TMI Blog2019 (2) TMI 1909X X X X Extracts X X X X X X X X Extracts X X X X ..... d paid the tax and pass the order in accordance with law. Needless to order that before passing the order the assessing officer shall grant opportunity of hearing to the assessee and to furnish necessary evidences. In the result this ground of appeal is allowed for statistical purpose. Disallowance of interest expenses - assessee submits that assessee debited interest and financial charges towards the interest paid to Bank and on unsecured loans - HELD THAT:- Assessee has shown his own funds of ₹ 5.68 crore, this fact has been duly recorded and accepted by learned Commissioner (Appeals) - The assessee has made a booking of office premises with Lotus Grhinirman Private Ltd. We have noted that the fund advanced by assessee is of ₹ 45 lacks on account of booking of office premises. The assessee has sufficient interest free funds in the form of reserve and surplus and share capital of ₹ 5.68 Crore. Therefore, keeping in view, the ratio of the decision of Hon ble Bombay High Court in CIT Vs Reliance Utility and Powers Ltd [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] , no interest disallowance is warranted, when the interest free funds available with the assessee is far m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5, Mumbai (the ld. CIT(A) dated 09.03.2015, which in turn arises from the assessment order passed under section 143(3) on 25.03.2013. The assessee has raised following ground of appeal: 1) Disallowance u/s. 40(a)(ia): (a) The learned Commissioner of Income Tax (Appeals) - 17, Mumbai [ the Ld. CIT(A) ] erred in facts and law in sustaining the disallowance to the extent of ₹ 28,49,485/- under section 40(a)(ia) of the Act made by the learned Income Tax Officer - 8(2)(2), Mumbai [ the Id. Assessing Officer] without appreciating the material placed on record substantiating the fact of reimbursement of expenses. (b) The Id. CIT(A) erred in facts and law in sustaining the disallowance under section 40(a)(ia) of the Act despite the fact that adequate material evidencing the payment of tax made by the payee in its return of income on the income earned from assessee was placed on record. (c) Without prejudice to lea) and 1 (b) above, the Ld. CIT(A) erred in facts and law in confirming the disallowance of ₹ 28,49,485/- under section 40(a)(ia) of the Act without appreciating that out of the said amount, the assessee has already paid ₹ 16,94,403/- in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - under section 36(1)(iii) and disallowed sundry balances are written off of ₹ 23,86,242/- under section 36(1)(vii). On appeal before Commissioner (Appeals) the disallowance under section 40(a)(ia) was restricted to ₹ 28,49,485/- and other disallowances under section 36(1)(iii) and sundry balances written off was confirmed. Thus, further aggrieved by the order of learned Commissioner (Appeals) the assessee has filed present appeal before us. 3. We have heard the submission of learned AR of the assessee and the learned DR for the revenue. The learned AR of the assessee submits that assessee had paid clearing and forwarding expenses of ₹ 1,21,71,665/- to M/s Esskay Shipping Private Limited (ESPL) in connection with imports. The expenditure included various expenses such as wharfage charges, stevedoring charges, port charges, detention charges, custom duty etc. During the assessment proceeding the assessee was asked to file detail of the expenses incurred and the TDS made thereon. With regard to the payment to ESPL the assessee submitted that they had deducted TDS from payments in the nature of stevedoring charges, freight charges and detention charges. However, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent. The assessees deducted the tax from some of the selected items and exclude the remaining in its compatible with the existing provision of the law. The assessing officer was of the view that the entire payment to ESPL was liable for tax deduction as per the provisions of section 194C, thus the entire payments made to ESPL was disallowed, consisting the impugned disallowances. Before learned Commissioner (Appeals) the assessee contended that ESPL have raised separate debit note for all the reimbursement and the assessee had satisfied itself about the reimbursement of the actual expenses as all the debit notes are supported by invoices of the service provided. There is no markup on any of the reimbursement; therefore, the assessee was not required to deduct tax at source on such reimbursement. The assessee also contended that the recipient was acting only as a conduit for receiving the payment and as per section 194I; the deduction is to be made by the payee on such income which income assessable as rent in term of the said section. Even so far as section 194C is concerned, the responsibility of the person paying any sum to the contactor and when the amount was reimbursed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is allowed for statistical purpose. 10. Ground No. 2 relates to disallowance of interest expenses of ₹ 7,42,500/-. The learned AR of the assessee submits that assessee debited interest and financial charges of ₹ 81,21,205/- towards the interest paid to Bank and on unsecured loans. During the assessment the assessing officer noted that assessee had given loan and advances of ₹ 4,74,11,238/- the assessing officer took the view that interest-bearing funds were diverted to non-interest bearing loans and advances. The assessee before the assessing officer has specifically contended that all the loans and advances were made for the purpose of its business. With regard to the loans to M/s Lotus Grhinirman Private Ltd it was submitted that the same was for booking property and copy of allotment letter was filed before assessing officer. Before the assessing officer the assessee vide its letter dated 18 February 2013 and 21 March 2013 contended that the advance to Lotus Grhinirman Private Ltd was out of refund received from Lotus Venture Private Ltd and not of borrowed funds. The assessing officer disallowed the interest expenses of ₹ 28,70,901/- with regard to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hasing the office premises, till such business asset is actually purchased and used for the purpose of business, this interest component on the borrowed capital used for the purpose of fixed asset needs to be capitalized. The assessing officer on the contention of assessee that assessee claimed to have received interest at the rate of 10% on loan of ₹ 3.0 crore paid to M/s Tirupati Developers. The interest free loan and advances of ₹ 1.73 crore the assessee contended that the rate of interest on such bank loans were ranging from 15 to 18%, the mean rate of interest was calculated by Assessing Officer at the rate of 16.5% and accordingly assessing officer disallowed interest of ₹ 28,70,901/-. The learned Commissioner (Appeals) restricted the disallowance only on the amount of ₹ 45 lakhs which was given as an advance to s Lotus Grhinirman Private Ltd. We have noted that the assessee has shown his own funds of ₹ 5.68 crore, this fact has been duly recorded and accepted by learned Commissioner (Appeals) in para 4.2 of its order. The assessee has made a booking of office premises with Lotus Grhinirman Private Ltd. We have noted that the fund advanced by ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of lower authorities. 16. We have considered the rival submission of the parties and have gone through the orders of authorities below. During the assessment, the Assessing Officer noted that the assessee debited sundry written off of ₹ 25,86,229/-. The assessee was asked to furnish the details. The assessee filed its reply and contended that assessee fulfill the condition prescribed under section 36(1)(vii) and section 36(2). No evidence was furnished by assessee. The Assessing Officer noted that the assessee write off of consist Cenvat Duty of ₹ 12,82,353/-, Education Cess, Excise Duty etc. required specific explanation how the same can be claimed as debts. No details were furnished by Assessing Officer, therefore, the Assessing Officer disallowed the written off of sundry balances. Before the ld. Commissioner (Appeals), the assessee contended that written off balances of ₹ 25,86,229/- consist of Cenvat Duty, Education Cess, Excise Duty etc. of ₹ 13,74,030/- and sundry debtor written of is ₹ 12,12,199/-. The details were also furnished along with the ledger copies of such parties reflecting write off made in the books of account and ledger ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60 8 Excise Duty 8% FY 09-10) 53,468 9 Higher Education Cess 1% on sales (FY 09-10) 5,213 10 Higher Education Cess 1% (RM) (8864 of FY 09-10 and balance of FY 07-08 16,433 Total 25,86,229 17. Alternatively, the assessee also submitted that write off of Cenvat Duty was allowable as business loss under section 28 or 37 of the Act. The contention of assessee was not accepted by ld. Commissioner (Appeals) except in case of M/s Inter Trade for ₹ 3,99,987/- holding that the condition prescribed under section 36(1)(vii) r.w.s. 36(2) are fulfilled to that claim only. For remaining claim, the ld. Commissioner (Appeals) concluded that the assessee given advances to the various parties for purchasing raw-material and supply could not be procured. The assessee was not able to produce evidence to show how the advances given to various suppliers have become bad or irrecoverable. The assessee failed to adduce evidence that advances were giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by it as against the rate of excise duty applicable on the manufactured items, consequently credit of excise duty was available with the assessee. The said excise duty paid from year to year was not claimed as an expenditure but was carried forward from year to year to be adjusted against the excise duty payable by the assessee on its manufactured items. However, during the year under consideration the assessee closed down its manufacturing unit and consequently the benefit of the CENVAT credit remained unadjusted. Once the manufacturing unit of the assessee is closed down, admittedly the benefit of CENVAT credit not availed of against the excise duty payable on manufactured items, cannot be utilized by the assessee and the said write off of CENVAT credit, is allowable as expenditure in the year under consideration on the closure of the business. The write off of CENVAT credit by the assessee in its books of account is thus allowable as business expenditure under the provisions of section 37(1) of the Act relatable to the year, in which the manufacturing activities are closed down by the assessee. Accordingly, we direct the Assessing Officer to allow the claim of the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the assessee are allowed. 19. Considering the decision of co-ordinate bench of Tribunal held that the write off of Cenvat credit by the assessee in its books of account is thus allowable as business expenditure under the provisions of section 37(1) of the Act relatable to the year, in which the manufacturing activities are closed down by the assessee. The claim of the assessee is that they have closed down the business pertaining to the aluminum business and the excess credit of Cenvat was not utilized pertaining to that business. Therefore, we direct the Assessing Officer to verify the fact about the availability of Cenvat Credit to the assessee at the end of relevant Financial Year and allow write off of Cenvat credit by following the decisions of Tribunal, which we have referred in para 17 of this order. 20. So far as claim of sundry balance written off is concern. We have noted that the assessee has given advances for purchasing various materials like steam coal, LAM Coke and other store consumable. Details of which are referred at page no. 134 of Paper Book. The Hon ble Apex Court in T.R.F. Ltd. vs. CIT [2010] 190 Taxman 391 (SC) held after 1st April 1989, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
