DR SHRIKANT ANANT BOKIL,SATARA vs. DEPUTY COMMISSIONER OF INCOME-TAX, SATARA CIRCLE, SATARA

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ITA 19/PUN/2020Status: DisposedITAT Pune31 May 2022AY 2008-094 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal rejected the addition under Section 40(a)(ia) based on a Supreme Court ruling. The issue under Section 36(1)(iii) was remanded to the Assessing Officer for fresh adjudication. The short-term capital gain addition was rejected as not pressed.

What were the facts?

The assessee appealed against the CIT(A)'s order confirming additions made under Sections 40(a)(ia), 36(1)(iii), and for short-term capital gains. The appeal involved assessment year 2008-09.

What were the issues?

Applicability of Section 40(a)(ia) for payments made before year-end and disallowance of interest under Section 36(1)(iii) due to availability of interest-free funds.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 36(1)(iii)

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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE

Before: SHRI S.S.GODARA

For Appellant: Shri M.K. Kulkarni
For Respondent: Shri Arvind Desai

आदेश / ORDER PER S.S. GODARA, JM :

1.

This assessee’s appeal for AY 2008-09 arises against the CIT(A)-4, Pune’s order dated 30-09-2019 passed in case No. PN/CIT(A)-4/Satara Circle, Satara/1515/2010-11/395 involving proceedings under Section 143(3) of the Income Tax Act, 1961 in short the Act.

Heard both the parties. Case file perused.

2.

Delay of 14 days in filing the instant appeal is condoned in light of the assessee’s pleadings explaining the same as well as on the account of no objection coming from the departmental side. The case is now taken up for adjudication on merits.

3. The assessee has raised the following three substantive grounds in the instant appeal :

“1. On the facts and the circumstances of the case and in law the Ld. CIT was not justified in confirming an addition of Rs. 3,00,407/- invoking the provisions of S. 40 (a)(ia) of the Act. Since the payments were already made before the end of the financial year i.e. before 31-03-2008, the provisions of S. 40(a)(ia) were not applicable as held by various judicial authorities including Pune Tribunal Bench. The disallowance be deleted.

2. On the facts and the circumstances of the case and in law the Ld. CIT(A) was not justified in making an addition of Rs. 1,16,177/- invoking the provisions of S. 36 (1)(iii) of the Act. The assessee is having sufficient interest-free funds with him therefore no disallowance was called for and the addition be deleted

3.

On the facts and the circumstances of the case and in law the addition made by the Rs. of Rs. 27,488/- on account of short term capital gain rejecting the computation of the same submitted by the assessee is not justified and the computation as per assessee be accepted.”

4.

The assessee’s first and foremost substantive ground that section 40(a)(ia) of the Act applies qua the instant expenses remaining payable as on 31-03-2008 only than those which stood paid earlier, already stands covered in department’s favour in Palam Gas Service Vs. CIT (2017) 394 ITR 300 (SC). This first and foremost substantive ground is rejected therefore.

5.

Next comes section 36(1)(iii) interest disallowance of Rs.1,16,177/- wherein the assessee’s sole argument in tune with his pleadings is that of availability of sufficient interest bearing funds in light of vs. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 (Bom) that necessary presumption in such an instance is of divergent of interest free funds only. I find that this second issue requires more a factual reconciliation than in substantive adjudication. I therefore restore the same back to the Assessing Officer for his fresh adjudication and if it is found that the assessee’s interest free funds exceeded the interest bearing funds, the impugned addition shall stand deleted. This second substantive ground is accepted for statistical purposes in very terms.

6.

Coming to the assessee’s last substantive ground of short term capital gain addition of Rs.27,488/-, Mr. Kulkarni rose to a seniority at Bar in not pressing the same on account of smallness of the amount involved. Rejected accordingly.

7.

This assessee’s appeal is partly allowed for statistical purposes in above terms.

Order pronounced in the Open Court on 31st May, 2022.

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