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05-09-2019, R.K. Infra & Engg., Section 40(a(ia), 40, 201, Tribunal Hydrabad

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5 days 5 hours ago #10756 by amit
Section - 40(a(ia), 40, 201, 192, 139
Order Date - 05-09-2019
Favouring - Revenue
Court - Tribunal Hydrabad
Appellant - ITO
Respondent - R.K. Infra & Engg. (India) P. Ltd.
Justice - P. MADHAVI DEVI JM & S. RIFAUR RAHMAN AM
Citation - 919Taxpundit77
Appeal No. - ITA No. 1227/Hyd/2016
Asstt. Year - 2012-13

Order

PER : S. RIFAUR RAHMAN, A.M.

This is an appeal of the assessee for the AY 2012-13 against the order of CIT(A) – 3, Hyderabad, dated, 17/06/2016. The assessee also filed CO against the said order of the CIT(A)

2. Brief facts of the case are, assessee company, in the contracts business of engineering, laying of roads and civil works, filed its return of income for the AY 2012-13 on 28/09/2012 declaring a total loss of Rs. 5,83,710/-. In scrutiny assessment, the AO made various disallowances including the disallowance of hire charges for non deduction of TDS of Rs. 1,67,65,947/-, which is the subject matter in this appeal.

2.1 The AO observed that on verification of ledger extract of finance cost as debited in the profit and loss account and out of the total finance cost of Rs. 1,78,81,236/-, the assessee company paid Rs. 1,67,65,947/- to M/s Reliance Capital Ltd., M/s Tata Capital Ltd., M/s SREI Infrastructure Finance Ltd., and M/s RK Infra - ALD, as per the following:

a) M/s Reliance Capital Ltd., - Rs. 3,48,590/-
b) M/s Tata Capital Ltd. - Rs. 2,70,868/-
c) M/s RK Infra – ALD - Rs. 3,78,047/-
d) M/s SREI Infrastructure Finance Ltd.,
- Rs. 1,57,68,442/-

Since the assessee has not deducted the tax on payments of interest to the above concerns and when the AO put the same before the assessee in the show cause notice in reply, the assessee company relied on Board’s Circular and stated that the hire purchase transaction does not attract TDS provisions. The AO observed that as the assessee’s transactions are financial transactions and the payment consists of principal and interest and the same were separately furnished by financial companies and Assessee was aware the portion of interest towards hire charges. Hence, according to AO, the above financial charges of Rs. 1,67,65,947/- are nothing but interest and accord ngly, the same was disallowed on the ground that the assessee has violated TDS provisions and hence, disallowance u/s 40(a)(ia) is warranted

3. Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A).

4. After considering the submissions of the assessee, the CIT(A) relying on various decisions including the special bench decision of the ITAT, Vizag, in the case of Merlyn Shipping directed the AO to allow the amounts, if the same were already paid by the assessee before 31/03/2012.

5. Aggrieved by the order of CIT(A), the revenue is in appeal before us raising the following grounds of appeal:

“1. The learned CIT(A) erred in law and on facts of the case.

2. The Learned CIT(A) ought to have appreciated that the AO has rightly made disallowance of Rs.1,67,65,947/- u/s. 40(a)(ia) for non deduction of TDS on interest payments and ought to have upheld the disallowance.

3. The learned CIT(A) ought to have appreciated the fact that the department is in further appeal in the case of Merylin Shipping and Transport, Visakhapatnam (2012) 136 lTD 002 on which the CIT(A) relied while giving relief to the assessee.

4. The learned CIT(A) ought to have appreciated the matter has not yet reached finality in the case of My s. Merylin Shipping and Transport, Visakhapatnam.

5. Any other grounds(s) that may be urged at the time of hearing.”

6. Before us, ld. DR relied on the decision of the Hon’ble Supreme Court in the case of Palam Gas Service Vs. CIT, [2017] 81 Taxmann.com 43 (SC) and relied on the order of AO.

7. The ld AR submitted that the assessee paid interest to the financial institutions, who are public limited companies and they must have offered the same to tax. Further, he submitted that assessee was not held to be an assessee in default, hence, the provisions of section 40(a(ia) cannot be invoked. He relied on the following cases:

1. Win Information Technology Pvt. Ltd. Vs. DCIT, ITA No. 642/Hyd/2017.

2. Country Club Hospitality & Holidays Ltd. Vs. Addl. CIT, ITA No. 1504/Hyd/2012.

3. DCIT Vs. Aditya Construction Company India Pvt. Ltd., ITA No. 1701/Hyd/2016

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