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TMI Blog2017 (6) TMI 489X X X X Extracts X X X X X X X X Extracts X X X X ..... to the record of the AO for verification of the fact that the recipient NBFCs have already taken into account the amount of interest received by them for computing the income in their return of income. Appeal of the assessee is allowed for statistical purposes. - ITA No. 144/Bang/2017 - - - Dated:- 7-6-2017 - SHRI VIJAY PAL RAO, JUDICIAL MEMBER For The Appellant : Shri C.R. Nulvi, CA For The Respondent : Shri M.K. Biju, JCIT ORDER Per Vijay Pal Rao, Judicial Member This appeal by the assessee is directed against the order dated 23.11.2016 of CIT(A) for the assessment year 2013-14. The assessee has raised the following grounds. 1.The order of the A.O is bad in law and against the fact and circumstances of the case. 2.On the facts and circumstances of the case and under the provisions of the law, the A.O erred in making the addition u/s 40(a)(ia) for the interest paid to NBFC s without TDS for the loan availed, as the Section 194A(1) is not applicable to financial corporation s i.e., NBFC s. 3. On the facts and circumstances of the case and under the provisions of the law, the A.O erred in making the addition u/s 40(a)(ia), as the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the AO however, the assessee raised this issue before the CIT(A) and now filed these certificates in support of his claim. Hence it is pleaded that the additional evidence filed by the assessee may be admitted and the matter may be remitted to the record of the AO for verification and deciding the same. On the other hand, the ld. DR has objected to the prayer of the assessee for admitting the additional evidences. He has relied upon the orders of the authorities below. 5. I have considered the rival submissions as well as relevant material on record. As regards the applicability of the second proviso to section 40(a)(ia) retrospectively an identical issue was considered by the Hon ble Delhi High Court in case of CIT Vs Naresh Kumar (362 ITR 256) and held that the proviso inserted in section 40(a)(ia) is an explanatory and remedial in nature and therefore will be applicable with retrospective effect in para 26 to 29 as under. 26. Principle of matching which is disturbed by Section 40(a)(ia) of the Act, may not materially be of consequence to the Revenue when the tax rates are stable and uniform or in cases of big assessees having substantial turnover and equally huge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercantile system of accountancy, in the year of accrual. It was noticed that in some cases hardship would be caused to assessees, who paid the statutory dues within the prescribed period though the payments so made would not fall within the relevant previous year. Accordingly, a proviso was added by Finance Act, 1987 applicable with effect from 1st April, 1988. The proviso stipulated that when statutory dues covered by Section 43B were paid on or before the due date for furnishing of the return under Section 139(1), the deduction/expense, equal to the amount paid would be allowed. The Supreme Court noticed the purpose behind the proviso and the remedial nature of the insertion made. Of course, the Supreme Court also referred to Explanation 2 which was inserted by Finance Act, 1989 which was made retrospective and was to take effect from 1st April, 1984. Highlighting the object behind Section 43B, it was observed that the proviso makes the provision workable, gives it a reasonable interpretation. It was elucidated: 12. In the case of Goodyear India Ltd. v. State of Haryana this Court said that the rule of reasonable construction must be applied while construing a statute. Lit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erve its object in such a situation unless it is construed as retrospective. The view, therefore, taken by the Delhi High Court cannot be sustained. 23. Section 43B deals with statutory dues and stipulates that the year in which the payment is made the same would be allowed as a deduction even if the assessee is following the mercantile system of accountancy. The proviso, however, stipulates that deduction would be allowed where the statutory dues covered by Section 43B stand paid on or before the due date of filing of return of income. Section 40(a)(ia) is applicable to cases where an assessee is required to deduct tax at source and fails to deduct or does not make payment of the TDS before the due date, in such cases, notwithstanding Sections 30 to 38 of the Act, deduction is to be allowed as an expenditure in the year of payment unless a case is covered under the exceptions carved out. The amended proviso as inserted by Finance Act, 2010 states where an assessee has made payment of the TDS on or before the due date of filing of the return under Section 139(1), the sum shall be allowed as an expense in computing the income of the previous year. The two provisions are akin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uting their income offered to tax then the disallowance u/s. 40(a)(ia) is not attracted. In this case though the assessee did not file the relevant material before the AO in this regard however, it is a fact which existed right from the beginning and the relevant details are available with the revenue regarding the income offered by these NBFCs. Therefore, in view of the facts and circumstances of the case if the certificates filed in support of the claim that the NBFCs have included this amount of interest in computation of their income offered to tax are found to be correct then the compliance u/s. 40(a)(ia) is deemed to have been made and no disallowance is called for. Therefore this issue is set aside to the record of the AO for verification of the fact that the recipient NBFCs have already taken into account the amount of interest received by them for computing the income in their return of income. In case the AO is satisfied that the NBFCs have considered this amount for computation of income in their return of income then no disallowance is called for u/s. 40(a)(ia). 5. In the result, the appeal of the assessee is allowed for statistical purposes. 6. Pronounced in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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