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TMI Blog2016 (9) TMI 1286X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has submitted that payment to these NBFC are in the nature of payment to bank and these are having no deduction certificate, however no such certificate has been submitted by the assessee. According to provision of section 194A payment of interest is required for deduction of tax at source except the cases where payment has been made to bank or financial institution. Payment made to NBFC is neither falling in the category of bank or financial institution, hence prevision of section 40(a)(ia) is applicable in this case. Language of provision of section 40(a)(ia) is very much clear that where payment relates to interest, contract, rent, professional services and tax is deductible but not deducted or after deduction not deposited, than the said amount of expenses is not allowable as deduction. In this case assessee has made payment of interest but no tax was deducted, hence the amount of Rs. 6,94,574/- is disallowed u/s 40(a)(ia) and added to taxable income of assessee." 4. The ld. CIT(A) while confirming the disallowance has held as under:- "3.3 I have perused the facts of the case, assessment order and the submissions of the appellant. The issue as to whether the term "paya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same was an 'orbiter dicta' while the decisions of the Hon'ble Gujarat and Calcutta High Court (supra) were 'ratio decidendi'. The ITAT accordingly applied the view taken by the Hon'ble Gujrat and Calcutta High Court as ratio decidendi prevails over orbiter dicta. 3.3.4 C.B.D.T Circular No. 10/DV/2013, dated, 16-12-2013, states that- "After careful examination of the issue, the Board is of the considered view that the provision of section 40(a)(ia) of the Act would cover not only the amounts which are payable as on 31st March of a previous year but also amounts which are payable at any time during the year. The statutory provisions are amply clear and in the context of section 40(a)(ia) of the Act the term "payable" would include "amounts which are paid during the previous year". 3.3.5 In the decision dated 10/4/2015 in the case of Shri Girdhari Lal Bargoti for A.Y. 2009-10 in ITA No. 757/JP/2012, Hon'ble ITAT, Jaipur has held as follows: "We have heard the rival contentions of both the parties and perused the material available on the record. On issue of amount already paid during the year or amount shown payable as on 31s' March of every year, the various courts ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld include the amounts 'paid' during the year in question. 3.4 In the case of Sh. Girdhari Lai Bargoti (supra) it was further indicated that once the I.T. Returns are filed by the recipient NBFC, including therein the interest receipts from the assessee then the assessee would not be deemed to be in default. It is seen that the corresponding provisions are in 1st proviso to section 201(1) which provides that the assessee shall not be deemed to be in default if the recipient or liable deductee has filed his Return taking into account the amounts on which IDS was not deducted by the assessee and pays due taxes and the assessee furnishes the report of C.A. in the specified format to the above effect. If the assessee furnishes such report of C.A., the assessee shall be deemed to have deducted and paid the tax on the date of furnishing of Return by the above stated recipient, in terms of 2nd Proviso to sec. 40(a)(ia). The said proviso is inserted by Finance Act,2012 w.e.f. 1.4.2013. However, several courts have held the same to be retrospective in operation. Be that as it may, the moot point is whether the assessee has furnished the said certificate of C.A. in terms of 1st Proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir income; that as such no disallowance U/s 40(a)(ia) ought to be made in the hands of the assessee; that second proviso to Section 40(a)(ia) inserted w.e.f. 01/4/2013, as retrospective effect; that the departmental appeal against the decision of the Hon'ble Allahabad High Court in the case of "CIT Vs. Vector Shipping Service Pvt. Ltd." 38 taxmann.com 77 (All) was dismissed by the Hon'ble Supreme Court; that the ld. CIT(A) has failed to consider that in the CBDT circular No. 10/DV/2013 dated 16/12/2013, it has been observed that where any High Court decides an issue contrary to the departmental view, the departmental view thereon shall not be operative in the area falling in the jurisdiction of the relevant High Court; that the Hon'ble Supreme Court dismissed the department's SLP in the case of Vector Shipping Service P. Ltd. (supra), post the issuance of the aforesaid CBDT circular; and that otherwise too, Saraswat Cooperative Bank to whom interest of Rs. 5,31,761/- was paid, is a scheduled cooperative bank, to which the provisions of Section 194A of the Act are not applicable, due to which, the disallowance, to this extent, is not sustainable. 7. On the other hand, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the assessee and the default U/s 40(a)(ia) of the Act subsists the second proviso to Section 40(a)(ia) having been held to be retrospective in operation. 8. I have heard the rival contentions of both the parties and have perused the material available on the record. In the case of Girdhari Lal Bargoti (supra), it has been held that considering the issue of amount already paid during the year or amount shown as payable as on 31st March of every year, dealing with the provisions of Section 40(a)(ia) of the Act, different courts have taken mutually divergent views and as such, there is a diversion of legal opinion, which is both in favour of the assessee and in favour of the department. In such a situation, the Jaipur Tribunal has followed the Hon'ble Supreme Court decision in the case of Vegetable Products Limited (supra) to decide the matter in favour of the assessee. Here, it is seen that clearly, the decision in the case of Vector Shipping (supra) is in favour of the assessee, whereas the decisions the case of CIT Vs. Crescent Export Syndicate, CIT Vs. Sikandar Khan N. Tunvar and PMS Diesels Vs CIT (supra) are in favour of the department. Therefore, evidently, there is a cl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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