2016 (2) TMI 463

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..... The only ground raised by the Revenue in these two appeals is with regard to deletion of disallowance of Rs. 3,75,25,075/-(A.Y 2010- 11) & Rs. 4,43,04,063/- (A.Y 2011-12) on the interest expenses u/s.40(a)(ia) of the Act. 3. The brief facts of the case are that the assessee filed its return of income on 24.02.2011 and 04.10.2011 declaring an incomes of Rs. 29,04,328/- Rs. 1,13,69,615/- for assessment years 2010-11 & 2011- 12 respectively. During the course of assessment proceedings, the ld. Assessing Officer found that the assessee had debited the interest expenses of Rs. 3,75,25,075/- and Rs. 4,43,04,063/- in the Profit and Loss Accounts of financial years 2009-10 and 2010-11. Further on verification, it was found that the assessee had ....

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...., of the Income-tax Act, 1961 - Business disallowance - Interest, etc., paid to resident without deduction of tax at source - Assessment year 2009-10 - Whether for disallowing expenses from business and profession on ground that TDS has not been deducted, amount should be payable and not which has been paid by end of year - Held, yes - Assessee, a shipping company, claimed deduction of salary paid to employees of company 'M' which performed ship, management work on its behalf - Assessing Officer disallowed expenses under section 40(a) (ia) on ground that TDS was not deducted on such expenses - Commissioner (Appeals) and Tribunal deleted disallowance by recording finding that 'M' had deducted TDS on salaries paid by it on beh....

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.... Court, we have to follow the judgment of the Hon'ble Allahabad High Court, which is in favour of the assessee. Accordingly, we hold that the disallowance under section 40(a)(ia) applies only to those amounts 'payable' and not to those amounts 'paid'............" Further the Commissioner of Income Tax(Appeals) observed that the Hon'ble Supreme Court of India, vide CC No.8068/20 14 dated 02.07.20 14, has upheld the decision of the Allahabad High Court (in the case of Vector Shipping Services P. Ltd) by dismissing the SLP filed by the Revenue. Accordingly, the Commissioner of Income Tax(Appeals) considering the decisions of the Allahabad High Court in the case of Vector Shipping Services P. Ltd. (357 ITR 642) (All.), ....

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.... show that any amount outstanding towards outstanding expenses either in the name of sundry creditors or as outstanding expenses as it is outstanding at the end of the close of the previous year relevant to the assessment year. Hence, in the absence of any material to suggest that the amount is outstanding at the end of the close of the previous year relevant to the assessment year, then impugned amount cannot be disallowed u/s. 40(a)(ia) of the Act. Similar view has been taken by the Co-ordinate Bench of Chennai Tribunal in the case of Shri N. Palanivelu Vs. ITO, Salem reported in [2015] 40 ITR(Trib.) 325(Chennai). Accordingly, we direct the Assessing Officer to disallow the only amount which is outstanding at the end of the close of the p....