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2017 (9) TMI 301 - AT - Income TaxAllowable business expenditure u/s 37 - Bills of various expenditure are in the name of other sister concern - double claim of expenses once by assessee and other by its sister concern - Held that - Tribunal held in earlier years that there cannot not be any double claim by different assessee towards the same expenditure. It is the duty of the assessee to establish that there is no double claim towards this expenditure and thereafter it is also proved that expenditure was incurred wholly and exclusively for the purpose of carrying on the business of assessee. Due to similarity of names of the other companies which are under the same management, suppliers/service providers by oversight raised such invoices on the names of the other concerns. With these observations, we remit this issue to the file of the AO for fresh consideration. This Grounds is partly allowed for statistical purposes. Violating provisions u/s 40A(3) - payments were made otherwise than by crossed cheque or demand draft - Held that - The facts of the case are similar to those in earlier year and the expenditure was incurred towards horticulture, then it falls under exceptions provided in Rule 6DD of IT Rules. There cannot be disallowance u/s. 40A(3) of the Act. On the other hand, the assessee has to prove thereafter that the expenditure was incurred wholly and exclusively for the purpose of business and falls under the purview of Section 37(1) of the Act. Accordingly, we direct the AO not to disallow any payments made by cross account payee cheque if the assessee is able to prove that it is incurred for the purpose of business of assessee. In case of expenses incurred in cash, the assessee is not only to prove the incurring of the expenditure for the purpose of business, it has to be proved that there is no inflation of expenditure. Since, it was held already on earlier occasion that there is a chance of inflating the expenditure by assessee by way of cash voucher, 10% of that cash expenditure is to be disallowed. - Decided partly for statistical purposes. Disallowance of interest - interest bearing funds were found to be utilize for giving interest free loans to sister concerns - Held that - In our opinion, assessee has to demonstrate that assessee has not borrowed any money to lend to its sister concern and it has lent its own funds or lent non-interest bearing funds and not resulted in any additional interest cost to assessee. In the present case, CIT(A) blindly followed the earlier order of the Tribunal without going into the actual facts of the case. In other words, CIT(A) has not gone into the money advanced to the sister concern as a measure of commercial expediency and only in such cases, no notional interest could be disallowed. With these observations, we remit the issue-in-dispute to the file of the AO with a direction to assessee to demonstrate that interest free funds are available with assessee as on date of advance to the sister concern and it is on account of commercial expediency so as to apply the ratio laid down by the Hon ble Supreme Court in the case of S.A. Builders Ltd. Vs. CIT 2006 (12) TMI 82 - SUPREME COURT . Thus emit the issue-in-dispute to the file of AO for his consideration. Allowability of Prior period expenditure - contention of the Ld.DR is that assessee is following the mercantile system of book keeping and as such prior period expenditure cannot be allowed - Held that - If it is statutory payment covered by Section 43B, it is to be allowed on actual payment basis. In respect of other payments which are not covered by the provisions of Section 43B, it cannot be allowed in the assessment year under consideration which is not relating to the assessment year under consideration. More so, the assessee is following the mercantile system of book keeping which is on accrual basis. Accordingly, we remit the issue-in-dispute to the file of AO for fresh consideration. This ground is partly allowed for statistical purposes. Provisions of section 40(a)(ia) applicability - non deduction of tds liability - Held that - Assessee has to prove that recipient of such income has declared the same in the return of income and paid tax on it. However, in the present case, assessee has not demonstrated this fact that recipient has paid the tax on the said income. Accordingly, the issue is remitted to the file of AO for fresh consideration with a direction to assessee to demonstrate that recipient of the said income has disclosed the same in their return of income and paid taxes thereon. Accordingly, we remit this issue to the file of AO for fresh consideration. This ground is partly allowed for statistical purposes. Short deduction of tax - invoking provisions of section 40(a)(ia) - Held that - As decided in assessee own case for previous year as in the case of SK Tekriwal (Infra) 2012 (12) TMI 873 - CALCUTTA HIGH COURT has held that the disallowance u/s 40a(ia) is not applicable in the case of short deduction of TDS. It was held that when there is a shortfall due to a difference of opinion, the tax payer may be treated as a defaulter u/s 201 but no disallowance can be made u/s 40a(ia).We are inclined to dismiss this ground of appeal taken by the Revenue.
Issues Involved:
1. Disallowance of expenditure under Section 37(1) of the Income Tax Act. 2. Disallowance of expenditure under Section 40A(3) of the Income Tax Act. 3. Disallowance of notional interest on interest-free loans to sister concerns. 4. Disallowance of expenses due to non-submission of bills. 5. Disallowance of prior period expenditure. 6. Disallowance under Section 40(a)(ia) for non-deduction of TDS. 7. Disallowance under Section 40(a)(ia) for short deduction of TDS. Detailed Analysis: 1. Disallowance of Expenditure under Section 37(1): The issue pertains to the disallowance of ?41,78,480/- by the AO due to the bills not being in the name of the assessee-company. The CIT(A) directed the AO to verify if there was any double claim by the assessee and its subsidiary. The Tribunal upheld the CIT(A)'s decision, emphasizing that there should be no double claim and that the expenditure should be wholly and exclusively for the business. The matter was remitted to the AO for fresh consideration. 2. Disallowance of Expenditure under Section 40A(3): The AO disallowed ?13,67,000/- for payments made in cash exceeding ?20,000/-. The CIT(A) directed the AO to disallow only 10% of such cash expenditure, following the Tribunal's earlier decisions. The Tribunal reiterated that if the expenditure was incurred by cheque, it should not be disallowed. For cash payments, the assessee must prove the genuineness and absence of inflation of expenditure. The issue was remitted to the AO for fresh consideration. 3. Disallowance of Notional Interest on Interest-Free Loans to Sister Concerns: The AO disallowed ?6,08,95,308/- as notional interest on interest-free loans given to sister concerns. The CIT(A) deleted the addition, following the Tribunal's earlier decision. The Tribunal noted that the assessee had sufficient interest-free funds and that the advances were for business purposes. The issue was remitted to the AO to verify if the advances were made from interest-free funds and for commercial expediency. 4. Disallowance of Expenses Due to Non-Submission of Bills: The AO disallowed ?2,34,06,450/- due to the lack of supporting evidence. The CIT(A) allowed the claim if the payments were made through banking channels and there was no double claim. The Tribunal upheld this decision, directing the AO to verify the genuineness of the payments and disallow 10% of cash payments if there was a chance of inflation. 5. Disallowance of Prior Period Expenditure: The AO disallowed ?2,48,43,132/- as prior period expenditure. The CIT(A) deleted the addition, noting that the payments were made by cheque and the genuineness was not in question. The Tribunal remitted the issue to the AO to verify if the payments were statutory and covered by Section 43B, allowing them on an actual payment basis. 6. Disallowance under Section 40(a)(ia) for Non-Deduction of TDS: The AO disallowed ?8,61,52,185/- for non-deduction of TDS. The CIT(A) directed the AO to verify if the recipient had paid taxes on the income. The Tribunal upheld this decision, remitting the issue to the AO to confirm if the recipient had declared the income and paid taxes. 7. Disallowance under Section 40(a)(ia) for Short Deduction of TDS: The AO disallowed ?2,41,06,046/- for short deduction of TDS. The CIT(A) deleted the addition, following the Tribunal's earlier decision that short deduction does not attract disallowance under Section 40(a)(ia). The Tribunal dismissed the Revenue's appeal on this ground. Separate Judgments: The judgment was delivered by a bench comprising an Accountant Member and a Judicial Member. The issues were analyzed based on earlier Tribunal decisions, and directions were given for fresh consideration by the AO where necessary. Conclusion: The appeals of the Revenue were partly allowed for statistical purposes, and the appeals of the assessee were dismissed. The Tribunal emphasized the need for verification and adherence to earlier decisions in similar cases.
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