TaxTMI 
TaxTMI 
TaxTMI 
2024 (6) TMI 856
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....the confirmation of addition of Rs. 24,68,080/- which was made by the Assessing Officer (in short ld. 'AO') in respect of interest paid on delayed payment to the share broker for purchase of shares due to non-deduction of tax at source. 3. The facts in brief are that during the course of assessment proceedings the AO observed that the assessee has charged a sum of Rs. 82,56,935/- under the head finance cost for delayed payments and accordingly called upon the assessee to furnish the details thereof. It was submitted before the AO that whenever the shares are purchased from the share broker, the amount becomes payable to a broker and the same has to be paid within two days. In case of delay interest is charged by the broker which ha....
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....during the normal course of business and therefore, cannot be considered as interest u/s 2(28A) of the Act. In our opinion, the provision of Section 194A of the Act is applicable only to the interest on borrowed capital and not on the interest which is paid on delayed payment of purchase considerations. The case of the assessee finds support from the decision of the Coordinate Bench in the case of Harbhajan Singh vs. ITO in ITA No. 1076/KOL/2013 wherein the similar issue has been decided in favour of the assessee. The operative part of the decision is as under: "12. We have gone through the submissions made by Id. AR and order of the lower authorities as well as perused the materials available on record. In the present case, the AO made t....
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....otors Corporation and M/s Rudra Motors for Rs.12,473.00 and Rs.29577.00 respectively, we concur with the argument of the assessee that the transactions are arising in the course of purchases of the goods from these parties as evident from the ledger copies of both the parties placed on the pages 53-71 of the paper book. The interest paid to the parties for the delayed payment of the bills for the purchases does not fall under the provisions of section 194A of the Act. In this connection, we find the guidance and support from the order of Hon'ble ITAT Ahmadabad Benches in the case of ITO vs Parag Mahasukhal Shah reported in 46 SOT 302 wherein it was held as under : "The true character of the term interest has been defined, but the definit....
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....02 (Guj), CIT vs. Indo Matsushita Carbon Co. Ltd. (2006) 205 CTR (Mad) 493: (2006) 286 ITR 201 (Mad) and Phatela Cotgin Industries (P) Ltd. vs. CIT (2008) 303 ITR 411 (P&H) relied on. An another interesting feature involved to resolve this controversy is that the Revenue otherwise cannot allow the claim of payment under s. 36(1)(Hi) because as per this section, the deduction is provided in respect of the amount of interest paid in respect of capital borrowed for the purpose of business. The only provision under the Act is s. 37 under which this payment/expenditure is allowable being laid out wholly and exclusively for the purpose of the business. The nature of payment is such that it cannot be considered either under s. 56, i.e. "Income f....
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.... of Rs.3,12,600 is not for any loan or debt incurred by the assessee but for the delaying payment of bills for purchases effected from M/s Sinermas Pulp & Papers Ltd. Therefore, it has to be seen as to whether such payment is in the nature of interest as envisaged u/s 2(8A) of the Act. As seen from the order of the ITAT Ahmedabad Bench in the case of Prag Mahasukhlal Shah (supra) the Tribunal has held that a payment which has direct link and immediate nexus with the trading liability being connected with the delayed purchase payments will not fall within the category of interest as defined in section 2(28A) of the Act. the payment made by the assessee in the present al being of similar nature also cannot be termed as interest as defined us.....