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TMI Blog2018 (6) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... Madhumita Roy, Judicial Member Appellant by : Shri T. P. Hemani, A.R. Respondent by : Shri Rajesh Meena, Sr. D.R. ORDER Per Waseem Ahmed, Accountant Member The captioned appeal has been filed at the instance of the assessee against the appellate order of the Commissioner of Income Tax(Appeals)-9 Ahmedabad [CIT(A) in short] vide appeal no.CIT(A)- XI/412/Wd-5(2)/13-14 dated 02.01.2015 arising in the assessment order passed under s.143(3) of the Income Tax Act, 1961 (here-in-after referred to as the Act ) dated 28.02.2013 relevant to Assessment Year (AY) 2010-11. 2. The grounds of appeal raised by the assessee are as under:- 1. The ld.CIT(A) has erred both in law and on the facts of the case in confirming the action of learned AO in disallowing an amount of ₹ 21,62,634/- u/s. 40(a)(ia) r.w.s 194A of the Act. The Id. CIT(A) ought to have considered that claim of discounting charges doesn't fall under the purview of the provisions of section 40(a)(ia) r.w.s 194A of the Act. 2. Alternatively and without prejudice to the above, the ld. CIT(A) has erred in holding that the inserted proviso to section 40(a)(ia) of the Act by Finance Act 2012 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng materials to Laren Toubro Ltd. and LAFARGE AGGREGATES CONCRETE INDIA PVT. LTD. on credit ranging from 45 to 75 days. The assessee used to get the bills raised to the above companies discounted from L T Finance Ltd. The assessee in support of his claim also supplied the copy of certificate obtained from L T Finance Ltd. Assessee alternatively also submitted that the discounting charges paid to L T Finance Ltd. have suffered the tax in the hands of L T Finance Ltd. Therefore, no disallowance can be made regarding the proviso attached to section 40(a)(ia) of the Act. However, learned CIT(A) disregarded the contention of the assessee and confirmed the order of the AO by observing as under: 3.2 I have carefully considered the rival contentions. After giving careful thought to detailed submission given by appellant I am of the opinion that the amendment in sec 40(a)(ia) by Finance Act 2012 does not change basics of provision u/s 40 (a)(ia). the amendment is only prospective and effective w.e.f 01.04.2013 which is discussed as under: With a view to liberalize provisions of Section 40(a)(ia) of the Act Finance Act 2012 brought amendment w.e.f 01.04.2013 as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecided the matter in favour of Revenue and held that amendment brought out by Finance Act, 2010 to Section 40(a)(ia) with effect from 1-4-2010 being not remedial and curative in nature cannot be declared as having retrospective effect from date of insertion of provision, i.e., 1-4-2005. In the case of income Tax Appellate Tribunal - Chandigarh Sh. Umesh Trehan, Chandigarh vs Assessee on 27 June, 2013 IN THE.INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH 'A', CHANDIGARH ITA No.1022/Chd/2012 (Assessment Year:2009-10) the issue has been dealt in detail wherein it HAS BEEN DISCUSSED AS UNDER;- That on the facts and circumstances of the case, Ld.CIT (A) has grossly erred in confirming addition of ₹ 12,84,325/- u/s 40(a)(ia) of the Income Tax Act,.1961 on account of alleged non.deduction of TDS on interest paid to NBFC's. Addition confirmed u/s 4o(a)(ia)of the Act is illegal and bad in law. b) That on the facts circumstances of the case, Ld. CIT(A) has grossly erred in confirming Ld.A.O's action of invoking provisions of sec. 40(a)(ia) of the Act on interest on loans from NBFC's which stood paid on 31-03-2009 to followings: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment made by Finance Act, 2012 as the same is prospective not retrospective. Hence I am in agreement with the view taken by A.O and addition on this issue stands confirmed. Being aggrieved by order of learned CIT(A) assessee is in the second appeal before us. Assessee before us filed a paper book which is running from pages 1 to 58 and submitted that: Assessee has entered into an arrangement with L T for short) as per which, L T discounts the invoices and makes payment to the assessee. In lieu of such services, L T charges certain sum from the assessee and such charges are called discounting charges . Thus, assessee basically gets its sale consideration discounted from L T so as to get the underlying sum early and for that. L T charges discounting charges . Thereafter, it is the responsibility of L T to recover such sum from the concerned customers. Such discounting charges for the year under consideration aggregate to ₹ 21,62,669/- as is evident from certificate issued by L T (Pg-31 of P/B). S. 194A provides for deducting lax at source on Interest (other than interest on securities . As per S.2(28A). interest means interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hings claimed that L T Finance Ltd. had included the bill discounting charges in its income tax return. Therefore, no disallowance on account of non-deduction of TDS can be made. However, the learned CIT(A) disregarded the contention of the assessee on the ground that the assessee was liable to deduct the TDS u/s 194A r.w.s. 40(a)(ia) of the Act. Similarly, the learned CIT(A) also observed that the amendment brought u/s 40(a)(ia) of the Act is prospective and not applicable for the year under consideration. Thus, the view taken by the AO was confirmed by the learned CIT(A). At this juncture we find important and relevant to reproduce the provision of Section 2(28A) of the Act, which reads as under: (28A)82 interest 83 means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised ;] From the above provisions, it is revealed that discounting charges are outside the purview of interest expenses, therefore, in our conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised by the Learned AR that L T Finance Ltd. has paid the taxes on the discounting charges received from the assessee. Indeed The said proviso though inserted by the Finance Act 2012 w.e.f. 1-4-2013 has been held to be retrospective in operation by recent decision of the Hon'ble Delhi High Court in the case of CIT v. Ansal Land Mark Township (P) Ltd. (2015) 61 taxmann.com 45 (Del) wherein the question raised before the court and the decision rendered thereon is reproduced herein below for the sake of clarity:- Question: Whether the second proviso to Section 40(a)(ia) (inserted by the Finance Act, 2012), which states that TDS shall be deemed to be deducted and paid by a deductor if resident recipient has disclosed the amount in his return of income and paid tax thereon, is retrospective in nature or not? Held: Section 40(a)(ia) was introduced by the Finance (No.2) Act, 2004 to ensure that an expenditure should not be allowed as deduction in the hands of an assessee in a situation where income embedded in such expenditure has remained untaxed due to tax withholding lapses by the assessee. Hence, section 40(a)(ia) is not a penalty provision for tax withholding la ..... X X X X Extracts X X X X X X X X Extracts X X X X
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