TMI Blog2023 (4) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... aid to BLB. Disallowance u/s 40(a)(i) - not deducting TDS on interest payment paid to Kreditanstat Fur Wiedraufbau (KFW) - HELD THAT:- We found that the ld. CIT(A) after calling for a Remand Report that the A.O. accepted the payment made to KFW is as per certificate issued by Central Government vide letter dated 5 December, 1994. Further in the subsequent Assessment Year 2010-11 though a show cause notice was issued to make such disallowance, but no disallowance were made by the Assessing Officer while passing an assessment order for the Assessment Year 2010-11. Therefore the ld. CIT(A) was justified in deleting the disallowance made by the Assessing Officer. Disallowance u/s 40(a)(i) - non-deducting TDS for interest paid to BNP Paribas, Mumbai - contention of the Assessing Officer that BNP is a foreign bank and exemption provided u/s 194A(3) do not apply to foreign bank. Thus assessee ought to have deducted TDS on payments made to the bank - Though the Assessing officer accepted this view in the Remand Report but however submitted original certificate not produced before the A.O. HELD THAT:- We are of the considered view, this cannot be a good ground to denying the exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01(1) and 201(1A) proceedings - disallowance made by the Assessing Officer is liable to be deleted. Reimbursement of assessee s tax liability - HELD THAT:- Assessing Officer was not justified in making separate addition of such amount on the ground that the assessee has not offered income on mercantile basis. It is further noticed that the A.O. in subsequent two years accepted such consistent accounting policy of the assessee and has not made any additions. Thus the grounds raised by the Revenue is devoid of merits and the same is liable to be dismissed. Disallowance of rebate given by assessee to its customer - Assessee has reiterated its contention as raised before Assessing Officer and argued that it was only cash discount which cannot be treated as payment of interest - HELD THAT:- As in this case there is no deposit of principal by the recipient of discount with the appellant therefore, there is no question of allowing interest the payments under reference made by the appellant is discount only and the same cannot be termed as interest as wrongly held by the A.O. In view of this, neither the provisions of sec. 194A are applicable nor the provisions of sec. 40(a)(ia) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee filed its Return of Income on 30.09.2009 declaring total income of Rs.213,80,37,081/-. Regular assessment u/s. 143(3) was completed on 30.03.2013 making various disallowances and determining the total income at Rs. 293,68,54,031/-. 3. Aggrieved against the various disallowances, the assessee filed an appeal before Commissioner of Income Tax (Appeals). The Ld. CIT(A) called for Remand Report from the Assessing Officer, rejoinder from the Assessee and passed a detailed order partly allowing the assessee s appeal and partly confirming few disallowances made by the A.O. 3.1. Aggrieved against the Appellate order, both the Assessee and Revenue are in appeal before us. 4. Revenue s Grounds of Appeal in ITA No. 2501/Ahd/2015 for A.Y. 2009-10 are as follows: (1) The CIT(A) has erred in law and on facts in deleting the dance made u/s 40(a)(i) of the Act at Rs.3,25,42,468/- being interest paid Bayerisehel Landesbanic (BLB). (2) The CIT(A) has erred in law and on faces in deleting the disallowance made u/s. 40(a)(i) of the Act of Rs.10,38,090/- being agency fees/legal expenses paid to Bayerischel Landesbanic (BLB). (3) The CIT(A) has erred in law and on facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidences were forwarded to Assessing Officer for his comments wherein Assessing Officer has stated that certificate is issued in the name of State Bank of India, Frankfurt and not to BLB State Bank of India was only the arranger of the loan, hence it was contended that said certificate does not allow Assessee for not deducting TDS on payment made to BLB. It was also stated that original certificate was not produced for verification. 4.3. The Assessee replied that State Bank of India, Frankfurt, was arranger of the loan, whereas BLB was main lender of the loan, hence principal along with interest payment was to be made to BLB. The Assessee has also drawn attention to exemption certificate for non- deduction of TDS issued by Department of Economic Affairs, Ministry of Finance, Government of India, along with various terms of loan Agreement and contended that terms and conditions mentioned in certificate as well as terms and conditions mentioned in loan agreement are similar, hence exemption certificate issued by Central Government in favour of State Bank of India also applies for payment made to BLB as State Bank of India, Frankfurt, was only arranger of loan with reference to obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the name of State Bank of India, Frankfurt. As stated herein above, the terms and conditions mentioned in certificate issued on 8 December, 1994 matches with terms and conditions of loan agreement with BLB and State Bank of India. Appellant is not required to deduct any TDS under Section 195 on payment made to BLB. Further, payment of agency fees to BLB is also pursuant to above loan agreement and covered by tax exemption certificate issued by the Government of India. In the present case, separate order under Section 201(1) and 201(1A) read with Section 195 was passed on 8 November, 2011 by ITO, International Taxation - II, Ahmedabad, and even he has not considered above payment as payment liable for deducting TDS under Section 195 of the Act. Therefore, the disallowance made by Assessing Officer for Rs. 5,25,42,468/- under Section 40(a)(i) is not justified and directed to deleted. Further, disallowance under Section 40(a)(i) made towards agency fees paid to BLB for Rs. 10,38,090/- is also directed to be deleted. Both the grounds of appeal are allowed. 