TMI Blog2021 (12) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee but the services were provided exclusively for the purpose of securing the mortgage property assigned to the bank. The services were assigned and respective payments were made by the bank directly. Since, the assessee is neither appointed the consultant nor paid the consultancy charges to them. Therefore, the TDS provisions will be applicable only when the services are utilized, respective payments made directly to the service provider. In this case, assessee is only the observer and the respective payments were made by the bank and recovered from the assessee. Therefore, provisions of section 40(a)(ia) of the Act is not applicable in the present case. Accordingly, the ground raised by the assessee is allowed. Disallowance being interest expenditure treating the same as prior period expenses - HELD THAT:- We find that in similar situation in the case of Saurashtra Cement Chemical Industries Ltd [ 1994 (10) TMI 30 - GUJARAT HIGH COURT ] as decided the issue in favour of the assessee as held that the true profit and gain of a previous year are required to be computed for the purpose of determining tax liability. The basis of taxing income is accrual of income as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same to the return income of the assessee. Aggrieved, assessee preferred the appeal before learned CIT(A) and learned CIT(A) partly allowed the appeal filed by the assessee. Aggrieved with the above order, assessee is in appeal before us, raising the following grounds of appeal: - 1. The Ld. Commissioner of Income Tax (Appeals)-9, Mumbai, [hereinafter referred to as the Ld. CIT(A)] erred in directing the Ld. A.O. to make disallowance of ₹ 3,28,002/- on account of an expenditure incurred with respect to leave encashment without appreciating the facts and circumstances of the case. 2. The Ld. CIT (A) erred in upholding the disallowance of ₹ 3,00,000/- under section 40(a)(ia) of the Act without appreciating that the said amount is nothing but the reimbursement made to the bank. Thus, the provisions of section 40(a)(ia) of the Act shall not attract in the present case. Hence, the disallowance made under section 40(a)(ia) of the Act is not justified and the same may be deleted. 3. The Ld. CIT (A) erred in confirming the disallowance of ₹ 52,01,000/- being interest expenditure treating the same as prior period expenses without appreciating that the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Aggrieved, now assessee is in appeal before us. 6. Before us, the learned AR took us through the order of learned CIT(A) and submitted that assessee s Rasayani and Kochin units had made the payments during the Financial Year 2010-11 and assessee had submitted all the relevant papers before tax authorities and also submitted that the expenditure incurred by the assessee is allowable under section 37(1) Read with section 43B(f) of the Act. He further submitted that since the learned CIT(A) remitted this issue back to the file of the Assessing Officer to verify the claim of the assessee and he directed only payment made by kochi unit. He prayed that the assessee has made complete payments during this year including Rasayani Unit, the Assessing Officer may be directed to verify the complete detail and allow the expenditure to the extent of payment made by the assessee including Kochi, Rasayani unit. 7. Considered the submissions of both the parties we noticed that since, this issue has already remitted back to Assessing Officer and this issue requires factual verification, we direct the Assessing Officer to verify the payments made by the assessee for all the units during thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of SBI in order to secure the assets mortgaged to the bank. This consultant was appointed by SBI and after submission of the report only, bank has settled the professional fees and recovered the same from the assessee. It is clear that no doubt the charges were ultimately collected from the assessee but the services were provided exclusively for the purpose of securing the mortgage property assigned to the bank. The services were assigned and respective payments were made by the bank directly. Since, the assessee is neither appointed the consultant nor paid the consultancy charges to them. Therefore, the TDS provisions will be applicable only when the services are utilized, respective payments made directly to the service provider. In this case, assessee is only the observer and the respective payments were made by the bank and recovered from the assessee. Therefore, provisions of section 40(a)(ia) of the Act is not applicable in the present case. Accordingly, the ground raised by the assessee is allowed. 10. With regard to ground No.3, during the assessment proceedings, the Assessing Officer perused the computation of total income submitted by the assessee and he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has rightly disallowed the above said expenses. Aggrieved, assessee is in appeal before us. 11. At the time of hearing, the learned AR submitted that it is a settled issue in favour of the assessee and he relied on the decision of Hon ble Gujarat High Court in the case of Saurashtra Cement Chemical Industries Ltd. vs. CIT [1995] 213 ITR 523 (Gujarat). 12. On the other hand, the learned DR vehemently relied on the orders of lower authorities. 13. Considering the rival submissions and materials on record, we find that in similar situation in the case of Saurashtra Cement Chemical Industries Ltd (supra), wherein Hon ble Gujarat High Court has decided the issue in favour of the assessee. The relevant held portion is reproduced below : Merely because an expense relates to a transaction of an earlier year it does not become a liability payable in the earlier year unless it can be said that the liability was determined and crystallized in the year in question on the basis of maintaining accounts on the mercantile basis. In each case where the accounts are maintained on mercantile basis, it has to be found in respect of any claim whether such liability was crystallized ..... X X X X Extracts X X X X X X X X Extracts X X X X
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