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TMI Blog2019 (4) TMI 1580X X X X Extracts X X X X X X X X Extracts X X X X ..... n as per law in the year the account was squared up. In the result, the ground of appeal is allowed. Disallowance of interest paid on service tax u/s 40(a)(ii) - assessee has paid interest on service tax - HELD THAT:- On a plain reading of the above provisions, it provides that any sum paid on account of any rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains. What it therefore provides is the rate or tax levied on the profits/gains of any business or profession. The interest on service tax is not a tax levied on the profits/gains of any business or profession. Thus, the very foundation of disallowance by invoking the provisions of section 40(a)(ii) is not satisfied in the instant case. Further, the decision relied upon by the ld CIT(A) is distinguishable as the said decision deals with case of interest on late deposit of TDS which was disallowed by the AO u/s 37(1) of the Act. Even where the provisions of section 37(1) are considered as implied invoked by the ld CIT(A) in the instant case, it is a settled position that the interest on account of delayed deposit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by vouchers along with complete details with purpose which is available for verification. It was submitted that all the bills were produced before the Assessing Officer which were test checked and he not specifically point out the defects which have been found by him. It was accordingly submitted that the addition as confirmed by the ld. CIT(A) should be deleted. 3. Per contra, the ld. DR has relied upon the orders of the lower authorities. 4. We have heard the rival contentions and perused the material available on record. We find that the expenses have been disallowed purely on an adhoc basis and even the ld CIT(A) has returned a finding that the AO has no material to make the subject disallowance. In absence of any finding that the expenses are bogus or not incurred for the purposes of the assessee s business, the adhoc disallowance so made is directed to be deleted. In the result, the ground of appeal is allowed. 5. In ground no. 2, the assessee has challenged the addition of ₹ 69,270/- made by the AO U/s 41(1) of the Act. During the course of hearing, the ld. AR has submitted that the assessee has engaged M/s Shekawati Courier Cargo and instructi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the appellant, assessment order and the material placed on record. It appears that during the appellate proceedings, the appellant has changed its stand as made before the AO. Further, on a perusal of the ledger account of Shekhawati Courier Cargo as appearing in the books of accounts of the appellant, it was observed that there was opening credit of ₹ 26,085/- as on 01.04.2010 and closing credit balance of ₹ 69,270/- as on 31.03.2011 which remained the same till 01.04.2014 and on the same date, through a journal entry an amount of ₹ 69,270 was debited in the said account and the account was squared up. In the ledger account of Ramkishan Coudhary, there was a debit balance of ₹ 1,57,721/- on 31.03.2011 which remained the same till 01.04.2014 and on the same date through journal entry, a sum of ₹ 69,270/- was credited. (iv) In view of the above discussion, it is clear that the appellant was having transactions with M/s Shekhawati Courier Cargo prior to 01.04.2010 whereas it has been claimed that the appellant appointed it only during the year 2010-11. Further, before the AO it was stated that the outstanding amount was paid in the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applies to any sum paid on account of tax on profits or gains of business or profession and the service tax is recovered on the value of the services. It was further submitted that the issue is squarely covered by the decision of the Tribunal in case of Remfry Sagar Consultants Pvt. Ltd. vs. ACIT 34 CCH 0131. Further, Reliance was placed on the decision of Hon ble Gujarat High Court in case of CIT vs. Kaypee Mechanical India P Ltd. 223 Taxman 346 and decision of Hon ble Supreme Court in case of Lachmandas Mathuradas vs. CIT 254 ITR 799. It was further submitted that the ld. CIT(A) has wrongly relied upon the Coordinate Bench decision in case of DNV GL AS (ITA No. 4687/Mum/2016 dated 31.05.2017) as the said decision has been rendered in the context of interest on delayed payment of TDS. It was further submitted that the AO has wrongly observed that borrowed funds have been used for payment of service tax merely for the reason that such interest has been clubbed under the head Interest paid to others . It was accordingly submitted that the interest paid on late deposit of service tax being compensatory in nature is duly allowable and therefore, the addition so made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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