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Income Tax Appellate Tribunal, ‘B’ SMC BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN
आदेश /O R D E R
Both the appeals of the assessee are directed against the respective orders of the Commissioner of Income Tax (Appeals) -5, Chennai, dated 07.03.2018 and pertain to assessment years 2011-12 and 2012-13.
The only issue arises for consideration is disallowance of interest paid to Shriram City Union Finance Limited for non-deduction of tax.
No one appeared for the assessee even though notice of hearing was served on the assessee by RPAD. The Registry has placed on record the postal acknowledgement as proof of service of notice to the assessee. Therefore, I heard the Ld. Departmental Representative and proceeded to dispose of the appeal on merit.
Shri B. Sagadevan, the Ld. Departmental Representative, submitted that the assessee paid interest to Shriram City Union Finance Ltd. without deducting tax at source. Therefore, according to the Ld. D.R., the Assessing Officer disallowed the claim of the assessee under Section 40(a)(ia) of the Income-tax Act, 1961 (in short 'the Act'). The CIT(Appeals) by placing reliance on the judgment of Kerala High Court in Thomas George Muthoot v. CIT (2015) 63 taxmann.com 99, confirmed the disallowance made by the Assessing Officer.
I have considered the submissions made by the Ld. Departmental Representative and perused the relevant material available on record.
Admittedly, the assessee paid interest to Shriram City Union Finance Ltd. without deducting tax. The assessee appears to have claimed before the lower authorities that the recipient, namely, Shriram City Union Finance Ltd. paid the taxes. In view of the second proviso to Section 40(a)(ia) of the Act, if the recipient paid the taxes, there cannot be any disallowance.
This provision was held to be prospective by the Kerala High Court.
However, the Delhi High Court in CIT v. Ansal Land Mark Township Pvt. Ltd. (377 ITR 635) found that it is retrospective in operation. Therefore, there are two conflicting views on the subject, one by Kerala High Court and another one by Delhi High Court. This Tribunal is of the considered opinion that when there was conflicting opinion between two different courts, in the absence of judgment of jurisdictional High Court, the judgment which favours the assessee has to be followed. Therefore, this Tribunal is of the considered opinion that the judgment of Delhi High Court which holds that the second proviso to Section 40(a)(ia) of the Act is retrospective in operation needs to be followed.
Moreover, it needs to be verified whether the recipient, namely, Shriram City Union Finance Ltd. has already paid taxes in respect of interest paid by the assessee. Accordingly, orders of both the authorities below are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the material available on record and find out whether the recipient, namely, Shriram City Union Finance Ltd. has paid the taxes in respect of interest payment received from the assessee and thereafter decide the issue afresh after following the judgment of Delhi High Court in Ansal Land Mark Township Pvt. Ltd. (supra).
In the result, both the appeals filed by the assessee are allowed for statistical purposes.
Order pronounced in the court on 11th October, 2018 at Chennai.