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DCIT(CC)-8(3) , MUMBAI vs SHAPOORJI PALLONJI AND COMPANY PRIVATE LIMITED, MUMBAI | BharatTax

DCIT(CC)-8(3) , MUMBAI vs. SHAPOORJI PALLONJI AND COMPANY PRIVATE LIMITED, MUMBAI

ITA 2831/MUM/2025Status: DisposedITAT Mumbai12 January 2026AY 2014-1557 pages

AI SummaryPartly Allowed

Facts

The assessee, engaged in construction and infrastructure works, filed its return declaring a loss. The assessment was completed, but later reopened under Section 147 due to alleged escaped income related to interest expenses and subcontract expenses. The assessee challenged the reassessment proceedings on various grounds, including validity of reopening and borrowed satisfaction.

Held

The Tribunal held that the reassessment proceedings were vitiated due to a 'change of opinion' as no new tangible material was presented. It also found that additions related to subcontract expenses were not part of the original reasons for reopening. Regarding the Section 14A disallowance, the Tribunal upheld the deletion based on the assessee's sufficient interest-free funds and consistency of previous rulings.

Key Issues

Validity of reassessment proceedings initiated on 'borrowed satisfaction' and 'change of opinion'; justification of Section 14A disallowance and its impact on book profit computation.

Sections Cited

147, 148, 143(3), 14A, 8D, 115JB, 151

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “C” MUMBAI

Before: SHRI OM PRAKASH KANT & SHRI RAJ KUMAR CHAUHAN

For Appellant: Mr. Nikhil Tiwari

For Respondent: Mr. R A Dhyani, CIT-DR

Hearing: 14/10/2025Pronounced: 12/01/2026

Per contra, the learned Departmental Representative 9.5 Per Per contra, contra, the the learned learned Departmental Departmental Representative Representative submitted that the ratio of submitted that the ratio of Jet Airways(supra) applies only to a applies only to a situation where the Assessing Officer himself does not make any situation where the Assessing Officer himself does not make any situation where the Assessing Officer himself does not make any addition on the issue forming the basis of reopening in the addition on the issue forming the basis of reopening in the addition on the issue forming the basis of reopening in the reassessment order. According to the Revenue, subsequent deletion der. According to the Revenue, subsequent deletion der. According to the Revenue, subsequent deletion of such addition by an appellate authority does not invalidate the of such addition by an appellate authority does not invalidate the of such addition by an appellate authority does not invalidate the reassessment proceedings, particularly when the issue is still reassessment proceedings, particularly when the issue is still reassessment proceedings, particularly when the issue is still contested by the Department. contested by the Department.

9.6 In rejoinder, the Ld. counsel for the asse he Ld. counsel for the assessee further referred ssee further referred to the decision of the Third Member in the case of Mahesh Kumar to the decision of the Third Member in the case of Mahesh Kumar to the decision of the Third Member in the case of Mahesh Kumar (ITA No. 2650/Del/2024) dated 06.08.2025 and submitted that (ITA No. 2650/Del/2024) dated 06.08.2025 and submitted that (ITA No. 2650/Del/2024) dated 06.08.2025 and submitted that even if addition for the basis of reopening has been deleted by the even if addition for the basis of reopening has been deleted by the even if addition for the basis of reopening has been deleted by the Ld. CIT(A) still the reassessment proceedi Ld. CIT(A) still the reassessment proceedings cannot be sustained ngs cannot be sustained in law as basis of the reopening itself has been removed. The Ld. the reopening itself has been removed. The Ld. the reopening itself has been removed. The Ld. counsel also relied on the decision of the Asha Kansal [2014] 62 counsel also relied on the decision of the Asha Kansal [2014] 62 counsel also relied on the decision of the Asha Kansal [2014] 62 SOT 146 (Agra-Trib.) wherein it is held that when the original Trib.) wherein it is held that when the original Trib.) wherein it is held that when the original reason for which the notice was issued reason for which the notice was issued was not sustained and was was not sustained and was deleted by the Ld. CIT(A) which was also accepted by the Ld. AO. In deleted by the Ld. CIT(A) which was also accepted by the Ld. AO. In deleted by the Ld. CIT(A) which was also accepted by the Ld. AO. In such case the reassessment proceedings had became infructuous. such case the reassessment proceedings had became infructuous. such case the reassessment proceedings had became infructuous.

9.7 We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused The legal position emanating from the relevant materials on record. the relevant materials on record. The legal position emanating from the judgment of the Hon’ble Bombay High Court in Jet Airways (I) the judgment of the Hon’ble Bombay High Court in the judgment of the Hon’ble Bombay High Court in Ltd.(supra) is that if the Assessing Officer, during reassessment is that if the Assessing Officer, during reassessment is that if the Assessing Officer, during reassessment proceedings, does not make any addition on the issue for which the proceedings, does not make any addition on the issue for which the proceedings, does not make any addition on the issue for which the assessment was reopened, he cannot assess any other income assessment was reopened, he cannot assess any other income assessment was reopened, he cannot assess any other income which comes to his notice during such proceedings. The rationale is which comes to his notice during such proceedings. The rationale is which comes to his notice during such proceedings. The rationale is that the assumption of jurisdiction under section 147 is issue e assumption of jurisdiction under section 147 is issue e assumption of jurisdiction under section 147 is issue- specific and must culminate in an addition on the very issue specific and must culminate in an addition on the very issue specific and must culminate in an addition on the very issue forming the basis of reopening. forming the basis of reopening. For ready reference, the relevant For ready reference, the relevant finding of the Hon’ble Bombay High Court in the case of Jet Airways finding of the Hon’ble Bombay High Court in the case of Jet Airways finding of the Hon’ble Bombay High Court in the case of Jet Airways (supra) is reproduced as under: a) is reproduced as under:

“17. We have approached the issue of interpretation that has arisen We have approached the issue of interpretation that has arisen We have approached the issue of interpretation that has arisen for decision in these appeals, both as a ion in these appeals, both as a matter of first principle, based on matter of first principle, based on the language used in section 147(1) and on the basis of the precedent on the language used in section 147(1) and on the basis of the precedent on the language used in section 147(1) and on the basis of the precedent on the subject. We agree with the submission which has been urged on the subject. We agree with the submission which has been urged on the subject. We agree with the submission which has been urged on behalf of the assessee that section 147(1) as it stands postulates that behalf of the assessee that section 147(1) as it stands postulates that behalf of the assessee that section 147(1) as it stands postulates that upon the formation of a reason to believe that income chargeable to tax formation of a reason to believe that income chargeable to tax formation of a reason to believe that income chargeable to tax has escaped assessment for any assessment year, the Assessing Officer has escaped assessment for any assessment year, the Assessing Officer has escaped assessment for any assessment year, the Assessing Officer may assess or reassess such income "and also" any other income may assess or reassess such income "and also" any other income may assess or reassess such income "and also" any other income chargeable to tax which comes to his notice subsequently dur chargeable to tax which comes to his notice subsequently during the chargeable to tax which comes to his notice subsequently dur proceedings as having escaped assessment. The words "and also" are proceedings as having escaped assessment. The words "and also" are proceedings as having escaped assessment. The words "and also" are used in a cumulative and conjunctive sense. To read these words as used in a cumulative and conjunctive sense. To read these words as used in a cumulative and conjunctive sense. To read these words as being in the alternative would be to rewrite the language used by being in the alternative would be to rewrite the language used by being in the alternative would be to rewrite the language used by Parliament. Our view has been supported by the background which led to Parliament. Our view has been supported by the b ackground which led to the insertion of Explanation 3 to section 147. Parliament must be the insertion of Explanation 3 to section 147. Parliament must be the insertion of Explanation 3 to section 147. Parliament must be regarded as being aware of the interpretation that was placed on the regarded as being aware of the interpretation that was placed on the regarded as being aware of the interpretation that was placed on the words "and also" by the Rajasthan High Court in Shri Ram Singh's case words "and also" by the Rajasthan High Court in Shri Ram Singh's case words "and also" by the Rajasthan High Court in Shri Ram Singh's case

