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

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.

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Therefore, the connected additions made by the AO during Therefore, the connected additions made by the AO during Therefore, the connected additions made by the AO during reassessment proceedings could not be sus reassessment proceedings could not be sustained.

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

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(supra). Parliament has not taken away the basis of that decision. While (supra). Parliament has not taken away the basis of that decision. While it is open to Parliament, having regard to the plenitude of its legislative it is open to Parliament, having regard to the plenitude of its legislative it is open to Parliament, having regard to the plenitude of its legislative powers to do so, the provisions of section 147(1) as they stood after the powers to do so, the provisions of section 147(1) as they stood after the powers to do so, the provisions of section 147(1) as they stood after the amendment of 1-4-1989 continue to hold the field.” 1989 continue to hold the field.” 9.8 The basis for reopening asis for reopening in the case is non disallowance of is non disallowance of interest while making disallowance of expenses related to exempted interest while making disallowance of expenses related to exempted interest while making disallowance of expenses related to exempted income. The ld AO in impugned assessment order made income. The ld AO in impugned assessment order made income. The ld AO in impugned assessment order made disallowance for such interest invoking section 14A read with Rule disallowance for such interest invoking section 14A read with Rule disallowance for such interest invoking section 14A read with Rule 8D(2)(ii) of Rules.

9.9 Alongwith the disallowance u/s 14A of the Act, in the Alongwith the disallowance u/s 14A of the Act, in the Alongwith the disallowance u/s 14A of the Act, in the impugned reassessment order, reassessment order, the Assessing also also made another addition for the disallowance of sub addition for the disallowance of sub-contract charges paid to two contract charges paid to two parties holding the same as in parties holding the same as in-genuine.

9.10 The contention of the Ld. counsel for the assessee The contention of the Ld. counsel for the assessee The contention of the Ld. counsel for the assessee contended before us that since the addition forming basis of the reasons before us that since the addition forming basis of the reasons before us that since the addition forming basis of the reasons recorded was comprised only recorded was comprised only of disallowance u/s 14A of the Act disallowance u/s 14A of the Act and which has been deleted by the Ld. CIT(A), t been deleted by the Ld. CIT(A), therefore, following herefore, following the decision of the Hon’ble Bombay High Court in the case of Jet e decision of the Hon’ble Bombay High Court in the case of Jet e decision of the Hon’ble Bombay High Court in the case of Jet Airways (supra) the other addition in respect of sub-contractor Airways (supra) the other addition in respect of sub Airways (supra) the other addition in respect of sub charges paid to two persons also cannot to two persons also cannot survive.

9.11 However, the above judgment does not lay down that where However, the above judgment does not lay down that where However, the above judgment does not lay down that where the Assessing Officer has, in fact, made an addition on the cer has, in fact, made an addition on the cer has, in fact, made an addition on the reopening issue, the reassessment becomes invalid merely because reopening issue, the reassessment becomes invalid merely because reopening issue, the reassessment becomes invalid merely because such addition is subsequently deleted by the appellate authority. such addition is subsequently deleted by the appellate authority. such addition is subsequently deleted by the appellate authority.

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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.

9.13 In such a situation, the reassessment proceedings cannot be In such a situation, the reassessment proceedings cannot be In such a situation, the reassessment proceedings cannot be held to be invalid merely because the first appellate authority has held to be invalid merely because the first appellate authority has held to be invalid merely because the first appellate authority has deleted the addition forming the basis of reopening. Consequently, deleted the addition forming the basis of reopening. Consequently, deleted the addition forming the basis of reopening. Consequently, the ratio laid down in the ratio laid down in Jet Airways (I) Ltd.(supra) Jet Airways (I) Ltd.(supra), Asha Kansal (supra), and Mahesh Kumar(supra) Mahesh Kumar(supra) does not advance the case of the does not advance the case of the assessee on the facts before us. assessee on the facts before us.

9.14 Accordingly, the cross Accordingly, the cross-objection No. 7 of the assessee is objection No. 7 of the assessee is dismissed.

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payments made to Smt. Mayaben Vijay Parmar and Shri Vijay G. payments made to Smt. Mayaben Vijay Parmar and Shri Vijay G. payments made to Smt. Mayaben Vijay Parmar and Shri Vijay G. Parmar (HUF).

11.1 The facts in brief qua the issue in dispute are that facts in brief qua the issue in dispute are that during the facts in brief qua the issue in dispute are that year under consideration, the Assessing Officer received information year under consideration, the Assessing Officer received information year under consideration, the Assessing Officer received information from the Investigation Wing, Ahmedabad, stating that detailed from the Investigation Wing, Ahmedabad, stating that detailed from the Investigation Wing, Ahmedabad, stating that detailed investigation had been carried out into transactions entered into by investigation had been carried out into transactions entered into investigation had been carried out into transactions entered into the assessee with the aforesaid two parties. The investigation noted the assessee with the aforesaid two parties. The investigation noted the assessee with the aforesaid two parties. The investigation noted that amounts received by these parties from the assessee were that amounts received by these parties from the assessee were that amounts received by these parties from the assessee were For ready reference details of withdrawn in cash shortly thereafter. withdrawn in cash shortly thereafter. For ready reference payment made by the assessee payment made by the assessee to these two parties to these two parties is extracted as under:

(i) Smt. Mayaben Vijay Parmar (i) Smt. Mayaben Vijay Parmar

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

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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.

