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TMI Blog2021 (8) TMI 873X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance u/s.14A - HELD THAT:- As assessee brought our notice that the assessee has not received any exempt income. This fact has been confirmed by the Ld. CIT(A). The Ld. CIT(A) after taking note of this fact that the assessee has not received any exempt income during the year under consideration has given relief by relying on the decision of this Tribunal in assessee s own case for AY 2011-12 [ 2018 (4) TMI 440 - ITAT KOLKATA] . We do not find any infirmity in the order of the Ld. CIT(A) on this issue and for that we rely on the ratio of the decision of the Hon ble Delhi High Court in the case of Cheminvest Ltd [ 2015 (9) TMI 238 - DELHI HIGH COURT] and CIT Vs. Hero Cycles [ 2009 (11) TMI 33 - PUNJAB AND HARYANA HIGH COURT] Disallowance of interest on borrowed fund as advanced to the subsidiary company free of cost - HELD THAT:- From the facts discussed, the assessee company which is the holding company had advanced loan interest free due to business exigency to tide over the deficit (due to low tariff rate of electricity), so even if interest free advances are given to subsidiary/sister concern, interest expenditure could not have been disallowed and for such a propositio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant : Shri Supriyo Pal, Addl. CIT For the Respondent : Shri Manish Tiwari, FCA ORDER PER SHRI A. T. VARKEY, JM: This is an appeal preferred by the revenue against the order of the Ld. CIT(A)-1, Kolkata dated 30.10.2019 for AY 2013-14. 2. The first ground of appeal of the revenue is against the action of the Ld. CIT(A) allowing the employees Provident Fund (PF) and ESI to the tune of ₹ 1,15,09,316/- and ₹ 22,35,069/- respectively. 3. Brief facts of the case as noted by the AO are that the assessee company is engaged in the business of manufacturing and trading of jute goods and Kraft paper. On examination of accounts, the AO observed that there has been a delay in depositing employees contribution to PF and ESI. And since there was a delay in depositing the employees contribution to PF ESI accounts as per the respective Acts/enactments [i.e. PF Act ESI Act], the AO disallowed the same and added back ₹ 1,37,44,385/-. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who was pleased to delete the same. Aggrieved the Revenue is in appeal before us. 4. We have heard rival submissions and gone through the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is no dispute that the payments were affected by the assessee before the due date of filing the return. Ground No. 3, therefore, stands dismissed. And that decision (supra) was followed in ITA No. 2080/Kol/2016 for AY 2011- 12 dated 28.03.2018. We also note that recently the Hyderabad Bench of this Tribunal in AY 2015-16 by its order dated 01.07.2021 in ITA No. 1592/Hyd/2018, AY 2015-16 wherein a similar issue came up before the Tribunal took note of the recent amendment by Finance Act, 2021 in section 36(1)(va) of the Act as well as in section 43B of the Act and held that amendment is prospective in nature and will be effective from 01.04.2021 and held as under: 2. Coming to the sole substantive issue of ESI/PF disallowance of ₹ 3,27,332/-, the assessee s and Revenue s plea that the same has been paid before the due date of filing sec. 139(1) return and after the due date prescribed in the corresponding statutes; respectively. We notice in this factual backdrop that the legislature has not only incorporated necessary amendment in Sections 36(1)(va) as well as 43B vide Finance Act, 2021 to this effect but also the CBDT has issued Memorandum of Explanation that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the close of the year was ₹ 7,19,54,550/- and ₹ 8,90,70,726/- respectively. It also revealed that no interest has been charged on aforesaid advances. The assessee company borrowed huge fund on interest by way of Secured and Unsecured loan on which Interest amounting to ₹ 1,65,09,890/- was claimed as deduction out of income earned. The assessee company relied on decision of S.A. Builders Ltd v CIT (A) and another (2007) 288 ITR 1 ( SC) for not charging interest on sum advanced to Subsidiary. But the aforesaid argument and decision cited by the assessee company A/R is not acceptable. The Hon ble Apex Court in the case of Addl. Commissioner of Income Tax vs M/s. Tulip Star Hotels Limited has observed that the decision given by the Apex Court in the case of S.A. Builders Limited needs reconsideration. Therefore, the ratio of the judgment of the Apex Court in the case of S.A. Builders is not binding. The assessee borrowed fund by way of Unsecured loan from related parties and paying interest. From the said fact it is clear that assessee company is taking interest bearing loan from related parties and interest free advance given to subsidiary. The assessee com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... association of M/s. Kamarhatty Co Ltd, the Parent Company as its object clause. Hence, the investment of appellant in subsidiary company should not be viewed in line with other interest free advances and that the same should be treated for the purpose of business for the reason that the profit of subsidiary eventually forms part of the holding Company. Advances made to its subsidiary is thus only for business consideration and that the Company had sufficient non-interest bearing funds, at the time of making advances to its subsidiaries. 