2022 (4) TMI 897 - AT - Income Tax

Addition u/s.40(a)(ia) - assessee had paid interest to M/s. Tata Motors Finance Ltd. without deducting tax at source - HELD THAT - Fact borne from the record that the assessee had failed to deduct tax at source on the amount of interest that was paid by it to M/s. Tata Motors Finance Ltd.- as the aforesaid payee, viz. Tata Motors Finance Ltd. had duly taken into account the aforementioned amount of interest while computing its income for the year under consideration and had paid the corresponding taxes on the same, as is evidenced from the certificate of the Chartered Accountant in Form 26A, dated 03.05.2017 filed by the assessee before us, therefore, we are of the considered view, that as stated by the Ld. AR, and rightly so, the assessee could not be held as an assessee-in-default as regards the aforementioned amount under Section 201(1) of the Act. Accordingly, now when the assessee could not be held as an assessee-in-default u/s. 201(1) of the Act, therefore, we concur with the claim of the Ld. AR that as per the 2nd proviso to Section 40(a)(ia) of the Act, the aforementioned amount could not have been disallowed in the hands of the assessee company. Backed by our aforesaid deliberations, we, herein, set-aside the order of the CIT(Appeals) and direct the Assessing Officer to vacate the disallowance - Appeal of assessee allowed.

Summary

Issues:
- Delay in filing appeal
- Disallowance of interest payment under section 40(a)(ia) of the Income-tax Act, 1961
- Admissibility of additional evidence
- Tax deduction at source on interest payment

Analysis:

Delay in filing appeal:
The appeal involved a delay of 29 days, attributed to the assessee's engagement in obtaining a certificate to demonstrate that the interest amount was included in the payee's income tax return. The Authorized Representative (AR) sought condonation of the delay due to a bona fide mistake. The Departmental Representative (DR) objected, but the Tribunal, considering the bona fide reasons, condoned the delay.

Disallowance of interest payment under section 40(a)(ia) of the Income-tax Act, 1961:
The assessee had paid interest to a party without deducting tax at source, leading to a disallowance under section 40(a)(ia) of the Act. The Assessing Officer disallowed the amount, which was upheld by the CIT(A). However, the AR argued that since the payee had included the interest amount in its income tax return and paid taxes, the assessee could not be considered an "assessee-in-default." The Tribunal admitted additional evidence, a Form-26A certificate, supporting the claim. Considering this evidence, the Tribunal held that the disallowance was unjustified, as the assessee was not at fault according to the provisions of the Act.

Admissibility of additional evidence:
The Tribunal admitted the additional evidence, the Form-26A certificate, as it was crucial to resolving the appeal and went to the heart of the matter in dispute. The certificate supported the contention that the interest payment was duly considered by the payee in its tax return, strengthening the assessee's case.

Tax deduction at source on interest payment:
The Tribunal observed that although the assessee failed to deduct tax at source on the interest payment, the payee had accounted for the interest income and paid taxes on it. As a result, the Tribunal concluded that the assessee could not be deemed an "assessee-in-default" under Section 201(1) of the Act. Consequently, the disallowance under Section 40(a)(ia) was overturned, directing the Assessing Officer to vacate the disallowance amount.

In conclusion, the appeal was allowed, setting aside the disallowance of the interest payment and ruling in favor of the assessee based on the evidence presented and the provisions of the Income-tax Act, 1961.