Kay Cee Enterprises , New Delhi V. JCIT, Range- 63, New Delhi

ITA 317/DEL/2018

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 8439 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 31-08-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 10-01-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AMICUS CURIAE
• Keywords: Depreciation
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘C’, NEW DELHI Before N. K. Choudhary, Judicial Member Dr. B. R. R. Kumar, Accountant Member ITA No. 317/Del/2018 : Asstt. Year : 2014-15 Kay Cee Enterprises, MEK 108, Mahipalpur Extn., New Delhi-110057 Vs JCIT, Range-63, New Delhi (APPELLANT) (RESPONDENT) PAN No. AALFK9443Q Assessee by : Sh. Satyjeet Goel, CA Amicus Curiae Revenue by : Sh. Ravi Kant Choudhary, Sr. DR Date of Hearing: 01.09.2022 Date of Pronouncement: 16.11.2022 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the assessee against the order of the ld. CIT(A)-20, New Delhi dated 23.10.2017. The case has been fixed for hearing on 11.01.2022, 21.02.2022, 07.07.2022, 31.08.2022. Since, the assessee has not attended any of the hearings, the bench took the help of Sh. Satyjeet Goel, CA as Amicus Curiae. {Amicus Curiae literally translated from Latin is "friend of the court." Plural is "amici curiae." Generally, it is referencing a person or group who is not a party to an action, but has a strong interest on the issues in general}. 2. Following grounds have been raised by the assessee: “1. On the facts and in the circumstances of the case and in law the Learned Commissioner of Income-tax (Appeals) - 20 New Delhi erred in confirming the addition made by the A.O. on account of disallowance of payment of additional service tax at Rs.2400000/- ITA No. 317/Del/2018 Kay Cee Enterprises 2 and interest thereon at Rs.1005575/- without appreciating that the law has been settled that where interest is levied on account of deprivation of the benefit of the tax for the period during which it has remained unpaid, the same is compensatory in nature, and is not imposed by way of penalty. 2. “On the facts and in the circumstances of the case and in law the Learned Commissioner of Income- tax (Appeals) - 20 New Delhi erred in confirming the addition made by the A.O. on account of disallowance of interest to the extent of Rs. 1437722/- out of total disallowance of Rs.3035343 on account of interest attributable to the interest free loans without appreciating that the law has been settled that the interest free loans to sister concerns or subsidiary company for the purpose of their business for commercial expediency falls in the category of commercial expediency. It has been clearly laid down now that commercial or business expediency does not mean for business of assessee itself only. 3. On the facts and in the circumstances of the case and in law the Learned Commissioner of Income-tax (Appeals) - 20 New Delhi erred in confirming the addition made by the A.O. on account of disallowance of late payment of Haryana Labour Welfare Funds of Rs.222089/- u/s 43B of Income Tax Act, without appreciating that the law has been settled that the amount was paid before due date as per Haryana Labour Welfare Act. 4. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in confirming the addition 57102/- out of disallowance of depreciation on vehicles which is fixed charge as par as vehicle insurance which has been allowed by the Ld. CIT (A).” 3. The assessee filed return of income on 17.09.2014 declaring a total income of Rs.50,42,251/-. The assessee is a firm engaged in the business of man power supply under the ITA No. 317/Del/2018 Kay Cee Enterprises 3 name and style of M/s Key Cee Enterprises and derived income from the same business. Disallowance on account of additional payment of Service Tax: 4. During the year, the assessee has claimed in P&L account an amount of Rs.34,05,576/- on account of additional service tax paid. It was not in dispute that the amount has been paid towards interest u/s 75 of the Finance Act, 1994 relating to late payment of service tax. 5. Before the ld. CIT(A), it was submitted that this amount consists of short fall on account of service tax of Rs.24,00,000/- and on interest on service tax of Rs.10,05,575/-. The ld. CIT(A) confirmed the order holding that the appellant has not submitted any documentary evidences in support of the claim. 