Mere default in furnishing Form 15G/15H doesn't call for sec. 40(a)(ia) disallowance

Facts:

The issue before the ITAT was:

Whether section 40(a)(ia) could be invoked when Form 15G/15H was obtained from the deductee although not filed before proper authority?

The ITAT held as under:

1) Section 40(a)(ia) spells out that the amount cannot be allowed as deduction only in the event when tax is deductible at source and such tax has not been deducted or, after deduction has not been paid.

2) In the instant case, it was the case of the AO that the assessee was required to deduct tax in terms of the provisions of section 194A. Section 194A is further qualified by section 197A(1A) which is a non obstante clause. Section 197A(1A) provides that liability to deduct tax under section 194A ceases when a declaration (i.e., Form 15G, Form 15H, etc.) is received by a person responsible for paying income to the payee.

Excess premium paid by builder while refunding booking amount to be deemed as interest; attracts sec. 194A TDS

Where assessee, a builder, having collected certain booking amount from purchasers of flats, sold those flats subsequently to some other parties at a higher price, amounts refunded by assessee to original purchasers with a margin, amounted to payment of interest to attract TDS under Sec. 194A.

Facts:

a)The assessee, a builder, received certain payments from customers who initially booked flats by making advance payments and a few installments; but due to various reasons the customers could not fulfill the payment schedule and they requested for refund.

b)The assessee had sold those flats at a higher price to other parties and returned the payment received from previous customers with a margin. The Assessing Officer (‘AO’) opined that the excess amount paid to previous customers was to be deemed as payment of interest, which would attract TDS under section 194A.

c)The AO disallowed these payments as assessee had failed to deduct tax at time of making interest payments to previous customers. The CIT(A) deleted disallowance made by AO. The aggrieved revenue filed that instant appeal.

The Tribunal held in favour of revenue as under:

1)It was clear from the plain reading of section 2(28A) that money paid in respect of amount borrowed or debt incurred, was interest payable in any manner. The definition of interest in section 2(28A) proceeds to include in the terms money borrowed or debt incurred, deposits, claims and 'other similar rights or obligations'.

2)The definition of interest has been carried to the extent that even the amounts payable in transactions had not been borrowed and those that had not been incurred, were brought within the scope of its definition.

3)Undisputedly, in the instant case, the amounts were paid in respect of an obligation in respect of purchase of flats through agreement, therefore, no fault could be found on the part of the AO for treating these charges as interest and liable for TDS under section 194A.

4)The mere fact that the assessee did not choose to characterize such payment as interest, would not take such payment out of the ambit of the definition of 'interest', in so far as payments made by the assessee was in respect of an obligation incurred with earlier flat holder. Thus, impugned payments had to be treated as interest under section 2(28A) and it were liable for tax deduction under section 194A. - INCOME-TAX OFFICER (TDS), TRIVANDRUM V. BEACON PROJECTS (P.) LTD. [2014] 49 taxmann.com 173 (Cochin - Trib.)