TMI Blog2022 (8) TMI 595X X X X Extracts X X X X X X X X Extracts X X X X ..... s. AO will verify the instrument giving rise to exempt income and only for those instruments, the investment will be considered for making disallowance u/r.8D(2)(iii) of the Rules and accordingly, this common issue is decided in terms of above directions. Consequently, the appeal filed by the assessee is partly allowed for statistical purposes. Disallowance of staff training expenses - assessee stated that persons were deputed for higher studies only after taking the large business interest of the assessee company into consideration and its large number of associated companies - as argued company sponsored the persons and deputed them for higher study on the understanding that on completion of advanced study, they would return to India and serving the company or in any of its group/associated company promoted by the group concern in a position of responsibility - HELD THAT:- After hearing both the sides and going through the facts of the case, we noted that this issue is exactly identical and there is no change in facts in these two years also, what was before the ITAT in AY 2010-11 [ 2015 (7) TMI 1411 - ITAT CHENNAI] and hence, taking the issue as covered, we decide the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s medical expenses of the relative of the Director of the assessee company in foreign currency are personal in nature and not in relation to any business connection. Hence, the lower authorities have rightly disallowed the same and we confirm the same. Disallowance of Interest for diversion of borrowed funds to subsidiary company at Lower rate of Interest - HELD THAT:- Assessee stated at the best, the matter can be referred back to the file of the AO for verification of the actual availability of surplus funds. Since, assessee has filed these details before us as the assessee is having surplus funds with it for making advance to TVS Srichakra Ltd. according to us, in such situation, no disallowance has been made in view of the decision of the Hon ble Bombay High Court in the case of CIT v. Reliance Utilities and Power Ltd.,. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] Accordingly, we remit this issue back to the file of the AO with the above directions. This issue is allowed for statistical purposes. TDS u/s 194C - disallowance made in respect of freight charges paid for non-deduction of TDS - HELD THAT:- We noted that CIT(A) has given exactly the same findings that there are p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invested to the tune of Rs.3419.82 lakhs and earned exempt income during the FY 2009-10 relevant to this AY 2010-11 at Rs.2642.49 lakhs and claimed the same as exempt u/s.10(34) of the Act. As regards to this issue, the facts and circumstances are exactly identical in all the years and hence, we will take up this issue from AY 2010-11. The brief facts of the case are that relating to disallowance of interest u/s.14A r.w.r.8D(2)(ii) of the Rules, are that the investments declared by the assessee company, is to the tune of Rs.3419.82 lakhs and earned dividend income from these investments at Rs.2642.49 lakhs and claimed the same as exempt. The AO disallowed the interest expenditure u/r.8D(2)(ii) of the Rules, at Rs.2,97,28,190/-. The Ld.CIT(A) confirmed the action of the AO. Aggrieved the assessee came in appeal before the Tribunal. Before us, the Ld.Counsel for the assessee filed the details of its investment and telling the same with the balance sheet and the relevant details, which are as under: For AY 2010-11 Opening investment 6360.78 Opening Reserves Surplus 26691.90 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO has not brought out any nexus in regard to investment made by the assessee for earning of exempt income. The investment is made out of interest free funds. Once this is the fact, the disallowance u/s.14A of the Act r.w.r.8D(2)(ii) of the Rules, cannot be made. 2.4 On the other hand, the ld.Sr.DR could not controvert the fact situation, but stated that the factual aspect of availability of funds, can be referred to the file of the AO for verification, because, at the appellate stage, there is no mechanism for verification of balance sheet filed by the assessee. 2.5 After hearing rival contentions and going through the fact situation, we find that the assessee has given complete details in regard to fund position as noted above, which is extracted from balance sheet for the AYs 2010-11, 2012-13, 2013-14 2014-15. The above reproduced statement shows that the assessee has enough surplus funds in the relevant current years to make investments and further, the opening investments at the start of each year, is much less than the available reserves and surplus, which proves that the investment is made out of assessee s own fund and no portion of borrowing was used to make i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment giving rise to exempt income and only for those instruments, the investment will be considered for making disallowance u/r.8D(2)(iii) of the Rules and accordingly, this common issue is decided in terms of above directions. Consequently, the appeal filed by the assessee is partly allowed for statistical purposes. 4. The second common issue in ITA Nos.2759 2761/Chny/2019 is as regards to disallowance of staff training expenses made by the AO and confirmed by the Ld.CIT(A). In both the years, the facts and circumstances are identical and raised identical worded grounds and hence, we take the facts and grounds in ITA No.2759/Chny/2019 for the AY 2012-13. The relevant grounds raised by the assessee are as under: 1.1. That the order of the learned Commissioner of Income Tax (Appeals) [CIT (A)'] is contrary to the facts and circumstances of the case and against the principles of equity and natural justice. 1.2. The learned CIT (A) erred in not appreciating the fact that the contents of the course of higher study for which admission was obtained, included specialization in various technical fields connected with Automobile Engineering and Management Studies which wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in dispute that the assessee incurred expenditure on higher education and foreign tours of the grandchildren/children of the Directors. As rightly submitted by the Ld. D.R, it is the responsibility of the parents/ grandparents to give education to their children/grandchildren. No business purpose is going to be served to the assessee by incurring expenditure on the foreign education of the children and grandchildren of the Directors. Merely because the company was in existence for decades, the law laid down by the jurisdictional High Court in RKKR Steels P. Ltd. (supra) and in K. Subramaniam Bros (supra) would not change. This Tribunal is of he considered opinion that the law laid down by Madras High Court in RKKR Steels P. Ltd. (supra) and in K. Subramaniam Bros. (supra) is squarely applicable to the facts of the case. Therefore, this Tribunal do not find any infirmity in the order of the CIT(Appeals) and accordingly, the same is confirmed. 