CHOUDHRY, JM: The instant appeal has been preferred by the Revenue Department against the order dated 29.06.2017 impugned herein passed by the Ld. CIT(A), J&K, Jammu u/s. 250(6) of Income Tax Act, 1961 (hereinafter called as the ‘Act’).
In this case the Revenue Department has raised two grounds, one relates to the deletion of addition of Rs.2,37,13,315/- on account of interest free loans given to sister concerns by the assessee, secondly the deletion of addition of Rs.11,02,182/- made by the Assessing Officer u/s 14A of the Act.
Let us to decide the appeal ground wise.
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3.1 By way of ground No.1 the Revenue Department has raised the issue qua deletion of addition of Rs.2,37,13,315/- on account of interest free loans given to sister concerns by the assessee . We realize that the Ld. CIT(A) while deciding the disallowance of Rs.2,37,13,315/- u/s 36(1)(iii) of the Act, not only respectfully followed the decision of Hon’ble Punjab & Haryana High Court in the case of CIT, Jalnadhar-1 vs. Max India Ltd. reported at [2017] 80 taxmann.com 98, but also followed the decision of the Apex Court in the case of Hero Cycles Ltd. [2010] 379 ITR 347 and Munjal Sales Corporation vs. CIT, Ludhiana (Civil Appeal No.1378/2008 dated 19th Feb., 2008) and also analyzed the facts that the assessee had total interest free funds amounting to Rs.58,77,69,077/- which includes share capital, reserves and surplus and loans and advances (deposits), whereas advance paid to the sister concern was only Rs.18,59,86,785/- and finally concluded that since the interest free loans have been advanced out of surplus funds available with the assessee, no notional interest @ 12.75% was required to be charged, thus, the addition made by the AO deserves to be deleted.
Recently, the Hon’ble Apex Court in the case of CIT vs. Reliance Industries Ltd. [2019] 102 taxmann.com 52 (SC) has affirmed the view of the High Court that if the interest free funds available to the assessee were sufficient to meet its investment, then it could be presumed that the investment were made from the interest free funds available with the assessee. In our considered view the Ld. CIT(A) followed the dictum of the Hon’ble High Courts and the Apex Court and rightly deleted the addition by holding that the interest free funds available with the assessee were more than the advance paid to the sister concerns. Hence, the decision on the issue qua addition of
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Rs.2,37,13,315/- on account of interest u/s 36(1)(iii) of the Act does not require any interference.
3.2 Ground No.2 relates to deletion of addition of Rs.11,02,182/- made by the Assessing Officer u/s 14A of the IT Act, 1961 in view of Circular No.5/2014 dated 11.02.2014. We have given our thoughtful consideration to the determination qua instant issue by the Ld. CIT(A) who while considering various judgments passed by the various High Courts specifically Cheminvest Ltd. vs. CIT [2015] 378 ITR 33 (Delhi) wherein it has been held that Sec.14A will not apply if no exempt income is received or receivable during the relevant previous year. The Ld. CIT(A) came to conclusion that issue of application of Sec.14A of the Act has already been decided and now judicial position is settled. Thus, no further adjudication is required as the case of the appellant is well covered under these decisions. The addition made by the AO therefore, is deleted. The Ld. CIT(A) before coming to the conclusion also considered the submissions of the assessee by observing that as on 31st March, 2014, the assessee company to the effect had interest free funds amounting to Rs.58,77,69,077/- against which the company has invested Rs.18,58,86,785/- in shares in group companies and thus the company has not invested interest bearing funds in these group companies and such no disallowance is called for u/s 14A r.w. Rule 8D.
Recently the Hon’ble Apex Court in the case of Principal Commissioner of Income Tax vs. G.V. K Protect & Technical Services Ltd. [2019] 106 taxmann.com 181 (SC) affirmed the view of the Hon’ble High Court to the effect that in the absence of any exempt income, disallowance was impermissible . Hence, we do not have any hesitation to upheld the conclusion drawn by the Ld. CIT(A) by deleting the addition of Rs.11,50,615/- on the ground that the
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assessee did not earn any exempt income, hence, no disallowance is called for.
In the result, the appeal filed by the Revenue Department stands dismissed.
Order pronounced in the open Court on 09/10/2019.
Sd/- Sd/- (B.R.BASKARAN) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated:09/10/2019. /PK/ Ps. Copy forwarded to: 1. The Appellant 2. The Respondent 3. The CIT 4. Then CIT(Appeals) 5. SR DR, I.T.A.T. Amritsar 6. Guard File True Copy By Order