6. We have gone through the facts of the case. The service tax is collected from the customer at the time of receipt of the amounts on account of service obtained. Having collected the service tax from the customer there is no reason not to deposit it in the Government account. The assessee would not at liberty to utilize the service tax collected from the customer, use it for his own purpose at his own volition, choose to pay interest and then claim the same as deduction in P&L account. Placing reliance on the following judgments namely,  CIT vs. Ashoka Mills Ltd. (1996) (Guj.) dated 09.10.1995  CIT vs. Raipur Manufacturing Co. Ltd. (14 ITR 725) (Bom.) ITA No. 317/Del/2018 Kay Cee Enterprises 4  Bharat Commerce & Industries Ltd. vs. CIT dated 05.03.1998 (SC), we hold that the “interest” is not an allowable deduction. The assessee may produce the documentary evidences of payment of “service tax” before the AO. Disallowance on account of interest on Loans & Advances: 7. As per the AO, the assessee has advanced loans of Rs.5,37,40,305/- to sister concerns and no interest has been charged. The assessee explained that due to shortage of funds all the firms have given loan of required amount to each other and returned them back. Even, during the year the opening balance of sister concerns was Rs.7,29,43,334/- and the same has been refunded during the year resulting in Nil balance. It was explained that the final outstanding balance was the fresh advances made to the sister concerns during the year. It was further submitted that the assessee had interest free unsecured loans and enough interest free fund to advance interest free sums to the sister concerns. The AO held that the assessee could not prove any commercial expediency involved in lending the amounts and disallowed an amount of Rs.30,35,343/- paid by the assessee to the bank on the borrowed funds. 8. During the course of appellant proceedings before the ld. CIT(A), the assessee was asked to give the calculation on the basis of the decision of ld. CIT(A) on the matter involving the similar issue. ITA No. 317/Del/2018 Kay Cee Enterprises 5 9. The submission of the assessee is as under: Interest Free Loan received from sister concerns/capital Interest expenditure disallowed X --------------------------------- Interest free loan given to sister concerns 4,36,22,862/- 30,35,343/- X --------------- = 23,29,515/- 5,68,40,305/- 10. Thus, out of total interest the disallowance is Rs.7,05,828/- [Rs.30,35,343/- (-) Rs.23,29,515/-] was computed by the assessee. 11. However, the ld. CIT(A) held that this calculation reveals that where as in A.Y. 2012-13 in Appeal No. 54/2015-2016 in the case of the proprietorship firm Sh. Ram Mehar Mann and in A.Y. 2013-14 Appeal No. 468/2015-16 order dated 23.03.2017 in A.Y. 2013-14 in the case of the sister concern Sukhmaa Sons & Associates, the then ld. CIT(A) has taken into account only the interest free loan received from sister concern and not the capital account but in the calculation submitted by the assessee, the assessee has taken undue benefit of the interest free loan received from sister concern as well as the capital account of the assessee which is not acceptable. Holding thus, the ld. CIT(A) recomputed the disallowance as under: Interest Free Loan received from sister concerns Interest expenditure disallowed X --------------------------------- Interest free loan given to sister concerns 2,99,17,306/- 30,35,343/- X --------------- = 15,97,621/- ITA No. 317/Del/2018 Kay Cee Enterprises 6 5,68,40,305/- 12. Thus, out of total interest of Rs.30,35,343/-, the ld. CIT(A) held that the disallowance would be Rs.14,37,722/- (3035343 – 1597621) but not Rs.7,05,828/- as calculated by the assessee and restricted the disallowance to Rs.14,37,722/- giving relief of Rs.15,97,621/-. 13. Depreciation and insurance: On examination of the record, we hold that disallowance of depreciation and insurance are without any legal basis and hence hereby directed to be deleted. 14. Having gone through the facts on record, we hold that the assessee should be given benefit of the capital amount of Rs.1,37,05,556/- should also be given the benefit of, along with interest free loans of Rs.2,99,17,306/- totaling to Rs.4,36,22,862/-. Taking into consideration, the total available interest free fund, we hold that the right disallowance would be Rs.7,05,828/-. Ordered accordingly. Disallowance u/s 43B: 15. The Assessing Officer made addition of Rs.2,22,089/- u/s 43B of the Income Tax Act, 1961 on the ground that the Tax Audit Report in Form 3CD, the Auditor has reported that this amount was not paid on or before the due date on account of employees contribution. During the course of appellate proceedings before the ld. CIT(A), the assessee submitted that the due date of payment in this case is 31.01.2015 as the payments are covered under Haryana Labour Welfare fund and this should be allowed. On going through the record, we find ITA No. 317/Del/2018 Kay Cee Enterprises 7 that the amount has been deposited before the due date and hence no disallowance is called for. 16. In the result, the appeal of the assessee is partly allowed. Order Pronounced in the Open Court on 16/11/2022. Sd/- Sd/- (N. K. Choudhary) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 16/11/2022 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR