TMI Blog2008 (7) TMI 460X X X X Extracts X X X X X X X X Extracts X X X X ..... the second proviso and the amendment to the first proviso brings into sharp focus the legal effect, that may ensue on all matters, pending assessment, containing the issue of payments in respect of welfare dues, made before the due date of filing the return. The first proviso and the second proviso to s. 43B of the Act contain due dates for various payments, enumerated in sub-cls. (a) to (f) of s. 43B of the Act. Consequently, these provisos contained identical legislative intent, on the issue of due date of payments, covered u/s. 43B of the Act - In view of this, the decision of the Hon'ble Supreme Court of India, in the case of Allied Motors (P) Ltd. vs. CIT [ 1997 (3) TMI 9 - SUPREME COURT] is squarely applicable to the deleted second proviso and amendment to first proviso to s. 43B of the Act. In the case of Allied Motors (P) Ltd., the apex Court of the land has categorically held, following the rule of reasonable construction of the statutory provisions, that the first proviso to s. 43B of the Act is retrospective in operation. On the same analogy, the decision of the Supreme Court is applicable to the amendment made by the Finance Act, 2003 w.e.f. 1st April, 2004 - There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proper facts supporting its decision. A decision based on the foundation of mere assertion or surmises or suspicion is liable to be quashed by higher Court. The decision must be supported by concrete facts and cogent evidences. This is a fundamental rule of justice - The Supreme Court has often frowned upon such tendency of the AO to frame the assessment order, on mere surmises and set aside these cases. This view has been held by the Supreme Court in the cases of Dhirajlal Girdhanlal vs. CIT[ 1954 (10) TMI 8 - SUPREME COURT] , Omar Salay Mohamed Sait vs. CIT [ 1959 (3) TMI 2 - SUPREME COURT] , Dhakeshwari Cotton Mills Ltd. vs. CIT [ 1954 (10) TMI 12 - SUPREME COURT] and Lalchand Bhagat Ambica Ram vs. CIT [ 1959 (5) TMI 12 - SUPREME COURT] - Thus, in a given fact-situation of the instant case, the Revenue has failed to justify invocation of the said Explanation and consequent addition, as the parties to whom commission was paid, mode of payment through account payee cheques, quantum of commission, for the purpose of business and for the services rendered by the parties, remained undisputed facts, emanating from the assessment order, CIT(A)'s order and submissions - Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason to interfere with the findings of the CIT(A), on the issue in question. Therefore, the finding of the learned CIT(A), on this ground of appeal is upheld. In the result, the appeal of the Revenue is dismissed. - VIMAL GANDHI, PRESIDENT AND MEHAR SINGH, A.M. For the Appellant : R.K. Paliwal For the Respondent : Ajay Vohra, Ashutosh Jain ORDER MEHAR SINGH, A.M.: 1. The present appeal has been filed by the Revenue, against the order dt. 14th July, 2005, passed under s. 250(6) of the IT Act, 1961, by the CIT(A). Aggrieved by the impugned appellate order, Revenue raised following three grounds of appeal: Ground No. 1.: On the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the addition of Rs. 3,73,793 and Rs. 96,404, made under s. 43B of the IT Act, on the account of delayed payment of employer's contribution towards PF. 2. The AO made an addition of Rs. 3,73,793 and Rs. 96,404 under s. 43B r/w s. 36(1)(iv) and (va) of the Act for not crediting the amount to the employee's account, on due date. The AO placed reliance for such addition, on the decision, in the case of CIT vs. South India Corporati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or in view of the amended provisions of the Act. The AO is directed to allow the same. 2(ii) Thus, a bare perusal of the conclusions or findings arrived at by the CIT(A) reveals that the same are supported by circular and judicial verdicts. A proviso, which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission, in the section and is required to be read into the section, to give the section a reasonable interpretation, requires to be treated as retrospective, in operation, so that a reasonable interpretation can be given to the section, as a whole, as held by the Hon'ble Supreme Court, in the case of Allied Motors (P) Ltd. vs. CIT (1997) 139 CTR (SC) 364 : (1997) 224 ITR 677 (SC). The relevant and operative part of the decision is extracted and reproduced hereunder: Sec. 43B of the IT Act, 1961, was inserted w.e.f. 1st April, 1984 to discourage taxpayers, who did not discharge their statutory liability of payment of excise duty, employer's contribution to PF, etc. for long period of time, but claimed deductions in that regard from their income, on the ground that the liability to pay these amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Karkhana Ltd. (2007) 212 CTR (Bom) 384 : (2008) 298 ITR 149 (Bom) wherein it was held that the omission of second proviso was not curative and, consequently, it cannot be said that the amendment is retrospective. However, there are judicial verdicts of the apex Court, jurisdictional High Court and jurisdictional Bench of the Tribunal, in favour of the assessee, discussed hereinafter. 