RAJESHWAR GARG,NEW DELHI vs. ITO, WARD - 40(1), NEW DELHI

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ITA 1219/DEL/2018Status: DisposedITAT Delhi25 July 2018AY 2014-154 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that the lower authorities did not consider the second proviso to Section 40(a)(ia) of the Income-tax Act. Therefore, the matter was set aside and remitted back to the Assessing Officer for re-examination.

What were the facts?

The assessee debited interest on unsecured loans to its Profit & Loss Account. The Assessing Officer disallowed a portion of this interest payment for failure to deduct tax at source, as the assessee could not prove the payee's income was below the taxable limit.

What were the issues?

Whether disallowance under Section 40(a)(ia) is permissible when the assessee is not treated as an assessee in default under Section 201(1), considering the second proviso to Section 40(a)(ia).

Which sections of the Income-tax Act were involved?

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

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCHES : SMC : NEW DELHI

Before: SHRI R.S. SYAL

For Appellant: Shri S.R. Gupta, CA
For Respondent: Shri Atiq Ahmed, Sr. DR
Hearing: 24.07.2018Pronounced: 25.07.2018

Date of Hearing : 24.07.2018 Date of Pronouncement : 25.07.2018 ORDER This appeal filed by the assessee arises out of the order passed by the CIT(A) on 15.01.2018 in relation to the assessment year 2014-15.

2.

The only issue raised in this appeal is against the confirmation of disallowance u/s 40(a)(ia) of the Income-tax Act, 1961.

3.

The assessee is engaged in the business of trading of yarn and cloth and is also acting as a commission agent. Interest of Rs.3.24 crore on unsecured loans was debited to the Profit & Loss Account. On being called upon to furnish the details of tax deduction at source from such interest payments, the assessee filed relevant documents. The Assessing Officer got satisfied with the explanation of the assessee in respect of the interest payments except of Rs.2,52,000/- paid to M/s Dara Singh, HUF. He observed that the assessee failed to deduct tax at source as the receipt of Form No.15H can immune the assessee from non-deduction of tax at source only if the income of the payee is below the taxable limit. As the assessee paid interest to M/s Dara Singh, HUF amounting to Rs.2,52,000/-, the Assessing Officer held that it was liable to withhold tax at source from such payment of interest. Invoking the provisions of section 40(a)(ia) of the Act, the Assessing Officer made disallowance for the same, which came to be countenanced in the first appeal.

4.

I have heard both the sides and perused the relevant material on record. The ld. AR contended that the authorities below have failed to take note of second proviso to section 40(a)(ia) which has been inserted by the 2

Finance Act, 2012 w.e.f. 01.04.2013. It was contended that the assessee has not been treated as assessee in default in terms of section 201(1) and, hence, no disallowance could be made u/s 40(a)(ia) in respect of the payment of interest made to M/s Dara Singh, HUF. I find that there is no discussion in the impugned order about the applicability or otherwise of the second proviso to section 40(a)(ia). In the given circumstances, I set aside the impugned order and remit the matter to the file of the AO to re-examine the issue in the light of the second proviso to section 40(a)(ia), after giving an opportunity of being heard to the assessee.

5.

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

The decision was pronounced in the open court on 25th July, 2018.

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