TMI Blog2011 (4) TMI 887X X X X Extracts X X X X X X X X Extracts X X X X ..... substance the deductibility or non-deductibility of tax on payments made by the assessee to the sub-contractors. Therefore, in our considered view non-compliance of third proviso becomes merely a technical default, which even if, remained non-complied would not affect the operation of section 40(a)(ia) - Appeal is partly allowed - IT APPEAL NO. 2228 (AHD.) OF 2009 - - - Dated:- 29-4-2011 - MUKUL KR. SHRAWAT, D.C. AGRAWAL, JJ. A.C. Shah for the Appellant. Anil Kumar for the Respondent. ORDER D.C. Agrawal, Accountant Member. This is an appeal filed by the assessee raising following grounds :-- 1. The ld. CIT(A) has erred in confirming the disallowance of Rs. 7,93,34,193 under section 40(a)(ia) on the ground that the assessee has filed Form No. 15J with CIT on 26-2-2009 instead of on or before 30-6-2006 inasmuch as the there is no failure to deduct tax at source under section 194C since the assessee has received Form No. 15-I from the sub-contractors before making payment to them. 1.1 There may be a failure to file Form No. 15J in time but there is no failure to deduct tax at source. Therefore, the addition made is not proper. 1.2 The appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtained from the transporters the same were not furnished to the CIT in Form No. 15J as per rule-29 of the Income-tax Rule, 1962. Further the contract payments to those transporters exceeded Rs. 50,000. He also noted that neither TDS have been made nor any Form No. 15-J is submitted. Since the assessee had not furnished requisite Form No. 15J to the CIT, the Assessing Officer issued a show-cause notice to the assessee, in response to which it was submitted that it was the first year of collection of Form No. 15-I and there was no intention not to submit these forms to the TDS department. The Assessing Officer thereafter quoting from section 194C(3) as applicable to the relevant assessment year held that once assessee failed to furnish Form No. 15J enclosing therewith Form No. 15-I to the CIT before 30-6-2006, he failed to fulfil the conditions laid down under section 194C(3)(ii), which were effective from 1-6-2005. The Assessing Officer then inferred that assessee was liable to deduct TDS from the payments made to such transporters and deposit the same into the Government account before the expiry of time prescribed under section 201 of the Income-tax Act. He accordingly, added b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition under section 40(a)(ia) can be made. The ld. AR relied on the decision of the Tribunal, Ahmedabad Bench-D in ITA No. 1717/Ahd./2010 assessment year 2007-08 in the case of ACIT v. Shree Pramukh Transport Co. Bhutadi, Baroda pronounced on 31-8-2010 wherein on similar facts addition under section 40(a)(ia) was deleted. He referred to para Nos.4 5 from that order as under : "4. The learned CIT(A) considering the material on record noted that the Assessing Officer has not disputed that the assessee claimed that he had obtained declaration in Form No. 15-I from the payees. The learned CIT(A) noted that ultimately Form No. 15-I was filed with delay in the office of the Commissioner, but the assessee in fact had obtained the declaration and therefore, it cannot be said that the assessee had violated the mandate given by the payees not to deduct tax. The addition was accordingly deleted. 5. On consideration of the rival submissions, we are of the view that no interference is called for in the matter. The learned DR submitted that Rule 29D of the Income-tax Rules is procedural in nature. The submission of the learned DR itself shows that since the compliance of the rule wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the three provisos should be cumulatively done and if there is any default even in respect of one proviso, the liability of the assessee to deduct the tax on payment made by it will continue to exist. Once assessee intends to seek exemption from the rigours of provisions then strict interpretation has to be made and assessee has to fulfil all the conditions laid down for allowing exemption. If condition relating to furnishing Form No. 15J to the CIT is done away with and assessee is allowed exemption from deducting the tax from payments by it to sub-contractors then conditions relating to furnishing Form No. 15J to the CIT will become otiose which cannot be the intention of the Legislature when they introduced this condition. The ld. DR further submitted that third proviso to section 194C(3) clearly lays down by using the word "shall" that it is mandatory to furnish particulars to the prescribed authority in the prescribed form for gaining exemption from deducting the tax. Merely obtaining Form No. 15-I from the sub-contractors is not sufficient to get exemption from deducting the tax from payments made to them but liability of the assessee extends to furnishing Form No. 15J a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n authorised by it such particulars as may be prescribed in such form and within such time as may be prescribed; or" Rule 29D in this regard reads as under : "29D. (1) The declaration under the second proviso to clause (i) of sub-section (3) of section 194C by a sub-contractor shall be in Form No. 15-I and shall be verified in the manner indicated therein by such sub-contractor. (2) The declaration referred to in sub-rule (1) may be furnished to the contractor responsible for paying or crediting any sum to the account of the sub-contractor before the event of such sum being credit or paid to such sub-contractor. (3) The particulars under the third proviso to clause (i) of sub-section (3) of section 194C to be furnished by a contractor responsible for paying any sum to such sub-contractor shall be in Form No. 15J. (4) the particulars referred to in sub-rule (3) shall be furnished - (i) to the Commissioner of Income-tax, so designated by the Chief Commissioner of Income-tax, within whose area of jurisdiction, the office of the contractor referred to in sub-rule (3) is situated; (ii) on or before the 30th June following the financial year." A combined reading of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uct tax under section 194C then addition under section 40(a)(ia) cannot be made. For the sake of convenience we reproduce section 40(a)(ia) as under :-- "40. Notwithstanding anything to the contrary in sections 30 to (38) the following amounts shall not be deducted in computing the income chargeable under the head profits and gains of business or profession' - (a) in the case of any assessee - (ia) any interest, commission or brokerage, (rent, royalty) fees or professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor being resident for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid,-" The conditions laid down under section 40(a)(ia) for making addition is that tax is deductible at source and such tax has not been deducted. If both the conditions are satisfied then such payment can be disallowed under section 40(a)(ia). In other words where tax is not deductible addition under section 40(a)(ia) cannot be made. From this it follows that secon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure thus giving a latitude to the assessee to submit Form No. 15J to the Commissioner much after he receives Form No. 15-I from the sub-contractors. Apparently the Legislature intended that the contractor should not only obtain the Form No. 15-I from the sub-contractors but should also submit Form No. 15J to the Commissioner immediately after releasing the payments to the sub-contractors without deducting the tax on the strength of Form No. 15-I and if both the conditions are satisfied, then the assessee may not be treated as in default for not complying the provisions of section 194C. Thus satisfaction of the conditions in 2nd and third proviso of section 194C(3)(i) may be necessary for an assessee to save himself from being declared as an assessee in default but conditions laid down for invoking section 40(a)(ia) are not the same as cumulative conditions mentioned in second and third proviso of section 194C(3)(i). For invoking section 40(a)(ia) it is to be decided whether tax was deductible or not, if yes, whether deducted/paid or not. When we look into section 194C(3)(i) for the purposes of invoking section 40(a)(ia) we find that only 2nd proviso to it is sufficient to decide wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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