Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2015 (4) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (4) TMI 909 - AT - Income TaxDis-allowance of Interest expenses on borrowed fund - Utilisation of part borrowed funds to repay debts of sister concerns - TDS not deducted on reimbursement of expenses - Commission paid to specified persons u/s 40A(2)(b) - Held that:-The first issue regarding dis-allowance of proportionate interest on borrowed funds, it is evident from the findings given in the impugned order as well as material placed on record that, the borrowings from the banks has been substantially reduced in this year, whereas interest free borrowings from the sister-concerns have increased. The interest free funds have been borrowed to reduce the bank borrowings only. The fund flow statement, which is part of the audited accounts, also show that the assessee has generated huge cash from operating activity. Besides this, if the assessee has taken interest free loans from sister-concerns for the purpose of business, then the payment of the said amount, even if they are partly from the interest bearing borrowings from the bank, the same cannot be held to be diversion for non-business purposes or not utilized for the purpose of business. Thus, we agree with the conclusion and findings given by the CIT(A) on this score and accordingly ground no.1 raised by the Revenue is dismissed. Regarding reimbursement of expenses, it is noted that CIT(A) has decided the issue against the assessee, however, has directed the A.O. to disallow only the correct amount of reimbursement for which he has directed the AO to verify the exact amount. We do not find any reason to interfere on such a direction. Accordingly ground no.2 raised by the Revenue stands dismissed. Lastly, regarding disallowance of ₹ 33,06,289 on account of commission paid to Shri Vijay Jain and M/s.B.Arunkumar & Co., who are specified persons u/s 40A(2)(b), it is seen from the records that, Shri Vijay Jain is the Director and CEO of the assessee-company and commission paid to him is a part of his salary package, as he is looking after the entire business of the assessee-company. The said amount of salary package, which includes commission income, was there in assessment years 2004- 2005 and 2005-2006 also, wherein the CIT(A) has deleted the disallowance made by the A.O. on similar grounds. The said order of the CIT(A) has attained finality as no appeal has been filed by the Revenue against the said order. Thus, we do not find any reason to disallow the payment made to Shri Vijay Jain either on the ground that it is excessive or it is not for the purpose of business. So far as the disallowance of ₹ 35,606 on account of commission paid to M/s.B.Arunkumar & Co., it is seen that similar payment of commission at the rate of 0.75% of the sales affected through them has been accepted in the earlier years and the same has attained finality. Therefore, consistent with the earlier years precedents, we do not find any reason to interfere such a finding in this year without any material on record to rebut the same. Accordingly ground no.3 is also treated as dismissed. - Decided against the revenue.
|