9911796707
TMI Blog2012 (11) TMI 802X X X X Extracts X X X X X X X X Extracts X X X X ..... n has arisen from the order dated 30.12.2009 passed by the Assessing Officer under section 143(3) of the Income-tax Act, 1961 (in short "the Act"), pertaining to the assessment year 2007-08. 3. First we shall take up the appeal of the assessee, which is directed against the action of the Commissioner of Income-tax (Appeals) in upholding the disallowance of Rs 16,86,619/- being the amount paid on account of salaries of employees deputed to the assessee from two sister concerns. The aforesaid disallowance has been made by the authorities below by invoking section 40A(2)(b) of the Act as also section 40(a)(ia) of the Act. 4. Before us, the learned Counsel for the assessee submitted that the assessee is a partnership firm engaged in the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f losses inspite of receipt of such income from the assessee. According to the Commissioner of Income-tax (Appeals), it was a case where the transactions have been carried out with a view to evade taxes, which was a relevant factor while considering the applicability of section 40A(2)(b) of the Act, as opined by the Hon'ble Bombay High Court in the case of Indo Saudi Services (Travel) P Ltd 310 ITR 306 (Bom). For the aforesaid reasons, the disallowance made by the Assessing Officer was upheld by the Commissioner of Income-tax (Appeals) against which the assessee is in appeal before us. 5. Before us, the learned Counsel for the assessee pointed out that in the earlier years, assessee was not carrying out execution of the contracts by itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns to work for the assessee. It was, therefore, contended that the factum of sister concerns incurring losses, was of no consequence so as to infer intention of tax evasion in the impugned transaction. 6. On the other hand, the learned Departmental Representative, appearing for the Revenue, has pointed out that it was quite clear that the impugned payment has been rightly held to be subject to TDS provisions and the assessee not having deducted tax at source, the amounts are disallowable under section 40(a)(ia) of the Act. 7. We have carefully considered the rival submissions. At the outset, we may examine the invoking of section 40A(2)(b) of the Act by the Commissioner of Income-tax (Appeals) to justify the disallowance. Section 40A(2)(a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments for any consideration extraneous to the cost of the employees deputed to the assessee. It is quite apparent from the orders of the authorities below that there is no allegation to say that the assessee has paid to sister concerns anything over and above salaries due to the employees who were on assignment to the assessee company. Therefore, it is a case where the expenditure has been incurred for services rendered and it has no complexion of tax evasion, as contended by the Commissioner of Income-tax (Appeals). Therefore, on this aspect, we are unable to uphold the objection raised by the Commissioner of Income-tax (Appeals). 8. Even with regard to invoking of section 40(a)(ia) of the Act, we find that it is a case where the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als) erred in deleting the addition without appreciating the fact that interest-bearing funds by way of secured loans from banks etc., had been applied to give interest-free advances to the sister concerns of the assessee and others. He accordingly submitted that the order of the Commissioner of Income-tax (Appeals) be set aside and that of the Assessing Office be restored. 12. On the other hand, the learned Counsel for the assessee has defended the action of the Commissioner of Income-tax (Appeals) by placing reliance on the same. 13. We have carefully considered the rival submissions. In this case, we find that the Commissioner of Income-tax (Appeals) has observed that own interest-free funds of the assessee in the business were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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