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M/s. ATS Infrastructure Ltd., 711/92, Deepali, Nehru Place, New Delhi. PIN 110 019. Vs. The ACIT, Central Circle, Noida.
January, 15th 2020
       IN THE INCOME TAX APPELLATE TRIBUNAL
              DELHI BENCHES "A": DELHI

  BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
                        AND
     SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER

                ITA.No.3080/Del./2017
            ITA.No.5408 & 5601/Del./2018
  Assessment Years 2012-2013, 2013-2014 & 2014-2015

M/s. ATS Infrastructure         The ACIT,
Ltd., 711/92, Deepali,
Nehru Place, New Delhi.    vs., Central Circle,
PIN ­ 110 019.
                                Noida.
PAN AADCA0609B
       (Appellant)                       (Respondent)

                            Shri Ved Jain, Advocate And
             For Assessee : Ms. Surbhi Goyal, C.A.
             For Revenue : Shri Ved Prakash Mishra, Sr. DR

           Date of Hearing : 08.01.2020
    Date of Pronouncement : 15.01.2020

                          ORDER

PER BHAVNESH SAINI, J.M.


         All the appeals by the Assessee are directed

against the different Orders of the Ld. CIT(A)-4, Kanpur,

Dated 31.03.2017, for the A.Y. 2012-2013 and 25.07.2018

for the A.Ys. 2013-2014 and 2014-2015.
                             2
                           ITA.Nos.3080/D/2017, 5408 & 5601/D/2018
                                 M/s. ATS Infrastructure Ltd., New Delhi


2.        We have heard the Learned Representatives of

both the parties and perused the material on record. Since

issues are common , therefore, all the appeals were heard

together and we dispose of the same by this consolidated

order. The appeals are decided year-wise as under :


A.Y. 2012-2013 :


3.        On Ground Nos. 1 and 2, assessee challenged the

disallowance of Rs.1,51,65,269/- made on account of

interest under section 36(1)(iii) of the I.T. Act, 1961. The

A.O. noted that assessee-company has given interest free

loans and advances to related party. The disallowance of

interest expenses against these loans have been discussed

in the assessment order passed for preceding A.Y. 2011-

2012. In the same manner, interest on loans/advances

given to M/s. Prateek Resorts & Builders Pvt. Ltd., has been

disallowed. The A.O, therefore, disallowed Rs.1,51,65,269/-

under section 36(1)(iii) of the I.T. Act, 1961. The assessee

made detailed written submissions before the Ld. CIT(A).

However, the Ld. CIT(A) dismissed the appeal of assessee.
                              3
                            ITA.Nos.3080/D/2017, 5408 & 5601/D/2018
                                  M/s. ATS Infrastructure Ltd., New Delhi


3.1.       Learned Counsel for the Assessee submitted that

addition has been made by the A.O. simply by relying on the

Order passed in preceding A.Y. 2011-2012 in the case of the

assessee. However, the said addition has been deleted by

the Ld. CIT(A) and Department did not move any appeal

against the said decision. Copy of the grounds of appeal for

the A.Y. 2011-2012 is filed on record in support of this

contention. The Order of the Ld. CIT(A) for the A.Y. 2011-

2012 is filed at Pages 186 and 187 of the paper book. In

addition to the above submissions, the Learned Counsel for

the Assessee further submitted that detailed break-up of

advances given to M/s. Prateek Resorts & Builders Pvt. Ltd.,

relating to assessment year under appeal as on 31.03.2012

was    Rs.12,13,22,153/-.   The    opening       balance       as    on

01.04.2011 was Rs.5,70,72,153/- relevant to A.Y. 2011-

2012 which have been decided in favour of the assessee.

Learned Counsel for the Assessee further submitted that

advances were given for business purposes. The evidence for

the same are filed at Pages 94, 95 and 98 of PB which is

correspondence between the parties. He has, therefore,
                                4
                              ITA.Nos.3080/D/2017, 5408 & 5601/D/2018
                                    M/s. ATS Infrastructure Ltd., New Delhi


submitted that since the amount in question have been

given for commercial expediency, therefore, no addition

could be made. He has relied upon Judgment of Hon'ble

Supreme Court in the case of S.A. Builders 288 ITR 1 (SC).

