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TMI Blog2024 (6) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... r opinion, the provision of Section 194A of the Act is applicable only to the interest on borrowed capital and not on the interest which is paid on delayed payment of purchase considerations. The case of the assessee finds support from the decision of the Coordinate Bench in the case of Harbhajan Singh [ 2017 (1) TMI 1089 - ITAT KOLKATA] wherein the similar issue has been decided in favour of the assessee - We direct the AO to delete the addition. Appeal filed by the assessee is allowed. - SRI RAJESH KUMAR , ACCOUNTANT MEMBER And SONJOY SARMA , JUDICIAL MEMBER For the Assessee : Sh. Miraj D. Shah , A / R For the Department : Sh. B. K. Singh , JCIT , Sr. D / R ORDER Per Rajesh Kumar , Accountant Member : This appeal preferred by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as soon as the broker purchases share on the direction of the assessee that is incurred by the assessee with the broker and on delayed payment of such amount, interest is charged by the broker which comes under the purview of Section 2(28A) of the Act and therefore, the AO distinguished the case laws relied by the assessee. Finally, the AO observed that TDS has not been deducted on the interest on delayed payments and therefore, 30% of the interest payments of Rs. 82,56,935/- becomes disallowable u/s 40(a)(ia) of the Act and accordingly Rs. 24,68,080/- was added to the income of the assessee. Ld. CIT(A) simply upheld the order of the AO. 4. After hearing the rival contentions and perusing the material on record, we find that in this case th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DS was deposited within the due date of filing of income tax returns and the deduction is allowable in terms of judgment of Hon ble jurisdictional High Court in the case of CIT Vs. Virgin Creations in G.A. No. 3200 of 2011 ITAT No. 302 of 2011 wherein it was held as under:- Moreover, the Supreme Court, as has been recorded by the learned Tribunal, in the case of Allied Motors Pvt. Ltd., and also in the case of Alom Extrusions Ltd., as already decided that the aforesaid provision has retrospective application again, in the case reported in 82 ITR 570, the Supreme Court held that the provision, which has inserted the remedy to make the provision workable, requires to be treated with retrospective operation so that reasonable deduction can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eu of use of borrowings. It is payable by a debtor to the creditor. But it is also worth to note that the said definition is not wide enough to include other payments. There ought to be distinction between the payments not connected with any debt, with a payment having connection with the borrowings. A payment having no nexus with a deposit, loan or borrowing is out of the ambit of the definition of interest as per s. 2(28A). Ghaziabad Development Authority vs. Dr. N.K. Gupta (2002) 258 ITR 337 (NCDRC) relied on. The term interest used in s. 194A relates to and in connection of a debt or a loan or a deposit. The circumstances under which the assessee is required to deduct the tax have also been narrated. Therefore, a conclusion can be drawn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he delayed purchase payment, hence, did not fall within the category of interest as defined in s. 2(28A) for the purpose of deduction of tax at source as prescribed under s. 194A. Resultantly, the assessee cannot be held a defaulter of non-deduction of tax at source under s. 194A. If a payment is compensatory in nature and not related to any deposit/debt/loan, then such a payment is out of the ambit of the provisions of s. 194A; impugned payment had a direct link and immediate nexus with the trade liability being connected with the delayed purchase payment, hence, did not require TDS and no disallowance unders. 40(a)(ia) was called for. 12.1 Similarly we also rely in the order of Hon ble ITAT Hyderabad Benches in the case of Venkatesh Paper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance of an amount of Rs.3,12,600 made u/s 40(a)(ia) cannot be sustained. We, therefore, direct the Assessing Officer to delete the same. The ground raised by the assessee is allowed. The proposition laid down by the Hon ble courts as discussed above are very much applicable to the instant case on hand. In the present case, the interest was paid for the delayed payment of the bills which in our considered view is outside the purview of the provisions of section 194A of the Act. Accordingly, the provisions of TDS will not be attracted to the payment of interest in the aforesaid cases. In view of above, we are inclined to reverse the order of authorities below. Hence the ground of appeal of the assessee is allowed. 13. In the result, ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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