4.5. The Ld. CIT-DR Shri Atul Pandey appearing for the Revenue supported the order passed by the Lower Authorities and reit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave given our thoughtful consideration and perused the materials available on record including the Paper Book and case laws filed by the assessee. The assessee cannot be denied the TDS Exemption on the ground that the original certificate was not produced by the assessee. The Ld. D.R. could not produce before us any evidences to uphold the disallowance made by the Assessing Officer. At the same time the Ld. D.R. could not produce contra findings of the Ld. CIT(A). In the absence of any contra evidences, we uphold the order passed by the ld. CIT(A) deleting the additions made u/s. 40(a)(i) of the Act for non deduction of Tax on interest amounting to Rs. 5.25 crores paid to BLB and also agency charges paid to BLB amounting to Rs. 10,38,000/-. 4.10. Thus the ground nos. 1 2 raised by the Revenue are hereby dismissed. 5. Ground no. 3 Disallowance under Section 40(a)(i) of the Act for not deducting TDS on interest payment of Rs. 6,90,21,681/- paid to Kreditanstat Fur Wiedraufbau (KFW). 5.1. The brief facts of the issue is that the Assessing Officer in the Assessment order has held that KFW carries its business through permanent establishment and assessed to tax in India with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent the Assessment Year 2009-10 is liable to be deleted which has been done by the ld. CIT(A). 5.5. We have perused the materials available on record and we found that the ld. CIT(A) after calling for a Remand Report that the A.O. accepted the payment made to KFW is as per certificate issued by Central Government vide letter dated 5 December, 1994. Further in the subsequent Assessment Year 2010-11 though a show cause notice was issued to make such disallowance, but no disallowance were made by the Assessing Officer while passing an assessment order for the Assessment Year 2010-11. Therefore the ld. CIT(A) was justified in deleting the disallowance made by the Assessing Officer. Thus the ground no. 3 raised by the Revenue is devoid of merits and the same is dismissed. 6. Ground no. 4 disallowance under Section 40(a)(i) for non-deducting TDS for interest amounting to Rs 4,18 64,708/- paid to BNP Paribas, Mumbai. 6.1. The brief facts of the issue is that the Assessing Officer in the assessment order has observed that BNP is foreign bank and exemption provided under Section 194A(3) do not apply to such bank, hence interest paid to such bank is chargeable to tax in India as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without TDS. Though the Assessing officer accepted this view in the Remand Report but however submitted original certificate not produced before the A.O. 6.4. We are of the considered view, this cannot be a good ground to denying the exemption given by the Department to the assessee. Therefore the disallowance made by the Assessing officer is liable to be deleted since no disallowance made by the Assessing Officer on similar payments. Thus the grounds raised by the Revenue is hereby devoid of merits and the same is liable to be dismissed. 7. Ground no. 5 disallowance for non-deduction of TDS on interest payment of Rs. 2,14,26,036 paid to IFCL Limited. 7.1. The brief facts of the issue is that the Assessing Officer in the assessment order has observed that IFCL is not covered by any sub-clauses of Clause (iii) of sub-section (3) of Section 195A of the Act and Assessee has not furnished any documentary evidence to prove its contention, hence payment made by Assessee without deduction of TDS is required to be disallowed under Section 40(a)(i) of the Act. The Assessee has referred to provisions of Section 194A and contended that provision of sub-section (1) requiring deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/- paid to IFCL Ltd. The Ld. CIT(A) held that IFCL is a public financial institution and necessary amendment was made by Central Government in its notification and for the Assessment year 2010-11, the Assessing Officer has not made any such disallowance. Therefore he deleted the disallowance made under section 40(a)(i) for the present assessment year 2009- 10. This factual things are not disputed by the Ld. CIT-DR. Therefore when the Assessing Officer in his Remand Report accepted that IFCL is a public financial institution, the question of disallowance made u/s. 40(a)(i) does not arise. Therefore the grounds raised by the Revenue is devoid of merits and the same is liable to be dismissed. 8. Ground no. 6 for non-deduction of TDS for legal and professional charges paid to Solomon Solomon amounting to Rs. 19,59,688/-. 8.1. The brief facts of the issue is that the Assessing Officer in the assessment order has observed that payment made to above party is for technical services and Assessee was required to deduct TDS on such payment. The Assessee has contended that said party has no permanent establishment in India and fees are not taxable in India. It was also submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smissed. 9. Ground no. 7 addition of Rs. 32,65,04,845/- on account of reimbursement of assessee s tax liability. 