TMI Blog2013 (10) TMI 784X X X X Extracts X X X X X X X X Extracts X X X X ..... hat such advance was given for commercial expediency. Principle of res-judicata for disallowance of expense – Held that:- Assessee has not been able to produce all bills and vouchers in respect of the claim of expenditure. The assessee has not brought out any evidence to prove that 10% of expenditure should not be disallowed as in the preceding year. Since, no new proof has been given for this year distinguishing the situation from earlier year, no any infirmity in the Order of the Assessing Officer in following the predecessor's order in the preceding year i.e., 2004-2005 – Decided against the Assessee. Disallowance u/s 40(a)(ia) of the Income tax act – Held that:- Assessee has to share 15% of the gross maintenance receipts collected during the year with the owner of the building i.e., Deep Corporation Pvt. Ltd. and taking into account the stipulation made in the agreement it is a diversion of income at source and not an expenditure in the hands of the assessee – Disallowance u/s 40(a)(ia) to be deleted – Decided in favor of Assessee. - ITA.No.1401/Hyd/2010, ITA.No.1423/Hyd/2010 - - - Dated:- 11-10-2013 - Shri Chandra Poojari And Smt. Asha Vijayaraghavan,JJ. For th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessed under section 143(1) and subsequently the case was selected for scrutiny and in the order under section 143(3) the Assessing Officer made certain additions. 3. With regard to the addition towards common maintenance charges of Rs.12,75,85/-, it was submitted before the Assessing Officer that the gross maintenance receipts during the year was Rs.2,49,41,784/- (including common maintenance of Rs.12,22,117/-) of which the share of the company @ 80% as per revised agreement filed amounted to Rs.2,01,07,979/- and the share of the owner @ 20% was Rs.48,33,805/-. The Assessing Officer followed the old agreement in which the company share was only @ 85% of maintenance charges amounting to Rs.2,01,61,717/- excluding common maintenance charges of Rs.12,22,117/- which was entirely to the company both totalling to Rs.2,13,83,834/-. The income shown in the P L account was Rs.2,01,07,979/- and the difference of Rs.12,75,855/- was added back as income of the company which the Assessing Officer has mentioned as undisclosed income while calculating the addition under section 40(a)(ia), the Assessing Officer has added back Rs.48,33,805/-. 4. On appeal before the CIT(A), the learned CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) held that the assessee has to share 15% of the gross maintenance receipts collected during the year, with the owner of the building i.e., Deep Corporation Pvt. Ltd. As per such stipulation, the assessee has to part with that portion of the gross collection with the owner of the complex. Having regard to such stipulation made in the agreement, the CIT(A) agreed with the submission of the learned A.R. that it is a case of diversion of income at source. Parting with that proportion of the annual maintenance receipts with the building owner, the CIT(A) cannot be treated it as expenditure in the hands of the assessee. Under this circumstance, the said disallowance made by the A.O. invoking sec. 40a(ia) of the Act was held by CIT(A), was not justified, and hence the same was deleted. 6. With respect to the disallowance of Rs.56,18,466/- towards interest the CIT(A) held that the Assessing Officer has disallowed the interest amount claimed at Rs.56,18,466/- on the ground that borrowed funds to the extent of advance given interest-free to the said concern Mohan Project Contractor Pvt. Ltd., has not been utilized for the business purpose of the assessee. Before the CIT(A), the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds interest made by the AO in the assessment, is justified. Reliance in support of this disallowance, is placed on the decisions in CIT vs MS Venkateswaram 222 ITR 163 (Mad), K Somasundaram and Brothers vs. CIT (1999) 238 ITR 939 (Mad), CIT vs. Abhisekh Industries Limited (2006) 286 ITR 1 (PH), CIT Vs. V.I Baby Co., 254 ITR 248 (Ker) and the decision of Hon'ble ITAT Cochin Bench in ACIT vs. Century Towers (2009) 312 ITR (AT) 161. Hence, the same was upheld by CIT(A). 10. With respect to the last issue relating to disallowance of Rs.5,13,219/- out of the expenses claimed by the assessee, the CIT(A) held as follows : "10. After referring to the amounts claimed by the appellant toward maintenance expenses and administrative expenses, the AO noted that, during the assessment proceedings, it could not produce all bills in support of such expenditure, despite allowance of sufficient opportunity. She further noted that the appellant has inflated expenditure under different heads. With these discussions and stating that during the assessment for AY 2004-05, the appellant has agreed for disallowance of 10% of the expenditure, the AO disallowed 10% of the total expenditure claimed at R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company for construction of commercial complex, purchase of property etc., along with Mohan Project Contractors Pvt. Ltd. Stating that such advance was given to that company for commercial expediency, the learned A.R. submitted that interest paid by the assessee is allowable. The learned Counsel for the assessee in this context relied upon the Order of the Hon'ble Supreme Court in the case of S.A. Builders Ltd. vs. CIT 288 ITR 1 (SC) and also decision in the case of Zuari Industries Ltd. vs. ACIT 298 ITR (AT) 97 (Mum.). The learned Counsel for the assessee has also stated that interest is allowable purely based on facts of the case and relied on the decision in the case of Electrics Others vs. CIT and another 277 ITR 549 (Del.). 14. The learned D.R. on the other hand relied on the decisions in the case of CIT vs. MM Nagalinga Nadar Sons 318 ITR 210 and CIT vs. Varinder Agro Chemicals Ltd. 290 ITR 147. 15. We have heard both the parties and perused the material available on record. We find that the assessee has advanced an amount of Rs.8,08,81,458/- to MPCPL. The assessee company has borrowed money from HDFC Bank and others and the assessee claimed that the borrowed amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1401/Hyd/2010 of the assessee is partly allowed for statistical purposes. 20. ITA.No.1423/Hyd/2010 - A.Y. 2007-2008 : The only ground raised by the department in this appeal is as follows : "The learned CIT(A) erred in facts and circumstances of the case and in law by allowing the corresponding prorate TDS credit of Rs.4,85,515/- in the hands of the assessee, where as the corresponding receipt of income was held to be assessed in the hands of M/s. Deep Corporation (P) Ltd." 21. The learned Counsel for the assessee Shri A.V. Raghuram, submitted that the Assessing Officer erred in disallowing a sum of Rs.4,85,515/- by invoking provisions of section 40(a)(ia) which is not applicable when the expenditure was not debited in the P L account. It was further submitted that the assessee had disclosed their share of income in the maintenance receipts in P L account and the balance share out of such maintenance receipt had to be paid to Deep Corporation Pvt. Ltd. has also been shown by them in their P L account. It was contended that share portion of their maintenance receipts with the said owner of the building amounts to diversion of the income at source. 22. The CIT(A) has ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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