2021 (9) TMI 808 - AT - Income Tax

Disallowance of an amount of TDS payable outstanding on 31st March, 2012 was paid within the due date prescribed - HELD THAT - The assessee is constantly following cash system which is not disputed by the Revenue. In the previous Assessment Years, no additions were made except in Assessment Year 2011-12 which was deleted by the CIT(A). Thus, the Revenue is continuously taking the stand that the TDS payables outstanding are proper. The decision in case of Deloitte 2021 (1) TMI 738 - ITAT DELHI is apt in the present case as the assessee has paid the said amount within the due date prescribed by the Act. Thus, Ground No. 1 of the assessee s appeal is allowed. Disallowance of amount being 4/5th of the Electricity expenses - HELD THAT - After going through the evidences placed before the Assessing Officer, it can be seen that the assessee has given a plausible explanation. AO has made an estimated disallowance which is not supported by any evidence at all. Besides this, the issue contested herein is already decided in favour of the assessee in preceding years upon which the CIT(A) has relied upon in the order. There is no distinguishing facts pointed out by the Ld. DR. Therefore, Ground No. 2 is allowed. Disallowance of interest u/s 40(b) paid to partner of the firm - HELD THAT - We are restoring the issue to the file of the Assessing Officer to calculate the interest payable to partner as per provisions of section 40(b)(iv) of the Income Tax Act. Needless to say the assessee be given opportunity of hearing by following principles of natural justice. Thus, Ground No. 3 is partly allowed for statistical purpose.

Summary

Issues:
1. Disallowance of TDS payable
2. Disallowance of electricity expenses
3. Disallowance of interest u/s 40(b) of the Act

Analysis:
1. Disallowance of TDS Payable:
The assessee appealed against the disallowance of TDS payable amounts for two assessment years. The CIT(A) confirmed the disallowance stating that the amounts were not paid during the relevant years due to the cash system of accounting followed by the assessee. However, the ITAT noted that the assessee had paid the TDS amounts within the due date prescribed by the Act. Referring to past decisions and the consistent cash system followed by the assessee, the ITAT allowed the appeal, emphasizing that the TDS payables were proper and the additions made by the Revenue were unjustified.

2. Disallowance of Electricity Expenses:
The disallowance of a portion of electricity expenses for office premises was contested by the assessee. The ITAT observed that the Assessing Officer had ignored the evidence provided by the assessee and made an estimated disallowance without proper basis. Citing previous favorable decisions for the assessee, the ITAT allowed the appeal, stating that the disallowance lacked supporting evidence and the issue had already been decided in favor of the assessee in earlier years.

3. Disallowance of Interest u/s 40(b) of the Act:
Regarding the disallowance of interest paid to a partner of the firm, the ITAT noted that the partnership deed clearly allowed for such interest payments. Referring to a previous Tribunal decision, the ITAT directed the issue to be sent back to the Assessing Officer for calculating the interest payable to the partner in accordance with the provisions of section 40(b)(iv) of the Income Tax Act. The ITAT partially allowed the appeal, emphasizing the need for correct calculation of interest as per the partnership deed and statutory provisions.

In conclusion, the ITAT partially allowed the appeals, highlighting the importance of adhering to statutory provisions, considering past decisions, and ensuring proper calculation of expenses and interest payments as per the law.