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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC-1’, NEW DELHI
Before: Sh. N. K. Saini
ORDER This is an appeal by the assessee against the order dated 30.08.2016 of ld. CIT(A)-12, New Delhi. 2. Following grounds have been raised in this appeal: “1.That under the facts and circumstances, addition for deemed interest income of Rs.1,98,611/- @ 12% per annum on the debit balance on partner Mrs. Aarti Garg is un-sustainable in law as well as on merits.
2. That under the facts and circumstances, disallowance of exhibition expenses of Rs.51,000/- paid for exhibition stall charges for non-deduction of TDS is un-sustainable in law as well as on merits.”
3. Vide Ground No. 1, the grievance of the assessee relates to the addition for deemed interest amounting to Rs.1,98,611/- on the debit balance of Smt. Aarti Garg. 2 R G International
4. Facts of the case in brief are that the assessee e-filed the return of income on 08.10.2008 declaring an income of Rs.89,010/- which was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act) on 24.08.2009. Later on, the case was selected for scrutiny. During the course of assessment proceedings, the AO noticed that there was debit balance of Rs.16.20 lacs in the account of partner Smt. Aarti Garg. The contention of the assessee was that the interest free loans of Rs.28.76 lacs were available to the assessee as on 31.03.2008 and the amount given to Smt. Aarti Garg was out of the interest free loans, therefore, no interest was recoverable. The AO however, did not accept the contention of the assessee by observing that interest had been paid to another partner Sh. Rakesh Garg on his capital, therefore, interest was also to be charged on the debit balance of the other partner, which worked out to Rs.1,98,611/- @12% per annum. Accordingly, the said amount was added to the income of the assessee.
Being aggrieved the assessee carried the matter to the ld. CIT(A) who sustained the addition made by the AO by observing that interest bearing loan had been diverted for non-business purposes.
Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that there was no provision to charge the interest from the debit balance of the partners, in the partnership deed and that the debit balance in the account of Smt. Aarti Garg was out of the interest free 3 R G International loans amounting to Rs.28.76 lacs, so the addition made by the AO and sustained by the ld. CIT(A) was not justified.
In his rival submissions the ld. DR strongly supported the orders of the authorities below and further submitted that the balance sheet now furnished by the assessee in support of the claim that interest free unsecured loan of Rs.28.76 lacs were available was not furnished to the ld. CIT(A) because there is no such discussion in the impugned order. Therefore, the ld. CIT(A) was justified in sustaining the addition made by the AO. 8. I have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it appears that the contention of the assessee that interest free unsecured loans amounting to Rs.28.76 lacs were available against the debit balance of Rs.16.20 lacs in the account of Smt. Aarti Garg has not be considered by the authorities below. It is also not clear as to whether there was any provision for charging the interest on the debit balance in the capital account of the partner in the partnership deed. I, therefore, considering the totality of the facts as discussed hereinabove, deem it appropriate to set aside this issue back to the file of the AO to be adjudicated afresh in accordance with law after considering the aforesaid submissions of the assessee and by providing a due and reasonable opportunity of being heard. 4 R G International 9. The next issue vide Ground No. 2, relates to the disallowance of exhibition expenses of Rs.51,000/- on account of non-deduction of TDS.
The facts related to this issue in brief are that the AO during the course of assessment proceedings noticed that the assessee had paid exhibition charges of Rs.51,000/- to M/s ITE India Pvt. Ltd., Lajpat Nagar-II, New Delhi who is an agent based in India for an exhibitor at Hotel Rembrandt, Bankok, no TDS was not deducted on the said payment. He, therefore, disallowed the said exhibition charges of Rs.51,000/-.
Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted that the impugned amount was paid to M/s ITE India Pvt. Ltd. who was engaged in arranging exhibition in various countries and therefore, the provisions of TDS were not applicable. The ld. CIT(A) did not find merit in the submissions of the assessee and sustained the disallowance made by the AO.
Now the assessee is in appeal. The ld. Counsel for the assessee submitted that neither the AO nor the ld. CIT(A) had pointed out under which section of the Income Tax Act, this amount was disallowed. He further submitted that the amount was not payable so there was no question of deducting TDS. It was also submitted that the assessee had made the payment to an agent based in India for an exhibitor at Hotel Rembrandt, Bankok who provided the premises for exhibition, therefore, the TDS 5 R G International provisions u/s 195 of the Act were not applicable as the business income of Hotel Rembrandt had occurred in Bankok and taxable there only.
In his rival submissions the ld. DR supported the orders of the authorities below. 14. I have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is noticed that the AO while making the disallowance has not pointed out under which section the impugned disallowance was made, the claim of the assessee is that the said amount was paid for exhibition, so it was business expenses and there was no need to deduct the TDS. Since the AO has not pointed out under which provision, the disallowance was made. Therefore, this issue is also set aside to the file of the AO for fresh adjudication. 15. In the result, the appeal of the assessee is allowed for statistical purposes. (Order Pronounced in the Court on 27/02/2017)