M/S. SAISIDHA SUGAR EQUIPMENT & ENGINEERING COMPANY PVT.LTD,,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 10,, PUNE

We proceed appeal-wise for the sake of convenience and brevity. The assessee‟s former appeal raises first and foremost issue of correctness of both the learned lower authorities action declining its donations paid of Rs.5,86,000/- as an expenditure wholly and exclusively incurred for the purpose of business u/s 37 of the Act.

Learned counsel vehemently argued that both the lower authorities have erred in law and on facts in disallowing the impugned regular business expenditure by wrongly treating the same as “donations” only. He further sought to highlight the fact that the assessee had taken its business decision to incur the impugned expenditure on the asking of its regular customers from whom it had been deriving substantial sales and therefore, section 37 is very much applicable herein.

We have given our thoughtful consideration to the assessee‟s foregoing arguments and find no merit therein. It emerges during the course of hearing that the assessee‟s impugned expenses nowhere relate to even its regular customers as it is evident from the perusal of case file. We find that this claim of Rs.5,86,000/- involves three recipients M/s. Cromopet, Shree Khedut SKUM (Kosamba) and Shri Loknete Bhaurao Patil SSK Ltd. (Rs.75,000/-, Rs.1,11,000/- and Rs.4,00,000/-), respectively. None of these three parties had any business relation with this assessee at all. Faced with this situation, we are of the opinion that the learned lower authorities have rightly treated its impugned claim of Rs.5,86,000/- as in the nature of donations only without having any nexus with its day-to-day business activities. The same stands upheld.

The assessee‟s second substantive ground seeks to reverse both the learned lower authorities action disallowing commission expenses of Rs.75,255/- paid in the relevant previous year. Learned counsel invited our attention to the CIT(A)‟s detailed discussion in para 8 page 3 that the assessee had paid the impugned sum to Mr. P.S. Lingraj for finalizing purchases from M/s. MTC Rolling Nashik. And also that the assessee had further deducted TDS thereupon as well.

We find no merit in the assessee‟s arguments as it come on record that it has sought to discharge its onus of genuineness of payment of commission by merely filing the TDS deduction certificates which hardly forms the sole reason to accept the impugned claim. The assessee has neither filed on record any agreement with the payee nor explained the corresponding arrangement with Mr. P.S. Lingraj. We, accordingly, affirm both the learned lower authorities‟ action making the impugned disallowance.

Lastly comes the assessee‟s third substantive ground in the instant appeal ITA No.430/PUN/2018 and solitary substantive ground in latter appeal 2013-14 that the learned lower authorities have erred in law and on facts in disallowing interest of Rs.1,59,578/- and Rs.19,08,317/- u/s 36(1)(iii); assessment year-wise, respectively alleging diversion of interest bearing funds for non-business purposes. We note during the course of hearing that the very issue had arisen between the parties in preceding assessment year 2010-11 as well. This tribunal‟s learned co-ordinate bench order in ITA No.1725/PUN/2016, order dated 12.12.2018 had deleted the same after drawing the necessary presumption of payment of interest- free funds only to sister concerns when non-interest bearing funds exceed such advances.

The very factual position appears to have been continuing in both these impugned assessment years as well as the CIT(A)‟s detailed discussion in paras 6 and 5; assessment year-wise, respectively, places reliance on his detailed discussion in assessment year 2010-11. Faced with this situation and in the absence of any distinction on facts and law, we accept the assessee‟s instant last substantive ground No.3 in former appeal ITA No.430/PUN/2018 and sole grievance in latter appeal ITA No.431/PUN/2018. Both these appeals stand partly accepted and accepted, respectively. No other ground has been pressed before us.

To sum up, the assessee‟s former appeal ITA No.430/PUN/2018 is partly allowed and latter appeal ITA No.431/PUN/2018 is allowed in foregoing terms. A copy of this common order be placed in the respective case files.