Learned Counsel for the Assessee further submitted that

during the year under consideration, the assessee-company

has sufficient own funds as well as interest free borrowing

funds which have been used to make these advances and

these advances have been shown in the balance-sheet, copy

of which is filed at page-10 of the PB to show that assessee

has total own surplus funds of Rs.35,57,47,999/-. It was,

therefore, submitted that no disallowance of interest should

be made out of the same. He has relied upon Judgment of

Hon'ble Supreme Court in the case of Commissioner of

Income Tax vs., Reliance Industries Ltd., 410 ITR 466 (SC)

in which the Hon'ble Supreme Court has noted findings of

Tribunal that "the findings of the Tribunal that interest free

funds available to the assessee were sufficient to him for its

investment. Hence, it can be presumed that investments were

made from the interest free funds available with the assessee".
                                5
                              ITA.Nos.3080/D/2017, 5408 & 5601/D/2018
                                    M/s. ATS Infrastructure Ltd., New Delhi


4.         On the other hand, Ld. D.R. relied upon the

Orders of the authorities below.







5.         We have considered the rival submissions and

perused the material on record. The A.O. on this issue made

the addition by following his Order for the A.Y. 2011-2012

without giving any independent findings. In A.Y. 2011-2012

the Ld. CIT(A) has allowed the claim of assessee and deleted

the addition, copy of the Order is placed in the paper book.

Though the Department has filed an appeal before the

Tribunal, but, no ground have been raised on this issue.

Copy of the grounds of appeal is also filed on record. These

facts itself are sufficient to delete the addition. We may

further note that assessee has own sufficient funds to give

advance to M/s. Prateek Resorts & Builders Pvt. Ltd., out of

own funds. There was also an opening balance as contended

by the Learned Counsel for the Assessee in preceding year,

on which, addition has already been deleted. The assessee

has also placed on record the correspondence between the

parties   to   show   that   advance      have     been      given     for

commercial expediency. It is well settled Law that when
                              6
                            ITA.Nos.3080/D/2017, 5408 & 5601/D/2018
                                  M/s. ATS Infrastructure Ltd., New Delhi


interest free funds are available to the assessee which were

sufficient to made its investments, it would be presumed

that the investments were made from the interest free funds

available with the assessee. We rely upon the Judgment of

the Hon'ble Bombay High Court in the case of Reliance

Utility and Power Ltd., 313 ITR 340 (Bom.) (HC) and

Judgment of Hon'ble Supreme Court in the case of Reliance

Industries Ltd., 410 ITR 466 (SC) and Judgment of Hon'ble

Supreme Court in the case of Munjal Sales Corporation 298

ITR 298 (SC). Considering the totality of the facts and

circumstances of the case, we do not find any justification

to sustain the addition. We, accordingly, set aside the

Orders of the authorities below and delete the addition of

Rs.1,51,65,269/-. Ground Nos. 1 and 2 of the appeal of

assessee are allowed.


6.        On Ground Nos.3 and 4, assessee challenged the

disallowance of Rs.1,52,47,867/- under section 14A of the

I.T. Act read with Rule 8D of the I.T. Rules, 1962.


6.1.      The A.O. noted that assessee has received

dividend income of Rs.64,59,304/- and has claimed the
                                  7
                                ITA.Nos.3080/D/2017, 5408 & 5601/D/2018
                                      M/s. ATS Infrastructure Ltd., New Delhi


same to be exempted. Since the assessee has not made

disallowance of expenditure against the exempted income,

therefore, the A.O. disallowed Rs.1,52,47,867/- under

section 14A read with Rule 8D of the I.T. Rules. The Ld.

CIT(A) confirmed the addition.


6.2.         Learned Counsel for the Assessee submitted that

the dividend earned by the assessee-company during the

assessment year under appeal can be bifurcated that

investment in M/s. ATS Town Ship Pvt. Ltd., yielded

dividend of Rs.56,25,000/- and from the Reliance Mutual

Funds dividend was earned of Rs.8,34,304/-. He has

further submitted that value of investments from where

dividend has been earned in the case of M/s. ATS Town

Ship Pvt. Ltd., as on 31.03.2012 was Rs.9,000/-, which is

supported by PB-17 which is the details of Note-12 Non-

current investments and PB-60 which is balance-sheet of

M/s. ATS Town Ship Pvt. Ltd. In the case of Reliance

Mutual Fund, the investment was NIL in assessment year

under appeal since purchase and sales were within the

year.   He    has   submitted     that     the    average       value     of
                                 8
                               ITA.Nos.3080/D/2017, 5408 & 5601/D/2018
                                     M/s. ATS Infrastructure Ltd., New Delhi


