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TMI Blog2018 (10) TMI 1595X X X X Extracts X X X X X X X X Extracts X X X X ..... as income of the assessee. The assessee was paying interest on borrowings, and therefore, notional interest at the rate of 18% on the advance of ₹ 72,45,000 was rightly brought to tax as income of the assessee by the A. O. Therefore, we see no reason to interfere with the findings of the CIT(A). Accordingly, we confirm the order of the CIT(A) on this issue. Disallowance invoking the provisions of section 40(a)(ia) - Held that:- Admittedly, no tax was deducted on the payment of ₹ 21,27,846. The assessee has not proved that the provisions of section 40(a)(ia) of the I. T. Act does not have any application on the said payment of ₹ 21,27,846. Hence, the A. O. was correctly disallowed the expenditure by invoking the provisions of section 40(a)(ia) of the I. T. Act, which was confirmed by the CIT(A). Hence, we see no reason to interfere with the order of the CIT(A) and we confirm the same. Disallowance of labour charges expenses - Held that:- The assessee has not produced any details that the said labour charges has been expended by it. Hence, the A. O. had correctly disallowed the expenditure and added back to the income of the assessee. We see no reasons to inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance was repaid to the assessee trust. The assessee was further show caused as to why the provisions of section 13(1)(c) of the I. T. Act should not be invoked and the exemption u/s 11 of the I. T. Act be denied. The assessee contended that the amount was paid for the purpose of purchase of timber and since the medical college could not be constructed, the amount advanced by the assessee-trust was duly repaid in the assessment years 2013- 2014, 2014-2015 and 2015-2016. It was submitted that all the repayments were made by account payee cheques. The Assessing Officer, however, rejected the contention raised by the assessee. The A. O. held that there was a clear violation of provisions of section 13(1)(c) of the I. T. Act since the assesseetrust had advanced money to the wife of Managing Trustee, a person mentioned u/s 13(3) of the I. T. Act. It was further held by the A. O. that the wife of the Managing trustee had the benefit of the advance, without payment of any interest. The A. O. was also of the view that since the assessee trust was paying interest on its borrowings, it was liable to be taxed for further amount of ₹ 13,04,700, being 18% interest on advance of ₹ 72, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption u/s 11 for the balance amount . 3. 3 Aggrieved by the CIT(A) s order, the assessee has filed the present appeal before the Tribunal. The learned Counsel for the assessee submitted that the amount advanced to M/s. VUS Timbers was for the purpose of purchase of wood, and there is no violation of provisions of section 13(1)(c) of the I. T. Act. It was submitted that the assessee-trust is running various educational institutions and for the purpose of construction of a medical college, advance was made to M/s. VUS Timbers for the purchase of timber. It was submitted that the medical college could not be constructed since no permission was granted, hence, the amount advanced to M/s. VUS Timbers was returned by account payee cheques. It was further stated that substantial portion of the advance paid to M/s. VUS Timbers was returned within a short period of four months, and therefore, there is no benefit to the wife of the Managing trustee and hence there is no violation of the provisions of section 13(1)(c) of the I. T. Act. 3. 4 The learned Departmental Representative, on the other hand, strongly supported the orders of the assessment and the CIT(A). 3. 5 We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 72,45,000 was rightly brought to tax as income of the assessee by the A. O. Therefore, we see no reason to interfere with the findings of the CIT(A). Accordingly, we confirm the order of the CIT(A) on this issue. Whether the CIT(A) is justified in confirming the disallowance of Rs . 21,27,846 by invoking the provisions of section 40(a)(ia) of the I . T . Act? 4. 1 The Assessing Officer has made the disallowance of ₹ 21,27,846 by invoking the provisions of section 40(a)(ia) of the I. T. Act. The relevant finding of the A. O. reads as follows:- It is seen that Shri Varghese Innocent is appearing in the list of sundry creditors of M/s . Ilahia Trust division for Rs . 11,83,384/- and as sundry credit with M/s . Ilahia School of Science Technology, Muvattupuzha for Rs . 9,44,462/- . The authorized representative was asked to furnish the nature of work carried out by Varghese Innocent and TDS deducted . It is seen that no TDS is seen deducted from contracts given . Hence the amount of Rs . 2127846/- (Rs . 11,83,384/- + Rs . 944,462) is disallowed by applying provisions of Sec . 40(a)( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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