JCIT (OSD), CIRCLE 14, PUNE vs. KUMAR BUILDER MUMBAI REALTY PRIVATE LIMITED, PUNE

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER Sl. ITA No. Name of Appellant Name of Respondent Asst. No. Year 1-2 20/PUN/2020 JCIT (OSD), Circle- Kumar Urban 2013-14 21/PUN/2020 14, Pune. Development Private 2014-15 Limited, 10th Floor, Kumar Business Centre, CTS No.29, Opp. Pune Central Bund Garden, Pune-411001. PAN : AAACK7659N 3 22/PUN/2020 JCIT (OSD), Circle- Kumar Builder 2014-15 14, Pune. Mumbai Realty Private Limited, 10th Floor, Kumar Business Centre, CTS No.29, Opp. Pune Central Bund Garden, Pune-411001. PAN : AADCK9563C Revenue by : Shri Abhinay Kumbhar & Shri Arvind Desai Assessee by : Shri Nikhil S. Pathak Date of hearing : 20.07.2022 Date of pronouncement : 22.08.2022 आदेश / ORDER PER INTURI RAMA RAO, AM: These are the three appeals filed by the Revenue directed against the separate orders of ld. Commissioner of Income Tax- 9,

2 ITA Nos.20, 21 & 22/PUN/2020 Pune [‘the CIT(A)] commonly dated 07.10.2019 for the assessment years 2013-14 and 2014-15 respectively. 2. Since the identical facts and common issues are involved in all the above captioned three appeals of the Revenue, we proceed to dispose of the same by this common order. 3. First, we shall take up the appeal in ITA No.20/PUN/2020 for A.Y. 2013-14 for adjudication. ITA No.20/PUN/2020, A.Y. 2013-14 : 4. The Revenue raised the following grounds of appeal :- “1. “The order of the Ld CIT(A) is contrary to law and to the facts and circumstances of the case. 2. “The learned Commissioner of Income Tax(Appeals) grossly erred in deleting the addition on account of expenses not related to the business of the assessee of Rs. 26,31,67,414/- instead of confirming the same. 3. The learned Commissioner of Income-Tax (Appeals) grossly erred in appreciating the decision of Supreme Court in the case of Lashmirathan Cotton Mills Co. Ltd Vs. CIT(1969) 73 ITR 634(SC) wherein it was held that in order to claim that an nexus of that expenditure to its business what the assessee has failed to dispose off. 4. “Whether on the facts and in the circumstances of the case and in law, the CIT(A) was justified in allowing the additional ground raised by the assessee in respect of reversal of disallowance u/s 14A of Rs.6,34,32,208/- made by the assessee itself in its return of income while computing its income thereby disregarding the judicial pronouncement of the Hon’ble Supreme Court in the case of Goetze(India) Ltd. ITR 323? 5. Whether on the facts and in the circumstances of the case and in law, the CIT(A) was correct in holding that no disallowance u/s 14A is called for, thereby resulting in a situation where the assessed income of the assessee would now be less than the income returned by the assessee?

3 ITA Nos.20, 21 & 22/PUN/2020 6. For the facts and such other reasons an may be urged at the time of hearing, the order of the Ld. Commissioner of Income Tax(Appeals)- 9, Pune may be vacated and that of the Assessing Officer be restored. 7. The above ground of appeal may kindly be allowed to be amended, altered, modified etc. in the interest of natural justice.” 5. Briefly, the facts of the case are as under : The respondent-assessee is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of promoters, builders and developers of land. The Return of Income for the assessment year 2013-14 was filed on 30.09.2013 declaring Rs.Nil income. Against the said return of income, the assessment was completed by the Dy. Commissioner of Income Tax, Circle-14, Pune (‘the Assessing Officer’) vide order dated 30.03.2016 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) at total income of Rs.18,43,46,100/-. While doing so, the Assessing Officer made the following disallowances/additions :- (i) Disallowance of service tax not paid u/s 43B of Rs.49,93,213/-. (ii) Disallowance of interest u/s 36(1)(iii) of Rs.26,31,67,414/- (iii) Addition on account of notional rent on account of completed flats of Rs.1,05,000/-.

