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TMI Blog2020 (1) TMI 995X X X X Extracts X X X X X X X X Extracts X X X X ..... s justified in AO was justified in deleting the disallowance of interest expenses u/s.40(a)(ia) of the Act, to the extent of the disallowance relates to interest paid to persons furnished Form 15 G and Form 15 H to the assessee as no disallowance can be made u/s 40a(ia) of the Act as held by the Hon ble Karnataka High Court in the case of Sri Marikamba Transport Co. [ 2015 (6) TMI 181 - KARNATAKA HIGH COURT] . The requirement of filing of Form 15G and 15H with the prescribed authority viz., CIT is only procedural and that cannot result in a disallowance u/s 40a(ia) of the Act. Consequently, we uphold the order of CIT(A) and dismiss Gr.No.3 raised by the Revenue. - ITA No. 1391 & 1392/Bang/2016, CO Nos.107 & 108/Bang/2017 [in ITA No. 1391 & 1392/Bang/2016] - - - Dated:- 23-1-2020 - Shri N.V. Vasudevan, Vice President And Shri B R Baskaran, Accountant Member For the Assessee : S/Shri Pranav Krishna, Ravishankar, Advocates For the Revenue : Shri Pradeep Kumar, CIT(DR)(ITAT), Bengaluru ORDER PER N.V. VASUDEVAN, VICE PRESIDENT ITA No. 1391/Bang/2016 is an appeal by the Revenue a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under this clause and Chapter VI-A) and an amount not exceeding ten per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner; Provided that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed in any of the relevant assessment years, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, for an amount not exceeding five per cent of the amount of such assets shown in the books of account of the bank on the last day of the previous year. 5. There are two deductions allowed under the aforesaid provisions viz., (i) 7.5% of the total income (computed before making any deduction under clause (viia) of Sec.36(1) of the Act towards provisions for bad and doubtful debts; (ii) 10% of the Aggregate average advances made by rural branches of the bank computed in the manner prescribed. The Assessee claimed a sum of ₹ 8,09,63,529 towards provision for bad and doubtful debts and a sum of ₹ 239,34, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra) of the Bangalore Bench relied upon by the learned CIT(A) in giving relief to the Assessee on this issue. The ld. counsel for the assesses submitted that the decision of the Bangalore Bench of ITAT in the case of Syndicate Bank (Supra) should be followed by the Tribunal in preference to the decision of the Hon ble Punjab and Haryana High Court in the case of State Bank of Patiala (supra)and in this regard submitted that the decision of co-ordinate Bench of the Tribunal should be followed in preference to the decision of non jurisdictional High Court decision. In this regard, the ld counsel for the assessee placed reliance on the decision of the Hon ble Karnataka High Court in the case of Patil Vijayakumar Others Vs. Union of India 151 ITR 48 (Kar). 8. We have considered the rival submission. The provisions of Section 36(1)(viia)(a) of the Act lays down as follows: viia) in respect of any provision for bad and doubtful debts made by (a) a scheduled bank not being a bank incorporated by or under the laws of a country outside India] or a cooperative bank other than a primary agricultural credit society or a primary co- operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 9.6.2006 considered the decision of the ITAT in the case of Syndicate Bank 78 ITD 103(Bang) and the decision of the Hon ble Punjab and Haryana High Court in the case of State Bank of Patiala (supra) and held that the decision rendered by the Hon ble High Court has to be followed. The above decision though of a non jurisdiction High Court was followed as the said decision of the Hon ble High Court was rendered after the decision in the case of Syndicate Bank 78 ITD 103 (Bang.). The Tribunal held that Judicial discipline demands that the Tribunal should follow the later decision which has considered both the decisions on the issue. The Tribunal following the said decision held deduction on account of Provision for Bad and Doubtful Debts u/s.36(1)(viia) of the Act has to be allowed only to the extent such provision is actually debited in the Profit Loss Account by the Assessee for the relevant previous year. We therefore respectfully following the decision of the Tribunal in the case of Canara Bank (supra), allow Gr.No.2 to 4 raised by the Revenue and hold that the disallowance made by the AO was proper and the Assessee is entitled to deduction only to the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amounts not deductible. 