2013 (12) TMI 1599 - AT - Income Tax

Disallowed u/s 40(a)(ia) - TDS u/s 194C - Transportation charges - non-submission of Form No. 15J within time-limit - Sub-Contract or not - HELD THAT - Mere non submission of Form No. 15J (having received Form No. 151 from his subcontractor for non deduction of TDS under Rule 29D to the AO within prescribed time limit cannot pave way for disallowance of expenses under section 40(a)(ia) . Payments to lorry owners is not a sub-contract hence TDS provisions are not applicable. It was contended by the assessee that assessee himself executed the contract of transportation and the lorry owners have simple placed the vehicle at the disposal of the assessee without involving themselves in carrying out any part of the work undertaken by the assessee. The decisions in the case of Mythri Transport Corporation vs ACIT 124 ITD 40(Vis) 2009 (1) TMI 337 - ITAT VISAKHAPATNAM and VALIBHAI KHANBHAI MANKAD VERSUS DEPUTY COMMISSIONER OF INCOME-TAX (OSD) CIRCLE-9 AHMEDABAD 2011 (4) TMI 887 - ITAT AHMEDABAD are followed. In the result the appeal of the revenue as well as cross objection filed by the assessee are dismissed.

Summary

Issues involved:
Dispute over deletion of addition under section 40(a)(ia) for failure to comply with provisions of section 194C(3)(i) and Rule 29D regarding submission of Forms No. 15-I and 15-J within specified time limits. Disallowance of expenses based on non-submission of Form No. 15-J within prescribed time limit. Disallowance of expenses under section 40(a)(ia) for payments to lorry owners. Withdrawal of cross objection by the assessee.

Issue 1: Deletion of addition under section 40(a)(ia) for non-compliance with section 194C(3)(i) and Rule 29D:
The department disputed the CIT(A)'s deletion of the addition of Rs. 4,75,51,774 based on the failure to comply with the second proviso to sub-section (3) of section 194C of the Act. The AO insisted that the submission of Form 15-J before the CIT on the due date was mandatory, leading to disallowance under section 40(a)(ia). However, the CIT(A) relied on a prior ITAT decision and held that the non-submission of Form 15-J within the prescribed time limit does not warrant disallowance under section 40(a)(ia). The CIT(A) emphasized that the contractor's deductibility of tax depends on the submission of Form 15-I from the sub-contractors, making the non-compliance of the third proviso a technical default that does not impact the deductibility of tax. The ITAT concurred with the CIT(A) and dismissed the revenue's appeal.

Issue 2: Disallowance of expenses based on non-submission of Form No. 15-J:
The AO disallowed an amount of Rs. 11,29,135 for failure to deduct tax at source under section 40(a)(ia) as the payees did not submit Form No. 15-I. The CIT(A, following a decision of ITAT Visakhapatnam Bench, ruled that the payments made to lorry owners were not under a sub-contract, hence not subject to TDS provisions. The ITAT upheld the CIT(A)'s decision, emphasizing that there was no evidence of a sub-contract between the assessee and the lorry owners, leading to the deletion of the addition under section 40(a)(ia).

Issue 3: Withdrawal of cross objection:
The assessee expressed the intention to withdraw the cross objection, which was deemed academic given the findings in the revenue's appeal. The ITAT dismissed the cross objection as withdrawn, and since the issues raised were intertwined with the revenue's appeal, no separate consideration was required.

In conclusion, the ITAT upheld the CIT(A)'s decision to delete the additions under section 40(a)(ia) for non-compliance with the provisions of section 194C(3)(i) and Rule 29D. The ITAT also affirmed the CIT(A)'s ruling regarding the disallowance of expenses based on the non-submission of Form No. 15-J, as the payments to lorry owners were not considered sub-contracts. The withdrawal of the cross objection by the assessee was accepted, leading to the dismissal of both the revenue's appeal and the cross objection filed by the assessee.