4 ITA Nos.20, 21 & 22/PUN/2020

5 ITA Nos.20, 21 & 22/PUN/2020 value of flats unsold of Rs.1,05,000/- under the head “Income from house property”. 7. Being aggrieved by the order of assessment, an appeal was preferred before the ld. CIT(A), who vide impugned order allowed the issue relating to the disallowance of interest u/s 36(1)(iii) of the Act, considering the submissions made before him that interest free funds as well as surplus reserve funds far exceeds the loans and advances made to the sister concern, therefore held that no disallowance u/s 36(1)(iii) is called for placing reliance on the decision of the Hon’ble Supreme Court in the case of CIT vs. Reliance Industries Ltd. 102 taxmann.com 52 (SC) and the decision of the Hon’ble Bombay High Court in the case of CIT vs. Reliance Utilities and Power Ltd. 313 ITR 340 (Bombay). B. As regards to the disallowance u/s 14A, the ld. CIT(A) on considering the submission made before him that no disallowance u/s 14A is warranted in the absence of any exempt income, directed the Assessing Officer to delete suo moto disallowance of expenditure of Rs.14A of Rs.6,34,32,208/-. 8. Being aggrieved by the decision of the ld. CIT(A), the Revenue is in appeal before us in the present appeal.

6 ITA Nos.20, 21 & 22/PUN/2020 9. The ld. CIT-DR contends that the ld. CIT(A) ought not to have directed the Assessing Officer to delete the addition u/s 36(1)(iii) of Rs.26,31,67,414/- in the absence of any nexus between the interest free share capital and reserves and the loans and advances given to the sister concerns. As regards to the disallowance u/s 14A, he submits that when the assessee company himself offered the disallowance u/s 14A, the ld. CIT(A) ought not to have deleted the addition by entertaining the additional ground of appeal. 10. On the other hand, ld. Counsel for the respondent-assessee taking us through the Paper Book, pages no.38 and 39 submits that no fresh loans and advances were made to the sister concern during the year under consideration similar disallowance made in the earlier assessment years by the Assessing Officer came to be allowed by this Tribunal in assessee’s own case vide ITA No.1569/PUN/2017 for A.Y. 2012-13 dated 23.10.2020, ITA Nos.2164 and 2175/PUN/2016 for A.Y. 2011-12 dated 14.08.2019, ITA Nos.39 & 46/PUN/2015 for A.Y. 2010-11 dated 31.10.2017, ITA Nos.1628 & 1636/PUN/2013 for A.Y. 2009-10 dated 02.02.2017 and ITA No.66/PUN/2015 for A.Y. 2008-09 dated 28.06.2017. He also filed the copies of the said ITAT’s orders in

7 ITA Nos.20, 21 & 22/PUN/2020 the assessee’s own case (supra), wherein this Tribunal had deleted addition u/s 36(1)(iii) on the ground that no addition on account of disallowance of interest on the ground that interest bearing funds were diverted for non-business purposes is warranted, as the own funds are more than the loans and advances made to the sister concern placing reliance on the decision of the Hon’ble Supreme Court in the case of CIT vs. Reliance Industries Ltd. 410 ITR 466 (SC). 11. As regards, the disallowance under the provisions of section 14A, ld. AR submits that it is a settled position of law that in the absence of any exempt income, resort to the provisions of section 14A cannot be made. This is purely a legal issue requiring no verification of facts and, therefore, the ld. CIT(A) rightly allowed the claim of the respondent-assessee that no disallowance u/s 14A is warranted in the absence of any exempt income. Mere fact that the respondent-assessee himself had offered suo moto disallowance does not alter the position. 12. We heard the rival submissions and perused the material on record. The issue in ground of appeal no.2 and 3 relates to the disallowance of interest u/s 36(1)(iii) on the ground that the interest bearing funds had been diverted to sister concern, in the form of

8 ITA Nos.20, 21 & 22/PUN/2020 loans and advances for non-business purposes. There is no gainsaying that if the loans and advances are made for business purposes, the question of disallowance u/s 36(1)(iii) does not arise. The respondent-assessee had asserted before the lower authorities that the loans and advances were made to the sister concern for business purposes, without prejudice to this argument it is further asserted that no disallowance of interest u/s 36(1)(iii) was warranted, for reason that the interest free funds in the form of share capital and surplus reserve far exceeds the loans and advances made to the sister concern, where the mixed funds are utilized for the purpose of making the loans and advances to the sister concerns, the presumption should be drawn that loans and advances are made out of own funds, hence no disallowance of interest is warranted. Rejecting the above contention of the respondent-assessee, the Assessing Officer had proceeded with making disallowance of interest @ 14% on the amount of loans and advances made to the sister concern. On appeal before the ld. CIT(A), the ld. CIT(A) on consideration of the factual position of availability of the interest free funds in the form of share capital, reserves, surplus and unsecured interest free loans from related parties, the advance from co-owners, advance from customers and advance against

