ITO, WD-1(1), KOLKATA, KOLKATA vs. SRI SUDHIR JAIN, KOLKATA

order

: October 13, 2017 ORDER

Per P.M. Jagtap, AM

therein, the revenue has challenged the action of the Ld. CIT (A) in deleting the disallowance of Rs. 2,30,70,671/- made by the AO under section 40(a)(ia) for the delay in payment of tax deducted at source from interest.

2. The assessee in the present case is an individual who is engaged in the business of share trading. The return of income for the year under consideration was filed by it on 02.11.2007 declaring a total income of Rs. 33,32,380/-. During the course of assessment proceedings, it was noticed by the AO that the assessee has deducted tax at source from the interest of Rs. 2,30,70,671/- paid to M/s.

2 Assessment Year: 2007-08 Shri Sudhir Jain Indiabulls Finance Company Pvt. Ltd. but the same was not deposited to the credit of the Central Government within the date specified in the Income Tax Act. He, therefore, invoked the provision of section 40(a)(ia) and made a disallowance of Rs. 2,30,70,671/- on account of interest paid by the assessee to M/s. Indiabulls Finance Company Pvt. Ltd. The disallowance made by the AO under section 40(a)(ia) on account of interest was challenged by the assessee in an appeal filed by the Ld. CIT (A) and after considering the submission made by the assessee as well as the material available on record, the Ld. CIT (A) deleted the said disallowance for the following reasons given in paragraph no 4.2 of his impugned order: “The submissions of the appellant and the case laws relied upon have been considered. The issue is regarding disallowance of Rs. 2,30,70,671/- paid as interest on which TDS had not been deposited in Government account by the due date. The issue is covered by the decision of the jurisdictional High Court in this case of Virgin Creation vs CIT (supra) and in view of the same if the TDS has been deposited before the due date of filing of return, no disallowance could be made u/s 40(a)(ia). The High Court while dismissing the department’s appeal, held that:- The learned Tribunal on fact found that the assessee had deducted tax at source from the paid charges between the period April, 1, 2005 and April 28, 2006 and the same were paid by the assessee in July and August 2006, i.e. well before the due date of filing of the return of income for the year under consideration. This factual position was indisputed. Moreover, the Supreme Court, as has been recorded by the learned Tribunal, in the case of Allied Motors Pvt. Ltd. and also in the case of Atom Extrusions Ltd., has already decided that the aforesaid provision has retrospective application. Again, in the case reported in 82 ITR 570, the Supreme Court held that the provision, which has inserted the remedy to make the provision workable, requires to be treated with retrospective operation so that reasonable deduction can be given to the section as well.