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TMI Blog2013 (5) TMI 940X X X X Extracts X X X X X X X X Extracts X X X X ..... est on interest free loans at the corresponding rate of interest paid by the assessee on his secured/unsecured loan, relying on the Hon'ble Supreme Court's judgement in the case of M/s. S.A. Builders Ltd., Vs. CIT(2007) 288 ITR 1 (SC), where it is held that interest can be allowed as deduction if the payment is made on account of commercial expediency u/s 37 if the I.T. Act. Whereas as per material available on record and reply of the assessee during the assessment proceedings, no commercial expediency reflected in giving interest free advances. 3. Whether the action of Ld. CIT(A), Chandigarh, allowing the claim made by the assessee u/s 54 F of the I.T. Act, 1961 at ₹ 5,67,904/- relying upon the decision of Hon'ble Madras High Court in 181 ITR 101 in the case of CIT Vs. P.V. Narasimhan, is correct. When the judgement relied upon is not of jurisdictional High Court. 4. Ground No.1: After hearing both the parties, we find that during assessment proceedings the Assessing Officer noticed that assessee has shown agriculture income of ₹ 4,75,827/-. The Assessing Officer informed the assessee that the gross receipts of agricultural produce could not be produced as agricultu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tifold and cannot be treated as a case of shifting of stand. Accordingly, we find nothing wrong in the order of Ld. CIT(A) and confirm the same. 10. Ground No.2 : After hearing both the parties, we find that during assessment proceedings the Assessing Officer noticed that assessee has given some interest free advances to M/s Chandigarh Cable Pvt. Ltd. On enquiry, it was submitted that advance was given for purchase of land for business purposes as well as for purchase of some materials. Since the land was not registered in the name of assessee till 31.3.2006, the Assessing Officer was of the opinion that ratio of the decision of Hon'ble Punjab & Haryana High Court in the case of Abhishek Industries Ltd 288 ITR 1(P&H). would be applicable and accordingly, he disallowed interest @ 10.9% on the amount of advance and added a sum of ₹ 79,364/- as income of the assessee. 11. Before CIT(A), it was mainly submitted that Assessing Officer has not denied that advance was given for purchase of material as well as land. He has made the disallowance merely because land was not registered in the name of the assessee. Details of the advances were also filed before the CIT(A). The Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst land is concerned, the interest cannot be allowed in any case not merely because the advance has been given to the sister concern but because the money has been borrowed for the acquisition of fixed assets. After amendment to section 36(1) (iii) it has been made quite clear that interest on the funds borrowed for the purpose of acquisition of assets is not allowable. Accordingly, we set aside the order of CIT(A) and direct the Assessing Officer to confirm the disallowance of interest amounting to ₹ 15,000/- which is approximate amount of interest incurred for the purpose of acquisition of assets. 15. Ground No.3 : After hearing both the parties, we find that assessee has some income from capital gains and against that it was found during assessment proceedings by Assessing Officer that assessee has claimed deduction u/s 54F amounting to ₹ 5,67,904/-. This amount was claimed by stating that assessee had made construction on the first floor on already existing house of the assessee. A sum of ₹ 8,95,950/- was spent towards construction of few rooms on the first floor. According to Assessing Officer, construction of such few rooms would not amount to constructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the following expenses:- i) Car repair and maintenance ₹ 1,00,000/- ii) Telephone Expenses 1/6 th ₹ 47,534/- iii) Car Depreciation 1/6 th ₹ 71,586/- 21. Out of the above grounds, ground No.3 was not pressed, therefore, the same is dismissed. 22. Ground No.1: After hearing both the parties, we find that during assessment proceedings, the Assessing Officer noticed that assessee has given an amount of ₹ 16,10,100/- for purchase of shares to his sister concern M/s Chandigarh Cables Pvt Ltd. According to Assessing Officer, section 14A read with Rules 8D was applicable and accordingly a disallowance of ₹ 32,930/- was made. 23. On appeal, the assessee could not improve his case before the Ld. CIT(A) and addition was confirmed. 24. Before us, Ld. Counsel for the assessee submitted that Rule 8D was not applicable during assessment year 2006-07 in view of the decision of Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing. Co. Ltd vs DCIT and Another (2010) 328 ITR 81 (Bom.) and at best only a reasonable amount can be disallowed. 25. On the other hand Ld. DR supported the order of Assessing Officer and CIT(A). 26. After cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT (Viskakapatnam) Special Bench in the case of Merilyn Shipping & Transports v ACIT (supra). However, as far as the higher charges amounting to ₹ 5,57,528/- are concerned, this issue has not been examined either by Assessing Officer or by CIT(A), therefore, this may be remitted. 30. On the other hand Ld. DR submitted that the decision of the Special Bench had already been reversed by the Hon'ble Calcutta High Court. For rest of the issue, he relied on the order of CIT(A). 31. After considering the rival submissions, we find that as far as the controversy whether TDS provisions are applicable on amount already paid or not, we find that decision of the Tribunal in the case of Merilyn Shipping & Transports v ACIT (supra) has already been overruled by the Hon'ble Calcutta High Court in case of CIT Vs. Crescant Export Syndicate and, therefore, provisions of TDS are applicable on amount already paid during the assessment year as well as amount remaining payable at the end of the assessment year, therefore, we confirm the addition amounting to ₹ 68,52,119/-. As far as issue regarding hire charge is concerned, it seems that some of the agreements were also not file ..... X X X X Extracts X X X X X X X X Extracts X X X X
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