2015 (7) TMI 1317 - AT - Income Tax

Addition u/s. 40(a)(ia) and u/s. 37(1) - Assessee has not produced any supporting evidence to prove assessee s claim - non-compliance of third proviso - authenticity of freight expenses - TDS u/s 194C - Non submission of Form No. 15-J to the Commissioner within the time prescribed in Rule 29D - HELD THAT - When we look into section 194C(3)(i) for the purposes of invoking 40(a)(ia) we find that only second proviso to it is sufficient to decide whether tax was deductible or not. Time factor involved for compliance of the conditions mentioned in two provisions are different. Second 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. 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 deducibility 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 subcontractors to the contractor then contractor was 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. Non-compliance of third proviso becomes merely a technical default which remained non-complied would not affect the provision of section 40(a)(ia). - Decided against revenue

Summary

Issues:
Appeal against order of Commissioner of Income Tax (Appeals) regarding addition made under section 40(a)(ia) of the Act for Assessment Year 2008-09.

Analysis:
The Revenue appealed against the CIT(A)'s decision to admit additional evidence and delete the addition of Rs. 6,10,58,022 made by the Assessing Officer under section 40(a)(ia) of the Act. The Assessing Officer disallowed Rs. 6,14,48,552 under section 40(a)(ia) and section 37(1) due to lack of supporting evidence from the assessee. The CIT(A) granted relief to the assessee after considering various contentions and remand reports. The Revenue contended that the CIT(A) erred in admitting additional evidence and deleting the addition. The ITAT found that the Assessing Officer did not doubt the authenticity of the expenses but found TDS deductions lacking. The CIT(A) restricted the addition to Rs. 3,90,530 under section 40(a)(ia) based on verifications and submissions. The ITAT upheld the CIT(A)'s decision, stating that non-compliance with the third proviso was a technical default and did not affect the deductibility of tax. Thus, the CIT(A) was justified in granting relief and restricting the disallowance. Consequently, the Revenue's appeal was dismissed.