No disallowance for interest paid to NBFC without TDS deduction, considered by NBFC in their Income

1. The only issue arises in the appeal of the assessee is whether in the facts and circumstances of the case the authorities below have erred in disallowing the interest payment to Non Banking Financial Corporations (NBFCs) u/s. 40(a)(ia).

2. In the course of assessment proceedings the AO made a dis allowance of Rs. 17,79,823/- on account of interest payment made by the assessee to NBFCs without deduction of tax at source by invoking the provisions of section 40(a)(ia). The assessee challenged the action of the AO before the CIT(A) and contented that Non Banking Financial Corporations are falling under the exclusion from TDS as per provisions of section 194A(3)(a)(b) of the Act. The CIT(A) did not accept the contention of the assessee and confirmed the dis allowance made by the AO.