Samir Synthetics Mills, Ahmedabad V. The Dy.CIT, Circle-3(3), Ahmedabad

ITA 734/AHD/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8449 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 04-05-2020
• Assessment Year: 2010-2011
• Appeal Filed On: 23-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVATIA
• Keywords: Capital asset; Depreciation; Earning of tax free income; TDS; Rule 8D; Set aside
• Section: 14A; 40(a)(ia); 194C; 143(2); 43; 48; 194A; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH ( THROUGH VIRTUAL COURT) BEFORE: SHR I AMARJIT SINGH , ACCOUNTANT MEMBER AND MS. MADHUMITA ROY , JUDICIAL MEMBER SAMIR SYNTHETICS MILLS, 395 - 402, GIDC ESTATE, ODHAV, AHMEDABAD - 382415 PAN: AADFS1631A (APPELLANT) VS THE DCIT , CIRCLE - 3 ( 3 ) , AHMEDABAD (RESPONDENT) REVENUE BY : S H RI VINOD TANWANI , SR. D . R. ASSESSEE BY: SHRI S.N. DIVATIA , A.R. DATE OF HEARING : 17 - 0 6 - 2 020 DATE OF PRONOUNCEMENT : 09 - 07 - 2 02 0 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2010 - 11 , ARI SES FROM ORDER OF T HE CIT(A) - 3, AHMEDABAD DATED 02 - 0 2 - 2 016 , IN PROCEEDINGS UNDER SECTION 1 4 3(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. THE LD. C.I.T. (A) HAS ERRED IN DISMISSING THE APPEAL PREFERRED BY THE APPELLANT IN REGARD TO THE DISALLOWANCE MADE BY THE A.O. U/S 14A AMOUNTING TO RS.5,13,516/ - BY FOLLOWING THE JUDGEMENT OF HON. MUMBAI ITAT IN THE CASE OF HDFC LTD. 1.1 IT IS SUBMITTED AND C ONTENDED THAT THE LD. C.I.T. (A) OUGHT NOT TO HAVE DISMISSED' REFERRED GROUND OF APPEAL BUT OUGHT TO HAVE ALLOWED THE APPEAL OF THE APPELLANT IN VIEW OF DETAILED FACTS AND SUBMISSION MADE BEFORE HIM. I T A NO . 734 / A HD/20 16 A SS ESSMENT YEAR 2010 - 11 I.T.A NO. 734 /AHD/20 16 A.Y. 2010 - 11 PAGE NO SAMIR SYNTHETICS MILLS VS. DCIT 2 2. THE LD. C.I.T.(A) HAS ERRED IN DISMISSING THE APPEA L PREFERRED BY THE APPELLANT AGAINST THE DISALLOWANCE OF DEPRECIATION ON MOTOR CARS AMOUNTING TO RS.L,98,672/ - MADE BY THE A.O. 2.2 IT IS SUBMITTED AND CONTENDED THAT THE LD. C.I.T. (A) OUGHT NOT TO HAVE DISMISSED THE ABOVE REFERRED GROUND OF APPEAL BUT OUG HT TO HAVE ALLOWED THE APPEAL OF THE APPELLANT IN VIEW OF DETAILED FACTS AND SUBMISSION MADE BEFORE HIM. 3. THE LD. C.I.T. (A) HAS ERRED IN DISMISSING THE APPEAL PREFERRED BY THE APPELLANT AGAINST THE DISALLOWANCE MADE BY THE A.O. U/S 40(A)(IA) AMOUNTING T O RS. 7,34,456/ - . 