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2014 (12) TMI 381 - AT - Income TaxReimbursement of interest borne by partners Applicability of provisions of TDS Tax withholding obligations u/s 194A discharged or not - Held that:- The assessee claimed that it had made payment of interest to Shraddha Credit Souharda Sahakari Niyamit on behalf of the partners who have obtained loan for the purposes of business of the partnership firm - as per section 194 and 191 of the Act, which provides that the person shall be deemed to be an issue in default in respect of non/short deduction of tax only in cases where the payee has also failed to pay the tax directly - the deductor cannot be treated as assessee in default in respect of no/short deduction of tax if the payee has discharged his tax liability. In order to provide clarity regarding discharge of tax liability by the resident payee on payment of any sum received by him without deduction of tax, it was amended in section 201 to provide that the payer who fails to deduct the whole or any part of the tax on the payment made to a resident payee shall not be deemed to be an assessee in default in respect of such tax if such resident payee has furnished the return of income u/s 139, secondly has taken into account such sum for computing income in such return of income and thirdly has paid the tax due on the income declared by him in such return of income and the payer furnishes a certificate to this effect from an accountant in such form as may be prescribed following the decision in Rajeev Kumar Agarwal Versus Additional Commissioner of Income Tax [2014 (6) TMI 79 - ITAT AGRA] the insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1st April, 2005, being the date from which sub clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004 thus, the matter is remitted back to the AO for fresh adjudication Decided in favour of assessee.
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