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TMI Blog2017 (12) TMI 985X X X X Extracts X X X X X X X X Extracts X X X X ..... ). This plea cannot be accepted because Assessing Officer was only required to give effect to the finding and direction of Tribunal and, therefore could pass order at any time. Under such circumstances, the assessment order passed by the Assessing Officer cannot be held to be barred by limitation and, accordingly, is to be upheld in the eyes of law. Addition u/s 14A - Held that:- We find that Assessing Officer has, inter alia, observed in paras 7.1 and 7.2 that in terms of the decisions of Hon’ble Bombay High court in the case of Godrej & Boyce Manufacturing Ltd. v. Dy. CIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] even in the remand proceedings the assessee failed to furnish any corroborative evidence to show how investments were made by it and through which funds. Therefore, in the absence of discharge of onus the expenditure had to be disallowed. From the above it is evident that proportionate disallowance is to be made for earning exempt income. We, accordingly confirm the findings of Assessing Officer. - ITA 212/DEL/2016 And ITA214/DEL/2016 - - - Dated:- 3-7-2017 - MR. S.V. MEHROTRA, VICE-PRESIDENT AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER For The Appellant : K.V.S. G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er considering the assessment order and the submissions made before him, it is mentioned by the learned CIT (A) that the undisputed fact is that the assessee earned interest income of ₹ 20 lacs which is not to be included in the total income by dint of the provisions contained in section 10. The Assessing Officer referred to the provisions contained in section 14A, which was inserted in the Act by the Finance Act, 2001, with retrospective effect from 01.04.1962. By relying on this provision, he made a disallowance of ₹ 7,52,494/- from the interest expenditure incurred by the assessee. The assessee furnished the details of the capital and current account deposits but failed to furnish a separate account of expenditure for exempt and non-exempt income. No other evidence was filed to prove that investment in HUDCO Bonds was made out of non-interest bearing funds. He was of the view that the onus that no expenditure was incurred in earning tax free income was on the assessee u/s. 14A of the Act. In absence of discharge of the onus, the disallowance made by the Assessing Officer was upheld. 6. The Tribunal after taking note of the fact that there were various Hon ble Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent order passed u/s. 143(3)/144C of the Income-tax Act 1961 by the learned Assessing Officer is erroneous and bad in law as well as in facts. (2) That this is not an eligible assessee as the conjoined conditions laid down in Section 144C(15)(b) are not fulfilled, since in this case the Transfer Price Officer has not issued any Order under Section 92CA(3) of the Act. Hence, provisions of this section are not applicable to the assessee. Therefore, the order dated 27.11.2015 passed u/s. 143(3)/144C(1) of the Income-tax Act 1961 is required to be quashed. (3) That the assessee-company is not an eligible assessee as per section 144C(15)(b) as it does not satisfy both conditions mentioned in section 144C(l)(15)(b)(i) and (ii) and hence 144C is not applicable and consequently the assessment should have been completed latest by 31.03.2012 and is barred by limitation as per law. (4) That Assessment Year 1999-2000 during which investment amounted to ₹ 2.00 crores in HUDCO Bonds was made is more than six year old and the same has been barred by time and it could not be enquired or verified for purpose of disallowance u/s. 14A. (5) That at the time of issuing draft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nexus between interest paid on short-term borrowings with tax exempted income. Hence the disallowance of proportionate amount of interest expenditure made u/s. 14A is uncalled for. Such disallowance is required to be deleted. (12) That all above grounds are independent and without prejudice to each other. (13) The assessee craves leave to add, amend, alter, delete, rescind, forego or withdraw any of the above grounds of objection either before or during the course of the proceedings in the interest of natural justice. 10. Ld. counsel for the assessee, in the course of proceedings, filed the copy of draft assessment order dated 11.02.2015. He referred to section 144C which deals with Reference to Dispute Resolution Panel (DRP) and pointed out that sub-section (1) of the same read as under :- Reference to Dispute Resolution Panel. 144C. (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act shows that the Assessing Officer, in the first instance, is to forward a draft of the proposed order of assessment to the eligible assessee , if he proposes to make any variation in the income or loss return which is prejudicial to the interest of such assessee. The draft assessment order is to be forwarded to an eligible assessee which means that for the section to apply a person has to be an eligible assessee . 9. Section 144C (15)(b) of the Act defines an eligible assessee to mean (i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under section 92CA(3); and (ii) any foreign company. 10. The Supreme Court in P. Kasilingam v. P.S.G. College of Technology : 1995 Suppl 2 SCC 348 has held that the use of word means indicates that the definition is a hard and fast definition and no other meaning can be assigned to the expression than is put down in the definition. 11. In Section 144C (15)(b) of the Act, the term eligible assessee is followed by an expression means only and there are two categories referred therein (i) any person in whose ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 153(2A). This plea cannot be accepted because Assessing Officer was only required to give effect to the finding and direction of Tribunal and, therefore could pass order at any time. In this regard we are fortified by the decision of Hon ble Delhi High Court in the case of Basu Distributors (P.) Ltd. v. ITO [2007] 229 ITR 29 wherein it has been, inter alia, held as under:- A writ petition under articles 226 and 227 of the Constitution is always maintainable if the High Courts find that any authority is acting contrary to the powers bestowed upon it. Therefore, writ petitions cannot be dismissed per se. The Tribunal set aside the assessments for the assessment years 1992-93, 1993-94 and 1994-95 holding that the assessee s case had not been properly examined by the Assessing Officer and the Commissioner (Appeals) and directed the Assessing Officer to pass a fresh order as per law. The assessee apprised the Assessing Officer of the orders of the Tribunal in August, 2002. At the relevant time, the fresh assessment had to be made before the expiry of two years from the end of the financial year in which such order was received by the Chief Commissioner or the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... current account deposit and loans but had again failed to furnish separate account of expenditure for exempted or non-exempted income or any other evidence to prove if the above referred investments in interest fee HUDCO Bond was made out of non-interest bearing fund. The assessee, in the present remand proceedings has submitted that the source of the investments is own funds i.e. Capital Reserve and loans taken were for short-term. The contention of the assessee cannot be accepted since the funds once pulled into the system are a pool of funds. The funds once brought into the business lose their identity or source of generation and it is merely imaginary to contend that the investments made were out of capital/free reserves. Furthermore, even if it is for a moment assumed that the funds are out of capital/free reserves, by utilizing the said capital/free reserves the assessee has restricted its funds and hence, borrowing of funds becomes inevitable for which company has to incur interest cost. 18. From the above it is evident that proportionate disallowance is to be made for earning exempt income. We, accordingly confirm the findings of Assessing Officer. 19. In the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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