Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH ‘A’ : NEW DELHI
Before: SHRI R.K. PANDA & SHRI KULDIP SINGH
PER KULDIP SINGH, JUDICIAL MEMBER : The appellant, M/s. Amorphos Chemicals Pvt. Ltd.
(hereinafter referred to as ‘the assessee’) by filing the present appeal, sought to set aside the impugned order dated 19.01.2018 passed by Ld. CIT (Appeals)-32, New Delhi qua the assessment year 2013-14 on the grounds inter alia that :-
“1. The order passed by CIT (A) -32 is bad in law and void ab-initio.
The CIT (A)-I has erred in confirming the disallowance of Rs.12,89,711/- on the appellant by the respondent under the head of finance cost claimed to the tune of Rs.l,87,14,112/-. The detailed list of charges paid to different banks and financial institutions were submitted to the Assessing officer at the time of Assessment proceedings. The learned Assessing officer has disallowed the sum on account of non deduction of TDS on the payment made to Financial Institutions. In respect of disallowance it is submitted that said loans were raised in the name of Assessee company and have been utilized for business purpose only. These companies are well known finance companies engaged in the business of financing business and are in the nature of financial institutions. Further Assessee company has paid interest to well known finance companies as shown in the order passed by the A.O. We are assuming that those said companies filed their returns on regular basis. Once the said companies have shown the interest received in their books of account and paid liabilities of income tax as calculated, then there is no question of disallowance as made by the Assessing Officer.” 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : The assessee is into the business of trading of chemicals specially construction chemical raw material and is also into trading of polyester film on a very small scale and the assessee has also received commission on sales made on consignment basis. AO noticed from the profit & loss account that the assessee has incurred finance cost of RS.1,87,14,112/- towards interest and the assessee was called upon to furnish the detail of payment of interest and deduction of tax. Details furnished by the assessee show that it has made payment of Rs.12,89,711/- to various parties without deduction of tax at source. Declining the contentions raised by the assessee, AO proceeded to conclude that assessee has committed default u/s 194A of the Income-tax Act, 1961 (for short ‘the Act’) and consequently expenditure of Rs.12,89,711/- has been disallowed u/s 40(a)(ia) of the Act.
Assessee carried the matter by way of appeal before the ld. CIT (A) who has confirmed the disallowance by dismissing the appeal. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
Admittedly, the assessee company has made payment towards interest to Non-Banking Financial Corporation (NBFC) without deducting TDS thereon and the loans were raised in the name of the assessee’s company itself which was utilized for business purpose only. It is also not in dispute that the companies are well-known finance companies engaged in the business of financing and as such are financial institutions. It is the case of the assessee that interest was paid to well-known finance companies who are NBFCs except two companies.
It is contended by ld. AR for the assessee that it is understandable that the said companies have filed their returns on regular basis and have shown the interest received in their books of account and paid due liabilities of income-tax and in such circumstances, no disallowance can be made and relied upon the cases of coordinate Benches of the Tribunal in Shri Azmath Ulla vs. ACIT – dated 07.06.2017 and ITO vs. Dr. Jaideep Kumar Sharma – (2014) 52 taxmann.com 420 (Delhi-Trib.) decided by following the decision rendered by Hon’ble Delhi High Court in case of CIT vs. Naresh Kumar – 362 ITR 256 and reached the conclusion that section 40(a)(ia) of the Act shall have retrospective effect and in case the recipient of interest in question have already considered the same for computing their income offered to tax then disallowance u/s 40(a) (ia) is not attracted.
No doubt, the assessee has not filed detail of any such material if the recipient of interest in question accounted for the interest received in their account and paid due liabilities of the income-tax, but taking the contentions raised by assessee on its face value as all the companies except two are well-known NBFC, the issue in question is remanded back to the AO to verify the contentions raised by the assessee and in case, he is satisfied that the concerned NBFCs have included this income in computation of their income offered to tax, then it would be deemed to comply with the provisions contained u/s 40(a)(ia) of the Act. So, in case NBFCs are found to have shown the interest received in their books of account and paid due liabilities of the income-tax for computation of income then no disallowance can be made u/s 40(a)(ia) of the Act. Consequently, appeal filed by the assessee is allowed for statistical purposes. Order pronounced in open court on this 23rd day of October, 2018.