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2020 (12) TMI 178 - AT - Income TaxTDS u/s 194A - disallowances of finance charges on hire purchase u/s 40(a)(ia) - HELD THAT:- There is no dispute that the payment in question was in respect of hire charges paid by the assessee to M/s Tata Capital Ltd. (a NBFC) under the hire purchase agreement. It is also not in dispute that the assessee has not acquired any title for ownership of the asset under the hire purchase agreement but the assessee is under no obligation to buy the asset. Thus, it is only an option with the assessee either to return the goods or to become its owner by payment in full of the hire charges. Therefore, this transaction of payment of hire charges and financial charges do not fall in the ambit of section 194A of the Act. There is no quarrel on the point that the provision to section 194A are not applicable in respect of the payment in question and consequently the claim of deduction cannot be disallowed by invoking the provision to section 40(a)(ia) - AO has invoked the provision to section 194A r.w.s. 40(a)(ia) as specified in the impugned order and hence there is no question of applying the section 194I of the Income Tax Act. Alternative plea of the ld. AR of the assessee, it is noted that the amendment by which the 2nd Proviso to section 40(a)(ia) is brought into Statute and the same is remedial in nature as held in the case of CIT vs. Calcutta Export [2018 (5) TMI 356 - SUPREME COURT]. Thus it is settled proposition that the 2nd Proviso to section 40(a)(ia) shall have retrospective effect. Once the recipient of the charges has considered this amount as part of its income and filed the return of income then the question of invoking of section 40(a)(ia) does not arise - Decided in favour of assessee.
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