TDS u/s 194A of the Income Tax Act

Last updated: 28 August 2021

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Quick Summary

This Income Tax Appellate Tribunal case involved an assessee who had filed a return showing a loss. The Principal CIT later directed the Assessing Officer to disallow interest payments made to certain companies under Section 40(a)(ia) of the Income Tax Act. The assessee argued that these companies had included the interest income in their returns and paid tax on it. However, the tribunal dismissed the assessee's appeal, upholding the disallowance.

Court :
ITAT Ahmedabad

Brief :
This assessee�s appeal for A.Y. 2012-13, arises from order of the CIT(A)-5, Ahmedabad dated 17-08-2018, in proceedings under section 143(3) r.w.s. 263 of the Income Tax Act, 1961; in short �the Act�.

Citation :
ITA No. 2175/Ahd/2018

THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD “SMC” BENCH
(Conducted Through Virtual Court)
Before: Shri Mahavir Prasad, Judicial Member
And Shri Amarjit Singh, Accountant Member
Shri Vipin Somabhai
Pujara A/11, Amijyot
Apartment, Nr. Rajnagar
Club, Parimal Society,
Ambawadi, Ahemedabd
PAN: AFUPP6021P
(Appellant)
Vs
The ACIT,
Circle-5(2),
Narayan Chambers
Nehru Bridge Corner
Ashram Road,
Ahmedabad
(Respondent)
Revenue by: Shri S. S. Shukla, Sr. D.R.
Assessee by: Shri S.N. Divatia, A.R.
Date of hearing : 03-08-2021
Date of pronouncement : 23-08-2021
ORDER

1. The fact in brief is that assessee has filed return of income showing loss of Rs. 79,96,219/- on 28th Sep, 2012. Assessment order u/s. 143(3) of the Act was passed on 2nd March, 2015 accepting the losses shown in the return of income. Subsequently, the Pr. CIT issued notice u/s. 263 of the act and passed order u/s. 263 of the Act on 28th March, 2017 directing the Assessing Officer to disallow the payment of interest of Rs. 74,54,822/- which included payment of Rs. 25,29,132/- to M/s. India Infoline, Rs. 35,07,114/- to DSP Merrill Lynch and Rs. 14,18,562/- to Morgen Stanely u/s. 40(a)(ia) of the act.

2. The assessee further submitted that all the accounts of the aforesaid companies were audited accounts and they have filed the income tax return and paid the tax on the interest income. The Assessing Officer has not accepted the explanation of the assessee. The Assessing Officer has stated that assessee has made request to disallow 30% of interest payment of Rs. 74,54,822/- u/s. 40(a)(ia) of the Act.

3.During the course of appellate proceedings before us, the ld. counsel contended that amount of interest payment has been included in the income of the parities to whom the amount of interest was paid and they have filed their return of income, therefore, no disallowance should be made.

4. In the result, the appeal of the assessee is dismissed.
Order pronounced in the open court on 23-08-2021.

Please find attached the enclosed file for the full judgement

FAQ :

The case primarily concerned Section 40(a)(ia) of the Income Tax Act, relating to the disallowance of certain expenses, and the initial assessment was made under Section 143(3). A notice was also issued under Section 263.

The core issue was whether interest payments made by the assessee to other companies should be disallowed under Section 40(a)(ia) of the Income Tax Act.

The assessee contended that the recipient companies had declared the interest income, filed their income tax returns, and paid the applicable taxes, therefore, no disallowance should be made.

The Income Tax Appellate Tribunal dismissed the assessee's appeal.

No, the Assessing Officer did not accept the assessee's explanation and had stated that the assessee had requested the disallowance of 30% of the interest payment.