2023 (8) TMI 372 - AT - Income Tax

Addition on account of difference in amount of income offered by assessee and entries mentioned in ITS statement - HELD THAT - CIT(A) while giving finding has not taken into consideration the affidavit as with regard to REVO Content Services (P) Ltd. The Bench is of considered opinion that when a fact is denied specifically on affidavit before any quasi judicial authority, specially Tax authorities who have powers of enquiry too, then without any attempt to discredit the depositions made in affidavit on basis of some facts or evidence the claim should be believed. Specially when an assessee is telling on oath that it has no concern with a particular party then that should be enquired into and which is missing in the orders of Ld. Tax authorities here. Addition on that account is not sustainable. For Huawei Telecommunication (India) Company (P) Ltd. once assessee does not deny its transaction with then in the absence of any confirmation being filed from the said company that the amount involved was only 6,09,083/- and not 6,93,767/- the assessee can only benefit to the extent that addition can be restricted to Rs. 84,684/- (6,93,767- 6,09,083) but that will entitle assessee to full credit of Rs. 52,881/- against Rs. 16,500/-. Accordingly, the issue is allowed to the benefit of assessee however, Ld. AO will re-compute the disallowance and credit as per aforesaid observations. Disallowance of interest against interest free loans given to subsidiary companies - money was given out of internal accruals and no disallowance is required to be made - HELD THAT - As observed admitted states of affairs appearing on record there appears to be no dispute to the fact that assessee s total reserves and funds far exceeded the interest free advances - bifurcation of the funds available with the company and assets held as on 31.03.2011 has been provided which support the contentions of Ld. AR that there is a presumption that interest free funds are used when available to give interest free advances for non-business purposes.See CIT vs. Reliance Utility and Power ltd. 2009 (1) TMI 4 - BOMBAY HIGH COURT - Decided in favour of assessee.

Summary

Issues Involved:
The appeal against the order of CIT(A)-43, New Delhi was filed with a delay of 18 days due to personal reasons. The issues involved include the addition of income related to undisclosed TDS, disallowance of interest on interest-free loans to subsidiary companies, and disallowance under section 14A.

Issue 1 - Addition of Income related to Undisclosed TDS:
The appeal pertained to the addition of Rs. 12,55,138/- on account of a difference in income offered by the assessee and entries in the ITS statement. The assessee submitted details to reconcile the undisclosed TDS, but discrepancies were found in the reconciliation for certain parties. The Tribunal observed that when a fact is denied specifically on affidavit before tax authorities, the claim should be believed. Thus, the addition related to a specific party was deemed unsustainable. Regarding another party, the Tribunal allowed a partial benefit to the assessee by restricting the addition based on the nature of the transaction.

Issue 2 - Disallowance of Interest on Interest-Free Loans:
The disallowance of Rs. 71,36,000/- out of interest paid on loans given to subsidiary companies was challenged. The CIT(A) considered the interest-free funds available with the assessee and the interest-bearing funds. It was observed that the disallowance rate of 16% was not appropriate given the varying interest rates on loans. The Tribunal agreed with the assessee's submissions and directed the AO to recompute the disallowance based on specific rates for each advance. The Tribunal found that the assessee had sufficient interest-free funds to support the interest-free advances, leading to a partial allowance of the appeal.

Separate Judgement by Anubhav Sharma, JM:
The Tribunal, comprising Sh. N.K.Billaiya, Accountant Member, and Sh. Anubhav Sharma, Judicial Member, pronounced the order on 14th June, 2023, allowing the appeal partly and providing detailed reasoning for each issue raised by the assessee.