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2022 (1) TMI 582 - AT - Income TaxTDS u/s 194A - assessee had paid interest to Tata Capital Ltd., which was an NBFC, without deduction of tax at source - Demand u/s 201(1) - HELD THAT - It is indeed the mandate of the provisions of the first proviso to section 201(1) of the Act, that in case a certificate as above is furnished, the person is not to be considered to be an assessee in default. In such case, no disallowance u/s 40(a)(ia) can be attracted, in terms of the second proviso to section 40(a)(i)(ia). Accordingly, we remit this matter to the file of the AO, to examine and verify the above certificate. If the same is found to be in order, the AO shall delete the disallowance. Treatment of interest expense as revenue expenditure - CIT(A) confirmed the disallowance, observing that even during the appellate proceedings before her, no details regarding Capital Work In Progress and interest paid on account of cash credit/buyer credit had been filed by the assessee - HELD THAT - Assessee has stated that details regarding the Capital Work In Progress were filed before the Ld. CIT(A). Our attention has been drawn to APB 6, i.e. the details of Capital Work In Progress. Here also, the details of Capital Work In Progress required verification at the hands of the AO. For this purpose, this issue is also remitted to the AO. If the details are found to be in order, the AO shall delete the disallowance accordingly.
Issues:
1. Disallowance of interest component of EMI paid to Tata Capital Ltd. under section 40(a)(ia) of the IT Act. 2. Disallowance of notional interest on work-in-progress under section 40(a)(ia) of the IT Act. Issue 1: Disallowance of interest component of EMI paid to Tata Capital Ltd. under section 40(a)(ia) of the IT Act: The Assessing Officer (AO) disallowed the interest payment of ?59,949 to Tata Capital Ltd. as tax was not deducted at the source, invoking section 40(a)(ia) of the IT Act. The Commissioner of Income Tax Appeals (CIT(A)) upheld the disallowance citing non-deduction of tax at source. The appellant argued that a certificate was filed before the CIT(A) as required under the first proviso to section 201(1), which was not considered. The ITAT Delhi held that as per the provisions of section 40(a)(ia), if a certificate is furnished as required, the person is not considered an assessee in default, and thus, the disallowance should be deleted. The matter was remitted to the AO for verification of the certificate. Issue 2: Disallowance of notional interest on work-in-progress under section 40(a)(ia) of the IT Act: The AO disallowed ?11,38,805 as notional interest on work-in-progress, as the assessee failed to provide details of interest expenses capitalized. The CIT(A) confirmed the disallowance stating lack of details regarding Capital Work In Progress and interest paid on cash credit/buyer credit. The appellant claimed that details were submitted, and the ITAT Delhi noted that verification of these details was necessary. The issue was remitted to the AO for verification, with instructions to delete the disallowance if the details were found to be in order. In conclusion, the ITAT Delhi allowed the appeal for statistical purposes, remitting both issues back to the AO for verification based on the certificates and details submitted by the assessee.
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