M/S P R PACKING SERVICE,MUMBAI vs. ASST CIT 25 (3), MUMBAI

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ITA 7490/MUM/2019Status: DisposedITAT Mumbai12 April 2022AY 2014-153 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee is eligible for immunity from disallowance under the second proviso to Section 201 of the Act, as the payees (NBFCs) had already paid taxes on the interest income. Therefore, the disallowance made under Section 40(a)(ia) was not justified.

What were the facts?

The assessee paid interest on loans taken from Non-Banking Financial Companies (NBFCs) without deducting tax at source. The Assessing Officer disallowed this interest payment under Section 40(a)(ia) of the Income Tax Act. The assessee provided additional evidence to the CIT(A) showing that the NBFCs had included this interest income in their returns and paid taxes on it.

What were the issues?

Whether interest paid on loans to NBFCs without TDS is disallowable under Section 40(a)(ia) when the recipient NBFCs have already paid tax on such income.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 201

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C‘ BENCH

For Appellant: Ms. Neha Paranjpe & Shri Om
For Respondent: Shri R A Dhyani, Sr. AR
Hearing: 12/04/2022Pronounced: 12/04/2022

O R D E R PER M. BALAGANESH (A.M): This appeal in for A.Y.2014-15 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-37, Mumbai in appeal No.CIT(A)37, Mumbai/11406/2016-17 dated 22/10/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 22/12/2016 by the ld. Asst. Commissioner of Income Tax-25(3), Mumbai (hereinafter referred to as ld. AO).

2.

The only issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in confirming the disallowance made u/s.40(a)(ia) of the Act in respect of interest paid on loans to non-banking financial companies without deduction of tax at source.

3.

We have heard rival submissions and perused the materials available on record. It is not in dispute that assessee had borrowed loans from Non-Banking Finance Companies (NBFCs). It is not in dispute that interest was paid on such loans by the assessee to NBFCs without deduction of tax at source. The ld. AO disallowed the said interest by applying the provisions of Section 40(a)(ia) of the Act as the payments were made without the deduction of tax at source. Before the ld. CIT(A), the assessee filed additional evidences in the form of certificate from the Chartered Accountant in the prescribed form that the payees i.e. NBFCs had duly included the said interest income in their returns and paid taxes thereon. This request was not accepted by the ld. CIT(A). We find that the facts and documentary evidences stated in the additional evidences before the ld. CIT(A) were not denied or doubted by the revenue before us. Accordingly, we hold that the assessee would be eligible for immunity from disallowance of expenditure under second proviso to Section 201 of the Act. Hence, assessee cannot be treated as assessee in default. Accordingly, no disallowance u/s.40(a)(ia) of the Act could be made in the hands of the assessee payer. Either way, there is no loss to the exchequer in the instant case in respect of tax portion. Accordingly, the grounds raised by the assessee are allowed.

4.

In the result, appeal of the assessee is allowed. Order pronounced in the open Court on 12/04/2022.

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