TaxTMI 
TaxTMI 
2004 (9) TMI 27
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....ince they were being disallowed in the earlier years. The assessee preferred an appeal before the Tribunal. The Tribunal had affirmed the order of the Commissioner of Income-tax (Appeals). In this context, the present appeal has been filed. The appeal was admitted on the grounds as quoted below: (i) Whether the Tribunal was justified in law in holding disallowance of carrying charges of Rs. 27,90,717? (ii) Whether the finding of fact is perverse? Appellant's submission: Mr. Khaitan, appearing on behalf of the appellant, contends that the amount which was payable to Bilaspur Industries was retained by the assessee, who utilised the same for the purpose of its business. The income earned out of this retained amount was shown as its income under the head "Income from business or profession" and was so taxed. In the process, it had shown the amount payable by Bilaspur Industries to its bankers from which Bilaspur Industries had borrowed the capital, payable as carrying charges by the assessee to Bilaspur Industries. In effect this was attempted to be shown as interest payable on the amount retained by it though described as carrying charges. According to him, this amount was laid o....
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.... of the assessee was, in fact, a device to avoid taxes at the hands of its sister concern. He referred to the accounts for the assessment years of the Bilaspur Industries and as well as the other two sister concerns to point out that this has never been shown to be a liability of the assessee. Inasmuch as Bilaspur Industries has not reflected this amount in its account either as income or otherwise, neither it has shown the liability towards the bank charges. This part has been shown to be neutral in its account. It has neither shown the liability towards the UCO Bank nor as amount receivable from the assessee. He has also pointed out that there is no nomenclature of carrying charges either in the accounting system or in the Income-tax Act, inasmuch as this amount was never spent for the purpose of carrying any goods. On the other hand, it is alleged to be utilised for payment of interest, which the Bilaspur Industries is liable to pay to the UCO Bank. Admittedly, there is no privity of contract between the assessee and the UCO Bank. Therefore, the interest payable to the UCO Bank by Bilaspur Industries even if paid by the assessee is to be routed through Bilaspur Industries and a....
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....e: Whether this is a colourable device to help someone else to avoid tax not, is not relevant for the purpose of assessing the income at the hands the assessee. If someone avoids tax, in that event, it would be its own liability and for which in this case Bilaspur Industries would be liable. But income when assessed at the hands of the assessee, it has to be assessed under the provision of the Act. Once it is shown to be an income of the assessee, it becomes assessable in the hands of the assessee. Having regard to the facts and circumstances of this case, this income is assessable at the hands of the assessee irrespective of the fact as to how it has been reflected or treated in the accounts of Bilaspur Industries. Whether the assessee can claim deduction under section 37: It is pointed out by Mr. Khaitan that this amount is not in the nature described in sections 30 and 36. Neither it is in the nature of capital expenditure nor personal expenses of the assessee. Since this qualification h been satisfied, therefore, this amount comes within the purview of section 37. At the same time, he has pointed out that this expenditure is payable on account of retention of the amount pay....
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....ity would not have the effect of converting the liability into a contingent one. In computing its taxable profits of a particular year, the assessee may properly deduct not only the payment actually made but also the amount payable in a subsequent year. It was so held in Amrish and Co. [2002] 257 ITR 180 (Guj). Whether the amount was spent or expended for the business: The definition of interest in section 2(28A) defines to mean any amount payable in respect of any monies borrowed or debt incurred including a deposit, claim or other similar right or obligation or in respect of any credit facility. In this case, admittedly, the assessee had availed of the facility of credit by retaining the money payable to Bilaspur Industries, which is also a debt incurred by it or a deposit of the retained amount of Bilaspur Industries with the assessee. Therefore, any amount payable on account of use of such fund as compensation or otherwise would amount to interest payable. Whether the assessee deducts this amount under section 194A or not, will not change the nature and character of the amount payable. On account of default of deduction under section 194A the assessee would be exposed to or ....