9 ITA Nos.20, 21 & 22/PUN/2020 development agreement, which stood at Rs.3,95,69,87,520/- and the loans and advances made to the sister concern stood at Rs.1,95,28,56,884/-. Relying on proposition that when the interest free funds available to the respondent-assessee are sufficient to meet the investments with the sister concern, it should be presumed that the investments are made out of the interest free funds. As law laid down by the Hon’ble Supreme Court in the case of East India Pharmaceutical Works Ltd. vs. CIT 224 ITR 627 (SC) held that no disallowance of interest is called for relying upon the ratio of the decision of the Hon’ble Supreme Court in the case of CIT vs. Reliance Industries Ltd. 410 ITR 466 (SC). The correctness of this finding of the ld. CIT(A) is under challenge before us vide this ground of appeal no.2 and 3. 13. It is an admitted position that the interest free funds available to the respondent-assessee as on 31.03.2013 stood Rs.3,95,69,87,520/- and investments in loans and advances made to the sister concern, stood at Rs.1,93,49,24,321/-. Thus, it is evident that own funds far exceeds the loans and advances made to the sister concern. It is settled position of law that in the case of mixed funds of borrowed funds and own funds, presumption has to be drawn that own funds are utilized for the purpose of making the interest free

10 ITA Nos.20, 21 & 22/PUN/2020 advances to the sister concern, as held by the Hon’ble Supreme Court in the case of East India Pharmaceutical Works Ltd. (supra) and, therefore, the question of disallowance does not arise. Even recently, the same proposition had been reiterated by the Hon’ble Supreme Court in the case of CIT vs. Reliance Industries Ltd. 410 ITR 466 (SC) and South Indian Bank Ltd. vs. CIT 130 taxmann.com 178 (SC). Therefore, the order of the ld. CIT(A) is based on the proper appreciation of relevant material facts on record and in consonance with the law laid down by the Hon’ble Apex Court (supra). 14. We also find from the material on record that no fresh loans and advances were made during the previous year relevant to the assessment year under consideration. All the loans and advances made to the sister concern were made in the earlier years, the additions made in the earlier assessment years by the disallowance of interest, came to be deleted by this Tribunal in assessee’s own case for the assessment years 2008-09 to 2012-13 (supra). Therefore, even on the principle of consistency, no disallowance of interest u/s 36(1)(iii) is warranted. Accordingly, we do not find any illegality and perversity in the findings of the ld. CIT(A). Therefore, we do not find any merits in the ground of appeal no.2

11 ITA Nos.20, 21 & 22/PUN/2020 and 3 filed by the Revenue. Hence, the ground of appeal no.2 and 3 filed by the Revenue stands dismissed. 15. Ground of appeal no.4 and 5 challenges the correctness of the findings of the ld. CIT(A) that in the absence of any exempt income, no disallowance u/s 14A can be made in spite of fact that the assessee had himself offered suo moto disallowance of Rs.6,34,32,208/- in the return of income. We find from the assessment record the assessee suo moto offered disallowance of Rs.6,34,32,208/- u/s 14A of the Act. However, during the course of proceedings before the ld. CIT(A), the respondent-assessee company raised a plea that in the absence of any exempt income, the question of disallowance u/s 14A does not arise. The ld. CIT(A) placing reliance on the decision of the Hon’ble Bombay High Court in the case of CIT vs. Pruthvi Brokers & Shareholders 349 ITR 336 (Bombay) admitted the additional ground and proceeded to dispose of the same following the decision of the Hon’ble Bombay High Court in the case of CIT vs. Ballarpur Industries Ltd. (ITA No.51/2016 order dated 13.10.2016) and the decision of the Hon’ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT 378 ITR 33 (Delhi) and the decision of ITAT in assessee’s own case (supra) held that in the absence of any exempt income, the question of

