ALBERT & CO. P LTD. ,CHENNAI vs. ITO CORPORATE WARD 6(1) , CHENNAI

आयकरअपीलीयअिधकरण,‘बी’ �ायपीठ,चे�ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI �ी जी मंजूनाथा, लेखा सद�,एवं �ी रा!ल चौधरी, �ाियक सद� के सम# BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER AND SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER I.T.A Nos.1618/CHNY/2017 (AY 2012-13) I.T.A Nos. 2577/CHNY/2018 (AY 2013-14) & I.T.A Nos. 2578/CHNY/2018 (AY 2014-15) M/s. Albert & Company Private Limited, No.13, Whannels Road, Egmore,Chennai – 600 008 …………… अपीलाथ$/Appellant PAN AADCS 9670C Vs. The Income Tax Officer, Corporate Ward – 6(1), 7th Floor, New Block, No.121, M.G. Road, …………… %&थ$/Respondent Chennai – 600 034. Appearances: For the Appellant/Assessee : Mr. S. Sridhar, Advocate For the Respondent/Department : Ms. V. Sreedevi, JCIT Date of conclusion of hearing : 31.05.2022 Date of pronouncement of order : 02.06.2022 आदेश /O R D E R Per Rahul Chaudhary, Judicial Member: 1. These are three appeals filed by the Appellant/Assessee which were heard together as there were common grounds, and therefore, the same are being disposed by way of a common order.

I.T.A. Nos. 1618/CHNY/2017 &. 2577 & 2578/CHNY/2018 Assessment Years : 2012 -13, 2013 -14 & 2014 -15

I.T.A. No. 2577/CHNY/2018 (A.Y. 2013 – 2014) & I.T.A No. 2578/CHNY/2018 (A.Y. 2014 – 2015)

the common order, dated 28.06.2018, passed by the Commissioner of

Income Tax (Appeals)-15, Chennai [hereinafter referred to as the ‘the

CIT(A)’] in I.T.A. No.78/2016-17/CIT(A)-15 and I.T.A. No.274/2016-

17/CIT(A)-15 for the Assessment Year 2013-14 & 2014-15,

respectively, whereby the CIT(A) had partly allowed the appeal filed by

the Appellant/Assessee against the Assessment Order dated

22.04.2016 for the Assessment Year 2013-14 and 09.01.2017 for the

Assessment Year 2014-15.

14 and 2014-05. Learned Authorized Representative of the Appellant,

referring to the affidavit filed by the Appellant explaining the reason for

delay, submitted that the employee of the Appellant had misplaced the

duly executed appeal sets and therefore, the appeals could not be filed

within time due to inadvertent mistake on the part of the employee of

the Company. He prayed that the delay in filing be condoned and

appeals be considered on merits. Learned Departmental

Representative did not raise any objections in view of the reasons for

delay provided by the Appellant. Accordingly, for the reasons stated in

the affidavit explaining the delay, we condone the delay of 2 days in

filing the appeal and proceed to decide the appeal on merits.

the Assessment Year 2013-2014 and 2014-2015 which were selected

I.T.A. Nos. 1618/CHNY/2017 &. 2577 & 2578/CHNY/2018 Assessment Years : 2012 -13, 2013 -14 & 2014 -15

for detailed scrutiny. The Assessing Officer completed the assessment

after making the following additions / disallowance:

AY 2013-14 AY 2014-15 Particular Amount Amount (INR) (INR) Disallowed deduction of proportionate 85,80,882 1,05,20,672 interest on the capital borrowed under Section 36(1)(iii) of the Act

Disallowed under Section 40(a)(ia) of the 49,93,513 38,26,918 Act on account of failure to deduct tax at source from Hire Chagres

Disallowed under Section 40(a)(ia) of the 89,11,904 1,84,18,116 Act on account of failure to deduct tax at source from Labour Chagres

CIT(A) confirmed the disallowance made by the assessing officer under

Section 36(1)(iii) of Act and under Section 40(a)(ia) of the Act in

respect of Labour Charges. However, as regards disallowance under

Section 40(a)(ia) in respect of Hire Charges, the CIT(A) granted some

relief to the Appellant by granting the benefit of Second Proviso to

Section 40(a)(ia) read with First Proviso to Section 201(1) of the Act.

