TMI Blog2015 (3) TMI 971X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the labour charges have been incurred by M/s. Dev Construction. The Ld. CIT(A) has given a categorical finding that TDS has been made by Dev Construction on such labour payments. It is an undisputed fact that the assessee has simply reimbursed the expenditure incurred by M/s. Dev Construction. On such reimbursement of expenditure, there is no liability for TDS. The Ld. CIT(A) has rightly deleted the addition. No interference is called for. - Decided against revenue. Deemed dividend - CIT(A) allowed part relief out of addition u/s 2(22)(e) - Held that:- The Ld. Counsel for the assessee for the first time stated that provisions of Sec. 2(22)(e) of the Act was not applicable on the facts of the case because the assessee is neither a share holder of M/s. Gazebo Industries Ltd. nor the assessee is a member or a partner or a share holder in any concern in which M/s. Gazebo Industries Ltd. has a substantial interest nor the assessee has any substantial interest in M/s. Gazebo Industries Ltd. We find that this aspect has not been looked into by the lower authorities. Therefore, for verifying the fact for this limited purpose, we restore this issue to the files of the AO. - Decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has made interest free advances to various parties amounting to ₹ 17,55,87,523/-. 3.2. On these facts the AO asked the assessee to explain why interest paid to its sister concern M/s. Gazebo Industries Ltd. be not disallowed and added back being inadmissible. The assessee explained that it was to sell certain property at Ludhiana to M/s. Gazebo Industries Ltd., since the property was not free from encumbrances, the deal broughtgot delayed and therefore the assessee agreed to pay interest @ 12% per annum to M/s. Gazebo Industries Ltd. This submission of the assessee did not find favour from the AO who was of the opinion that the assessee has not paid interest to any parties from whom he has taken advances and further the said interest was not reflected in the Tax Audit report u/s. 44AB of the Act. The AO accordingly disallowed interest of ₹ 63,45,627/- paid to M/s. Gazebo Industries Ltd. being specified person u/s. 40A(2)(b) of the Act. 4. Before the Ld. CIT(A), the assessee explained the nature of transaction with M/s. Gazebo Industries Ltd. After considering the facts and the submissions of the assessee, the Ld. CIT(A) observed that the AO has not doubted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 40(a)(ia), the AO disallowed the sum of ₹ 71,90,199/-. 10. Before the Ld. CIT(A), it was strongly contended that the assessee has sold one property to M/s. Dev construction which was under development and required additions/renovation work. The possession of the said property was given at the time of entering into sale agreement and it was agreed that the additions/renovation/alteration work would be carried on by M/s. Dev Construction and the assessee would reimburse the expenses incurred by the said party, ₹ 71,90,199/- was paid to M/s. Dev Construction on this account. Therefore, provisions of Sec. 40a(ia) are not applicable. The Ld. CIT(A) considered the facts and the submissions. The CIT(A) found that the labour charges have been incurred by M/s. Dev Construction which had deducted the tax as per provisions of law. The Ld. CIT(A) observed that once the labour charges have been incurred by the purchaser party and TDS was duly deducted by that party out of such labour payment, the assessee was not required to deduct tax at the time of reimbursing such payment to the purchaser party and accordingly directed the AO to delete the addition of ₹ 71.90,199/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction of amount taken and given to M/s. Gazebo Industries Ltd. The said transactions are exhibited at page-22 of the order of the Ld. CIT(A). The Ld. CIT(A) finally concluded that amount aggregating to ₹ 19,98,285 can only be considered as deemed dividend u/s. 2(22)(e) of the Act and allowed a relief of ₹ 2,42,51,715/-. 16. Aggrieved by this, the Revenue is before us. 17. The Ld. DR simply relied upon the findings of the AO. 18. The Ld. Counsel for the assessee for the first time stated that provisions of Sec. 2(22)(e) of the Act was not applicable on the facts of the case because the assessee is neither a share holder of M/s. Gazebo Industries Ltd. nor the assessee is a member or a partner or a share holder in any concern in which M/s. Gazebo Industries Ltd. has a substantial interest nor the assessee has any substantial interest in M/s. Gazebo Industries Ltd. We find that this aspect has not been looked into by the lower authorities. Therefore, for verifying the fact for this limited purpose, we restore this issue to the files of the AO. The assessee is directed to furnish the share holding pattern in the related companies during the year under consider ..... X X X X Extracts X X X X X X X X Extracts X X X X
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