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Income Tax Appellate Tribunal, AGRA BENCH, AGRA
Before: SMT. ANNAPURNA GUPTA & SHRI SUNIL KUMAR SINGH
ORDER Per Annapurna Gupta, Accountant Member: The present appeal has been filed by the assessee against the order passed by the learned Commissioner of Income-tax (Appeals) [in short “CIT(A)”] u/s. 250(6) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”).
Grounds raised by the assessee are as under :
On the facts and circumstances of the Case The learned C.I.T.(A) erred in confirming disallowance of Rs.2,74,978 under section 40(a)(ia) is illegal unjustified and is bad in law.
The learned C.I.T.(A) erred in not restricting the disallowance to only 30% of Rs.2,74,978 as amended in section 40(a)(ia) is illegal, unjustified and bad in law.”
The solitary issue in the present appeal relates to addition made to the income of the assessee of Rs.2,74,978/- u/s. 40(a)(ia) of the Act for non-deduction of tax at source. A perusal of the order of the Assessing Officer reveals the assessee to be carrying on the business of civil construction. The Assessing Officer noted the assessee to have taken loan from Sundaram Finance Ltd. for purchase of plants and machinery and paid interest of Rs.2,74,978/- on the same debiting it to its profit and loss account under the head ‘interest on vehicle loan’. In the assessment framed u/s. 143(3) of the Act, the said claim of the assessee was allowed, but thereafter re-assessment proceedings were initiated noting that no TDS had been made on the payment of interest.
During the assessment proceedings, the assessee pointed out that as per prevailing provisions of law in this regard, if the payee is shown to have paid taxes on the income and the certificate in this regard in form 26A from an accountant is furnished by the assessee, the assessee cannot be treated as an assessee in default for not deducting tax at source and no disallowance is warranted. The assessee contended that it had paid interest to Sundaram Finance Ltd. without deducting tax, but furnished certificate from its Chartered Accountant in Form 26-A to the effect that taxes on said interest income had been paid by the payee, i.e., 2 | P a g e Sundaram Finance Ltd. as required u/s. 201(1) of the Act. Copy of Form 26-A was also furnished. The Assessing officer noted that there was difference in the amount of interest paid to Sundaram Finance Ltd.
debited in the profit and loss account amounting to Rs.2,74,978/- while that reflected in Form No. 26-A certified as tax paid there on by the payee by the Accountant amounting to Rs.2,47,843/-. In the absence of any explanation of the difference, the Assessing Officer held that the veracity of Form 26-A furnished by the assessee was doubtful. He accordingly rejected the certificate furnished by the Accountant and went on to treat the entire amount of Rs.2,47,843/- as disallowable for non- deduction of tax at source in terms of section 40(a)(ia) of the Act.
Learned CIT(A) confirmed the order of the Assessing Officer.
None came present before us on behalf of the assessee nor any adjournment application was filed.The appeal was therefore proceeded to be adjudicated on the basis of material and facts on record before us.
We have noted that before learned CIT(A) the assessee had raised a plea that disallowance of the entire amount of interest paid was grossly unjustified since the accountant has certified that out of the total amount of Rs.2.74 lacs, tax on the amount of Rs. 2.47 lacs has been paid by the payee. In view of the same, disallowance to the tune of Rs.2.47 lacs was 3 | P a g e quite unjustified and un-substantiated and the disallowance ought to have been adjusted only to the difference.
We find merit in this contention of the assessee and we find the act of the learned CIT(A) disallowing the entire amount of interest paid to be grossly unjustified. It is nobodies’ case that the certificate furnished by the Accountant in Form 26-A was false or incorrect. The only anomaly was in respect to the figure of the amount of interest certified by the Accountant as that which was reflected by the payee as its income and taxes paid there on. In the light of the same, the Assessing Officer was grossly unjustified in not accepting the certification of the taxes having been paid on interest expenses to the tune of Rs.2.47 lacs as certified by the Accountant. Learned counsel for the assessee is justified in seeking allowance of the claim of expenses to the tune of Rs.2.47 lacscertified as taxes paid thereon by the payee , as required by law. We accordingly direct deletion of disallowance of expenses u/s. 40(a)(ia) of the Act to the tune of Rs.2.47 lacs.
Appeal of the assessee is allowed in the above terms.
Order pronounced in the open court on 02.04.2025.
Sd/- Sd/- (SUNIL KUMAR SINGH) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: *aks/- 4 | P a g e