investments comes to Rs.9,500/- only. He has submitted

that provisions of Section 14A read with Rule 8D provide for

disallowance of expenses which are incurred only in relation

to the exempt income earned. It is well settled Law that

while computing the disallowance under Rule 8D (iii), rate of

0.5% has to be applied to only those investments which

actually have resulted in exempted dividend income rather

than 0.5% of the average of total investments. Thus, in

assessee's case also for the purpose of making disallowance

under the above provision, only average value of investment

as calculated at Rs.9,500/- shall be considered which would

make disallowance of Rs.47.50 only. He has submitted that

the issue is covered by the Judgment of Hon'ble Delhi High

Court   in   the   case   of    ACB      India     Ltd.,     vs.,    ACIT

ITA.No.615/2014 Dated 24.03.2015 in which it was held

that "the A.O. instead of adopting the average value of

investment of which income is not part of total income i.e., the

value of tax exempt investment, chose to factor in the total

investment itself. Even though the Ld. CIT(A) noticed the exact

value of the investment which yielded taxable income, he did
                               9
                             ITA.Nos.3080/D/2017, 5408 & 5601/D/2018
                                   M/s. ATS Infrastructure Ltd., New Delhi


not correct the error to chose to apply his own equity. Given

the record that it be done so to substitute the figure of

Rs.38,61,09,287/- with the figure of Rs.3,53,26,800/- and

thereafter, arrive at the exact details of .05%. In view of the

above reasoning, the findings of the ITAT and lower

authorities are hereby set aside. The appeal is allowed and

the matter is remitted to work-out the tax effect to the A.O.

who shall do so after giving due notice to the party." Learned

Counsel for the Assessee on the same proposition also relied

upon other decision of the Hon'ble Delhi High Court.

Learned Counsel for the Assessee further submitted that the

A.O. has merely made the impugned addition by stating that

since the assessee has earned exempt income, therefore,

provisions of Section 14A are applicable. It is evident that in

the assessment order there is no satisfaction recorded by

the A.O. before making any disallowance, therefore, no

addition could be made. He has relied upon Judgment of

Hon'ble Delhi High Court in the case of Max                         Opp

Investment Ltd., vs., Commissioner of Income Tax 347 ITR

272 (Del.) (HC), which is confirmed by the Hon'ble Supreme
                                 10
                            ITA.Nos.3080/D/2017, 5408 & 5601/D/2018
                                  M/s. ATS Infrastructure Ltd., New Delhi


Court. He has also relied upon Judgments of Hon'ble Delhi

High Court on the same proposition in the case of

Commissioner of Income Tax vs., Taikisha Engineering India

Ltd., 370 ITR 338 (Del.) (HC).


7.        On the other hand, Ld. D.R. relied upon the

Orders of the authorities below.


8.        We have considered the rival submissions and

perused the material on record. The investments made by

assessee as on 31.03.2012 as argued by the Learned

Counsel for the Assessee is not in dispute that in case of

M/s.ATS Township Pvt. Ltd., assessee made investment of

Rs.9000/- only and in the case of Reliance Mutual Fund it

was NIL because sales and purchases were within the year.

Thus while computing the disallowance under the above

provision, the rate of 0.5% has to be applied to only those

investments   which    actually       have    resulted   in    exempt

dividend income rather than .05% of the average of the total

investments. The A.O. shall have to take average value of

such   investment.    Further     A.O.       did   not   record    any

satisfaction before making the disallowance and merely
                                 11
                             ITA.Nos.3080/D/2017, 5408 & 5601/D/2018
                                   M/s. ATS Infrastructure Ltd., New Delhi


made the addition because assessee has earned dividend

income. Thus, these are not sufficient to make any addition

against the assessee. The Hon'ble Delhi High Court in the

case of I.P. Support Services India Ltd., 378 ITR 240 9Del.)

