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2020 (9) TMI 317 - AT - Income TaxRevision u/s 263 - TDS u/s 194A - Addition u/s.40(a)(ia) - non deduction of tds on payment of interest to M/s. Magma Financial Corporation by the assessee during the relevant financial period - HELD THAT - Ld counsel could not controvert the fact that recipient of impugned interest is a company incorporated under the Companies Act, 1956 and thus, the provisions of section 194A(3)(iii)(b) of the Act is not applicable to the facts and circumstances of the case. It is also not in dispute that the assessee has not complied with the provisions of Rule 31CAB read with first proviso to section 201(1) of the Act and has not submitted Form 26A as mandated under Rule 31ACB of the I.T.Rules. No hesitation to uphold the order of the PCIT, holding the assessment order is erroneous and prejudicial to the interest of the revenue and directing the AO to modify the assessment order by disallowing a sum u/s.40(a)(ia) of the Act and adding the same to the total income of the assessee. Hence, we confirm the order of the ld PCIT. - Decided against assessee.
Issues:
1. Disallowance of interest expenditure under section 40(a)(ia) of the Income Tax Act, 1961 for non-deduction of tax at source. Analysis: The appeal was filed against the order of the Principal Commissioner of Income Tax (PCIT) for the assessment year 2014-15. The PCIT found that the assessee had claimed an expenditure of ?76,772 as "interest on tanker loan" without deducting tax at source as required under section 194A of the Income Tax Act. The PCIT directed the Assessing Officer (AO) to disallow this amount under section 40(a)(ia) of the Act. The assessee contended that since the payment was made to M/s. Magma Financial Corporation, which is a financial corporation established under the Companies Act, the provisions of section 194A(1) did not apply, and hence, disallowance under section 40(a)(ia) was not justified. During the proceedings, the Counsel for the assessee argued that the AO had verified the interest payment to M/s. Magma Financial Corporation during the assessment proceedings, and since the recipient was a company incorporated under the Companies Act, the provisions of section 194A(1) did not apply. The Counsel also argued that there was no requirement to invoke section 263 of the Act as all relevant details were duly verified during assessment. On the other hand, the CIT DR contended that the provisions of section 194A(3)(iii)(b) were not applicable to the case as M/s. Magma Financial Corporation was not established under a Central, State, or Provincial Act. After considering the submissions, the Tribunal observed that the AO had not made any inquiry regarding the interest payment to M/s. Magma Financial Corporation. It was noted that the recipient was a company incorporated under the Companies Act, and hence, section 194A(3)(iii)(b) did not apply. Additionally, the assessee had not complied with the required provisions and had not submitted the necessary forms. Therefore, the Tribunal upheld the PCIT's order, deeming the assessment order as erroneous and prejudicial to revenue, and directed the AO to disallow the amount under section 40(a)(ia) and add it to the total income of the assessee. Consequently, the appeal of the assessee was dismissed, confirming the PCIT's decision.
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