Swing Infraspace Pvt. Ltd., Ahmedabad V. The ITO, Ward-5(3)(1), Ahmedabad

ITA 11/AHD/2023

AI Insights

Swing Infraspace P. Ltd. appealed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, which confirmed the disallowances made by the AO for the assessment year 2018-19. The disallowances included interest and late fees on TDS, late payment and penalty charges, and interest on margin trading facilities, totaling Rs.48,23,159. The AO had treated these expenses as penal in nature and thus not allowable under section 37(1) of the Income Tax Act, 1961, due to lack of evidence from the assessee to substantiate that they were incurred wholly and exclusively for business purposes. The Tribunal, after reviewing the accounts and ledger entries presented by the assessee, concluded that these expenses were indeed incurred for business purposes and were not penalties for any legal infringements, thus allowing the appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133464 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-07-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 04-01-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS
• Section: 37(1)

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘A’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI T.R.SENTHIL KUMAR, JUDICIAL MEMBER ITA No.11/AHD/2023 Assessment Year :2018-19 Swing Infraspace P. Ltd. 405, Abhishree Adroit Nr.Swaminarayan Temple Vastrapur Ahmedabad. PAN : AAWCS 0342 J Vs. ITO, Ward-5(3)(1) Ahmedabad. अपीलाथ / (Appellant) यथ /(Respondent) Assessee by : Shri Parin S. Shah, AR Revenue by : Ms. Saumya Pandey Jain, Sr.DR स ु नवाई क तार ख/Date of Hearing : 18/07/2023 घोषणा क तार ख /Date of Pronouncement: 11/10/2023 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER This appeal has been filed by the assessee against order passed by the ld.Commissioner of Income Tax(Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “Ld.CIT(A)”] under section 250(6) of the Income Tax Act, 1961 ("the Act" for short) dated 13.12.2022pertaining to the Asst.Year 2018-19. 2. In the appeal, the assessee has raised the following grounds for adjudication: i) The order passed by AO and confirmed by NFAC is bad in law and required to be quashed. ii) Ld. NFAC erred in law and on facts in confirming addition of Rs.159058/-on account of interest and late fees of IDS. ITA No.11/Ahd/2023 2 iii) Ld. NFAC erred in law and on facts in confirming late payment and penalty charges of Rs.3092199/-. iv) Ld. NFAC erred in law and on facts in confirming addition of Rs.1571902/-on account of interest on margin trading facility. v) Ld.NFAC ought to have adjudicated the appeal on merits rather than dismissing it in limine. 3. As transpires from the grounds raised before us, the assessee is aggrieved by order of the ld.CIT(A) in confirming disallowance made by the AO of the following expenses: i) Interest and late fee on TDS : Rs.1,59,058/- ii) Late payment & penalty charges : Rs.30,92,199/- iii) Interest on margin trading facility : Rs.15,71,902/- Total : Rs.48,23,159/- 4. The orders of the authorities below reveal, that the AO had made disallowance treating the aforesaid expenses as being penal in nature, not allowable under section 37(1) of the Act, in the absence of the assessee being able to furnish any evidence to substantiate its claim that expenses were incurred wholly and exclusively for the purpose of business of the assessee. The ld.CIT(A) has confirmed the same. 5. The argument of the ld.counsel for the assessee before us against the disallowance so made was that the books of accounts of the assessee were produced during the assessment proceedings, ledger accounts of all the expenses incurred were placed before the AO, which revealed the true nature of the expenses. That the AO was aware that the assessee was in the business of dealing in shares and securities. The nomenclature of these expenses and the ledger ITA No.11/Ahd/2023 3 account clearly revealed that all these expenses pertained to the business of the assessee of dealing in shares & securities being interest on margin trading facilities paid to brokers and late payment charges paid to brokers. Copy of the ledger accounts was also filed before us explaining the same. He therefore contended that in the light of all the records, the evidences/documents before the AO, there was no reason or the AO to reject the contentions of the assessee that these expenses were incurred wholly and exclusively for the purpose of business of the assessee. He contended that neither narration of the expenses nor copy of the ledger account of these expenses revealed any fact leading to the conclusion or finding that these expenses were pertained to penalty for infringement of any law which is not allowed in terms of provisions of section 37(1) of the Act. He therefore pleaded that the disallowance made be deleted. The ld.DR however supported order of the ld.CIT(A) stating that the assessee had not filed any evidence to prove its claim that these expenses were incurred for the purpose of business of the assessee. 6. Having heard the rival contentions, we agree with the ld.counsel for the assessee that there was no basis with the AO/ld.CIT(A) to hold that these expenses were in the nature of penalty/expenses for any purpose being an offence or which is prohibited by law, not allowed in terms of Explanation to section 37(1) of the Act; that we completely agree with the ld.counsel for the assessee that narration of these expenses, as noted by the AO/CIT(A) does not reveal any such nature of the expenses as far as interest on margin trading facility or TDS is concerned. And as for the late payment and penal charges also, the nomenclature ITA No.11/Ahd/2023 4 mentioning late payment also, there was no basis to arrive at a conclusion that all referred to penalty paid by the assessee, that too infringement of any law. Further, the books of accounts admittedly were all produced before the AO, and the ledger account of these expenses also did not reveal any such fact so as to arrive at a finding that these expenses were disallowable being penalty in nature. The ledger account of these expenses, coupled with the explanation of the assessee that these expenses were incurred for the purpose of business of the assessee substantially substantiated the claim of the assessee. The assessee being in the nature of trading in shares and securities, the expenses incurred on account of interest on margin facility and late payment to brokers is undoubtedly incurred in the course of business. There was no requirement for the assessee to prove they were not in the nature of penalty, disallowable u/s 37(1) of the Act. In view of the above, we hold that the disallowance of afore- mentioned expenses amounting in all to Rs.48,23,159/- holding the same to be penal in nature, is without any basis and without appreciating the facts on record. The same is held to be untenable in law therefore, and direct to be deleted. All the grounds raised by the assessee are allowed. 7. In the result, the appeal of the assessee is allowed. Order pronounced in the Court on 10 th October, 2023 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad,dated 10/10/2023