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TMI Blog2011 (4) TMI 1004X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. CIT(A) has erred in confirming the disallowance of Rs.7,93,34,193/- 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. 1.1 There may be a failure to file Form No.15J in time but there is no failure to deduct tax at source. Therefore, the addition made is not proper. 1.2 The appellant says and submits that Form No.15J is filed on 26.02.2009 separately with CIT 1.3 The appellant further says and submits that requirement to file Form No.15J by 30th June 2006 is directory and not mandatory and that non-furnishing of Form No.15J in time does not invalidate Form No.15-I submitted by the sub-contractors who submit Form No.15-I before the payment is made in the beginning of the financial year. Whereas Form No.15-J is required to be filed before the end of three months from the end of financial year. 2. The ld. CIT(A) has erred in confirming disallowance of Rs.2,32,182/- u/s 40(a)(ia) where from No.15-I were not submitted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herewith form No.15-I to the CIT before 30th June, 2006, he failed to fulfill the conditions laid down u/s 194C(3)(ii), which were effective from 1.6.2005. The AO then inferred that assessee was liable to deduct TDS from the payments made to such transporters and deposit the same into the Government account before the expiry of time prescribed under section 201 of the IT Act. He accordingly, added back the sum of Rs.7,91,02,011/- into the total income of the assessee. 5. The ld. CIT(A) confirmed the addition by holding that responsibility of non-deducting the tax at source does not stop just by collecting form No.15-I from the sub-contractors but also extends to requiring the contractor to furnish form No.15J to the CIT on or before 30th June of the following FY. This form No.15J gives details of declaration given in form No.15I furnished by sub-contractors for nondeducting the TDS. It was contended before the ld. CIT(A) that form no.15J was submitted to the CIT on 26.2.2009 i.e. after the completion of assessment and after delay of 2 years 8 months. The ld. CIT(A) rejected this contention holding that such delay defeats the very purpose of the section. She accordingly confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration of the rival submissions, we are of the view that no interference is called for in the matter. The learned DR submitted that Rule 29 D of the IT Rules is procedural in nature. The submission of the learned DR itself shows that since the compliance of the rule was procedural only, therefore, when the assessee obtained requisite declaration and filed the same with delay with the office of the Commissioner and also filed the same before the AO at the assessment stage, would prove that the addition is clearly unjustified in the matter. According to section 194(c)(3) of the IT Act, the assessee complied with the second proviso by obtaining declaration in the prescribed form. Therefore, there was no liability for deduction of tax at source. The genuineness of the certificate is not doubted by the authorities below. Therefore, the assessee has substantially complied with the provisions of law. In case of procedural irregularities, the assessee cannot be put to unnecessary hardship in the matter and that too when certain exemption has been given to the assessee in section proviso to section 194(c)(3) of the IT Act. Since, there is sufficient compliance of the provisions of law, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he tax. Merely obtaining form No.15-I from the subcontractors is not sufficient to get exemption from deducting the tax from payments made to them but liability of the assessee extends to furnishing form No.15J also which is a prescribed form to be submitted to the CIT who is the prescribed authority. The ld. DR also submitted that there is no word like failure used in section 40(a)(ia) and it refers to only non-deduction of tax and disallowance of such payments. It does not refer to genuineness of the payment or otherwise. In other words the ld. DR submitted that addition u/s 40(a)(ia) can be made even though payments are genuine but tax is not deducted as required u/s 194C. 8. We have heard the rival submissions and perused the material on record. The undisputed facts are that assessee has obtained form No.15-I from the sub-contractors to whom a total payment of Rs.7,93,34,193/- has been made. It submitted form No.15-I to the AO during the course of assessment proceedings but did not submit form No.15J to the Commissioner by 30.6.2006 as required u/d 194C. For the sake of convenience we reproduce section 193C(3) as under :- "Sec.194C(3) No deduction shall be made under sub-se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the contractor referred to in sub-rule (3) is situated; (ii) on or before the 30th June following the financial year. A combined reading of the provisions and the rules made therein shows that assessee is exempted from deduction of tax from payment made to sub-contractors if following conditions are fulfilled :- (1) amount paid to sub-contractor does not exceed Rs.20,000/- (2) total payment in FY should not exceed Rs.50,000/- (3) the sub-contractor produces the declaration to the assessee in the prescribed form and verified in the prescribed manner within such time as may be prescribed, if such sub-contractor does not hold more than two goods carriers at any time during the previous year; (4) The assessee furnishes to the prescribed income-tax authority such particulars as may be prescribed in such form within such time as may be prescribed; (5) declaration as per second proviso to clause (i) of sub-section (3) of section 194C is form No.15-I; (6) the particulars referred to in 3rd proviso would be in form No.15J; (7) form No.15J shall be furnished to the Commissioner of Income-tax so designated by the Chief Commissioner of Income-tax. (8) it shall be furni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made. From this it follows that second proviso to section 194C(3) (i) alone would be operative for deciding whether tax is deductible or not deductible. Non-furnishing of form No.15J to the Commissioner is an act posterior in time to payments made to subcontractors. This cannot by itself, undo the eligibility of exemption created by second proviso by virtue of which sub-contractors have submitted form No.15-I. The deductibility of tax is, therefore, confined or limited to applicability of second proviso only because it is at that point of time of assessee has to decide whether it has to deduct the tax or not. Where forms No.15-I are not submitted, it has to deduct the tax. Conversely where form No.15-I is submitted to the assessee by the subcontractors, the tax is not deductible and once tax is not deductible no addition u/s 40(a)(ia) can be made. From this it follows that third proviso to section 194C(3)(1) which requires the assessee to submit form No.15J is only procedural formality and cannot undo what has been done by second proviso. Non-submission of form No.15J to the Commissioner within the time prescribed in rule 29D cannot have any effect on deciding as to whether tax was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as deductible or not. There is another reason for holding so. Time factor involved for compliance of the conditions mentioned in two provisions are different. 2nd 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 FY. In other words the contractor can wait to comply with third proviso till 30th June of next FY after complying with second proviso. However, the decision on deductibility of tax from the payment made to the subcontractor cannot be deferred till 30th June of next FY. 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.15I are submitted by the sub contractors to the contractor then contractor is 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 substanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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