TaxTMI 
TaxTMI 
TaxTMI 
2012 (9) TMI 147
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.... :- "During the course of hearing, it has been found that the assessee has claimed compensation expenses of Rs.80,00,000/-. On query it has been submitted by the àssessee that it has entered into an agreement with Diana Tea Co. Ltd. for repayment of loan of Rs.1,10,50,000/- On going through the agreement it has been found that the interest of Rs.80,00,000/- has to be paid in four installments starting from the F.Y.2008- 09. The loan taken is a very old loan. Since there is no liability to pay in the relevant F.Y., the expenses debited a compensation of Rs.80,00,000/- has been disallowed and added back to the total income. So, even if it was amply clear that there was no liability to pay arisen, the assessee claimed it as expenses which amounts of mis-representation of facts and furnishing wrong particulars of income. Accordingly is has concealed the taxable income by making wrong claim intentionally." 4.1. And further he disallowed an amount of 82,854/- u/s 14A of the IT Act while calculating the tax under MAT by observing as under : "From the profit & loss account it appears that the assessee has earned exempted income of Rs.82,33,292/- from LTCG and dividend and interes....
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.... However, as per the deed of settlement both the parties have mentioned that no interest has been paid. It is also settled in the deed that w.e.f. 1.4.2008 no interest in whatever name shall be charged or claimed by M/s Diana Tea Co. Ltd. from the appellant. The Assessing Officer has observed that there is no liability to pay in the current year as the loan is old and this liability does not pertain to this year. 6. The authorised representative of the assessee was asked during appellate proceedings to explain why the TDS u/s 194A has not been done on interest payment. The A.R. replied that it is not interest payment but a compensation for the amount borrowed from M/s Dina Tea Co. Ltd. However, no interest was paid during this period. The word interest has been defined in Section 2(28A) and the liability to deduct Tax i.e. TDS is provided in Section 194A. 194A. Interest other than "Interest on securities". (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income by way of interest on securities, shall, at the time of credit of such income to the account of the payee or at th....
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....4A also provides that when such interest is credited in any account by whatever name it may be called then such credit will be deemed to be credit of such income to the account of the payee and provisions of Section 194A will apply. In this case the assessee has incurred liability to pay Rs.80,00,000/- as due interest on the amount received from M/s Dina Tea Co. Ltd. It is held that the amount of Rs. 80,00,000/- is in nature of interest payment. The provision of Section 194A r.w.s. 2(28A) are applicable to deduction TDS on the amount of Rs. 80,00,000/-. The deduction of TDS is a strict liability as per the provisions of section 40A(ia). Therefore, the expenditure of Rs.80,00,000/- is disahlowable u/s 40(a)(ia). 8. The assessee has relied on the following cases: a) Navjivan Roller Flour and Pulse Mills Ltd. Vs. Deputy Commissioner of Income Tax (Assessment), 315 ITR 190 (Guj) [2009] b) Deputy Commissioner of Income Tax (Assessment) Vs. Arvind Mills Ltd. 314 ITR 251 (Guj) [2009] c) TVS Finance and Services Ltd. Vs. Joint Commissioner of Income Tax, 318 ITR 435 (Mad) [2009] The facts and issues are different from the case of the assessee in the above stated case laws. 9. From th....
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....o Telecom Infrastructure Ltd vs ACIT.,Circle-14(1), New Delhi vide ITA NO.4931/Del/2010 order dated 18.02.2011. Therefore he requested to delete the addition made u/s 14A of the IT Act. 6. On the other hand, the ld. DR appearing on behalf of the revenue relied on the orders of the revenue authorities and further pointed out that the ld. CIT(A) has considered all the points raised by assessee and has given a categorical findings on account of adjustment of Rs.80,00,000/-. Therefore he requested to confirm the action of ld. CIT(A). 6.1. As regarding the disallowance made u/s 14A of the IT Act the ld. DR has not disputed the submissions made by the ld. Counsel for assessee. 7. After hearing the rival submissions and on careful perusal of materials available on record, it is observed that assessee has debited an amount of Rs.80,00,000/- to the compensation account and credited the same to M/s.Diana Tea Co.Ltd. and shown as outstanding liabilities under the head "Security liability and provisions". It is further observed that in the notes attached to the accounts it was mentioned that that during the year the company has provided Rs.80,00,000/- as compensation to the lender M/s.Diana....