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2014 (11) TMI 282 - AT - Income TaxDeletion of disallowance u/s 40(a)(ia) Held that - The assessee has deducted the tax at source on 31.03.2009 and deposited it in May/June, 2009 following the decision in DCIT vs. Rajasthan Art Emporium 2014 (11) TMI 43 - ITAT JODHPUR - the amendment brought in by Finance Act, 2010 in the provisions of section 40(a)(ia) should be read as clarificatory in nature and applied retrospectively - the entire expenditure has been paid by the assessee and nothing remains payable as on the end of the year thus, the order of the CIT(A) is upheld Decided against revenue. Delayed deposition of Employees Contribution to PF & ESI Held that - Following the decision in CIT vs. Hindustan Organics Chemicals Ltd. 2014 (7) TMI 477 - BOMBAY HIGH COURT - the Employees Contribution to PF & ESI has been found allowable if the same is paid till the due date of filing return of income u/s 139(1) - even the employees contribution to PF and ESI has been found allowable if paid prior to the due date of filing return u/s 139 (1) Decided against revenue. Advertisement and Publicity Expenditure Held that - Complete details of payment to each individual is available with the assessee along with the details of work done - the AO without going into details of the issue has made the disallowance as he has applied provisions of section 40A(3) without considering the fact that many parties are involved and payment to none of them exceeds ₹ 20,000 the order of the CIT(A) is upheld Decided against revenue. Disallowance out of discount expenses deleted Held that - Apparently the AO appears to have not applied his mind and not gone into detailed enquiry of the matter - CIT(A) has perused the material made available before him which is part of regular books of accounts of the assessee - CIT(A) rightly found that as there are many parties involved in total discount of ₹ 23,000/- , provision of section 40A(3) does not apply thus, the order of the CIT(A) is upheld Decided against revenue. Disallowance on interest expenses in interest free advances given to sister concern deleted Held that - The AOhas observed about reducing the interest cost without finding any nexus of advance to sister concern with the interest bearing funds - Assessee has ample interest free funds as capital of partners - the partners fund has been given to sister concern relying upon CIT vs. Arihant Avenue & Credit Limited 2014 (10) TMI 790 - GUJARAT HIGH COURT the order of the CIT(A) is upheld Decided against revenue.
Issues Involved:
1. Deletion of disallowance under Section 40(a)(ia) of the Income-tax Act, 1961. 2. Deletion of disallowance for delayed deposition of Employees Contribution to PF & ESI. 3. Deletion of disallowance of Advertisement and Publicity Expenditure. 4. Deletion of disallowance of discount expenses. 5. Deletion of disallowance of interest expenses related to interest-free advances to sister concerns. Issue-wise Detailed Analysis: 1. Deletion of Disallowance under Section 40(a)(ia): The primary issue was the deletion of disallowance of Rs. 12,28,478/- made by applying the provisions of Section 40(a)(ia) of the Income-tax Act, 1961. The assessee had deducted tax at source on 31.03.2009 and deposited it in May/June 2009. The AO disallowed the expenditure as the tax was not deposited in the respective succeeding month as required. However, the CIT(A) allowed the claim based on the amendment in Section 40(a)(ia) by the Finance Act, 2010, which was considered clarificatory and retrospective. The Tribunal upheld the CIT(A)'s decision, referencing various judgments, including the Special Leave Petition dismissal against the Allahabad High Court's decision in CIT vs. Vector Shipping Services Pvt. Ltd., which favored the assessee. 2. Deletion of Disallowance for Delayed Deposition of Employees Contribution to PF & ESI: The AO disallowed Rs. 19,932/- for delayed deposition of Employees Contribution to PF & ESI, arguing it was beyond the prescribed dates under the respective Acts. However, the CIT(A) deleted the disallowance, holding that the provisions of Section 43B are applicable if the payment is made before the due date of filing the return under Section 139(1). The Tribunal upheld the CIT(A)'s decision, referencing the Mumbai High Court's judgment in CIT vs. Hindustan Organics Chemicals Ltd., which allowed such contributions if paid by the due date of filing the return. 3. Deletion of Disallowance of Advertisement and Publicity Expenditure: The AO disallowed Rs. 2,00,000/- out of Rs. 4,48,727/- claimed for wall painting charges, alleging the absence of vouchers and cash payments violating Section 40A(3). The CIT(A) found the disallowance baseless, noting that payments were made to fourteen individuals, each below the prescribed limit under Section 40A(3). The Tribunal upheld the CIT(A)'s decision, noting the AO's failure to examine the recipients and the details provided by the assessee. 4. Deletion of Disallowance of Discount Expenses: The AO disallowed Rs. 23,000/- out of Rs. 6,55,644/- claimed as discounts, citing cash payments violating Section 40A(3). The CIT(A) found the disallowance unwarranted, noting that the payments were made to multiple parties, each below the limit prescribed under Section 40A(3), and supported by bills/vouchers. The Tribunal upheld the CIT(A)'s decision, noting the AO's lack of detailed inquiry. 5. Deletion of Disallowance of Interest Expenses: The AO disallowed Rs. 1,55,246/- as interest expenses related to interest-free advances of Rs. 12,93,724/- to sister concerns, presuming the assessee could have reduced its interest cost. The CIT(A) deleted the disallowance, noting the lack of direct nexus between interest-bearing loans and interest-free advances, and the availability of interest-free funds from partners. The Tribunal upheld the CIT(A)'s decision, referencing the Gujarat High Court's judgment in CIT vs. Arihant Avenue & Credit Ltd., which held that no addition can be made without proving the use of interest-bearing funds for interest-free advances. Conclusion: The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s order on all grounds, favoring the assessee. The decision was pronounced on 25th September 2014.
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