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2015 (12) TMI 1553 - ITAT CHENNAI

2015 (12) TMI 1553 - ITAT CHENNAI - TMI - Disallowance under Section 40(a)(ia) - assessee has not made any TDS at the time of payment and the recipient of the amount has submitted Form 15H on 10.04.2011 - Held that:- The fact is that the recipient of interest amount informed the assessee that she will file Form 15H. Accordingly, at the time of credit, the tax was not deducted. Subsequently Form 15H was filed on 10.04.2011, before the due date for depositing the amount in the Government account. .....

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s Tribunal is of the considered opinion that there cannot be any disallowance under Section 40(a)(ia) of the Act. Therefore, this Tribunal is unable to uphold the order of the lower authority and accordingly, the order of the lower authority is set aside and the addition is deleted. - Disallowance u/s 36(1)(iii) - contention of the assessee is that addition of one more windmill does not amount to extension, it is only an expansion of the business - addition one more windmill to the existing .....

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f asset for extension of the existing business of generation of electricity through windmill, this Tribunal is of the considered opinion that the interest cannot be allowed as deduction till the capital asset acquired by the assessee is put to use. In this case, admittedly, the capital asset purchased is not put to use. Therefore, the CIT(Appeals) has rightly confirmed the addition made by the Assessing Officer. - Disallowance being the amount paid to Life Insurance Corporation of India, tow .....

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ion made by the assessee ultimately came back to the Employees Gratuity Fund, the Apex Court found that the conditions stipulated under Section 36(1)(v) of the Act is satisfied. In the case before us, the application made by the assessee is still pending before the Commissioner for approval and the amount was paid to the LIC. The assessee had no control over the Fund created by the LIC for the benefit of its employees. Since the assessee has no control over the funds and application is still pen .....

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ted. - IT Appeal No. 957 (Mds.) of 2015 - Dated:- 9-12-2015 - N.R.S. GANESAN, JUDICIAL MEMBER AND A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER. G. Baskar, Advocate for the Appellant. P. Radhakrishnan, JCIT for the Respondent. ORDER: This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals), Salem, dated 27.03.2015 and pertains to assessment year 2011-12. 2. Shri G. Baskar, The Ld. counsel for the assessee, submitted that the Assessing Officer made a disallow .....

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earlier assessment years, the said Ms. M. Krishnaveni used to file Form 15H and the assessee has paid the amount without deducting the tax. During the year consideration, Form 15H in fact was filed on 10.04.2011, before the due date for deposit of the TDS amount. Since the assessee was informed in advance, according to the Ld. counsel, the TDS was not made and in fact, the assessee has filed the TDS certificate subsequently. Therefore, there cannot be any disallowance. The Ld. counsel placed hi .....

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s required under Section 194A of the Act. In this case, admittedly, the interest was credited in the books of account before 10.04.2011 and the tax was not deducted. Therefore, the expenditure claimed by the assessee to the extent of ₹ 71,016/- towards payment of interest cannot be allowed under Section 40(a)(ia) of the Act. Therefore, merely because the assessee has received Form 15H on 10.04.2011 that cannot be a reason for allowing the claim of the assessee. 4. We have considered the ri .....

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ore us, admittedly, the interest payment of ₹ 71,016/- is claimed as expenditure. The question arises for consideration is when the assessee has not deducted tax under Section 194A of the Act in respect of the payment of interest income, whether such expenditure otherwise allowable can be allowed in view of Section 40(a)(ia) of the Act. Section 40(a)(ia) clearly says that the tax is deductible at source. The fact remains that the assessee is making similar payment to the very recipient in .....

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of the assessee to deduct tax. Admittedly, the tax was not deducted at the time of credit. However, before the due date for filing return of income, the recipient filed Form 15H. Therefore, on the date of filing of return of income, tax is not deductible on the amount paid to the recipient since Form 15H is filed. When there is no requirement for deduction of tax in view of filing of Form 15H by the recipient on 10.04.2011, this Tribunal is of the considered opinion that there cannot be any dis .....

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nsideration, the assessee has added one more windmill to the existing business. Therefore, according to the Ld. counsel, it was an expansion of business and not extension of business. Therefore, proviso to Section 36(1)(iii) of the Act is not applicable. However, the Assessing Officer found that the assessee has to capitalize the interest on the borrowed funds till the machinery is put to use. Referring to Section 36(1)(iii) of the Act, the Ld. counsel submitted that the interest payment till th .....

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taxmann.com 181 and the judgment of Apex Court in Dy. CIT v. Core Health Care Ltd. [2008] 298 ITR 194/167 Taxman 206. 7. On the contrary, Sh. P. Radhakrishnan, the Ld. Departmental Representative, submitted that Section 36(1)(iii) of the Act, which is very much applicable during the year under consideration, clearly says that when the assessee borrowed funds for acquisition of asset, whether it is capitalized in the books of account or not. The interest paid on the borrowed funds from the date .....

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Ld. D.R. pointed out that the extension is in respect of existing business. Admittedly, when the assessee is generating electricity through windmill by adding one more windmill, the assessee is extending the business of existing generation of electricity. It is not a new business of the assessee. Therefore, the intention of the Parliament is that the capital asset shall be utilised for extending the existing business. In this case, admittedly, the existing business was extended. Therefore, ther .....

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computing the income referred to in section 28- (iii) the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession : Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalised in the books of account or not) ; for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on whic .....

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ended is existing business or profession. The contention of the Ld. counsel for the assessee is that addition of one more windmill does not amount to extension, it is only an expansion of the business. This Tribunal is of the considered opinion that when the assessee is admittedly in the business of generation of electricity through windmill and made addition of one more windmill, it is an extension of such existing business of generation of electricity through windmill. Therefore, the capital b .....

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Therefore, the CIT(Appeals) has rightly confirmed the addition made by the Assessing Officer. 9. We have also carefully gone through the decision of the Ahmedabad Bench in Gujarat Mineral Development Corpn. Ltd. (supra). In the case before Ahmedabad Bench, the assessee is engaged in the business of manufacturing lignite. The Ahmedabad Bench of this Tribunal found that the borrowed funds are for the purpose of setting up a new unit of the existing business. However, the assessee before the Ahmed .....

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bunal is of the considered opinion that the decision of Ahmedabad Bench of this Tribunal may not be of any assistance to the assessee. 10. We have also carefully gone through the judgment of Apex Court in the case of Core Health Care Ltd. (supra). In this case, the Apex Court found that the assessee was entitled to deduction under Section 36(1)(iii) of the Act prior to amendment by Finance Act, 2003 in respect of the money borrowed for purchase of machinery even though the assessee had not used .....

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he CIT(Appeals) and accordingly, the same is confirmed. 12. The next ground of appeal is with regard to disallowance of ₹ 46,71,233/- being the amount paid to Life Insurance Corporation of India, towards Narasu's Spinning Mills Employees Group Gratuity Fund. 13. Shri G. Baskar, the Ld.counsel for the assessee, submitted that the assessee has admittedly paid ₹ 46,71,233/- towards Employees Group Gratuity Fund to LIC. The assessee has also produced a copy of the receipt for payment .....

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