Shapoorji Pallaonji And Company Pvt. Ltd. Shapoorji Pallaonji And Company Pvt. Ltd. CO 130/M/2025 The Assessing Officer cannot be expected to anticipate or prejudge The Assessing Officer cannot be expected to anticipate or prejudge The Assessing Officer cannot be expected to anticipate or prejudge the the outcome outcome of of a appellate ppellate proceedings proceedings while while framing framing the the reassessment. change if the Department accept the finding 9.12 But situation will will change if the Department accept the finding of the appellate authority and does not dispute further. In the case of the appellate authority and does not dispute further of the appellate authority and does not dispute further of Asha Cansal (supra) also the addition forming basis of the of Asha Cansal (supra) also the addition forming basis of the of Asha Cansal (supra) also the addition forming basis of the reasons recorded was deleted by the ons recorded was deleted by the Ld. CIT(A) and it was also ) and it was also accepted by the Department Department. In the case of the Mahesh Kumar . In the case of the Mahesh Kumar (supra) also the finding of the Ld. CIT(A) was accepted by the (supra) also the finding of the Ld. CIT(A) was accepted by the (supra) also the finding of the Ld. CIT(A) was accepted by the Department, whereas in the instant case before us, whereas in the instant case before us, whereas in the instant case before us, the deletion of the disallowance under section 14A by the learned CIT(A) is under disallowance under section 14A by the learned CIT(A) is under disallowance under section 14A by the learned CIT(A) is under challenge before us by the Revenue and has not attained finality. challenge before us by the Revenue and has not attained finality. challenge before us by the Revenue and has not attained finality. The issue remains sub judice and is actively contested. Therefore, it The issue remains sub judice and is actively contested. Therefore, it The issue remains sub judice and is actively contested. Therefore, it cannot be said, at this stage, that the basis of reopening has been cannot be said, at this stage, that the basis of reopening cannot be said, at this stage, that the basis of reopening finally removed or accepted by the Department. finally removed or accepted by the Department.

1. "Whether, on the fac 1. "Whether, on the facts and in the circumstances of the case and in ts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting . CIT(A) erred in deleting the addition of Rs. the addition of Rs. 3,74,61,918/- made by the A made by the Assessing Officer u/s 69C of the Act, on 69C of the Act, on account of unexplained expenditure relating to transactions with account of unexplained expenditure relating to transactions account of unexplained expenditure relating to transactions Smt. Mayaben Vijay Parmar and Shri Vijay Gajendrusinh Smt. Mayaben Vijay Parmar and Shri Vijay Gajendrusinh Smt. Mayaben Vijay Parmar and Shri Vijay Gajendrusinh Parmar (HUF)? Parmar (HUF)?" 2." Whether, on the facts and in t 2." Whether, on the facts and in the circumstances of the case and in he circumstances of the case and in law, the Id. CIT(A) failed to properly consider the findings and law, the Id. CIT(A) failed to properly consider the findings and law, the Id. CIT(A) failed to properly consider the findings and evidence recorded by the Assessing Officer in the assessment order, evidence recorded by the Assessing Officer in the assessment order, evidence recorded by the Assessing Officer in the assessment order, and erred in granting relief without conducting adequate verification and erred in granting relief without conducting adequate verification and erred in granting relief without conducting adequate verification or bringing any c or bringing any corroborative material on record to justify the orroborative material on record to justify the deletion of the addition made by the AO deletion of the addition made by the AO u/s. 69C of the Act on 69C of the Act on account of unexplained expenditure?" account of unexplained expenditure?" 3. "Whether, on the 3. "Whether, on the facts and in the circumstances of the case and in and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting law, the Ld. CIT(A) erred in deleting the disallowance of Rs. the disallowance of Rs. 76,99,24,606/- - made by the Assessing Officer under Section 14t of made by the Assessing Officer under Section 14t of the Income-tax Act, 1961, read with Rule 8D(2)(ii) of the Income tax Act, 1961, read with Rule 8D(2)(ii) of the Income tax Act, 1961, read with Rule 8D(2)(ii) of the Income-tax Rules, 1962, without properly appreciating the facts as mentioned in Rules, 1962, without properly appreciating the facts as mentioned in Rules, 1962, without properly appreciating the facts as mentioned in the assessment order by the the assessment order by the Ld.AO. 4. "Whether on the facts and in the circumstances of the case and in 4. "Whether on the facts and in the circumstances of the case and in 4. "Whether on the facts and in the circumstances of the case and in law, the Ed. CT(A) erred in deleting the disallowance of Rs. law, the Ed. CT(A) erred in deleting the disallowance of Rs. law, the Ed. CT(A) erred in deleting the disallowance of Rs. 76,99,24,606/- - made by the Assessing Officer under section 144 of nder section 144 of the Income Tax Act, 1961 r.w.r 8D(2)(ii) o the Income Tax Act, 1961 r.w.r 8D(2)(ii) of the Act while computing the tax liability w/s 115JB of the Act, without appreciating the facts x liability w/s 115JB of the Act, without appreciating the facts x liability w/s 115JB of the Act, without appreciating the facts as mentioned in the assessment order by the AO. as mentioned in the assessment order by the AO. 5. "The appellant craves leave to amend, alter, or add any ground of 5. "The appellant craves leave to amend, alter, or add any ground of 5. "The appellant craves leave to amend, alter, or add any ground of appeal

Sr. No. Name of Bank & A/c No. Name of Bank & A/c No. F.Y. Amount (Rs.) Amount (Rs.) 1. IDBI, 910400224765 IDBI, 910400224765 2011-12 71,99,052/- 71,99,052/ 2. IDBI, 9102000049629 IDBI, 9102000049629 2011-12 1,46,99,364/- 1,46,99,364/ 3. IDBI, 9102000049629 IDBI, 9102000049629 2012-13 2,87,92,909/- 2,87,92,909/ 4. IDBI, 9102000049629 9102000049629 2013-14 49,62,067/- 49,62,067/ (ii) Shri Vijay G. Parmar (HUF) (ii) Shri Vijay G. Parmar (HUF) Shri Vijay G. Parmar holds a joint account no. 910400224765 with his wife Shri Vijay G. Parmar holds a joint account no. 910400224765 with his wife Shri Vijay G. Parmar holds a joint account no. 910400224765 with his wife Mayaben V. Parmar in the IDBI Bank, Ahmedabad. Mayaben V. Parmar in the IDBI Bank, Ahmedabad. Sr. No. Name of Bank & A/c No. Name of Bank & A/c No. F.Y. Amount (Rs.) Amount (Rs.) 1. IDBI, 910400224765 910400224765 2013-14 3,24,99,851/- 3,24,99,851/ 2. IDBI, 910400224765 IDBI, 910400224765 2014-15 3,46,38,688/- 3,46,38,688/ 11.2 The Investigation Wing observed that neither the assessee nor The Investigation Wing observed that neither the assessee nor The Investigation Wing observed that neither the assessee nor the contractors, namely Smt. Mayaben Vijay Parmar and Shri Vijay the contractors, namely Smt. Mayaben Vijay Parmar and Shri Vijay the contractors, namely Smt. Mayaben Vijay Parmar and Shri Vijay G. Parmar (HUF), were able to substantiate the transactions with G. Parmar (HUF), were able to substantiate the transactions with G. Parmar (HUF), were able to substantiate the transactions with Shapoorji Pallaonji And Company Pvt. Ltd. Shapoorji Pallaonji And Company Pvt. Ltd. CO 130/M/2025 primary evidences such as muster rolls, wage registers, or labour primary evidences such as muster rolls, wage registers, or labou primary evidences such as muster rolls, wage registers, or labou payment vouchers. It was further noticed that the amounts received payment vouchers. It was further noticed that the amounts received payment vouchers. It was further noticed that the amounts received by the contractors from the assessee were withdrawn in cash soon by the contractors from the assessee were withdrawn in cash soon by the contractors from the assessee were withdrawn in cash soon after being credited to their bank accounts. after being credited to their bank accounts.

