RATHORE FREIGHT CARRIERS PVT. LTD.,,GANDHIDHAM-KUTCH vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3(1)(2),, AHMEDABAD

The assessee has raised the following grounds of appeal: 1. The CIT(A)grossly erred in law and on facts of the case in confirming addition u/s 36(l)(iii) for an amount Rs.3,15,000/- in respect of expenditure on account of interest paid on money borrowed and used for the purpose of the business. 2. The CIT(A) grossly erred in law and on facts of the case in confirming addition u/s 36(l)(iii) for an amount Rs.3,15,0007- without appreciating the fact that no interest bearing borrowed fund was diverted for non-business purposes and that the interest free loan/advance given by the appellant assessee is relatable to interest free fund available with it and that such loans and advances were given keeping view larger interest of the business of the appellant and the commercial expediency. 3. The CIT(A)grossly erred in law and on facts of the case in confirming addition u/s 36(1)(iii) for an amount Rs.3,15,000/- without appreciating the fact that the interest free loans and advances given to the associate concerns were out of the Assessee's own fund. 4. The CIT(A)grossly erred in law and on facts of the case in confirming addition u/s 36(l)(iii) for an amount Rs.3,15,000 /- u/s 36(l)(iii), since the interest charged on the said loans and advances given was as per the prevailing market rate and it was unjustified on part of the AO to discount the fact that the Appellant had long-standing business relations with the parties involved. Therefore, the appellant prays that the impugned addition of Rs.3,15,000/-, being completely unwarranted may be please be deleted. 5. The CIT(A)grossly erred in law and on facts of the case in confirming addition u/s u/s 40(a)(ia) for an amount of Rs. 21,13,002/- on the alleged ground that the appellate has not deducted tax at source on payment of commission, in utter disregard to the fact that during the year under appeal, the appellant had not incurred nor has it claimed any expenditure on account of payment of commission of Rs.21,13,002 as alleged by the Assessing Officer. It is therefore prayed that the impugned addition/disallowance may please be deleted. 6. The CIT(A) grossly erred in law and on facts of the case in confirming Rs. 1,81,750 /- on account)fj3afleiene£jn the figure of outstanding balance in the name of " Shre Shyam Petroleum PoinP)by ignoring various explanations and submissions made by the Appellant in that regard. 7. The CIT(A)grossly erred in law and on facts of the case in confirming addition for an amount of Rs. 1,81,750 /- disregarding the explanation and reconciliation furnished by the Appellant before the Assessing Officer. The Id. CIT(A) failed to appreciate the fact that alleged difference was due to difference in the opening balance as per the books of the appellant and that of " Shree Shyam Petroleum Point" and there has been no difference in respect of the transactions during the year. 8. Thus the appellant prays the impugned addition of Rs.1,81,750 /-, may be please be deleted, as it is irrational and against the facts of the case. 9. The Id. CIT(A) has erred in law and on facts in confirming the action of Id. AO in charging interest u/s 234B/C/D of the Act. 10. The Id. CIT(A) has erred in law and on facts in confirming the action of Id. AO in initiating penalty proceedings u/s 271(l)(c) of the Act.

On the other hand the ld. DR opposed to condone such inordinate delay.

We have perused the records and heard the rival submissions of both the sides. There was a delay of 415 days in filing the appeal by the assessee before us. From the preceding discussion, we note that there was reasonable cause for the assessee for not preferring the appeal within the stipulated time as discussed above. The case of the assessee also appears to be strong. But there is a technical defect in the appeal since the appeal was not filed within the period of limitation. There was the affidavit filed by the assessee explaining the reasons for the delay in filing the appeal before us. However, the Revenue has not filed any counter-affidavit to deny the allegation made by the assessee.

The 1st issue raised by the assessee is that the learned CIT(A) erred in confirming the disallowance made by the AO for Rs. 3,15,000/- on account of diversion of interest-bearing fund.

The AO during the assessment proceedings found that the assessee on one hand is incurring interest expenses and on the other hand it has advanced money amounting to Rs. 21 Lacs without charging any interest thereon. Therefore the AO worked out the proportionate amount of interest attributable to such interest-free loans and advances for Rs. 3.15 Lacs and added to the total income of the assessee.

Aggrieved assessee preferred an appeal to the learned CIT(A) who has also confirmed the order of the AO.

Being aggrieved by the order of the learned CIT(A) the assessee is in appeal before us.

The learned AR before us contended that own fund of the assessee exceeds the amount of interest free loans and advances. Therefore, it can be presumed that the amount of the loans and advances has been made out of the own fund of the assessee and therefore no disallowance of interest is warranted.

