2015 (10) TMI 2744 - AT - Income Tax

Disallowance u/s 40(a)(ia) - Non deduction of tds on printing and stationary expenses - amount already paid during the year or amount shown payable as on 31st March of every year - Held that - As relying on ACIT, Circle- 4, Jaipur vs. Shri Girdhari Lal Bargoti 2015 (11) TMI 746 - ITAT JAIPUR On issue of amount already paid during the year or amount shown payable as on 31st March of every year, the various courts have different views i.e. in favour of the assessee and against the assessee and when there are to views on an issue, the view in favour of the assessee has to be preferred. Therefore, we confirm the order of the Ld. CIT(A). Further the recipient are NBFC, therefore, not possible to not be assessed to tax, these payments were related for A.Y. 2009-10 and return for A.Y. 2009-10 already might have been filed by these NBFC by including these interests receipts as their income. Therefore, we do not find any reason to interfere in the order of the Ld. CIT(A).- Decided against revenue.

Summary

Issues:
Disallowance of tax under section 40(a)(ia) on interest paid to a company due to non-deduction of tax at source.

Analysis:

Issue 1: Disallowance under section 40(a)(ia)
The appellant contested the disallowance of &8377; 3,56,790/- by the Assessing Officer (AO) under section 40(a)(ia) for not deducting tax at source on interest paid to a company. The appellant argued that the issue was in their favor based on a judgment by the ITAT Jaipur Bench in a similar case. The appellant cited various court decisions and legislative amendments to support their case. They highlighted that the second proviso to section 40(a)(ia) inserted by Finance Act, 2012, provided relief in cases where the resident payee had paid taxes on the sum received. The appellant also pointed out the amendment made by Finance Act, 2014, which reduced the disallowance to 30% of the sum payable to a resident. The appellant relied on the principle that when two views exist on an issue, the view favoring the assessee should be preferred. The appellant emphasized that the legislative intent behind the amendments was to reduce undue hardship. The appellant requested the department to verify if the recipient companies had paid taxes on the interest received, thereby justifying no disallowance under section 40(a)(ia). The appellant further argued that even if disallowance was warranted, it should be restricted to 30% of the interest paid. The ITAT upheld the order of the CIT(A) based on the principle of preferring the view in favor of the assessee and the fact that the recipient companies were likely assessed to tax, thus dismissing the department's appeal.

Issue 2: Decision of the ITAT
After hearing both parties, the ITAT, following the judgment in a similar case, deleted the disallowance made by the AO under section 40(a)(ia) as raised in the grounds of appeal. The ITAT found no reason to interfere in the order of the CIT(A) as the recipient companies were likely assessed to tax, and the interest receipts were included in their income for the relevant assessment year. Therefore, the ITAT allowed the solitary ground of the assessee, resulting in the appeal being allowed.

In conclusion, the ITAT Jaipur Bench ruled in favor of the assessee, deleting the disallowance under section 40(a)(ia) based on the legislative amendments, court decisions, and the principle of preferring the view favoring the assessee when two views exist on an issue. The judgment highlighted the importance of verifying if the recipient companies had paid taxes on the interest received and emphasized the legislative intent behind the amendments to reduce undue hardship. The ITAT's decision was based on these factors, ultimately allowing the appeal of the assessee.