TaxTMI 
TaxTMI 
2017 (6) TMI 1278
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....ion of learned AR that leave encashment was claimed on the basis of decision of Calcutta High Court in case of Exide Industries Limited, operation of which was stopped by the Hon'ble Supreme Court. 6. Our attention was invited to the order of the Tribunal in case of Birla Sunlife Asset Management Company Ltd., in ITA No.5457/Mum/2013 dated 30/06/2015 wherein under similar facts and circumstances, matter was restored back to the file of the AO. 7. We had carefully gone through the order of the Tribunal in case of Birla Sunlife Asset Management Company Ltd., (Supra) wherein matter was restored back by the Tribunal to the AO after having the following observation:- 9. In view of the observations of the Hon'ble Supreme Court, in our view, it will be proper to dispose of this appeal in the light of the order of the Hon'ble Supreme Court dated 08.05.2009 passed in the case of "CIT vs. Exide Industries Ltd." (supra). We therefore dispose of the present appeal with a direction that the assessee will pay the tax as if section 43B(f) is on the statute book, however, till the decision of the Hon'ble Supreme Court in the case of "CIT vs. Exide Industries Ltd." (supra), the Reven....
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....uld have charged interest on said delayed payment, the interest would have been allowable as a business expenditure. 11. It is further submitted that Assessing Officer has invoked the provisions of S. 40(a)(ii) of the Act which is not applicable to the interest payment so made by assessee. 12. As per learned AR, on perusal of the said provisions, it is evident that what is disallowable is 'any sum paid on account of any rate or tax levied on profits or gains of any business or profession'. It is submitted that as per the said provisions, income tax payable by assessee or interest on income tax payable by assessee i.e. personal income tax is not allowable as deduction. It is submitted that TDS is not personal tax rather it is a tax on the third person which would not be covered u/s 40(a)(ii). Similarly interest paid on TDS is not 'on account of 'any personal tax and hence the same would not be hit by the provisions of S. 40(a)(ii) of the Act. 13. It was also submitted that it is not the case of the Assessing Officer that interest paid is not an expenditure u/s 37 of the Act. It is submitted that the Assessing Officer has equated the interest on TDS with inte....
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....hat if payer had defaulted in deducting tax at source from such payments the non resident is no absolved from payment of taxes thereupon. 17. The facts of the present case are not with regard to the short deduction of TDS made by assessee. In the present case, TDS has been deducted correctly but the same was not deposited in time with the Government on which the assessee paid interest. The said interest is a business expenditure and not hit by provisions of S. 40(a)(ii) for reasons stated above. 18. It was further submitted that the interest paid on TDS is compensatory in nature and hence would not be hit by Explanation to S. 37(1) of the Act. In view of the above, it is submitted that interest on TDS is allowable us/ 37 of the Act and is not hit by provision of S. 40(a)(ii) of the Act. 19. We have considered rival contentions and gone through the orders of the authorities below. In this case, AO has disallowed interest paid on delayed payment of TDS by invoking provision of Section 40(a)(ii). So far as nature of payment is concerned, we are in agreement with learned AR that this interest is not on the personal tax but is attributable to the tax which, the assessee has ded....
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....an integral part of the assessee's business. Thus, the assessee had deep interest in the marine construction business and as a result the assessee invested entirely in the share capital of EOSL. It is submitted that the above investments were made as an extension of existing business which were purely on account of commercial expediency. 28. However, the Assessing Officer has held that borrowed funds were used for the above investments in subsidiary and hence, he disallowed the interest on borrowed funds u/s 36(1)(iii) of the Act. 29. We have considered rival contentions. From the record, we found that during the course of assessment the assessee, vide letter dated 22.03.2013 has furnished copies of Bank statement from Dena Bank from which the funds corresponding to the investment in aforesaid equity shares have been made by the assessee. The relevant details are extracted herein below for better understanding of the issue: S.No. Entry Date Posting Date Amount (Rs.) Text Bank 1 10.03.2009 01.03.2009 15,00,000 AS PER DR BOI-MUM-CC- 16030110000019-Deposit 2 06.04.2009 01.03.2009 4,50,00,000 BEING . INVESTMENT BOI-MUM-CC-....
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....ments in equity shares of EOSSL is not allowable u/s.36(1)(iii) of the Act. 32. The AO further observed that since the assessee has claimed interest expense u/s.36(1)(iii), therefore, the onus is on the assessee to prove that the entire borrowed funds were used for the purpose of business and retained in the business during the relevant year. 33. The AO further observed that if the assessee had not made investment in EOSSL, the need to borrow money would have been alleviated. Since the assessee has not furnished any evidence or fund flow statement to prove that the monies advanced to its subsidiaries is not made out of borrowed funds the contention of the assessee is not acceptable as it is for the assessee to submit the direct nexus to prove that investments in shares of EOSSL is made out of its own funds, and also the utilization of the borrowed funds which the assessee failed to prove. The onus was on the assessee to prove with evidence and satisfy the assessing officer that interest bearing fund is not diverted for the non interest bearing or non income earning purpose, since deduction on account of interest was being claimed by it. Further, in the process of examination,....
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....er strengthens the stand of the assessee that the said investment were for business purpose. It was further submitted that the assessee has sufficient own funds to cover up the investments in subsidiary. The own funds available with the assessee as per the balance sheet as on 31.03.2009 are Rs. 600.02 crores whereas the investments are Rs. 44.95 crores. 39. Reliance was placed on the decision of Hon'ble Bombay High court in the case of Reliance utilities (313 ITR 340) wherein it was held that, in case of mixed funds, if own funds are sufficient to cover up the value of investments it has to be presumed that the own funds have been utilised for the purpose of investments and hence, no interest disallowance is required to be made u/s 36(1)(iii) under the Act. 40. It was further submitted that the assessee has used the overdraft account for making investment in subsidiary. It was submitted that merely because overdraft account was used for making investments, it cannot be concluded that interest free funds were not used for making investment. On the other hand, ld. DR relied on the order of lower authorities. 41. In this regard, reliance was also placed on the decision of....
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....h its books of accounts. The assessee filed details of reconciliation of AIR information vide letter dated 08/03/2013. On doing a party-wise reconciliation, AO found that the following receipts aggregating to Rs. 4,99,58,097/- are not recorded in the books of the assessee. Name of the Party As per AIR As per Books Difference Remarks State Bank of Hyderabad 11,91,043 0 11,91,043 Accounted in A.Y.2010-11 Essar Holdings Ltd., 4,44,05,195 0 4,44,05,195 Accounted in A.Y.2010-11 Hindustan Construction Co. 43,61,859 0 43,61,859 Not pertains to assessee TOTAL 4,99,58,097 4,99,58,097 48. The assessee was asked to reconcile the difference of Income party wise as shown in its Books of Account and as reflected in AIR data. It was submitted by the assessee that the amounts credited by Essar Holdings Ltd. & State Bank of Hyderabad have been accounted for by the assessee in F.Y.2009-10 (A.Y.2010-11). With regard to the amount shown to have received by the assessee from Hindustan Construction Co., it was contended that the same does not pertain to the assessee. 49. After considering the assessee's reply ....