M/S. SPENCER TRAVEL SERVICES LTD.,CHENNAI vs. DCIT, CHENNAI

2 - 2. The limited prayer of Ld. AR is that the payee has declared the impugned payments in their tax returns and paid due taxes thereon. Accordingly, the assessee could not be held to be assessee-in-default. In support, copy of Income Tax Return of the payee has been placed on record. The Ld. AR, thus, pleaded for shelter of second proviso to Sec. 40(a)(i). The Ld. Sr. DR submitted that the assessee has to file requisite documents and the plea could not be accepted merely on the basis of Income Tax Return of the payee. Having heard rival submissions, the issue is adjudicated as under.

The impugned disallowance stem from the fact that the assessee made certain remittances to Air Maldives without deducting applicable tax at source. Accordingly, disallowance of Rs.4.15 Lacs was made u/s 40(a)(i). The Ld. CIT(A) confirmed the same against which the assessee is in further appeal before us.

We find that in terms of second proviso to Sec. 40(a)(i), if the assessee is not deemed to be an assessee-in-default under first proviso to sub-section (1) of Sec.201, then it shall be deemed that the assessee has deducted and paid tax on such sum. Though the proviso has been inserted from 01.04.2020, however, we are of the opinion that the said amendment is curative in nature and intended to avoid undue hardship that may have been caused to the assessee due to harsh provisions of Sec. 40(a)(i) since failure to deduct TDS would result into full disallowance of the expenditure. Therefore, accepting the plea of Ld. AR, we direct the assessee to demonstrate before Ld. AO that the assessee fulfills the prescribed conditions and could not be considered as assessee-in-default in terms of first proviso to sub- section (1) of Sec.201 by furnishing the requisite documents as 3 - specified therein. The Ld. AO would verify the claim of the assessee and re-adjudicate the same. The corresponding grounds stands partly allowed for statistical purposes.

Another issue in the appeal is withdrawal of interest granted to the assessee u/s 244A. The same stem from the fact that in the regular scrutiny assessment proceedings, balance refund of Rs.24.61 Lacs was determined which was rectified on 12.01.2011 and re-determined at Rs.43.43 Lacs. The same was issued on 30.03.2011. However, return was processed u/s 143(1) and refund of Rs.43.42 Lacs was issued on 29.10.2010 after taking credit of Rs.53.98 Lacs against the claimed credit of Rs.79.71 Lacs. The credit was allowed in full for Rs.79.69 Lacs and refund of Rs.43.42 Lacs was issued. No details were available with respect to credit of Rs.36.26 Lacs disallowed in the 143(1) intimation. This needed verification and the period of delay attributable to the assessee had to be disallowed for grant of interest u/s 244A. The interest u/s 244A was reworked and difference of Rs.0.99 Lacs was computed which is given on para-2 of the assessment order. The same was withdrawn. The Ld. CIT(A) confirmed the same against which the assessee is in further appeal before us.

We find that the claim of TDS credit has finally been found to be correct and the credit of the same has been granted to the assessee. Therefore, the withdrawal of interest is not justified. We order so.

The appeal stand partly allowed in terms of our above order. Order pronounced on 13th April, 2023.