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TMI Blog2019 (8) TMI 1051X X X X Extracts X X X X X X X X Extracts X X X X ..... ve of the payment of tax, the question is it is to be seen whether the recipient had admitted the income representing the interest paid by the assessee or not. If the interest is included and exemption u/s 10(23C)(vi) is allowed, the assessee satisfied the requirement of not to treat the assessee in default for the purpose of section 201(1) of the Act. In the instant case, there is no dispute that the recipient had filed the returns of income by including the interest received from the assessee. Therefore, there is no case for making the addition u/s 40(a)(ia), hence the orders of the lower authorities are set aside and the appeal of the assessee is allowed. - I.T.A.No.598/Viz/2018 - - - Dated:- 21-8-2019 - Shri V. Durga Rao, J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of ₹ 27,29,767/- relating to interest for non deduction of tax at source u/s 40(a)(ia) of the Act. 3. Aggrieved by the order of the Assessing Officer (AO), the assessee filed appeal before the CIT(A) and the Ld.CIT(A) confirmed the addition. 4. Against the order of the Ld.CIT(A) the assessee filed appeal before the Tribunal and the Hon ble ITAT in it s order vide I.T.A. No.236/Viz/2013 dated 17.06.2016 has remitted the matter back to the file of the Assessing Officer(AO) for limited purpose to verify whether the recipient had accounted the interest income and discharged the obligation by filing returns of income and allow the deduction. Before the Tribunal, in the first round of appeal, the Ld.A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Education Society for the A.Y. 2008-09 and 2009-10. On perusal of paper book filed by the assessee (PB Page No. 54 to 63), we noticed that the assessee had paid interest of ₹ 27,29,767/- for the A.Y. 2009-10 and the recipient Sri Koundinya Education Society had accounted interest income of ₹ 27,29,767/- in their books of accounts in two financial years, i.e. F.Y. 2007- 08 ₹ 14,66,813/- and F.Y. 2008- 09 ₹ 12,62,954. Similarly, the assessee had paid interest of ₹ 50,13,728/- and the recipient had accounted interest income in the financial year 2009-10 and furnished a certificate from the Chartered Accountant under the provisions of sec. 201(1) of the Act, to the effect that the payee had discharged the tax on s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b clause (ia) of sec. 40(a) was inserted by the Finance (No.2) Act, 2004. Therefore, we are of the view that in view of the second proviso to sec. 40(a)(ia) of the Act, if assessee fails to deduct TDS, but is not deemed to be an assessee in default under the first proviso to sub sec. (1) of sec. 201, then, for the purpose of this sub clause, it shall be deemed that the assessee has deducted and paid the tax on such some and no disallowance can be made under sec. 40(a)(ia) of the Act. 14. In the present case on hand, the assessee claims that the recipient had included the interest income in their books of accounts and discharged the tax liability on such interest. The assessee further claims that the assessee was not held as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er chapter XVIIB of the Act and accordingly made the addition. The assessee went on appeal before the CIT(A) and the Ld.CIT(A) agreed with the view of the AO and confirmed the addition. 5. We have heard both the parties and perused the material placed on record. The ITAT, in it s order dated 17.06.2016 after considering the submissions made by the assessee and the provisions of the Act, has taken a conscious decision to allow the deduction subject to verification, whether the recipient had accounted the interest income and discharged its obligation by filing returns of income or not. In the instant case, it is evident from para No.13 of the order of this Tribunal that it is aware of the effective date of second proviso to sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the recipient had admitted the impugned interest and filed in the return of income. The assessee had also filed acknowledgement of returns for the A.Y. 2008-09 and 2009-10 admitting the said income. This fact was not disputed by the AO. The AO s grievance is that the income of the assessee was exempt u/s 10(23C)(vi), therefore, contended that the recipient has not paid the tax , thus not complied with the directions. Irrespective of the payment of tax, the question is it is to be seen whether the recipient had admitted the income representing the interest paid by the assessee or not. If the interest is included and exemption u/s 10(23C)(vi) is allowed, the assessee satisfied the requirement of not to treat the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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