Payment in the nature interest under sec 2(28A) liable to deduct TDS under sec 40(a)(i)

Last updated: 16 April 2012

Court :
Income Tax Appeallate Tribunal

Brief :
Briefly stated facts of the case are that the assessee paid a sum of Rs.9,54,684/- to a foreign bank without deduction of tax at source. In the audit report, it was mentioned that it was a usance interest paid under the letter of credit and hence not liable for any deduction of tax at source. In support of its case, the assessee relied on the order passed by the Tribunal in the case of Vijay Ship Breaking Corporation vs. DCIT (2002) 76 TTJ 169 (Rajkot) by contending that the interest paid to bank related to the purchases and hence should be considered as part of purchase price. Not convinced with the assessee’s submission, the AO came to hold that the assessee was required to deduct tax at source on such interest and having not done so, the amount was disallowable u/s.40(a)(i). The ld. CIT(A) upheld the action of the AO on this point.

Citation :
M/s. Sunoco Industries Pvt. Ltd.,[Presently M/s. Gandhar Oil Refinery (India) Ltd.], 29/3, Sewree Premises Co- Op.Soc.Ltd., Sewree Bunder Road,Sewree (E), Mumbai-400 015.PAN: AAACG3996J Appellant Vs. Dy.Commr. of Income-tax,Central Circle 34,Mumbai. Respondent