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TMI Blog2022 (11) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... 03.2016 declaring loss of Rs.(-)16,69,10,860/- under normal provisions and Rs.46,23,044/- under 115JB of the I.T. Act, 1961. The case of the assessee company was selected for scrutiny and notice under section 143(2) dated 28.08.2015 was issued and served upon the assessee. Further, the A.O. also issued notices under section 142(1) of the I.T. Act, 1961 on 12.08.2016 and 21.09.2016 and in response to the said notices, the A.R. of the Assessee appeared before the A.O. from time to time and filed details/information/documents which are placed on record by the A.O. During the course of assessment proceedings the A.O. noted that the assessee had substantial amount of investment in the shares of companies and assessee company had earned dividend out of such investments. As per the return of income, the assessee had tax free exempt income of Rs.1,70,76,212/-. The A.O. called for the explanation of the assessee company as to why the provisions of Section 14A read with Rule 8D should not be made on such exempt income. In response to the same, the assessee submitted that as on 31.03.2014 the net worth of the assessee company was at Rs.130.11 crores consists of share capital, reserve and surp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al before the Tribunal, and has raised the following grounds : "1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eye of law and on facts. 2. (i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the disallowance of an amount of Rs.1,24,00,298/- made by the AO invoking the provisions of Section 14A read with Rule 8D. (ii) That the disallowance has been confirmed rejecting the contention of the assessee that AO has made the disallowance without recording satisfaction as specified under 14A(2) of the Act having regard to the correctness of the claim made by the assessee in respect of expenditure in relation to the exempt income. (iii) That the disallowance has been confirmed ignoring the fact that assessee having sufficient owned funds, investments having not been made out of borrowed funds, no disallowance of interest under Section 14A can be made. (iv) That the learned CIT(A) has erred both on facts and in law in not taking into consideration of the interest cost of Rs. 7,84,50,864/- already capitalized by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble on the loan availed in India in domestic currency. 9. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the above additions despite that the same have been made on the basis of material collected at the back of the assessee without giving assessee an opportunity to rebut the same in violation of provisions of the Act." 4. Though the assessee has raised various grounds of appeal, but, they are relates to only two issues viz., (1) addition of Rs.1,24,00,298/- made on account of disallowance under section 14A read with Rule 8D of the I.T. Act, 1961 vide grounds of appeal no.2(i) to 2(v) and the second issue relates to transfer pricing adjustment on account of non-payment of interest on loan to the AE amounting to Rs.1,34,91,351/- vide grounds of appeal no.3(i) to 9. 5. During the course of hearing, the Learned Counsel for the Assessee submitted that the disallowance of Rs.1,24,00,298/- made by the A.O. and partly confirmed by the Ld. CIT(A) by invoking the provisions of Section 14A of the I.T. Act, 1961 is not sustained in law as the authorities below failed to consider that the assessee company had not incurred exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee with respect to deletion of addition by the Tribunal in assessee's own case vide order dated 17.10.2020 (supra) in the preceding A.Y. 2013-14. 7. We have heard the rival submissions and perused the material available on record. We find that in the instant case the assessee company had substantial net worth of Rs.130.11 crores as against the investment made in shares at Rs.39.49 crores. Since the assessee company has sufficient own interest free funds and had not borrowed the funds to make investment in shares to earn the dividend income, the provisions of Section 14A is not applicable and consequently, the addition made by the authorities below cannot be sustained in the eye of law. Further, when the A.O. is not accepting the contention of the assessee company that no expenditure is incurred in relation to earning exempt income, then the burden lies on the Revenue to prove that assessee company had incurred the expenditure to earn the dividend income. In the instant case, the A.O. made the impugned addition of Rs.1,24,00,298/- on conjectures and surmises and applied the provisions of Section 14A read with Rule 8D of the I.T. Act, 1961. We find that on identical facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in assessee's own case in its order dated 17.01.2020 (supra), respectfully following the reasoning given by the Tribunal, we delete the addition of Rs.1,24,00,298/- made by the A.O. and partly sustained by the Ld. CIT(A) on account of disallowance made under section 14A read with Rule 8D of the I.T. Act, 1961. Accordingly, the grounds of appeal raised by the assessee on this issue are allowed. 8. With respect to second issue of ALP determined by the A.O. at Rs.1,34,91,351/-, the Learned Counsel for the Assessee submitted that the TPO re-charecterized the equity amount to AE as a loan transaction and treated the equity amount to AE as loan and determined the Arm's Length interest on loan @ 12.83% and computed the interest amount at Rs. Rs.1,34,91,351/- which was added by the A.O. to the returned loss of assessee company and in appeal, the addition made by the A.O. was confirmed by the Ld. CIT(A). He submitted that on identical facts, the Tribunal in assessee's own case in preceding A.Y. 2013-14 in ITA.No.1384/Del./2017 deleted the addition made by the lower authorities. He prayed that similar directions may be given in the present A.Y. 2014-15 also. 9. The Ld. D.R. on the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, we are of the considered view that addition made by the AO and confirmed by the ld. CIT(A) on account of arm's length price of value of interest receivable on loans outstanding of Rs.1,04,24,675/- in the name of Jaypee Singapore Pte Ltd. is not sustainable, hence ordered to be deleted. So, grounds no.10 to 13 are determined in favour of the assessee. 10.1. Since the facts and circumstances of the case are similar for the impugned assessment year also, respectfully following the decision of Coordinate Bench of the Tribunal in assessee's own case for the preceding A.Y. 2013-14 (supra), we delete the addition of Rs.1,34,91,351/- made by the A.O. on account of Arm's Length interest on loan @ 12.83% and sustained by the Ld. CIT(A). Accordingly, the grounds of the assessee company on this issue are allowed. 11. In the result, appeal of the assessee is allowed. ITA.No.6046/Del./2019 : A.Y. 2014-15 : 12. The grounds raised by the Revenue in it's appeal are as under : "1. On the facts and in the circumstances of the case, the Ld.CIT(A) was not legally justified in ignoring the fact that the details regarding the loan availed from different financiers and the consequent interes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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