TaxTMI 
TaxTMI 
2017 (11) TMI 1359
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..... 376/Kol/2013. 4. In this appeal various grounds have been raised out of which ground No. 3 to 8 were not pressed and therefore same are dismissed as not pressed. Ground No.9 is of general in nature and does not require separate adjudication. Remaining grounds are reproduced as below:- "1) That the Ld. CIT(Appeals) were grossly erred in confirming the disallowance of Rs. 1,60,37,426/- out of Interest paid Rs. 1,71,36,916/-. 2) That the Ld. Assessing Officer was grossly erred in treating loss of Rs. 70,67,236/- in Future & Options and Derivative transaction as bogus loss and Ld. CIT(Appeals) grossly erred in not adjudicating the said ground in spite of proper submission made before him with regards to said disallowance." 5. First issue raised by assessee in this appeal is that Ld. CIT(A) erred in confirming the order of Assessing Officer by restricting the disallowance of Rs.1,60,37,426/- out of interest paid Rs.1,71,36,916/- on account of diversion of funds. 6. Briefly stated facts are that assessee is a limited company and engaged in trading business of raw jute and derivative export of jute products. The assessee in its balance-sheet as on 31.03.2008 a....
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....d as deduction during the year. On being question by the AO for the non-deduction of TDS, assessee submitted that in fact, the interest expense to M/s PEC Ltd. represents the reimbursement of bank charges to M/s PEC Ltd. for arranging the LC facility from the bank. Therefore, there was no need to deduct TDS under the provision of Section 194A of the Act. However, AO disregarded the contention of the assessee and made the disallowance of the interest expense claimed by the assessee for Rs.1,71,36,916/- on account of following reasons. a) Diversion of interest bearing fund to non-commercial activity i.e., providing interest free loan / advance to its group concern; b) The interest expense of Rs.81,77,928/- was claimed without deducting TDS as specified u/s. 194A of the Act; c) Out of total interest of Rs.81,77,928/- to M/s PEC Ltd., an amount of Rs.24,48,531/- represents the prior period expense. In view of above, AO made the disallowance expense for Rs.1,71,36,916/-. 8. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted as under:- i) PEC Ltd. is wholly owned company by the Government of ....
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....pted the disallowance of interest expense on the Rs.10,06,58,478/- as worked out for Rs.1,35,88,895/- (13.5% of 100658478). The assessee against the finding of Ld. CIT(A) filed a rectification application u/s. 154 of the Act wherein Ld. CIT(A) has accepted the fact that assessee has never agreed for the disallowance of interest for Rs.1,35,88,895/-. The relevant extract of the order of Ld. CIT(A) passed order u/s 154 of the Act is reproduced as below:- "4. The rate of 13.5% has been used as calculation for determining the disallowance on merits. It is held that the authorized representative has not accepted the disallowance of interest on interest free advances on merits. In accepting the rate and taking the interest @ 13.5%, the issue of interest free advances and corresponding disallowance of interest u/s. 37 was decided on merits and there is no mistake apparent from record to be rectified u/s 154 of the Income-tax Act, 1961. Hence, this plea of the appellant is partly allowed to that extent." Ld. AR before us further submitted that he has been instructed by the assessee not to press the amount of prior period interest of Rs.24,48,531/- paid to M/s PEC Ltd.. He fu....
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....he Bench to confirm the same. 12. We have heard the rival contentions of both the parties and perused and carefully considered the material on account of record; including the judicial pronouncements cited and placed reliance upon. From the foregoing discussion, we find that the AO made the disallowance of interest expense claimed by assessee on account of the following reasons:- 1) Diversion of interest bearing loan for non-commercial purpose without charging any interest, 2) Interest expense for Rs.81,77,928/- was disallowed on the ground of nondeduction of TDS; 3) Out of interest of Rs.81,77,928/- a sum of Rs.24,38,531/- was disallowed on account of prior period item. Ld. AR before us fairly conceded and agreed not to agitate the disallowance of Rs.24,48,531/- on account of prior period expense. Out of total disallowance of interest for Rs.1,71,36,916/- has allowed the interest of Rs.58,16,270/- as detailed under:- (B) Disallowance of interest allowed by CIT(A) Rs. (i) interest to PEC Ltd. (relating to relevant period) 57,29,397/- (ii) car loan 80,558/- (iii) Interest on TDS 6,315/- 58,16,27....
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....appeal is that Ld. CIT(A) erred in not adjudicating the ground of appeal raised by assessee for treating the loss of Rs.70,07,236/- as bogus loss. 14. At the outset, Ld. AR for the assessee before us submitted 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 to the file of Ld. CIT(A). In view of the above, we are inclined to restore the matter back to the file of Ld. CIT(A) to adjudicate the matter in accordance with law. This ground of assessee's appeal is allowed for statistical purpose. 15. In the result, assessee's appeal is partly allowed for statistical purpose. Coming to Revenue's appeal in ITA No.532/Kol/2013. 16. Grounds raised by Revenue are reproduced below:- "Ld. CI....
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....O has disallowed the interest levied on account of late deposit of TDS u/s 40(a)(ii) of the Act. The AO was of the view that the interest on TDS is nothing but income tax paid by the assessee on behalf of parties. However, in our considered view, the interest charge was levied on account of delay in making payment of TDS which is compensatory in nature. As such, the interest on delayed payment is not in the nature of penalty in the given facts and circumstance. 22. Further 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. In holding so, we draw the principle laid down by Hon'ble Supreme ....
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....oss was already treated by it as speculative in nature which was claimed to be set off against the speculative income only. Ld. CIT(A) after considering the submission of assessee deleted the addition made by AO by observing as under:- "21. The appellant submitted that it had not done any hedging. The transactions were not in the nature to guard against any loss of future fluctuation in price for sale/purchase. Thus the commodity profit should be treated as speculative profit as claimed by the assessee and allowed set off against the share trading business which has been held by the Assessing Officer as speculation business. In the facts and circumstances it is held that the appellant has done commodity trading in jute which is the line of the business of the appellant but the transactions have been done without taking delivery and the gain is a speculation gain. The appellant has shown the profit from the same as speculative profit in the Profit & Loss Account. The Assessing Officer has already held the share loss amounting to Rs. 65,33,582/- as speculation loss as per explanation to section 73 of the Income Tax Act, 196. Therefore, the set off of speculation pro....
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....8 received from M/s Baljit Securities Pvt. Ltd. Ld. CIT(A) after considering the submission of assessee directed the AO to verify the necessary details from the books of account of assessee and accordingly adjudicate the issue by observing as under:- "24. I have carefully considered the observations of the Assessing Officer in the assessment order, and submissions of the appellant. The appellant is directed to give a certificate based upon his books of account that such dealings have been entered by the appellant with those parties whose receipt is being asked by the Assessing Officer. On receipt of such a certificate showing such dealings expressly by the appellant, the Assessing Officer will verify such information. The appellant has filed the copy of the contract note received from Balajit Securities Pvt Ltd in which both amounts are reflected totaling to Rs. 14,72,050/-. This ground of appeal is accordingly considered to be allowed for statistical purposes." The Revenue, being aggrieved, is in appeal before us. 33. Before us both the parties relied on the order of Authorities Below as favourable to them. 34. We have heard the rival contentions of both the part....