Shapoorji Pallaonji And Company Pvt. Ltd. Shapoorji Pallaonji And Company Pvt. Ltd. CO 130/M/2025 11.12 Further, the ld counsel for the the ld counsel for the assessee submitted that the said investigation report itself stated that Smt. Mayaben Vijay the said investigation report itself stated that Smt. Mayaben Vijay the said investigation report itself stated that Smt. Mayaben Vijay Parmar and Shri Vijay Parmar have supplied labour services to the Parmar and Shri Vijay Parmar have supplied labour services to the Parmar and Shri Vijay Parmar have supplied labour services to the Assessee and the Assessee as well as the aforesaid Contractors had Assessee and the Assessee as well as the aforesaid Contractors had Assessee and the Assessee as well as the aforesaid Contractors had provided sufficient documents to substantiate the provided sufficient documents to substantiate the payments made payments made and further, it has been clearly mentioned that the subsequent and further, it has been clearly mentioned that the subsequent and further, it has been clearly mentioned that the subsequent cash withdrawal was for making payments to the labourers. Thus, cash withdrawal was for making payments to the labourers. Thus, cash withdrawal was for making payments to the labourers. Thus, the Assessee as well as the aforesaid Contractor had provided all the Assessee as well as the aforesaid Contractor had provided all the Assessee as well as the aforesaid Contractor had provided all the documentary evidence and had provided its explanation with the documentary evidence and had provided its exp the documentary evidence and had provided its exp respect to the aforesaid transaction and which was also accepted in respect to the aforesaid transaction and which was also accepted in respect to the aforesaid transaction and which was also accepted in the investigation report. Thus, the investigation report seems to be the investigation report. Thus, the investigation report seems to be the investigation report. Thus, the investigation report seems to be in favour of the Assessee. in favour of the Assessee.

Power Plant of Bhavnagar Energy Co. Pvt. Power Plant of Bhavnagar Energy Co. Pvt. Rs. 3800 Crore Rs. 3800 Crore Ltd. at Padva Bhavnagar Ltd. at Padva Bhavnagar Cement plant of ABG Cement at Kutch Cement plant of ABG Cement at Kutch Rs. 900 Crore 11.14 It was emphasized that It was emphasized that the aforesaid projects the aforesaid projects were huge of almost Rs. 1,000 to to Rs. 4,000 Crore , against which the Assessee against which the Assessee has made contractor payment of very meagre amount and the Ld. has made contractor payment of very meagre amount and the Ld. has made contractor payment of very meagre amount and the Ld. AO has without verifying the documentation submitted has doubted AO has without verifying the documentation submitted AO has without verifying the documentation submitted the genuineness of payments without providing any cogent reasons the genuineness of payments without providing any cogent reasons the genuineness of payments without providing any cogent reasons for doubting the genuineness of the projects. for doubting the genuineness of the projects. Further, it Further, it was submitted that the Assessee's turnover from Construction business that the Assessee's turnover from Construction business that the Assessee's turnover from Construction business is Rs. 4,351.56 Crores out of the total turnover a is Rs. 4,351.56 Crores out of the total turnover amounting to Rs. mounting to Rs. 4,522.60 Crores. (Refer Pg. No. 41 of Factual Paperbook). The 4,522.60 Crores. (Refer Pg. No. 41 of Factual Paperbook). The 4,522.60 Crores. (Refer Pg. No. 41 of Factual Paperbook). The payment made to contractor Smt. Mayaben Parmar and Vijay G payment made to contractor Smt. Mayaben Parmar and Vijay G payment made to contractor Smt. Mayaben Parmar and Vijay G Parmar (HUF) is Rs. 0.50 Crores and Rs. 3.25 crores respectively. Parmar (HUF) is Rs. 0.50 Crores and Rs. 3.25 crores respectively. Parmar (HUF) is Rs. 0.50 Crores and Rs. 3.25 crores respectively. Thus, the payment made to the contractors is merely 0.09% of the Thus, the payment made to the contractors is merely 0 Thus, the payment made to the contractors is merely 0 turnover from construction business. Thus, this is meagre amount turnover from construction business. Thus, this is meagre amount turnover from construction business. Thus, this is meagre amount as compared to the huge transactions undertaken by the Assessee as compared to the huge transactions undertaken by the Assessee as compared to the huge transactions undertaken by the Assessee during the year. It was also submitted that t was also submitted that the Assessee during the the Assessee during the year has claimed sub year has claimed sub-contracting charges amount contracting charges amounting to Rs. 1,490.97 Crores (Refer Pg. No. 42 of Factual Paperbook). The 1,490.97 Crores (Refer Pg. No. 42 of Factual Paperbook). The 1,490.97 Crores (Refer Pg. No. 42 of Factual Paperbook). The payment made to contractor Smt. Mayaben Parmar and Vijay G payment made to contractor Smt. Mayaben Parmar and Vijay G payment made to contractor Smt. Mayaben Parmar and Vijay G Parmar (HUF) is Rs. 0.50 Crores and 3.25 crores respectively. Thus, Parmar (HUF) is Rs. 0.50 Crores and 3.25 crores respectively. Thus, Parmar (HUF) is Rs. 0.50 Crores and 3.25 crores respectively. Thus, the payment made to contractors comprises of only 0.25% of the the payment made to contractors comprises of only 0.25% o the payment made to contractors comprises of only 0.25% o total sub-contracting charges claimed which is just a meagre contracting charges claimed which is just a meagre contracting charges claimed which is just a meagre

11.18 The Ld. counsel for the assessee relied on the decision of The Ld. counsel for the assessee relied on the decision of The Ld. counsel for the assessee relied on the decision of inate Bench of the Tribunal in the case of the assessee’s the Co-ordinate Bench of the Tribunal in the case of the assessee’s inate Bench of the Tribunal in the case of the assessee’s own case for assessment year 2010 own case for assessment year 2010-11 which has been further 11 which has been further affirmed by the Hon’ble Bombay High Court in of affirmed by the Hon’ble Bombay High Court in of affirmed by the Hon’ble Bombay High Court in of 2017. In said decision, the Hon’ble Bombay High Court has held 2017. In said decision, the Hon’ble Bombay High Court has held 2017. In said decision, the Hon’ble Bombay High Court has held that the assessee had furnished all the material to prove see had furnished all the material to prove see had furnished all the material to prove genuineness of the purchases but the AO held that those materials genuineness of the purchases but the AO held that those ma genuineness of the purchases but the AO held that those ma were bogus and under tho were bogus and under those set of facts, there was was no justification in doubting the genuineness of purchases made by the assessee. in doubting the genuineness of purchases made by the assessee. in doubting the genuineness of purchases made by the assessee. Further, it was held that such alleged bogus purchases formed only held that such alleged bogus purchases formed only held that such alleged bogus purchases formed only a minor fraction of total a minor fraction of total volume of the assessee company and it is volume of the assessee company and it is day involvement of the management. stated that there is no day stated that there is no day-to-day involvement of the management. Further, the Ld. counsel for the assessee relied on the decision of Further, the Ld. counsel for the assessee relied on the decision of Further, the Ld. counsel for the assessee relied on the decision of the Hon’ble Bombay High Court in the case of Nikunj Eximp Hon’ble Bombay High Court in the case of Nikunj Eximp Hon’ble Bombay High Court in the case of Nikunj Eximp Enterprises (P) Ltd. (2015) 372 ITR 619. The relevant extract of Enterprises (P) Ltd. (2015) 372 ITR 619. The relevant extract of Enterprises (P) Ltd. (2015) 372 ITR 619. The relevant extract of which is reproduced as under: which is reproduced as under:

