TaxTMI 
TaxTMI 
2021 (12) TMI 254
X X X X Extracts X X X X
X X X X Extracts X X X X
....ical reasons and had erroneously disallowed the proportionate interest on advance given for business purpose to M/s Temptation Foods as interest free advance." 3. The issue relates to disallowance of interest amounting to Rs. 3,15,616/-, as per provisions of Section 36(1)(iii) of the Act, pertaining to interest free advances made to M/s Temptation Foods amounting to Rs. 50 lacs treating the same to be not for the purpose of business of the assessee. 4. The ld. counsel for the assessee drew our attention to the fact that the impugned advance to M/s Temptation Foods had been made in the preceding year i.e. assessment year 2012-13 and identical disallowance had been made in the said year also which issue had travelled upto the ITAT who had restored the matter to the AO with the direction to determine the funds used for the purpose of making the advance and thereafter adjudicate the issue in accordance with law. That the AO on re-consideration of the issue had deleted the disallowance noting that the advance had been made out of current account and that all the interest bearing funds had been used for the purpose of business of the assessee. In this regard he drew our attention to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... impugned year and that the issue was clearly covered by the aforestated orders for the preceding year. 6. The ld. DR on the other hand relied on the order of the CIT(A) that the assessee had neither demonstrated business purpose for making the impugned advance nor that it had used interest free funds for making the advance. She further pointed out that identical disallowance made in AY 2014-15 was not deleted in appeal by the ITAT. 7. The Ld.Counsel for the assessee countered by stating that in A.Y 2014-15 the assessee had not pressed the ground raised considering the insignificant amount involved of Rs. 26,926/-. He drew our attention to the order of the ITAT in A.Y 2014-15 placed at paper book page no.130-135 bringing out the said facts. 8. We have heard both the parties. It is not denied that identical disallowance of interest on the said advance of Rs. 50 lacs to M/s Temptation Foods had been made in the preceding assessment year also and after various rounds of litigation, when the issue had been restored to the AO by the ITAT directing him to determine the nature of funds used for the purpose of making the advance, it was found by the AO that no interest bearing funds had....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... hands of the shareholders and it was the MD who was shareholder in M/s Punjab Metallics P.ltd. and not the assessee company and therefore, the deemed dividend could be taxed in the hands of the MD only. Copy of the order was placed before us at P.B 130-135. 13. Ld.DR on the other hand relied on the order of the Ld.CIT(A) contending that the conditions specified in section 2(22)(e) of the Act admittedly stood fulfilled in the present case and therefore the amount received by the assessee from Punjab Metallics had been rightly treated as deemed dividend in its hands. 14. The Ld.Counsel for the assessee was asked at bar to explain the position of law vis a vis the issue considering the decision of the apex court in the case of National Travel Services vs CIT CA No.2068-2071 of 2012 dated January 18 2018. 15. To this, the Ld.Counsel for the assessee placed a compilation of judgments before us consisting of 11 judgments. Referring to the same he contended that the issue in the case of National Travel Services Vs. CIT, which travelled upto the Supreme Court and was referred to a larger bench was a different aspect relating to interpretation of the provisions of section 2(22)(e) of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble Supreme Court in the case of National Travel services (supra) being in relation to a different issue as opposed to that as decided by the Hon'ble Delhi High Court in the case of Ankitech Private Limited & Others (supra) pertaining to the taxability to deemed dividend being possible only in the hands of shareholder. He, therefore, contended that the decision of the Hon'ble Delhi High Court in the case of Ankitech Private Limited & Others (supra) was good law and had been reiterated by the Hon'ble Jurisdictional High Court in the case of Sherman Woollen Mills (supra), following which the ITAT had deleted the addition in the case of the assessee for assessment year 2014-15. 17. We have heard both the parties and have also gone through the decisions cited by the Ld.Counsel for the assessee before us. We are convinced that the issue referred by the apex court to a larger bench is not relevant on account of withdrawal of the appeal by the assessee having opted for settlement under the Direct tax Vivad se Vishwas Act,2020 and also on account of the fact that the issue involved related to a different aspect of section 2(22)(e) of the Act as opposed to that before us. As ri....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... had calculated the amount of disallowance by assuming the TDS to have been deducted @ 2% and worked the amount disallowable at Rs. 39,24,228/-. He stated that the disallowance actually amounted to only Rs. 7,88,680/- and pleaded that it be restricted to the said extent. 21. The ld. DR, however, pointed out that Ld.CIT(A) had noted that no affidavit of tax auditor to the effect of having made such a wrong calculation had been filed by the assessee and therefore, it was not possible to believe the explanation. 22. The ld. counsel for the assessee at this juncture stated that though he had tried procuring such an affidavit but had failed to do so. He pleaded for an opportunity to prove his explanation and requested the matter be remanded to the AO for the said purpose. 23. We have heard both the parties. We find that the contention of the assessee that the amount disallowable u/s 40(a)(ia) has been mistakenly reported by the tax auditor at a higher figure cannot be simply discarded. The Ld.Counsel has made certain factual contentions while explaining the mistaken reporting, to the effect that while the assessee had deducted taxes @ 10% on the contractual payments to be disallowed ....