TaxTMI 
TaxTMI 
2014 (1) TMI 927
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....ely a procedural delay and has been accepted in the preceding year by CIT(A)." 2. Briefly stated, AO noticed that the assessee claimed an amount of Rs. 5,30,425/- as deduction on account of interest expenditure. AO asked the assessee to explain why the said expenditure should not be disallowed u/s. 40(a)(ia) on failure to deduct tax at source. While furnishing the details the assessee submitted that the assessee had taken loans from various parties in the business of trading in Iron & Steel and those parties were paid interest on regular basis and TDS was also deducted on interest paid to them except in 17 parties from whom form-15G /15H were received. The details were furnished as under :- S. No. Name of the party Interest (Rs.) 1. Aartiben Ghiya 22,876 2. Archna Daria 22,876 3. Ashok Ghiya 22,876 4. Bishan S. Agarwal (HUF) 48,667 5. Devyani Sanghvi 44,144 6. Dhirajlal Kothari 14,083 7. Hansa Sanghavi 18,250 8. Ila A. Shah 36,500 9. Kalawati Mavji Shah 36,500 10. Karubha Jadeja 48,667 11. Mansukhlal S. Shah(HUF) 48,667 12. Meena palav Valia 23,567 13. Mira ....
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.... Therefore disallowance u/s. 40(a)(ia) is warranted. 4. We have considered the issue. The provisions of section 40(a)(ia) are as under :- "40. Amounts not deductible - Notwithstanding anything to the contrary in Sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "profits and Gains of business or profession",- (a) In the case of any assessee- (i)....... (ia) any interest, commission or brokerage, [rent, royalty,] fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, [has not been paid,- ...... (rest not extracted.)" (Emphasis supplied) 4.1 As can be seen from above provision, the amount can not be allowed as deduction only in the event when tax is deductible at source under Chapter-XVI....
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....ubmitted that by oversight he did not submit copies of declarations in Form No. 15G/15H to office of Commissioner (TDS) -Assessing Officer took a view that it was only when he proposed disallowance of interest by invoking section 40(a)(ia) then assessee filed declarations claimed to have been submitted to him by payees of interest, in office of Commissioner (TDS) as required by sub-section (2) of section 197A - Accordingly, Assessing Officer invoked section 40(a)(ia) and disallowed interest payments - Commissioner (Appeals) confirmed disallowance made by Assessing Officer - On instant appeal, it was seen that apart from aforesaid inference, there was no other evidence in possession of revenue authorities to hold that declarations were not submitted by payees of interest to assessee at time when payments were made - Moreover, Assessing Officer had not recorded any statements from payees of interest to effect that they did not file any declarations with assessee at appropriate time or to effect that they filed declarations only at request of assessee -Whether in absence of any direct evidence produced by revenue authorities, assessee's claim that he had declarations of payees in pres....
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....t was proved that these forms were not in fact submitted by the loan creditors, the assessee could not be blamed because at the time of paying the interest to the loan creditors, he had to perforce rely upon the declarations filed by the loan creditors and he was not expected to embark upon an enquiry as to whether the loan creditors really and in truth had no taxable income on which tax was payable. That would be putting an impossible burden on the assessee. That apart section (1A) of section 197A merely requires a declaration to be filed by the payee of the interest and once it is filed the payee of the interest has no choice except to desist from deducting tax from the interest. The sub-section uses the word shall which leaves no choice to the assessee in the matter. The sub-section does not impose any obligation on the payer to find out the truth of the declarations filed by the payee. Even if the assessee had delayed the filing of the declarations with the office of the Commissioner /Chief Commissioner (TDS) within the time-limit specified in sub-section (2) of section 197A, that was a distinct omission or default for which a penalty is prescribed Section 273B provides that no....