Non-furnishing of Form 15G/15H before CIT by the deductor is merely procedural defect and cannot lead to disallowance u/s 40(a)(ia)

20. [2020] 79 ITR(T) 207 (Bang.)(Trib.) JCIT vs. Karnataka Vikas Grameena Bank ITA Nos.: 1391 & 1392 (Bang.) of 2016 A.Ys.: 2012-13 and 2013-14 Date of order: 23^rd January, 2020

Non-furnishing of Form 15G/15H before CIT by the deductor is merely procedural defect and cannot lead to disallowance u/s 40(a)(ia)

FACTS

The assessee was engaged in the business of banking. As per the provisions of section 194A, the assesse was liable to deduct tax at source on interest paid in excess of Rs. 10,000 to its depositors. However, some depositors had provided Form 15G/15H to the assesse and hence tax was not deducted from interest paid to such depositors. The A.O. contended that the assessee ought to have furnished those Forms 15G/15H to the Commissioner of Income-tax within the prescribed time which the assessee failed to do and hence the interest paid to such depositors was subject to disallowance u/s 40(a)(ia) on account of failure to deduct tax at source.

The CIT(A) deleted the disallowance made by the A.O. by holding that there was no breach committed by the assessee by not filing Form No. 15G/H before the Commissioner of Income-tax.

HELD

The issue was covered by the decision of the Tribunal in the assessee’s own case for A.Y. 2010-11 in ITA Nos.: 673 & 674/Bang/2014. In this case, the Tribunal had relied upon the decision of the Karnataka High Court in CIT vs. Sri Marikamba Transport Co. [ITA No. 553/2015; order dated 13^th April, 2015] wherein, in the context of section 194C, it was held that once the conditions of section 194C(3) were satisfied, the liability of the deductor to deduct tax at source would cease and, accordingly, disallowance u/s 40(a)(ia) would also not arise; filing of Form No. 15-I/J was held as directory and not mandatory.

Accordingly,the Tribunal held that no disallowance can be made u/s 40(a)(ia) merely because the assessee did not furnish Form 15G/15H to the Commissioner. The requirement of filing of such forms before the prescribed authority is only procedural and that cannot result in a disallowance u/s 40(a)(ia). Accordingly, disallowance u/s 40(a)(ia) was held unsustainable.