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TMI Blog2020 (11) TMI 270X X X X Extracts X X X X X X X X Extracts X X X X ..... ly if the tax is assessable in India if tax is not so assessable, there is no question of tax at source being deducted. Assessee also cited a judgment of MGM Exports [ 2018 (5) TMI 1240 - GUJARAT HIGH COURT ] wherein held that fundamental principle of deducting tax at source in connection with payment only, where the sum is chargeable to tax under the Act, still continues to hold the field. In the present case, the Revenue has not seven seriously contended that the payment to foreign commission agent was not taxable in India. - Decided against revenue. Disallowance of interest u/s. 40A(2)(b) - justification for interest paid on unsecured loan at the rate of 18%. - A.O. after reducing 3% of interest allowed 15% interest - CIT(A) who granted relief on the ground that A.O. has not given any basis and support to adopt the interest rate at 15% per annum as the prevalent interest rate - HELD THAT:- In the matter of Laxmi Pulse Rice [ 2012 (8) TMI 1183 - ITAT AHMEDABAD ] wherein similar issue was decided by the Co-ordinate Bench in favour of the assessee and allowed 18% of interest and similar rate of interest was allowed by the Co-ordinate Bench. Disallowance of capitalization of interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er may be restored to the above extent. 2. The revenue has taken seven grounds but ground nos. 1 to 4 are relevant remaining grounds are formals, therefore, we would like to disposed of ground nos. 1 to 4. 3. Facts of the case are that the assessee is in the business of manufacturing as well as trading of Pesticides. From the perusal of the accounts, it was observed that the assessee has debited ₹ 10707684/- under the head other expenses on account of Product Development Expenditure. Assessee filed before the lower authorities copies of ledger accounts for Analytical Fees Expenses of ₹ 4053995/- Analytical Fes Exps. Export of ₹ 6053689/-. But ld. A.O. did not accept the contention given by the assessee and made addition of ₹ 10707684/-. 4. Thereafter assessee preferred first statutory appeal before the Ld. CIT(A) who granted relief to the assessee on the ground of consistency. Since similar expenses were allowed by the department in assessee's own case for assessment year 2009-10. 5. Now revenue has come before us by way of second statutory appeal. As we can see that in ITA No. 2491/Ahd/2014 for immediate preceding assessment year 2011-12 ITAT granted re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. 2. Whether the Appellate Tribunal has erred on facts and in law in deleting the addition of ₹ 5,05,330/- made u/s. 40(a)(ia) of the Act without appreciating that the commission paid to a non-resident agent was subject to TDS u/s. 195 of the Act? 14. The matter was in favour of the assessee with following observations: It is indisputably true that such explanation inserted with retrospective effect provides that obligation to comply with subsection [1] of Section 195 would extend to any person resident or non-resident, whether or not non-resident person has a residence or place of business or business connections in India or any other persons in any manner whatsoever in India. This expression which is added for removal of doubt is clear from the plain language thereof, may have a bearing while ascertaining whether certain payment made to a non-resident was taxable under the Act or not. However, once the conclusion is arrived that such payment did not entail tax liability of the payee under the Act, as held by the Supreme Court in the case of GE India Technology Centre P. Limited [Supra], subsection [1] of Section 195 of the Act would not apply. The fundamental principle of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00). Since, allowable rate of interest on unsecured loan was held at 15% out of total expenses debited in profit and loss account, proportionate interest @ 15% on the amount of ₹ 4182000/- which comes to ₹ 627300/- was disallowed and capitalized u/s. 36(1)(iii) of the Act. 23. In appeal before the ld. CIT(A) who granted relief to the assessee on the ground that interest bearing funds utilized for the capital advances is without any basis and therefore disallowance of interest was deleted. 24. Now Revenue has come before us by way of second statutory appeal. 25. As we can read from the order of the ld. CIT(A) wherein audited balance sheet with regard to share capital and reserve and surplus were reproduced wherein assessee is having share capital of ₹ 2500 lacs and reserve and surplus is having of ₹ 2514 lacs and total comes to 5014 lacs. Meaning thereby, assessee is having interest free funds for much more. 26. And in support of its contention, assessee cited a judgment of Hon'ble Gujarat High Court in the matter of Raghuvir Synthetics 354 ITR 222 wherein relief was granted to the assessee with following observations: During the course of the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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