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TMI Blog2017 (12) TMI 749X X X X Extracts X X X X X X X X Extracts X X X X ..... t and in case it is found that the recipient has offered the finance charges of ₹ 7,91,49,028 as income in the return of income filed for the impugned assessment year no disallowance under section 40(a)(ia) of the Act is required to be made. The impugned order is modified to this extent only. - ITA no.3710/Mum./2017 - - - Dated:- 13-12-2017 - SHRISAKTIJIT DEY, JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER For The Assessee : Shri Anuj Kisnadwala For The Revenue : Ms. S. Padmaja ORDER PER SAKTIJIT DEY, J.M. Aforesaid appeal by the assesseeis against the order dated 20th March 2017, passed by the learned Commissioner (Appeals) 4, Mumbai, under section 263 Income-tax Act, 1961 (for short the Act ) for the assessment year 2012 13. 2. Brief facts are, the assessee a company is engaged in the business of real estate developer. For the assessment year under consideration, the assessee filed its return of income on 28th September 2012, declaring loss of ₹ 87,30,715. During the assessment proceedings, the Assessing Officer noticing that the assessee has not deducted tax at source on interest payment of ₹ 1,68,44,164, disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pient company in form no.26A. It was submitted by the assessee, since, the recipient has offered the amount as income, the assessee cannot be treated as an assessee in default in terms of first proviso to section 201(1) of the Act, hence, no disallowance under section 40(a)(ia) can be made as per the second proviso to section 40(a)(ia) of the Act. The learned Commissioner of Income-tax after considering the submissions of the assessee, however, did not find merit in the same. He observed that the Assessing Officer while disallowing interest payment of ₹ 1,68,44,164 under section 40(a)(ia) of the Act for non deduction of tax at source has completely overlooked the applicability of section 40(a)(ia) on payment of finance charges of ₹ 7,91,49,028 in absence of TDS. The learned Commissioner of Income-tax further observed, the assessee had not produced any evidence either before the Assessing Officer or before him to demonstrate that the recipient of the finance charges has offered it as income in the return of income filed for the impugned assessment year. The learned Commissioner of Income-tax held, since, the Assessing Officer has not made any enquiry which he should have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntative submitted, for the aforesaid reasons, the view taken by the Assessing Officer in not disallowing the finance charges under section 40(a)(ia) being a possible view, cannot be subject matter of proceedings under section 263 of the Act. Without prejudice to the aforesaid submissions, the learned Authorised Representative submitted, the order passed by the learned Commissioner of Income-tax can be modified to the extent of issuing a direction to the Assessing Officer for the limited purpose of verifying whether the recipient has offered the amount in question as income in the return of income filed for the impugned assessment year. 6. Learned Departmental Representative submitted, though, the issue whether as per second proviso to section 40(a)(ia) of the Act is applicable to the assessee is a debatable issue and the assessee might have a strong case on the issue, however, the assessee has to satisfy the conditions of the first proviso to section 201)(1) of the Act. She submitted, unless the assessee satisfies the conditions of the first proviso to section 201(1), the provisions of second proviso to section 40(a)(ia) will not be applicable. She submitted, conditions of first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst proviso to section 201(1) of the Act. It is fairly well settled now that the second proviso to section 40(a)(ia) will have retrospective operation. In fact, in assessee s own case for the assessment year 2012 13, the Tribunal in ITA no.7011/Mum./2016, dated 1st September 2017, has upheld the order of the learned Commissioner (Appeals) in deleting the disallowance made under section 40(a)(ia) of the Act by applying the second proviso to section 40(a)(ia) of the Act. Therefore, we accept the contention of the assessee that in terms of second proviso to section 40(a)(ia) of the Act, the assessee will not be treated as an assessee in default for making disallowance under section 40(a)(ia) of the Act. However, there is another aspect to the issue. As per the first proviso to section 201(1) of the Act, the onus is on the assessee to prove that the recipient of payment made without deduction of tax at source has offered it as income in the return of income filed for the relevant assessment year. In this context, a certificate from the concerned Chartered Accountant is required to be filed before the Assessing Officer. As it emerges from the facts on record, neither the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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