TaxTMI 
TaxTMI 
2017 (10) TMI 1244
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....filed its return of income for the A.Y. 2011-12 on 30.09.2011 declaring total income of Rs. 86,61,520/-. Subsequently, the case was selected under CASS and notices u/s 143(2) & 142(1) were issued. The Assessing Officer had completed scrutiny Assessment u/s.143(3) on 25.03.2013 determining the total income Rs. 3,93,11,974/-. 2.1 During the course of assessment proceedings, the Assessing Officer noticed that the assessee had borrowed amounts and paid interest. The interest expenditure debited to P&L a/c was Rs. 4,68,79,147/- which consists of payment to following finance companies:. M/s. Diwan Housing Finance Ltd (DHFL) : Rs.2,80,91,495/- India Bulls Financial Services Ltd : Rs. 19,05,659/- HDFC Bank : Rs.1,64,74,479/- Corporati....
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....ing and paying the tax at source is not the assessee and it is the financial institutions. The assessee had also claimed that since the respective financial institutions have already paid the tax, there is no loss of revenue and no disallowance is warranted. 5. After considering the submissions of the assessee, the CIT(A) observed that there is strength in the submissions of the assessee as the recipients were well known companies and since the amounts were paid, they need not be brought u/s 40(a)(ia) of the Act. He, therefore, deleted the addition made by the AO. 6. Aggrieved by the order of the CIT(A), the revenue is in appeal before us raising the following grounds of appeal: " (i) Ld. CIT(Appeals)erred in accepting the contention of....
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....tio of decisions in the case of Crescent Export Ltd., (216 Taxman 258) (Cal) and Sikandar Khan N Tunvar (357 ITR 312) (Guj). (vi) Ld. CIT(A) erred in law in taking note of the second proviso to section 40 (a)(ia) that where the assessee cannot be found in default u/s 201, no disallowance u/s 40(a)(ia) could be made when the said proviso was inserted w.e.f. 01-04-2013 in the statute and not applicable to the year under consideration. (vii) The appellant craves leave to add, delete, substitute, amend any grounds of appeal at the time of hearing. (viii) For these and other grounds that may be canvassed at the time of hearing of the appeal, it is beseeched that disallowance of interest made by the assessing officer be restored." 7. T....
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....Hon'ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Township (P) Ltd., [2015] 61 Taxmann.com 45 (Delhi), wherein the Hon'ble Court has dealt with the issue of applicability of second proviso retrospectively. 9. Considered the rival submissions and perused the material facts on record as well as the decisions cited. In the case of Ansal Land Mark Township (P) Ltd., (supra), the Hon'ble Delhi High Court has held as under: "It was seen that the second proviso to Section 40(a) (ia) was inserted by the Finance Act 2012 with effect from 1st April 2013. The effect of the said proviso was to introduce a legal fiction where an assessee failed to deduct tax in accordance with the provisions of Chapter XVII B. Where such assessee was de....
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.... was embedded and had also paid tax on such income, the Assessee would not be treated as a person in default. As far as the present case was concerned, it was not disputed by the Revenue that the payee had filed returns and offered the sum received to tax. Agra Bench of ITAT in Rajiv Kumar Agarwal v. ACIT had undertaken a thorough analysis of the second proviso to s 40(a)(ia) and also sought to explain the rationale behind its insertion. The primary justification for such a disallowance was that such a denial of deduction was to compensate for the loss of revenue by corresponding income not being taken into account in computation of taxable income in the hands of the recipients of the payments. Such a policy motivated deduction and restr....
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....AT as regards the rationale behind the insertion of the second proviso to Section 40(a) (ia) of the Act and its conclusion that the said proviso was declaratory and curative and had retrospective effect from 1st April 2005, merits acceptance. In that view of the matter, the Court was unable to find any legal infirmity in the impugned order of the ITAT in adopting the ratio of the decision of the Agra Bench, ITAT in Rajiv Kumar Agarwal v. ACIT. No substantial question of law arises in the facts and circumstances of the present case. The appeal was accordingly dismissed." 9.1. The coordinate bench has also decided similar issue in assessee's own case for AY 2010-11 in ITA No. 1319/Hyd/2011, order dated 28/11/2014 wherein the Bench has ob....