TMI Blog2019 (11) TMI 1115X X X X Extracts X X X X X X X X Extracts X X X X ..... ined by the AO as to whether payer was to deduct TDS or assessee s income was subjected to TDS. Therefore, we deem it fit to remit back this issue to the file of the AO to verify where the entire income of the assessee was liable to TDS on the payments made from the payer, if so then there was no question of payment of advance tax by the assessee and the Revenue could not charge the interest u/s.234B of the Act. In view of this, additional ground is set-aside for limited purpose to the file of the AO. Disallowance being interest debited to the Profit and Loss Account and the balance amount appearing in RA bills - Disallowance u/s.40(a)(ia) in respect of expenses on account of nonpayment of TDS - HELD THAT:- We find that the assessee has debited interest in the Profit and Loss Account which itself states that the interest was paid by the assessee of which TDS was required to be made as per provisions of section 194A r.w. 2(28A) of the Act. We find that the interest is defined u/s.2(28)(A) which says that interest payable on any-money borrowed or that debt incurred this means that the assessee as borrowed and mobilize as mobilization advance and debt was incurred. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law, not involving any investigation of facts. 6. Now, we discuss this ground on merit. The ld.Counsel for the assessee submitted that the whole income of the assessee is subjected to TDS. The various courts have held that when whole income is subjected to TDS, then provisions of payment and advance tax u/s.234B are not applicable. The ld.Counsel further placed reliance on the decision of Hon ble Delhi High Court in the case of Director of Income Tax, International Taxation Vs. G.E.Packaged Power Ink [2015] 56 taxmann.com 190 (Del) wherein it was held that where the assessee was non-resident companies, entire tax was to be deducted at source of payments made by payer to it and there was no question of payment of advance tax by assessee, therefore, Revenue could not charge any interest u/s.234B from assessee. 7. Per contra, the ld.DR relied on the orders of the Lower Authorities. 8. We have heard the rival submissions and perused the material available on record. The assessee has claimed that whole of its income is subjected to TDS, therefore, the payer who was obliged to deduct tax at source and therefore, the assessee was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 1,87,176/- and interest on loan paid to M/s.Magma Fin Corp Limited of ₹ 2,82,645/-. Since the TDS was not deducted, the interest expenditure of ₹ 41,33,062/- was disallowed u/s.40(a)(ia) of the Act. 12. In appeal, it was contended that the interest expenses of ₹ 16,76,232/- were paid to Air Force Naval Housing Board and BHEL which were debited to Profit and Loss Account of the assessee. However, the no disallowance of ₹ 36,63,241/- could not have been made by the AO on this account. The assessee has also filed bifurcation of the interest paid by the assessee. Considering these facts, the ld.CIT(A) observed that the assessee has debited interest of ₹ 16,76,232/- only in the Profit and Loss Account and the balance accounts appearing in RA Bills which were to be adjusted from the advance received from parties or were yet to be paid. Therefore, no disallowance in interest income of ₹ 16,76,232/- can be made. However, the ld.CIT(A) observed that the contention of the assessee that interest paid was not covered by the definition of interest as per section 194A r.w.s. 2(28A) of the Act is not acceptable as the plai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent made by Finance Act [2014] w.e.f. 01.04.2015 restricting disallowance made u/s.40(a)(ia) from 100% to 30% is curative in nature and therefore having retrospective effect. We, therefore direct the AO to restrict the impugned disallowance to the extent of 30% only, accordingly the ground no.1 to 4 are partly allowed. 16. Ground No.6 to 8 relates to disallowance u/s.40(a)(ia) in respect of expenses of ₹ 6,54,79,350/- on account of nonpayment of TDS. 17. Brief facts are that the AO noted that the assessee company has shown TDS payable of ₹ 18,81,605/- as on 31.03.2013. It was claimed that the TDS provisions are not applicable to the extent in question as they fall below the taxable limit. Therefore, provision of section 40(a)(ia) of the Act are not applicable. However, the AO observed that the assessee has not filed any invoice or confirmation from the parties to whom such payments were made. It was further submitted that the payments were made for sale, purchase transactions and not to for works contract and in business parlance they could term the supplier as the contractor. However, the AO observed that the audited b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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