6.9 The appellant has got relief on the same issue for earlier years as under from Hon ble ITAT Kolkata a) ITAT order dated 05.02.2014 No. 947/Ko/12 in case of Kamarhatty Co. Ltd. vs DCIT , for the A.Y - 2008-09 , Para 10 of the Order b) ITAT order dt 28.03.2018 No.2080/Kol/2016 in case of Kamarhatty Co. Ltd. v DCIT for the AY - 2011-2012 .Para 5 of the Order 6.10. After careful consideration of the submission of the appellant, perusal of assessment records and decision of various judicial authorities including the decision of Hon ble SC in case of S A Builders, the investment made is out of own funds and in the interest of its own busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .- CIT [288 ITR 1] submitted that the amounts were given to the subsidiary based on commercial expediency. As per the assessee, sources of funds were explained. Reliance was also placed on the decision of the Hon ble Apex Court in the case of Madhab Prasad Jatia -vs.- CIT [118 ITR 200]. 14. Ld. CIT(Appeals) was appreciative of these contentions. According to him, assessee had sufficient interest-free fund available with it and Assessing Officer could not establish the nexus between borrowed fund and the amount given as advance to the subsidiary. He, therefore, deleted the addition made. 15. Now before us, ld. DR strongly assailing the order of ld. CIT(Appeals) submitted that the money was given out of assessee s cash credit account with Allahabad Bank. Each time the cheque was cleared, the dues to the Bank increased. Therefore, according to him, one to one nexus was established. Assessing Officer was, therefore, justified in considering the advance of money as going out of interest bearing funds and making the disallowance 16. Per contra, ld. AR supported the order of ld. CIT(Appeals). 17. We have heard the rival submissions. Whenever a cheque issued by a party is clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts of this case. Therefore, we are of the opinion that the disallowance of interest on loan to subsidiary u/s. 36(1)(iii) of the Act by the AO has been rightly held to be unjustified. Further we note that the issue is squarely covered in favour of the assessee by order of the Coordinate bench of this Tribunal in assessee s own case (supra) and there is no change in facts and law and the Ld. DR was unable to controvert the same by producing any cogent material, therefore, we find no reason to interfere in the impugned order of the Ld. CIT(A) and the same is hereby upheld. Therefore, we uphold the action of the Ld. CIT(A) and dismiss this ground of appeal of the revenue. 14. Ground no.4 is against the action of the Ld. CIT(A) in allowing the claim of the assessee in respect of the subsidy received from National Jute Board amounting to ₹ 60,16,264/-. 15. Brief facts of the case are that the assessee had received ₹ 60,16,264/- from National Jute Board as subsidy. The AO added the said amount to the total income of the assessee on the ground that it is a revenue receipt. The AO did not accept the assessee s explanation that the subsidy received from the National ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation has not been claimed on the said plant and machinery. Further, we note that the Ld. CIT(A) has given a finding that the object of the subsidy scheme of National Jute Board was for expansion of business capacities, modernization and improving the market capabilities which is evident from the page no. 47 to 50 of the paper book which are the copy of the ledger account and capital subsidy and the copies of the letter of the National Jute Board wherein it is spelled out that subsidy has been given to the assessee for acquisition of plant and machinery (capital subsidy ) as per scheme no. 6.4 i.e. under Jute Technology Mission; Mini Mission-IV (scheme No. 6.4) Phase-II. The Ld. CIT(A) has clearly given a finding that subsidy was on capital account and this finding of the Ld. CIT(A) has not been assailed by the department by raising specific ground of appeal. Therefore, this finding of the Ld. CIT(A) crystallizes and become final. Therefore, we endorse the finding of the Ld. CIT(A) that the assistance given by the National Jute Board as per this scheme No. 6.4 Mini Mission-IV, Phase II, was on capital account and the same is confirmed. And in the light of the aforesaid find ..... X X X X Extracts X X X X X X X X Extracts X X X X
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