SUBHASH CHANDRA BOSE HANUMARA, HYDERABAD,HYDERABAD vs. DCIT, CIRCLE-14(1), HYDERABAD, HYDERABAD
What did the Tribunal hold?
The Tribunal restored the issue to the Assessing Officer for verification of whether the payees were assessed for the impugned financial charges, considering the retrospective effect of the second proviso to Section 40(a)(ia). The assessee did not press the ground regarding disallowance of Rs. 1 lakh under 'other' expenditure.
What were the facts?
The assessee claimed interest expenses on vehicle loan finances but did not deduct TDS on these payments. The lower authorities invoked Section 40(a)(ia) to disallow the interest. The assessee argued that the second proviso to Section 40(a)(ia) was applicable.
What were the issues?
Whether the disallowance of interest under Section 40(a)(ia) is sustainable when the assessee is not an assessee in default under Section 201(1) due to the retrospective curative nature of the second proviso.
Which sections of the Income-tax Act were involved?
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- CIT v. Ansal Land Mark Township (P) Ltd.369 citing377 ITR 635 · 2015 · HC · Read judgment
Income Tax Appellate Tribunal, HYDERABAD BENCHES “A” : HYDERABAD
Before: SHRI S.S.GODARA & SHRI LAXMI PRASAD SAHU
O R D E R PER S.S.GODARA, J.M. :
This assessee’s appeal for AY.2012-13 arises from the CIT(A)-6, Hyderabad’s order dated 14-12-2016 passed in case No.1599/2014-15/CIT(A)-6/16-17 in proceedings u/s.143(3) of the Income Tax Act, 1961 [in short, ‘the Act’]. Heard both the parties. Case file perused.
Coming to the assessee’s first and foremost substantive ground that both the lower authorities have erred in law and on facts in invoking Section 40(a)(ia) r.w.s.194A disallowance of interest claimed to the tune of Rs.1,43,22,348/-. We notice during the course of hearing that he had pleaded before the CIT(A) that second proviso to Section 40(a)(ia) was squarely applicable stipulating that if an assessee is not an assessee in default u/s.201(1) first proviso, the impugned disallowance is not sustainable. The CIT(A) holds in his order vide para 5.4 that even if the said proviso is held as carrying retrospective effect, the assessee had failed to place on record the corresponding computation of income of its four payees M/s.Cholamandalam Finance, Reliance Capital, India Bulls, Religare Finance and L&T Finance so as to get the necessary relief. It is noticed in this factual backdrop that the assessee has sought to delete the impugned disallowance.
We have given our thoughtful consideration to rival pleadings against and in support of the impugned disallowance. There is no dispute on the clinching fact that the assessee had indeed not deducted any TDS on the impugned interest payments on vehicle loan finances. Next is the hon’ble Delhi high court’s decision in CIT Vs. Ansal Landmark Townships (P) Ltd., (2015) [377 ITR 635] (Del) holds that the above proviso carries retrospective effect being curative in nature. Faced with this situation, we deem it appropriate to restore the instant former issue back to the Assessing Officer for his necessary factual verification as per law in light of Section 40(a)(ia), 2nd proviso as to whether assessee payees stand assessed qua the impugned financial charges or not? This first substantive ground is treated as allowed for statistical purposes.
Learned authorised representative next stated at the bar that the assessee does not wish to press for disallowance of Rs.1 lakh under the head ‘other’ expenditure keeping in mind smallness thereof. The same is declined as prayed for.
This appeal of assessee is treated as partly allowed for statistical purposes in above terms.
Order pronounced in the open court on 29th April, 2021
More judgments on Section 40(a)(ia)
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- J.D. Marketing, Kolkata vs ITO, Ward 37(1), KolkataITA 1492/KOL/2026[2013-2014]Status: Disposed15 Oct 2026AY 2013-2014
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