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2015 (11) TMI 293

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..... tion of TDS credit - AO rejected the claim of the credit of the said amount of TDS u/s 194C towards mobilisation advance on the ground as such credit cannot be allowed when the corresponding receipt has not been offered to tax - Held that:- As decided in assessee's own case for the assessment year 2002-03 as held if the amount is a mobilisation advance and not an income at all, the question of paying income tax would net arise. When the gross receipts is offered and in that assessment year he has suffered loss, the question of paying any tax on the said amount also does not arise. A conjoint reading of Sections 194C, 199 & 237 of the Act makes it clear that if there was no liability to pay tax, the TDS paid is liable to be refunded and that is absolutely what the Tribunal has stated. - Decided in favour of assessee. Disallowance of interest on account of interest-free advance made to Shri Manohar Shetty - Held that:- Interest-free loan was given from borrowed fund. In view of our finding on this issue for the assessment year 2006-07, we uphold the impugned order of the CIT(A) qua this issue as the argument that the interest free loan had been given for the purpose of facilitatin .....

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..... dated 25/2/2011 requiring the assessee to file objections. In response, the assessee submitted before the CIT that the AO, after verifying various details furnished during the assessment proceedings and after applying his mind, passed the order u/s 143(3). Therefore, it was contended that there was no lack of inquiry or inadequate inquiry in the matter. Further, the assessee submitted on the merits of the issue that the assessee AOP (joint venture) was awarded work by National Highways Authority of India (NHAI) for an amount of ₹ 195,18,58,171/- and as per the terms and conditions contract, the assessee was to provide performance guarantee for 10% of the total amount of the contract along with mobilisation bank guarantee of equivalent amount which works out at ₹ 19.5 crores each. The assessee requested its joint venture partner SCC to arrange bank guarantee to be furnished to NHAI on behalf of the assessee. Accordingly, SCC gave a bank guarantee of ₹ 19.15 crores towards performance guarantee and Rs.,19.51 crore as mobilisation advance guarantee and further ₹ 9.76 crore towards equipment advance guarantee on behalf of the assessee. It was further submitted .....

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..... e to furnish details of the loan and advance (asset). In reply, the assessee vide letter dated 14/10/2008 explained the advance to SCC as well as Shri Manohar Shetty. Further no new advance was given in this year and the amount of ₹ 11.5 crore is only a brought forward balance from earlier year. The AO raised a query and after reply of the assessee, did not make any disallowance. Therefore, the AO applied his mind. The learned AR of the assessee has relied upon the decision of this Tribunal in the case of M/s.Saravana Developers vs. CIT in ITA No.620/Bang/2011 and 48/Bang/2013 dated 6/9/2013 as well as the decision of the Hon'ble jurisdictional High Court in the case of CIT vs. Sridev Enterprises (192 ITR 165). Thus, the learned AR of the assessee has submitted that in view of the decision of the Hon'ble Supreme Court in the case of S.A.Builders (supra), when the interest free advance was given due to commercial expediency and the AO after conducting inquiry taken a possible view then the CIT is not permitted to invoke the provisions of sec.263. On the other hand, learned departmental representative has strongly supported the impugned revision order. He submitted t .....

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..... n behalf of the assessee-joint venture. But at the same time, one shall not forget that it was otherwise obligation of the partners of the joint venture to arrange the bank guarantee required by NHAI as per terms and conditions of the contract awarded to the assessee. Further, each of the partners of the joint venture was required to contribute the requisite capital in the joint venture but SCC contributed only ₹ 9.5 crore and that amount was nothing but interest-free advance given by the assessee to Shri Manohar Shetty which was received back routing through SCC. Therefore, the transaction of advancing of ₹ 11.5 crore to Shri Manohar Shetty does not involve any economic substance or business interest of the assessee and hence there is no commercial expediency. Even the contribution by SCC is nothing but its obligation as per the joint venture agreement. At the cost of repetition, it is pertinent to mention that the bank guarantee was to be arranged by the partners of the joint venture and therefore, furnishing the bank guarantee by one of the partners cannot be linked with the transaction of interest-free advance to Shri Manohar Shetty. In the facts of the case, we .....

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..... e facts arid circumstances of the case. 8. The Appellant craves leave to add, alter, delete or substitute any of the grounds urged above. 9. In view of the above and other grounds that may be urged at the time of hearing of the appeal, your appellant prays that the appeal may be allowed in the interest of equity and justice . 9. Grounds No.1 and 2 are general in nature and the assessee has not addressed any argument in respect of these grounds. Accordingly no specific adjudication is required for ground Nos.1 and 2. 10. Grounds No.3 to 5 are regarding rejection of TDS credit. NHAI inter alia, paid a sum of ₹ 10 crores to the assessee towards mobilisation advance and deducted therefrom TDS of ₹ 22,44,000/- u/s 194C of the Act and deposited the same to the credit of the Central Government of India. The assessee has not offered the advance received from NHAI holding the same as not assessable to tax. The AO rejected the claim of the credit of the said amount of TDS of ₹ 22,44,000/- on the ground that as per the provisions of sec.199(2) of the Act, such credit cannot be allowed when the corresponding receipt has not been offered to tax. 11. The ass .....

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..... in the future years as and when the assessee offers to tax. If the amount of ₹ 29,98,50,937/- is a mobilisation advance and not an income at all, the question of paying income tax would net arise. When the gross receipts of ₹ 7,32,14,128/- is offered and in that assessment year he has suffered loss, the question of paying any tax on the said amount also does not arise. He has passed an order for refund of ₹ 14,93,568/accepting the loss returns of the assessee. But he was in error in not refunding the balance amount on account on the ground that it is liable to be adjusted in future years. If ₹ 14,93,568/- was refundable as the assessee had no income for the assessment year 2002-2003, the balance amount could not have been retained when there was no income which is liable to tax at the hands of the assessee. In fact the advance has been given after taking hank guarantees. It is here Section 237 of the Act comes into operation. As rightly held by the Tribunal, the said amount is also refundable. A conjoint reading of Sections 194C, 199 237 of the Act makes it clear that if there was no liability to pay tax, the TDS paid is liable to be refunded and that is a .....

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..... wever, for arguments sake it is accepted that the Bank could have asked for further collateral securities to increase the facility and SNC needed to increase its financial capacity in the eye of the Bank to get the increased bank facilities so that it can provide the same to the appellant AOP for onward transfer to NHAI to get the desired work contract. The appellant therefore devised a circuitous route Mr.Manohar Shetty (MS) is one of the partners of SNC. The appellant gave interest free loans to MS. MS deposited the same in SNC as capital contribution. SNC deposited the same in the Bank. Bank increased the guarantee of SNC to 80 crores. The appellant utilized the same and got the contract. Thus it is pleaded that the funds borrowed from Bank on Mortgage of property was given as loan to MS for utilization of the same to increase the bank guarantee of SNC to 80 crore to obtain the work contract of 195 crores and the same was for the purpose of business of getting contract only and hence deserves deletion. I find loopholes in the above explanation. The loans were given to MS in F.Y. 2002-03, 2003-04 and 2004-05. The NHAI asked for the bank guarantee in F.Y. 2006-07. The appellant AO .....

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