"7. We have considered the submission on behalf of the revenue. "7. We have considered the submission on behalf of the revenue. "7. We have considered the submission on behalf of the revenue. However, from the order of the Tribunal da However, from the order of the Tribunal dated 30-04-2010, we find 2010, we find that the Tribunal has deleted the additions on account of bogus that the Tribunal has deleted the additions on account of bogus that the Tribunal has deleted the additions on account of bogus purchases not only on the basis of stock statement i.e. reconciliation purchases not only on the basis of stock statement i.e. reconciliation purchases not only on the basis of stock statement i.e. reconciliation statement, but also in view of the other facts. The Tribunal records statement, but also in view of the other facts. The Tribunal records statement, but also in view of the other facts. The Tribunal records that the Books of Accounts o that the Books of Accounts of the respondent-assessee have not assessee have not been rejected. Similarly, the sales have not been doubted and it is been rejected. Similarly, the sales have not been doubted and it is been rejected. Similarly, the sales have not been doubted and it is an admitted position that substantial amount of sales have been an admitted position that substantial amount of sales have been an admitted position that substantial amount of sales have been made to the Government Department i.e. Defence Research and made to the Government Department i.e. Defence Research and made to the Government Department i.e. Defence Research and Development Development Laboratory, Laboratory, Hyderabad. Hyder abad. Further, Further, there there were were Shapoorji Pallaonji And Company Pvt. Ltd. Shapoorji Pallaonji And Company Pvt. Ltd. CO 130/M/2025 confirmation letters filed by the suppliers, copies of invoices for confirmation letters filed by the suppliers, copies of invoices for confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank statement all of which would purchases as well as copies of bank statement all of which would purchases as well as copies of bank statement all of which would indicate that the purchases were infact made. In our view, merely indicate that the purchases were infact made. In our view, merely indicate that the purchases were infact made. In our view, merely because the suppliers have not because the suppliers have not appeared before the Assessing appeared before the Assessing Officer or the CIT(A), one cannot coriclude that the purchases were Officer or the CIT(A), one cannot coriclude that the purchases were Officer or the CIT(A), one cannot coriclude that the purchases were not made by the respondent not made by the respondent-assessee. The Assessing Officer as assessee. The Assessing Officer as well as CIT(A) have disallowed the deduction of Rs.1.33 crores on well as CIT(A) have disallowed the deduction of Rs.1.33 crores on well as CIT(A) have disallowed the deduction of Rs.1.33 crores on account of purchases merely on account of purchases merely on the basis of suspicion because the the basis of suspicion because the sellers and the canvassing agents have not been produced before sellers and the canvassing agents have not been produced before sellers and the canvassing agents have not been produced before them. We find that the order of the Tribunal is well a reasoned order them. We find that the order of the Tribunal is well a reasoned order them. We find that the order of the Tribunal is well a reasoned order taking into account all the facts before concluding that the taking into account all the facts before concluding that the taking into account all the facts before concluding that the purchases of Rs. 1.33 cro purchases of Rs. 1.33 crores was not bogus. No fault can be found res was not bogus. No fault can be found with the order dated 30 with the order dated 30-04-2010 of the Tribunal." 11.19 Further, the Ld. counsel relied on the Further, the Ld. counsel relied on the Coordinate bench Coordinate bench of Delhi Tribunal in the case of Swastik Pipes Ltd. (2018) 66 ITR(T) Delhi Tribunal in the case of Swastik Pipes Ltd. (2018) 66 ITR(T) Delhi Tribunal in the case of Swastik Pipes Ltd. (2018) 66 ITR(T) 1). The relevant para of which is 1). The relevant para of which is reproduced as under: reproduced as under:

"16. On ground No.6, Revenue challenged the addition of Rs. "16. On ground No.6, Revenue challenged the addition of Rs. "16. On ground No.6, Revenue challenged the addition of Rs. 14,64,445/- made on account of disallowance of general repair and made on account of disallowance of general repair and made on account of disallowance of general repair and maintenance expenses. The assessee explained before Ld. CIT (A) maintenance expenses. The assessee explained before Ld. CIT (A) maintenance expenses. The assessee explained before Ld. CIT (A) that it has incurred expenses for various typ that it has incurred expenses for various types of electrical, es of electrical, mechanical and engineering type of activities which were got done mechanical and engineering type of activities which were got done mechanical and engineering type of activities which were got done from labour on regular basis. Local/casual labour is hired on from labour on regular basis. Local/casual labour is hired on from labour on regular basis. Local/casual labour is hired on regular basis for execution of various types of electrical, mechanical regular basis for execution of various types of electrical, mechanical regular basis for execution of various types of electrical, mechanical and engineering works. They are being p and engineering works. They are being paid small amounts for aid small amounts for carrying out these CIT(A) accepted the contention of assessee on the carrying out these CIT(A) accepted the contention of assessee on the carrying out these CIT(A) accepted the contention of assessee on the basis of documents produced before him which are wage rolls for basis of documents produced before him which are wage rolls for basis of documents produced before him which are wage rolls for the wages paid by the assessee in assessment year. The services the wages paid by the assessee in assessment year. The services the wages paid by the assessee in assessment year. The services were hired on rate contract basis and were hired on rate contract basis and payments are relating thereto. payments are relating thereto. The quantum of expenditure pointed out by the Revenue is also not The quantum of expenditure pointed out by the Revenue is also not The quantum of expenditure pointed out by the Revenue is also not in any consequence keeping in view the fact that assessee runs in any consequence keeping in view the fact that assessee runs in any consequence keeping in view the fact that assessee runs several steel and coil manufacturing units and such expenses on several steel and coil manufacturing units and such expenses on several steel and coil manufacturing units and such expenses on repairs and maintenance of the repairs and maintenance of the factory premises are naturally factory premises are naturally running into lakhs of rupees. Ld. CIT (A) accepted the explanation of running into lakhs of rupees. Ld. CIT (A) accepted the explanation of running into lakhs of rupees. Ld. CIT (A) accepted the explanation of assessee and deleted the addition. assessee and deleted the addition.

11.23 The determinative question, therefore, is whether the The determinative question, therefore, is whether the The determinative question, therefore, is whether the assessee has established actual receipt and utilisation of labour assessee has established actual receipt and utilisation of labour assessee has established actual receipt and utilisation of labour services. On consideration of the material on record, we find that services. On consideration of the material on record, we find that services. On consideration of the material on record, we find that the assessee has successfully demonstrated that services of skilled the assessee has successfully demonstrated that service the assessee has successfully demonstrated that service and unskilled labour were availed and consumed in its business and unskilled labour were availed and consumed in its business and unskilled labour were availed and consumed in its business projects. Once such utilisation of services is established and projects. Once such utilisation of services is established and projects. Once such utilisation of services is established and payments are made through banking channels against invoices, the payments are made through banking channels against invoices, the payments are made through banking channels against invoices, the primary onus cast upon the assessee stands duly discharged. primary onus cast upon the assessee stands duly disc primary onus cast upon the assessee stands duly disc 11.24 The assessee engaged the labour through independent The assessee engaged the labour through independent The assessee engaged the labour through independent contractors and made payments to them by account payee cheques. contractors and made payments to them by account payee cheques. contractors and made payments to them by account payee cheques. The assessee cannot be held responsible for the manner in which The assessee cannot be held responsible for the manner in which The assessee cannot be held responsible for the manner in which the contractors withdrew cash or maintained their internal records. the contractors withdrew cash or maintained their internal rec the contractors withdrew cash or maintained their internal rec The law does not oblige an assessee to maintain or produce internal The law does not oblige an assessee to maintain or produce internal The law does not oblige an assessee to maintain or produce internal documents of third-party contractors, such as muster rolls or wage party contractors, such as muster rolls or wage party contractors, such as muster rolls or wage registers, nor does it require the assessee to explain as why the registers, nor does it require the assessee to explain registers, nor does it require the assessee to explain payments to labourer payments to labourers was made in cash, once the nce the genuineness of the transaction and business purpose are established. Significantly, the transaction and business purpose are established. Significantly, the transaction and business purpose are established. Significantly, there is no finding that the work was not executed or that the there is no finding that the work was not executed or that the there is no finding that the work was not executed or that the projects themselves were fictitious. The disallowance rests solely on projects themselves were fictitious. The disallowance rests solely on projects themselves were fictitious. The disallowance rests solely on suspicion arising from cash withdrawals suspicion arising from cash withdrawals by the contractors, which, by the contractors, which, by itself, is insufficient to hold the expenditure as non-genuine. by itself, is insufficient to hold the expenditure as non by itself, is insufficient to hold the expenditure as non

