TaxTMI 
TaxTMI 
2012 (11) TMI 1233
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....essee had filed its return of income declaring a total income of Rs. 6,10,66,421/-, which was processed u/s 143(1) of the IT Act. Subsequently, the case was selected for scrutiny and the assessment had been completed u/s 143(3) by the AO by making the following disallowances: 1. Disallowance u/s 36(1)(va) of Rs. 8,61,225/- 2. Disallowance u/s 40(a)(ia) of Rs. 1,50,729/-. 3. Disallowance of proportionate interest income of Rs. 6,00,000/-. 3. Aggrieved, the assessee carried the matter in appeal before the CIT(A). 4. As regards the disallowance u/s 36(1)(v) of Rs. 8,61,225/-, the AR of the assessee contended before the CIT(A) that the assessee had already furnished complete details of PF & ESI, and the AO has not considered whil....
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....ited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the PF ct as well as in the ESI Act. Therefore, the Act permits the employer to make the deposit with some delay, subject the aforesaid consequences. In so far as the Income-tax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed, as per the principle laid down by the Hon'ble Supreme Court in the case of CIT Vs. Vinay Cement Ltd., [2007] 213 CTR (SC) 268." 10. The Karnataka High Court in the case of CIT Vs. Sabari Enterprises (supra) held that "contributions made by the assessee to PF and ESI are allowable deduction even though made beyond stipula....
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....e issue in accordance with law. 16. The last issue is with regard to the proportionate disallowance of interest expenses of Rs. 6,00,000/-. 17. The AO noted that the assessee had invested Rs. 50,00,000/-in the share capital of M/s Creative Health Care Pvt. Ltd. in order to earn dividend income, which is exempt from tax and since the assessee had borrowed funds and was paying interest thereon, the interest attributable to the investments made in shares to earn dividend income is exempt. Therefore, he was of the view that the proportionate interest on the investment made needs to be disallowed from the interest debited to the P&L A/c. Relying on the decision of Hon'ble Kerala High Court in the case of CIT Vs. VI Babi & Co., 254 ITR 248,....
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....os. 2630/Mum/2010 & 2726/Mum/2010 vide order dated 22nd July, 2011. 21. On the other hand, the learned DR has relied upon the decision of the Jurisdictional Bench of ITAT, Hyderabad in the case of M/s Suryavamshi Spinning Mills Ltd. in ITA No. 1173/H/2009 & others, order dated 31/01/2011. 22. We have heard the arguments of both the parties and perused the record as well as decisions cited. The coordinate bench in the case of Suryavamshi Spinning Mills Ltd. (supra) held as follows: "9. We have heard both the parties and perused the materials on record and carefully gone through the case law cited by the parties. The main plea of the assessee's counsel herein is that M/s SVTL as become a sick company, as such interest was not cha....
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....opinion, the entire money in a business entity comes in a common kitty. Monies are received as share capital or as term loan or working capital loan or as internal accruals do not have a different colour. Whatever the receipts in the business, have the colours of business receipts and have no separate identification. The only thing sufficient is to disallow the interest paid on the borrowing to the extent of amount lend to subsidiary company without carrying any interest would be that the assessee has some loans or interest bearing debts to be repaid. In case, the assessee had a surplus which according to it could not be repaid immediately, it would either be required to be circulated and utilized for the purpose of business or to be invest....