ITO 4(2)(4), MUMBAI V. OCTANT INTERACITVE TECHNOLGIES LTD, MUMBAI

ITA 6395/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1657 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 14-09-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 30-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M DAYASAGAR
• Keywords: Unexplained cash credit; Additional evidence
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND SHRI C.N. PRASAD, JUDICIAL MEMBER / ITA NO.6395/M/2013 ( / ASSESSMENT YEAR: 2009-10) THE INCOME TAX OFFICER 4(2)(4), AAYAKAR BHAVAN, ROOM NO.647, 6 TH FLOOR, M.K. ROAD, MUMBAI 400 020 / VS. M/S. OCTANT INTERACTIVE TECHNOLOGIES LTD., (FORMERLY KNOWN AS M/S. KUSHAL SOFTWARE LTD.), D.NO.A-5, 1 ST FLOOR, INDIAN AIR LINES COLONY, OPP. POLICELINE, SECUNDERABAD 500 003 PAN: AACCK0438R ( / APPELLANT) ( /RESPONDENT) PRESENT FOR: ASSESSEE BY : NONE REVENUE BY : SHRI M. DAYASAGAR, D.R. / DATE OF HEARING : 14.09.2016 / DATE OF PRONOUNCEMENT : 30.11.2016 / O R D E R PER C.N. PRASAD, JUDICIAL MEMBER: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX-8, MUMBAI (HEREINAFTER R EFERRED TO AS THE CIT) DATED 26.08.2013 FOR THE ASSESSMENT YEAR 2009-10. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ACCEPTING ADDITIONAL EVIDENCE W ITHOUT RECORDING THE REASONS AS PER RULE 46A(2). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED ACCEPTING SHARE SWAP ALLOTMENT WIT HOUT ANY COURT ORDER. ITA NO.6395/M/2013 M/S. OCTANT INTERACTIVE TECHNOLOGIES LTD., (FORMERLY KNOWN AS M/S. KUSHAL SOFTWARE LTD.) 2 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED ACCEPTING THE VALUATION OF SHARES ISSUED AT PREMIUM AGAINST DEBENTURE VALUE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE ON A CCOUNT OF UNEXPLAINED CASH CREDIT U/S. 68. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE ON A CCOUNT OF DIRECT EXPENSES U/S. 37(1). 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE IMPUGNED ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW AND CONSEQUENTLY MERITS TO BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 7. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3. IN SPITE OF ISSUE OF NOTICE NONE APPEARED ON BEH ALF OF THE ASSESSEE NOR ANY ADJOURNMENT PETITION IS MOVED. THEREFORE WE HE ARD THE LD. D.R. AND DISPOSE OFF THIS APPEAL ON MERITS. 4. THE FIRST ISSUE IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF UNEXPLA INED CASH CREDIT UNDER SECTION 68 OF THE ACT. THE LD. D.R. SUBMITS THAT T HE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT MADE ADDITION OF RS.29,39 ,40,000/- UNDER SECTION 68 OF THE ACT BEING THE INCREASE IN SHARE CAPITAL/S HARE PREMIUM. THE ASSESSING OFFICER TREATED THE INCREASE IN SHARE CAP ITAL/SHARE PREMIUM AS UNEXPLAINED CASH CREDIT. THE LD. D.R. SUBMITS THAT SINCE THE ASSESSEE DID NOT FILE THE COMPLETE DETAILS REGARDING INCREASE IN SHA RE CAPITAL AND NOT PROVED THE GENUINENESS, IDENTITY AND CREDITWORTHINESS OF THE C REDITORS THE ASSESSING OFFICER DISALLOWED AND TREATED THE SAME AS UNEXPLAI NED CASH CREDIT. 5. THE LD. D.R. SUBMITS THAT THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) AFTER CALLING FOR A REMAN D REPORT FROM THE ITA NO.6395/M/2013 M/S. OCTANT INTERACTIVE TECHNOLOGIES LTD., (FORMERLY KNOWN AS M/S. KUSHAL SOFTWARE LTD.) 3 ASSESSING OFFICER AND BY CONSIDERING THE REMAND REP ORT DELETED THE ADDITION. THE LD. D.R. PLACES THE RELIANCE ON THE ORDERS OF T HE ASSESSING OFFICER. 6. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BE LOW AND HEARD THE LD. D.R. WE NOTICE THAT THE ASSESSING OFFICER TREATED INCREASE IN SHARE CAPITAL/SHARE PREMIUM AS UNEXPLAINED CASH CREDIT FO R THE REASON THAT THE ASSESSEE HAS NOT PRODUCED PRIMARILY THE AGREEMENT/A RRANGEMENT BETWEEN THE ASSESSEE AND THE COMPANY NAMELY TEMPPL WHICH WAS TA KEN OVER BY THE ASSESSEE AND THE CORRESPONDENCE FILED BY THE ASSESS EE ARE INSUFFICIENT TO PROVE THAT THE TRANSACTION IS GENUINE. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE SUBMITTED THAT ASSESSEE COMPANY TOOK OVER TRAUMA & EMERGENCY MEDICAL PRODUCTS PVT. LTD. (FOR SHORT TEMPPL) ALONG WITH THEIR ASSETS AND LIABILITIES BY ALLOTTING 5 SHARES EACH OF RS.10/- O N A PREMIUM OF RS.10/- FOR EACH DEBENTURE OF RS.100/- HELD BY TEMPPL. THE ASS ESSEE ALSO SUBMITTED COPIES OF LETTERS ISSUED BY PUNE AND AHMEDABAD STOC K EXCHANGE LISTING THE SAID EQUITY SHARES IN SUPPORT OF THE INCREASE IN SH ARE CAPITAL/SHARE PREMIUM. HOWEVER, THE ASSESSING OFFICER MADE ADDITION TREATI NG SUCH INCREASE IN SHARE CAPITAL AS UNEXPLAINED CASH CREDIT OBSERVING THAT A SSESSEE HAS NOT FURNISHED COPY OF ANY AGREEMENT FOR ACQUISITION OF THE SAID C OMPANY AND THE TERMS AND CONDITIONS AS PER WHICH THE ASSESSEE COMPANY TOOK O VER IS NOT KNOWN. THEREFORE THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE HAS NOT DISCHARGED HIS ONUS TO ESTABLISH THAT THE TRANSACTION IS GENUI NE, THE GENUINENESS OF THE CREDITORS AND CREDITWORTHINESS OF THE CREDITORS HAV E NOT BEEN PROVED. 7. THE ASSESSEE PRODUCED VARIOUS DOCUMENTS BEFORE T HE LD. CIT(A) AND MADE VARIOUS SUBMISSIONS. THE LD. CIT(A) CALLED FO R REMAND REPORT FROM THE ASSESSING OFFICER AND THE ASSESSING OFFICER VIDE LE TTER DATED 15.02.13 SUBMITTED THE REMAND REPORT AFTER EXAMINING THE COP Y OF AGREEMENT BETWEEN THE ASSESSEE AND TEMPPL WHICH WAS TAKEN OVER BY THE ASSESSEE AND HE HAS ITA NO.6395/M/2013 M/S. OCTANT INTERACTIVE TECHNOLOGIES LTD., (FORMERLY KNOWN AS M/S. KUSHAL SOFTWARE LTD.) 4 NOT DISPUTED THE GENUINENESS OF THE TRANSACTION ENT ERED INTO BY THE ASSESSEE. THERE WAS NO ADVERSE COMMENTS BY THE ASSESSING OFFI CER REGARDING THESE TRANSACTIONS. THUS, THE LD. CIT(A) DELETED THE ADD ITION TAKING INTO ACCOUNT THE REMAND REPORT OBSERVING AS UNDER: 2.2 DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E AR OF THE APPELLANT SUBMITTED DETAILED SUBMISSIONS AND EVIDENCES ETC. I N SUPPORT OF ITS CLAIM THAT AMOUNT RECEIVED IN RESPECT OF INCREASE IN SHARE CAP ITAL/SHARE PREMIUM IS GENUINE. THE DETAILS /SUBMISSIONS OF THE APPELLANT WERE FORWARDED TO THE AO FOR HIS COMMENTS VIDE THIS OFFICE LETTER DATED 13.1 2.2012. THE AO AFTER VERIFYING THE SUBMISSIONS AND DETAILS FILED BY THE APPELLANT SUBM ITTED HIS COMMENTS VIDE LETTER DATED 15.02.2013. THE COMMENTS OF THE AO ON THIS IS SUE ARE REPRODUCED AS UNDER:- 'ASSESSEE CO. INCREASED SHARE CAPITAL BY RS.14,69,7 0,000/- BY ALLOTTING 1,46,97,000 EQUITY SHARES OF RS.10 BY CHARGING PREM IUM OF RS.10/-. ASSESSEE COLLECTED SHARE PREMIUM OF RS.14,69,70,000/-. THE S HARES WERE ISSUED TO THE HOLDERS OF FULLY CONVERTIBLE DEBENTURES OF RS.2 9,39,40,000/- ISSUED BY M/S. TRAUMA & EMERGENCY MEDICAL PRODUCTS PVT. LTD. THE ASSESSEE CO. TOOK OVER THE ASSETS AND LIABILITIES OF M/S. TRAUMA & EM ERGENCY MEDICAL PRODUCTS PVT. LTD. THE ACTUAL CASH WAS NOT RECEIVE D BY ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE HAD FILE D THE LETTER OF PUNE & AHMEDABAD STOCK EXCHANGE REGARDING ACKNOWLEDGEMENT OF 1,46,97,000 NEW SHARES ALLOTTED. BUT THE ASSESSEE HAS NOT FILED THE COPY OF AGREEMENT TO ESTABLISH THE TERMS & CONDITIONS OF ISSUING SHARES FOR ACQUIRING BUSINESS OF M/S TRAUMA & EMERGENCY MEDICAL PRODUCTS PVT. LTD. ASSESSEE ALSO DID NOT PRODUCE THE BOOKS OF ACCOUNT. ASSESSEE ALSO DID NOT FILE ANY WRITTEN SUBMISSION ON THIS ISSUE. AS THE ASSESSEE FAILED TO SUBMIT SUPPORTING DOCUMENTS OF ALLOTMENT OF SHARES ON SHARP SWAP BASI S, ADDITION WAS MADE U/S. 68 OF THE ACT. NOW THE ASSESSEE HAD FILED THE AGREEMENT COPY DT. 2 6.09.2008 BETWEEN THE ASSESSEE AND M/S. TRAUMA & EMERGENCY MEDICAL PRODUC TS PVT. LTD. AS PER THE AGREEMENT, THE ASSESSEE HAD ISSUED 1,46,97,000 SHARES AT RS.20/- CHARGING PREMIUM OF RS.10/- TO 12 PARTIES IN LIEU O F FULLY CONVERTIBLE DEBENTURES OF RS.100/- EACH, FOR A VALUE OF RS.29,3 9,40,000/-. THE BALANCE SHEET OF M/S. TRAUMA & EMERGENCY MEDICA L PRODUCTS PVT. LTD. FOR F. Y. 2007-08 & 2008-09 IS FILED. THE CONFIRMAT IONS OF 6 PARTIES TO WHOM SHARES MORE THAN 10 LACS HAVE BEEN ISSUED BY THE AS SESSEE IS ALSO FILED ALONGWITH PAN. THE LETTER OF PUNE AND AHMEDABAD STO CK EXCHANGE REGARDING ACKNOWLEDGEMENT OF 1,46,97,000 NEW SHARES ALLOTTED WAS FILED AT THE TIME ASSESSMENT. THE QUOTING OF SHARE PRICE ON BSE IN BETWEEN 1.1.2009 TO 19.3.2009 IS ALSO FILED. THE ASSESSEE IS A PUBLI C LTD. CO. LISTED ON STOCK EXCHANGE. HENCE BOOKS OF ACCOUNTS ARE NOT CALLED FO R. AS PER THE SUBMISSION, THE SHARE CAPITAL IS INCREASED AS PER A GREEMENT DATED ITA NO.6395/M/2013 M/S. OCTANT INTERACTIVE TECHNOLOGIES LTD., (FORMERLY KNOWN AS M/S. KUSHAL SOFTWARE LTD.) 5 26.09.2008 BETWEEN ASSESSEE AND M/S. TRAUMA & EMERG ENCY MEDICAL PRODUCTS PVT. LTD.' 2.3 A COPY OF THE COMMENTS WAS FORWARDED TO THE APP ELLANT FOR FURTHER COMMENTS ON HIS PART. THE APPELLANT VIDE LETTER DAT ED 18.03.2013 HAS SUBMITTED COMMENTS ON REMAND REPORT SUBMITTED BY THE AO. THE COMMENTS OF THE APPELLANT ARE REPRODUCED AS UNDER :- 'THE AO HAS SUBMITTED REMAND REPORT DT. 15.2.2013 I N RESPONSE TO THE LETTER DT.13.12.2012 CALLING REMAND REPORT. AS PER PARA A OF THE REMAND REPORT, THE AO HAS CLEARLY STATED THAT THE ASSESSEE HAD FILED THE COPY OF AGREEMENT DTD. 26.09.2008 BETWEEN THE ASSESSEE AND M/S. TRAUMA & EMERGENCY MEDICAL PRODUCTS PVT. LTD. THE AO HAS ALS O STATED THAT THE ASSESSEE HAD ALSO FILED NECESSARY BALANCE SHEETS AN D CONFIRMATIONS OF 6 PARTIES TO WHOM THE SHARES OF MORE THAN 10 INES HAV E BEEN ISSUED ALONGWITH THEIR PAN. THE AO HAS ALSO STATED THAT TH E LETTER OF PANE AND AHMEDABAD STOCK EXCHANGE WERE ALSO FILED. THE AO HA S ALSO SPECIFICALLY STATED THAT THE ASSESSEE BEING A PUBLIC LIMITED COM PANY, THE BOOKS OF ACCOUNTS ARE NOT CALLED. IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE AO HAS E XAMINED THE ISSUE IN DETAIL AND ALL THE NECESSARY EVIDENCES HAVE BEEN SUBMITTED . THE AO HAS NEITHER DENIED ANYTHING NOR HAS PUT ANY ADVERSE REMARK. ALS O, HE HAS NOT OBJECTED FOR ANY ADDITIONAL EVIDENCES, IF ANY, FILED BEFORE HIM ON THE ISSUE IN HIS REMAND REPORT AND AS SUCH THE ADDITION MADE U/S. 68 NEEDS TO BE DELETED.' 2.4 I HAVE CONSIDERED THE REPORT OF THE AO, COMMEN TS OF THE APPELLANT CAREFULLY. IT IS SEE N FROM THE REPORT SUBMITTED BY THE AO THAT NECESSAR Y VERIFICATION HAS BEEN CARRIED OUT BY HIM DURING THE COURSE OF REMAND REPORT PROCE EDINGS AND THE AO WAS SATISFIED REGARDING GENUINENESS OF THE TRANSACTION AFTER VERIFYING EVIDENCES SUBMITTED BY THE APPELLANT. 2.5 IN VIEW OF THIS, THE AO IS DIRECTED TO DELET E THE ADDITION MADE U/S. 68 OF THE ACT AMOUNTING TO RS.29,39,40,000/-. THIS GROUND OF APPEAL IS ACCORDINGLY ALLOWED . 8. ON A CAREFUL READING OF THE LD. CIT(A)S ORDER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) IN ACCEPTING THE TRANSACTIONS AS GENUINE. IN THE REMAND PROCEEDINGS ALSO THE ASSESS ING OFFICER HAS NOT GIVEN ANY ADVERSE COMMENTS ON THE TRANSACTION. THE OBSER VATIONS OF THE LD. CIT(A) WERE NOT REBUTTED. THUS WE SUSTAIN THE ORDER OF TH E LD. CIT(A) ON THIS ISSUE. ITA NO.6395/M/2013 M/S. OCTANT INTERACTIVE TECHNOLOGIES LTD., (FORMERLY KNOWN AS M/S. KUSHAL SOFTWARE LTD.) 6 9. THE NEXT ISSUE IN THE APPEAL OF THE REVENUE IS T HAT LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE TOWARDS DIRECT EXPEN SES. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT DISALLOWED RS.10,69,23,945/- OUT OF DIRECT EXPENSES OF RS.53,21,19,723/- INCURRED BY TH E ASSESSEE OBSERVING THAT THE ASSESSEE HAS NOT GIVEN COMPLETE DETAILS OF DIRE CT EXPENSES AND WERE GIVEN ONLY THE NAMES OF THE PARTIES TO WHOM PAYMENTS WERE MADE ON VARIOUS DATES. HE OBSERVED THAT THE ASSESSEE HAS NOT GIVEN THE COM PLETE DETAILS OF ITS DIFFERENT HEADS OF EXPENSES AND THE NATURE OF DIRECT EXPENSES INCURRED, NOT FURNISHED BILLS, VOUCHERS. THEREFORE THE ONUS OF PROVIDING D ETAILS CALLED FOR WERE NOT DISCHARGED BY THE ASSESSEE AND THEREFORE THE EXPENS ES CANNOT BE VERIFIED AND THEREFORE ON AN ADHOC BASIS THE ASSESSING OFFICER D ISALLOWED 20% OF SUCH EXPENSES. 10. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) AFTER CALLING FOR REMAND REPORT RESTRICTED T HE DISALLOWANCE TO RS.39,75,165/- OBSERVING AS UNDER: 3.2 DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E AR OF THE APPELLANT SUBMITTED DETAILED SUBMISSIONS AND EVIDENCES ETC. I N SUPPORT OF ITS CLAIM OF DIRECT EXPENSES. THE DETAILS/SUBMISSIONS OF THE APPELLANT WERE FORWARDED TO THE AO FOR HIS COMMENTS VIDE THIS OFFICE LETTER DATED 13.12.20 12. THE AO AFTER VERIFYING THE SUBMISSIONS AND DETAILS FILED BY THE APPELLANT SUBM ITTED HIS COMMENTS VIDE LETTER DATED 15.02.2013. THE COMMENTS OF THE AO ON THIS I SSUE ARE REPRODUCED AS UNDER: 'THE ASSESSEE HAD DEBITED RS.53,21,79,723/- AS DIRE CT EXPENSES. ASSESSEE HAS NOT FILED THE COMPLETE DETAILS OF THESE EXPENSE S. BILLS & VOUCHERS OF THESE EXPENSES WERE ALSO NOT FILED. HENCE OUT OF T HESE, 20% EXPENSES OF RS.10,69,23,945/- WAS DISALLOWED AS ASSESSEE FAILED TO FURNISH THE DETAILS / NATURE OF THE DIRECT EXPENSES INCURRED. ASSESSEE FI LED THE DETAILS DIRECT EXPENSES AS FOLLOWS:- SOFTWARE DIVISION PURCHASE RS.31,45,01 ,000/- FINANCE DIVISION PURCHASES RS.27,71,17,379/- ITA NO.6395/M/2013 M/S. OCTANT INTERACTIVE TECHNOLOGIES LTD., (FORMERLY KNOWN AS M/S. KUSHAL SOFTWARE LTD.) 7 INTEREST ON LOAN RS. 39,75,165/- OTHER CHARGES RS. 9,853/- OPENING STOCK RS.14,71,71,975/- LESS: CLOSING STOCK RS.21,06,55,649/- RS.21,76,18,723/- TOTAL RS.53,21,19,723/- IN SUPPORT OF ABOVE CLAIM, THE ASSESSEE FILED P/CO TO COPIES OF PURCHASE BILLS OF SOFTWARE DIVISION AND FINANCE DIVISION. OPENING AND CLOSING STOCK ARE AS PER BALANCE SHEET. AS REGARDS CLAIM OF INTEREST ON LOAN OF RS. 39,75,165/-, ASSESSEE HAS SUBMITTED ONLY NAMES OF 37 PARTIES AND AMOUNT PAID TO EACH OF THEM. VIDE ORDER SHEET NOTING DTD. 27.12.2012, IT WAS ASKED TO FILE TDS DETAILS OR 15G FORM. BUT NO SUCH DETAILS WERE FILED BY THE ASSESSE E AND DURING THE HEARING, ASSESSEE ALSO CONFIRMED THAT TDS IS NOT DEDUCTED ON INTEREST PAYMENT. THE AUDITOR IN ITS 3CD REPORT HAS MENTIONED 'NOT APPLIC ABLE' AGAINST THE COLUMN OF 'AMOUNT INADMISSIBLE U/S. 40(A). THE INTEREST EXPENSES OF RS.39,75,105/- CLAIMED AS DIRECT EXPENSES IS NOT AL LOWABLE U/S. 40(A)(IA), AS NO TAX IS DEDUCTED.' 3.3 A COPY OF THE COMMENTS WAS FORWARDED TO THE AP PELLANT FOR FURTHER COMMENTS ON HIS PART. THE APPELLANT VIDE LETTER DAT ED 18.03.2013 HAS SUBMITTED COMMENTS ON REMAND REPORT SUBMITTED BY THE AO. THE COMMENTS OF THE APPELLANT ARE REPRODUCED AS UNDER:- THE AO HAS SUBMITTED REMAND REPORT DATED 15.02.201 3 IN RESPONSE TO THE LETTER DATED 13.12.2012 CALLING REMAND REPORT. AS PER PARA B OF THE REMAND REPORT, THE AO HAS STATED THAT IN SUPPORT OF THE CLAIM OF EXPENSES, THE ASSESSEE FILED COPIES OF NECESSARY PU RCHASE BILLS, THE AO HAS NEITHER DENIED ANYTHING NOR HAS PUT ANY ADVERSE REMARK ON THE ISSUE IN HIS REMAND REPORT EXCEPT THE CLAIM OF INTEREST E XPENSES OF RS.39,75,165/- PAID TO 37 PARTIES WITHOUT DEDUCTING TAX AT SOURCE. AS A RESULT, HE HAS STATED THAT THE INTEREST OF RS.39,75 ,165/- CLAIMED AS DIRECT EXPENSES IS NOT ALLOWABLE TI/S. 40('A)(IA). BUT AS REGARDS DEDUCTION OF TDS ON INTEREST EXPENSES CLAIMED BY THE ASSESSEE COMPAN Y, WE HAVE TO STATE THAT THE TDS WAS DEDUCTED AND PAID BY THE ASSESSEE, BUT THE DETAILS THEREOF IS NOT AVAILABLE AT PRESENT WITH THE COMPAN Y. IT IS ALSO EVIDENT FROM THE AUDITOR'S REPORT THAT THERE WAS NO NON-COM PLIANCE AS REGARDS DEDUCTION OF TAX AT SOURCE, WHICH IS ALSO ACKNOWLED GED BY THE LD. AO IN THE REMAND REPORT.' 3.4 I HAVE CONSIDERED THE REMAND REPORT SUBMITTED BY THE AO AND THE COMMENTS OF THE APPELLANT CAREFULLY. IT IS SEEN THA T THE AO WAS SATISFIED WITH THE CLAIM OF EXPENSES. HOWEVER, THE AO OBSERVED THA T INTEREST EXPENSES OF RS. ITA NO.6395/M/2013 M/S. OCTANT INTERACTIVE TECHNOLOGIES LTD., (FORMERLY KNOWN AS M/S. KUSHAL SOFTWARE LTD.) 8 39,75,165/- CLAIMED AS DIRECT EXPENSES IS NOT ALLOW ABLE U/S.40(A)(IA). DURING THE COURSE OF APPELLATE PROCEEDINGS, THE AR OF THE APPE LLANT HAD NO OBJECTION IN CONFIRMING THE ADDITION TO THE EXTENT OF RS.39,75,1 65/- U/ S. 40(A)(IA) (VIDE ORDER SHEET NOTING DATED 23.08.2013). 3.5 TO SUMMARIZE, IT IS SEEN THAT THE AO WAS SATISF IED REGARDING THE CLAIM OF DIRECT EXPENSES MADE BY THE APPELLANT, EXCEPT INTER EST EXPENDITURE AS DISCUSSED ABOVE. 3.6 IN VIEW OF THE ABOVE, THE AO IS DIRECTED TO RES TRICT THE DISALLOWANCE OUT OF DIRECT EXPENSES TO RS.39,75,165/- AND THE BALANCE D ISALLOWANCE MADE MAY BE DELETED. 11. ON A CAREFUL READING OF THE LD. CIT(A)S ORDER, WE FIND THAT IN THE REMAND PROCEEDINGS THE ASSESSING OFFICER ACCEPTED T HAT THE ASSESSEE HAS FILED THE DETAILS IN RESPECT OF THE DIRECT EXPENSES OF RS .53.21 CRORES AND HE HAS OBJECTED ONLY TO INTEREST ON LOAN OF RS.39,75,165/- STATING THAT IT IS AN INADMISSIBLE AMOUNT UNDER SECTION 40(A)(IA) OF THE ACT AND THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO THIS AMOUNT. THUS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) IN RESTRICTIN G THE DISALLOWANCE TO RS.39,75,165/- AND DELETING THE BALANCE DISALLOWANC E. 12. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 30.11.2016. SD/- SD/- ( / RAJENDRA) ( / C.N. PRASAD) / ACCOUNTANT MEMBER / JUDICIAL MEMBER /MUMBAI ; / DATED 30. 11.2016 * KISHORE ITA NO.6395/M/2013 M/S. OCTANT INTERACTIVE TECHNOLOGIES LTD., (FORMERLY KNOWN AS M/S. KUSHAL SOFTWARE LTD.) 9 /COPY OF THE ORDER FORWARDED COPY OF THE ORDER FORWARDED COPY OF THE ORDER FORWARDED COPY OF THE ORDER FORWARDED TO TOTO TO : :: : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - 4. / CIT 5. / DR, ITAT, MUMBAI 6. / GUARD FILE. / // / BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) / ITAT, MUMBAI / ITAT, MUMBAI / ITAT, MUMBAI / ITAT, MUMBAI