“140. In this regard, the Assessee would like to place reliance on 140. In this regard, the Assessee would like to place reliance on 140. In this regard, the Assessee would like to place reliance on the decision of the Hon'ble Mumbai Tribunal in Appellant's own case the decision of the Hon'ble Mumbai Tribunal in Appellant's own case the decision of the Hon'ble Mumbai Tribunal in Appellant's own case for AY 2008-09 in (Refer page no. 383 of 09 in (Refer page no. 383 of 09 in (Refer page no. 383 of Factual paperbook) wherein the Hon'ble Tribunal held that since Factual paperbook) wherein the Hon'ble Tribunal held that since Factual paperbook) wherein the Hon'ble Tribunal held that since Appellant's own capital is much more than investment in Appellant's own capital is much more than investment in Appellant's own capital is much more than investment in share/funds generating exempt income, the jurisdictional High share/funds generating exempt income, the jurisdictional High share/funds generating exempt income, the jurisdictional High Court decision Court decisions in the case of Reliance Utilities and Power Ltd. (221 s in the case of Reliance Utilities and Power Ltd. (221 CTR 435) shall be applicable and no disallowance shall be CTR 435) shall be applicable and no disallowance shall be CTR 435) shall be applicable and no disallowance shall be warranted under Rule 8D(2) of the Rules. The same has been warranted under Rule 8D(2) of the Rules. The same has been warranted under Rule 8D(2) of the Rules. The same has been further affirmed by the Hon'ble Jurisdictional Bombay High Court in further affirmed by the Hon'ble Jurisdictional Bombay High Court in further affirmed by the Hon'ble Jurisdictional Bombay High Court in of ITA No. 1843 of 2016. (Refer page no. 391 of Factual paperbook). 2016. (Refer page no. 391 of Factual paperbook). The relevant extract of the decision of the Hon'ble Tribunal has been The relevant extract of the decision of the Hon'ble Tribunal has been The relevant extract of the decision of the Hon'ble Tribunal has been reproduced below for your Honour's ready reference: reproduced below for your Honour's ready reference: "Learned CIT(A) find that the assessee "Learned CIT(A) find that the assessee-company has suo moto company has suo moto worked out the interest worked out the interest disallowance of borrowing which were disallowance of borrowing which were subject matter of investment in shares which were generating subject matter of investment in shares which were generating subject matter of investment in shares which were generating exempt income and hence the working given by the assessee is exempt income and hence the working given by the assessee is exempt income and hence the working given by the assessee is done on the basis of Auditor's report of statutory auditor who done on the basis of Auditor's report of statutory auditor who done on the basis of Auditor's report of statutory auditor who carried out the work of audit. He carried out the work of audit. He finds that no qualifying has been finds that no qualifying has been made by the auditor while submitting Form 3CD report u/s. 44AB of made by the auditor while submitting Form 3CD report u/s. 44AB of made by the auditor while submitting Form 3CD report u/s. 44AB of the Act. He also finds that the assessee the Act. He also finds that the assessee-company's own capital is company's own capital is much more than the investment made by the assessee much more than the investment made by the assessee much more than the investment made by the assessee-company in the shares/mutual funds whic the shares/mutual funds which were generating exempt income h were generating exempt income and therefore disallowance was not correct considering the and therefore disallowance was not correct considering the and therefore disallowance was not correct considering the jurisdictional High Court decisions in the case of Reliance Utilities jurisdictional High Court decisions in the case of Reliance Utilities jurisdictional High Court decisions in the case of Reliance Utilities

Shapoorji Pallaonji And Company Pvt. Ltd. Shapoorji Pallaonji And Company Pvt. Ltd. CO 130/M/2025 and Power Ltd. (221 CTR 435) and also taking note of the facts and Power Ltd. (221 CTR 435) and also taking note of the facts and Power Ltd. (221 CTR 435) and also taking note of the facts available on record and also tak available on record and also taking note of his predecessor CIT(A)'s ing note of his predecessor CIT(A)'s orders which have been referred by the assessee orders which have been referred by the assessee orders which have been referred by the assessee-company. Learned CIT(A) held that a sum of Rs. 5,00,000/ Learned CIT(A) held that a sum of Rs. 5,00,000/ Learned CIT(A) held that a sum of Rs. 5,00,000/- would be appropriate to allocate for administrative expenses in relation to appropriate to allocate for administrative expenses in relation to appropriate to allocate for administrative expenses in relation to earning of exempt income. He thus res earning of exempt income. He thus restricted the disallowance u/s. tricted the disallowance u/s. 14A to Rs. 1,12,91,985/ 14A to Rs. 1,12,91,985/- and addition made by the Assessing and addition made by the Assessing Officer to that extent is confirmed. Officer to that extent is confirmed. We have considered the rival submissions and perused the record. We have considered the rival submissions and perused the record. We have considered the rival submissions and perused the record. We are of the view that the order passed by learned CIT(A) does We are of the view that the order passed by learned CIT(A) does We are of the view that the order passed by learned CIT(A) does not require any require require any any interference as interference interference as as he he has he has has rightly rightly restricted the rightly restricted restricted the the disallowance u/s. 14A read with section 8D by following judgment disallowance u/s. 14A read with section 8D by following judgment disallowance u/s. 14A read with section 8D by following judgment of Hon'ble Jurisdictional High Court in the case of Reliance Utilities of Hon'ble Jurisdictional High Court in the case of Reliance Utilities of Hon'ble Jurisdictional High Court in the case of Reliance Utilities and Power Ltd. (supra) also order of his predecessors pass and Power Ltd. (supra) also order of his predecessors pass and Power Ltd. (supra) also order of his predecessors passed in earlier years. Therefore we uphold the order of learned CIT(A) and earlier years. Therefore we uphold the order of learned CIT(A) and earlier years. Therefore we uphold the order of learned CIT(A) and reject the grounds taken by the Revenue." reject the grounds taken by the Revenue."

141.

Further reliance is also placed on Appellants own case for AY 141. Further reliance is also placed on Appellants own case for AY 141. Further reliance is also placed on Appellants own case for AY 2010-11 on similar issue. wherein the Hon'ble Jurisdictional High 11 on similar issue. wherein the Hon'ble Jurisdictional High 11 on similar issue. wherein the Hon'ble Jurisdictional High Court in of 2017 (Refer page no. 395 of Factual of 2017 (Refer page no. 395 of Factual of 2017 (Refer page no. 395 of Factual paperbook) held that if interest free as well as loan funds are paperbook) held that if interest free as well as loan funds are paperbook) held that if interest free as well as loan funds are available with the assessee, then a presumption would arise that available with the assessee, then a presumption would arise that available with the assessee, then a presumption would arise that the investment would be out of interest free funds available with the the investment would be out of interest free funds available with the the investment would be out of interest free funds available with the assessee. Disallowance under rule 8D(2)(ii) of the Rules shall not be ssee. Disallowance under rule 8D(2)(ii) of the Rules shall not be ssee. Disallowance under rule 8D(2)(ii) of the Rules shall not be warranted if interest free funds are sufficient to meet the warranted if interest free funds are sufficient to meet the warranted if interest free funds are sufficient to meet the investments. A Special Leave Petition against the order of the investments. A Special Leave Petition against the order of the investments. A Special Leave Petition against the order of the Hon'ble High Court has been dismissed by the Hon'ble Supreme Hon'ble High Court has been dismissed by the Hon'ble Supreme Hon'ble High Court has been dismissed by the Hon'ble Supreme Court in SLP No. 11299 of 2022. (Refer page no. 401 of Factual in SLP No. 11299 of 2022. (Refer page no. 401 of Factual in SLP No. 11299 of 2022. (Refer page no. 401 of Factual paperbook) The relevant extract of the decision of the Hon'ble High paperbook) The relevant extract of the decision of the Hon'ble High paperbook) The relevant extract of the decision of the Hon'ble High Court has been reproduced below for your Honour's ready Court has been reproduced below for your Honour's ready Court has been reproduced below for your Honour's ready reference: "7. We have perused the decision of this Court in Reliance Utili "7. We have perused the decision of this Court in Reliance Utili "7. We have perused the decision of this Court in Reliance Utilities and Power Limited (supra) wherein it has been held that if there are and Power Limited (supra) wherein it has been held that if there are and Power Limited (supra) wherein it has been held that if there are funds available with the assessee, both, interest funds available with the assessee, both, interest-free and overdraft free and overdraft and/or loans taken then a presumption would arise that and/or loans taken then a presumption would arise that and/or loans taken then a presumption would arise that investments would be out of the interest investments would be out of the interest-free funds genera free funds generated or available with the assessee if the interest available with the assessee if the interest-free funds were sufficient free funds were sufficient to meet the investments. In the facts of that case, it was noted that to meet the investments. In the facts of that case, it was noted that to meet the investments. In the facts of that case, it was noted that the said presumption was established considering the finding of the said presumption was established considering the finding of the said presumption was established considering the finding of fact returned by the first appellate authori fact returned by the first appellate authority as affirmed by the ty as affirmed by the Tribunal which is identical in the present case. Tribunal which is identical in the present case. 7.1. We also note that the said decision of this Court has been 7.1. We also note that the said decision of this Court has been 7.1. We also note that the said decision of this Court has been affirmed by the Supreme Court in CIT Vs. Reliance Industries affirmed by the Supreme Court in CIT Vs. Reliance Industries affirmed by the Supreme Court in CIT Vs. Reliance Industries Limited, 410 ITR 466. Limited, 410 ITR 466.

In the light of the above, we do no 8. In the light of the above, we do not find any good ground to t find any good ground to entertain this question for consideration." entertain this question for consideration." 142. Additionally, reliance is also placed on Appellant's own case 142. Additionally, reliance is also placed on Appellant's own case 142. Additionally, reliance is also placed on Appellant's own case for AY 2011 for AY 2011-12, wherein the Hon'ble Tribunal in wherein the Hon'ble Tribunal in (Refer page no. 402 of Factual paperbook), having 3053/Mum/2012 (Refer page no. 402 of Factual paperbook), having 3053/Mum/2012 (Refer page no. 402 of Factual paperbook), having regard to the similar issues which are settled for earlier AY by the regard to the similar issues which are settled for earlier AY by the regard to the similar issues which are settled for earlier AY by the Hon'ble Jurisdictional High Court and Hon'ble Supreme Court, Hon'ble Jurisdictional High Court and Hon'ble Supreme Court, Hon'ble Jurisdictional High Court and Hon'ble Supreme Court, followed the principal of consistency and restricted the disallowance followed the principal of consistency and restricted the disallowance followed the principal of consistency and restricted the disallowance made by the Ld. AO under section 14A of the Act read wi made by the Ld. AO under section 14A of the Act read wi made by the Ld. AO under section 14A of the Act read with rule 8D(2) of the Rules. Further, appeal against the order of the Hon'ble 8D(2) of the Rules. Further, appeal against the order of the Hon'ble 8D(2) of the Rules. Further, appeal against the order of the Hon'ble Tribunal has been dismissed by the Hon'ble High Courtin has been dismissed by the Hon'ble High Courtin has been dismissed by the Hon'ble High Courtin ITA No. 792 of 2018 (Refer page no. 461 of Factual paperbook). Further, 792 of 2018 (Refer page no. 461 of Factual paperbook). Further, 792 of 2018 (Refer page no. 461 of Factual paperbook). Further, Special Leave Petition against the High Court order Special Leave Petition against the High Court order Special Leave Petition against the High Court order has been dismissed by the Hon'ble Supreme Court in SLP No. 26248 of 2024 dismissed by the Hon'ble Supreme Court in SLP No. 26248 of 2024 dismissed by the Hon'ble Supreme Court in SLP No. 26248 of 2024 (Refer page no. 463 of Factual paperbook). The relevant extract of (Refer page no. 463 of Factual paperbook). The relevant extract of (Refer page no. 463 of Factual paperbook). The relevant extract of the decision of the Tribunal has been reproduced below for your the decision of the Tribunal has been reproduced below for your the decision of the Tribunal has been reproduced below for your Honour's ready reference: Honour's ready reference: "3.18. It is noted that b "3.18. It is noted that before the Ld. Assessing Officer as well as efore the Ld. Assessing Officer as well as before the Ld. Commissioner of Income Tax (Appeal), the assessee before the Ld. Commissioner of Income Tax (Appeal), the assessee before the Ld. Commissioner of Income Tax (Appeal), the assessee took the stand that the Department, in preceding years, accepted took the stand that the Department, in preceding years, accepted took the stand that the Department, in preceding years, accepted the suo-moto disallowance made by the assessee, therefore, in the moto disallowance made by the assessee, therefore, in the moto disallowance made by the assessee, therefore, in the present Assessmen present Assessment Year also, the same has to be followed. t Year also, the same has to be followed. However, we find that instead of following the rule of consistency, However, we find that instead of following the rule of consistency, However, we find that instead of following the rule of consistency, the Ld. Commissioner of Income Tax (Appeal) enhanced the the Ld. Commissioner of Income Tax (Appeal) enhanced the the Ld. Commissioner of Income Tax (Appeal) enhanced the disallowance disallowance under under Rule-8D(2)(ii) Rule 8D(2)(ii) for for an an amount amount of of Rs.60,04,84,033/ Rs.60,04,84,033/-, which is under challenge before us. We find that lenge before us. We find that the Tribunal vide order dated 27/03/2015 (ITA No. 202/Mum/2013 the Tribunal vide order dated 27/03/2015 (ITA No. 202/Mum/2013 the Tribunal vide order dated 27/03/2015 (ITA No. 202/Mum/2013 and 207/Mum /2013) for Assessment Year 2009 and 207/Mum /2013) for Assessment Year 2009-10, followed the 10, followed the decision of the Tribunal in the case of assessee itself for decision of the Tribunal in the case of assessee itself for decision of the Tribunal in the case of assessee itself for Assessment Year 2008 Assessment Year 2008-09 with respect to disallowance made by sallowance made by the Assessing Officer under rule the Assessing Officer under rule-8D(2)(ii) and 8D(2)(iii) of the Rules 8D(2)(ii) and 8D(2)(iii) of the Rules along with the disallowance of the administrative expenses. In that along with the disallowance of the administrative expenses. In that along with the disallowance of the administrative expenses. In that case, the Ld. Commissioner of Income Tax (Appeal) restricted the case, the Ld. Commissioner of Income Tax (Appeal) restricted the case, the Ld. Commissioner of Income Tax (Appeal) restricted the disallowance to Rs.10 lakh agains disallowance to Rs.10 lakh against the suo-moto disallowance moto disallowance made to the tune of Rs.1 lakh. The disallowance to the tune of Rs. made to the tune of Rs.1 lakh. The disallowance to the tune of Rs. made to the tune of Rs.1 lakh. The disallowance to the tune of Rs. 10 lakh was upheld by the Tribunal against the claim of Rs.1 lakh 10 lakh was upheld by the Tribunal against the claim of Rs.1 lakh 10 lakh was upheld by the Tribunal against the claim of Rs.1 lakh by the assessee. So far as, the contention of the Id. counsel for the by the assessee. So far as, the contention of the Id. counsel for the by the assessee. So far as, the contention of the Id. counsel for the assessee that the disallo assessee that the disallowance may be restricted to Rs.1 lakh only, wance may be restricted to Rs.1 lakh only, is concerned, we are not satisfied with such reasoning because the is concerned, we are not satisfied with such reasoning because the is concerned, we are not satisfied with such reasoning because the rule of consistency applies to both sides and since, the Tribunal for rule of consistency applies to both sides and since, the Tribunal for rule of consistency applies to both sides and since, the Tribunal for Assessment Year 2008 Assessment Year 2008-09, 2009-10, being on identical facts, 10, being on identical facts, directed the Ass directed the Assessing Officer to restrict the disallowance as essing Officer to restrict the disallowance as contained in the order of the Tribunal dated 27/03/2015 (for contained in the order of the Tribunal dated 27/03/2015 (for contained in the order of the Tribunal dated 27/03/2015 (for Assessment Year 2009 Assessment Year 2009-10), for the present Assessment Year also, 10), for the present Assessment Year also, the disallowance is directed to be restricted to Rs.10 lakh under the disallowance is directed to be restricted to Rs.10 lakh under the disallowance is directed to be restricted to Rs.10 lakh under Shapoorji Pallaonji And Company Pvt. Ltd. Shapoorji Pallaonji And Company Pvt. Ltd. CO 130/M/2025

