AI Drafter 
TaxTMI 
TaxTMI 
2023 (10) TMI 368
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....eal:- "Ground No. 1 1.1 That on the facts and in the circumstances of the case and as per law, learned CIT (Appeals) erred in sustaining the disallowance of Rs. 5,85,582 under section 40(a)(ia) of the Act on the ground that appellant was liable to deduct the tax at source under section 194A and it failed to do so. 1.2 That learned CIT (Appeals) was ought to have consider the fact that appellant had paid the finance charges / interest to the non-banking finance companies and at the end of the year there was no amount remained outstanding towards finance charges/interest. Hence, provisions of section 40(a)(ia) was not applicable as per ratio laid down by Honourable ITAT Special bench of Vishakhapatnam in the case of....
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....iance Capital and BHW home finance amounting to Rs. 5.85 lakhs on which no tax was deducted at source under section 194A of the Act. During the course of assessment, the assessee did not file any response/reply in respect of non-deduction of tax at source. Accordingly, the assessing officer made an addition of the aforesaid amount in the assessment order. 4. In appeal, Ld. CIT(A) dismissed the appeal of the assessee with the following observations: "The AO very elaborately discussed the issue before disallowing such expenses u/s 40(a)(a) of the Act As far as facts are concerned, there is no dispute that appellant was required to deduct TDS out of interest payment to Non-banking finance companies (NBFC) u/s 194 A of the Act and o....
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....use including ratio of case law relied on not applicable, the disallowance and addition so made by A.O. are upheld and confirmed." 5. Before us, the counsel for the assessee submitted that no tax is deductible in respect of such payments Firstly, for the reason that the assessee, being a partnership firm, never took any loan from any of the aforesaid parties to whom the interest was paid. It was the partners of the said firm, who had taken loan in their personal names, and thereafter introduced the same as capital in the firm, and accordingly, the assessee firm was not under an obligation to deduct tax at source on such interest payments. Secondly, the counsel for the assessee contended that the payees/recipients to whom interest was pai....
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....at source. Further, the assessee placed reliance on the case of Merilyn Shipping and Transport supra and contended that provisions of section 40(a)(ia) is applicable only when expenditure remained outstanding at the end of the financial year. Since in the instant facts, the interest payment of Rs. 5.85 lakhs has already been paid before the end of the financial year, in view of the aforesaid decision, there was no requirement to deduct tax at source. Ld. CIT(A) had passed the order after taking into consideration the aforesaid arguments put forth by the counsel for the assessee. 8. However, before ITAT, the counsel for the assessee has taken new sets of arguments which had not been taken before the Revenue Authorities during the course o....
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....enue Authority at any stage of the proceedings, and therefore, the Department never got an opportunity to test the veracity of those arguments (refer Written Submission dated 31/01/2013 before Ld. CIT(A) at page 253 of Paper-Book wherein no such arguments were placed on record before Ld. CIT(A). 10. Therefore, the veracity of the aforesaid argument has not been examined by the Revenue Authorities at any prior stage since this argument has not been taken earlier and the Department has not had an opportunity to check the veracity of the aforesaid claim put forth by the assessee, which has been taken before us, for the first time. Accordingly, this issue is being set aside to the file of assessing officer to verify the claims/contentions pu....