2017 (11) TMI 1359 - AT - Income Tax

Tribunal decisions on tax appeals stress documentation & legal precedents. Partial appeals allowed, remanded for adjudication.

The Tribunal partly allowed the assessee's appeal, remanding certain issues back to the AO and CIT(A) for fresh adjudication. The Revenue's appeal was ... Disallowance of interest paid on account of diversion of funds - whether borrowed fund has been utilized for non-commercial purpose without charging any interest? - Held that:- Whether to treat the advance given to sister concern in the course of assessee’s business or not, it all depends upon the facts and circumstance of each case. A specific query from the Bench was raised to the Ld. AR to prove that all 28 concerns are falling in the category group / sister concern. The Ld. AR in this regard requested the Bench to restore the matter to the file of AO for fresh adjudication in accordance with law. Ld. DR agreed to the submission of the Ld. AR for the assessee. In view of the above and in the interest of natural justice and fair play we are inclined to restore the issue back to the file of AO with a direction to adjudicate the issue in the light of above stated discussion and according to the provision of law. Hence, this ground of assessee’s appeal is allowed for statistical purpose. Bogus loss - Held that:- The issue of loss in future & option and derivative transaction was raised before Ld. CIT(A) but he failed to adjudicate the same. Ld. AR further submitted that an application u/s 154 of the Act was preferred before Ld. CIT(A) against his order dated 13.12.2012 wherein the Ld. CIT(A) rejected the claim of assessee without adducing any reason. In view of above, Ld. AR submitted to restore the matter back to the file of Ld. CIT(A) for fresh adjudication. In rejoinder Ld. DR does not raise any objection if the matter is remitted back Disallowance of interest levied on account of late deposit of TDS u/s 40(a)(ii) - AO was of the view that the interest on TDS is nothing but income tax paid by the assessee on behalf of parties - Held that:- The provision of Section 40(a)(ii) of the Act denies for the deduction of income-tax paid by the assessee but it does not speak about the interest levied on account of late deposit of TDS. In fact, the amount of TDS deducted by the assessee does not represent the income of the assessee rather it represent the income for the party in whose name the TDS was deducted. Thus, in our considered view, the amount of interest expense cannot be disallowed under the provision of Section 40(a)(ii) of the Act. As such, the amount of interest expense is eligible for deduction u/s. 37(1) of the Act, as it was incurred in the course of assessee’s business. The amount of TDS represents the amount of income tax of the party on whose behalf the payment was deducted and paid to the Government Exchequer and not the income of the assessee. In view of the above, we conclude that the interest expenses claimed by assessee on account of delayed deposit of TDS are allowable expense u/s. 37(1) of the Act. - Decided against revenue Treating the loss as non speculative as per the Explanation to Section 73 - Held that:- As observed that assessee claimed the loss of ₹65,73,582/- as speculative in nature as per explanation to Section 73 of the Act. Thus, such loss was set off against the speculative income by the assessee. In view of this, we find that the AO has already treated the impugned loss as speculative in nature and the same is also claimed by assessee as speculative in nature. Therefore, we find no infirmity in the order of Ld. CIT(A). We uphold the same. This ground of Revenue’s appeal is dismissed. Undisclosed income of assessee - Held that:- AR fairly conceded that assessee has shown less income in its return filed at ₹1,04,941/- only. Accordingly, Ld. AR requested the Bench to sustain the addition as made by AO. In view of the above proposition, we reverse the order of Ld. CIT(A) and confirm the order of AO. - Decided against assessee. Undisclosed investment - transactions with the BSE Ltd.failed to be explained from the books of account to the AO - Held that:- In the instant case, the addition made by Assessing Officer on the ground that assessee failed to explain the transactions of ₹14,72,050/- from the books of account. However, Ld. CIT(A) has restored the matter back to the file of AO with a direction to verify the necessary details from the books of account of assessee. From the above proposition, we find that necessary details were submitted by assessee before appellate stage to prove the genuineness of the transactions as discussed above. Ld. CIT(A) has accordingly directed the Assessing Officer to verify the same and adjudicate the matter. We find that the matter was not set aside to AO blanket by the ld. CIT(A). In such direction, we do not find any infirmity in the order of Ld. CIT(A) Issues Involved:1. Disallowance of interest expense.2. Treatment of loss in Future & Options and Derivative transactions.3. Interest on delayed deposit of TDS.4. Treatment of share transaction loss as business loss.5. Undisclosed income and investment verification.Issue-wise Detailed Analysis:1. Disallowance of Interest Expense:The assessee contested the disallowance of Rs. 1,60,37,426/- out of Rs. 1,71,36,916/- interest paid, which was restricted by the CIT(A) on grounds of diversion of funds for non-commercial purposes. The assessee argued that the loans were given in the course of business and for property purchases to group concerns, and thus, the interest should be deductible. The Tribunal found that the assessee did not provide sufficient evidence to prove that the advances were to group companies and restored the issue to the AO for fresh adjudication in line with the Supreme Court’s ruling in S.A. Builders Ltd. vs. CIT.2. Treatment of Loss in Future & Options and Derivative Transactions:The assessee argued that the CIT(A) failed to adjudicate the ground concerning the treatment of Rs. 70,07,236/- loss in Future & Options and Derivative transactions as bogus. The Tribunal noted that the CIT(A) did not address this issue and remitted it back to the CIT(A) for fresh adjudication.3. Interest on Delayed Deposit of TDS:The AO disallowed Rs. 6,315/- interest on delayed deposit of TDS, treating it as inadmissible under Section 40(a)(ii) of the Act. The CIT(A) deleted this addition, and the Tribunal upheld this decision, stating that interest on delayed TDS payment is compensatory and not penal, thus allowable under Section 37(1) of the Act, drawing from the Supreme Court’s decision in Lachmandas Mathuradas vs. CIT.4. Treatment of Share Transaction Loss as Business Loss:The AO treated the Rs. 65,33,582/- share transaction loss as speculative as per Explanation to Section 73 of the Act. The CIT(A) allowed the set-off of this speculative loss against speculative income. The Tribunal upheld the CIT(A)’s decision, noting that the assessee had already treated the loss as speculative and claimed set-off accordingly.5. Undisclosed Income and Investment Verification:The AO added Rs. 1,04,941/- due to undisclosed income, which the assessee conceded. The Tribunal reversed the CIT(A)’s deletion and confirmed the AO’s addition. Regarding the Rs. 14,72,050/- undisclosed investment, the CIT(A) directed the AO to verify the transaction details from the assessee’s books, which the Tribunal upheld, finding no infirmity in the CIT(A)’s order.Conclusion:The Tribunal partly allowed the assessee’s appeal for statistical purposes, remanding certain issues back to the AO and CIT(A) for fresh adjudication. The Revenue’s appeal was also partly allowed, with some additions confirmed and others remanded for verification. The Tribunal emphasized the need for proper documentation and adherence to legal precedents in adjudicating tax matters.