2013 (6) TMI 884 - AT - Income Tax

Summary

Issues involved: The judgment involves appeals by the Revenue for the assessment years 2005-06, 2006-07, and 2007-08, addressing various issues including disallowance of charges paid, disallowance of interest on borrowed funds, disallowance under section 14A, and charges paid without tax deduction at source.

Assessment Year 2005-06:
1. Disallowance of Charges Paid to M/s.Fumigation Services:
The Commissioner of Income-tax(Appeals) erred in granting relief under section 40(a)(ia) for charges paid to M/s.Fumigation Services. The Tribunal held that the decision of the Special Bench of the Tribunal no longer holds good due to a judgment of the Hon'ble Calcutta High Court. Consequently, the disallowance made by the Assessing Officer was confirmed, deciding in favor of the Revenue.

2. Disallowance of Freight Charges to M/s.Goodearth Maritime Limited:
The Revenue challenged the deletion of disallowance under section 40(a)(ia) for freight charges paid to M/s.Goodearth Maritime Limited. The Tribunal upheld the Commissioner's decision, citing that the amendment to section 40(a)(ia) regarding TDS payment before the due date for filing of the return is retrospective. As the assessee complied with this requirement, the disallowance was not justified, ruling against the Revenue.

Assessment Year 2006-07:
1. Disallowance of Interest on Borrowed Funds:
The Revenue contested the deletion of the addition made for disallowance of interest on borrowed funds under section 36(1)(iii). The Tribunal upheld the Commissioner's decision, stating that there was no diversion of funds and the loans were covered by the assessee's internal resources, deciding against the Revenue.

2. Disallowance under Section 14A:
The Revenue challenged the deletion of disallowance under section 14A. While Rule 8D did not apply retrospectively, the Tribunal modified the decision, reducing the disallowance amount, partly allowing the ground raised by the Revenue.

3. Charges Paid to M/s.Fumigation Services:
The Revenue raised an issue regarding charges paid to M/s.Fumigation Services without tax deduction at source. The disallowance was confirmed, aligning with the decision for the assessment year 2005-06.

Assessment Year 2007-08:
1. Disallowance of Interest on Borrowed Funds:
Similar to the assessment year 2006-07, the Revenue contested the deletion of disallowance of interest on borrowed funds under section 36(1)(iii). Following the previous decision, the Tribunal upheld the Commissioner's order, ruling against the Revenue.

2. Disallowance under Section 14A:
The Revenue challenged the deletion of disallowance under section 14A. The Tribunal retained a disallowance amount, partly allowing the Revenue's claim.

3. Charges Paid to M/s.Fumigation Services:
The issue of charges paid to M/s.Fumigation Services without tax deduction at source was raised. The disallowance was confirmed, in line with the decision for the assessment year 2006-07.

4. Disallowance of Lorry Expenses:
The Revenue contested the relief granted towards disallowance of lorry expenses not supported by evidence. The Tribunal found the disallowance confirmed by the Commissioner to be sufficient considering the nature of expenses, deciding against the Revenue.

In conclusion, the Tribunal partly allowed the appeals filed by the Revenue for all three assessment years, addressing various issues related to disallowances and charges paid without tax deduction at source.