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TMI Blog2022 (2) TMI 379X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts of the case fn confirming the disallowance of Rs. 1,44,500/- u/s. 40(a)(ia) r.w.s. 94C of the Act. 4. The learned CIT(A) has erred both in law and on the facts of the case in confirming the disallowance of interest expense of Rs. 44,18,949/- u/s. 36(1)(iii) of the Act. 5. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 6. The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in levying interest u/s. 234A/B/C of the Act. 7. The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in initiating penalty u/s. 271(1)(c) of the Act. 8. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. 3. The in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authored representative of that appellant submitted that' he is not pressing this ground. Accordingly, addition of Rs. 4,72,860/- is confirmed. This ground of appeal is dismissed. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX In fact, the firm has paid and debited interest expenses instead of interest income receivable from that firm" but no further submission were made on this account. The A.R. of the appellant during hearing of appeal submitted that he is not; pressing this ground. In any case, the appellant has not contested with' corroborative evidence finding of the AO that instead of paying interest to Anjani Enterprises, the appellant has received interest of Rs. 4,72,643/-. Accordingly, addition of Rs. 4,72,643/- is upheld. This ground of appeal is rejected. It is seen that during assessment proceedings, the AO noted that the appellant had made payment of Rs. 72,000/- and Rs. 72,500/- to Ishwarbhai and Parmeshwarbhai respectively for colour work. The AO further noted that no TDS was deducted on these amounts which was deductible 'u/s. 194C of the/Act. Thus, the AO after giving the appellant an opportunity to explain and not finding expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Therefore in the interest of justice and fair play, we have no hesitation in admitting the ground raised by the assessee as discussed above though the same was not pressed before the learned CIT(A) by the assessee. 9.1. As there is no finding by the learned CIT(A) qua the dispute on hand, therefore we are inclined to set aside the same to the file of the learned CIT(A) for fresh adjudication as per the provisions of law. Hence, the ground raised by the assessee is allowed for statistical purposes. 10. The 2nd issue raised by the assessee in ground No. 3 is that the learned CIT(A) erred in confirming the disallowance made by the AO for Rs. 1,44,500 on account of non-deduction of TDS under the provisions of section 194C read with section 40(a)(ia) of the Act. 11. The assessee in the year under consideration has incurred an expense of Rs. 1,44,500/- towards the colouring work but no TDS was deducted thereon under the provisions of section 194C of the Act. Therefore the same was disallowed by the AO and added to the total income of the assessee. 12. Aggrieved assessee preferred an appeal to the learned CIT(A) who confirmed the order of the AO by observing as under: 13. Being ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 40(a)(ia) of the Act be restricted to 30% of the expenses paid as against 100% because amended provision is curative in nature and the provisions should be applied retrospectively. 16.1. Likewise, the Ahmedabad tribunal in the case of Electronic Instrumentation & Control Pvt. Ltd. vs. ITO in ITA No. 3055 and 3056/AHD/2013 has held that the proviso added to the provisions of section 40(a)(ia) of the Act by the Finance Act (No. 2) 2014 is applicable retrospectively. Thus, in view of the above provisions, the 100% of the expenses incurred by the assessee without incurring the TDS cannot be disallowed. Rather disallowance shall be restricted to the tune of 30% only. Accordingly, we direct the AO to restrict the disallowance to the tune of 30% of the total expenses incurred by the assessee. 16.2. In the alternate contention, the learned AR at the time of hearing before us has submitted that the payees have already included the amount received from the assessee in the financial statements and paid the due taxes thereon. Accordingly, there cannot be any disallowance by virtue of the 2nd proviso to section 40(a)(ia) of the Act. For this purpose, the matter can be referred back to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payee. From the above discussion, it is transpired that the assessee can be granted immunity from disallowances of expenses on account of non/short deduction of Taxes provided that the assessee furnishes the certificate in the prescribed form. Thus the onus is upon the assessee. However, we find that assessee has not furnished the necessary certificate in form 26A prescribed by the CBDT. Now at the time of hearing before us, the learned AR has also not furnished any certificate in form 26A prescribed by CBDT. Now the issue arises, can the matter be set aside to the file of the AO for collecting the necessary evidences from the respective payees to ensure that such payees have paid the taxes on the amount received from the assessee? 16.7. In this regard we note it is the duty of assessee to deduct appropriate tax from the amount paid/payable to any party i.e. payee if such amount falls under the preview of provision of chapter XVII(B) of the Act i.e. deduction at source. Further, the provision of section 40(a)(ia) of the Act provides that if assessee failed to deduct or failed to deduct appropriate tax on amount paid on which it was liable to deduct tax then such amount will not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the assessee that no interest expense has been debited in the profit and loss account was not correct. It is for the reason that indeed the assessee has increased the closing WIP by the amount of interest expense but the same will become the opening WIP for the subsequent year and the assessee will claim the deduction of the same in the succeeding years. 18.2. The AO further found that the assessee has carried out financial transactions approximately for Rs. 5.70 crores with its sister concern namely M/s. Anajni Enterprise, having no commercial dealings. Thus, he was of the view that the borrowed fund has been diverted to extend the benefit to the sister concern. Accordingly, the AO concluded that the interest expense has not been incurred for the purpose of business as provided under section 36(1)(iii) of the Act and disallowed the interest expenses of Rs. 44,18,949.00 (48,91,809 minus 4,72,860.00 the amount already added) by adding to the total income of the assessee. 19. Aggrieved assessee preferred an appeal to the learned CIT(A) 20. The assessee before the learned CIT(A) submitted that it has shown closing WIP of its project namely namely 'Shivdhara Site' as on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has received a sum of Rs. 5,82,71,860.00 and repaid a sum of Rs. 5,40,69,286.00 during the year under consideration leaving a credit balance of Rs. 8,73,136.00 at the end of the financial year. Thus, as such the assessee has received more fund from the sister concern than advancing the same to the sister concern. Thus the question of diversion of fund does not arise. 23. Alternatively, the assessee submitted that maximum amount outstanding from the sister concern as on 11 May 2013 was of Rs. 1,47,78,435.00 against the capital of the assessee at Rs. 1,49,56,320.00. Accordingly it can be said that the amount of loan has been given to the sister concern out of its own fund. 23.1. Without prejudice to the above, the assessee also contended that amount of interest expenses of Rs. 37,99,950.00 has already been included in the closing WIP. Thus to this extent, the amount of interest has been nullified. Thus, the addition to this extent, if sustained it shall tantamount double addition which is unwarranted under the provisions of law. 24. On the other hand the learned DR vehemently supported the order of the authorities below. 25. We have heard the rival contentions of bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concern for making the disallowance of the interest expenses claimed by the assessee with respect to its project. 25.1. We also find force in the contention of the learned AR that the assessee in the year under consideration has not claimed any deduction of the interest to the extent of Rs. 37,99,950.00 being shown as part of the closing WIP. Indeed, in the later years, this closing WIP shall become the opening WIP and again the same will be allowed as deduction in the subsequent year which will result in the reduction of the profit of the assessee of the subsequent years. Once, an amount of interest has already been suffered to tax, if the addition is sustained, then the same amount should not be treated as opening WIP. In doing so, it would lead to the double taxation which is not warranted under the provisions of law. On this count as well as, the addition to the extent of Rs. 37,99950 is liable to be deleted. 25.2. It is also pertinent to note that all the details about the interest expenses, financial statements, written submissions of the assessee were available before the learned CIT(A) and no defect of whatsoever was pointed out by him therein. The learned CIT(A) has just ..... X X X X Extracts X X X X X X X X Extracts X X X X
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