11.3 Accordingly, summons under section 131 of the Act were Accordingly, summons under section 131 of the Act were Accordingly, summons under section 131 of the Act were issued to the assessee by the Deputy Director of Income essee by the Deputy Director of Income essee by the Deputy Director of Income-tax (Investigation) on 24.01.2019. In response, the assessee, vide letter (Investigation) on 24.01.2019. In response, the assessee, vide letter (Investigation) on 24.01.2019. In response, the assessee, vide letter dated 30.01.2019, furnished details of the relevant projects and dated 30.01.2019, furnished details of the relevant projects and dated 30.01.2019, furnished details of the relevant projects and copies of work orders issued to Smt. Mayaben Vijay Parmar for copies of work orders issued to Smt. Mayaben Vijay Parmar for copies of work orders issued to Smt. Mayaben Vijay Parmar for providing manpower services. Subsequently, vide letter dated er services. Subsequently, vide letter dated er services. Subsequently, vide letter dated 05.02.2019, the assessee also submitted copies of ledger accounts 05.02.2019, the assessee also submitted copies of ledger accounts 05.02.2019, the assessee also submitted copies of ledger accounts of Smt. Mayaben Parmar and Shri Vijay G. Parmar (HUF) for the of Smt. Mayaben Parmar and Shri Vijay G. Parmar (HUF) for the of Smt. Mayaben Parmar and Shri Vijay G. Parmar (HUF) for the period April 2013 to March 2014, along with copies of TDS period April 2013 to March 2014, along with copies of TDS period April 2013 to March 2014, along with copies of TDS certificates issued to th certificates issued to them.

11.4 The assessee explained that the said parties had provided The assessee explained that the said parties had provided The assessee explained that the said parties had provided skilled and unskilled manpower, hired machinery, construction skilled and unskilled manpower, hired machinery, construction skilled and unskilled manpower, hired machinery, construction material, and other allied services at various construction sites. material, and other allied services at various construction sites. material, and other allied services at various construction sites. However, the Investigation Wing required the assessee to furnish However, the Investigation Wing required the assessee to fur However, the Investigation Wing required the assessee to fur further documentary evidence such as labour payment receipts or further documentary evidence such as labour payment receipts or further documentary evidence such as labour payment receipts or supporting records evidencing disbursement of wages, which, supporting records evidencing disbursement of wages, which, supporting records evidencing disbursement of wages, which, according to the Investigation Wing, were not produced. according to the Investigation Wing, were not produced. according to the Investigation Wing, were not produced.

11.5 Similar requisitions were made to the contractors, who Similar requisitions were made to the contractors, who Similar requisitions were made to the contractors, who furnished only copies of their income furnished only copies of their income-tax returns and bank tax returns and bank

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statements, but did not produce independent evidence to statements, but did not produce independent evidence to statements, but did not produce independent evidence to substantiate the nature of services rendered. On this basis, the substantiate the nature of services rendered. On this basis, the substantiate the nature of services rendered. On this basis, the Investigation Wing co Investigation Wing concluded that the transactions were not ncluded that the transactions were not genuine.

11.6 Relying upon these observations, the Assessing Officer called Relying upon these observations, the Assessing Officer called Relying upon these observations, the Assessing Officer called upon the assessee to explain why the expenditure should not be upon the assessee to explain why the expenditure should not be upon the assessee to explain why the expenditure should not be treated as unexplained and non treated as unexplained and non-genuine. The contention of the The contention of the assessee was not accepted and the Assessing Officer made addition t accepted and the Assessing Officer made addition t accepted and the Assessing Officer made addition genuine. But, on holding those expenses as unexplained and non holding those expenses as unexplained and non-genuine. But further appeal, the Ld. CIT(A) following his finding in assessment further appeal, the Ld. CIT(A) following his finding in assessment further appeal, the Ld. CIT(A) following his finding in assessment years 2012-13 deleted the addition holding that facts in the year 13 deleted the addition holding that facts in the year 13 deleted the addition holding that facts in the year under consideration are identical to the assessment year 2012 sideration are identical to the assessment year 2012 sideration are identical to the assessment year 2012-13.

11.7 Before us, the Ld. counsel for the assessee submitted that Before us, the Ld. counsel for the assessee submitted that Before us, the Ld. counsel for the assessee submitted that expenditure has been incurred wholly and exclusively for the expenditure has been incurred wholly and exclusively for the expenditure has been incurred wholly and exclusively for the purpose of the business of the assessee and therefore, same is purpose of the business of the assessee and therefore, same is purpose of the business of the assessee and therefore, same is allowable u/s 37 of the Act. u/s 37 of the Act.

11.8 Before us the assessee the assessee for justification of genui for justification of genuineness of the transaction submitted submitted that it is a large construction company that it is a large construction company executing executing multiple multiple labour-intensive labour intensive projects projects across across various various locations in India. Given the nature, scale, locations in India. Given the nature, scale, and urgency of such and urgency of such projects, it was neither practical nor feasible to deploy permanent projects, it was neither practical nor feasible to deploy permanent projects, it was neither practical nor feasible to deploy permanent employees at each site. Consequently, the assessee engaged employees at each site. Consequently, the assessee engaged employees at each site. Consequently, the assessee engaged independent contractors and labour suppliers to provide skilled and independent contractors and labour suppliers to provide skilled and independent contractors and labour suppliers to provide skilled and

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unskilled manpower, machinery, and allie unskilled manpower, machinery, and allied services as per project d services as per project requirements.

