2013 (1) TMI 808 - AT - Income Tax

Delay in filing the appeal - Held that - assessee was under the bonafide belief that no appeal need to be filed against the order of CIT till reassessment is made - On the facts of the case it is deemed fit in the interest of justice to condone the delay of 26 days - Decided in favor of assessee Whether TDS deducted on professional charges and interest charges - levy interest u/s.201(IA) - Held that - The scope of the order u/s.263 is restricted to the income and expenditure in computation of taxable income - The failure to deduct tax at source and levy of interest there on are to be considered under separate provisions - Thus AO cannot levy interest u/s.201(IA) - Decided in favor of assessee Interest income on loans advanced by the assessee to M/s. Adarsh Developers (P) Ltd - Held that - As per the agreement a coupon rate of 4% p.a for he first quarter was decided - Such interest is subject to TDS - The borrower co. invested the amount in share capital of another co. - the assessee co. has not derived any interest from M/s Adarsh Developers Pvt. Ltd and no interest has been provided in its books - the order of CIT is to be setaside - decided in favor of assessee Disallowance of ₹ 5,35,748/- as factory maintenance - Held that - assessee acquired a property in auction - incurred expenditure of ₹ 5,35,000 as maintenance of plant and machinery - assessee had neither produced any evidence regarding such expense - issue is set aside for reconsidering the allowability of expenditure - remanded bck

Summary

Issues involved:
1. Condonation of delay in filing appeal against CIT order
2. Revision of assessment under Section 263 for non-deduction of TDS and levy of interest
3. Treatment of loans advanced to another company
4. Disallowance of factory maintenance expenditure

Analysis:

Issue 1: Condonation of delay in filing appeal against CIT order
The appeal was filed by the assessee against the order of CIT-IV, Hyderabad for the assessment year 2006-07, with a delay of 26 days. The assessee claimed they believed no appeal was needed until reassessment was made, but later filed the appeal on legal counsel's advice. The Tribunal, considering the interest of justice, decided to condone the delay and proceed with the appeal on merits.

Issue 2: Revision of assessment under Section 263 for non-deduction of TDS and levy of interest
The CIT directed the Assessing Officer to revise the assessment on issues related to non-deduction of TDS and levy of interest under Section 201(IA). However, the Tribunal held that the CIT's scope of revision under Section 263 is limited to income and expenditure considered in arriving at taxable income. The failure to deduct TDS and levy interest falls under separate provisions and cannot be part of the assessment proceedings. Therefore, the Tribunal deleted the CIT's direction to levy interest under Section 201(IA) on Professional Charges and Interest.

Issue 3: Treatment of loans advanced to another company
The CIT questioned the treatment of loans advanced by the assessee to another company, highlighting discrepancies in interest income. The Tribunal examined the agreements and submissions, concluding that the unsecured loan was converted into share capital as per written agreements. As no interest was derived from the company, the Tribunal set aside the CIT's order and allowed the assessee's appeal on this issue.

Issue 4: Disallowance of factory maintenance expenditure
The CIT disallowed a factory maintenance expenditure of &8377;5,35,748 due to lack of evidence. The Tribunal disagreed with the CIT's direction to straightaway disallow the expenditure and remanded the issue to the Assessing Officer for reconsideration based on evidence provided by the assessee.

In conclusion, the Tribunal partly allowed the appeal for statistical purposes, setting aside the CIT's order for fresh consideration by the Assessing Officer on the issue of factory maintenance expenditure.