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Facts
The assessee, a partnership firm, appealed against the CIT(A)'s order confirming the Assessing Officer's disallowance of Rs. 3,14,708/- for interest paid to Muthoot Finance Ltd. under Section 40(a)(ia) due to non-deduction of TDS, and short granting of TCS credits. The assessee contended that the recipient had offered the interest income to tax and that TCS credits were incorrectly calculated.
Held
The Tribunal observed that the recipient, Muthoot Finance Ltd., had confirmed the receipt of interest and offered it to tax. It directed the Assessing Officer to verify the evidence regarding the interest payment and grant relief accordingly. Furthermore, the AO was directed to examine the TCS claim supported by Form 26AS and grant correct TCS credits.
Key Issues
Whether the disallowance of interest payment under Section 40(a)(ia) was justified when the recipient had offered the income to tax, and whether correct TCS credits were granted to the assessee.
Sections Cited
143(3), 250, 40(a)(ia), 143(2), 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, NAGPUR
Before: SHRI PAVAN KUMAR GADALE
Date of Hearing – 14/10/2025 Date of Order – 14/10/2025
O R D E R The assessee has filed the appeal against the order dated 20/06/2025 passed by the Addl. CIT(A)–1, Noida, u/sec143(3) and u/sec 250 of the Income Tax Act, 1961 (for short "the Act") for the A.Y. 2016– 17. The assessee has raised the grounds of appeal challenging the action of the CIT(A) confirming the disallowance of interest payments u/sec40(a)(ia) of the Act and short TCS Credits.
At the time of hearing, the Ld.AR of the assessee submitted that there is a delay in filing the appeal before the Hon’ble Tribunal and the assesse
2 Jaiswal & Sons Liquor Business Consortium ITA no.529/NAG./2025 has filed an application for condonation of delay explaining the sufficient cause. Whereas the facts mentioned in the application are reasonable and the learned D.R. has no specific objections. Accordingly, the delay is condoned and the appeal is admitted.
The brief facts of the case are that the assessee is a partnership firm and is engaged in the liquor business. The assessee has filed the return of income for A.Y.2016-17 on 26/03/2017 disclosing a total income of Rs.5,22,630/-. Subsequently, the case was selected for scrutiny under CASS and notice u/sec 143(2) and U/sec 142(1) along with questionnaire was issued. In compliance, the Ld.A.R. of the assessee appeared from time to time and submitted computation of income, audit report, audited financial statement, bank statement, confirmations. The Assessing Officer on a perusal of the financial statements find in the Profit & Loss A/c that the assessee has debited Rs.3,14,708/- towards the interest paid on loan to Muthoot Finance Ltd. and the Assessing Officer observed that the assessee has not deducted TDS and issued notice u/sec142(1) of the Act. The assessee has filed the information on 05/11/2016 explaining the fact that the assessee has paid the amount towards interest component to Muthoot Finance Ltd and the Muthoot Finance has accepted the same and has offered to tax in its return of income filed. Whereas, the Assessing Officer found that the assessee has not substantiated the claim with evidence offering interest income in the return of income. Therefore, the 3 Jaiswal & Sons Liquor Business Consortium ITA no.529/NAG./2025 Assessing Officer considering the information on record has invoked the provisions of section 40(a)(ia) of the Act and made disallowance of interest payment of Rs.3,14,708/– and assessed the total income of Rs.8,37,340/- and passed the order u/sec143(3) dated 06/12/2018. Aggrieved by the order, the assessee has filed the appeal before the CIT(A).
In the appellate proceedings, the CIT(A) considered the grounds of appeal, statement of facts, submissions and findings of the Assessing Officer but has confirmed the action of the assessing officer and dismissed the assesseE appeal. The assessee being aggrieved filed appeal before the Hon’ble Tribunal.
5. At the time of hearing, the ld.AR submitted that the CIT(A) has erred in sustaining the disallowance made by the Assessing Officer overlooking the facts and circumstances that the assessee has made an application to the lender company i.e Muthoot Finance Limited to issue Form no.26A whereas the company has issued a letter confirming the receipt of payment and offering the interest income in the return of income . Similarly, the Ld.A.R. also submitted that the Assessing Officer has granted TCS credit less than the claim made in the return of income and duly supported with Form NO.26AS. The Ld.AR substantiated the submissions with the Paper Book and prayed for allowing the assessee’s appeal. Per–contra, the Ld.DR supported the order passed by the CIT(A).
4 Jaiswal & Sons Liquor Business Consortium ITA no.529/NAG./2025
Heard the rival submissions and perused the material on record. In respect of first disputed issue, disallowance of interest u/sec 40(a)(ia) of the Act, the assessee has filed a letter to the lender company i.e Muthoot Finance Limited to issue Form no.26A as the Assessing Officer has made a disallowance of interest payment placed at page 23 of the paper book. The Ld.AR has demonstrated the letter of Muthoot Finance Limited dated 27-12-2018 confirming the interest income of Rs.3,05,938/- received and the same was offered to tax in the F.Y. 2015–16 relevant to the A.Y. 2016–17. The Ld.ARs contentions are that the Assessing Officer has not disbelieved the interest payment and erred in invoking the provisions of sec40(a)(ia) of the Act as the recipient has accepted and offered to income tax. The Ld.D.R. accepted the fact with respect to the interest income and the letter filed by Muthoot Finance Ltd. which is not disputed but prima–facie the company should issue Form no.26A as per Income Tax Rules. Hence considering the facts, circumstances and submissions of the Ld.A.R. the disputed issue for limited issue to file of the Assesseing officer to verify the evidences and grant the relief. Further the Assessing officer is directed to examine TCS claim of the assessee supported with the Form.No.26AS and grant correct TCS credits. And the grounds of appeal of the assessee are partly allowed for stastical purposes.
5 Jaiswal & Sons Liquor Business Consortium ITA no.529/NAG./2025
In the result, appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced on 14/10/2025 as per rule 34(5) of the ITAT Rules 1963