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TMI Blog2020 (8) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... milar disallowance was deleted by his predecessor in Asst. Year 2009-10 and therefore, ought to have allowed the deduction for expenses. 1.2 The learned C.I.T.(Appeals) has failed to consider the fact that the payee M/s. Associated Carriers is merely an arranger of transporters and there is no contract between assessee and payee and in the circumstances, no liability to deduct tax. 1.3 The learned C.I.T.(Appeals) erred in confirming the disallowance by ignoring the fact that the PAN of party was submitted and in view of amendment, no TDS is required to be deducted from payment made to transporter having PAN. 2. The learned C.I.T.(Appeals) has erred in confirming disallowance of interest expenses for Rs. 7,16,4687- on account 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istrative Commissioner, the impugned expenses claimed by the assessee cannot be disallowed for nondeduction of TDS. 4.1 Regarding the payment of freight/transport expenses pertaining to the period up to 30 September 2009 prior to the amendment of section 194C(6) of the Act, the learned AR contended that there was the similar disallowance made by the AO in the immediate preceding assessment year and the same was deleted by the learned CIT (A). Therefore, he was of the view that the principles of consistency can be applied to such payment. 5. On the other hand, the learned DR vehemently supported the order of the authorities below. 6. We have heard the rival contentions of both the parties and perused the materials available on record. In the present appeal, the issue for the disallowance of the transport expenses amounting to Rs. 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 Rs. 93,310 only. ii. Payment of transport/freight charges paid post amendment under the provisions of section 194C of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) alone would be operative for deciding whether tax is deductible or not deductible. Non-furnishing of Form No. 15J to the Commissioner is an act posterior in time to payments made to sub-contractors. This cannot by itself, undo the eligibility of exemption created by second proviso by virtue of which sub-contractors have submitted Form No. 15-I. The deductibility of tax is, therefore, confined or limited to applicability of second proviso only because it is at that point of time of assessee has to decide whether it has to deduct the tax or not. Where Form No. 15-I are not submitted, it has to deduct the tax. Conversely where Form No. 15-I is submitted to the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to Rs. 14,79,652/- on the money borrowed from the bank and the relatives. The assessee at the same time has advanced money to two concerns in which the father of the assessee is proprietor being a related party within the meaning of section 40A(2)(b) of the Act, without charging any interest from them. The details of the loans and advance stand as under: Sr.No. Name of the person to whom loans and advances given Opening Bal Rs Transaction Closing Balance Debit Debit Credit 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 Rs. 26,25,970/- lakhs (Rs. 23,01,006/- Lacs as share capital and Rs. 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 inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercial purposes and therefore there cannot be any disallowance of interest expenses. The learned AR in support of his contention drew our attention on the ledger of Job charges paid to the firms which are placed on pages 1-5 of the additional 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 Rs. 54,33,417/- which was adjusted against the job work charges amounting to Rs. 1,18,400/- in the financial year 2011- 12. As such we note that a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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