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2021 (12) TMI 254 - AT - Income TaxDisallowance of interest as per provisions of Section 36(1)(iii) pertaining to interest free advances made treating the same to be not for the purpose of business of the assessee - assessee contended that since the year in which the advance was given, it was found that the advances had been made from interest free funds, there was no reason to make any disallowance of interest u/s 36(1)(iii) - HELD THAT:- It is not denied that identical disallowance of interest on the said advance to M/s Temptation Foods had been made in the preceding assessment year also and after various rounds of litigation, when the issue had been restored to the AO by the ITAT directing him to determine the nature of funds used for the purpose of making the advance, it was found by the AO that no interest bearing funds had been used and infact interest free funds in the current account of the assessee had been used for the purpose of making the advance. This conclusive finding of fact, therefore, puts an end to all dispute vis-à-vis the issue of disallowance of interest on the advance given to M/s Temptation Foods, since it has been factually found by the department that interest free funds had been used for the purpose of making the advance. No occasion arises, therefore, for making any disallowance of interest u/s 36(1)(iii) of the Act with regard to the same. The reliance placed by the Revenue on the decision of the ITAT in A.Y 2014-15, is of no relevance since the ground was not adjudicated being not pressed by the assessee. Deemed dividend as per the provisions of Section 2(22)(e) - HELD THAT:- Since in the present case the assessee is not a shareholder of M/s Punjab Metalics Limited from which it has received the impugned advance and the same though qualifies as deemed income u/s 2(22)(e) of the Act, but is not taxable in the hands of the assessee. The addition so made is, therefore, directed to be deleted. Disallowance on account of tax deducted at source - HELD THAT:- We find that the contention of the assessee that the amount disallowable u/s 40(a)(ia) has been mistakenly reported by the tax auditor at a higher figure cannot be simply discarded. Assessee has made certain factual contentions while explaining the mistaken reporting, to the effect that while the assessee had deducted taxes @ 10% on the contractual payments to be disallowed of ₹ 7,88,680/-, amounting to ₹ 78868/-, the auditor had assumed tax deducted @ 2% and calculated the amount disallowable basis this rate of TDS, which amounted consequently to ₹ 39,24,228/-. The explanation of the Ld.Counsel for the assessee is not outrightly perverse or unbelievable, but the facts we find, as pointed out by him need to be verified. Therefore agreeing with the plea of the Ld.Counsel for the assessee, we restore this issue to the AO to examine it afresh in the light of the contentions made by the Ld.Counsel for the assessee before us as aforestated, duly verifying all relevant facts and thereafter decide the issue in accordance with law. Needless to add the assessee be granted due opportunity of hearing. Addition u/s 43B in respect of service tax and PF Payable - HELD THAT:- Assessee had attempted demonstrating the compliance with the requirements of section 43B of the Act vis a vis the issue of PF payable, but had failed to file clinching third party evidence for which he has sought further opportunity. In the interest of justice therefore we consider it fit to give the assessee adequate opportunity to substantiate its claim and accordingly restore the issue of allowance of PF as per the provisions of section 43B of the Act to the AO to examine it afresh and thereafter decide it in accordance with law. Needless to add the assessee be given due opportunity to produce all evidences it seeks to rely upon in support of its claim.
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