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The Income Tax Appellate Tribunal held that the assessee was not an "assessee in default" for non-deduction of tax deducted at source (TDS) u/s 194A on interest paid on loans from group entities. The payments were in the nature of reimbursement and not liable for TDS deduction. The assessee borrowed funds from banks through its group entities and reimbursed the interest cost to them. Since the group entities were not in the lending business and the assessee enjoyed the credit facility through them, the interest payment was a reimbursement. Consequently, the assessee was under no statutory obligation to deduct TDS u/s 194A, and the interest payable for failure to deduct TDS u/s 201(1A) did not arise.
The Income Tax Appellate Tribunal held that the assessee was not an "assessee in default" for non-deduction of tax deducted at source (TDS) u/s 194A on interest paid on loans from group entities. The payments were in the nature of reimbursement and not liable for TDS deduction. The assessee borrowed funds from banks through its group entities and reimbursed the interest cost to them. Since the group entities were not in the lending business and the assessee enjoyed the credit facility through them, the interest payment was a reimbursement. Consequently, the assessee was under no statutory obligation to deduct TDS u/s 194A, and the interest payable for failure to deduct TDS u/s 201(1A) did not arise.
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