ACIT, New Delhi V. M/s. Quippo Energy (P) Ltd., New Delhi

ITA 4777/DEL/2016

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7629 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 08-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOVIND SINGHAL
• Keywords: Depreciation; Additional evidence; Revenue expenditure; TDS
• Section: 40(a)(ia); 143(1); 13

Judgement Text

PAGE | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI F BENCH: NEW DELHI (THROUGH VIDEO CONFERENCING ) BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER & SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.4777/DEL/2016 ASSESSMENT YEAR : 2009-10 ACIT, CIRCLE-21(2), ROOM NO.199C, 1 ST FLOOR, C.R.BUILDING, I.P.ESTATE, NEW DELHI. VS QUIPPO ENERGY (P.) LTD., D-2, SAKET PALACE, SAKET, NEW DELHI-110017. PAN-AAACQ1675Q APPELLANT RESPONDENT APPELLANT BY SH. GOVIND SINGHAL, SR.DR RESPONDENT BY SMT. ALKA ARREN, ADV. DATE OF HEARING 05.08.2021 DATE OF PRONOUNCEMENT 2 3 .08.2021 ORDER PER KUL BHARAT, JM : THIS APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2009-10 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-7, NEW DEL HI DATED 03.06.2016. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A ERRED ON FACTS AND IN LAW BY ADMITTING ADDITIONAL EVIDENCE A ND DELETING AN AMOUNT OF RS.11,70,000/- AND RS.11,44,415/- WHEN TH E ASSESSEE COULD NOT PRODUCE THE GENUINENESS OF THE SUNDRY CRE DITORS AT THE TIME OF ASSESSMENT DESPITE GIVING SUFFICIENT OPPORTUNITY . 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN DELETING RS.1,47,85,097/- AMOUNT OF EXPENSE WHICH I S OF CAPITAL NATURE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE ON SHORT PAYMENT OF TDS. PAGE | 2 2. FACTS GIVING RISE TO THE PRESENT APPEAL ARE THAT THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 30.09.2009 OF RS.61,08,204/- AN D PAID TAX UNDER MAT ON BOOK PROFITS AMOUNTING TO RS.2,07,08,618/-. THE RE TURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (THE ACT) ON 1 4.03.2011. THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS. WHILE F RAMING THE ASSESSMENT, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD VA RIOUS SUNDRY CREDITORS. THE ASSESSEE WAS ASKED TO PROVIDE THE DETAILS OF SUNDRY CREDITORS EXCEEDING ABOVE RS.1,00,000/- VIDE QUESTIONNAIRE DATED 22.09.2010. IN RESPONSE THERETO, THE ASSESSEE SUBMITTED DETAILS OF SUNDRY CREDITORS VIDE LETTER DATED 04.02.2011. OUT OF THE LIST OF SUNDRY CREDITORS, THE ASSESSING OFFI CER NOTICED THAT THE FIVE SUNDRY CREDITORS BEING DEUTZ POWER SYSTEMS GMBH; CLARKE EN ERGY LTD.; SYMATIC ENGINEERING PVT.LTD.; SURYA INDUSTRIES; AND GREEN P OWER INTERNATIONAL P.LTD. WERE THE TOP CREDITORS. THE ASSESSEE WAS ASKED TO FURNISH CONFIRMATION FROM ALL THE AFORESAID SUNDRY CREDITORS VIDE ORDER SHEET DAT ED 05.12.2011. THE ASSESSING OFFICER HAS RECORDED THAT MANY MORE OPPORTUNITIES W ERE GIVEN. DESPITE HAVING GIVEN SUFFICIENT OPPORTUNITY, CONFIRMATION OF ONLY THREE SUNDRY CREDITORS NAMELY M/S. KANTILAL CHIMANLAL; M/S. SWATI SWITCH GEARS IN DIA PVT.LTD.; AND M/S. GREEN POWER INTERNATIONAL PVT.LTD. WAS FURNISHED. 