ITA allows appeal on Section 40(a)(ia) disallowance due to proof of interest payment for tax non-deduction. Arm's Length price not contested. No penalty discussed.

The ITAT allowed the appeal against disallowance under Section 40(a)(ia) as the assessee proved payment of interest for non-deduction of tax, thus not defaulting. The Arm's Length price adjustment issue was not contested and therefore not addressed in the judgment. Penalty proceedings under sections 271(1)(C) and 271BA were not discussed as these grounds were not pressed during the hearing.

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Issues:
1. Disallowance under Section 40(a)(ia) for non-deduction of tax at source.
2. Arm's Length price adjustment.
3. Penalty proceedings under sections 271(1)(C) and 271BA.

Analysis:
1. The appeal was against disallowance under Section 40(a)(ia) for non-deduction of tax at source. The assessee, a Private Ltd. Company, made interest payments without TDS to a Non-Banking Financial Institution. The CIT(A) disallowed the claim despite the assessee fulfilling conditions under Section 201(1A) not to be treated as an assessee in default. The CIT(A) held the claim invalid due to the absence of a Chartered Accountant's signature on Form No. 26A provided by the assessee. However, the ITAT found that the assessee paid the interest amount for non-deduction of tax, thus not defaulting. Citing the Agra ITAT case, the ITAT allowed the appeal, stating the disallowance was unjustifiable.

2. The second issue of Arm's Length price adjustment was not pressed during the hearing, indicating the assessee did not contest it. Hence, this issue was not further deliberated upon in the judgment.

3. The penalty proceedings under sections 271(1)(C) and 271BA were initiated by the ACIT. However, the AR did not press these grounds during the hearing. As a result, the judgment did not delve into these penalty proceedings, and they were not considered in the final decision.

In conclusion, the ITAT allowed the appeal against the disallowance under Section 40(a)(ia) as the assessee proved payment of interest for non-deduction of tax, thus not defaulting. The judgment did not address the Arm's Length price adjustment issue as it was not contested, and the penalty proceedings under sections 271(1)(C) and 271BA were not discussed as these grounds were not pressed during the hearing.

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