If a payment is compensatory in nature and not related to any deposit/debt/loan, then such a payment is out of the ambit of the provisions of s 194A, as held by AhdTrib in ITO v Parag Mahasukhlal Shah — In favour of: The assessee.
Interest received on the delayed payment on account of the sale to customers had a direct link and immediate nexus with the trade liability and, thus, did not fall within the category of “interest” for the purpose of a deduction of tax at source under s 194A.
Decided on: 30 June 2011.
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