section 14A of the section 14A of the Act r.w.r. 8D(2)(iii), against the claim of the Act r.w.r. 8D(2)(iii), against the claim of the assessee at Rs.1 lakh, consequently, the Ld. Assessing Officer is assessee at Rs.1 lakh, consequently, the Ld. Assessing Officer is assessee at Rs.1 lakh, consequently, the Ld. Assessing Officer is directed to follow the ratio laid down in order dated 27/03/2015 directed to follow the ratio laid down in order dated 27/03/2015 directed to follow the ratio laid down in order dated 27/03/2015 (Assessment Year 2009 (Assessment Year 2009-10). Thus, ground no. 2 & 3 are disposed 10). Thus, ground no. 2 & 3 are disposed off in terms indicated hereinabove." indicated hereinabove." Facts of the present year are similar to the prior years i.e. AY 2008 Facts of the present year are similar to the prior years i.e. AY 2008 Facts of the present year are similar to the prior years i.e. AY 2008- 09, AY 2010-11 and AY 2011 11 and AY 2011-12.” 12.6 The assessee furnished details demonstrating availability of The assessee furnished details demonstrating availability of The assessee furnished details demonstrating availability of substantial interest- -free funds, comprising share capital and free funds, comprising share capital and reserves, aggregating to ₹1,671.50 crores, whereas the tax reserves, aggregating to 1,671.50 crores, whereas the tax-free investments stood at ₹620.12 crores and total investments at investments stood at 620.12 crores and total investments at ₹1,391.37 crores. It was thus contended that the presumption in 7 crores. It was thus contended that the presumption in 7 crores. It was thus contended that the presumption in law clearly operated in favour of the assessee that investments were law clearly operated in favour of the assessee that investments were law clearly operated in favour of the assessee that investments were made out of interest made out of interest-free funds. Further, the assessee provided Further, the assessee provided detail of the interest free funds available as under: detail of the interest free funds available as under:

Particulars Particulars AY 2014-15 Share Capital 205.02,04,000 Share Capital Reserves and Surplus 1466,48,06,132 Reserves and Surplus Total Interest Free funds Total Interest Free funds 1671,50,10,132 50,10,132 Tax Free Investments Tax Free Investments 620,12,39,872 12,39,872 Total Investments Total Investments 1391,37,43,359 37,43,359 12.7 We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused the relevant materials on record. the relevant materials on record. The legal position governing The legal position governing disallowance of interest under section 14A read with Rule 8D(2)(ii) disallowance of interest under section 14A read with Rule 8D(2)(ii) disallowance of interest under section 14A read with Rule 8D(2)(ii) is now well settled. The Hon’ble Supreme Court in South Indian is now well settled. The Hon’ble Supreme Court in is now well settled. The Hon’ble Supreme Court in Bank Ltd. (2021) 283 Taxman 178 k Ltd. (2021) 283 Taxman 178 has categorically held that where has categorically held that where an assessee has mixed funds and the interest an assessee has mixed funds and the interest-free own funds free own funds available exceed the investments made in tax available exceed the investments made in tax-free securities, a free securities, a Shapoorji Pallaonji And Company Pvt. Ltd. Shapoorji Pallaonji And Company Pvt. Ltd. CO 130/M/2025 presumption arises that such investments are made out of interest- presumption arises that such investments are made out of interest presumption arises that such investments are made out of interest free funds. In such circumstances, proportionate disallowance of e funds. In such circumstances, proportionate disallowance of e funds. In such circumstances, proportionate disallowance of interest under section 14A is not warranted, even if separate interest under section 14A is not warranted, even if separate interest under section 14A is not warranted, even if separate accounts are not maintained. accounts are not maintained. The relevant extract of The relevant extract of said judgment is reproduced as under: is reproduced as under:

“If there be interest free funds available to an appellant interest free funds available to an appellant sufficient to meet its investments and at the same time the sufficient to meet its investments and at the same time the sufficient to meet its investments and at the same time the appellant had raised a loan it can be presumed that the appellant had raised a loan it can be presumed that the appellant had raised a loan it can be presumed that the investments were from the interest free funds available. In investments were from the interest free funds available. In investments were from the interest free funds available. In our opinion the Supreme Court in our opinion the Supreme Court in East India Pharmaceutical East India Pharmaceutical Works Ltd. (Supra) had the occasion to consider the decision Works Ltd. (Supra) had the occasion to consider the decision Works Ltd. (Supra) had the occasion to consider the decision of the Calcutta High Court in Woolcombers of India Ltd. of the Calcutta High Court in Woolcombers of India Ltd. of the Calcutta High Court in Woolcombers of India Ltd. (supra) where a similar issue had arisen. Before the Supreme (supra) where a similar issue had arisen. Before the Supreme (supra) where a similar issue had arisen. Before the Supreme Court it was argued that it should have been presume Court it was argued that it should have been presume Court it was argued that it should have been presumed that in essence and true character the taxes were paid out of the in essence and true character the taxes were paid out of the in essence and true character the taxes were paid out of the profits of the relevant year and not out of the overdraft profits of the relevant year and not out of the overdraft profits of the relevant year and not out of the overdraft account for the running of the business and in these account for the running of the business and in these account for the running of the business and in these circumstances the appellant was entitled to claim the circumstances the appellant was entitled to claim the circumstances the appellant was entitled to claim the deductions. The Supreme deductions. The Supreme Court noted that the argument had Court noted that the argument had considerable force, but considering the fact that the considerable force, but considering the fact that the considerable force, but considering the fact that the contention had not been advanced earlier it did not require to contention had not been advanced earlier it did not require to contention had not been advanced earlier it did not require to be answered. It then noted that in Woolcomber's cose (Supra) be answered. It then noted that in Woolcomber's cose (Supra) be answered. It then noted that in Woolcomber's cose (Supra) the Calcutta High Court had come to the con the Calcutta High Court had come to the conclusion that the clusion that the profits were sufficient to meet the advance tax liability and profits were sufficient to meet the advance tax liability and profits were sufficient to meet the advance tax liability and the profits were deposited in the overdraft account of the the profits were deposited in the overdraft account of the the profits were deposited in the overdraft account of the appellant and in such a case it should be presumed that the appellant and in such a case it should be presumed that the appellant and in such a case it should be presumed that the taxes were paid out of the profits of the year and not out taxes were paid out of the profits of the year and not out taxes were paid out of the profits of the year and not out of the overdraft account for the running of the business. It noted the overdraft account for the running of the business. It noted the overdraft account for the running of the business. It noted that to raise the presumption, there was sufficient material that to raise the presumption, there was sufficient material that to raise the presumption, there was sufficient material and the appellant had urged the contention before the High and the appellant had urged the contention before the High and the appellant had urged the contention before the High Court. The principle therefore would be that if there are funds Court. The principle therefore would be that if there are funds Court. The principle therefore would be that if there are funds available both interest free and over draft and/or loans lable both interest free and over draft and/or loans lable both interest free and over draft and/or loans taken, then a presumption would arise that investments taken, then a presumption would arise that investments taken, then a presumption would arise that investments would be out of the interest free fund generated or available would be out of the interest free fund generated or available would be out of the interest free fund generated or available with the company, if the interest free funds were sufficient to with the company, if the interest free funds were sufficient to with the company, if the interest free funds were sufficient to meet the investments. meet the investments. In this case this presumption is In this case this presumption is established considering the finding of fact both by the CIT established considering the finding of fact both by the CIT established considering the finding of fact both by the CIT (Appeals) and ITAT Considering the above, in our opinion, (Appeals) and ITAT Considering the above, in our opinion, (Appeals) and ITAT Considering the above, in our opinion, there is no merit in this appeal which is accordingly there is no merit in this appeal which is accordingly there is no merit in this appeal which is accordingly dismissed." 12.9 This principle has consistently be This principle has consistently been followed by Coordinate en followed by Coordinate Benches of the Tribunal. The presumption operates as a rule of law Benches of the Tribunal. The presumption operates as a rule of law Benches of the Tribunal. The presumption operates as a rule of law

