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TMI Blog2017 (4) TMI 1189X X X X Extracts X X X X X X X X Extracts X X X X ..... holding disallowance of expenses to the extent of Rs. 2,25,540/- being total expenses claimed by the assessee for the year as per Profit & Loss Account without proving nexus of expenses incurred with investments and/or exempt income. The reasons given by him for doing so are wrong and contrary to the facts of the case and against the provisions of law. 2. Disallowance u/s 36(1)(iii) a) The Ld. CIT (A) erred in law and facts in upholding disallowance of entire net interest of Rs. 2,13,47,579/- u/s 36(1)(iii) being difference between interest paid and interest received for advancing loans, claimed as business loss by the assessee being NBFC engaged in finance business. The reasons given by him for doing so are wrong and contrary to the facts of the case and against the provisions of law. b) The Ld. AO erred in law and facts in considering bank & other financial charges of Rs. 389,941/- as interest for disallowance of interest u/s 36(1 )(iii) of the Act. The reasons given by him for doing so are wrong and contrary to the facts of the case and against the provisions of law. 3. The above grounds / sub-grounds are without prejudice to each other." 3. Ground 1: In this ground, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... group companies which cannot be considered for making disallowance u/s 14A, as per the latest position of law, (ii) The disallowance could not have been made more than the amount of dividend received by the assessee, (iii) The disallowance of interest can be made on the basis of net basis only and not on gross basis and (iv) No proper satisfaction was recorded by the AO before making the disallowance. 7. In view of the aforesaid submissions, it was requested by the Ld. Counsel that the issue should be sent back to the file of the AO for examining this issue afresh and making this disallowance strictly in accordance with law irrespective of the treatment given by the assessee in the return of income. 8. Per contra, the Ld. DR vehemently opposed the submissions of the assessee and placed reliance upon the judgment of Hon'ble Supreme Court reported in the case of State of Karnataka vs Selvi J. Jayalalitha & Others and K Anbazhagan 67 ITR 106 (SC) for the proposition that once assessee has himself made a disallowance, then he cannot seek relief for the same at a subsequent stage. It was submitted by him that CIT(A) has rightly confirmed the impugned disallowance and the orders pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This very issue was decided by Hon'ble Delhi High Court also in the case of Bharat General Insurance Co. 81 ITR 303 (Del). Thus, in our considered view, the assessee must be given an opportunity in the interest of justice and fair play to demonstrate and establish that disallowance made u/s 14A is not in accordance with law. 10. Ld. Counsel has raised various issues to show that disallowance made u/s 14A is contrary to law on account of many reasons which have been tabulated above, in our order. We also find that the law in regard to the disallowance u/s 14A has evolved quite recently and subsequent to passing of impugned assessment order. Ld. DR was unable to prima facie rebut the issues raised by the Ld. Counsel before us. Under these circumstances, we find it appropriate to send this issue back to the file of the AO where the assessee shall be free to raise all legal and factual issues with regard to the disallowance u/s 14A and shall file requisite evidences to establish its claim, as may be required by the AO from time to time. The AO shall decide this issue afresh after considering the material and the arguments as may be brought on record by the assessee on objective basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions carried out by the assessee. No examination was done by AO of any borrower or lender before rejecting the transactions of the assessee. It was the assessee, who was best judge of his business and the AO was nobody to dictate how the business was to be carried out by the assessee. He also placed reliance upon the judgment of Hon'ble Supreme Court in the case of SA Builders 288 ITR 1 (SC) for the proposition that once the amount borrowed is found to be utilized for the purposes of the business of the assessee, then no disallowance of interest can be made by the AO. 15. Per contra, Ld. DR vehemently supported the orders of the lower authorities and submitted that no prudent businessman would carry on the business in this manner. Reliance was placed on the judgment of Hon'ble Madras High Court in the case of Coimbatore Salem Transport (P) Ltd 61 ITR 480 (Mad) for the proposition that taxpayers are expected to carry out the business in a prudent manner. 16. We have gone through the orders passed by the lower authorities. It is noted by us that assessee had taken loans from well established and duly identified financial institutions. The factum of borrowing of amount and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by both the parties that facts and circumstances in this year are identical to ground 1 of appeal for AY 2009-10. Therefore, following our order, this issue is sent back to the file of the AO. The AO shall follow the directions given by us in ground 1 of assessee's appeal for AY 2009-10. This appeal may be treated as partly allowed for statistical purposes. 19. Now we shall take up appeal filed by the revenue in ITA No.5122/Mum/2014 for AY 2010-11. 20. The only issue agitated in this appeal is with regard to deletion of disallowance made by the AO on account of interest u/s 36(1)(iii) of the Act. It was jointly stated that the facts and circumstances of this ground are identical to ground 2 of appeal of the assessee for AY 2009-10. We have already deleted the said disallowance in our order for AY 2009-10. Therefore, we find that Ld. CIT(A) has rightly deleted the disallowance in this year. Therefore, no interference is called for in his order and the same is upheld. Thus, grounds raised by the revenue in this appeal are dismissed. 21. As a result, appeal filed by the revenue is hereby dismissed. 22. In the result, appeals filed by the assessee for AYrs. 2009-10 and 2010-11 are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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