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TMI Blog2021 (11) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... IA." "ITA No.1123/Del/2018 (AY 2014-15) 1. The ld. CIT (A) has erred on the facts and circumstances of the case by deleting the addition made by the AO on account of disallowance of claim of deduction u/s 80IA. 2. The ld. CIT (A) has erred in not appreciation of the fact that AO made the disallowance in accordance with sec. 14A r.w.r. 8D of the IT Act only. 3. The Ld. CIT (A) has erred on the facts and circumstances of the case by deleting addition u/s 37 made by the AO on account of addition u/s 37 of the I.T. Act. 4. The Ld. CIT (A) has erred on the facts and circumstances of the case by deleting the addition made by the AO on account of disallowance of interest earned on FDR." 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : Assessee company during the year under consideration was engaged in the business of operating and maintaining Dry Port (Inland Container Depot). Assessee claimed deduction under section 80IA of the Income-tax Act, 1961 (for short 'the Act') to the tune of Rs. 10,79,48,177/- & Rs. 9,64,63,739/- for Assessment Years 2013-14 & 2014-15 respectively. Declining the contentions raised by the assessee for the claim o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by Hon'ble Delhi High Court in case of Container Corporation of India Ltd. vs. ACIT 346 ITR 140 (Del.) and thereby filed Special Leave Petition before Hon'ble Supreme Court. 9. Ld. CIT (A) deleted the impugned disallowance on account of deduction u/s 80IA by following the decision rendered by Hon'ble Delhi High Court in case of Container Corporation of India Ltd. (supra). 10. Hon'ble Delhi High Court decided the identical issue in case of Container Corporation of India Ltd. (supra) by returning following findings :- ".....In our opinion having regard to the provisions of the Customs Act, the communications issued by the CBEC as well as the Ministry of Commerce and Industry, the object of including "inland port" as an infrastructure facility and also having regard to the fact that customs clearance also takes place in the ICD, the assessee's claim that the ICDs are Inland Ports under Explanation (d) of section 80-IA (4) requires to be upheld......." 11. In view of what has been discussed above, we are of the considered view that ld. CIT (A) deleted the impugned addition made by the AO by way of disallowance made u/s 80IA by thrashing the facts at hand in the light of the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.299/2014 and Hon'ble Supreme Court in case of Godrej & Boyce Manufacturing Company Ltd. vs. DCIT - 394 ITR 449 (SC) have categorically held that, "when the assessee has not earned any dividend income forming part of the total income during the year under consideration, section 14A read with Rule 8D is not attracted." Consequently, we find no scope to interfere into the deletion of disallowance made by the ld. CIT (A) u/s 14A read with Rule 8D. So, ground no.2 of Assessment Year 2014-15 is determined against the Revenue. GROUND NO.3 OF AY 2014-15 16. Ld. CIT (A) deleted the addition of Rs. 3,49,97,305/- made by the AO u/s 37 of the Act by way of proportionate disallowance of interest qua the amount of Rs. 35,42,64,402/- made by the assessee to its subsidiary and sister concern on the ground that the same was not for business purpose by returning following findings:- "5.3.2 The appellant, however, claims that Assessee has not lent any interest free funds to related companies out of the interest bearing funds. During the previous year relevant to AY 2014-15, loans amounting to Rs. 61,65,581/- only has been freshly lent to related concerns out of total Rs. 35,42,69,402/. The net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advance given by the appellant to its subsidiaries of Rs,35.42 crores which includes current year fresh advance of Rs. 61.65 lakhs be taken and construed to be out of own surplus fund at Rs. 133.06 crore comprising of Rs. 119.3 crore on account of reserve and surplus and Rs. 13.7 crore on account of share capital. In view of facts and judicial pronouncement noted above, this ground of appeal relating to disallowance of interest of Rs. 3,49,97,30S/- is allowed in favour of appellant." 17. Bare perusal of the impugned order passed by the ld. CIT(A) goes to prove that ld. CIT (A) has deleted the addition by thrashing facts in the light of the submissions made by the assessee on the ground that when the AO has failed to establish a reasonable nexus between the borrowing fund and interest free advances, addition is not sustainable and relied upon the decision rendered by Hon'ble Madhya Pradesh High Court in R.D. Joshi & Co. vs. CIT 251 ITR 332 (MP) and order passed by the coordinate Bench of the Tribunal in ACIT vs. Chandra Prakash 27 tax world 328 (Jaipur Bench). 18. At the same time, ld. CIT (A) brought on record the fact that the assessee was having surplus fund of Rs. 133.06 crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation) requires to be treated as business income (as claimed by the appellant) or income from other sources (as treated by the Ld. AO in the impugned order). 5.4,5 It is ascertained from the document submitted by the appellant like agreement with the CWC, bank guarantee document by the banks to the CWC, term and condition mentioned in the sanctioned letter for bank guarantee etc, and fact of the case discussed above that as a precondition to secure the contract/agreement with the CWC, the appellant was under obligation to submit bank guarantee to the CWC and for this reason, the appellant had to keep FOR as margin money with the bank to obtain the said bank guarantee, Importantly, the act of keeping FOR with the bank is apparently a compulsion on the part of the appellant which indicates a direct nexus between the interest income on account of this FOR and the business activity, Thus, this interest income attains the character of business income as held in the case of CIT vs Jaypee OSC ventures Ltd. (2012) 17 taxmann.com 257 (Delhi) wherein the Hon'ble Delhi High Court has interalia observed that: "***** it was apparent from records that bank guarantee was furnished as a co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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