3. THUS, IN THE ABSENCE OF CONFIRMATIONS FROM SUNDR Y CREDITORS, THE ASSESSING OFFICER MADE ADDITION OF RS.2,80,55,795/- BEING UNVERIFIED CREDIT. FURTHER, THE ASSESSING OFFICER NOTICED THAT AS ON 3 1.03.2009, THE AMOUNT OF CAPITAL WORK IN PROGRESS WAS RS.22,69,56,000/- OUT OF FIXED ASSETS AMOUNTING TO RS.75,75,35,000/- I.E. 29.96% OF THE TOTAL FIXED AS SETS. HOWEVER, FROM THE TAX AUDIT REPORTS ANNEXURE D, IT WAS NOTICED THAT A VERY SMALL AMOUNT OF INTEREST PAGE | 3 OF RS.26,74,988/- WAS CAPITALIZED. IT WAS NOTICED THAT THE LOANS OUTSTANDING AS PER THE BALANCE SHEET OF THE ASSESSEE, WERE SECURED AND TERM LOANS AMOUNTING TO RS.46,63,34,000/-. THE ASSESSING OFFICER WAS OF THE VIEW THAT THESE LOANS WERE TAKEN TO FINANCE FUTURE ASSETS OF COMPANY. A QUERY WAS RAISED TO THE ASSESSEE IN THIS REGARD. IN RESPONSE TO THE QUERY OF THE ASSES SING OFFICER, THE ASSESSEE FILED ITS REPLY VIDE LETTER DATED 21.12.2011. FURTHER, SUBMISSION WAS MADE VIDE LETTER DATED 23.12.2011 IN THIS REGARD. THE ASSESSING OFF ICER HOWEVER, DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE. HE PROCEEDED TO MA KE DISALLOWANCE OF INTEREST OF RS.1,49,86,193/- OUT OF THE TOTAL INTEREST CLAIMED BY THE ASSESSEE, AS BEING THE AMOUNT OF EXPENSE WHICH WAS OF CAPITAL NATURE. AS PER ASSESSING OFFICER, IT OUGHT TO HAVE BEEN CAPITALIZED ALONGWITH WORK IN PR OGRESS AS LOAN ON WHICH THIS INTEREST HAD BEEN PAID, WAS FOR CREATION OF FIXED A SSETS WHICH WAS YET TO BE CAPITALIZED. FURTHER, THE ASSESSING OFFICER DISALL OWED THE UNPAID BONUS OF RS.9,15,250/-, PROVISION OF LEAVE ENCASHMENT OF RS. 6,30,381/- AND AMOUNT DEDUCTION OF TAX OF RS.1,34,545/- AND FURTHER DISAL LOWANCE OF RS.1,49,535/-. 4. AGGRIEVED AGAINST THIS, THE ASSESSEE PREFERRED T HE APPEAL BEFORE LD.CIT(A) WHO PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. THE REBY, LD.CIT(A) DELETED THE ADDITIONS MADE IN RESPECT OF SUNDRY CREDITORS NAME LY, SYMATIC ENGINEERING PVT. LTD. AND SURYA INDUSTRIES AMOUNTING TO RS.11,70,000 /- AND RS.11,44,415/- RESPECTIVELY. THE OTHER ADDITION OF RS.2,57,41,795 /- WAS CONFIRMED. IN RESPECT OF PROPORTIONATE DISALLOWANCE OF INTEREST OF RS.1, 49,86,193/-, LD.CIT(A) PARTLY ALLOWED THE GROUNDS THEREBY, DELETED THE ADDITION O F RS.1,47,85,097/- AND CONFIRMED THE ADDITION OF RS.2,01,096/- IN THIS RES PECT. HOWEVER, IN RESPECT OF THE DISALLOWANCE OF BONUS AND LEAVE ENCASHMENT OF R S.9,15,250/- AND PAGE | 4 RS.6,30,389/- WERE CONFIRMED. FURTHER, THE ADDITIO N MADE ON ACCOUNT OF SHORT DEDUCTION OF TAX AMOUNTING TO RS.1,34,545/WAS DELET ED AND CONFIRMED THE ADDITION OF RS.1,49,535/- MADE ON ACCOUNT OF DISALL OWANCE OF LEGAL AND PROFESSIONAL CHARGES PAID TO SHRI RAHMAN RAHMAN HAQ WITHOUT DEDUCTING TAX AT SOURCE. IN RESPECT OF THE ADDITIONAL GROUND RAISED BY THE ASSESSEE, THE DIRECTION WAS GIVEN TO THE ASSESSING OFFICER FOR VERIFICATION OF DEDUCTION OF TAX AT SOURCE. 