M/S. VGP HOUSING P. LTD.,CHENNAI vs. DCIT, CENTRAL CIRCLE - 1 (3), CHENNAI

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ITA 292/CHNY/2020Status: DisposedITAT Chennai20 July 2022AY 2012-134 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal dismissed the ground related to the disallowance of donations as the assessee conceded the issue. For the interest payment, the Tribunal remanded the matter back to the Assessing Officer to verify if the recipient had offered the interest income and paid taxes, in light of the second proviso to Section 40(a)(ia).

What were the facts?

The assessee's appeal concerned disallowance of donations and interest payment. The assessee conceded the disallowance of donations. For the interest payment, the assessee argued that the recipient had already offered the interest in their income, making disallowance under Section 40(a)(ia) inappropriate.

What were the issues?

Whether donations claimed as revenue expenditure are to be disallowed. Whether interest payment is disallowable under Section 40(a)(ia) when the recipient has offered the income and paid taxes.

Which sections of the Income-tax Act were involved?

Section 115JB,Section 40(a)(ia),Section 194A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI

Before: SHRI MAHAVIR SINGHAND SHRI MANOJ KUMAR AGGARWAL

Hearing: 20.07.2022Pronounced: 20.07.2022

आदेश /O R D E R

PER MAHAVIR SINGH, VICE PRESIDENT:

1.

This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-11, Chennai in dated 05.11.2019. The assessment was framed by the DCIT, Central Circle 1(3), Chennai for the assessment year 2012-13 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 19.03.2015.

2.

At the outset it is noticed that this appeal is time barred by 9 days and assessee has filed affidavit condonation petition stating that the order of CIT(A) was received on 28.11.2019 and appeal was to be filed on or before 27.01.2020 but appeal was actually filed on 05.02.2020. We noted that the reason given by assessee in its affidavit is that the appellate order was misplaced by the Accountant of the assessee Shri Mohd. Gouse and on checking after 5 to 7 days, it was traced and accordingly papers were prepared and appeal was filed. We see that the delay is very small and cause seems reasonable, which was not contested by the Revenue. Hence, we condone the delay in filing of this appeal by assessee and admit the appeal for adjudication.

3.

The first issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of AO in disallowing donations to the tune of Rs.37,35,361/- while computing book profit u/s.115JB of the Act. For this assessee has raised following grounds:-

2. The CIT(Appeals) erred in sustaining the disallowance of donations to the tune of Rs.37,35,361/- both in the book profits computation and in the normal computation and consequently erred in sustaining the addition of such sum in both the computations without assigning proper reasons and justification.

3. The CIT(Appeals) failed to appreciate that the sustenance of the disallowance of claim of donations in both the computations without verification of the details available was wrong, erroneous, unjustified, incorrect, invalid and not sustainable both on facts and in law.

4. At the outset, the ld.counsel for the assessee agreed that the donations made by assessee of Rs.37,35,361/- and claimed as revenue expenditure, the assessee has no case. He agreed for confirmation of disallowance. Accordingly, this ground of assessee is dismissed.

5. The next issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of AO in disallowing a sum of Rs.50,06,244/- being interest payment without deduction of TDS u/s.194A of the Act and thereby invoked the provisions of section 40(a)(ia) of the Act for making disallowance.

6. At the outset, the ld.counsel for the assessee stated that this issue is to be sent back to the file of the AO for the reason that the recipient has already included the interest in the return of income and in view of the second proviso to section 40(a)(ia) of the Act, the disallowance cannot be made in such situation. He relied to the decision of Co-ordinate Bench of this Tribunal in the case of Mani Nagappa Motors Madurai P. Ltd., vs. ITO in order dated 07.12.2021, wherein on exactly identical circumstances, the matter was referred back to the file of AO by observing as under:- We find that the assessee could escape the rigors of Sec.40(a)(ia) in terms of second proviso to Section 40(a)(ia) read with first proviso to sub-section (1) of Section 201 by demonstrating that the payee had duly offered the payment in their Income tax returns and paid due taxes thereon. In such a case, no disallowance u/s 40(a)(ia) is called for. As per the submissions of Ld. AR, the assessee could demonstrate the fulfillment of these conditions and is ready to file the requisite certificate / declaration from the payee. Therefore, we deem it fit to restore the matter back to the file of AO on similar lines as above to provide an opportunity to the assessee to demonstrate fulfillment of these conditions by adducing requisite documentary evidences. The Ld. AO is directed to consider the same and grant the benefit of proviso to the assessee, if otherwise available and found in order. The assessee, in turn, is directed to substantiate its claim in accordance with law. No other arguments have been urged before us.

7.

When confronted to ld.Senior DR, he has not objected to the same.

8.

In light of Tribunal’s decision in the case of Mani Nagappa Motors Madurai P. Ltd., supra, we remand the matter back to the file of the AO afresh.

9.

In the result, the appeal filed by the assessee is partly-allowed for statistical purposes.

Order pronounced in the open court on 20th July, 2022 at Chennai.

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