12 ITA Nos.20, 21 & 22/PUN/2020 disallowance u/s 14A does not arise. The correctness of this finding of the ld. CIT(A) is under challenge before us in the present grounds of appal no.4 and 5 primary on the ground that the claim which has not gone through the process of assessment, cannot be adjudicated by the ld. CIT(A) placing reliance on the decision of the Hon’ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT 284 ITR 323 (SC) and on the ground that the assessed income will be lower than the returned income. 16. It is now well settled position of law that prior to the insertion of Explanation 2 of sub-section (3) of section 14A by the Finance Act, 2022 w.e.f. 1.4.2022 that in the absence of any exempt income, the provisions of section 14A cannot be invoked as held in the following plethora of decisions :- (i) Redington (India) Ltd. vs. Addl. CIT, 392 ITR 633 (Mad); (ii) CIT vs. Celebrity Fashion Ltd., 428 ITR 470 (Mad); (iii) CIT vs. Chettinad Logistics Pvt. Ltd., 80 taxmann.com 221 (Mad) (Against which the SLP filed by the Department was dismissed by the Hon’ble Supreme Court in the case of CIT vs. Chettinad Logistics P. Ltd., 95 taxmann.com 250 (SC); (iv) CIT vs. Continuum Wind Energy (India) Pvt. Ltd., 430 ITR 52 (Mad); (v) PCIT vs. Kohinoor Project Pvt. Ltd., 425 ITR 700 (Bom.); (vi) Cheminvest Ltd. vs. CIT, 378 ITR 33 (Delhi); (vii) MAN Infraprojects Ltd. (ITA No.259 of 2017 dated 09.04.2019) (Bom.).

13 ITA Nos.20, 21 & 22/PUN/2020

14 ITA Nos.20, 21 & 22/PUN/2020 and 5 raised by the Revenue. Accordingly, these ground of appeal no.4 and 5 raised by the Revenue stand dismissed. 18. In the result, the appeal filed by the Revenue in ITA No.20/PUN/2020 stands dismissed. 19. Now, we take up the appeal of the Revenue in ITA No.21/PUN/2020 for assessment year 2014-15 for adjudication. ITA No.21/PUN/2020, A.Y. 2014-15 : 20. The Revenue raised the following grounds of appeal :- “1. “The order of the Ld CIT(A) is contrary to law and to the facts and circumstances of the case. 2. “The learned Commissioner of Income Tax(Appeals) grossly erred in deleting the addition on account of expenses not related to the business of the assessee of Rs. 3,73,84,490/- instead of confirming the same. 3. The learned Commissioner of Income-Tax (Appeals) grossly erred in appreciating the decision of Supreme Court in the case of Lashmirathan Cotton Mills Co. Ltd Vs. CIT(1969) 73 ITR 634(SC) wherein it was held that in order to claim that an nexus of that expenditure to its business what the assessee has failed to dispose off. 4. “Whether on the facts and in the circumstances of the case and in law, the CIT(A) was justified in allowing the additional ground raised by the assessee in respect of reversal of disallowance u/s 14A of Rs.1,28,13,319/- made by the assessee itself in its return of income while computing its income thereby disregarding the judicial pronouncement of the Hon’ble Supreme Court in the case of Goetze(India) Ltd. ITR 323? 5. Whether on the facts and in the circumstances of the case and in law, the CIT(A) was correct in holding that no disallowance u/s 14A is called for, thereby resulting in a situation where the assessed income of the assessee would now be less than the income returned by the assessee?

15 ITA Nos.20, 21 & 22/PUN/2020 6. For the facts and such other reasons an may be urged at the time of hearing, the order of the Ld. Commissioner of Income Tax(Appeals)- 9, Pune may be vacated and that of the Assessing Officer be restored. 7. The above ground of appeal may kindly be allowed to be amended, altered, modified etc. in the interest of natural justice.” 21. Briefly, the facts of the case are that the respondent-assessee is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of promoters, builders and developers of land. The return of income for the assessment year 2014-15 was filed on 30.11.2014 declaring Rs.Nil income. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-14(2), Pune (‘the Assessing Officer’) vide order dated 30.12.2016 passed u/s 143(3) of the Act at total income of Rs.3,74,89,490/-. While doing so, the Assessing Officer made disallowance of interest of Rs.3,73,84,490/- u/s 36(1)(iii) on the ground that interest bearing funds have been diverted to the sister concern in the form of loans and advances without charging any interest. The Assessing Officer also made addition on account of notional rent on completed flats of Rs.1,05,000/-. 22. Being aggrieved by the order of assessment, an appeal was preferred before the ld. CIT(A) who vide impugned order directed the Assessing Officer to delete the addition of interest u/s 36(1)(iii)

