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2017 (4) TMI 404 - AT - Income TaxTDS u/s 194A - Disallowance of interest expenditure under section 40(a)(ia) - payments to Adlabs Films Ltd. for non-deduction at source - Held that - The disallowance under section 40(a)(ia) of the Act will not be attracted in the case on hand if the payee M/s. Adlabs Films Ltd. has offered for tax the interest payments received by it from the assessee in its return of income for A.Y. 2007-08 as claimed, subject to restoration of this issue to the file of the AO for verification of the actual position, i.e. as to whether the payee/recipient M/s. Adlabs Films Ltd. has offered the said interest receipts for taxation in its return of income for A.Y. 2007-08. We hold and direct accordingly.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Disallowance of interest expenditure under section 40(a)(ia). Detailed Analysis: 1. Condonation of Delay in Filing the Appeal: The appeal was delayed by 248 days. The assessee received the CIT(A) order on 20.06.2011 and was supposed to file the appeal by 20.08.2011 but filed it on 23.04.2012. The assessee submitted an affidavit explaining the delay, citing a misunderstanding regarding the availability of relief under section 40(a)(ia). The Tribunal considered the principles laid down by the Hon'ble Apex Court in the case of Collector, Land Acquisition vs. MST Katji & Others (167 ITR 471) (SC), emphasizing that substantial justice should prevail over technicalities and that a pragmatic approach should be taken. The Tribunal concluded that condoning the delay would not harm the Revenue as legitimate taxes would still be collected, whereas rejecting the petition could cause hardship to the assessee. Thus, the delay was condoned, and the appeal was admitted for consideration. 2. Disallowance of Interest Expenditure under Section 40(a)(ia): Ground No. 1(a): The assessee contested the disallowance of interest expenditure of ?10,08,795/- under section 40(a)(ia) r.w.s. 194A, arguing that the recipient, M/s. Adlabs Films Ltd., had already offered the same amount as interest income in its return for A.Y. 2007-08. The assessee provided Form 26A, certified by a Chartered Accountant, confirming that the interest was accounted for and taxed by Adlabs Films Ltd. The Tribunal referred to various judicial pronouncements, including CIT vs. Ansal Land Mark Township (P) Ltd. (2015) 61 taxmann.com 45 (Delhi), and held that disallowance under section 40(a)(ia) is not warranted if the payee has paid the due taxes. The Tribunal restored the issue to the AO for verification of whether Adlabs Films Ltd. had indeed offered the interest income for tax in its return for A.Y. 2007-08. Consequently, this ground was allowed for statistical purposes. Ground No. 1(b) and 1(c): The assessee did not press these grounds, and they were dismissed as infructuous. Ground No. 2: This ground was general in nature and did not require adjudication. Conclusion: The appeal was partly allowed for statistical purposes, with the issue of disallowance of interest expenditure under section 40(a)(ia) being remanded to the AO for verification. Order Pronouncement: The order was pronounced in the open court on 5th April, 2017.
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