FUTURA POLYSTERS LTD,MUMBAI vs. ITO TDS 1(5), MUMBAI

This appeal by the assessee is directed against the order of the CIT(A)- 5, Mumbai dated 30.10.2014 for A.Y. 2007-08.

1. The Commissioner of Income Tax (Appeals) erred in confirming the action of the Assessing Officer of holding that the Bill Discounting charges were liable to TDS under section 194A of the Act.

2. The Commissioner of Income Tax (Appeals) erred in rejecting the Appellant’s contention that it cannot be called upon to pay the TDS liability, if the recipient of the Bill Discounting charges have already paid Tax on the Bill Discounting charges.”

4. The case was fixed for hearing on number of dates, but on each of these dates when the case was called, none was present for the assessee. Even issue of notices by RPAD did not elicit any response from the assessee. On 26.10.2016 also when this case was called for hearing, none was present for the assessee but the learned D.R. for Revenue was present and ready to present Revenue’s side of the case. In the circumstances as enumerated above we are of the opinion that the assessee is not interested in pursuing this appeal seriously and therefore proceed to dispose off this appeal with the assistance of the learned D.R. for Revenue and the material on record.

5. We have heard the learned D.R. for Revenue and perused and carefully considered the material on record. The assessee in the grounds raised contends that the learned CIT(A) erred in upholding the AO’s view that bill discounting charges were liable for TDS under section 194A of the Act. It was also submitted that the assessee was not liable if the recipient of bill discounting charges had paid taxes thereon. According to the learned D.R. the assessee’s appeal ought to be dismissed as it has failed to controvert the findings of the AO that the assessee was liable to deduct tax under section 194A of the Act on bill discounting charges paid to financiers for discounting the sale consideration on sale bills. It would be relevant here to extract the learned CIT(A)’s observations and finding in the matter: -

M/s. Futura Polyesters Ltd. “2. The various grounds raised by assessee has challenged the AO’s decision in holding that the bill discounting charges were liable to TDS u/s 194A and thereby the demand raised u/s 201(1) on account of short deduction of TDS, tax deducted but not paid and interest u/s 201(1A) thereon. 2.1 The facts of the case are that on the strength of sale bills [where sale consideration was to be received after a certain period], the assessee raised fund by way of discounting those bills with financers. In the process, the financer deducts charges which is general known as ‘discounting charges’ but that would have bearing onto the period after which those sale bills will be due for payment [by the clients]. The AO has treated such discounting charges in the nature of interest liable for TDS, whereas, the assessee has taken the plea that the discounting charges were not chargeable to TDS. The issue is considered. The point to be noted is that in this practice of discounting of bills, the assessee still remains responsible for payment to the financers, in case the client does not honour those sales bills on the due date. Thus, for all practical purposes, the fund raised through discounting acquires the nature of loan onto which discounting charges in the nature of interest has been paid in advance. In view thereof, the AO’s decision for holding that bill discounting charges are liable to TDS is correct and is, therefore, upheld.”

6. On an appreciation of the orders of the authorities below and the material on record, we find that the assessee, except for raising grounds, was not able to bring on record any material evidence to controvert the findings of the authorities below that it was liable to deduct tax at source under section 194A of the Act on payments made by it as bill discounting charges, which are in the nature of interest, for getting sale bills discounted. We, therefore, uphold the orders of the authorities below in consequently holding the assessee as an assessee in default under section 201(1) of the Act and charge interest thereon under section 201(1A) of the Act. Consequently, the grounds raised by the assessee at S.No. 1 & 2 are dismissed.