Appellant has raised identical grounds in the two appeals for the

Assessment Year 2013-14 and 2014-15 and the same are as under:

I.T.A. Nos. 1618/CHNY/2017 &. 2577 & 2578/CHNY/2018 Assessment Years : 2012 -13, 2013 -14 & 2014 -15

I.T.A. Nos. 1618/CHNY/2017 &. 2577 & 2578/CHNY/2018 Assessment Years : 2012 -13, 2013 -14 & 2014 -15

the Act while Ground 4 to 10 pertain to disallowance under Section

40(a)(ia). The connected grounds are taken up together hereinafter.

Ground Nos.2 & 3:

assessment proceedings the assessing officer noticed that while on

one hand the Appellant has claimed deduction for interest expenses

incurred on borrowed funds, on the other hand the Appellant has given

interest free loans and advances to the Directors. Since the assessing

officer was of view that the funds given to the directors were not for

business purpose, the assessing officer made disallowance of

proportionate interest expenditure under Section 36(1)(iii) of the Act

which was computed as under:

AY 2013-14 AY 2014-15 Particular Amount (INR) Amount (INR)

(A) Interest Debited to P&L A/c 1,51,71,085/- 1,38,40,095/-

(B) Total Interest Fee Loans & 8,48,46,427/- 7,93,31,564/- Advances to Directors

I.T.A. Nos. 1618/CHNY/2017 &. 2577 & 2578/CHNY/2018 Assessment Years : 2012 -13, 2013 -14 & 2014 -15

(C) Total Borrowed Funds 12,23,50,773/- 12,79,53,785/-

(D) Disallowed u/s 36(1)(iii) 1,05,20,672/- 85,80,882/- [A x B/C]

CIT(A). Before the CIT(A) it was contended on behalf of the Appellant

that the Assessing Officer has erred in not excluding interest on long

terms borrowing, being vehicle loans & term loans, and the interest on

overdraft facility & packing credit from the amount of interest debited to

the Profit & Loss Account as the same could not have been used for

purpose other than business purpose from which the same were

granted. It was also contended on behalf of the Appellant that the loans

and advances given to Directors were out of the own funds available

with the Appellant. However, the CIT(A) rejected the aforesaid

contentions and confirmed the additions made by the assessing officer

under Section 36(1)(iii) of the Act.

Representative of the Appellant reiterated the submissions made

before the lower authorities. He vehemently contended that the interest

on terms loan, car loan, overdraft facility and packing credit facility

cannot be disallowed as the funds from the aforesaid loans/facilities

were used for business purposes. In this regard, he referred to Note 3 :

‘Long Term Borrowings Secured’ forming part of the financial statement

for the Assessment Year 2013-14. He submitted that the Assessing

Officer had failed to establish that the interest bearing funds were given

I.T.A. Nos. 1618/CHNY/2017 &. 2577 & 2578/CHNY/2018 Assessment Years : 2012 -13, 2013 -14 & 2014 -15

as interest free loans and advances to the directors. He further

submitted that the Appellant had interest free own funds which were

used to give loans and advances to the directors of the Appellant.

Assessing Officer and CIT(A) have concluded that interest bearing

funds were used for giving loans and advances to the Directors. The

Appellant did not have sufficient own funds for making loans and

advances to the Directors. She supported the assessment order by

relying upon the order passed by the CIT(A).

record. The Assessing Officer and CIT(A) have concluded the funds

given to the directors as loans and advances were not used for

business purpose. The Appellant has contended that the Assessing

Officer had committed error in computing proportionate interest

disallowance directors by not excluding interest on loans granted for

specific purpose. While we find merit in the contention of the Appellant

as regards car loans are concerned, there is no material on record to

show that the funds were utilized for business purposes. The Appellant

has not placed on record any material in support of this contention in

the form of cash flow statement or otherwise. On the other hand, the

CIT(A) has made the following observations:

