TMI Blog2021 (4) TMI 997X X X X Extracts X X X X X X X X Extracts X X X X ..... ed not to made the addition against the assessee - HELD THAT:- Considering the submissions by both the parties and the fact the ld.AR of the assessee submitted that recipient has already paid tax on the interest received, therefore, we restore the issue to the file of the AO to verify the facts if the recipient had paid the tax on the interest paid by the assessee, no disallowance be made against the assessee. Therefore, the A.O. is directed to verify the facts and pass the order afresh in accordance with Law. The assessee is directed to provide all necessary information and documents to the AO, accordingly this ground no.2 is allowed for statistical purpose. Disallowance of interest paid on TDS - assessee submits that the interest paid by the assessee is not a penalty and compensatory in nature and is allowable deduction under section 37 - HELD THAT:- Hon ble Apex Court in Prakash Cotton Mills Vs CIT [ 1993 (4) TMI 3 - SUPREME COURT ] held that whenever any statutory impost paid by an assessee by way of damages or penalty or interest is claimed as an allowable expenditure under section 37(1), the assessing authority is required to examine the scheme of the provisions of the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of ₹ 61,883/- made by Assessing Officer u/s.14A. 2. Brief facts of the case are that the assessee is engaged in the business of electrical installation and commissioning activities. The assessee filed its return of income for the assessment year under consideration on 03.10.2013 declaring total income at ₹ 96,72,140/-. The case was selected for scrutiny. The assessing officer while passing the assessment order, made addition on under section 36(1)(va) of ₹ 3,11,536/-, disallowed ₹ 90,637/- being the payment of interest to the Kotak Mahindra Prime Ltd., disallowed ₹ 1,27,628/- the interest paid on late payment of TDS under section 37 and disallowance of ₹ 61,883/- under section 14A of the Act. On appeal before ld. CIT(A), the action of the A.O. was upheld. 3. Being aggrieved, the assessee filed appeal before this Tribunal. 4. We have heard the submissions of learned authorized representative (Ld. AR) of the assessee and the learned departmental representative (Ld. DR) for the revenue and perused the orders of the lower authorities. The ld.AR of the assessee submitted that the ground no.1 raised by the assessee is covered against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. On the other hand, the ld. DR for the revenue submits that this issue may be restored to the file of the ld.AO for verification of facts and to pass the order, in case the recipient has not paid the tax on the interest, the disallowance be sustained. 9. Considering the submissions by both the parties and the fact the ld.AR of the assessee submitted that recipient has already paid tax on the interest received, therefore, we restore the issue to the file of the AO to verify the facts if the recipient had paid the tax on the interest paid by the assessee, no disallowance be made against the assessee. Therefore, the A.O. is directed to verify the facts and pass the order afresh in accordance with Law. The assessee is directed to provide all necessary information and documents to the AO, accordingly this ground no.2 is allowed for statistical purpose. 10. In the result, Ground No.2 of the assessee is allowed for statistical purposes. 11. Ground No. 3 relates to disallowance of interest paid on TDS. The Ld. AR for the assessee submits that the interest paid by the assessee is not a penalty and compensatory in nature and is allowable deduction under section 37 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Court finds that the complete answer is provided by the decision of this Court in CIT v. Holcim India (P.) Ltd. [2015] 57 taxmann.com 28. In that case a similar question arose, viz., whether the ITAT was justified in deleting the disallowance under Section 14A of the Act when no dividend income had been earned by the Assessee in the relevant AY? The Court referred to the decision of this Court in Maxopp Investment Ltd's. case (supra) and to the decision of the Special Bench of the ITAT in this very case i.e. Cheminvest Ltd. v. ITO [2009] 121 ITD 318. The Court also referred to three decisions of different High Courts which have decided the issue against Revenue. The first was the decision in CIT v. Lakhani Marketing Inc . [2014] 226 Taxman 45/49 taxmann.com 257 of the High Court of Punjab and Haryana which in turn referred to two earlier decisions of the same Court in CIT v. Hero Cycles Ltd. [2010] 323 ITR 518/189 Taxman 50 and CIT v. Winsome Textile Industries Ltd . [2009] 319 ITR 204. The second was of the Gujarat High Court in CIT v. Corrtech Energy (P.) Ltd. [2014] 223 Taxman 130/45 taxmann.com 116 and the third of the Allahabad High Court in CIT v. Shivam Motors (P.) L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income was earned by the Assessee in the relevant AY and since the genuineness of the expenditure incurred by the Assessee is not in doubt, the question framed is required to be answered in favour of the Assessee and against the Revenue. 20. Since the Special Bench has relied upon the decision of the Supreme Court in Rajendra Prasad Moody's case (supra), it is considered necessary to discuss the true purport of the said decision. It is noticed to begin with that the issue before the Supreme Court in the said case was whether the expenditure under Section 57(iii) of the Act could be allowed as a deduction against dividend income assessable under the head income from other sources . Under Section 57(iii) of the Act deduction is allowed in respect of any expenditure laid out or expended wholly or exclusively for the purpose of making or earning such income. The Supreme Court explained that the expression incurred for making or earning such income', did not mean that any income should in fact have been earned as a condition precedent for claiming the expenditure. The Court explained: What s. 57(iii) requires is that the expenditure must be laid out or expended wholly a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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