THOMAS JOHN MUTHOOT,THIRUVANANTHAPURAM vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -1 , THIRUVALLA, TRIVANDRUM

The only issue raised by the assessee is that the learned CIT(A) erred in confirming the disallowance made by the AO on account of non-deduction of TDS under the provisions of section 194A r.w.s. 40(a)(ia) of the Income Tax Act, 1961 the Act amounting to Rs.31,77,000/- only.

The Assessing Officer (AO) during the course of assessment proceedings found that the assessee has incurred interest expenses amounting to Rs. 31,77,000/- without deducting TDS under the provisions of section 194A r.w.s. 40(a)(ia) of the Act. Therefore. the AO disallowed the same and

Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.

The learned A.R. before us submitted that interest was paid by the assessee to a firm in which he is a partner, and the firm has already suffered tax on the interest received from the partner. Therefore, the claim of the assessee cannot be denied on account of non-deduction of TDS under the provisions of section 194A r.w.s. 40(a)(ia) of the Act.

On the other hand, the learned CIT-DR submitted that the assessee cannot take the benefit of the second proviso to section 40(a)(ia) of the Act which was made effective from 01.04.2013 prospectively whereas the year in dispute is much prior to such amendment. Therefore, the assessee cannot be absolved from the deduction of TDS in the year under consideration on the ground that the recipient of interest income has accounted such interest as income in its books of account.The learned Sr. DR vehemently supported the orders of the authorities below.

We have heard the rival contentions of both the parties and perused the materials available on record. The Finance Act, 2012 has brought an amendment in the second proviso to section 40(a)(ia) of the Act stating that there cannot be any disallowance of the expenses on account of non- deduction of TDS if the recipient of such amount has offered the same as income in its return of income. Admittedly such amendment was effective from 01.04.2013 whereas the year before us relates to AY 2008-09. The Thomas John Muthoot Hon'ble Kerala High Court in the case of Thomas George Muthoot v. CIT reported in [2015] 63 taxmann.com 99 (Ker.) held as under: - “15. A statutory provision, unless otherwise expressly stated to be retrospective or by intendment shown to be retrospective, is always prospective in operation, Finance Act, 2012 shows that the second proviso to Section 40 (a)(ia) has been introduced with effect from 01.04.2013. Reading of the second proviso does not show that it was meant or intended to be curative or remedial in nature, and even the appellants did not have such a case. Instead, by this proviso, an additional benefit was conferred on the assessees. Such a provision can only beprospective as held by this Court in Prudential Logistics and Transports (supra). Therefore, this contention raised also cannot be accepted.”

In view of the above we hold that the assessee cannot be given the benefit of the amendment as claimed by the assessee. Accordingly, we do not find any infirmity in the order of the learned CIT(A). Hence the ground of appeal of the assessee is hereby dismissed.