TMI Blog2016 (1) TMI 635X X X X Extracts X X X X X X X X Extracts X X X X ..... NAGENDRA PRASAD, JUDICIAL MEMBER For The Appellant : Mr. A.B.Koli, JCIT For The Respondent : Mr. N.Devanathan, Advocate ORDER Per Challa Nagendra Prasad, JM: This appeal is filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-2, Tiruchirapalli dated 9.12.2014 for the assessment year 2011-12. The grievance of the Revenue in its appeal is that Commissioner of Income Tax (Appeals) erred in deleting the addition of ₹ 72,54,609/- made under section 40(a)(ia) of the Act for nondeduction of tax on delayed payment of dues on purchase of tractors for assessee s business M/s. Raj Motors. 2. The assessee, an individual, is a dealer and distributor of Escort tractors filed return of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad Bench of the Tribunal in the case of ITO Vs. Parag Mahasukhlal Shah (143 TTJ 606) and the decision of Madras High Court in the case of India Pistons (282 ITR 632). 3. Departmental Representative vehemently supports the order of the Assessing Officer in invoking the provisions of section 40(a)(ia) for non-deduction of TDS on delayed payment of interest on purchases made by the assessee. 4. Heard both sides. Perused orders of lower authorities and the decisions relied on. The assessee paid interest to Escorts Ltd. for delay in making the outstanding dues in purchasing of tractors. The Assessing Officer disallowed such interest as the assessee did not deduct TDS under section 194A read with section 40(a)(ia) of the Act. The Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x at source. The Assessing Officer, however, did not accept the explanation of the assessee and disallowed the sum of ₹ 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 assessee being aggrieved of such addition, filed an appeal before the CIT(A). 6. Before the CIT(A) it was contended on behalf of the assessee that the amount of ₹ 3,12,600 pertains to the payment made on account of overdue bills and, therefore, was not in the nature of interest envisaged under the TDS provisions of the Act. In this context, the assessee relied upon a decision of the ITAT Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T 302. 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 Trade liability being connected with the delayed purchase payment, hence, did not fall within the category of Interest as defined in Sec. 2(28A) of the I.T. Act for the purpose of deduction of Tax at Source as prescribed u/s. 194A of the Act. Resultantly, this assessee cannot be held a defaulter of non-deduction of tax at source u/s. 194A of the Act. The Learned CIT(Appeals) has rightly reversed the findings of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessment year under dispute no disallowance could be made u/s. 40(a)(ia) in view of the ITAT Special Bench decision in the case of Merilyn Shipping Transports (supra). In the aforesaid view of the matter, the disallowance of an amount of ₹ 3,12,600 made u/s. 40(a)(ia) cannot be sustained. We, therefore, direct the assessing Officer to delete the same. The ground raised by the assessee is allow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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