Form 15G/Form 15H delay does not trigger disallowance where valid declarations were received before interest payment.

Disallowance under section 40(a)(ia) cannot be invoked merely because Form 15G/Form 15H declarations were filed late or not forwarded to the prescribed authority under rule 29C, where the assessee had already received valid declarations from the payees before making interest payments. Once such declarations are furnished in the prescribed form under section 197A(1A), the payer is relieved of the obligation to deduct tax at source; any failure to file them timely with the department is a separate procedural default, attracting the consequence provided by the Act, not automatic disallowance. The statutory condition for section 40(a)(ia) was therefore not met.

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Issues: Whether disallowance under section 40(a)(ia) of the Income-tax Act, 1961 can be made merely because declarations in Form 15G/Form 15H were filed belatedly or not filed with the Commissioner in the prescribed manner under rule 29C, when the assessee had received such declarations from the payees before making interest payments.

Analysis: The disallowance provision applies only where tax is deductible at source under Chapter XVII-B and such tax has not been deducted, or after deduction has not been paid. Where the payees furnish valid declarations under section 197A(1A) in the prescribed form, the payer is relieved of the obligation to deduct tax on the interest payment. Any failure to transmit those declarations to the department in time is a separate procedural default for which the Act contemplates a different consequence, including penalty. The record did not show that the declarations were absent when the interest was paid; the only objection was late or non-filing with the prescribed authority. On that basis, the statutory condition for invoking section 40(a)(ia) was not satisfied.

Conclusion: Non-filing or delayed filing of Form 15G/Form 15H with the prescribed authority does not, by itself, attract disallowance under section 40(a)(ia) where the assessee had received the declarations and was not required to deduct tax at source.

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