9.1. The brief facts of the issue is that the Assessing Officer in the Assessment Order has observed that during the course of Assessment Proceedings Assessee was asked to explain as to why amount of Rs.32,64,04,845/- accrued on account of reimbur sement of MAT by GUVNL should not be brought to tax as income. The Assessee's reply is reproduced at page 10 of Assessment Order. The contention of Assessee was not accepted by Assessing Officer on the ground that Assessee raised a debit note for the amount along with a certificate of Chartered Accountant which is acknowledged by GUVNL and on that basis it was held that said income has accrued during the year under consideration. On this basis Assessing Officer has made addition of Rs32,65,04,845/-. The assessee has referred to power purchase agreement entered into with GUVNL and contended that it has followed consistent practice of accounting income on accrual basis for the estimated liability of income tax that it was likely to incur on its income for financial year. Accordingly, during the year under consideration, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that Appellant has already made provision for such income at Rs. 100.33 crores in its audited accounts. It is observed that when Appellant has already offered income pertaining to MAT tax liability to be recovered from GUVNL at Rs. 100.33 crores, which is higher in comparison with actual MAT tax liability of Rs. 32.65 crores. Assessing Officer was not justified in making separate addition of such amount on the ground that Appellant has not offered income on mercantile basis. This issue for the first time raised by A.O. The appellant follows consistent policy of accounting monthly provision of such MAT liability reimbursement and adjustment on account of final determination. The A.O. in subsequent two years accepted such consistent policy and not made such addition. Accordingly, the addition made by Assessing Officer for Rs. 32,65,04,845 is not justified and directed to be deleted. This ground of appeal is allowed. 9.3. The Ld. D.R. appearing for the Revenue could not contravent the findings of the Ld. CIT(A), when the assessee has already offered income pertaining to Mat Tax Liability to be recovered from GUVNL at Rs. 100.33 crores, which is higher in comparison with actual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 194A, the entire expenditure was disallowed us 40(a)(ia). Aggrieved by the order of AO, Assessee carried the matter before CIT(A) CIT(A) decided the issue in favour of Assessee by holding as under: 9.5 I have considered the facts and submission of the Ld. AR carefully. The rebate allowed by the appellant to its customers for early payment cannot be equated with interest as defined in section 2(28A) of the Act. Even it is a common knowledge that for earning an interest a deposit is required to be made with the concerned person and that deposit is called principal amount which is considered for earning the interest. Here, in this case there is no deposit of principal by the recipient of discount with the appellant therefore, there is no question of allowing interest the payments under reference made by the appellant is discount only and the same cannot be termed as interest as wrongly held by the A.O. In view of this, neither the provisions of sec. 194A are applicable nor the provisions of sec. 40(a)(ia) of the Act are attracted on such payments would be invoked. Therefore, the disallowance made by the AO is hereby deleted. 10.3. This issue is squarely covered by assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well as before the Ld. CIT(A). Hence the additional evidences may kindly be admitted in the interest of natural justice and fair play, and the additional documents were sent back to the Ld. CIT(A) for fresh adjudication. 12.1. The Ld. D.R. appearing for the Revenue though objected to the admission of the additional evidences but agreed to set aside the matter back to the file of Ld. CIT(A) for fresh adjudication. 13. We have given our thoughtful consideration and perused the material available on record including the Paper Book and additional documents filed before us. Rule 29 of the Income Tax Appellate Tribunal Rules provides for admission of additional evidence before the Tribunal for the first time. It is seen from record, the assessee could not produce the same for reasons beyond is control and therefore in order to meet the ends of justice, we think it fit to entertain the additional documents filed by the assessee and set aside the same to the file of Ld. CIT(A) who is to adjudicate the various additional documents filed by the assessee. Needless to say that the assessee should co-operate with the department by producing all the additional evidences before the Ld CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A amount of expenditure by way of interest other than the amount of interest included in clause (i) incurred during the previous year: 76899000 13776621 B the average of value of investment, income from which does not or shall not form part of the total income, as appearing in the balance-sheet of the assessee, on the first day and the last day of the previous year: P.Y. Invest 5528600000 C.Y. Invest. 2690900000 Total PY+CY 8219500000 2 4109750000 C the average of total assets as appearing in the balance-sheet of the assessee, on the first day and the last day of the previous year; P.Y. Assets 22314894000 C.Y. Assets 23565102000 Total PY+CY 45879996000 2 22939998000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not satisfactorily explained. Notwithstanding the same, we have gone into the merits of the case and do not find any substance in the special leave petition. The special leave petition is dismissed on the ground of delay as well as on merits. 22.2. Thus the Ld. Senior Counsel submitted that as per the Jurisdictional High Court judgment, the disallowance u/s. 14A is to be restricted to the dividend income of Rs. 50,000/- received by the assessee during the financial year. Thus the Revenue appeal is to be dismissed. The Ld. Senior Counsel also has raised a ground in C.O. NO. 12/Ahd/2016 and the disallowance should be restricted to the dividend income earned by the assessee. 23. We have given our thoughtful consideration and perused the materials available on record. The Hon ble Gujarat High Court in the case of Corrtech Energy Pvt. Ltd. (cited supra) as well as in Vision Finstock Ltd. in Tax Appeal No. 486 of 2017 has held that the disallowance made u/s. 14A are restricted to the extent of exempt income earned by the assessee during the financial year. Now the issue has been upheld by the Hon ble Supreme Court in SLP Diary No. 13152 of 2018 (cited supra), therefore th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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