2022 (1) TMI 961 - AT - Income Tax

Addition u/s 40(a)(ia) - payments as actually made to the payee which attract liability to deduct tax at source - Scope of amendment by virtue of which 2nd proviso has been provided to section 40(a)(ia) - HELD THAT - We find that an amendment has been brought in by the Finance Act, 2012 w.e.f. 1.4.2013 by virtue of which 2nd proviso has been provided to section 40(a)(ia) . The impugned assessment year is assessment year 2013-14 and there cannot be any dispute that the aforesaid amendment is applicable in the instant case. It has been contended that the payees are publicly known NBFCs and it is unlikely that they have not considered the payments so made by the assessee while computing their income and filing their respective tax returns and the assessee may be allowed an opportunity to furnish the requisite certificates in support of the same. We find that the legislative mandate so provided by the aforesaid amendment should be allowed to reach its logical conclusion and considering the same and in the interest of substantial justice, we hereby allow the assessee one more opportunity to furnish the requisite certificates from the respective parties and where the certificates are so furnished by the assessee containing the requisite information, allow the necessary relief to the assessee. The alternate contention is therefore not considered and left open. The matter is accordingly set-aside to the file of the Assessing officer for the limited purposes of examining and considering the certificates which shall be furnished by the assessee within reasonable period of time as so specified by the Assessing officer. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Merits of the addition of ?48,19,477/- under section 40(a)(ia) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appeal was delayed by 358 days. The assessee explained that the delay was due to the serious illness of the initially engaged advocate, who was diagnosed with a brain tumor. The assessee believed the appeal had been filed until they received a communication regarding penalty proceedings. Upon realizing the appeal had not been filed, the assessee promptly engaged a new counsel and filed the appeal within 10 days. The Tribunal considered the affidavit and submissions, noting there was no culpable negligence or mala fide intent. It was found that the delay was due to reasonable and bona fide reasons. The Tribunal emphasized that substantial justice should prevail over technical considerations and condoned the delay under section 253(5) of the Act, admitting the appeal for adjudication on merits.

2. Merits of the Addition of ?48,19,477/- Under Section 40(a)(ia):
The assessee, engaged in the property business, claimed interest expenses of ?48,19,477/- paid to M/s. India Infoline Finance Limited and M/s. Religare Finvest Limited without deducting tax at source under section 194A. The AO disallowed the expenses under section 40(a)(ia), referencing the decision in P.M.S. Diesel Vs. CIT, which held that the term 'payable' includes payments made without TDS. The Ld. CIT(A) upheld the AO's decision, noting the assessee failed to produce certificates from the payees confirming the inclusion of the interest in their income and payment of taxes.

During the Tribunal hearing, the assessee argued that the amendment by the Finance Act, 2012, introducing the second proviso to section 40(a)(ia), should apply retrospectively from 1st April 2005, as held in Pr.CIT Vs. Shivpal Singh Chaudhry. The assessee also contended that the amendment by the Finance Act, 2014, limiting disallowance to 30% of the sum payable, should apply retrospectively to mitigate undue hardship.

The Tribunal noted that the amendment by the Finance Act, 2012, applied to the assessment year 2013-14 and allowed the assessee an opportunity to furnish the requisite certificates from the payees. The Tribunal set aside the matter to the AO for verification of the certificates, thereby allowing the appeal for statistical purposes.

Conclusion:
The Tribunal condoned the delay in filing the appeal and admitted it for adjudication on merits. On the merits, the Tribunal allowed the assessee an opportunity to furnish certificates confirming the inclusion of the interest in the payees' income and payment of taxes, setting aside the matter to the AO for verification. The appeal was allowed for statistical purposes.