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2020 (3) TMI 592 - AT - Income TaxAddition on account of diversion of interest bearing funds - HELD THAT - Undoubtedly the own interest free funds of the assessee exceeds the amount of interest free advances therefore we are of the view that no disallowance of interest expenses on account of diversion of the fund is warranted. See RELIANCE UTILITIES POWER LTD. 2009 (1) TMI 4 - BOMBAY HIGH COURT - thus we hold that no disallowance of interest expense claimed by the assessee can be made on account of loans and advances - Decided in favour of assessee Nature of expenses - Information Technology Expenses - revenue or capital expenditures - HELD THAT - AO in his assessment order has recorded the findings that the assessee has not furnished the supporting evidences to justify the disputed expenditure as revenue in nature. However we find that the disallowance have been made by the AO treting the same as capital in nature. Thus it is implied that the AO has not doubted on the genuineness of the expenses claimed by the assessee. Had the AO been doubted on the genuineness of the expenses claimed by the assessee then he would have disallowed the entire expenditure. But he has not done so. Now the controversy arises whether the expenditure claimed by the assessee representing the capital expenditure which are eligible for depreciation. It is the admitted fact that there was no allegation of the revenue to the effect that some asset came into existence out of such expenditure. Further more we find that major expenses were incurred by the assessee in the name of three parties which were providing services to the assessee as discussed above. On perusal of the same expenses we find that these expenditure are incurred in routine and therefore no benefit of enduring nature is arising. Similarly we also note that the expenses incurred on IT consumables are also routine expenses which doesn not bring any fixed asset into existence. See NJ. INDIA INVEST (P.) LTD. 2013 (7) TMI 738 - GUJARAT HIGH COURT . Disallowance u/s 14A r.w.r. 8D - HELD THAT - As own fund of the assessee exceeds the amount of investment. This fact was also not disputed by the Ld. DR appearing for the Revenue. Accordingly we presume that the investment was made by the assessee out of its own fund. In holding so we find support and guidance from the judgment of Hon ble Bombay High Court in the case of Reliance Utilities and Power Ltd 2009 (1) TMI 4 - BOMBAY HIGH COURT - no disallowance of interest expense claimed by the assessee can be made on account of investment as discussed above. Hence we do not find any infirmity in the order of the ld. CIT-A. Addition representing the income as shown in the TDS certificate - certain entries in the form 26AS showing the TDS deducted by several parties only which was not claim by the assessee in its income tax return - HELD THAT - Admittedly there is no change in the rate of tax for the year under consideration vis-a-vis in the subsequent assessment year. Therefore even the income pertaining to the year under consideration has been offered to tax in the subsequent assessment year there is no loss to the revenue and therefore no addition can be made. In holding so we find support and guidance from judgment of Hon ble S.C. in the case of CIT vs Excel Industries 2013 (10) TMI 324 - SUPREME COURT . Disallowance u/s.36(1)(va) on account of late payment of Employee s contribution of PF - HELD THAT - Assessee is not eligible for deduction on account of late payment of employees Contributiuon by the order of the Hon ble Gujarat High Court in the case of CIT versus GSRTC 2014 (1) TMI 502 - GUJARAT HIGH COURT .
Issues Involved:
1. Deletion of addition on account of disallowance of interest in respect of interest-free advances. 2. Deletion of addition on account of Capital Expenditure (Information Technology Expenses). 3. Restriction of addition under section 14A read with Rule 8D. 4. Deletion of addition on account of income corresponding to TDS. 5. Disallowance under section 36(1)(va) on account of late payment of Employee’s contribution to PF. Issue-wise Detailed Analysis: 1. Deletion of Addition on Account of Disallowance of Interest: The Revenue contended that the CIT(A) erred in deleting the addition of ?6,77,67,630/- made by the AO for diversion of interest-bearing funds. The assessee had given advances for the purchase of land/development rights without charging interest. The AO disallowed the interest expenses, assuming the advances were for non-commercial activities. However, the CIT(A) and the Tribunal found that the assessee's own interest-free funds exceeded the amount of advances, thus no disallowance was warranted. This was supported by judgments from the Bombay High Court in Reliance Utilities and Power Ltd. and HDFC Bank Ltd., and the Gujarat High Court in UTI Bank Ltd., which established that if interest-free funds are sufficient, no disallowance can be made. 2. Deletion of Addition on Account of Capital Expenditure (Information Technology Expenses): The Revenue argued that the CIT(A) erred in deleting the addition of ?7,05,498/- by treating Information Technology Expenses as capital expenditure. The assessee incurred ?8,37,793/- on IT charges, which the AO treated as capital in nature. However, the CIT(A) found these expenses to be routine and not providing enduring benefits, thus treating them as revenue in nature. The Tribunal upheld this view, noting that the expenses were for maintenance and support services, not for creating new assets, referencing the Gujarat High Court's decision in CIT Vs N.J. India Invest(P) Ltd. 3. Restriction of Addition under Section 14A read with Rule 8D: The Revenue challenged the CIT(A)'s decision to restrict the addition from ?13,514/- to ?2,610/- under section 14A read with Rule 8D. The AO had made a disallowance for expenses related to exempt income. The CIT(A) found that the assessee's own funds exceeded the investments, thus no interest expense disallowance was warranted. The Tribunal supported this, citing the Bombay High Court's judgments in Reliance Utilities and Power Ltd. and HDFC Bank Ltd., and the Gujarat High Court in UTI Bank Ltd., which presumed investments were made from interest-free funds if sufficient. 4. Deletion of Addition on Account of Income Corresponding to TDS: The Revenue contended that the CIT(A) erred in deleting the addition of ?15,53,966/- representing income shown in the TDS certificate but not in the return. The AO added this amount, assuming the income was not offered to tax. However, the CIT(A) found that the income was offered in the subsequent year with no tax rate change, resulting in no revenue loss. The Tribunal upheld this, referencing the Supreme Court's judgment in CIT vs Excel Industries, which stated that if the tax rate remains the same, the dispute is academic. 5. Disallowance under Section 36(1)(va) on Account of Late Payment of Employee’s Contribution to PF: The assessee contested the disallowance of ?1,56,601/- for late payment of employees' PF contribution. The Tribunal upheld the disallowance, referencing the Gujarat High Court's decision in CIT versus GSRTC, which held that deductions are only allowed if contributions are credited on or before the due date. Conclusion: The Tribunal dismissed the Revenue's appeal and the assessee's cross-objection. The Tribunal found no infirmity in the CIT(A)'s order on all issues, supporting the deletion of additions and the treatment of expenses as revenue in nature. The Tribunal also upheld the disallowance of late PF contributions based on established legal precedents.
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