Income Tax Appellate Tribunal - Ahmedabad
M/S. Madhu Silica Pvt. Ltd.,, Bhavnagar vs The Dcit., Circle-1,, Bhavnagar on 18 August, 2023
Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat
ITA no. 856/Ahd/2018
THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "C" BENCH, AHMEDABAD
Before: Shri Ramit Kochar, Accountant Member
And Ms. Madhumita Roy, Judicial Member
ITA No. 856/Ahd/2018
Assessment Year : 2014-15
M/s Madhu Silica The DCIT, Circle-1,
Private Limited, Plot Aaykar Bhawan,
No. 147, GIDC, Vartej, v. Bhavnagar, Gujarat
Bhavnagar-364060, (Respondent)
Gujarat
PAN: AABCM4381J
(Appellant)
Assessee by: Shri Bandish S. Soparkar, Advocate and
CA Shri Parin S Shah,AR
Revenue by: Shri Kamlesh Makwana, CIT-D.R.
Date of hearing : 10-08-2023
Date of pronouncement : 18-08-2023
आदे श/ORDER
PER : RAMIT KOCHAR, ACCOUNTANT MEMBER:-
This appeal bearing ITA No. 856/Ahd/2018 for assessment year (ay) :
2014-15 filed by the assessee company arises from the appellate order dated 09th February, 2018 passed by ld. Commissioner of Income-tax (Appeals)-6, Ahmedabad(hereinafter called " the CIT(A)") in Appeal No. CIT(A)-6/ 286/ Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 16-17, the appellate proceedings had arisen before ld. CIT(A) from assessment order dated 20.10.2016 passed by ld. Assessing Officer for assessment year 2014-15 u/s. 143(3) of the Income-tax Act, 1961 (hereinafter called "the 1961 Act").
2. The grounds of appeal raised by assessee company in memo of appeal filed with Income-Tax Appellate Tribunal, Ahmedabad (hereinafter called "the Tribunal") in ITA No. 856/Ahd/2018 for assessment year: 2014- 15, reads as under:-
"1. Ld. CIT(A) erred in law and on facts confirming action of AO disallowing deduction of Rs. 16,08,70,789/- claimed u/s 32AC of the Act.
2.Ld. CIT(A) erred in law and on facts in confirming disallowance although the appellant fulfilled all the conditions laid down u/s 32AC of the Act.
3. Ld. CIT(A) erred in law and on facts confirming action of AO to reduce cost of Pollution Control Equipment worth Rs. 10,80,64,368/- on which 100% depreciation is allowable from new additions to fixed assets.
4. Ld. CIT(A) erred in law and on facts in not appreciating that provision of Sec. 32AB refers to 'depreciation allowed' and not ' depreciation allowable' to disqualify purchase of Pollution Control Equipment on which only 50% depreciation was claimed and allowed since put to use after 30.09.2013.
5. Ld. CIT(A) erred in law and on facts confirming reduction by AO of cost of Pollution Control Equipment while considering cost of fixed assets of Rs. 100 crores for benefit u/s 32AB of the Act.2
Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018
6. Ld. CIT(A) erred in law and on facts confirming disallowance by AO of Rs. 32,11,000/- invoking provisions of Sec 14A r w Rule 8D of the Act.
7. Ld. CIT(A) erred in law and on facts confirming disallowance of interest expense in absence of fresh investment made during the year & ignoring cash flow statement demonstrating sufficient interest free funds available for investment made in earlier years.
8. Levy of interest u/s 234A, 234B, 234C & 234D is not justified.
9. Initiation of penalty u/s 271(1)(c) of the Act is not justified.
The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal."
3. The brief facts of the case are that the assessee company e-filed its return of income declaring total income of Rs. 36,02,12,530/- , on 25.09.2014. The case of the assessee company was selected by Revenue for framing scrutiny assessment, and statutory notices u/s 143(2) and 142(1) of the 1961 Act were issued and served by the AO on to the assessee company. The assessee company participated in assessment proceedings conducted by AO u/s 143(3) read with Section 143(2) of the 1961 Act. There are ,broadly, two issues raised by the assesse in its appeal filed with the Tribunal. We shall deal with these two issues one by one. Firstly, during the course of assessment proceedings, the AO observed that the assessee company has claimed deduction u/s 32AC of Rs. 16,08,70,789/- w.r.t. investments made in new plant and machinery. The AO referred to Section 32AC, and observed that the as per provisions of Section 32AC, the tax-payer being a manufacturing company is entitled to an investment allowance @15% of 3 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 actual cost of new plant and machinery acquired and installed during the financial year 2013-14, if the actual cost of new plant and machinery exceeds Rs. 100 Crore. The AO observed that "new asset" means new plant or machinery (other than ship or aircraft), but does not include any plant or machinery the whole of the actual cost of which is allowed as deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head "Profits and gains of business or profession" of any previous year. Their are other conditions also before any deduction is allowed u/s 32AC of the 1961 Act, but presently we are not concerned with the same.The AO observed from the fixed assets addition chart of the assessee company, that the assessee has made total additions of Rs. 151,64,97,046/- under the head of fixed assets. The AO observed that , out of that, an combined additions of Rs. 44,37,47,481/- was made in the Block of Factory Building, Vehicles, Office Equipment's, Computers and Furniture & Fixtures, on which the assessee company is not eligible to claim benefit u/s 32AC of the 1961 Act . The AO further observed that the assessee company has also made additions of Rs. 10,80,64,368/- under the Block of Pollution Control Equipment's on which 100% depreciation is allowed. The AO observed that the assessee company is also not eligible to claim deduction u/s 32AC on the Pollution Control Equipment's, on which 100% depreciation is allowed. The AO observed that the remaining block of new plant and machinery added during the year (after excluding the aforesaid assets which as per AO were ineligible for grant of deduction u/s 32AC) were Rs. 96,46,85,197/- on which the assessee company is eligible to claim deduction u/s 32AC, but since the aggregate value is less than Rs. 100 crores, therefore, the assessee failed to meet the conditions of 4 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 acquisition and installation of new assets, actual cost of which exceeds Rs. 100 crores. The AO concluded that therefore, as per provisions of Section 32AC , the assessee company is not eligible to claim the benefits u/s 32AC of the 1961 Act. The assessee company was asked by AO to explain the same. The assessee's main bone of contention was that the