(HC) held that "no disallowance be made in the absence of

satisfaction as to why voluntary disclosure made by

assessee was unreasonable and unsatisfactory." Similar

view have been taken by the Hon'ble Delhi High Court in the

case   of   Commissioner    of        Income   Tax    vs.,    Taikisha

Engineering India Ltd., 370 ITR 338 (Del.) (HC). The Hon'ble

Punjab & Haryana High Court in the case of Abhishek

Industries Ltd., 380 ITR 652 (P & H) (HC) held that "onus is

on A.O. to record satisfaction that interest bearing funds used

for investment to earn tax free income."           Considering the

facts and circumstances of the case in the light of

submissions of the Learned Counsel for the Assessee and in

the absence of any satisfaction recorded by the A.O. for

making disallowance under section 14A read with Rule 8D

of the I.T. Act, no disallowance could be made in the case of

the assessee. We, accordingly, set aside the Orders of the
                               12
                            ITA.Nos.3080/D/2017, 5408 & 5601/D/2018
                                  M/s. ATS Infrastructure Ltd., New Delhi


authorities below and delete the entire addition. In the

result, Ground Nos.3 and 4 of the appeal of the Assessee are

allowed.


9.         In the result, ITA.No.3080/Del./2017 for the A.Y.

2012-2013 of the Assessee is allowed.


A.Y. 2013-2014 :


10.        On Ground Nos.1 to 4, the assessee challenged

the disallowance of Rs.2,04,97,971/- under section 14A

read with Rule 8D of the I.T. Rules, 1962.


11.        The A.O. noted that in the balance-sheet filed

along with the return of income, an investment of Rs.414.96

crores have been shown as non-current investment. In view

of this, disallowance is to be made as per Section 14A read

with Rule 8D. The assessee was asked to submit as to why

disallowance under section 14A should not be made. The

assessee    submitted   that        during    the     year      under

consideration the assessee has not earned any income by

way of dividend and that no expenditure is incurred in

relation to any exempted income. The A.O. however, did not
                                 13
                               ITA.Nos.3080/D/2017, 5408 & 5601/D/2018
                                     M/s. ATS Infrastructure Ltd., New Delhi


accept   the    contention     of     assessee     and      made       the

disallowance of Rs.2,04,97,971/- under section 14A read

with Rule 8D of I.T. Rules, 1962. On appeal, the Ld. CIT(A)

dismissed the appeal of assessee.


12.       Learned Counsel for the Assessee submitted that

in assessment year under appeal assessee has not earned

any exempt income. He has referred to PB-29 which is

balance-sheet    of   the    assessee     to   show      that     as    on

31.03.2013 assessee has not earned any dividend income.

He has submitted that the Hon'ble Supreme Court in the

case of CIT vs., Chettinad Logistics (P.) Ltd., [2018] 95

taxmann.com 250 (SC) dismissed the SLP of the Revenue by

confirming the Order of the Hon'ble Madras High Court

holding that "Section 14A of the Act cannot be invoked where

no exempt income is earned by the assessee". He has relied

upon Judgment of Hon'ble Delhi High Court in the case of

Cheminvest Ltd., vs., CIT 378 ITR 33 (Del.) in which the

Hon'ble High Court similarly held that "if assessee has not

earned exempt income, no disallowance could be made." He
                              14
                            ITA.Nos.3080/D/2017, 5408 & 5601/D/2018
                                  M/s. ATS Infrastructure Ltd., New Delhi


has, therefore, submitted that no disallowance could be

made by the authorities below.


13.       The Ld. D.R. relied upon the Orders of the

authorities below.







14.       We have considered the rival submissions. It is

well settled Law that in the absence of any exempt income

no addition can be made by the A.O. The above decisions

squarely apply to the facts of the case. It is not in dispute

that during the assessment year under appeal assessee has

not earned any exempt income, therefore, no disallowance

under section 14A read with Rule 8D could be made.

Further no satisfaction as required under section 14A have

been recorded by the A.O. in the assessment order.

Therefore, the issue would also be squarely covered by

reasoning given in A.Y. 2012-2013 (supra). In view of the

above, we set aside the Orders of the authorities below and

delete the addition. Ground Nos. 1 to 4 of the appeal of the

Assessee are allowed.
                                15
                              ITA.Nos.3080/D/2017, 5408 & 5601/D/2018
                                    M/s. ATS Infrastructure Ltd., New Delhi


15.        On Ground Nos.5 and 6, assessee challenged

disallowance of Rs.39,89,019/- made by A.O. on account of

interest under section 36(1)(iii) of the I.T. Act, 1961.


16.        The A.O. noted that in A.Y. 2011-2012 he has

made disallowance of interest on loan and advances given to

M/s. Prateek Resorts & Builders Pvt. Ltd., The A.O,

therefore, disallowed the impugned amount.


