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2023 (4) TMI 1112 - AT - Income TaxDisallowance of interest expenditure u/s. 40(a)(ia) for non furnishing Form 15G / Form 15H - HELD THAT - As no TDS has been deducted by the payer on the interest and no supportive documents were filed before the Ld.AO. As in case of CIT vs. Sri Marikamba Transport Co. 2015 (6) TMI 181 - KARNATAKA HIGH COURT has held that no disallowance of interest paid to persons who furnish form 15G/H can be made in the hands of the assessee u/s. 40(a)(ia) of the Act. As in case of JCIT vs. Karnataka Vikas Grameena Bank 2018 (5) TMI 1627 - ITAT BANGALORE has held that filing of form 15G/H with prescribed authority is only procedural and cannot result in a disallowance. This Tribunal also held that to the extent that payment of interest relates to the government and exempted category of persons, no disallowance is warranted. As in the present facts, the assessee is directed to furnish Form 15G/H to the Ld.AO. AO is directed to consider the same and to consider the claim of assessee by carrying out necessary verification after affording proper opportunity of being heard. Ground raised by assessee stands allowed for statistical purposes.
Issues involved:
The issues involved in the judgment are: 1. Disallowance of interest expenditure under section 40(a)(ia) for non-furnishing of Form 15G/15H. 2. Disallowance of interest expenditure without appreciating certain facts. 3. Consideration of income under the head "Income from Other Sources" leading to potential double taxation. Issue 1: Disallowance of interest expenditure under section 40(a)(ia) for non-furnishing of Form 15G/15H: The assessee appealed against the order disallowing 30% of interest expenditure under section 40(a)(ia) due to a delay in furnishing Form 15G/15H. The CIT(A) upheld the disallowance of Rs.77,74,626 for non-deduction of TDS, citing the requirement of submitting the forms during the relevant year. However, the Tribunal allowed the appeal, emphasizing that filing Form 15G/H is procedural and does not automatically lead to disallowance. The Tribunal directed the assessee to furnish the forms to the AO for verification, following precedents that disallowance is not warranted for payments to exempted entities. Issue 2: Disallowance of interest expenditure without appreciating certain facts: The AO disallowed interest expenditure on the investment in Omkar Inc. made from unsecured loans, leading to a total disallowance of Rs.77,74,626. The CIT(A) partially allowed the appeal, restricting the disallowance to 30% of the amount as per the amended section 40(a)(ia). The Tribunal further reduced the disallowance to Rs.23,32,387, granting relief to the appellant. The Tribunal emphasized the need for proper verification by the AO and an opportunity for the assessee to be heard. Issue 3: Consideration of income under the head "Income from Other Sources" leading to potential double taxation: The CIT(A) upheld an addition of Rs.2,19,570 under the head "Income from Other Sources," despite the returned loss already factoring in this income. The Tribunal directed the AO to verify the potential double taxation issue and consider the claim in accordance with the law. The appeal was allowed for statistical purposes pending verification by the AO.
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