2018 (6) TMI 682 - AT - Income Tax

TDS u/s 194C - Disallowance u/s 40(a)(ia) - non submission of forms/ declarations in the office of Chief Commissioner/ Commissioner as prescribed U/s 191A(2) - non production of Form 15G/15H - Held that - as per the provisions of Section 197A(1A) the only requirement is taking the declaration in writing from recipient and verification in the prescribed form and once the requirements of this section is complied with the assessee is under no obligation to deduct tax at source on such payments. Following the judgement in case of CIT vs. Sri Marikamba Transport Co. 2015 (6) TMI 181 - KARNATAKA HIGH COURT where it is held that Once, the declaration forms are filed by the assessee, the liability of the assessee to deduct tax on the payments made to the sub-contractor would not arise - thus we have taken a consistent view that non production of Form 15G/15H would not lead to disallowance U/s 40(a)(ia) - Also see CHITTOOR DIST. CO-OPERATIVE CENTRAL BANK LTD. 2016 (7) TMI 338 - ITAT HYDERABAD - Decided in favor of assessee.

Summary

Issues:
Disallowance of amount under Section 40(a)(ia) for non-submission of Form 15G/15H by the assessee.

Analysis:
The appeal was against the order of the CIT (A), Jaipur for A.Y. 2014-15, where the AO disallowed an amount under Section 40(a)(ia) due to the assessee not deducting TDS on interest paid on unsecured loans. The assessee argued that the income of the recipients was below the taxable limit and submitted Form 15G/15H, but the AO did not accept them as they were not delivered to the Chief Commissioner/Commissioner as required by law. The assessee contended that the non-submission should not lead to disallowance under Section 40(a)(ia) and cited legal precedents supporting their stance.

The assessee maintained that obtaining declarations in Form 15G/15H from the recipients should suffice, and the failure to submit these forms to the Chief Commissioner/Commissioner should not warrant disallowance under Section 40(a)(ia). The AR relied on the Karnataka High Court's decision and Tribunal rulings to support this argument. The Revenue, however, supported the lower authorities' orders, emphasizing the purpose of submitting Form 15G/15H to prevent tax avoidance.

The ITAT analyzed the provisions of Section 197A(1A) and (2) of the Act, highlighting that while non-compliance with the latter could attract penalties under Section 272A(2)(f), it should not negate the benefits of Section 197A(1A) if the recipient's income is below the taxable limit. Citing the Karnataka High Court's decision and Tribunal rulings, the ITAT held that the non-production of Form 15G/15H should not result in disallowance under Section 40(a)(ia). Therefore, the disallowance made by the AO under Section 40(a)(ia) was deleted, and the appeal of the assessee was allowed.

In conclusion, the ITAT's judgment clarified the distinction between the requirements of Section 197A(1A) and (2) regarding Form 15G/15H submissions and upheld the assessee's argument that non-submission to the Chief Commissioner/Commissioner should not lead to disallowance under Section 40(a)(ia) if other conditions are met. The decision was based on legal interpretations and precedents, ultimately favoring the assessee and allowing the appeal.