DCIT Vs Piramal Enterprises Limited (ITAT Mumbai)
Accrued Interest in Loan Sale is Purchase Consideration, Not Interest – No Borrower-Lender Relationship, No TDS: ITAT Mumbai
Mumbai ITAT has held that amounts paid for acquisition of loan portfolios including ICDs, NCDs & term loans, comprising principal along with accrued interest, are in the nature of purchase consideration & not “interest” liable for deduction of tax at source u/s 193/194A.
Assessee, a registered NBFC, had acquired loans from Piramal Enterprises Ltd. & Piramal Capital & Housing Finance Ltd. at their carrying value. During survey proceedings u/s 133B, AO noted that part of the consideration represented accrued interest & held that Assessee failed to deduct TDS thereon. AO passed order u/s 201(1)/201(1A), raising demand of ₹33.73 crore along with interest of ₹4.17 crore, treating Assessee as assessee-in-default.
On appeal, CIT(A) accepted the contention of Assessee that the transaction was acquisition of financial assets & the consideration paid was a lump sum for acquiring rights over principal & accrued interest. It was observed that there was no borrower-lender relationship between Assessee & the transferor & therefore provisions of TDS u/s 193/194A were not applicable. Accordingly, CIT(A) deleted the demand.
Revenue challenged the order before Tribunal, contending that since the consideration included accrued interest, it was liable for TDS in the hands of Assessee.
