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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC’ NEW DELHI
Before: SH. BHAVNESH SAINI
PER BHAVNESH SAINI, JUDICIAL MEMBER
This appeal by the assessee has been directed against the order of Ld.CIT(A)-9, New Delhi dated 22.03.2016 for A.Y. 2012-13 on the following grounds:-
1. “CIT(A) erred in defying the Supreme Court in case of vector Shipping which is identical to the facts of the appellants case.
2. CIT(A) erred in not distinguishing between the words “paid” and “payable.” 3. CIT(A) erred in upholding the AO’s order of disallowing Rs.15.85 lakhs paid towards interest on loan paid by way of Equated Monthly installments (EMIs) through Post Dated Cheques. 4. The order of the CIT(A) is against the principles of equity and justice.”
I have heard Ld. Representatives of both the parties and perused the findings of the authorities below.
Page 2 of 6 3. The AO noted that the assessee has taken unsecured loan of Rs.1,13,02,477/- from Religare Finvest Ltd. and paid an amount of Rs.15,85,380/- as interest thereon. The assessee asked by the AO to furnish the details of TDS deducted on interest payment and show- caused why expenditure be not disallowed u/s 40(a)(ia) of the Act. The assessee submitted that M.D. of the assessee had by hypothecating his property at A-I, Rajouri Garden to M/s Religare Finvest Ltd. obtained loan and the same have been ploughed into the company for the regular business operations. Further, TDS was not required to be deducted by M.D. being as individual. The entire funds have been used by the assessee company for the business. The AO called for information u/s 133(6) of the Act from M/s Religare Finvest Ltd. and noted that loan was granted to the assessee company and repayment of the loan amount and interest was paid through the account of the assessee company. The entire funds have been used by the assessee for the business. The asset pledged is owned by the assessee. The reply of the assessee was not found satisfactory and the AO disallowed the interest paid of Rs.15,85,380/- to Religare Finvest Ltd. u/s 40(a)(ia) of the Act and made the addition.
The assessee in his submissions before the Ld.CIT(A) submitted that disallowance under the above provisions will only be made against sum
Page 3 of 6 payable at the end of the F.Y. Entire interest was paid by 31st March, therefore, no amount was payable. The assessee relied upon the decision of the Allahabad High Court in the case of Victor Shipping Services Pvt.Ltd. vs CIT 357 ITR DT 06.07.2014. The Ld.CIT(A), however, dismiss the appeal of the assessee. His findings in paras 2.2 to 3 are reproduced as under:-
2.2. “I have considered the submission of the appellant and order of the AO and I find that the issue involved was that the assessee has made the payment of interest of amounting to Rs.15,85,380/- as interest on unsecured loan of amounting to Rs.1,13,02,477/- obtain from Religare Finvest Ltd.but no IDS was deducted on interest payment. The appellant has submitted before the AO that TDS was not required to be deducted by MD being an individual. The entire fund has been used by the assessee company for business. The AO concluded that the loan has been given to the assessee company and not to the MD of the assessee. So the AO disallowed this amount u/s 40(a)(ia) for non deduction of TDS.
2.2.1. The appellant has submitted that the AO had made disallowance for non deduction of Tax u/s 40(a)(ia) of the Act. From the provision of section 40(a)(ia) it is clear that any disallowance against payment of interest will only be made against sum payable at the year end of financial year. In their case the entire interest was paid by 31st March and no sum was shown as payable. In this regard the appellant has relied the decision of Hon'ble Allahabad High court in the case of Victoria Shipping services Pvt. Ltd. v. CIT reported in 357 ITR dated 06.07.2014 where the Hon'ble High Court has held that disallowance is only if any sum remains payable at the end of accounting year and not if sum has been paid. Hon'ble Supreme Court had dismissed SLP of the department.