17.        After considering the rival submissions, we are of

the view that the issue is same as have been considered in

A.Y. 2012-2013 (supra). Both the parties have submitted

that the Order in A.Y. 2012-2013 may be followed in this

year. In this view of the matter, we set aside the Orders of

the authorities below and delete the addition. In the result,

Ground Nos.5 and 6 of the appeal of the Assessee are

allowed.


18.        In the result, ITA.No.5408/Del./2018 for the A.Y.

2013-2014 of the Assessee is allowed.
                             16
                           ITA.Nos.3080/D/2017, 5408 & 5601/D/2018
                                 M/s. ATS Infrastructure Ltd., New Delhi


A.Y. 2014-2015 :


19.       On Ground Nos. 1 to 6, the assessee challenged

the disallowance of Rs.2,39,66,670/- made by A.O. invoking

the provisions of section 14A read with Rule 8D of the I.T.

Rules, 1962.


20.       The A.O. noted that in assessment year under

appeal assessee has shown investment of Rs.543.71 crores

as    non-current   investment.    The      A.O.      noted       that

disallowance have to be made under section 14A of the I.T.

Act. The assessee submitted that in assessment year under

appeal, assessee has earned dividend of Rs.1,97,449/- only

for which no expenditure was incurred in relation to exempt

income. The A.O. however under the above provisions

disallowed the impugned amount. The Ld. CIT(A) confirmed

the addition.


21.       Learned Counsel for the Assessee reiterated the

submissions made before the authorities below. He has

submitted that the assessee has received this dividend out

of investment made in Reliance Mutual Funds whose
                              17
                            ITA.Nos.3080/D/2017, 5408 & 5601/D/2018
                                  M/s. ATS Infrastructure Ltd., New Delhi


opening and closing balance during the year were NIL (PB-

26). Thus, the average value of investment will be calculated

as NIL as is evident from audited financial year statement of

the assessee. Complete copies are placed at pages 7 to 43 of

the PB. He has submitted that provisions of Section 14A

read with Rule 8D provide for disallowance of expenses

which are incurred only in relation to exempt income

earned. He has relied upon the Judgment of Hon'ble Delhi

High Court in the case of ACB India Ltd., (supra) and other

decisions and submitted that the issue is same as has been

considered in A.Y. 2012-2013. He has further submitted

that no satisfaction have been recorded by A.O. in the

assessment order before making any disallowance as

required under section 14A of the I.T. act. In the alternate

contention, he has submitted that since assessee earned

only Rs.1,97,449/- as dividend income, therefore, impugned

addition is unjustified and disallowance should restricted to

the dividend income of Rs.1,97,499/- and relied upon

Judgment of Hon'ble Delhi High Court in the case of Joint

Investment Pvt. Ltd., [2015] 372 ITR 694 (Del.) (HC).
                              18
                            ITA.Nos.3080/D/2017, 5408 & 5601/D/2018
                                  M/s. ATS Infrastructure Ltd., New Delhi


22.        On the other hand, Ld. D.R. relied upon the

Orders of the authorities below.


23.        Considering the rival submissions, we are of the

view that the issue is same as have been considered in A.Y.

2012-2013. Following the reasons for decision for the same

and in the absence of any satisfaction recorded by the A.O.

in the assessment order, we are of the view that no addition

could be made in the matter. We, accordingly, set aside the

Orders of the authorities below and delete the entire

addition. In the result, Ground Nos.1 to 6 of the appeal of

the Assessee are allowed.


24.        In the result, ITA.No.5601/Del./2018 for the A.Y.

2014-2015 of the Assessee is allowed.


25.        To sum-up, all the appeals of the Assessee are

allowed.


           Order pronounced in the open Court.


    Sd/-                                  Sd/-
   (N.K. BILLAIYA)                       (BHAVNESH SAINI)
ACCOUNTANT MEMBER                       JUDICIAL MEMBER
Delhi, Dated 15th January, 2020
VBP/-
                              19
                            ITA.Nos.3080/D/2017, 5408 & 5601/D/2018
                                  M/s. ATS Infrastructure Ltd., New Delhi



Copy to

1.   The appellant
2.   The respondent
3.   CIT(A) concerned
4.   CIT concerned
5.   D.R. ITAT "A" Bench
6.   Guard File


                       // BY Order //




            Asst. Registrar : ITAT Delhi Benches :
                             Delhi.

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