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TMI Blog2016 (7) TMI 1661X X X X Extracts X X X X X X X X Extracts X X X X ..... ermining the income of the assessee at Rs. NIL. 2.The first ground of appeal is about disallowing of interest expenses of Rs.10,39,94,746/u/s. 40(a) (ia)of the Act. At the time of assessment, it was observed that in the return filed u/s. 139 (1)of the Act, the assessee had claimed interest expenses of Rs.10,82,30,717/-which included interest of Rs.10,39,94,746/- payable to M/s. Hubtown Ltd.(HL),that it had not discharged its TDS liability on the said interest accrued which worked out to Rs.1, 03, 99, 475/-.Since the assessee had not paid the TDS on the aforesaid interest on or before the due date specified in section 139(1),the AO asked it to explain as to why the said interest of Rs.10,39,94,746/- should not be disallowed u/s.40(a)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - in the balance sheet under the head "inventories". As a result, the inventory shown by the assessee was reduced to Rs.61,25,84,025/- as against Rs.71,65, 78,771/-declared by the assessee and the claim made by the assessee was disallowed u/s.40(a)(ia)of the Act. 3.In the course of appellate proceedings, before the First Appellate Authority (FAA),the assessee submitted that it had accrued/paid interest of Rs.10,39,94,746/- to HL which was also its Holding Company, that the TDS liability on the interest accrued was Rs.1,03, 99, 475/-,that the assessee was passing through a very bad phase of liquidity crunch, that it could not make the payment of TDS within the due date of filing of return u/s.139 of the Act,that based on judicial pronouncem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisfies the Income-tax Authorities that such taxes have been paid by the payee/deductee. The assessee referred to the judicial decisions of Allied Motors (P.) Ltd (91 Taxman 205), Alom Extrusions Ltd.(185 Taxman 416),Ansal Landmark Tonshir Pvt. Ltd. (ITA Nos. 160 & 161of 2015), JH.Gotla (23 Taxmann 14). 3.1 After considering the submissions and the assessment order,the FAA held that the assessee had borrowed funds from HL for the purpose of its ongoing project that during the year under consideration it had accrued/paid interest of Rs1039,94746/- to HI which was capitalised to the WIP account in the return of income filed by the assessee,that he was unable to accept the assessee's plea that since HL had filed its return and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not deducted tax at source as per the provisions of chapter XVII of the Act, that later on it withdrew the disallowance made under section 40(a)(ia) in the revised return, that it relied upon the case of Hindustan Coca-Cola Beverages Private Ltd.(293 ITR 226), that the AO and the FAA held that facts of Hindustan Coca-Cola Beverages Private Ltd. were distinguishable, that the provisions of section 40(a)(ia) were amended by the Finance act, 2012, that second proviso had been brought in statute book with effect from 01/04/2013, that the act of the assessee of deleting the addition under section 40(a)(ia) in the revised return for the assessment year 2012-13 was not in consonance with the judgment of the Hon'ble of Apex Court or the Act, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such tax if such resident has furnished his return of income under section 139 . What is common to both provisos to sections 40(a)(ia) and 201(1) of the Act is that as long as the payee or resident has filed its return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid tax on such income, the assessee would not be treated as a person in default." Considering the facts of the case and the above judgment, we hold that the proviso to the section is applicable from 01.04.2005,that the deductee had paid the taxes on the income that was subject of TDS provisions, that no action could be taken against the assessee making the payment to HL. The basic aim of chapter XVII is to ensure t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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