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TMI Blog2017 (12) TMI 1199X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed form with it at the time when the interest was paid to the respective customers, in this position, the assessee cannot be held to be liable to deduct tax therefrom u/s 194A of the Act. We further hold that if the assessee bank was not liable to deduct tax at the time of payment of interest, then section 40(a)(ia) of the Act is not attracted and the assessee cannot be held liable to pay tax. Therefore, we are of the view that section 40(a)(ia) cannot be invoked by the AO in a situation when the assessee has filed Form 15G/15H before the Appropriate Authority. Non deduction of tax at source by the assessee to the parties against payment on account of repairs and maintenance - Held that:- Assessee was rendering different types of service to the customers. Firstly, it was rendering service directly and secondly he was undertaking repairs and service on behalf of the companies for whom products were sold. It is seen that the assessee had deducted TDS when services were on behalf but has not deducted any TDS when the payments was made by way of any reimbursement to the services. We are of the view that the payment was by nature of reimbursement for repair costs met by the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(2) of the Income Tax Act, 1961 and the AO has completed the assessment by making various additions. During the assessment proceedings, AO observed that interest paid/payable of ₹ 23,86,002/- by the assessee on unsecured loan of ₹ 2,17,15,000/- is not an allowable business expenditure under the provision of section 36(1)(iii) of the Income Tax Act, 1961, because in assessee s case the fund was advanced to its sister concerns without charging any interest. During the course of assessment proceedings, the assessee failed to bring any material on record to show that he has derived any business benefit by providing the interest free advance to its sister concerns. It was evidenced from record, that the assessee borrowed interest bearing funds and provided interest free advances to its sister concerns. During the course of hearing, copy of audited balance-sheet and profit and loss account for the year ended 31.03.2012 of one of its sister concerns M/s Nandlal Kamal Kishore Vyapaar Pvt. Ltd was obtained from the assessee and on perusal of the same it was noticed that the said concern is paying interest of ₹ 22,07,956/- on unsecured loan from various parties and at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the assessee that in the F.Y 2011-12, the interest free loan was given to the sister concern in which the assessee was also a director namely M/s Nandlal Kamal Kishore vyapaar Pvt. Ltd, and that around ₹ 2 crore which was used to construct a building (G+4) in a land, which was loan owned by the company M/s Nandlal Kamal Kishore Vyapaar Pvt. Ltd is to be looked at and analyzed. It had been brought on record by the assessee that currently, he was generating income against such advances made earlier, and that from the F.Y 2014-15, the assessee was receiving rent-free office accommodation at 1A, Akrur Dutta Lane, 4th Floor, Kolkata 700012. This address is the same address of the office of the assessee currently. It had also been contended that the assessee had received the maintenance contract of the first floor of the building from SBI from which it was generating income of around ₹ 14 lacs of income per year. This was clear from the copies of the 26AS for FY 14-15 15-16 filed by the assessee during appeal. From these it is seen that the assessee is receiving rent from M/s SBI and TDS under section 194IB and section 194IA has been deducted. Accordingly, the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract and receiving rent-free office accommodation as per agreement were additional evidences before the CIT(A) which were not examined by the AO. Therefore, there was no commercial expediency proved by the assessee for giving this loan. The ld DR for the revenue also submitted that this issue needs to be adjudicate fresh by the ld. CIT(A) after taking the proper remand report from the AO. 3.4 However, the ld. counsel for the assessee has defended the order passed by the CIT(A). 3.5 Having heard the rival submission and perused the materials available on record, we are of the view that there is merit in the submissions of ld DR for the Revenue as he explained before us that the documents, contracts and agreements in respect of receiving rent-free office accommodation had not been examined by the AO because the CIT(A) did not ask the remand report. The assessee was in receipt of maintenance contract of the first floor of the building from SBI Bank. The maintenance contract has neither examined by CIT(A) nor by AO. The CIT(A) did not ask the remand report from the AO to verify the maintenance contract. The Maintenance contract and receiving rent-free office accommodation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o avoid disallowance of interest expense of ₹ 11,97,624/- un/s 40(a)(ia), an afterthought story was prepared by the assessee in his submission. Hence, AO held that question of double taxation on this issue does not arise and it is an established fact that the assessee failed to deduct tax on interest payment of ₹ 11,97,624/- and the same is liable to be disallowed under the provision of section 40(a)(ia) of the Act, and, accordingly, AO disallowed the same. 4.2. Aggrieved by the order of the AO, the assessee filed an appeal before the ld. CIT(A) who has deleted the addition made by the AO. The ld. CIT(A) observed that section 40(a)(ia) cannot be invoked by the ld. AO in a situation when the assessee may not have submitted the requisite Form 15G before the Authority in time, or even may not have submitted the same at all. The ld. CIT(A) observed that in the present situation from the emergent facts, it was appeared that there was no need for the assessee to deduct taxes at source from the cases, and therefore it cannot be said that there was any default on the part of the assessee. The ld CIT(A) also relied on the case of M/s Karwat Steel Traders Vs ITO (2013) 145 ITD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefrom u/s 194A of the Act. We further hold that if the assessee bank was not liable to deduct tax at the time of payment of interest, then section 40(a)(ia) of the Act is not attracted and the assessee cannot be held liable to pay tax. Therefore, respectfully following the judgment of Coordinate Bench in the case of Malineni Bagulu (supra), on identical issues, we are of the view that section 40(a)(ia) cannot be invoked by the AO in a situation when the assessee has filed Form 15G/15H before the Appropriate Authority. Hence, considering the factual position, we confirm the order passed by the CIT(A). 4.6 In the result, the appeal filed by the Revenue (in Ground no.2), is dismissed. 5. Ground No.3 raised by the Revenue relates to disallowances of ₹ 1,15,200/- on account of non deduction of tax at source by the assessee to the parties against payment on account of repairs and maintenances. 5.1 The brief facts qua the issue are that, it was seen by the AO from the Profit and Loss Account of the assessee as on 31.03.2012 that a sum of ₹ 2,07,062/- has been claimed as deduction on account of repairs and maintenance. From the details filed by the assessee during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eimbursement and the assessee was not paying any amount directly to the vendors was merely reimbursing the expense borne by our customer in relation to repairs of defective items. It was further explained that in those cases, where the assessee was responsible for repairs for customer, TDS had been deducted as per the rate applicable. It was pointed out that the total payments made was ₹ 2,05,862/- out of which TDS was not made against payment of ₹ 43,200/- and ₹ 72,000/- to M/s Clear Point Instrumentation Pvt. ltd and M/s TTL Technologies Pvt. Ltd, as the assessee has to merely reimburse the actual expense borne by the customers. However, in the case of M/s Doble Engineering Pvt. Ltd, the assessee has paid the repairs amount of ₹ 90,662/- to the vendor on behalf of M/s Doble Engineering Pvt. Ltd, on which TDS was deducted @Rs.1813/- as the assessee has paid the amount directly and not behalf of any customer. The assessee was rendering different types of service to the customers. Firstly, it was rendering service directly and secondly he was undertaking repairs and service on behalf of the companies for whom products were sold. Based on the submissions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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