5. AGGRIEVED AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL. 6. GROUND NO.1 RAISED BY THE REVENUE IS AGAINST THE DELETION OF ADDITION OF RS. 11,70,000/- AND RS.11,44,415/- MADE ON ACCOUNT OF UNVERIFIABLE SUNDRY CREDITORS. 7. LD. SR. DR SUBMITTED THAT LD.CIT(A) WAS NOT JUST IFIED IN DELETING THE ADDITIONS. HE SUPPORTED THE ORDERS OF THE ASSESSING OFFICER. 8. LD. COUNSEL FOR THE ASSESSEE OPPOSED THE SUBMISS IONS OF LD. SR. DR AND REITERATED THE SUBMISSIONS MADE IN THE SUMMARY OF A RGUMENTS. SUMMARY OF ARGUMENTS OF THE ASSESSEE ARE REPRODUCED AS UNDER F OR READY-REFERENCE:- 1.0. DELETION OF ADDITION ON ACCOUNT OF UNCONFIRME D SUNDRY CREDITORS BY ADMITTING ADDITIONAL EVIDENCE (RS.23,1 4,415/-) [GROUND NO.1 OF DEPARTMENTAL APPEAL] 1.1 IN THE ORDER U/S 143(3), THE AO ADDED THE OUTS TANDING BALANCES OF FOLLOWING CREDITORS IN THE ABSENCE OF CONFIRMATIONS FROM SUPPLIERS: [PARA 4 & 5 AT PG. 2 OF THE AO'S ORDER] A) CLARKE ENERGY LTD. - RS. 2,57,41,795/- B) SYMATIC ENGINEERING (P) LTD- RS. 11,70,000/- C) SURYA INDUSTRIES - RS. 11,44,415/- PAGE | 5 DETAILS OF ABOVE CREDITORS WERE SOUGHT BY THE AO ON LY AT THE FAG END OF ASSESSMENT PROCEEDINGS. 1.2 DURING THE COURSE OF HEARING BEFORE THE LD. CL T(APPEALS), THE ASSESSEE SUBMITTED CONFIRMATIONS OBTAINED FROM CREDITORS. SU BSEQUENTLY, A REMAND REPORT WAS SOUGHT FROM THE AO ON THE EVIDENCES [BEI NG CONFIRMATION FROM PARTIES] FILED BY THE APPELLANT. IN THE REMAND REPO RT, THE AO PRAYED NOT TO ACCEPT ADDITIONAL EVIDENCES AND FAILED TO GIVE ANY COMMENTS ON THE MERITS OF THE ISSUE AS WELL AS ON CONFIRMATIONS SUBMITTED [PARA 5.3 OF CIT(A)S ORDER]. THE ASSESSEE FILED ITS RESPONSE TO THE REMA ND REPORT VIDE REPLY DATED 13-03-2015. 1.3 THE LD. CIT(APPEALS) DELETED THE ADDITION MADE BY THE AO TOWARDS BALANCES OF SYMATIC ENGINEERING (P) LTD (RS.11,70,0 00/-) AND SURYA INDUSTRIES (RS.11,44,415/-) ON THE CONTENTION THAT THE BALANCES WITH RESPECT TO THEM ARE CONFIRMED AND VERIFIED AND THERE IS NO BASIS TO SUSTAIN THE ADDITIONS MADE BY AO. [PARA 5.5 AT PG. 4-5 OF THE C IT(A)'S ORDER]. THE ADDITION ON ACCOUNT OF CLARKE ENERGY LTD. (RS. 2,57 ,41,795/-) WAS CONFIRMED. 1.4 THE LD. CIT(APPEALS) ADMITTED THE ADDITIONAL E VIDENCE ONLY AFTER PROVIDING OPPORTUNITY TO THE AO AND OBTAINING HIS R ESPONSE. HENCE, ORDER OF THE CIT(A) IS LIABLE TO BE CONFIRMED. HON'BLE JURIS DICTIONAL ITAT IN ACIT -VS.