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2017 (11) TMI 1827 - AT - Income TaxTDS u/s 194A - disallowance u/s 40(a)(ia) - assessee paid interest on NBFCs without deduction of tds - scope of second proviso to Sec. 40(a)(ia)amended - retrospectivity - it is assessee s contention that the amounts of interest paid by the assessee have been offered to tax by the respective recipients and as proof of the amount offered by the respective recipient to tax is also certified by their Chartered Accountants and the necessary C.A. Certificates - HELD THAT - We find that the Co-ordinate Bench of Pune Tribunal in the case of Yamazaki Mazak 2016 (10) TMI 1038 - ITAT PUNE after considering the decision of PRUDENTIAL LOGISTICS 2015 (2) TMI 847 - KERALA HIGH COURT and Ansal Land Mark 2015 (9) TMI 79 - DELHI HIGH COURT has held that the second proviso to Sec. 40(a)(ia) inserted by the Finance Act, 2012 is retrospective in nature. As before us assessee has placed reconciliation statements showing the amount of interest paid by the assessee and that are offered by the respective recipients of interest in their income and that there are certain difference which the assessee has not been able to reconcile. We therefore find force in the argument of Ld.A.R. that to the extent the amounts have been reconciled, the assessee be allowed the expenditure. There is no finding on this issue by the lower authorities. In such a situation, we are of the view that the matter be remanded back to AO to verify the contention of the assessee - Appeal of assessee allowed for statistical purposes.
Issues Involved:
1. Adhoc disallowance of labor expenses. 2. Disallowance under Section 40(a)(ia) for non-deduction of TDS on interest paid to NBFCs. 3. Validity of notice issued under Section 153C. 4. Admission of additional evidence. Detailed Analysis: 1. Adhoc Disallowance of Labor Expenses: The assessee challenged the adhoc disallowance of labor expenses for various assessment years. For A.Y. 2009-10, the CIT(A) had confirmed the disallowance of ?3,18,870/-, which the assessee argued was unreasonable as the expenses were justified despite some vouchers being self-made. However, the assessee did not press this ground during the appeal, leading to its dismissal as not pressed. For A.Y. 2012-13, the CIT(A) confirmed the adhoc disallowance of ?1,79,930/-. The assessee argued that the expenses were reasonable and that self-made vouchers should not warrant disallowance. However, the assessee did not press this ground either, leading to its dismissal as not pressed. 2. Disallowance under Section 40(a)(ia): The primary issue revolved around the disallowance of interest expenses under Section 40(a)(ia) for non-deduction of TDS on interest paid to NBFCs. The AO disallowed interest payments to Srei Equipment Finance Ltd and Tata Motors Finance Ltd for A.Y. 2010-11 (?7,68,310/-), A.Y. 2011-12 (?49,59,341/-), and A.Y. 2012-13 (?67,68,277/-) due to non-deduction of TDS under Section 194A. The CIT(A) upheld the AO's decision, citing the assessee's failure to deduct TDS and ruling that the second proviso to Section 40(a)(ia) was not retrospective, relying on the Kerala High Court's decision in Prudential Logistics and Transports. However, the assessee argued that the second proviso to Section 40(a)(ia), which states that no disallowance is warranted if the recipient has paid tax on the income, is retrospective, supported by the Delhi High Court's decision in Ansal Land Mark Township. The Tribunal noted conflicting judgments from different High Courts but leaned towards the Delhi High Court's view that the proviso is retrospective. The Tribunal remanded the matter back to the AO to verify the assessee's claim that the interest paid was included in the income of the recipients and to allow the expenditure to the extent it was reconciled. 3. Validity of Notice Issued under Section 153C: The assessee challenged the validity of the notice issued under Section 153C for A.Y. 2010-11 and 2011-12, claiming it was bad in law. However, the assessee did not press this ground during the appeal, leading to its dismissal as not pressed. 4. Admission of Additional Evidence: The assessee requested the admission of additional evidence to support their grounds of appeal. However, this request was not elaborated upon during the proceedings, and no specific additional evidence was admitted or discussed in detail. Conclusion: The Tribunal dismissed the appeal for A.Y. 2009-10 as not pressed and partly allowed the appeals for A.Y. 2010-11 to 2012-13. The Tribunal remanded the issue of disallowance under Section 40(a)(ia) back to the AO for verification, directing that the disallowance should be limited to the extent the interest paid by the assessee was not offered to tax by the recipients. The Tribunal emphasized the need for the AO to provide the assessee with adequate opportunity to present their case and for the assessee to cooperate fully.
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