TMI Blog2017 (11) TMI 1359X X X X Extracts X X X X X X X X Extracts X X X X ..... nd derivative transaction was raised before Ld. CIT(A) but he failed to adjudicate the same. Ld. AR further submitted that an application u/s 154 of the Act was preferred before Ld. CIT(A) against his order dated 13.12.2012 wherein the Ld. CIT(A) rejected the claim of assessee without adducing any reason. In view of above, Ld. AR submitted to restore the matter back to the file of Ld. CIT(A) for fresh adjudication. In rejoinder Ld. DR does not raise any objection if the matter is remitted back Disallowance of interest levied on account of late deposit of TDS u/s 40(a)(ii) - AO was of the view that the interest on TDS is nothing but income tax paid by the assessee on behalf of parties - Held that:- The provision of Section 40(a)(ii) of the Act denies for the deduction of income-tax paid by the assessee but it does not speak about the interest levied on account of late deposit of TDS. In fact, the amount of TDS deducted by the assessee does not represent the income of the assessee rather it represent the income for the party in whose name the TDS was deducted. Thus, in our considered view, the amount of interest expense cannot be disallowed under the provision of Section 40(a)(i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 - - - Dated:- 31-10-2017 - Shri N.V.Vasudevan, Judicial Member And Shri Waseem Ahmed, Accountant Member For The Assessee : Shri Subash Agarwal, Advocate For The Revenue : Shri Saurabh Kumar, Addl. CIT-DR ORDER PER Waseem Ahmed, Accountant Member:- These are cross-appeal filed by the Revenue as well as assessee is directed against the common order of Commissioner of Income Tax (Appeals)-VI, Kolkata dated 13.12.2012. Assessment was framed by ITO Ward-6(2), Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his order dated 29.12.2011 for assessment year 2009-10. 2. Shri Subash Agarwal, Ld. Advocate appeared on behalf of assessee and Shri Saurabh Kumar, Ld. Departmental Representative appeared on behalf of Revenue. 3. Both the appeals are heard together and are being disposed of by way of this consolidated order for the sake of convenience. First we take up assessee s appeal in ITA No. 376/Kol/2013 . 4. In this appeal various grounds have been raised out of which ground No. 3 to 8 were not pressed and therefore same are dismissed as not pressed. Ground No.9 is of general in nature and does not r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on TDS ₹ 6,315 5 Interest on term loan (SBI) ₹ 13,15,661 6 Interest on CC a/c ₹ 56,06,714 7 Interest on LC ₹ 81,77,928 Total Rs.1,71,36,916 The assessee, during the course of assessment proceedings, submitted that unsecured loan for ₹ 45 lakh was not interest bearing loan and therefore no expense for interest on such loan was claimed in the profit and loss account of assessee. 7. The assessee also submitted that the loan of ₹10,06,58,478/- has been given to 28 parties which are group concern of it. The assessee also submitted that the loan has been given to 28 parties in the course of business as well as advance has been given for the purchase of property. But assessee failed to furnish the documentary evidence in support of its claim during the course of assessment proceedings. Thus, AO was of the view that the assessee has diverted its interest bearing fund for non-commercial purpose and theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld good. iii) The amounts of loan / advance given to 28 parties by the assessee are associated concerns of assessee and all the amount were given in the course of business. Therefore, no disallowance of interest on account of diversion of fund can be made by the AO. 9. However, Ld. CIT(A) after considering the submission of assessee has partly granted relief to assessee by observing as under:- .. During the appellate proceedings on 05.12.2012, the appellant submitted that the interest on the amount of ₹ 10,06,58,478/- may to be disallowed @ 13.5% on which rate the appellant has taken secured loans from the bank. The plea of the appellant is accepted. The interest @ 13.5% on the amount of ₹ 10,06,58,478/- calculated at an amount of ₹ 1,35,88,895/- is disallowed u/s. 37 out of interest paid of ₹ 1,71,36,916/-. 15. Therefore, the disallowance of amount of ₹ 24,48,531/- as relating to prior period expenses and an amount of ₹ 1,35,88,895/- as interest out of the interest expenses u/s. 37 is as interest on account of giving interest free loans and advances out of the interest bearing secured and unsecured loan taken by the assessee compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the amount of advance/loan. Ld. AR in support of assessee s claim has also relied on the order of Hon'ble Supreme Court in the case of S.A Builders Ltd. vs. CIT And Another (2007) 288 ITR 1 (SC), wherein it was held as under:- 35. We wish to make it clear that it is not our opinion that in every case interest on borrowed loan has to be allowed if the assessee advances it to a sister concern. It all depends on the facts and circumstances of the respective case. For instance, if the Directors of the sister concern utilize the amount advanced to it by the assessee for their personal benefit, obviously it cannot be said that such money was advanced as a measure of commercial expediency. However, money can be said to be advanced to a sister