3.1 IT IS SUBMITTED AND CONTENDED THAT THE LD. C.I.T. (A) OUGHT NOT TO HAVE DISMISSED THE ABOVE' REFERRED GROUND OF APPEAL BUT OUGHT TO HAVE ALLOWED THE APPEAL OF THE APPELLANT IN VIEW OF DETAILED FACTS AND SUBMISSION MADE BEFORE HIM. 4. THE LD. C.I.T. (A) HAS ERRED IN DISMISSING THE APPEAL PREFERRED BY THE APPELLANT AGAINST THE DISALLOWANCE MADE BY THE A.O. U/S 36(1)(III) AMOUNTING TO RS. 3,49,216/ - . 4.1 IT IS SUBMITTED AND CONTENDED THAT THE LD. C.I.T. (A) OUGHT NOT TO HAVE DISMISSED THE ABOVE REFERRED GROUND OF APPEAL BUT OUGHT TO HAVE ALLOWED THE APPEAL OF THE APPELLANT IN VIEW OF DETAILED FACTS AND SUBMISSION MADE BEFORE HIM. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER OF THE C.I.T.(A) CONFIRMING THE DISALLOWANCE AS REFERR ED ABOVE IS REQUESTED TO BE SET - ASIDE AND APPEAL OF THE APPELLANT MAY KINDLY BE ALLOWED. 3. THE FACT IN BRIEF IS THAT ASSESSE E HAS FILED RETURN OF INCOME DISCLOS ING INCOME AT NILL ON 27 TH SEP, 2010. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY A ND ISSUED NOTICE U/S. 143(2) OF THE ACT ON 31 ST AUGUST, 2011. THE REMAINING FACTS OF THE CASE ARE DISCUSSED AS UNDER: GROUND NO. 1 ( DISALLOWANCE U/S. 14A AMOUNTING TO RS. 5 , 13 , 516/ - ) 4. AT THE TIME OF ASSESSMENT, THE ASSESSING OFFICER NOTICED THAT ASSESS EE HAS EARNED EXEMPT INCOME. ON QUERY , THE ASSESSE E EXPLAINED THAT THEY HAVE EARNED DIVIDEND INCOME OF RS. 2 , 48 , 183/ - AND THIS DIVIDEND INCOME WAS EARNED FROM THE INVESTMENT MADE IN SHARES/MF IN THE PAST YEARS AND NO NEW INVESTMENT WAS MADE DURING THE YE AR. IT WAS FURTHER STATED THAT WHATSOEVER INVESTMENT WAS MADE, IT WAS MADE OUT OF INTERNAL ACCRUAL OR NON - INTEREST BEARING FUND. T HE ASSESSE E HAS GIVEN WORKING OF INADMISSIBLE AMOUNT U/S. 14A TO THE AMOUNT OF RS. 43 , 634/ - FOR DISALLOWANCE U/S. 14A OF TH E ACT. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSE STATING THAT ASSESSE E HAS GIVEN ONLY GENERAL EXPLANATION AND NOT SUBMITTED ANY PROOF I.T.A NO. 734 /AHD/20 16 A.Y. 2010 - 11 PAGE NO SAMIR SYNTHETICS MILLS VS. DCIT 3 OR SPECIFIC EXPLANATION TO DEMONSTRATE THAT INVESTMENT MADE OUT OF INTEREST FREE FUND AND TH ERE WAS NO DIVERSION OF INTEREST BEARING FUNDS FOR NON - BUSINESS PURPOSES. THEREFORE, THE ASSESSING OFFICER HAS COMPUTED THE DISALLOWANCE U/S. 14A TO THE AMOUNT OF RS. 5 , 13 , 5 1 6/ - U/S. 14A R.W. RULE 8D OF THE I.T. ACT. 5. THE ASSESSE HAS FILED APPEAL AGA INST THE DECISION OF LD. CIT(A) . THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSE E REITERATING THE FACTS REPORTED BY THE ASSESSING OFFICER. GROUND NO. 2 ( D EPRECIATION OF MOTOR CAR EXPENSES OF RS. 1 , 98 , 672/ - ) 6. AT THE TIME OF ASSESSMENT, THE ASS ESSING OFFICER NOTICED THAT ASSESSE E HAS MADE DISALLOWANCE OF RS. 20, 000/ - OUT OF MOTOR CAR EXPENSES, H OWEVER , NO PROPORTIONATE DISALLOWANCE HAS BEEN MADE OUT OF DEPREC I AT I ON CLAIMED ON MOTOR CAR. THE ASSESSING OFFICER HAS STATED THAT THE ASSESSE E HAS T REATED THE PART OF MOTOR CAR EXPENSES AS PERTAINED TO NON - BUSINESS PURPOSES, T HEREFORE, THE PROPORTIONATE DISALLOWANCE OF DEPRECIATION @ 20% TO THE AMOUNT OF RS. 1 , 98 , 672/ - WAS DISALLOWED AFTER ATTRACTING PROVISION OF SECTION 38(2) OF THE ACT. 7. THE ASS ESSE HAS FILED APPEAL BEFORE THE LD. CIT(A) . THE LD. CIT(A) HAS DIS MISSED THE APPEAL STATING THAT ASSESSE E COULD NOT SUBSTANTIATE THAT MOTOR CAR HAS BEEN EXCLUSIVELY USED FOR BUSINESS PURPOSES. GROUND NO. 3 ( DISALLOWANCE OF RS. 7 , 34 , 456/ - U/S. 40(A)(IA ) OF THE ACT) I.T.A NO. 734 /AHD/20 16 A.Y. 2010 - 11 PAGE NO SAMIR SYNTHETICS MILLS VS. DCIT 4 8. DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER ASKED THE ASSESSE E TO FURNISH DETAIL OF INTEREST PAID ON CAR LOAN AND TDS DEDUCTED THEREUPON AND FURTHER TO EXPLAIN IF TDS HAS NOT BEEN DEDUC TED ON SUCH INTEREST PAID THEN WHY THE SAID INTEREST SHOULD NOT BE DISALLOWED U/S. 40(A)( IA) OF THE ACT. THE ASSESSE E EXPLAINED THAT NO TDS ON INTEREST PAID OF RS. 5 , 51 , 159/ - ON CAR LOAN WAS DEDUCTED SINCE THE AMOUNT OF MONTHLY EMI DET ERMINED BY THE CAR LOAN PROVIDER WAS INCLUSIVE OF PRINCIPAL + I NTEREST AMOUNT SECURED B Y WA Y OF POST DATED CHEQUE PRES ENTED EVERY MONTH FOR A C LEARANCE ON STIPULATED DATE. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSE E AND DISALLOWED INTEREST OF RS. 5 , 51 , 159/ - PAID ON CAR LOAN U/S. 4 0(A)(I A) OF THE ACT. T HE ASSESSING OFFICER HAS ALSO NOTICED THAT THE ASSESSE E HAS PAID SUM OF RS 3 , 54 , 746/ - ON ACCOUNT OF HANDLING EXPENSES TO MR. NAVEEN TRADE LINK PV T. LTD. WITHOUT DEDUCTION OF TAX. THE ASSESSING OFFICER WAS OF THE VIEW THAT SINCE THE PROVI SION OF SECTION 194C HAS BEEN BROUGHT ON STATU TE BY THE FINANCE ACT, 2009, T HEREFORE, THE ASSESSE E WAS REQUESTED TO EXPLAIN AS TO WHY THE PAYMENT MADE TO M/ S NAVEEN TRADE LINK PVT. LTD. S HOULD NOT BE DISALLOWED U/S. 40(A)( IA) OF THE ACT. THE ASSESSE E EXPL AINED THAT NO DISALLOWANCE U/S. 40(A)(IA) COULD BE MADE ALTHOUGH NO TDS HAS BEEN MADE SINCE THE HANDLING CHARGES WAS ACTUALLY PAID DURING THE PERIOD FROM 01 - 04 - 2009 TO 31 - 0 9 - 2009 AND NO AMOUNT REMAINED PAYABLE AT T HE YEAR END. THE ASSESSING OFFICER HAS