TMI Blog2012 (10) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of form No. 15G/15H beyond the last date of accounting year. Therefore, it was not right to direct the AO to allow the deduction on the ground that no loss of revenue has occurred and delay in filing was technical in nature. Case remand back to AO. Addition on account of unexplained cash credit u/s 68 - The AO did not consider the evidences filed by the assessee at all in the remand report in respect of additional evidence. Therefore the issue required to be examined by the AO afresh with reference to identity, creditworthiness of the creditors and genuineness of the transaction. Case remand back to the file of AO. - I.T.A.No.5114/Del/2010 - - - Dated:- 13-7-2012 - SHRI R.P. TOLANI, AND SHRI K.D. RANJAN, JJ. Appellant by : Shri R.S. Negi, Sr. DR. Respondent by : Shri O.P. Sapra, Advocate. O R D E R PER K.D. RANJAN, ACCOUNTANT MEMBE R This appeal by the Revenue for Assessment Year 2006-07 arises out of the order of Commissioner of Income-tax (Appeals), Meerut. The grounds raised by the Revenue are reproduced as under:- 1. Whether the Ld. Commissioner of Income tax (Appeals) has erred in law and on facts in deleting the addition of Rs.4,50,818/- ignoring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see was asked to explain as to why interest has not been charged from the partners. It was explained by the assessee that partners had decided not to charge interest on their capital account. This contention of the assessee was not accepted by the AO on the ground that the assessee had paid interest on loans which have not been utilized for the purpose of business or for purpose of earning interest to the extent of debit balances outstanding in the account of four partners. The total loan taken by the assessee as per balance-sheet was Rs.1,86,19,956/- out of which there is debit balance in the name of partners amounting to Rs.59,46,947/- on which interest has not been charged. The amount given to the partners worked out to 31.93% of the total loan. The AO therefore, disallowed 31.93% of interest of Rs.14,11,890/- which was determined at Rs.4,50,818/-. 3. Before the CIT(A) it was submitted that that assessee incurred losses in Assessment Year 2003-04, 2004-05, 2005-06 and 2006-07 totalling to Rs.83,19,086/-. The partners of the assessee firm introduced fresh capital of Rs.9,726/- during the year ending 31st March, 2004 and Rs.33,39,922/- during the year ending 31st March, 2005. Ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were withdrawn in the year under consideration. From these facts it is clear that the outstanding debit balance in the names of the partners at Rs.59,46,974/- is on account of losses suffered by the firm and not because of withdrawal of borrowed funds. The AO had also not shown any nexus between the funds borrowed and the debit balance which in fact is the outcome of losses suffered by the assessee. Therefore, interest cannot be disallowed. Accordingly, we do not find any infirmity in the order of the CIT(A) deleting the addition of interest charged on debit balances of the partners. 6. Next issue for consideration relates to deleting the addition made under sec. 40(a)(ia) of the Act. The AO noted that the assessee had paid interest of Rs.5,31,386/-. The assessee was required to deduct tax at source u/s 194A of the Act. Since the assessee did not deduct tax at source, the assessee was asked to explain as to why the amount of Rs.5,31,386/- should not be disallowed u/s 40(a)(ia) of the Act. It was submitted by the assessee that persons had filed form No.15G and 15H on the basis of which tax was not deducted on interest payment. The assessee was asked to furnish Form No.15G 15H c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Act. Therefore, the learned CIT(A) was justified in deleting the addition. 9. We have heard both the parties and gone through the material available on record. There is no dispute about the fact that the assessee was required to deduct tax at source u/s 194A of the Act. Under section 40(a)(ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-sec.(1) of sec. 139 of the Act, shall not be deducted in computing total income chargeable under the head Profits and gains of business or profession . The assessee had not deducted tax at source on the ground that the depositors intended to file form No.15G/15H in time but Form No.15G/15H were not filed by the date on which the interest was credited/paid to the depositors. In section 40 the word shall not be deducted in computing the income chargeable under the heads Profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed during the assessment proceedings for the reason that the counsel of the assessee met with severe accident and the person representing the assessment proceedings could not take note of the requirement of the AO to submit confirmed copies of account of the depositors making deposit of less than Rs.50,000/- each. It was further submitted that the assessee had fully cooperated in assessment proceedings and had filed all confirmed copies of accounts and other requisite details with reference to all depositors whether new or old. Regarding the deposit of Rs.50,000/- from Shri Manoj Kumar it was submitted that there was no cash deposit on the date of issuance of cheque to the assessee which was issued on 8.4.2005 and cleared from the depositor s bank account on 11.04.2005. It was also submitted that there were bank deposits of Rs.90,000/- and Rs.1,00,000/- on 4.04.2005 and 5.04.2005 in the bank account of the depositor. He further submitted that to assume that for getting a deposit of Rs.50,000/- from the said depositor, the assessee had deposited the sum of Rs.1,90,000/- in his bank account was beyond imagination. He therefore, submitted that the depositor was a man of means an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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