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2015 (1) TMI 688 - AT - Income TaxDisallowance u/s. 40(a)(ia) - non deduction of TDS on lorry hire charges - CIT(A) deleted the disallowance holding that TDS disallowance applies only to amounts payable as on 31st March and not to amounts already paid during the year - Held that - The key words used in Section 40(a)(ia) according to us are on which tax is deductible at source under Chapter XVII -B . If the question is which expenses are sought to be disallowed? The answer is bound to be those expenses on which tax is deductible at source under Chapter XVII -B. Once this is realized nothing turns on the basis of the fact that the legislature used the word payable and not paid or credited. the legislature provided that the amounts on which tax is deductible at source under Chapter XVII-B payable on account of interest commission or brokerage rent royalty fees for professional services or fees for technical services or to a contractor or sub-contractor shall not be deducted in computing the income of an assessee in case he has not deduced or after deduction has not paid within the specified time. The language used by the legislature in the finally enacted law is clear and unambiguous whereas the language used in the bill was ambiguous. - Decided in favour of revenue. Non deduction of TDS on Freight payments - whether compliance of third proviso can be deferred till 30th June of next financial year? - Held that - Once the conditions of further proviso of section 194C(3) are satisfied the liability of the payee to deduct tax at source would cease. The requirement of such payee to furnish details to the income tax authority in the prescribed form within prescribed time would arise later and any infraction in such a requirement would not make the requirement of deduction at source applicable under sub-section (2) of section 194C of the Act. In our view therefore the Tribunal was perfectly justified in taking the view in the impugned judgment. It may be that failure to comply such requirement by the payee may result into some other adverse consequences if so provided under the Act. However fulfillment of such requirement cannot be linked to the declaration of tax at source. Any such failure therefore cannot be visualized by adverse consequences provided under section 40(a)(ia) of the Act. In the present case even though the assessee has filed the original Form No. 15J with the ITO (TDS) Ajmer within prescribed time limit as provided in Rule 29D subsequently he also filed the form with required details in the office of the CIT-V Pune also. In our opinion the principles laid down in the case of Valibhai Khanbhai Mandad (2012 (12) TMI 413 - GUJARAT HIGH COURT) are applicable to the assessee s case. We accordingly allow the Ground - Decided in favour of assessee.
Issues Involved:
1. Whether the Ld. CIT(A) was justified in deleting the disallowance u/s. 40(a)(ia) by holding that TDS disallowance applies only to amounts 'payable' as on 31st March and not to amounts already paid during the year. 2. Whether the assessee was required to deduct TDS on lorry hire charges paid to the truck owners who did not own more than two vehicles. 3. Whether the assessee complied with the provisions of Rule 29D read with the proviso to clause (i) of Section 194C(3) of the Income-tax Act, 1961. 4. Whether the assessee received notice u/s 143(2) within the prescribed time limit. Issue-wise Detailed Analysis: 1. Deletion of Disallowance u/s. 40(a)(ia): The Revenue challenged the decision of the Ld. CIT(A) who deleted the disallowance of Rs. 4,29,03,093/- made by the Assessing Officer under Section 40(a)(ia) of the Income-tax Act. The Assessing Officer had disallowed the amount on the grounds that the assessee failed to deduct TDS on lorry hire charges paid. The Ld. CIT(A) provided relief based on the decision in the case of Merilyn Shipping & Transport Vs. Addl. CIT, which held that TDS disallowance applies only to amounts 'payable' as on 31st March and not to amounts already paid. However, the Revenue argued that this decision was reversed by higher courts, and the Tribunal agreed, reversing the order of the Ld. CIT(A) and restoring the disallowance made by the Assessing Officer. 2. Requirement to Deduct TDS on Lorry Hire Charges: The assessee contended that TDS was not required on lorry hire charges as per the second proviso to Section 194C(3)(i) of the Income-tax Act, since the recipients did not own more than two vehicles. The assessee provided declarations in Form No. 15I from the truck owners and submitted Form No. 15J to the tax authorities. The Tribunal found that the assessee complied with the provisions by obtaining the necessary declarations and filing Form No. 15J, albeit initially with the wrong tax authority. The Tribunal held that the assessee should not be penalized for this procedural lapse, especially since the forms were subsequently filed with the correct authority. 3. Compliance with Rule 29D and Proviso to Section 194C(3)(i): The Tribunal examined whether the assessee complied with Rule 29D and the proviso to Section 194C(3)(i). The assessee had filed Form No. 15J with the ITO (TDS), Ajmer, within the prescribed time limit and later with the CIT-V, Pune. The Tribunal found that the assessee met the conditions of the second proviso to Section 194C(3)(i) by obtaining declarations from the truck owners and filing the requisite forms. The Tribunal referred to the decision of the Hon'ble High Court of Gujarat in the case of Valibhai Khanbhai Mandad, which supported the view that compliance with the requirement to file Form No. 15J within the prescribed time would not attract disallowance under Section 40(a)(ia). 4. Receipt of Notice u/s 143(2): The assessee claimed that they did not receive notice u/s 143(2) within the prescribed time limit. However, this ground was not pressed by the assessee during the proceedings and was dismissed as not pressed. Conclusion: The Tribunal allowed the Revenue's appeal, reversing the order of the Ld. CIT(A) and restoring the disallowance made by the Assessing Officer under Section 40(a)(ia). The Cross Objection filed by the assessee was allowed, deleting the addition made by the Assessing Officer on the grounds that the assessee complied with the provisions of Section 194C(3)(i) and Rule 29D by obtaining declarations and filing Form No. 15J with the tax authorities. The issue regarding the receipt of notice u/s 143(2) was dismissed as not pressed.
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