16 ITA Nos.20, 21 & 22/PUN/2020 by holding that not disallowance is warranted u/s 36(1)(iii) for the reason that the interest free own funds far exceeds the loans and advances made to the sister concern following the decision of the Hon’ble Supreme Court in the case of CIT vs. Reliance Industries Ltd. 410 ITR 466 (SC) and the decision of this Tribunal in assessee’s own case in the earlier assessment years (supra). Similarly, the ld. CIT(A) also directed the Assessing Officer not to make any addition on account of notional rent of unsold flats. The ld. CIT(A) also allowed the additional ground of appeal challenging the addition u/s 14A in spite of fact that the respondent-assessee had himself offered suo moto disallowance of Rs.1,28,13,994/- by holding that the appellant had not any exempt income. 23. Being aggrieved by the decision of the ld. CIT(A), the Revenue is in appeal before us in the present appeal. 24. Ground of appeal no.1, 6 and 7 are general in nature do not require any adjudication. 25. Ground of appeal no.2 and 3 challenges the correctness of the decision of the ld. CIT(A) in holding that no disallowance of interest u/s 36(1)(iii) of Rs.3,73,84,490/- is warranted. An identical issue was dealt by us in assessee’s own case for assessment year 2013-14 in ITA No.20/PUN/2020 in the foregoing paragraphs of

17 ITA Nos.20, 21 & 22/PUN/2020 this order. It is an admitted position that there is no change of facts in the present year. In the circumstances, on the parity of reasoning given by us in assessee’s own case for assessment year 2013-14, we hold that the order of the ld. CIT(A) is in consonance with the well- settled position of law and we do not find any perversity, illegality in the finding of the ld. CIT(A). Accordingly, the ground of appeal no.2 and 3 filed by the Revenue stands dismissed. 26. Ground of appeal no.4 and 5 challenges the correctness of the decision of the ld. CIT(A) in allowing the additional ground of appeal raised by the respondent-assessee challenging the disallowance u/s 14A of Rs.1,28,13,319/-. For the reason stated in the order for the assessment year 2013-14 in ITA No.20/PUN/2020, we do not find any illegality in admitting this additional ground of appeal by the ld. CIT(A). However, we find that the findings of the ld. CIT(A) that no exempt income is earned by the respondent- assessee during the previous year relevant to the assessment year under consideration is contrary to the fact that the assessee had earned exempt income of Rs.2.04 crores. Thus, the finding of the ld. CIT(A) that in the absence of any exempt income, no disallowance u/s 14A can be made, is reversed. However, we find from the material on record that interest free funds are far exceeds

18 ITA Nos.20, 21 & 22/PUN/2020 the investments made as evident from page no.77 of the Paper Book and, therefore, no disallowance of interest is warranted u/s 14A r.w. Rule 8D(2)(ii) of the Income Tax Rules, 1963 (‘the Rules’) in view of well settled position of law. However, for the purpose of computing the disallowance under limb of Rule 8D(2)(iii) of the Rules, we restore the matter to the file of the Assessing Officer for the purpose of computing the disallowance under Rule 8D(2)(iii) of the Rules with direction that the amount of disallowance should be computed by considering the value of those investments, which yielded the exempt income alone for the purpose of arriving at average value of investments, in view of the decision of the Hon’ble Delhi High Court in the case of in the case of Joint Investments Pvt. Ltd. vs. CIT, 374 ITR 694 (Delhi), the decisions of Hon’ble Madras High Court in the cases of ACB India Ltd. Vs. Assistant Commissioner of Income Tax, Marg Ltd. Vs. CIT, 318 CTR (Mad.) 148 and CIT Vs. Shriram Ownership Trust 318 CTR (Mad.) 233 and also by the Hon’ble Karnataka High Court in the case of Pragathi Krishna Gramin Bank Vs. Jt.CIT, 95 Taxman.com 41 (Kar.). Thus, the ground of appeal no.4 and 5 filed by the Revenue stands partly allowed.

