ACIT Vs Smt. Champa Nandi (ITAT Kolkata)
The Income Tax Appellate Tribunal ( ITAT ), Kolkata has held that the finance charges to Non-Banking Financial Companies (NBFCs) are not subject to Tax Deduction at Source ( TDS ) under the provisions of section 194A of the Income Tax Act.
The assessee has debited in his profit and loss account an aggregate sum of Rs.5,68,40,472/- under the head interest and finance charges. While completing the assessment proceedings, the Assessing Officer held that such amounts were payable/paid to different non-banking financial companies and no tax has been deducted at source under section 194A of the Act.
According to the assessee, the finance charges do not interest and hence, section 194A is not attracted since his business was that of hiring out industrial crane and equipment which are acquired on hire purchase finance from the bank and other financial companies. It was contended that the monthly hire -purchase installments were paid in which financial charges were also included.
The Tribunal noted that all such loans, monthly deduction of principal and proportionate interest had been paid by the assessee and claimed in the accounts as finance charges. The total interest debited during the year amounted to Rs.4,41,12,661/- without any deduction of TDS.
“However, out of the four finance Companies, two Companies namely M/s L & T Finance and M/s SREI Equipment and Finance Pvt. Ltd. had issued a confirmation to payer Company that they have duly included the same in their income. For the other two Companies, Chartered Accountant’s certificates confirming that the interest so received have all been duly credited to their income, were also received by the payer company. Therefore, in view of the insertion of the second proviso of section 40(a)(ia) and proviso of section 201(1) which are curative and retrospective in nature, the addition made by the Assessing Officer should be deleted,” the Tribunal said.
FULL TEXT OF THE ITAT JUDGMENT
The captioned appeal filed by the Revenue, pertaining to Assessment Year 2012-13, is directed against an order passed by the Ld. Commissioner of Income Tax (Appeals)-7, Kolkata, in Appeal No.82/CIT(A)-7/Kol/Cir-25/15-16, dated 29.09.2017, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
2. The grievances raised by the Revenue are as follows:
“1. That on the facts and circumstances of the case ld. CIT(A)-7/Kol/ had erred in deleting the addition on a/c of disallowance of interest paid to different parties amounting to Rs.4,41,12,662/- u/s 40(a)(ia).
2. That the ld. CIT(A)-7/Kol was wrong in holding that the second proviso to section 40(a)(ia) is applicable to the instant case for Assessment Year 2012-13 although second proviso to section 40(a)(ia) was not applicable to the Assessment Year 2012-13 since this proviso was inserted by Finance Act 2012 i.e w.e.f. 01/04/2013 i.e. Assessment Year 2013-14.
3. That the petitioner craves leave to add, amend, alter vary and/or withdraw any or all the above grounds of appeal.”
3. The brief facts qua the issue are that assessee has debited in his profit and loss account an aggregate sum of Rs.5,68,40,472/- under the head interest and finance charges. On perusal of the same it was noted by assessing officer that the following amounts were payable/paid to different non-banking financial companies and no tax has been deducted at source under section 194A of the Act:
