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TMI Blog2013 (7) TMI 252X X X X Extracts X X X X X X X X Extracts X X X X ..... Held that:- Considering assessee's reliance on case of Merilyn Shipping and Transports vs. ACIT (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) wherein held that the word "payable" used in section 40(a)(ia) has to be given its natural meaning and section 40(a)(ia) would be applicable only to expenditure which is payable as on March 31 of every year and can not be invoked to disallow amount which have already been paid during the previous year. As assessee submitted that no amount remained payable on account of M/s. JSMC at the end of the year provision of section 40(a)(ia) were not applicable. Levy of interest u/s 220(2) - AO has charged interest under section 220(2) from date of the original assessment order - Held that:- Once the original demand notice has been dispensed with and fresh demand notice has been raised in view of the order giving effect to the Commissioner (Appeals)'s order wherein instead of demand there was a refund and such an order has attained finality as no second appeal was filed, then interest cannot be levied under section 220(2) from the date of original demand notice - restore this issue back to the file of the AO to verify whether interest has been ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... going through the impugned orders and the decision of the Tribunal in assessee's own case, we find that the issue before us is similar to the issue decided by the Tribunal in assessee's own case for assessment year 2006-07 wherein the disallowance of expenses of payments made to M/s. J.S. Financial Services was deleted by the Tribunal. The relevant facts, arguments and the findings of the Tribunal are reproduced herein below for better appreciation of facts:- "5. The fourth dispute is regarding disallowance of claim of deduction of Rs.29.36 lacs claimed by the assessee against the share of profit in the branch. The assessee during the assessment proceedings explained that the assessee had opened a branch at Lokhandawala, Andheri, and since the assessee was finding it difficult to get a person as branch manager who could take care of the business, the assessee entered into an arrangement with M/s. J.S. Financial Services (in short, JSMS) to manage the activities of the branch. It was submitted that it was assessee's own branch where all assets and equipments belonged to the assessee. As per the arrangement, all policy decisions were to be taken at head office and day to day decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him that profit sharing is essential motive in formation of joint ventures and therefore, the arrangement made by the assessee was of the nature of joint venture and deduction was therefore not allowable in view of the judgment of Hon'ble Supreme Court in case of CIT vs. Panipat Woolen and General Mills Company Ltd. (supra), CIT(A) also agreed with the alternate finding of AO that Shri K.P. Shroff was managing the entire affairs of the branch which was nothing but managerial services, therefore, provisions of section 194J were applicable and the claim was also not allowable under section 40(a)(ia) as the assessee had not deducted tax at source. CIT(A) accordingly confirmed the disallowance made by AO, aggrieved by which, the assessee is in appeal before the Tribunal. 5.3 Before us, the ld. AR for the assessee reiterated the submissions made before the lower authorities that arrangement made with M/s. J.S. Financial services was not a joint venture as the investments had been made by the assessee and policy decisions were taken by the assessee. The case was, therefore, different from the case of CIT vs. Panipat Woolen and General Mills Company Ltd. (supra). It was also submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to M/s. JSMS was not allowable as deduction. However, we are unable to agree with the view taken by the authorities below. We agree with the submission of the ld. AR that the case of CIT vs. Panipat Woollen and General Mills Co. Ltd. (supra), is distinguishable as in that case the agent had also made most of the investments and was sharing both profits and losses whereas in this case, the assessee was only sharing profit with M/s. JSMS who was managing only day to day affairs of the branch whereas policy decisions were taken by the assessee and the entire investments had also been made by the assessee. We, therefore, hold that the arrangement was not a case of joint venture. The authorities below have also disallowed the claim on the ground that the payment made to M/s. JSMS was of the nature of fees for professional services/technical services on which tax was required to be deducted under section 194J and since assessee had not deducted tax at source, claim was not allowable under section 40(a)(ia). We agree with the authorities below that nature of work done by M/s. JSMS was professional or managerial in nature as they were managing day to day work of the branch by providing pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 143(3) r/w section 147 of the Act, vide order dated 24th December 2009. In the demand notice, the Assessing Officer has charged interest under section 220(2) from date of the original assessment order. Once the original demand notice has been dispensed with and fresh demand notice has been raised in view of the order giving effect to the Commissioner (Appeals)'s order wherein instead of demand there was a refund and such an order has attained finality as no second appeal was filed, then interest cannot be levied under section 220(2) from the date of original demand notice. The Assessing Officer has to work out the demand and chargeability of interest under section 220(2), if any, from the demand notice of assessment order passed under section 143(3) r/w section 147. With these observations, we restore this issue back to the file of the Assessing Officer to verify as to whether interest has been charged as per the demand notice in pursuance of assessment order dated 24th December 2009, passed under section 143(3) r/w section 147 or original assessment order dated 23rd February 2005, passed under section 143(3). If interest has been calculated from the due date of demand notic ..... 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