SHRI LABHUBHAI RAVJIBHAI JASANI,SURAT vs. INCOME TAX OFFICER, WARD-1(3)(7) , SURAT

Assessee represented by Shri Ashwin K. Parekh, C.A. Department represented by Shri Minal Kamble, Sr. Dr Date of Institution of Appeal 18/01/2023 Date of hearing 18/07/2023 Date of pronouncement 18/07/2023 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of National Faceless Appeal Centre, Delhi (NFAC)/learned Commissioner of Income Tax (Appeals) (in short, the ld. CIT(A)) dated 23/12/2022 for the Assessment Year (AY) 2016-17. The assessee has raised following grounds of appeal: “1. The learned Commissioner of Income Tax (Appeals) has grievously erred in law and on facts in confirming the addition of Rs. 35,34,657/- by disallowing interest u/s 40(a)(ia) of the Act without appreciating the evidence of For, 26A and other relevant explanation submitted by appellant. The addition of Rs. 35,34,657/- should therefore be deleted.

2. The appellant reserves the right to add, alter, modify, amend or withdraw any of the grounds of appeal before hearing.”

2. Rival submissions of both the parties have been heard and record perused. The learned Authorised Representative (ld. AR) of the assessee Shri Labhubhai Ravjibhai Jasani Vs ITO submits that a very short point is involved in the present appeal which relates to disallowance of interest expenditure of Rs. 35,34,657/- under Section 40(a)(ia) of the Income Tax Act, 1961 (in short, the Act). The Assessing Officer made disallowance on account of non-deduction of TDS on interest payment paid to HDB Financial Services Ltd. which is a Non-Banking Financial Company (NBFC). The assessee paid only interest of Rs. 34,86,211/- without TDS. The assessee now filed Form 26A under Rule 31ACB issued by the Chartered Accountant (Auditor) of said NBFC. The ld. AR of the assessee submits that as per First Proviso to Section 201(1) of the Act, no disallowance is warranted if the recipient of the said interest income has included such interest income in their total income and paid taxes thereon. The ld. AR of the assessee submits that only amount of interest is Rs. 34,86,211/- was paid. The correct copy of Form 26A is also filed on record. The ld. AR of the assessee submits that the issue raised in the present appeal is covered by the decision of Division Bench of Surat Tribunal in Prakashbhai Haribhai Ahir Vs ITO in dated 23/08/2022 wherein on similar set of facts, the Division Bench of this Tribunal has directed the Assessing Officer to verify the fact about inclusion of interest by recipient (NBFC) in their total income and to grant relief to the assessee. Thus, the grounds of appeal in squarely covered in favour of assessee. The ld. AR submits that appropriate direction may be given to the Assessing Officer to verify the fact and to grant appropriate relief to the assessee. 2 Shri Labhubhai Ravjibhai Jasani Vs ITO 3. On the other hand, the learned Senior Departmental Representative (ld. Sr. DR) for the revenue on hearing of ld. AR of the assessee submits that the matter may be restored to the file of Assessing Officer, with the direction to the assessee to file appropriate evidence including the necessary certificate of Chartered Accountant and details as per Form 26A, so that the Assessing Officer may verify such fact before passing the order in accordance with law.

raised by assessee is allowed for statistical purposes.

5. In the result, this appeal of assessee is allowed for statistical purposes. Order announced in open court on 18th July, 2023 at the time of hearing.