2015 (10) TMI 2046 - AT - Income Tax

Tribunal allows delay condonation, upholds CIT(A) on TDS, disallows STT credit for 2011-12.

Asst. Commissioner of Income Tax, Circle-1 (1), Tirupati Versus Sri V. Dwarakanath Reddy

The Tribunal allowed the condonation of delay in filing appeals by the Revenue. Regarding the disallowance under Section 40(a)(ia) for non-deduction of ... Disallowance made U/s. 40(a)(ia) - non deduction of TDS on the interest paid - said interest payments have been accounted by the payee in their Books of Accounts and payee has offered as part of their computation in the return of income. - Held that:- No reason to interfere with the well reasoned order of CIT(A) as he has considered the legal principles established by the Co-ordinate Benches and accordingly, decided the issue. Therefore, the order of CIT(A) is upheld and Revenue’s ground on this is rejected. In fact the Revenue’s ground is that second proviso is effective only from 01-04-2013 and not for the impugned assessment years. Since this issue was already considered and decided that the second proviso to Section 40(a)(ia) is declaratory and curative in nature and has retrospective effect from 01-04-2005 from the date in which sub-clause i.e., section 40(a) was inserted by Finance Act. In view of this, we find no merit in the Revenue’s contentions - Decided against revenue. Credit for Security Transactions Tax - CIT(A) allowed the claim - Held that:- There is a mistake in the direction of CIT(A) to give credit for the Security Transaction Tax as per the provisions of Section 88E. The Ld. CIT(A) failed to notice that vide sub-section 3 of Section 88E, no deduction under this section shall be allowed in or after the assessment year beginning on the first day of April, 2009. Since, the impugned assessment years are after that date, the direction of CIT(A) is not as per the provisions of law. Accordingly, the order of CIT(A) on this issue is set aside. The order of AO is therefore restored. - Decided in favour of revenue. Issues Involved:1. Condonation of delay in filing appeals.2. Disallowance under Section 40(a)(ia) for non-deduction of TDS on interest payments.3. Credit for Security Transaction Tax (STT) under Section 88E.Detailed Analysis:1. Condonation of Delay in Filing Appeals:The Revenue filed appeals with a delay of 16 days, citing that the records could not be traced. The Tribunal, considering the application and arguments from both parties, condoned the delay and admitted the appeals.2. Disallowance under Section 40(a)(ia) for Non-Deduction of TDS on Interest Payments:In both assessment years (2010-11 and 2011-12), the common issue was the disallowance of interest payments under Section 40(a)(ia) due to non-deduction of TDS. The assessee, an individual and partner in a firm, paid interest to the firm without deducting TDS, which the Assessing Officer (AO) disallowed. The assessee argued that since the firm had included the interest as income and paid taxes, disallowing the amount would result in double taxation. The CIT(A) accepted the assessee's claim, relying on judicial decisions that the second proviso to Section 40(a)(ia), inserted by the Finance Act, 2013, should be applied retrospectively. The CIT(A) directed the AO to verify if the amounts were offered for tax by the payee and, if so, to allow the expenses. The Tribunal upheld the CIT(A)'s decision, stating the second proviso is declaratory and curative, having retrospective effect from April 1, 2005. The Tribunal rejected the Revenue's contention that the proviso applies only from April 1, 2013.3. Credit for Security Transaction Tax (STT) under Section 88E:For the assessment year 2011-12, the issue was whether the assessee should get credit for Security Transaction Tax (STT) of Rs. 7,58,263. The AO disallowed the amount as it was claimed twice, and the assessee's AR agreed to the disallowance. However, the CIT(A) directed the AO to give credit for the STT under Section 88E. The Tribunal noted that Section 88E(3) disallows such credit for assessment years beginning on or after April 1, 2009. Since the assessment years in question were after this date, the Tribunal set aside the CIT(A)'s direction and restored the AO's order, disallowing the credit for STT.Conclusion:- The appeal for AY 2010-11 was dismissed.- The appeal for AY 2011-12 was partly allowed, specifically disallowing the credit for STT as per Section 88E.Order Pronouncement:The order was pronounced in the open court on September 11, 2015.