I never filed Form 26A, but my payee did include the amount in its return and pay tax. Is the s.40(a)(ia) disallowance still good?
No, on these facts. The Tribunal deleted the disallowance where the recipient had offered the interest in its return and paid tax on it, applying Hindustan Coca-Cola, and held that the absence of Form 26A could not defeat the claim for a year before rule 31ACB and Form 26A existed at all.
Decided by the ITAT (Income Tax Appellate Tribunal, Kolkata Bench (the members are not named on the source pages)) on 2025-04-24, reported as ITA No. 1233/KOL/2024 (Kolkata Trib.), AY 2008-09. It bears on section 40(a)(ia), section 201, section 201(1), section 194A, section Rule 31ACB of the Income Tax Act 1961, in TDS Defaults and Deductions & Disallowances matters.
It is the only corroborated authority I could find for the proposition that the certificate is not the sole route to the relief. But read the limit carefully: what carried it was that the assessment year was 2008-09 and Form 26A was prescribed only from 12 September 2012. For a current year the department will say the form is the prescribed proof and this order does not say otherwise.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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For assessment year 2008-09 the assessee is reported to have paid interest to M/s Srei Infrastructure Pvt. Ltd. without deducting tax at source, and the Assessing Officer is reported to have disallowed the interest under s.40(a)(ia) on the footing that no Form 26A had been filed. The CIT(A) confirmed the disallowance, relying on s.201(1) and the requirements of rule 31ACB. The assessee's case was that the recipient had duly offered the interest income in its own return and paid the tax on it. One figure in the secondary reports does not fit the year: they describe a disallowance of thirty per cent of the interest, but the words 'thirty per cent of any sum payable to a resident' were substituted into s.40(a)(ia) by section 14 of the Finance Act 2014 with effect from 1 April 2015, that is from assessment year 2015-16. For assessment year 2008-09 the clause disallowed the whole of the sum. Whether the reports are wrong, or the officer applied a later form of the provision, cannot be determined without the order.
The orders below were reversed and the addition deleted. Where the payee has taken the sum into account in its return and paid tax on it, the disallowance under s.40(a)(ia) cannot be sustained merely because Form 26A was not filed — the more so for an assessment year before Form 26A and rule 31ACB were introduced.
The Tribunal proceeded from the Supreme Court's decision in Hindustan Coca-Cola Beverages that tax cannot be recovered from the payer once the payee has paid tax on the same income, and applied that logic to the disallowance: the object of s.40(a)(ia) is to secure the tax on the payment, and where the recipient has independently returned the amount and paid tax on it that object has already been met. On the procedural objection, the sources record the Tribunal noting that Form 26A and rule 31ACB took effect only from 12 September 2012, so for assessment year 2008-09 non-filing of a form that did not then exist could not be the ground of a disallowance.
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Handle my notice → Ask a CA on WhatsAppNo, on these facts. The Tribunal deleted the disallowance where the recipient had offered the interest in its return and paid tax on it, applying Hindustan Coca-Cola, and held that the absence of Form 26A could not defeat the claim for a year before rule 31ACB and Form 26A existed at all. This was decided by the ITAT (Income Tax Appellate Tribunal, Kolkata Bench (the members are not named on the source pages)) and bears on section 40(a)(ia), section 201, section 201(1), section 194A, section Rule 31ACB of the Income Tax Act 1961. It is reported as ITA No. 1233/KOL/2024 (Kolkata Trib.), AY 2008-09. It is the only corroborated authority I could find for the proposition that the certificate is not the sole route to the relief. But read the limit carefully: what carried it was that the assessment year was 2008-09 and Form 26A was prescribed only from 12 September 2012. For a current year the department will say the form is the prescribed proof and this order does not say otherwise. If it applies to you, the first step is this: Check the assessment year first — this reasoning is at its strongest for years before 12 September 2012, when rule 31ACB and Form 26A were notified.
For assessment year 2008-09 the assessee is reported to have paid interest to M/s Srei Infrastructure Pvt. Ltd. without deducting tax at source, and the Assessing Officer is reported to have disallowed the interest under s.40(a)(ia) on the footing that no Form 26A had been filed. The CIT(A) confirmed the disallowance, relying on s.201(1) and the requirements of rule 31ACB. The assessee's case was that the recipient had duly offered the interest income in its own return and paid the tax on it. One figure in the secondary reports does not fit the year: they describe a disallowance of thirty per cent of the interest, but the words 'thirty per cent of any sum payable to a resident' were substituted into s.40(a)(ia) by section 14 of the Finance Act 2014 with effect from 1 April 2015, that is from assessment year 2015-16. For assessment year 2008-09 the clause disallowed the whole of the sum. Whether the reports are wrong, or the officer applied a later form of the provision, cannot be determined without the order. The matter was decided on 2025-04-24 by the ITAT (Income Tax Appellate Tribunal, Kolkata Bench (the members are not named on the source pages)). On those facts the ITAT held as follows. The orders below were reversed and the addition deleted. Where the payee has taken the sum into account in its return and paid tax on it, the disallowance under s.40(a)(ia) cannot be sustained merely because Form 26A was not filed — the more so for an assessment year before Form 26A and rule 31ACB were introduced.
