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TMI Blog2022 (11) TMI 965X X X X Extracts X X X X X X X X Extracts X X X X ..... categorised as interest it is essential that the same is payable in respect of money borrowed or debt incurred. Upon perusal of the definition of interest as per section 2(28A). Interest pertains only to monies borrowed or debt incurred or for any credit facility. In the present case in hand, there is no such classification of money involved which attracts the said interest . The transaction entered into by the assessee is with M/s SBI Global Factors Ltd is only a discounted sale consideration arising out of debts purchased by M/s SBI Global Factors Ltd from the assessee. This does not extend to the nature of debt thereby establishing that discounting / factoring charges are not in the nature of interest as defined in section 2(28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax(Appeals)-18, Mumbai dated 14/10/2019 passed under section 250 of the Income-tax Act, 1961 pertaining to assessment year 2012-13. 2. The grounds of appeal raised by the assessee are as below:- 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by the Assessing Officer u/s 40(a)(ia) of the Act without appreciating the facts that factoring charges debited by the assessee-company are of the nature of interest only and TDS is liable to be deducted under section 40(a)(ia) of the Act. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in relying upon the certificate by accountant under section 201(1) of the Act when the secon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under section 40(a)(ia) of the Act. The Ld.DR further stated that mere obtaining certificate from the Chartered Accountant is not suffice to prove that the assessee cannot be treated as an assessee in default under section 201(1) of the Act and that the Second Proviso to section 40(a)(ia) was inserted by the Finance Act, 2012 with effect from 01/04/2013. The Ld.DR relied on the order of the Assessing Officer. 5. The Ld.AR, on the other hand, contended that the assessee company has entered into a factoring agreement with M/s SBI Global Factors Ltd thereby incurring factoring expenses of Rs.1,56,10,554/-. The Ld.AR further stated that the factoring charges incurred are not in the nature of interest and that section 194A is not applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- of M/s SBI Global Factors Ltd, whether or not the assessee company received the bill amount from customers. This, according to the assessee, is no way a debt incurred by the assessee from M/s SBI Global Factors Ltd. The amount paid to the assessee by M/s SBI Global Factors Ltd as bill discounting is akin to a sale proceeds pertaining to debts purchased by M/s SBI Global Factors Ltd from the assessee. The assessee has differentiated the factoring charges with that of the definition of interest on securities under section 2(28A). The assessee further stated that it is only in the nature of discounted sale consideration which is receivable on sale of goods and there is no borrowal of money resulting in debt or credit facility. It is fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, we are of the view that the factoring charges incurred by the assessee company is not in the nature of interest and that the assessee was not under the obligation to deduct TDS as per the provisions of section 40(a)(ia) of the I.T. Act. For this, we would like to place our reliance on the decision of Hon ble Supreme Court in the case of Bombay Steam Navigation Co. P. Ltd vs CIT (1963) 56 ITR 52 (SC) which held that interest on unpaid purchase price is not in the nature of interest on loan and for any amount which is to be categorised as interest it is essential that the same is payable in respect of money borrowed or debt incurred. Upon perusal of the definition of interest as per section 2(28A) which is extracted below section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon ble jurisdictional Bombay High Court in the case of Pr. Commissioner of Incometax- 5 vs Perfect Circle India P. Ltd in which the Hon ble High Court has held that the Second Proviso to section 40(a)(ia) has retrospective effect from 01/04/2005, the date from when the impugned Proviso to section 40(a)(ia) was inserted. The Hon ble High Court also relied on the decision of Hon ble Delhi High Court in the case of CIT vs Ansal Landmark Township P Ltd (2015) 377 ITR 635 (Del) which held that section 40(a)(ia) is not a penalty and insertion of Second Proviso is declaratory and curative in nature and would have retrospective effect from 01/04/2005 and not with effect from 01/04/2013. From the above observation, by respectfully following the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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