9911796707
TMI Blog2016 (2) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... was issued on 17/08/2009. Assessment order was framed u/s 143(3) of the Act on 11/12/2010 and the loss of the assessee was assessed at Rs. 85,82,953/- after making addition of Rs. 21,72,166/- on following items :- Total loss as per return of income Rs. Late payment of Employees Contribution to PF & ESIC 63,832/- Interest to micro & small enterprises 96,822/- Disallowance u/s 40(a)(ia) 6,93,235/- Interest disallowance 13,18,277/- Total 21,72,166 Aggrieved, assessee went in appeal before ld. CIT(A) who partly allowed the appeal of assessee. 4. Aggrieved, assessee is now in appeal before the Tribunal on the following grounds :- 1. The Assessment Order passed by learned Assessing Officer, Dy. Commissioner of Income-tax Range-1, u/s 143(3) of the Income-tax Act and the learned Commissioner of Income-tax (Appeals)'s confirming the same , are bad in law, illegal and deserves to be modified. 2. The ld. Assessing Officer has erred in law and on the facts and circumstances of the case and the ld. CIT(A) has erred on the facts and circumstances of the case in confirming the making of disallowance u/s 40(A)(ia) of Rs. 6,93,236/- in income. The disallowance be cancell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ia) of IT Act the expenses are not allowable. Appellant only submitted that it made payment of wages directly to the workers since there were disputes between the contractor and workers. However, auditor of the appellant certified the payment by appellant to the contractor. Further these workers were not employed by the appellant and therefore payment to them cannot be covered under section 192. The workers were hired by the contractor and payment was to be made to the contractor only. Therefore the provisions of section 194C is clearly applicable and appellant defaulted in deducting and deposing TDS. Since there is a clear default in deducting and paying TDS, expenses clamed are not allowable. Accordingly the disallowance made by the assessing officer is confirmed." 10. We have heard the rival contentions and perused the material on record. The issue before us is to examine as to whether assessee was liable to deduct TDS on the payments made to the workers who were not on the pay-roll of the assessee but have been working in the assessee company on behalf of a labour contractor. From examining of the records, we find that assessee has been regularly deducting TDS in the precedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance is as under :- Sl.No. Name of party Loans given Rs. Interest @ 12% 1 Medtek Asia Ltd. 1,07,75,407 12,93,040 2 IRM Investment Pvt.Ltd. 2,00,235 24,028 3 Casil Finance Ltd. 10,000 1,200 Total 13,18,277 12. Aggrieved, assessee went in appeal before CIT(A), who partly allowed the appeal of the assessee by accepting the assessee's submissions of applying average cost of fund @ 3.5% on the average cost of total fund by observing as under :- "5.3 I have considered the facts of the case, assessment order and appellant's submission. It is not in dispute that appellant has borrowed funds on which interest was paid therefore it cannot be said that appellant had sufficient own funds. The amount outstanding against associate company is in the nature of advance since appellant has not recovered the same. If this was business advance, the same could have been recovered or adjusted by now but the fact that it remain outstanding for many years clearly shows that this is interest free advances given out of overall business fund which included borrowed funds also. Since appellant did not maintain separate bank accounts for borrowed funds and their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of M/s Medtek Asia P. Ltd. into M/s IRM Ltd. and there are identical monies given by M/s IRM Ltd. to the assessee company's holding company which in turn have been flown into the assessee company and thus effectively the advance to medtek gets squared off against identical liability to IRM Ltd. (which since has merged Medtek into itself.). In respect of working capital loans, where interest is spent, these are taken against moving Debtors, RM/PM and stocks. Thus there are no specific borrowings for advances to Medtek Asa... Ld. AR further submitted that if at all these are treated as advances without charging interest or non business advances we would like to submit that the said advances are given out of huge non interest borne funds of the assessee company and the avg. interest servicing cost of funds for the company is hardly 3.5% worked out by considering the average cost of interest, with own capital and unsecured loans not having borne interest cost, the interest to banks on working capital loans at appc.12%). Accordingly, if at all there is disallowance the same (without prejudice) will not exceed Rs. 3.92 lacs. 14. The ld. DR relied on the orders of authorities below. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings u/s 271(1)(c) of the Act, which is premature and needs no adjudication. 18. The appeal of assessee is dismissed. 19. Now we take up Revenue's appeal in ITA No.545/Ahd/2012 for Asst. Year 2008-09, wherein following grounds have been raised :- 1. The ld. CIT(A) erred in law and on facts in directing the AO to allow the employees contribution of PF & ESI, if paid, before the due date of filing the return, without considering the specific provision of 36(1)(va) r.w.s.2(24)(x) of the IT Act for employees contribution of PF & ESI. 2. The ld. CIT(A) erred in holding that the disallowance u/s 36(1)(iii) of the Act should be at average cost of funds 3.5% as against the actual rate at which the funds diverted were borrowed (12%). On the facts and in the circumstances of the case and in law, the ld. CIT(A) ought to have upheld the order of the Assessing Officer to the extent mentioned above, since the assessee has failed to disclose his true income. The appellant prays that the order of ld. CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. The appellant craves leave or alter any ground or add a new ground which may be necessary. 20. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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