On the other hand the learned AR vehemently supported the order of the athorities below.

We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly the own fund of the assessee stands at Rs. 4,73,43,797/- and Rs. 4,95,70,828/- as on 31st March 2011 and 31st March 2012 which is far ahead of the amount of loan and advances given by the assessee without charging any interest. This fact can be verified from the balance sheet of the assessee which are placed on pages 146 of the paper book. Accordingly we hold that it can be presumed that the amount of interest free loans and advances have been made out of the own fund of the assessee and therefore no disallowance of interest is warranted in the given facts and circumstances. Hence the ground of appeal of the assessee is allowed.

The 2nd issue raised by the assessee is that the learned CIT (A) erred in confirming the addition of ₹ 21,13,002/- on the reasoning that the same has been incurred without deducting the TDS under the provisions of section 194H Act of the Act.

The AO during the assessment proceedings found that the assessee has outsourced its trucks/trailers to its sister concern namely Rathore Freight Carries. The sister concern of the assessee on the use of such truck on hiring have earned a gross amount of Rs. 4,22,60,045/- only out of which the sister concern has given a sum of Rs. 4,01,47,043/- and retained the balance amount of ₹ 21,13,002/- for itself. Accordingly, the AO was of the view that the assessee has incurred commission expenses of ₹ 21,13,002/- which was paid to its sister concern without deducting the TDS. Thus, the AO disallowed the same on account of non-deduction of TDS and added to the total income of the assessee.

Aggrieved assessee preferred an appeal to the learned CIT(A) who also confirmed the order of the AO.

Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.

The learned AR before us contended that the question of disallowance arises on the expenses claimed by the assessee without deduction of TDS. But in the given case, the assessee has not claimed any expense by way of commission and therefore the question of any disallowance on account of non-deduction of tax at source does not arise.

On the other hand the learned DR vehemently supported the order of the authorities below.

We have heard the rival contentions of both the parties and perused the materials available on record. The provisions of section 40(a)(ia) of the Act provides that notwithstanding anything to the contrary in section 32 to 38 of the Act, there are certain deductions which will not be available to the assessee until and unless the assessee deducts the TDS as provided under chapter XVII-B and after deduction the same is paid on or before the due date of filing the return of income as specified under section 139(1) of the Act. The relevant extract of the section as under: 40. Notwithstanding anything to the contrary in sections 30 to 31[38], the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession",— 32(a) in the case of any assessee— ****** (ia) any interest, commission or brokerage, 34[rent, royalty,] fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, 35[has not been paid on or before the due date specified in sub-section (1) of section 139 :] 19.1 It is the overriding provisions and applies in relation to the computation of income chargeable to tax under the head profit and gains of business or profession. It states that there are certain sums which cannot be allowed as deduction without deducting the TDS. Thus, the question of disallowance arises if the deduction was claimed by the assessee without deducting the TDS. In the given facts and circumstances, the assessee has not claimed the deduction for ₹ 21,13,002/- and therefore the question of disallowance of the same does not arise on account of non-deduction of TDS. In view of the above and after considering the facts in totality, we set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him on account of non-deduction of TDS under the provisions of section 40(a)(ia) of the Act. Hence, the ground of appeal of the assessee is allowed.

The next issue raised by the assessee is that the learned CIT(A) erred in confirming the order of the AO on account of mismatch in the outstanding balance of the creditor.

The AO during the assessment proceedings found that the assessee has credited the ledger of creditor namely Shree Shayam Petroleum Point by an amount of Rs. 1,81,750/- vide entry dated 15th April 2011 which has not been reconciled by the assessee with the ledger of the party. Therefore, such difference of Rs. 1,81,750/- was treated by the AO as income and added to the total income of the assessee.

Aggrieved assessee preferred an appeal to the learned CIT (A) who has also confirmed the order of the AO.

Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.

The learned AR before us contended that the amount of difference of ₹ 1,81,750/- is arising out of the opening balance. Therefore, the same cannot be added as income of the assessee for the year under consideration. As per the learned AR there was no difference in respect of the transactions carried out by the assessee in the year under consideration with the party namely Shree Shyam Petrol Point. Accordingly the learned AR contended that no addition of whatsoever is warranted the given facts and circumstances.

On the contrary the learned DR vehemently supported the order of the authorities below.

We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that all the transactions carried out by the assessee in the year under consideration with the party Shyam Petrol Point were duly accounted for in its books of accounts which were also matching with the accounts of the creditor Shree Shyam Petrol Point except one journal entry dated 15th April 2011 crediting the balance of Shree

In the result the appeal filed by the assessee is allowed.