2013 (10) TMI 919 - AT - Income Tax

Disallowance of discounting charges/ interest - Held that - On the appreciation of the entire material / evidence placed by the assessee before the A.O. in the fresh round of proceedings, the learned CIT (A) has recorded a categorical finding that these expenses were incurred during the course of business - Apart from relying on the assessment order, the learned Departmental Representative could not controvert the findings given by the learned CIT(A) in support of the grant of deduction - D.R. has not brought before us any distinguishable fact which may justify departure from the findings of the co-ordinate bench of the tribunal given for the preceding year based on similar facts and circumstances - the order of the ld. CIT(A) deleting the disallowance relating to the issue is upheld Decided against Revenue. Disallowance of interest on call money Held that - The claim of assessee is certainly allowable in favour of the assessee - the payment of interest on the amounts of the call money stands in the same footing as payment of like interest in the same amount, therefore, such interest constitutes revenue expenditure - the order of the CIT (A) is reasonable and it does not call for any interference - DR has not brought any distinguishable fact which may justify departure from the findings of the co-ordinate bench of the tribunal given on similar facts and circumstances in the case of group concern of the assessee - the order of the ld. CIT(A) deleting the disallowance relating to this issue is also upheld Decided in favour of Assessee.

Summary

Issues:
- Disallowance of discounting charges/interest
- Disallowance of interest on call money
- Penalty u/s 271(1)(c) of the Act

Disallowance of Discounting Charges/Interest:
The appeals by Revenue pertain to connected assessees for the assessment year 1997-1998. The primary issue relates to the disallowance of discounting charges/interest amounting to Rs.46,32,752. The Tribunal had directed the Assessing Officer to re-examine whether such charges were incurred in the course of business. The CIT(A) subsequently deleted the addition, leading to the Revenue's appeal. The Tribunal upheld the deletion based on the assessee's submission of detailed evidence, including fund flow statements and account details, demonstrating that the expenses were business-related. The Tribunal found no justifiable reason to deviate from the earlier year's decision on similar grounds, thereby ruling in favor of the assessee.

Disallowance of Interest on Call Money:
Another issue concerned the disallowance of Rs.13,30,886 as interest on call money, which the ITAT had remanded to the AO for fresh examination. The assessee argued that the interest was a business expenditure related to shares held as stock-in-trade. Despite the assessee's submissions and citing relevant legal precedents, the AO mechanically repeated the addition, prompting an appeal to the CIT(A). The CIT(A) overturned the disallowance, emphasizing that the AO failed to consider the evidence presented by the assessee. The Tribunal, following a similar decision in a related case, upheld the CIT(A)'s order, dismissing the Revenue's appeal.

Penalty u/s 271(1)(c) of the Act:
The appeals by Revenue also challenged the deletion of penalties under section 271(1)(c) for the same assessment year. These penalties were linked to the disallowances discussed in the earlier issues. As the Tribunal had confirmed the CIT(A)'s deletion of the disallowances, it held that the penalties did not stand. The Tribunal dismissed the Revenue's appeals, reiterating the principle that when additions made by the AO are deleted, related penalties under section 271(1)(c) do not survive. Consequently, all four appeals by Revenue were dismissed.

In conclusion, the Tribunal's consolidated order addressed the disallowance of discounting charges/interest, disallowance of interest on call money, and penalties under section 271(1)(c) for the assessment year 1997-1998. The Tribunal consistently upheld the CIT(A)'s decisions, emphasizing the necessity for the AO to consider evidence and legal precedents while determining business-related expenses and penalties.