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TMI Blog2014 (1) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... e contrary to the provision to section 36(1)(iii) of the Income Tax Act, 1961‟. In the instant case, the assessee has made a payment of Rs. 93.98 lacs to SIDCUL by availing overdraft facility from the CC account No. 3008 which was an overdraft account. There was debit balance on the date of payments and thereby incurred liability of payment of interest on the same. The industrial plot, which was allotted to the assessee company, was not put to use for business purposes by the assessee during the year under assessment. 2. On the facts and in the circumstances of the case, the ld CIT(A) has erred on facts and in law in deleting the addition of Rs. 10,52,537/- made by Assessing Officer on account of interest liability under section 36(1)(iii) of the Income Tax Act, by observing that „the profit generated during the year and recoveries from the debtors etc are more than the investment so made in the assets‟ without taking into consideration the ratio of the judgment pronounced by the Hon‟ble Punjab and Haryana High Court in the case of Abhishek Industries ltd. reported in 286 ITR 1 (P&H), wherein Hon‟ble court has opined that „the monies received as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made a payment ofRs.14 lacs on 31sr August 2004 and Rs. 56 lacs on 16.10.2004. According to the Assessing Officer, assessee is having a CC Account bearing number 3008, with Bank of India. The payments have been made from this account towards the cost of land. According to the Assessing Officer there was an overdraft leading to debit balance on the dates of the above payments. This plot was not put to use before the end of the accounting period, hence as per the proviso appended to Section 36 (1) (iii) the interest paid in respect of capital borrowed for acquisition of an asset for extension of existing business has to be capitalized from the date on which the capital was borrowed for acquisition of assets till the date on which such asset was first put to use. The deduction of such interest liability would not be allowed as a deduction. The ld. AO harboured belief that assessee must have incurred interest expenditure, because there was a debit balance on the dates of payment in the above CC Account. Accordingly he disallowed a sum of Rs.3,42,417 and made addition in the income of the assessee. 16. On appeal, it was contended by the assessee that a sum of Rs.25 lacs was deposited i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer by making a disallowance under sec. 40(a)(i) of the Act on the ground that assessee has failed to deduct TDS under sec. 195 while making payment to the non-resident. The brief facts of the case are that assessee has engaged Mr. Andrea Bonotto and Mr. Frank Decavelle of Italy for designing and development for Springs Summer 2005 Collection. They were paid a fee of Euro 10,000 in three installments. According to the Assessing Officer, the assessee has claimed payment of Rs.21,83,917. He observed that it is a payment of fee for technical services, because the consultancy for designing and development clearly comes in the ambit of provisions of sec. 9 of the Act. According to the Assessing Officer, before making payment to a non-resident, assessee ought to have deducted the TDS, therefore, he invited the explanation of the assessee as to why the claim of the assessee be not disallowed under sec. 40(a)(i) of the Act. According to the assessee, Article 15 of the DTAA between India and Italy notified on 25.4.1996 contemplates that if income has been derived by a resident of a contracting in respect of professional services or other independent activity of a similar character ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gregating 183 days in the relevant fiscal year; or (b) he has a fixed base regularly available to him in that other State for the purpose of performing his activities but only so much of the income as is attributable to that fixed base." 21. We do not feel it necessary to go into the issue, whether the payments made by the assessee to Mr. Andrea Bonotto is a fee for technical services or not, because even for the sake of argument, we presume that it is fee for technical service then also TDS would be deductible only when element of income is involved in such payment. Learned Assessing Officer has restricted himself qua Article 13 only. He did not look into Article 15 learned first appellate authority has made lucid enunciation of the fact and law on the impact of Article 15. A bare perusal of this article suggests that income derived by a resident of a contracting state in respect of professional services or other independent activities of a similar character may be taxed in that State. Such income may also be taxed in India but subject to fulfillment of conditions of clauses (a) and (b) of Article 15 (extracted supra). If Mr. Andrea Bonotto has carried out his activities by stay ..... X X X X Extracts X X X X X X X X Extracts X X X X
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