No TDS deductible on delayed payment of Purchase Bills U/s. 194A

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IN THE ITAT HYDERABAD BENCH ‘A’

Sri Venkatesh Paper Agencies (Hyd.) (P.) Ltd.

v.

Deputy Commissioner of Income-tax, Circle-3(1), Hyderabad

IT APPEAL NO. 636 (HYD.) OF 2011

[ASSESSMENT YEAR 2005-06]

JUNE 22, 2012

 

It is not disputed that the interest paid is not for any loan or debt incurred by the assessee but for the delay in payment of bills for purchases effected from company. Therefore, it has to be seen as to whether such payment is in the nature of interest as envisaged under section 2(28A). As seen from the order of the ITAT Ahmedabad Bench in the case of ITO v. Parag Mahasukhlal Shah [2011] 46 SOT 302 the Tribunal has held that a payment which has direct link and immediate nexus with the trading liability being connected with the delayed purchase payments will not fall within the category of interest as defined in section 2(28A). The payment made by the assessee in the present appeal being of similar nature also cannot be termed as interest as defined under section 2(28A). Even without entering into the controversy as to whether the payment made on overdue bills will come within the ambit of interest as defined in section 2(28A), the assessee is also bound to succeed on its alternative argument that the entire payment having been made during the previous year relevant to the assessment year under dispute no disallowance could be made under section 40(a)(ia) in view of the ITAT Special Bench decision in the case of Merilyn Shipping & Transports v. Addl. CIT [2012] 136 ITD 23. In the afore said view of the matter, the disallowance made under section 40(a)(ia) cannot be sustained. Therefore, the Assessing Officer is to be directed to delete the same.