11.9 It was explained that the labourers were on the payroll of the It was explained that the labourers were on the payroll of the It was explained that the labourers were on the payroll of the contractors and had no direct contractual relationship with the contractors and had no direct contractual relationship with the contractors and had no direct contractual relationship with the assessee. The assessee’s obligation was limited to making payments assessee. The assessee’s obligation was limited to making payments assessee. The assessee’s obligation was limited to making payments to the contractors against invoices raised by them, and the contractors against invoices raised by them, and the contractors against invoices raised by them, and the contractors, in turn, were responsible for making payments to contractors, in turn, were responsible for making payments to contractors, in turn, were responsible for making payments to individual labourers. The assessee was not required, either individual labourers. The assessee was not required, either individual labourers. The assessee was not required, either contractually or under law, to make direct payments to such contractually or under law, to make direct payments to such contractually or under law, to make direct payments to such labourers. The assess he assessee explained that during the reassessment explained that during the reassessment proceedings extensive documentary evidence extensive documentary evidence were furnished were furnished, including:

 project-wise details for which contractor services were utilised; wise details for which contractor services were utilised; wise details for which contractor services were utilised;  copies of work orders specifying scope of work, rates for skilled copies of work orders specifying scope of work, rates for skilled copies of work orders specifying scope of work, rates for skilled and unskilled labour, and project details; d labour, and project details;  ledger accounts of the contractors in the books of the ledger accounts of the contractors in the books of the ledger accounts of the contractors in the books of the assessee;  copies of invoices raised by the contractors; copies of invoices raised by the contractors;  statements of salaries paid to labour along with department statements of salaries paid to labour along with department statements of salaries paid to labour along with department- wise break-up;  details of provident fund and service t details of provident fund and service tax;  bank statements evidencing payments made through banking bank statements evidencing payments made through banking bank statements evidencing payments made through banking channels; and

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 TDS certificates issued to the contractors. TDS certificates issued to the contractors.

11.10 The assessee further pointed out that the contractors had The assessee further pointed out that the contractors had The assessee further pointed out that the contractors had also furnished their income also furnished their income-tax returns, bank statements, and tax returns, bank statements, and bank books, and had explained that cash withdrawals were made to and had explained that cash withdrawals were made to and had explained that cash withdrawals were made to disburse wages to labourers. It was submitted that mere withdrawal disburse wages to labourers. It was submitted that mere withdrawal disburse wages to labourers. It was submitted that mere withdrawal of cash by contractors does not render the expenditure non- of cash by contractors does not render the expenditure non of cash by contractors does not render the expenditure non genuine, particularly in the construction industry where cash genuine, particularly in the construction industry where cash genuine, particularly in the construction industry where cash payments to labourers are common. bourers are common. It was emphasised that the It was emphasised that the assessee had maintained proper books of account and had fully assessee had maintained proper books of account and had fully assessee had maintained proper books of account and had fully discharged its obligation of substantiating the expenditure incurred. discharged its obligation of substantiating the expenditure incurred. discharged its obligation of substantiating the expenditure incurred. Any failure on the part of the contractors to maintain detailed Any failure on the part of the contractors to maintain detailed Any failure on the part of the contractors to maintain detailed internal records such as muster rolls or wage registers could not be rds such as muster rolls or wage registers could not be rds such as muster rolls or wage registers could not be attributed to the assessee. attributed to the assessee.

11.11 The assessee also highlighted that the projects executed The assessee also highlighted that the projects executed The assessee also highlighted that the projects executed were large, well- -known known infrastructure infrastructure projects projects involving involving construction costs ranging from approximately construction costs ranging from approximately ₹900 c 900 crores to over ₹4,000 crores. Against such projects, the payments made to the two 4,000 crores. Against such projects, the payments made to the two 4,000 crores. Against such projects, the payments made to the two contractors were negligible, constituting a minuscule percentage of contractors were negligible, constituting a minuscule percentage of contractors were negligible, constituting a minuscule percentage of the total turnover and total subcontracting expenditure. The the total turnover and total subcontracting expenditure. The the total turnover and total subcontracting expenditure. The assessee contended that the Assessing Officer assessee contended that the Assessing Officer had doubted the had doubted the genuineness of the expenditure without disproving execution of the genuineness of the expenditure without disproving execution of the genuineness of the expenditure without disproving execution of the projects or utilisation of labour, and without pointing out any projects or utilisation of labour, and without pointing out any projects or utilisation of labour, and without pointing out any specific defect in the documentation furnished. specific defect in the documentation furnished.

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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.

11.13 Further it Further it was submitted that even during investigation that even during investigation and the reassessment proceedings, the Assessee had submitted ment proceedings, the Assessee had submitted ment proceedings, the Assessee had submitted details of project undertaken by the Assessee for which the details of project undertaken by the Assessee for which the details of project undertaken by the Assessee for which the contractor services were utilised. (Refer page no. 359 of Factual contractor services were utilised. (Refer page no. 359 of Factual contractor services were utilised. (Refer page no. 359 of Factual paperbook). From the details of the project given below including paperbook). From the details of the project given below including paperbook). From the details of the project given below including project value it is quite clear that the projects undertaken by the quite clear that the projects undertaken by the quite clear that the projects undertaken by the Assessee were well known and huge projects involving labour Assessee were well known and huge projects involving labour Assessee were well known and huge projects involving labour intensive work and thus, for the said purpose, the Assessee had intensive work and thus, for the said purpose, the Assessee had intensive work and thus, for the said purpose, the Assessee had obtained contractor services from contractor Smt. Mayaben Parmar obtained contractor services from contractor Smt. Mayaben Parmar obtained contractor services from contractor Smt. Mayaben Parmar and Shri Vijay G Parmar armar: Project Name Project Name Cost of Construction Cost of Construction Tata Motors Plant at Sanand Tata Motors Plant at Sanand Rs. 3,676.64 Crore Rs. 3,676.64 Crore Ford Motors Plant at Sanand Ford Motors Plant at Sanand Rs. 4,000 Crore Rs. 4,000 Crore

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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

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amount as against the huge sub amount as against the huge sub-contracting charges claimed contracting charges claimed during the year.

