WARANA INDUSRIES LTD,,KOLHAPUR vs. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 1, , KOLHAPUR

So far as the disallowance of interest of Rs.4,15,71,718/- is concerned, the Ld. CIT(A) sustained an amount of Rs.27,01,163/- disallowed by the Assessing Officer u/s 36(1)(iii) of the Act by observing as under:

Similarly the addition of Rs.20,38,356/- paid to Tatyasahebkore Warana Sahakarisakhar Karkhana Ltd was also sustained by the Ld. CIT(A) by observing as under:

Aggrieved with such order of the Ld. CIT(A) the assessee is in appeal before the Tribunal by raising the following grounds: 1. a) In view of the facts and circumstances of the case and Legal aspects, Commissioner of Income Tax (Appeals) has erred in confirming the addition of Rs.27,01,163/-. Same may please be deleted. 1. b) Commissioner of Income Tax Appeals, has failed to appreciate the Submission and evidence that though the payment is made from Pledge Loan Account. Said payment is for payment outstanding and not Interest Free Advance. Appellant prays for cancellation of disallowance made of Rs.27,01,163/-. 1.c) Without Prejudice, CIT(A) has erred in disallowing Interest u/s 36(1) (iii) of Rs.27,01,163/- inspite of the fact that appellant company has Interest Free Funds.

None appeared on behalf of the assessee. However, written submissions have been filed with a request to consider the same. Accordingly this appeal is being decided on the basis of the written submissions and after hearing the Ld. DR.

So far as the disallowance of Rs.27,01,163/- is concerned, the assessee has filed the following written submissions:

So far as the disallowance of interest of Rs.20,38,356/- is concerned, the assessee has filed the following written submissions:

The assessee in the written submissions has also relied on the following decisions: i) S.A. Builders Ltd. Vs. CIT & Anr (2007) 288 ITR 1 (SC) ii) PCIT vs. Sesa Resources Ltd. (2018) 404 ITR 707 (Bom) iii) CIT vs. Reliance Industries Ltd. (2019) 102 taxmann.com 52 (SC) iv) PCIT vs. Reebok India Company (2018) 103 CCH 28 (Del) v) M/s. Garuda Plant Product Ltd. Vs. DCIT vide and 2966/PUN/2016 order dated 27.06.2019 for assessment years 2012-13 and 2013-14 vi) HDFC Bank Ltd vs. DCIT 366 ITR 505

The Ld. DR on the other hand heavily relied on the order of the Ld. CIT(A).

We have perused the written submissions filed by the Ld. Counsel for the assessee and heard the Ld. DR. So far as the first issue i.e. disallowance of interest to the tune of Rs.27,01,163/- is concerned, it is the case of the assessee that the same is paid against their credit balance / payable account or advance for purchases and therefore, no such disallowance and provision of section 36(1)(iii) of the Act are attracted. It is also the alternate submission of the assessee that the company has adequate interest-free funds i.e. Capital + Free Reserves and interest free advance from the customers which is more than the amount paid to Warana Dudh Sangh. Further, it is also the case of the assessee that in the books of the company there are 4 to 5 different accounts of Sangh in the Ledger which was due to maintenance of books at factory as well as Head Office. It has also been mentioned in the written submission that as on 01.04.2013 in the books of the assessee, the account shows credit balance of Rs.13,44,17,500/- payable to Sangh and no interest has been paid for assessment year 2013-14 on such credit balance as the same is mainly advance received from Sangh for sale of dairy machinery. Similarly, as on 06.12.2013, the credit balance standing to Sangh Account in the books was also Rs.10,71,70,752/- for which the repayment by the company started from January 2014 to March, 2014. Further, it is the case of the assessee that account payable to Sangh which turned to be debit balance of Rs.8,88,487.50 because of net difference of sale of machinery and purchase of machinery. Since these are all factual aspects to be verified at the level of the Assessing Officer, therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the first issue to the file of the Assessing Officer with a direction to adjudicate the issue afresh and in accordance with law and after giving due opportunity of being heard to the assessee.

So far as the second issue raised in the grounds of appeal is concerned, the same relates to the interest payable on loan from Tatyasahebkore Warana Sahakarisakhar Karkhana Ltd. It is the case of the assessee that interest for assessment year 2013-14 amounting to Rs.20,38,356/- was not debited to the Profit and Loss Account in the financial year 2012-13 i.e. assessment year 2013-14 nor any tax was deducted. During the current year the assessee has paid the amount and due tax has been deducted and therefore, in view of the provisions of section 40(a)(ia) of the Act which allows the deduction on actual payment of TDS irrespective of the year to which the expenditure belongs to no disallowance is called for. Since this also needs verification at the level of the Assessing Officer as to whether the assessee has debited such interest in assessment year 2013-14 or not and whether the provisions of section 40(a)(ia) of the Act are attracted or not on account of deduction of TDS on actual payment during this year, therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the second issue also to the file of the Assessing Officer with a direction to decide the same afresh and in accordance with law and after giving due opportunity of being heard to the assessee. The grounds raised by the assessee are accordingly allowed for statistical purposes.

The first issue raised by the assessee in the CO is regarding the maintainability of the appeal filed by the Revenue on account of low tax effect. This issue has already been taken care of by the Tribunal while dismissing the appeal filed by the Revenue. Therefore, the first issue raised in the CO is dismissed as infructuous.

So far as the remaining grounds are concerned, these are identical to the grounds raised by the assessee in its appeal vide . Since we have already adjudicated the grounds raised by the assessee and restored the issues to the file of the Assessing Officer, therefore, the grounds raised in the CO become infructuous. Accordingly, the same are dismissed.

In the result, the appeal filed by the assessee is allowed for statistical purposes and the Cross Objection filed by the assessee is dismissed.