Disallowance of Interest of Rs. 17,73,769/- on account of Non Deduction of TDS

The Income Tax Appellate Tribunal (ITAT) reviewed a case where an assessee's claim for interest expenses was disallowed. This disallowance, amounting to £17,73,769, was due to the failure to deduct Tax Deducted at Source (TDS) on payments made to two financial institutions. The Assessing Officer and the Commissioner of Income Tax (Appeals) upheld this disallowance, leading the assessee to appeal to the ITAT.

IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES “A”, JAIPUR

BEFORE SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM

ITA No. 1259/JP/2019

Assessment Year: 2012-13

M/s Ratan Conductors,
H-377(B), Road No. 17, VKI Area, Jaipur.

vs

A.C.I.T.,
Circle-4,
Jaipur

Assessee by : Shri Ashok Kr. Gupta (Adv)

Revenue by : Smt. Monisha Choudhary (JCIT)

Date of Hearing : 05/08/2021

Date of Pronouncement : 02/09/2021

ORDER

That on the facts and in the circumstances of the case Ld. CIT(A) has grossly erred in law and facts in confirming disallowance of interest of Rs.17,73,769/- paid to M/s Barelays Investment & Loan (india) Ltd. (Rs. 298826/-) and M/s Future Capital (Rs. 1474943/-) on account of non deduction of TDS thereon by invoking provisions of section 40(a)(ia) of the IT Act 1961.

2. The A.O. completed the assessment U/s 143(3) of the Income tax Act, 1961 (in short, the Act) determining total income of Rs. 41,44,010/- by disallowing Rs. 17,73,769/- U/s 40(a)(ia) of the Act.

3.Being aggrieved by the order of the A.O., the assessee carried the matter before the ld. CIT(A), who after considering the submissions of the parties and material placed on record, dismissed the appeal of the assessee by upholding the action taken by the A.O. Aggrieved by the order of the ld. CIT(A), the assessee has preferred the present appeal before the ITAT on the grounds mentioned above.

4.The disallowance of whole of the amount of expenditure result into undue hardship and therefore in order to reduce the hardship, it is proposed that in case of non-deduction or non-payment of TDS on payments made to residents as specified in section 40 (a) (ia) of the Act, the disallowance shall be restricted to 30% of the amount of expenditure claimed.

5. We have considered the rival contentions and carefully perused the material placed on record. As per facts of the present case, the assessment was completed U/s 143(3) of the Act at Rs. 41,44,010/- by making disallowance of Rs. 17,73,769/- U/s 40(a)(ia) of the Act on the ground that the assessee had not deducted TDS on the payment of interest amount of Rs. 17,73,769/- paid to Barclays Investment & Loan (India) Ltd. and Future Capital.

6. In the present case, the disallowance U/s 40(a)(ia) of the Act was made on account of the fact that the assessee could not place on record any documentary evidence in order to demonstrate that the interest paid by the assessee has been shown by the NBFCs as income in the return of income, therefore, the claim was of the assessee was rejected.

7.Order pronounced in the open court on 02nd September, 2021.

Please find attached the enclosed file for the full judgement