TMI Blog2021 (5) TMI 735X X X X Extracts X X X X X X X X Extracts X X X X ..... before the CIT(A) and had relied on number of judgments. We set aside the order of the CIT(A) on this issue and accordingly, allow the grounds raised by the assessee on this issue in the respective AYs. Interest receivable from subsidiary company - HELD THAT:- Subsidiary company APHMEL was a sick company as declared by BIFR during January 1993 whose net worth was totally eroded and the interest receivable was also uncertain. Against the BIFR order, M/s APHMEL preferred an appeal before the AAIFR and vide order dated 05/09/2005, the matter was remanded back to BIFR by AAIFR. AO observed that the interest should be offered as income by the assessee on the accrual basis is not correct in respect of the interest receivable from sick company if the matter is pending before the BIFR. There is no certainty in regard to the interest receivable from the sick company. We find substance on the case laws relied upon by the ld. AR on this issue - we delete the addition made on this issue with a rider that the AO is free to make addition when the interest shall be received by the assessee company in the year in which it is received by the assessee. Accordingly, the grounds raised by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not sustainable in the eyes of law and, therefore, the addition is deleted. Accordingly, grounds raised on this issue are allowed in favour of the assessee. Loss due to exchange fluctuation on interest on capital borrowed in forex for acquisition of machinery, after such asset is put to use - HELD THAT:- We find substance in the submissions made by the ld. AR that once capital assets are put to use thereafter interest expenditure in respect of the loan taken for purchase of the capital assets is treated as revenue expenditure as per Explanation 8 to section 43(1) of Income Tax Act. We agree with the submissions made by the ld. AR, but, none has provided the actual date of put to use the machinery into the business of the assessee. Therefore, this issue is remitted back to the file of AO for limited purpose for verification for actual date of put to use the machinery and if the interest paid by the assessee is after the machinery put to use then the claim of the assessee is to be allowed as a revenue expenditure and if it is found otherwise, then AO will decide the issue as per Explanation 8 to section 43(1) of Income Tax Act. This ground is treated as allowed for statistical p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above payments at lower rate as prescribed in the Act. The section 40(a)(ia) is applicable only in those cases where tax has not been deducted at all. But in the given case, the assessee has deducted tax at lower rate. The assessing Officer is not justified to make disallowance U/s 40(a)(ia) on the payments made and debited into the Profit Loss Account on the ground that assessee has not deducted TDS at full rate as was in force. TDS u/s 194A - HELD THAT:- The assessee has made payments which were required to be deducted tax at source as per the prescribed rate in force as per chapter XVIIB, which has been narrated by the Tax auditor in Form 3CD as per annexure - IX of the Tax audit report . On perusal of the orders of the authorities below, it is clear that the assessee has deducted TDS on the above payments at lower rate as prescribed in the Act. The section 40(a)(ia) is applicable only in those cases where tax has not been deducted at all. But in the given case, the assessee has deducted tax at lower rate. The assessing Officer is not justified to make disallowance U/s 40(a)(ia) on the payments made and debited into the Profit Loss Account on the ground that assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.24 crores towards assets written off and the same was included under the head provisions and write off was debited to the P L A/c. Out of the said amount, the assessee had added back a sum of ₹ 4,09,97,398/- in the income computation statement as the same did not represent an allowable deduction in arriving at the total income as per the provisions of the IT Act. The balance amount of ₹ 14,54,302/- had not been added back by the assessee in the income computation statement. In this regard it was mentioned in Col. 17(a) of the tax audit report enclosed to the return that the said balance amount represents the value of work-in-progress written off and that the same is eligible for deduction. 