19 ITA Nos.20, 21 & 22/PUN/2020 27. In the result, the appeal filed by the Revenue in ITA No.21/PUN/2020 for A.Y. 2014-15 stands partly allowed. 28. Now, we take up the last appeal of the Revenue in ITA No.22/PUN/2020 for assessment year 2014-15 for adjudication. ITA No.22/PUN/2020, A.Y. 2014-15 : 29. The Revenue raised the following grounds of appeal :- “1. “The order of the Ld CIT(A) is contrary to law and to the facts and circumstances of the case. 2. “The learned Commissioner of Income Tax(Appeals) grossly erred in deleting the addition on account of expenses not related to the business of the assessee of Rs. 2,70,11,676/- instead of confirming the same. 3. The learned Commissioner of Income-Tax (Appeals) grossly erred in appreciating the decision of Supreme Court in the case of Lashmirathan Cotton Mills Co. Ltd Vs. CIT(1969) 73 ITR 634(SC) wherein it was held that in order to claim that an nexus of that expenditure to its business what the assessee has failed to dispose off. 4. For the facts and such other reasons an may be urged at the time of hearing, the order of the Ld. Commissioner of Income Tax(Appeals)- 9, Pune may be vacated and that of the Assessing Officer be restored. 5. The above ground of appeal may kindly be allowed to be amended, altered, modified etc. in the interest of natural justice.” 30. Briefly, the facts of the case are that the respondent-assessee is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of promoters, builders and developers of land. The return of income for the assessment year 2014-15 was filed on 29.11.2014 declaring Rs.Nil income. Against

20 ITA Nos.20, 21 & 22/PUN/2020 the said return of income, the assessment was completed by the Income Tax Officer, Ward-14(2), Pune (‘the Assessing Officer’) vide order dated 30.12.2016 passed u/s 143(3) of the Act at total income of Rs.3,00,66,635/-. While doing so, the Assessing Officer made addition by disallowing the interest of Rs.2,70,11,676/- by holding that the interest bearing funds have been diverted to the sister concern in the form of interest free loans and advances. The Assessing Officer also made an additional addition of Rs.55,00,000/- on account of cash credits on the ground that the respondent-assessee had failed to prove the genuineness and creditworthiness of the credits received during the year. 31. Being aggrieved by the above assessment order, an appeal was preferred before the ld. CIT(A) who vide impugned order had allowed the appeal. 32. Being aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us in the present appeal challenging the decision of the ld. CIT(A) deleting the addition on account of disallowance of interest of Rs.2,70,11,676/-. 33. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the correctness of the decision of the ld. CIT(A) deleting the addition of proportionate

21 ITA Nos.20, 21 & 22/PUN/2020 interest of Rs.2,89,21,612/-. During the course of assessment proceedings, the Assessing Officer observed that the respondent- assessee company diverted the interest bearing loans to the sister concern to Kumar Builders and Kumar Housing and Land Development, hence, the Assessing Officer was of the opinion that the interest proportionate to such land should be disallowed. Accordingly, the Assessing Officer made disallowance of Rs.2,70,11,676/-. On appeal before the ld. CIT(A), the ld. CIT(A) considering the position that own funds and interest free funds are far exceeds the loans and advances given to the sister concern directed the Assessing Officer to delete the addition placing reliance on the decision of the Hon’ble Supreme Court in the case of CIT vs. Reliance Industries Ltd. 410 ITR 466 (SC) and the decision of this Tribunal in assessee’s own case in the earlier assessment years (supra). The correctness of this finding of the ld. CIT(A) is under challenge before us in the present appeal. It is an admitted position that as extracted by the ld. CIT(A) from the ld. CIT(A)’s order at page no.19 para 3.3.1 that interest free funds or own funds far exceeds as on 31.03.2014 stood at Rs.27,90,64,928/- whereas the loans and advances made to the sister concern stood at 23,19,05,317/-. Therefore, it can be safely concluded that the loans