N OT AGREED WITH THE SUBMISSION OF THE ASSESSE E STATING THAT ASSESSE E WAS LIABLE TO DEDUCT TAX AS PER THE PROVISION OF SECT ION 194C OF THE ACT AND MADE DISALLOWANCE OF RS. 1 , 83 , 297/ - OF PAYMENT MADE UPTO 31 ST SEP, 2009 TO M/S. NAVEEN TRADE LINK PV. LTD. AC CORDINGLY, THE ASSESSING OFFICER HAS MA DE TOTAL DISALLOWANCE OF RS. 7,3 4 , 456/ - U/S. 40(A)(IA) OF THE ACT. I.T.A NO. 734 /AHD/20 16 A.Y. 2010 - 11 PAGE NO SAMIR SYNTHETICS MILLS VS. DCIT 5 9 . AGGRIEVED ASSESSE HAS FILED APPEAL BEFORE THE LD. CIT(A) . THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSE E . GROUND NO. 4 ( DISALLOWANCE OF RS. 3 , 49 , 216/ - U/S. 36(1)(VII) OF THE ACT. 10 . AT THE TIME OF ASSESSMENT, THE ASSESSING OFFICER OBSERVED THAT ASSESSE E HAS MADE ADVANCES TO THE FOLLOWING PERSONS FOR WHICH NO BUSINESS PURPOSES HAVE BEEN EXPLAINED AND NO INTEREST HAS BEEN RECEIVED . THE DETAIL OF SUCH LOANS AND ADVANCES IS REPRODUCED AS UNDER: - NAME OF THE PERSONS AMOUNT OF LOANS AND ADVANCES PURPOSE REMARKS NITIN B KASTIYA 30000 LOAN NO BUSINESS PURPOSE SAF AI BUILDCON 654074 SHOP BOOKING CAPITAL THE SANDESH LTD. 1833705 SHOP BOOKING CAPITAL YOGESH KAMBLAY (BLUE DOT) 15000 LOAN NO BUSINESS PURPOSE AX. STEEL INDUSTRIES 100000 ADVANCE, MACHINE CAPITAL BLUETEX INDUSTRIES 166631 ADVANCE MACHINE CAPITAL TOTAL 27 99410 THE ASSESSING OFFICER HAS ALSO NOTICED THAT PART OF THE LOAN AND ADVANCES WERE GIVEN FOR ACQUISITION OF CAPITAL ASSET . IT IS ALSO POINTED OUT THAT ASSESSE E HAS FAILED TO PROVE BY DEMONSTRATIVE EVIDENCE S THAT ON THE DATE OF MAKING THE ADVANCE S , THE ASSESSE E WA S HAVING INTEREST FREE FUNDS AND THERE WAS NO DIVERSION OF INTEREST FREE FUNDS FOR NON - BUSINESS PURPOSES/CAPITAL PURPOSES. THE ASSESSEE HAS FAILED TO SUBMIT ANY FUND FLOW STATEMENT TO DEMONSTRATE THAT THERE WAS NO DIVERSION OF INTEREST B EARING FUNDS. THEREFORE, THE ASSESSING OFFICER HAS MADE PROPORTIONATE DISALLOWANCE OF INTEREST U/S. 36(1)9III) OF RS. 3 , 49 , 216/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSE E . I.T.A NO. 734 /AHD/20 16 A.Y. 2010 - 11 PAGE NO SAMIR SYNTHETICS MILLS VS. DCIT 6 11 . AGGRIEVED ASSESSE HAS FILED APPEAL BEFORE THE LD. CIT(A) . THE LD. CIT(A ) HAS DISMISSED THE APPEAL OF THE ASSESSEE REITERATING THE FACTS REPORTED BY THE ASSESSING OFFICER . 12 . DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, IN RESPECT OF DISALLOWANCE U/S. 14A , THE LD. COUNSEL CONTENDED THAT ASSESSE E HAS EARNED DIVIDE ND INCOME TO THE AMOUNT OF RS. 2 , 10 , 249/ - WHEREAS ASSESSING OFFICER HAD MADE DISALLOWANCE TO THE AMOUNT OF RS. 5 , 13 , 516/ - WHICH WAS MORE THAN THE EXEMPT INCOME EARNED. THE LD. COUNSEL HAS FURTHER STATED THAT ASSESSE E HAS CORRECTLY COMPUTED THE DISALLOWAN CE TO THE EXTENT OF RS. 43 , 634/ - WHICH HAS NOT BEEN CONSIDERED BY THE LOWER AUTHORITIES. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. C OUNSEL HAS ALSO FURN ISHED PAPER BOOK COMPRISING COPIES OF BILL S FURNISHED BEFORE THE LOWER AUTHORITIES AND REFERRED PAGE S NO. 8 TO 23 OF THE PAPER BOOK. T HE LD. C OUNSEL HAS CONTENDED THAT DETAILS OF EXEMPT INCOME WAS FURNISHED ALONG WITH COMPUTATION U/S. 14A OF THE ACT WHICH WAS NOT PROPERLY CONSIDERED BY THE LOWER AUTHORITIES. REGARDI NG MOTOR CAR EXPEN SES, THE LD. C OUNSEL CONTENDED THAT ASSESSE E IS A COMPANY AND THE MOTOR CAR WAS USED FOR BUSINESS P URPOSE, THEREFORE, DISALLOWANCE OF DEPRECIATION WAS NOT CORRECTLY MADE BY THE ASSESSING OFFICER . REGARDING DISALLOWANCE OF RS. 7 , 43 , 456/ - U/S. 40(A)(IA) O F THE ACT, THE LD. C OUNSEL HAS REFERRED PAGE S NO. 42 TO 44 OF THE PAPER BOOK COMPRISING COPIES OF INVOICE OF NAVEEN TRADE LINK PV T. LTD. AND LEDGER OF HANDLING EXPENSES AND CONTENDED THAT THESE PAYMENTS WAS OF THE NATURE OF REIMBURSEMENT OF EXP ENSES REQU IRING NO DEDUCTION OF TAX . THE LD. C OUNSEL I.T.A NO. 734 /AHD/20 16 A.Y. 2010 - 11 PAGE NO SAMIR SYNTHETICS MILLS VS. DCIT 7 HAS ALSO REFERRED PAGE NO. 68 TO 69 OF THE PAPER BOOK PERTAIN ING TO WRITTEN SUBMISSION MADE BEFORE THE LD. CIT(A) EXPLAINING THAT PAYMENT MADE TO NAVEEN TRADE LINK PVT. L TD. W AS TOWARDS REIMBURSEMENT OF EXPENSE S FOR WHICH NO TDS WAS REQUIRED TO BE DEDUCTED. THE LD. COUNSEL HAS ALSO SUBMITTED THAT PART OF THE PAYMENT TOWARDS REPAYMENT OF LOAN WAS MADE TO THE NBFC FOR WHICH NO TDS IS REQUIRED TO BE DEDUCTED. IN RESPECT OF DISALLOWANCE OF RS. 3 , 49 , 216/ - U/S. 36(1 )(III) OF THE ACT, THE LD. C OUNSEL HAS CONTENDED THAT ASSESSE E HAS ADVANCED INTEREST FREE LOAN FOR BUSINESS PURPOSES AND THEREFORE THE ASSESSING OFFICER WAS NOT CORRECT AND JUSTIFIED IN DISALLOWING THE INTEREST U/S. 36(1)(III). 13 . WE HAVE HEARD BOTH TH E SIDES AND PERUSED THE MATERI AL ON RECORD. O N THE ISSUE OF DISALLOWANCE U/S. 14A AMOUNTING TO RS. 5 , 13 , 516/ - , THE ASSESSING OFFICER HAS DISALLOWED AN AMOUNT OF RS. 5 , 13 , 516/ - AFTER COMPUTING THE DISALLOWANCE AS PER RULE 8D OF THE I.T. RULE, 19 6 2 STATING THAT THE ASSESSE E HAS FAILED TO FURNISH ANY FUND FLO W STATEMENT TO SUBSTANTIATE THAT NO PART OF INTEREST BEARING FUNDS HAS BEEN UTILIZED FOR EARNING EXEMPT INCOME. ON SIMILAR FACTS, THE LD. CIT(A) HAS SUSTAINED THE DISALLOWANCE HOLDING THAT ASSESSEE HAS F AILED TO FURNISH ANY DAY TO DAY FUND FLOW ANALYSIS TO PROVE THAT NO EXPENDITURE HAS BEEN INCURRED TOWARDS EARNING EXEMPT INCOME. IN THIS REGARD, WE HAVE GONE THROUGH THE COPY OF BALANCE SHEET FURNISHED BY THE ASSESSE E - PARTNERSHIP FIRM AS ON 31 ST MARCH, 2010 AND IT IS NOTICED THAT AS ON 31 ST MARCH, 2010 , THE TOTAL CAPITAL OF THE PARTNER S WERE ONLY RS. 3 , 70 , 849/ - WHEREAS ASSESSE E HAS OBTAINED SARAFI DEPOSIT TO THE AMOUNT FOR RS. 3,89,48, 473/ - AND OTHER SECURED LOAN AND U NSECURED LOAN TO THE AMOUNT OF R S. 38 , 17 , 183/ - AND TOTAL INVESTMENT MADE WA S REFLECTED AT RS. 61 , 34 , 107/ - . I.T.A NO. 734 /AHD/20 16 A.Y. 2010 - 11 PAGE NO SAMIR SYNTHETICS MILLS VS. DCIT 8 IN THE BALANCE SHEET OF THE ASSESSEE FIRM OF THE PRECEDING YEAR, AS ON 31 ST MARCH, 200 9 THE TOTAL CAPITAL OF THE PARTNERS WERE IN THE NEGATIVE AS ON 31 ST MARCH, 2009 AT RS. - 81 , 05 , 598/ - WHEREAS THE SARAFI DEPOSIT SHOWN AT RS. 3 , 78 , 52 , 532/ - AND SECURED L OAN AND UNSECURED LOAN WAS T O THE AMOUNT OF RS. 77 , 29 , 181/ - AND TOTAL INVESTMENTS WAS REFLECTED AT R S. 1 , 12 , 44 , 492/ - . NO OTHER INFORMATION I.E. BREAK - UP OF INVESTMENT OR SCHEDULES O F THE BALANCE SHEET WERE SUBMITTED TO SUBSTANTIATE THAT NO EXPENSES WERE INCURRED TOWARDS EARNING EXEMPT INCOME. THEREFORE, WE DO NOT FIND ANY SUBSTANCE IN THE CONTENTION OF THE ASSESSE E OF COMPUTING DISALLOWANCE TO THE EXTENT OF R S. 43,634/ - TOWARDS EXPE NDITURE INCURRED FOR EARNING EXEMPT INCOME, H OWEVER, WE RESTRICT THE DISALLOWANCE TO THE EXTENT OF EXEMPT INCOME TO THE AMOUNT OF RS. 2 , 48 , 183/ - AS HELD IN THE VARIOUS DECISIONS OF ITAT AHMEDABAD I.E. JIVRAJ TEA LT. VS. DCIT, ITA NO. 886/AHD/2012 DATED 28 T H AUGUST, 2014 AND THE DECISION OF ITAT DELHI IN THE CAS E OF SAHARA INDIA FINANCE CORPORATION LTD. 1481 ITD 336. THE ASSESSING OFFICER HAD MADE DISALLOWANC E OUT OF DEPRECIATION HOLDING THAT SAME WAS NOT FULLY USED FOR THE PURPOSE OF BUSINESS. THE ASSES SEE IS NOT A COMPANY BUT A PARTNERSHIP FIRM. THE ASSESSEE HAS SUO MOTTO MADE DISALLOWANCE OF RS. 20 , 0 0 0/ - OUT OF MOTOR CAR EXPENSES INDICATING PROPORTIONA TELY PERSONAL ELEMENTS IN USE OF MOTOR CAR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESS SEE HAS FAIL ED TO CONTROVERT THE PERSONAL USE OF THE MOTOR CAR BY THE PARTNERS THEREFORE THE ASSESSING OFFICER HAS PROPORTIONATELY MADE DISALLOWANCE @ 20% OF MOTOR CAR EXPENSES AS PRESCRIBED IN T H E PROVISIONS OF SECTION 38(2) OF THE I. T. ACT. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US THE LD. COUNSEL HAS FAILED TO REFER ANY SPECIFIC MATERIAL TO DEMONSTRATE ANY INFIRMITY IN THE DECISION OF THE I.T.A NO. 734 /AHD/20 16 A.Y. 2010 - 11 PAGE NO SAMIR SYNTHETICS MILLS VS. DCIT 9 LOWER AUTHORITY. THEREFORE, W E DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE ASSESSEE AND THE S AME STANDS DISMISSED. T HE ISSUE OF DISALLOWANCE OF RS. 7 , 34 , 456/ - U/S. 4 0(A)(IA) OF THE I.T. ACT PERTAINED TO DISALLOWANCE OF INTEREST OF R S. 5 , 51 , 159/ - ON CAR LOAN AND AMOUNT OF RS. 1 , 83 , 297/ - PAID TO M/ S. NAVEEN TRADE LINK PVT. LTD. A S HANDLING CHARGES ON WHICH NO TDS WAS DEDUCTED. IN RESPECT OF CAR LOAN INTEREST OF RS. 5 , 51 ,159/ - , THE LD. C OUNSEL CONTENDE D THAT THIS INTEREST CHARGES BEING PAID TO NBFC AND IS NOT COVERED U/S. 194A OF THE ACT. I N THE ALTERNATIVE, HE HAS CONTENDED THAT AS PER PROVISO T O SECTION 40(A)(IA) NO TDS TO BE MADE IF THE PAYEE HAS ALREADY PAID TAX THEREON. IN THIS REGARD HE HAS PLACED RELIANCE ON THE DECISION OF CIT VS. ANSAL LANDMARK TOWNSHIP PVT. L TD. 377 ITA 635 DELHI AND ALSO O N THE DECIS ION OF CIT VS. ASE MARKET LTD. , TAX APPEAL NO. 616 OF 2017 DATED 22 AUGUST, 2017, GUJARAT . REGARDING PAYMENT OF HANDLING CHARGES TO M/S. NAVEEN TRADE LINK PVT. L TD, THE LD. C OUNSEL CONTENDED THAT THIS AMOUNT WAS PAID AS REIMBURSEMENT OF EXPENSES WHICH WERE NOT LIABLE TO TDS AS HELD IN THE CASE OF THE CIT VS. SHAH INVESTORS HOME LTD. , TAX APPEAL NO. 281 OF 2017 DATED 4 TH MAY, 2017. WE HAVE PERUSED THE PROVISIONS OF SECTION 194A OF THE ACT PERTAINING OF DEDUCTION OF TAX ON PAYMENT OF INTEREST OTHER THAN INTEREST ON SECURITIES. THE LD. COUN SEL HAS NEITHER DEMONSTRATED HOW THE FINANCIAL CHARGES PAID FOR CAR LOAN ARE NOT COVERED U/S. 194A OF THE ACT , NOR POINTED OUT ANY SPECIFIC EXCEPTION PRESCRIBED IN SECTION194(3) OF THE ACT UNDER WHICH THE PAYER OF THE INTEREST ON CAR LOAN WAS COVERED. H OWEVER, THE ALTERNATIVE CONTENTION OF THE LD. COUNSEL THAT NO TDS TO BE MADE IF THE PAYEE HAS PAID TAX AS PER PROVISO TO SECTION 40(A)(IA) AND THE I.T.A NO. 734 /AHD/20 16 A.Y. 2010 - 11 PAGE NO SAMIR SYNTHETICS MILLS VS. DCIT 10 JUDICIAL PRONOUNCEMENT S REFERRED IN HIS SUBMISSION AND THE CLAIM THAT PAYMENT MADE TO NAVIN TRADELINK PVT. LT D. WAS TOWARDS REIMBURSEMEN T OF EXPENSES ARE REQUIRED TO BE CONSIDERED AFTER EXAMINATION AND VERIFICATION OF THE RELEVANT MATERIAL. THEREFORE, WE RESTORE BOTH THE ISSUES AS SUPRA TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING AFRESH AFTER EXAMINATION/ VERIFICATION OF THE RELEVANT MATERIAL TO BE FURNISHED BY THE ASSESSEE AT THE TIME OF SET ASIDE PROCEEDINGS. ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF INTEREST E XPENDITURE OF RS. 3 , 49 , 216/ - U/S. 36(1)(III) TREATING THE ADVANCES MADE FOR NON - BUSINESS PURPOSES . ON THIS ISSUE, THE LD. CIT(A) HAS HELD THAT INTEREST COST ON INVESTMENT MADE IN THE CAPITAL ASSETS I.E. ON PURCHASE OF SHOPS, PURCHASE OF MACHINERY SHOULD H AVE BEEN CAPITA LIZED AND THE ASSESSE E HAS NOT GIVEN ANY FUND FLOW ANALYSIS TO SUBSTANTIATE THAT AMOUNT USED FOR INVESTMENT IN SUCH ASSET WAS GENERATED FROM THE INTERNAL ACCRUAL OF THE PARTNERS HIP FIRM. IT IS OBSERVED THAT ASSESSEE HAS NOT DEMONSTRATED W ITH ANY EVIDENCES THAT SAID ASSETS HAS BEEN REFLECTED AS BUSINESS ASSET IN THE BALANCE SHEET OF THE ASSESSEE. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD. COUNSEL HAS REFERRED PAGES 101 TO 178 PLACED IN THE PAPER BOOK PERTAINING TO LEDGER ACCOUNT, SALE DEEDS OF SHOPS ETC. WE DO NOT FIND ANY REFERENCE OR EXAMINATION OF SUCH MATERIALS IN THE FINDINGS OF THE LOWER AUTHORITIES. IT IS ALSO OBSERVED THAT THE ISSUE OF INTEREST P AID IN RESPECT OF ACQUIRING CAPITAL ASSETS HAS NOT BEEN EXAMINED AS PRESCRIBE D IN THE PROVISO TO SECTION 36(1)(III) IN RESPECT OF PERIOD OF ACQUISITION OF THE ASSET AND THE DATE ON WHICH SUCH ASSET WAS FIRST PUT TO USE TO DETERMI NE THE DEDUCTION. THE ASSESSING OFFICER IS REQUIRED TO EXAMINE/VERIFY THE ABOVE REFERRED MATERIAL I.T.A NO. 734 /AHD/20 16 A.Y. 2010 - 11 PAGE NO SAMIR SYNTHETICS MILLS VS. DCIT 11 PLACE D IN THE PAPER BOOK TO DETERMINE THE CLAIM OF THE ASSESSEE THAT LOAN/ADVANCES WERE EXTENDED FOR THE BUSINESS PURPOSES AND IN CASE IT IS FOUND THAT THE LOAN/ADVANCES USED FOR ACQUIRING CAPITA L ASSET THEN THE ASSESSING OFFICER HAS TO EXAMINE THE SAME AS ELA BORATED ABOVE AFTER TAKING INTO CONSIDERATION THE PROVISO TO SECTION 36(1)(III). ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 14 . IN THE RE SULT, THE GROUND NO. 1 OF THE APPEAL IS PARTLY ALLOWED AND GROUND NO. 2 OF THE APPEAL IS DISMISSED. GROUND NOS. 3 & 4 OF THE APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PR ONOUNCED IN THE OPEN C OURT ON 09 - 07 - 20 20 SD/ - SD/ - ( MADHUMITA ROY ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 09 /07 /2020 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,