M/S. REGMA CERAMICS LIMITED,YANAM vs. THE ASST CIT, KAKINADA

Ground Nos. 1 and 5 are general in nature which does not require specific adjudication.

Ground No.2 is not pressed by the Ld. AR during the appeal hearing, hence this ground is dismissed as not pressed.

Ground No.3 and 4 are related to the disallowance u/s 40(a)(ia) of the act, made by the Assessing Officer (AO) for not deducting the TDS on interest payment to M/s Pondicherry Industrial Promotion Development and Investment Corporation (PIPDIC) of Rs.41,35,478/- as required u/s 194A of the Income Tax Act (hereinafter called as ‘Act’).

During the assessment proceedings, the AO found that the assessee has made the payment of Rs.41,35,476/- to M/s PIPDIC, but not deducted the TDS as required u/s 194A of the Act. Therefore, the AO made the disallowance of Rs.41,35,478/- as per section 40(a)(ia) of the Act.

On appeal to the CIT(A), the Ld.CIT(A) confirmed the addition made by the AO.

Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before this Tribunal.

We have heard both the parties and perused the material placed on record. The assessee had paid the interest to the tune of Rs.41,35,478/- to M/s PIPDIC without deduction of tax at source. The said entity, PIPDIC is not a statutory corporation u/s 194A(iii)(b) and not a notified institution u/s 194A(iii)(f) of the Act. Therefore, the payment of interest to PIPDIC required to be deducted u/s 194A of the Act. Since the assessee has not deducted the tax at source and remitted to Government account, the payment of interest attracts disallowance u/s 40(a)(ia) of the Act. Though the Ld.AR relied on the decision of special bench in the case of Merrilyn Shipping & Transport, 146 TTJ 1 of ITAT, Visakhapatnam, now the issue is settled by Hon’ble Supreme Court in the case of Palam Gas Service [2017] 81 taxmann.com 43 (SC) and the Hon’ble Apex Court held that Word 'payable' occurring in section 40(a)(ia) not only covers cases where amount is yet to be paid but also those cases where amount has actually been paid. Therefore, we hold that the Ld.CIT(A) has rightly confirmed the addition and we do not find any reason to interfere with the order of the Ld.CIT(A).

In the result, the appeal of the assessee is dismissed.