The Tribunal proceeded from the Supreme Court's decision in Hindustan Coca-Cola Beverages that tax cannot be recovered from the payer once the payee has paid tax on the same income, and applied that logic to the disallowance: the object of s.40(a)(ia) is to secure the tax on the payment, and where the recipient has independently returned the amount and paid tax on it that object has already been met. On the procedural objection, the sources record the Tribunal noting that Form 26A and rule 31ACB took effect only from 12 September 2012, so for assessment year 2008-09 non-filing of a form that did not then exist could not be the ground of a disallowance. The decision followed or applied Hindustan Coca Cola Beverage Pvt. Ltd. v. CIT (SC) — relied on.
It was decided by the ITAT on 2025-04-24 and is reported as ITA No. 1233/KOL/2024 (Kolkata Trib.), AY 2008-09. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 40(a)(ia), section 201, section 201(1), section 194A, section Rule 31ACB, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The orders below were reversed and the addition deleted. Where the payee has taken the sum into account in its return and paid tax on it, the disallowance under s.40(a)(ia) cannot be sustained merely because Form 26A was not filed — the more so for an assessment year before Form 26A and rule 31ACB were introduced. It arises in TDS Defaults and Deductions & Disallowances matters, on section 40(a)(ia), section 201, section 201(1), section 194A, section Rule 31ACB of the Income Tax Act 1961, and was decided by Income Tax Appellate Tribunal, Kolkata Bench (the members are not named on the source pages). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Put the payee's return, computation and proof of tax paid on record whether or not you can obtain the form; that evidence is what the Tribunal acted on. Frame the argument through s.201(1) and Hindustan Coca-Cola — that the tax has already reached the Government — rather than as a plea to excuse a procedural default. For a current year, still attempt the Form 26A route on TRACES, and record in writing why it could not be completed.
Validity check could not be completed. The order still cannot be found. Beyond the three searches recorded earlier - the party name, the party name as an exact phrase and the appeal number - three more were run in a subscription research database in this pass: the appeal number as an exact phrase, which returned nothing; the party name as an exact phrase, which returned only the same unrelated Allahabad labour matter, Ompal Singh v. M/s. Madhu Transport Company [2018] 7 taxmann.com 1654 / 159 FLR 1000 (All.); and the rule together with the lender's name, which returned nothing. So no citator can be run, no reporter citation exists to add, and the appeal number and the date remain unconfirmed against any report of the order itself. Nothing was found either way on an appeal to the Calcutta High Court. On the statute, what checks out is this: section 14 of the Finance Act 2014 substituted 'thirty per cent of any sum payable to a resident' into section 40(a)(ia) with effect from 1 April 2015, so the clause as it stood for assessment year 2008-09 disallowed the whole sum - which makes the thirty per cent figure in the secondary reports doubtful for that year. The second proviso to section 40(a)(ia), which deems the assessee to have deducted and paid where the resident payee has satisfied the conditions in the first proviso to section 201(1), and Form 26A with rule 31ACB, both postdate assessment year 2008-09, which is the point the order is reported to turn on; those dates were carried over from the earlier note and were not re-verified in this pass. Whether that proviso reaches back at all is contested: a Bombay Chartered Accountants' Society analysis records the Delhi, Allahabad and Punjab & Haryana High Courts holding it retrospective and the Kerala High Court holding it prospective. The order is therefore useful, if it exists as reported, only for an early year in a jurisdiction on the retrospective side of that line. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order has not been read by anyone for this entry, and two separate passes have failed to find it in a subscription research database - six searches in all, on the party name, the party name as an exact phrase, the appeal number, the appeal number as an exact phrase, and the rule together with the lender's name. The only record the party name returns is an unrelated employees' compensation matter against a transport firm of the same name in another State. Neither of the two commentary pages this entry rests on names the bench members and neither gives a law report citation, so the appeal number and the date are unconfirmed against any report of the order. Nothing in this entry is the Tribunal's language; the sentence formerly quoted here was the source article's statement of the principle in Hindustan Coca-Cola Beverages Pvt. Ltd. v. CIT (2007) 293 ITR 226 (SC) and was removed. A new discrepancy has surfaced: the reports describe a disallowance of thirty per cent of the interest for assessment year 2008-09, but that restriction was written into section 40(a)(ia) only by section 14 of the Finance Act 2014 with effect from 1 April 2015; for 2008-09 the whole sum fell to be disallowed. Rule 31ACB is a rule and not a section of the Act, so it is described in the prose rather than listed in the sections. One of the sources infers that the Tribunal was implying Form 26A remains mandatory for years after September 2012; that is the commentator's reading and not a holding, and it is recorded here because it cuts against the taxpayer. Do not present this as authority that Form 26A is dispensable in a current year. The order does not deal with a payee that cannot certify - dead, dissolved or uncooperative - and does not say what evidence short of Form 26A would suffice for a year in which the form is prescribed. Neither source records what the payee's tax position actually was, in particular whether it had a loss, which matters because the first proviso to section 201(1) requires the payee to have furnished a return, taken the sum into account in computing income and paid the tax due. And because the order itself has not been read, it is not known how the quantum was arrived at; the thirty per cent figure the reports give does not fit assessment year 2008-09. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The orders below were reversed and the addition deleted. Where the payee has taken the sum into account in its return and paid tax on it, the disallowance under s.40(a)(ia) cannot be sustained merely because Form 26A was not filed — the more so for an assessment year before Form 26A and rule 31ACB were introduced.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
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