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2016 (7) TMI 1439 - AT - Income TaxDisallowance of interest on loans advanced to the subsidiaries - sufficiency of own funds - Held that:- We are convinced that the assessee had sufficient interest free funds available with it to advance loans to its subsidiary companies. That being the factual position, in our view, no disallowance of interest attributable to such loans advanced can be made in view of the principle laid down by the Hon'ble Jurisdictional High Court in Reliance Utilities and Powers Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT). In the aforesaid view of the matter, we delete the addition made on account of disallowance of interest on loans advanced to subsidiary companies. Disallowance made u/s 14A - Held that:- The direction of the learned Commissioner (Appeals) to exclude the investment made in the financial years wherein there is a decrease in loan liability is logical as it pre–supposes, assessee had sufficient interest free funds available with him to make the investment. In fact, the assessee through the fund flow statement for the financial year 1996–97 to 2000–01, has demonstrated before us that he had enough interest free surplus fund available to make the investments in exempt income yielding assets. See case of HDFC Bank [2016 (3) TMI 755 - BOMBAY HIGH COURT] Disallowance of expenditure claimed on account of payment made to Ocean Tech - Held that:- Only because the party did not respond to the notice under section 133(6), the payment made by the assessee cannot be held to be bogus as the assessee through other documentary evidence has been able to establish the authenticity of the payment. Moreover, when it is not disputed that the payment has been made through cheque, the Department could have enquired from the concerned bank the genuineness of the payment made. Further, when the entire payment to sub–contractors has been accepted as genuine, it is unacceptable that assessee would have inflated the expenditure to the extent of ₹ 14,76,291 in respect of one of the parties. In the aforesaid view of the matter, we delete the addition. TDS u/s 195 - Disallowance of consultation fee to Meteo Consult, B.V., Netherlands - disallowance u/s 40(a)(i) - P.E. in India - Held that:- We are convinced that the information supplied by Meteo Consult, B.V., Netherlands, is in the nature of general weather forecast related to condition of sea. Therefore, in our considered opinion, the payment made cannot be termed to be towards fees for technical services or royalty. Therefore, we find merit in the submissions of the learned Authorised Representative that in terms of Article 7(1) of Indo–Netherland treaty, the payment made is not taxable in India as it is in the nature of business profit and the payee has no P.E. in India. That being the case, there was no requirement on the part of the assessee to deduct tax at source on such payment. On a perusal of the order of the learned Commissioner (Appeals), it gives an impression that he has sustained the disallowance being perturbed over the fact that payment was made to an overseas party. In our view, that should not be the consideration to make disallowance under section 40(a)(i). Addition made on account of lease rental - Held that:- when the assessee has taken equipments on lease for the purpose of using them in its business, the lease rental paid has to be allowed as deduction. The fact that these lease arrangements are continuing from past years and the assessee had been claiming lease rent as deduction and department has allowed them in the past years has not been controverted by the learned Departmental Representative. Moreover, lease rentals paid to various other entities towards leased assets have been accepted by the Assessing Officer. That being the case, the deduction claimed by the assessee in respect of lease rental is allowable as revenue expenditure. Even otherwise also, in case, the arrangement between the parties is treated as financial transaction then the assessee has to be treated as the owner of the equipment / machinery and will be eligible to claim deduction on account of depreciation on the value of asset. Addition made on account of payment made to Shri Sukhdev Singh Dhiman - Held that:- The amount paid to Shri Sukhdev Singh Dhiman is allowable as deduction. As far as the contention of the assessee that double disallowance was made by the Assessing Officer, learned Commissioner (Appeals) directed the Assessing Officer to verify the fact and if it is found that same disallowance was made twice, then delete the addition. Disallowance of claim of depreciation - possession of property - Held that:- The machinery / equipments were purchased by the principal but the assessee had been vested with the possession of them and has utilized them for its business. It is also not disputed that the principal has debited the cost of machinery to the assessee’s account and the assessee has capitalized it in its books of account. That being the case, applying the ratio laid down by the Hon'ble Supreme Court in Mysore Minerals Ltd. (1999 (9) TMI 1 - SUPREME Court) the assessee is eligible for depreciation. Sales tax liability by applying the provisions of section 43B - Held that:- it is the stand of the Department that the deduction claimed is not allowable as per section 43B as the assessee has not paid within the time stipulated under the said provision. However, it is the claim of the assessee that the amount has been adjusted on 31st March 2001, hence, it is allowable as deduction. Considering the aforesaid submissions of the assessee, we direct the Assessing Officer to allow claim of deduction in case the amount was paid within the stipulated period prescribed under section 43B. Disallowance of deduction claimed u/s 14A - addition challenged on the ground that as per the provisions of section 115–O of the Act, a company paying dividend was liable to pay tax on the dividend paid, therefore, it cannot be said that no tax was paid in respect of dividend - Held that:- The issue has to be decided against the assessee in view of the decision of the Hon'ble Jurisdictional High Court in Godrej & Boyce Mfg. Co. Ltd. v/s DCIT, [2010 (8) TMI 77 - BOMBAY HIGH COURT] Non deleting of disallowance by AO as directed - Held that:- Except the disallowance made in respect of payment made to Ocean Tech all other disallowances were deleted by him. Therefore, in our view, the Assessing Officer while giving effect to the directions of the learned Commissioner (Appeals) has committed a mistake by not deleting the disallowance of ₹ 40,08,929. That being the case, learned Commissioner (Appeals) was justified in entertaining the appeal of the assessee and directing the Assessing Officer to delete the addition made of ₹ 40,08,929.
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