TMI Blog2019 (2) TMI 1357X X X X Extracts X X X X X X X X Extracts X X X X ..... . Kazstray service infrastructure Private Limited is a free of cost - when the sale receipt should accrue to the assessee - HELD THAT:- Respectfully following the finding of the Hon’ble Supreme Court in the case of Excel Industries Ltd [2013 (10) TMI 324 - SUPREME COURT] we set aside the order of the lower authorities on the issue in dispute and direct the Assessing Officer to delete the addition made in the year under consideration of the amount of ₹ 19.50 lakhs, which the assessee has already offered in the subsequent assessment year under the head miscellaneous income. - ITA No.2106/Del/2015 - - - Dated:- 5-2-2019 - Shri Amit Shukla, Judicial Member And Shri O.P. Kant, Accountant Member For the Appellant : Shri Somil Aggarwal, CA And Dr. Rakesh Gupta, Adv. For the Respondent : Shri Praveen Kumar, Sr.DR ORDER PER O.P. KANT, A.M.: This appeal by the assessee is directed against order dated 03/03/2015 passed by the Ld. Commissioner Income Tax(Appeals), Faridabad [in short the Ld. CIT(A) ] for assessment year 2011-12, raising following grounds: 1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law in uph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, however, same was compensated by M/s Tata Hitachi construction machinery company limited 2.1 On further appeal to the Ld. CIT(A), both issues have been decided against the assessee. Accordingly, the assessee filed appeal before the Tribunal and raised the grounds as reproduced above. 3. In grounds No. 1 and 2, the assessee has challenged disallowance of sum of ₹ 9,02,309/- under section 40(a)(ia) of the Act. 3.1 The facts qua the issue-in-dispute are that the Assessing Officer observed expenses of ₹ 9,02,309/-claimed by the assessee in the profit and loss account under the head subvention charges . According to the Assessing Officer, the charges were in the nature of interest expenses and, therefore, liable for deduction of tax at source . 3.2 Before the Assessing Officer, the assessee submitted that it was engaged in sale of capital goods i.e. excavators and backhoeloaders etc having sale price in the range of 18 lakhs to 55 lakhs. The buyers, who intend to purchase the equipment, had to approach to the financial institution for taking loans. The assessee used to provide details to the buyers of the financial institutions, where it was empanelled so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submission made before the Ld. CIT(A) . He submitted that the payments made by the assessee to the banks and NBFCs are in the nature of bill discounting and therefore no tax was required to be deducted on payment. 3.5 The Ld. DR, on the other hand, relied on the finding of the lower authorities and submitted that payment made by the assessee was in the nature of the interest only and, thus, liable for the tax deduction at source. 3.6 We have heard the rival submissions and perused the relevant material on record including the paper book filed by the assessee. On perusal of page- 18 of the paper book, we find that the assessee debited amount of ₹ 9,02,309/-with nomenclature of subvention charges under schedule P (office and administrative expenses) of profit and loss account. In the submission made before the Assessing Officer, a copy of which is available on page 26 to 28, also the assessee claimed the payment as subvention charges. A party wise detail of such charges paid to various financial institutions is available on page 128 of the paper book. Before the Ld. CIT(A), the assessee submitted that the nature of the payment was of bill discounting rather than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cepted in absence of the relationship of seller and buyer between the assessee and the financial institution. The amount of finance on behalf of the purchaser from the financial institution, which in normal course would have been received by the assessee company in 30 to 60 days, but the assessee by way of making this payment has received the said finance amount in 7 to 15 days, thus the charges or payment becomes in the nature of interest for availing the finance amount from the financial institution prior than the stipulated date, may be for a period of around one month. The amount paid for availing the finance for this short period from the financial institution that too on number days basis definitely falls under the definition of the interest under section 2(28A) of the Act which reads as under: Definitions. 2. In this Act, unless the context otherwise requires,- .................................................................................................... (28A) interest means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59,464/-as discount allowed, however, in the subsequent assessment year, the assessee shown the same as income on receipt basis. The claim of the assessee that the compensation did not come in the year under consideration and thus looking to uncertainty on the realisation of the compensation, it has been accounted for on the basis of the receipt. 4.2 The Ld. counsel referred to page 150 of the paper book, which is a copy of the scheduled to profit and loss account for year ending on 31/03/2013. The Ld. counsel submitted that the income of ₹ 19.50 Lacs has been included in miscellaneous income of ₹ 23,93,549 /-. The Ld. counsel also referred to ledger account of the miscellaneous income, available on page 158 of the paper book and submitted that income of ₹ 19.50 lakhs has been entered by way of two debit notes of ₹ 9 lakh dated 20/07/2012 and ₹ 10.50 lakh dated 22/12/2012 respectively. According to Ld. counsel, the income on sale of the machine accrued only in subsequent assessment year, and, therefore, the assessee is justified in showing the same in subsequent assessment year. 4.3 Alternatively, the Ld. counsel also submitted that there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erstand how there was uncertainty in realisation of the compensation particularly when the assessees is dealer of the said company. Thus, this contention of the assessee that sale got accrued in the subsequent assessment year is not acceptable. Accordingly, we reject this contention of the assessee. However, we have noted of the decision of the Hon ble Supreme Court in the case of CIT Vs Excel industries Ltd (supra), that there is no substantial loss to the Revenue on tax amount, if the sale is declared on receipt basis . The relevant part of the decision of the Hon ble Supreme Court is reproduced as under: 32. Thirdly, the real question concerning us is the year in which the assessee is required to pay tax. There is no dispute that in the subsequent accounting year, the assessee did make imports and did derive benefits under the advance licence and the duty entitlement pass book and paid tax thereon. Therefore, it is not as if the Revenue has been deprived of any tax. We are told that the rate of tax remained the same in the present assessment year as well as in the subsequent assessment year. Therefore, the dispute raised by the Revenue is entirely academic or at best may ha ..... 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