2014 (5) TMI 1123 - AT - Income Tax

Claim of deprecation on the fixed assets acquired - assessee could not produce original invoices/bills for the purchase of fixed assets - Held that - In the light of the fire incident which has gutted the branch offices of the assessee at Bhiwandi and Jamshedpur, the assessee has not been able to produce documents in support of purchase of assets. However, the assessee has been able to show from records expenditure incurred for fixing of the assets. The said claim of the assessee has not been rebutted by the Revenue. In view of the facts and circumstances of the case, we hold that the assessee is entitled to claim deprecation on the fixed assets acquired for Bhiwandi and Jamshedpur Branches. - Decided in favour of assessee TDS u/s 194C - Dis-allowance u/s.40(a)(ia) - non deduction of tds on freight charges - Held that - A perusal of the assessment order as well as the impugned order shows that the assessee during the course of assessment proceedings had produced 164 Form 15-I having value of ₹ 7.28 Crores on 10-11-2009 of which the Assessing Officer had not taken note of although reference of the same has been made in the assessment order. The CIT(Appeals) after considering the same had granted the relief to the assessee to the extent of Form 15-I produced by the assessee before the Assessing Officer. We do not find any error in the order of CIT(Appeals) in giving benefit of Form 15-I valuing ₹ 7.28 Crores. This ground in the appeal of Revenue is accordingly dismissed. For the remaining amount of ₹ 8.41 Crores assessee has submitted that the details of truck-wise list of forms 15-I received and destroyed in fire at Bhiwandi were produced before the Assessing Officer Filing of Form 15-I is mandatory. Obtaining of duplicate Form 15-I could be difficult but not impossible. The assessee could have made some effort in procuring duplicate Forms. There is nothing on record to show that any effort was made to obtain duplicate Forms. Therefore, in our considered opinion, the assessee has not discharged its duty and thus, cannot take advantage of fire in the office to get absolved from this liability. Accordingly, this ground of appeal of the assessee is dismissed. Dis-allowance of foreign exchange fluctuation loss - CIT(Appeals) after examining the documents on record concluded that out of the total loan of ₹ 23.84 Crores, ₹ 21.68 Crores were utilized for working capital purposes and hence allowed the same as expenditure - Held that - The Hon ble Apex Court in the case of Woodward Governor India (P) Ltd., (2009 (4) TMI 4 - SUPREME COURT ) has held that loss suffered by the assessee on account of fluctuation in the rates of foreign exchange as on the date of balance sheet is an expenditure u/s.37(1) of the Act. We do not find any infirmity in the findings of the CIT(Appeals) on this issue. Dis-allowance of interest on diversion of interest bearing loans - Held that - CIT(Appeals) has rightly allowed the interest claimed by the assessee on sums advanced to its subsidiary company as a measure of commercial expediency. We do not find any reason to dislodge the findings of the CIT(Appeals) on the issue.See case of S.A. Builders Ltd., v. CIT 2006 (12) TMI 82 - SUPREME COURT

Issues Involved:
1. Disallowance of depreciation on fixed assets.
2. Disallowance under Section 40(a)(ia) for non-deduction of tax at source on truck hire charges.
3. Disallowance of foreign exchange fluctuation loss.
4. Disallowance of interest on diversion of interest-bearing loans to subsidiary company.

Issue-wise Detailed Analysis:

1. Disallowance of Depreciation on Fixed Assets:
The assessee claimed depreciation on fixed assets amounting to Rs. 4,73,185/-. The assets were acquired for Bhiwandi and Jamshedpur branches, but the original invoices were destroyed in a fire. The assessee provided ledger extracts instead, which were not accepted by the authorities. The Tribunal acknowledged the fire incident and the genuine hardship faced by the assessee. It noted that 78% of the total additions were supported by bills and there was no dispute on the cash outflow for the assets. The Tribunal concluded that the assessee was entitled to claim depreciation on the fixed assets acquired for the affected branches, thus allowing this ground of appeal.

2. Disallowance under Section 40(a)(ia) for Non-Deduction of Tax at Source on Truck Hire Charges:
The assessee faced a disallowance of Rs. 8,41,46,181/- under Section 40(a)(ia) for non-deduction of tax at source on truck hire charges. The Revenue also contested the deletion of disallowance to the extent of Rs. 7,28,38,925/- by the CIT(Appeals). The assessee had produced Form 15-I for Rs. 7.28 Crores during assessment, which the Assessing Officer ignored. The CIT(Appeals) considered these forms and granted relief accordingly. The Tribunal upheld this decision, dismissing the Revenue's appeal on this ground. However, for the remaining Rs. 8.41 Crores, the Tribunal found that the assessee failed to submit Form 15-I within the prescribed time and did not make efforts to obtain duplicates, thus dismissing the assessee's appeal on this ground.

3. Disallowance of Foreign Exchange Fluctuation Loss:
The assessee claimed a loss on foreign exchange fluctuation due to the re-statement of shareholders' loans used for general business purposes. The Assessing Officer disallowed this, considering it a capital liability. The CIT(Appeals) allowed the claim, referencing the Supreme Court's decision in CIT v. Woodward Governor India (P) Ltd., which treats such losses as deductible expenses. The Tribunal found no error in the CIT(Appeals)' decision and dismissed the Revenue's appeal on this issue.

4. Disallowance of Interest on Diversion of Interest-Bearing Loans to Subsidiary Company:
The Revenue contended that the interest-free loan given by the assessee to its subsidiary lacked a business nexus. The assessee argued that the loan was for business exigencies and the subsidiary was a clearing and forwarding agent with 99.9% shareholding by the assessee. The CIT(Appeals) accepted this explanation, supported by the Supreme Court's ruling in S.A. Builders Ltd. v. CIT, which allows interest-free loans to subsidiaries on grounds of commercial expediency. The Tribunal upheld the CIT(Appeals)' decision, dismissing the Revenue's appeal on this ground.

Conclusion:
The appeal of the assessee was partly allowed, granting depreciation on fixed assets and upholding the deletion of disallowance for Rs. 7.28 Crores under Section 40(a)(ia). The Revenue's appeal was dismissed on all grounds, including foreign exchange fluctuation loss and interest on loans to the subsidiary.

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