The Tax Publishers2020 TaxPub(DT) 4672 (SC) : (2020) 275 TAXMAN 0007

INCOME TAX ACT, 1961

Section 261 Section 40(a) Section 194A

Where the assessee preferred SLP to appeal against the judgment and order of Kerala High Court in Thomas George Muthoot v. CIT (2015) 235 Taxman 246 (Ker-HC) : 2015 TaxPub(DT) 3322 (Ker-HC), whereby the High Court held that (i) benefit of exclusion from purview of section 194A is restricted only to those individuals and Hindu Undivided families, whose total sales, gross receipts or turnover from business or profession do not exceed monetary limit specified under section 44AB(a) or (b), and (ii) second proviso to section 40(a)(ia) introduced with effect from 1-4-2013 is only prospective. It further held that section 40(a)(ia) is automatically attracted on failure of an assessee to deduct tax on interest paid by him and fact that recipient has subsequently paid tax, will not absolve assessee from consequence of disallowance. It further held that language of section 40(a)(ia) does not warrant an interpretation that it is attracted only if interest remains payable on last day of financial year, the Supreme Court granted leave to assessee to appeal thereagainst. It was noted in the order that appeal to be disposed of within one year. Further, Registry was directed to tag the matter along with Civil Appeal No. 7326 of 2016.

Appeal (Supreme Court) - Special leave petition - Deduction of tax at source - Business disallowance under section 40(a)(ia) for not complying with section 194A

Assessee preferred SLP to appeal against the judgment and order of Kerala High Court in Thomas George Muthoot v. CIT (2015) 235 Taxman 246 (Ker-HC) : 2015 TaxPub(DT) 3322 (Ker-HC), whereby the High Court held that (i) benefit of exclusion from purview of section 194A is restricted only to those individuals and Hindu Undivided families, whose total sales, gross receipts or turnover from business or profession do not exceed monetary limit specified under section 44AB(a) or (b), and (ii) second proviso to section 40(a)(ia) introduced with effect from 1-4-2013 is only prospective. It further held that section 40(a)(ia) is automatically attracted on failure of an assessee to deduct tax on interest paid by him and fact that recipient has subsequently paid tax, will not absolve assessee from consequence of disallowance. It further held that language of section 40(a)(ia) does not warrant an interpretation that it is attracted only if interest remains payable on last day of financial year. Held: The Supreme Court granted leave to assessee to appeal thereagainst. It was noted in the order that appeal to be disposed of within one year. Further, Registry was directed to tag the matter along with Civil Appeal No. 7326 of 2016.

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