2011 (4) TMI 887 - AT - Income Tax

Tribunal rules in favor of assessee on Form 15J issue, upholds vehicle & telephone expense disallowances

Valibhai Khanbhai Mankad Versus Deputy Commissioner of Income-tax (OSD), Circle-9, Ahmedabad

The Tribunal partially allowed the appeal by ruling in favor of the assessee regarding the disallowance under section 40(a)(ia) for late filing of Form ... Non deduction of TDS - Disallowance u/s 40(a)(ia) - Held that:- The undisputed facts are that assessee has obtained Form No. 15-I from the sub-contractors to whom a total payment of Rs. 7,93,34,193 has been made, thus once assessee has obtained Form No. 15-I from the sub-contractors whose contents are not disputed or whose genuineness is not doubted then assessee is not liable to deduct tax from the payments made to sub-contractors. The two events are spatially kept apart by the Legislature 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. It is at this point of time second proviso would come into play and when Form No. 15-I are submitted by the sub-contractors to the contractor then contractor is not required to deduct tax from such payments. Once deductibility of tax depends upon submission or non-submission of Form No. 15-I from the sub-contractor to the assessee then non-compliance of third proviso becomes merely technical without affecting in 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 Issues Involved:1. Disallowance under section 40(a)(ia) for late filing of Form No. 15J.2. Disallowance under section 40(a)(ia) where Form No. 15-I was not submitted by sub-contractors.3. Disallowance of 1/10th vehicle expenses.4. Disallowance of 1/10th telephone expenses.Issue-wise Detailed Analysis:1. Disallowance under section 40(a)(ia) for late filing of Form No. 15J:The primary issue was whether the assessee's failure to file Form No. 15J by the prescribed date invalidated the non-deduction of TDS on payments made to sub-contractors. The assessee argued that Form No. 15-I was obtained from sub-contractors before making payments, thus fulfilling the conditions under section 194C(3). The Tribunal noted that the assessee had indeed obtained Form No. 15-I from sub-contractors, and the genuineness of these forms was not disputed. The Tribunal emphasized that the requirement to file Form No. 15J is procedural and subsequent to the financial year-end. As such, non-filing of Form No. 15J on time does not affect the compliance with section 194C(3) and cannot be the basis for disallowance under section 40(a)(ia). The Tribunal cited a similar decision in the case of ACIT v. Shree Pramukh Transport Co., where it was held that obtaining Form No. 15-I substantially complies with the provisions of section 194C, and procedural delays in filing Form No. 15J should not result in disallowance.2. Disallowance under section 40(a)(ia) where Form No. 15-I was not submitted by sub-contractors:This ground was not pressed by the assessee's representative and was therefore rejected by the Tribunal.3. Disallowance of 1/10th vehicle expenses:The Tribunal confirmed the disallowance of 1/10th of vehicle expenses amounting to Rs. 20,985. The assessee failed to prove that the entire expenditure was incurred wholly and exclusively for business purposes. The Tribunal found the disallowance reasonable given the facts of the case.4. Disallowance of 1/10th telephone expenses:Similarly, the Tribunal confirmed the disallowance of 1/10th of telephone expenses amounting to Rs. 24,673. The assessee could not demonstrate that the entire expenditure was solely for business purposes, and the Tribunal deemed the disallowance reasonable.Conclusion:The Tribunal allowed the appeal in part. It deleted the addition under section 40(a)(ia) related to the late filing of Form No. 15J, holding that obtaining Form No. 15-I was sufficient compliance. Disallowances related to vehicle and telephone expenses were upheld due to the assessee's inability to prove exclusive business use. The appeal concerning the non-submission of Form No. 15-I by sub-contractors was not pressed and thus rejected.