9911796707
TMI Blog2015 (10) TMI 1278X X X X Extracts X X X X X X X X Extracts X X X X ..... cost also. Further, there is also no material on record to show that the company has paid any amount to the consultant on behalf of the assessee. In this view of the matter, we set-aside the order of the CIT(A) and direct the AO to delete the addition.- Decided in favour of assessee. Additional of notional interest u/s.2(24)(iv) - Held that:- We find the Hon’ble Supreme Court in the case of V.M. Salgaocar and Bros. Pvt. Ltd. vs. CIT (2000 (4) TMI 2 - SUPREME Court) has held that insertion of clause (vi) in sections 17(2) and 40A(5) by Taxation Laws (Amendment) Act, 1984 and its subsequent repeal by Finance Act, 1985 provide a clear direction to interpret the provisions of section 17(2) and 40A(5) before insertion of clause (vi). Therefore, when a company obtains loan by paying interest and advances the same to directors without charging any interest, the interest attributable to the amounts advanced to directors could not be treated as perquisite. We further find that the Ld. Departmental Representative could not controvert the submission of the Ld. Counsel for the assessee that no such disallowance was made in scrutiny assessments in the past and no 263 proceedings or 148 proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a profession shall be chargeable to income-tax under the head “Profits and gains of business or Profession”. Here, the assessee is not carrying out any business or profession. Therefore, the provisions of section 28(iv) are not applicable to the facts of the present case. In this view of the matter and in view of the detailed reasoning given by the Ld.CIT(A), we find no infirmity in the same. Accordingly, the same is upheld and the ground raised by the Revenue is dismissed - Decided in favour of assessee. Disallowance of interest from the interest expenditure - Held that:- There is no dispute to the fact that both the borrowings as well as the investments were made in the past. According to the AO since the assessee has not given the details of utilisation of borrowed funds, therefore, he was of the opinion that such borrowed funds might have been utilised towards purchase of immovable properties, jewelleries etc., However, from the copies of the assessment orders for A.Yrs. 2006-07 to 2008-09, we find no such disallowance has been made. The AO has only restricted the interest expenditure to the extent of interest income. The assessee in the impugned assessment year has also re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any are also utilised for this purpose. The total number of group cases are 30 where all the sons of the assessee are having substantial interest. Shri B.A. Wohra also attends the scrutiny proceedings in case of the assessee as well as the other family members. The Assessing Officer noted that the total salary of 2 employees, i.e., Mr. P.M. Narayanan ₹ 30,733/- and Mr. Rajesh Shantilal Sharma ₹ 59,643 comes to ₹ 90,376. Similarly, Shri B.A. Wohra is also paid remuneration of ₹ 2,79,000/-. The AO considered 25% of such remuneration as belonging to JISL and the rest as perquisite in the hands of different family members. He accordingly made addition of ₹ 10,000/- to the total income of the assessee on account of perquisite. 3. In appeal the Ld.CIT(A) confirmed the addition by observing as under: 8. I have carefully gone through the assessment order, submissions of the appellant and the material on record. I find that Shri. Wohra who according to the appellant is working as consultant was paid 7 2,79,000/- by JISL. There is no dispute that Shri. Wohra had represented the appellant during the assessment proceedings as well as the appellate proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal to charge for the professional services rendered to any director or relative of a director or close family members of directors when he is getting fees for rendering services to a company. He may do it voluntarily and free of cost also. Further, there is also no material on record to show that the company has paid any amount to the consultant on behalf of the assessee. In this view of the matter, we set-aside the order of the CIT(A) and direct the AO to delete the addition. Ground of appeal No.1 by the assessee is accordingly allowed. 7. Ground of appeal No.2 by the assessee reads as under : 2. Additional of notional interest u/s.2(24)(iv) 2.1 The learned AO erred in confirming the addition of ₹ 16,48,208 and further enhancing the same by ₹ 3,06,000. On the facts and in the circumstances of the case the appellant prays for the deletion/cancellation of the addition of ₹ 19,54,208 made u/s. 2 (24) (iv) of the Act. 2.2 The learned CIT (A) erroneously concluded that the notional interest on the security deposit was taxable u/s. 2 (24) (iv) of the Act. 2.3 The learned CIT (A) failed to appreciate that only real income could be brought to tax and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08/- to the total income of the assessee u/s.2(24)(iv) of the I.T. Act. While doing so, he observed that such a huge rent and huge security deposit has been given to the assessee simply because the assessee and his family members are holding key position in the company. According to him, normally the rental income of the property is around 20% of the land cost but here it is exorbitant. The company s funds have been utilized for the personal benefit of the assessee on one hand and the company is paying huge interest on borrowings on the other hand. Thus, apart from huge rent, which is being deducted from the security deposit, the assessee is enjoying the capital of the company without any interest which falls u/s.2(24)(iv) of the I.T. Act. He accordingly made addition of ₹ 16,48,208 u/s.2(24)(iv) of the I.T. Act being 12% interest on the outstanding balance of ₹ 1,37,35,067/- as on 31-03-2009. 8. Before the CIT(A) the assessee again reiterated that it is not unusual for the property owners to collect interest free deposit. Referring to the decision of the Hon ble Bombay High Court in the case of CIT Vs. J.K. Investors (Bombay) Ltd., reported in 248 ITR 723 it was arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and the amount of rent charged. I am therefore, of the considered view that AO was justified in treating the notional interest on security deposit u/s 2(24)(iv) of the Act as perquisite. The AO has calculated interest @ 12% on closing balance of the security deposit. Since the rent was adjusted on 31/03/2009, I am of the opinion that interest on opening balance should have been added. Interest 12% on ₹ 1,62,85,067/- comes to ₹ 19,54,208/-. AO has already added ₹ 16,48,208/-. The income is therefore, enhanced by difference of ₹ 3,06,000/-. Consequently, the income of the appellant under section 2(24)(iv) of the Act appellant was given an enhancement notice in this regard on 23/10/2012. Appellant's contention in response to the said enhancement notice is not found to be tenable and hence rejected. AO is directed accordingly . 9.1 Aggrieved with such order of the CIT(A) the assessee is in appeal before us. 10. The Ld. Counsel for the assessee reiterated the same arguments as made before the AO and the CIT(A). He submitted that granting of interest free loan by company to its directors is not a perquisite or benefit under the provisions of section 2( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advantage from the company who has borrowed money by paying huge interest and diverted the same to the directors free of interest. He accordingly submitted that the order of the CIT(A) be upheld. 12. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that the assessee has let out an agricultural land admeasuring 2H 89R to JISL for a period of 12 years under an agreement dated 20-08-2002 according to which the company pays yearly rent of ₹ 25,50,000/-, net of TDS of ₹ 5,22,104/-. Thus, gross rent comes to ₹ 30,66,104/. Further, the company has also given interest free deposit of ₹ 3.06 crores to the assessee. According to the AO since the cost of land was only ₹ 4,64,371/- + stamp duty and its market value during 2002 was only ₹ 32,80,817/-, therefore the rent and deposit paid by the company to the assessee are very very excessive. The AO, therefore, calculated interest @12% on the outstanding balance of ₹ 1,37,35,067/- as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor or other person aforesaid; 6. Learned counsel for the appellant has relied upon two judgments of Madras High Court reported as Additional Commissioner of Income Tax Vs. Late A.K.Lakshmi others (by LRs) 113 ITR 368 and Commissioner of Income Tax, Madras Vs. S.S.M.Lingappan 129 ITR 597. In A.K.Lakshmi's case (supra), it was held that grant of amount by the Company for the personal use of its employees without charging interest is a benefit granted by the Company. The Court held to the following effect: .....We have no doubt that his section is not intended to restrict the discretion of the right of the company to advance amounts to its employees with or without interest or at any specified rate of interest. But the question would still arise whether granting amounts of the company for the personal use of its employees without charging interest would be the grant of any benefit. Our answer here must be in the affirmative. It is well known that it is difficult, if not impossible, to borrow amounts for one's own use without having any liability to pay interest. Putting it positively, ordinarily borrowing can be had only by incurring an obligation to pay interest. What ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and to bring such items in /the net of taxation, the law was amended by the Taxation Laws (Amendment) Act, 1984. By this amendment, as already indicated, a new sub-clause (vi) was inserted in Section 17 (2) and similarly another sub-clause (vi) was I was inserted in clause (b) of Explanation 2 to Section 40A (5). The effect of these amendments, which were made effective from April 1, 1985 was to ensure treatment and taxation in a case where an employee receives loan for certain prescribed purposes either free of interest or at a rate which was lower than the specified rate. However, subsequently, the Finance act, 1985, omitted the aforesaid amendments made by the Taxation Laws (Amendment) Act, 1984, with effect from the date of its insertion, namely, April 1, 1985 with a view to provide relief to salaried taxpayers. The very fact that the statute had to be amended at the first instance to bring the said item within the purview of the expression perquisite and it later sought to delete the same from the date of its insertion clearly shows that Parliament does not intend to treat interest-free loan or loan at a concessional rate as any benefit or perquisite granted or provided by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clause (vi) in Clause (2) of Section 17. Moreover, the High Court in the impugned judgment did not consider the amendments made by the Amending Act, 1984 on the ground it is difficult to see how this amendment can have any bearing upon the interpretation of the then existing provisions of the Act. . We do not think this approach was also correct. An amending provision can certainly give guidance to interpretation of the existing provisions. The judgments of the Madras High Court which were relied upon by the High Court in the impugned judgment were for the period prior to the 1984 amendment and the Madras High Court had no occasion to consider the impact of the amendments to section 17(2) and section 40A(5) of the Act. xxx xxx xxx The High Court in the impugned judgment could not have brushed aside the consideration of the Amending Act, 1984 and its subsequent repeal by the Finance Act 1985, by terming them of no consequence....... 10. At this stage, we may notice that Section 17 falling in Chapter IV deals Computation of Income under the head 'salary'. Section 17(2) defines 'perquisite' for the purposes of Sections 15 16 and for the purposes of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. Ground raised by the assessee is accordingly allowed. 13. Ground of appeal No.3 by the assessee reads as under : 3. Addition/enhancement u/s.14A of the Act. 3.1 The Ld.CIT(A) erred in enhancing the assessment by way of disallowance u/s.14A of ₹ 88,921/-. On the facts and in the circumstances of the case, the disallowance u/s.14A be cancelled. 3.2 The Ld.CIT(A) erred in making enhancement on the ground not mentioned in the assessment order and consequently the addition of ₹ 88,921/- could not be sustained . 13.1 Facts of the case, in brief, are that the Ld.CIT(A) during the course of appeal proceedings noticed that the assessee had received dividend of ₹ 65,03,530/- from M/s. JISL. He, therefore, asked the assessee to explain as to why the provisions of section 14A r.w. Rule 8D of the Act should not be invoked. The enhancement notice was also issued to the assessee proposing disallowance of a sum of ₹ 7,88,921/- r.w. Rule 8D. The assessee furnished a detailed working of disallowance of ₹ 88,921/- u/s.14A r.w. Rule 8D. Since the assessee did not produce his personal balance sheet stating that the same is not being maintained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income of the assessee by ₹ 88,921/- being disallowance u/s.14A r.w. Rule 8D. 13.3 Aggrieved with such order of the Ld.CIT(A) the assessee is in appeal before us. 14. The Ld. Counsel for the assessee referring to pages 10 to 14 of the paper book drew the attention of the Bench to the computation of income and submitted that the assessee has not claimed any expenditure from the dividend income. Referring to the decision of the Pune Bench of the Tribunal in the case of ACIT Vs. M/s. Magarpatta Township Development and Construction Company Pvt. Ltd., vide ITA No.2114/PN/2012 order dated 27-05-2014 for A.Y. 2009-10 he submitted that the Tribunal in the said decision has held that no disallowance u/s.14A r.w. Rule 8D is required when there is no direct or indirect expenditure incurred by the assessee in relation to earning exempt income. He also relied on the decision of Hon ble Bombay High Court in the case of CIT Vs. Reliance Utilities and Power Ltd., reported in 313 ITR 340 and the decision of the Pune Bench of the Tribunal in the case of Dharmveer Sambhaji Urban Coop. Bank Ltd., Vs. Adl.CIT vide ITA No.1287/PN/2012 order dated 20-09-2013 for A.Y. 2008-09. 15. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture incurred in relation to the income which does not form part of the total income i.e. exempt income. It is no longer res integra that invoking of rule 8D of the Rules in order to compute the disallowance u/s 14A of the Act is neither automatic and nor is dependent merely on the existence of an exempt income in the hands of the assessee. In support of the aforesaid proposition, A.Y. 2009-10 a gainful reference can be made to the judgement of the Hon'ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. (supra) as well as the judgement of the Hon'ble Delhi High Court in the case of Maxopp Investment Ltd. Ors. vs. CIT (2012) 247 CTR 162 (Del). The Pune Bench of the Tribunal in the case of Kalyani Steels Ltd. (supra) has also considered the aforesaid judgements and concluded that section 14A(2) of the Act envisages a condition precedent for invoking rule 8D of the Rules and computing disallowance; and, such condition being that the Assessing Officer records that he is not satisfied with the correctness of the claim of the assessee in respect of expenditure incurred in relation to income which does not form part of the total income under the Act, having regard t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he year. The CIT(A) further notes that the Assessing Officer considered interest expenditure of ₹ 3,00,19,761/- as expenditure not directly attributable to any particular income or receipt and subjected the same to disallowance as per clause (ii) of sub-rule (2) of rule 8D of the Rules. As per the CIT(A), the manner and the working for considering ₹ 3,00,19,761/- for the purposes of clause (ii) of subrule (2) of rule 8D of the Rules has not been recorded by the Assessing Officer in his order. The CIT(A) further records that the Assessing Officer has not examined the accounts of the assessee so as to arrive at a satisfaction and finding regarding incurrence of direct or indirect expenses in connection with earning of the exempt income, as required by sub-section (2) of section 14A of the Act. The CIT(A) also observed that assessee has made the investment from own funds and therefore question of any expense on account of interest for earning of impugned exempt income, in the given set of facts and circumstances of the case, does not arise . 10. Pertinently, we find no such reasons to distract from the aforesaid findings of the CIT(A) which are clearly borne out by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,406/- - alleged perquisite 1.1 The learned CIT (A) erred in confirming the addition of ₹ 62,406 on account of alleged perquisite on account of services rendered by CA Shri. Whora B.A. On the facts and in the circumstances of the case the said addition be cancelled. 1.2 The learned CIT (A) failed to appreciate that Jain Irrigation Systems Ltd., (JISL) had paid professional charges of ₹ 2,79,000 to said Mr. B. A. Whora only for rendering services to the said company and no part of such payment could be treated as perquisite in the hands of the appellant on account of honorary services rendered by Mr. Wohra to the appellant. 1.3 Alternatively, the value of alleged perquisite be restricted to a nominal amount as against the addition of ₹ 62,406 which is excessive. 18.1 After hearing both the sides, we find the above ground is identical to ground of appeal No.1 in ITA No.735/PN/2013. We have already decided the issue and the ground raised by the assessee has been allowed. Following the ratio, this ground by the assessee is allowed. 19. Ground of appeal No.2 by the assessee reads as under : 2. Enhancement by ₹ 25,41,694/- u/s.14A 2.1 Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Amount of interest expenditure incurred 68,96,925 2 Computation of disallowance A) Interest amount paid 68,96,925 B) Average value of investment from which income is exempt 6,96,05,606 C) Average value of Total Assets 21,98,43,410 3 Disallowance = A*B C 68.96.925*69605606 21,83,666 21,98,43,410 4 0.5 % of the Average value of investment, income from which is exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interest payment of ₹ 68,96,925/- the assessee has restricted such deduction to ₹ 56,16,040/- being the interest income and an amount of ₹ 12,80,885/- was not claimed. Therefore, this benefit should be given to the assessee and the disallowance should be restricted to ₹ 9,02,781/- (i.e. 21,83,666 12,80,885). 23. We find some force in the above submission of the Ld. Counsel for the assessee. Admittedly, the assessee has borrowed funds from different parties which was invested in fixed deposits with banks/companies and shares of a Cooperative Bank. As against the interest earned at ₹ 56,16,040/- the assessee has paid interest of ₹ 68,96,925/-. Since the interest expenditure was higher than the corresponding interest income, the assessee had restricted the deduction to ₹ 56,16,040/- thus excluding the excess interest of ₹ 12,80,885/-. Therefore, in our opinion, the disallowance u/s.14A r.w. Rule 8D should be recomputed by taking the interest expenditure at ₹ 56,16,040/- and not ₹ 68,96,925/- for working out the disallowance u/s.14A r.w. Rule 8D(1)(ii) since the assessee is not in appeal against the disallowance of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile making the addition are as under : I have considered the submission of the assessee quite carefully. The transfer of shares is done from the proprietary concern to the assessee individual In the proprietary concern, the business in trading/ investments of shares were carried out in past and the shares were purchased/allotted long time ago. It is a fact that no two persons are involved but it is also a fact that Had the assessee was not carrying out the business in shares , he should have purchased the share on the date of transfer at market rate and not on cost price. Thus, assessee has been able to get the shares on cost price only because of he was trader in shares in past and shares were business asset of the proprietary concern and just because of Stock Exchange Restriction he could not trade and kept business closed and thus these shares were lying in stock and ultimately got transferred on cost price. As the above gain has occurred on account of assessee's own business, the same is liable for tax as Business Income u/s. 28 (iv). The language of the section is plain which reads as under the value of any benefit or perquisite, whether convertible into money or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proprietary concern debiting capital account and crediting Share Account. The donee company has credited the Capital Reserve A/c and debited the quoted Investment A/c in its balance sheet at market value of the shares. There is no evidence on record that the appellant has received any consideration directly or indirectly from the done company in lieu of the gifted shares. The Gift deed dt. 7/11/2008 interalia mentions that the gift of shares has been made without any monetary consideration. The AO has however, worked out the difference between the market value as on 07/11/2008 and the cost of 1,80,000 shares only (out of the gifted shares of 1,81,208) and made a consequential addition of ₹ 4,80,09,600/- to the income returned applying the provisions of Sec. 28 (iv) of the Act. The present settled legal position is that 'gift' does not constitute an income in the hands of the Donor. The Gift Tax Act, 1958 has since been abolished w.e.f. 01/10/1998. Similarly the provisions of Sec. 56 (2) (vii) are also not applicable in this case. The appellant has gifted 17,49,000 shares of JISL out of 17,79,280 shares owned by him. However, the AO has brought to tax the so calle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there should be two persons. The section speaks only From business or Profession . He accordingly submitted that the order of the CIT(A) be set-aside and that of the AO be restored. 28. The Ld. Counsel for the assessee on the other hand strongly supported the order of the CIT(A). He submitted that AO has no problem for the transfer. He only says that the benefit has accrued due to transfer of the shares from the proprietary concern. Referring to provisions of section 28(iv) he submitted that value of any benefit or perquisite whether convertible into money or not arising from business or the exercise of a profession shall be chargeable to incometax under the head Profit and gains of business or Profession . He submitted that the assessee is not carrying out any business or profession. It is a mere transfer from proprietary concern to individual account. Referring to the decision of the Hon ble Supreme Court in the case of Sir Kikabhai Premchand Vs. CIT reported in 24 ITR 506 he submitted that the Hon ble Supreme Court in the said decision has held that withdrawal of stock in trade for non business purpose does not result in income and it can be valued on cost price where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tible into money or not arising from business or the exercise of a profession shall be chargeable to income-tax under the head Profits and gains of business or Profession . Here, the assessee is not carrying out any business or profession. Therefore, the provisions of section 28(iv) are not applicable to the facts of the present case. In this view of the matter and in view of the detailed reasoning given by the Ld.CIT(A), we find no infirmity in the same. Accordingly, the same is upheld and the ground raised by the Revenue is dismissed. 30. Ground of appeal No.2 by the Revenue reads as under : (2) On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of ₹ 56,16,040/-. The Ld. CIT(A) has totally ignored the fact that during the year there is no business activity. This fact is also accepted by assessee by not claiming loss from business. 30.1 Facts of the case, in brief, are that the AO during the course of assessment proceedings observed from the revised return of income that the assessee has claimed that there was no business during the relevant assessment year and the loss of ₹ 3,92,946/- from Jain and Sons Investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opies of assessment orders for A.Yrs. 2006-07 to 2008-09 he submitted that there is no such disallowance in the scrutiny assessments in the past. The AO in these assessments has restricted the interest expenditure to the extent of interest income. Therefore, there is no justification for deviating from the settled principle. He accordingly submitted that the order of the CIT(A) be upheld and the ground raised by the Revenue should be dismissed. 34. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. There is no dispute to the fact that both the borrowings as well as the investments were made in the past. According to the AO since the assessee has not given the details of utilisation of borrowed funds, therefore, he was of the opinion that such borrowed funds might have been utilised towards purchase of immovable properties, jewelleries etc., However, from the copies of the assessment orders for A.Yrs. 2006-07 to 2008-09, which are placed at paper book pages 4 to 21, we find no such disallowance has been made. The AO has only restricted the interest expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ides, we find the assessee is the owner of a bungalow which was let out to Jain Irrigation System Ltd., for an annual rent of ₹ 11,50,536/- net of TDS in terms of an agreement duly executed in 2002. The said terms were again revised by a lease deed dated 20-08-2002 under which the assessee was to receive yearly rent of ₹ 9,50,000/- and has credited interest free deposit of ₹ 1,14,60,000/-. The balance of unadjusted deposit as on 31-03-2009 was ₹ 51,43,912/-. The AO calculated interest @12% on the said sum of ₹ 51,43,912/- and made addition of ₹ 6,17,270/- u/s.2(24)(iv) of the I.T. Act to the total income of the assessee. 37. In appeal the Ld.CIT(A) enhanced such notional interest to ₹ 7,31,870/- by directing the AO to add notional interest @12% on the unadjusted opening balance of interest free deposit. 38. After hearing both the sides, we find the above ground is identical to the ground of appeal No.2 in ITA No.735/PN/2013. In that case notional interest was added on account of interest free advance given for let out of agricultural land. We have discussed the issue and have directed the AO to delete the addition. Following the same rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000 2 Computation of disallowance A) Interest amount paid 1,10,18,000 B) Average value of investment from which income is exempt 10,38,59,559 C) Average value of Total Assets 26,49,12,434 3 Disallowance = A*B C 60,17,336*10,38,59,559 43,19,633 26,49,12,434 4 0.5 % of the Average value of investment, income from which is exempt As on 31.03.2008 14,72,44527 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO to recompute the disallowance u/s.14A r.w. Rule 8D after giving due opportunity of being heard to the assessee as per law. This ground by the assessee is accordingly allowed for statistical purposes. 43. Ground of appeal No.4 being general in nature is dismissed. ITA No.779/PN/2013 (Shri Ashok Bhavarlal Jain) (By Revenue) : 44. Ground of appeal No.1 by the Revenue reads as under : (1) On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of ₹ 13,95,53,921/-, while in para-8 of his order, he himself held the transaction of gift of shares to a private limited company as a debatable issue. Thus, the Ld. CIT(A) has erred in not considering the provisions of section 28(iv) which does not speak that there should be two persons and it speaks only 'from business or profession'. 44.1 After hearing both the sides, we find the above ground is identical to ground of appeal No.1 by the Revenue in ITA No.780/PN/2013. We have already decided the issue and the ground raised by the Revenue has been dismissed. Following the same ratio this ground by the revenue is dismissed. 45. Ground of appeal No.2 by the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company funds have been utilized for the personal benefit of the assessee on one hand and on the other hand the company is also paying huge amount of interest for above capital. He, therefore, brought to tax an amount of ₹ 6,17,270/- u/s.2(24)(iv) of the I.T. Act being interest @12% on the outstanding balance of ₹ 51,43,912/- as on 31-03-2009. Relying on various decisions the Ld.CIT(A) deleted the addition by holding that notional interest on such income should be treated as income from house property . He however directed the AO to calculate such notional income @12% on the opening balance of ₹ 60,98,915/- which comes to ₹ 7,31,870/-. Thus he enhanced the income from house property to ₹ 13,17,685/- as against ₹ 8,05,375/- determined by the AO. The relevant observation of the CIT(A) at para 12 of the order reads as under : 12. I have gone through the details filed and submissions made, besides the reasons for addition as stated by the AO in his order. I find that the interest free deposit of ₹ 1,14,60,000/- to the appellant for hiring the premises was totally disproportionate to the market practice and the value of the property. Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in detail in paras 13 and 14 below. 46.2 Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 47. The Ld. Departmental Representative supported the order of the AO. 48. We have heard the rival arguments made by both the sides. We find in the assessee s appeal while deciding ground No.2 we have setaside the order of the CIT(A) and directed the AO to delete the addition of notional interest on interest free deposit given to the assessee on account of letting out of the bungalow. Therefore, this ground by the Revenue becomes infructuous. Accordingly, the same is dismissed. ITA No.738/PN/2013 (Shri Ajit Bhavarlal Jain) : 49. Ground of appeal No.1 by the assessee reads as under : 1. Addition of ₹ 62,406/- alleged perquisite 1.1 The learned CIT (A) erred in confirming the addition of ₹ 62,406 on account of alleged perquisite on account of services rendered by CA Shri. Whora B.A. On the facts and in the circumstances of the case the said addition be cancelled. 1.2 The learned CIT (A) failed to appreciate that Jain Irrigation Systems Ltd., (JISL) had paid professional charges of ₹ 2,79,000 to said Mr. B. A. Whora o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e investment in shares of the company (dividend from which being exempt) was made long ago and that too out of owned/non interest bearing funds. 3.5 The learned CIT (A) failed to appreciate that in the absence of any nexus between the borrowed funds and investment in shares of the company income on which was exempt, interest payment of ₹ 70,32,427 ought to have been ignored while calculating disallowance u/s. 14A r.w.r. 8D. 3.6 WITHOUT PREJUDICE, the disallowance u/s. 14A r.w.r. 8D should be restricted to ₹ 7,49,195. 51.1 Facts of the case, in brief, are that during the course of appeal proceedings the Ld.CIT(A) noted that the assessee has received dividend of ₹ 49,01,113/- from Jain Irrigation System Ltd. The assessee has also paid interest of ₹ 70,32,427/- on borrowed funds. He, therefore, asked the assessee to explain as to why the provisions of section 14A r.w. Rule 8D should not be invoked. He calculated such disallowance at ₹ 46,72,667/-. The assessee filed a revised computation according to which such disallowance comes to ₹ 43,72,666/-. The Ld.CIT(A) accordingly issued an enhancement notice and made addition of ₹ 43,72,666 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has earned interest income of ₹ 53,99,347/-. Since the interest paid was higher than the corresponding interest income the assessee restricted such deduction to ₹ 53,99,347/- only ignoring the excess of ₹ 16,33,080/-. He accordingly submitted that the disallowance u/s.14A r.w. Rule 8D should be restricted to the difference between the interest of ₹ 36,23,471/- calculated at para 48 and the interest foregone to the extent of ₹ 16,33,080/-. 53. The Ld. Departmental Representative on the other hand supported the order of the CIT(A). 54. After hearing both the sides, we find the above ground is identical to ground of appeal No.2 in the case of Shri Atul Bhavarlal Jain vide ITA No.736/PN/2013 wherein we have partly accepted such plea of the assessee and restored the issue to the file of the AO for recomputing the disallowance u/s.14A r.w. Rule 8D. Following the same ratio, we restore the issue to the file of the AO for recomputing the disallowance in the light of our direction therein. This ground by the assessee is accordingly allowed for statistical purposes. 55. Ground of appeal No.4 being general in nature is dismissed. ITA No.778/P ..... X X X X Extracts X X X X X X X X Extracts X X X X
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