2018 (9) TMI 1757 - AT - Income Tax

TDS u/s 194A - disallowance u/s 40(a)(ia) - non deduction TDS on interest payment - Held that - The assessee had paid the interest to the tune of 41, 35, 478/- to M/s PIPDIC without deduction of tax at source. The said entity PIPDIC is not a statutory corporation u/s 194A(iii)(b) and not a notified institution u/s 194A(iii)(f) of the Act. Therefore the payment of interest to PIPDIC required to be deducted u/s 194A. Since the assessee has not deducted the tax at source and remitted to Government account the payment of interest attracts disallowance u/s 40(a)(ia) of the Act. The issue is settled by Hon ble Supreme Court in the case of Palam Gas Service 2017 (5) TMI 242 - SUPREME COURT and held that Word payable occurring in section 40(a)(ia) not only covers cases where amount is yet to be paid but also those cases where amount has actually been paid. Therefore we hold that the Ld.CIT(A) has rightly confirmed the addition - decided against assessee

Summary

Issues: Disallowance u/s 40(a)(ia) for non-deduction of TDS on interest payment to M/s Pondicherry Industrial Promotion Development and Investment Corporation (PIPDIC).

Analysis:
1. Ground Nos. 1 and 5: These grounds were deemed general in nature and did not require specific adjudication.

2. Ground No.2: The Ld. AR did not press this ground during the appeal hearing, leading to its dismissal as not pressed.

3. Ground Nos. 3 and 4: These grounds pertained to the disallowance u/s 40(a)(ia) of the Income Tax Act for the failure to deduct TDS on an interest payment to M/s PIPDIC. The AO had disallowed &8377; 41,35,478/- for non-compliance with section 194A of the Act.

4. Assessment Proceedings: The AO noted that the assessee had made a payment of &8377; 41,35,476/- to M/s PIPDIC without deducting TDS as required by section 194A of the Act, resulting in the disallowance under section 40(a)(ia).

5. CIT(A) Decision: The CIT(A) upheld the AO's addition, leading to the assessee appealing to the Tribunal.

6. Tribunal Decision: After hearing both parties and examining the facts, the Tribunal observed that the payment to PIPDIC required TDS deduction under section 194A. Despite the Ld.AR's reference to a special bench decision, the Tribunal noted the settled position by the Supreme Court in the case of Palam Gas Service. The Supreme Court clarified that the term 'payable' in section 40(a)(ia) encompasses cases where the amount has been paid. Consequently, the Tribunal upheld the CIT(A)'s decision, dismissing the assessee's appeal.

7. Conclusion: The Tribunal dismissed the appeal, affirming the disallowance under section 40(a)(ia) due to the failure to deduct TDS on interest payment to M/s PIPDIC, in accordance with the provisions of the Income Tax Act.

This detailed analysis outlines the progression of the case, highlighting the key legal arguments and decisions made by the authorities involved, ultimately leading to the Tribunal's final judgment.