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2017 (12) TMI 1163 - AT - Income TaxAddition on account of interest paid on delayed payment of TDS/TCS - Held that:- As far as the nature of payment is concerned, there cannot be any doubt that the interest on delayed payment of TDS/TCS is not penal in character but it is compensatory in nature. This view has been expressed in the case of CIT vs. Oriental Insurance Co. Ltd. [2008 (10) TMI 230 - KARNATAKA HIGH COURT]. Further in our considered view the interest on delayed payment of TDS/TCS cannot be considered to be a payment towards any rate or tax levied on the profit or gains of any business or profession as provided u/s. 40 (a)(ii) of the Act. That being the case, we do not find any infirmity in the order of the first appellate authority in deleting the addition. Disallowance of provision for warranty expenses - Held that:- The assessee has demonstrated before us that out of the provisions created in the financial year relevant to the assessment year under dispute the assessee has utilized an amount of ₹ 2,14,73,380/-. It is also a fact on record that in assessee‟s own case for the preceding Assessment Year the CIT(A) has held that the provision on account of warranty and maintenance have been created on scientific basis cannot be treated as unascertained liability. We have also noted in case of other group companies similar disallowance made by the AO was deleted by the CIT(A) and while deciding the appeal of the department the Tribunal following the decision of Hon‟ble Supreme Court in the case of Rotork Controls India (P) Ltd has upheld the decision of the CIT(A). Even in the facts of the present case also the AO has agreed in principle that provision for warranty and maintenance is allowable as per the methodology laid down by the Hon‟ble Supreme Court in the case of Rotork Controls India (P) Ltd (2009 (5) TMI 16 - SUPREME COURT OF INDIA). In view of the aforesaid, we uphold the order of the CIT(A) by dismissing the ground raised. Disallowance u/s. 14A - Held that:- The factual finding of the first appellate authority that the assessee has sufficient interest free funds available with it has not been controverted by the department therefore, no disallowance of interest expenditure under Rule 8D(2)(ii) can be made. Further the claim of the assessee that all investments are in group companies hence, are in the nature of strategic investment therefore should be excluded from the average value of investment for computing disallowance u/s. 14A deserves to be accepted. It is further relevant to observe from the assessment order it appears that the AO has proceeded to make disallowance u/s. 14A read with Rule 8D only because investments made by the assessee would give rise to exempt income. There is nothing on record to indicate that in the relevant previous year assessee has earned any exempt income by way of dividend. That being the case no disallowance u/s. 14A can be made in view of the decision of Hon‟ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT [2015 (9) TMI 238 - DELHI HIGH COURT]
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