Daily Archives: August 16, 2012


  Sri Venkatesh Paper Agencies (Hyd.) (P.) Ltd. [ITA No.: 636 (Hyd) of 2011] (Hyderabad ITAT) Background: The assessee is engaged in the business of paper and boards. During the course of assessment proceedings, the AO found that the assessee has claimed interest payment of Rs. 3,12,600 to M/s. Sinermas Pulp & Papers Ltd. without deducting tax at source. The assessee contended that the amount of Rs. 3,12,600 was paid as interest on the overdue bills and that the payment of interest was not on a deposit or loan but on purchases. Therefore, it is not required to deduct tax at source. The AO however, did not accept the explanation of the assessee and disallowed the sum of Rs. 3,12,600 u/s. 40(a)(ia) on the reasoning that whether the assessee paid the interest in respect of delayed payment of purchases or deposits or loans it has to deduct tax at source as per the provisions of the Act. CIT(A), came to held that the definition of the term interest as given in section 2(28A) of the Act would mean interest payable in any manner in respect of any monies borrowed or debt incurred and held that the definition of interest is wide enough to take within its ambit the debt owed by the assessee on account of overdue bills.

Interest on trading liability not subject to TDS u/s 194A – Hyderabad ITAT