Mr. Shekhar Dadarkar Vs DCIT (ITAT Mumbai)
TDS provisions were applicable to interest payments made to NBFCs, however, if payees had shown interest income in their respective returns and paid income tax thereon, no disallowance could be made in view of second proviso to section 40(a)(ia).
FULL TEXT OF THE ITAT JUDGMENT
The above titled five appeals by the assessee and one by the Revenue have been preferred against the different orders of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] for the respective assessment years.
2. At the outset, we would like to mention that at the time of hearing neither assessee nor his authorized representative was present to represent the cases. However, the application seeking adjournment was filed which was rejected for the reasons that the case of the assessee has been adjourned at as many as 10 times from 10.03.14 till today i.e. 04.04.18. In view of the said facts we observe that the assessee is non cooperative in prosecution of his appeals. We are of the view that these appeals should be disposed of on merits after hearing the Ld. D.R. Accordingly, these appeals are being disposed of in the ensuing paras after hearing the Ld. D.R. and considering the merits of the respective cases.
3. The grounds raised by the assessee are as under:
“1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming
1.1 Invocation of section 40(a)(ia) to transaction entered into with non banking finance companies;
1.2 Addition of Rs.88,85,487/- u/s 40(a)(ia) for non deduction of tax at source.
2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming addition of Rs.7,98,000/- u/s 40A(3) of Income Tax Act,
3. Appellant craves leave to add, alter and/or modify the grounds of appeal on or before the date of hearing of the appeal.”
4. The issue involved in ground No.1 is against the confirmation of addition of Rs.88,85,487/- as made by the AO under section 40(a)(ia) of the Act on account of non deduction of TDS on the payments made to non banking finance companies towards interest on loans.
5. The brief facts are that the AO during the course of assessment proceedings noticed that the assessee has charged a sum of Rs.88,85,487/- as payment of interest to non banking finance companies namely Religare Finvest Ltd., Reliance Capital Ltd., Indiabulls Hsg. Fin. Ltd., Indiabulls Hsg. Loans and Cholamanglam DBS Finance Ltd. which was debited under the head interest charges while no TDS was deducted on these payments. Upon an enquiry from the AO the assessee replied that the provisions of deduction of TDS at source as contained in section 194 of the Act are not applicable as NBFCs are carrying on banking business. The AO was not convinced with the reply of the assessee and added the said sum of Rs.88,85,487/- on account of non deduction of TDS by applying the provision of section 40(a)(ia) of the Act which was also confirmed by the Ld. CIT(A) in the appellate proceedings by holding that the NBFCs are not exempted from the application of provisions of section 193 & 194 of the Act.
6. Having heard the Ld. D.R. and considering the facts on record, we find that the assessee has made payment of Rs.88,85,487/- as per details extracted below which represented the payment of interest to non banking finance companies on which no TDS was deducted by the assessee.
