TaxTMI 
TaxTMI 
2017 (12) TMI 918
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....ct that the assessee had filed form 15G from the creditors and hence there was no necessity to deduct tax on payment of Interest. 2. The Learned commissioner of Income tax (Appeals) ought to have appreciated the fact that all the recipients of interest were income tax assesses and they had admitted the interest in their individual income tax returns. 3. The Learned commissioner of Income tax (Appeals) ought to have appreciated the fact that as per the second proviso to section 40 (a) (ia) introduced by the finance Act, 2012 effective from 2013-14 that where the recipients have paid the tax on the interest received, and where the assessee has been treated as an assessee in default u/s 201(1) section 40 (a) (ia) is not furth....
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....for assessment year 2013-14 declaring total income at Rs. 5,70,820/-. The case was selected for scrutiny through CASS. The AO noticed that assessee has debited in the P&L A/c a sum of Rs. 4,58,889/- towards interest payment when details are called for, assessee claimed, it is interest payment from unsecured loans. As TDS were not deducted on this payment, disallowance u/s 40(a)(ia) of the Act was made by the AO for Rs. 3,60,009/-. Aggrieved by this, the assessee carried the appeal before the Ld.CIT(A). 3.1 Before the Ld.CIT(A), the assessee made written submissions and produced evidences for claim: The interest has been paid to the following persons who are all income tax assesses. Name Amount PAN 1. JasodadeviBhattad Rs. ....
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.... at source on the sum paid to a resident or on the sum credited to the account of a resident such person shall not be deemed to be an assessee in default in respect of such tax if such resident has furnished his return of income under section 139 of the Act. No doubt, there is a mandatory requirement under section 201 to deduct tax at source under certain contingencies but the intention of the Legislature is not to treat the assessee as a person in default subject to the fulfilment of the conditions as stipulated in the first proviso to section 201(1). The insertion of the second proviso to section 40(a)(ia) also requires to be viewed in the same manner. This again is a proviso intended to benefit the assessee. The effect of the legal ficti....
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.... play when an assessee is able to establish that there is no actual loss of revenue. This disallowance does deincentivise not deducting tax at source, when such tax deductions are due but so far as the legal framework is concerned, this pro vision is not for the purpose of penalising for the tax deduction at source lapses. There are separate penal provisions to that effect. Dein centivising a lapse and punishing a lapse are two different things and have distinctly different, and sometimes mutually exclusive, connotations. When we appreciate the object of scheme of section 40(a)(ia), as on the statute, and to examine whether or not, on a 'fair, just and equitable' interpretation of law-as is the guidance from the hon'ble Delhi Hi....
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....trospective in nature even though it may not state so specifically, the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was intro duced. In view of these discussions, as also for the detailed reasons set out earlier, we cannot subscribe to the view that it could have been an 'intended consequence' to punish the assessees for nondeduction of tax at source by declining the deduction in respect of related payments, even when the corresponding income is duly brought to tax. That will be going much beyond the obvious intention of the section. Accordingly, we hold that the insertion of second pro viso to section 40(a)(ia) is declaratory and curative in nature and it ha....