Home Income tax Corporate Income tax Compensation Payments Are Not Considered Interest U/S 194A for TDS Deduction

Compensation Payments Are Not Considered Interest U/S 194A for TDS Deduction

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Compensation Payments Are Not Considered Interest U/S 194A for TDS Deduction

The Chennai Bench of the Earnings Tax Appellate Tribunal (ITAT) has made a ruling stating that funds made in a compensatory nature shouldn’t be thought-about as curiosity for the aim of tax deduction at supply (TDS) beneath Part 194A of the Earnings Tax Act, 1961.

The Assessing Officer (AO) had seen within the tax audit report that Trimex Industries Pvt. Ltd (the Assessee) had made a cost of Rs. 24,44,193/- to Empire Mineral and Transport as plot hire, with out deducting TDS on the quantity. Consequently, the AO invoked part 40(a)(ia) of the Earnings Tax Act and disallowed Rs. 26,44,193/-, including it to the assessee’s complete revenue. In response, the assessee filed an enchantment with the Commissioner of Earnings Tax (Appeals) [CIT(A)].

Upon reviewing the submissions made by the assessee, the CIT(A) discovered that the information recorded by the AO have been incorrect. The assessee procured barite lumps from Andhra Pradesh Mineral Growth Company (APMDC) for buying and selling functions.

Learn Additionally: ITAT Chennai: Assessing Officer Didn’t Confirm Extra Proof in Violation of IT Rule 46A

Initially, the provider agreed to grant a 90-day interest-free credit score interval. Nonetheless, it has been renegotiated to permit the provider to decide on between receiving money or receiving cost with curiosity for the credit score interval offered to the assessee.

A compensation cost amounting to Rs. 26,44,193/- has been paid by the assessee for the credit score interval it obtained. This cost was thought-about beneath curiosity by the assessee. Moreover, the assessee argued that the cost made to APMDC is compensatory in nature and shouldn’t be thought-about as curiosity as outlined beneath Part 194A of the Earnings Tax Act. Therefore this cost doesn’t qualify for tax deduction at supply, as decided by the Assessing Officer (AO).

The contentions offered and the circumstances of the case have been completely examined by a Two-Member Bench consisting of Mahavir Singh, Vice President, and Manoj Kumar Aggrwal, Accountant Member. They concluded that as per the provisions of Part 194A of the Earnings Tax Act, the funds made to APMDC have been clearly compensatory in nature and shouldn’t be labeled as curiosity for the aim of TDS deduction.

Subsequently, the ITAT upheld the choice of the CIT(A) to delete the disallowance, discovering no errors within the order. Consequently, the Income’s enchantment was dismissed.

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