Loading judgment…
No AI summary yet for this case.
2 ITA No. 447/CT K/ 2017 Asse ssment Year : 20 12- 201 3
have paid interest of Rs.29,34,572/- on vehicle loans to four parties as
under:
Sr.No. Name of the Bank Interest paid(Rs.) 1. Mahindra Finance Ltd. 1,61,261 2. L&T Finance Ltd. 8,70,809 3. Tata Finance Lt. 27,018 4. Magma Fincorp Ltd. 18,75,484 Total: 29 34 572 5. He observed that the assessee has not deducted TDS as per section
194A of the Act. The explanation of the assessee was that the
disallowance u/s.40(a)(ia) can be made if the amount is payable and not
actually paid during the year. The Assessing Officer was not convinced
with the arguments of the assessee and following CBDT Circular
No.10/2013 dated 16.12.2013 disallowed interest amount of
Rs.29,34,572/-.
On appeal before the CIT(A), the assessee contended that it has
filed certificates of Chartered Accountant in respect of 2 NBFCs namely;
L&T Finance Ltd and Magma Fincorp Ltd. to the effect that the recipients
of the interest have included the amount in their return of income and
paid due tax thereon and hence, no disallowance of interest to the extent
of Rs.21,59,199/- should be made.
The CIT(A) was not convinced with the arguments of ld A.R. of the
assessee on the ground that the second proviso to section 40(a)(ia) which
refers to compliance with the first proviso to section 201(1) has been
inserted by the Finance Act, 2012 w.e.f. 1.4.2013 and the benefit of this
3 ITA No. 447/CT K/ 2017 Asse ssment Year : 20 12- 201 3
provision is available from assessment year 2013-14 onwards. Therefore,
he dismissed the appeal of the assessee.
After hearing the rival submissions and perusing the materials
available on record, we find that in the instant case, the disallowance of
interest expenditure on vehicle loan of Rs.29,34,572/- was made by the
Assessing Officer on the ground that the assessee failed to deduct tax at
source u/s.194A of the Act. The argument of the assessee was that the
disallowance u/s.40(a)(ia) can be made on the amount of interest which
was payable and not the amount which was paid by the assessee. We
find that Hon’ble Supreme Court in the case of M/s. Palam Gas Service vs.
CIT [Civil Appeal No. 5512 of 2017] Date of judgment: 03 May 2017,
wherein, it was held that Section 40(a)(ia) covers not only those cases
where the amount is payable but also when it is paid. Therefore, we hold
that the Assessing Officer was justified in making the disallowance
u/s.40(a)(ia) of the Act.
We find that before the CIT(A), the assessee filed certificates of the
Chartered Accountants of two NBFCs namely, L&T Finance Ltd and Magma
Fincorp Ltd., to the effect that the recipients of the interest amount have
included the amount in their return of income and paid due tax thereon
and therefore, no disallowance of interest to the extent of Rs.21,59,199/-
should be made u/s.40(a)(ia) of the Act. The CIT(A) rejected the
explanation of the assessee on the ground that the first proviso was
4 ITA No. 447/CT K/ 2017 Asse ssment Year : 20 12- 201 3
inserted u/s.201(1) by the Finance Act, 2012 w.e.f. 1.4.2013 and was
prospective in operation.
We find that Hon’ble Delhi High Court in the case of CIT vs. Ansal
Land Mark Township (P Ld., 377 ITR 635 (Del) has held that the second
proviso to section 40(a)(ia) is declaratory and curative in nature and has
retrospective effect from 1st April 2005. Therefore, we are of the
considered view that the CIT(A) was not justified in dismissing the appeal
of the assessee on the ground that the second proviso is applicable for
the assessment year 2013-14 and subsequent assessment years. We,
therefore, set aside the orders of lower authorities and restore this issue
back to the file of the Assessing Officer for verification of the certificates
filed by the C.A. to the effect that the NBFCs namely, L&T Finance Ltd.,
and Magma Fincorp Ltd., have disclosed the interest amount of
Rs.21,59,199/- in their return of income and paid due tax thereon. If the
Assessing Officer finds that the recipients of the amount have disclosed
the amount received from the assessee in their returns of income, then
the Assessing Officer is directed to delete the addition. This ground of
appeal of the assessee is allowed for statistical purposes.
In Ground No.3 of the appeal, the grievance of the assessee is that
the CIT(A) erred in confirming the disallowance of depreciation on
vehicles of Rs.1,22,185/-.
5 ITA No. 447/CT K/ 2017 Asse ssment Year : 20 12- 201 3
The brief facts of the case are that the Assessing Officer observed
that the assessee has claimed depreciation on vehicles like Fortuner,
Scorpio, Bolero, etc. These are SUVs vehicles and use of these vehicles
for personal purpose cannot be ruled out. Therefore, he disallowed
deduction of 20% of the depreciation claimed by the assessee of
Rs.6,10,923/- and added Rs.1,22,185/- to the income of the assessee.
The assessee carried the matter in appeal before the CIT(A). The
CIT(A) held that the assessee has not produced the log book as evidence
of its contention that the vehicles were used by the staff of the assessee.
Before us, ld A.R. of the assessee only submitted that the
disallowance was on a higher side. He could not produce log book to
evidence that the vehicles were in fact used by the staff of the assessee
for business of the assessee. Therefore, we find no good reason to
interfere with the order of the CIT(A), which is hereby confirmed and
ground of appeal of the assessee is dismissed.
In the result, appeal of the assessee is partly allowed.
Order pronounced on 14 /05/2018.
SD/- sd/- (Pavan Kumar Gadale) (N.S Saini) JUDICIALMEMBER ACCOUNTANT MEMBER Cuttack; Dated 14 /05/2018 B.K.Parida, SPS