No disallowance of interest to the extent which relates to persons who furnished Form 15G and Form 15H
IN THE INCOME TAX APPELLATE TRIBUNAL
The Relevant Text of the Order are as follows :
15. The decision cited by the revenue in the grounds of appeal is with regard to the action of the CIT(A) in the deleting the disallowance u/s.40(a)(ia) of the Act on the ground the sums in question did not remain payable as on the last date of the relevant previous year and by following the decision of the Special Bench, Visakapatnam in the case of Merilyn Shipping & Transports (supra). As we have already seen the CIT(A) appeal deleted the disallowance u/s.40(a)(ia) of the Act on two grounds viz.,
(i) once the depositors give Form No.15G/H, the law empowers the Assessee to make payment of interest without deduction of tax at source. The requirement of filing the form so obtained before the prescribed authority within the prescribed period was only a procedural requirement and it was mandatory and for failure to file the form before the prescribed authority no disallowance can be made u/s.40(a)(ia) of the Act, and
(ii) the sums in question did not remain payable as on the last date of the relevant previous year and by following the decision of the Special Bench, Visakapatnam in the case of Merilyn Shipping & Transports (supra). The decision cited by the revenue in the grounds of appeal is only in the context of the second ground on which the CIT(A) allowed relief to the Assessee.
As far as the first ground on which CIT(A) gave relief to the Assessee is concerned, that ground is supported by the decision of the Hon’ble Karnataka High Court in the case of Sri Marikamma Transport Co.(supra) and that basis on which CIT(A) gave relief to the Assessee still holds good.
16. Respectfully following the decision of the Tribunal in Assessee’s own case we hold that the CIT(A) was justified in AO was justified in deleting the disallowance of interest expenses u/s.40(a)(ia) of the Act, to the extent of the disallowance relates to interest paid to persons furnished Form 15 G and Form 15 H to the assessee as no disallowance can be made u/s 40a(ia) of the Act as held by the Hon’ble Karnataka High Court in the case of Sri Marikamba Transport Co., (Supra). The requirement of filing of Form 15G and 15H with the prescribed authority viz., CIT is only procedural and that cannot result in a disallowance u/s 40a(ia) of the Act. Consequently, we uphold the order of CIT(A) and dismiss Gr.No.3 raised by the Revenue.
17. In the result, the appeal by the Revenue is partly allowed.
ITA No.1392/Bang/2016 (Revenues’ Appeal for Asst. Year 2013-14)
18. As far as AY 2013-14 is concerned, the grounds of appeal raised by the revenue are identical to Grounds raised in the appeal for AY 2012-13. The grounds raised in the appeal for AY 2013-14 read thus:
“1. Whether on facts & circumstances of the case, is the learned CIT(A) correct in holding that the Assessee is entitled to deduction u/s.36(1)((vii) as well as U/s.36(1)(viia), of the Income Tax Act, 1961, without the restriction imposed by the provisions of Se.36(2)(v) of the Income Tax Act, 1961..
2. Whether on the facts & circumstances and in law, the CIT(A) is correct in allowing deduction /s.36(1(vii) as well as u/s.36(1)(viia) of the Income Tax Act, 1961 thereby allowing the provisions of sections to operate independently and allowing the Assessee double deduction.
3. “Whether on the facts and circumstances and in law, the CIT(A) is correct in holding that no disallowance of interest could be resorted to u/s.40(a)(ia) of the Income Tax Act, 1961 for non-deduction of tax at source in respect of interest paid during the financial year disregarding the decision of the Hon’ble High Court of Karnataka, Dharwad Bench in ITA Nos.100111- 120/2015, ITA No.100012/2016 to ITA Nos.100017/2016 dated 26-02-2016 in the case of Ryatar Sahakari Sakkare Karkane Niyamit, Timmapur, Mudhol Taluq.”
19. It is not disputed that the facts and circumstances of the case and the basis on which addition was made by the AO and relief was allowed by the CIT(A) is same in AY 2013-14 except for change in the sum added/disallowed. In the circumstances, we follow the decision rendered in AY 2012-13 and allow Gr.No.1 & 2 raised by the Revenue and dismiss Ground No.3 raised by the revenue in AY 2013-14.
20. In the result the appeal is Partly allowed.
21. As far as the Cross-objections of the Assessee are concerned, they are in support of the relief allowed to the Assessee on the disallowance made by the AO u/s.40(a)(ia) of the Act. Since the relevant ground of appeal of the revenue is dismissed, we are of the view that there is no necessity to decide the grounds raised in the cross objection, though we find that similar objections as is sought to be raised in the cross-objection was raised by the Assessee in its appeal for AY 2010-11 in ITA No,.684/Bang/2014 order dated 25.4.2018 and dismissed. Hence, the cross-objections are dismissed as infructuous.
22. In the combined result, the appeals by the revenue are partly allowed, while the cross-objections are dismissed.
Pronounced in the open court on this 23rd day of January, 2020.
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