2012 (12) TMI 413 - GUJARAT HIGH COURT

Disallowance u/s 40(a) (ia) - payment made to transporters - AO disallowed such expenditure under section 40(a)(ia) on the ground that the assessee had not furnished form No. 15J before 30th June 2006 as required under Rule 29D of the Income Tax Rules, 1962 - held that:- The exclusion provided in sub-section (3) of section 194C from the liability to deduct tax at source under sub-section (2) would thus be complete the moment the requirements contained therein are satisfied. Such requirements, principally, are that the sub-contractor, recipient of the payment produces a necessary declaration in the prescribed format and further that such sub-contractor does not own more than two goods carriages during the entire previous year. The moment, such requirements are fulfilled, the liability of the assessee to deduct tax on the payments made or to be made to such sub-contractors would cease. In fact he would have no authority to make any such deduction.

once the conditions of further proviso of section 194C(3) are satisfied, the liability of the payee to deduct tax at source would cease. The requirement of such payee to furnish details to the income tax authority in the prescribed form within prescribed time would arise later and any infraction in such a requirement would not make the requirement of deduction at source applicable under sub-section (2) of section 194C of the Act. - application of section 40(a)(ia) would not arise - Decided in favor of assessee.