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TMI Blog2016 (5) TMI 619X X X X Extracts X X X X X X X X Extracts X X X X ..... invoking jurisdiction u/s.263 of the I.T. Act. - Decided in favour of assessee. - ITA No.1168/PN/2014 - - - Dated:- 6-4-2016 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Appellant : Shri S.N. Doshi For The Respondent : Shri S.K. Rastogi ORDER PER R.K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 18-03-2014 passed u/s.263 by the CIT, Aurangabad relating to Assessment Year 2009-10. 2. Facts of the case, in brief, are that the assessee is a partnership firm engaged in the business of Travel Agency under the name and style of M/s. City Link Travels at Aurangabad. It filed its return of income on 29-09-2009 declaring total income of ₹ 4,29,900/-. The AO completed the assessment u/s.143(3) on 11- 04-2011 determining the total income at ₹ 5,23,342/-. The Ld. CIT examined the records and noted that the assessee has borrowed secured loans from Tata Finance and Tata Motors Ltd. for purchase of vehicles. The assessee during the year has paid interest to the tune of ₹ 17,45,830/- to the said non banking financial companies without deduction of tax as per the provisions of section 194A. Since tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held by Supreme Court in case of Vegetable Products Ltd. 88 ITR 192. The above grounds of appeal may kindly be allowed to be amended, altered, modified etc., in the interest of natural justice. 4. The Ld. Counsel for the assessee strongly challenged the action of the CIT in invoking the jurisdiction u/s.263 of the I.T. Act. Referring to page 4 of the paper book filed the Ld. Counsel for the assessee submitted that prior to invoking action u/s.263 by the CIT, the AO had initiated proceedings u/s.154 on the very same issue by proposing to rectify the assessment order for making disallowance of ₹ 17,45,839/- u/s.40(a)(ia) of the I.T. Act. Referring to page 5 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the reply given by the assessee vide letter dated 12- 09-2012 wherein it was stated that each and every details/information which was necessary as well as asked by the AO to complete the assessment proceedings were furnished. It was stated that the AO at that time of completing the assessment was of the opinion that interest paid to Tata Finance and Tata Motors Ltd. is not covered under the disallowance of provisions of section 40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs. ITO reported in 153 ITD 247 7. The Ld. Counsel for the assessee referring to the proviso to section 40(a)(ia) inserted w.e.f. 01-04-2013 submitted that where the payee has offered the relevant income and paid the taxes thereon the payer cannot be considered as defaulter within the meaning of section 201 of the I.T. Act. He submitted that there is hardly any reason to believe that the reputed companies such as Tata Finance and Tata Motors Ltd. have not offered the interest income in their return of income. Therefore, in that case also no disallowance is called for u/s.40(a)(ia) of the I.T. Act. 8. The Ld. Departmental Representative on the other hand heavily relied on the order of the Ld.CIT. He submitted that since the assessee has not deducted any tax u/s.194A from the interest paid to Tata Finance and Tata Motors Ltd., therefore, no disallowance u/s.40(a)(ia) was required which the AO has failed to do. Therefore, the order passed by the AO has become erroneous as well as prejudicial to the interest of the revenue. Therefore, the CIT was justified in invoking the jurisdiction u/s.263 of the I.T. Act. 9. We have considered the rival arguments made by both the sides, pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... THE I.T. ACT, 1961 The proceedings initiated under section 154 by issue of notice under section 154 for the assessment year 2009-10 are hereby dropped. 11. We further find from the submission of the assessee as well as the order of the Ld.CIT that the interest has actually been paid during the year and nothing was payable at the end of the financial year. During the relevant period of time there are decisions both in favour of the assessee as well as against the assessee on account of disallowance u/s.40(a)(ia) when no amount is outstanding. While decision of Hon ble Allahabad High Court in the case of Vector Shipping Service Pvt. Ltd. reported in 357 ITR 642 and the decision of Special Bench of the Tribunal in the case of Merilyn Shipping and Transport reported in 136 ITD 23 are in favour of the assessee there are also decisions against the assessee by the decision of Hon ble Gujarat High Court in the case of Sikanderkhan Tunwar and Hon ble Kolkata High Court in the case of Crescent Export Syndicate. Thus, whether the provisions of section 40(a)(ia) are attracted for non-deduction of tax u/s.194A from the payments made to Tata Finance and Tata Motors Ltd. is a debatable is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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