KAY CEE ENTERPRISES ,NEW DELHI vs. JCIT, RANGE- 63, NEW DELHI

The present appeal has been filed by the assessee against the order of the ld. CIT(A)-20, New Delhi dated 23.10.2017. The case has been fixed for hearing on 11.01.2022, 21.02.2022, 07.07.2022, 31.08.2022. Since, the assessee has not attended any of the hearings, the bench took the help of Sh. Satyjeet Goel, CA as Amicus Curiae. {Amicus Curiae literally translated from Latin is "friend of the court." Plural is "amici curiae." Generally, it is referencing a person or group who is not a party to an action, but has a strong interest on the issues in general}.

Following grounds have been raised by the assessee:

The assessee filed return of income on 17.09.2014 declaring a total income of Rs.50,42,251/-. The assessee is a firm engaged in the business of man power supply under the 3 Kay Cee Enterprises name and style of M/s Key Cee Enterprises and derived income from the same business.

During the year, the assessee has claimed in P&L account an amount of Rs.34,05,576/- on account of additional service tax paid. It was not in dispute that the amount has been paid towards interest u/s 75 of the Finance Act, 1994 relating to late payment of service tax.

Before the ld. CIT(A), it was submitted that this amount consists of short fall on account of service tax of Rs.24,00,000/- and on interest on service tax of Rs.10,05,575/-. The ld. CIT(A) confirmed the order holding that the appellant has not submitted any documentary evidences in support of the claim.

We have gone through the facts of the case. The service tax is collected from the customer at the time of receipt of the amounts on account of service obtained. Having collected the service tax from the customer there is no reason not to deposit it in the Government account. The assessee would not at liberty to utilize the service tax collected from the customer, use it for his own purpose at his own volition, choose to pay interest and then claim the same as deduction in P&L account. Placing reliance on the following judgments namely,

As per the AO, the assessee has advanced loans of Rs.5,37,40,305/- to sister concerns and no interest has been charged. The assessee explained that due to shortage of funds all the firms have given loan of required amount to each other and returned them back. Even, during the year the opening balance of sister concerns was Rs.7,29,43,334/- and the same has been refunded during the year resulting in Nil balance. It was explained that the final outstanding balance was the fresh advances made to the sister concerns during the year. It was further submitted that the assessee had interest free unsecured loans and enough interest free fund to advance interest free sums to the sister concerns. The AO held that the assessee could not prove any commercial expediency involved in lending the amounts and disallowed an amount of Rs.30,35,343/- paid by the assessee to the bank on the borrowed funds.

During the course of appellant proceedings before the ld. CIT(A), the assessee was asked to give the calculation on the basis of the decision of ld. CIT(A) on the matter involving the similar issue.

Thus, out of total interest the disallowance is Rs.7,05,828/- [Rs.30,35,343/- (-) Rs.23,29,515/-] was computed by the assessee.

However, the ld. CIT(A) held that this calculation reveals that where as in A.Y. 2012-13 in Appeal No. 54/2015-2016 in the case of the proprietorship firm Sh. Ram Mehar Mann and in A.Y. 2013-14 Appeal No. 468/2015-16 order dated 23.03.2017 in A.Y. 2013-14 in the case of the sister concern Sukhmaa Sons & Associates, the then ld. CIT(A) has taken into account only the interest free loan received from sister concern and not the capital account but in the calculation submitted by the assessee, the assessee has taken undue benefit of the interest free loan received from sister concern as well as the capital account of the assessee which is not acceptable. Holding thus, the ld. CIT(A) recomputed the disallowance as under:

Thus, out of total interest of Rs.30,35,343/-, the ld. CIT(A) held that the disallowance would be Rs.14,37,722/- (3035343 – 1597621) but not Rs.7,05,828/- as calculated by the assessee and restricted the disallowance to Rs.14,37,722/- giving relief of Rs.15,97,621/-.

Depreciation and insurance: On examination of the record, we hold that disallowance of depreciation and insurance are without any legal basis and hence hereby directed to be deleted.

Having gone through the facts on record, we hold that the assessee should be given benefit of the capital amount of Rs.1,37,05,556/- should also be given the benefit of, along with interest free loans of Rs.2,99,17,306/- totaling to Rs.4,36,22,862/-. Taking into consideration, the total available interest free fund, we hold that the right disallowance would be Rs.7,05,828/-. Ordered accordingly.

The Assessing Officer made addition of Rs.2,22,089/- u/s 43B of the Income Tax Act, 1961 on the ground that the Tax Audit Report in Form 3CD, the Auditor has reported that this amount was not paid on or before the due date on account of employees contribution. During the course of appellate proceedings before the ld. CIT(A), the assessee submitted that the due date of payment in this case is 31.01.2015 as the payments are covered under Haryana Labour Welfare fund and this should be allowed. On going through the record, we find

In the result, the appeal of the assessee is partly allowed. Order Pronounced in the Open Court on 16/11/2022.