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2020 (1) TMI 960 - AT - Income TaxAllowability of interest expenses on trade advances u/s 36(1) - whether interest on borrowed capital for the purpose of construction of building can be disallowed on interest accrued only upto the date of completion of building or put to use of building to capitalize the same? - HELD THAT:- AO has not doubted the genuineness of the capital expenditure incurred by assessee nor there is any doubt about payment of interest on these trade advances by assessee to Brakes India Limited It is observed from audited financial statements placed before the Bench that assessee is also claiming depreciation on building. As carefully perused audited financial statement of the assessee and we could not find that there was any diversion of funds by assessee for non business purposes nor it is the case of the AO that diversion of funds for non business purposes has taken place. Merely because trade advances were utilized for construction of factory building could not be a reason to disallow interest expenses once the said asset is put to use for business purposes, which is the mandate of Section 36(1)(iii) of the 1961 Act read with proviso to Section 36(1)(iii) of the 1961 Act. The Revenue has not filed any evidences to demolish the findings of learned CIT(A) in its well reasoned order and merely bald grounds/averments are raised which has no legs to stand. CIT(A) has passed well reasoned order on this issue and there is no reason for us to interfere with said well reasoned appellate order passed by learned CIT(A) on this issue of allowability of interest expenses on trade advances. Allow interest expenses on trade advances as business deduction while computing income of the assessee and dismiss appeal filed by Revenue on this issue TDS U/ 192 - secondment charges paid by assessee to M/s.Brakes India Ltd.by way of reimbursement of salaries and allowance of employees of Brakes India Limited deputed with assessee - addition u/s 40(a)(ia) - HELD THAT:- We have observed that assessee has not placed on record secondment agreement entered into by it with Brakes India Limited and its terms and conditions for deputing these employees of Brakes India Limited were not analysed by authorities below. We have also observed that authorities below have also not analyzed the nature of services rendered and functions performed by these employees who were deputed by Brakes India Limited with assessee. Under these circumstances, we are inclined to set aside and restore this issue back to the file of the AO for detailed analysis of terms and conditions of secondment agreements and also of various services and functions performed by employees who were deputed with assessee, keeping in view ratio of decision of Hon’ble Delhi High Court in the case of M/s.Centrica India Offshore (P.) Ltd. [2014 (5) TMI 154 - DELHI HIGH COURT] and CIT v. M/s.Emerson Process Management (India) Pvt. Ltd. [2014 (6) TMI 1037 - BOMBAY HIGH COURT] The assessee is directed to produce secondment agreement entered into by it with Brakes India Limited as well furnish complete details of nature of services rendered and functions performed by these employees, before the AO in set aside denovo assessment proceedings. Needless to say that AO shall provide adequate opportunity of being heard to assessee in de novo assessment proceedings in accordance with principles of natural justice in accordance with law in denovo assessment proceedings and explanations/ evidences filed by assessee in denovo assessment proceedings shall be admitted by AO in the interest of justice. During denovo assessment proceedings, the AO shall also consider the applicability of decision of Hon’ble Delhi High Court in the case of CIT v. Ansal Land Mark Township Private Limited [2015 (9) TMI 79 - DELHI HIGH COURT] , against which SLP has been admitted by Hon’ble Supreme Court [2016 (8) TMI 1281 - SC ORDER] - Ground filed by Revenue is allowed for statistical purposes
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