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2014 (4) TMI 904 - AT - Income TaxDisallowance of hire charges u/s 40(a)(ia) of the Act Whether it is interest or not on hire purchase contract The decision in CIT Vs. M/s M.G. Brothers Finance Ltd. [2014 (1) TMI 1590 - ANDHRA PRADESH HIGH COURT] followed - the payment made by the assessee on account of hire purchase transaction and payment of finance charges/hire charges cannot be construed as interest so as to deduct TDS u/s 194A of the IT Act - to that extent, the CIT(A) justified in observing that section 40(a)(ia) is not applicable - but, the insertion of Explanation 1 to section after amendment of section 194A by Taxation Laws (Amendment) Act, 2006, with effect from 13/07/2006, payment by the assessee towards hire charges on hire purchase agreement to be liable for TDS u/s 194I of the Act thus, the AO is directed to recomputed the disallowance u/s 40(a)(ia) in the light of the amended provisions, which came into effect from 13/07/2006 Decided partly in favour of Revenue. Disallowance of mobilization advance paid to JV Held that:- The payment of interest is the income of the JV and if this included as income in the JV as income, assessee has not deducted the tax in view of the amended provisions of section 40(a)(ia) of the Act, wherein it was held that second proviso to section 40(a)(ia) inserted by the Finance Act, 2012 with effect from 01/04/2013, which is clarificatory in nature and the benefit of the same should be applied restrospectively Relying upon as held by the Cochin Bench in the case of Antony D. Mundackal Vs. ACIT [2013 (12) TMI 67 - ITAT COCHIN] thus, the AO is directed to see whether JV has paid tax on the income or not on this income and decide the issue in accordance with law Decided in favour of Revenue.
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