2019 (12) TMI 868 - AT - Income Tax

TDS u/s 194A - Addition u/s 40(a)(i) - TDS on finance charges - year of assessment - assessee submitted before the AO that though the TDS was not made, the recipient had admitted the income and filed the return of income, hence requested not to disallow the said sum u/s 40(a)(ia) - CIT-A upheld the addition and held that the assessee is entitled for benefit of deduction only in the subsequent assessment year i.e. 2014-15 - assessee argued that the benefit of deduction is to be allowed in the impugned assessment year to the assessee and it should not be postponed to the subsequent year HELD THAT - In the instant case, the assessee has made the payment without deduction of tax at source and the recipient has filed the return of income on 28.11.2013 relevant to the F.Y. 2013-14 which is relevant to the A.Y. 2014-15. As per second proviso to sub section 40(a)(ia) of the Act, if the assessee is not deemed to be assessee in default in accordance with the provisions of Chapter XVII-B of the Act, on the said sum it shall be deemed that the assessee has deducted the TDS and paid the tax on such sum on the date of furnishing the return of income by the recipient referred to in said proviso, if the recipient has admitted the income and paid the tax thereon. In the instant case, the payee has filed the return of income on 28.11.2013 which is relevant to the A.Y.2014-15. Therefore as rightly held by the Ld.CIT(A), the assessee is entitled to claim the benefit of second proviso in the subsequent A.Y. i.e. 2014-15, but not for the A.Y. 2013-14. - Decided against assessee.

Summary

Issues:
Appeal against addition under section 40(a)(ia) of the Act for non-deduction of TDS on finance charges.

Analysis:
1. The appellant contested the addition of ?5,77,426 made by the Assessing Officer (AO) under section 40(a)(ia) of the Act for non-deduction of tax at source (TDS) on finance charges paid to Shriram Finance Limited. The AO disallowed the amount as TDS was not deducted, despite the recipient admitting the income and filing the return.

2. The CIT(A) upheld the addition, stating that the benefit of deduction can only be claimed in the subsequent assessment year, 2014-15, as per the second proviso to section 40(a)(ia). The appellant then appealed to the ITAT, arguing that recent amendments easing provisions for non-residents under section 40(a)(i) should also apply to residents under section 40(a)(ia).

3. The ITAT considered both arguments and noted that the payee filed the return of income for the relevant year, 2013-14, in AY 2014-15. Referring to the statutory provisions, the ITAT agreed with the CIT(A) that the benefit of the second proviso to section 40(a)(ia) can only be availed in the subsequent assessment year, not the current one.

4. The appellant relied on amendments effective from AY 2020-21, arguing for parity between residents and non-residents in TDS provisions. However, the ITAT found no error in the CIT(A)'s decision and upheld the order, dismissing the appeal.

5. The ITAT concluded the appeal by affirming the CIT(A)'s order, emphasizing that the benefit of the second proviso to section 40(a)(ia) is applicable in the subsequent assessment year, leading to the dismissal of the appellant's appeal.