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TMI Blog2015 (6) TMI 759X X X X Extracts X X X X X X X X Extracts X X X X ..... on’ble Calcutta High Court judgment, we hold that the factoring charges will not come within the purview of section 2(28A) of the Income-tax Act, 1961 and as such, the provisions of TDS are not applicable on facts and circumstances of the case. - Decided in favour of assessee. - ITA No.5419/Del./2012 - - - Dated:- 17-6-2015 - Shri S.V. Mehrotra and Shri George George K., JJ. For the Petitioner: Shri Sachin Jain, CA For the Respondent: Shri P. Dam Kanunjna, Senior DR ORDER PER GEORGE GEORGE K., JUDICIAL MEMBER : This appeal, at the instance of the assessee, is directed against the order of the Commissioner of Income-tax (Appeals)-IX, New Delhi dated 27.07.2012. The relevant assessment year is 2009-10. 2. The assessee in its grounds of appeal raised six grounds. All the grounds relate to the issue whether the CIT (A) is justified in confirming the addition of ₹ 93,68,870/- by invoking the provisions of section 40(a)(ia) of the Income-tax Act, 1961. 3. The assessee is a private limited company engaged in the business of manufacturing and trading in gold, diamond jewellery and bullion. For the relevant year, return of income was filed on 07.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and bill discounting. On the basis of the detailed discussion, (and referring to the various clauses of the Agreement entered into by the appellant with GTF), the Id. AO has successfully established that the arrangement the appellant had with GTF, falls in the realm of factoring. The following distinctive facts emerge from the findings recorded by the ld. AO in the assessment order : (i) The whole concept of factoring charges shows that they are in the nature of specialized services rendered by the financial institutions. The concept of factoring also shows that the prepayments made, against the invoices, is nothing but a shortterm financing facility provided by the financial Institution (factor), on which the client is under a legal obligation to pay interest at a fixed rate along with the factoring charges. (ii) The finance so provided is to be recovered by the factor from the debtors of the client and in case of default by the debtors the entire advance given by the factor is liable to be repaid by the client to the factor along with the interest. The interest paid by the client is also termed as discount charges , however, the terminology itself cannot change th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also charged factoring charges @ 0.10% on the gross invoice amount. Hence, GTF was charging interest on the finances and the factoring charges on the factoring services provided by it. The factoring charges are administrative charges which are charged towards providing services to the operational overheads and collection of debts etc. 6.1 On the basis of the aforesaid facts, I find that the appellant's contention that it did not pay interest to GTF on factoring services is not tenable and is against the whole concept of factoring. The appellant's contention that 'Factoring' is synonymous with 'Bill/Invoice Discounting' this is factually incorrect as 'Factoring' and 'Sill/Invoice discounting' are two different concepts having distinctive features as elaborately brought out by the ld. AO in the assessment order. 6.2 It is clear from the plain reading of Section 2(28A) that money paid in respect of amount borrowed or debt incurred, is interest payable in any manner. The definition of interest in Section 2(28A) after referring to the interest payable in any manner in respect of any moneys borrowed or debt incurred proceeds to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduct tax in the earlier years cannot absolve the appellant from discharging its legal obligation. 6.4 Moreover, as mentioned earlier, GTF is an NBFC and not a banking company governed by the Banking Regulation Act 1949. The appellant's contention is, therefore, found to be baseless and devoid of any merits and accordingly liable to be rejected. 6.5 Although, the Id. AR vehemently argued that there is no difference between factoring and bill discounting and if there are any differences at all, the same prove that both are nothing but the same type of facility, but it could not meaningfully counter the differences elaborately pointed out by the Ld. AO in the assessment order. The contentions / averments made by the appellant on the differences pointed out between Bill Discounting and Factoring by the AO are too shallow superfacial and hence not tenable. 6.6 In view of the aforesaid detailed discussion, I hold that the ld. AO has rightly disallowed the amount of ₹ 93,68,870/- invoking the provisions of section 40(a)(ia) of the Act as no TDS was made by the appellant. Accordingly, the ground nos. 2 and 4 are rejected. 6. The assessee, being aggrieved ..... X X X X Extracts X X X X X X X X Extracts X X X X
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