TMI Blog2016 (5) TMI 1369X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the assessee. - ITA No. 597/JP/2013 - - - Dated:- 13-5-2016 - SHRI T.R.MEENA, AM SHRI LALIET KUMAR, JM Assessee by : Shri Rohan Sogani Shri Rajeev Sogani (C.As.) Revenue by : Ms Roshanta Meena (JCIT) ORDER PER SHRI LALIET KUMAR, J.M. This is an appeal filed by the assessee against the order of ld. CIT (Appeals)- I, Jaipur dated 08.03.2013 for the A.Y. 2008-09. The grounds raised by the assessee are as under :- 1. In the facts and circumstances of the case and in law, the ld. CIT (A) has erred in confirming the action of the ld. AO in disallowing a sum of ₹ 3,34,612/- of interest expenses under section 40(a)(ia) of the Income Tax Act, 1961. The action of the ld. CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the said disallowances of ₹ 3,34,612/-. 2. In the facts and circumstances of the case and in law the ld. CIT (A) has erred in confirming the action of the ld. AO in making addition of ₹ 57,000/- of unsecured loans from parties under section 68 of the Income Tax Act, 1961 :- S.No. Name of the Party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 2,91,544/- is added to the total income of the assessee applying the gross profit rate of 15% on a total sales and the same is added to the total income of the assessee. Though the assessee has worked as an individual capacity and the main source of income of the assessee is only from this business, yet the personal use in telephone, conveyance, low household withdrawals etc. are not added separately. The above trading addition includes all the expenditure which is of personal nature nd the same are not disallowed separately. Thereafter the AO has disallowed the interest expenditure on the secured loans taken in the assessment year and in the previous year to the extent of ₹ 3,34,612/-. 3. Being aggrieved, the assessee has filed the appeal against the order of AO before ld. CIT (A). The ld. CIT (A) confirmed the disallowance by invoking provisions of section 40(a)(ia) of the Act. The relevant para in the order of ld. CIT (A) is as under :- The second ground of appeal is against the addition of ₹ 3,34,612/- paid to creditors u/s 40(a)(ia). In the assessment order the AO stated that the assessee has taken some unsecured loans in this year only and some u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntent for introducing section 40(a)(ia) is explained in CBDT Circular No.5/2005 dt. 15.07.2005 reported at 269 ITR 101 (statute). In the present case there is no dispute as to the fact that interest has actually been paid to above finance companies and as on 31.03.2009 no amount of interest was payable. The Special Bench of ITAT in case of Merilyn Shipping Transport Vs. ACIT 16 ITR (Trib) 1 (PB 62-63) has held that section 40(a)(ia) cannot be invoked in respect of amounts actually paid within the previous years without deduction of tax at source. After this decision the Gujarat High Court in case of CIT Vs. Sikandar Khan N. Tunvar 357 ITR 312 and Calcutta High Court in case of CIT Vs. Crescent Export Syndicate 94 DTR 81 held that section 40(a)(ia) would cover not only to the amounts which are payable as on 31st March of the particular year but also which are payable at any time during the year. However, the Allahabad High Court in case of CIT Vs. Vector Shipping Services (P) Ltd. 94 DTR 101/357 ITR 642 held that it is only the amount which is payable and not that which has been already paid by the end of the year that can be disallowed u/s 40(a)(ia). Against the said decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the due date of filing of the return by the deductee. Therefore, considering the above amendment which is introduced to remove unintended hardship, the department may be directed to verify this fact and where finance companies has paid tax on such interest, no disallowance u/s 40(a)(ia) be made in the hands of the assessee. It is a settled law that second proviso to section 40(a)(ia) inserted w.e.f. 01.04.2013 has retrospective effect as held in Bangalore Bench in case of Sh. G. Shankar Vs. ACIT in ITA No.1832/Bang/2013 dt. 10.10.2014, Agra Bench in case of Rajeev Kumar Agarwal Vs. ACIT (2014) 34 ITR(Trib.)479, Delhi Bench in case of ITO Vs. Dr. Jaideep Kumar Sharma (2014) 34 ITR(Trib.)565, Bangalore Bench in case of DCIT Vs. Ananda Marakala (2014) 150 ITD 323 as the amendment was made to remove the undue hardship. 3. It may also be pointed out that an amendment has been made by FA, 2014 w.e.f. 01.04.2015 in section 40(a)(ia) whereby it is provided that 30% of any sum payable to a resident shall be disallowed if tax is not deducted at source under Ch. XVIIB as against the 100% presently made. The purpose of this amendment was explained in the memorandum as under:- the disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Supreme Court in the case of CIT Vs. Vegetable Products Ltd. (supra) has held that when there are to views on an issue, the view in favour of the assessee has to be preferred. Therefore, we confirm the order of the Ld. CIT(A). Further the recipient are NBFC, therefore, not possible to not be assessed to tax, these payments were related for A.Y. 2009-10 and return for A.Y. 2009- 10 already might have been filed by these NBFC by including these interests receipts as their income. Therefore, we do not find any reason to interfere in the order of the Ld. CIT(A). In the alternative, it was submitted by the ld. A/R for the assessee that since the books of accounts are rejected, no further addition can be made relying on the said books of account in view of law laid down by the Hon ble Punjab Haryana High Court in the matter of Dulla Ram, Labour Contractor, Kotkapura (2014) 42 taxmann.com 349 ( Punjab Haryana ). The ld. A/R has also referred the judgment of the Jaipur Tribunal passed in the matter of Cosmopolitan Trading Corporation in ITA No. 298/JP/2013 and also the judgment in the matter of M/s. K.Y. Continental Interiors Pvt. Ltd. Vs. ITO in ITA No. 595/JP/2013. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are formed. The consideration for each other is an agreement and an agreement enforceable by law is a contract. In the present case, the contract stands concluded when the assessee asked M/s. Garvit Stonex and others to do the edge cutting and sawing of granite blocks and convert them into marble tiles for it for a consideration. The moment the said contractors/persons doing the sawing and edge cutting of the marble blocks, the said persons are entitled for the amount required to be paid as per the bills raise by them. In fact, in the present case after doing the edge cutting and sawing, the charges were even paid by the assessee, in our understanding, a contract has come into existence between the assessee and M/s. Garvit Stonex and others. In our view, the assessee is responsible for paying the amount to such persons i.e. contractor for carrying out the specific work. Therefore, the assessee is liable to deduct the tax on such payments. Since the assessee has failed to deduct the tax on the amount paid by it to such persons/contractor, the assessee is duty bound to deduct the tax, and non deduction of tax by the assessee, attracts the provisions of section 40(a)(ia). 6.1. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id down in the case of Rajendra Yadav in ITA No. 895/JP/2012 decided on 29.01.2016, it will be in the interest of justice if the disallowance is only restricted to 30% of ₹ 3,34,612/- which comes to ₹ 1,00,384/-. Accordingly the issue is partly allowed in favour of the assessee. 5. Second ground of the assessee is with respect to cash credit to the extent of ₹ 57,000/-. 5.1. We have already held that addition under section 68 was made as the assessee has failed to furnish the identity, creditworthiness and genuineness of the transaction of the person. However, on perusal of the record, we find that the assessee was not able to produce any cogent evidence to prove the creditworthiness, genuineness and identity of the person. Therefore, in view of section 68 the assessee is not entitled to any benefit. The AO has made the separate addition of ₹ 57,000/- under section 68 as mentioned in para 5.4 and 5.5 of the assessment order. The argument of the ld. A/R that in view of estimation of income, no separate addition can be made, in our view, is not applicable and do not come to the rescue of the assessee as the income of the assessee was estimated only on th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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