TaxTMI 
TaxTMI 
2018 (10) TMI 1595
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....g tax arrears. 2. Three issues are raised in this appeal, viz. , (i) whether the CIT(A) is justified in directing the Assessing Officer to tax an amount of Rs. 72,45,000 and interest of Rs. 13,04,700 at the maximum marginal rate and allow exemption for the balance amount?; (ii) whether the CIT(A) is justified in confirming the disallowance of Rs. 21,27,846 by invoking the provisions of section 40(a)(ia) of the I. T. Act ? and (iii) whether the CIT(A) is correct in confirming the disallowance of labour charges expenses amounting to Rs. 5,40,390?; 3. We shall adjudicate the issue raised as under:- Whether the CIT(A) is justified in directing the A. O. to tax an amount of Rs. 72,45,000 and interest of Rs. 13,04,700 at the maximum marg....
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....payee cheques. The Assessing Officer, however, rejected the contention raised by the assessee. The A. O. held that there was a clear violation of provisions of section 13(1)(c) of the I. T. Act since the assesseetrust had advanced money to the wife of Managing Trustee, a person mentioned u/s 13(3) of the I. T. Act. It was further held by the A. O. that the wife of the Managing trustee had the benefit of the advance, without payment of any interest. The A. O. was also of the view that since the assessee trust was paying interest on its borrowings, it was liable to be taxed for further amount of Rs. 13,04,700, being 18% interest on advance of Rs. 72,45,000. The A. O. concluded by stating that since there is a violation of provisions of sectio....
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....e taxed only the amount of Rs. 72,45,000/- and should not have denied the exemption under section 11 altogether. Subsequent repayment of the amount of Rs. 72,45,000/- by the wife of the Managing Trustee is of no consequence. It is also seen that even though she has held on to the money for a substantial period of time, she has not paid any interest to the appellant Trust, whereas the Appellant Trust has been paying interest on its borrowings. Therefore, I do not see any infirmity in the decision of the AO in disallowing the proportionate interest amounting to Rs. 13,04,700/-. Thus, in view of above, discussion, the AO is directed to tax the amount of Rs. 72,45,000/- + Rs. 13,04,700/- at the maximum rate and allow exemption u/s 11 f....
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....edly, the amount has been advanced to M/s. VUS Timbers, a proprietory concern of wife of the Managing trustee. Therefore, the advance clearly comes within the mischief of section 13(1)(c) of the I. T. Act unless it is proved that the said advance is for the purpose of assesseetrust itself. It is the claim of the assessee that the amount has been advanced for purchase of timber for the proposed construction of a medical college. It is an admitted fact that no permission was given for the setting up of medical college. The assessee has also not produced any application or other documents which ought to have been submitted to the Governmental authorities or Medical Council of India for the proposal for setting up of medical college. The story ....
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....nfirm the order of the CIT(A) on this issue. Whether the CIT(A) is justified in confirming the disallowance of Rs. 21,27,846 by invoking the provisions of section 40(a)(ia) of the I. T. Act? 4. 1 The Assessing Officer has made the disallowance of Rs. 21,27,846 by invoking the provisions of section 40(a)(ia) of the I. T. Act. The relevant finding of the A. O. reads as follows:- "It is seen that Shri Varghese Innocent is appearing in the list of sundry creditors of M/s. Ilahia Trust division for Rs. 11,83,384/- and as sundry credit with M/s. Ilahia School of Science & Technology, Muvattupuzha for Rs. 9,44,462/-. The authorized representative was asked to furnish the nature of work carried out by Varghese Innocent and TDS ....
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....d the expenditure by invoking the provisions of section 40(a)(ia) of the I. T. Act, which was confirmed by the CIT(A). Hence, we see no reason to interfere with the order of the CIT(A) and we confirm the same. 4. 5 Therefore, this issue raised by the assessee is rejected. Whether the CIT(A) is correct in confirming the disallowance of labour charges expenses amounting to Rs. 5,40,390? 5. 1 The Assessing Officer had disallowed a sum of Rs. 5,40,392. The relevant finding of the A. O. reads as follows:- "8. The assessee was asked to furnish the nature of expenses and proof regarding the same. The assessee replied that these are the payments made to casual workers for various works done by them on various days settled then and....