SRI KUSHA APAT,KEONJHAR vs. ACIT, CIRCLE-1(1), CUTTACK

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/-.

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.

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

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provision is available from assessment year 2013-14 onwards. Therefore,

he dismissed the appeal of the assessee.

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.

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

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inserted u/s.201(1) by the Finance Act, 2012 w.e.f. 1.4.2013 and was

prospective in operation.

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.

the CIT(A) erred in confirming the disallowance of depreciation on

vehicles of Rs.1,22,185/-.

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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.

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.

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.

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