5.1 The AO after considering the submissions of the assessee and analysed the issue elaborately with case law, inter-alia, observed that the contentions of the assessee in this regard are treated as untenable and held that the deduction claimed for the expenditure represented by mine development work-in-progress written off due to closure of the mine is not in accordance with the and accordingly, disallowed the assessee s claim of deduction amounting to ₹ 14,54,302/-, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n such expenditure incurred which is accounted as CWIP in the books, the same expenditure was written off as infructuous since no asset was created nor any enduring benefit was derived from that. This method of accounting was followed since inception of the company and was accepted by the department. This is the first year in which there is a departure by the department. The details of CWIP written off and charged to revenue during various years under appeal is enclosed herewith as Annexure-I in paper book. The ld. AR of the assessee relied on the following case law in support of assessee s case: 1. Binani Cements Ltd., vs CIT - 380 ITR 116 (Calcutta HC). 2 CIT vs Praga Tools Ltd. - 157 ITR 282 (AP HC). 3 Hindustan Zinc Ltd. Vs Add1.CIT -153 ITD 111 (ITAT Jaipur) head note 4 ITO vs Abdul G Nadiadwala 49 taxmann.com 581 (Mumbai Trib). 5 Jay Engineering Works Ltd Vs CIT -311 ITR405 ( Delhi HC). Referring to the above submissions, the ld. AR of the assessee requested the Bench to delete the addition on account of CWIP written off. 5.3 The ld. DR on the other hand besides relying on the orders of revenue authorities submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the facts and circumstances of that case, the Tribunal was justified in holding that the expenditure incurred for the assessee's proposed petro-chemical project was revenue expenditure and to be allowed as a deduction? This Court in answering the question, held as follows: So far as question No. 4 is concerned, the Tribunal recorded the finding that the assessee spent an amount of ₹ 56,665 as project expenditure. The expenditure represented fees paid to Engineering India Ltd. in connection with the petrochemical project report. The amount was paid by the assessee in order to explore the possibility of setting up of a petro-chemical project which could provide a captive plant for manufacture of raw material at the assessee's own factory which would help the assessee in getting continuous supply of raw material even during periods of acute shortage. In fact, the project did not materialise. The ITO as well as the CIT(A), therefore, held that the expenditure was capital in nature. However, the Tribunal found that the expenditure did not result in bringing into existence any capital asset of enduring in nature. The Tribunal further found that the decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advocate appearing on behalf of the Revenue relying upon the decision in Delhi Tourism TDC Ltd. v. CIT [2006] 285 ITR 114/155 Taxman 10 (Delhi) submitted that the expenditure was rightly disallowed by the learned Tribunal as it was made and related to earlier years. 7. We accept Mr. Bajoria's submission regarding the expenditure made for construction/acquisition of new facility subsequently abandoned at the work-in-progress stage was allowable as incurred wholly or exclusively for the purpose of assessee's business as covered by the decision in Graphite India Ltd. (supra ). The issue whether such expenditure could be allowed in the relevant assessment year is however yet to be resolved. 8. The CIT(A) in his order had found as follows : The company claimed as allowable the expenditure on this abandoned project. While it was found to be unviable, the expenditure on it was for the purpose of business. It was not claimed or allowed earlier as business expenditure because it was of capital nature entitled to depreciation after completion and on commencement of its use for business. But since that stage is not reached-no asset having come into existence-th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons the question is answered in the affirmative in favour of the assessee. The appeal is thus allowed. 5.4.2 In the case of CIT Vs. Indian Oxyge Ltd., [1996] 218 ITR 337 (SC), the Hon ble Supreme Court has held as under: The Tribunal held that the certain amount paid by the assessee to the English company, in pursuance of the agreement, was a permissible deduction under section 37(1). On reference, the High Court found that the English company did not sell any information, processes and inventions to the Indian company; that under the agreement, the Indian company was not entitled to use them after the termination of this agreement; that the Indian company was prohibited from disclosing these information, processes and inventions during the currency and also after the determination of this agreement and that thought the agreement was for a period of ten years, it could be terminated earlier. The High Court, therefore, held that the Indian company had not incurred the expenditure for the purposes of bringing into existence any asset or advantage of an enduring nature and that this expenditure was not a capital but a revenue expenditure. On appeal to the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subsidiary company M/s APHMEL continues to debit the interest payable to the assessee company on an accrual basis in its books of account. Continuing to persist with the cash system of