By C. N. Vaze, Shailesh Kamdar, Jagdish T. Punjabi, Bhadresh Doshi
Chartered Accountants
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Section 40(a)(ia) — Payment of hire charges to sub-contractors after obtaining Form 15-I cannot be disallowed u/s.40(a)(ia) on the ground that Form 15J was not filed in time as per Rule 29D.
Facts:
The assessee had made payment of Rs.7,93,34,193 to sub-contractors to whom it awarded subcontract for hiring and from whom he obtained Form 15-I and hence TDS was not deducted. The AO, however, noted that even though the Forms 15-I were obtained from the transporters, the same were not furnished to the CIT in Form 15J as per Rule 29D of the IT Rules, 1962. He therefore, quoting from section 194C(3) as applicable to the relevant assessment year, held that once the assessee failed to furnish Form 15J enclosing therewith Form 15-I to the CIT before 30th June, 2006, he failed to fulfil the conditions laid down u/s. 194C(3)(ii). He accordingly added back the sum paid without TDS u/s.40(a)(ia).
The learned CIT(A) confirmed the addition by holding that responsibility after non-deduction does not stop just at collecting Forms 15-I from the sub-contractors, but also extends to requiring the contractor to furnish Form 15J to the CIT on or before 30th June of the following financial year. It was contended before the learned CIT(A) that Form 15J was submitted to the CIT on 26th February 2009 i.e., after the completion of assessment. The learned CIT(A) rejected this contention holding that such delay defeats the very purpose of the section.
Held:
Once the assessee has obtained Forms 15-I from the sub-contractors, and contents thereof are not disputed or whose genuineness is not doubted, then the assessee is not liable to deduct tax from the payments made to sub-contractors. Once the assessee is not liable to deduct tax u/s.194C, then addition u/s.40(a)(ia) cannot be made.
Non-furnishing of Form 15J to the CIT is an act posterior in time to payments made to subcontractors. This cannot by itself, undo the eligibility of exemption created by second proviso. Third proviso to section 194C(3)(i) which requires the assessee to submit Form 15J is only a procedural formality and cannot undo what has been done by second proviso.
