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2012 (8) TMI 266 - AT - Income TaxInterest on borrowed funds - dis-allowance on ground that same has been used to provide interest free loans and advances - assessee contended that interest free advances were made out of mixed funds consisting of borrowed and own funds - Held that - When mixed pool of funds is utilised and no specific borrowed funds are used for investment and sufficient non-interest bearing funds are available presumption is that investment is made out of own non-interest bearing funds. Deletion of dis-allowance upheld. See CIT vs Reliance Utilities and Power Ltd. (2009 (1) TMI 4 - HIGH COURT BOMBAY ) - Decided in favor of assessee. Employees contribution to PF and ESIC - dis-allowance - belated payment - Held that - If the employee s share of contribution is paid before the due date of filing of the return u/s 139(1) then no dis-allowance can be made. See CIT V/s Alom Extrusions Ltd (2009 (11) TMI 27 - SUPREME COURT) - Decided in favor of assessee. Dis-allowance u/s 40(a)(ia) - belated payment of TDS - Held that - Amendment made u/s 40(a)(ia) requires to be treated with retrospective operation. Hence since TDS has been deposited before the due date of filing of the return of income u/s 139(1) therefore we delete the addition made u/s 40(a)(ia) - Decided in favor of assessee.
Issues:
1. Disallowance of interest on interest-free advances. 2. Disallowance of employees' contribution to PF and ESIC. 3. Disallowance under section 40(a)(ia) of the Act. Issue 1: Disallowance of interest on interest-free advances: The Assessing Officer (A.O.) observed that the assessee had given interest-free loans and advances while borrowing funds and disallowed the interest of Rs. 37,79,720. The ld. CIT(A) upheld the disallowance but directed the A.O. to apply the principle from CIT vs. Tin Box Co. to determine if the interest-free advances were from own funds. The Revenue argued that the advances were not from own funds, citing fixed assets' funding from share capital and reserves. The assessee contended that when a mixed pool of funds is used, the presumption is that investments are from non-interest bearing funds. The tribunal, following Reliance Utilities and Power Ltd., rejected the Revenue's plea and upheld the CIT(A)'s decision to delete the disallowance. Issue 2: Disallowance of employees' contribution to PF and ESIC: The A.O. disallowed Rs. 8,48,490 under section 43B r.w.s. 36(1)(va) as belated payments for employees' PF and ESIC contributions. The ld. CIT(A) allowed payments made within the due date extended by PF authorities. The assessee argued that all payments were made before the due date of filing the return u/s 139(1). Relying on Supreme Court and High Court decisions, the tribunal deleted the disallowance, stating that if the employee's share of contribution is paid before the due date of filing the return, no disallowance can be made. Issue 3: Disallowance under section 40(a)(ia) of the Act: The A.O. disallowed Rs. 2,07,51,098 for contract payments to M/s Indage Development Corporation Pvt. Ltd. due to late TDS deposit. The ld. CIT(A) disallowed the deduction but directed allowance in the next assessment year. The assessee contended that TDS was paid before the due date of filing the return u/s 139(1). Citing a recent Calcutta High Court judgment, the tribunal held that as TDS was deposited before the due date, the disallowance under section 40(a)(ia) was not justified and deleted the addition. In conclusion, the tribunal allowed the assessee's appeal and dismissed the Revenue's appeal, ruling in favor of the assessee on all the issues raised in the case.
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