pollution control equipment was acquired and installed after 30th September, 2013, and hence although the aforesaid asset was eligible for depreciation @100%, but since the asset was put to use for less than 180 days, 50% depreciation was claimed in the year under consideration, by relying on the second proviso to Section 32(1). Thus, it was submitted by assessee company before the AO during assessment proceedings that the actual deduction claimed and allowed towards depreciation during the year under consideration on Pollution Control Equipment was 50% and not 100%. The assessee also referred to provisions of Section 43(6) and submitted that actual depreciation allowed has to be taken into account and reduced from actual cost of asset while computing written down value of the assets, and not the notional depreciation or depreciation allowable. The assessee company relied upon judgment and order of Hon'ble Supreme Court in the case of Madeva Upendra Sinai v. UOI & Ors. (1975) 98 ITR 209(SC); judgment and order of Hon'ble Delhi High Court in the case of CIT v. Chiranji Lal (1969) 74 ITR 480(Del. HC) ; and judgment and order of Hon'ble Supreme Court in the case of Straw Products Limited v. ITO (1968) 98 ITR 227(SC). The AO rejected the contentions of the assessee company , because in the opinion of the AO , Block of Pollution Control Equipment's is eligible for depreciation @100%. Therefore as per AO, keeping in view clause (v) of sub-section (4) of Section 32AC of the 1961 Act, the said block of Pollution Control 5 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 Equipment's carrying depreciation @100% shall not be included while considering the aggregate amount of actual cost of such new assets acquired and installed by the assessee company, while computing deduction u/s. 32AC. The AO concluded that by excluding investments made by the assessee company in Factory Building, Vehicles, Office Equipment's, Computers , Furniture and Fixture as well Pollution Control Equipment's , the assessee has made investment in new assets being Plant and Machinery to the tune of Rs. 96,46,85,197/- which is eligible for deduction u/s 32AC, but since the assessee company has failed to meet the condition of acquisition and installation of new assets, actual cost of which exceeds Rs. 100 crores, the assessee company was not granted deduction u/s 32AC by the AO for the impugned assessment year.
3b.The another contention of the assessee company that it has made the addition of Rs. 10,80,64,368/- under the Block of Pollution Control Equipment's on which 100% depreciation is allowed, but since the addition to the aforesaid Pollution Control Equipment was made after 30th September, 2013, the assessee has availed 50% depreciation i.e. Rs. 5,40,32,184/- keeping in view second proviso to Section 32(1), and hence remaining block of Rs. 5,40,32,184/- was available on which the assessee was eligible to claim the benefits u/s 32AC, because the aggregate amount of actual cost of the new assets acquired and installed was Rs. 1,01,87,17,381/- i.e. new plant and machinery of Rs. 96,46,85,197/- which was eligible for deduction u/s 32AC + remaining block of Pollution Control Equipment's after claiming 50% depreciation in the current year i.e. Rs. 5,40,32,184/- , which as claimed by the assessee that aggregate is more than Rs. 100 crores and hence 6 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 the assessee is eligible for deduction u/s 32AC . The AO rejected this contention of the assessee also by holding that clause (v) of sub-section (4) of Section 32AC was wrongly interpreted by the assessee company, and the AO observed that after reading the aforesaid relevant provision, the definition of "new assets" eligible to claim benefit u/s 32AC , does not include , any plant or machinery, the whole of the actual cost of which is allowed as deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head "Profits and Gains of business or profession" of any previous year. Thus, the AO observed that the Block of the Pollution Control Equipment's on which 100% depreciation is allowed will not be included in the definition of "new assets" applicable to get the benefits u/s 32AC. The AO further observed that Section 32AC was inserted by Finance Act, 2013 to provide a tax incentive by way of investment allowance to encourage huge investment in Plant or Machinery. The manufacturing company is entitled to benefit u/s 32AC investment allowance @15% of actual cost of new plant and machinery acquired and installed during the financial year 2013-14 and 2014-15, if the actual cost of plant and machinery exceeds Rs. 100 crores. It was observed by the AO that on the investment in Pollution Control Equipment's, any assessee will be eligible to avail 100% depreciation i.e. maximum amount i.e. the actual cost of investment made by the assessee would be allowed as deduction, and if the assessee is allowed deductions u/s. 32AC, then it will be a case of double deduction claimed beyond the prescribed limits of the statute, which could not be the intention of the legislature. The assessee company in the instant case will be claiming 50% depreciation on pollution control equipment's due to acquisition and installation after 30th September, 2013, and the remaining 7 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 50% depreciation will be claimed by the assessee company in the immediately succeeding financial year. Thus, if the assessee company is also allowed deduction u/s 32AC by including Block of Pollution Control Equipment's in the "new assets" , then the assessee will get additional deduction on the Block of the Pollution Control Equipment's , which will be over and above regular 100% depreciation, which certainly could not be the intention of the statute . Thus, AO rejected the entire claim of deduction of Rs. 16,08,70,789/- claimed by the assessee company u/s 32AC of the 1961 Act which stood added by the AO to the income of the assessee company , vide assessment order dated 20.10.2016 passed by AO u/s 143(3) of the 1961 Act. The AO also initiated penalty proceedings u/s 271(1)(c) of the 1961 Act against the assessee company for furnishing of inaccurate particulars of the income.
4. Aggrieved by rejection of its claim for deduction u/s 32AC by the AO, the assessee company filed first appeal with ld. CIT(A) and reiterated its submissions as were made before the AO on this issue of denial of deduction u/s 32AC, which contentions of the assessee company stood dismissed by ld. CIT(A), vide appellate order dated 09.02.2018 passed by ld. CIT(A).
