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2024 (6) TMI 856 - ITAT KOLKATATDS u/s 194A - Delay interest is charged by the broker which has been shown as finance cost for delayed payments - HELD THAT - We find that in this case the interest payments have been made to the broker for delayed payments of amounts due to the broker and no TDS has been deducted at source from the said interest. We note that the said interest has not been incurred by the assessee on any amount borrowed during the normal course of business and therefore, cannot be considered as interest u/s 2(28A) of the Act. In our opinion, the provision of Section 194A of the Act is applicable only to the interest on borrowed capital and not on the interest which is paid on delayed payment of purchase considerations. The case of the assessee finds support from the decision of the Coordinate Bench in the case of Harbhajan Singh 2017 (1) TMI 1089 - ITAT KOLKATA wherein the similar issue has been decided in favour of the assessee - We direct the AO to delete the addition. Appeal filed by the assessee is allowed.
Issues Involved:
The appeal challenges the addition of interest paid on delayed payment to a share broker due to non-deduction of tax at source. Comprehensive Details: 1. The AO observed the finance cost charged by the assessee for delayed payments and added Rs. 24,68,080/- to the income for non-deduction of TDS on interest. The CIT(A) upheld the AO's decision. 2. The ITAT found that the interest payments were made to the broker for delayed payments, not on borrowed capital, and thus not covered u/s 2(28A) of the Act. Citing precedent, the ITAT concluded that the interest on delayed payments is not subject to TDS u/s 194A. 3. Referring to case law, the ITAT highlighted that payments for delayed purchase bills do not fall under the definition of interest u/s 2(28A). The nature of the payment was considered a trade liability, not requiring TDS deduction under s. 194A or falling under s. 40(a)(ia) disallowance. 4. Relying on previous decisions, the ITAT determined that the interest paid for delayed purchase payments did not qualify as interest u/s 2(28A) and was not subject to TDS deduction. Consequently, the ITAT directed the AO to delete the addition made by the AO and allowed the appeal. *Note: Separate judgment was not delivered by the judges mentioned in the citation.*
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