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2017 (12) TMI 1411 - AT - Income TaxTDS u/s 194C - Disallowance u/s 40(a)(ia) - disallowance against advertisement material - Held that - As in assessee s own case for A.Y.2009- 10 the assessee had made payments for purchase of material and had admittedly not supplied the materials to the job worker and hence the same would not fall under the definition of work as per section 194C of the Act, hence there is no violation of section 194C warranting any disallowance u/s 40(a) (ia) of the Act. - Decided against revenue Addition u/s 14A read with Rule 8D - Held that - No disallowance U/s 14A of the Act need to be made by invoking the provisions of Rule 8D (2) (ii) of the Rules as the investments admittedly are business expediency investments and strategic investments. Since the investments were held to be business expediency investments, there is no case for making any disallowance by adopting Rule 8D (2) (iii) of the Rules also Addition being interest attributed to alleged working capital employed in Wind Mill Unit although the Unit s Balance Sheet reflects outflow to Consolidated Account - Deduction u/s 80IA - Held that - We note that it is not a cash flow statement at all. Accounting Standard-3 issued by ICAI provides the method to draw the cash flow statement having operating investment and financing activities. Cash flow statement should explain on what account the cash is coming in the organization and on what account cash is going out side the organization. This statement shows electricity sale in sources and decrease in debtors in application which does not have any scene. What includes in further debts of ₹ 14,13,885/- has not been explained. We also note that figures explained to assessing officer and figures mentioned in the above cited cash flow statement does not tally. Considering the factual position explain above, we are of the view that order passed by the ld CIT(A) does not have any infirmity and hence we confirm the order passed by ld CIT(A).
Issues Involved:
1. Disallowance under Section 40(a)(ia) of the Income Tax Act. 2. Addition under Section 14A read with Rule 8D of the Income Tax Act. 3. Disallowance of claim under Section 80IA of the Income Tax Act. Issue-wise Detailed Analysis: 1. Disallowance under Section 40(a)(ia) of the Income Tax Act: Facts: The Revenue appealed against the deletion of disallowance of ?1,12,07,224/- made by the Assessing Officer (AO) under Section 40(a)(ia) of the Income Tax Act. The assessee, a sole proprietor, incurred expenses for purchasing advertisement materials like umbrellas, bags, and pens with the "TT" logo, but did not deduct TDS on these expenses. AO's Contention: The AO argued that the payments for advertisement materials constituted job work, attracting TDS under Section 194C. The AO disallowed the expenses under Section 40(a)(ia) for non-deduction of TDS. Assessee's Argument: The assessee contended that the payments were for outright purchase of materials and not for any job work, thus not attracting Section 194C. The assessee cited previous CIT(A) decisions in their favor for similar transactions in earlier years. CIT(A) Decision: The CIT(A) deleted the disallowance, agreeing with the assessee that the payments were for purchase of materials and not for job work. This decision was consistent with the CIT(A)’s rulings in previous years. Tribunal's Ruling: The Tribunal upheld the CIT(A)’s order, citing the principle of consistency and the Supreme Court's decision in Radhasoami Satsang vs. CIT. The Tribunal noted that the issue was already decided in favor of the assessee in previous years and the department did not appeal those decisions. Hence, no disallowance under Section 40(a)(ia) was warranted. Conclusion: The appeal by the Revenue on this ground was dismissed. 2. Addition under Section 14A read with Rule 8D of the Income Tax Act: Facts: The AO made an addition of ?1,95,30,660/- under Section 14A read with Rule 8D, disallowing expenses related to exempt dividend income of ?2,870/-. AO's Contention: The AO argued that a portion of the borrowed funds was used to acquire shares, which could yield exempt income, thus justifying the disallowance under Section 14A. Assessee's Argument: The assessee claimed that the investments were made from own funds and not borrowed funds. The assessee also argued that the investments were for business expediency and strategic purposes, not merely for earning exempt income. CIT(A) Decision: The CIT(A) deleted the addition, accepting the assessee's argument that the investments were made from own funds and were for business purposes. Tribunal's Ruling: The Tribunal upheld the CIT(A)’s order, noting that the issue was covered by the decision of the coordinate Bench in the assessee’s own case for the assessment year 2009-10. The Tribunal agreed that the investments were for business expediency and strategic purposes, and thus, no disallowance under Section 14A was warranted. Conclusion: The appeal by the Revenue on this ground was dismissed. 3. Disallowance of claim under Section 80IA of the Income Tax Act: Facts: The assessee claimed a deduction under Section 80IA for profits from a windmill unit. The AO disallowed ?20,00,000/- of interest attributed to working capital employed in the windmill unit, arguing that the assessee used consolidated funds, including borrowed funds, for the windmill unit. AO's Contention: The AO observed that the windmill unit was financed by borrowings and a part of the loan from the consolidated fund was used for running the windmill unit. The AO apportioned the interest expense to the windmill unit, reducing the profit eligible for deduction under Section 80IA. Assessee's Argument: The assessee argued that the repayment of the loan was made from business receipts and not from borrowed funds. The assessee submitted a cash flow statement to support their claim. CIT(A) Decision: The CIT(A) partly allowed the appeal, reducing the disallowance to ?20,00,000/- instead of ?29,04,452/- as made by the AO. The CIT(A) agreed with the AO that some portion of the loan was used for the windmill unit but found the AO’s apportionment method flawed. Tribunal's Ruling: The Tribunal upheld the CIT(A)’s order, agreeing that the cash flow statement provided by the assessee was not a proper cash flow statement and did not substantiate the claim that no borrowed funds were used. The Tribunal found no infirmity in the CIT(A)’s decision to restrict the disallowance to ?20,00,000/-. Conclusion: The cross-objection filed by the assessee was dismissed. Final Order: The Tribunal dismissed the Revenue’s appeal and the assessee’s cross-objection, upholding the CIT(A)’s decisions on all grounds.
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