the purposes of Minimum Alternate Tax ('MAT the purposes of Minimum Alternate Tax ('MAT') under Section ') under Section 115 JB of the Act. This pertained to the expenditure incurred 115 JB of the Act. This pertained to the expenditure incurred 115 JB of the Act. This pertained to the expenditure incurred for earning exempt income under Section 14A read with Rule for earning exempt income under Section 14A read with Rule for earning exempt income under Section 14A read with Rule 8D. The ITAT has rightly held that this being in the nature of 8D. The ITAT has rightly held that this being in the nature of 8D. The ITAT has rightly held that this being in the nature of disallowance, and with Explanation 115JB not specifical disallowance, and with Explanation 115JB not specifical disallowance, and with Explanation 115JB not specifically mentioning Section 14A of the Act, the addition of Rs. mentioning Section 14A of the Act, the addition of Rs. mentioning Section 14A of the Act, the addition of Rs. 89,00,000 was not justified. The view taken by the 1TAT 89,00,000 was not justified. The view taken by the 1TAT 89,00,000 was not justified. The view taken by the 1TAT cannot be faulted with. It is consistent with the decision in cannot be faulted with. It is consistent with the decision in cannot be faulted with. It is consistent with the decision in Apollo Tyres Ltd. v. Commissioner of Income Tax 255 ITR 273 Apollo Tyres Ltd. v. Commissioner of Income Tax 255 ITR 273 Apollo Tyres Ltd. v. Commissioner of Income Tax 255 ITR 273 (SC) which held that (SC) which held that "the Assessing Officer does not have the "the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and jurisdiction to go behind the net profit shown in the profit and jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation loss account except to the extent provided in the Explanation loss account except to the extent provided in the Explanation to Section 115J." The Court declines to frame a question on to Section 115J." The Court declines to frame a question on to Section 115J." The Court declines to frame a question on the above issue." the above issue." In such a scenario, in our humble opinion, proper course scenario, in our humble opinion, proper course scenario, in our humble opinion, proper course would be to follow the decision of Hon'ble Supreme Court in would be to follow the decision of Hon'ble Supreme Court in would be to follow the decision of Hon'ble Supreme Court in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192.... ... In the back drop of these facts the controversy before ... In the back drop of these facts the controversy before ... In the back drop of these facts the controversy before Hon'ble Supreme Court wa Hon'ble Supreme Court was whether the penalty was to be s whether the penalty was to be levied on the tax assessed under section 143 or as levied on the tax assessed under section 143 or as levied on the tax assessed under section 143 or as demanded under section 156 being tax assessed minus the demanded under section 156 being tax assessed minus the demanded under section 156 being tax assessed minus the amount paid under the provisional assessment order. Hon'ble amount paid under the provisional assessment order. Hon'ble amount paid under the provisional assessment order. Hon'ble Supreme Court before resorting to the interpretation of t Supreme Court before resorting to the interpretation of t Supreme Court before resorting to the interpretation of term in addition to the amount of the tax, if any, payable by him as addition to the amount of the tax, if any, payable by him as addition to the amount of the tax, if any, payable by him as appearing in section 271(1)(a) (i) observed as under: appearing in section 271(1)(a) (i) observed as under: "On the other hand, it two reasonable constructions of a "On the other hand, it two reasonable constructions of a "On the other hand, it two reasonable constructions of a taxing provision are possible, that construction which favours taxing provision are possible, that construction which favours taxing provision are possible, that construction which favours the assessee m the assessee must be adopted. This is a well-accepted rule of accepted rule of construction recognized by this court in several of its construction recognized by this court in several of its construction recognized by this court in several of its decisions. " We have; therefore, to follow the later decision of Ho'nble We have; therefore, to follow the later decision of Ho'nble We have; therefore, to follow the later decision of Ho'nble Delhi High Court in the case of Bhushan Steel (supra). Delhi High Court in the case of Bhushan Steel (supra). 6.22 In view of above di 6.22 In view of above discussion, we answer the question scussion, we answer the question referred to us in favour of asssessee by holding that the referred to us in favour of asssessee by holding that the referred to us in favour of asssessee by holding that the computation under clause (f) of Explanation 1 to section computation under clause (f) of Explanation 1 to section computation under clause (f) of Explanation 1 to section 115JB(2), is to be made without resorting to the computation 115JB(2), is to be made without resorting to the computation 115JB(2), is to be made without resorting to the computation as contemplated u/s 14A read with Rule 8D of th as contemplated u/s 14A read with Rule 8D of the Income e Income- tax Rules, 1962." tax Rules, 1962."

"12. We have heard the rival submissions and perused the "12. We have heard the rival submissions and perused the "12. We have heard the rival submissions and perused the materials available on record. It is observed that the A.O. aterials available on record. It is observed that the A.O. aterials available on record. It is observed that the A.O. made addition of Rs. 6,93,36,620/ made addition of Rs. 6,93,36,620/- u/s. 14A read with Rule u/s. 14A read with Rule 8D and had added the said amount while computing the 8D and had added the said amount while computing the 8D and had added the said amount while computing the book profits in accordance with the clause (f) of Explanation 1 book profits in accordance with the clause (f) of Explanation 1 book profits in accordance with the clause (f) of Explanation 1 to section 115JB(2) o to section 115JB(2) of the Act by placing reliance on the f the Act by placing reliance on the Tribunal's decision in the case of Viraj Profile Ltd. (supra) and Tribunal's decision in the case of Viraj Profile Ltd. (supra) and Tribunal's decision in the case of Viraj Profile Ltd. (supra) and the same was restricted to the extent to Rs.5 lacs being the the same was restricted to the extent to Rs.5 lacs being the the same was restricted to the extent to Rs.5 lacs being the suo moto disallowance made by the first appellate authority suo moto disallowance made by the first appellate authority suo moto disallowance made by the first appellate authority by placing reliance on the Speci by placing reliance on the Special Bench decision of Vireet al Bench decision of Vireet Investment (P). Ltd. (supra). The assessee had relied on the Investment (P). Ltd. (supra). The assessee had relied on the Investment (P). Ltd. (supra). The assessee had relied on the decision of the Tribunal in assessee's case for A.Y. 2010 decision of the Tribunal in assessee's case for A.Y. 2010 decision of the Tribunal in assessee's case for A.Y. 2010-11 where on identical facts, the impugned addition was deleted where on identical facts, the impugned addition was deleted where on identical facts, the impugned addition was deleted and the same was upheld by the Hon'ble Jurisdi and the same was upheld by the Hon'ble Jurisdictional High ctional High Court and subsequently the SLP filed by the Revenue before Court and subsequently the SLP filed by the Revenue before Court and subsequently the SLP filed by the Revenue before the Hon'ble Apex Court was dismissed, meaning to say that the Hon'ble Apex Court was dismissed, meaning to say that the Hon'ble Apex Court was dismissed, meaning to say that the issue had attained finality. As this issue has already the issue had attained finality. As this issue has already the issue had attained finality. As this issue has already been decided by the Special Bench of the Tribunal in the case been decided by the Special Bench of the Tribunal in the case been decided by the Special Bench of the Tribunal in the case of Vireet Investment (P.) Ltd. (supra) which has held that for reet Investment (P.) Ltd. (supra) which has held that for reet Investment (P.) Ltd. (supra) which has held that for computation under clause (f) of Explanation 1 to section computation under clause (f) of Explanation 1 to section computation under clause (f) of Explanation 1 to section 115JB(2) of the Act restart to computation u/s. 14A r.w. Rule 115JB(2) of the Act restart to computation u/s. 14A r.w. Rule 115JB(2) of the Act restart to computation u/s. 14A r.w. Rule 8D should not be made where there is a separate mechanism 8D should not be made where there is a separate mechanism 8D should not be made where there is a separate mechanism available for adjustm available for adjustment to the book profit of such ent to the book profit of such expenditure incurred. As these issues are identical and expenditure incurred. As these issues are identical and expenditure incurred. As these issues are identical and covered by various decisions including the decision in covered by various decisions including the decision in covered by various decisions including the decision in assessee's case, we deem it fit to allow the grounds raised assessee's case, we deem it fit to allow the grounds raised assessee's case, we deem it fit to allow the grounds raised by the assessee in its cross objection and dismiss the by the assessee in its cross objection and dismiss the by the assessee in its cross objection and dismiss the grounds raised by the Revenue. Therefore, ground no. 2 of grounds raised by the Revenue. Therefore, ground no. 2 of grounds raised by the Revenue. Therefore, ground no. 2 of the Revenue's appeal is dismissed and ground nos. 4, 5 and the Revenue's appeal is dismissed and ground nos. 4, 5 and the Revenue's appeal is dismissed and ground nos. 4, 5 and 6 of the assessee's cross objection are allowed." 6 of the assessee's cross objection are allowed."