accounting in respect of such interest even after the change in the assessee's honest assessment of the prospect of recovery of interest amounts to incorrect computation of true income of the assessee, given the fact that the all other receipts and expenses falling under the scope of income from other sources are being accounted in accordance with the mercantile system of accounting. In view of this, it is held that the interest receivable from Mis APHMEL for the previous year, computed on the basis of accrual system, needs to be included in the total income of the assessee by invoking the provisions of section 145(3) of the IT Act. The amount of such accrued interest, attributable to the instant asst. year, as mentioned in note no.19 in the notes forming part of the accounts is 62.81 lakhs. Accordingly, 'this accrued interest of ₹ 62.81 lakns (₹ 213.60 lakhs as on 31/03/05 reduced by ₹ 150.79 lakhs as on 31/03/04) is added to the income of the assessee. 6.2 The C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is showing profits from FY 2001-02 and onwards, the winding up order passed by the BIFR in the year 2002 has been set aside by the AAIFR. It was also observed that APHMEL is booking the expenditure in its books of account. She submitted that assessee is following mercantile system of accounting in respect of other incomes and only regarding interest income, it is following cash system which is not correct and, therefore, the authorities below were justified in this regard. 6.5 We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. We observe that the subsidiary company APHMEL was a sick company as declared by BIFR during January 1993 whose net worth was totally eroded and the interest receivable was also uncertain. Against the BIFR order, M/s APHMEL preferred an appeal before the AAIFR and vide order dated 05/09/2005, the matter was remanded back to BIFR by AAIFR. The AO observed that the interest should be offered as income by the assessee on the accrual basis is not correct in respect of the interest receivable from sick company if the matter is pending before the BIFR. There is no certainty in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the prior period expenses. The Assessing Officer in his remand report confirmed that the expenditure which was earlier disallowed was in fact crystallized during the year and was to be allowed as current year expenditure. The CIT(A) ignoring these facts, has enhanced the income where she should have allowed the claim as per the remand report. We draw your kind attention to the decision of Hindustan Zinc Ltd Vs Addl. CIT 153 ITD 111 (Jaipur Trib) Head Note - Paper Book pages 16-20. 7.2 The Ld. DR, on the other hand, relied on the orders of revenue authorities and she submitted that the AO has examined this issue in detail, which is clear from his order and the same cannot be controverted by the ld. AR and the CIT(A) has upheld the action of the AO. 7.3 We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. We find that the details were filed before the AO during the course of assessment proceedings and rejecting the details, the AO made the addition. In the appellate proceedings before the CIT(A), again the details were provided and the CIT(A) has called for a remand report from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prospecting for, or extraction of coal from the mines. The company has incurred the expenditure of KS.11 ,51 ,81 ,916/- on account of drilling done for production support and general exploration expenditure. It is said that the company undertakes operation for the purposes of exploring, locating, or proving deposits of coal mineral. As specified in Section 35E any operation undertaken for the purpose of exploring, locating or proving deposits of any minerals (specified in Part A or Part B, respectively, of the Seventh Schedule) commences including operations of infructuous or abortive nature. Thus, me Act is clear and there is no ambiguity with regard to nature of expenditure to be covered under Section 35E. The definition of expenditure on prospecting operation is inclusive of operation of infructuous or abortive mines. The contention of the assessee that the expenditure incurred Oli mines which yield commercial production shall only be capitalized and expense on operation which proves to be infructuous or abortive shall be treated as revenue is not at all in accordance with the provisions of this section. The assessee company may adopt different accounting method in the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and operations are aborted and in the case of KTK LW, BHPL, the mine is stated to be a new one and has commenced production during the year under consideration. As per the provisions of sec. 35E, the amount which is eligible for deduction must have been incurred either during the year of commercial production or 4 years immediately preceding that year and/or the expenditure on suspended/aborted cases. As explained in detail, it is