2011 (4) TMI 1004 - AT - Income Tax

Whether CIT(A) has erred in confirming the disallowance u/s 40(a)(ia) on the ground that the assessee has filed Form No.15J with CIT on 26.02.2009 instead of on or before 30th June 2006 in as much the there is no failure to deduct tax at soure under section 194C since the assessee has received Form No.15-I from the sub-contractors before making payment to them - if assessee has obtained form No.15-I then it is substantial compliance of the provision of section 194C - addition deleted by holding that tax was not liable to be deducted from the payments made to sub-contractors on account of they submitting form No.15-I to the contractor and therefore no addition u/s 40(a)(ia) could be made - appeal filed by the assessee is partly allowed

Summary

Issues Involved:

1. Disallowance under Section 40(a)(ia) due to 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.

Detailed Analysis:

1. Disallowance under Section 40(a)(ia) due to late filing of Form No. 15J:

The assessee contended that although Form No. 15J was filed late, there was no failure to deduct tax at source as Form No. 15-I was obtained from sub-contractors before making payments. The CIT(A) confirmed the addition, emphasizing that the responsibility extends beyond obtaining Form No. 15-I to filing Form No. 15J timely. The Tribunal noted that the assessee had obtained Form No. 15-I from sub-contractors, which exempts them from deducting TDS under Section 194C. The Tribunal referenced a similar case (ACIT vs. M/s Shree Pramukh Transport Co.) where it was held that obtaining Form No. 15-I is substantial compliance, and late filing of Form No. 15J is a procedural lapse that does not warrant disallowance under Section 40(a)(ia). Thus, the addition was deleted.

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 hence rejected.

3. Disallowance of 1/10th vehicle expenses:

The CIT(A) disallowed 1/10th of the vehicle expenses amounting to Rs. 20,985/- on the grounds of personal use. The Tribunal upheld this disallowance, noting that the assessee failed to prove that the entire expenditure was incurred exclusively for business purposes. The disallowance was deemed reasonable given the facts of the case.

4. Disallowance of 1/10th telephone expenses:

Similarly, 1/10th of the telephone expenses amounting to Rs. 24,673/- was disallowed by the CIT(A) on the grounds of personal use. The Tribunal confirmed this disallowance as well, for the same reasons cited in the vehicle expenses issue.

Conclusion:

The Tribunal partly allowed the appeal. The major relief was granted by deleting the addition under Section 40(a)(ia) due to the late filing of Form No. 15J, holding that obtaining Form No. 15-I from sub-contractors constituted substantial compliance. The disallowances for vehicle and telephone expenses were upheld due to the inability of the assessee to prove exclusive business use. The appeal regarding non-submission of Form No. 15-I by sub-contractors was not pressed and thus rejected.