| The Tax Publishers2022 TaxPub(DT) 5384 (Chen-Trib) INCOME TAX ACT, 1961
Section 37(1)
Where AO made disallowance of guarantees fees claimed, which was deleted by CIT(A) in appeal; in view of the fact that the assessee produced details of tax deducted on the guarantee fees before the CIT(A) that were already before the AO, however, the AO without duly considering those details, made the addition, thus, the CIT(A) was justified in deleting the said disallowance.
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Business expenditure - Allowability - Guarantee fees paid to holding company -
Assessee-company claimed guarantee fees paid to its holding company at the rate of 1.4% of loan amounts received. On verification of details furnished by the assessee, AO observed that the assessee claimed certain amounts under the head guarantee fees on loans already closed during earlier previous year or on those loans not pertaining to current year. The total amount of such excess guarantee fees paid over and above the proportion calculated as per the Guarantee Agreement was disallowed by AO. On appeal, after considering the evidences furnished by the assessee regarding incurring of expenses and the details regarding deduction of tax on the said expenses, CIT(A) deleted the disallowance of excess claim of guarantee fees. Revenue contended that without giving an opportunity to the AO, the CIT(A) deleted the disallowance of excess guarantee fee claimed, which was in violation of rule 46A of Income Tax Rules, 1962. Held: CIT(A) directed assessee to produce details of tax deducted on guarantee fees and also substantiate that the assessee had not claimed the guarantee fees twice as stated by AO. Assessee by following the directions given by the CIT(A) filed the above-mentioned details, which were already filed before AO. AO, however, extracted half portion in one page and half portion in another page and without considering the details, made the addition. Admittedly, the CIT(A) did not entertain any fresh material for adjudication of the issue. The TDS on guarantee fee paid by the assessee was very much produced before the AO and the AO, without considering its entirety, extracted half portion in one page and half portion in another page and made the addition. Moreover, under section 251(1)(a), the powers of first appellate authority are coterminous with those of AO. Hence, the CIT(A) rightly assumed the jurisdiction to conclude the issue based on materials already available with the AO. Accordingly, order passed by the CIT(A) was upheld.
REFERRED :
FAVOUR : In assessee's favour
A.Y. :
INCOME TAX ACT, 1961
Section 36(1)(va) & 43B
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