MEGA AUTOMOBILES PVT LTD.,ANKLESHWAR vs. ACIT, CIRCLE-2, BHARUCH

On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in making disallowance Assessment Year 2017-18

On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in setting aside the matter to the file of AO by contravening the provisions of Section 251(1)(a).

It is therefore prayed that above additions/disallowances made by the assessing officer and confirmed by learned CIT(A) may please be deleted.

Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”

The assessee filed return of income on 28-10-2017 declaring total income at Rs. 51,51,994/-. The Assessing Officer made following disallowances/additions: 1. Disallowance of interest of Rs. 9,60,000/- u/s 36(1)(iii) of the Act.

Addition of Rs. 2,73,258/- on account of difference between the amounts appearing in the 26AS statement of the appellant vis-à-vis that reflected in its Profit and Loss Account.

Rs. 30,83,831/- u/s 40A(3) of the Act, on account of expenditure incurred in cash.

Disallowance of Rs. 73,605/- being 30% of Rs. 2,45,350/-, made u/s 40(a)(ia) of the Act for non deduction of tax at source on payment made to Mahindra & Mahindra Ltd.

The assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

The ld. A.R. submitted that as regards the disallowance u/s. 36(1)(iii) of the Act of Rs. 9,60,000/- on account of proportionate interest at 12% on loans and advances, the ld. A.R. submitted that during the year under consideration, the assessee was having opening balance of loans and advances given to A.M. Enterprises amounting to Rs. 80 lacs out of which assessee received back Rs. 35 lacs from A.M. Enterprise in the year and the balance of Rs. 45 lacs. The said loan was given out of interest free funds. The assessee has stated that the said loan was given out of interest from assets available with the company and without looking into the balance the company, the Assessing Officer has disallowed the said claim.

The ld. D.R. relied upon the assessment order and the order of the CIT(A).

We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that that the assessee was having its own funds and is clearly reflected in the opening balance and the closing balance. In fact, the assessee has received back Rs. 35 lacs in the current assessment year which shows that the loan was genuinely given and it was from the interest free fund only. Therefore, the disallowance u/s. 36(i)(ii) of the Act by the Assessing Officer is not justifiable. Thus, ground no. 1 is allowed.

As regards to ground no. 2 related to disallowance u/s. 10(a)(ia) of the Act of Rs. 73,650/-, 30% of 2,45,336/- on account of non-deduction of TDS by the assessee. The assessee has submitted all the ledger accounts of the expenses including that of development expenses, training expenses and communication expenses, the assessee has given detailed related to the said expenses. These expense incurred by M&M was taken as reimbursement from the assessee company for providing training to sales and workshops staff of the assessee company. There was no separate contract and therefore section 194C will not come into picture as per the contentions of the ld. A.R.

The ld. D.R. relied upon the assessment order and the order of the CIT(A).

We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee was having the preliminary business of selling vehicles and the assessee company is a dealer for Mahindra Cars and the expenses incurred related to the training of sales and workshop staff of the assessee company is a part and parcel of the said business itself. Therefore, disallowance u/s 40(a)(ia) of the At is not justified. Hence, ground no. 2 is allowed.

As regards ground no. 3, the addition of Rs. 2,73,258/- on account of difference in income as per ITR, the ld. A.R. submitted that the method and manner of maintenance of the books of accounts was maintained throughout the years and no discrepancy was found by the Assessing Officer and anything of the previous assessment years. The ld. A.R. submitted that the difference in ITR and Form 26AS cannot be taken into account as the income is recognized for a particular period for one year on the basis of the method employed by assessee and it cannot be possible all the time to co-relate specific amount of TDS with a specific amount of income earned by any assessee in a particular assessment year.

The ld. D.R. relied upon the assessment order and the order of the CIT(A).

We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the difference which was pointed out by the Assessing Officer related to Income Tax Return and Form 26AS. The Assessing Officer overlooked the fact that the difference may arise due to entries for discount/debit-note/credit note spanning across

As regards the component of addition of Rs. 30,83,831/- u/s. 40A(3) of the Act being RTO charges reimbursed by the assessee, the assessee has explained these expenses. Therefore, the disallowance made by the Assessing Officer was not justified. Ground no. 3 in respect of addition of Rs. 2,73,258 and Rs. 30,83,831/- is allowed.

In the result, the appeal of the assessee is allowed.

Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Surat 6. Guard file. By order,