2023 (6) TMI 482 - AT - Income Tax

TDS u/s 194A - Disallowance of interest expenses u/s 40(a)(ia) - effect of 2nd Proviso to Section 40(a)(ia) - assessee has debited interest which included interest paid to Non-Banking Finance Company without deducting TDS - as per case of the assessee if the amount paid by payer have been included by the payee in its return of income filed u/s 139 and has paid the tax due on the income declared in such return, to the extent recipient from such assessee is included the sum in his return of income and filed the same, no disallowance under Section 40(a)(ia) can be made in view of the 2nd Proviso to Section 40(a)(ia) r.w.s. First Proviso to Section 201(1) - HELD THAT - Whether the 2nd Proviso to Section 40(a)(ia) of the Act is having retrospective effect from 01.04.2005 has also already dealt with by the Ld. CIT(A) with an affirmative view supported by the judgment passed by the Hon ble Delhi High Court in case of Dr. Jaydeep Sharma 2014 (11) TMI 720 - ITAT DELHI - Thus, the order passed by the Ld. CIT(A) is found to be just and proper without any ambiguity so as to warrant interference. The same is, therefore, upheld. Decided against revenue.

Summary

Issues involved:
The appeal filed by the Revenue against the order passed by the Ld. Commissioner of Income Tax (Appeals) regarding the deletion of addition of interest expenses under Section 40(a)(ia) of the Income Tax Act, 1961 for Assessment Year 2012-13.

Details of the Judgment:

1. The appeal concerned the deletion of addition of Rs. 11,85,187/- made on account of disallowance of interest expenses under Section 40(a)(ia) of the Act. The assessee had failed to comply with TDS provisions, leading to the disallowance by the Ld. AO.

2. The assessee contended that no disallowance under Section 40(a)(ia) could be made if the payee had included the amount in their income tax return and paid the due taxes. The Ld. CIT(A) held that the 2nd Proviso to Section 40(a)(ia) has retrospective effect from 01.04.2005, citing judicial pronouncements.

3. The Ld. CIT(A) relied on the judgment of the Hon'ble Delhi High Court in the case of Dr. Jaydeep Sharma, which stated that no disallowance under Section 40(a)(ia) would be made if the recipient of payment had filed their income tax return and paid the taxes in time.

4. The Ld. CIT(A) concluded that the 2nd Proviso to Section 40(a)(ia) of the Act is not applicable in the case of the assessee, and therefore, the disallowance made by the AO was deleted. The order of the Ld. CIT(A) was upheld without any ambiguity, and the Revenue's appeal was dismissed.

5. The judgment was pronounced on 09/06/2023 by Ms. Madhumita Roy, Judicial Member, and Smt. Annapurna Gupta, Accountant Member, of the Appellate Tribunal ITAT Ahmedabad.