4.2 When these facts are confronted to ld.Sr.DR, he stated that the issue is covered in the assessee s own case by the decision of the co-ordinate Bench and hence, no different view can be taken as the facts and circumstances are exact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses of Director of assessee s sister Ms.Anitha Raajyalaxmi Ratnam, was confirmed. Aggrieved the assessee is in appeal before the Tribunal. 5.2 We have heard the rival contentions and gone through the facts and circumstances of the case. Before us, the Ld.Counsel for the assessee only made bald submission that the assessee has spent money towards travel expenditure of Consultants of the assessee company and for this, he relied on the decision of the Hon ble Calcutta High Court in the case of JK Industries Ltd. v. CIT reported in [2011] 335 ITR 170 (Cal). Now, we noted that the Hon ble Madras High Court has categorically held that expenses on foreign travel, wife of Director of assessee s company, the assessee has to show that the expenditure is incurred for the business purpose. Here, even now, on a query from the Bench, the ld.Counsel could not produce any evidence or explain how the business expenditure incurred for foreign travel of sister of Director of the assessee company that Ms.Anitha Raajyalaxmi Ratnam, is for the purpose of business. He failed to do so. In the absence of any evidence, we have no alternative except to confirm the addition. The similar are the facts i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the AO dismissed this grounds of appeal confirming the action of the AO in making disallowance of medical expenses. Aggrieved, assessee came in appeal before the Tribunal. 6.3 Before us, the Ld.Counsel for the assessee stated that Ms.Shirmathi Mahesh, Director of the assessee company and as per the terms of his appointment, included medical expenses for self and family as in the case of other executives and employees of the company and terms of remuneration fixed by the Board of Directors and as approved by the Members of the company. The Ld.Counsel for the assessee explained that for the year ended 31.03.2012, an amount of Rs.9,74,968/- was incurred in foreign currency towards medical treatment of Ms.Shirmathi Mahesh, who is spouse of whole time Director of the assessee company. The main argument of the Ld.Counsel for the assessee was that the same should have been allowed as the same is based on the terms of his appointment, includes medical expenses for self and family. On the other hand, the Sr.DR heavily relied on the assessment order and the order of the Ld.CIT(A). 6.4 We have heard the rival contentions and gone through the facts and circumstances of the case. We n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has raised the following Ground No.2, which reads as under: 2. Disallowance of Interest for diversion of borrowed funds to subsidiary company at Lower rate of Interest? 2.1. The learned CIT (A) erred in wrongly assuming that M/S 'T'VS Srichakra Ltd is a subsidiary company. He has failed to appreciate the fact that M/ s 'T'VS Srichakra Ltd is an Associate Company and is only a supplier of materials to the Appellant. 2.2. The learned CIT (A) failed to appreciate the fact that the amount was advanced to them charging a proper interest to ensure uninterrupted supply of goods. The 'Advance was however returned back by the said company. 2.3. The learned CIT(A) failed to appreciate the fact that although no interest is chargeable on such advances, the company has charged interest at 11% and received a sum of Rs.1,45,36,607/- and has been offered to tax. 2.4. The learned CIT (A) erred in assuming that the interest charged on advances should match with interest paid on borrowings. 2.5. The learned CIT (A) failed to appreciate that the issue is pending before the Hon'ble ITAT in ITA 554/CHNY-2016. 8.1 Brief facts of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14068.62 Less: Taxes paid -3472.62 Less: Dividend Dividend Tax -6107.29 Balance 4488.71 Less : Investments made during the year in companies 656 Balance Surplus 3832.71 Amount Lent to TVS Srichakra (issue on diversion) 1500 Opening investment 17531.21 Opening Reserves Surplus 42040.33 Closing investments 15233.89 Closing Reserves Surplus 45158.25 8.4 In view of the above, the Ld.Counsel for the assessee stated at the best, the matter can be referred back to the file of the AO for verification of the actual availability of surplus funds. Since, assessee has filed these details before us as the assessee is having surplus funds with it for making advance to TVS Srichakra Ltd., according to us, in such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the authorized representative on this issue. There is no dispute that the appellant has filed TDS statements required u/s.194C(6) (7) r.w.rule 31A but with a huge delay. Circular 19 of 2015 dated 27.11.2015 at para No.43.8, reiterates the fundamental position of law under this section that non-furnishing or incomplete furnishing of the required information in Form No.26Q shall make the deductor liable for penalty u/s.271H of the Income Tax Act, !961. As per section 194C(6) no deduction of TDS shall be made from any sum credited or paid or likely to be credited or paid during the relevant previous year to the account of contractor in course of business of plying, hiring, leasing goods carriages, where such contractor owns 10 or less goods carriages at any time during the previous year and furnishes a declaration to that effect along with his Permanent Account Number to the person paying or crediting such sum. Section 194C(7) requires the deductor to furnish the same to the prescribed authority, in the prescribed format, within the required due dates as explained under Rule 31A of the Income Tax Rules. In this case, the appellant complied with the provisions contained u/s.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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