TMI Blog2018 (9) TMI 700X X X X Extracts X X X X X X X X Extracts X X X X ..... are not out of interest bearing funds and the nexus between the loan taken from SBI on the hypothecation of sundry debtors is clearly proved. Therefore, we do not see any reason as to why the CIT(A), should have remitted the matter back to the A.O for verification. Ground of appeal No. 3 accordingly allowed. TDS u/s 195 - payments been made to the non-resident outside India, for the services rendered by her outside India - Held that:- We find that the assessee has paid commission to Mrs. Sandhya Prakash for the liasioning work done by her outside India. The argument of the assessee that for making disallowance u/s 40(a)(ia) the presumption is that the same is allowable u/s 37 of the IT Act was not raised by the assessee before the autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s u/s 143(3) of the IT Act, the assessee was required to file certain details. After verifying the books of accounts and the information filed by the assessee, the A.O proposed to make: (a) Disallowance of interest of ₹ 20,27,350/- u/s 14A from out of the expenditure claimed under the head Interest to others in view of its investment in preference shares of M/s. Suryajyoti Spinning Mills Ltd. (b) Disallowance of balance interest of ₹ 14,84,556/- from out of the expenditure claimed under the head Interest to others in view of advancing of ₹ 1,53,27,055/-of interest f ree loans and advances. (c) Disallowance U/s 40(a)(ia) of ₹ 31,54,388/- paid to Mrs. Sandhya Prakash towards liasioning, in the absence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference shares in its sister company which did not yield any income during the year and did also not incur any expenditure for making such investment as it is only a sister company. 3. CIT(A) is not justified in directing the A.O to cause necessary enquiries as to allowability of interest of ₹ 12,27,425/- disallowed while making assessment in view of the findings given in para 5.4 of the Appellate order that loans taken in earlier year on which interest was paid, was partly repaid. Hence CIT(A) erred in directing the A.O to cause necessary enquiries regarding use of funds and decide the matter. 4. Commissioner of Income Tax is not justified in confirming the disallowance of ₹ 31,54,388/- u/s 40(a)(ia) made by the A.O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he IT Act. In the assessment order, it is clearly brought out by the A.O, that the assessee has not earned any dividend income from the investments during the relevant assessment year. It is also observed that the entire interest expenditure claimed by the assessee is interest paid by the assessee towards the secured loan taken by it from SBI against the sundry debtors. The total interest paid was ₹ 35,11,906/- which consisted of interest of ₹ 32,89,412/- and the bank charges of ₹ 2,22,494/-. 7. As regards the applicability of Sec. 14A of the IT Act, where the assessee has not earned any dividend income which is exempt from tax is concerned, we find that this issue is covered in favour of the assessee by various decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the company which included ₹ 4,48,10,873/- as on 31.03.2011 and thus the entire secured loan was covered by sundry debtors. Such being the case, the directions of the CIT(A) to the A.O to cause necessary enquiries and take action as per the directions of the Hon ble Special Bench at Mumbai in the case of HP Shaw limited in ITA No. 3694/Mum/2006 dated 15.01.2009 is unwarranted. The assessee has given interest free loans to its sisters concerns but the advances are not out of interest bearing funds and the nexus between the loan taken from SBI on the hypothecation of sundry debtors is clearly proved. Therefore, we do not see any reason as to why the CIT(A), should have remitted the matter back to the A.O for verification. Ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture is allowable u/s 37 of the Act, the applicability of Sec. 40(a)(ia) of the IT Act requires the assessee to prove that the income of the recipient is not taxable in India. None of the authorities below have examined this issue and the assessee has also not filed any documents to disprove the finding of the Revenue. Therefore, accepting the assessee s plea that the assessee, may be given an opportunity to produce the relevant documents to prove that Mrs. Sandhya Prakash has rendered services to the assessee warranting the payment of commission, we deem it fit and proper to remand this issue to the file of the A.O with a direction to the assessee to produce all the relevant documents before the A.O within a period of two months from t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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