- DENTSPLY INDIA (P) LTD (IT A NO. 31/DEL/2011) (DEL ITAT) HELD AS UNDER: 'THE POWERS OF THE CIT(A) TO ADMIT ADDITIONAL EVIDE NCE ARE NOT ONLY IN SITUATIONS WHERE THE EVIDENCE COULD NOT BE PRODUCED BEFORE LOWER AUTHORITIES OWING TO LACK OF ADEQUATE OPPORTUNITY B UT ALSO IN SITUATIONS WHERE THE FRESH EVIDENCE WOULD ENABLE TH E CIT(A) TO DISPOSE OF THE APPEAL OR FOR ANY OTHER SUBSTANTIAL CAUSE.' SIMILAR VIEW HAS BEEN GIVEN IN FOLLOWING DECISIONS: - ITO -VS.- M/S.XO INFOTECH LTD. (ITA NO.3342/DEV20 13)(AHD. ITAT) - CIT -VS- VIRGIN SECURITIES & CREDITS (P) LTD. (20 11) 332 ITR 396 (DEL ITAT) PAGE | 6 1.5. AS REGARDS THE ABOVE SUNDRY BALANCES, THE BRIE F FACTS OF THE SAME IS AS UNDER: SYMATIC ENGINEERING (P) LTD (RS. 11,70,000/-)-THE B ALANCE OUTSTANDING ON 31-03-2009 REPRESENTS ADVANCES FOR P URCHASES PAID BY CHEQUE DURING THE YEAR, AGAINST WHICH PURCHASES HAVE BEEN MADE IN THE SUBSEQUENT YEAR. DEBIT BALANCES OF CREDITORS ON ACCOUNT OF ADVANCES FOR PURCHASES MADE TO SUPPLIERS CANNOT TRE ATED AS INCOME AS HELD BY HON'BLE MUMBAI ITAT IN DCIT -VS.- M/S CH ARAK PHARMACEUTICALS (ITA NO. 4667/MUM/2010). SURYA INDUSTRIES (RS.11,44,415/-) - THE BALANCE OUT STANDING ON 31- 03-2009 REPRESENTS SUM PAYABLE ON ACCOUNT OF PURCHA SES MADE DURING THE YEAR. THE SAID SUM WAS PAID IN THE SUBSE QUENT YEAR. 1.6 LEDGER ACCOUNTS AND CONFIRMATIONS FOR BOTH THE SE ABOVE PARTIES WERE VERIFIED BY THE LD. CIT(APPEALS) AND GRANTED PARTIA L RELIEF. HENCE, THE GROUNDS RAISED BY THE DEPARTMENT IS LIABLE TO BE DI SMISSED. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT LD.CIT(A) HAS GIVEN A FINDING ON FACT IN PARA 5.5 OF THE IMPUGNED ORDER WHICH REPRODUCED HEREUNDER FOR READY -REFERENCE:- 5.5. THE LD. AR HAS STATED THAT COPY OF LETTER CON FIRMING THE BALANCE FROM CLARKE ENERGY LTD. IS FILED AS PER PAGE 112 OF THE WRITTEN SUBMISSION. I HAVE PERUSED THE SAID CONFIRMATION. THERE IS NO REFERENC E OF ANY AMOUNT PAYABLE BY THE APPELLANT COMPANY TO CREDITOR MIS CLARKE ENE RGY LTD. AS THE BALANCE IS NOT VERIFIED AND NO CONFIRMATION IS FURNISHED WI TH RESPECT TO MIS CLARKE ENERGY LTD. NO INTERFERENCE IS CALLED FOR IN THE AD DITION MADE BY AO OF RS.2,57,41,795/- WHICH IS CONFIRMED. IN SO FAR AS C REDIT APPEARING IN THE NAME OF M/S SYMATIC ENGINEERING (P) LTD. AND SURYA INDUSTRIES IS CONCERNED, LEDGER ACCOUNT OF THE SAID VENDORS AND C ONFIRMATIONS HAVE BEEN DULY FURNISHED. AS THE BALANCE WITH RESPECT TO THE SE CREDITORS ARE CONFIRMED AND VERIFIED THERE IS NO BASIS TO SUSTAIN THE ADDIT IONS MADE BY THE PAGE | 7 ASSESSING OFFICER WITH RESPECT TO THESE ENTITIES AT RS.11,70,000/- AND RS.11,44,415/- RESPECTIVELY, WHICH IS DIRECTED TO B E DELETED. THIS GROUND OF APPEAL IS PARTLY RULED IN FAVOUR OF THE APPELLANT. 