TMI Blog2012 (9) TMI 249X X X X Extracts X X X X X X X X Extracts X X X X ..... nce could be made u/s. 40 (a) (ia) - in favour of assessee. Disallowance of interest paid by the assessee on borrowals - Held that:- No addition of proportionate interest on interest free advance can be called for on the self same interest free advance made - in favour of assessee. - IT APPEAL NO. 636 (HYD.) OF 2011 - - - Dated:- 22-6-2012 - D. KARUNAKARA RAO, SAKTIJIT DEY, JJ. Mohd. Afzal for the Appellant. M.H. Naik for the Respondent. ORDER Saktijit Dey, Judicial Member In this appeal the assessee has challenged the order dated 31.1.2011 passed by the CIT(A)-IV, Hyderabad in appeal No. 449/ DCIT-3(2)/CIT(A)-IV/07-08 pertaining to assessment year 2005-06. 2. The assessee has raised the following grounds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed interest payment of Rs. 3,12,600 to M/s. Sinermas Pulp Papers Ltd. without deducting tax at source. When asked to explain, the assessee contended that the amount of Rs. 3,12,600 was paid as interest on the overdue bills, therefore, no TDS was required to be deducted. The assessee contended that the payment of interest was not on a deposit or loan but on purchases. It is not required to deduct tax at source. The Assessing Officer, however, did not accept the explanation of the assessee and disallowed the sum of Rs. 3,12,600 u/s. 40(a)(ia) on the reasoning that whether the assessee paid the interest in respect of delayed payment of purchases or deposits or loans it has to deduct tax at source as per the provisions of the Act. The as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of a trade payment. He also contended that for delay in making payment to the sellers, the assessee has to pay interest on the overdue bills. Thus, it is a part of the trade payment constituting the sale price of the commodity purchased. In support of such contention, the learned AR relied upon the decision of ITAT Ahmedabad Bench in the case of ITO v. Parag Mahasukhlal Shah [2011] 46 SOT 302/12 taxmann.com 37. In the aforesaid decision the ITAT Ahmedabad Bench on considering the definition of the term interest as envisaged in section 2(28A) has held in the following manner: "12. In the light of the overall discussion made hereinabove, we are of the view that the impugned payment had a direct link and immediate nexus with the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Parag Mahasukhlal Shah ( supra ) the Tribunal has held that a payment which has direct link and immediate nexus with the trading liability being connected with the delayed purchase payments will not fall within the category of interest as defined in section 2(28A) of the Act. The payment made by the assessee in the present appeal being of similar nature also cannot be termed as interest as defined u/s. 2(28A) of the Act. Even without entering into the controversy as to whether the payment made on overdue bills will come within the ambit of interest as defined in section 2(28A), the assessee is also bound to succeed on its alternative argument that the entire payment having been made during the previous year relevant to the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee not advanced such amount to the sister-concern it would not have been required to pay interest on borrowings to that extent. He upheld the action of the Assessing Officer. He, however, directed the Assessing Officer to restrict the proportionate interest at the average rate of borrowings by the assessee for the year or maximum amount of debit of interest whichever is lower. 13. The learned AR contended before us that similar issue was subject matter of appeal before the ITAT in earlier assessment years i.e., A.Y. 2002-03 in ITA No. 917/Hyd/2006. The ITAT after considering all aspects in its order dated 29.2.2008 restored the matter back to the Assessing Officer to decide again after examining the contentions of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
