TaxTMI 
TaxTMI 
2022 (11) TMI 776
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....ax at source on interest paid by it to Muthoot Mini Finance Corporation Ltd. 3. Succinctly, the facts of the case are that the assessee is a Non-banking finance company (NBFC) set up with the object of carrying on business of hire-purchase, housing, industrial and general finance. For this purpose, the assessee made borrowings from various financial institutions, including four NBFCs to whom interest amounting to Rs.4,15,50,000/- was paid. The AO observed that no tax at source was deducted at source u/s.194A from such interest. The assessee was called upon to explain the position. It was responded that an amendment has been carried out to section 201(1) of the Act along with section 40(a)(ia) with the effect that if the payee has include....
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....fourth lender, namely, Muthoot Mini Finance Corp. Ltd., the assessee furnished a certificate from the company initially, which was later on replaced with certificate in Form 26A. The ld. CIT(A), after taking remand report from the AO, deleted the disallowance u/s.40(a)(ia) of the Act in respect of the first three amounts. He, however, sustained the disallowance for a sum of Rs.86,88,000/- on the ground that the AO refused, in remand report, to entertain a photocopy of the certificate issued by Muthoot Mini Finance Corporation Ltd. Aggrieved thereby, the assessee has come up in appeal before the Tribunal. 4. I have heard both the sides and gone through the relevant material on record. Indisputably, the assessee paid interest to four NBFCs....
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....ed in such return of income. When these conditions are cumulatively fulfilled and the person responsible for paying furnishes a certificate in this regard from a Chartered Accountant in Annexure A to Form 26A, then the payer cannot be treated as an assessee in default. The first proviso has been inserted by the Finance Act, 2012 w.e.f. 01-07-2012. 7. At this juncture, it is relevant to consider the judgment in Hindustan Coca Cola Beverage India (P) Ltd. vs. CIT (2007) 293 ITR 226 (SC). This judgment of August, 2007 was rendered in the context of the judgment of the Hon‟ble Delhi High Court passed in October, 2006. The Hon‟ble Summit Court in this case was confronted with a situation in which the income was paid by the assesse....
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....here the non-deduction by the payer is followed by the payee, inter alia, paying the tax due on the income declared by him in the return of income. One-to-one co-relation between the amount of tax not deducted by the payer and payment of such tax by the payee as given in section 191 has been given a go-by in the proviso to section 201 by stipulating that the failure to deduct tax by the payer and payment of tax by the payee on his total income including such income is a norm for not treating the payer as assessee in default. 8. On a conjoint reading of the judgment of Hon‟ble Apex Court in Hindustan Coca Cola Beverage (supra) por una parte with Explanation to section 191 and first proviso to section 201(1) por otra parte, there rem....
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....to 30-06-2012 before the insertion of the proviso to section 201(1). Once a person is not deemed to be an assessee in default for failure to deduct tax at source or payment of tax after deduction, the logical consequence is that the provisions of section 40(a)(ia) do not get magnetized. Be that as it may, the relevant point to be accentuated in this regard is that the second proviso to section 40(a)(ia), considering failure of the assessee to deduct tax at source as not an assessee in default under the first proviso to section 201(1), unlike the first proviso to section 201(1), has been inserted w.e.f. 01-04-2013, which further strengthens the case of the assessee. 9. The second point of view espoused by the AO as well as the ld. CIT(A) ....