10. IT IS STATED ON BEHALF OF THE ASSESSEE THAT THE EVIDENCES IN THE FORM OF CONFIRMATION WERE FORWARDED TO THE ASSESSING OFFICE R FOR HIS REMAND REPORT, THEREFORE, DUE OPPORTUNITY WAS GIVEN TO THE ASSESSI NG OFFICER. 11. HAVING PERUSED THE MATERIAL AVAILABLE ON RECORD , WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF LD.CIT(A) AS THE ASSESSEE HAS FILED CONFIRMATION WHICH HAS BEEN VERIFIED BY LD.CIT(A) HENCE, GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 12. GROUND NO.2 RAISED IN THE REVENUES APPEAL IS A GAINST THE DELETION OF ADDITION OF RS.1,47,85,097/-, THE EXPENSES WHICH WE RE TREATED AS CAPITAL IN NATURE. 13. LD. SR. DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE ASSESSING OFFICER HAS RIGHTLY TREATED THE EXPEN DITURE AS OF CAPITAL NATURE SINCE THE ASSESSEE HAD OBTAINED SECURED LOAN IN THE FORM OF TERMS LOANS FOR THE PURPOSE OF FINANCING FUTURE ASSETS. 14. ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE S UPPORTED THE ORDER OF LD.CIT(A) AND REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN SUBMISSIONS. THE SUBMISSIONS OF THE ASSESSEE ARE REPRODUCED HERE IN BELOW FOR READY- REFERENCE:- PAGE | 8 2.0 DELETION OF DISALLOWANCE OF INTEREST EXPENDIT URE WHICH IS OF CAPITAL NATURE (RS. 1,47,85,097/-) [GROUND NO.2 OF DEPARTMENTAL APPEAL] 2.1 THE ASSESSEE HAS DEBITED TO PROFIT & LOSS ACCO UNT AN AMOUNT OF RS. 5,00,20,327/- TOWARDS INTEREST EXPENSES. IN THE ORD ER U/ S 143(3), THE AO MADE DISALLOWANCE OF INTEREST ON UNSCIENTIFIC PROPO RTIONATE BASIS AT RS.1,49,86,193/- ALLOCATING THE INTEREST TOWARDS CA PITAL WORK IN PROGRESS [PARA 7 AT PG. 4 & 5 OF THE AO'S ORDER] 2.2 OUT OF TOTAL INTEREST OF RS. 500,20,327/-, INT EREST EXPENSES TO THE TUNE OF RS. 3,94,80,262/ - PERTAINS TO OPENING BALANCE O F LOANS FROM OBC, IDFC AND SIFL WHICH WERE TRANSFERRED TO THE ASSESSEE UND ER DULY APPROVED SCHEME OF ARRANGEMENT. FURTHER, OUT OF THIS INTERES T EXPENSES, AN AMOUNT OF RS. 26,74,988/- PERTAINS TO LOAN FROM OBC & SIFL SA NCTIONED FOR SPECIFIC PURCHASES AND CAPITALIZED IN THE BOOKS OF ACCOUNTS. ACCORDINGLY, BALANCE INTEREST AMOUNT OF RS. 3,68,05,274/- (RS. 3,94,80,2 62/-LESS RS. 26,74,988/- ), BEING REVENUE EXPENDITURE WAS CLAIMED AS DEDUCTI ON U/S 36(1)(III) OF THE ACT. FURTHER, BALANCE INTEREST AMOUNTING TO RS. 1,05,40, 065/- [RS. 500,20,327/- LESS RS. 3,94,80,262/-] PERTAINS TO SECURED AND UNS ECURED LOANS OF RS. 35,70,13,698/- & RS. 6,64,83,348/- RESPECTIVELY FRO M SREI INFRASTRUCTURE FINANCE LTD. OBTAINED DURING THE YEAR AND UTILISED FOR BUSINESS. 2.3 THE LD. CIT(APPEALS) EXAMINED ALL THE DETAILS, BALANCE SHEET, LOAN AGREEMENTS AND CORRECTLY CONSIDERED INVESTMENT IN F IXED ASSETS AND CWIP BEFORE DEDUCTING DEPRECIATION AT RS.83,17,32,000/- (RS. 60,47,76,000/- PLUS RS 22,69,56,000/ -) INSTEAD OF ERRONEOUS AMOUN T CONSIDERED BY THE AO [PARA 8 AT PG. 5 OF THE AD'S ORDER). 