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TMI Blog2015 (10) TMI 2545X X X X Extracts X X X X X X X X Extracts X X X X ..... te of Haryana for giving guarantee against loan taken from HUDCO by the assessee corporation. The total guarantee against fees was Rs. 1121.56 lacs which was to be amortized in the period of loan taken in various schemes. The Assessing Officer concluded that assessee had raised loan from HUDCO for its projects on which guarantee fee of Rs. 96,91,000/- was claimed. Since the amount of loan was capitalized because same was used for the projects, guarantee fees paid was also in nature of capital expenditure whereas the same was claimed as revenue expenditure. The Assessing Officer, accordingly, treated the same as capital expenditure and made the addition. 6. The assessee submitted before ld. CIT(Appeals) that assessee is engaged in the maintenance and improvement of State Highways and other district roads in the State of Haryana. For the same projects, assessee borrowed loan from HUDCO. The Haryana Government gives guarantee against loan taken from HUDCO by the assessee. The guarantee fees paid to the State Government was claimed as revenue expenditure. The guarantee fees paid is expenditure and is not refundable, therefore, it was revenue expenditure. The assessee relied upon certa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure for the business of the appellant. The appellant is a corporation in the state of Haryana entrusted with maintenance and improvement of state highways. Main District Roads and Other District Roads in the entire state of Haryana. The Haryana State Government has given guarantee for State Corporation to HUDCO (a Central Government Organization) against grant of loan. For this activity of giving guarantee, the Haryana State Government has taken the guarantee fee. During the appellate proceedings, the counsel of appellant was asked to justify and furnish the documentary evidences showing the provision for making such payment and its justification as business expenditure. The appellant submitted a copy of memorandum dated 16.09.2002 issued by Commissioner and Secretary to the Government of Haryana, Public Works Department where under Item No. 8, the payment of Government guarantee fee to the Haryana Government is reflected against recovery of FISRDC Funds. The appellant also furnished a copy of letter dated 17.01.2012 issued by Executive Director to Finance Commissioner and Principal Secretary, Government of Haryana where it is mentioned that an account of Rs. 560.78 Crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id guarantee fee of Rs. 1121.56 lacs to State Government for raising a loan of Rs. 560.78 Crores from another Central Government Organization (HUDCO). No other basis or justification has been submitted for giving the guarantee fee to the State Government by its own Corporation. It is a clear case of diversion of income by the appellant to the State Government. In fact, by such arrangement, a portion of the loan raised have been diverted to the State Government without any apparent reason. The expenditure has been given a name of guarantee fee which is in fact diversion of funds to the State Government. As per provisions of section 37(1) of the Act, the claimed expenditure as guarantee fee has not been incurred wholly and exclusively for the purposes of earning profits from the business activity by the Corporation. Merely because the State Government became guarantor and charged such guarantee fee, the guarantee fee paid by the corporation would not constituted a lawful expenditure so as to claim' deduction u/s 37(1) of the Act. 4.6 In this context, reliance is placed on the decision of Hon'ble high court of Knrnataka in the case of CIT Vs. United Breweries Ltd. (2012) 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporation of HUDCO against grant of loan. For this activity of giving guarantee, the Haryana State Government has taken the Guarantee Fees. The counsel for assessee was directed to explain and justify that it was revenue expenditure. It is also admitted fact that assessee in its books of account has amortized the total guarantee fees of Rs. 1121.56 lacs in the period of loan taken for various schemes i.e. for 13 to 14 years. Therefore, guarantee fees was amortized by the assessee in the books of account. The ld. CIT(Appeals), in the background of these facts noted that assessee is a creation of State Government and no other basis or justification has been submitted for giving guarantee fees to the State Government by its own corporation. 7(i) The ld. CIT(Appeals) also noted that it is a case of diversion of income by assessee to the State Government. It was also recorded in the finding of fact that in-fact, by such arrangement, a portion of the loan raised have been diverted to the State Government without any apparent reasons. As per letter on record, the State Government decided to levy Guarantee Fee at specified rate on all the current borrowings. The finding of fact recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Andhra Pradesh High Court, decision of the jurisdictional High Court in the case of Subhag Textiles Pvt. Ltd. (supra) was rightly relied upon by ld. DR. Hon'ble Punjab & Haryana High Court in case of Sobhag Textile (P) Ltd. (supra) referred to decision relied on by ld. counsel for the assessee. 8. Considering the totality of the facts and circumstances and the findings of fact recorded by ld. CIT(Appeals), which have not been assailed to through any evidence or material on record, we do not find any justification to interfere with the order of the ld. CIT(Appeals). We confirm his findings and dismiss this ground of appeal of assessee. 9. On ground No. 3, assessee challenged the order of ld. CIT(Appeals) in upholding the addition of Rs. 4,03,129/- under section 40(a)(ia) of the Income Tax Act. The Assessing Officer noted that TDS was not deducted on the payments of Rs. 4,03,129/- made for consultancy charges to M/s Consulting Engg. Associates. The Assessing Officer, therefore, disallowed the same under section 40(a)(ia) of the Act. 9(i) The assessee submitted before ld. CIT(Appeals) that provisions of Section 40(a)(ia) is applicable only in respect of TDS defaults if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tually paid, therefore, assessee is not required to deduct TDS on the same amount. No other submissions were raised before authorities below. The issue of 'paid' and 'payable' has already been decided against the assessee by Hon'ble Punjab & Haryana High Court in the case of PMS Diesels (supra). Now, the ld. counsel for the assessee has come up with new plea that since tax has been deducted, therefore, matter may be remanded to the Assessing Officer. First of all, the plea of the assessee has no merit because once assessee pleaded before authorities below that amount of Rs. 4,03,129/- has been paid on 15.09.2009, where is the question of deduction of TDS on the same amount. Further, assessee has not filed any application for admission of the additional evidences and has not explained any reason why assessee has not filed these documents before the authorities below which have been now filed at pages 11 to 15 of the Paper Book, genuineness of same are in doubt. Therefore, no cognizance of the same could be taken at this stage. Since these documents (PB-11 to 15) were not filed before authorities below and this issue is not arising out of the orders of authorities below, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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