TMI Blog2016 (10) TMI 1282X X X X Extracts X X X X X X X X Extracts X X X X ..... when two constructions are possible, the one in favour of the assessee should be applied. Accordingly in view of the above precedent, it is of the considered opinion that the assessee deserves benefit if the payees of the interest have filed their returns and paid taxes thereon. Since this aspect need factual verification, remit this issue to the file of the AO to consider the issue afresh in accordance with the Hon ble Delhi High Court decision ANSAL LAND MARK TOWNSHIP (P) LTD. [ 2015 (9) TMI 79 - DELHI HIGH COURT] - Appeal filed by the assessee stands partly allowed for statistical purposes. - I.T.A. No. 368/Nag/2014 Assessment Year : 2007-08 - - - Dated:- 7-10-2016 - Shri Shamim Yahya, Accountant Member. Appellant by: Shri C.J. Thakar Shri S.C. Thakar. Respondent by: Smt. Agnes P. Thomas. ORDER. This appeal by the assessee is directed against the order of learned CIT(Appeals)-I, Nagpur dated 12-06-2014 and pertains to assessment year 2007-08. The grounds of appeal read as under : 1. Learned C.I.T.(A) erred in not allowing the claim U/s 80IB(3)(ii) of I.T. Act amounting to ₹ 2,55,690/-. 2. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that the assessee has not filed the return of income within the due date specified u/s 139(1). Hence she submitted that in view of the specific provision of section 80AC the assessee will not be entitled for deduction claimed. In this regard learned D.R. referred to the decision of Hon ble Calcutta High Court in the case of CIT vs. Shelcon Properties P. Ltd. 44 taxmann.com. 7. I have carefully considered the submissions and perused the records. I find that section 80AC of the I.T. Act provides as under : Where in computing the total income of an assessee of the previous year relevant to the assessment year commencing on the 1st day of April, 2006 or any subsequent assessment year, any deduction is admissible under section 80-IA or 80IAB or section 80-IB or section 80-IC [or section 80-ID or section 80-IE], no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139. 8. The above provision of law specifies that the assessee shall not be granted deduction u/s 80IA or section 80IB or section 80IC or section 80ID or sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010, for the assessment year 2009-10. Therefore, the questions of law which arise in this case are: (a) Whether the deduction under section 80-IB(10) of the Incometax Act can be allowed when the return was not filed on or before the due date specified under section 139(1) of the Incometax Act? (b) Whether section 80AC of the Income-tax Act can be said to have left any room for discretion in the case of delayed filing of returns? 10. After very elaborately considering the issue the Hon ble High Court concluded as under : Mr. Khaitan submitted that the provision regarding filing of the return on or before the prescribed day is directory in nature. We are unable to concur with him. The benefit, in the present case, can only be claimed of fulfilment of the pre-conditions laid down under section 80AC of the Income-tax Act. When the pre-conditions have not been fulfilled, the benefit cannot be claimed. There is, as such, no reason to find out whether the direction is directory or mandatory. In any event, when the provision is that the benefit cannot b e claimed if the return has not been filed on or before the prescribed day, in our view, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall not be allowed deduction u/s 80IB. In these circumstances, respectfully following the Hon ble Calcutta High Court decision, I affirm the orders of the authorities below. 13. Since the assessee s claim is not valid ab initio adjudication on the merits of the case qua the deduction claimed on job work basis is only academic in nature. Hence the same is not being engaged into. 14. Apropos ground No.2 Disallowance of interest amounting to ₹ 3,86,368/-. On this issue the AO noted and observed as under : 7. During the examination of books of accounts, in individual capacity of the assessee, it is seen that the assessee has debited interest of ₹ 3,79,983/- to the P L account, The assessee was requested to explain as why the interest has been debited from the profit earned from the business of the assessee and its nexus with the business income. The assessee filed written submission which is as follows :- Allowability of interest of ₹ 379983/- :-The assessee owns an oil mill styled as t-t/s Mahesh Oil Products at Savarna Tah Shegaon Dist.Buldhana which was started on 08-11-2000 i.e.A. Y.Ol-02. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts of the oil mill as per requirement of district industrial centre for calculation of subsidies and sales tax exemptions. It is therefore that the deduction of interest of ₹ 379983/- may kindly be allowed u/s 36(1)(iii) of the I.T. Act, 1961. The submission of the assessee has been perused carefully and same is not acceptable. Foremostly, the assessee has not proved any nexus with the business income of the assessee out of which interest was debited. Secondly, the assessee has not made any T.D.S. on the amount so paid to various parties. Assessee has earned income from various sources inter alia business income. Considering all facts, the interest paid at ₹ 3,79,983/- is disallowed. 15 Upon assessee s appeal learned CIT(Appeals) considered the issue and and held as under : I have carefully considered the issue before me. The decision relied upon by the appellant reported in 293 ITR 226 is not relevant to the facts of the case and the issue of disallowance u/s 40a(ia). The said decision is only concerned with the provision of the sec. 201 which deal with the failure of a deductor to deduct tax at source. In the said de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pheld the AO s action only on the ground that since TDS has not been deducted u/s 40(a)(ia) the amount of expenditure cannot be allowed. However, I find that this proposition is not correct in view of Hon ble Delhi High Court decision in the case of CIT vs. Ansal Land Mark Township P. Ltd. 377 ITR 635. In this case the Hon ble High Court has decided as under : Section 40(a)(ia) of the Income-tax Act, 1961, is aimed at ensuring that an expenditure should not be allowed as deduction in the hands of an assessee in a situation in which income embedded in such expenditure has remained untaxed due to tax withholding lapses by the assessee. It is not a penalty for tax withholding lapses but it is a sort of compensatory deduction restriction for an income going untaxed due to tax withholding lapse. The insertion of the second proviso to section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from April 1, 2005, being the date from which sub-clause (ia) of section 40(a) was inserted by the Finance (No.2) Act, 2004. The first proviso to section 201(1) of the Act has been inserted to benefit the assessee. It also states that where a person fails to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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