2010 (9) TMI 1268

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....bmissions and carefully perused the orders of the authorities below and documents placed on record. Since the facts of both these cases are similar except the quantum, we take up the facts in ITA No.353 for the sake of reference, according to which the assessee has claimed financial charges of ₹ 35,92,244/- on loans taken from the various parties for acquiring buses on hire purchase basis. During the course of assessment proceedings, A.O. has noticed that no TDS was deducted u/s 194A on these payments of financial charges. He accordingly invoked provisions of section 40a(ia) of the I.T. Act, according to which on nondeduction of tax on the interest payment, the same shall not be allowed as deduction while computing the income of busin....

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....perusal of the orders of the lower authorities and the judgement of the apex court in the case of Charanjit Singh Chadha and other Vs. Sudhir Mehra (supra) and the instructions of the CBDT bearing no.1425 dated 16.11.1981 and we find that undisputedly assessee had taken the buses on hire purchase agreement from different parties and assessee have been making the payment of financial charges to all these parties on which deduction of TDS u/s 194A was not done and the A.O. invoked the provisions of section 40a(ia) of the Act and made the disallowance of the payments after treating the payments of financial charges to be in interest. In the case of Charanjit Singh Chadha and others Vs. Sudhir Mehra (supra), the issue of nature of financial cha....

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....he hirer in periodical instalments cannot, therefore, be characterized as interest payable in any manner with the meaning of section 2(28A) of the I.T. Act, as it is not in the respect of any money borrowed or debt incurred. In this view of the matter, it is clarified that provisions of section 194A of the income tax act are not attracted in these transactions. We however, for the sake of reference extract the instructions of the CBDT as under: 1. On the representation of the Federation of Indian Hire Purchase instalment paid by a hirer to the owner under a hire-purchase contract can be deemed to constitute payment of interest within the meaning of sec.2(28A) of the I.T. Act thereby attracting the provisions of section 194A of the said Ac....