TaxTMI 
TaxTMI 
2014 (4) TMI 110
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.... 3. Briefly the facts are the assessee is a joint venture assessed in the status of AOP. It is engaged in the business of execution of civil contract works. The assessee entered into an agreement on 31-8-2002 with Konkan Railway Corporation Ltd., a government of India undertaking for executing BG Single Line Tunnels works under the Udhampur - Srinagar-Barmulla Rail Link Project by M/s. Konkan Railway Corporation Ltd vide work order No.108/05-06 dated 9-10-2005. For the impugned assessment year, the assessee filed its return of income declaring a loss of Rs.19,90,292/-. Initially, the return was processed u/s 143(1) of the Act. Subsequently, the Assessing Officer having reason to believe that there is escapement of income on account of exces....
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....)(ia) of the Act. The assessee challenged the disallowance u/s 40(a)(ia) of the Act by preferring an appeal before the CIT (A). 5. The CIT (A) after considering the submissions of the assessee in the light of the terms of the contract as well as the statutory provisions contained u/s 194A of the Act concluded that no disallowance can be made u/s 40(a)(ia) of the Act by holding as under:- "7.3. From the above stipulation, in the said agreement relating to charging of interest on the mobilization advance granted earlier to the appellant and the mode of payment of the same to Konkan Railway Corporation Ltd., as per the said agreement, executed by the latter, it is seen that the appellant was not required to actually make payment....
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....Being aggrieved, the revenue is in appeal before us. 6. The learned Departmental Representative submitted before us that when the assessee is paying interest then he had to comply with the TDS provisions. When admittedly the assessee has not deducted TDS interest payment, the expenditure could not be allowed as a deduction in view of the mandatory provisions of section 40(a)(ia) of the Act. In support of his contention, the learned Departmental Representative relied upon a decision of the Hon'ble Madras High Court in case of Viswa Priya Financial Services and Securities Ltd. Vs. CIT (258 ITR 496). 7. The learned authorised representative for the assessee, on the other hand, submitted before us that the assessment order makes it very clear....
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....t was recovered by the contractee M/s Konkan Railway Corporation Ltd., while making the payment of contract charges. Therefore, in real sense it cannot be said that the assessee has credited the interest to the account of the contractee in terms of section 194A of the Act. As observed by the CIT (A) in his order the terms of the contract entered into between the parties authorises the contractee to recover interest on the mobilisation advances and also prescribes the mode and manner of calculation of interest. Therefore, when the interest on mobilisation advance was recovered by the contractee from the running bills before releasing the contract charges to the assessee, it cannot be said that the assessee has credited the interest paid or p....