5. Still aggrieved by the appellate order passed by ld. CIT(A) denying deduction u/s 32AC of the 1961 Act to assessee company for the impugned assessment year, the assessee has filed second appeal with Tribunal. The ld. Counsel for the assessee, Shri Bandish S. Soparkar, Advocate supported by CA Shri Parin S Shah opened arguments before the Bench. The ld. Counsel's for the assessee company submitted that the assessee was wrongly denied the benefit of deduction u/s 32AC of the 1961 Act. It was submitted that the assessee 8 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 company invested more than Rs. 100 crores in the new plant and machinery during the financial year 2013-14(Assessment Year:
2014-15), and hence the assessee company is eligible for deduction u/s 32AC of the 1961 Act. The ld. Counsel's for the assessee company drew our attention to provisions of Section 32AC of the 1961 Act. Our attention was also drawn to Page 6 / Paper book, where depreciation chart for the relevant year(financial year 2013-14) is placed. It was submitted that total additions to the fixed assets during the year under consideration, were in aggregate Rs. 1,51,65,97,046/-. It was submitted that the investment made in Factory Building, Administrative Building, Office Equipment's, Computers , Vehicles and Furniture and fixture, aggregating to Rs. 44,37,47,481/- are not eligible for claim of deduction u/s 32AC, and hence the same are to excluded while granting benefit of deduction of investment allowance @15% u/s 32AC. Thus, after excluding the aforesaid non eligible assets, the total investment in Plant and Machinery was Rs. 1,07,24,38,524/-, which included Pollution Control Equipment's acquired and installed of Rs. 10,80,64,368/-. It was submitted that the said Pollution Control Equipment's are eligible for depreciation @100%, but since the said Pollution Control Equipment's were acquired and installed after 30 t h September, 2013 & having been put to use for less than 180 days in the financial year 2013-14, depreciation @50% was claimed by the assessee and allowed by Revenue , keeping in view the second proviso to Section 32(1). Thus, it was submitted 9 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 that the actual depreciation allowed on the Pollution Control Equipment for the impugned assessment year was 50% and not 100% , keeping in view second proviso to Section 32(1) , and hence Pollution Control Equipment cannot be excluded while computing threshold limit of Rs. 100 crores in acquiring and installing new assets being eligible plant and machineries as provided u/s 32AC(4). It was submitted that if investment in Pollution Control Equipment's is included, then total investment made by the assessee company in acquiring and installing new assets being plant and machinery as provided u/s 32AC(4) shall be Rs. 107,24,38,524/- which is in excess of Rs. 100 crores and hence the assessee shall be eligible for deduction u/s 32AC.
It was further submitted by ld. Counsel's for the assessee as an alternate argument that the depreciation claimed by assessee company and allowed by Revenue was 50% on total investment of Rs. 10,80,64,368/-made in Pollution Control Equipment's i.e. depreciation allowed was Rs. 5,40,32,184/-, keeping in view second proviso to Section 32(1). It was submitted that written down value of Pollution Control Equipment's after deducting actual depreciation allowed for the impugned assessment year 2014-15, was Rs. 5,40,32,184/-(w.d.v.), and if the same is added to the other new assets being plant and machined acquired and installed during the year of Rs. 96,46,85,197/- which are eligible new assets as provided u/s 32AC(4) , the total investments eligible for deduction u/s 32AC comes to Rs. 101,87,17,381/- which is more than Rs.100 crores. The ld. Counsel's for the 10 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 assessee heavily relied upon judgment and order of Hon'ble Supreme Court in the case of CIT v. Mahindra Mills & Ors., reported in (2000) 109 Taxman 225(SC). The ld. Counsel's for the assessee submitted that aforesaid judgment and order dealt with the Section 32 and 34 of the 1961 Act as they stood prior to their amendment w.e.f. 01.04.1988. The ld. Counsel for the assessee reiterated that depreciation 'actually allowed' is relevant, and not what is 'notionally allowable'. He again drew our attention to clause (v) of sub-section (4) of Section 32AC, and reiterated that it is only when the whole of the cost of the new plant and machinery is actually allowed as deduction(whether by way of depreciation or otherwise) in computing the income chargeable to income-tax of any previous year under the head "Profits and gains of business or profession" of any previous year , then only the same can be excluded as is provided under clause (v) of sub-section (4) of Section 32AC. It was strenuously submitted that what is relevant is the actual deduction of the whole of the cost of the eligible new assets as deduction( whether by way of depreciation or otherwise) while computing income chargeable to tax under the head 'Profits and Gains of Business or Profession' and not the deduction allowable i.e. notional deduction available as provided under the statute., before the eligible new asset is excluded while computing deduction u/s 32AC. It was submitted that keeping in view second proviso to Section 32(1), the assessee having acquired and installed i.e. put to use Pollution Control equipment after 11 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 30 t h September,2013 viz. for less than 180 days, the statute itself provided for 50% of the rate prescribed for the stipulated assets as allowable depreciation . Although the rate of depreciation prescribed for Pollution Control Equipment's is 100% , but since it was put to use for less than 180 days having being acquired and installed after 30 t h September, 2013, the assessee company claimed and was allowed deduction towards depreciation @50% on Pollution Control Equipment. Reference was also drawn to Provision of Section 43(6) , and it was submitted that w.d.v. of Pollution Control Equipment as at year end after allowing depreciation claimed , was Rs. 5,40,32,184/- and even if the same is added to remaining eligible new assets, it shall cross threshold limit of Rs. 100 crores and hence the assessee company should be allowed deduction u/s 32AC. It was also submitted, as an alternative plea by ld. Counsel's for the assessee, that if the deduction is not to be allowed u/s 32AC for the impugned assessment year, then directions be issued for granting deduction u/s 32AC for immediately succeeding assessment year as the investments made by the assessee in 'new assets' eligible for deduction u/s 32AC even after excluding aforesaid Pollution Control Equipment's , had exceeded Rs. 100 crores if the investment made in the eligible new asset for subsequent year is also to be cumulatively considered.It was submitted that the assessee has not claimed deduction u/s 32AC in the immediately succeeding assessment year.
12Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018
6. The ld, CIT-DR heavily relied upon the appellate order passed by ld. CIT(A) , and submitted that keeping in view facts and circumstances of the case, the authorities below have rightly rejected the claim of the assessee for grant of deduction u/s 32AC for the impugned assessment year.