2.4 THE LD. CIT(A) AT PARA 6.4 AT PG 8-9 OF ITS OR DER, RE-COMPUTED THE DISALLOWANCE AT RS. 28,76,084/ - WHICH PERTAINS TO CAPITAL WORK IN PROGRESS. SINCE RS. 26,74,988/ - WAS ALREADY CAPITA LIZED BY THE ASSESSE, BALANCE DISALLOWANCE OF RS. 2,01,096/ - WAS DULY CO NFIRMED. RELEVANT PAGE | 9 EXTRACTS OF THE CIT(APPEALS)'S ORDER IS AS UNDER (P ARA 6.4, PAGE 9 OF THE CIT(A)'S ORDER): IN THE LIGHT OF THESE FACTS, COMPUTATION MADE BY TH E AD BY CONSIDERING THE ENTIRE INTEREST EXPENDITURE AND THE INCORRECT F IGURE OF THE FIXED ASSETS AND WIP IS NOT IN ORDER. THE CORRECT COMPUTA TION WOULD BE AS UNDER: (INTEREST DURING THE YEAR X WIP)/WIP (1,05,40,065 X 22,69,56,000)/83,17,32,000 = RS. 28,76,084/- AS THE APPELLANT COMPANY HAS CAPITALISED RS. 26,74, 988/- OUT OF THE INTEREST PAYMENT DURING THE YEAR, THE PROPORTIONATE DISALLOWANCE WOULD WORK OUT TO RS.2,01,096/- (28,76,084 - 26,74, 988). THE BALANCE DISALLOWANCE I.E. RS. 1,49,86,193 - RS. 2, 01,096 = RS. 1,47,85,097 IS DIRECTED TO BE DISALLOWED. 2.5 THE CIT(APPEALS) AFTER DUE VERIFICATION OF THE FACTS AND DOCUMENTS, HAS RECOMPUTED THE DISALLOWANCE AND GRANTED PARTIAL RELIEF TO THE ASSESSE. FURTHER, THE ERROR MADE BY THE AO IN APPLYING UNSCI ENTIFIC AND BASELESS CALCULATION OF DISALLOWANCE OF INTEREST WAS DULY RE CTIFIED. IN THE ABSENCE OF ANY ERROR IN THE CALCULATION MADE BY THE LD. CIT(AP PEALS), THE GROUNDS RAISED BY THE DEPARTMENT IS LIABLE TO BE DISMISSED. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. LD.CIT(A) HAS DECIDED THIS ISSUE BY OBSERV ING AS UNDER:_ 6.4. I HAVE CONSIDERED THE ASSESSMENT ORDER AND TH E SUBMISSIONS FURNISHED BY THE LD.AR. THE STATEMENT OF LOANS AND INTEREST PAYMENT CLEARLY SHOWS THAT OUT OF THE TOTAL INTEREST PAYMEN T OF RS.5,00,20,595/- CLAIMED BY THE APPELLANT COMPANY, INTEREST OF RS.3, 94,80,262/- WAS ON ACCOUNT OF OPENING BALANCES OF LOANS PURSUANT TO SC HEME OF ARRANGEMENT BETWEEN THE APPELLANT COMPANY WITH M/S. QUIPPO INFR ASTRUCTURE EQUIPMENT LTD. (QIEA) AND M/S. QUIPPO CONSTRUCTION EQUIPMENT LTD. (QCEL) APPROVED BY THE HONBLE HIGH COURT OF DELHI AND THE HON'BLE HIGH COURT OF ANDHRA PRADESH VIDE THEIR ORDERS DATED .11.2008 AND 05.12 .2008 RESPECTIVELY. PAGE | 10 THE SAID ARRANGEMENT BECAME EFFECTIVE FROM 01.04.20 08. PURSUANT TO THE SAID SCHEME, SECURED LOAN OF RS.28,42,96,628/- AND UNSECURED LOAN OF RS.3,40,17,OOO/- STOOD TRANSFERRED FROM QIEL W.E.F. 01.04.2008 TO THE APPELLANT COMPANY. THE TOTAL INTEREST PAYMENT ON LO ANS OBTAINED DURING THE YEAR IS RS.1,05,40,065/-. THERE IS THEREFORE, MERIT IN THE CONTENTION OF THE LD. AR THAT INTEREST ON OPENING BALANCE OF LOANS SHOULD NOT BE CONSIDERED FOR COMPUTING THE PROPORTIONATE DISALLOWANCE. IT IS ALS O NOTED FROM THE COMPUTATION OF INTEREST DISALLOWANCE MADE BY THE