“4.3.1. It is an undisputed fact that the Appellant had borrowed funds during the previous year relevant to the Assessment Year 2013- 2014 and such borrowings remained unpaid during the subsequent previous year relevant for the Assessment Yea 2014

I.T.A. Nos. 1618/CHNY/2017 &. 2577 & 2578/CHNY/2018 Assessment Years : 2012 -13, 2013 -14 & 2014 -15

– 2015 a well. It is also apparent that the Appellant had advanced interest free loans during the previous relevant for the Assessment Year 20-13 – 2014 and such loans continued to remain outstanding in the books of the Appellant as on 31.03.2013 and 31.03.2014. In fact the outstanding from Directors had increased during the year ended 31.03.2014.

4.3.4. A close scrutiny of the financials for the year ended 31.03.2013 shows that there has been an increase of short term borrowings and with corresponding increase of loans and advances to Directors (interest free). The relevant data is as under:

Particulars 31.03.2012 31.03.2013 Increase

Short Term 186,68,748 694,48,602 507,79,854 borrowings

Loans and advances 41148454 983,80,578 572,32,124 to Directors

4.3.5 On the contrary, the increase in reserve and surplus was only Rs.31,65,460/-. There have not been any significant changes in the sources and application. The Appellant did not make available cash flow statements proving that the interest- free advances were made out of internal accrual and there has not been any diversion of interest bearing borrowed funds. In the absence of direct evidence to show that the advances has been made out of funds generated by way of internal accruals the factual position stands against the Appellant and there is every reason to hold that interest bearing funds have been diverted for Directors by way of interest-free loans and advances. It is therefore held that the financial data prima facie proves that there has been diversion of funds and such funds were outstanding at the end of 31.03.2013 and 31.03.2014 along with interest-free loans and advances to Directors.”

Thus, the CIT(A) has examined the increase in short term borrowings

and co-related it to the increase in the loans and advances given to the

I.T.A. Nos. 1618/CHNY/2017 &. 2577 & 2578/CHNY/2018 Assessment Years : 2012 -13, 2013 -14 & 2014 -15

directors during the previous year relevant to Assessment Year 2013-

14 to establish nexus between interest bearing funds and loans &

advances to the directors. Further, the CIT(A) has also returned a

finding that there was an increase of INR 31,65,460/- only during the

aforesaid previous year. These findings of the CIT(A) have not been

controverted in the appellate proceedings before us.

amount of proportionate disallowance of interest on borrowed capital

for the purpose of disallowance under Section 36(1)(iii) of the Act for

the Assessment Year 2013-14 and 2014-15 by excluding the interest

on car loans (Kotak Mahindra Prime Limited - Tata Sumo & XUV Car)

from the amount of interest debited to Profit & Loss Account, and by

reducing the total amount of interest free loans and advances given to

directors by the surplus of INR 31,65,460/- generated during the

previous year relevant to Assessment Year 2013-14.

Appellant are partly allowed.

Ground Nos. 4 to 10

the Appellant had failed to deduct tax on source on hire charges of

Crane, Front End Loader (FEL) and Grab [hereinafter referred to as

‘the Hire Charges’] which were included under the head Sugar/Wheat

Handling Charges in the books of accounts. The Appellant contended

I.T.A. Nos. 1618/CHNY/2017 &. 2577 & 2578/CHNY/2018 Assessment Years : 2012 -13, 2013 -14 & 2014 -15

that the Crane, FEL and Grab were ‘goods carriage’ and therefore,

provisions of Section 194C were not attracted. However, the Assessing

Officer rejected the aforesaid contention and since the Appellant had

failed to deduct tax at source, the Assessing Officer made disallowance

under Section 40(a)(ia) of the Act amounting to INR.49,93,513/- and

INR.38,26,918/- for the Assessment Year 2013-14 and 2014-15,

respectively.

under Section 40(a)(ia) of the Act. However, the CIT(A) granted relief

to the Appellant by extending the benefit of the Second Proviso to

Section 40(a)(ia) of the Act (amended through Finance Act, 2013) to

the Appellant. The aforesaid Second Proviso provided that in case the

amount paid by payer (on which tax has not been deducted at source)

has been included by the payee in his return of income for relevant

assessment year filed under Section139 of the Act, and payee has paid

the taxes due on the income declared in such return of income, then to

the extent the payee includes the sum in his return of income, no

disallowance under Section 40(a)(ia) of the Act can be made by the

Assessing Officer in terms of Second Proviso to Section 40(a)(ia) of the

Act read with First Proviso to Section 201(1) of the Act. Accordingly,

the CIT(A) directed the Appellant to provide specified

certificate/documents to the Assessing Officer while holding that no

disallowance shall be made by the Assessing Officer in respect of the

amount specified in the aforesaid certificate/document.

I.T.A. Nos. 1618/CHNY/2017 &. 2577 & 2578/CHNY/2018 Assessment Years : 2012 -13, 2013 -14 & 2014 -15

submissions made before the lower authorities. He submitted that the

provisions of Section 40(a)(ia) of the Act are attracted only in relation to

amounts outstanding at the end of the year. He further submitted that

though the CIT(A) has granted the benefit of Second Proviso to Section

40(a)(ia) of the Act to the Appellant, the disallowance should be

restricted to 30% in view of the amendment made to the provisions of

Section 40(a)(ia) by the Finance Act, 2014.The Learned Departmental

Representative relied upon the order passed by the CIT(A) on this

issue and submitted that sufficient relief has already been granted to

the Appellant by the CIT(A).

record including the orders passed by the lower authorities. We note

that the Hon’ble Supreme Court has in the case of Shree Chaudhary

Transport Company Vs ITO: (2020) 118 Tamann.com 47 (SC) held that

the applicability of provisions of Section 40(a)(ia) is not limited to the

amount outstanding at the year end, and is also applicable to the

amount incurred/paid during the year. Further, the amendments to

Section 40(a)(ia) introduced by the Finance Act, 2014, the benefit of

which has been sought by the Appellant, are effective from 01.04.2015

and therefore, are not applicable to the assessment years before us.

We are of the considered view that the order passed by the CIT(A) on

this issue does not require any interference. Having held that the Hire

I.T.A. Nos. 1618/CHNY/2017 &. 2577 & 2578/CHNY/2018 Assessment Years : 2012 -13, 2013 -14 & 2014 -15

Charges were subject to deduction of tax under Section 194C of the

Act, the Assessing Officer had made disallowance of the entire amount

as the Appellant had failed to deduct tax from the same. However, the

CIT(A) has granted the benefit of Second Proviso to the Appellant. We

are not persuaded to interfere with the order passed by the CIT(A) on

this issue.

Section 40(a)(ia) of the Act in respect of labour charges as the

Appellant had failed to deduct tax at source from the same. During the

assessment proceedings the Appellant had contended that the labour

charges/payments were actually disbursements to coolies for loading

and unloading purposes made through one common person. However,

the Assessing Officer observed that the payments of labour charges

were contractual in nature. Not being satisfied with the explanation

offered by the Appellant, the Assessing Officer made disallowance

under Section 40(a)(ia) of the Act amounting to INR.89,11,904/- and

INR.1,84,18,116/- for the Assessment Year 2013-14 and 2014-15,

respectively.

the Appellant that the labour charges represented payments disbursed

through employees of the Appellant and the leader of coolies in relation

to multiple days of work done during the relevant previous year. The

individual payments to be made to the coolies/labour were very small

and fell below the limit for deduction at tax at source, however, in the

I.T.A. Nos. 1618/CHNY/2017 &. 2577 & 2578/CHNY/2018 Assessment Years : 2012 -13, 2013 -14 & 2014 -15

books of accounts cumulative entries were passed in the name of the

employee of the Appellant or the leader of the coolies. However, the

Assessing Officer failed to take the same into account and invoked

provisions of Section 40(a)(ia) of the Act in a mechanical manner.

However, the CIT(A) was not convinced as he noted that the Appellant

had failed to file any documents such as ledger accounts during the

assessment and the appellate proceedings to support the claim. The

CIT(A) was of the view that nothing prevented the Appellant for making

payments through bank accounts and therefore, in absence of any

details and documents to support the claim of the Appellant, CIT(A)

confirmed the disallowance made by the Assessing Officer.

CIT(A) on this issue. The learned Authorized Representative of the

Appellant vehemently argued that the authorities below fell in error in

not appreciating that payments were made through supervisors to

many casual labourers which were very small and were grouped under

one name. The provisions of Section 40(a)(ia) had no application to

such payments and had been invoked/applied mechanically. Learned

Departmental Representative, countering the submissions made by the

Authorized Representative of the Appellant, submitted that the

Appellant had not filed any documents to support his claim and

therefore, the Assessing Officer/CIT(A) were justified in making

disallowance under Section 40(a)(ia) of the Act.

I.T.A. Nos. 1618/CHNY/2017 &. 2577 & 2578/CHNY/2018 Assessment Years : 2012 -13, 2013 -14 & 2014 -15

material on record. It is an admitted fact that the payments were made

in cash. According to the Assessee the small payments were made to

a number of coolies/laborer which were clubbed together and recorded

in the books of accounts in the name of an employee of the company

or the leader of coolies. In our view, the Assessing Officer was justified

in taking the figures as recorded in the books of accounts and in

invoking provisions of Section 40(a)(ia) of the Act. The Appellant had

the opportunity to file documents during the assessment as well as the

Appellate proceedings to support his claim. However, no such

documents were filed before the authorities below. Even in the present

appellate proceedings, the Appellant has not filed any

evidence/additional evidence in support of his claim. The

contentions/claims of the Appellant are not based upon the material on

record, The order passed by the CIT(A) on this issue is, therefore,

upheld.

disposed of in terms of paragraph 20 and 24 above.

Ground No.1 & 11

Now, we would take up appeal for the Assessment Year 2012-13.

I.T.A. Nos. 1618/CHNY/2017 &. 2577 & 2578/CHNY/2018 Assessment Years : 2012 -13, 2013 -14 & 2014 -15

I.T.A. No. 1618/CHNY/2017 (A.Y. 2012-13)

2013. Learned Authorized Representative of the Appellant, submitted

that appeal could not be filed within time on account of dispute in the

family of one of the Directors an account of which the business of the

Appellant had come to stand still. This resulted in inadvertent delay of

18 days in filing the appeal. Learned Departmental Representative did

not raise any objections regarding the reasons of delay. Accordingly,

for the reasons stated in the application for condonation of delay the

delay of 18 days in filing the appeal is condoned, and we proceed to

decide the appeal on merits.

the Assessment Year 2011-12 which was selected for detailed scrutiny.

The Assessing Officer completed the assessment after making the

following additions / disallowance:

AY 2014-15 Particular Amount (INR) Disallowed deduction of proportionate interest on 51,89,484 the capital borrowed under Section 36(1)(iii) of the Act

Disallowed under Section 40(a)(ia) of the Act on 76,94,449 account of failure to deduct tax at source from Hire Chagres

Disallowed under Section 40(a)(ia) of the Act on 34,50,866 account of failure to deduct tax at source from Labour Chagres

Disallowed under Section 40(a)(ia) of the Act on 11,76,000 account of failure to deduct tax at source from Other Charges – lease rent, forwarding charges & legal fee

I.T.A. Nos. 1618/CHNY/2017 &. 2577 & 2578/CHNY/2018 Assessment Years : 2012 -13, 2013 -14 & 2014 -15

Disallowance under Section 37 of the Act being 35,000 ROC Fee pertaining to earlier years debited to P&L Account

CIT(A) on all the above issues. The CIT(A) confirmed the order of the

Assessing Officer on all the above issues. However, the CIT(A)

granted relief to the Appellant by giving directions in relation to the

disallowance made u/s.40(a)(ia) of the Act holding as under: “Besides the above disallowances, the AO has also disallowed expenses of lease rent, forwarding charges and legal fees since the Appellant had failed to make TDS on the payments. In the written submission of the Learned Authorized Representative, it has been contended that the AO has mechanically applied the provisions of Section 40(a)(ia) without going into the applicability of the provisions governing TDS in relation thereto. In the assessment order, the AO has not discussed the issues at length. She has simply invoked Section 40(a)(ia) of the Act and disallowed the expenses. However, at the same time, the Appellant has also not contradicted the findings of the AO with cogent material evidence. Therefore, notwithstanding the above rival contentions, the nature of payments reveals that these expenses attracted the provisions of TDS. Since the Appellant has failed to deduct the tax at source, the disallowance u/s.40(a)(ia) is confirmed.

However, notwithstanding the above findings of the AO, as claimed by the Appellant, the provisions of Section 40(a)(ia) of the Act are not applicable since the said sums remain paid at the end of the previous year relevant to the assessment year under consideration. The Learned Authorized Representative has also relied on the decision of the Hon’ble Jurisdictional Tribunal in the case of the Appellant in I.T.A. No.435/Mds/2015/A.Y.2010-11; dated 14.01.2016 wherein the Tribunal relied on its own decision in the case of Shri N. Palanivelu vs. ITO in I.T.A. No.618/Mds/20156; dated

I.T.A. Nos. 1618/CHNY/2017 &. 2577 & 2578/CHNY/2018 Assessment Years : 2012 -13, 2013 -14 & 2014 -15

29.04.2015. It was held by the Hon’ble Tribunal that if the impugned amount is not outstanding at the end of the close of the relevant assessment year in respect of the expenses either as outstanding expenses or as sundry creditors, this amount cannot be disallowed.

Therefore, respectfully following the decision of the Hon’ble Jurisdictional Tribunal, I direct the AO to allow the expenses of Rs.1,23,21,315/-. However, the AO is directed to verify that the amount remains paid as on 31.03.2012. If, however, the impugned amount or part thereof remains unpaid as on 31.03.2012, the same shall be disallowed.” (Emphasis supplied)

Section 40(a)(ia) of the Act. However, CIT(A) granted relief to the

Appellant by directing the Assessing Officer to verify the amount paid

as on 31.03.2012 and restricted the disallowance under Section

40(a)(ia) of the Act to the amount remaining unpaid as on 31.03.2012.

appeal raising the following grounds:

[1] The order of the Commissioner of Income Tax (Appeals) – 15, Chennai dated 24.03.2017 in I.T.A. No.92/A.Y.2012- 13/CIT(A)-15/2015-16 for the above mentioned Assessment Year is contrary to law, facts and in the circumstances of the case.

[2] The CIT(Appeals) erred in sustaining the disallowance of proportionate interest aggregating to Rs.51,89,484/- on the application of Section 36(1)(iii) of the Act in the computation of taxable total income without assigning proper reasons and justification.

[3] The CIT(Appeals) failed to appreciate that the presumption of diversion of interest bearing funds for non-business purpose was not correct and further ought to have

I.T.A. Nos. 1618/CHNY/2017 &. 2577 & 2578/CHNY/2018 Assessment Years : 2012 -13, 2013 -14 & 2014 -15

appreciated that the commercial expediency aspect in placing the funds to the Directors was completely overlooked and brushed aside in the impugned order.

[4] The CIT(Appeals) failed to appreciate that the decisions cited in support of the plea were not considered and further ought to have appreciated that the decisions applied to sustain the addition were not applicable to the factual matrix of the case.

[5] The CIT(Appeals) went wrong in recording the findings in this regard from para 16 to 18 of the impugned order without assigning proper reasons and justification.

[6] The CIT(Appeals) erred in sustaining the disallowance of Rs.35,000/- being the ROC fees in the computation of taxable total income without assigning proper reasons and justification and went wrong in recording the findings in this regard in para 13 of the impugned order without assigning proper reasons and justification.

[7] The CIT(Appeals) erred in sustaining the applicability of the provisions of Section 194C of the Act for the payments made which were morefully captured in Ground Nos.2 to 6 of the statutory Form No.35 without assigning proper reasons and justification.

[8] The CIT(Appeals) went wrong in recording the findings in this regard in para 12 of the impugned order without assigning proper reasons and justification.

[9] The CIT(Appeals) failed to appreciate that in the absence of a valid contract, the provisions governing TDS had no application thereby vitiating the finding recorded in relation thereto.

