2024 (10) TMI 482 - AT - Income Tax

Assessee in default u/s 201(1) - non deduction of TDS u/s 194LBC on the EIS paid to the Originator - CIT(A) held that since the originator in this case has not subscribed to any PTCs, it cannot be termed as an investor as defined in section 194LBC r.w.s. 115TCA of the Act and further no investment has also been shown to have been made by the originator, thereby determining that the originator in this case is not an investor and provisions of section 194LBC of the Act could not be attracted. HELD THAT - As relying on ITO vs. Syamantaka IFMR Capital 2024 (5) TMI 1233 - ITAT MUMBAI , M/s. Vivriti Cibus 2023 (12) TMI 806 - ITAT MUMBAI and SME Pool Series 2024 (2) TMI 1383 - ITAT MUMBAI it is observed that this issue has already been dealt with by the jurisdictional co-ordinate bench extensively which has taken a view in support of the assessee. We also find no infirmity in the order of the ld. CIT(A) and we find no justification in taking any other view. Therefore, the grounds of appeal are dismissed.

Summary

Issues:
1. Interpretation of Excess Interest Spread (EIS) payment and its tax implications under section 115TCA and 194LBC of the Income Tax Act, 1961.
2. Determination of whether the assessee is liable to deduct TDS on EIS payment to the originator.
3. Assessment of whether the assessee can be deemed an assessee in default for non-deduction of TDS on EIS.
4. Evaluation of the findings made by the Assessing Officer regarding TDS liability under section 194LBC.

Analysis:
1. The appeal by the Revenue challenges the order of the Commissioner of Income Tax (Appeals) regarding the Excess Interest Spread (EIS) payment of Rs. 8,73,92,849 made to the originator, M/s. Janalakshmi Financial Services Limited. The Assessing Officer held the assessee to be an assessee in default for not deducting TDS under section 194LBC. The first appellate authority allowed the appeal, stating that the assessee is not liable to deduct TDS.

2. The Revenue contended that the assessee was rightly held as an assessee in default, while the assessee argued that various Tribunal decisions favored their position. The Special Purpose Vehicle (SPV) structure was explained, emphasizing the transfer of risks and rewards to the SPV through Pass Through Certificates (PTCs). The EIS payment was detailed, showing the difference in interest rates between original loans and PTCs. The CIT(A) held that the EIS payment is not a committed return but a contractual payment, and since the originator did not subscribe to PTCs, they are not considered an investor under section 194LBC.

3. The CIT(A) determined that the income received by the originator from the EIS did not accrue from an investment, thus TDS deduction was not required. The CIT(A) referenced section 115TCA and 194LBC to support this decision. The assessee relied on previous Tribunal decisions to strengthen their argument, highlighting consistency in the interpretation of similar cases.

4. The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision. The Tribunal found no infirmity in the order and upheld the assessee's position. The judgment concluded that the grounds of appeal filed by the Revenue were dismissed, and the appeal was rejected.

This detailed analysis outlines the key issues raised in the judgment and provides a comprehensive understanding of the legal reasoning and decisions made by the authorities involved in the case.