7. We have considered rival contentions and perused the material on record including cited case laws. The whole controversy between rival parties revolves around the interpretation of Section 32AC , and is within narrow compass. Thus, it is important to reproduce provisions of Section 32AC before we proceed further, which is reproduced hereunder:
'32AC. Investment in new plant or machinery.--(1) Where an assessee, being a company, engaged in the business of manufacture or production of any article or thing, acquires and installs new asset after the 31st day of March, 2013 but before the 1st day of April, 2015 and the aggregate amount of actual cost of such new assets exceeds one hundred crore rupees, then, there shall be allowed a deduction,--
(a) for the assessment year commencing on the 1st day of April, 2014, of a sum equal to fifteen per cent of the actual cost of new assets acquired and installed after the 31st day of March, 2013 but before the 1st day of April, 2014, if the aggregate amount of actual cost of such new assets exceeds one hundred crore rupees; and
(b) for the assessment year commencing on the 1st day of April, 2015, of a sum equal to fifteen per cent of the actual cost of new assets acquired and installed after the 31st day of March, 2013 but before the 1st day of April, 2015, as reduced by the amount of deduction allowed, if any, under clause (a). (2) If any new asset acquired and installed by the assessee is sold or otherwise transferred, except in connection with the amalgamation or demerger, within a period of five years from the date of its installation, the amount of deduction allowed under sub-section (1) in respect of such new asset shall be deemed to be the income of the assessee chargeable under the head "Profits and gains of business or profession" of the previous year in which such new asset is sold or otherwise transferred, in addition to taxability of gains, arising on account of transfer of such new asset. (3) Where the new asset is sold or otherwise transferred in connection with the amalgamation or demerger within a period of five years from the date of its installation, 13 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 the provisions of sub-section (2) shall apply to the amalgamated company or the resulting company, as the case may be, as they would have applied to the amalgamating company or the demerged company.
(4) For the purposes of this section, "new asset" means any new plant or machinery (other than ship or aircraft) but does not include--
(i) any plant or machinery which before its installation by the assessee was used either within or outside India by any other person;
(ii) any plant or machinery installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house;
(iii) any office appliances including computers or computer software;
(iv) any vehicle; or
(v) any plant or machinery, the whole of the actual cost of which is allowed as deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head "Profits and gains of business or profession" of any previous year.'.
7.1 The brief facts of the case are that the assessee company acquired and installed fixed assets during the year under consideration , aggregating to Rs. 151,64,97,046/- . Out of the above , the fixed assets acquired towards Factory Building, Administrative Building, Vehicles, Computers, Office Equipment's and Furniture and Fixture, aggregating to Rs. 44,37,47,481/- are admittedly ineligible assets for grant of deduction u/s 32AC, keeping in view provisions of sub-section (4) of Section 32AC, and have to be excluded while computing "new assets' eligible for deduction u/s 32AC, which leaves remaining fixed assets of Rs. 107,24,38,524/- which were acquired and installed during the year under consideration. The threshold limit for availing deduction u/s 32AC is the eligible "new assets" acquired and installed during the year under consideration, exceeding Rs. 100 crores. The dispute has arisen between rival parties as to the inclusion of Pollution Control Equipment's of Rs. 10,80,64,368/- admittedly acquired and installed by the assessee during the year under consideration. The prescribed 14 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 depreciation rate under the 1961 Act, on Pollution Control Equipment's is 100%. By virtue of clause (v) of sub-section (4) of Section 32AC , the investment made in Pollution Control Equipment's is to be excluded while computing prescribed threshold limit of Rs.100 crores of investments in the eligible "new assets" , to avail deduction u/s 32AC of the 1961 Act, as prescribed rate of depreciation under the 1961 Act on such Pollution Control Equipment's is admittedly 100% , and hence whole of the actual cost is allowed as deduction on account of depreciation while computing income chargeable to tax under the head "Profit or gain of Business or Profession"
of any previous year. There is admittedly no controversy about the aforesaid proposition between rival parties. The clause (v) of sub-section (4) of Section 32AC, is reproduced hereunder:
(4) For the purposes of this section, "new asset" means any new plant or machinery (other than ship or aircraft) but does not include--
(i) to (iv) ***** any plant or machinery, the whole of the actual cost of which is allowed as
v) deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head "Profits and gains of business or profession" of any previous year.'.
7.2 If the Pollution Control Equipment's to the tune of Rs. 10,80,64,368/- which carries depreciation rate of 100% is excluded, the remaining investment made by the assessee in acquiring and installing eligible "new assets" during the year under consideration shall come below threshold limit of Rs. 100 crores prescribed u/s 32AC to claim deduction u/s 32AC, to Rs. 96,46,85,197/- , and the assessee will become ineligible for claim of deduction u/s 32AC of the 1961 Act for the impugned assessment year. So far, there is no dispute between rival parties. The dispute has arisen between 15 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 rival parties, as the assessee has contended that this Pollution Control Equipment's of Rs. 10,80,64,368/- acquired and installed during the year under consideration , were all acquired and installed after 30th September, 2013 and was put to use for less than 180 days during the year under consideration , and hence by virtue of second proviso to Section 32(1), the assessee is entitled to claim 50% of the depreciation on Pollution Control Equipment's of Rs. 10,80,64,368/- acquired and installed during the year under consideration, as the asset was put to use for less than 180 days during the year under consideration. The ld. Counsels for the assessee has stated before the Bench, that in fact the assessee has made a claim of 50% depreciation on Pollution Control Equipment's acquired and installed during the year under consideration in the return of income filed with department wherein depreciation of Rs. 5,40,32,184/- was claimed by the assessee which stood was allowed by Revenue. Thus, it is claimed that the written down value of the Pollution Control Equipment's as at the end of the year was Rs. 5,40,32,184/- which was carried forward to the next year. The assessee has relied upon the judgment and order of Hon'ble Supreme Court in the case of Mahindra Mills(supra) to claim that what is relevant is the actual depreciation allowed which is 50% on Pollution Control Equipment's, and not the depreciation which is allowable i.e. 100% on Pollution Control Equipment's , may be owing to its usage for less than 180 days in the year and second proviso to Section 32(1) getting attracted, for considering the claim of the assesse for deduction u/s 32AC as the aforesaid Pollution Control Equipment cannot be excluded as the assesse has claimed and department has allowed depreciation @50% for the