Malineni Babulu (HUF) vs. Income Tax Officer ITAT “A” Bench, Hyderabad P. Madhavi Devi (J.M.) and Inturi Rama Rao (A. M.) I.T.A. No.: 1326/HYD/2014 Assessment Year: 2009-10. Decided on 07-08-2015 Counsel for Assessee / Revenue: S. Rama Rao/ D. Srinivas

Section 40(a)(ia) – Non deduction of tax at source on interest paid as payees furnished Form 15H – Mere non-filing of Form 15H would not entail disallowance of interest paid.

Facts:
One of the issues before the Tribunal was regarding addition of Rs.0.98 lakh made under the provisions of Section 40(a)(ia). During the year, the appellant had made interest payment of Rs.0.98 lakh to the coparceners of the appellant. It was claimed that the taxable income of the payees was below the taxable limit hence Form 15H were obtained from them and it was claimed to have been submitted to the CIT, Guntur by post, but no proof in support of the dispatch by post was furnished before the CIT. However, copies of Form 15H were filed before the AO. The CIT acting u/s. 263 directed the AO to disallow the same for failure to adduce evidence in support of dispatch of Form 15H by post.

Held:
According to the Tribunal, mere non-filing of Form 15H with the CIT does not entail disallowance of expenditure. It is only a technical breach of law and the Act provides for separate penal provisions for such default. Thus, according to the Tribunal, where the taxable income of the payees is below the taxable limit and Form 15H is obtained from them no disallowance under the provisions of section 40(a)(ia) can be made. Further, relying on the decision of the Delhi Bench of the Tribunal in the case of Vijaya Bank vs. ITO [2014] [49 Taxmann.com 533, the tribunal allowed the appeal filed by the assessee.