2016 (12) TMI 1358 - AT - Income Tax

Revision u/s 263 - non deduction of TDS u/s 194A on interest expenditure - Held that - A.O. has examined the issue of disallowance u/s 40(a)(ia) of the Act, towards interest payments at the time of assessment. The assessee has furnished details of declarations received from the recipient of interest and the A.O. after satisfied with the explanations offered by the assessee has chosen to accept interest payment, therefore, the CIT was incorrect in holding that the A.O. has not examined the issue at the time of assessment proceedings. In the present case on hand, on perusal of the materials available on record, we find that the recipients have furnished declarations in form 15G/15H before the due date of payment of TDS to the credit of the Government account. Since, the recipient has furnished statutory forms in form 15G/15H, the assessee need not to deduct TDS u/s 194A of the Act, consequently, no disallowance can be made u/s 40(a)(ia) of the Act, accordingly, there is no prejudice is caused to the interest of revenue. Since, the assessment order passed by the A.O. is neither erroneous nor prejudicial to the interest of the revenue, the CIT was incorrect in assuming jurisdiction u/s 263 of the Act. Therefore, we set aside the order passed by the CIT u/s 263 of the Act and restore the assessment order passed by the A.O. u/s 143(3) of the Act. - Decided in favour of assessee

Summary

Issues involved:
Assessment order under section 263 of the Income Tax Act, 1961 for the assessment year 2009-10 regarding disallowance of interest expenditure under section 40(a)(ia) for non-deduction of TDS under section 194A.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax, Guntur, under section 263 of the Income Tax Act, 1961, for the assessment year 2009-10. The case involved a partnership firm engaged in trading in gunnies and jute. The assessment was completed under section 143(3) of the Act, making additions towards disallowance of certain expenditures. The Commissioner proposed to revise the order due to the failure of the Assessing Officer to make additions under section 40(a)(ia) for interest expenditure where TDS was not deducted under section 194A. The Commissioner held that the assessment order was prejudicial to the revenue's interest as the A.O. did not examine the issue properly.

The assessee contended that the A.O. had examined the TDS issue during assessment proceedings and accepted explanations provided. The CIT, however, found the assessment order erroneous as the A.O. did not address the disallowance of interest under section 40(a)(ia) for non-deduction of TDS. The CIT set aside the assessment order, directing the A.O. to modify it. The assessee argued that TDS was not required as declarations in form 15G/15H were submitted before the due date of TDS payment. The Department, on the other hand, supported the CIT's order, stating that TDS should have been deducted.

Upon review, the Tribunal found that the A.O. had examined the issue of disallowance during assessment and accepted the explanations provided by the assessee. The Tribunal noted that the recipients had submitted form 15G/15H before the due date of TDS payment, allowing the assessee not to deduct TDS under section 194A. As the assessee had received declarations in time, no disallowance could be made under section 40(a)(ia). Therefore, the Tribunal set aside the CIT's order, restoring the assessment order passed by the A.O. under section 143(3) of the Act. The appeal filed by the assessee was allowed.

This detailed analysis of the judgment highlights the issues involved, the arguments presented by both parties, and the Tribunal's reasoning in reaching its decision to uphold the assessment order and set aside the CIT's revision under section 263 of the Income Tax Act, 1961.