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2016 (6) TMI 1370 - ITAT DELHIDisallowance u/s 40(a)(ia) - amounts otherwise be allowable as a business expenditure - revenue’s submission is that since assessee did not make the entry in the P&L A/c in the year in which the liability actually accrued, therefore, the assessee’s claim is to be denied - HELD THAT:- We are not inclined to accept this proposition advanced by revenue for the simple reason that the real income of an assessee is to be determined as per the provisions of the Income-tax Act and not on the basis of entries made in the books of account. As per the proviso of section 40(a)(ia), admittedly, the deduction is allowable in regard to an expenditure only in the year in which the TDS amount has been deposited. There is no dispute on this count. Further, even if an assessee had not debited these expenses in the P&L A/c of earlier year that cannot be the basis for denying deduction which is otherwise admissible to assessee. We further find that section 40(a)(ia) does not mandate for any disallowance in earlier year for proviso to section 40(a)(ia) to come into operation. We find that the assessee’s claim is fully covered in the case of SMC Construction [2010 (1) TMI 10 - HIGH COURT OF DELHI] as held the amounts which may otherwise be allowable as a business expenditure as per the provisions of sections 30 to 38 and which is 'chargeable to tax in the hands of the recipient would not be allowed as a deduction unless requisite amount of tax has been deducted on the' said amount. Thus, mere passing a debit entry in the books of account, of these expenses would not be sufficient for claiming the deduction in the present account in the concerned year then also deduction would not be admissible unless tax has been paid on such amount. The proviso to section 40(a)(i) makes it clear that if tax has been deducted in the subsequent year and paid then deduction would be allowed in that year. Therefore, we are of the opinion that the learned first appellate authority has rightly deleted the disallowance. - Decided against revenue TP Adjustment - international transaction of payment of interest on external commercial borrowings of ₹ 3,32,11,250/- - interest had been paid to BT plc. @ 9.72% - HELD THAT:- Admittedly the external commercial borrowings, made by assessee, are denominated in the Indian currency. Therefore, for bench marking the interest rate paid by assessee @ 9.72%, the prevailing PLR in India, was to be applied and not the 6 months GPB LIBOR in view of the decision of Cotton Naturals (I) (P) Ltd. [2015 (3) TMI 1031 - DELHI HIGH COURT] . Since, the interest paid by assessee is much less than as per PLR, therefore, no adjustment is called for. In the result, this ground is allowed.
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