2010 (2) TMI 667 - AT - Income Tax

Disallowance of interest u/s 40(a)(ia) - During the course of proceedings for the assessment year in dispute, the AO, while perusing the books of accounts, came across that the assessee had paid Rs. 14.55 lakhs to various depositors for which no TDS was effected under the provisions of S.194A of the Act - The assessee s prime contention is that in the cases of certain payees, applications for No TDS/lower TDS were made by some of the payees in Form No. 13 to their respective jurisdictional AOs with copies to the assessee - the assessee had over-stepped in his perception which he was not obliged to do so under any provisions of I.T.Act Interest - Charging of interest u/s 234B of the Act is mandatory and consequential in nature and, thus, this ground is dismissed as not maintainable - In the result, the assessee s appeal is dismissed

Summary

Issues:
1. Disallowance of interest expenditure under section 40(a)(ia) of the Act.
2. Sustaining the charge of interest under section 234B of the Act.

Issue 1: Disallowance of interest expenditure under section 40(a)(ia) of the Act:

The appellant, an individual engaged in the iron and steel business, faced disallowance of Rs. 14.55 lakhs by the Assessing Officer (AO) for not deducting TDS on payments to depositors under section 194A of the Act. The AO relied on a High Court finding and disallowed the claimed expenses. The CIT(A) upheld the disallowance, emphasizing the mandatory nature of TDS deduction and the absence of Form No.15G. The appellant's argument that payees had applied for No TDS/lower TDS was rejected. The Tribunal admitted additional evidence but concluded the appellant was obligated to deduct TDS, dismissing the appeal.

Issue 2: Sustaining the charge of interest under section 234B of the Act:

The appellant contested the charging of interest under section 234B, claiming it to be mandatory and consequential. The Tribunal dismissed this ground as not maintainable, upholding the charge of interest under section 234B. The appeal was ultimately dismissed by the Tribunal on 16.2.2010.

This detailed analysis of the judgment highlights the key issues, arguments presented, authorities' decisions, and the final outcome of the appeal before the Appellate Tribunal.