2021 (9) TMI 641 - AT - Income Tax

Disallowance u/s. 40(a)(ia) - assessee has paid interest to various Non Banking Financial Companies without deducting tax at source - HELD THAT - The above said payments have been made to various NBFCs like L T Finance Ltd. Bajaj Finance Ltd. Reliance Capital Ltd. India Bulls Ltd. Daimler Finance Ltd. Kotak Mahindra Bank Ltd. LIC India Ltd. and Tata Capital Ltd. However the assessee has obtained certificate only from one company named M/s. Tata Capital Ltd. which has claimed to have received interest income - The assessee has not furnished any certificate from any of other payees for the remaining amount. We confirm the disallowance of interest expenditure paid to NBFCs other than M/s. Tata Capital Ltd. With regard to the payment made to M/s. Tata Capital Ltd. we restore the same to the file of the AO for examining the same afresh in the light of additional evidence furnished by the assessee. Accordingly the order passed by Ld. CIT(A) on this issue would stand modified. Disallowance of wages expenditure - AO examined the vouchers relating to wage payments and noticed that most of them are self made thus made ad hoc disallowance of 10% of wage expenditure - HELD THAT - As decided in own case 2019 (12) TMI 1537 - ITAT BANGALORE identical disallowance was deleted as that the books of accounts were not rejected and that expenses were allowed consistently in the past in scrutiny assessments. The tribunal has also noticed that the Ld. CIT(A) has observed that the AO has not pointed any specific defects in any of the vouchers. In the instant year also the Ld. CIT(A) has observed that the AO has given vague reasons for making the disallowance. Further the AO has not rejected the books of accounts. Accordingly following the decisions rendered by the co-ordinate benches we confirm the orders passed by LD CIT(A) on this issue. Disallowance made u/s. 14A r.w.r. 8D - HELD THAT - Identical disallowance was made by the AO u/s. 14A of the Act in AY 2013-14 2019 (12) TMI 1537 - ITAT BANGALORE also and the Tribunal in its order referred supra has confirmed the order passed by LD CIT(A) in restricting the disallowance to the amount of exempt dividend income. We notice that the Hon ble High Court of Delhi in the case of Joint Investment Private Limited 2015 (3) TMI 155 - DELHI HIGH COURT has held that the disallowance u/s. 14A should not exceed exempt income - No infirmity in the decision of Ld. CIT(A) in restricting the disallowance u/s. 14A to the amount of exempt income. Disallowance of interest expenditure relatable to advance given for acquisition of land - HELD THAT - It is the duty of the assessee to prove that the loan funds were not used for giving advance for purchase of land. Further it is necessary for the assessee to address on applicability or otherwise of proviso to sec. 36(1)(iii) to the facts of the present case and it is for the Ld. CIT(A) to take a decision on it. Accordingly we are of the view that this issue requires fresh examination at the end of Ld. CIT(A). As noticed that the AO has estimated the interest expenditure to be disallowed for the whole year. In our view if it is decided that the interest expenditure attributable to advance given for land purchase then the disallowance should be restricted to the period of actual usage of loan funds - we set aside the order passed by LD CIT(A) on this issue and restore the same to his file with the direction to examine the applicability of proviso to sec. 36(1)(iii) to the facts of the present case and its effect on the interest expenditure claimed by the assessee. CIT(A) may take decision in accordance with law after affording adequate opportunity to the assessee.