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III. Direct Taxes Case Law:
1. Omkara Impex & Merchandise P. Ltd. Vs. ITO, I.T.A. No. 984/Ahd/2015, Date of Pronouncement: 20.06.2018, ITAT - Ahemdabad
Issue:
Whether bill discounting charges paid can be considered as
“Interest paid” for the purpose ofdeduction of tax at source u/s 194Aof
Income Tax Act’1961.
Held: No.
Brief Facts:
The assessee is a limited company engaged in the business of trading
of construction materials. The assessee in its P/L A/c has claimed an
expense under the head “Interest on finance” for Rs. 21,62,634/- as
discounting charges paid to L&T Finance Co. The Ld.AO treated the
expense as “Interest paid” and consequently disallowed the expense on
account of non-deduction of tax u/s 194A. On appeal, the assessee put
forth the fact that L&T has already paid the tax thereon on said
income and assessee can’t be termed as "assessee in default",however,
Ld.CIT(A) rejected the same stating that 2ndProviso to Sec 40(a)(ia) is
prospective in nature and not applicable for the year under
consideration. Being aggrieved, the assessee has filed an appeal before
the Hon’ble ITAT.
Held:
The Hon’ble ITAT by placing reliance on judgement of Hon’ble Delhi
High Court in the case of PCIT vs. M. Sons Gems N. Jewellery Pvt. Ltd.
held that “discounting charges” are outside the purview of definition of
“Interest” as contemplated in Sec 2(28A) of the Act, therefore question
of making any dis-allowance on account of such “discounting charges”
doesn’t arise. Moreover,a clarification was given by Hon’ble ITAT
stating that 2nd Proviso to Sec 40(a)(ia) though introduced as being
prospective in nature was held to be “retrospective” in operation on the
basis of recent decision of Hon’ble Delhi High Court in case of CIT Vs
CIT v. Ansal Land Mark Township (P) Ltd.
Therefore, the appeal was held in favour of assessee and against the revenue.
Cases Referred:-
1. CIT v. Ansal Land Mark Township (P) Ltd. (2015) 61 Taxmann.com 45(Delhi High Court).
2. PCIT vs. M. Sons Gems N. Jewellery Pvt. Ltd 69 Taxmann.com 373 (Delhi High Court).
(Please click here for judgment)
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