2014 (12) TMI 1200 - AT - Income Tax

Disallowance u/s 40(a)(ia) - non deduction of tds on interest expense - Held that - A.R, has not placed any material on record to demonstrate that the India Bulls has filed return of income u/s. 139(1), had offered the amounts received from Assessee as its income and has paid the tax on such income. Further, we find that the decision of the Co-ordinate Bench in the case of Rajiv Kumar Agarwal (2014 (6) TMI 79 - ITAT AGRA ) was not available before A,O. and CIT(A). We therefore feel that the issue where the Assessee has not deducted TDS but payee has paid the taxes needs to be re-examined by the A.O in the light of the aforesaid decision of Agra Tribunal and we therefore set aside the issue to the file of A.O for him to decide the issue in the light of decision of Agra Tribunal and in accordance with law. - Decided in favour of assessee for statistical purpose.

Summary

Issues Involved:
Appeal against order of Ld. CIT(A)-I, Baroda for A.Y. 2010-11. Disallowance of interest paid to NBFC due to non-deduction of TDS under section 40(a)(ia) of the Income Tax Act.

Detailed Analysis:

Issue 1: Disallowance of Interest Paid to NBFC

Facts: The assessee, a construction company, filed its return for A.Y. 2010-11 declaring total income. During scrutiny, it was found that interest of Rs. 41,60,384 paid to India Bull was not subjected to TDS. The AO disallowed this amount under section 40(a)(ia).

Ld. CIT(A) Decision: The CIT(A) upheld the AO's decision, stating that the provisions of section 40(a)(ia) apply to amounts payable during the year, not just those payable on March 31st. Referring to a High Court decision, it was held that the disallowance was justified.

Appellant's Argument: The appellant argued that the amendment to section 40(a)(ia) inserted a second proviso, which should be applied retrospectively. They also cited a Supreme Court decision and requested a remittance to the AO for further verification.

ITAT Decision: The ITAT noted that the appellant failed to demonstrate that India Bulls had filed returns and paid taxes on the income received. Referring to a Co-ordinate Bench decision, the ITAT set aside the issue for the AO to re-examine in light of the Agra Tribunal's decision. The appellant was directed to provide necessary details.

Conclusion: The ITAT allowed the appeal for statistical purposes, remitting the issue to the AO for re-examination in accordance with the law and the cited decision. The appellant was granted an opportunity for a fair hearing in this regard.