The assessee is engaged in the business of transportation and contract. The return of income for Assessment Year (AY) 2009-10 was filed declaring income at Rs.5,23,080/-. The assessment was made under s.143(3) of the Act and total income of Rs.5,33,620/- was determined. Subsequently, case was reopened and assessment under s.143(3) r.w.s.147 of the Income Tax Act, 1961 was passed after making additions towards interest expenses of Rs.3,25,528/- paid to non-financial institutions on the ground that TDS on interest payment has not been not deducted in terms of 194A of the Act. It was observed by the AO that on verification of the details of interest expenditure, it was noticed that the assessee has paid interest of Rs.29,127/- to M/s.Tata Motors Ltd. and Tata Capitals Ltd. aggregating to Rs.3,25,528/-. It was asserted by the AO that as per the provisions of section 194A of the
It was asserted by the AO that as per the provisions of section 194A of the Act, when the aggregate sum payable during the Financial Year (FY) towards interest exceeds Rs.20,000/-, the assessee is under statutory obligation to deduct TDS thereon. The assessee having faulted in the deduction of TDS in terms of section 194A, the expenditure is required to be disallowed in terms of provisions of section 40(a)(ia) of the Act while computing the taxable income. The disallowance was accordingly made invoking the section 40(a)(ia) of the Act which was confirmed by the CIT(A).
We have carefully considered the submissions made on behalf of the respective parties. It is the case of the assessee that in view of the second proviso to section 40(a)(ia) of the Act introduced by the Finance Act, 2012 w.e.f. 01/07/2012 r.w.s. 201, despite failure to deduct TDS, disallowance of expenditure ought not to have been made if the recipients payee, namely Tata Motors Ltd. and Tata Capitals Ltd. have taken into account the aforesaid sum of interest while computing income in their hands and paid taxes thereon. It is a case of the assessee that the aforesaid amendment is retrospective in nature and therefore apply to the present case. It was claimed by the assessee that recipients of the interest are reputed financial institutions have duly paid the taxes. We find that the issue is fairly settled by
We find that the issue is fairly settled by long line of judicial precedents on the issue. The latest decision of the issue is in the case of CIT vs. Ansol Land Mark Township Pvt.Ltd. reported in 377 ITR 635 (Delhi). The Revenue has not been able to rebut the assertions of the assessee on factual position that the recipients have duly paid the taxes on the aforesaid amount. The recipients are reputed companies. The amount involved is meager. Thus, there is no reason to doubt the claim of the Assessee. Thus, in the backdrop of the aforesaid decision of the Hon’ble Delhi High Court, we hold that disallowance under s.40(a)(ia) cannot be fastened on the assessee in such circumstances. We thus find merit in the case of the assessee and direct the AO to delete the disallowance.