BANWARI AROMAS PVT. LTD.,DELHI vs. ITO, NEW DELHI

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ITA 6100/DEL/2016Status: DisposedITAT Delhi14 August 2019AY 2012-133 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal restored the issue to the Assessing Officer to examine if the payee offered the interest income and paid tax on it. This is to consider the provisos to Section 40(a)(ia) and Section 201(1) regarding deemed TDS deduction and payment.

What were the facts?

The assessee paid interest on a loan without deducting TDS, claiming the payee was a public financial institution exempt from TDS. The Assessing Officer and CIT(A) disallowed the interest expense under Section 40(a)(ia).

What were the issues?

Whether disallowance under Section 40(a)(ia) is warranted when TDS was not deducted, and if the provisos to Section 40(a)(ia) and Section 201(1) can be applied to deem TDS as deducted and paid if the recipient has offered the income for taxation.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 194A,Section 201(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH “A” NEW DELHI

Before: SHRI T.S. KAPOOR & SHRI AMIT SHUKLA

For Appellant: Ms. Rano Jain, Adv., Shri Pranshu, CA & Ms. Manshi Jain, CA
For Respondent: Shri Mithun Sethi, Sr.D.R

O R D E R PER AMIT SHUKLA, JM

The aforesaid appeal has been filed by the Assessee against the impugned order dated 21.09.2016 passed by Commissioner of Income Tax (Appeals)-XXXV, New Delhi for the quantum of assessment passed u/s.143(3) for the Assessment Year 2012-13. In the grounds of appeal, the assessee has challenged the disallowance made u/s.40(a)(ia).

2. The assessee has taken loan from Indiabulls Financial Services Ltd. on which it has paid interest amounting to Rs.20,90,804/-. However, no TDS was deducted by the assessee-company. In response to the show cause notice by the Assessing Officer, the assessee submitted that it was not required to deduct TDS on payment of interest to Indiabulls Financial Services Ltd. as it is public financial institution and in terms of Section 194A, no TDS was required to be deducted on such payments. However, the Assessing Officer after detailed discussion held that assessee was required to deduct TDS u/s.194A and accordingly made the disallowance of interest u/s.40(a)(ia) which has also been confirmed by the ld. CIT(A).

3. Ld. counsel for the assessee, Ms. Rano Jain prayed that the matter should be restored back to the file of the Assessing Officer to examine whether the payee has offered this interest income as its income and pay tax thereon. The disallowance should be exempted in view of 2nd proviso to Section 40(a)(ia) read with 1st proviso to Section 201(1). In support, she also relied upon the decision of Hon’ble Gujarat High Court in the case of PCIT vs. M/s. Arvind Lifestyle Brands Ltd, (2019) 8 TMI 570 (Guj.).

4.

On the other hand, ld. DR relied upon the order of the authorities below.

5.

After considering the aforesaid submissions and without going into the merits of the case, whether payment of interest to M/s. Indiabulls Financial Services Ltd. entails deduction u/s.194A or not, we feel that the disallowance should be examined in view of second proviso to Section 40(a)(ia) and first proviso to Section 201(1) which provides that where assessee has failed to deduct TDS, but he is not deemed to be assessee in default under 1st proviso to Section 201(1); then, it shall be deemed that assessee had deducted and paid the same on such sum. Accordingly, we are restoring this issue to the file of the Assessing Officer who shall examine whether the payee has shown this payment in its account for computing the income in the return of income and also paid tax on such income. The assessee shall furnish all the requisite details and certificate before the Assessing Officer. Accordingly, this issue is remanded back to the file of the Assessing Officer to decide in the light of the aforesaid directions.

6.

In the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open Court on 14th August, 2019.

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