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TMI Blog2018 (3) TMI 1569X X X X Extracts X X X X X X X X Extracts X X X X ..... see has claimed the interest due to financial institutions i.e ₹ 2,11,22,788/- in other income. Hence we remit the matter back to the file of the AO to examine whether the impugned expenditure is claimed in other income (other than income of interest from Govt. of AP as per schedule –L) or not and decide the issue as per merits. In case the assessee has not claimed the expenditure in other income the same is not to be disallowed u/s 43B. The assessee’s appeal on this ground is allowed for statistical purposes. TDS u/s 194C - Disallowance u/s. 40(a)(ia)- Held that:- The amount of the amount of ₹ 5,20,88,872/- was the amount of break up of expenditure incurred on contractors and TDS required to be deducted as on 31/03/2009. From page No.73 onwards the assessee has submitted the details of payments made and remittances made to government account before filing the return and balance remained was only ₹ 1,26,25,001/- for non deduction of tax at source. DR did not dispute the fact. Therefore, we do not find any justifiable reason for the enhancement made by the CIT(A). Hence the enhanced addition made by the CIT(A) is unsustainable and accordingly deleted. TDS u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lice stations and other offices and facilities for the Police Department. The company is established only with the purpose of construction of residential houses for Police Department and Police stations. The company was established in the year 1971 and the share capital is fully subscribed by the Government of Andhra Pradesh. 4. The Government of Andhra Pradesh also issued an order vide G.O.Ms.No. 517, dated 25th September, 1980, clarifying that Government will arrange funding of the corporation for construction of houses in the shape of advances not bearing interest and the corporation shall build the houses and handed over them to Government within a reasonable time from the date of drawl of the advances. The corporation should not include interest on these advances while computing the cost of the quarters. When the quarters are handed over to the Government, the cost of this quarters will be adjusted against the advances given by the Government. 5. The first issue is related to the addition made u/s. 43B of the Income Tax Act [Act]. The assessee filed its return of income declaring total income of ₹ 13,26,020/- on 03-03- 2011. The AO selected the case for scrutiny an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djusted against the constructed housing quarters of the corporation which would be handed over to the Government of Andhra Pradesh. The Ld.AR submitted that there are no sales in the case of the assessee and there is no expenditure in the hands of the assessee for construction for the activity carried on by the assessee. The entire expenditure to be borne by Government of Andhra Pradesh. The entire interest required to be paid to the LIC of India, HUDCO would be given by the Government of Andhra Pradesh as interest free loan. Therefore, argued that there is no income earned by the assessee and there is no expenditure claimed towards interest in the P L A/c. The Ld.AR invited our attention to Page No. 53 of Paper Book in Schedule-L, wherein it was mentioned that interest of ₹ 951.14 Lakhs [from Government of Andhra Pradesh for payment of financial institutions on loans], which indicates that the assessee is required to receive the sum of ₹ 951.14 Lakhs representing the interest payable to Financial institutions on loans which was categorised as income in the hands of the assessee and the same amount was shown as interest expenditure which is a contra entry. Since interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome received by the assessee from the Government of Andhra Pradesh and there is no expenditure related to the earning of the income. Both the income and expenditure were debited to the P L A/c under the Income and Expenditure head as contra entries. The interest expenditure on loans is payable to the public financial institutions and the same is to be reimbursed by the Government of Andhra Pradesh as interest free loans. In the result, neither income accrued to the assessee nor the expenditure claimed by the assessee. 9. The assessee relied on the decision of CIT Vs. Chamanlal Mangaldas Co., [39 ITR 8] (SC), wherein the Hon'ble Supreme Court held that if incomes does not result at all, there cannot be tax though the book keeping entry is made about hypothetical income which does not materialize. Ld.AR also relied on the decision of Co-ordinate Bench of ITAT, Ahmedabad in ITA No. 2549/Ahd/2013 (AY. 2010-11) in the case of Gujarat State Police Housing Corporation Ltd., Vs. ACIT, dt. 18-07-2014, wherein the Co-ordinate Bench of ITAT held as under: The whole of funds belonged to the state Exchequer and the appellant was only to channelize them for the objects of Polic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de the orders of the AO and the first appellate authority and the claim of the assessee was allowed. (Pg No.166-167) . 10. In the assessee s case, the entire amount of funds were received from Government of Andhra Pradesh as interest free advance which utlised for construction of police housing and after completion of construction, the property is handed over to the Government of Andhra Pradesh and the loan / advance interest gets adjusted towards cost of construction. The interest payment has to be received from the Government of Andhra Pradesh. Neither the income is accrued nor the assessee claimed the interest expenditure which remained unpaid. Hence, we hold that Section 43B of the Act not is applicable in assessee s case. However it is not clear from the assessment order or the P L account whether the assessee has claimed the interest due to financial institutions i.e ₹ 2,11,22,788/- in other income. Hence we remit the matter back to the file of the AO to examine whether the impugned expenditure is claimed in other income (other than income of interest from Govt. of AP as per schedule L) or not and decide the issue as per merits. In case the assessee has not claime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with regard to the addition of ₹ 1,26,25,001/- u/s 40(a)(ia) of the act. The Ld.AR argued that the assessee has neither made the payment to the contractor nor credited the amount to the account of the contractor. Only provision was made on estimation basis in the books of account to arrive at the true and correct state of affairs. As per Section 194C of the Act, assessee is required to deduct the tax at the time of payment or at the time of crediting the amount to the contractor. In this case, since assessee neither credited the payment to the contractor nor paid the amount, the question of TDS does not arise. Only journal entries are passed by assessee and the same were reversed immediately on the first day of succeeding year. Per contra the Ld.DR supported the orders of the lower authorities. 15. We have heard both the parties and perused the material on record. As per the provisions of Section 194C the TDS is required to be made when the payment is made to the contractor or the amount is credited to the account of the contractor. For ready reference, we extract hereunder the relevant provisions of Section 194C. 194C. (1) Any person responsible for paying any su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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