TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 277
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....xcept the claim of excess depreciation which was given relief and on which the Revenue is not an appeal. Aggrieved on the order of the learned Commissioner of Income-tax (Appeals), the assessee is in appeal before us. 3. Ground No. 1 is as under : "1. The Commissioner of Income-tax (Appeals) erred in law and facts of the case in confirming the addition of Rs. 58,714 by the Assessing Officer under section 40A(3) of the Income-tax Act, 1961, ignoring the fact that they are independent payments supported by vouchers and cannot be aggregated." 3.1 The issue pertaining to this ground is that the Assessing Officer noticed from the books of account that the assessee made payments on various dates in cash exceeding Rs. 20,000 each amounting to Rs. 2,93,569 and 20 per cent. thereof was disallowed invoking the provisions of section 40A(3). 3.2 Before learned Commissioner of Income-tax (Appeals), the asses see contested that there is no single payment in excess of Rs. 20,000 and the amounts were paid at different times in the day, which would not attract the provisions of section 40A(3) of the Income-tax Act. Copy of the cash book furnished in support of the claim. 3.3 The learned Commi....
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....he Income-tax Act as applicable are not attracted. Accordingly, the disallowances made by Assessing Officer, as confirmed by the Commissioner of Income-tax (Appeals), stands deleted. The ground is allowed. 4. Ground No. 2 is as under : "2. The Commissioner of Income-tax (Appeals) ought to have deleted the addition under section 40(a)(ia) of the Income-tax Act, 1961 amounting to Rs. 1,78,280 considering the fact that TDS has been deducted and paid." 4.1 The issue pertains to the disallowance of an amount of Rs. 1,78,280 invoking the provisions of section 40A(3) of the Income-tax Act. The Assessing Officer noticed that in the five cases of contractors, TDS has been charged to the respective accounts and later Rs. 50,620 was written off. The Assessing Officer noted that the assessee had paid/credited various accounts to the contractors without deducting TDS. However, the assessee submitted that tax on contract amounts have been paid to the Government and expenditure has been incurred by the company itself. The Assessing Officer invoking the provisions of section 195A of the Income-tax Act grossed up the amount and disallowed an amount Rs. 1,78,280. 4.2 The learned Commissioner of....
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....count. Even though the same was reiterated before the learned Commissioner of Income-tax (Appeals), the learned Commissioner of Income-tax (Appeals) rejected the ground that the assessee has not preferred the ground nor substantiated the contentions made in the statements of facts. 5.2 After consider the rival contentions, we are of the opinion that the disallowance is not warranted. The assessee has not violated the provisions of section 40(a)(ia) of the Income-tax Act as the TDS has been deducted and paid to the Government. Moreover the amount is also not outstanding at the end of the year. In view of that, we direct the Assessing Officer to delete the amount and the ground is accordingly allowed. 6. Ground Nos. 4 and 5 are as under : "4. The Commissioner of Income-tax (Appeals) ought to have considered that fact that rent paid of Rs. 8,10,000 for the managing director's residence is in the course of business and exclusively for the purpose of business of the company and allowed the same on the ratio of the decision of the hon'ble Supreme Court in the case of Upper India Publishing House P. Ltd. v. CIT [1979] 117 ITR 569 (SC) and also that in the case of D. C. Gandhi ....
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....ncome offered. The learned counsel referred to the return filed at Rs. 13,28,963 whereas the revised computation of the director would come to Rs. 11,62,590. It was submitted that the expenditure was for the purpose of business and allowable in the hands of the company. 6.4 After considering the rival contentions, we are of the opinion that the provision of rent-free accommodation to the director is generally provided by the company. However, the assessee has not placed on record the terms of employment or the resolution passed with reference to the provision of accommodation to the managing director. Not only that the Assessing Officer has invoked the provision of section 40A of the Income- tax Act, however, there is no finding of the Assessing Officer that the amount was unreasonable. In these circumstances the disallowance cannot be either deleted or sustained in the absence of complete details. It is a fact that the respective recipients have declared the income. It is also the fact that the director has not shown its value in the computation of income nor the company included in Form No. 16 given to the director. In these circumstances, we are of the opinion that the same is ....
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.... Income-tax (Appeals) however distinguished the said judgment as it pertains to the assessment year 1972-73. He also referred to the judgment of the hon'ble Supreme Court in the case of Deputy CIT v. Core Health Care Ltd. [2008] 298 ITR 194 (SC) and stated that the proviso inserted in section 36(1)(iii) of the Income-tax Act with effect from April 1, 2004 will operate prospectively and accordingly the proportionate disallowance was required to be capitalised. 7.3 The learned counsel while reiterating the submissions made before the Commissioner of Income-tax (Appeals), referred to the judgment of the hon'ble Delhi High Court in the case of CIT v. Bharat Hotels Ltd. [2016] 381 ITR 222 (Delhi) for the proposition that in a business which is already in existence, the funds borrowed for expansion of the business is allowable as revenue expenditure. It was further submitted that the term "loan" obtained from new machinery was only Rs. 69.30 lakhs and not the entire amount which include working capital loans by hypothecation of stock. If at all a disallowance is required, it should be restricted to the term "loan" obtained for the purpose of investing in assets and not on the wo....