AO THAT HE HAS CONSIDERED THE INVESTMENT AT RS.75,75,35,000/- (RS. 53,05,79,000/- FIXED ASSETS + RS.22,69,56,000/- WIP) INSTEAD OF RS.83,17 ,32,OOO/- (RS.60,47,76,0001- FIXED ASSETS+ RS.22,69,56,0001- WIP) WHICH IS EVIDENT FROM SCHEDULE 4 FIXED ASSETS OF THE AUDITED ACCOUNT S ANNEXED AT PAGE 44 OF THE WRITTEN SUBMISSION. THE APPELLANT COMPANY HAS C APITALIZED RS.26,74,988/- OUT OF THE INTEREST EXPENSE OF THE R S.105,40,065/- AS PER ANNEXURE D OF THE TAX AUDIT REPORT FILED AND ANNEXE D AS PAGE 77 OF THE WRITTEN SUBMISSIONS. IN THE LIGHT OF THESE FACTS, T HE COMPUTATION MADE BY THE AO BY CONSIDERING THE ENTIRE INTEREST EXPENDITURE A ND THE INCORRECT FIGURE OF THE FIXED ASSETS AND WIP IS NOT IN ORDER. THE CORRE CT COMPUTATION WOULD BE AS UNDER: INTEREST DURING THE YEAR X WIP 1,05,40,065 X 22,69,56,000=RS.28,76,084/- FIXED ASSETS 83,17,32,00 0 6.5. AS THE APPELLANT COMPANY HAS CAPITALIZED RS.26 ,74.988/- OUT OF THE INTEREST PAYMENT DURING THE YEAR, THE PROPORTIONATE DISALLOWANCE WOULD WORK OUT TO RS.2,01.096/-(28,76,084-26,74,988). THE BALANCE DISALLOWANCE I.E. RS.1,49,86,193 - RS.2,01,096 = RS.1,47,85,097/ - IS DIRECTED TO BE DELETED. THIS GROUND OF APPEAL IS PARTLY RULED IN F AVOUR OF THE APPELLANT. 16. LD.CIT(A) HAS POINTED OUT THAT FROM THE COMPUTA TION OF INTEREST DISALLOWANCE, THE AO HAD CONSIDERED INVESTMENT OF R S.75,75,35,000/- AGAINST RS.83,17,32,000/-. THIS FACT IS NOT REBUTTED BY TH E REVENUE. IT IS SEEN THAT LD.CIT(A) HAS COMPUTED THE INCOME AT RS.28,76,084/- AGAINST COMPUTATION PAGE | 11 MADE BY THE ASSESSING OFFICER AT RS.1,49,86,193/-. THE REVENUE COULD NOT POINT OUT ANY ERROR IN THE COMPUTATION BY LD.CIT(A). TH EREFORE, WE DO NOT SEE ANY INFIRMITY INTO THE FINDING OF LD.CIT(A), THE SAME I S HEREBY AFFIRMED. GROUND NO.2 RAISED BY THE REVENUE IS, THUS REJECTED. 17. GROUND NO.3 RAISED BY THE REVENUE IS AGAINST TH E DELETION OF DISALLOWANCE MADE ON ACCOUNT OF SHORT PAYMENT OF TDS. 18. LD. SR. DR SUPPORTED THE ORDER OF ASSESSING OF FICER. 19. ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE S UPPORTED THE ORDER OF LD.CIT(A) AND REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN SUBMISSIONS. FOR THE SAKE OF CLARITY, WRITTEN SUBMISSIONS OF THE ASSESSEE ARE REPRODUCED AS UNDER:- 3.0. DELETION OF DISALLOWANCE ON ACCOUNT OF SHORT PAYMENT OF TDS (RS. 1,34,545/-) [GROUND NO.3 OF DEPARTMENTAL APPEA L] 3.1 THE ASSESSEE HAS PAID LEG AL AND PROFESSIONAL CHARGES OF RS. 3,00,000/- TO M/ S GENSOL CONSULTANTS PVT LTD. IN THE ORDER U/ S 143(3), THE AO MADE AD-HOC DISALLOWANCE U/ S 40(A)(IA) OF T HE ACT AS FOLLOWS [PARA 12 AT PG. 5-6 OF THE AO'S ORDER] : PARTICULARS AMOUNT (RS.) TDS DEDUCTED (A) RS. 17,042/ - RATE OF TDS (B) 10.3% AMOUNT ON WHICH CORRECT TDS DEDUCTED (C=A/B) RS. 1,65,455/ - TOTAL EXPENSES (D) RS. 3,00,000/ - BALANCE (E=D - C) RS. 1,34,545/ - 3.2 THE LD. CIT(APPEALS) DELETED THE DISALLOWANCE MADE BY THE AO HOLDING THAT TDS DEDUCTION MADE IN EARLIER YEAR BY TRANSFEROR COMPANY HAS NOT BEEN CONSIDERED BY THE AO [PARA 9.3 & 9.4 AT PG . 16-17 OF THE CIT(A)'S ORDER]. PAGE | 12 3.3 THE DETAILS OF IMPUGNED PROFESSIONAL CHARGES A ND TDS DEDUCTED THEREON ARE AS BELOW:- SL.NO. AMOUNT OF EXPENSE SERVICE TAX (RS.) TOTAL (RS.) DATE OF PAYMENT AMOUNT OF TDS TDS DEDUCTOR 1. 1,50,000 18,540 1,68,540 16 - 08 - 2007 (AY 08-09) 17,360 QIEL (DEMERGED COMPANY) 2. 1,50,000 15,450 1,65,450 23.03.2009 (AY 09-10) 17,042 ASSESSEE (RESULTING COMPANY) TOTAL 3,00,000 34,402 THE AMOUNT PAID BY QIEL HAS BEEN TRANSFERRED TO THE ASSESSEE UNDER DULY APPROVED SCHEME OF DEMERGER WHICH HAS BEEN CLAIMED BY ASSESSEE AS EXPENSES IN ITS BOOKS OF ACCOUNTS. SEE. 40(A)(IA) P ROVIDES THAT EXPENDITURE SHALL BE DISALLOWED IN CASE TAX HAS NOT BEEN DEDUCT ED THEREON OR AFTER DEDUCTION HAS NOT BEEN PAID. IN THE INSTANT CASE, T DS OF RS. 17,360/- AND RS. 17,042/- ON ENTIRE AMOUNT OF RS. 3,00,000/- HAS BEEN DULY DEDUCTED AND DEPOSITED. HENCE, DISALLOWANCE U/ S 40(A)(IA) F OR EXPENSES IN THE NATURE OF REIMBURSEMENTS IS NOT SUSTAINABLE. 3.4 WITHOUT PREJUDICE, SECTION 40(A)(IA) ISN'T APP LICABLE TO SHORT DEDUCTION OF TDS AS HELD IN FOLLOWING DECISIONS: - M/S NEEMRANA HOTELS PVT LTD. -VS.- DCIT [ITA NO.9 8/DEL/2017) - UE TRADE CORPORATION (INDIA) LTD -VS.- DCIT [ITA NO.2303/DEL/2011) (DEL ITAT) - CIT -VS.- S. K. TEKRIWAL (ITA NO. 183/KOL/V2012) (CAL HC). 20. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSING OFFICER MADE DI SALLOWANCE ON ACCOUNT OF SHORT DEDUCTION OF TAX. AS PER THE ASSESSING OFFIC ER, THE ASSESSEE OUGHT TO HAVE DEDUCTED THE TAX AT SOURCE @ 10.3% ON THE PAYMENT O F RS.3,00,000/- MADE TO THE M/S. GENSOL CONSULTANT (P.) LTD. LD.CIT(A) WHI LE DELETING THE ADDITION HAS RELIED UPON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS PAGE | 13 S.K.TEKRIWAL 361 ITR 432 [CAL.] AND DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL RENDERED IN THE CASE OF UE TRADE CORPORATION (INDIA) LTD. VS DCIT IN ITA NO.2303/DEL/2011. THE REVENUE HAS NOT POINTED OUT ANY CONTRARY BIND ING PRECEDENTS THEREFORE, WE DO NOT SEE ANY INFIRMITY I N THE FINDING OF LD.CIT(A) AND THE SAME IS HEREBY AFFIRMED. GROUND NO.3 RAISED BY THE REVENUE IS THUS, REJECTED. 21. GROUND NO.4 RAISED BY THE REVENUE IS GENERAL IN NATURE, NEEDS NO ADJUDICATION. 22. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ABOVE DECISION WAS PRONOUNCED ON CONCLUSION OF VIRT UAL HEARING IN THE PRESENCE OF BOTH THE PARTIES ON 23 RD AUGUST, 2021. SD/- SD/- (PRASHANT MAHARISHI) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIA L MEMBER *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI