TMI Blog2022 (3) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... issue back to the A.O. to adjudicate the issue afresh in the light of the aforesaid submissions made by the assessee.The AO is directed to verify the fact of availability of own interest free funds with the assessee for making the impugned interest free advances - Ground allowed for statistical purposes. TDS u/s 195 - Disallowance of expenses invoking the provisions of section 40(a)(ia) - non-deduction tax at source on payments made for export clearing and forwarding charges, shipping freight and export expenses - contention of the assessee that no tax was required to be deducted on same, being payments made to agents of non-resident shipping companies for freight and for payments made on behalf of the non-residents - HELD THAT:- Undeniably the disallowance of expenses u/s. 40(a)(ia) of the Act has been made for want of evidences without considering the contentions advanced by the assessee on merits,but ld. Counsel for the assesee has demonstrated that the evidences were filed to the lower authorities. The issue therefore needs to be adjudicated on merits. We therefore consider it fit to restore this issue back to the A.O. to adjudicate it afresh in accordance with law after c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income tax (Appeals) erred in not deleting the disallowance of ₹ 14,54,731/- in respect of interest payment u/s. 36(1)(iii) The appellant submits that interest expenses were incurred wholly and exclusively for the purpose of business and no disallowance is justified. The disallowance being contrary to the facts and contrary to the provisions of law be deleted. 2.1 The appellant without prejudice to above further submits that disallowance in any event is excessively high and it be directed to be substantially reduced. It is submitted that it be so held now. 4. The contention of the Ld. counsel for the assessee before us was that identical issue stood adjudicated by the ITAT in the case of the assessee itself in assessment year 2010-11 in ITA No. 2276/Ahd/2015 vide order dated 21.02.2019 wherein the issue was restored back to the A.O. for deciding afresh. Copy of the order was placed before us. 5. Ld. D.R. fairly agreed with the above contention of the ld. Counsel for the assessee. 6. In the light of the above submissions made before us, we shall now proceed to adjudicate the issue. 7. The facts relating to the issue are that the disallowance of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r page no. 8 of the assessment order, the assessing officer stated that assessee was having interest free funds in the form of share capital and reserves and surplus to the extent of ₹ 2,61,14,663/- only. However as mentioned above in this order, the ld. counsel has submitted that the assesse was having total interest free funds aggregating to ₹ 4,41,33,783/- and pleaded that no disallowance u/s.36(i)(iii) is called for. In the light of aforesaid facts and circumstances, we observe that the Assessing officer and the ld. CIT (A) has not given categorical finding on the following issues. (i) Whether assessee had sufficient interest free funds to cover advances given to its associate concerns and no interest bearing fund was advanced to its associate concerns. (ii) Whether the money advanced to the sister concerns and others was for the purpose of business need of the assessee. The ld. counsel has submitted that such fact was categorically pointed out before the assessing officer and the same has not been denied by either of the lower authorities. During the course of appellate proceedings before us these contentions of the ld. counsel was not controverted by the Revenue T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ₹ 598.42 lacs by our company. 12. He also pointed out that the AO had noted the quantum of interest free funds available with the assessee at page 5 para B of his order as under: B) On further verification of balance sheet, it is found that the assessee company is having interest free funds in the form of share capital and reserves and surplus to the extent of ₹ 84,11,519 only. The break up of which is given here under: Share capital ₹ 2,0833,880 Reserve and surplus ₹ 1,01,59,839 Total ₹ 3,09,93,719 13. He pointed out that this amount of ₹ 3,09,93,719/- was sufficient for making the interest free advances of ₹ 1,98,55,747/-. and in view of the settled proposition of law in the case of CIT vs. Reliance Industries Ltd.410 ITR 466(SC) that where sufficient own interest free funds were available, the presumption is that the said funds were used for making interest free advances calling for no disallowance of interest, the issue be adjudicated following the said proposition. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the assessment order that the impugned disallowance was made on account of non-deduction tax at source on payments made for export clearing and forwarding charges, shipping freight and export expenses amounting in all to ₹ 30,29,797/- pertaining to the following parties. : Sr. No. Name of the parties Export clearing and forwarding charges Shipping freight Export expenses Total (i) Freight lines (i) Pvt. Ltd. 536964/- 1434784/- 287722/- 2259470/- (ii) J.M. Baxi Co. 594957/- 175360/- 770327/- Total 3029797/- 18.It was pointed out from the assessment order that the contention of the assessee that no tax was required to be deducted on same, being payments made to agents of no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1)(c) of the Act for furnishing inaccurate particulars of income are being initiated on this account. 19. ld. Counsel for the assessee further pointed out that the despite reiterating these contentions before the Ld. CIT(A) also. The same were also rejected for the same reasons by the Ld. CIT(A). He drew our attention to para 4.3 of the Ld. CIT(A) order in this regards is as under: 4.3 I have considered the facts of the case; assessment order and appellant's written submission. Appellant did not deduct TDS on shipping freight and other expenses paid to C and F agents which was disallowed by the assessing officer under section 40 (a) (ia) of IT act. Appellant submitted that the payment was made to agent of nonresident shipping companies on which no TDS was deductible as per circular number 723 issued by CBDT. However appellant did not submit any evidence to prove that the payment made to C and F agents was as agents of non-resident shipping companies. I agree with the assessing officer that onus is on the appellant to prove that the ocean freight was paid to non-resident shipping companies or their agents. In the absence of this, the TDS was deductible. Since appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoices in the paper book reveal that the contention of the assessee were not entirely correct, since some invoices reveaedl payment made to the agents for freight paid to Indian shipping Companies, the contention of the assessee in this regard would fail. He therefore pleaded that the matter be restored back to the A.O. to be decided in the light of the evidences placed by the assessee. 22. We have heard both the parties. Undeniably the disallowance of expenses u/s. 40(a)(ia) of the Act has been made for want of evidences without considering the contentions advanced by the assessee on merits,but ld. Counsel for the assesee has demonstrated that the evidences were filed to the lower authorities. The issue therefore needs to be adjudicated on merits. We therefore consider it fit to restore this issue back to the A.O. to adjudicate it afresh in accordance with law after considering and verifying the evidences filed by the assessee, and the contentions made by the assesseee. Needless to add due opportunity of hearing be granted to the assessee 22.1 Ground of appeal No.3 to 3.2 is allowed for statistical purposes. 23. Ground no. 4 to 4.2 relates to the issue of disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e gone through the facts mentioned in the assessment order and the submission filed by the appellant. My predecessor in appellant's own case for A.Y. 2010-11 has given relief by following comments:- Ground No.5 is against the disallowances of interest payment of ₹ 1,46,079/- u/s.40(a)(ia) of the Act being payment made to foreign bank without deduction of TDS. The Assessing Officer disallowed the interest payment made by appellant of ₹ 1,46,079/- to Barclays Bank treating the same as foreign bank and on account of non-deduction of TDS u/s. 195 of the Act. The appellant during appeal proceedings submitted list of scheduled banks which are regulated under Banking Regulation Act 1949 as prescribed by RBI and Barclays bank is treated as scheduled commercial bank. It was contended that as per clause(a) of first proviso to section 194A(3) of the Act the appellant was not required to deduct TDS out of such interest payment I am inclined with appellant's contention that Barclays bank is a scheduled commercial bank under Banking Regulation Act 1949 hence appellant is not required to deduct TDS u/s.194A of the Act and also cannot be held in default u/s.201 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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