2.2.2. After considering the above fact I find that the Hon'ble Supreme Court has decided the issue inlimany, without giving any reasons, and therefore, the dismissal did not confirm the view of the Hon'ble Allahabad High Court. In this regard the Hon'ble Calcutta High Court has held in the case of Ruby Traders & exporters Limited reported in Page 4 of 6 263 ITR 300. On this issue the Hon'ble Calcutta High court has held that having regard to the order dismissing the SLP, we find that it was purely on a question of fact the Supreme Court did not interfere. That such a decision has no binding effect under Article 141 of the constitution would be apparent from the decisions in Municipal Corpn. Of Delhi v. Gurnam Kaur AIR 1989 SC 38; Gangadharan V. Janardan Mallar Air 1996 Sc 2124; Director of Settlements V. M.R. Apparao (2002) 4 SCC 638 at p. 650, relied upon by Mr. Deb. In these decisions, it was held that the decision by the Apex Court dismissing the SLP without entering into the merits of the case would not be binding under Article 141. If the SLP is dismissed by non-speaking order, it does not lay down any law. Article 141 is not applicable on a statement of fact and matter other than law.
2.2.3. As facts discussed above the appellant has relied the decision of Hon'ble Allahabad High Court which has dismissed inlimany by the Hon'ble Supreme Court which does not lay down the law. Further the same issue has been decided by the Hon'ble High Court of Gujarat and Hon'ble High Court of Calcutta in the case of CIT vs. Slkandarkhan N Tunvar and Crescent exports Syndicate where it has been decided that Section 40(a)(ia) would cover not only amounts which are payable as on 31st March of a particular year but also which are payable at any time during relevant year. The Central Board of Direct Taxes has also clarified the issue in circular no. 10/DB/2013 of departmental view. The appellant has relied the decision of Hon'ble Allahabad High Court which is in its favour but'two High Court decisions are in favour of revenue on the issue. So, it is very clear the appellant has violated the provision of section 40(a)(ia) by not deducting the tax on interest payment. In the above circumstances and in view of the decisions of Hon'ble Gujarat High Court and in view of the decision of Hon'ble calcutta High Court, the addition made by the AO is hereby confirm. Hence the grounds of appeal are dismissed.
In the result the appeal is dismissed.”
I have heard Ld. representatives of both the parties. The appeal is time barred by 6 days. The assessee explained in the application for condonation of delay that the reason for delay was that the Ld. counsel
Page 5 of 6 for the assessee was away to Chennai in connection with certain family matters, therefore, there was a nominal delay which was unintentional, the same may be condoned. After considering rival submissions, I am of the view that the assessee has been able to explain the delay in filing the appeal which was beyond the control of the assessee. The nominal delay in filing the appeal is, therefore, condoned.
After considering rival submissions, I am of the view that no inference is called for in the matter. The Ld. counsel for the assessee submitted that no amount was payable at the end of the year and that provisions of section 40(a)(ia) are not applicable to the facts of this case.
However, Ld. counsel for the assessee was not able to satisfy as to how provisions of section 40(a)(ia) are not applicable on this case. The authorities below have specifically brought the material on record that loan was granted to the assessee company and that repayment of loan amount and interest was paid through the account of the assessee company. The asset pledged was owned by the assessee. Since no TDS was deducted on interest payment, authorities below were justified in disallowing interest u/s 40(a)(ia). The issue is covered against the assessee by judgement of Hon’ble Gujarat High Court in the case of CIT vs Sikander Khan N Tunvar 357 ITR 312 in which it was held that “provisions u/s 40(a)(ia) would cover amount payable at any time during
Page 6 of 6 the accounting year”. The issue is also decided against the assessee by judgment of Hon’ble P & H High Court in the case of P.M.S.Diesels reported in 374 ITR 562 in which on the same principle, the appeal of the assessee has been dismissed. No infirmity has been pointed out in the order of the Ld.CIT(A), therefore, the appeal of the assessee has no merit, the same is accordingly dismissed.
In the result, the appeal of the assessee is dismissed.
The order is pronounced in the open court.