[10] The CIT(Appeals) failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles of natural justice would be nullity in law.

I.T.A. Nos. 1618/CHNY/2017 &. 2577 & 2578/CHNY/2018 Assessment Years : 2012 -13, 2013 -14 & 2014 -15

[11] The Appellant craves leave to file additional grounds / arguments at the time of hearing.

Adjudication on this issue for the Assessment Years 2013-14 and

2014-15 would be apply mutatis mutandis to the Assessment Year

2012-13 as both sides agree that identical grounds have been raised in

similar facts and circumstances.

Ground No.1 & 11

Ground No.2 to 5

51,89,484/- made by the AO u/s.36(1)(iii) of the Act which has been

confirmed by the Learned CIT(A). In view of our adjudication on this

issue in appeal for the assessment year 2013-14 & 2014-15 above in

identical facts and circumstances, the order of CIT(A) of confirming

disallowance of INR 51,89,484/- made by the AO u/s.36(1)(iii) of the

Act is confirmed. Ground No 2 to 5 are partly allowed in terms of

Paragraph 14 above. Accordingly, we direct the Assessing Officer to

re-compute the amount of proportionate disallowance of interest on

borrowed capital for the purpose of disallowance under Section

36(1)(iii) of the Act for the Assessment Year 2013-14 and 2014-15 by

excluding the interest on car loans (Kotak Mahindra Prime Limited -

Tata Sumo) from the amount of interest debited to Profit & Loss

Account, and by reducing the total amount of interest free loans and

I.T.A. Nos. 1618/CHNY/2017 &. 2577 & 2578/CHNY/2018 Assessment Years : 2012 -13, 2013 -14 & 2014 -15

advances given to directors by the surplus, if any, generated during the

previous year relevant to Assessment Year 2012-13

Ground No.6

pertaining to prior period debited to the Profit & Loss Account. The

CIT(A) has returned a factual finding that the expense does not pertain

to the relevant assessment year which have gone uncontroverted in

appellate proceedings before us. Accordingly, the order of CIT(A) on

this issue is sustained and Ground No. 6 raised by the Appellant is

dismissed.

Ground No.7 to 10

the Act. In view of our adjudication on this issue in appeal for the

assessment year 2013-14 & 2014-15 above in identical facts and

circumstances, the disallowance under Section 40(a)(ia), made by the

Assessing Officer and to the extent confirmed by CIT(A), is confirmed

in respect of labour charges amounting to INR 34,50,866/-, and other

charges amounting to INR 11,76,000/- [consisting of ease rent INR

10,80,000, forwarding charges INR 51,000 and legal fee INR 45,000/-]

is confirmed. Whereas, in respect of disallowance made in respect of

Hire Charges of INR.7,69,449/- the issue is remanded back to the file

of Assessing Officer for re-computing the disallowance under Section

40(a)(ia) of the Act after giving benefit of Second Proviso to Section

40(a)(ia) of the Act subject to the Appellant complying with the

I.T.A. Nos. 1618/CHNY/2017 &. 2577 & 2578/CHNY/2018 Assessment Years : 2012 -13, 2013 -14 & 2014 -15

requirements of the said provision by furnishing relevant certificate/documents. In view of the aforesaid, Ground No. 7 to 10 are disposed off as partly allowed.

Order pronounced in the court on 02.06.2022 at Chennai. Sd/- Sd/- (जीमंजूनाथा) (रा!लचौधरी) (G. MANJUNATHA) (RAHUL CHAUDHARY) लेखासद�/ACCOUNTANT MEMBER �ाियकसद�एवं /JUDICIAL MEMBER चे�ई/Chennai, िदनांक/Dated, the 2nd June, 2022 IA, Sr. PS आदेशकी%ितिलिपअ)ेिषत/Copy to: 1. अपीलाथ$/Appellant 2. %&थ$/Respondent 3. आयकरआयु, (अपील)/CIT(A) 4. आयकरआयु,/CIT 5. िवभागीय%ितिनिध/DR 6. गाड0फाईल/GF .