11.15 The ld counsel for the assessee submitted that except The ld counsel for the assessee submitted The ld counsel for the assessee submitted no where in the relying on the investigation report, the Ld. AO relying on the investigation report, the Ld. AO no w reassessment order has stated that why the expenses were non- reassessment order has stated that why the expenses were non reassessment order has stated that why the expenses were non genuine and what documentation the Assessee has failed to provide genuine and what documentation the Assessee has failed to provide genuine and what documentation the Assessee has failed to provide to prove the genuineness of the transaction. Thus, the Ld. AO to prove the genuineness of the transaction. Thus, the Ld. AO to prove the genuineness of the transaction. Thus, the Ld. AO merely on the basis of investigation report has alleged the merely on the basis of investigation report has alleged merely on the basis of investigation report has alleged transaction as non-genuine expenditure. genuine expenditure.

11.16 The assessee further sub The assessee further submitted that the learned CIT(A), mitted that the learned CIT(A), after examining the entire material, had recorded a categorical after examining the entire material, had recorded a categorical after examining the entire material, had recorded a categorical finding that (i) payments were made through banking channels after finding that (i) payments were made through banking channels after finding that (i) payments were made through banking channels after deduction of tax at deduction of tax at source;(ii) the Investigation Wing itself source;(ii) the Investigation Wing itself acknowledged that labour services were provided and that cash acknowledged that labour services were provided and that cash acknowledged that labour services were provided and that cash withdrawals were for payment to labourers; and (iii) expenditure withdrawals were for payment to labourers; and (iii) expenditure withdrawals were for payment to labourers; and (iii) expenditure recorded in the books could not be treated as unexplained merely recorded in the books could not be treated as unexplained merely recorded in the books could not be treated as unexplained merely on the basis of suspic on the basis of suspicion. Accordingly, the CIT(A) deleted the ion. Accordingly, the CIT(A) deleted the disallowance, holding that the assessee had furnished sufficient disallowance, holding that the assessee had furnished sufficient disallowance, holding that the assessee had furnished sufficient material to establish the genuineness and business purpose of the material to establish the genuineness and business purpose of the material to establish the genuineness and business purpose of the expenditure.

11.17 It was submitted that It was submitted that the claim of the Assessee cannot be the claim of the Assessee cannot be denied merely on the ground that sufficient documentation is not merely on the ground that sufficient documentation is not merely on the ground that sufficient documentation is not

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submitted when actually actually the Assessee has submitted documents the Assessee has submitted documents and has proved the genuineness and source of the expenditure. and has proved the genuineness and source of the expenditure. and has proved the genuineness and source of the expenditure.

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 ITA No. 1298 of affirmed by the Hon’ble Bombay High Court in ITA No. 1298 of affirmed by the Hon’ble Bombay High Court in ITA No. 1298 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

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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. 19. After considering the rival submissions we do not find any merit 19. After considering the rival submissions we do not find any merit 19. After considering the rival submissions we do not find any merit in this ground of Revenue. the Ld. CIT (A) correctl in this ground of Revenue. the Ld. CIT (A) correctly appreciated the y appreciated the fact that for repair and maintenance, assessee has to engage labour fact that for repair and maintenance, assessee has to engage labour fact that for repair and maintenance, assessee has to engage labour for which details are maintained. Learned Counsel for the Assessee for which details are maintained. Learned Counsel for the Assessee for which details are maintained. Learned Counsel for the Assessee pointed out to various documents in the paper book to show that pointed out to various documents in the paper book to show that pointed out to various documents in the paper book to show that same are properly vouched. Since the ex same are properly vouched. Since the expenditure were incurred penditure were incurred wholly and exclusively for the purpose of business, therefore, the wholly and exclusively for the purpose of business, therefore, the wholly and exclusively for the purpose of business, therefore, the

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same were correctly allowed as deduction. Ground No.6 of appeal of same were correctly allowed as deduction. Ground No.6 of appeal of same were correctly allowed as deduction. Ground No.6 of appeal of Revenue is dismissed. Revenue is dismissed.” 11.20 We have heard the rival submissions and perused the We have heard the rival submissions and perused the We have heard the rival submissions and perused the material placed on record. The core issue for adjudication is on record. The core issue for adjudication is on record. The core issue for adjudication is whether the assessee has discharged its burden of proving that the whether the assessee has discharged its burden of proving that the whether the assessee has discharged its burden of proving that the subcontract expenditure incurred through Smt. Mayaben Parmar subcontract expenditure incurred through Smt. Mayaben Parmar subcontract expenditure incurred through Smt. Mayaben Parmar and Shri Vijay G. Parmar (HUF) was genuine and incurred wholly and Shri Vijay G. Parmar (HUF) was genuine and incurred wholly and Shri Vijay G. Parmar (HUF) was genuine and incurred wholly and exclusively for the purposes of its business. the purposes of its business.

