2011 (3) TMI 708 - AT - Income Tax

TDS on interest u/s 194A - The assessee company has paid interest of Rs.69, 64, 623/- to ONGC and HUDA and no TDS was deducted - The assessee too has failed to submit the certificate u/s 197 showing for non-deduction of taxes - Certificate showing that that no TDS was deductible on the interest payment made was necessary - It was not produced before authorities below - Assessee made a simple statement in this regard without any documentary proof - Therefore, find no merits in the appeal of the assessee. As regards the assessee has claimed that the interest payment of Rs.14, 17, 500/- made to HUDA was on account of delayed payment for purchase of land - It is claimed as capital expenditure - It is also claimed that the interest has not been debited in the books of account as revenue expenditure - In view of this claim we find that this fact was never raised/disclosed before the authorities below therefore these facts require verification - Thus the issue in respect of the interest to the HUDA of Rs.14, 17, 500/- to the file of the Assessing Officer to decide the same afresh after providing an opportunity of being heard.

Summary

Issues:
- Disallowance of interest paid to M/s. ONGC and HUDA under section 40(a)(ia)
- Treatment of payment made to HUDA as capital expenditure

Analysis:
1. The appeal was filed by the assessee against the order of the CIT (Appeals) related to the disallowance of interest paid to M/s. ONGC and HUDA under section 40(a)(ia). The assessee argued that the disallowance was unjustified and unsustainable. The interest paid to ONGC was Rs. 55,47,123/-, and no TDS was deducted under section 194(a) as ONGC was considered a Government company. The assessee claimed that ONGC would submit an exemption certificate under section 197 of the Income-tax Act to support the non-deduction of TDS.

2. The Tribunal found that the assessee failed to provide the required certificate under section 197 to show the non-deduction of taxes on the interest payment made. The absence of documentary proof led to the dismissal of the appeal. However, regarding the payment of Rs. 14,17,500/- to HUDA, the assessee claimed it was for delayed payment related to the purchase of land, treated as capital expenditure. The interest amount was not recorded as revenue expenditure in the books of account. Since this claim was not raised before the lower authorities, the Tribunal decided to send the issue back to the Assessing Officer for further examination and a fresh decision after allowing the assessee an opportunity to be heard.

3. The Tribunal partially allowed the appeal for statistical purposes, emphasizing the need for proper documentation and verification of facts. The decision was made to ensure justice and equity in resolving the issue of interest payment to HUDA. The order was pronounced on 11.3.2011 by B.C. Meena, with the appeal outcome favoring the assessee in part.