Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2021 (5) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (5) TMI 761 - AT - Income TaxValidity of assumption of jurisdiction by the ld. PCIT u/s.263 - disallowance of interest on borrowed funds - HELD THAT:- Assessee had furnished the details of loans taken during the year and corresponding interest payments made thereon before the ld. AO during the course of original assessment proceedings. But we find that the basic premise on which the ld PCIT had invoked revisionary jurisdiction is that the AO having alleged that the assessee had invested in plant and machinery only to the extent of ₹ 8.26 crores (based on valuation report of DVO), ought to have correspondingly examined the allowability of interest expenditure on borrowed funds utilised for investment in plant and machinery. Since this was not examined by the ld AO while framing the original assessment, the order passed by the ld AO becomes erroneous in as much as it is prejudicial to the interest of the revenue. The issue pending before the ld CITA is only on the depreciation on value of plant and machinery and the issue of disallowance of interest on borrowed funds thereon was not before the ld CITA. Hence the argument advanced by the ld DR that provisions of Explanation 1 clause (c ) of section 263(1) of the Act does not come into operation in the instant case, holds good and deserves to be accepted. We find that the ld. PCIT had presumed that the investment in plant and machinery and other assets have been made out of borrowed funds of the assessee. In this regard, we find that the ld AR vehemently argued that the assessee was having sufficient interest free funds in its kitty to make investment in plant and machinery. However, we find that there is no finding of fact to this effect in the orders of the lower authorities. We find that this matter certainly requires factual verification and the ld AO had to give a factual finding as to whether the assessee is indeed having sufficient interest free funds which would explain the investment in plant and machinery. To this extent, the order of the ld PCIT u/s 263 of the Act stands modified as per the aforesaid directions to the ld AO to examine the availability of interest free funds with the assessee. Accordingly, the grounds raised by the assessee are partly allowed. Production expenses disallowed u/s.40(a)(ia) of the Act for valuation of TDS provisions - We find that ultimately this is a matter requiring factual verification. There is no mention as to whether these details were filed by the assessee before the ld. AO in the course of original assessment proceedings. Hence, it could be safely held that the ld. PCIT had indeed validly assumed revision jurisdiction u/s.263 of the Act in respect of this issue of production expenses vis-à-vis its TDS compliance. This is a matter requiring factual verification, hence, we hold that the ld. PCIT had rightly invoked revision jurisdiction in respect of this issue of production expenses. We find that the ld. AR had also placed on record the copy of the assessment order passed by the ld. AO dated 11/12/2019 u/s.143(3) r.w.s. 263 of the Act wherein the ld. AO had ultimately on verification of the entire details of all the parties vis-à-vis the TDS compliance made thereon, held that the sum of ₹ 3,60,000/- is required to be disallowed u/s.40(a)(ia) of the Act for payments made without deduction of tax at source. In view of these observations, we hold that the ld. PCIT had rightly assumed revision jurisdiction u/s.263 of the Act in respect of this issue of production expenses. Accordingly, the ground No.3 raised by the assessee is dismissed and ground No.1 raised by the assessee is partly allowed.
|