VARSHA KHUSHAL DHAROD,MUMBAI vs. ACIT, RANGE 27(3), MUMBAI, VASHI

Briefly stated, the assessee has filed his return of income on 28.09.2012 declaring total income of Rs.23,31,094/-. The case was selected for scrutiny assessment which was completed on 12.03.2015 with the additions, (i) disallowance u/s 40(a)(ia) for Rs.9,50,588/- as the assessee had not deducted TDS on payment of interested to M/s. Sundaram Finance Ltd. and M/s. SREI Finance Ltd. during the year under consideration. (ii) One more disallowance was made on estimated basis as the assessee could not satisfy the Assessing Officer towards the expenditure claimed under the head ‘travelling expenses’, ‘repair and maintenance expenses’ and ‘staff welfare expenses’, in aggregate amounting to Rs.22,15,788/-. Estimated disallowance of 10% on ‘travelling expenses’ and ‘staff welfare expenses’ was made and 5% of ‘repair and maintenance expenses’. The total disallowance was of Rs.1,31,580/-. Accordingly, the taxable income of assessee has been enhanced with the aforesaid two disallowances.

The assessee preferred an appeal before the Ld. CIT(A), wherein the assessee contended that the amount of interest on which the TDS could not be deducted by the assessee has been offered by the respective payees in their respective return of income filed by them. In this connection, the assessee 2

Regarding estimated disallowance of expenditure, it is observed by the Ld. CIT(A) that the expenditure incurred in cash are supported by self-made vouchers, therefore considering the nature of expense and the possibility of personal element which is unverifiable, the claim of assessee was genuinely accepted by the Ld. AO and a reasonable disallowance towards the unverifiable claims was made by the Ld. AO. Therefore, the same is justified and sustainable. Ld. CIT(A) also noted that the assessee has not pressed his ground of appeal, thus has reached the finality.

Before us, the assessee is contesting the issue regarding disallowance of Rs.9,50,588/- made u/s 40(a)(ia) by the Ld. AO and confirmed by the Ld. CIT(A). The assessee relied on the decision of Hon’ble Bombay High Court in 3

Ld. AR of the assessee drawing supportfrom the aforesaid decision has submitted that once the respective entities, to whom the interest was paid by the assessee have provided a certificate of Chartered Accountant in terms of 1stproviso to section 201(1) of the Act and the income is offered for tax by the payees in their respective returns, no further disallowance would called for in the case of assessee u/s 40(a)(ia). The copies of certificates from Chartered Accountant are placed before us at page no.4, 5 and 6 of the assessee’s paper book.

We have considered the rival submissions, perused the material available on record and case laws relied upon by the assessee. Admittedly in the present case, the assessee has made certain interest payment to M/s. Sundaram Finance Ltd. and M/s. SREI Finance Ltd. It is also a fact that the assessee had not deducted any TDS on such payments. The assessee complyingwith the 1st Proviso to Section 201(1) of the Act had obtained the CA certificates from the concerned assessee having assessee’s name therein stating that the assessee has paid such sums to the respective entities without deducting TDS. The amounts of interest and other charges received by the respective entities are produced in totality in the said certificates but the certificates are not clarifying as to how much they have received from the assessee. Also, the amounts furnished by them in the head interest and other charges as well as interest on loan are not matching with the figures which the assessee has claimed in its profit and loss account and the AO has disallowed.

Under such circumstances, the assessee is required to reconcile the payment of interest made to aforesaid entities from its books of accounts and the certificate issued by them u/s 201(1) of the Act. The matter therefore is set aside 5

Needless to say, the assessee shall be provided with reasonable opportunities of being heard in the set aside proceedings. The assessee is also directed to assist in the set aside proceedings by submitting necessary details and evidence to satisfy that the subjected interest paid by the assessee is duly offered for tax by the payees.

In result, the appeal of assessee is allowed for statistical purposes in above terms.