2013 (7) TMI 965 - AT - Income Tax

Summary

Issues involved: Challenge to disallowance of interest u/s. 40(a)(ia) of the IT Act for non-deduction of TDS on interest payments to Tata Capital Ltd. and Tata Motor Finance Ltd. for the assessment year 2009-10.

Summary:

Issue 1: Disallowance of interest u/s. 40(a)(ia)
The assessee appealed against the disallowance of interest amounting to Rs. 18,02,893 u/s. 40(a)(ia) for failure to deduct TDS on interest payments to Tata Capital Ltd. and Tata Motor Finance Ltd. The AO made the addition as the assessee admitted to not deducting TDS due to inadvertent mistake. The assessee contended that disallowance should apply to expenditure payable at year-end, not on amounts already paid without tax deduction, citing a decision of ITAT Special Bench in Merilyn Shipping & Transports vs. ACIT. However, the ld. CIT(A) upheld the addition, noting that the assessee admitted to the non-deduction of tax. The ITAT found no merit in the appeal, emphasizing that once the Special Bench decision was stayed by the High Court, it no longer applied in favor of the assessee. Therefore, the appeal was dismissed, and the addition was confirmed.

Conclusion:
The appeal challenging the disallowance of interest u/s. 40(a)(ia) for non-deduction of TDS on interest payments was dismissed, as the assessee's admission of non-compliance with TDS requirements rendered the Special Bench decision inapplicable following the stay by the High Court.