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2022 (11) TMI 965 - AT - Income TaxTDS u/s 194A - Addition u/s 40(a(ia) - TDS on factoring charges - assessee in default u/s 201(1) - HELD THAT:- As factoring charges incurred by the assessee company is not in the nature of interest and that the assessee was not under the obligation to deduct TDS as per the provisions of section 40(a)(ia) of the I.T. Act. For this, we would like to place our reliance on the decision in the case of Bombay Steam Navigation Co. P. Ltd[1964 (10) TMI 12 - SUPREME COURT] which held that interest on unpaid purchase price is not in the nature of interest on loan and for any amount which is to be categorised as “interest” it is essential that the same is payable in respect of money borrowed or debt incurred. Upon perusal of the definition of ‘interest’ as per section 2(28A). Interest pertains only to monies borrowed or debt incurred or for any credit facility. In the present case in hand, there is no such classification of money involved which attracts the said “interest”. The transaction entered into by the assessee is with M/s SBI Global Factors Ltd is only a discounted sale consideration arising out of debts purchased by M/s SBI Global Factors Ltd from the assessee. This does not extend to the nature of debt thereby establishing that discounting / factoring charges are not in the nature of “interest” as defined in section 2(28A) - See M/S. MKJ. ENTERPRISES LTD. [2014 (1) TMI 1484 - ITAT KOLKATA] - Decided in favour of assessee. Applicability of Second Proviso to section 40(a)(ia) as inserted by the Finance Act, 2012 with effect from 01/04/2013 - We place our reliance on the decision of Perfect Circle India P. Ltd [2019 (1) TMI 1532 - BOMBAY HIGH COURT] as held that the Second Proviso to section 40(a)(ia) has retrospective effect from 01/04/2005, the date from when the impugned Proviso to section 40(a)(ia) was inserted. The Hon’ble High Court also relied on the decision of Ansal Landmark Township P Ltd [2015 (9) TMI 79 - DELHI HIGH COURT] which held that section 40(a)(ia) is not a penalty and insertion of Second Proviso is declaratory and curative in nature and would have retrospective effect from 01/04/2005 and not with effect from 01/04/2013 - we accept the contention of the assessee. Since the payee has already paid the said tax the assessee cannot be treated as an assessee in default as per the provisions of section 201(1) of the Act, we thereby dismiss this ground of appeal filed by the Revenue.
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