40. Notwithstanding anything to the contrary in sections 30 to 38 , the following amounts shall not be deducted in computing the income chargeable under the head Profits and gains of business or profession ,- ( a) in the case of any assessee- (ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid during the previous year, or in the subsequent year before the expiry of the time prescribed under sub-section (1) of section 200 : Provided that where in respect of any such sum, tax has been deducted in any subsequent year or, has been deducted in the previous year but paid in any subsequent year after the expiry of the time prescribed under sub-section (1) of section 200 , such sum shall be allowed as a deduction in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make payment of interest without deduction of tax at source. The requirement of filing the form so obtained before the prescribed authority within the prescribed period was only a procedural requirement and it was mandatory and for failure to file the form before the prescribed authority no disallowance can be made u/s.40(a)(ia) of the Act. The Assessee in this regard relied on the decisions of the Hon ble Gujarat High Court in the case of CIT Vs. Valibhai Khanbhai Manhad (2012) Taxman 119 (Guj.) CIT Vs. Guruvindar Transport (2013) 215 Taxman 593 (Guj.) laying down the proposition that requirement of filing the form so obtained before the prescribed authority within the prescribed period was only a procedural requirement and it was mandatory and for failure to file the form before the prescribed authority no disallowance can be made u/s.40(a)(ia) of the Act. Apart from the above, the Assessee also contended that as on the last date of the previous year the interest in question had already been paid and did not remain payable as on the last date of the previous year. The assessee relied on the decision of the Special Bench of ITAT, Visakhapatnam in the case of Merilyn Shi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are filed by the subcontractor, the liability of the assessee to deduct tax on the payments made to the sub-contractor would not arise. As we have examined, the sub-contractors have filed Form No. 15-1 before the assessee. Such being the case, the assessee is not required to deduct tax under Section 194C(3) of the Act and to file Form No. 15J. it is only a technical defect as pointed out by the Tribunal in not filing Form No.15J by the assessee. This matter was extensively considered by the ITAT, Ahmedabad Bench in Valibhai Khanclbai Mankad case (supra) and the said Judgment has been upheld by in High Court of Gujarat in CIT v. Valibhai Khanbhai Mankad 120131 216 Taxman 18/28 taxmann.com 119 wherein it is held that once the conditions of Section 194C(3) were satisfied, the liability of the payee to deduct tax at source would cease and accordingly, application of Section 40(a)(ia) would also not arise. The Tribunal, placing reliance on the judgment of the ITAT, Ahmedabad Bench, has dismissed the appeal filed by the Revenue. We agree with the said propositions and hold that filing of Form No. 151/J is only directory and not mandatory. (emphasis supplied) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Sri Marikamba Transport Co., (Supra). The requirement of filing of Form 15G and 15H with the prescribed authority viz., CIT is only procedural and that cannot result in a disallowance u/s 40a(ia) of the Act. To the extent that payment of interest relates to the Government and the exempted category of persons, the assessee is directed to furnish required details to the AO and the AO will consider the claim of the assessee after affording opportunity of being heard to the assessee. 15. The decision cited by the revenue in the grounds of appeal is with regard to the action of the CIT(A) in the deleting the disallowance u/s.40(a)(ia) of the Act on the ground the sums in question did not remain payable as on the last date of the relevant previous year and by following the decision of the Special Bench, Visakapatnam in the case of Merilyn Shipping Transports (supra). As we have already seen the CIT(A) appeal deleted the disallowance u/s.40(a)(ia) of the Act on two grounds viz., (i) once the depositors give Form No.15G/H, the law empowers the Assessee to make payment of interest without deduction of tax at source. The requirement of filing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2)(v) of the Income Tax Act, 1961.. 2. Whether on the facts circumstances and in law, the CIT(A) is correct in allowing deduction /s.36(1(vii) as well as u/s.36(1)(viia) of the Income Tax Act, 1961 thereby allowing the provisions of sections to operate independently and allowing the Assessee double deduction. 3. Whether on the facts and circumstances and in law, the CIT(A) is correct in holding that no disallowance of interest could be resorted to u/s.40(a)(ia) of the Income Tax Act, 1961 for non-deduction of tax at source in respect of interest paid during the financial year disregarding the decision of the Hon ble High Court of Karnataka, Dharwad Bench in ITA Nos.100111- 120/2015, ITA No.100012/2016 to ITA Nos.100017/2016 dated 26-02-2016 in the case of Ryatar Sahakari Sakkare Karkane Niyamit, Timmapur, Mudhol Taluq. 19. It is not disputed that the facts and circumstances of the case and the basis on which addition was made by the AO and relief was allowed by the CIT(A) is same in AY 2013-14 except for change in the sum added/disallowed. In the circumstances, we follow the decision rendered in AY 2012-13 and allow Gr.No.1 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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