2014 (9) TMI 1015 - AT - Income Tax

Disallowance of expenditure u/s 40(a)(ia) - non deduction of tds on interest payment - Held that - On perusal of the said orders of the Tribunal in the cases of Rajeev Kumar Agarwal (2014 (6) TMI 79 - ITAT AGRA ) and Shri Antony D. Mundackal (2013 (12) TMI 67 - ITAT COCHIN), we find merit in the arguments raised by the Ld Counsel. Accordingly, we set aside the orders of the Revenue and remand the issues to the file of the AO in all the instant three cases for adjudicating the issues afresh after examining the applicability of the said second proviso to section 40(a)(ia) of the Act and after verifying the records of the assessees. AO shall grant a reasonable opportunity of being heard to the assessees as per the principles of natural justice. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Applicability of section 40(a)(ia) of the Income Tax Act, 1961 to the three appeals.
2. Retrospective application of the provisions of section 40(a)(ia) to the facts of the instant appeals.

Analysis:

I. Gopal Dineshchandra Tulshan (AY 2006-07):
The issues raised included the disallowance of expenditure under section 40(a)(ia) of the Act. The appellant argued that there was no liability to deduct TDS from interest payment and that the recipient had already paid advance tax on the interest receipt. The Counsel for the assessee highlighted the retrospective application of the proviso to section 40(a)(ia) inserted by the Finance Act, 2012, and cited relevant Tribunal decisions. The Tribunal found merit in the arguments and remanded the issue to the AO for fresh adjudication after considering the applicability of the proviso.

II. Smt. Smita Sanjya Jadhao (AY 2007-08):
The appellant contested the addition made by the AO under section 40(a)(ia) of the Act. The issue of interest liability under section 234B was also raised. The Tribunal, after hearing both parties and reviewing relevant orders, set aside the orders of the Revenue and remanded the matter to the AO for reevaluation in light of the second proviso to section 40(a)(ia) and principles of natural justice.

III. Smt. Vandana Deepak Morey (AY 2007-08):
Similar to the previous cases, the appellant challenged the addition made under section 40(a)(ia) of the Act and the interest liability under section 234B. The Tribunal, considering the arguments presented and relevant Tribunal decisions, allowed the appeals for statistical purposes and directed the AO to reexamine the applicability of the second proviso to section 40(a)(ia) after granting a reasonable opportunity to the assessees.

In conclusion, the Tribunal found merit in the arguments regarding the retrospective application of the proviso to section 40(a)(ia) and remanded all three cases to the AO for fresh adjudication. The appeals were allowed for statistical purposes, emphasizing the need for a thorough review of the applicability of the said proviso and adherence to principles of natural justice.