ORDER
SHEET GA No.1927 of 2014 ITAT No.74 of 2014 IN THE HIGH COURT AT CALCUTTA Special Jurisdiction (Income Tax) ORIGINAL SIDE COMMISSIONER OF INCOME TAX, KOLKATA-II, KOLKATA Versus M/S.MKJ ENTERPRISES LIMITED BEFORE: The Hon'ble JUSTICE SOUMITRA PAL The Hon'ble JUSTICE ARINDAM SINHA Date : 12th August, 2014.
Appearance: Ms.Smita Das De, Adv.The Court: This appeal has been preferred by the Revenue against the order dated 27th January, 2014 passed by the Income Tax Appellate Tribunal ‘C’ Bench, Kolkata in I.T.A.No.729/Kol/2011 for the assessment year 2007-08.
Two following questions have been raised for admission by the Revenue being: I) “Whether on the facts and in the circumstances of the case the learned Tribunal was Justified in law to uphold the order of the CIT(A) holding, inter alia, that Rule 8D is applicable from assessment year 2008-09 onwards not for earlier period by relying upon the decision of Bombay High Court in the case of DCIT -vs.- Godrej Boyce Manufacturing Company Limited reported in 328 ITR81 ignoring the that SLP is pending against this decision on whether Rule 8D is applicable with retrospective date or not.
II) Whether on the facts and in the circumstances of the case the Learned Tribunal was justified in law to hold inter alia that the factoring charges of Rs.56,33,112/- was not interest and as such provision of TDS under Section 194A of the said Act was not applicable, hence disallowance under section 40(a) (ia) of the said act was not warranted, ignoring the fact that the assesses itself shown this expenditure under the head interest in its books of account and as such disallowance under Section 40(a)(ia) was rightly made on accountly of non deduction of tax under section 194A.
Ms.Das De does not press the fiRs.question for admission by reason of the judgment delivered in ITA No.282 of 2009 with WP No.412 of 2010 dated 7th February, 2014 (Birla Corporation LTD.versus Commissioner of Income Tax-II, Kolkata).The second question was raised by the Revenue for admission on the basis of the Assessee having shown the expenditure incurred under the head interest in its books of accounts which it then claimed before the Assessing Officer to be factoring charges, its bills having been discounted by one M/s Lalji Financial.
The Assessing Officer did not accept such contention of the assessee and the Assessee preferred an appeal before the Commissioner of Appeals.
The Commissioner of Appeals by the order dated 31st January, 2011 went into the facts of the issue and found that when AO had asked the assessee to explain why these charges/expenses should not be treated as interest expenses, the assessee in its submission dated 30th November, 2009 had argued that factoring charges did not come under the purview of Section 2 (28A) of the Income Tax Act 1961.
The commissioner of Appeals thereafter allowed the appeal of the assessee.
The Revenue preferred appeal therefrom before the Tribunal.
We find that the Tribunal had agreed with the Commissioner and further went on to hold in relation to the explanation given by the Assessee as follows: “From the above explanation of the assesse it is clear that inteRs.is a term relating to a pre-existing debt, which implies a debtor creditor relationship.
According to us, unpaid consideration gives rise to a lien over goods sold and not for money lent.
This interpretation of ours is supported by the decision of Hon’ble Supreme Court in the case of Bombay Steam Navigation Co.PVT.LTD.versus CIT (1963) 56 ITR52(SC).wherein it is held that, where interest on unpaid purchase price was not treated as interest on loan.
It is clear from the definition that before any amount paid is construed as interest, it has to be established that the same is payable in respect of any money borrowed or debt incurred.
According to us, discounting charges of Bill of Exchange or factoring charges of sale cannot be termed as interest.
The assessee in the present case is acting as an agent.” By reason of the above, we do not find any question of law arises in this appeal.
Accordingly, appeal and the application are dismissed.
Urgent certified photocopy of this order be supplied to the parties, if applied for, upon compliance of all requisite formalities.
(SOUMITRA PAL, J.) (ARINDAM SINHA, J.) cs.