TMI Blog2020 (8) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... HMEDABAD]. If the assessee failed to furnish the requisite form to the prescribed authority within the time, he cannot be made subject to the disallowance of transport expenses on account of non-deduction of TDS. Accordingly, we hold that there cannot be any disallowance of the transport expenses incurred by the assessee after 30th September 2009. TDS u/s 194C - HELD THAT:- We hold that the expenses claimed by the assessee on account of transport charges cannot be disallowed on account of non-deduction of TDS under section 194C of the Act. Hence the ground of appeal of the assessee is allowed. Disallowance of amount of interest on the amount advanced as interest-free advance loans - addition u/s 40A - whether the assessee has given loans and advances without interest to the specified persons for the commercial purposes? - HELD THAT:- Assessee on one hand is advancing interest free loans and advances to his father proprietary concern and on the other hand the assessee is paying interest on the loan obtained from his father. In the case on hand it is a transaction between the individual assessee and the Proprietary concerns of the father of the assessee. Accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of alleged diversion of borrowed fund for purposes other than business purpose. 2.1 The learned C.I.T.(Appeals) has failed to consider the fact that during the year, there was no advance as opening debit balance was reduced at the close of the year. 2.2 The learned C.I.T.(Appeals) failed to appreciate that there is no direct nexus between borrowed funds and amount advanced to sister concerns. 2.3 Without prejudice to ground taken herein above, the assessee prays that the C.I.T.(Appeals) ought to have considered the spare funds available with the assessee and could have made disallowance on the remaining amount. The appellant reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing. 2. The assessee in ground No. 1 has challenged the disallowance made by the AO and confirmed by the learned CIT (A) for the transport/freight expenses amounting to ₹ 2,13,832/- paid to the arranger of the transporter. 2.1 The briefly stated facts are that the assessee in the present case is an individual and engaged in the business of Manufacturing and trading of engineering hardware. The assessee in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d perused the materials available on record. In the present appeal, the issue for the disallowance of the transport expenses amounting to ₹ 2,13,832/- paid to ARCL can be separated into 2 parts as detailed under: i. Payment of transport/freight charges paid up to 30 September 2009 prior to the amendment brought under the provisions of section 194C of the Act amounting to ₹ 93,310 only. ii. Payment of transport/freight charges paid post amendment under the provisions of section 194C of the Act, i.e. after 30 September 2009 amounting to ₹ 1,20,522/-. 6.1 First, we take up the issue relating to the payment made for the transport charges after 30 September 2009 amounting to ₹ 1,20,522 only. In this connection we find that the provisions of section 194C (6) and (7) have direct bearing on the issue on hand, as applicable in the year under consideration, which reads as under: (6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his Permanent Account Number, to the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee by the sub-contractors, the tax is not deductible and once tax is not deductible no addition under section 40(a)( ia) can be made. From this it follows that third proviso to section 194C(3)(1) which requires the assessee to submit Form No. 15J is only procedural formality and cannot undo what has been done by second proviso. Thus in view of the above, if the assessee failed to furnish the requisite form to the prescribed authority within the time, he cannot be made subject to the disallowance of transport expenses on account of non-deduction of TDS. Accordingly, we hold that there cannot be any disallowance of the transport expenses incurred by the assessee after 30th September 2009. 6.4 Now coming to the transport expenses incurred by the assessee up to 30 September 2009 amounting to ₹ 93,310/-, in this regard we note that same reasoning can be applied as discussed above for holding that the assessee is not liable to deduct the TDS once he has obtained the PAN of the transporter. In this connection we draw our support and our guidance from the order of the Cuttuck Tribunal in the case of Govind Ram Gupta v JCIT reported in 32 taxmann.com 111. The releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Eeteel Hardwares 79,58,170/- Dr. 36,30,401/- 67,22,790/- 48,65,780/- 2. Spring lock Engineering Industries 5,94,254/- Dr. 50,50,648/- 50,57,264/- 5,67,637/- 7.2 The assessee during the assessment proceedings claimed that it had its own interest free funds amounting to ₹ 26,25,970/- lakhs (₹ 23,01,006/- Lacs as share capital and ₹ 3,24,964/- as depreciation) which has been utilized for advancing such loan to the aforesaid proprietary concerns. The assessee besides the above also contended that it has advanced money to the said firms for commercial expediency. Accordingly the assessee contended that there cannot be any allegation against him for the diversion of interest-bearing fund for non-commercial purposes. However, the AO found that the major money has been advanced to the party out of OD account. Accordingly he was of the view that the assessee has diverted his interest-bearing loan fund for non-commercial purposes. 7.3 Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al paper book. The learned AR in support of his contention referred to the judgment of the Hon ble Bombay High Court in the case of Pr. CIT vs. Sesa Resouces Limited reported in 404 ITR 707. 10. On the other hand the learned DR vehemently supported the order of the authorities below. 11. We have heard the rival contentions of both the parties and perused the materials available on record. The facts of the case are not in dispute and therefore we are not referring the same for the sake of brevity and convenience. 11.1 The 1st issue arises for our adjudication whether the assessee has given loans and advances without interest to the specified persons for the commercial purposes. On perusal of the ledgers filed by the assessee, we note that the assessee has advanced loan to these parties amounting to ₹ 54,33,417/- which was adjusted against the job work charges amounting to ₹ 1,18,400/- in the financial year 2011- 12. As such we note that a small amount of gross advances was adjusted against the job work charges which is not very significant and that too after a period of 2 years. Thus considering the financial transactions as discussed above, it cannot be s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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