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2012 (4) TMI 190 - AT - Income TaxNature of 'Usance Interest' assessee engaged in business of manufacturing of cables of different types imports raw material from parties who are non-residents finance charges/usance charges paid for availing credit under LC - whether usance interest comes within meaning of Section 2(28) assessee contending it to be partaking character of purchase price - taxability in view of DTAA between India and countries where-from raw material is imported dis-allowance u/s 40(a)(ia) for non-deduction of tax at source AY 02-03 - Held that:- There was no nexus between the interest amount and fixation of the price of the raw materials purchased. Price of the material supplied was reflected in a separate invoice and interest paid for availing credit facility of 180 days from the date of bill of lading was reflected in separate invoice. The nexus of interest was only with the period from which the purchase price of the raw material became due viz., the date of bill of lading. Therefore, usance interest, is interest within the meaning of sec. 2(28A) and same would be deemed to have accrued and arisen in India in view of the provisions of sec. 9(1)(v)(b) of the Act. Taxability in view of DTAA between India and the respective countries Held that:- Neither the AO nor the CIT(A) had discussed the issue in the light of the relevant DTAA. Therefore, we remand the issue to the AO for fresh consideration. Applicability of Section 40(a)(ia) In present case, payment is made to to non-residents and in the event of doubt the Assessee ought to have approached the AO for appropriate certificate u/s.195. He cannot plead bonafide belief to stand out of the said provisions. Addition of unutilized Modvat credit to the value of Closing stock Held that:- Addition made by the AO as modified by the CIT(A) i.e. to allow it under u/s 43B if it is paid before filing of returns, has to be sustained but the AO should be directed to allow corresponding adjustment to the opening stock in respect of unutilized Modvat credit. - Decided partly in favor of assessee. Prior period expenses mercantile system of accounting AY 2001-02 - Held that:- No infirmity is found in the order of CIT(A) allowing the claim of the assessee if these expenses are related to that year after verification. The same is therefore upheld Appeal of Revenue dismissed. Waiver of penalty for concealment dis-allowances in respect of write off of leasehold premium, prior period expenses, payment of gratuity, unexplained expenses AY 99-2000 Held that:- It is seen that few dis-allowances have been deleted by Tribunal and dis-allowance in respect of write off of leasehold premium was then a matter of debate hence in view of Reliance Petroproducts (P) Ltd.(2010 (3) TMI 80 - SUPREME COURT) mere rejection of a claim for deduction made by the assessee will not give rise to imposition of penalty for concealment Decided against the Revenue.
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