TaxTMI 
TaxTMI 
2025 (8) TMI 1378
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....ccrued interest as well? 2. Whether the Addl. CIT(A) erred in granting relief to the assessee by holding the sections 193 and 194A are not applicable to the transactions between PHL Finvest Pvt. Ltd. and Piramal Enterprises Ltd.? 3. Whether the Addl. CIT(A) erred in accepting the view of the assessee that there is no income, for provisions of TDS to be applicable, without appreciating the fact that transaction between PHL Finvest Pvt. Ltd. and Piramal Enterprises Ltd. is different from the transaction between Piramal Enterprises Ltd. & borrower?"" 3. The brief facts of the case are that the assessee is a non-deposit taking Non-Banking Finance Company registered with the Reserve Bank of India. The primary activity of the assessee includes lending/investing. In the course of its business, the assessee purchased loans (including NCDs, ICDs and term loans) from Piramal Enterprises Ltd and Piramal Capital and Housing Finance Limited at carrying value, comprising the principal and accrued interest till the date of transfer of the loan. In order to verify whether the assessee properly complied with the provisions contained in Chapter XVIIB of the Act, a survey under s....
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....ssee and treated the assessee as an "assessee in default" for non-deduction of tax under section 194A/section 193 of the Act on payment of consideration with respect to accrued interest for acquiring loans from Piramal Enterprises Ltd and Piramal Capital and Housing Finance Ltd and raised a demand of INR 33,73,87,782 and levied interest under section 201(1A) of the Act of INR 4,17,24,480, thereby raising the total demand of INR 37,91,22,261. 5. The learned Addl./Joint CIT(A), vide impugned order, following the decisions of the coordinate bench of the Tribunal in State Bank of India v/s DCIT, reported in (2024) 163 taxmann.com 266 (Mumbai-Trib.), and Piramal Capital and Housing Finance Ltd v/s ACIT, in ITA No. 2345/Mum/2024, allowed the appeal filed by the assessee and held that the amount paid for the acquisition of the financial instruments is not "interest" and, in the absence of borrower-lender relationship or borrowed funds, no obligation to deduct tax at source arises under section 194A of the Act. Being aggrieved, the Revenue is in appeal before us. 6. We have considered the submissions of both sides and perused the material available on record. In the present case, as ....
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....heir respective books of accounts] and had deposited the tax so deducted with the Government Treasury as per provisions of the Act has not been controverted by the Revenue. Therefore, in our view, in the present case, the provisions of Section 193/194A of the Act having already been triggered and complied with at the time of credit of interest income to the account of PEL in the books of accounts of the borrowers fi.e. the person responsible for making payment of such interest income at the relevant time), would not again get triggered on payment of the same interest income by the Appellant to PEL. In case the contention of the Revenue is accepted it would amount to subjecting same interest income to deduction of tax at source once at the time of credit and then again at the time of payment. Whereas Section 193/194A of the Act provide for deduction of tax at source at the time of credit or payment, whichever is earlier. Therefore, we hold that, given the facts and circumstances of the present case, the provisions contained in Section 193/194A of the Act were not attracted and therefore, the question of Appellant committing default in complying with the same does not arise. ....
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.... 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 utilised;* 17. Therefore, from the plain reading of the provisions of section 2(28A) of the Act, it is evident that interest means interest payable in respect of any money borrowed or debt incurred. As per the Revenue, since 90% of the pool of assets was purchased by the assessee, therefore the total interest pertaining to the assessee's share first accrued to the assessee and thereafter the same, by virtue of the tripartite agreement, is allowed by the assessee to be retained back by the originating NBFCs. Therefore, in light of the provisions of Section 194A read with Section 2(28A) of the Act, it needs to be examined whether the part interest allowed to be retained back with the originating NBFC by the assessee. In the present case, it has been disputed that the assessee purchased a pool of loans from the NBFCs by way of Direct Assignment. It is also the claim of the Rev....
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....rred. Accordingly, we are of the considered view that there is no obligation on the assessee to deduct tax at source under section 194A of the Act. Thus, levy of tax under section 201(1) and levy of interest under section 201(1A) of the Act for non-deduction of TDS under section 194A of the Act is not sustainable. Accordingly, grounds no.1, 2, and 4 raised in Revenue's appeal are dismissed." (Emphasis Supplied) 11.2. To the same effect is the decision of Mumbai Bench of the Tribunal in the case of Idea Cellular Ltd. v. ADIT (2015] 58 taxmann.com 101/69 SOT 526/41 ITR(T) 338 wherein it was held that as under: "9. Now, the issue before us is, whether such a fees paid to the arranger can be termed as "interest" within the meaning of section 2(28A) or "fees for technical services for service" within the meaning of section 9(1)(vii). 10. The definition of "interest" u/s 2(28A) reads as under:- "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 ....