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TMI Blog2015 (4) TMI 674X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order. As discussed above, in M/s. Om Satya Exim Private Ltd. [2011 (5) TMI 894 - ITAT AHMEDABAD]held that assessee was not liable to deduct TDS on reimbursement of expenses incurred by Agent on behalf of assessee. Disallowance in respect of these items has not been made u/s. 40(a)(ia). Nothing contrary was brought to our knowledge on behalf of revenue. Facts being similar so following same reasoning, CIT(A) was justified in deleting addition made by Assessing Officer on account of disallowance u/s. 40(a)(ia) of the Act. We uphold the same. - Decided against the revenue. - ITA. No.2125/Ahd/2011 - - - Dated:- 30-3-2015 - Shri Shailendra Kumar Yadav And Shri Anil Chaturvedi JJ. For the Appellant : Shri M. K. Singh, Sr. D.R. For the Respondent : Shri Prakash D. Shah, A.R. ORDER Per Shailendra Kumar Yadav, J.M: This appeal has been filed by the Revenue against the order of Commissioner of Income Tax (Appeals)-VI, Ahmedabad, dated June 17.06.2011 for A.Y. 2008-09 on the following grounds: 1. The Ld. CIT(A) erred in law and on facts in deleting the addition of ₹ 8,33,252/- made on account of disallowance of interest u/s.36(i)(iii) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oo naive . Where the assessee lends money without interest, there can be no inference of notional income based on reasonable interest, which the assessee might have charged for lending to relatives or sister concerns/others. But then, it is possible in such cases, to disallow a proportionate part of interest paid on such borrowed capital, if any, to the extent that the borrowed funds are utilized for interest-free advances. Disallowance is on the ground, that it will not be eligible for deduction as expenditure incurred for purposes of business. Further, reliance is placed on the following decisions:- 1. Patel Filter Ltd. vs. CIT [2003] 264 ITR 21 (Guj.) 2. CIT vs. Vallabh Glass Works Ltd. [1982] 137 ITR 389 (Guj.) 3. CIT vs. H. R. Sugar Factory Pvt. Ltd. [1991] 187 ITR 363 (All.) 4. Indian Saving Products Ltd. vs. CIT [2004] 265 ITR 250 (Raj.) 5. Caldern Pharmaceutical Pvt. Ltd. vs. CIT [2004] 265 ITR 244 (Kal.) 6. CIT vs. Bombay Samachar Ltd. [ 1969] 74 ITR 723 (Bom.) 7. K. Somasundram Bro. [1999] 238 ITR 939 (Madras) 8. Elmer Havell Electrics vs. CIT [2005] 277 ITR 549 (Del.) In view of the above narrated facts and the judicial pronouncements, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e disallowance made by the assessing officer is deleted. Since facts are identical this year also, it is held that interest-bearing borrowed funds were not diverted for nonbusiness use and accordingly the disallowance of interest cannot be made. The addition made by the assessing officer is therefore deleted. 2.2 Nothing contrary was brought to our knowledge on behalf of Revenue. Facts being similar so following same reasoning, we are not inclined to interfere in the order of CIT(A) because interest bearing funds were held not to be diverted for non business use and accordingly disallowance in question was rightly deleted by CIT(A). For sake of consistency, we uphold the same. 3. Next issue is with regards to disallowance u/s. 40(a)(ia) on account of reimbursement of expenses. Assessing Officer has stated in assessment order as under: Reply of the assessee is carefully considered. As per details furnished by the assessee, clearing and forwarding agents are rendering services of clearing and forwarding to the assessee. The contention of the assessee that the amount involved is below the prescribed limit is far from the facts as the payments made are in lakhs to the ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at language of S. 194 C (1) does not permit exclusion of any amount paid to contractor as reimbursement of amount paid by him on behalf of organization. In the above decision, Hon'ble SC further held that payment to contractor is not confined to a work contract. Any sum payable by an organization for carrying out any work is liable to deduct tax. The assessee has not explained that on the facts of the case, judgement relied upon by the assessee is applicable. In the case relied upon by the assessee the payment was made to sister concern outside India, which is not the case with the assessee. On the facts of the case, Judgement of the Hon'ble High Court of Madras in the case of CIT Vs. Kumdum Publications P. Ltd. is also applicable. The HC held that Assessee was liable to deduct tax from amounts paid to contractor as per section 194 C as the agreement was in the nature of work contract. In the present case also there is contract for carrying out work between assessee and the service provider and provisions of section 194 C are clearly applicable. Thus, as the tax was not deducted on the amount of ₹ 55,94,825/- by the assessee company. These amounts are disallowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quired to be deducted from such reimbursement of expenses and as a consequence, section 40 (a) (ia) is not applicable with regard to such payments. The tribunal decision cited by the AR of the assessee rendered in the case of Modicon network private Ltd and Grandpricks Fab private Ltd also support the case of the assessee and hence, by respectfully following all the above tribunal decisions, we hold that no TDS is required to be deducted in the present case for reimbursement of expenses for which separate bills were raised by the commission agent and hence, the provisions of section 40 (a) (ia) is not applicable to such payments. Therefore, disallowance made by the assessing officer is to be deleted. 3.3 This view is fortified by the decision of ITAT, Ahmedabad A Bench in case of DCIT vs. Ignite Mundra Pvt. Ltd. in ITA Nos. 3110 3111/Ahd/2010, wherein similar issue has been decided in favour of assessee by observing as under: 4.2 Without going further in detail and keeping brevity in mind, we hereby hold that in a situation when the admitted factual position was that the payment was nothing but reimbursement as admitted by learned CIT(A); hence, we are not inclined to i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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