11.21 It is a matter of record that the Investigation Wing, It is a matter of record that the Investigation Wing, It is a matter of record that the Investigation Wing, Ahmedabad, noticed that the said parties had withdrawn Ahmedabad, noticed that the said parties had withdrawn Ahmedabad, noticed that the said parties had withdrawn substantial amounts of cash soon after receipt of payments from substantial amounts of cash soon after receipt of payments from substantial amounts of cash soon after receipt of payments from the assessee. On that basis, investigation was the assessee. On that basis, investigation was carried out in the carried out in the cases of the contractors. Although the contractors stated that the cases of the contractors. Although the contractors stated that the cases of the contractors. Although the contractors stated that the cash withdrawals were made for payment to labourers, they could cash withdrawals were made for payment to labourers, they could cash withdrawals were made for payment to labourers, they could not produce muster rolls, wage registers or payment vouchers, not produce muster rolls, wage registers or payment vouchers, not produce muster rolls, wage registers or payment vouchers, except copies of their income except copies of their income-tax returns.

11.22 Pursuant thereto, the assessee was summoned by the Pursuant thereto, the assessee was summoned by the Pursuant thereto, the assessee was summoned by the Investigation Wing and, in response, furnished comprehensive Investigation Wing and, in response, furnished comprehensive Investigation Wing and, in response, furnished comprehensive details, including project details, including project-wise particulars for which manpower wise particulars for which manpower services were availed, copies of work orders, invoices raised by the services were availed, copies of work orders, invoices raised by the services were availed, copies of work orders, invoices raised by the contractors, ledger accounts, bank statements evidencing payments ctors, ledger accounts, bank statements evidencing payments ctors, ledger accounts, bank statements evidencing payments through banking channels, and TDS certificates. The assessee also through banking channels, and TDS certificates. The assessee also through banking channels, and TDS certificates. The assessee also demonstrated that skilled and unskilled manpower supplied by the demonstrated that skilled and unskilled manpower supplied by the demonstrated that skilled and unskilled manpower supplied by the

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said contractors was utilised in execution of its construction said contractors was utilised in execution of its construction said contractors was utilised in execution of its construction projects.

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

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11.25 We also note that in assessment year 2013-14, the We also note that in assessment year 2013 We also note that in assessment year 2013 Assessing Officer himself accepted similar subcontract expenditure Assessing Officer himself accepted similar subcontract expenditure Assessing Officer himself accepted similar subcontract expenditure as genuine and made no disallowance. W as genuine and made no disallowance. When identical transactions hen identical transactions with the same parties, based on the same investigation material, with the same parties, based on the same investigation material, with the same parties, based on the same investigation material, have been accepted in other assessment years, the Revenue is not have been accepted in other assessment years, the Revenue is not have been accepted in other assessment years, the Revenue is not justified in taking a contrary view in the year under consideration in justified in taking a contrary view in the year under consideration in justified in taking a contrary view in the year under consideration in the absence of any material the absence of any material change in facts or circumstances. change in facts or circumstances.

11.26 In view of the foregoing discussion, we find that the order In view of the foregoing discussion, we find that the order In view of the foregoing discussion, we find that the order of the learned CIT(A) is based on proper appreciation of facts and of the learned CIT(A) is based on proper appreciation of facts and of the learned CIT(A) is based on proper appreciation of facts and settled legal principles and does not suffer from any infirmity or settled legal principles and does not suffer from any infirmity or settled legal principles and does not suffer from any infirmity or perversity. Accordingl perversity. Accordingly, we uphold the same. Ground Nos. 1 to 3 y, we uphold the same. Ground Nos. 1 to 3 raised by the Revenue are dismissed. raised by the Revenue are dismissed.

12.1 The facts in brief brief qua the issue in dispute are that the qua the issue in dispute are that the assessee shown exempted income compr assessee shown exempted income comprised of dividend income of dividend income of Rs.17,25,20,478/-; ; ; income income income from from from partnership partnership partnership firm firm firm of Rs.4,26,45,913/- and long term capital gain (of Rs.82,69,16,993/ and long term capital gain (of Rs.82,69,16,993/-). and long term capital gain (of Rs.82,69,16,993/ As against the said exempte s against the said exempted income, the assessee made , the assessee made suo-motu disallowance of Rs.5,00,000/ disallowance of Rs.5,00,000/- u/s 14A of the Act towards expenses u/s 14A of the Act towards expenses incurred for collection of dividend. incurred for collection of dividend.

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12.2 The Assessing Officer, not being satisfied with the assessee’s The Assessing Officer, not being satisfied with the assessee’s The Assessing Officer, not being satisfied with the assessee’s claim, issued a show cause notice proposing disallowance under claim, issued a show cause notice proposing disallowanc claim, issued a show cause notice proposing disallowanc section 14A read with Rule 8D. After examining the computation of section 14A read with Rule 8D. After examining the computation of section 14A read with Rule 8D. After examining the computation of income, audited financial statements, and tax audit report, the income, audited financial statements, and tax audit report, the income, audited financial statements, and tax audit report, the Assessing Officer recorded dissatisfaction with the assessee’s Assessing Officer recorded dissatisfaction with the assessee’s Assessing Officer recorded dissatisfaction with the assessee’s explanation.

12.3 In the original assessment proceeding In the original assessment proceedings, the Assessing Officer s, the Assessing Officer made a disallowance under Rule 8D(2)(iii) at 0.5% of the average made a disallowance under Rule 8D(2)(iii) at 0.5% of the average made a disallowance under Rule 8D(2)(iii) at 0.5% of the average value of investments yielding exempt income. Subsequently, in the value of investments yielding exempt income. Subsequently, in the value of investments yielding exempt income. Subsequently, in the reassessment proceedings, the Assessing Officer invoked Rule reassessment proceedings, the Assessing Officer invoked Rule reassessment proceedings, the Assessing Officer invoked Rule 8D(2)(ii) and made a proportionate disa 8D(2)(ii) and made a proportionate disallowance of interest on the llowance of interest on the allegation that borrowed funds were utilised for investments allegation that borrowed funds were utilised for investments allegation that borrowed funds were utilised for investments yielding exempt income. yielding exempt income.

