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2023 (1) TMI 481 - AT - Income TaxTDS u/s 194A - Allowability of interest expenditure neither accounted in the books of account nor paid during the previous year relevant to the assessment year under consideration - Applicability of provision of sec 40(a)(ia) - HELD THAT:- It is settled position of law that in the absence or presence of entries in the books of account does not determine the allowability of interest expenditure while computing the taxable income of an assessee under the head “business”. Similarly, the provisions of section 194A have no application in case where no interest is credited to the account of the parties nor was paid during the previous year relevant to the assessment year under consideration. Therefore, in the absence of obligation to deduct tax at source, the assessee cannot be held to be an assessee in default and consequential provisions of section 40(a)(ia) have no application. The ratio of case of Pranik Shipping & Services Ltd. [2012 (3) TMI 210 - ITAT MUMBAI] is squarely applicable to the facts of the present case. However, the Assessing Officer had no occasion to examine accrual of the interest liability of expenditure since the AO had disallowed the same on the ground that no TDS was deducted. Therefore, we remit the matter to the file of the AO to allow the interest liability for expenditure as allowable expenditure on satisfying himself that the interest liability had crystallized during the previous year relevant to the assessment year under consideration in terms of the contract entered by the appellant with the lenders. Thus, the grounds of appeal filed by the assessee stand partly allowed.
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