year under consideration and not 100% which is the prescribed rate of depreciation. It is submitted 16 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 that for Section 43(6), what is relevant for computing written down value of the assets is the actual cost from which actual depreciation allowed is to be deducted , and not the notional depreciation or the depreciation allowable under the 1961 Act , to arrive at the written down value of the fixed assets to be carried forward to the succeeding year. The second bone of contention is that with 50% depreciation actually being allowed on Pollution Control Equipment's to the tune of Rs. 5,40,32,184/- owing to second proviso to Section 32(1) being attracted as the aforesaid is put to use for less than 180 days during the current year, the written down value of Pollution Control Equipment's as at the end of the year under consideration , was Rs. 5.40,32,184/- , and when this amount is added to the other " new assets" of Rs. 96,46,85,197/- which are admittedly eligible for deduction u/s 32AC, the total investment in " new assets" will be Rs. 101,87,17,381/- during the year under consideration, which is exceeding the threshold limit of Rs. 100 crores to be eligible for deduction u/s 32AC, and hence the assessee is entitled for deduction u/s 32AC. Before we proceed further , it will be relevant to reproduce Section 32AC of the 1961 Act, which reads as under:
7.3 Thus, before proceeding further, it will be appropriate to reproduce provisions of Section 32AC again, which reads as under:-
'32AC. Investment in new plant or machinery.--(1) Where an assessee, being a company, engaged in the business of manufacture or production of any article or thing, acquires and installs new asset after the 31st day of March, 2013 but before the 1st day of April, 2015 and the aggregate amount of actual cost of such new assets exceeds one hundred crore rupees, then, there shall be allowed a deduction,--
(a) for the assessment year commencing on the 1st day of April, 2014, of a sum equal to fifteen per cent of the actual cost of new assets acquired and installed after the 31st day of March, 2013 but before the 1st day of April, 2014, if the aggregate amount of actual cost of such new assets exceeds one hundred crore rupees; and 17 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018
(b) for the assessment year commencing on the 1st day of April, 2015, of a sum equal to fifteen per cent of the actual cost of new assets acquired and installed after the 31st day of March, 2013 but before the 1st day of April, 2015, as reduced by the amount of deduction allowed, if any, under clause (a). (2) If any new asset acquired and installed by the assessee is sold or otherwise transferred, except in connection with the amalgamation or demerger, within a period of five years from the date of its installation, the amount of deduction allowed under sub-section (1) in respect of such new asset shall be deemed to be the income of the assessee chargeable under the head "Profits and gains of business or profession" of the previous year in which such new asset is sold or otherwise transferred, in addition to taxability of gains, arising on account of transfer of such new asset. (3) Where the new asset is sold or otherwise transferred in connection with the amalgamation or demerger within a period of five years from the date of its installation, the provisions of sub-section (2) shall apply to the amalgamated company or the resulting company, as the case may be, as they would have applied to the amalgamating company or the demerged company.
(4) For the purposes of this section, "new asset" means any new plant or machinery (other than ship or aircraft) but does not include--
(i) any plant or machinery which before its installation by the assessee was used either within or outside India by any other person;
(ii) any plant or machinery installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house;
(iii) any office appliances including computers or computer software;
(iv) any vehicle; or
(v) any plant or machinery, the whole of the actual cost of which is allowed as deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head "Profits and gains of business or profession" of any previous year.'.
7.4 Memorandum / Explanatory Statement to Finance Bill, 2013, reads as under:
C. MEASURES TO PROMOTE SOCIO-ECONOMIC GROWTH "Incentive for acquisition and installation of new plant or machinery by manufacturing company In order to encourage substantial investment in plant or machinery, it is proposed to insert a new section 32AC in the Income tax Act to provide that where an assessee, being a company,--
(a) is engaged in the business of manufacture of an article or thing; and 18 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018
(b) invests a sum of more than Rs.100 crore in new assets (plant or machinery) during the period beginning from 1st April, 2013 and ending on 31st March, 2015, then, the assessee shall be allowed--
(i) for assessment year 2014-15, a deduction of 15% of aggregate amount of actual cost of new assets acquired and installed during the financial year 2013-14, if the cost of such assets exceeds Rs.100 crore;
(ii) for assessment year 2015-16, a deduction of 15% of aggregate amount of actual cost of new assets, acquired and installed during the period beginning on 1st April, 2013 and ending on 31st March, 2015, as reduced by the deduction allowed, if any, for assessment year 2014-15.
The phrase "new asset" has been defined as new plant or machinery but does not include--
(i) any plant or machinery which before its installation by the assessee was used either within or outside India by any other person;
(ii) any plant or machinery installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house;
(iii) any office appliances including computers or computer software;
(iv) any vehicle;
(v) ship or aircraft; or
(vi) any plant or machinery, the whole of the actual cost of which is allowed as deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head "Profits and gains of business or profession" of any previous year.
It is further proposed to provide suitable safeguards so as to restrict the transfer of the plant or machinery for a period of 5 years. However, this restriction shall not apply in a case of amalgamation or demerger but shall continue to apply to the amalgamated company or resulting company, as the case may be. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years."
19Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 7.5 Thus, it could be seen that Section 32AC is a beneficial provision which was inserted as a measure to promote socio-economic growth, and it provided Incentive for acquisition and installation of eligible "new assets"
being plant or machinery by company engaged in the business of manufacture or production of any article or thing. The threshold limit is exceeding Rs. 100 crores investment in eligible new assets . Thus, it encouraged substantial investment in eligible plant or machinery.The Section 32AC provided certain conditions , which are required to be met before deduction u/s 32AC can be allowed. It is well settled that exemption provisions are to be strictly construed, and burden is on the assessee to demonstrate that it fulfills all the stipulated conditions as mandated by exemption provisions before any deduction/exemption is allowed, and any ambiguity in the provision is to be interpreted in favour of Revenue. The judgment and order dated 30.07.2018 of Constitution Bench of Hon'ble Supreme Court in the case of Commissioner of Customs(Imports), Mumbai v. Dilip Kumar And Company & Ors in Civil Appeal No. 3327 of 2007 is relevant, wherein Hon'ble Supreme Court concluded as under:
"52.To sum up, we answer the reference holding as under (1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification.