4. The Finance Act, 2003 w.e.f. 1st April, 2004, omitted the second proviso to s. 43B of the Act, mandating that no deduction shall be allowable, if not paid on due date. The due date, for payment of welfare dues, as mentioned under s. 43B(b) of the Act, was specified under the second proviso to s. 43B of the Act. The omission of second proviso and amendment to first proviso, removing the exclusion of cl. (b) to s. 43B of the Act, for deduction of amounts paid before the due date, for filing the return would clearly indicate the legislative intent, to treat welfare dues, on par with other payments covered by s. 43B, removing the invidious distinction between welfare dues and other payments. 4(i) The core issue emerging from the above omission of the second proviso and the amendment to the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rises (2007) 213 CTR (Kar) 269 : (2008) 298 ITR 141 (Kar) has categorically held that the amendment to s. 43B, inserted by the Finance Act, 2003, w.e.f. 1st April, 2004, should be read retrospectively and should be understood as if s. 43B would not be applicable to the assessee. Thus, the Hon'ble Karnataka High Court held that amendment to s. 43B is retrospective in nature. The relevant operative part of the decision is reproduced hereunder: Clause (va) of sub-s. (1) of s. 36 of the IT Act, 1961, makes it clear that the amounts actually paid by the assessee on or before the due date for filing the return under s. 139 are allowable deductions. Held accordingly, dismissing the appeals, that the contributions made by the assessee to the PF and the employees' State insurance were allowable deductions even though they were made beyond the stipulated period as contemplated under the mandatory provisions of s. 36(1)(va) r/w s. 2 (24)(x) and s. 43B as the amounts were paid by the assessee on or before the due date for furnishing the return under s. 139(1). The amendment to s. 43B, inserted by the Finance Act, 2003, w.e.f. 1st April, 2004, should be read retrospectively an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anation to s. 37, does not arise. The AO did not accept the explanation and contention of the assessee company and by placing reliance on the decision, in the case of M/s Ahluwaiia Contract (India) Ltd. New Delhi, before the Settlement Commission, vide its order dt. 30th July, 2004, wherein Commission discussed the applicability of the said Explanation and it was held by the Settlement Commission that the payments to a director or who are employees in public sector, are covered by Explanation to s. 37 of the Act. The AO also relied on the decision in the case of CIT vs. Orissa Cement Ltd. (2002) 177 CTR (Del) 361 : (2002) 258 ITR 365 (Del). The learned CIT(A) examined the issue in detail specifically with reference to the assessment order, the submission made by the appellant company before him and the case law, relied upon. It would be appropriate and pertinent to refer to the relevant and appropriate part of the order of the learned CIT(A), with a view to appreciating. detailed analysis, made by him, in the matter: I have considered the submission of the learned counsel vis-a-vis the facts of the case. The AO made the disallowance of Rs. 48,44,030 being commission paid to two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mi entities. Neither is there any finding by the AO with any supporting material that the agreement entered into between the above parties and the appellant was sham or a colorable device to reduce its tax liability. No doubt, the appellant's main clients are Government undertakings, but that does not mean that the appellant appoints agents to act as middlemen, for paying secret commission, for procurement of orders from the Government. There is absolutely no evidence on record, before me to substantiate this charge. This suspicion is in the mind of the AO but is it not supported by any finding of fact based on evidence. The decisions relied upon by the AO are not applicable in the instant case. In the case of M/s Ahluwalia Contract (India) Ltd., the facts are distinguishable from the facts of the instant case. In that case, in the course of a search, a diary was seized from one of the employees, wherein certain payments have been recorded. The appellant has explained the modus operandi of its business and the payments recorded in the diary. It has been stated that owing to the competition between the applicant and other big contractors, for securing big works from big parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned Authorised Representative and hold that the payments to a director or an employee of a public limited company are covered in the Explanation to s. 37(1) of the Act.' It may be noted from the above that in the case cited above, there was a clear admission by the appellant that payments, recorded in diary, were pay backs to their big clients or its employees and on the other hand, there was no confirmation from the recipients, wherein in the instant case, the payments have been made to the parties, in question, through account payee cheques, for the specific services rendered by them and they are regularly assessed to tax. The parties have confirmed the receipt of payments. As regards, the other case of Delhi High Court, the same is not applicable in the instant case, as in that case, it was payment of commission to sole selling agent, where the Government has abolished appointment of sole selling agents in cement industries. There is no finding in this case that there were any ban in obtaining services of the outside parties in preparation of tender and other related works. Further, the appellant has explained in detail how the appellant and the parties conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view that the disallowance of commission, made is without any valid ground and cannot be sustained. The AO is directed to allow the same. 5(i) In the course of appellate proceedings before the Bench, the Authorized Representative of the assessee company, placed reliance on the clear statutory provisions, as contained in Explanation to s. 37(1) of the Act, submissions and pleadings made, various decisions relied upon as highlighted in the paper book, and the impugned appellate order of the learned CIT(A). The primary plank of contention and the entire course of its pleadings and corroborative evidences revolve around non-applicability of the Explanation to s. 37(1) of the Act, to the facts of the instant case. It was contended that the Revenue has failed to establish and bring reliable and cogent material, on record to discharge the onus cast on it, to justify applicability of the said Explanation to the fact-situation of the present case. The reliance placed on the case law by the AO was distinguished properly by the learned CIT(A), in the impugned appellate order and by the Authorized Representative of the assessee company, in the course of current appellate proceedings. It wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned CIT(A) found that the AO misread and misapplied the case law, quoted to support its contention, as the fact-situation of the present case does not have even the semblance of the resemblance, to the fact-situation of the cases relied upon. Consequently, the learned CIT(A) has properly distinguished such case law. It is established legal proposition that reliance on judicial precedents can be placed when legal and factual position of both the cases are identical, as is evident from ensuing discussion. (a) The following words of Lord Denning in the matter of applying precedents have become locus classicus: Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect. In deciding such cases, one should avoid the temptation to decide cases (as said by Cardozo) by matching the colour of one case against the colour of another. To decide, therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive...... Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has misread and misapplied the decisions of the case law, to invoke the provisions of Explanation to s. 37(1) of the Act. as categorically observed by the learned CIT(A), in the impugned appellate order. 5(v) In the specific context, it is pertinent to refer to the Speech of the Finance Minister. in his Budget, with a view to ascertaining and appreciating the nature and scope of Explanation to s. 37(1) of the Act, inserted by the Finance (No. 2) Act, 1998, with retrospective effect from 1st April, 1962, as the law did disallow expenses related to violation of law, the need (or Explanation was to target payments, which by themselves constitute violation of laws, like payment of extortion of money, which itself constitutes offense. The relevant part of the Finance Minister's Speech is reproduced hereunder: 111. A controversy has arisen recently regarding the deductibility of payments by way of extortion money. To set the controversy at rest, I propose to explicitly provide retrospectively since the inception of IT Act, 1961, that any money paid by way of extortion will not qualify for deduction as a business expense. To ascertain the clear legislative intent or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d speaking and detailed order and categorically held, the AO invoked the Explanation to s. 37(1) of the Act, purely on surmises and suspicion and no cogent material brought on record to justify