YM MOTORS P. LTD.,MUMBAI vs. THE ACIT-8(3)(2), MUMBAI

In this appeal, the assessee has raised the following grounds:–

The appeal filed before us is delayed by 251 days. The assessee has filed an application seeking condonation of delay in filing the present appeal supported by an affidavit sworn by the Director of the assessee Shri Shrinivas Anantrao Pawar. In the application, the assessee has submitted that the order passed by the learned CIT(A) was served on 25.08.2020 and thus the appeal before the Tribunal was to be filed on/or before 24.10.2020. The assessee further submitted that due to worst pandemic situation in Mumbai during the period from October 2020 to till June 2021, the office of the assessee was not in operation regularly. Therefore, the next course of action pursuant to the order passed by the learned CIT(A) could not be discussed with the Counsel, resulting in delay in filing the present appeal and the appeal was ultimately filed on 05.07.2021. By placing reliance on the order dated 27.04.2021, passed by the Hon'ble

We further find that the Hon'ble Supreme Court vide order dated 10.01.2022, in M.A. no.21 of 2022, in M.A. no.665 of 2021, in Suo–Motu Writ Petition (Civil) no.3 of 2020, directed that the period from 15.03.2020 till 28.02.2022, shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial and quasi judicial proceedings. In view of the above, there is no delay in filing the present appeal and we hear the appeal on merits.

The only issue arising in the present appeal is with regard to the disallowance under section 40(a)(ia) of the Act on account of interest paid to Non Banking Finance Companies (“NBFCs”).

The brief facts of the case pertaining to this issue as emanating from the record are: The assessee is engaged in the business of sales and services of automobiles and spare parts. During the year under consideration, the assessee e–filed its return of income on 25.09.2013, declaring total income of Rs.Nil. During the course of scrutiny proceedings, it was observed that the assessee has made payment of interest of Rs. 10,15,337, on loan to Tata Capital Financial Services Ltd., Kotak Mahindra Prime Ltd. and Reliance Capital Ltd., on which no tax at source was Y.M. Motors Pvt. Ltd. ITA No.1274/Mum./2021 deducted by the assessee. The assessee was asked to show cause as to why the interest expenditure to NBFCs should not be disallowed under section 40(a)(ia) of the Act as the assessee has failed to deduct TDS on interest paid to such NBFCs during the year. In reply, the assessee furnished the details pertaining to the interest paid, inter–alia, to the NBFCs. The Assessing Officer vide order dated 07.03.2016, passed under section 143(3) of the Act disallowed the interest amounting to Rs.10,15,337, under section 40(a)(ia) of the Act for non–deduction of TDS on interest paid to the NBFCs.

In appeal before the learned CIT(A), the assessee submitted the certificates issued by the Accountant in Form no.26A under the first proviso to section 201(1) of the Act in respect of interest paid by the assessee to Tata Capital Financial Services Ltd., and Reliance Capital Ltd. However, the learned CIT(A) vide impugned order dated 25.02.2020, inter–alia, upheld the disallowance under section 40(a)(ia) for non–deduction of TDS on interest paid to NBFCs. The learned CIT(A) further held that the income offered by the NBFCs in their return of income has no bearing on the requirement laid down by the Act on the assessee to deduct TDS. Being aggrieved, the assessee is in appeal before us.

During the course of hearing, Shri Prakash Jani, the learned Authorised Representative for the assessee (“learned A.R.”) submitted that the assessee vide application dated 02.03.2022 has sought admission of additional evidences, which were received only after completion of Y.M. Motors Pvt. Ltd. ITA No.1274/Mum./2021 appellate proceedings before the learned CIT(A) and have bearing on the present appeal. The learned A.R. submitted that the assessee has, inter– alia, received Form no.26A, issued by the Accountant under the first proviso to section 201(1) of the Act in respect of all the three NBFCs i.e., Tata Capital Financial Services Ltd., Kotak Mahindra Prime Ltd. and Reliance Capital Ltd., wherein it has been certified that the aforesaid NBFCs have taken into account the sum received as interest from the assessee while computing its taxable income in the return of income filed. Thus, the learned A.R. submitted that this issue may be remitted to the Assessing Officer for necessary verification.

On the other hand, Shri Hoshang B. Irani, the learned Departmental Representative (“learned D.R.”) vehemently objected to the admission of additional evidences furnished by the assessee and placed reliance on the order passed by the lower authorities.

We have considered the rival submissions and perused the material available on record. In the present case, it has not been disputed that the assessee had availed loans from the aforesaid three NBFCs. Further, the learned CIT(A) also refused to grant any relief to the assessee on this issue even when the assessee had furnished the certificate in Form no.26A, in respect of Tata Capital Financial Services Ltd., and Reliance Capital Ltd. The second proviso to section 40(a)(ia) of the Act inserted by Finance Act, 2012, w.e.f. 01.04.2013, provides that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Y.M. Motors Pvt. Ltd. ITA No.1274/Mum./2021 Chapter–XVII–B on any such sum but is not deemed to be an assessee in default under the first proviso to section 201(1) of the Act, then, for the purpose of this sub–clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the payee.

From the facts available on record, it is evident that the assessee though has taken the plea on the basis of second proviso to section 40(i)(ia) of the Act and has also furnished certificates in Form no.26A in respect of two NBFCs, however, no relief was granted by the learned CIT(A) and disallowance made by the Assessing Officer was upheld. Now in the present appeal, the assessee by way of additional evidences has produced copies of Form no.26A in respect of all the three NBFCs in support of its aforesaid plea based on second proviso to section 40(a)(ia) of the Act.

In view of the above, the additional evidences as filed by the assessee are admitted and the Assessing Officer is directed to verify the details as submitted before us. We further direct that if it is found that the NBFCs have taken into account the sum received as interest from the assessee while computing its taxable income in the return of income filed, then, to that extent, relief be granted to the assessee as per second proviso to section 40(a)(ia) of the Act. With above directions, this issue is restored to the file of the Assessing Officer for de novo adjudication, and the impugned order passed by the learned CIT(A) is set aside.

In the result, appeal by the assessee is allowed for statistical purpose. Order pronounced in the open court on 13/04/2022