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TMI Blog2012 (8) TMI 266X X X X Extracts X X X X X X X X Extracts X X X X ..... e company is engaged in the business of manufacturing and sale of wines. The return of income was filed declaring total loss of Rs. 1,84,91,284/-. However, the assessment was completed at an income of Rs. 68,88,020/- under normal provisions of the Act and book profit u/s 115JB of the Income Tax Act, 1961 (the Act) Rs. 6,02,26,847/- vide order dtd. 31-12-2007 passed u/s 143(3) of the Act. 3. On appeal, the ld. CIT(A) partly allowed the appeal. 4. Being aggrieved by the order of the ld. CIT(A) the assessee and the Revenue both are in appeal before us. ITA No. 5940/Mum/2010 (Revenue's appeal) 5. The grounds taken by the Revenue read as under:- "1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in giving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of section 36(1)(iii) and the various decisions cited in the assessment order disallowed the interest of Rs. 37,79,720/- calculated at the average rate of interest at 8%. 7. On appeal, the ld. CIT(A) while upholding the rate of interest at 8% directed the A.O. to apply the principle laid down in CIT vs. Tin Box Co. (2003) 260 ITR 637(Delhi) to determine whether the interest free advances are out of own funds or not and if the assessee fails to pass the above test, disallowance made on the ground that borrowed funds had been used for interest free advances would be justified. 8. At the time of hearing, the ld. D.R. while relying on the order of the A.O. submits that the decision in the case of Tin Box Co. (supra) relied on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red the submissions of the rival parties and perused the material available on record. We find that the facts are not in dispute inasmuch as it is also not in dispute that the interest free advances were given out of mixed funds consisting of borrowed and own funds. 11. In Reliance Utilities and Power Ltd. (supra) Their Lordships after considering the plea of the Revenue that ".......It is pointed out that in so far as the shareholders funds are concerned, in terms of the balancesheet as on March 31, 1999, they were utilised for the purpose of purchase of fixed assets shown in schedule D" have held at page 344 as under:- "......The principle, therefore, would be that if there are funds available both interest-free and over draft and/or lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nting to Rs. 16,000/- and accordingly he made disallowance of Rs. 8,48,490/- u/s 43B r.w.s. 36(1)(va) of the Act. On appeal, the ld. CIT(A) directed the A.O. to allow the payment to the extent, it is made within the due date as extended by the grace period allowed by the PF authorities and restricted the disallowance to the payment made beyond the extended due date. 17. At the time of hearing, the ld. Counsel for the assessee submits that the assessee has made the entire payment of employees' contribution to PF and ESIC before the due date of filing of the return u/s 139(1) of the Act, therefore, following the decision in CIT v. Alom Extrusions Ltd. 319 ITR 306 (SC) and CIT v. AIMIL Limited 321 ITR 508 (Del) and the other decisions of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,905/- and the same was deposited in the Central Government Account on 9-9-2005 which was required to be deposited on or before 31-5-2005. On being asked, it was submitted by the assessee that the assessee has made payment to Indage Development Corporation Pvt. Ltd. for construction of IIIrd Winery and the said payment was treated by the assessee as capital expenditure not charged to P&L account. It was further submitted that the TDS has also been deducted and the payment of such TDS was made on 9-9-2005. However, the A.O. has not accepted the assessee's explanation. According to the A.O. the payment of TDS was required to be deposited by 31-5-2005 and hence he disallowed the payment of Rs. 2,07,51,098/- u/s 40(a)(ia) of the Act. On appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT vs. Virgin Creations in ITA No. 302 of 2011, GA 3200/2011 vide judgment dated 23-11-2011 has held that the amendment made u/s 40(a)(ia) requires to be treated with retrospective operation. Respectfully following the same and the decisions of the Tribunal including the decision in Rajan C. Pillai vs. Dy. CIT and vice versa in ITA No. 4176 and 4984/M/2010 for A.Y. 2006-07 dtd. 27.4.2012 wherein it has been held "that since the assessee has paid TDS amount on 8-6-2006 before the due date of filing of return of income u/s 139(1) of the Act, the impugned disallowance u/s 40(a)(ia) made by the A.O. is deleted", we hold that in the present case the amount of TDS Rs. 4,33,905/- has been deposited on 12-9-2005 before the due date of filing of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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