DCIT, NEW DELHI vs. M/S. M. SONS GEMS N JEWELLERY PVT. LTD., NEW DELHI

Following ground have been raised in this appeal: “1. Whether on the facts and circumstances of the facts & in law, the Ld. CIT(A) has erred in deleting the disallowance of Rs.1,12,87,989/- u/s 40a (ia) ignoring the facts that transaction of assessee are in nature of interest liable to TDS u/s 194A?

4. That the appellant craves leave to add, alter, amend or forego any ground(s) of the appeal raised above at the time of the hearing.”

In his rival submissions, the ld. Sr. DR although supported the order of the AO but could not controvert the aforesaid contention of the ld. Counsel for the assessee.

We have considered the submissions of both the parties and perused the material available on the record. In the present case, it is noticed that an identical issue having similar facts was a subject matter of the assessee’s appeal in for the assessment year 2009-10 wherein vide order dated 17.06.2015, the relevant findings have been given in para 9 which read as under: “9. We have heard the rival submissions and perused the material on record. In the instant case, the Assessing Officer, at page 13 of the assessment order, had listed out the distinction between factoring and bill/invoicing discount. It was further held by the Assessing Officer that as per the terms of agreement entered between the assessee and GTF, the “discounting charges” mentioned therein is actually interest component on the loan. However, we notice that the Hon’ble Calcutta High Court in the case of CIT vs. M/s. MKJ Enterprises Limited (GA No.1927 of 2014, copy enclosed) was specifically considering a case where factoring charges tantamount to interest and whether the tax is to be deducted at source on the same. The Hon’ble High Court held that factoring charges were not interest and as such, provisions of TDS are not applicable. The Hon’ble High Court was considering the following question of law:- “Whether on the facts and in the circumstances of the case the Learned Tribunal was justified in law to hold inter alia that the factoring charges of Rs.56,33,112/- was not interest and as such provision of TDS under Section 194A of the said Act was not applicable, hence disallowance under section 40(a)(ia) of the said act was not warranted, ignoring the fact that the assesses itself shown this expenditure under the head interest in its books of account and as such disallowance under Section 40(a)(ia) was rightly made on account of non deduction of tax under section 194A.” The Hon’ble Calcutta High Court, on considering the above question of law, held categorically that factoring charges on sale cannot be termed as interest. In view of the Hon’ble Calcutta High Court judgment, we hold that the factoring charges will not come within the purview of section 2(28A) of the Income-tax Act, 1961 and as such, the provisions of TDS are not applicable on facts and circumstances of the case.”

So, respectfully following the aforesaid referred to order dated 17.06.2015 in assessee’s own case, the issue under consideration is decided in assessee’s favour and against the department. In that view of the matter, we do not see any merit in this appeal of the department.

In the result, the appeal of the department is dismissed. (Order Pronounced in the Court on 17/10/2018)