Tribunal overturns CIT(A) decision on interest disallowance under section 40(a)(ia)

The Tribunal set aside the CIT(A)'s decision to delete the disallowance of interest expenditure under section 40(a)(ia) of the Act. The case was remanded to the AO for fresh adjudication, considering the Finance Act, 2012 amendments, and granting the assessee a hearing opportunity. The Revenue's appeal was allowed for statistical purposes.

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Issues involved: Disallowance of interest expenditure u/s 40(a)(ia) of the Act.

Summary:
The appeal was filed by the Revenue against the order of the CIT(A)-XV, Ahmedabad dated 3.9.2012. The sole issue was the deletion of disallowance of interest paid to G.E. Capital and Cholamandlam Finance Co. u/s 40(a)(ia) of the Act by the learned CIT(A).

The AO disallowed interest expenditure of &8377; 8,16,690/- as TDS was not deducted u/s 194A of the Act. The assessee argued that it was difficult to deduct TDS on interest payments made as per loan terms. The learned CIT(A) vacated the disallowance citing a Tribunal case that section 40(a)(ia) applies only to amounts payable as of 31st March.

The learned DR argued that a High Court case overruled the Tribunal's decision, stating that section 40(a)(ia) covers amounts payable at any time during the year. The assessee requested a remand for reevaluation considering the Finance Act, 2012 amendments.

The Tribunal set aside the CIT(A)'s order, remanding the issue to the AO for fresh adjudication. The AO was directed to consider the Finance Act, 2012 amendments and allow the assessee a hearing opportunity. The appeal of the Revenue was allowed for statistical purposes.

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