TaxTMI 
TaxTMI 
2018 (6) TMI 1108
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....sidered that claim of discounting charges doesn't fall under the purview of the provisions of section 40(a)(ia) r.w.s 194A of the Act. 2. Alternatively and without prejudice to the above, the ld. CIT(A) has erred in holding that the inserted proviso to section 40(a)(ia) of the Act by Finance Act 2012 is prospective and not retrospective and thereby erred in not considering that when the recipients of the alleged amount have already paid taxes on the same than as per the proviso to 201(1) of the Act the Appellant cannot be treated as assessee in default for non deduction of TDS u/s. 40(a)(ia) r.w.s 194A of the Act. 3. Both the lower authorities have passed the orders without properly appreciating the fact and that they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 4. The learned CIT(A) has erred both in law and on the facts of the case in confirming action of the Id. A....
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....n sec 40(a)(ia) by Finance Act 2012 does not change basics of provision u/s 40 (a)(ia). the amendment is only prospective and effective w.e.f 01.04.2013 which is discussed as under: * With a view to liberalize provisions of Section 40(a)(ia) of the Act Finance Act 2012 brought amendment w.e.f 01.04.2013 as under: * The following second proviso shall be inserted in sub-clause (ia) of clause (a) of Section 40 by the Finance Act, 2012, w.e.f. 1-4-2013; Provided further that where an assesses fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assesses in default under the first proviso to sub-section (1) of Section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso; Since provisions of Section 40(a)(ia) as amended by Finance Act 2012 is linked to Section 201 of the Act, so it is essential to know and understand the provisions of Section 201 of the Act. Relevant provisions of Section 201. (1) Wher....
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....paid to NBFC's. Addition confirmed u/s 4o(a)(ia)of the Act is illegal and bad in law. b) That on the facts & circumstances of the case, Ld. CIT(A) has grossly erred in confirming Ld.A.O's action of invoking provisions of sec. 40(a)(ia) of the Act on interest on loans from NBFC's which stood paid on 31-03-2009 to followings: i) Reliance Capital Ltd. Rs.4,42,793/- ii) Religfire Finvest Ltd. Rs. 79,321/- iii) India Bull Ltd. Rs. 5,50,491/- iv) G.E. Money Rs. 2,11,720/- Total: Rs. 12,84,325/- The issue in Ground Nos. 3 & 4 raised by the assessee is against the disallowance of interest by invoking the provisions of section 40(a)(ia) of the Act. Admittedly, the assessee had failed to deduct tax at source and deposit the same within the stipulated period and in view thereof, the interest paid to NBFCs totaling to Rs. 12,84,325/- and Rs. 150,671/- on unsecured loans was disallowed by the Assessing Officer, in view of the provisions of section 40(a)(ia) of the Act. The said disallowance was confirmed by the CIT (Appeals). We have heard the rival contentions and perused the record. The issue raised in the present ....
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.... * S. 194A provides for deducting lax at source on "Interest" (other than interest on securities". * As per S.2(28A). "interest" means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized. * In the present case, assessee has not paid any "interest" within the meaning defined u/s 2(28A). Instead, assessee has paid "discounting charges" which, by no stretch of imagination, fall within the ambit of "interest". When no'interest" has been paid, question of invoking provisions of section 194A do not arise and hence, disallowance u/s.40(a)(ia) is unwarranted, Reliance is placed on followings: CIT vs Cargill Global Trading (P.) Ltd. 335 TTR 94 (Del) PCIT vs. M Sons Gems N Jewellery P. Ltd. -(2016) 69 taxmann.com 373) (Delhi High Court); (Annexure "A") CIT vs. MKJ Enterprises Ltd. - (2014) 50 taxmann.com 441 (Calcutta High Court). * On this short count, impugned disallowance deserves....
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....ich has not been utilised ;] From the above provisions, it is revealed that discounting charges are outside the purview of interest expenses, therefore, in our considered view, the question of making any disallowance on account of nondeduction of TDS on such discounting charges does not arise. In holding so, we find support and guidance from the judgment of Hon'ble Delhi High Court in the case of PCIT vs. M. Sons Gems N. Jewellery Pvt. Ltd. reported in 69 Taxmann.com 373 (Delhi). The relevant extract of the order is reproduced as under: "7. The Court first notes that under Section 194A of the Act, the obligation to deduct tax at source is on the 'payer' of interest. In the instant case, the Assessee has permitted factoring and discounting charges to be deducted upfront by GTFL. In response to a query raised by the AO during assessment proceedings, the Assessee by its letter dated 12th September 2011 clarified as under: "The assessee company had paid discount to M/s. Global Trade Finance Ltd. (GTF) for availment of Factoring facility and not interest. This fact is very clear as per the sanction letter given by the GTF which was filed before your goodself....