the validity of such approach adopted in the assessment order. The CIT(A) specifically held that the AO failed to adduce material evidence to establish that the payment of such commission is an offence or such payment is prohibited by law. Mere assertion without any corroboration cannot be substitute for credible evidence leading to invocation of the said Explanation by the AO. It remains to be demonstrated by plausible justification that the payment of commission to identifiable parties, through account payee cheques who are assessed to tax, for the services rendered as defined in the agreement, in the absence of colorable or collusive nature of transactions, payments made for the purpose of business, cannot be termed as against public policy, as construed by the AO. No evidence has been placed by the Revenue before the CIT(A) or before the Bench establishing any violation of public policy or provisions of any statute. It is well-settled legal proposition that Revenue cannot decide on an is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds. The AO computed the total interest-bearing funds of the appellant at Rs. 366.54 crores (as against actual interest-bearing funds of Rs. 358.83 crores) and interest free funds at Rs. 220.33 crores (as against actual non-interest-bearing funds of Rs. 223.36 crores) and the total funds at Rs. 587 crores (as against the actual total funds of Rs. 582.19 crores). The AO then worked out the percentage of interest-bearing funds to total funds at 62.5 per cent and owned funds at 37.5 per cent (as against 61.63 per cent and 38.37 per cent respectively). On this basis the AO held that 62.5 per cent of Rs. 84.76 crores advanced as loan i.e. Rs. 52.5 crores was made out of borrowed funds. Applying interest rate of 12 per cent, the AO computed the interest cost of borrowed funds of Rs. 52.5 crores at Rs. 6.3 crores and disallowed the same out of interest expenditure on account of non-business use, i.e. providing interest free loans to group companies. While making aforesaid disallowance, the AO has observed that aforesaid allocation of total funds in the ratio of interest-bearing funds and own funds was made by the AO in assessee's own case for asst. yr. 2000-01 for the purposes of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, without prejudice in the case of mixed pool of funds, in the absence of any nexus between the borrowed funds and funds advanced, a presumption can be drawn that non-income earning advances have been made out of the profits/non-interest-bearing funds available with the assessee and accordingly borrowed funds were utilized for giving interest free advances: (i) East India Pharmaceutical Works Ltd. vs. CIT (l997) 139 CTR (SC) 372 : (1997) 224 ITR 627 (SC); (ii) Woolcombers of India Ltd. vs. CIT (l981) 23 CTR (Cal) 204 : (l982) 134 ITR 219 (Cal); (iii) India Explosives Ltd. vs. CIT (l983) 35 CTR (Cal) 244 : (l984) 147 ITR 392 (Cal); (iv) Alkali Chemical Corporation of India Ltd. vs. CIT (l986) 50 CTR (Cal) 139 : (1986) 161 ITR 820 (Cal) [implidly as approved in East India Pharmaceuticals] (v) CIT vs. Radico Khaitan Ltd. (2005) 194 CTR (All) 451 : (2005) 274 ITR 354 (All); (vi) CIT vs. Dhampur Sugar Mills Ltd. (2005) 274 ITR 370 (All). Further, the Supreme Court in the case of S.A. Builders Ltd. vs. CIT (2006) 206 CTR (SC) 631 : (2007) 288 ITR 1 (SC) has held that no disallowance under s. 36(1)(iii) of the Act is to be made if interest-bearing funds are passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 263 of the Act in asst. yr. 2000-01 has been quashed by the Tribunal and it has been categorically held that since the interest free funds available with the appellant in the form of share capital reserves, interest free deposits etc., were more than the amount lent to the sister-concern no disallowance of interest was called for. Further, no disallowance has been made in this regard in asst. yrs. 2001-02, 2003-04 and 2004-05 and on the ground of consistency too, no disallowance is called for. Reliance is placed on the following decisions in this regard: (i) Radhasoami Satsang vs. CIT (1991) 100 CTR (SC) 267 : (1992) 193 ITR 321 (SC); (ii) Director of IT (Exemptions) vs. Apparel Export Promotion Council (2000) 163 CTR (Del) 131 : (2000) 244 ITR 734 (Del); (iii) CIT vs. Neo Poly Pack (P) Ltd. (2000) 245 ITR 492 (Del); (iv) CIT vs. Girish Mohan Ganeriwala (2003) 260 ITR 417 (P H). The CIT(A) appreciating the aforesaid submissions has deleted the disallowance of interest expenditure of Rs. 6.3 crores allegedly relating to interest free loans given to group companies and the order of the CIT(A) needs to be upheld. Without prejudice, the average percentage of intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , etc., and such funds cannot be utilized for any other purpose. In case the financial institutions did not advance funds for making investment in shares