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TMI Blog2017 (10) TMI 479X X X X Extracts X X X X X X X X Extracts X X X X ..... AR For The Revenue : Shri S . N . Divatia, AR ORDER PER PRADIP KUMAR KEDIA - AM The captioned cross-appeals filed by the Assessee and the Revenue are directed against the order of the Commissioner of Income Tax(Appeals)-VI, Ahmedabad [CIT(A) in short] dated 05/09/2014 passed for the Assessment Year (AY) 2011-12. 2. The assessee in its appeal has objected to the disallowance of interest expenditure of ₹ 3,65,752/-. 3. The Revenue, on the other hand, in its appeal has assailed the order of the CIT(A) towards reversal of disallowance of ₹ 3,68,94,759/- made by the Assessing Officer (AO) under s.40(a)(ia) of the Act for non-deduction of tax at source under s.194H of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 4. As regards the assessee s appeal, the relevant facts in brief are that the assessee is a partnership-firm engaged in the business of sole distributor of Sheela Foam Pvt.Ltd. in the State of Gujarat for sale of its products in PUF foam-sheets, pillows, cushions, covered mattresses etc. The assessee filed return of income for AY 2011-12 declaring total income of ₹ 92,95,230/-. The return of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation by the Tribunal in ITA No.2433/Ahd/2013 for AY 2010-11 order dated 13/06/2014. He accordingly pleaded that the issue be set aside to the file of CIT(A). 7. The Ld.DR, on the other hand, submitted that it is apparent from the financial statements filed by the assessee that borrowed and interest bearing funds have been diverted towards advances given free of interest. Therefore, interest chargeable on the borrowed funds to the extent of interest-free advances requires to be disallowed as having been incurred for non-purposes in terms of section 36(1)(iii) of the Act. The Ld.DR thereafter referred to the ledger account of the parties to whom interestfree advances have been lent and submitted that the payment has been made to the parties out of the AMCO Bank Ltd. mortgage account which impliedly means that interest has been borne on this interest bearing mortgage account whereas advances has been given free of interest. The Ld.DR submitted that there is nothing on record to prove that non-interest bearing funds have been diverted for interest-free advances. The Ld.DR contended that the onus to prove that the interest has been incurred for business purposes under s.36(1)(iii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proportionate disallowance of interest to the extent of interest-free advances. The Revenue Authorities have rejected various contentions of the assessee on the ground that no fund flow statement has been furnished before them to appreciate assessee s perspective. We do not see any such statement or other evidences before us either, which could establish usage of non-interest bearing funds. Needless to say, onus lies on assessee to establish that expenditure has been incurred for business purposes to enable it to claim deduction under s.36(1)(iii) of the Act. Therefore, on facts, we do not see any reason to grant second opportunity to the assessee in this regard and increase multiplicity of proceedings. We shall now turn to the decision of the Hon ble Calcutta High Court in the case of Woolcombers India Ltd. (supra) relied upon by the assessee. We fail to understand the purport of the aforesaid decision in the facts of the present case. In the aforesaid decision, the advance tax was paid out of overdraft account and the interest on overdraft account was claimed as business expenditure. The Hon ble High Court held that the payment from overdraft account by itself will not tantamount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sales incentive payment of Rs . 3,68,94,759 /- . 4 . 1 Written submission is as under :- 2 . 2 During the course of asstt . proceedings,, the appellant produced all accounting records and other material from time to time which were duly verified by AO . However, the AO noticed that the appellant had claimed sales incentive of Rs . 3,68,94,759 /- but no TDS u / s 194H was deducted there from and hence the appellant was asked to submit its explanation for the same . The appellant filed its reply on 12 . 11 . 2013 stating that it was not required to make any TDS u / s . 194H in view of the fact that the sales incentive is not brokerage or commissioner paid to the dealers as its agent . The appellant also pointed out that identical issue was raised by AO in the assessment for AY 2008 - 09 to 2010 - 11 but on appeal; CIT ( A ) deleted the impugned disallowance . Recently even the appeal filed by the dept . to ITAT being ITA no . 2553 / AHD / 2013 was dismissed vide order dtd . 13 - 6 - 2014 . However, the A . O . rejected the said explanation mainly on the grounds as stated in p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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