22 ITA Nos.20, 21 & 22/PUN/2020 and advances are made to the sister concern out of the interest free own funds and, therefore, no disallowance of interest is warranted in the of the settled position of law as settled by the Hon’ble Supreme Court in the case of CIT vs. Reliance Industries Ltd. 410 ITR 466 (SC). Similar view has been taken by the Hon’ble Supreme Court in the case of South Indian Bank Ltd. vs. CIT, 130 taxmann.com 178 (SC) by holding as under :- “17. In a situation where the assessee has mixed fund (made up partly of interest free funds and partly of interest-bearing funds) and payment is made out of that mixed fund, the investment must be considered to have been made out of the interest free fund. To put it another way, in respect of payment made out of mixed fund, it is the assessee who has such right of appropriation and also the right to assert from what part of the fund a particular investment is made and it may not be permissible for the Revenue to make an estimation of a proportionate figure. For accepting such a proposition, it would be helpful to refer to the decision of the Bombay High Court in Pr. CIT v. Bombay Dyeing & Mfg. Co. Ltd. [IT Appeal No. 1225 of 2015, dated 28-11-2017], where the answer was in favour of the assessee on the question, whether the Tribunal was justified in deleting the disallowance under section 80M of the Act on the presumption that when the funds available to the assessee were both interest free and loans, the investments made would be out of the interest free funds available with the assessee, provided the interest free funds were sufficient to meet the investments. The resultant SLP of the Revenue challenging the Bombay High Court judgment was dismissed both on merit and on delay by this Court. The merit of the above proposition of law of the Bombay High Court would now be appreciated in the following discussion. 18. In the above context, it would be apposite to refer to a similar decision in CIT v. Reliance Industries Ltd. [2019] 102 taxmann.com 52/261 Taxman 165/410 ITR 466 (SC), where a Division Bench of this Court expressly held that where there is finding of fact that interest free funds available to assessee were sufficient to meet its investment it will be presumed that investments were made from such interest free funds. 19. In HDFC Bank Ltd. v. Dy. CIT [2016] 67 taxmann.com 42/383 ITR 529 (Bom.), the assessee was a Scheduled Bank and the issue therein also pertained to disallowance under section 14A. In this case, the Bombay High Court even while remanding the case back to

23 ITA Nos.20, 21 & 22/PUN/2020 Tribunal for adjudicating afresh observed (relying on its own previous judgment in same assessee's case for a different Assessment Year) that, if assessee possesses sufficient interest free funds as against investment in tax-free securities then, there is a presumption that investment which has been made in tax-free securities, has come out of interest free funds available with assessee. In such situation section 14A of the Act would not be applicable. Similar views have been expressed by other High Courts in CIT v. Suzlon Energy Ltd. [2013] 33 taxmann.com 157/215 Taxman 272/354 ITR 630 (Guj.), CIT v. Microlabs Ltd. [2017] 79 taxmann.com 365/[2016] 383 ITR 490 (Kar.) and CIT v. Max India Ltd. [2016] 75 taxmann.com 268/388 ITR 81 (Punj. & Har.). Mr. S Ganesh the learned Senior Counsel while citing these cases from the High Courts have further pointed out that those judgments have attained finality. On reading of these judgments, we are of the considered opinion that the High Courts have correctly interpreted the scope of section 14A of the Act in their decisions favouring the assessees. 20. Applying the same logic, the disallowance would be legally impermissible for the investment made by the assessees in bonds/shares using interest free funds, under section 14A of the Act. In other words, if investments in securities is made out of common funds and the assessee has available, non-interest-bearing funds larger than the investments made in tax-free securities then in such cases, disallowance under section 14A cannot be made.” 34. Therefore, the decision of the ld. CIT(A) is based on the proper appreciation of material facts on record and in consonance with the well settled position of law, does not require any interference. Thus, we do not find any merit in the grounds of appeal filed by the Revenue. 35. In the result, the appeal filed by the Revenue in ITA No.22/PUN/2020 for A.Y. 2014-15 stands dismissed. 36. To sum up, the appeal of the Revenue in ITA No.20/PUN/2020 stands dismissed. Appeal of the Revenue in ITA

24 ITA Nos.20, 21 & 22/PUN/2020 No.21/PUN/2020 for A.Y. 2014-15 stands partly allowed. Appeal of the Revenue in ITA No.22/PUN/2020 for A.Y. 2014-15 stands dismissed Order pronounced on this 22nd day of August, 2022. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; �दनांक / Dated : 22nd August, 2022. Sujeet आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(A) -9, Pune. 4. The Pr. CIT-6, Pune. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “A” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.