2014 (4) TMI 705 - AT - Income Tax

Disallowance of interest on loans Held that - The term loan obtained by assessee among various other secured loans was in fact carried-over term loan which was reflected in the Balance Sheet as on 31st March, 2008 as well - assessee has submitted detailed explanation before the CIT(A) that it has its own funds available and no part of the borrowed funds were diverted but, the CIT(A) did not examine the facts and went by the observations of the AO - Even though, CIT(A) accepted that funds were given to the sister concern for purchase of land, he was of the opinion that it is diversion of funds though, the contentions of assessee were examined by the authorities, the matter is required to be re-examined thus, the matter is matter is remitted back to the AO for examination about the borrowed funds and see whether any part of the amount has been diverted for non-business purposes Decided in favour of Assessee. Disallowance u/s 40(a)(ia) of the Act Held that - Assessee contended that the amount added back need not be added back is correct - since the CIT(A) has already directed the AO to verify and as submitted by the assessee the details of payments are already stated in the 3CD report as well as enclosure to the returns, AO is directed to allow the amount, if the amounts are paid by due date as per the amended provisions of the Act - It was also contended that the amount of Rs.33,99,622/- was also paid within the period - This amount is also required to be verified and if paid within the dates as permitted by amended provision, no addition can be made Decided in favour of Assessee. Disallowance for want of evidence Held that - It is an admitted fact that the assessee failed to produce any bills or vouchers and in the absence of necessary evidence AO as well as CIT(A) disallowed the amount assessee contended that the disallowance pertains to amounts paid to various Government organisations for land development, permissions, approvals etc. - but, in the absence of any evidence of expenditure, it cannot be allowed Decided against Assessee.

Issues Involved:
1. Allowance under section 40(a)(ia)
2. Disallowance of interest on loans
3. Disallowance under section 40(a)(ia)
4. Claim disallowance for want of evidence
5. Levy of interest under section 234B and 234C

Issue 1: Allowance under section 40(a)(ia):
The appeal was against the Order of the CIT(A)-III, Hyderabad regarding an additional ground on the issue of allowance under section 40(a)(ia). The assessee contended that the entire TDS amount was remitted to the Central Government before the due date for filing the return of income, thus should have been allowed. The legal nature of the ground was contested, but it was admitted for consideration based on Supreme Court principles. The issue was considered in light of the retrospective application of the Finance Act, 2010, and the High Court's decision in a similar case. The Tribunal directed the Assessing Officer to verify the payments and allow the amounts if paid within the specified dates as per the amended provisions of the Act.

Issue 2: Disallowance of interest on loans:
The appeal involved the disallowance of interest on loans by the Assessing Officer due to funds not being utilized for business purposes. The CIT(A) upheld the disallowance, stating that the borrowed funds were transferred to sister concerns without commercial expediency. The Tribunal, after examining the facts, found discrepancies in the A.O.'s observations and directed a re-examination of the issue. It was noted that the A.O. did not consider the detailed explanation provided by the assessee, leading to a decision to set aside the orders and restore the issue for further examination.

Issue 3: Disallowance under section 40(a)(ia):
The Assessing Officer disallowed an amount under section 40(a)(ia) as the assessee failed to remit TDS into the Government account. The CIT(A) confirmed part of the disallowance and directed verification by the A.O. The Tribunal referred to relevant case law indicating the retrospective operation of the provisions and directed the A.O. to allow the amounts if paid within the specified dates as per the amended provisions.

Issue 4: Claim disallowance for want of evidence:
The A.O. disallowed a claim made by the assessee due to lack of evidence for payments made to various Government organizations. The CIT(A) upheld the disallowance as no bills or vouchers were produced. The Tribunal rejected the ground, stating that without evidence, the claim could not be allowed, especially for cash payments.

Issue 5: Levy of interest under section 234B and 234C:
The issue of levy of interest under sections 234B and 234C was deemed consequential and did not require further adjudication. The Tribunal rejected the ground related to this issue.

In conclusion, the Tribunal partly allowed the appeal for statistical purposes, directing re-examination of certain issues, verification of payments, and rejection of claims without supporting evidence. The judgment emphasized adherence to legal provisions and proper examination of facts to ensure fair decisions.

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