and the lenders periodically monitor that the funds are being used for the purpose for which they are being borrowed. The issue of utilization of borrowed funds for making investment in group companies, therefore, does not arise. Also, since most of the investments have been made before asst. yr. 1994-95 and the outstanding loans at the year end have been borrowed after that date the question of utilization of the aforesaid funds for investment in shares does not arise. Reliance is placed on following decisions, wherein it has been held that where there is no clear nexus of expenses incurred with earning of exempt income, disallowance cannot be made under s. 14A of the Act: (i) Asstt. CIT vs. Eicher Ltd. (2006) 101 TTJ (Del) 369; (ii) Maruti Udyog Ltd. vs. Dy. CIT (2005) 92 TTJ (Del) 987 : (2005) 92 ITD 119 (Del); (iii) Punjab National Bank vs. Dy. CIT (2006) 103 TTJ 908 (Del); (iv) Vidyut Investment Ltd. vs. ITO (2006) 10 SOT 284 (Del); (v) D.J. Mehta vs. ITD (2007) 107 TTJ (Mumbai) 12 : (2007) 290 ITR 238 (M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Finance Company Ltd., wherefrom no dividend was received. Besides this, as on 31st March, 2002, the loans and advances made to various group and subsidiaries stood at Rs. 84.76 crores. He further noted that as on 31st March, 2002, as per its balance sheet, the appellant had about Rs. 220.33 crores (i.e. share capital and reserves) of own funds and about Rs. 366.54 crores of borrowed funds and the appellant had incurred gross finance cost i.e. the interest payable on the said borrowed funds at Rs. 56.59 crores. Merely on the basis of above observation, he had concluded that a significant portion of the appellant's pool of funds comprising of borrowed funds as well as its own funds is being diverted to the subsidiaries and group companies by way of investment in their shares and loans and advances to them. By adding Rs. 366.54 and Rs. 220.33 crores, as mentioned above, the AO worked out total funds of the assessee at Rs. 587 crores against which, according to the AO, on the asset side the assessee had investments in shares aggregating to Rs. 64 crores, loans and advances to group companies and subsidiaries aggregating to Rs. 84 crores, fixed assets aggregating to Rs. 180 cror ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is to be reduced by the revaluation reserve of Rs. 23.14 and increased by the deferred sales-tax loan and deferred tax of Rs. 26.16 crores. The AO's argument is that there is interest-bearing borrowed fund to the extent of Rs. 358.83 crores (total loans of Rs. 366.54 crores less interest free sales-tax loans of Rs. 7.71 crores) and therefore, it is possible that some amount might have been advanced out of the borrowed fund also. However, the fact is that the AO could not point out any specific interest-bearing fund which had been diverted by the assessee to subsidiary company without charging any interest or interest at a lower rate than what is being paid by the appellant on its borrowed funds. No doubt, the appellant has not maintained two separate accounts-one for the borrowed funds and the other for its own funds. It deposited the profits and other accruals also in the same account and loans and advances were also made out of the same account. The specific claim of the appellant was that the loans/advances to its subsidiary group companies were given out of the funds available to it in the shape of profits, share capital, etc. and not out of borrowed funds. The AO admitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrowed funds but from such profits and surplus, etc., unless contrary position is established. This has also been held by the Hon'ble Madras High Court in CIT vs. Hotel Savera (1998) 148 CTR (Mad) 585 : (1999) 239 ITR 795 (Mad) and other decisions as cited by the assessee. In the instant case, the AO has not brought on record any material to establish contrary to what has been explained by the learned counsel. This contention of the learned counsel is also found to be legally correct in view of the various case law relied upon by him as quoted above. The next disallowance of Rs. 4.8 crores is on dividend received invoking provisions of s. 14A. Here again, there was no finding by the AO that interest-bearing funds were utilized for investment in shares of group companies or others for earning dividend which is exempt under s. 10(33). In the asst. yr. 2000-01 on the same issue, CIT, Delhi-III, passed an order under s. 263 referring to the very same issue. While disposing of the appeal against, the said order, the Tribunal made the following observations: 'On merit in the first issue of disallowance on dividend received involving provisions of s. 14A, the learned CIT ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wings had been made after investments were made. No major investment has been made in the last five