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TMI Blog2018 (5) TMI 2081X X X X Extracts X X X X X X X X Extracts X X X X ..... d; * Secondly, disallowance of Rs. 1,72,23,000/- debited under the head 'community development and welfare expenses'. 2. The assessee is a Public Sector undertaking under the aegis of Ministry of Urban Development, Government of India. The assessee corporation is engaged in executing various types of civil / electrical projects all over India and abroad. 3. The brief facts qua the issue involved are that Assessing Officer noted that assessee has claimed an amount of Rs. 1,15,54,000/- in its profit and loss account under the head 'Bank Charges and Guarantee Commission" as deductible expenditure. A show cause notice was issued by the AO as to why guarantee commission paid may not be disallowed on the ground that no TDS has been deducted and the CBDT notification no.56/2012 brought to exempt such deduction of TDS covers the matter only from 31.12.2012 onwards. In response, the assessee filed details submission stating that; * Firstly, such payment of guarantee commission is not covered u/s.194H, because there is no element of agency and; * Secondly, assessee relied upon various decisions of the Hon'ble High Court and Tribunal which has been incorporated in the assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as income in their respective return of income for which certificates have also been filed in the paper book at pages 116 to 120, and therefore, it was contended that in view of second proviso to Section 40(a)(ia), no disallowance should be made. He further submitted that, the said proviso though inserted w.e.f. 01.04.2013, but has been held to be retrospectively applicable from A.Y. 2005-06 by the Hon'ble Jurisdictional High Court in the case of CIT vs. Ansal Land Mark Township (P) Ltd. (2015) 377 ITR 635 (Del.). Lastly, he submitted that disallowance will only result into enhancement of profit on which deduction u/s. 80IA of the Act should be allowed. 7. On the other hand, learned Department Representative has strongly relied upon the order of the Assessing Officer and ld. CIT (A). 8. From the perusal of the details of the bank guarantee expenses, we find that assessee had paid following bank guarantee commission to the schedule banks:- Name of Bank Amount Corporation Bank 34,60,014 Indus Ind. Bank Ltd. 24,40,875 Punjab National Bank 29,66,100 Yes Bank Ltd. 88,88,542 8. To remove the rigours of deduction of TDS on the various kinds of payment to Scheduled banks, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly curative and declaratory but also shows the intention of the Government that payment of bank guarantee commission etc. to the schedule bank, no TDS provisions should be applicable, and therefore, such notification would apply even prior to 1st day of January, 2013. Moreover, assessee has already filed certificates from all the Schedule Banks that the bank guarantee commission received has been offered as income on which due taxes has been paid, therefore, in view of second proviso to Section 40(a)(ia) which has been held to be applicable retrospectively by the Hon'ble Jurisdictional High Court in Ansal Land Mark Township (supra), no disallowance u/s.40(a)(ia) can be made. Accordingly, ground no.1 raised by the assessee is allowed. 9. Coming to the issue of disallowance of Rs. 1,72,23,000/-, the Assessing Officer has disallowed such an expenditure paid to various organisation towards sales promotion and advertisement, holding it to be expenses in the nature of Corporate Social Responsibility. The assessee in response to show-cause notice submitted that expenditure was incurred as per Office Memorandum issued by the Department of Public Enterprises, which issued guidelines to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty as referred in Section 135 of the Companies Act, 2013, shall not be deemed to be an expenditure by the assessee for the purpose of business or profession. Such an explanation has been inserted by the Finance Act, 2014 w.e.f. 01.04.2015. If any deemed disallowance has been brought in the statute with a particular date creating any liability upon taxpayer or claim has been made disallowable, then such a provision cannot held to be applicable retrospectively. Such an invocation of Explanation-2 in the Assessment Year 2011-12 is not called for. The assessee being a public sector undertaking and is governed by Ministry of Urban and Development and is also guided by the Office Memorandum issued by the Department of Public Enterprises. The expenditure incurred in pursuance of any guidelines or office memorandum, however has to be seen from the perspective of, whether there was any commercial expediency in making such payment or not; and if the payment is to be made to any other department or organization for advertisement or sales promotion, then whether assessee's name and publicity in such advertisement is appearing or not needs to be verified. Accordingly, we restore this matter to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) has deleted the said disallowance on the ground that; * Firstly, assessee has no secured and unsecured loans and there is no interest bearing borrowed funds during the year, therefore, the disallowance of interest made by the Assessing Officer under Rule 8D is uncalled for; * Secondly, the investment made in five Joint Ventures, there was no exempt income relating from such investment, therefore, applying the ratio of Delhi High Court in the case of Cheminvest Ltd. vs. ITO, he held that no disallowance should be made on such investments. Lastly, on the investment made in Liquidity Fund Cash Plan, he noted that assessee has already made suo motu disallowance and therefore, no inference is required. 18. After hearing the rival submissions and on perusal of the relevant findings given in the impugned orders, we find that Assessing Officer has made disallowance under Rule 8D (2)(ii) of interest of Rs. 28,04,000/-, which ostensibly could not have been made for the reason that assessee has not taken any secured or unsecured loan for making any investment and; secondly, the interest expenditure debited is on account of delayed payment made to the contractors. Thus, there could not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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