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TMI Blog2019 (2) TMI 1357X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Ld. A.O. in making an addition of Rs. 19,50,000/- on account of machine supplied free of cost and in any case has erred in bringing to tax this amount even though the said amount has been offered to tax in next year. 4. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the addition of Rs. 19,50,000/- is bad in law and against the facts and circumstances of the case. 5. That Ld. CIT(A) has erred in not directing Ld. A.O. to refund the tax paid twice in respect of the addition of Rs. 19,50,000/-. 6. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in passing the impugned order without giving adequate opportunity of being heard. 7. That in any case and in any view of the matter action of Ld. CIT(A) in confirming the action of Ld. A.O in making the impugned addition/disallowance is bad in law and against the facts and circumstance of case. 8. That the appellant craves the leave to add, alter or amend the grounds of appeal at any stage and all the grounds are without prejudice to each other. 2. Briefly stated facts of the case are that, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. the assessee. It was submitted by the assessee, that such charges were termed as "subvention charges" or "bill discounting charges". It was contended by the assessee that there is no debtor/creditor or lender/ borrower relation between the financial institution and the seller company and thus it was not in the nature of "interest". 3.3 However, according to the Assessing Officer, the assessee incurred higher interest charges to release the amount earlier than the normal time taken for release of the loan and therefore the term "subvention charges" is nothing but "enhanced interest" rate paid for early of sanction of the loan. According to him, the charges claimed by the assessee fall within the meaning of the "interest" as defined under section 2(28A) of the Act. Accordingly, he disallowed the amount under section 40(a)(ia) of the Act for non-deduction of tax at source by the assessee. On further appeal, the Ld. CIT(A) observed that the terminology "subvention charges" was used by the assessee itself and not the "bill discounting" while claiming the expenses in the profit and loss account. According to the Ld. CIT(A) the very nature of the transaction indicates that it is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purchaser of the machines got finance from various financial institutions. The assessee further submitted that in normal circumstances those financial institutions makes payment to the assessee within 30 to 60 days of completion of the formalities by the buyer of the machine, but the assessee sought payment within 7 to 10 days, thus, those financial institution transferred the finance amount to the assessee after deducting certain charges, which has been termed as subvention charges or bill discounting charges. According to the assessee there is no debtor/creditor or lender/borrower relationship between the financial institution and the assessee company. The Ld. Assessing Officer referred to meaning of the interest as defined in section 2(28A) of the Act and observed that interest includes any service fee or other charges in respect of the money borrowed or debt incurred in respect of any credit facility which has been utilised. The contention of the Ld. Assessing Officer is that the assessee incurred higher interest charges to release the loan amount earlier than the normal time taken for sanction of the loan. Before the Ld. CIT(A), the assessee claimed that it was in the natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en paid in relation to HDFC bank, which is not covered under section 194A because of the exclusion given to banking company under section 194A(3)(iii)(a) of the Act. 3.11 Thus, assessee can be held liable for non-deduction of tax for the remaining charges of Rs. 7,82,503/- (9,02,309 -1,19,806). We, accordingly, uphold the liability of non-deduction of tax at source to this extent and direct the Assessing Officer to restrict the disallowance under section 40(a)(ia) of Act, to this extent only. In the result, the ground numbers 1 and 2 of the appeal are partly allowed. 4. Grounds No. 3 to 5 of the appeal are related to addition of Rs. 19,50,000/-on account of the machine supplied to M/s. Kazstray service infrastructure Private Limited is a free of cost. 4.1 From the schedule 'R' to the audit report, the Assessing Officer observed that the assessee, who is a dealer of Tata Hitachi Vehicles, on the instruction from Tata Hitachi Construction Machines Ltd. (Tata Hitachi), i.e., principal company, supplied a machine to M/s Kazstray service infrastructure India Private Limited against invoice of even number dated 07/03/2011 of Rs. 16,15,464/-as a free of cost. The cost of the machine a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t assessment year. 4.4 The Ld. DR, on the other hand, relied on the order of the lower authorities and submitted that in view of the letter from the company M/s Tata Hitachi, it is clear that the policy of the company of compensation was in existence and thus assessee is not justified in claiming that there was uncertainty of realisation. According to him, on supplying the machine, the sale was complete and in view of the policy of compensation, the assessee was required to credit the sale in the year under consideration only. On the issue of claim of the Ld. counsel that making addition in the year under consideration rather than income in the subsequent year is a revenue neutral exercise, he submitted that by postponing payment of taxes by one year, the assessee has got benefited whereas the revenue has lost interest component on payment of taxes corresponding to the said sale receipts. 4.5 We have heard the rival submissions and perused the relevant material on record. The issue in dispute in the case of the assessee is when the sale receipt should accrue to the assessee. The assessee is dealer of M/s Tata Hitachi and sold a machine amounting to Rs. 16,59,464/- to one of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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