TaxTMI 
TaxTMI 
2011 (4) TMI 887
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....d submits that requirement to file Form No. 15J by 30-6-2006 is directory and not mandatory and that non-furnishing of Form No. 15J in time does not invalidate Form No. 15-I submitted by the sub-contractors who submit Form No. 15-I before the payment is made in the beginning of the financial year. Whereas Form No. 15-J is required to be filed before the end of three months from the end of financial year. 2. The ld. CIT(A) has erred in confirming disallowance of Rs. 2,32,182 under section 40(a)(ia) where Form No. 15-I were not submitted by sub-contractors. 3. The ld. CIT(A) has erred in confirming 1/10th vehicle expenses of Rs. 20,985 on the ground that it is personal inasmuch as the expenditure is incurred wholly and exclusively for the purposes of business and there is no element of personal nature. 4. The ld. CIT(A) has erred in confirming 1/10th telephone expenses of Rs. 24,673 on the ground that it is personal inasmuch as the expenditure is incurred wholly and exclusively for the purposes of business and there is no element out of personal nature. 2. Ground No. 2 is not pressed by the ld. AR and hence it is rejected. ....
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....d. CIT(A) confirmed the addition by holding that responsibility of non-deducting the tax at source does not stop just by collecting Form No. 15-I from the sub-contractors but also extends to requiring the contractor to furnish Form No. 15J to the CIT on or before 30th June of the following financial year. This Form No. 15J gives details of declaration given in Form No. 15-I furnished by sub-contractors for non-deducting the TDS. It was contended before the ld. CIT(A) that Form No. 15J was submitted to the CIT on 26-2-2009 i.e. after the completion of assessment and after delay of 2 years 8 months. The ld. CIT(A) rejected this contention holding that such delay defeats the very purpose of the section. She accordingly confirmed the addition. 6. Before us, the ld. AR for the assessee submitted that this is the first year of obtaining of Form No. 15-I. The sub-contractors have submitted Form No. 15-I being declaration under second proviso to clause (1) of sub-section (C) of section 194, to the assessee as required by rule 29D(1). Once sub-contractor have furnished Form No. 15-I then assessee is not required to deduct the tax on the payment made to the sub-contractors. Once there is no....
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....filed the same with delay with the office of the Commissioner and also filed the same before the Assessing Officer at the assessment stage, would prove that the addition is clearly unjustified in the matter. According to section 194C(3) of the Income-tax Act, the assessee complied with the second proviso by obtaining declaration in the prescribed form. Therefore, there was no liability for deduction of tax at source. The genuineness of the certificate is not doubted by the authorities below. Therefore, the assessee has substantially complied with the provisions of law. In case of procedural irregularities, the assessee cannot be put to unnecessary hardship in the matter and that too when certain exemption has been given to the assessee in section proviso to section 194C(3) of the Income-tax Act. Since, there is sufficient compliance of the provisions of law, therefore, the learned CIT(A) was justified in deleting the addition. We, therefore, do not find any justification to interfere with the order of the learned CIT(A). We confirm his findings and dismiss the appeal of the revenue." The ld. AR also submitted that genuineness of the payment has not been doubted and addition has be....
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....rity. The ld. DR also submitted that there is no word like failure used in section 40(a)(ia) and it refers to only non-deduction of tax and disallowance of such payments. It does not refer to genuineness of the payment or otherwise. In other words the ld. DR submitted that addition under section 40(a)(ia) can be made even though payments are genuine but tax is not deducted as required under section 194C. 8. We have heard the rival submissions and perused the material on record. 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. It submitted Form No. 15-I to the Assessing Officer during the course of assessment proceedings but did not submit Form No. 15J to the Commissioner by 30-6-2006 as required u/s 194C. For the sake of convenience we reproduce section 193C(3) as under :- "Section 194C. (3) No deduction shall be made under sub-section (1) or sub-section (2) from - (i) the amount of any sub-credited or paid or likely to be credited or paid to the account of or to the contractor or sub-contractor, if such sum does not exceed twenty thousand rupees: Provided that wher....
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....ted from deduction of tax from payment made to sub-contractors if following conditions are fulfilled :-- (1) amount paid to sub-contractor does not exceed Rs. 20,000 (2) total payment in financial year should not exceed Rs. 50,000 (3) the sub-contractor produces the declaration to the assessee in the prescribed form and verified in the prescribed manner within such time as may be prescribed, if such sub-contractor does not hold more than two goods carriers at any time during the previous year; (4) the assessee furnishes to the prescribed income-tax authority such particulars as may be prescribed in such form within such time as may be prescribed; (5) declaration as per second proviso to clause (i) of sub-section (3) of section 194C is Form No. 15-I; (6) the particulars referred to in 3rd proviso would be in Form No. 15J; (7) form No. 15J shall be furnished to the Commissioner of Income-tax so designated by the Chief Commissioner of Income-tax. (8) it shall be furnished on or before 30th June following the financial year. The three proviso mentioned in sub-section (3) under claus....
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....s that second proviso to section 194C(3)(i) alone would be operative for deciding whether tax is deductible or not deductible. Non-furnishing of Form No. 15J to the Commissioner is an act posterior in time to payments made to sub-contractors. This cannot by itself, undo the eligibility of exemption created by second proviso by virtue of which sub-contractors have submitted Form No. 15-I. The deductibility of tax is, therefore, confined or limited to applicability of second proviso only because it is at that point of time of assessee has to decide whether it has to deduct the tax or not. Where Form No. 15-I are not submitted, it has to deduct the tax. Conversely where Form No. 15-I is submitted to the assessee by the sub-contractors, the tax is not deductible and once tax is not deductible no addition under section 40(a)(ia) can be made. From this it follows that third proviso to section 194C(3)(1) which requires the assessee to submit Form No. 15J is only procedural formality and cannot undo what has been done by second proviso. Non-submission of Form No. 15J to the Commissioner within the time prescribed in rule 29D cannot have any effect on deciding as to whether tax was deductib....
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....to decide whether tax was deductible or not. There is another reason for holding so. Time factor involved for compliance of the conditions mentioned in two provisions are different. 2nd proviso is to be complied with at the time of making payment to the sub-contractor, whereas compliance of third proviso can be deferred till 30th June of next financial year. In other words the contractor can wait to comply with third proviso till 30th June of next financial year after complying with second proviso. However, the decision on deductibility of tax from the payment made to the sub-contractor cannot be deferred till 30th June of next financial year. He has to take this decision (about deductibility of tax from payments being made by it to the sub-contractors) just at the time when he is releasing the payments to 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....