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

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ITA 896/COCH/2023Status: DisposedITAT Cochin21 October 2024AY 2008-09Bench: Shri Waseem Ahmed (Accountant Member), Shri Soundararajan K. (Judicial Member)3 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the amendment to Section 40(a)(ia) allowing deduction if the recipient offered income was prospective from 01.04.2013. Since the assessment year was 2008-09, the assessee could not avail this benefit.

What were the facts?

The assessee paid interest expenses of Rs. 31,77,000/- without deducting TDS. The Assessing Officer disallowed this expense, which was confirmed by the CIT(A). The assessee argued that the recipient firm had already paid tax on the interest.

What were the issues?

Whether the benefit of the second proviso to Section 40(a)(ia) of the Income Tax Act, as amended by the Finance Act, 2012, can be applied retrospectively to an assessment year prior to its effective date.

Which sections of the Income-tax Act were involved?

Section 194A,Section 40(a)(ia)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN

Before: Shri Waseem Ahmed & Shri Soundararajan K.

For Appellant: Shri Srinivasan, CA
For Respondent: Shri Sanjit Kumar Das
Hearing: 01.10.2024Pronounced: 21.10.2024

Appellant by: Shri Srinivasan, CA Respondent by: Shri Sanjit Kumar Das Date of Hearing: 01.10.2024 Date of Pronouncement: 21.10.2024 O R D E R Per Bench This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 20.11.2023 for Assessment Year (AY) 2008-09.

2.

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.

3.

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

4.

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

5.

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.

6.

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.

7.

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.”

8.

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.

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