12.4 Before the Assessing Officer as well as before us, the assessee Before the Assessing Officer as well as before us, the assessee Before the Assessing Officer as well as before us, the assessee contended that no disallowance under Rule 8D(2)(ii) was warranted contended that no disallowance under Rule 8D(2)(ii) was warranted contended that no disallowance under Rule 8D(2)(ii) was warranted since its interest-free own funds were far in excess of the free own funds were far in excess of the free own funds were far in excess of the investments yielding exempt income. It was submitted that the facts investments yielding exempt income. It was submitted that the facts investments yielding exempt income. It was submitted that the facts of the year under consideration were identical to those in the of the year under consideration were identical to those in the of the year under consideration were identical to those in the assessee’s own cases for assessment years 2008 assessee’s own cases for assessment years 2008-09, 2010 09, 2010-11, and 2011-12, where similar disallowances were deleted by the Tribunal where similar disallowances were deleted by the Tribunal where similar disallowances were deleted by the Tribunal and such orders were affirmed by the Hon’ble Bombay High Court and such orders were affirmed by the Hon’ble Bombay High Court and such orders were affirmed by the Hon’ble Bombay High Court and further by the Hon’ble Supreme Court. and further by the Hon’ble Supreme Court.

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12.5 Before the Assessing Officer as well as before us, the assessee Before the Assessing Officer as well as before us, the assessee Before the Assessing Officer as well as before us, the assessee contended that no disallowance under Rule 8D(2)(ii) was warranted contended that no disallowance under Rule 8D(2)(ii) was warranted contended that no disallowance under Rule 8D(2)(ii) was warranted since its interest-free own funds were far in excess of the free own funds were far in excess of the free own funds were far in excess of the investments yielding exempt income. It was submitted that the facts investments yielding exempt income. It was submitted that the fact investments yielding exempt income. It was submitted that the fact of the year under consideration were identical to those in the of the year under consideration were identical to those in the of the year under consideration were identical to those in the assessee’s own cases for assessment years 2008 assessee’s own cases for assessment years 2008-09, 2010 09, 2010-11, and 2011-12, where similar disallowances were deleted by the Tribunal 12, where similar disallowances were deleted by the Tribunal 12, where similar disallowances were deleted by the Tribunal and such orders were affirmed by the Hon’ble Bombay High Court and such orders were affirmed by the Hon’ble Bombay High Cour and such orders were affirmed by the Hon’ble Bombay High Cour and further by the Hon’ble Supreme Court. and further by the Hon’ble Supreme Court. Relevant part of Relevant part of submission made before the ld AO made before the ld AO is reproduced as under: under:

“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 ITA No. 4418/Mum/2012 (Refer page no. 383 of 09 in ITA No. 4418/Mum/2012 (Refer page no. 383 of 09 in ITA No. 4418/Mum/2012 (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 ITA No. 1843 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

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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 ITA No. 1298 of 2017 (Refer page no. 395 of Factual ITA No. 1298 of 2017 (Refer page no. 395 of Factual ITA No. 1298 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.

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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

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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:

“17. In a situation where the assessee 17. In a situation where the assessee has mixed fund (made has mixed fund (made up partly of interest free funds and partly of interest up partly of interest free funds and partly of interest-bearing bearing funds) and payment is made out of that mixed fund, the funds) and payment is made out of that mixed fund, the funds) and payment is made out of that mixed fund, the investment must be considered to have been made out of the investment must be considered to have been made out of the investment must be considered to have been made out of the interest free fund. To put it another way, in respect of interest free fund. To put it another way, in respect of interest free fund. To put it another way, in respect of payment made out of mixed fund, it is the assessee who has payment made out of mixed fund, it is the assessee who has payment made out of mixed fund, it is the assessee who has such right of appropriation and also the right to assert from such right of appropriation and also the right to assert from such right of appropriation and also the right to assert from what part of the fund a particular investment is made and it what part of the fund a particular investment is made and it what part of the fund a particular investment is made and it may not be permissible for the Revenue to make an may not be permissible for the Revenue to make an may not be permissible for the Revenue to make an estimation of a estimation of a proportionate figure................................ ............................... 20. Applying the same logic, the disallowance would be 20. Applying the same logic, the disallowance would be 20. Applying the same logic, the disallowance would be legally impermissible for the investment made by the legally impermissible for the investment made by the legally impermissible for the investment made by the assessees in bonds/shares using interest free funds, under assessees in bonds/shares using interest free funds, under assessees in bonds/shares using interest free funds, under section 14A of the Act. In other words, if i section 14A of the Act. In other words, if investments in nvestments in securities is made out of common funds and the assessee securities is made out of common funds and the assessee securities is made out of common funds and the assessee has available, non has available, non-interest-bearing funds larger than the bearing funds larger than the investments made in tax investments made in tax-free securities then in such cases, free securities then in such cases, disallowance under section 14A cannot be made. disallowance under section 14A cannot be made. 27. The aforesaid dis 27. The aforesaid discussion and the cited judgments advise cussion and the cited judgments advise this Court to conclude that the proportionate disallowance of this Court to conclude that the proportionate disallowance of this Court to conclude that the proportionate disallowance of interest is not warranted, under section 14A of Income Tax interest is not warranted, under section 14A of Income Tax interest is not warranted, under section 14A of Income Tax Act for investments made in tax Act for investments made in tax-free bonds/securities which free bonds/securities which yield tax-free dividend and interest free dividend and interest to Assessee Banks in to Assessee Banks in those situations where, interest free own funds available those situations where, interest free own funds available those situations where, interest free own funds available with the Assessee, exceeded their investments. With this with the Assessee, exceeded their investments. With this with the Assessee, exceeded their investments. With this conclusion, we unhesitatingly agree with the view taken by conclusion, we unhesitatingly agree with the view taken by conclusion, we unhesitatingly agree with the view taken by the learned ITAT favouring the assessees." the learned ITAT favouring the assessees." 12.8 Further, the Ld. counsel for the assessee relied on the decision Ld. counsel for the assessee relied on the decision Ld. counsel for the assessee relied on the decision of the Hon’ble Bombay High Court in the case of Reliance Utilities & of the Hon’ble Bombay High Court in the case of Reliance Utilities & of the Hon’ble Bombay High Court in the case of Reliance Utilities &

