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Question ID : 38141

interest paid without TDS to NBFC

A Proprietorship concern subject to Tax Audit repays installment of Mortgage loan in installments to NBFC. It is not deducting TDS . Whether Full amount of Interest paid can be disallowed or 30% Please clarify

Posted by Mahesh Kumar on May 12, 2019


Answer ID : 76559

In the case of Shri Azmath Ulla Vs ACIT (ITAT Bangalore) it was held that t if the recipients of interest in question have already considered the same for computing their income offered to tax then the dis allowance u/s. 40(a)(ia) is not attracted. So you need to pprov that at higher lever court say ITAT , Lower appeal may not give you relief . You can deposit the tds in the name of NBFC and then take the refund form them to avoid the litigation

Posted by CA. BISHT RAKESH on May 13, 2019
Answer ID : 76560

As per second proviso of section 40(a)(ia), if the payee has included such interest in computation of income and paid tax on it, no disallowance can be made. Hence if CA certificate is available in this regard, no need to deduct TDS.

Posted by CA. chunauti dholakia on May 13, 2019
Answer ID : 76564

As per section 40(a)(ia) if you have not deducted TDS on Interest to NBFC and claimed the Interest as deduction then 30% of the Interest shall be disallowed and Non Deduction of TDS shall be reported by CA in his Audit report. Presently Returns are processed by CPC Bangluru and they are straight forward adding the 30% portion in the assessed income and creating the demand. In such a case if you want the relief you have to file an appeal and proved the NBFC had included that interest income in its taxable income and also paid the tax on it. In such situation you may get relief. else you have to pay tax on 30% part of interest.

Posted by RAJENDRA KHANDELWAL on May 14, 2019
Answer ID : 76578

Non deduction of tax at source though attracts 40(a)(ia) but its proviso grants the relief to you subject to those conditions. But your liability to pay interest if any is to be considered.

Posted by SIVADAS CHETTOOR on May 16, 2019
Answer ID : 76639

You can verify that the NBFC has filed the return of income and get a Form 26 from them and avoid the 305 disallowance.

Posted by CA. VENKITARAMAN K V on May 25, 2019
Answer ID : 76760

No full amount of interest paid would not be disallowed. At best 30% interest can be disallowed. However the assessee can prove before the assessing officer that whole amount of interest paid has been included in the taxable income of the NBFC then nothing will be disallowed.

Posted by CA. JHA SHANKAR KUMAR on Jun 06, 2019