2019 (11) TMI 872 - HC - Income Tax

Payment of interest disallowed u/s 40(a) (ia) - forms submitted by the recipients of interest, filed in Form No.15G and 15H were not produced before the assessing authority - HELD THAT - The order of remand by the Tribunal is in the light of the Judgment rendered by Division Bench of this Court in the matter of Commissioner of Income-Tax v. Sri Marikamba Transport Co. 2015 (6) TMI 181 - KARNATAKA HIGH COURT as held that though filing of Form Nos.15G and 15H by recipient of interest is mandatory before the persons from whom they seek payment of interest without deducting tax at source. However filing of same by the person disbursing interest to the authorities is procedural and not mandatory. In the event the assessing authority decides to look into the same, it could be called for while taking up the same for assessment. In the instant case, though the assessing authority entertained doubt regarding the respondent herein collecting such form before disbursing the interest, there is nothing on record to demonstrate that the assessee was called upon to produce forms to substantiate the deductions which they have made. Assessing Authority as well as Appellate Authority is rightly set aside by the Tribunal and the same is remanded back to the Assessing Authority for fresh consideration. On going through the order impugned, this Court is of the considered opinion that the order of remand is just and proper on factual matrix of the case.

Summary

Issues:
Appeal under Section 260A of the Income Tax Act, 1961 challenging the order of the Tribunal setting aside the order of assessing authority and appellate authority regarding disallowance of expenses shown towards payment of interest under Section 40(a) (ia) of the Act.

Analysis:
The judgment involves an appeal under Section 260A of the Income Tax Act, 1961, where the Assessing Authority and the Competent Authority challenged the Tribunal's decision to set aside their orders and remand the case for fresh consideration. The respondent, an assessee, had their income tax returns for the assessment year 2010-2011 considered under Section 143(3) of the Act. The assessing authority disallowed expenses for payment of interest amounting to ?28,98,43,076, citing non-submission of forms (Form No.15G and 15H) by the recipients of interest. The order of the assessing authority was challenged before the Commissioner of Income Tax (Appeals) and subsequently before the Income Tax Appellate Tribunal, Bengaluru Bench 'A'.

The Tribunal allowed the appeal by the assessee, setting aside the orders of the Assessing Authority and the Appellate Authority, remanding the case for fresh consideration by the assessing authority. The Tribunal's decision was based on a judgment by a Division Bench of the High Court, which clarified the mandatory nature of filing Form Nos.15G and 15H by recipients of interest and the procedural nature of filing by the person disbursing interest. The Tribunal observed that if the assessing authority decides to consider these forms, they could be called for during assessment. In this case, there was doubt regarding the collection of forms by the respondent, but no record demonstrated that the assessee was asked to produce the forms for verification.

The High Court upheld the Tribunal's decision of remand, stating that it was just and proper based on the factual matrix of the case. The Court concluded that no substantial question of law arose for consideration in the appeal filed by the revenue, thereby dismissing the appeal. The judgment highlights the importance of procedural compliance and the need for proper verification in income tax assessments.

This detailed analysis provides a comprehensive understanding of the legal issues and the reasoning behind the judgment delivered by the High Court.