years. While dealing with this issue, the learned CIT has also dealt with the aspect of advancing loans to subsidiary and other companies, which he has alleged that the AO has not examined. We fail to understand how advancing of loans to subsidiary and other companies has any bearing on the question of deduction of interest from the dividend income. If at all this issue is relevant, it will be relevant in the context of allowability of interest expenditure and not in the context of attribution of interest cost to earning of dividend. It is also pertinent to note that in the immediately succeeding year i.e. in asst. yr. 2001-02, AO has specifically looked into the applicability of s. 14A and has made no disallowance. Further, in the preceding years also, there has been no disallowance of interest against dividend income. Applying the rule of consistency, no disallowance was called for unless there has been material change in the facts. The CIT in his order has not brought out any change in the facts and thus on this plea also no disallowance was called for. We also agree with the plea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arning of taxable income. It is proposed to insert a new s. 14A so as to clarify the intention of the legislature since the inception of the IT Act, 1961, that no deduction shall be made in respect of any expenditure incurred by the assessee in relation to income which does not form part of the total income under the IT Act. The proposed amendment will take effect retrospectively from 1st April, 1962 and will accordingly, apply in relation to the asst. yr. 1962-63 and subsequent assessment years. 6(iv) The s. 10 of the IT Act gives a list of various items of income which do not form part of total income. The newly inserted section can be understood to mean that expenditure in relation to such exempt income will not be allowable. Sec. 14A of the Act has codified well-settled legal principle that expenditure in relation to earning tax-free income is not an allowable item. Therefore, even in the absence of a new s. 14A, the law was well-settled on the issue. It may be important to know that Explanatory Memorandum clearly states that this new provision was only clarificatory in nature. The newly inserted s. 14A has used the phrase expenditure incurred in relation to income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be broad at first impression, but on deeper examination, and read in conjunction with the word 'incurred', it seems that these are restrictive words, restricting the power of the AO to estimate a part of the expenditure incurred by the assessee as relatable to the exempted income. It seems that implicit in the expression 'in relation to' is the concept that the AO should be in a position to pinpoint, with an acceptable degree of accuracy, the expenditure which was incurred by the assessee to produce non-taxable income. The word 'incurred' signifies that the expenditure must have been actually incurred, not notionally. Reading both the abovementioned expressions together, the conclusion seems inescapable that the expenditure which the AO seeks to disallow under s. 14A should be actually incurred and so incurred with a view to producing non-taxable income. If this much is clear from the section, it follows that it is the duty of the AO to pinpoint such expenditure on the basis of the material on record. Sec. 14A only removes the disability on the part of the AO to disallow such expenditure, a disability to which he was subjected by the three judgments of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and advances to the subsidiary companies at Rs. 152.12 crores, (Rs. 84.76 crores + Rs. 67.36 crores), which is less than its interest free funds. Further, the question of considering loans of Rs. 49.07 crores (except Rs. 3.88 crores) does not arise as interest has been charged thereon. Similarly, regarding investment in shares to the extent of Rs. 14.67 also, the question does not arise, as income earned therefrom is not exempt. The net amount of investment to be considered is Rs. 141.33 crores as worked out at p. 23 of the CIT(A)'s order in question. It is further observed that borrowed funds obtained by the appellant were for specific business purposes and the Revenue failed to give clear findings that such funds were not used for the purposes of the business, for which the same were borrowed but used for making investment in shares or for giving loans to group companies. The total assets of the company as on 31st March, 2002, as per balance sheet stood at Rs. 605.33 crores, as highlighted in the impugned appellate order. The investment/interest free loans and advances out of it stood at Rs. 141.33 crores. If this is reduced from the total assets, the business assets/investm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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