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Income Tax Appellate Tribunal, ‘ D’ SMC BENCH : CHENNAI
Before: SHRI GEORGE MATHAN
आदेश / O R D E R
This is an appeal filed by the assessee against the order of Commissioner of Income-tax (Appeals)-5, Chennai in appeal No.167/CIT(A)-5/2016-17 dated 24.08.2017 for the assessment year 2014-15.
Shri D.Anand represented on behalf of the Assessee, and shri B.Sagadevan represented on behalf of the Revenue.
There was a delay of 14 days in filing this appeal. Before me, the ld.A.R submitted an affidavit prepared by Managing Partner of the Firm dated 23.05.2018 for condoantion of delay. I have gone through the affidavit filed by the assessee stating that the delay was occurred on the reason that the set of appeal papers received from my counsel was mixed up with other files of office. Hence, Managing Partner of the firm requested that the ld.A.R was unable to file the appeal in time. Therefore, ld.A.R prayed that delay of 14 days may be condoned. In my opinion, the reasons shown are justified and hence, delay in filing the appeal belatedly for 14 days before the Tribunal is condoned and appeal is admitted for adjudication.
It was submitted by ld.A.R that in regard to ground No.2, the ld. Assessing Officer had disallowed a sum of `76,648/- being the labour charges paid for loading and unloading goods which formed part of purchase invoices by invoking provisions of the section 40(a)(ia) of the Act. It was a submission that the assessee is a dealer in Iron and Steel Products and the assessee used to buy Re-Bar and sell the same. It was a submission that when purchasing re-bars, the invoices would contain the price of the re-bars along with the freight charges and handling charges. It was a submission that though freight charges and handling charges were specified in the invoices being a consolidated invoice, the payment was made directly for the full amount. It was a submission that the assessee was not paying the handling charges or labour charges separately for loading and unloading of the goods. It was a submission that as the assessee has not paid the handling charges, loading and unloading charges separately, no disallowance is called for.
On the other hand, ld.D.R supported the orders of ld. Assessing Officer and the Ld.CIT(A).
I have considered the rival submissions. A perusal of the invoice in the case of M/s.Vishnu Enterprises, main supplier of iron and steel re-bars to the assessee, shows that the invoice is a consolidated invoice including the price of the re-bars along with the freight charges and handling charges. There are no invoices separated for labour charges. This being so, I am of the view that as the assessee has paid for the purchase of re-bars on consolidated invoice, no TDS was liable to be made in respect of the payments to M/s.Vishnu Enterprises as no labour charges have been paid separately. Further, M/s.Vishnu Enterprises is not a labour contractor or labour supplier. The payments are not exceeding the specified amounts also. In these circumstances, Ground No.2 of the assessee’s appeal stands allowed.
It was submitted by ld.A.R that in regard to grounds Nos. 3 to 6, the ld. Assessing Officer had disallowed a sum of `2,39,113/- representing clearing & forwarding expenditure paid to M/s.Bharat Logistics Solutions Pvt Ltd., by invoking the provisions of section 40(a)(ia) of the Act. Before me, ld.A.R placed a copy of certificate of Accountant in Form 26A confirming that M/s.Bharat Logistics Solutions Pvt Ltd. has taken into account the sum referred to, being the sum paid by the assessee, when computing taxable income. It was a submission that in view of decision of Hon’ble Delhi High Court in the case of CIT Vs.Ansal Lank Mark Township (P.) Ltd., reported in [2015] 377 ITR 635 (Del.), the issue may be restored to the file of ld. Assessing Officer for verification and re-adjudication.
In reply, ld.D.R vehemently supported the orders of lower authorities.
I have considered the rival submissions. It is noticed that the assessee has filed Form No.26A in respect of non-deduction of TDS in respect of payment made to M/s.Bharat Logistics Solutions Pvt Ltd., under clearing and forwarding charges. This being so, this issue is restored to the file of ld. Assessing Officer for verification and re- adjudication in line with the decision of Hon’ble Delhi High Court in the case of CIT Vs.Ansal Lank Mark Township (P.) Ltd., referred to supra.
In these circumstances, Grounds Nos. 3 to 6 of the assessee are partly allowed for statistical purposes.
It was submitted by ld.A.R that in regard to ground No.7, the ld. Assessing Officer disallowed interest @ 12% on the negative current capital balance of one of the partners Shri Rajesh Dhokani. It was a submission that the assessee firm has two partners and though the debit balance in current account of one of the partners to an extent of `4,81,618/-, there was a credit balance in the other partner’s account to an extent of `31,78,832/- and no interest has been paid on the same. It was a submission that net of the current account of both the partners had only credit balance and no interest has also been charged on the same. Consequently, no interest is liable to be disallowed on the debit balance of one of the partner’s current capital account.
In reply, ld.D.R supported the orders of ld. Assessing Officer and the Ld.CIT(A).
I have considered the rival submissions. Perusal of the assessment order as well as the order of the CIT(Appeals) clearly shows that one of the partners was having a debit balance and other partner was having credit balance in their credit capital account.
Admittedly, no interest has been paid on the credit balance in the current account. The net of the current capital account also shows the credit balance only. The Partnership Deed also does not provide the interest on current account. This being so, no disallowance of interest can be made on account of debit in the current capital account of one of the partners. In these circumstances, the disallowance of interest as has been made by the ld. Assessing Officer and confirmed by the Ld.CIT(A) stands deleted. Ground No.7 of assessee stands allowed.
In the result, appeal of the assessee is partly allowed for statistical purposes
Order pronounced in the open court after conclusion of hearing on 23rd May, 2018, at Chennai.