NAWANY CORP (I) LTD,MUMBAI vs. ITO 9(2)(3), MUMBAI
In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal noted that the recipients of the interest had included it in their income and paid taxes. Therefore, the disallowance under Section 40(a)(ia) was not sustainable, especially considering the retrospective effect of the second proviso.
What were the facts?
The assessee paid interest without deducting TDS to certain companies. The Assessing Officer disallowed this interest expense under Section 40(a)(ia) of the Income Tax Act.
What were the issues?
Whether disallowance under Section 40(a)(ia) is permissible when the recipient has already offered the interest income to tax and paid taxes thereon, considering the retrospective nature of the second proviso.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI ASHWANI TANEJA
This appeal by assessee is arising out of the order of CIT(A)-20 Mumbai in Appeal No.CIT(A)-20/9(2)(3)/IT-409/2011-12 dated 16/10/2012. Assessment was framed by ITO, Ward 9(2)(3), Mumbai under section 143(3) of the Income Tax Act, 1961 ( in short ‘the Act’) for the assessment year 2009-10 vide his order dated 16/10/2012.
The only issue in this appeal of assessee is against the order of CIT(A) confirming the disallowance of interest amounting to Rs.16,01,356/- for non-deduction of TDS under section 194A of the Act thereby invoking provisions of section 40(a)(ia) of the Act.
At the outset, Ld. Counsel for the assessee stated that in this case he don’t want to argue the issue of “paid or payable” as mentioned in the provisions of section 40(a)(ia) of the Act but, according to Ld. counsel the recipients of interest have already included the receipt of this interest as income in their respective return of income. According to him, the issue is clearly covered by second proviso to section 40(a) (ia) of the Act as inserted by Finance Act, 2012, w.e.f. 01/04/2013 and which is held to be retrospective by Hon’ble Delhi High Court in the case of CIT vs. Ansal Land Mark Township Pvt. Ltd. In & 161 of 2015 dated 28/08/2015. According to Ld. Counsel for the assessee, once the second proviso to section 40(a)(ia) is retrospective and in the present case, the recipients have included receipt of interest in their respective return of income, the disallowance under section 40(a)(ia) cannot be made on the non-deduction of TDS on the above interest payments.
We have heard the rival submissions and gone through the facts and circumstances of the case. Briefly stated fats are that the assessee has paid interest without deduction of TDS to Tata Motor Finance Ltd., Tata Capital Ltd. and G.E. Commercial Finance Ltd. This fact is narrated in the assessment order, wherein the total amount of interest paid by the assessee is depicted. As argued by Ld. Counsel for the assessee, these parties are assessed to income-tax and assessee’s Counsel undertakes to file the assessment details of these parties to the Assessing Officer, so that Assessing Officer can verify whether this interest is included by these parties in their respective return of income in the relevant assessment years and paid taxes accordingly. As the Ld. Counsel for the assessee has not argued the issue of ‘paid and payable’ in respect to disallowance u/s. 40(a)(ia) of the Act, we dismiss the same as not argued. In term of above, this issue is set aside to the file of Assessing Officer and allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 18/05/ 2016.
More judgments on Section 40(a)(ia)
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- M/S. Shree Laminators Ltd., Kolkata vs DCIT, Circle 4(4), KolkataITA 1534/KOL/2026[2011-2012]Status: Disposed15 Oct 2026AY 2011-2012
- J.D. Marketing, Kolkata vs ITO, Ward 37(1), KolkataITA 1493/KOL/2026[2015-2016]Status: Disposed15 Oct 2026AY 2015-2016
- J.D. Marketing, Kolkata vs ITO, Ward 37(1), KolkataITA 1492/KOL/2026[2013-2014]Status: Disposed15 Oct 2026AY 2013-2014
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