Allen Career Institute Vs The JCIT (ITAT Jaipur)
Where assessee is having mixed funds and interest free funds are larger than the amount of investments made during the year, can a presumption be drawn that the investments in the mutual fund units have been made out of interest- free funds and not out of interest bearing funds. In this regard, we find that the assessee is having opening bank balance in their FDR account at the beginning of the year amounting to Rs. 62.99 Cr. and closing balance of Rs. 98.03 Cr with fresh FDRs made during the year amounting to Rs. 58.03 Cr and FDRs matured during the year amounting to Rs. 22.99 Cr. The funds in the FDRs accounts clearly reflect the interest free funds which are available with the assessee which is far in excess of the amount of investments which has been made in the Mutual Funds units amounting to Rs. 3 Cr. Accordingly, on appreciation of the said facts and in absence of anything to the contrary, as per the settled legal proposition, a presumption can be drawn that the investments in the mutual fund units have been made out of interest- free funds and not out of interest bearing funds.
Full Text of the ITAT Order is as follows:-
This is an appeal filed by the assessee against the order of learned Commissioner (Appeals), Kota dated 26-11-2012 for assessment year 2009-10 wherein the assessee has taken the following grounds of appeal are as under :–
“1. The impugned additions and disallowance made in the order dated 29-12-2011 under section 143(3) of the Act, bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same kindly be deleted.
2. Rs. 20,45,751: The learned Commissioner (Appeals) erred in law as well as on the facts of the case in confirming the disallowance of Rs. 20,45,751 out of interest expenses alleging not for business purpose and further erred in also invoking section 14A of the Act. The disallowance so made and confirmed by the learned Commissioner (Appeals), is contrary to the provisions of law and facts hence, kindly be deleted in full.
3. Rs. 11,57,453: The learned Commissioner (Appeals) erred in law as well as on the facts of the case in confirming the disallowance of Rs. 11,57,453 out of interest expenses alleging incurred on capital expenditure. The disallowance so made and confirmed by the learned Commissioner (Appeals), is contrary to the provisions of law and facts hence, kindly be deleted in full.
4. Rs. 4,920: The learned Commissioner (Appeals) erred in law as well as on the facts of the case in confirming the disallowance of Rs. 4,920 out of interest payment on account of alleged notional interest on interest free advance. The disallowance so made and confirmed by the learned Commissioner (Appeals), is contrary to the provisions of law and facts hence, kindly be deleted in full.
5. The learned assessing officer further erred in law as well as on the facts of the case in charging interest under section 234A, 234B, 234C & 234D of the Act and as also in withdrawing of interest under section 244A of the Act. The appellant totally denies its liability of charging and withdrawal of any such interest. The interest so charged/withdrawn, being contrary to the provisions of law and facts, kindly be deleted in full.”
2. Firstly, regarding ground No. 1 and ground No. 4, the same were not pressed during the course of hearing. Hence, the same are dismissed as not pressed.
3. Regarding ground No. 5 relating to charging of interest under section 234A, 234B, 234C & 234D and withdrawal of interest under section 244A of the Act, no arguments have been advanced by the learned Authorised Representative during the course of hearing and the levy and withdrawal of interest being consequential in nature, the said ground taken by the assessee is dismissed.
4. Now coming to ground No. 2 where the assessee has challenged the disallowance of Rs. 20,45,751 out of interest expenses incurred by the assessee on availing the bank overdraft facility which was debited in the profit and loss account and claimed in the return of income.
Facts and findings of the Assessing officer
5. During the course of assessment proceedings, the assessing officer observed that the assessee has made following investments towards purchase of mutual funds units in fixed maturity plans out of the funds withdrawn from the bank overdraft account :–
