TaxTMI 
TaxTMI 
2017 (1) TMI 1089
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....f lower authorities. Therefore the revised grounds have been admitted in the course of hearing. 4. The first issue raised by assessee in this appeal is that Ld. CIT(A) erred in confirming the order of AO by sustaining the addition of Rs. 10,50,000.00 of unsecured loan as income of assessee. 4.1 Briefly, the facts are that the assessee in the present case is an individual and proprietor of M/s Saluja Motors. The assessee derives its income from commission on sale of Motor Cycles, spares & accessories and repairing and servicing. The assessee has shown several loans from various parties in his balance-sheet as on 31.03.2008 including the following loans:- Sl. No. Name of lender Amount 1. Cyrillic Consultancy Pvt. Ltd. 4 lac 2. Smt. Manmit Kour 2.50 lac 3. Simron Pret Singh 4 lac During the course of assessment proceedings, Assessing Officer observed that the balance in the bank account of the aforesaid parties as on 31.03.2007 and 31.03.2008 was insufficient to give the loan of the aforesaid amount to the assessee. The AO, in case of Cyrillic Consultancy Pvt. Ltd. (for short CCP) also observed that loan was taken in cash. According all the loans as ....
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....red in confirming the order of AO by sustaining the disallowance of interest paid for Rs. 2,10,184/- on account of non-deduction of TDS u/s. 40(a)(ia) of the Act. 9. The assessee has paid interest to the following parties:- i) Harpeet Kaaur 47,370/- ii) Cyrillic Consultancy Service 1,20,764/- iii) Bansal Motor Corporation 12,473/- iv) Rudra Motor 29,577/- 2,10,184/- The AO observed that interest expense has been claimed by assessee without deducting TDS u/s. 194A of the Act and he accordingly disallowed the same and added back to the total income of assessee. 10. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who gave relief to assessee in part by observing as under:- "6. In this ground the appellant is disputing the AO's action in disallowing interest paid by it on the ground that no TDS had been deducted from it. The appellant's claim is that except for the interest paid to Rudra Motors the TDS on the other amounts have been duly made and have been paid into the credit of the Govt. in respect of Rudra Motors the appellant's case is that the interest was deducted out of advance lying with Rudra Motors and he had no knowledge of....
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....to make the provision workable, requires to be treated with retrospective operation so that reasonable deduction can be given to the section a well. In view of the authoritative pronouncement of the Supreme Court, this court cannot decide otherwise. Hence we dismiss the appeal without any order as to costs." For the other 2 payments of interest to M/s Bansal Motors Corporation and M/s Rudra Motors for Rs. 12,473.00 and Rs. 29577.00 respectively, We concur with the argument of the assessee that the transactions are arising in the course of purchases of the goods from these parties as evident from the ledger copies of both the parties placed on the pages 53-71 of the paper book. The interest paid to the parties for the delayed payment of the bills for the purchases does not fall under the provisions of section 194A of the Act. In this connection, we find the guidance and support from the order of Hon'ble ITAT Ahmadabad Benches in the case of ITO vs Parag Mahasukhal Shah reported in 46 SOT 302 wherein it was held as under : "The true character of the term interest has been defined, but the definition appears to be wide, inter alia, covers interest payable in any manner in respe....
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....ces" as also cannot be allowed as payment of interest under s. 36(1)(iii), therefore, its true nature is nothing but added value of cost of purchase, hence no TDS was required to be deducted. The impugned payment had a direct link and immediate nexus with the trade liability being connected with the delayed purchase payment, hence, did not fall within the category of "interest" as defined in s. 2(28A) for the purpose of deduction of tax at source as prescribed under s. 194A. Resultantly, the assessee cannot be held a defaulter of non-deduction of tax at source under s. 194A. If a payment is compensatory in nature and not related to any deposit/debt/loan, then such a payment is out of the ambit of the provisions of s. 194A; impugned payment had a direct link and immediate nexus with the trade liability being connected with the delayed purchase payment, hence, did not require TDS and no disallowance under s. 40(a)(ia) was called for." 12.1 Similarly we also rely in the order of Hon'ble ITAT Hyderabad Benches in the case of Venkatesh Paper Agencies (Hyd.) Private Ltd v. DCIT in ITA No. 636 (HYD) of 2011 wherein it was held as under:- "10. We have heard rival contentions and ....