MANI NAGAPPA MOTORS MADURAI PVT LTD,MADURAI vs. ITO CORPORATE WARD-1, MADURAI

Aforesaid appeal by assessee for Assessment Year (AY) 2014-15 arises out of the order of learned Commissioner of Income Tax (Appeals)-1, Madurai, [CIT(A)] dated 16/04/2019 in the matter of assessment framed by Ld. Assessing Officer (AO) u/s.143(3) on 28/12/2016. In this appeal, the assessee is aggrieved by confirmation of certain addition u/s 40(a)(ia) for Rs.18.49 Lacs

The Ld.AR, drawing our attention to the factual matrix, sought similar directions as given by the Tribunal under similar circumstances in the case of M/s Royal India Gems & Jewels Pvt. Ltd. V/s ITO (ITA No.683/CHNY/2018) dated 18/09/2018. The copy of the order has been placed on record. The Ld. DR opposed the same by submitting that the assessee did not discharge the required onus and failed to file Form 26A which justify the confirmation of impugned disallowance. Having heard rival submissions and after going through the orders of lower authorities, our adjudication would be as given in succeeding paragraphs.

During assessment proceedings, it transpired that the assessee paid interest of Rs.18.49 Lacs to an entity namely M/s Hero Motors Corp. Ltd. but the assessee did not deduct tax at source (TDS) against the same as required u/s 194A. The assessee submitted that it had requested the payee to issue Form No.26A. However, since the said form could not be produced by the assessee during assessment proceedings, Ld. AO disallowed the expenditure u/s 40(a)(ia) for want of TDS. During appellate proceedings, the assessee expressed inability to produce the same which resulted into confirmation of disallowance. Aggrieved, the assessee is in further appeal before us. 4. We find that similar issue has been dealt with by the Tribunal in the cited decision as under: - 6. We have considered the rival contentions and perused the orders of the authorities below. Disallowance u/s.40(a)(i) of the Act was fastened on the assessee for its failure to furnish Form 26A for the interest paid by it to M/s. Reliance Capital Ltd. As per the ld. Authorized Representative, assessee had addressed a letter on 18.03.2016 to M/s. Reliance Capital Ltd for getting Form 26A, but the said company had not responded. Where the payee had included the amounts received as a part of its income and filed return after paying the taxes, assessee can always say that it cannot be deemed as one in default. By virtue of the judgment of Hon’ble Delhi High Court in the case of Ansal Land Mark Township P. Ltd (supra), first proviso to Section 201(1) as well as proviso to Section 40(a)(i) of the Act had to be construed retrospectively. Considering the facts and circumstances of the case, we are of the opinion that issue requires a fresh look by the ld. Assessing Officer. Ld. Assessing Officer can use the powers vested on him for getting the required information from M/s. Reliance Capital Ltd, so as to ascertain whether they had included the interest paid by the assessee, as a part of their income and filed return after paying due taxes. Ld. Assessing Officer can also direct the M/s. Reliance Capital Ltd to issue the certificate mandated in Annexure A to form 26A, if the said company fails to respond to assessee’s request. Ld. Assessing Officer shall thereafter proceed in accordance with law. We find that the assessee could escape the rigors of Sec.40(a)(ia) in terms of second proviso to Section 40(a)(ia) read with first proviso to sub-section (1) of Section 201 by demonstrating that the payee had duly offered the payment in their Income tax returns and paid due taxes thereon. In such a case, no disallowance u/s 40(a)(ia) is called for. As per the submissions of Ld. AR, the assessee could demonstrate the fulfillment of these conditions and is ready to file the requisite certificate / declaration from the payee. Therefore, we deem it fit to restore the matter back to the file of AO on similar lines as above to provide an opportunity to the assessee to demonstrate fulfillment of these conditions by adducing requisite documentary evidences. The Ld. AO is directed to consider the same and grant the benefit of proviso to the assessee, if otherwise available and found in order. The assessee, in turn, is directed to substantiate its claim in accordance with law. No other arguments have been urged before us.