(2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee andit must be interpreted in favour of t he revenue.20
Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 (3) The ratio in Sun Export case (supra) is notcorrect and all the decisions which took similar view as in Sun Export Case (supra) stands overruled."
7.6 In the taxing statute there is no scope for intendment, and if the language is simple, plain, unambiguous and clear, the same has to be applied howsoever harsh the consequences may be. There is no equity in taxing statute, and literal rule of interpretation is to be followed if there is not ambiguity in the provisions and is in simple clear and plain language. Thus, as could be seen from clause(v) of sub-section (4) of Section 32AC, the "new asset" shall not include any plant or machinery, the whole of the actual cost of which is allowed as deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head "Profits and gains of business or profession" of any previous year. Thus, in the instant case , Pollution Control Equipment's admittedly carry prescribed rate of depreciation @100% , and hence the entire actual cost of Pollution Control Equipment's is deductible while computing income chargeable to tax under the head "Profits and gains of business or profession" of any previous year. It is merely because the aforesaid Pollution Control Equipment's were acquired and installed after 30th September, 2013 and were put to use for less than 180 days during the year under consideration , the depreciation allowed shall be 50% in the year under consideration while the remaining 50% depreciation shall be allowed in the subsequent assessment year, but the facts remains which cannot be negated is that the whole of the actual cost of Pollution Control Equipment's is deducted at the prescribed rate of depreciation @100%, and is hit by clause
(v) sub-section (4) of Section 32AC, and shall be ineligible for claim of 21 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 deduction u/s 32AC. The language used in clause (v) of sub-section (4) of Section 32AC is as under:
(4) For the purposes of this section, "new asset" means any new plant or machinery (other than ship or aircraft) but does not include--
(i) to (iv) ***** any plant or machinery, the whole of the actual cost of which is allowed as
v) deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head "Profits and gains of business or profession" of any previous year.'.
7.7 The aforesaid clause (v) of sub-section (4) to Section 32AC never states that the whole of the actual cost of the new asset is to be allowed as deduction in one previous year , or whole of the actual cost of the new asset is to be actually allowed as deduction , before the said asset become ineligible for claim of deduction u/s 32AC . Infact, in the erstwhile Section 32A , there were clear mention that deduction is to be allowed in any one previous year of the whole of the actual cost of the "new assets: before the same become ineligible for deduction u/s 32A, which is not the case in Section 32AC wherein law makers consciously chose "any previous year"
instead of "any one previous year" laid down in Section 32A. The erstwhile Section 32A also dealt with investment allowance. We are concerned with interpretation of Section 32AC. The relevant portion of erstwhile Section 32A is reproduced hereunder :
"32A. (1) In respect of a ship or an aircraft or machinery or plant specified in sub-section (2), which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject provisions of this section, be allowed a deduction, in respect of the previous year in which the ship or aircraft or aircraft was acquired or the machinery or plant was installed or, if the ship, aircraft, machinery or plant is fist put to use in the immediately succeeding previous year, then, in respect of that previous year, of a sum by way of 22 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 investment allowance equal to twenty-five per cent. of the actual cost of the ship, aircraft, machinery of plant to the assessee: Provided that no deduction shall be allowed under this section in respect of--
(a) any machinery or plant installed in any office premises or any residential accommodation, including any accommodation in, the nature of a guest-house;
(b) any office appliances or road transport vehicles;
(c) any ship, machinery or plant in respect of which the deduction by way of development rebate is allowable under section 33; and
(d) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head "Profits and gains of business or profession "of any one previous year.
*** ***"
7.8 Thus, the law makers consciously chose not to restrict or circumscribed Section 32AC to allow deduction only when the actual cost of the new asset is allowed as deduction (whether by depreciation or otherwise ) in computing the income chargeable under the head "Profits and Gains of business of profession" of any one previous year, rather it states any previous year. Thus, the whole of the actual cost of Pollution Control Equipment's which carries prescribed rate of depreciation of 100%, the whole of the actual cost of "new asset" is allowed as deduction while computing income chargeable to tax under the head " Profits and Gains of Business or Profession" in any previous year, and merely because owing to second proviso to Section 32(1) , the depreciation is allowed @50% in the year in which such Pollution Control Equipment's are acquired and put to use for less than 180 days in the first year, and the remaining 50% of the depreciation is to be allowed in subsequent year, then a myopic view cannot 23 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 be taken that the depreciation allowed for Pollution Control Equipment's is 50% owing to its use during the current year of less than 180 days, and hence the deduction u/s 32AC be allowed. If such an interpretation is accepted , then not only it will do violence to the plain, clear,simple and unambiguous language of Section 32AC , and also defeat the very purpose of Section 32AC which was introduced to encourage substantial investments by manufacturing companies in eligible "new assets" of more than Rs. 100 crores in the year under consideration, with the exclusion , inter-alia, of the plant and machinery where otherwise the whole of actual cost is allowed as deduction while computing income chargeable to tax under the head "Profits and gains of business or profession" of any previous year.The objective behind is to encourage manufacturing companies in making substantial investment in eligible new plant and machineries exceeding threshold limit of Rs. 100 crores to achieve rapid industrialization, while excluding , inter-alia, such plant and machineries on which otherwise deduction( by way of depreciation or otherwise) of the whole of the actual cost is allowed while computing income from profits and gains of business or profession of any previous year. The objective of exclusion of such new assets being that these new assets are already been granted benefit of some other beneficial provision in the 1961 Act by way of deduction of the whole of the actual cost being allowed as deduction while computing income chargeable to tax under the head "Profits and gains of business or profession" of any previous year, and therefore again allowing benefit of deduction u/s 32AC will lead to double deduction which was hence excluded by virtue of clause (v) of sub-section (4) of Section 32AC . In the taxing statute there is no scope for intendment, and if the language is simple , plain, unambiguous and clear, the same has to be applied howsoever 24 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 harsh the consequences may be.There is no equity in taxing statute, and literal rule of interpretation is to be followed when there is no ambiguity in the provision itself . The second contention of the assessee that since it was allowed deduction of Rs. 5,40,32,184/- being @50% on Pollution Control Equipment's acquired and installed during the current year , the written down value to be carried forward w.r.t. Pollution Control Equipment's was Rs. 5,40,32,184/- which should be added to the other eligible " new assets"
