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TMI Blog2021 (10) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... der Explanation 7 to section 9(2),the deduction under section 40(a)(ia) was not warranted - Decided in favour of assessee. Disallowance of interest paid on account of notional interest on interest free advances given to the related party against the purchase of guest house property - HELD THAT:- The issue is identical to the issue involved in the earlier year. The matter travelled to Hon ble High Court. Hon ble High Court has confirmed the deletion made by the Tribunal [ 2018 (1) TMI 739 - DELHI HIGH COURT ] disallowance under section 36(1)(iii) is concerned, the addition was made purely on the basis that the funds were borrowed by a Director and that interest needed to be charged. This was wholly erroneous premise because the amounts were given to the Director for purely business purpose of the entity, i.e. to acquire guest house. The proposal did not materialize and eventually the money was returned. It is not Revenue s case that the amounts were utilized by the Director for her own purpose - finding with respect to commercial expediency, in the circumstances, does not call for interference - Decided against revenue. Addition invoking the provision of section 40A(3) - a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is based on erroneous views and / or non-appreciation of the facts and law. 3. No TDS was deductible out of legal and professional expenses either under the Act or under certain relevant provisions of the DTAA. As such, section 40(a)(i) is not applicable and the disallowance of ₹ 55,14,741/- is liable to be deleted. 4. That Ld CIT(A) has erred in confirming the disallowance of ₹ 87,18,393/- out of interest paid on account of notional interest on interest free advances given to related party against purchase of guest house property. The advance was given in the course of business for commercial expediency and as such no disallowance is called for. The disallowance as sustained by the Ld. CIT(A) is based on erroneous views and non-appreciation of facts and law involved and is also against the consistency principle. Similar interest disallowance was deleted last year by Ld. CIT(A). 3.1 That the Ld. CIT(A) has erred on facts and in law in not appreciating that the appellant had large amount of own noninterest bearing funds in the form of capital, reserves and other interest free funds. As such too the disallowance as made by the Assessing Officer and confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance made by the Assessing Officer for Assessment Year 2009-10 deleted by the Tribunal and confirmed by the Hon ble Delhi High Court. 9. On the contrary, Ld. Sr. DR supported the orders of the authorities below. However, he conceded the fact that the issue has been decided in favour of the assessee by the Tribunal and the same has been confirmed by the Hon ble Delhi High Court. 10. Therefore, we do not see any justification to sustain the addition as made by the Assessing Officer. Ld.CIT(A) has categorically stated that the retrospective amendment has been clarified that even if non-resident has no business communication to India and not rendered any services in India then also the payment received deem to accrue or arise in India. The Assessing Officer has relied upon the Article 12 of DTAA between India and Germany in this regard. Further, the Hon ble High Court in ITA No.1084/2017 has held as under:- So far as the first question, i.e. deletion of ₹ 7,27,532/- is concerned, this Court is of the opinion that since the ITAT has rendered findings that the amounts paid were not Fee for Technical Services (FTS) under Explanation 7 to section 9(2), similar treatmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or her own purpose. In these circumstances, the ITAT appropriately relied under CIT vs Bharti Televentures Ltd. (2011) 331 ITR 502 (Del.). The finding with respect to commercial expediency, in the circumstances, does not call for interference. 16. Respectfully following the binding precedents, we hereby direct the Assessing Officer to delete the addition. 17. Ground No.5 is not providing the sufficient opportunity. 18. At the time of hearing, Ld. Counsel for the assessee did not point out as to how the sufficient opportunity was given. 19. Ld. Sr. DR supported the orders of the authorities below. 20. We have heard the rival contentions and perused the material available on record. We find that the assessee has given sufficient opportunity by the authorities below. Therefore, this Ground of the assessee s appeal is rejected. 21. Ground No.6 raised by the assessee is against the charging of interest u/s 234B, 234C, 234D and 244A of the Act. 22. The assessee has not raised any arguments as to how this interest is not chargeable. In the absence of the same, this Ground No.6 raised by the assessee is rejected. 23. Ground No.7 raised by the assessee is general ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses either under the Act or under certain relevant provisions of the DTAA. As such, section 40(a)(i) is not applicable and the disallowance of ₹ 25,88,314/- out of ₹ 34,99,078/- is liable to be deleted. 6. That the disallowances have been made and certain adverse comments made without proper lawful opportunity and without compliance of principles of natural justice. As such too, the disallowances as appealed against in grounds above are liable to be deleted in toto. 7. That the interest u/s 2348 and 234C is incorrect and excessive. 8. That the grounds of appeal as herein are without prejudice to each other. 9. That the appellant respectfully craves leave to add, amend, alter and /or forego any ground(s) at or before the time of hearing. 27. Ground No.1 raised by the assessee in this appeal is against the disallowance of ₹ 1,10,593/- towards alleged personal use. 28. At the outset, Ld. Counsel for the assessee submitted that the issue is covered in favour of the assessee by the decision of the Tribunal in earlier years. 29. Ld. Sr. DR could not controvert these facts. 30. We have heard the rival contentions and perused the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Being cash paid to Mr.S N Pandey. Total 1,14,612/- In view of cash payments without any detail the disallowance made by the AO is fully justified. Further, considering the provisions of Sec. 40A(3) if the circumstances as prescribed in Rule 6DD are not fulfilled in the case of the assessee, the disallowance is to be enhanced to ₹ 1,14,612/-. AO is directed to verify whether the circumstances as prescribed in Rule 6DD are fulfilled by the assessee, before enhancing the disallowance. Therefore, appeal fails in this ground with direction to the Assessing Officer. 34.2. We find that Ld.CIT(A) did not comply with the provision of section 251(2) of the Act. Therefore, the direction of Ld.CIT(A) is hereby, quashed being illegal. Ground Nos.2 3 raised by the assessee are allowed. 35. Ground Nos.4 5 raised by the assessee are in respect of sustaining the disallowance of ₹ 25,88,314/- by invoking the provisions of section 40(a)(i) of the Act. 36. Ld. Counsel for the assessee submitted that these grounds related to disallowance of ₹ 25,88,314/- out of legal and professional cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delete the addition. 39. Ground No.6 raised by the assessee is not providing the sufficient opportunity. 40. At the time of hearing, Ld. Counsel for the assessee did not point out as to how the sufficient opportunity was given. 41. Ld. Sr. DR supported the orders of the authorities below. 42. We have heard the rival contentions and perused the material available on record. We find that the assessee has given sufficient opportunity by the authorities below. Therefore, this Ground of the assessee s appeal is rejected. 43. Ground No.7 raised by the assessee is against the charging of interest u/s 234B 234C of the Act. 44. The assessee has not raised any arguments as to how this interest is not chargeable. In the absence of the same, this Ground No.7 raised by the assessee is rejected. 45. Ground No.8 raised by the assessee is general in nature, needs no separate adjudication. 46. Ground No.9 raised by the assessee is in the form of prayer, no such prayed has been made hence, dismissed as rejected. 47. In the result, the appeal of the assessee is partly allowed. 48. In the final result, both appeals of the assessee are partly allowed. Above decision w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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