INCOME TAX ACT, 1961

Section 194A Section 40(a)(ia)

Business disallowance under section 40(a)(ia) - Non-deduction of TDS -- Form 26A not furnished - -

AO made disallowance on ground that assessee had paid interest to an NBFC on which tax had not been deducted at source under section 194A and thus, assessee had failed to comply with provisions of section 40(a)(ia). Before CIT(A), assessee filed certificate issued by NBFC wherein they have certified receiving interest and have included said interest in their income and paid taxes. CIT(A) rejected assessee's contention. Held:If payee had confirmed that interest amount received had been duly accounted for as its income, then it cannot be said that said interest income had not been returned by NBFC in its income tax return or had not paid taxes thereon. Though, certificate in Form 26A was not furnished but once such a declaration had been given, then artificial disallowance of section 40(a)(ia) was not to be made. Section 40(a)(ia) is meant for collection of tax at source on behalf of payee and if such taxes had neither been deducted by payer nor shown by payee, then there is loss to exchequer which consequently entails disallowance of expenditure claimed by assessee. However, such a provision is not meant to call for disallowance when payer had paid taxes on such an income as 2nd proviso to section 201(1) read with 1st proviso to section 201(1) was brought to remove such hardship to payer. Such a beneficial amendment has also been held to be retrospective by Courts.

Relied:CIT v. Ansal Land Mark Township (P) Ltd. (2015) 377 ITR 635 (Del-HC) : 2015 TaxPub(DT) 3482 (Del-HC),

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

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