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TMI Blog2011 (5) TMI 503X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the departmental authorities are justified in disallowing the interest of Rs. 7,87,291 by invoking section 40(a)(ia) of the Act. Under this section any interest paid by the assessee on which tax is deductible at source under Chapter XVII-B but such tax has not been deducted or after deduction the same has not been paid on or before the due date specified in section 139(1) for filing the return, will be disallowed in computing the income from business. The assessee herein paid Rs. 13,51,056 on account of interest and claimed the same as deduction in computing his business income. The Assessing Officer noted that the assessee had paid interest exceeding Rs. 5,000 to 34 parties and the total thereof came to Rs. 7,87,291. The Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e claimed that they also filed form No. 15G with the assessee which were in turn filed by the assessee with the office of the CIT(TDS). From these facts, the Assessing Officer came to the conclusion that the assessee purposely did not deduct the tax as required by section 194A. He accordingly invoked section 40(a)(ia) and disallowed the interest payment of Rs. 7,87,291. 4. On appeal the CIT(A) held that the assessee's arguments cannot be accepted because unless and until the declarations filed by the payees of the interest in the prescribed form are filed with the CIT(TDS) within seven days of the month following the month in which they were submitted to the assessee they are as good as no declarations having been filed and therefore the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n order to prevent misuse of the provisions of section 197A, it should be held that the assessee did not have the declarations of the payees before him when the payment of interest was made and consequently he was under a liability to deduct tax under section 194A. Having failed to do so, it was submitted, the assessee must suffer the disallowance. 6. We have carefully considered the facts and the rival contentions. Section 194A provides for deduction of tax from the interest paid by the assessee, at the appropriate rate. Section 197A(1A) provides that notwithstanding anything contained in section 194A no deduction of tax shall be made under the section if the payee of the interest furnished to the person responsible for paying the interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest without any tax deduction. If the claim is true then the contention must be accepted because under sub-section (1A) of section 197A, if such a declaration is filed by the payee of interest, no deduction of tax shall be made by the assessee. The revenue authorities have doubted the assessee's version because according to them it is only when the Assessing Officer proposed the disallowance of the interest by invoking the section 40(a)(ia) in the course of the assessment proceedings that the assessee filed the declarations claimed to have been submitted to him by the payees of the interest, in the office of the CIT(TDS) as required by sub-section (2) of section 197A. Apart from this inference, there is no other evidence in their posse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led the payer of the interest has no choice except to desist from deducting tax from the interest. The sub-section uses the word "shall" which leaves no choice to the assessee in the matter. In the case of payment of leave travel concession and conveyance allowance to employees who are liable to deduct tax from the salary paid to the employees under section 192, the Supreme Court has held in CIT v. Larsen & Toubro Ltd. [2009] 313 ITR 1/181 Taaxman 71, that the assessee was under no statutory obligation under the Act or Rules to collect evidence to show that the employee had actually utilized the money paid towards leave travel concession/ conveyance allowance. The position is stronger under section 197A which does not apply to section 192, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e matter and separate proof and evidence is required to show that even when the assessee paid the interest, he did not have the declarations from the payees with him and therefore he ought to have deducted the tax from the payment. No such evidence or proof has been brought by the department. 8. For the aforesaid reasons, we accept the assessee's claim that since he had the declarations of the payees in the prescribed form before him at the time when the interest was paid, he was not liable to deduct tax therefrom under section 194A. If he was not liable to deduct tax, section 40(a)(ia) is not attracted. There is no other ground taken by the Income-tax authorities to disallow the interest. We therefore accept the assessee's appeal and dele ..... X X X X Extracts X X X X X X X X Extracts X X X X
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