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2017 (3) TMI 961 - AT - Income TaxDisallowance of interest paid to bank in cash credit account - Held that - On examination of the records, it was found that the account which the lower authorities treated as cash credit account is in fact the current account of the assessee. Therefore, the observations made by the ld. Counsel in their respective years are baseless. The ld. AR before us has submitted the bank statement from where the fund was invested in the capital work-in-progress. On perusal of the bank statement, we find that this is the current account of the assessee and not the cash credit account as held by the lower authorities. Therefore, we are in agreement with the submissions of the ld. AR. AR in support of his claim has submitted the bank book of the assessee. The ld. AR also submitted that the current account of the assessee was classified under the head current assets in the audited financial statement. However, on perusal of the records we find that the bank statement was not submitted by the assessee before the lower authorities. Now the assessee before us has submitted copies of the bank statement which is additional document and needs to be verified by the AO. Therefore, we are inclined to restore this issue to the file of the AO for fresh adjudication - Decided in favour of assessee for statistical purposes. TDS u/s 194J - non deduction of tds on expenditure under the nomenclature of Quality Care Expenses - as per AO such expenses is in the nature of fees for professional and technical services - Held that - Respectfully following the decision in the case of Ansal Land Mark Township (P) Ltd. (2015 (9) TMI 79 - DELHI HIGH COURT ) we deem it fit and appropriate in the interest of natural justice and fair play to set aside this issue to the file of AO to decide the issue afresh in the light of the aforesaid judgment. Accordingly, we direct the AO to verify whether the payees have included the subject-mentioned receipts in their respective returns and paid taxes thereon or not. If that is so, then the assessee should not be treated as assessee in default u/s. 201(1) of the Act. We also find from the submission of Ld. AR that there were certain transactions for the purchase of the goods and the same has been disallowed for non deduction of TDS. In our considered view, such transactions of purchases are outside the purview of TDS. Therefore, the AO also directed to check whether the transactions represents the purchase of the goods or not and adjudicated the matter in terms of above direction. Accordingly, assessee s ground is allowed for statistical purposes.
Issues Involved:
1. Disallowance of ?5,79,837 as interest paid to the bank in the cash credit account. 2. Disallowance of ?3,00,000 under the provision of section 40(a)(ia) of the Income Tax Act, 1961 for non-deduction of TDS. Detailed Analysis: 1. Disallowance of ?5,79,837 as Interest Paid to the Bank in Cash Credit Account: The assessee, a limited company engaged in the business of sale and servicing of vehicles and sale of spare parts and accessories, made an investment of ?3,15,00,023, shown under "capital work-in-progress." The assessee capitalized the interest expenses of ?15,93,440.006 on a loan taken from SBI for this investment. However, the AO observed that ?62.50 lakhs withdrawn from another SBI cash credit account was also invested in the capital work-in-progress, but the interest on this loan was claimed as revenue expenditure in the profit and loss account instead of being capitalized. The assessee contended that the funds from the bank were not used for the investment and ?35 lakhs were invested by its directors. The AO disagreed and treated ?5,79,837 as capital expenditure, disallowing it and adding it to the total income. The CIT(A) upheld the AO's decision, noting that the assessee failed to provide supporting evidence to substantiate its claim that the funds were not from the cash credit account but from a current account. The CIT(A) emphasized that the onus was on the assessee to substantiate the genuineness of its claim with supporting evidence. Upon appeal, the Tribunal found that the account treated as a cash credit account by the lower authorities was actually a current account. The Tribunal agreed with the assessee's submission and found that the bank statement provided by the assessee, which was not submitted before the lower authorities, needed verification. Therefore, the issue was restored to the AO for fresh adjudication in accordance with the law, allowing the assessee's ground for statistical purposes. 2. Disallowance of ?3,00,000 under Section 40(a)(ia) for Non-Deduction of TDS: The assessee debited ?3,00,000 as Quality Care Expenses, which the AO deemed as fees for professional and technical services, requiring TDS deduction under section 194J of the Act. The assessee argued that the amount was discharged by way of a debit note and did not represent professional services, thus not requiring TDS. The AO disallowed the amount under section 40(a)(ia) for non-compliance with TDS provisions. The CIT(A) upheld the AO's decision, stating that the payment for Quality Care Services to M/s Ford India Ltd. was in the nature of professional or technical services and thus liable for TDS deduction. The CIT(A) noted that the liability to deduct TDS arose at the time of credit in the assessee's books of accounts, regardless of the payment method. The Tribunal noted the assessee's argument that an amendment by the Finance Act 2012 provides no disallowance if the recipient has included the payment in its turnover and paid taxes. The Tribunal found merit in this argument and referred to the Delhi High Court's decision in CIT v. Ansal Land Mark Township (P) Ltd., which held that the second proviso to Section 40(a)(ia) is retrospective and curative. The Tribunal set aside the issue to the AO to verify whether the payees included the receipts in their returns and paid taxes. The Tribunal also directed the AO to check if the transactions represented the purchase of goods, which are outside the purview of TDS, and adjudicate accordingly. Thus, the assessee's ground was allowed for statistical purposes. Conclusion: The appeal of the assessee was allowed for statistical purposes, with both issues being restored to the AO for fresh adjudication. The Tribunal emphasized the need for verification of the bank account type and the inclusion of payments in the payees' returns for proper adjudication.
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