concern for commercial expediency in many other circumstances (which need not be enumerated here). However, where it is obvious that a holding company has a deep interest in its subsidiary, and hence if the holding company advances borrowed money to a subsidiary and the same is used by the subsidiary for some business purposes, the assessee would, in our opinion, ordinarily be entitled to deduction of interest on its borrow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance of interest has to be seen whether borrowed fund has been utilized for non-commercial purpose without charging any interest. In this regard, the argument placed by Ld. AR is that amount was given to the sister / group concern and therefore the same is allowable in view of the judgment of Hon'ble Supreme Court in the case of S.A. Builders (supra). However, after going through the records, we find that Ld. AR has not brought anything on record suggesting that the advance given to the parties are group companies of the assessee. We also find that the principle laid down by Hon'ble Supreme Court in the case of S.A. Builders (supra) cannot be blatantly followed as Hon'ble Supreme Court has clearly observed as under:- It all depends on the facts and circumstances of the respective case. For instance, if the Directors of the sister concern utilize the amount advanced to it by the assessee for their personal benefit, obviously it cannot be said that such money was advanced as a measure of commercial expediency. However, money can be said to be advanced to a sister concern for commercial expediency in many other circumstances (which need not be enumerated h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elayed deposit of TDs in Central Govt. A/c without considering the fact that said interest debited in the account is an inadmissible item. b) Ld. CIT(A)-VI, Kol erred in treating loss of ₹ 65,33,582/- towards share transaction as business loss per provision of section 45(5)(a) against treatment of the same by the AO as deemed speculation loss as per Explanation to Sec. 73 of the IT Act 61 considering facts of the case. c) Ld. CIT(A)-VI, Kol also erred in allowing relief to the assessee for ₹ 104,941/- towards commodity profit without considering the facts that as per details filed towards net commodity profit as arrived at ₹ 69,37,152/- against income shown for ₹ 68,58,425/-. d) An amount of ₹ 14,72,050/- was added to the total income of the assessee being difference in ITS details. Ld. CIT(A)-VI, Kol erred in directing the AO to verify the same on receipt of a certificate to be filled by the assessee company without either allowing relief to the assessee company or confirming the addition. In the facts and circumstances of the case, and considering that quantum of revenue involved in this case is higher, it is proposed that app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 ITR 387 (All.) . The said judgment of the Full Bench had been reversed by the larger Bench of the High Court in Triveni Engg. Works Ltd. v. CIT [1983] 144 ITR 732/15 Taxman 452 (All.) (FB) , wherein it had been held that interest on arrears of tax is compensatory in nature and not penal. That question had also been considered by the Supreme Court in Saraya Sugar Mills (P.) Ltd. v. CIT [Civil Appeal No. 830 of 1979 dated 29-2-1996]. In that view of the matter, the appeal was to be allowed. In view of the above, we feel that the above principle laid down by Hon'ble Supreme Court can be applied to the interest expense levied on account of delayed payment of TDS as it relates to the expenses claimed by assessee which are subject to the provision of TDS. The assessee s argument is that it claims the expense of certain amount in its profit and loss account and out of such expense it deducts certain percentage as specified under the Act as TDS which is paid to the Government Exchequer on behalf of the party. Thus, the amount of TDS represents the amount of income tax of the party on whose behalf the payment was deducted and paid to the Government Exchequer and not th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irected to allow these off of gain from jute with the loss from share trading. These grounds are accordingly allowed. The Revenue, being aggrieved, is in appeal before us. 26. Before us both parties relied on the order of Authorities Below as favourable to them. 27. We have heard the rival contentions of both the parties and perused the material available on record. At the outset, it was observed that assessee claimed the loss of ₹65,73,582/- as speculative in nature as per explanation to Section 73 of the Act. Thus, such loss was set off against the speculative income by the assessee. In view of this, we find that the AO has already treated the impugned loss as speculative in nature and the same is also claimed by assessee as speculative in nature. Therefore, we find no infirmity in the order of Ld. CIT(A). We uphold the same. This ground of Revenue s appeal is dismissed. 28. Next issue raised by Revenue in this appeal is that Ld. CIT(A) erred in deleting the addition made by AO for ₹1,04,941/- on account of undisclosed income of assessee. 29. At the outset, Ld. AR fairly conceded that assessee has shown less income in its return filed at ₹1,04, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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