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Power Ltd. 313 ITR 340 where similar principle has been upheld. Power Ltd. 313 ITR 340 where similar principle has been upheld. Power Ltd. 313 ITR 340 where similar principle has been upheld. The relevant portion of the order is reproduced as under: The relevant portion of the order is reproduced as under: The relevant portion of the order 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

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once the factual foundation of availability of sufficient interest-free once the factual foundation of availability of sufficient interest once the factual foundation of availability of sufficient interest funds is established.

12.10 Applying the aforesaid settled principles to the facts of Applying the aforesaid settled principles to the facts of Applying the aforesaid settled principles to the facts of present case, we find that the assessee has conclusively the present case, we find that the assessee has conclusively present case, we find that the assessee has conclusively demonstrated that its interest demonstrated that its interest-free funds were substantially higher free funds were substantially higher than the investments yielding exempt income. This factual position than the investments yielding exempt income. This factual position than the investments yielding exempt income. This factual position has not been controverted by the Revenue. In the absence of any has not been controverted by the Revenue. In the absence of any has not been controverted by the Revenue. In the absence of any finding establishing a direct nexus between borrowed funds and finding establishing a direct nexus between borrowed funds and finding establishing a direct nexus between borrowed funds and investments yielding exempt income, invocation of Rule 8D(2)(ii) is investments yielding exempt income, invocation of Rule 8D(2)(ii) is investments yielding exempt income, invocation of Rule 8D(2)(ii) is legally unsustainable. legally unsustainable.

12.11 We also find merit in the assessee’s contention based on We also find merit in the assessee’s contention based on We also find merit in the assessee’s contention based on the principle of consistency. On identi the principle of consistency. On identical facts, disallowance under cal facts, disallowance under Rule 8D(2)(ii) has been deleted in the assessee’s own cases for Rule 8D(2)(ii) has been deleted in the assessee’s own cases for Rule 8D(2)(ii) has been deleted in the assessee’s own cases for earlier assessment years, and such decisions have attained finality earlier assessment years, and such decisions have attained finality earlier assessment years, and such decisions have attained finality up to the Hon’ble Supreme Court. In the absence of any change in up to the Hon’ble Supreme Court. In the absence of any change in up to the Hon’ble Supreme Court. In the absence of any change in facts or law, a departure fro facts or law, a departure from the settled position is not justified. m the settled position is not justified.

12.12 In view of the above discussion and in light of binding In view of the above discussion and in light of binding In view of the above discussion and in light of binding judicial precedents, we hold that no disallowance of interest under judicial precedents, we hold that no disallowance of interest under judicial precedents, we hold that no disallowance of interest under section 14A read with Rule 8D(2)(ii) is warranted in the present section 14A read with Rule 8D(2)(ii) is warranted in the present section 14A read with Rule 8D(2)(ii) is warranted in the present case. The finding of the learned CIT(A) deleting the disallowance is the learned CIT(A) deleting the disallowance is well reasoned and does not call for any interference. well reasoned and does not call for any interference.

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12.13 Accordingly, the ground No.3 Accordingly, the ground No.3 raised by the Revenue on raised by the Revenue on this issue is dismissed. dismissed.

13.1 During the relevant assessment year, the asse During the relevant assessment year, the asse During the relevant assessment year, the assessee earned exempt income and, while computing its book profits under section exempt income and, while computing its book profits exempt income and, while computing its book profits motu adjustment of ₹5 lakhs towards expenses 115JB, made a suo-mot 5 lakhs towards expenses relating to earning such exempt income. In the reassessment relating to earning such exempt income. In the reassessment relating to earning such exempt income. In the reassessment proceedings, the Assessing Officer applied the computation proceedings, the Assessing Officer applied the computat proceedings, the Assessing Officer applied the computat mechanism of section 14A read with Rule 8D(2)(ii) and made a mechanism of section 14A read with Rule 8D(2)(ii) and made a mechanism of section 14A read with Rule 8D(2)(ii) and made a further adjustment of ₹76.99 crores under clause (f) of Explanation further adjustment of 76.99 crores under clause (f) of Explanation 1 to section 115JB(2), thereby enhancing the book profits. 1 to section 115JB(2), thereby enhancing the book profits. 1 to section 115JB(2), thereby enhancing the book profits.

