M/S. JYOTI VINYL LTD.,NEW DELHI vs. DCIT, NEW DELHI

This appeal filed by the assessee is directed against the order dated 6th May, 2016 of the CIT(A)-5, New Delhi, relating to assessment year 2012-13.

The assessee in its various grounds of appeal has challenged the order of the CIT(A) in confirming the addition of Rs.3,69,505/- disallowed by the Assessing Officer u/s 40(a)(ia) of the IT Act on account of interest paid to Religare Finvest Ltd. Facts of the case, in brief, are that the assessee is a company engaged in the business of manufacturing of PVC flexible hoses & profiles and trading of resin. It filed its 27th September, 2012 declaring the total income of Rs.72,82,390.00. The Assessing Officer completed the assessment determining the total income at Rs.84,45,430/- wherein, apart from other additions, the Assessing Officer had made addition of Rs.8,52,197/- u/s 40(a)(ia) on account of non-deduction of tax from interest paid to non-banking financial companies, namely, Religare Finvest Ltd. – Rs.3,69,505/-; and Tata Capital – Rs.4,82,692/-. The explanation of the assessee that the payment of interest and principal was already paid in advance at the time of sanctioning of loan itself, therefore, deduction of TDS was not practically possible was rejected by the Assessing Officer. Further, the submission of the assessee that the above two companies are regularly assessed to income-tax and are paying tax on the interest income recovered from the assessee company was also not accepted by the Assessing Officer. In appeal, the ld.CIT(A) upheld the action of the Assessing Officer.

The ld. counsel for the assessee, referring to first proviso to section 201(1), submitted that if the payee has paid the tax due on the income declared by him in his return of income, then, the assessee cannot be treated as an ‘assessee in default.’ He submitted that the auditors have already certified that the payees have furnished their returns of income for assessment year 2012-13 wherein they have declared such interest income and paid tax due thereon. He has accordingly submitted that he has no Assessing Officer for the limited purpose of verification of the same and for passing appropriate order as per law.

The ld. DR, on the other hand, while supporting the order of the CIT(A), submitted that he has no objection if the matter is restored to the file of the Assessing Officer for verification.

We have considered the rival arguments made by both the sides and perused the orders of the authorities below. We find the Assessing Officer, invoking the provisions of section 40(a)(ia), made addition of Rs.8,52,197/- on account of non- deduction of tax from payment of interest to Religare Finvest Ltd. and Tata Capital.

Considering the totality of the facts of the case and considering the fact that the assessee has filed a certificate from the Accountant certifying that both the payees have declared such interest income in their return of income and paid taxes thereon, therefore, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to verify the veracity of the claim of the assessee and pass appropriate order as per law. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes. 3

In the result, the appeal filed by the assessee is allowed for statistical purposes. The decision was pronounced in the open court on 16.09.2019.