TaxTMI 
TaxTMI 
2025 (2) TMI 1347
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....ocuments/details as called upon which was duly considered by the Ld. Assessing Officer ("AO"). 2.1 During the course of the assessment proceedings, the Ld. AO found that the assessee has shown unsecured loan of Rs. 4,79,21,411/- as on 31.03.2017 and paid total interest of Rs. 13,06,833/- to four Non Banking Financial Companies ("NBFCs"); namely : (i) Bajaj Finance Ltd.; (ii) IDFC First (Capital First) Ltd.; (iii) Tata Capital Finvest Ltd. and (iv) M/s Religare Finvest Ltd. which was debited to the profit and loss account of the assessee. However, the assessee has not deducted TDS on the interest paid to these four NBFCs. The Ld. AO, therefore, issued a show cause notice dated 14.12.2019 asking the assessee as to why the interest paid by the assessee should not be disallowed under the provisions of section 40(a)(ia) of the Act and added to the income of the assessee for the relevant AY 2017-18, as neither the TDS has been deducted on these interest payments nor Form 26A has been submitted by the assessee. Since, the assessee did not respond and due to the time barring nature of the pending proceedings, the Ld. AO proceeded to complete the assessment at an assessed income of Rs. 5....
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....exed) to indicate that when a request was made to issue Form 26A, they have denied issuing Form 26A as according to them, it is not mandatory to do so. But they have acknowledged the loan A/c no. XSMEPUN00077171 and also the earlier letter referred at point No. (i) above sufficiently indicates that the interest is paid to Religare Finvest Ltd. and being accounted by them. 3.1 After considering the above submissions of the assessee, the facts of the case and the position of law, the Ld. CIT(A) dismissed the appeal of the assessee and confirmed the findings of the Ld. AO for the reason that the assessee has neither withheld applicable tax on the interest payments to the NBFCs, which is an admitted fact nor furnished a certificate from an Accountant in prescribed form. The relevant observations and findings of the Ld. CIT(A) is as under : "5. Findings : I have carefully considered the facts of the case, submissions of the appellant and position of law. The following is observed: 1. No tax has been withheld by the appellant on interest payment of Rs. 13,06,833/- to the 04 NBFCs at applicable rates i.e. rates prescribed under the Act /authorised in the certificate u....
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....f the Tribunal in the case of Karwat Steel Traders Vs. ITO, 145 ITD 370 (Mum) deleted the addition made by the Ld. AO on account of disallowance made u/s 40(a)(ia) of the Act on account of nondeduction of TDS on rent payment made to the payee. 5.1 As regards the interest payment to the fourth party i.e. M/s Religare Finvest Ltd., the Ld. AR admitted that the assessee failed to produce the necessary supporting documentary evidence before the Ld. CIT(A) i.e. ITR/ Form 26A. He submitted that given an opportunity the assessee shall submit the relevant details/documents in support of its claim to the satisfaction of the Ld. CIT(A)/AO and therefore requested that this limited issue may be set aside to the file of the Ld. CIT(A)/AO to examine and verify the claim of the assessee and modify the assessment order accordingly. 6. The Ld. DR supported the order of the Ld. AO/CIT(A). He, however, fairly conceded that the addition made by the Ld. AO and sustained by the Ld. CIT(A) in respect of three parties who have already paid the taxes due on their respective interest income received by the assessee may be deleted. However, with regard to the fourth party i.e. M/s Religare Finvest Ltd.....
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....he Tribunal that the recovery could not once again be made from the tax deductor where the payee included the income on which tax was alleged to have been short deducted in its taxable income and paid taxes thereon. There is no dispute whatsoever that Pradeep Oil Corporation had already paid the taxes due on its income received from the appellant and had received refund from the tax department. The Tribunal came to the right conclusion that the tax once again could not be recovered from the appellant (deductor-assessee) since the tax has already been paid by the recipient of income." 7.2 We have also perused the order of the Cuttack Bench of the Tribunal in the case of Jai Mata Di (supra) wherein the Tribunal under the similar set of facts to that of the assessee, has deleted the addition made by the Ld. AO/CIT(A) on account of disallowance of expenditure u/s 40(a)(ia) of the Act due to non-deduction of TDS. The relevant findings and observations of the Tribunal are as under : "7. We have heard the rival submissions, perused the orders of lower authorities and materials available on record. We find that the Mumbai Bench Á' of the Tribunal in the case of Karwat St....
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....T(A). The only ground for rejecting the explanation of the assessee was that the said Form was not filed with Director General of Income Tax (Systems) or his authorised persons. Hence, in our considered view, for non-filing of the said Form before the Director General of Income Tax (Systems), the assessee can be visited with penalty as provided under the income Tax Act but no disallowance of the expenditure can be made u/s.40(a)(ia) of the Act in view of the above quoted decision of the Tribunal in the case of Karwat Steel Traders (supra). Hence, we set aside the order of the CIT(A) and delete the addition of Rs. 2,24,662/- and Rs. 11,24,266/- made by the Assessing Officer." 8. In view of the factual and legal position set out above and the decision of the Tribunal (supra), in our view no disallowance of the interest payment made to the three parties; namely-Bajaj Finance Ltd., IDFC First (Capital First) Ltd. and Tata Capital Finvest Ltd. can be made u/s 40(a)(ia) of the Act as these three parties have already included the said interest payment(s) as their income in their respective income tax return and have already paid the taxes due thereon which has been duly substantiated b....
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....ub-section (1) of section 201 of Income-tax Act, 1961, any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident- (0) has furnished his return of income under section 139; (i) has taken into account such sum for computing income in such return of income; and (a) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed. 2. As per sub-rule (1) of Rule 31ACB of Income-tax Rules, 1962, the certificate from an accountant under the first proviso to sub-section (1) of section 201 shall be furnished in Form 26A to the Principal Director General of Income tax (Systems) or the person authorised by the Director General of Income-tax (Systems) in accordance with the procedures, formats and standards specified under sub-rule (2), and verified in accordance with the procedures, formats an....