M/S. JMC AUTOMOTIVE COMPONENTS PVT. LTD.,FARIDABAD vs. ITO, FARIDABAD

In brief, the facts of the case are that the appellant is engaged in the business of manufacturing and trading of auto parts components. It had e-filed its return declaring income of Rs. 28,83,670/- on 29.09.2013 and the same was processed u/s 143(1) of the Income Tax Act. The appellant had also declared deemed income of Rs. 33,10,662/- u/s 115JB of the Income Tax Act. Later on the case of the appellant was selected for scrutiny through CASS, and subsequently assessment was completed u/s 143(3) of the Income Tax Act. The return income of Rs. 28,83,670/- was assessed u/s 143(3) of the Act at an income of Rs. 75,59,880/- on 26.02.2016. is engaged in the business of manufacturing and trading of auto parts components.

The Ld. AO had made following additions : • Rs.9,61,425/- under the provision of section 40(a)(ia) of the Income Tax Act, 1961. • Rs.1,50,808/- under the provision of section 36(l)(iii) of the Income Tax Act, 1961.

Heard the Ld. Counsel for the assessee and ld. Sr. DR for the revenue. On behalf of the assessee relying order dated 16.11.2016 of ITAT, Delhi Bench SMC 3 in ITA No. 6441/Del/2015 for Assessment Year 2011-12 and Delhi Bench – G, ITA no. 1310/Del/2016 for Assessment Year 2012-13, order dated 13.08.2021 it was contended that ground no. 1, 2 and 4 are squarely covered in assessee’s own

In regard to the Ground no. 3 it is contended that the appellant availed bill discount facilities from Sandhar Automotavies (Dhumspur) which is a unit of M/s. Sandhar Technologies Ltd. And same is also customer of appellant company and from M/s. Sandhar Enterprises is Proprietary firm of MD of Sandhar technologies Ltd. Appellant company claimed interest on discounting charges of bills amounting to Rs. 17,34,336/- which were disallowed by Ld. AO and Ld. FAA has restricted the disallowance to an amount of Rs. 1,25,821/- being difference on account of rate of difference as paid to Sandhar Automotaves (Dhumspur) and M/s. Sandhar Enterprises. It was submitted that expenditure interest is based on commercial expediency and to cover up temporary cash flow mismatch. It was submitted that Bill Discounting expenses cannot be restricted on account of difference in the rate of interest between two entities.

In regard to Ground no. 5 it was submitted that the process charges of Rs. 78,652/- were paid to SIDBI for sanction of term loan of Rs. 70,00,000/- but this amount was for working capital and should have been treated as a revenue expenditure. Ld. Counsel placed on record sanction letter dated 01.01.2013 of the SIDBI wherein the loan is shown to be sanctioned to meet the margin money for working capital requirements of the company.

Ld. Sr. DR submitted that the Ld. Tax Authorities below have followed the settled legal principles on the basis of which assessment was done and additions made in the case of assessee and he thus, defended the orders of Ld. Tax

It can be observed as with regard to non-deduction of TDS, as per the provisions of Section 194A of the Act for interest Rs. 2,47,363/- paid to Barclays Investment & Loan (India) Ltd., that except for changed figures, the principles of law have been considered in assesse’s own case in ITA No. 1310/Del/2016 order dated 13.08.2021 for assessment year 2012-13. It is explained by the assessee that the lender company has closed its operation in India, therefore, appellant could not lay hand on the certificate issued u/s 201 of the Act. Though appellant succeeded to get certificates from the two other lenders and placing it before the Ld. First Appellate Authority to get part relief.

As with regard to ground no. 2 in assessee’s own case for the assessment year 2012-13, the Co-ordinate Bench of the Tribunal has examined the issues based on the basis of relevant statutory provisions and judicial pronouncements while determining the controversies of disallowance of interest on the advances

In regard to this ground no 3, it can be observed that the assessee has paid bill discounting charges 15 and 16% to Sandhar Automotavies (Dhumspur) and 19% to Sandhar Enterprises. While as per the own case of assessee they are connected enterprises of one proprietor. Thus, the Ld. First Appellate Authority has rightly disallowed amount of Rs. 1,25,821/- being not based on principles of prudence and considering them excessively paid. Even otherwise, admittedly, in assessee’s own case for the year 2012-13, the Co-ordinate Bench has also determined the issue against the assessee and meeting the similar fate, in the present appeal, ground no. 3 is determined against the assessee.

As with regard to ground no. 4 in assessee’s own case for the assessment year 2012-13, the Co-ordinate Bench of the Tribunal has examined the issues based on the basis of relevant statutory provisions and judicial pronouncements while determining the controversy of disallowance of interest on the advances made by the assessee. There is no reason to differ. The advances were not given in the relevant assessment year but given in the year 2011-2012. The same were given out of interest free funds. The Bench is thus inclined to decided this ground in favour of the assessee.

Resultantly, the appeal filed by the assessee is partly allowed for statistical purposes.