13.2 On appeal, the learned CIT(A) deleted the said adjustment, On appeal, the learned CIT(A) deleted the said adjustment, On appeal, the learned CIT(A) deleted the said adjustment, holding that the disallowance computed under section 14A read holding that the disallowance computed under section 14A read holding that the disallowance computed under section 14A read with Rule 8D cannot be imported into the computation of book with Rule 8D cannot be imported into the computation of book with Rule 8D cannot be imported into the computation of book profits under section 115JB, and that the addition made by the profits under section 115JB, and that the addition made by the profits under section 115JB, and that the addition made by the Assessing Officer was unsustainable in law. Aggrieved by this Assessing Officer was unsustainable in law. Aggrieved by this Assessing Officer was unsustainable in law. Aggrieved by this deletion, the Revenue has raised the present ground before the , the Revenue has raised the present ground before the , the Revenue has raised the present ground before the Tribunal.

Shapoorji Pallaonji And Company Pvt. Ltd. Shapoorji Pallaonji And Company Pvt. Ltd. 54 ITA No. 2831/MUM/2025 & CO ITA No. 2831/MUM/2025 130/M/2025

13.3 We have heard rival submissions of the parties and We have heard rival submissions of the parties and We have heard rival submissions of the parties and perused the relevant materials on record. perused the relevant materials on record. The scope and ambit of The scope and ambit of section 115JB are now well settled. The said provision is a self- section 115JB are now well settled. The said provision is a self section 115JB are now well settled. The said provision is a self contained code and commences with a non obstante clause. The ained code and commences with a non obstante clause. The ained code and commences with a non obstante clause. The Assessing Officer’s jurisdiction to adjust the net profit as per the Assessing Officer’s jurisdiction to adjust the net profit as per the Assessing Officer’s jurisdiction to adjust the net profit as per the profit and loss account is strictly confined to the items expressly profit and loss account is strictly confined to the items expressly profit and loss account is strictly confined to the items expressly specified in Explanation 1 to section 115JB(2). specified in Explanation 1 to section 115JB(2).

13.4 The Special Bench of the Tribunal in al Bench of the Tribunal in Vireet Industries Pvt. Ltd. Vireet Industries Pvt. Ltd. ITA No. 502/Del/2012 ITA No. 502/Del/2012 has categorically held that the computation has categorically held that the computation mechanism prescribed under section 14A read with Rule 8D cannot mechanism prescribed under section 14A read with Rule 8D cannot mechanism prescribed under section 14A read with Rule 8D cannot be applied while determining the amount of expenditure relatable to be applied while determining the amount of expenditure relatable to be applied while determining the amount of expenditure relatable to exempt income for the purposes of clause (f) of Explanation 1 to exempt income for the purposes of clause (f) of Explanation 1 to exempt income for the purposes of clause (f) of Explanation 1 to section 115JB(2). The adjustment, if any, under clause (f) must be 2). The adjustment, if any, under clause (f) must be 2). The adjustment, if any, under clause (f) must be made independently and cannot be mechanically borrowed from made independently and cannot be mechanically borrowed from made independently and cannot be mechanically borrowed from section 14A. The relevant extract of the said decision is reproduced The relevant extract of the said decision is reproduced The relevant extract of the said decision is reproduced as under:

Shapoorji Pallaonji And Company Pvt. Ltd. Shapoorji Pallaonji And Company Pvt. Ltd. 55 ITA No. 2831/MUM/2025 & CO ITA No. 2831/MUM/2025 130/M/2025

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."

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13.5 We further note that note that Tribunal in assessee's own case for the Tribunal in assessee's own case for the year under consideration i.e. AY 2014 year under consideration i.e. AY 2014-15 (ΙΤΑ No. 2025/Mum/2021 15 (ΙΤΑ No. 2025/Mum/2021 & CO No. 55/Mum/2022) in normal 143(3) proceedings, (Refer page & CO No. 55/Mum/2022) in normal 143(3) proceedings, (Refer page & CO No. 55/Mum/2022) in normal 143(3) proceedings, (Refer page no. 782A to 782S of legal paperbook no. 782A to 782S of legal paperbook) wherein it has been held that ) wherein it has been held that disallowance under Section 14A of the Act should not be added disallowance under Section 14A of the Act should not be added disallowance under Section 14A of the Act should not be added while computing book profits under Section 115JB of the Act. The while computing book profits under Section 115JB of the Act. The while computing book profits under Section 115JB of the Act. The relevant extracts reproduced as under: relevant extracts reproduced as under:

"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."

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13.6 In view of the settled legal position, the action of the Assessing In view of the settled legal position, the action of the Assessing In view of the settled legal position, the action of the Assessing Officer in importing the computation under section 14A read with importing the computation under section 14A read with importing the computation under section 14A read with Rule 8D(2)(ii) into clause (f) of Explanation 1 to section 115JB(2) is Rule 8D(2)(ii) into clause (f) of Explanation 1 to section 115JB(2) is Rule 8D(2)(ii) into clause (f) of Explanation 1 to section 115JB(2) is unsustainable in law. unsustainable in law.

13.7 Accordingly, we find no infirmity in the order of the learned Accordingly, we find no infirmity in the order of the learned Accordingly, we find no infirmity in the order of the learned CIT(A) deleting the addition made under se CIT(A) deleting the addition made under section 115JB on the basis ction 115JB on the basis of section 14A read with Rule 8D. The ground raised by the of section 14A read with Rule 8D. The ground raised by the of section 14A read with Rule 8D. The ground raised by the Revenue is, therefore, dismissed. Revenue is, therefore, dismissed.

Order pronounc ounced in the open Court on 12/01 01/2026.

Sd/- Sd/- (RAJ KUMAR CHAUHAN) (RAJ KUMAR CHAUHAN (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 12/01/2026 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai