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TMI Blog2014 (10) TMI 650X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT(A) - it is seen that the fact that the travel was undertaken entirely for business purposes has not been established the order of the CIT(A) is upheld Decided against assessee. Addition u/s 40(a)(ia) Effluent treatment charges paid by assessee - Held that:- CIT(A) rightly was of the view that the decision in Sing Killing Vs. ITO [2002 (3) TMI 39 - GAUHATI High Court] is to be followed - TDS provisions were not applicable on services rendered by the attendant association to members - the contribution made by the assessee to its association Vapi Waste Effluent Management Company as a member cannot be classified as payment for contractual services as covered u/s. 194C of the Act revenue could not bring any material on record to show that the payments were covered under the provisions of section 194C of the Act thus, the order of the CIT(A) is upheld Decided against revenue. Overseas freight expenditure Held that:- CIT(A) rightly was of the view that the decision in ITO vs. Freight Systems India Private Ltd. [2005 (10) TMI 229 - ITAT DELHI-F] is to be followed - demurrage charge or handling charge or any other amounts of similar nature are treated at par with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Act, 1961, therefore the Assessing Officer worked out disallowance for proportionate interest expenditure of ₹ 5,84,706/- and disallowance on account of administrative expenses of ₹ 8,22,228/- and thereby made a total disallowance of ₹ 14,06,934/-. As the assessee himself had made disallowance of ₹ 2,00,000/- in the return of income, therefore he made the disallowance of balance amount of ₹ 12,06,934/-. 4. On appeal, the Commissioner of Income Tax (Appeals) observed that the company had taken specific term loans for the purpose of vehicles and old loan of 2005/- for Captive Power Plant, therefore borrowed funds were used for non-business purposes could not established on the facts of the case. The assessee has relied on the decisions of Hon'ble Supreme Court in the case of SA Builders Ltd. 288 ITR 1 and in the case of Munjal Sales Corporation 298 ITR 298 and on the decision of Hon'ble Mumbai High Court in the case of Reliance Utility Power Ltd. 313 ITR 340 where it has been held that if the assessee has sufficient own funds available and interest free funds were sufficient to meet the investments, no disallowance of interest was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t income of approximately ₹ 50.74 lakhs during the year. He, therefore, held that disallowance made by the Assessing Officer u/s. 36(i)(iii) was of ₹ 40,10,861/- was not justified. 7. The Departmental Representative has merely relied upon the order of the Assessing Officer. He has not pointed out any specific error in the order of the Commissioner of Income Tax (Appeals). He could not bring any material on record to show that the assessee could not have advanced interest free loans or loans at lower rate of interest to the sister concerns out of its interest free funds available with it. Therefore, we find no infirmity in the order of the Commissioner of Income Tax (Appeals) which is confirmed and the ground no. 1 of appeal of the Revenue is dismissed. 8. Further, the Assessing Officer also made disallowance of ₹ 8,22,228/- out of administrative expenses, but had restricted the disallowance made to ₹ 6,22,228/- as the assessee himself had made disallowance of ₹ 2,00,000/- as expenses incurred for earning tax free dividend income. The Commissioner of Income Tax (Appeals) observed that the said expenses must have been incurred by the assessee in ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch and every expense, he considered 10% of the total travelling expenditure of ₹ 12,49,082/- as being incurred for personal purposes. Therefore, he restricted the disallowance to ₹ 12,49,082/- and deleted the balance amount of disallowance of ₹ 49,96,332/-. 13. The Authorized Representative of the assessee submitted that the assessee was required to travel abroad for business purpose and therefore the expenditure was incurred by the assessee. He further argued that each expenditure to be incurred was the domain of the businessman and not of the Assessing Officer. 14. We have heard the rival submissions and perused the orders of lower authorities and material available on record. In the instant case, the Assessing Officer made a disallowance of 50% of directors' travelling expenses of ₹ 1,24,10,828/- and thereby made addition of ₹ 62,05,414/- to the income of the assessee on the ground that the assessee had not justified the reasons for incurring of the expenses which were more than five times of expenses incurred on other employees and the assessee has not produce vouchers in support of its claim. 15. On appeal, the Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment order and the submission of the appellant. The AO has made disallowance of ₹ 1,02,43,720/- u/s.40(a)(ia) of the IT Act and added back to the total income of the appellant. The appellant has submitted that the payment/contribution made to the Vapi waste Effluent Management Company which is established under the directions of the Hon'ble Gujarat High court and all the industries in Vapi industrial are the members of the said mutual association. The appellant is having Industry at Vapi and is one of the members of the Vapi waste Effluent Management Company. The Industry members make their contribution to the said Mutual Company in proportion to the discharge of effluent to the common effluent treatment plant and they are required to contribute on the basis of consumption of water. The appellant has further submitted that:- the income of the said mutual association is contributed by its members. The association or company has been formed specifically with the object of providing a common effluent facility to its members. The income is not generated out of dealings with any third party. The entire contribution originates in its members and is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing any material on record to show that the payments were covered under the provisions of section 194C of the Act. In absence of the same, we find no infirmity in the order of the Commissioner of Income Tax (Appeals) which is confirmed and ground no. 2 of appeal of the Revenue is dismissed. 24. Ground no. 3 of appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) deleting the addition of ₹ 21,11,736/- made u/s. 40(a)(ia) of the Act. 25. The brief facts of the case are that the assessee claimed deduction of ₹ 1,15,41,396 as overseas freight expenditure. According to the Assessing Officer, the assessee has also made payment to M/s. NYK Line India Limited of ₹ 6622/-, M/s. Nobel Shipping Private Limited of ₹ 3,53,382/- totaling to ₹ 3,60,004/- for handling charges. Further, the Assessing Officer observed that the assessee had paid only ₹ 94,29,664/- towards overseas freight expenditure. He also observed that the assessee has paid ₹ 21,11,736/- which is about 20% of the total overseas freight expenses paid to resident Indians for rendering their services on which the assessee should have deducted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance is deleted. 27. The Departmental Representative relied on the order of the Assessing Officer whereas the Authorized Representative relied on the order of Commissioner of Income Tax (Appeals). 28. We have heard the rival submissions and perused the orders of lower authorities and material available on record. In the instant case, the Assessing Officer disallowed ₹ 21,11,736/- paid by the assessee towards handling and other charges as the assessee had not deducted tax at source on the same u/s. 194C of the Act. On appeal, the Commissioner of Income Tax (Appeals) deleted the disallowance for the reasons that the Delhi Bench of the Tribunal in the case of ITO vs. Freight Systems India Private Ltd. 103 TTJ 103 held that demurrage charge or handling charge or any other amounts of similar nature are treated at par with carriage freight payable to the ship owner or charter. Therefore, amounts in the nature of demurrage etc. which may not end up being paid to non-residents are treated as amounts falling within special provisions of section 172. This has been clarified by CBDT in Circular No. 723 of 1995 where such amounts have been taken outside the purview of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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