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2018 (1) TMI 1229 - AT - Income TaxDisallowance u/s 40(a)(ia) - non deduction of tds on interest paid to NBFCs - Held that:- The second proviso to section 40(a)(ia) of the Act would be effective retrospective as it was undisputedly inserted to removable the hardship faced by the assesses. Hence, we set aside this issue to the record of the Assessing Officer for limited purpose to verify the fact that the interest income received by these NBFCs have been included in the return of income and offered to tax and then decide this issue in light of above observation. Disallowance u/s 40A(2)(a) - Held that:- We find that when there is no actual out go from the assessee to its subsidiary but the assessee has allowed discount to the subsidiary on sale made to the subsidiary. Therefore, even if the said discount was not allowed to the other parties and it is allowed to the related parties, in the absence of any provisions u/s 40A(2)(a) or u/s 37, the same cannot be disallowed. It is pertinent to note that the transaction may be falling under the category of domestic transfer pricing however, when the said provision is not applicable for the year under consideration and the AO has not applied the same then, it cannot be disallowed. Thus when the trade disallowance is not an expenditure paid or payable as per the provisions of section 40A(2)(a) then the same cannot be disallowed for want of any prohibitory provision in the Income Tax Act. Disallowance of registrar of company fees and foreign travelling expenditure - Held that:- In the absence of the specific purpose of the foreign trip of the Executive Manager, the expenditure incurred on the foreign trip of the Executive Manger cannot be considered as an expenditure incurred wholly and exclusively for the business of the assessee. Thus upheld by the ld. CIT(A) in respect of the foreign trip expenses of the wife of the executive manager is justified and proper. As regards disallowance of ROC fees we find that the expenditure was incurred by the assessee for increasing the authorized share capital and therefore, the authorities below have rightly considered the said expenditure as capital in nature. The assessee has failed to show that how the said expenditure is revenue in nature when the same is incurred for increase of authorized capital except the contention that it would be used for working capital. Difference in the interest on FDRs as per 26AS and the interest income recognized by the assessee in the books of accounts - Held that:- We do not agree with the contention of the assessee simply on the reason that when the correct amount of income is available as per Form 26AS then, the income of the assessee is required to be assessed on correct figures and facts instead of estimated figures accounted by the assessee. Further, when the corresponding TDS credit is available to the assessee for the year under consideration against the income reported in 26AS then the said credit cannot be allowed against less income declared by the assessee on this account. Accordingly, we do not find any error or illegality in the impugned orders of the authorities below qua this issue. Disallowance u/s 40(a)(ia) - disallowance of claim in respect of other NBFCs who have filed their return of income belatedly - Held that:- CIT(A) has not disputed the fact that all the three NBFCs has filed their return of income within a time period allowed u/s 139 and particularly u/s 139(4) of the Act. The first proviso to section 201(1) specifically requires the furnishing of return of income u/s 139 without specifying any sub-section, therefore, the time limit provided under any of the sub-section of section 139 will be considered for the purpose of allowing the benefit as per the first proviso. Once, the return of income were filed by the recipient, as per the provisions of section 139 specifically under sub-section (4) then having accepted the applicability of the second proviso to section 40(a)(ia) respective effect no disallowance is called for in respect of the interest paid to the NBFCs. Accordingly, we delete this issue in favour of the assessee and delete the disallowance made by the AO.
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