2018 (10) TMI 1225 - AT - Income Tax

TDS u/s 194A - payment of interest to NBFC - addition u/s 40(a)(ia) - IT is claimed that NBFC has included interest into its income - admission of additional evidence - CA certificate filed by the assessee not admitted by the CIT(A) - Held that - CIT(A) before whom the certificate was filed for the first time rejected the same at threshold without admitting the same on the grounds that it was obtained post filing of return of income and also post assessment farmed by the AO. CIT(A) was also of the view that second proviso to Section 40(a)(ia) of the 1961 Act as introduced by Finance Act, 2012 w.e.f 01-04-2013 cannot be given retrospective effect. In the case of Ansal Land Mark Township Private Limited 2015 (9) TMI 79 - DELHI HIGH COURT had held that insertion of second proviso to Section 40(a)(ia) of the 1961 Act is to be given retrospective effect wef 01-04-2005. CA certificate filed by the assessee is a material evidence for adjudicating this issue and we admit the said additional evidence filed by the assessee in the interest of justice. Contents of the said CA certificate was not verified by any of the authorities below and hence in the interest of justice and in fairness to both the parties, we are restoring the matter back to the file of the AO for necessary verification of the said CA certificate and thereafter if the contents of the CA certificate are proved to be correct , the AO is directed to grant relief to the assessee keeping in view second proviso to Section 40(a)(ia). Disallowance of delayed pay-in-charges to share brokers for making delayed payments against share purchased by the assessee - non deduction of TDS - Held that - Assessee cannot be accepted and the delayed pay-in-charges payable by the assessee to sharebroker for making delayed payment of purchase consideration for purchase of shares is infact interest within meaning of Section 2(28A) of the 1961 Act and the assessee was required to deduct income-tax at source on such interest of ₹ 4,21,773/- within the provisions of Section 194A. Since, the assessee fails to deduct income-tax at source on this payment the assessee will be hit by provisions of Section 40(a)(ia) of the 1961 Act and the disallowance as was done by the AO and as confirmed by learned CIT(A) is upheld. The assessee fails on this issue.

Summary

Issues Involved:
1. Disallowance under Section 14A read with Rule 8D.
2. Disallowance under Section 40(a)(ia) for non-deduction of TDS on interest expenses.
3. Treatment of share loss as bogus.
4. Addition on account of profit from share trading.

Issue-wise Detailed Analysis:

1. Disallowance under Section 14A read with Rule 8D:
The assessee initially raised an issue regarding the disallowance of ?63,750/- by invoking the provisions of Section 14A read with Rule 8D, but later did not press this ground. Consequently, the tribunal dismissed this ground as not being pressed.

2. Disallowance under Section 40(a)(ia) for non-deduction of TDS on interest expenses:
The primary contention was regarding the disallowance of ?34,82,572/- under Section 40(a)(ia) due to non-deduction of TDS on interest expenses. This included ?30,60,799/- paid to IIFL NBFC and ?4,21,773/- paid as delayed pay-in-charges to share brokers.

- Interest Paid to IIFL NBFC:
The assessee did not deduct TDS on ?30,60,799/- paid as interest to IIFL NBFC. The assessee submitted a Chartered Accountant's certificate stating that IIFL NBFC had included this interest in its income and paid due taxes. The CIT(A) did not accept this certificate, considering it was obtained post-assessment and deemed the second proviso to Section 40(a)(ia) as prospective. The tribunal, however, admitted the additional evidence and remanded the matter back to the AO for verification of the CA certificate. If verified, relief should be granted in line with the Delhi High Court's decision in CIT v. Ansal Land Mark Township Pvt. Ltd.

- Delayed Pay-in-Charges:
The assessee argued that ?4,21,773/- paid as delayed pay-in-charges to share brokers was not interest but part of the purchase cost of shares. The tribunal rejected this argument, interpreting the charges as "interest" under Section 2(28A) of the Act, requiring TDS under Section 194A. Consequently, the disallowance under Section 40(a)(ia) was upheld.

3. Treatment of share loss as bogus:
The assessee initially contested the treatment of a share loss of ?1,00,08,493/- as bogus but later did not press this ground. The tribunal dismissed this ground as not being pressed.

4. Addition on account of profit from share trading:
The assessee raised an issue regarding the addition of ?1,10,88,198/- on account of profit from share trading but did not press this ground. The tribunal dismissed this ground as not being pressed.

Conclusion:
The tribunal dismissed grounds 1, 3, 4, and 5 as not being pressed or general in nature. For ground 2, the tribunal partially allowed the appeal for statistical purposes, remanding the issue of interest paid to IIFL NBFC back to the AO for verification, while upholding the disallowance of delayed pay-in-charges. The appeal was thus partly allowed for statistical purposes.