to the tune of Rs. 96,46,85,197/-, which will make total investment in eligible "new assets" to the tune of Rs. 101,87,17,381/- , which is above threshold limit of Rs. 100 crores, and hence deduction u/s 32AC be allowed during the current year, this argument of ld. Counsel for the assesse cannot be accepted as we have already held that the Pollution Control Equipment's carrying prescribed rate of depreciation of 100% is to be excluded by virtue of clause (v) of sub-section (4) of Section 32AC, even if 50% depreciation is allowed in the current year as the said assets were put to use for less than 180 days keeping in view second proviso to Section 32(1), and hence the written down value of Pollution Control Equipment's cannot be added to other eligible "new assets" because of its exclusion at threshold by virtue of clause (v) of sub-section (4) of Section 32AC. Moreover, Section 32AC speaks of aggregating the amount of actual costs of eligible "new assets" , and we cannot do violence to statute by including "written down value" of Pollution Control Equipment's , while computing threshold limit of Rs. 100 crores. The relevant portion of Section 32AC is reproduced hereunder:
'32AC. Investment in new plant or machinery.--(1) Where an assessee, being a company, engaged in the business of manufacture or production of any article or thing, acquires and installs new asset after the 31st day of March, 2013 but before the 25 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 1st day of April, 2015 and the aggregate amount of actual cost of such new assets exceeds one hundred crore rupees, then, there shall be allowed a deduction,- *** ***"
7.9 Thus, we are of the considered view, that the actual cost of Pollution Control Equipment's of Rs. 10,80,64,368/- which was acquired and installed after 30th September, 2013 , and which was put to use for less than 180 days during the current year, and on which 50% depreciation was claimed by the assessee which stood allowed by Revenue by virtue of second proviso to Section 32(1) and which, otherwise, carries prescribed rate of depreciation of 100%, shall not be considered and included in aggregating actual costs of eligible "new assets" , for computing and allowing deduction u/s 32AC of the 1961 Act, and since after such exclusion , the assessee's aggregate amount of actual cost of such new assets did not exceeded threshold of one hundred crores rupees, the assessee will not be eligible for deduction u/s 32AC for the year under consideration. The assesse has relied on the judgment and order of Hon'ble Supreme Court in the case of Mahindra Mills(supra), there is no quarrel so far as the manner of computation of written down value, which shall be computing by deducting depreciation actually allowed from the actual cost of the fixed assets, but that does not have any bearing on our decision w.r.t. allowability of deduction u/s 32AC on the ground that 50% depreciation was allowed owing to second proviso to Section 32(1) or as to inclusion of written down value of the asset for computing aggregate of actual cost of eligible "new assets" , as are adjudicated by us in this order as above. to The assesse has submitted , as an alternate plea, that if the benefit of deduction u/s 32AC cannot be allowed in 26 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 the current year, then the same be allowed in the immediately succeeding assessment year as is provided u/s 32AC. In our considered view, the assessee, if it meets all other conditions for grant of deduction u/s 32AC, shall be allowed deduction u/s 32AC in the subsequent year, for which the assessee has to meet all the statutory requirements as mandated by Section 32AC , and the onus is entirely on the assessee to demonstrate and prove with evidence before the AO that it is eligible and entitled for deduction u/s 32AC in the immediately succeeding year as it meets all the conditions as are prescribed u/s 32AC. The ld. Counsel for the assessee submitted that the assessee did not claim deduction u/s 32AC in the return of income filed for immediately succeeding assessment year, as the claim was made in the return of income filed for current assessment year. Be it as it may be , if the assessee meets all the stipulated conditions as are prescribed u/s 32AC for immediately succeeding assessment year for which onus is entirely on the assessee to demonstrate and prove by evidence before the AO that it is eligible and entitled for deduction u/s 32AC, the AO is directed to consider the claim of the assessee for deduction u/s 32AC for immediately succeeding year viz. ay: 2015-16, on merits in accordance with law. Reference is drawn to CBDT circular No. 14 of 1955, dated 11.04.1955. The grounds of appeal numbers 1 to 5 are partly allowed , in the manner indicated above. We order accordingly.
8. The second issue by way of grounds of appeal number's 6 & 7 raised by the assesse in memo of appeal concerns with disallowance of Rs. 32,11,000/- by the AO by invoking provisions of Section 14A read with Rule 8D of the Income-tax Rules, 1962. The AO observed during assessment proceedings that the assesse has earned dividend income of Rs.27
Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 11,22,747/- which has been claimed as an exempt income u/s 10(34) of the 1961 Act. The assesse has also shown exempt income of Rs. 2,81,86,511/- u/s 10(38) from the sale of Mutual Funds. The AO observed that the assesse has incurred interest expenses of Rs. 163 lacs. The AO further observed that the assesse has mixed used funds which were used for making investments, and the assesse failed to show that interest free funds were used for making investment in the securities/mutual funds. The assesse explained that the assesse has not made any fresh investment during the year under consideration, and rather the assessee liquidated investments of Rs. 54.73 crores during the year under consideration. The opening investment were Rs. 58.78 crores at the beginning of the year, while closing investment as at the end of the year were Rs. 4.05 crores. The dividend income were Rs. 0.12 crores from the investment made by the assesse company. The investments made were from cash accruals of the earlier years. The assesse submitted cash flow statement to demonstrate that no fresh investments were made during the year under consideration, old investments were liquidated and it has cash accruals from operations during the year under consideration. The assesse also relied upon ld. CIT(A) orders for assessment year's 2005-06, 2007-08, 2008-09, 2009-10, 2010-11 and 2011-12 in assessee's own case, where ld. CIT(A) held that the entire investment in shares have come from interest free funds and presumption is to be applied and no disallowance is required to be made u/s 14A. The assesse also relied upon orders passed by ITAT for assessment years 2005-06 and 2007-08 in assessee's own case, where the Tribunal decided this issue in favour of the assesse. The assesse also relied upon orders passed by Hon'ble Courts to reiterate its aforesaid submissions, which are duly found mentioned in assessment order. The AO 28 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 rejected the contentions of the assesse, as the funds as per AO which were used for making investment in the securities/mutual funds, were mixed used funds and the assessee having failed to show that interest free funds were used to make investments in securities/mutual funds, as the assesse has also borrowed interest bearing funds. The AO made additions u/s 14A r.w. Rule 8D(2)(ii) towards disallowance of interest expenses to the tune of Rs. 16.37 lacs, while further additions were made by the AO to the tune of Rs. 15.75 lacs u/s 14A r.w.Rule 8D(2)(iii) of the 1962 Rules towards disallowance of administrative expenses. Thus, the AO made additions to the tune of aggregate of Rs. 32.11 lacs by invoking Section 14A read with Rule 8D of the Income-tax Rules , 1962.
