2011 (6) TMI 150

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....dent. ORDER Shri R.C. Sharma, Accountant Member. - This is an appeal filed by the assessee against the order of CIT(A) dated 17-4-2009, for the assessment year 2006-07. 2. The only grievance of the assessee relates to disallowance of discounting charges of Rs. 2,70,633 paid to M/s. Hero Honda Motors Limited by invoking provisions of section 40(a)(ai) of the Income-tax Act, 1961. 3. ....

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....e same by observing that discounting charges was in the nature of interest, which is liable to deduction of tax at source and since the assessee was not deducting tax on such discounting charges, the Assessing Officer declined claim of deduction of such discounting charges by invoking the provisions of section 40(a)(ai) of the Income-tax Act, 1961. By the impugned order, the ld. CIT(A) confirmed t....

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.... of discounting charges has been elaborately discussed by the ITAT, Delhi Bench in the case of Asstt. CIT v. Cargill Global Trading (I)(P.) Ltd. [2009] 34 SOT 424, wherein after relying on the decision of Hon'ble Gujarat High Court in the case of CIT v. Vijay Ship Breaking Corporation [2003] 129 Taxman 120, it was held that discounting charges on the bill of exchange is not in the nature of intere....

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.... discounting of bill of exchange. Circular No. 65 issued on 2-9-1971 by the CBDT clarifies and explains the transaction for usage of bills and its discounting according to which such payment cannot technically be held as including interest and, therefore, no tax need to be deducted at source. Thus, it is clear from the circular that for such cases of immediate discounting the net payment made to t....