concluded that in both the cases, the prospecting expenses should be dealt in accordance with the provisions of Section 35E. 5.5 The assessee company has furnished the details such as the total meterage drilled ie., 87468.75 meters and the cost involved for prospecting, etc. is ₹ 11,51,81,906 thereby the cost per meterage comes to ₹ 1316.83 (115181906/ 87468.75). Thus, the total amount works out on two mines is ₹ 3,49,19,206/- after allowing 1/10th of the expenses in the previous year as per section 35E. The working is given hereunder: Mine / Block Meterage drilled Amount Gundala Block III 21,167.30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er burden has to be removed in order to extract the coal. Even in underground mines we face similar situation wherein the prospecting department comes to playa major roll. In all these cases commercial production has already commenced and all of them are revenue yielding mines. Hence the company was consistently following the method of accounting of claiming such expenses as revenue expenses and the same was allowed year after year. We would also like to submit that this ground has become only academic; since the company has already received allowance under section 35E in respect of additions made during various years and also modified its accounting policy to be in sync with section 35E. Therefore, this ground may be treated as not pressed. We draw your attention to the following decisions: 1. CIT Vs Hindustan Zinc Ltd 221 CTR 631 Paper book pages 16-20 Head note 2. Hindustan Aluminium Corp Ltd Vs CIT 159 ITR 673 (Cal HC) Paper Book pages 21 to 23. 3. Northern Coalfields Ltd Vs ACIT 69 SOT 637 (Jabalpur Trib) Paper Book Pages 24 to 31 8.3 The Ld. DR, on the other hand, relied on the orders of revenue authorities. 8.4 We have considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein it was stated that any amount of interest exceeding prescribed limit paid or credited without deducting tax at source or deducting tax at source but failed to remit the TDS to the Govt. account, such interest has to be disallowed. 9.2 On appeal, the CIT(A) confirmed the said addition. 9.3 Before us, the ld. AR of the assessee filed written submissions on this issue, which are as under: The Assessing Officer disallowed this amount on the ground that TDS has not been deducted ignoring the fact that the amount was deposited as per the Court Directions and Your Appellant is not aware of the persons who have to be paid at the time of deposit. Hence, the question of TDS on such payment does not arise. CIT (A) confirmed the addition accepting the contention of the Assessing Officer. Your Appellant once again submits that the interest on Land Compensation claimed includes interest deposited in Civil Courts in the account of respective Judges, as per respective court orders. It was explained to the Assessing Officer that the interest on land compensation was deposited in to accounts of respective Civil Court Judges based Court Orders and TDS provisions of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n fails to pay to the credit of the Central Government the tax deducted at source by him, he shall be punishable with rigorous imprisonment for a term which shall be between 3 months and 7 years and with fine. 2. It has come to notice that various State Development Authorities, the Housing Boards, Public Works Department, etc., acquire immovable property from the public for the purpose of their developmental activities. Huge amounts are disbursed on behalf of these departments as payments of compensation for land acquired including considerable amount of interest on excess compensation as per the Land Acquisition Act.The interest payment made under the Land Acquisition Act are covered by the provisions of section 194A. As a result tax will have to be deducted at source under section 194A from the interest payments made to the public under the Land Acquisition Act. Circular : No. 526, dated 5-12-1988. JUDICIAL ANALYSIS EXPLAINED IN - In Special Tehsildar and Land Acquisition Officer v. Dandu Saraswatamma [1994] 205 ITR 587 (AP), the Commissioner addressed a D.O. letter dated 1-3-1987 to the then Revenue Secretary requesting him to issue instruction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g an affidavit or statement in writing declaring that his estimated total income assessable to tax for the assessment year next following the financial year in which the income is credited or paid will be less than the minimum liable to income-tax. The orders under revision did not disclose the break-up in each execution petition about the compensation amount awarded and the interest payable thereon. The orders also did not disclose as to when possession of the land concerned in each execution petition was taken by the Government and the date of depositing the compensation amount. In the absence of those details, it was not possible to determine whether the individual claimants were liable to pay income-tax or not. In view