2026 (2) TMI 753

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....en based on the documents filed by the assessee himself the AO held that it has deducted the TDS of Rs. 1,48,96,640/- on the interest of Rs. 32,38,40,000/- paid to M/s. Shapoorji Pallonji and Co Pvt. Ltd. @4.60% based on LDC obtained by the deductee. 2. Whether on the facts and in the circumstances of the case and in law, the ld. Addl. CIT(A) is justified in holding that the assessee is not a defaulter as the payment of interest has not been made to the deductee and the assessee did not have any money to pay the TDS amount. 3. Whether on the facts and in the circumstances of the case and in law, the Ld. Addl. CIT(A) is justified in holding that the assessee is not a defaulter as the deductee has offered the interest income for tax and paid the due taxes thereon ignoring the factual finding that the assessee has deducted the tax as per its books of accounts but not deposited the same. 4. Whether on the facts and in the circumstances of the case and in law, the Ld. Addl. CIT(A) is justified in not appreciating the findings made by the AO in the order u/s 201/201(1A) of the I.T. Act, 1961 regarding assessee's default of non-deposit of TDS as the disallow....

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....e with the provisions of Chapter XVII-B of the Act @30%. Thus, as per ITR defaults referred u/s 40(a)(ia) on accounts of payments on which tax was not deducted or after deduction had not been paid was worked out to Rs. 32,65,45,000/-. 4.1 In response to the show cause notice as to why it should not be treated as "assessee in default" and order u/s 201(1)/201(1A) should not be passed for such non-compliance of TDS provisions i.e. TDS deducted of Rs. 1,49,52,541/- on payment made amounting to Rs. 32,40,45,000/- but not depositing the same into the Government Treasury, the assessee submitted that during the relevant year, the assessee company had an outstanding loan from Shapoorji & Pallonji amounting to Rs 281,60,00,000/-.The assessee company's net-worth as on 31st March 2021 was Rs 95,11,70,000/.- Thus, the assessee was in no position to repay the loan. There was no question of assessee company's ability to pay the interest. However, as per the accounting standards, it was forced to record the interest on loan amounting to Rs 32,38,40,000/-. The assessee Company was in no position to service this interest. Till date, the assessee Company had not paid this interest amount to SPPL.....

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....ns of section 201(1), the assessee Company had not made any payment towards interest to M/s SPPL. Further, as per Form 26A, SPPL had offered the interest income to tax in its return of income. As per provisions of section 201(1) of the Act, if the other party has offered the income to tax in its return of income, the assessee company could not be considered as assessee in default. Considering the above discussion, the assessee should not be treated as assessee in default in respect of non-deposition of TDS to SPPL as the appellant had neither made any payment to it towards interest nor had it deducted any TDS on it. The ld.CIT(A) deleted the impugned sums holding that the assessee could not be treated as a defaulter under the aforesaid sections of the Act. 6. Before us, the learned Departmental Representative, appearing for the Revenue has supported the orders of the authorities below by pointing out that the assessee has been rightly held liable for TDS in terms of section 201(1) and 201(1A) of the Act. Even with regard to the plea of the assessee that the taxes on such income have been duly paid by the payee. 6.1 Per contra, the ld.AR has repeated the same arguments claimin....

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....r the Act. In the present case, as per the Revenue the assessee was required to deduct tax in terms of section 194A of the Act. As per section 194A, an assessee who is responsible for paying to a resident any income by way of interest other than interest on securities, shall deduct income- tax thereon at the prescribed rates at the time of payment or at the time of credit of such income to the account of the payee, whichever is earlier. The Assessing Officer held that the assessee had defaulted in not deducting the tax at source as required under section 194A of the Act. It is argued that no demand visualized under section 201(1) of the Act is liable to be enforced after the tax deductor satisfies the AO that taxes due have been paid by the deductee assessee. The assessee has asserted all along that notwithstanding that it was being held to be an assessee in default, there could be no recovery of tax alleged to be in default once again from the appellant considering that SPPL had already paid taxes on the income stated to have been received from the appellant. 7.2 Having regard to the parity of reasoning laid down by the Hon'ble Supreme court in the case of Hindustan Coca Co....