Case Law Details
Draipl-Mskel (JV) Vs ITO (ITAT Ahmedabad)
In the present case, the expense claimed by the assessee for interest was disallowed by the AO on account of non-deduction of TDS. The disallowance made by the AO was also subsequently confirmed by the learned CIT (A). Now, the issue which require consideration and the adjudication is whether the disallowance of the expense should be restricted to 30% by virtue of the amended provisions of section 40(a)(ia) of the Act which was brought in the statute by the Finance Act (No. 2) 2014. Admittedly, as per the provision of section 40(a)(ia) of the Act, the disallowance has to be restricted to the tune of 30% in respect of the expenses on which TDS was not deducted by the assessee. Such amendment was retrospective as held by the Delhi Tribunal in the case of Muradul Haque vs. ITO reported in 184 ITD 58 wherein it was held as under:
We find that Finance (No.2) Act has made amendment to section 40(a)(ia) of the Act w.e.f. 1-4-2015. Various benches of the Tribunals including the Delhi Benches of the Tribunal, have held the amendment made by Finance (No 2) Act to be curative in nature. We further finds the coordinate bench of the Tribunal in the case of R.H. International (supra) has held that disallowance u/s. 40(a)(ia) of the Act be restricted to 30% of the expenses paid as against 100% because amended provision is curative in nature and the provisions should be applied retrospectively.
Likewise, the Ahmedabad Tribunal in the case of Electronic Instrumentation & Control Pvt. Ltd. vs. ITO in ITA No. 3055 and 3056/AHD/2013 has held that the amendment brought under the provisions of section 40(a)(ia) of the Act by the Finance Act (No. 2) 2014 is applicable retrospectively. Thus, in view of the above provisions, the 100% of the expenses incurred by the assessee without incurring the TDS cannot be disallowed. Rather disallowance shall be restricted to the tune of 30% only of such expenses. Accordingly, we direct the AO to restrict the disallowance to the tune of 30% of the interest expenses, as discussed above, incurred by the assessee. Hence, the ground of appeal of the assessee is partly allowed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD Please become a Premium member. If you are already a Premium member, login here to access the full content.
