2021 (7) TMI 105 - AT - Income Tax

Disallowance u/s 37(1) towards the Interest payment - amalgamation scheme conceived - HELD THAT - As in support of the impugned interest disallowance and find no merit in Revenue s stand in principle. This is for the reason that the hon'ble jurisdictional high court s order approving amalgamation scheme with effect from the appointed date i.e., 01-04-2012 (falling in the relevant previous year) makes it clear that the assessee had undertaken all the liabilities and duties of transferer company, M/s.Everbig Properties Finvest Private Ltd., who infact had borrowed the principle amount of ₹ 54.75 Lakhs in FY.2004-05 and 2006-07 i.e. well before merger. We further notice that the assessee has also filed a petition dt.26-12-2020 inte alia placing on record audited financial statements of M/s.Gajmukh Investments Pvt. Ltd., (FY.2012-13) Form-26AS of M/s.Gajmukh Investments Pvt. Ltd., for the AY.2013-14 and detailed copy of the amalgamation scheme; respectively. Faced with this situation, we deem it appropriate to express our agreement with the Revenue s stand qua the foregoing additional expenditure that all these documents require the Assessing Officer s necessary factual verification. We therefore restore the instant former issue of interest disallowance back to the Assessing Officer for his verification as per law within three effective opportunities of hearing. This former substantive issue is accepted for statistical purposes. CIT-A Restoring the issue of TDS and advance tax claim(s) - Since the power to set aside is no more available to him in light of Section 251(1)(a) containing the omission to this effect vide Finance Act, 2001 w.e.f.01-06-2001. We find merit in the assessee s grievance in principle and deem it appropriate to restore the instant latter issue back to the Assessing Officer at the same time to verify the corresponding facts pertaining to the impugned twin heads.

Summary

Issues Involved:
1. Disallowance of interest payment to M/s.Gajmukh Investments Private Limited.
2. Disallowance of TDS and Advance Tax claim.

Issue 1: Disallowance of interest payment to M/s.Gajmukh Investments Private Limited:

The Assessing Officer disallowed the interest payment of ?94,28,655 claimed by the assessee, as it was found that the total outstanding advance from Gajmukh was only ?55 lakhs, making the interest claimed disproportionate. The appellant argued that the interest was paid for a loan from M/s.Gajmukh, and the amount was repaid in the accounting year 2012-13. However, the appellant failed to provide detailed workings of the interest claimed, supporting documentary evidence, or proof of the interest transaction. The CIT(A) upheld the disallowance, stating that the interest did not pertain to the business of the assessee. The Tribunal noted the amalgamation of M/s.Everbig Properties & Finvest Pvt Ltd into the assessee company, where the liabilities were transferred. The Tribunal agreed with the Revenue's stand, directing the Assessing Officer to verify the documents provided by the assessee for factual verification.

Issue 2: Disallowance of TDS and Advance Tax claim:

The assessee challenged the CIT(A)'s decision to restore the issue of TDS and Advance Tax claim of ?50,32,183, arguing that the power to 'set aside' was no longer available to the CIT(A) under Section 251(1)(a) post the Finance Act, 2001. The Tribunal found merit in the assessee's argument and decided to restore the issue back to the Assessing Officer for verifying the facts related to the TDS and Advance Tax claim. The appeal was treated as allowed for statistical purposes in relation to these issues.

In conclusion, the Tribunal upheld the disallowance of interest payment to M/s.Gajmukh Investments Private Limited, directing the Assessing Officer to verify the documents provided by the assessee. Additionally, the Tribunal restored the issue of TDS and Advance Tax claim back to the Assessing Officer for further verification, as the power to set aside by the CIT(A) was no longer applicable.