Sec. 194A TDS not deductible on Hundi discount as it is not interest

During the course of the scrutiny the assessment proceedings the AO noticed that under the Head ‘Finance Expenses’ the assessee has debited an amount of Rs.91,30,250/- on account of discount on Hundi. The assessee was asked whether tax has been deducted at source u/s 194A of the Act. The assessee replied that provision of section 194A are not attracted as the said expenses are only discount and not interest and are covered by Circular No. 647 dated 22.03.1993 of the CBDT, and therefore, provisions of section 40(a)(ia) are also not applicable. This explanation did not find favour wi...