TMI Blog2021 (12) TMI 254X X X X Extracts X X X X X X X X Extracts X X X X ..... rest on the advance given to M/s Temptation Foods, since it has been factually found by the department that interest free funds had been used for the purpose of making the advance. No occasion arises, therefore, for making any disallowance of interest u/s 36(1)(iii) of the Act with regard to the same. The reliance placed by the Revenue on the decision of the ITAT in A.Y 2014-15, is of no relevance since the ground was not adjudicated being not pressed by the assessee. Deemed dividend as per the provisions of Section 2(22)(e) - HELD THAT:- Since in the present case the assessee is not a shareholder of M/s Punjab Metalics Limited from which it has received the impugned advance and the same though qualifies as deemed income u/s 2(22)(e) of the Act, but is not taxable in the hands of the assessee. The addition so made is, therefore, directed to be deleted. Disallowance on account of tax deducted at source - HELD THAT:- We find that the contention of the assessee that the amount disallowable u/s 40(a)(ia) has been mistakenly reported by the tax auditor at a higher figure cannot be simply discarded. Assessee has made certain factual contentions while explaining the mistaken rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces and legal position of the case, Worthy CIT(A) has erred in confirming the action of Ld. AO wherein he made addition of ₹ 3,15,616/- u/s 36(l)(iii) of the Act on estimated, arbitrary, presumptive and prejudiced basis without assigning any logical reasons and had erroneously disallowed the proportionate interest on advance given for business purpose to M/s Temptation Foods as interest free advance. 3. The issue relates to disallowance of interest amounting to ₹ 3,15,616/-, as per provisions of Section 36(1)(iii) of the Act, pertaining to interest free advances made to M/s Temptation Foods amounting to ₹ 50 lacs treating the same to be not for the purpose of business of the assessee. 4. The ld. counsel for the assessee drew our attention to the fact that the impugned advance to M/s Temptation Foods had been made in the preceding year i.e. assessment year 2012-13 and identical disallowance had been made in the said year also which issue had travelled upto the ITAT who had restored the matter to the AO with the direction to determine the funds used for the purpose of making the advance and thereafter adjudicate the issue in accordance with law. That the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. 5. The ld. counsel for the assessee contended that since the year in which the advance was given, it was found that the advances had been made from interest free funds, there was no reason to make any disallowance of interest u/s 36(1)(iii) of the Act in the impugned year and that the issue was clearly covered by the aforestated orders for the preceding year. 6. The ld. DR on the other hand relied on the order of the CIT(A) that the assessee had neither demonstrated business purpose for making the impugned advance nor that it had used interest free funds for making the advance. She further pointed out that identical disallowance made in AY 2014-15 was not deleted in appeal by the ITAT. 7. The Ld.Counsel for the assessee countered by stating that in A.Y 2014-15 the assessee had not pressed the ground raised considering the insignificant amount involved of ₹ 26,926/-. He drew our attention to the order of the ITAT in A.Y 2014-15 placed at paper book page no.130-135 bringing out the said facts. 8. We have heard both the parties. It is not denied that identical disallowance of interest on the said advance of ₹ 50 lacs to M/s Temptation Foods had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in assessment year 2014-15 which order had been agitated before the ITAT who in turn had decided the issue in favour of the assessee by following the order of the jurisdictional High Court in the case of CIT Vs Sharman Woolen Mills Ltd. (2012) 204 Taxman 82 (P H) noting that dividend could be taxed only in the hands of the shareholders and it was the MD who was shareholder in M/s Punjab Metallics P.ltd. and not the assessee company and therefore, the deemed dividend could be taxed in the hands of the MD only. Copy of the order was placed before us at P.B 130-135. 13. Ld.DR on the other hand relied on the order of the Ld.CIT(A) contending that the conditions specified in section 2(22)(e) of the Act admittedly stood fulfilled in the present case and therefore the amount received by the assessee from Punjab Metallics had been rightly treated as deemed dividend in its hands. 14. The Ld.Counsel for the assessee was asked at bar to explain the position of law vis a vis the issue considering the decision of the apex court in the case of National Travel Services vs CIT CA No.2068-2071 of 2012 dated January 18 2018. 15. To this, the Ld.Counsel for the assessee placed a compilation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee further pointed out the decision of the Hon'ble Bombay High Court in the case of PCIT Vs. Sunjewels International Limited, 411 ITR 613 and CIT Vs. M/s T. Abdul Wahid Company, 428 ITR 426 pointing out therefrom that in both the decisions the Hon'ble High Court had distinguished the case before the Hon'ble Supreme Court in the case of National Travel services (supra) being in relation to a different issue as opposed to that as decided by the Hon'ble Delhi High Court in the case of Ankitech Private Limited Others (supra) pertaining to the taxability to deemed dividend being possible only in the hands of shareholder. He, therefore, contended that the decision of the Hon'ble Delhi High Court in the case of Ankitech Private Limited Others (supra) was good law and had been reiterated by the Hon'ble Jurisdictional High Court in the case of Sherman Woollen Mills (supra), following which the ITAT had deleted the addition in the case of the assessee for assessment year 2014-15. 17. We have heard both the parties and have also gone through the decisions cited by the Ld.Counsel for the assessee before us. We are convinced that the issue referred by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor aggregating to ₹ 788680/- on which TDS was deducted by the assessee @ 10% but was required to be deducted @ 2%. Our attention was drawn to the said two bills placed before us at page 53-54. The ld. counsel for the assessee pointed out that the tax auditor had on the basis of TDS deducted by the assessee wrongly @ 10% amounting to ₹ 78868/- had calculated the amount of disallowance by assuming the TDS to have been deducted @ 2% and worked the amount disallowable at ₹ 39,24,228/-. He stated that the disallowance actually amounted to only ₹ 7,88,680/- and pleaded that it be restricted to the said extent. 21. The ld. DR, however, pointed out that Ld.CIT(A) had noted that no affidavit of tax auditor to the effect of having made such a wrong calculation had been filed by the assessee and therefore, it was not possible to believe the explanation. 22. The ld. counsel for the assessee at this juncture stated that though he had tried procuring such an affidavit but had failed to do so. He pleaded for an opportunity to prove his explanation and requested the matter be remanded to the AO for the said purpose. 23. We have heard both the parties. We find tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strating the payment of PF in the succeeding year. 27. The ld. DR, however, stated that the ledger account was not sufficient and the assessee needed to substantiate its explanation with necessary documentary evidence. 28. To this ld. counsel for the assessee sought further opportunity and requested the matter be restored to the AO for the said purpose. 29. We have heard both the parties. We find that the assessee had attempted demonstrating the compliance with the requirements of section 43B of the Act vis a vis the issue of PF payable, but had failed to file clinching third party evidence for which he has sought further opportunity. In the interest of justice therefore we consider it fit to give the assessee adequate opportunity to substantiate its claim and accordingly restore the issue of allowance of PF as per the provisions of section 43B of the Act amounting to ₹ 1,60,846/-, to the AO to examine it afresh and thereafter decide it in accordance with law. Needless to add the assessee be given due opportunity to produce all evidences it seeks to rely upon in support of its claim. Ground of appeal No.5 is partly allowed for statistical purposes. 30. In the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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