TMI Blog2016 (6) TMI 842X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Act. Accordingly, to that extent,section 40(a)(ia) is not applicable. Thus we do not find any infirmity in the order of the CIT(A) in cancelling the penalty levied by the AO u/s 271C and therefore, the same is hereby upheld dismissing the grounds raised by the revenue on this issue. See Commissioner of Income-tax Versus MG. Brothers Finance Ltd [2014 (1) TMI 1590 - ANDHRA PRADESH HIGH COURT] - Decided in favour of assessee - ITA No. 253 /Hyd/2016 - - - Dated:- 17-6-2016 - Smt P. Madhavi Devi, Judicial Member And Shri S. Rifaur Rahman, Accountant Member For the Revenue by : Shri B. Kurmi Naidu For the Assessee : None ORDER Per S. Rifaur Rahman, A. M. This appeal is preferred by the Revenue against the order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of the assessee company cannot be exonerated from the interest liability u/s 201(1A) of the Act and that the company failed to establish proof of offering of income by M/s. TML Finance, M/s. SREI International and M/s. GE Capital and accordingly, the proceedings u/s 201(1) and 201(1A) for the asst. year 2010-11 were concluded as above. As the assessee failed to deduct tax on interest payments made to Nonbanking Financial Institutions, the AO initiated penalty proceedings u/s 271C of the I.T. Act. As the failure to adhere to the provisions of TDS under Chapter XVII B attracts penalty u/s 271C, a notice was issued to the assessee 23/04/2014 which was duly served on the assessee. As there is a change of incumbent, a fresh notice was issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A), the revenue is in appeal before us raising the following grounds of appeal. 1. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in deleting the penalty levied u/s 271C for the AY 2010-11. 2. The ld. CIT(A) has failed to appreciate the fact that the assessee was liable to deduct tax at source u/s 194A(1) of the Income Tax Act, 1961 on payments made to non-banking financial institutions as the payments include component of interest. 8. None appeared on behalf of the respondent-assessee at the time of hearing of this appeal in spite of service of notice. Therefore, we proceed to decide the appeal after hearing the ld. DR and on merits of the case. 9. Ld. DR relied on the order of the AO. 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents so far made are treated to be rentals. Therefore, the whole concept is with regard to payment of consideration money or rental not repayment of loan amount in financial transaction. Unless there is involvement of loan transaction, the question of payment of interest does not arise. The aforesaid peculiar situation with regard to the hire purchase agreement has been explained by the Supreme Court quite long time back in the case of Sundaram Finance Ltd. Vs. The State of Kerala. In paragraph-24 of the said judgment, their lordships have explained the position stating thus: But a hire purchase agreement is more complex transaction. The owner under the hire purchase agreement enters into a transaction of hiring out goods on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase agreement to be liable for TDS u/s 194I of the Act. Accordingly, we direct the Assessing Officer to recompute the disallowance u/s 40(a)(ia) in the light of the amended provisions, which came into effect from 13/07/2006. Accordingly, this ground of appeal is partly allowed. As the decision of the CIT(A) is in consonance with the decision of the coordinate bench as above as well as the jurisdictional High Court s decision in the case of MG Brothers Finance Ltd. (supra), we do not find any infirmity in the order of the CIT(A) in cancelling the penalty levied by the AO u/s 271C and therefore, the same is hereby upheld dismissing the grounds raised by the revenue on this issue. 10. In the result, appeal of the revenue is dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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