2015 (5) TMI 784 - AT - Income Tax

Disallowance u/s 40(a)(ia) - non deduction of tds on payment against freight charges against form 15-I - Held that - Once the specified forms have been collected under Rule 29D(4)(ii) by the assessee even if the same is not submitted to the CIT for one reason or another, the assessee is not required to deduct tax at source u/s 194C of the Act and therefore provisions of section 40(a)(ia) cannot be made applicable. SEE Rajesh Kr.Garg 2011 (8) TMI 632 - ITAT Kolkata , Valibhai Khanbhai Mankad, Ahmedabad 2011 (4) TMI 887 - ITAT, AHMEDABAD , ITO vs M/s. S.S.Impex 2011 (9) TMI 927 - ITAT KOLKATA and case of Vipin P.Mehta 2011 (5) TMI 503 - ITAT MUMBAI - Decided in favour of assesse.

Summary

Issues Involved:
1. Applicability of Section 40(a)(ia) of the Income Tax Act, 1961 regarding disallowance of expenses due to non-deduction of TDS.
2. Compliance with provisions of Section 194C of the Income Tax Act, 1961 concerning deduction of tax at source on payments made to truck owners.
3. Validity of submission of Form 15I and Form 15J by the assessee.

Issue-wise Detailed Analysis:

1. Applicability of Section 40(a)(ia):
The primary issue in this case was whether the assessee was liable for disallowance under Section 40(a)(ia) of the Income Tax Act, 1961, for failing to deduct tax at source on freight payments totaling Rs. 2,65,48,566/-. The Assessing Officer (AO) contended that the assessee should have deducted TDS under Section 194C on these payments, as they were made to truck owners for the transportation of goods. The AO disallowed the amount under Section 40(a)(ia) due to non-compliance with TDS provisions.

2. Compliance with Section 194C:
The assessee argued that the payments to truck owners did not constitute sub-contracts but were merely hire charges for trucks. The assessee claimed that the truck owners did not assume any responsibility as sub-contractors and that the payments were made against delivery. Additionally, the assessee had collected Form 15I from the truck owners, declaring that no TDS was required. The AO, however, rejected this explanation, asserting that the arrangement amounted to a sub-contract, thereby necessitating TDS under Section 194C.

3. Validity of Submission of Form 15I and Form 15J:
The assessee submitted that Form 15I was collected from truck owners and Form 15J was sent to the jurisdictional Commissioner of Income Tax by post on 30.06.2008. The AO found no record of Form 15J in the Commissioner's office and doubted the genuineness of the submission. However, the assessee provided postal dispatch documents as evidence. The CIT(A) and the Tribunal accepted the assessee's explanation, noting that the forms were collected and submitted within the stipulated time frame, and the non-receipt by the Commissioner's office did not negate the assessee's compliance.

Judgment Analysis:
The Tribunal upheld the CIT(A)'s decision, which relied on the precedent set by the Hon'ble Rajasthan High Court in the case of Chhogmal Chiranjilal, where it was held that if declarations are received before credit or payment within the financial year, the appellant is not liable to deduct tax. The CIT(A) also referenced the ITAT Mumbai Bench's decision in Vipin P. Mehta, which supported the view that once declarations in Form 15I are collected, the payer is not required to deduct TDS, even if Form 15J is not submitted to the CIT on time.

The Tribunal noted that the assessee had collected Form 15I within the financial year and had provided postal evidence for dispatching Form 15J. The Tribunal emphasized that the AO did not provide concrete evidence to disprove the assessee's claim. The Tribunal concluded that the assessee was not liable to deduct TDS under Section 194C, and thus, the provisions of Section 40(a)(ia) were not applicable.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming that the assessee was not required to deduct tax at source under Section 194C due to the valid collection of Form 15I and the reasonable effort to submit Form 15J. Consequently, the disallowance under Section 40(a)(ia) was not warranted. The appeal of the Revenue was dismissed, and the order of the CIT(A) was upheld.