9. The assessee being aggrieved by assessment order, filed first appeal , which also stood dismissed by ld. CIT(A). The assesse reiterated its contentions before ld. CIT(A) as were made before the AO. The assesse also demonstrated that its own funds available were to the tune of Rs. 260.19 crores including share capital and reserves, while the investments were to the tune of Rs. 4.05 crores as at the year end, which were Rs. 58.78 crores as at the beginning of the year. That , it did not invested in any securities/ mutual funds during the year , and rather sold securities during the year under consideration. Thus, it was prayed that additions made towards disallowance of interest expenses be deleted. The assessee relied upon number of judicial precedents to contend that no disallowance of interest expenses are warranted. The ld. CIT(A) rejected the contentions of the assessee , and upheld the additions as were made by the AO. While upholding the additions, the ld. CIT(A) relied on the appellate order passed 29 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 by ld. CIT(A) for assessment year 2013-14 and 2014-15 in assessee's own case , where this issue was decided by ld. CIT(A) in favour of Revenue. The ld. CIT(A) also observed that the AO has duly recorded satisfaction while invoking provisions of Section 14A read with Rule 8D of the 1962 Rules.
10. Still Aggrieved by the appellate order passed by ld. CIT(A), the asssessee filed second appeal with ITAT. The ld. Counsel's for the assessee submitted that the assessee's own interest free funds consisting of Share Capital and free reserves as at 31.03.2014 , were to the tune of Rs. 260.19 crores. The ld. Counsel for the assesse drew our attention to the audited accounts for the year ended 31.03.2015(financial year 2014-15) filed in the PB/page 100-125. The assesse has filed audited annual accounts for the year ended 31.03.2015(financial year 2014-15) , while the assesse was required to file audited annual accounts for the year ended 31.03.2014 ( Financial Year 2013-14) , as presently we are concerned with assessment year 2014- 15(financial year 2013-14). The complete information could not be gathered even from preceding year figures given in the audited accounts for the financial year 2014-15 filed by the assesse. There is substantial increase in the issue of share capital, the old investments as at 01.04.2013 are not discernible from the audited accounts for financial year 2014-15 filed by the assessee. Moving forwards, the argument advanced by the ld. Counsel's for the assesse is that the owned funds by way of share capital and reserves are much more than the investments made in the securities/mutual funds , and hence no disallowance could be made for interest expenses u/s 14A read with Rule 8D(2)(ii) , as presumption will apply that the assessee has invested in the securities/mutual funds, out of own interest free funds available with 30 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 the assessee. The assesse has relied upon the judgment and order of Hon'ble Supreme Court in the case of South India Bank Limited v. CIT (Civil Appeal No. 9606 , 9609-11 & 9615 of 2011, dated 09.09.2021. We are principally in agreement with ld. Counsel's for the assesse that in case if the investments are made out of mixed use funds, the presumption shall apply that the assesse has used its own interest free funds available for making investments in the securities/mutual funds provided the own interest free funds are sufficient to cover the aforesaid investments, but complete facts are not there on record as audited financial statements for relevant period are not filed but are filed for subsequent financial year i.e. 2014-15, and , thus, for limited purposes , we are remitting the matter back to the file of the AO for verification of this aspect and if it is found that own interest free funds are sufficient to cover investments made in securities/mutual funds , no disallowance of interest expenses shall be made as it will be presumed that the assesse has invested its own interest free funds for making investment in securities/mutual funds . The assessee is directed to file relevant records with the AO. So far as disallowance of administrative expenses of Rs. 15,75,000/- by authorities below, by invoking provisions of Section 14A read with Rule 8D(2)(iii) is concerned , no serious contentions were raised by the ld. Counsels for the assesse. The Tribunal in its appellate orders in ITA No.450/Ahd/2017 for assessment year 2012-13 , dated 18.02.2019 and as well in its appellate orders in ITA no. 37/Ahd/2018 for assessment year 2013-14, dated 04.01.2021, in assessee's own case has confirmed the additions made by authorities below by disallowing administrative expenses by invoking provisions of Section 14A read with Rule 8D(2)(iii) of the 1962 31 Madhu Silica Private Limited v. DCIT, Circle-1, Bhavnagar, Gujarat ITA no. 856/Ahd/2018 Rules. The grounds of appeal number 6 and 7 are partly allowed for statistical purposes, in the manner as indicated above. We order accordingly.
11. The grounds of appeal number 8 raised by the assesse in memo of appeal filed with ITAT are consequential in nature and does not require separate adjudication, while ground number 9 raised by the assesse in memo of appeal filed with ITAT is premature at this stage and hence does not requires adjudication at this stage. We order accordingly.
12. In the result, appeal of the assesse in ITA No. 856/Ahd/2018 for assessment year 2014-15 is partly allowed, as indicated above.
Order pronounced in the open court on 18-08-2023 at Ahmedabad, Gujarat.
Sd/- Sd/-
(MADHUMITA ROY) (RAMIT KOCHAR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad : Dated 18/08/2023
आदे श क त ल प अ े षत / Copy of Order Forwarded to:-
1. Assessee
2. Revenue
3. Concerned CIT
4. CIT (A)
5. DR, ITAT, Ahmedabad
6. Guard file.
By order/आदे श से,
उप/सहायक पंजीकार
आयकर अपील य अ धकरण,
अहमदाबाद
32