M/s Pearl Bottling Pvt. LTD., Visakhapatnam V. The Addl. CIT, Range-4,

ITA 686/VIZ/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1188 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 25-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K HARIPRASAD
• Assessee Lawyers: V K JAIN
• Section: 142(1); 37

Judgement Text

ITA NO.686/VIZAG/2013 M/S. PEARL BOTTLING PVT. LTD., VISAKHAPATNAM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.686/VIZAG/2013 ( / ASSESSMENT YEAR: 2008-09) M/S. PEARL BOTTLING PVT. LTD. VISAKHAPATNAM VS. ADDL. CIT, RANGE - 4 , VISAKHAPATNAM [PAN: AABCK2911Q ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI V.K. JAIN, AR / RESPONDENT BY : SHRI K. HARI PRASAD, DR / DATE OF HEARING : 25.04.2016 / DATE OF PRONOUNCEMENT : 06.05.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A), VISAKHAPATNAM DATED 20.9.2013 AND IT PERTAI NS TO THE ASSESSMENT YEAR 2008-09. ITA NO.686/VIZAG/2013 M/S. PEARL BOTTLING PVT. LTD., VISAKHAPATNAM 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND TRADING IN SOFT DRINKS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-0 9 ON 29.9.2008 DECLARING NIL TOTAL INCOME AFTER SETTING OFF THE DE PRECIATION LOSS BROUGHT FORWARD FROM THE EARLIER YEARS. THE CASE HAS BEEN SELECTED FOR SCRUTINY AND ACCORDINGLY, NOTICES U/S 143(2) & 142(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT') WERE ISSUED. IN RESPONSE TO THE NOTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSES SEE APPEARED FROM TIME TO TOME AND PRODUCED THE BOOKS OF ACCOUNTS AND OTHER RELEVANT DETAILS. THE ASSESSEE COMPANY IS ENGAGED IN THE BUS INESS OF MANUFACTURE OF PEPSI BRAND SOFT DRINKS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE A SSESSEE HAS INCURRED DIRECTORS FOREIGN TRAVEL EXPENDITURE OF ` 29,44,193/-. THEREFORE, REQUESTED TO FURNISH THE DETAILS OF FORE IGN TRAVEL EXPENDITURE ALONG WITH PURPOSE FOR WHICH THE DIRECTORS HAVE INC URRED THE TRAVEL EXPENDITURE. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED THAT THE DIRECTORS OF THE COMPANY HAVE VI SITED DUBAI, AUSTRALIA, SINGAPORE AND LONDON TO MEET THE EXECUTI VES OF PEPSI COMPANY TO DISCUSS THE MARKETING AND PRODUCTION PLA N OF THE COMPANY FOR THE COMING YEARS. IT IS FURTHER SUBMITTED THAT THE DIRECTORS HAVE ATTENDED THE BUSINESS MEETING AND ALSO TO MEET THE NRIS FOR MOBILIZING ITA NO.686/VIZAG/2013 M/S. PEARL BOTTLING PVT. LTD., VISAKHAPATNAM 3 FUNDS FOR EXPANSION OF THE COMPANYS OPERATIONS. TH E FOREIGN TRAVEL EXPENDITURE HAS BEEN INCURRED EXCLUSIVELY FOR THE P URPOSE OF BUSINESS AND THERE IS NO ELEMENT OF PERSONAL NATURE IN THE T RAVEL EXPENDITURE. IT IS ALSO SUBMITTED THAT THE COMPANY HAS PAID THE FRI NGE BENEFITS TAX ON SAID TRAVEL EXPENSES. THEREFORE, REQUESTED TO ALLOW THE FOREIGN TRAVEL EXPENDITURE. SIMILARLY, THE A.O. NOTICED THAT THE A SSESSEE HAD INCURRED AN AMOUNT OF ` 12,28,901/- TOWARDS FINANCE CHARGES. TO ASCERTAIN THE CLAIM OF THE ASSESSEE, WITH REFERENCE TO DEDUCTION OF TDS UNDER THE RESPECTIVE PROVISIONS OF THE ACT, ISSUED A SHOW CAU SE NOTICE AND ASKED TO EXPLAIN WHETHER THE TDS HAS BEEN DEDUCTED IN RES PECT OF INTEREST PAYMENTS. IN RESPONSE TO THE NOTICE, THE ASSESSEE COMPANY SUBMITTED A BREAKUP OF THE BANK CHARGES AND ALSO CONTENDED TH AT THE FINANCE CHARGE REPRESENTS THE INTEREST PAID TO BANKS AND FI NANCE COMPANIES TOWARDS LOANS AVAILED FOR ACQUISITION OF FIXED ASSE TS BEING VEHICLES. THE ASSESSEE FURTHER SUBMITTED THAT THE INTEREST PAID T O FINANCE COMPANIES IS IN RESPECT OF HIRE PURCHASE AGREEMENTS AND THEREFOR E NO TDS IS DEDUCTIBLE U/S 194A OF THE ACT. CONSEQUENTLY, DISAL LOWANCE U/S 40(A)(IA) OF THE ACT CANNOT BE MADE. 3. THE A.O. AFTER CONSIDERING THE EXPLANATIONS FURN ISHED BY THE ASSESSEE HELD THAT THE ASSESSEE HAS NOT PROVED WITH ANY EVIDENCE TO ITA NO.686/VIZAG/2013 M/S. PEARL BOTTLING PVT. LTD., VISAKHAPATNAM 4 JUSTIFY THE FOREIGN TRAVEL EXPENDITURE OF THE DIREC TORS. THOUGH ASSESSEE CONTENDS THAT THE DIRECTORS HAVE VISITED FOREIGN CO UNTRIES TO DISCUSS WITH THE EXECUTIVES OF THE PEPSI HOLDING IN RESPECT OF C OMPANYS OPERATIONS, FAILED TO FURNISH ANY EVIDENCES IN SUPPORT OF ITS C LAIMS. WITH THESE OBSERVATIONS, DISALLOWED THE FOREIGN TRAVEL EXPENDI TURE OF ` 29,44,193/-. SIMILARLY, IN RESPECT OF FINANCE CHARGES, THE A.O. OBSERVED THAT THOUGH, ASSESSEE NEEDS TO DEDUCT TDS U/S 194A OF THE ACT IN RESPECT OF INTEREST PAYMENTS, FAILED TO DEDUCT TDS IN RESPECT OF SUCH P AYMENTS. THEREFORE, INVOKED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND DISALLOWED THE INTEREST PAYMENTS OF ` 5,56,122/-. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE AS SESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. THE ASSESSEE FURT HER SUBMITTED THAT THE LD. A.O. HAS FAILED TO CONSIDER THE EVIDENCE PR ODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALONG WITH JUSTIFI CATION OF EXPENSES INCURRED FOR BUSINESS PURPOSES AND THEREFORE, NO DI SALLOWANCE IS CALLED FOR. IT WAS FURTHER ARGUED THAT THE DIRECTORS FOREI GN TRAVELLING EXPENSES ARE RELATED TO BUSINESS PURPOSE OF THE ASSESSEE. TH E DIRECTORS HAVE ATTENDED THE BUSINESS MEETING AT ABROAD WITH PEPSIC O EXECUTIVES TO DISCUSS BUSINESS IN INDIA AND ALSO TO MEET THE NRIS FOR MOBILIZING THE ITA NO.686/VIZAG/2013 M/S. PEARL BOTTLING PVT. LTD., VISAKHAPATNAM 5 FUNDS FOR THE PURPOSE OF EXPANSION OF BUSINESS. IT WAS FURTHER ARGUED THAT THE EXPENDITURE WAS PURELY INCURRED FOR THE PU RPOSE OF BUSINESS OF THE ASSESSEE. THERE WAS NO ELEMENT OF PERSONAL NATU RE IN THE SAID EXPENDITURE. THEREFORE, THE A.O. WAS NOT CORRECT I N DISALLOWING THE FOREIGN TRAVEL EXPENDITURE. AS REGARDS THE DISALLOW ANCE OF FINANCE CHARGES U/S 40(A)(IA) OF THE ACT, IT WAS SUBMITTED THAT THE FINANCE CHARGES PAID TO FINANCE COMPANIES IS IN RESPECT OF HIRE PURCHASE OF VEHICLES, THEREFORE, NO TDS IS APPLICABLE IN RESPEC T OF HIRE CHARGES. CONSEQUENTLY, DISALLOWANCE U/S 40(A)(IA) OF THE ACT CANNOT BE MADE. THE CIT(A) AFTER CONSIDERING THE EXPLANATIONS OF TH E ASSESSEE HELD THAT THOUGH ASSESSEE MADE VARIOUS CLAIMS IN RESPECT OF F OREIGN TRAVEL EXPENDITURE, FAILED TO FILE ANY EVIDENCE TO JUSTIFY THE CLAIMS. THE ASSESSEE HAS NOT EXPLAINED WHY IT COULD NOT PRODUCE ANY EVIDENCE IN SUPPORT OF THE CLAIM. THE CLAIM OF THE ASSESSEE THA T IT HAS PAID THE FRINGE BENEFIT TAX ON SUCH EXPENDITURE CANNOT SUBST ITUTE THE EVIDENCE TO BE PRODUCED TO PROVE THE CLAIM THAT THE EXPENDITURE WAS INCURRED ONLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN TH E ABSENCE OF ANY EVIDENCE, UPHELD THE DISALLOWANCE MADE BY THE A.O. SIMILARLY, THE CIT(A) HELD THAT TDS PROVISIONS ARE ATTRACTED ON TH E INTEREST PAYMENTS MADE TO THE FINANCE COMPANIES. ON PERUSAL OF THE A GREEMENT PRODUCED BY THE ASSESSEE, IT IS CLEARLY SHOWS THAT THE COMPA NY HAS BORROWED ITA NO.686/VIZAG/2013 M/S. PEARL BOTTLING PVT. LTD., VISAKHAPATNAM 6 MONEY FROM THOSE COMPANIES FOR BUYING THE VEHICLES. AS THERE WAS FAILURE TO DEDUCT TDS, THE A.O. WAS JUSTIFIED IN DI SALLOWING THE AMOUNT BY INVOKING THE PROVISIONS OF THE SECTION 40(A)(IA) OF THE ACT. AGGRIEVED BY THE CIT(A) ORDER, THE ASSESSEE IS IN APPEAL BEFO RE US. 5. THE FIRST ISSUE CAME UP FOR OUR CONSIDERATION IS DISALLOWANCE OF DIRECTORS FOREIGN TRAVEL EXPENDITURE. THE A.O. DIS ALLOWED A SUM OF ` 29,44,193/- TOWARDS DIRECTORS FOREIGN TRAVEL EXPEN DITURE. THE LD. A.R. SUBMITTED THAT THE A.O. WAS NOT CORRECT IN DISALLOW ING THE FOREIGN TRAVEL EXPENDITURE, AS THE TRAVEL EXPENDITURE HAS BEEN INC URRED EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF ASSESSEE. IT IS FURTHER SUBMITTED THAT THE DIRECTORS OF THE COMPANY HAVE VISITED THE COUNTRIES LIKE DUBAI, AUSTRALIA, SINGAPORE AND LONDON TO MEET THE EXECUTIVES OF THE PEPSI HOLDINGS TO DISCUSS ABOUT THE BUSINESS PLAN OF THE COMPANY IN I NDIA. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE O F PEPSI BRAND SOFT DRINKS IN INDIA. THE DIRECTORS HAVE MET THE COMPANY EXECUTIVES TO CHALK OUT THE MARKETING AND EXPANSION PLAN OF THE PRODUCT IN THE COMING YEARS. THE DIRECTORS ALSO MET THE NRIS BY MOBILIZI NG THE FUNDS FOR THE EXPANSION OF THE COMPANYS BUSINESS. THE A.O. FAIL ED TO APPRECIATE THE FACT THAT THE EXPENDITURE HAS BEEN INCURRED EXCLUSI VELY FOR THE PURPOSE OF BUSINESS. THE A.R. FURTHER SUBMITTED THAT AFTER MEETING THE COMPANY ITA NO.686/VIZAG/2013 M/S. PEARL BOTTLING PVT. LTD., VISAKHAPATNAM 7 EXECUTIVES, IT WAS HELPED THE BUSINESS PROFILE OF T HE COMPANY IN INDIA AND COMPANY COULD ACHIEVE MORE TURNOVER. THEREFORE , THE A.O. WAS NOT CORRECT IN HOLDING THAT THE ASSESSEE HAS NOT PRODUC ED ANY EVIDENCES IN SUPPORT OF THE CLAIM. 6. ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPORT ED THE ORDER OF THE CIT(A). THE LD. D.R. FURTHER SUBMITTED THAT TH OUGH ASSESSEE CLAIMS TO HAVE INCURRED THE EXPENDITURE EXCLUSIVELY FOR TH E PURPOSE OF BUSINESS, FAILED TO FURNISH IOTA OF EVIDENCE TO SHOW THAT THE DIRECTORS HAVE VISITED THE COUNTRIES FOR THE PURPOSE OF MEETING THE PEPSIC O OFFICIALS. THE ASSESSEE IS JUST SHOWING THE LETTERS WRITTEN BY THE ASSESSEE TO THE EXECUTIVES OF THE COMPANY IN ABROAD, AT THE SAME TI ME, FAILED TO FURNISH SINGLE EVIDENCE IN THE FORM OF INVITATIONS OR LETTE RS FROM THE PEPSICO HOLDING TO INVITE THE DIRECTORS FOR THE MEETING. I N THE ABSENCE OF ANY EVIDENCES, THE A.O. WAS JUSTIFIED IN DISALLOWING TH E FOREIGN TRAVEL EXPENDITURE. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIALS AVAILABLE ON RECORD. THE A.O. DISALLOWED THE DIRECT ORS FOREIGN TRAVEL EXPENDITURE FOR THE REASON THAT THE ASSESSEE HAS FA ILED TO PRODUCE ANY EVIDENCES TO SHOW THAT THE EXPENDITURE IS INCURRED EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. IT IS THE CONT ENTION OF THE ASSESSEE ITA NO.686/VIZAG/2013 M/S. PEARL BOTTLING PVT. LTD., VISAKHAPATNAM 8 THAT THE FOREIGN TRAVEL EXPENDITURE IS INCURRED EXC LUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THE ASSESSEE FURTHER CONTENDED THAT THE DIRECTORS OF THE COMPANY HAVE VISITED THE FOREIGN C OUNTRIES TO MEET THE EXECUTIVES OF THE PEPSICO HOLDINGS TO DISCUSS ABOUT THE MARKETING AND EXPANSION PLAN OF THE COMPANY IN INDIA. IN SUPPORT OF HIS CONTENTION, FILED FEW LETTERS ADDRESSED BY THE ASSESSEE TO THE EXECUTIVES OF THE PEPSICO HOLDINGS SITUATED IN FOREIGN COUNTRIES AND SUBMITTED THAT THE DIRECTORS HAVE MET THE EXECUTIVES IN RESPECTIVE COU NTRIES AND DISCUSSED THE ANNUAL OPERATING PLAN FOR THE CURRENT YEAR 2007 AND ALSO ABOUT THE DETAILS OF PRODUCT TO BE MANUFACTURE, SIZE OF PACK, QUANTITY, PRICE STRUCTURE, ETC. SO AS TO ACHIEVE THE DESIRED OPERAT ING RESULTS. THE ASSESSEE ALSO FILED FEW LETTERS ADDRESSED TO ONE MR . ABDUL LATIF, PRESIDENT OF AMEA (ASIA, MIDDLE EAST, AFRICA) PEPSI CO COMPANY INC. AND CONVEYED THEIR GRATITUDE FOR HAVING ARRANGED THE ME ETINGS. THE ASSESSEE FURTHER CONTENDED THAT AFTER THE MEETING W ITH THE PEPSICO EXECUTIVES, THE COMPANY COULD ACHIEVE A SUBSTANTIAL GROWTH IN TURNOVER AND PROFIT AND THE FOREIGN TRAVEL EXPENDITURE INCUR RED HAS YIELDED THE RESULTS IN THE COMING YEARS. THEREFORE, THE A.O. WA S NOT CORRECT IN COMING TO THE CONCLUSION THAT THE EXPENDITURE HAS N OT BEEN INCURRED EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE COMP ANY. ITA NO.686/VIZAG/2013 M/S. PEARL BOTTLING PVT. LTD., VISAKHAPATNAM 9 8. SECTION 37 OF THE ACT, PROVIDES FOR DEDUCTION OF ANY EXPENDITURE (NOT BEING EXPENDITURE OF THE NATURE DESCRIBED IN S ECTION 30 TO 36 OF THE ACT AND NOT BEING IN THE NATURE OF CAPITAL EXPENDIT URE OR PERSONAL EXPENSES OF THE ASSESSEE) LAID OUT OR EXPENDED ONLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROFESSION OF THE ASSESS EE. THEREFORE, ANY EXPENDITURE INCURRED IN RELATION TO THE BUSINESS OF THE ASSESSEE AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSE SSEE IS ALLOWED AS DEDUCTION IN COMPUTING THE INCOME UNDER THE HEAD PR OFITS & GAINS OF BUSINESS OR PROFESSION. TO CLAIM THE EXPENDITURE, THE ASSESSEE NEEDS TO PROVE BEYOND DOUBT THAT THE EXPENDITURE HAS BEEN IN CURRED EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE ONUS IS ON THE ASS ESSEE TO FURNISH NECESSARY EVIDENCE BEFORE THE A.O. TO CLAIM SUCH EX PENDITURE HAS BEEN ACTUALLY INCURRED FOR THE PURPOSE OF BUSINESS. IN THE PRESENT CASE ON HAND, THE ASSESSEE CLAIMS TO HAVE INCURRED FOREIGN TRAVEL EXPENDITURE IN RESPECT OF TWO OF ITS DIRECTORS TOWARDS THE BUSINES S PURPOSES OF THE ASSESSEE. THOUGH ASSESSEE CLAIMS TO HAVE INCURRED THE EXPENDITURE EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, IT HAS FAI LED TO FURNISH ANY EVIDENCES IN SUPPORT OF ITS CLAIM. THE ASSESSEE CO NTENDED THAT TWO OF ITS DIRECTORS HAVE VISITED COUNTRIES LIKE DUBAI, AU STRALIA, SINGAPORE AND LONDON TO MEET THE OFFICIALS OF PEPSICO HOLDING TO DISCUSS THE MARKETING AND FUTURE EXPANSION PLAN OF THE COMPANY IN INDIA. IN ITA NO.686/VIZAG/2013 M/S. PEARL BOTTLING PVT. LTD., VISAKHAPATNAM 10 SUPPORT OF ITS CONTENTIONS, FILED FEW LETTERS ADDRE SSED TO THE EXECUTIVES OF THE PEPSICO HOLDING SITUATED IN RESPECTIVE COUNT RIES, HOWEVER, FAILED TO FURNISH ANY EVIDENCES IN THE FORM OF INVITATIONS , LETTERS OR MINUTES OR PROCEEDINGS OF THE MEETING TO SUBSTANTIATE THE CLAI M THAT THE DIRECTORS HAVE MET THE EXECUTIVES OF PEPSICO HOLDINGS IN ABRO AD. THE ASSESSEE FURTHER CONTENDED THAT THE DIRECTORS HAVE MET THE N RIS TO MOBILIZE THE FUNDS FOR THE EXPANSION OF THE BUSINESS OF THE COMP ANY. THOUGH, ASSESSEE CLAIMS TO HAVE INCURRED THE EXPENDITURE TO WARDS MEETING THE NRIS FOR MOBILIZING THE FUNDS, FAILED TO FURNISH AN Y EVIDENCE IN THE FORM OF AGREEMENTS BETWEEN THE FOREIGN LENDERS FOR ARRAN GEMENT OF BORROWINGS FOR THE PURPOSE OF THE COMPANY. WE FURTHE R OBSERVED THAT TWO OF THE DIRECTORS MR. RUCHIRANS JAIPURIA AND MRS . PAYAL JAIPURIA HAVE VISITED THE FOREIGN COUNTRIES TO MEET THE PEPSICO O FFICIALS FOR THE BUSINESS EXPANSION OF THE COMPANY. THE ASSESSEE FI LED A PAPER BOOK CONTAINING VARIOUS DETAILS INCLUDING FINANCIAL STAT EMENTS OF THE ASSESSEE FOR THE RELEVANT FINANCIAL YEARS. ON PERUSAL OF TH E FINANCIAL STATEMENTS OF THE ASSESSEE FOR THE RELEVANT FINANCIAL YEAR, WE FIND THAT IN THE DIRECTOR REPORT ATTACHED TO FINANCIAL STATEMENTS, T HE ASSESSEE HAS REPORTED THE NAME OF MR. RUCHIRANS JAIPURIA IN THE KEY MANAGERIAL PERSONAL. THE OTHER DIRECTOR SMT. PAYAL JAIPURIAS NAME DID NOT FIND IN THE KEY MANAGERIAL, PERSONAL POSITION. THEREFORE, WE ARE OF THE VIEW ITA NO.686/VIZAG/2013 M/S. PEARL BOTTLING PVT. LTD., VISAKHAPATNAM 11 THAT THE ASSESSEE HAS FILED TO PROVE THAT MRS. PAYA L JAIPURIA IS A DIRECTOR ACTIVELY INVOLVED IN THE BUSINESS OF THE ASSESSEE T O SAY THAT SHE HAD ATTENDED THE MEETINGS IN ABROAD TO DISCUSS ABOUT TH E FUTURE PLAN OF THE COMPANY. UNDER THESE CIRCUMSTANCES, WE ARE OF THE C ONSIDERED VIEW THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS CAST UPON IT TO PROVE THE EXPENDITURE INCURRED EXCLUSIVELY FOR THE PURPOS E OF BUSINESS OF THE ASSESSEE. THEREFORE, WE ARE OF THE VIEW THAT THE A. O. HAS RIGHTLY DISALLOWED THE FOREIGN TRAVEL EXPENDITURE. THE CIT (A) AFTER CONSIDERING THE RELEVANT DETAILS FILED BY THE ASSESSEE UPHOLD T HE ORDER OF THE A.O. WE DO NOT SEE ANY ERROR OR INFIRMITY IN THE ORDER PA SSED BY THE CIT(A). HENCE, WE INCLINED TO UPHOLD THE CIT(A) ORDER AND R EJECT THE GROUND RAISED BY THE ASSESSEE. 9. THE NEXT ISSUE CAME UP FOR OUR CONSIDERATION IS DISALLOWANCE OF FINANCE CHARGES U/S 40(A)(IA) OF THE ACT. THE A.O. DISALLOWED FINANCE CHARGES FOR THE REASON THAT THE ASSESSEE HAS NOT DE DUCTED TDS U/S 194A OF THE ACT, CONSEQUENTLY, DISALLOWED THE EXPEN DITURE U/S 40(A)(IA) OF THE ACT. THE LD. A.R. SUBMITTED THAT THE LD. CIT (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE A.O. BY INV OKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE A.R. FURTHER S UBMITTED THAT THE FINANCE CHARGES PAID TO THE FINANCE COMPANIES IN RE SPECT OF HIRE ITA NO.686/VIZAG/2013 M/S. PEARL BOTTLING PVT. LTD., VISAKHAPATNAM 12 PURCHASE AGREEMENTS IS NOT INTEREST WHICH ATTRACTS THE PROVISIONS OF TDS U/S 194A OF THE ACT. THEREFORE, THE A.O. WAS NOT C ORRECT IN DISALLOWING THE AMOUNT BY INVOKING THE PROVISIONS OF SECTION 40 (A)(IA) OF THE ACT. ALTERNATIVELY, THE LD. A.R. SUBMITTED THAT THOUGH A SSESSEE HAS NOT DEDUCTED TDS ON SUCH PAYMENTS, ALL THE PAYMENTS HAV E BEEN PAID DURING THE SAME FINANCIAL YEAR. THEREFORE, IN VIEW OF THE SPECIAL BENCH DECISION OF ITAT, VISAKHAPATNAM IN THE CASE OF MERI LYN SHIPPING AND TRANSPORTERS VS. ACIT IN ITA NO.477/VIZAG/2008 DATE D 9.4.2012, NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT, IF THE AMOUNTS HAVE ALREADY BEEN PAID DURING THE SAME FINANCIAL YEAR. O N THE OTHER HAND, THE LD. D.R. STRONGLY SUPPORTED THE ORDER OF THE CI T(A). 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIALS AVAILABLE ON RECORD. THE A.O. DISALLOWED FINANCE C HARGES OF ` 5,56,121/- BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS FAILED TO DEDU CT TDS U/S 194A OF THE ACT, THEREFORE, THE FINANCE CHARGES CANNOT BE A LLOWED AS DEDUCTION IN COMPUTING THE PROFITS AND GAINS OF BUSINESS OR P ROFESSION. IT IS THE CONTENTION OF THE ASSESSEE THAT THE FINANCE CHARGES PAID TO FINANCE COMPANIES REPRESENTS THE HIRE PURCHASE CHARGES PAID FOR ACQUIRING THE VEHICLES, THEREFORE, NO TDS IS DEDUCTIBLE U/S 194A OF THE ACT, ITA NO.686/VIZAG/2013 M/S. PEARL BOTTLING PVT. LTD., VISAKHAPATNAM 13 CONSEQUENTLY DISALLOWANCE CANNOT BE MADE BY INVOKIN G THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. WE DO NOT FIND ANY ME RITS IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT ANY INTEREST PA ID EITHER ON LOAN OR HIRE PURCHASE AGREEMENT IS IN THE NATURE OF INTERES T WHICH ATTRACTS TDS U/S 194A OF THE ACT. THE ASSESSEE FAILED TO DEDUCT THE TDS U/S 194A OF THE ACT. THEREFORE, THE A.O. WAS RIGHT IN HOLDING T HAT THE FINANCE CHARGES ARE LIABLE FOR DEDUCTION OF TDS U/S 194A OF THE ACT. 11. COMING TO THE ALTERNATIVE PLEA OF THE ASSESSEE. THE ASSESSEE SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS COVERED BY THE DECISION OF ITAT, VISAKHAPATNAM SPECIAL BENCH IN TH E CASE OF M/S. MERILYN SHIPPING AND TRANSPORTERS VS. ACIT (SUPRA) AND ARGUED THAT NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT, IF THE AMOUNTS HAVE ALREADY BEEN PAID DURING THE SAME FINANCIAL YEAR. WE HAVE GONE THROUGH THE CASE LAW RELIED UPON BY THE LD. A.R., I N THE LINE OF THE FACTS OF THE PRESENT CASE AND FIND THAT THE ITAT, VISAKHA PATNAM BENCH IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTERS VS. AC IT, HELD THAT NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT I N RESPECT OF AMOUNTS WHICH HAVE ALREADY BEEN PAID DURING THE SAME FINANC IAL YEAR. 12. IN VIEW OF THE ABOVE AND ALSO CONSIDERING THE RATIO OF THE COORDINATE BENCH DECISION, IN THE CASE OF M/S. MERI LYN SHIPPING & ITA NO.686/VIZAG/2013 M/S. PEARL BOTTLING PVT. LTD., VISAKHAPATNAM 14 TRANSPORTERS (SUPRA), WE ARE OF THE OPINION THAT NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT FOR THE AMOUNTS WHICH HAVE BEEN ALREADY PAID DURING THE SAME FINANCIAL YEAR. THE CIT(A) WIT HOUT APPRECIATING THE FACTS, SIMPLY UPHOLD THE ADDITIONS MADE BY THE A.O. THEREFORE, WE SET ASIDE THE ORDER PASSED BY THE CIT(A) AND DIRECT THE A.O. TO DELETE THE ADDITIONS OF ` 5,56,121/- MADE U/S 40(A)(IA) OF THE ACT. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 6 TH MAY16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 06.05.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT M/S. PEARL BOTTLING PVT. LTD., C HANDRAMPALEM, MADHURAVADA, VISAKHAPATNAM, ANDHRA PRADESH. 2. / THE RESPONDENT THE ACIT, RANGE-4, VISAKHAPATNA M 3. + / THE CIT, VISAKHAPATNAM 4. + ( ) / THE CIT (A), VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM