Abhishek Engineers Pvt.Ltd.,, ... vs Department Of Income Tax

Dy. CIT, M/s. Abhishek Engineers Cir. 1, Pvt. Ltd, Abhishek A W ing, Room No. 309, Vs House, 5, Shrimali 3 r d Floor, Pratyakha Kar Society, Navrangpura, Bhavan, Ambawadi, Ahmedabad Ahmedabad-380015 (Respondent) (Appellant)

Revenue by: Shri M.K. Singh, Sr. D.R. Assessee by: Shri R.C. Shah, A.R.

Date of hearing : 23-02-2015 Date of pronouncement : 26-02-2015

आदे श/ORDER

PER : ANIL CHATURVEDI, ACCOUNTANT MEMBER:-

This is the assessee's appeal against the order of Ld. CIT(A)-VI, Ahmedabad dated 05-07-2011 for A.Y. 2005-06.

2. The facts as culled out from the material on record are as under.

3. Assessee is a company stated to be engaged in the business of project consultants, construction contractors, and software developer. I.T.A No. 2452/Ahd/2011 A.Y. 2005-06 Page No 2 DCIT vs. M/s. Abhishek Engineers Pvt. Ltd Assessee filed its return of income for A.Y. 2005-06 on 30-10-2005 declaring total income of Rs. 7,79,010/-. Thereafter assessment was framed u/s. 143(3) vide order dated 31-12-2007 and the total income was determined at Rs. 82,84,950/-. Subsequently, pursuant to the order passed by the Commissioner u/s. 263 of the Act and to give directions contained in the order of CIT, assessment was framed u/s. 143(3) r.w.s. 263 of the Act vide order dated 31/12/2010 and the total income was determined at Rs. 1,25,92,804/-. Aggrieved by the order of AO, Assessee carried the matter before Ld. CIT(A) who vide order dated 05-02-2011 allowed the appeal of the assessee. Aggrieved by the aforesaid order of CIT(A), Revenue is now in appeal before us and has raised the following ground:-

"1. The ld. CIT(A) erred in law and on facts in deleting the addition of Rs. 43,07,854/- on account of disallowance of interest expenses u/s. 40(a)(ia) of the Act."

4. On the basis of details available on record, it was noted that assessee had paid interest to Anubhoti Commercial Complex Co-operative Society Ltd and Gardenia Commercial Housing Pvt Ltd and Gardener Apartment Pvt Ltd but no TDS was deducted u/s. 194A before making the interest payment. AO was of the view that as per the provisions of section 194A of the Act, the assessee was required to deduct tax on the amount credited to the aforesaid parties and since assessee had failed to deduct TDS, the interest expense aggregating to Rs. 43,07,854/- was disallowed u/s. 40(a)(ia) of the Act. Aggrieved by the order of AO, Assessee carried the matter before CIT(A) who after considering the submissions of the assessee deleted the addition by holding as under:-

"2.3 I have considered the facts of the case; assessment order and appellant submission. Assessing officer disallowed interest credited in the accounts of two parties' namely- Anubhooti commercial complex co-operative Society Ltd and Gardenia Apartments private Ltd, it is not in dispute that appellant received interest from both the parties and appellant has not paid or claimed any interest in the I.T.A No. 2452/Ahd/2011 A.Y. 2005-06 Page No 3 DCIT vs. M/s. Abhishek Engineers Pvt. Ltd name of these two parties. It is only the accounts of these two parties, there are two entries of interest- one entry for interest credit and other entry for interest debit on the amounts outstanding in the running accounts of these two parties. These entries are in respect of calculation of interest on outstanding funds. The payment of interest or credit of interest income in the parties' accounts is only in respect of interest payable by these parties. As discussed in the appellant's submission, appellant received interest from these parties and did not pay any interest or interest income to these parties therefore there was no liability to deduct tax under section 194A. I have referred the P&L account of the appellant and as per that appellant had received interest from these two parties therefore there is no claim of interest expenses in respect of these two parties. In the absence of any claim of interest, there cannot be any disallowance under section 40 (a)(ia) of IT act. Accordingly, disallowance of interest made by the assessing officer cannot survive and hence the same is deleted."

5. Aggrieved by the aforesaid order of CIT(A), Revenue is now in appeal before us.

6. Before us, Ld. DR supported the order of AO. On the other hand, Ld AR reiterated the submissions made before AO and CIT(A) and supported the order of CIT(A).

7. We have heard the rival submissions and perused the material available on record. We find that CIT(A) while deleting the addition made u/s. 40(a)(ia) and after perusing the Profits and Loss Account of the assessee has given a finding that Assessee had received interest from these parties but had not paid any interest to them and therefore there was no liability to deduct tax u/s. 194A and that there was no claim of interest expenditure in respect of the aforesaid parties. Before us, Revenue has not brought any material on record to controvert the findings of CIT(A). In view of the aforesaid facts, we find no reason to interfere with the order of CIT(A) and thus this ground is dismissed.

I.T.A No. 2452/Ahd/2011 A.Y. 2005-06 Page No 4 DCIT vs. M/s. Abhishek Engineers Pvt. Ltd

8. In the result, the appeal of the Revenue is dismissed.

Order pronounced in open court on the date mentioned hereinabove at caption page

Sd/- Sd/-

(SHAILENDRA KR. YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 26/02/2015 ak

आदे श क ूितिल प अमे षत / Copy of Order Forwarded to:-

1. Assessee

2. Revenue

3. Concerned CIT

4. CIT (A)

5. DR, ITAT, Ahmedabad

6. Guard file.

By order/आदे श से,

उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद