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TMI Blog2021 (10) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of TDS. 2. Facts giving rise to the present appeal are that the assessee had filed its return of income on 30.09.2009 of Rs. 61,08,204/- and paid tax under MAT on book profits amounting to Rs. 2,07,08,618/-. The return was processed u/s 143(1) of the Income Tax Act, 1961 ("the Act") on 14.03.2011. Thereafter, the case was selected for scrutiny under CASS. While framing the assessment, the Assessing Officer noticed that the assessee had various sundry creditors. The assessee was asked to provide the details of sundry creditors exceeding above Rs. 1,00,000/- vide questionnaire dated 22.09.2010. In response thereto, the assessee submitted details of sundry creditors vide letter dated 04.02.2011. Out of the list of sundry creditors, the Assessing Officer noticed that the five sundry creditors being Deutz Power Systems GmbH; Clarke Energy Ltd.; Symatic Engineering Pvt.Ltd.; Surya Industries; and Green Power International P.Ltd. were the top creditors. The assessee was asked to furnish confirmation from all the aforesaid sundry creditors vide order sheet dated 05.12.2011. The Assessing Officer has recorded that many more opportunities were given. Despite having given sufficien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the addition of Rs. 2,01,096/- in this respect. However, in respect of the disallowance of bonus and leave encashment of Rs. 9,15,250/- and Rs. 6,30,389/- were confirmed. Further, the addition made on account of short deduction of tax amounting to Rs. 1,34,545/was deleted and confirmed the addition of Rs. 1,49,535/- made on account of disallowance of legal and professional charges paid to Shri Rahman Rahman Haq without deducting tax at source. In respect of the additional ground raised by the assessee, the direction was given to the Assessing Officer for verification of deduction of tax at source. 5. Aggrieved against this, the Revenue is in appeal before this Tribunal. 6. Ground No.1 raised by the Revenue is against the deletion of addition of Rs. 11,70,000/- and Rs. 11,44,415/- made on account of unverifiable sundry creditors. 7. Ld. Sr. DR submitted that Ld.CIT(A) was not justified in deleting the additions. He supported the orders of the Assessing Officer. 8. Ld. Counsel for the assessee opposed the submissions of Ld. Sr. DR and reiterated the submissions made in the summary of arguments. Summary of arguments of the assessee are reproduced as under for ready-reference:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regards the above sundry balances, the brief facts of the same is as under: Symatic Engineering (P) Ltd (Rs. 11,70,000/-)-The balance outstanding on 31-03-2009 represents advances for purchases paid by cheque during the year, against which purchases have been made in the subsequent year. Debit balances of creditors on account of advances for purchases made to suppliers cannot treated as income as held by Hon'ble Mumbai ITAT in DCIT -vs.- M/s Charak Pharmaceuticals (ITA No. 4667/Mum/2010). Surya Industries (Rs. 11,44,415/-) - The balance outstanding on 31- 03-2009 represents sum payable on account of purchases made during the year. The said sum was paid in the subsequent year. 1.6 Ledger accounts and confirmations for both these above parties were verified by the Ld. CIT(Appeals) and granted partial relief. Hence, the grounds raised by the department is liable to be dismissed." 9. We have heard the rival contentions and perused the material available on record. We find that Ld.CIT(A) has given a finding on fact in para 5.5 of the impugned order which reproduced hereunder for ready-reference:- 5.5. "The Ld. AR has stated that copy of letter confirming the balance fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oportionate basis at Rs. 1,49,86,193/- allocating the interest towards capital work in progress [Para 7 at Pg. 4 & 5 of the AO's order] 2.2 Out of total interest of Rs. 500,20,327/-, interest expenses to the tune of Rs. 3,94,80,262/ - pertains to opening balance of loans from OBC, IDFC and SIFL which were transferred to the assessee under duly approved scheme of arrangement. Further, out of this interest expenses, an amount of Rs. 26,74,988/- pertains to loan from OBC & SIFL sanctioned for specific purchases and capitalized in the books of accounts. Accordingly, balance interest amount of Rs. 3,68,05,274/- (Rs. 3,94,80,262/-less Rs. 26,74,988/- ), being revenue expenditure was claimed as deduction u/s 36(1)(iii) of the Act. Further, balance interest amounting to Rs. 1,05,40,065/- [Rs. 500,20,327/- less Rs. 3,94,80,262/-] pertains to secured and unsecured loans of Rs. 35,70,13,698/- & Rs. 6,64,83,348/- respectively from Srei Infrastructure Finance Ltd. obtained during the year and utilised for business. 2.3 The Ld. CIT(Appeals) examined all the details, balance sheet, loan agreements and correctly considered investment in fixed assets and CWIP before deducting depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... became effective from 01.04.2008. Pursuant to the said scheme, secured loan of Rs. 28,42,96,628/- and unsecured loan of Rs. 3,40,17,OOO/- stood transferred from QIEL w.e.f. 01.04.2008 to the appellant company. The total interest payment on loans obtained during the year is Rs. 1,05,40,065/-. There is therefore, merit in the contention of the ld. AR that interest on opening balance of loans should not be considered for computing the proportionate disallowance. It is also noted from the computation of interest disallowance made by the AO that he has considered the investment at Rs. 75,75,35,000/- (Rs. 53,05,79,000/- Fixed Assets + Rs. 22,69,56,000/- WIP) instead of Rs. 83,17,32,OOO/- (Rs. 60,47,76,0001- Fixed Assets+ Rs. 22,69,56,0001- WIP) which is evident from schedule 4 fixed assets of the audited accounts annexed at page 44 of the written submission. The appellant company has capitalized Rs. 26,74,988/- out of the interest expense of the Rs. 105,40,065/- as per annexure D of the tax audit report filed and annexed as page 77 of the written submissions. In the light of these facts, the computation made by the AO by considering the entire interest expenditure and the incorrect figur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ]. 3.3 The details of impugned professional charges and TDS deducted thereon are as below:- Sl.No. Amount of expense Service Tax (Rs.) Total (Rs.) Date of payment Amount of TDS TDS Deductor 1. 1,50,000 18,540 1,68,540 16-08-2007 (AY 08-09) 17,360 QIEL (Demerged company) 2. 1,50,000 15,450 1,65,450 23.03.2009 (AY 09-10) 17,042 Assessee (Resulting company) Total 3,00,000 34,402 The amount paid by QIEL has been transferred to the assessee under duly approved scheme of demerger which has been claimed by assessee as expenses in its books of accounts. See. 40(a)(ia) provides that expenditure shall be disallowed in case tax has not been deducted thereon or after deduction has not been paid. In the instant case, TDS of Rs. 17,360/- and Rs. 17,042/- on entire amount of Rs. 3,00,000/- has been duly deducted and deposited. Hence, disallowance u/ s 40(a)(ia) for expenses in the nature of reimbursements is not sustainable. 3.4 Without prejudice, Section 40(a)(ia) isn't applicable to short deduction of TDS as held in following decisions: - M/s Neemrana Hotels Pvt Ltd. -vs.- DCIT [ITA No.98/Del/2017) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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