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Before: Shri Chandra Poojari & Shri Duvvuru RL Reddy
आदेश /O R D E R
PER DUVVURU RL REDDY, JUDICIAL MEMBER:
This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 15, Chennai dated 29.09.2016 relevant to the assessment year 2012-13. In the grounds of appeal, the assessee has raised following grounds: “1) The order of the learned Commissioner of Income Tax (Appeals) is erroneous in as much as it does not deal with all grounds reached in the appeal.
2) The learned CIT (Appeals) appeal erred in not upholding the appellant's contention that amount advanced for capitalizing the Company would not be covered by the provision of deemed dividend covered by Sec (2) (22) of the Income Tax Act 1961 as has been held in the following decision. (DCIT Vs. Vikas Oberoi ITA No.4364/M.2011-2013-ITRV-ITAT- MUM-051) 3) The learned CIT (Appeals) also erred in not upholding the contention of the appellant that rental deposits of Rs.22,94,160/- paid to the owner of the property pursuant to lease agreement dated 15th December 2008, being a commercial transaction would not be hit by the provisions of Section 2(22) (e). 4) The learned CIT (Appeals) erred in rejecting the contention of the appellant that reimbursement of EMI on a back to back basis in regard to borrowing to bank would not be covered by the requirement to deduct tax and consequent disallowance of Rs. 5,24,719/- under section 40 (a)(ia) is not warranted as there is no income implicit in the payment. For these and other reasons to be adduced at the time of hearing the appellant prays for favourable orders on the appeal. The Appellant craves leave to add/amend the aforesaid Grounds of Appeal
.”
2. At the time of hearing, by making endorsement in the grounds of appeal “not pressed” against ground (2) & (3), the ld. Counsel for the assessee has submitted that the said grounds are not pressed and accordingly, the both the grounds raised in the grounds of appeal are dismissed as not pressed.
3. The only effective ground raised for adjudication is with regard to confirmation of disallowance made under section 40(a)(ia) of the Income Tax Act, 1961 [“Act” in short]. Facts leading to the issue are that the assessee has taken unsecured loan of ₹.65,00,000/- from M/s. S.I. Data Consultants and paid total interest of ₹.5,24,719/-. Since the assessee has not deducted TDS on the above interest payment, the Assessing Officer disallowed the interest payment and brought to tax.
4. On appeal, the ld. CIT(A) confirmed the disallowance, against which, the assessee is in appeal before the Tribunal.
We have heard both sides, perused the materials available on record and gone through the orders of authorities below. By filing written submission, the ld. Counsel for the assessee has submitted that out of total interest debited in the accounts of ₹.27,56,592/-, ₹.4,86,747 pertains to the payment to SI Data Consultants, which was wrongly mentioned as ₹.5,24,710/-. It was the submission of the assessee that the interest is embedded in the EMI that the assessee had to pay matching the payout of the recipient, who in turn had to pay equal amount to CITI Bank. It was further submitted that the above payment represented interest out of back- to-back EMI paid on CITI Bank loan taken by SI Data Consultants and there was no income to SI Data Consultants which only facilitated acquisition of property by assessee of Mphape (New Mumbai) for the purpose of its business. It was the further submission of the assessee that the payments were in the form of EMI which, the recipient in turn had to pay CITI Bank and there was no income embedded in the payments and relied on various case law.
We find that the assessment order is very cryptic and it is only four line order. In this case, the assessee claims to have paid EMI to SI Data Consultants, and in turn the recipient had to pay CITI Bank. Admittedly, the assessee has not taken any loan from CITI Bank. To our best of knowledge, the EMI means “An Equated Monthly Installment (EMI), which is a fixed payment made by a borrower to a lender at a specified date each calendar month. Equated monthly installments are used to pay off both interest and principal each month so that over a specified number of years, the loan is paid off in full. Against the notice under section 142(1) of the Act, by filing the break-up of the payments, we have noticed that from the month of October, 2011 to March, 2012, the assessee has paid various amounts to the extent of ₹.4,86,747/-. It the payment made by the assessee is an EMI then the amount should not vary from month to month. It was the claim of the assessee that the loan was procured by SI Data Consultants from Citi Bank and EMIs were repaid on a back to back basis by the assessee. Tax is deductible at source under Chapter XVII-B of the Act, only in respect of payment of income or other sum made by the person responsible for such payment, viz., tax deductor to other person being the tax deductee. Since there is variation on the sums paid by the assessee between October, 2011 to March, 2012, stated to be an EMI, the Assessing Officer is directed to verify any income in the hands of the payee [SI Data Consultants], which is liable for TDS, and pass a detailed speaking order on this issue in accordance with law after allowing sufficient opportunity of being heard to the assessee. Moreover, as claimed to have wrongly stated the total sum of interest/EMI of ₹. 4,86,747/- as ₹.5,24,710/- mentioned in the assessment order as well as appellate order, the Assessing Officer may rectify the same after verification. Hence, the ground raised by the assessee is allowed for statistical purposes.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced on the 12th July, 2017 at Chennai.