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TMI Blog2016 (2) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... DER PER T.R. MEENA, A.M. This is an appeal filed by the assessee against the order dated 24/12/2013 of the learned CIT(A), Alwar for A.Y. 2010-11. The effective grounds of appeal are as under:- 1. That the learned Assessing Officer has erred in law as well as on facts and circumstances of the case in making the disallowance out of misc. exp of ₹ 463487.00 and ld CIT(A) has erred in sustaining of sum of ₹ 200000.00 out of the same. 2. That the learned Assessing Officer has erred in law as well as on facts and circumstances of the case in making the disallowance out of repair and maintenance of ₹ 296122.00 and ld CIT(A) has erred in sustaining the same. 3. That the learned Assessing Officer has erred in law as well as on facts and circumstances of the case in making the disallowance out of travelling expenses of ₹ 50000.00 and ld CIT(A) has erred in sustaining of sum of ₹ 20000.00 out of the same. 4. Disallowance of interest of ₹ 2384269.00.00:- 4.1 That the learned Assessing Officer has erred in law as well as on the facts and circumstances of the case in giving a finding that the assessee company has investe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer, the assessee carried the matter before the ld CIT(A), who had allowed the appeal partly by observing as under: 4.5 Considering the submissions made, it is found that the appellant has not been able to completely controvert the findings given by the AO. Further, it is noted that the appellant has placed reliance on the order passed by the Id. CIT(A) in the case of the appellant for the preceding year i.e. A.Y. 2009-10, vide order dated 25- 03-2013 in Appeal No. 344/2011-12. My Id. Predecessor had upheld a disallowance of ₹ 1 lac under this head out of the total disallowance made by the AO of ₹ 4,26,890 in the last year. Since, during the period under consideration the turnover has declined by 15.75% and the claim of expenses under this head on the contrary have increased from 0.08% to 0.10% in the period under consideration. Logically speaking, there is no force in the argument taken by the appellant that there is no correlation between the level of expenses incurred under the head Misc. and the turnover of the period under consideration. Thus, considering all these factors, I find that it would be just and fair to restrict the disallowance under this he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in preceding year, which was at ₹ 17,14,889/-. As mentioned in the preceding para, the assessee s turnover has declined. The Assessing Officer also gave reasonable opportunity of being heard on this issue. The assessee produced the bills/vouchers for verification to the Assessing Officer. On examination of these details and bills/vouchers, it was found by her that certain vouchers for which no supporting bills were available and also at times, the bills for expenses not printed but self made vouchers were made by the assessee. The Assessing Officer held that the assessee had booked excessive expenses on self made vouchers, therefore, she disallowed ₹ 2,96,122/- @ 10% of total expenses. 8. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had confirmed the addition by observing as under:- 6.3 I have perused the assessment order as well as submission made by the AR and find that AO had made the disallowance on the ground that the turnover during the period under consideration has declined by 15.75% as compared to the turnover in the preceding year, whereas, the expenses under this head have increased f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted out any expenses where the expenditure was excessively booked through self made vouchers was only ₹ 4,50,698/-. He has drawn our attention on page No. 17 to 22 of the paper book. There cannot be any correlation of these expenses with the turnover of the assessee. He further argued that there was a disallowance under this head in A.Y. 2007-08 and 2009-10 by the Assessing Officer at Rs. One lac each, which was confirmed by the ld CIT(A) at ₹ 47,952/- in A.Y. 2007-08 and ₹ 30,000/- in A.Y. 2009-10. Therefore, he prayed to delete the lump sum addition made by the Assessing Officer and confirmed by the ld CIT(A). 10. At the outset, the ld DR has vehemently supported the order of the ld CIT(A) and argued that the discrepancy has been pointed out by the Assessing Officer in the assessment order. The assessee claimed these expenses on self made vouchers, therefore, reasonable disallowance made by the Assessing Officer may please be confirmed. 11. We have heard the rival contentions of both the parties and perused the material available on the record. The assessee itself admitted that it had claimed expenses on self made vouchers claimed at ₹ 4,50,698/-, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee had declared dividend income of ₹ 54,760/-. The assessee was asked to give the calculation of disallowance U/s 14A read with Rules 8D of the rules by the Assessing Officer. The assessee filed reply vide letter dated 08/12/2011. After considering the assessee s reply, the Assessing Officer held that the assessee failed to furnish date wise availability of interest free fund and out of which date wise investment in shares of the companies including shares of the sister concerns thereby the assessee could not establish the nexus between the interest free fund and investment in shares. The assessee had deliberately declared the aggregate investment of ₹ 6.65 crores out of reserved and surplus of ₹ 59.88 lacs. The assessee always had interest bearing fund in the form of making capital loan from bank and unsecured loan for day to day functioning and did not have surplus fund for investment in shares. In the instant case, neither there was question of commercial expediency nor loan/advances to its sister concerns but question of proving the nexus between the interest surplus free funds and investment thereof in shares. She further held that calculation f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Hon ble High Court of Delhi has observed that prior to introduction of section 14A, the law was that if the assessee was having a composite and individual business which had elements of both taxable and non- taxable income, the entire expenditure was deductible. While introducing section 14A intention of the legislature was 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 Act. The basic object of section 14A is to disallow the direct and indirect expenditure incurred in relation to income which does not form part of the total income. 10.13 In the case of Maxopp Investment Ltd. 247 CTR (Del), it has been held by the Hon ble High Court that the investment in shares for gaining controlling interest is hit by the provisions of section 14 A. 10.14 In the case of Godrej Boyce Manufacturing Co. Ltd. Vs. CIT 328 ITR 81 (Bom) the Hon ble High Court of Bombay has observed that the following principles would emerge from section 14A and the decision in CIT v. Walfort Share and Stock Brokers P. Ltd. [2010] 326 ITR 1 (SC): (a) the mandate of section 14A is to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of share capital and reserve and surplus. The AR has drawn our attention on page No. 30 of the paper book and argued that the ld Assessing Officer had not established the nexus between interest bearing fund with interest free investment. He further argued that various Hon ble Courts had decided that if there are fund available both interest free and overdraft or loan taken then a presumption would arise that investment would be out of interest free fund generated or available with the company. If the interest free fund were sufficient to meet the investment, no addition can be made. He relied on the following case laws:- (i) CIT Vs Tailisha Engineering India Ltd. (2015) 370 ITR 338 (HC). (ii) CIT Vs. HDFC Bank Ltd. (2014) 366 ITR 0505 (Bom) (HC). (iii) CIT Vs. UTI Bank Ltd. (2013) 215 Taxman 8 (Guj)(HC) (Magz.) (iv) CIT Vs. Suzlon Energy Ltd. (2013) 354 ITR 630 (Guj)(HC). (vi) CIT Vs Reliance Utilities Power Ltd. 313 ITR 340 (Bom)(HC). (vii) Sahara India Financial Corporation Ltd. Vs. DCIT (2014) 105 DTR 1. He further argued that in assessee s sister concern M/s Deepak Vegpro Pvt. Ltd., the Hon ble ITAT has decided that in our considered view no disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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