KOHINOOR TOBACOO COMPANY,VADODARA vs. THE INCOME TAX OFFICER, WARD-1(2)(1), BARODA

Though the assessee has taken four grounds of appeal, but its grievances revolves around a single issue viz. the ld.CIT(A) has erred in confirming disallowance of interest paid to unsecured creditors with aid of section 40(a)(ia) of the Income Tax Act, 1961.

With the assistance of ld.representatives, I have gone through the record carefully. It emerges out from the record that the assessee paid interest to Shri Manoj Pandey and Rs.58,800/- to Smt. Trupti Pandey without deduction of tax under section 194A of the Act. On query from

On due consideration of the above facts and circumstances, I am of the view that Hon’ble Delhi High Court in the case of CIT Vs. Ansal Landmark Township P.Ltd., 377 ITR 635 (Del) has held that second proviso to section 40(a)(ia) inserted by Finance Act, 2014 be construed as applicable from retrospective effect. According to this, if recipient has accounted for these receipts in their taxable income, disallowance will not be made in the hands of payer on account of non-deduction of tax. Considering this aspect, I deem it appropriate to set aside this issue to the file of the AO with direction that the ld.AO shall verify from the alleged loan creditors whether they have accounted interest income received from the assessee in their taxable income or not. If they have accounted for then, no disallowance in the hands of the assessee be made. The ld.AO shall decide this issue after providing due opportunity of hearing to the assessee.

In the result, appeal of the assessee is allowed for statistical purpose. Pronounced in the Open Court on 10th May, 2018.