9911796707
TMI Blog2022 (1) TMI 582X X X X Extracts X X X X X X X X Extracts X X X X ..... nj 40A(ia) of the IT Act, is arbitrary, unjust and bad in law. 2) That the disallowance of notional interest of Rs. 11,38,805/- being the amount calculateld at 12% on the amount of work-in-progress is arbitrary, unjust, bad in law and at any rate very excessive. 3) That the above grounds of appeal are independent and without prejudice to one another." 2. Apropos ground No. 1, the AO observed that the assessee had paid interest of Rs. 59,949/- to Tata Capital Ltd., which was an NBFC, without deduction of tax at source. The AO noted that the assessee was liable to deduct tax at source from the interest paid u/s 194A of the IT. Act. It was, therefore, that the AO disallowed the said expenditure of Rs. 59,949/- under the provisions of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 40(a)(ia) of the IT Act, thirty per cent of any sum payable to a resident, on which, tax is deductible at source under Chapter XVII-B and such tax has not been deducted is not to be deducted in computing the income chargeable as profit and gains of business or profession. The second proviso to section 40(a)(ia), however, lays down that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum, but is not deemed to be an assessee in default under the first proviso to section 201(1), then, for the purpose of section 40(a)(ia), it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mandate of the provisions of the first proviso to section 201(1) of the Act, that in case a certificate as above is furnished, the person is not to be considered to be an assessee in default. In such case, no disallowance u/s 40(a)(ia) can be attracted, in terms of the second proviso to section 40(a)(i)(ia), as discussed above. Accordingly, we remit this matter to the file of the AO, to examine and verify the above certificate. If the same is found to be in order, the AO shall delete the disallowance of Rs. 59,949/-. 10. So far as regards ground No. 2, the AO noted that while capitalising the amount of Rs. 94,90,045/-, the assessee was also required to capitalize the interest cost used for the purpose of capital work in progress. The amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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