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TMI Blog2020 (1) TMI 960X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes, which is the mandate of Section 36(1)(iii) of the 1961 Act read with proviso to Section 36(1)(iii) of the 1961 Act. The Revenue has not filed any evidences to demolish the findings of learned CIT(A) in its well reasoned order and merely bald grounds/averments are raised which has no legs to stand. CIT(A) has passed well reasoned order on this issue and there is no reason for us to interfere with said well reasoned appellate order passed by learned CIT(A) on this issue of allowability of interest expenses on trade advances. Allow interest expenses on trade advances as business deduction while computing income of the assessee and dismiss appeal filed by Revenue on this issue TDS U/ 192 - secondment charges paid by assessee to M/s.Brakes India Ltd.by way of reimbursement of salaries and allowance of employees of Brakes India Limited deputed with assessee - addition u/s 40(a)(ia) - HELD THAT:- We have observed that assessee has not placed on record secondment agreement entered into by it with Brakes India Limited and its terms and conditions for deputing these employees of Brakes India Limited were not analysed by authorities below. We have also observed that auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 and hence consequentially restrict our discussions to ay: 2014-15. The appellate proceedings before learned CIT(A) for ay: 2014-15 had arisen from assessment order dated 23.12.2016 passed by learned Assessing Officer (hereinafter called the AO ) u/s.143(3) of the Income-tax Act, 1961 (hereinafter called the Act ). 2. The grounds of appeal raised by Revenue in memo of appeal filed with Income-Tax Appellate Tribunal, Chennai (hereinafter called the Tribunal ) read as under:- 1. The order of the learned CIT(A) is contrary to law and facts and circumstances of the case. 2.1 The Id.CIT(A) erred in deleting the disallowance of Interest paid on trade advance ₹ 34,86,845/- holding that the interest on borrowed capital for the purpose of construction of building can be disallowed on interest accrued only upto the date of completion of building or put to use of building to capitalize the same. 2.2 The Id. CIT(A) failed to verify the actual purpose for which trade was received and terms of repayment along with the interest, etc. The assessee company has not produced any agreement of loan between the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.Brakes India Ltd., which were shown in books of accounts as trade advances. The AO asked assessee as to why loan is shown as trade advance and interest paid thereon. The assessee claimed that keeping in view provisions of Section 2(28A) of the 1961 Act, the interest is allowable not only in respect of money borrowed but also for debt incurred . It was submitted that these trade advances are debt incurred and there is an obligation to adjust these advances with interest thereon. The prayers were made by assessee before AO to allow these interest expenses u/s.36(1)(iii) of the Act. The AO rejected contentions of the assessee. The AO observed that the assessee has not accounted for re-payment of principal which is an income of the assessee. The AO also observed that assessee has not grossed the amounts through P L A/c and set off his liability which the assessee should have done. The AO also observed that trade advances are short term liability but same were used for capital purpose. It was observed by AO that amounts were not used for intended purposes and thus AO disallowed said interest expenses and added the same to income of the assessee, vide assessment order dated 23.12.2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Bench that said trade advances received from Brakes India Limited were reflected as long term liabilities in the audited financial statements. 3.4 .We have considered rival contentions and perused material on record. We have observed that assessee is in business of manufacturing of automobile components. The assessee is undertaking job work for M/s.Brakes India Ltd.. The assessee received trade advance from M/s.Brakes India Ltd. and as per audited accounts, the trade advance outstanding as on 31.03.2013 was ₹ 17.15 Crs. and as on 31.03.2014, the said trade advance outstanding were to the tune of ₹ 13.57 Crs. We have observed that assessee has shown said trade advances received from M/s.Brakes India Ltd., as long term liability in its audited financial statements. It is also observed that assessee is doing job work entirely for said M/s.Brakes India Ltd. . We have observed that the assessee has earned Revenue from operation to the tune of ₹ 15,76,92,179/- which consisted majorly of conversion charges being ₹ 15,76,83,679/-. The assessee has paid interest to Brakes India Limited on the trade advances to the tune of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business purposes, which is the mandate of Section 36(1)(iii) of the 1961 Act read with proviso to Section 36(1)(iii) of the 1961 Act. The Revenue has not filed any evidences to demolish the findings of learned CIT(A) in its well reasoned order and merely bald grounds/averments are raised which has no legs to stand. Under these circumstances, we are of the considered view that Ld.CIT(A) has passed well reasoned order on this issue and there is no reason for us to interfere with said well reasoned appellate order passed by learned CIT(A) on this issue of allowability of interest expenses on trade advances. Thus, we sustain and uphold well reasoned appellate order passed by Ld.CIT(A) and allow interest expenses on trade advances as business deduction while computing income of the assessee and dismiss appeal filed by Revenue on this issue. We order accordingly. 4. The second issue concerns itself with secondment charges paid by assessee to M/s.Brakes India Ltd. to the tune of ₹ 1,30,28,173/- by way of reimbursement of salaries and allowance of employees of Brakes India Limited deputed with assessee. The AO invoked provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n business of manufacturing of automobile components. The assessee has set up factory for manufacturing of automobile components and doing job work for its associated enterprise M/s.Brakes India Ltd. . The assessee is entirely doing work for said concern M/s Brakes India Limited . The said M/s.Brakes India Ltd. has also given huge trade advances to assessee which were used by it for constructing factory building as we have seen in earlier paragraphs of this order. The said Brakes India Limited has also deputed its employees with assessee on deputation basis . Thus, the assessee is basically a captive manufacturer for M/s.Brakes India Ltd. Coming back, the assessee has reimbursed salaries and allowances of these employees deputed by Brakes India Limited with assessee . while reimbursing these salaries and allowances, the assessee did not deducted income-tax at source as is contemplated under provisions of Chapter XVIIB of the 1961 Act and rather it is claimed that there is no necessity of deducting income-tax at sources as these are merely reimbursement of expenses and in any case Brakes India Limited has deducted income-tax at source u/s 192 of the 1961 Act while making payments to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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