of above it was further held that Circular No. 526, dated 5-12-1988, which is on same line as D.O. stated above, will not have binding effect on Civil Court unless provisions of the Act are made applicable. CLARIFICATION TWO I am directed to say that it had recently come to the notice of the Board that there was no uniform practice in vogue in the matter of the deduction of tax at source from interest payments awarded by the Courts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Rural Development have stated that the person responsible for payment of compensation under Land Acquisition Act is the Collector. In Baldeep Singh v. UOI [1993] 199 ITR 628 the Punjab and Haryana High Court held that the Court is not the person responsible for paying any income by way of interest...As per the legal incidents, the legal person responsible for paying income by way of interest is the Land Acquisition Collector who had the money in his possession and was responsible for making the payment of that income to the petitioners....The Court is acting only as a conduit for getting the payment to the petition er in execution of a decree passed in his favour. In view of the above, we confirm the views expressed by us earlier, referred to above. The Administrative Department have stated that while there may be no objection to TDS being made by Collector, in such cases a practical difficulty that may arise is that the Collector would be required by the court to deposit the entire amount of compensation and interest with it and if the Collector deducts tax from that amount it would be regarded as disobedience of the Court s order. In this connection the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchased as at 31/03/2009, though the payments were made during the FY 2009-10. The AO stated that the payment is on account of capital asset purchased from Germany and the interest accruing on account of foreign exchange fluctuations towards acquisition of capital asset has to be treated as capital expenditure. In view of the above observations, the AO disallowed interest amount of ₹ 1,94,52,069/- claimed by the assessee in P L Account treating it as capital expenditure. 10.1 On appeal, the CIT(A) confirmed the addition. 10.2 The ld. AR of the assessee filed written submissions on this issue, which are as under: During the year SCCL provided ₹ 1,94,52069/- towards interest payable on deferred payment guarantee for machinery purchased from Germany in US Dollars. This was in respect of period after the machinery was put to use. The Assessing Officer treated this as capital expenditure includable in the cost of machinery. It is submitted that this issue is covered under Explanation 8 to section 43(1) of Income Tax Act and the entire interest of ₹ 1,94,52069/- is allowable as revenue expenditure. We draw your kind attention to the following c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Construction of Steel Bunkers, Construction of Water Dams, construction of water tankers for sand stowing, building retention wall for sand stowing, construction bunkers in mines for workers, construction of check dams in mines to prevent water gushing etc. The entire expenditure was incurred within the mines, which are categorized as plant and machinery for the purpose of depreciation. Functionally the expenditure assumes the nature of plant and machinery in the coal mines. Any expenditure incurred to develop/sustain plant and machinery would assume the same character. As percircu1ar No. OFF-43011/22/81 dated 20.04.1981 of department of Coal, Ministry of Energy, Govt, of India expenditure incurred for the development of mine shall be capitalized and depreciated over the life of the mine. Further, as per Schedule XV of the Company's Act, Mines and shafts are eligible for charge of depreciation at the rates applicable to 'P1ant Machinery'. As Income Tax Act/ Rules does not provide rate of depreciation for Mines shafts. SCCL have claimed depreciation at general rates applicable to plant and machinery, based on functionality of the expenditure incurred. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties that is sinking of shafts and inclines and we also further affirm that the above expenditure under Mines and Shafts is directly related to Coal Mining and incurred towards extracting coal from mines. We draw your kind attention to the following case laws: 1. CIT V s Kamataka Power Corp. 247 ITR 268 (SC) Paper Book Pages 32 to 35 2. CIT Vs Singareni Collieries Co 221 ITR 194 (AP HC) Paper Book Pages 36 to 40 3. CIT Vs Dr B Venkata Rao 243 ITR 0081 (SC)Paper Book Pages 51 to 53 4. S K Tulsi and Sons Vs CIT 187 ITR 685 (Allahabad HC) Paper Book pages 49 to 50. 5. CIT Vs Shashi Nursing Home Ltd 269 CTR 99 (A11ahahad HC) Paper book pages 45 to 48. 6. CIT Vs Sesa Goa Ltd 271 ITR 331 (SC) Paper book pages 41 to 44. 11.3 The Ld. DR, on the other hand, relied on the orders of revenue authorities and submitted that the expenditure incurred by the assessee are in the nature of civil works which are not qualified for depreciation @ 15% as plant and machineries. 11.4 We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. The assessee is engaged in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it relates to Investment Allowance U/s 32A of the Income Tax Act, 1961. Once similar expenditures have been accepted by the Hon ble SC as quoted supra , we are of the view that the expenditures incurred by the assessee were necessary for excavation of coal from mines and shafts . In view of the above observations, we allow this ground of appeal of the assessee by holding that the assessee is entitled to charge depreciation @ 15% under the block of assets plant and machinery , as against 10% made by the AO . 12. As regards the issue relating to prior period expenditure enhancement of income by CIT(A), raised as additional ground in AY 2007-08 2009-10, the ld. AR of the assessee filed written submissions, which are as under: a. While disposing off SCCL's appeal in ITA No.235/CIT(A)NJA/09-10 dated 28/2/14, the CIT(A), Vijayawada gave directions for enhancement of income in respect prior period expenditure allowed in assessment order dated 30/12/2009 by the Assessing Officer to the extent of ₹ 15,74,43,344/-. In fact, SCCL had claimed only ₹ 46,16,251/- under Prior period expenditure, in the return of Income. While quantifying the enhancement, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissing the same on account of low tax effect with the liberty to the Revenue to seek recall of the order, if any of these cases falls within the exceptions mentioned in the Circulars cited above. 15. In the result, Revenue s appeal is dismissed in above terms. 16. As regards the appeal of revenue in ITA No. 801/Hyd/2014 for AY 2006-07, the revenue has raised a substantial ground that the CIT(A) erred in deleting the disallowance of ₹ 3,49,71,516/-, the AO disallowed this amount u/s 40(a)(ia) of the Act with reference to the short deduction u/S 194C of ₹ 1,91,31,631/- and U/s 194J of ₹ 1,58,39,885/-. The CIT(A) deleted the said disallowance by observing as under: 4.4.5. Coming to the portion of short deduction of TDS u/s.194C and 194J of the Act, there is force in the submissions made by the appellant. The Provisions of section 40(a)(ia) stipulate that any interest, commission or brokerage [rent, royalty] fees for professional Services or fees for technical services payable to a resident, or amounts payable to a contractor or Subcontractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly with the provisions of the IT act in respect of TDS deduction. The AO observes that the appellant was liable to deduct TDS of ₹ 4,08,954 under section 194C of the Income Tax Act from the total expenditure of ₹ 2,08,88,541 relating to can outwards, labour charges, car hire charges, security charges, advertisement and office decoration charges. However, deduction was made only of ₹ 1,61,856 resulting in short deduction of rupees 2,47,098. Therefore, the proceeded to disallow the sum of ₹ 19,95,048 under section 40(a)(ia) respect of which no TDS was deducted. During the appellate proceedings the AR of the appellant submits that TDS was deducted at a lower rate and hence provisions of section 40(a)(ia) are not applicable in respect of the appellant. Appellant s contentions were carefully analysed. It is observe that the appellant has not come up-with any evidence either before the AO or during the appellate proceedings that it has deducted the due TDS in respect of the impugned sum disallowed by the AO. It is also observed from the assessment order that having regard to the lower deduction TDS certificates in respect of M/s Maheswari Transport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. As regards the appeals of the revenue in ITA No. 802 803/Hyd/2014 for AYs 2009-10 2010-11, the revenue has raised an identical ground in both these appeals that the CIT(A) erred in deleting the addition of ₹ 1,59,93,000/- in AY 2009-10 and ₹ 1,45,70,000/- in AY 2010-11, the AO observed that on careful reading of the Notes submitted by the assessee company it is clear that the assessee is providing interest at certain percentage and credited to the fund account. Further, he observed that it is also a fact that the insurance premium is paid out of interest provided by the company against FBIS members. It is also a fact that every member certainly gets the amount contributed by them in addition to the interest provided by the company. Further, it is also a fact that the assessee company failed to give the bifurcation of interest to be paid to each member relevant to the year under consideration. However, the interest provided by the company towards the fund maintained for the purpose of this scheme, without deducting tax surely attracts the provisions of section 40(a)(ia) rws 194 of the Act. In view of the above observations, the AO disallowed the interest pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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