TaxTMI 
TaxTMI 
2016 (1) TMI 635
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....ion 40(a)(ia) of the Act for nondeduction of tax on delayed payment of dues on purchase of tractors for assessee's business M/s. Raj Motors. 2. The assessee, an individual, is a dealer and distributor of Escort tractors filed return of income on 15.07.2011 admitting income of Rs. 7,24,940/-. Assessment was completed under section 143(3) on 29.03.2014 determining the income at Rs. 1,49,27,010/-. While completing the assessment Assessing Officer disallowed interest payments made to Escorts Ltd. of Rs. 72,54,609/- for non-deduction of tax on such interest. The assessee contended that interest was paid to Escorts Ltd. for delayed payment of dues on account of purchase of tractors for assessee's business as a dealer. The interest paid to Escort....
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....d. for delay in making the outstanding dues in purchasing of tractors. The Assessing Officer disallowed such interest as the assessee did not deduct TDS under section 194A read with section 40(a)(ia) of the Act. The Commissioner of Income Tax (Appeals) deleted the disallowance holding that it is not the amount paid towards interest which cannot be disallowed for non-deduction of TDS as such interest was not paid on a loan or deposit but it is only on account of trading liability. We have perused the case laws relied on by the assessee. Hyderabad Bench of the Tribunal in the case of Sri Venkatesh Paper Industries P.Ltd. (supra) considered a similar situation, wherein it was held that interest paid on delayed payment of purchases is not inter....
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....ment made on account of overdue bills and, therefore, was not in the nature of interest envisaged under the TDS provisions of the Act. In this context, the assessee relied upon a decision of the ITAT Delhi Bench in the case of Delhi Development Authority vs. ITO reported in 62 TTJ 107 wherein the ITAT while considering the case of compensation paid to the allottees on account of delay in construction of dwelling units held that it is not within the nature of interest as defined u/s. 2(28A) of the Act. The CIT(A), however, came to held that the definition of the term interest as given in section 2(28A) of the Act would mean interest payable in any manner in respect of any monies borrowed or debt incurred including a deposit, claim or other s....
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....ed u/s. 194A of the Act. Resultantly, this assessee cannot be held a defaulter of non-deduction of tax at source u/s. 194A of the Act. The Learned CIT(Appeals) has rightly reversed the findings of the Assessing Officer. Ground raised of the Revenue is,therefore, dismissed." 8. In the alternative, the learned AR contended that even if the amount paid is to be held as interest coming withinthe definition of section 2(28A), then also no disallowance could be made u/s. 40(a)(ia) in view of the ITAT Special Bench decision in the case of Merilyn Shipping & Transports vs. Addl. CIT reported in (2012) 16 ITR (Trib) 1 (Visakhapatnam) (SB) since the entire amount was paid by the assessee within the relevant previous year. 9. The learned DR, on th....