2023 (3) TMI 555 - AT - Income Tax

Disallowance of interest expenses - assessee on one hand had paid interest on borrowed funds, whereas on the other hand had given interest free loans to its sister concerns and promoters - HELD THAT:- We observe that during the year under consideration, the assessee had substantial interest free funds to the tune of ₹ 9 crores as own funds at its disposal. Further, the assessee submitted before us copy of the ledger account of the parties to whom the aforesaid advances were made and it is evident that the said advances were made in the earlier assessment years.

In the case of CIT v. Reliance Industries Ltd [2019 (1) TMI 757 - SUPREME COURT] held that where AO rejected assessee's claim u/s 36(1)(iii) taking a view that interest would not have been payable to banks if funds were not provided to subsidiaries, in view of fact that interest free funds were available to assessee which were sufficient to meet its investment in subsidiaries, appellate authorities were justified in allowing assessee's claim for deduction.

Accordingly, since the assessee is having substantial interest free funds at its disposal amounting to ₹ 9 crores as against an advance of 19.7 lakhs approximately advanced to sister concerns, we are of the view that addition on this count cannot be sustained.

Disallowance u/s 40(a)(ia) - assessee claimed rent expenses and the AO discovered that the assessee had not deducted TDS on rent - HELD THAT:- We observe that the assessee had filed a detailed chart giving details of rent before the assessing Officer vide submission dated 07-10-2014, however, evidently the same was not taken cognizance by the Revenue Authorities. Before us, assessee submitted that the assessee has correctly deducted TDS on rent as per law.

TDS was not deducted only in cases where either the payment of rent was below the threshold limit or the recipient of rental income had furnished a lower tax withholding the certificate furnishing the rate at which taxes were to be deducted by the assessee. Accordingly, evidently the detailed chart filed by the assessee regarding TDS on rent payments, furnished during the course of assessment proceedings was not properly examined by the AO, we are hereby restoring the matter to the file of AO for proper examination of the details of rent paid and TDS deducted thereon, after giving due opportunity of hearing to the assessee.

Disallowance of depreciation - HELD THAT:- We observe that identical set of facts and identical submissions on this issue were already made before the AO by the assessee during the course of assessment for assessment year 2009-10. In the said assessment order, the AO denied the assessee’s claim for depreciation after discussing the issue in detail. Similar observations were also made by the AO in the assessment order for the present year as well. We find no infirmity in the order of ld. CIT(A) and we are not inclined to interfere with the order of CIT(Appeals) for the present year as well.