VIJAY INDUSTRIES,ALWAR vs. DEPUTY COMMISSIONER OF INCOME TAX, ALWAR

PER VIJAY PAL RAO, JM :

This appeal by the assessee is directed against the order dated 6th October,

2017 of ld. CIT (A), Alwar for the assessment year 2008-09. The assessee has

raised the solitary ground in this appeal as under :-

“ That the ld. Assessing Officer has erred in law as well as on the facts and circumstances of the dase in not allowing the deduction of Rs. 253417.00 in set aside assessment proceedings and disallowed the same by invoking the provisions of section 14A of the I.Tax Act 1961 and ld. CIT (A) has erred in sustaining the same.”

by the AO under section 14A of the IT Act in respect of the investment in shares of

Rs. 18,77,160/-. This is second round of appeal as in the first round this Tribunal

2 ITA No. 998/JP/2017 M/s. Vijay Industries, Alwar. vide its order dated 4th December, 2014 in ITA No. 825/JP/2011 remitted the matter

to the record of the AO with the direction as contained in para 10.1 as under :-

“ 10.1. However, with respect to the investment in shares of Indian companies (Group Companies) of Rs. 18,77,160/-, we find that the ITAT has given a direction to the AO to invoke the provisions of section 14A only if the relation of expenses of exempt income is established. After considering pleadings of both the sides and case laws, we restore this issue to the file of the AO to decide afresh as per law.”

Thus the Tribunal set aside the issue to the record of the AO to decide the same

afresh by considering the relation of expenses incurred for earning the exempt

income. In the set aside proceedings, the AO has repeated the disallowance under

section 14A and consequently the assessee challenged the action of the AO before

the ld. CIT (A). The ld. CIT (A) deleted the addition/disallowance made by the AO

on this account by considering the decision of this Tribunal in assessee’s own case

for the assessment year 2006-07.

material on record. The ld. D/R has supported the order of the AO and submitted

that in the absence of complete details filed before the AO, the assessee has failed

to discharge its onus to prove that the investment in shares was made out of

interest free funds and not the interest bearing funds. Thus he has submitted that

the assessee has not complied with the directions of the Tribunal in set aside

proceedings.

3 ITA No. 998/JP/2017 M/s. Vijay Industries, Alwar.

3.1. On the other hand, the ld. A/R has submitted that the assessee filed complete

details before the AO and the direction of the Tribunal was to establish the nexus

between the borrowed fund and the investment as required by the AO and not by

the assessee. He has further submitted that the investment in question is old

investment made between the assessment years 1992-93 to 2001-02. There is no

fresh assessment during the year and, therefore, this identical issue has been

considered by this Tribunal in assessee’s own case for the assessment year 2006-07

vide order dated 17.06.2016 in ITA No. 673/JP/2015. Hence the ld. A/R has

submitted that the matter is covered by the decision of this Tribunal in assessee’s

own case.

record, at the outset we note that the investment in shares of Rs. 18,77,160/- is old

investment made during the assessment years 1992-93 to 2001-02. Therefore,

there is no dispute that there is no fresh investment during the year under

consideration and the amount of investment remains same as it was for the

assessment year 2006-07. It is also undisputed fact that the assessee has not

received any dividend income during the year under consideration. These two facts

remained constant and undisputed. The Tribunal in assessee’s own case for the

assessment year 2006-07 (supra) while dealing with an identical issue has held in

para 6 as under :-

“ 6. We have heard the rival contentions of both the parties and perused the material available on the record. As per Coordinate Bench’s decision dated 23/09/2011 passed in ITA No. 902/JP/2010 and

4 ITA No. 998/JP/2017 M/s. Vijay Industries, Alwar.

952/JP/2010 in assessee’s own case, the issue has been set aside in following terms “ the A.O. should establish the nexus between the borrowed fund and investment in shares and will accordingly disallowed the interest.” At the time of set aside proceedings before the ld Assessing Officer, the assessee has submitted fund flow statement as on 31.2.2005 and 31.3.2006. The assessee has borrowed fund at Rs. 6.58 crores, which has been utilized in stock in trade, debtors, cash and bank and loan advances to the tune of Rs. 7.83 crores as on 31.3.2006. The ld. Assessing Officer has not established any nexus between the interest bearing borrowed fund and investment made on the basis of fund position submitted by the assessee during the assessment proceedings. He asked the assessee to file the details on the basis of day to day basis of investment made in shares and on particular date, cash available with the assessee. It is undisputed fact that this investment in shares at Rs. 18,77,160/- has been made in A.y. 1992-93 to 2001-02. These facts have not been controverted by the lower authorities as well as DR during the course of hearing. During the year the assessee does not have dividend income and no investment has been made during the year in shares but all the investments are carry forwarded from A.Y. 1992-93.The ld. CIT (A) relied on the decision of ITAT Delhi (Special Bench) in the case of Cheminvest Ltd. vs. ITO (supra) wherein it has been held by the Coordinate Bench of Delhi ITAT that in position of no dividend income, disallowance can be made by the Assessing Officer U/s 14A, which has been overruled by the Hon’ble Delhi High Court vide order dated 2.9.2015 and held that there should be actual receipt of income for disallowance u/s 14A of the Act. The other arguments of the assessee also support that the assessee has exempt fund particularly reserve and surplus to make investment in the shares. The Hon’ble Bombay High Court in the case of CIT vs. Reliance Utilities & Power Ltd. (supra) is squarely applicable. In absence of direct nexus between the interest

5 ITA No. 998/JP/2017 M/s. Vijay Industries, Alwar.

bearing fund and investment in shares, no disallowance can be made by the assessing Officer u/s 14A. Accordingly, we reverse the order of the ld. CIT (A) and allow the assessee’s appeal.”

Accordingly, when the facts remain unchanged for the year under consideration and

the Tribunal has given a finding based on the same facts then to maintain the rule of

consistency, we decide this issue against the revenue and in favour of the assessee.

Hence we reverse the order of ld. CIT (A).

Order is pronounced in the open court on 08/03/2018.

Sd/- Sd/- (foØe flag ;kno) (fot; iky jkWo ½ ( VIKRAM SINGH YADAV ) (VIJAY PAL RAO) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member

Jaipur Dated:- 08/03/2018. Das/

आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत

6 ITA No. 998/JP/2017 M/s. Vijay Industries, Alwar.