आयकर अपीलीय अिधकरण चਔीगढ़ (cid:586)ायपीठ “ए” चਔीगढ़ , , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH HEARING THROUGH: PHYSICAL MODE ঒ी राजपाल यादव, उपा(cid:559)঴ एवं ঒ी कृ णव(cid:566) सहाय, लेखा सद(cid:735)

BEFORE: SHRI. RAJPAL YADAV, VP & SHRI. KRINWANT SAHAY, AM आयकर अपील सं ITA No. 588/Chd/ 2018 ./

िनधा१रण वष१ Assessment Years : 2012-13 /

The DCIT बनाम M/s Hero Cycles Ltd.

C-V, Ludhiana Hero Nagar, G.T. Road Ludhiana (cid:725)ायी लेखा सं PAN NO: AAACH4073P ./

अपीलाथ५ Appellant ঋ(cid:529)थ५ Respondent / /

आयकर अपील सं ITA No. 473/Chd/ 2018 ./

िनधा१रण वष१ Assessment Years : 2012-13 /

M/s Hero Cycles Ltd. बनाम The ACIT Hero Nagar, G.T. Road Ludhiana C-V, Ludhiana (cid:725)ायी लेखा सं PAN NO: AAACH4073P ./

अपीलाथ५ Appellant ঋ(cid:529)थ५ Respondent / /

िनधा१ौरती की ओर से Assessee by : Shri Ashwani Kumar, Shri Ashish Aggarwal &

/

Ms. Deepali Aggarwal, C.A’s राज(cid:738) की ओर से Revenue by : Shri Manav Bansal, CIT, DR /

सुनवाई की तारीख Date of Hearing : 29/07/2025 /

उदघोषणा की तारीख Date of Pronouncement : 08/09/2025 /

आदेश Order /

PER KRINWANT SAHAY, AM:

The present appeal is filed by the Revenue and Cross Appeal is filed by the Assessee against the order of the Ld. CIT(A)-2, Ludhiana dt.

15/02/2018 pertaining to Assessment Year 2012-13.

2. Since both the above appeals were h eard together therefore they are being disposed off by this consolidated order for the sake of convenience and brevity.

3. At the first instance we will deal with the appeal of the department in ITA No. 588/Chd/2018 wherein following grounds have been raised.

I. Whether on the facts and circumstances of the case and in law, the CIT(A) was right in deleting the disallowance of Rs. 14,15,10,213/-made u/s 14A of the Act without establishing the fact whether own funds were actually used for making investments while ignoring the fact that the assessee had huge borrowings on which interest expenses were claimed and also ignoring the CBDT circular No. 5 of 2014?

II. Whether on the facts and circumstances of the case and in law, the CIT(A) was right in deleting the disallowance of Rs. 8,98,66,194/-made on account of excessive commission expenses while ignoring the fact that a clear relation existed between the assessee company and the firm, as a director of the assessee company was also a partner in the firm concerned?

III. Whether on the facts and circumstances of the case and in law, the CIT(A) was right in deleting the disallowance u/s 36(1)(iii) of the Act on account of advances made to /debit balances of M/s Hero Exports and M/s Hero Motors Ltd. on the ground of sufficient own funds while ignoring that the assessee has huge borrowings on which interest expenses were claimed?

4. Vide ground no. 1 the grievance of the Department relates to the deletion of disallowance of Rs. 14,15,10,213/- made by the A.O. by invoking the provisions of Section 14A of the Income Tax Act, 1961.

(hereinafter referred to as Act).

5. Facts of the case in brief are that the assessee filed its return of income on 20/03/2014 declaring an income of Rs. 140,32,08,590/- which was processed under section 143(1) of the Act. Later on the case was selected for scrutiny. The A.O. during the course of assessment proceedings noticed that the assessee earned dividend income of Rs.9,19,28,102/- and LTCG taxable Rs. 7,59,39,798/- and Rs.6,06,39,256/- which were claimed exempt under section 10(38) of the Act and that the assessee had an investment, income of which is not includible in total income of Rs.5,70,97,51,129/- and Rs.6,06,97,35,636/- as on 31/03/2011 and 31/03/2012 respectively. The A.O. also observed that the assessee claimed interest expenditure of Rs.38,91,69,331/- during the year under consideration. He asked the assessee to explain and submit the details of expenditure relating to the earning of tax free income. The assesse furnished the reply which has been reproduced by the A.O. at page no. 2 to 15 of the assessment order dt. 03/03/2015, avoiding repetition the same is not being repro