2018 (12) TMI 1462

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.... "Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal has erred in law and on facts in deleting the addition of Rs. 1,96,33,029/- made on account of Letter of Credit (LC) discount charges u/s 40(a)(ia) of the I. T. Act?" 2. The assessment year is 2008-09 and the relevant accounting period is the year ending on 31.3.2008. 3. The assessment in the case of the respondent-assessee was completed under section 143(3) of the Act on 28.3.2013 determining total income at Rs. 6,82,35,270/-. Thereafter, the assessment came to be reopened under section 147 of the Act on the ground that during the period under consideration, the assessee Company had debited payment of interest of Rs. 7,26,34,754/-, which incl....

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....nd thus, there was a requirement to deduct TDS on Rs. 1,96,33,029/-. Therefore, the provisions of section 40(a)(i) of the Act were attracted. He, accordingly, disallowed expenses to the tune of Rs. 1,96,36,029/-. Being aggrieved, the assessee carried the matter in appeal before the Commissioner of Income Tax (Appeals), who by an order dated 26.8.2016, allowed the appeal and set aside the disallowance. Revenue went in appeal before the Tribunal, which concurred with the view adopted by the Commissioner (Appeals) and dismissed the appeal. 5. Mrs. Mauna Bhatt, learned Senior Standing Counsel for the appellant, assailed the impugned order made by the Tribunal on the grounds set out by the Assessing Officer in the order passed under section 143....

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....ed LC in favour of their supplier and the payment due under such LC was 60 to 75 days from the date of purchase. (d) Under the agreed arrangement, their supplier discounted the LC with the bank and the bank deducted some amount for early payment and they had to reimburse their supplier such charges deducted by the bank. (e) Their supplier informed them the amount of bill discount charges and they credited the supplier's account and debited the LC discount charge account. In effect, in addition to the invoiced cost of goods credited to supplier's account, there is additional credit in their account towards reimbursement of cost incurred by them towards early discounted LCs resulting into additional cost towards purchase of goods. 8. It ....

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....0. From the facts as emerging from the record, it is evident that the assessee had opened LC in favour of its suppliers who had discounted the same with the bank. On account of early payment, the bank had deducted some amount which the assessee was liable to reimburse to its suppliers. Accordingly, the assessee had credited the suppliers' account with the amount of bill discount charges and had debited the LC discount charge account. The amount credited to the suppliers' account was in the nature of reimbursement of cost incurred by the supplier towards early discounting of the LC resulting into additional cost towards purchase of goods. Thus, the assessee has not made payment of interest to the bank or to the supplier and the amount credit....