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TMI Blog2018 (4) TMI 1128X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case the ld. CIT(Appeals) was not justified in confirming the disallowance u/s 40A(3) to the extent of Rs. 9,47,220/-. He failed to appreciate that all the payments to Truck drivers were under prescribed limit and the provisions of sec.40A(3) were not applicable. b) THAT the ld. CIT(Appeals) was wrong in observing that the assessee has not been able to provide the necessary proof of having paid the said amount of Rs. 9,47,220/- to the Agents. The upholding of the disallowance on the basis of such observation is wrong, unjustified and misconceived. 2. THAT the appellant craves leave to alter, amend, modify any of the grounds and/or take additional grounds before or at the time of hearing of this appeal." 4. The Grievancesraised by the Revenue (in ITA No.188/Kol/2016) read as under: "1. On the facts and circumstances of the case and in law, the CIT(A) erred indeleting the addition of Rs. 33,00,009/- u/s 40A(3) by relying on an agreement with a clearing & forwarding agent, Sri Dipu Banerjee, eventhough this agreement was not produced during assessment proceedingsand the AO objected to this agreement in the remand report submittingthat mere submission of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings, the Assessing Officer found that the assessee paid freight charges of Rs. 42,47,229/- in the violation of the provisions of section 40A(3) of the Act. The Assessing Officer, on verification of ledger account filed by the assessee, detected that the freight charges were paid by the assessee exceeding Rs. 20,000/-, and Rs. 35,000/- (from 01.10.2009) which were paid in cash by the assessee and thus violated the provisions of section 40A(3) of the Act.The Assessing Officer in his assessment order tabulated the date, voucher number, and the amount paid in cash,(vide AO order page 4 and 5) wherein he has demonstrated that since the assessee has violated the provisions of section 40A(3) of the Act, as the amount paid in cash is exceeding Rs. 20,000/-, and Rs. 35,000/- (from 01.10.2009 threshold limit was increased), therefore, he made addition of Rs. 42,47,229/-. 5.2 Aggrieved by the addition made by the Assessing Officer, the assessee filed an appeal before the ld. CIT(A) who has deleted Rs. 33,00,009/- out of Rs. 42,47,229/- and confirmed the addition of Rs. 9,47,220/-. Before the ld. CIT(A), the assessee submitted that Assessing Officer made the disallowance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other persons also cannot be treated as Agent in terms of Rule-6DD(k) of I.T. Rules. About the payments of Rs. 9,47,220/- the assessee has submitted before the ld. CIT(A) that the other persons were doing job in absence of Sri Dipu Banerjee and on his instruction and therefore no separate agreement was made with them. However,they have done the same job as Dipu Banerjee and hence they should also be treated as Agent in terms of Rule- 6DD(k) of the I.T. Rules. The assessee submitted that all the vouchers for handling charges to Agents wereproduced before the A.O. All the payments are supported withvouchers and were below prescribed limit and paid to Agents. Therefore the addition of Rs. 9,47,220/- should not be made. 5.3 The ld. CIT(A), after considering the remand report and submissions of the assessee, observed that the payments in question which had been tabulated were made by the assessee to different truck drivers near the Bangladesh Border.These truck drivers having been engaged to transport certain product, onions in this case on behalf of the assessee. The ld. CIT(A) observed that these payments have been verified by the Assessing Officer and a substantial portion of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent proceedings that the payments made to others are below the prescribed limit but the same has not been examined by the ld. CIT(A). Therefore, we are of the view that the assessee has discharged its onus by submitting that the payments at Rs. 9,47,220/- made to other persons was below the prescribed limit mentioned in section 40A(3) of the Act and the ld. DR for the Revenue could not bring any evidence on the report to show that the said amount was paid by the assessee in violation of section 40A(3) of the Act. Therefore, based on the factual position explained above, we delete the addition of Rs. 9,47,220/-. 5.7 In the result, the appeal filed by the assessee [in Ground Nos.1(a) & 1(b)] are allowed and whereas appeals filed by the Revenue [in Ground Nos.1,2 & 3] are dismissed. 6.Ground Nos.4, 5 & 6 raised by the Revenue (in Appeal No.188/Kol/2016) relates to disallowance of interest on borrowed fund, as the assessee provided interest free advance to related business entities/concern at Rs. 11,41,000/-. 6.1The brief facts qua the issue are that during the course of assessment proceedings, on verification of the balance sheet as on 31.03.2010, the Assessing Officer observed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT(A), the assessee submitted that out of total advances of Rs. 19,78,243/-, a sum of Rs. 8,37,243/- is brought forward balance from earlier years and, therefore, addition during the year is Rs. 11,41,000/- (Rs.19,78,243 - Rs. 8,37,243/-) only. The assessee also submitted that he has sufficient balance in his capital account, that is, own funds were sufficient to give the interest free advances, therefore, no addition should be made on account of interest free advances. The assessee has its own funds at Rs. 1,23,06,344/- and interest free advances given were to the tune of Rs. 11,41,000/- only. Therefore, interest free advances has been given out of own capital and assessee has not utilized the secured loan from bank to provide these interest free advances. The assessee submitted that if own funds available with the assessee then presumption would be that investment would be out of interest-free funds generated or available with the company, if the interest-free funds were sufficient to meet the investments. Therefore, the interest free advances were given out of its own funds available with the assessee and, hence, addition on that account should be deleted. Moreover, the adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st free loans given by the assessee only at Rs. 11,41,000/-, which is much lesser than the own funds, therefore, it would be deemed that these advances are given out of own capital of the assessee and, therefore, the disallowances on account of interest free advances should not be made. For that we rely on the judgment of Hon'ble Bombay High Court in the case of Reliance Utilities 313 ITR 340(2009) wherein it was held that if there were funds available, both interest-free and overdraft and/or loans taken, then a presumption would be that investments would be out of the interest-free funds generated or available with the company, if the interest-free funds were sufficient to meet the investments. In the assessee's case under consideration, presumption was established considering the fact that assessee has its own capital at Rs. 1,23,06,344/- whereas the interest free advances were given to the tune of Rs. 11,41,000/-. Therefore, it would be presumed that these interest free advances have been given out of its own capital and hence, no disallowance should be made. That being so, we decline to interfere in the order passed by the ld. CIT(A). The order of the ld. CIT(A) deleting the af ..... X X X X Extracts X X X X X X X X Extracts X X X X
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