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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI V. DURGA RAO& SHRI D.S. SUNDER SINGH
Per Shri D.S.Sunder Singh, Accountant Member : This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]-6, Hyderabad in Appeal No.10363/2018-19/B3/CIT(A)-6 dated 28.12.2018 for the Assessment Year (A.Y.) 2011-12.
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Ground No.1, 2, 4 and 5 are not pressed by the Ld.AR, therefore, ground No1, 2, 4 and 5 are dismissed as not pressed.
Ground No.3 is related to the disallowance of interest paid to B.Rohit Kumar Jain Trust and B.Suresh Kumar Jain Trust amounting to Rs.2,98,134/- . During the assessment proceedings, the AO found that the assessee has paid the interest of Rs.2,98,134/- to two beneficiaries namely, B.Rohit Kumar Jain Trust and B.Suresh Kumar Jain Trust, but not deducted the tax at source. During the assessment proceedings, though the assessee stated that the beneficiaries have offered the interest and paid the tax for the A.Y. 2011-12, the assessee has not furnished certificate from the accountant with regard to admission of income and the payment of taxes. Hence, the AO disallowed the interest and added back to the income.
Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) dismissed the appeal of the assessee on the ground that proviso to section 40(a)(ia) is applicable from the A.Y.2013-14, and the same is not applicable for the assessment year under consideration. Secondly, the Ld.CIT(A) observed that the recipients of the interest have filed the return of income on 04.11.2011 relevant to the F.Y.2011-12 which corresponds to the A.Y.2012-13, thus, held that even if
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the proviso to section 40(a)(ia) is made applicable for the earlier years, the assessee would be entitled for deduction for the A.Y.2012-13, but not for the A.Y.2011-12. Accordingly, the Ld.CIT(A) dismissed the appeal of the assessee. For the sake of clarity, we extract relevant part of the order of the Ld.CIT(A) which reads as under : 7.3.9. In the instant case, as per Form 26A filed, the return of income in respect of both the loan creditors was filed in the F.Y.2011-12 relevant to the A.Y.2012-13. The details of the same are given below : S.No. Name of the recipient of Date of filing the interest / deductee return of income 1. M/s Rohit Kumar Jain Trust 04.11.2011 2. M/s B.Sumeet Kumar Jain Trust 04.11.2011 7.3.10. As seen from the above, both the recipients of interest have filed their returns of income on 04.11.2011 relevant to F.Y.2011-12 which corresponds to the A.Y.2012-13. Accordingly, if at all, the assessee is eligible to claim the benefit of second proviso, then he would be entitled to claim the same only in the A.Y.2012-13 rather than in the impugned A.Y.2011-12. 7.3.3. I have examined the facts of the case and additional evidence filed by the assessee in the shape of Form 26A issued by the loan creditors. As such, the assessee has invoked the second proviso to Sec. 40(a)(ia) of the Act in order to claim relief from the rigours of Sec 40(a)(ia) of the Act. However, I am of the considered opinion that, as clearly stated in the Statute, the said proviso was inserted by Finance Act, 2012 and came into force w.e.f 01.04.2013. Thus, the same is applicable starting from the A.Y 2013-14. On the other hand, in the instant case, the A.Y under dispute is 2011-12. Accordingly, the assessee cannot avail the benefit of second proviso to Sec. 40(a)(ia) of the Act for the impugned AY 2011-12. Thus, the grounds of appeal raised by the assessee on this issue are dismissed.”
Against the order of the Ld.CIT(A), the assessee filed appeal before this Tribunal and submitted that as far as the proviso to section 40(a)(ia) is concerned, the Ld.AR placed reliance on the decision of ACIT, Circle-1,
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Kakinada Vs. Navodaya Granite Industries in I.T.A. No.486/Viz/2016 dated 22.12.2017 and submitted that Hon’ble ITAT held that section 40(a)(ia) is declaratory and curative in nature and has retrospective effect from 01.04.2005, thus, argued that since the recipients had admitted the income and paid the taxes, hence the assessee is entitled for deduction and no addition is called for u/s 40(a)(ia) of the Act.
5.1. With regard to second part of the issue regarding filing the return of income on 04.11.2011 by the beneficiary relevant to the A.Y.2012-13, the Ld.AR argued that since the recipients have admitted the income in the subsequent assessment year and paid the taxes thereon, he has requested to allow the deduction in the subsequent assessment year i.e. 2012-13 if it is not possible to allow the deduction in the impugned A.Y.. The Ld.AR further submitted that the issue is squarely covered by the decision of Sanapala Satyanarayana Vs. ACIT, Circle-1(1) in I.T.A. No.63/Viz/2019 dated 15.11.2019 of this tribunal .
On the other hand, the Ld.DR supported the orders of the lower authorities.
We have heard both the parties and perused the material placed on record. In the instant case, there is no dispute that the assessee has made
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the payment of interest without deduction of tax at source. The recipients also have filed the returns of income on 04.11.2011 i.e. in the Financial Year 2011-12 which corresponds to the A.Y. 2012-13. Therefore the we, hold that the AO has rightly made the disallowance and no interference is called for in the order of the Ld.CIT(A).
The Ld.AR made an alternate plea stating that even if the the Ld.CIT(A) contention is accepted the assessee would be entitled for deduction in the subsequent year, hence, requested to allow the deduction in A.Y.2012-13 as an alternate remedy. It is observed from the information placed before the lower authorities that the recipients have admitted the income, filed the returns of income and paid the taxes thereon. However the returns were filed on 04.11.2011 i.e. in the Financial Year 2011-12 which corresponds to the A.Y. 2012-13. Therefore, issue is squarely covered by the decision of this Tribunal in Sanapala Satyanarayana (supra). Hence, we direct the AO to allow the expenditure which was disallowed u/s 40(a)(ia) in the A.Y.2012-13. On this ground the appeal of the assessee is allowed.
In the result, appeal of the assessee is partly allowed.
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Order pronounced in the open court on 18th December, 2019.
Sd/- Sd/- (िी.दुगाा राि) (धड.एस. सुन्दर धसंह) (V. DURGA RAO) (D.S. SUNDER SINGH) न्याधयक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER नवशधखधपटणम /Visakhapatnam नदनधंक /Dated : 18.12.2019 L.Rama, SPS आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. ननधधाऩरती/ The Assessee - Jethmalji Bipin Kumar, Flat No.302, D.No.9-24-10 Vinayagar Towers, CBM Compound, Visakhapatnam 2. रधजस्व/The Revenue - Income Tax Officer, Ward-1(2), Visakhapatnam 3. The Principal Commissioner of Income Tax, Visakhapatnam 4. The Commissioner of Income Tax (Appeals)-6, Hyderabad 5. तिभागीय प्रतितिति, आयकर अिीिीय अतिकरण, तिशाखािटणम/DR, ITAT, Visakhapatnam 6.गार्ड फ़ाईि / Guard file
आदेशािुसार / BY ORDER // True Copy //
Sr. Private Secretary ITAT, Visakhapatnam