2015 (3) TMI 1398 - AT - Income Tax

Rectification of mistake u/s 254 - A.R submitted that the said disallowance is not warranted since the own funds available with the assessee exceeds the borrowed funds - A.R submitted that the assessee is having the view that the availability of own funds and other non-interest bearing funds vis-a-vis the investment should be examined as on the date of Balance Sheet and not as on the date of making investment - HELD THAT - We find merit in the miscellaneous petitions of the assessee and accordingly we are of the view that the errors pointed out by the assessee require rectification.

Summary

Issues:

Rectification of common order dated 12.11.2014 for assessment years 2008-09 to 2010-11 regarding disallowance of investments made in tax-free securities due to the availability of own funds and non-interest bearing funds.

Analysis:

1. The applicant filed miscellaneous applications seeking rectification of a common order passed by the Tribunal for assessment years 2008-09 to 2010-11. The applicant's counsel argued that the Tribunal's observation regarding the availability of own funds exceeding borrowed funds was inaccurate. The counsel contended that own funds and non-interest bearing funds were more than the investment in tax-free securities. The Tribunal agreed with the applicant's submissions and decided to modify the expression used in the order accordingly.

2. The Tribunal expressed a view in paragraph 4 of the order that the availability of own funds should be verified as of the date of making investments. However, the applicant disagreed with this view and believed that the examination should be based on the date of the Balance Sheet. The Tribunal suggested restoring the issue to the Assessing Officer for fresh examination, considering the applicant's contentions and relevant case law. The Tribunal directed the Assessing Officer to reevaluate the issue by addressing the applicant's arguments and taking a decision in accordance with the law.

3. The Tribunal emphasized that the availability of own funds and interest-free funds for investments should be assessed as of the date of making investments, not the date of the Balance Sheet. An illustrative example was provided to explain this principle, highlighting that comparing own funds and interest-free funds with investments at the date of investment is crucial to avoid misleading results. The Tribunal directed the Assessing Officer to reconsider the applicant's contentions in light of this clarification.

4. Ultimately, the Tribunal allowed all the miscellaneous applications filed by the assessee, indicating that the errors pointed out by the assessee required rectification. The order was pronounced in open court on 31st March 2015, granting the applicant's requests for modifications to the original order.