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TMI Blog2014 (10) TMI 650X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has made investment of Rs. 21,14,07,850/- in shares and mutual funds. The assessee has disallowed amount of Rs. 2,00,000/- on account of section 14A of the Act of the Income Tax Act, 1961. The assessee has not been able to justify that the investments made in shares are from his own funds or from funds on which no interest payment is made by the assessee. Therefore, provision of section 14A is applicable to the assessee. Since the assessee has not offered disallowance worked out u/s. 14A of the Income Tax Act, 1961, therefore the Assessing Officer worked out disallowance for proportionate interest expenditure of Rs. 5,84,706/- and disallowance on account of administrative expenses of Rs. 8,22,228/- and thereby made a total disallowance of Rs. 14,06,934/-. As the assessee himself had made disallowance of Rs. 2,00,000/- in the return of income, therefore he made the disallowance of balance amount of Rs. 12,06,934/-. 4. On appeal, the Commissioner of Income Tax (Appeals) observed that the company had taken specific term loans for the purpose of vehicles and old loan of 2005/- for Captive Power Plant, therefore borrowed funds were used for non-business purposes could not establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for making investments, no disallowance of interest expenditure was called for. The Commissioner of Income Tax (Appeals) held that the finding of the Assessing Officer was not correct that the assessee has not charged any interest free loan to associate concerns. He held that the assessee in fact earned interest income at the rate varying from 9% to 12.5% from the associated concerns depending upon the availability of surplus funds and thereby earned interest income of approximately Rs. 50.74 lakhs during the year. He, therefore, held that disallowance made by the Assessing Officer u/s. 36(i)(iii) was of Rs. 40,10,861/- was not justified. 7. The Departmental Representative has merely relied upon the order of the Assessing Officer. He has not pointed out any specific error in the order of the Commissioner of Income Tax (Appeals). He could not bring any material on record to show that the assessee could not have advanced interest free loans or loans at lower rate of interest to the sister concerns out of its interest free funds available with it. Therefore, we find no infirmity in the order of the Commissioner of Income Tax (Appeals) which is confirmed and the ground no. 1 of appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax (Appeals) observed that the assessee company has drawn his attention to the list of exports made to more than 12 countries which evidences that the assessee company has been benefitted by such travelling expenditure. He however observed that the element of personal nature of expenses in travelling expenses cannot be ruled out totally. In absence of full and complete information of each and every expense, he considered 10% of the total travelling expenditure of Rs. 12,49,082/- as being incurred for personal purposes. Therefore, he restricted the disallowance to Rs. 12,49,082/- and deleted the balance amount of disallowance of Rs. 49,96,332/-. 13. The Authorized Representative of the assessee submitted that the assessee was required to travel abroad for business purpose and therefore the expenditure was incurred by the assessee. He further argued that each expenditure to be incurred was the domain of the businessman and not of the Assessing Officer. 14. We have heard the rival submissions and perused the orders of lower authorities and material available on record. In the instant case, the Assessing Officer made a disallowance of 50% of directors' travelling expenses of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ource from the above payment, they are by the provisions of section 40(a)(ia) of the Act. Accordingly, he disallowed Rs. 1,02,43,720/- and added the same to the income of the assessee. 19. On appeal, the Commissioner of Income Tax (Appeals) vacated the disallowance by observing as under: "4.4. I have carefully gone through the assessment order and the submission of the appellant. The AO has made disallowance of Rs. 1,02,43,720/- u/s.40(a)(ia) of the IT Act and added back to the total income of the appellant. The appellant has submitted that the payment/contribution made to the Vapi waste Effluent Management Company which is established under the directions of the Hon'ble Gujarat High court and all the industries in Vapi industrial are the members of the said mutual association. The appellant is having Industry at Vapi and is one of the members of the Vapi waste Effluent Management Company. The Industry members make their contribution to the said Mutual Company in proportion to the discharge of effluent to the common effluent treatment plant and they are required to contribute on the basis of consumption of water. The appellant has further submitted that:- * the income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntribution made by the assessee to its association Vapi Waste Effluent Management Company as a member cannot be classified as payment for contractual services as covered u/s. 194C of the Act. 23. The Departmental Representative merely relied on the order of the Assessing Officer. He could not bring any material on record to show that the payments were covered under the provisions of section 194C of the Act. In absence of the same, we find no infirmity in the order of the Commissioner of Income Tax (Appeals) which is confirmed and ground no. 2 of appeal of the Revenue is dismissed. 24. Ground no. 3 of appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) deleting the addition of Rs. 21,11,736/- made u/s. 40(a)(ia) of the Act. 25. The brief facts of the case are that the assessee claimed deduction of Rs. 1,15,41,396 as overseas freight expenditure. According to the Assessing Officer, the assessee has also made payment to M/s. NYK Line India Limited of Rs. 6622/-, M/s. Nobel Shipping Private Limited of Rs. 3,53,382/- totaling to Rs. 3,60,004/- for handling charges. Further, the Assessing Officer observed that the assessee had paid only Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of the above, the said disallowance is deleted." 27. The Departmental Representative relied on the order of the Assessing Officer whereas the Authorized Representative relied on the order of Commissioner of Income Tax (Appeals). 28. We have heard the rival submissions and perused the orders of lower authorities and material available on record. In the instant case, the Assessing Officer disallowed Rs. 21,11,736/- paid by the assessee towards handling and other charges as the assessee had not deducted tax at source on the same u/s. 194C of the Act. On appeal, the Commissioner of Income Tax (Appeals) deleted the disallowance for the reasons that the Delhi Bench of the Tribunal in the case of ITO vs. Freight Systems India Private Ltd. 103 TTJ 103 held that demurrage charge or handling charge or any other amounts of similar nature are treated at par with carriage freight payable to the ship owner or charter. Therefore, amounts in the nature of demurrage etc. which may not end up being paid to non-residents are treated as amounts falling within special provisions of section 172. This has been clarified by CBDT in Circular No. 723 of 1995 where such amounts have been taken outsi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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