SHRI IYAMPERUMAL SHANMUGADURAI, CHENNAI V. DCIT , CORPORATE CIRCLE - 10 (1) , CHENNAI

ITA 1091/CHNY/2022

AI Insights

The case involves an appeal by Shri Iyamperumal Shanmugadurai against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, which confirmed the disallowance of interest payment to a Non-Banking Financial Company (NBFC) without deduction of TDS under section 194A of the Income Tax Act, 1961. The primary contention was whether the interest payments made to NBFCs, which had already suffered tax, should be disallowed under section 40(a)(ia) of the Act. The Tribunal found merit in the assessee's argument, referencing a Delhi High Court decision that supported the retrospective application of the relevant legal provision. Furthermore, the Tribunal addressed the disallowance of expenses related to exempt income, directing a reduction to match the exempt income amount.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135009 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 11-07-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 15-12-2022
• Other Referred Cases: CIT vs. Ansal Landmark Township (P) Ltd., 377 ITR 635
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Retrospective amendment; TDS; Rule 8D
• Section: 14A; 40(a)(ia)

Judgement Text

आयकर अपीलीय अिधकरण, ‘बी’ ᭠यायपीठ, चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI ᮰ी महावीर ᳲसह,उपा᭟यᭃ एवं ᮰ी मनोज कुमार अᮕवाल,लेखा सद᭭य के समᭃ BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.: 1091/CHNY/2022 िनधाᭅरण वषᭅ /Assessment Year:2012-13 Shri Iyamperumal Shanmugadurai, No.42, Paper Mills Road, Perambur, Chennai – 600 011. PAN: AAHPS 8819A v. The DCIT, Corporate Circle 10(1), Chennai. (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri R. Vijayaraghavan, Advocate ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri D. Hema Bhupal, JCIT सुनवाई कᳱ तारीख/Date of Hearing : 12.07.2023 घोषणा कᳱ तारीख/Date of Pronouncement : 12.07.2023 आदेश /O R D E R PER MAHAVIR SINGH, VP: This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi in Order No.ITBA/NFAC/S/250/2022- 23/1046368411(1) dated 18.10.2022. The assessment was framed by the DCIT, Non-Corporate Circle 10(1), Chennai for the assessment year 2012-13 u/s.143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’), vide order dated 17.03.2015. 2 ITA No.1091/Chny/2022 2. The first issue in this appeal of assessee is as regards to the order of CIT(A) confirming the disallowance of interest payment of Rs.3,10,35,767/- to Non-Banking Financial Company (NBFC) without deduction of TDS u/s.194A of the Act, thereby invoking the provisions of section 40(a)(ia) of the Act. 3. We have heard rival contentions and gone through facts and circumstances of the case. We noted that the AO during the course of assessment proceedings required the assessee to explain as to why ‘HP Finance Charges - Others’ amounting to Rs.3,10,35,767/- debited by the assessee has suffered TDS or not. The assessee admitted that no TDS was deducted but it was stated and assessee filed details of NBFCs and certificate issued in Form No.26A thereby paying the amount on the alleged payments to the extent of Rs.2,83,74,079/-. The details were given by the assessee and are reproduced by the CIT(A) in para 4.2.4. However, total disallowance is Rs.3,10,35,767/-. The ld.counsel for the assessee before AO as well as before CIT(A) and even before us claimed that this amount of Rs.2,83,74,079/- has already suffered tax in the hands of the respective NBFCs i.e., namely (1) India Bulls Financial Services Ltd., (2) HDB Financial Services Ltd., (3) Fullerton India Credit Company Ltd., and (4) Bajaj Finance Ltd. The details of the 3 ITA No.1091/Chny/2022 same were given in the order of CIT(A) at para 4.2.4. The ld.counsel for the assessee stated that this issue is now covered by the decision of Hon’ble Delhi High Court in the case of CIT vs. Ansal Landmark Township (P) Ltd., 377 ITR 635, wherein the Hon’ble Delhi High Court has considered that the second proviso to section 40(a)(ia) of the Act has retrospective effect and it has to be given retrospective effect from 01.04.2005 and the relevant year involved in assessee’s appeal is 2012-13. 4. We find that this issue is squarely covered in favour of assessee for an amount of Rs.2,83,74,079/- out of the total disallowance of Rs.3,10,35,767/-. Thereby, we restrict the disallowance only to the extent of Rs.26,61,688/-. This issue of assessee’s appeal is partly allowed. 5. The next issue in this appeal of assessee is as regards to the order of CIT(A) confirming the disallowance of expenses relating to exempt income i.e., interest disallowance under Rule 8D(2)(ii) at Rs.5,61,082/- and administrative expenses being 0.5% of the average value of investment under Rule 8D(2)(iii) at Rs.29,972/- by invoking the provisions of section 14A r.w.rule 8D of the Rules. 4 ITA No.1091/Chny/2022 6. We noted that the assessee has received dividend income of Rs.3,15,096/- during the financial year 2011-12 relevant to this assessment year 2012-13 and the ld.counsel for the assessee agreed that disallowance can be restricted only to the extent of exempt income claimed by assessee i.e., dividend income of Rs.3,15,096/-. We direct the AO to restrict the disallowance to the extent of dividend income of Rs.3,15,096/- only. This issue of assessee’s appeal is partly-allowed. 7. In the result, the appeal filed by the assessee is partly- allowed. Order pronounced in the open court on 12 th July, 2023 at Chennai. Sd/- Sd/- (मनोज कुमार अᮕवाल) (MANOJ KUMAR AGGARWAL) लेखा सद᭭य /ACCOUNTANT MEMBER (महावीर ᳲसह ) (MAHAVIR SINGH) उपा᭟यᭃ /VICE PRESIDENT चे᳖ई/Chennai, ᳰदनांक/Dated, the 12 th July, 2023 RSR आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथᱮ/Appellant 2. ᮧ᭜यथᱮ/Respondent 3. आयकर आयुᲦ /CIT 4. िवभागीय ᮧितिनिध/DR 5. गाडᭅ फाईल/GF.