Case Law Details
ACIT Vs Singareni Colleries Company Ltd. (ITAT Hyderabad)
On careful reading of the Notes submitted by the assessee company it is clear that the assessee is providing interest at certain percentage and credited to the fund account. Further, he observed that it is also a fact that the insurance premium is paid out of interest provided by the company against FBIS members. It is also a fact that every member certainly gets the amount contributed by them in addition to the interest provided by the company. Further, it is also a fact that the assessee company failed to give the bifurcation of interest to be paid to each member relevant to the year under consideration. However, the interest provided by the company towards the fund maintained for the purpose of this scheme, without deducting tax surely attracts the provisions of section 40(a)(ia) rws 194 of the Act. In view of the above observations, the AO disallowed the interest provided to the fund under this scheme of Rs. 1,59,93,000/- in AY 2009-10 and Rs. 1,45,70,000/- in AY 2010-11.
The assessee preferred an appeal before the CIT(A) and submitted during the appeal proceedings that FBIS scheme is that every employee contributes Rs.10/- p.m. which works out to Rs.120 per year. The interest on this amount at 6% works out to Rs.7.20. Hence, the appellant contends that provisions of section 194A are not attracted as the amount of interest per annum is less than Rs.5,000/- per year including the accumulated balance per employee.
After considering the submissions of the assessee, the CIT(A) directed the AO to delete the disallowance by observing as under:
“4.4.4.2. I have gone through the observations of the Assessing Officer and submissions made by the appellant. As the amount of interest per annum provided by the appellant under the said scheme of Family Benefit-cum-Insurance Scheme (FBIS) is below the threshold limit as prescribed in section 194A of the Act, I am of the opinion that the Assessing Officer is not justified in disallowing the SAID expenditure u/s.40(a)(ia) of the Act. Hence, he is directed to delete the disallowance made in this regard.”
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