Shri Valibhai Khanbhai mankad, Ahmedabad V. The Dy.CIT.,(OSD)Circle-9, Ahmedabad

ITA 2228/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6692 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 19-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 17-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: A C SHAH
• Keywords: Non-deduction of tax
• Section: 143(3); 194C; 10

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE S/SHRI MUKUL KR. SHRAWAT, JM AND D.C.AGRAWAL , AM VALIBHAI KHANBHAI MANKAD, PROP. ABAD ROADWAYS, 35- A, TASLIM SOCIETY, NR. BIBI TALAV, VATVA, AHMEDABAD. VS. DY. CIT (OSD), CIRCLE-9, AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI A. C. SHAH, AR RESPONDENT BY:- SHRI ANIL KUMAR, CIT, DR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS :- 1. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISAL LOWANCE OF RS.7,93,34,193/- U/S 40(A)(IA) ON THE GROUND THAT T HE ASSESSEE HAS FILED FORM NO.15J WITH CIT ON 26.02.2009 INSTEAD OF ON OR BEFORE 30 TH JUNE, 2006 IN AS MUCH THE THERE IS NO FAILURE TO D EDUCT TAX AT SOURE UNDER SECTION 194C SINCE THE ASSESSEE HAS REC EIVED FORM NO.15-I FROM THE SUB-CONTRACTORS BEFORE MAKING PAYM ENT TO THEM. 1.1 THERE MAY BE A FAILURE TO FILE FORM NO.15J IN T IME BUT THERE IS NO FAILURE TO DEDUCT TAX AT SOURCE. THEREFORE, THE ADD ITION 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 REQ UIREMENT TO FILE FORM NO.15J BY 30 TH JUNE 2006 IS DIRECTORY AND NOT MANDATORY AND ITA NO.2228/AHD/2009 ASST. YEAR 2006-07 ITA NO.2228/AHD/2009 ASST. YEAR 2006-07 2 THAT NON-FURNISHING OF FORM NO.15J IN TIME DOES NOT INVALIDATE FORM NO.15-I SUBMITTED BY THE SUB-CONTRACTORS WHO S UBMIT 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 Y EAR. 2. THE LD. CIT(A) HAS ERRED IN CONFIRMING DISALLOWA NCE OF RS.2,32,182/- U/S 40(A)(IA) WHERE FROM NO.15-I WERE NOT SUBMITTED BY SUB-CONTRACTORS. 3. THE LD. CIT(A) HAS ERRED IN CONFIRMING 1/10 TH VEHICLE EXPENSES OF RS.20,985/- ON THE GROUND THAT IT IS PERSONAL INASM UCH AS THE EXPENDITURE IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS AND THERE IS NO ELEMENT OF PERSONAL NATURE . 4. THE LD. CIT(A) HAS ERRED IN CONFIRMING 1/10 TH TELEPHONE EXPENSES OF RS.24,673/- ON THE GROUND THAT IT IS PERSONAL IN ASMUCH AS THE EXPENDITURE IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS AND THERE IS NO ELEMENT OUT OF PERSONAL NA TURE. 2. GROUND NO.2 IS NOT PRESSED BY THE LD. AR AND HE NCE IT IS REJECTED. 3. GROUND NOS.3 & 4 RELATE TO DISALLOWANCE OF 1/10 TH VEHICLE EXPENSES AND 1/10 TH TELEPHONE EXPENSES AT RS.20,985/- AND RS.24,673/- RESPECTIVELY. WE CONFIRM THESE ADDITIONS FOR THE RE ASON THAT ASSESSEE WAS NOT ABLE TO PROVE THAT ENTIRE EXPENDITURE CLAIMED W AS INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES AND THAT SUCH DISALLOWANCE IS REASONABLE LOOKING TO THE FACTS OF THE CASE. 4. GROUND NO.1 RELATES TO ADDITION U/S 40(A)(IA), O F A SUM OF RS.7,93,34,193/-. THE ASSESSEE HAD FILED RETURN OF INCOME AT RS.48,62,265/- BY SHOWING INCOME FROM TRANSPORT CON TRACT AND COMMISSION AGENCY. THE AO DURING THE COURSE OF ASSE SSMENT PROCEEDINGS FOUND THAT ASSESSEE HAS MADE PAYMENT OF RS.7,93,34,193/- TO SUB-CONTRACTORS TO WHOM IT AWARDED SUB-CONTRACT FOR HIRING. IT WAS EXPLAINED TO THE AO THAT HE HAS MADE PAYMENT OF RS. 7,91,02,011/- TO 151 ITA NO.2228/AHD/2009 ASST. YEAR 2006-07 3 DIFFERENT TRANSPORTERS FROM WHOM HE HAD OBTAINED FO RM NO.15-I AND HENCE NO TDS WAS REQUIRED TO BE MADE BY HIM FROM TH E PAYMENTS MADE TO THOSE 151 TRANSPORTERS. THE AO, HOWEVER, NOTED T HAT EVEN THOUGH THE FORMS NO.15I WERE OBTAINED FROM THE TRANSPORTERS TH E SAME WERE NOT FURNISHED TO THE CIT IN FORM NO.15J AS PER RULE -29 OF THE IT RULE, 1962. FURTHER THE CONTRACT PAYMENTS TO THOSE TRANSPORTERS EXCEEDED RS.50,000/-. HE ALSO NOTED THAT NEITHER TDS HAVE BEEN MADE NOR A NY FORM NO.15-J IS SUBMITTED. SINCE THE ASSESSEE HAD NOT FURNISHED REQ UISITE FORM NO.15J TO THE CIT, THE AO ISSUED A SHOW CAUSE NOTICE TO THE A SSESSEE, IN RESPONSE TO WHICH IT WAS SUBMITTED THAT IT WAS THE FIRST YEAR O F COLLECTION OF FORM NO.15-I AND THERE WAS NO INTENTION NOT TO SUBMIT TH ESE FORMS TO THE TDS DEPARTMENT. THE AO THEREAFTER QUOTING FROM SECTION 194C(3) AS APPLICABLE TO THE RELEVANT ASST. YEAR HELD THAT ONC E ASSESSEE FAILED TO FURNISH FORM NO.15J ENCLOSING THEREWITH FORM NO.15- I TO THE CIT BEFORE 30 TH JUNE, 2006, HE FAILED TO FULFILL THE CONDITIONS LA ID DOWN U/S 194C(3)(II), WHICH WERE EFFECTIVE FROM 1.6.2005. TH E AO THEN INFERRED THAT ASSESSEE WAS LIABLE TO DEDUCT TDS FROM THE PAY MENTS MADE TO SUCH TRANSPORTERS AND DEPOSIT THE SAME INTO THE GOVERNME NT 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 D OES NOT STOP JUST BY COLLECTING FORM NO.15-I FROM THE SUB-CONTRACTORS BU T ALSO EXTENDS TO REQUIRING THE CONTRACTOR TO FURNISH FORM NO.15J TO THE CIT ON OR BEFORE 30 TH JUNE OF THE FOLLOWING FY. THIS FORM NO.15J GIVES D ETAILS OF DECLARATION GIVEN IN FORM NO.15I FURNISHED BY SUB-C ONTRACTORS FOR NON- DEDUCTING THE TDS. IT WAS CONTENDED BEFORE THE LD. CIT(A) THAT FORM ITA NO.2228/AHD/2009 ASST. YEAR 2006-07 4 NO.15J WAS SUBMITTED TO THE CIT ON 26.2.2009 I.E. A FTER 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 THE ADDITION. 6. BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THIS IS THE FIRST YEAR OF OBTAINING OF FORM NO.15-I. THE SUB-CONTRACT ORS HAVE SUBMITTED FORM NO.15-I BEING DECLARATION UNDER SECOND PROVISO TO CLAUSE (1) OF SUB- SECTION (C) OF SECTION 194, TO THE ASSESSEE AS REQU IRED BY RULE 29D(1). ONCE SUB CONTRACTOR HAVE FURNISHED FORM NO.15-I THE N ASSESSEE IS NOT REQUIRED TO DEDUCT THE TAX ON THE PAYMENT MADE TO T HE SUB-CONTRACTORS. ONCE THERE IS NO REQUIREMENT OF DEDUCTING THE TAX U /S 194C THEN THERE CANNOT BE ANY DEFAULT AS MENTIONED IN SECTION 40(A) (IA). EVEN THOUGH THERE IS A DEFAULT ON THE PART OF THE ASSESSEE IN S UBMITTING FORM NO.15J IN TIME TO THE CIT BUT THIS DEFAULT ALONE CANNOT BECOM E THE BASIS OF MAKING ADDITION U/S 40(A)(IA). IN FACT SUBMISSION OF FORM NO.15J IS AN ACT SUBSEQUENT TO THE CLOSE OF THE FY WHEREAS PAYMENT T O SUB-CONTRACTORS AND DEDUCTION OF TAX THEREFROM HAS TO BE DONE DURIN G THE COURSE OF THE FY. IF SUB-CONTRACTORS HAVE FURNISHED FORM NO.15-I DURING THE COURSE OF FY THEN ASSESSEE CANNOT MAKE DEDUCTION OF TAX THERE FROM, AS RULE 29D(1) PROHIBITS SUCH DEDUCTIONS. ONCE DEDUCTION OF TDS IS NOT MADE AND PAYMENT IS RELEASED TO THE SUB-CONTRACTORS THEN BY MERELY NOT FURNISHING FORM NO.15J THE ASSESSEE CANNOT BE COMPELLED TO DED UCT TAX FROM THE PAYMENT WHICH IS ALREADY RELEASED. THE CIT CAN TAKE ACTION AGAINST THE ASSESSEE FOR NOT FURNISHING THE FORM NO.15J IN TIME BUT THIS DEFAULT IS NOT SUFFICIENT TO HOLD THAT THERE WAS NON-COMPLIANCE OF SECTION 194C AND THEREFORE, THE ADDITION U/S 40(A)(IA) CAN BE MADE. THE LD. AR RELIED ON THE DECISION OF THE TRIBUNAL, AHMEDABAD BENCH-D IN ITA NO.1717/AJD/2010 ASST. YEAR 2007-08 IN THE CASE OF ACIT VS. M/S SHRE E PRAMUKH TRANSPORT ITA NO.2228/AHD/2009 ASST. YEAR 2006-07 5 CO. BHUTADI, BARODA PRONOUNCED ON 31.08.2010 WHEREI N ON SIMILAR FACTS ADDITION U/S 40(A)(IA) WAS DELETED. HE REFERRED TO PARA NOS.4 & 5 FROM THAT ORDER AS UNDER :- 4. THE LEARNED CIT(A) CONSIDERING THE MATERIAL ON RECORD NOTED THAT THE AO HAS NOT DISPUTED THAT THE ASSESSEE CLAIMED THAT HE HAD OBTAINED DECLARATION IN FORM NO.15-I FROM THE PAYEES. THE LE ARNED CIT(A) NOTED THAT ULTIMATELY FORM NO.15-I WAS FILED WITH DELAY I N THE OFFICE OF THE COMMISSIONER, BUT THE ASSESSEE IN FACT HAD OBTAINED THE DECLARATION AND THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE HAD VIOLATED THE MANDATE GIVEN BY THE PAYEES NOT TO DEDUCT TAX. THE ADDITION WAS ACCORDINGLY DELETED. 5. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE MATTER. THE LEARN ED 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 O F THE RULE WAS PROCEDURAL ONLY, THEREFORE, WHEN THE ASSESSEE OBTAI NED 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 UNJ USTIFIED IN THE MATTER. ACCORDING TO SECTION 194(C)(3) OF THE IT ACT, THE A SSESSEE 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 TH E AUTHORITIES BELOW. THEREFORE, THE ASSESSEE HAS SUBSTANTIALLY COMPLIED WITH THE PROVISIONS OF LAW. IN CASE OF PROCEDURAL IRREGULARITIES, THE ASSE SSEE CANNOT BE PUT TO UNNECESSARY HARDSHIP IN THE MATTER AND THAT TOO WHE N CERTAIN EXEMPTION HAS BEEN GIVEN TO THE ASSESSEE IN SECTION PROVISO T O SECTION 194(C)(3) OF THE IT ACT. SINCE, THERE IS SUFFICIENT COMPLIANCE O F THE PROVISIONS OF LAW, THEREFORE, THE LEARNED CIT(A) WAS JUSTIFIED IN DELE TING THE ADDITION. WE, THEREFORE, DO NOT FIND ANY JUSTIFICATION TO INTERFE RE WITH THE ORDER OF THE LEARNED CIT (A). WE CONFIRM HIS FINDINGS AND DISMIS S THE APPEAL OF THE REVENUE. THE LD. AR ALSO SUBMITTED THAT GENUINENESS OF THE P AYMENT HAS NOT BEEN DOUBTED AND ADDITION HAS BEEN MADE ONLY ON TECHNICA L GROUND EVEN THOUGH SUBSTANTIAL COMPLIANCE HAS BEEN MADE BY THE ASSESSEE. ITA NO.2228/AHD/2009 ASST. YEAR 2006-07 6 7. AGAINST THIS, THE LD. DR SUBMITTED THAT FACTS AS REPORTED IN THE CASE OF SHREE PRAMUKH TRANSPORT CO. (SUPRA) ARE DIFFEREN T THAN THE FACTS IN THE CASE OF ASSESSEE. THE ASST. YEAR INVOLVED IN THE CA SE OF SHREE PRAMUKH TRANSPORT CO. (SUPRA) WAS 2007-08, FORM NO.15J WAS SUBMITTED BEFORE CIT ON 17/12/2007 THOUGH IT WAS REQUIRED TO BE FILE D ON 30.6.2007. THUS THERE WAS A DELAY OF ONLY SIX MONTHS. FURTHER FORM NO.15J WAS FILED BEFORE COMPLETION OF ASSESSMENT THUS ENABLING THE A O TO CARRY OUT THE NECESSARY ENQUIRIES AS TO THE GENUINENESS OF THE PA YMENTS. IN THE PRESENT CASE THERE WAS INORDINATE DELAY OF 2 YEARS AND 8 MO NTHS WHICH HAS NOT BEEN EXPLAINED AND FORM NO.15J IS FILED LONG AFTER COMPLETION OF ASSESSMENT U/S 143(3) ON 26/12/2008. THE LD. DR THE N SUBMITTED THAT WHILE GOING THROUGH SECTION 194C (3) ALL THE THREE PROVISOS MENTIONED THEREIN ARE REQUIRED TO BE SATISFIED SIMULTANEOUSLY AND IT IS NOT A CASE THAT ONLY SECOND PROVISO ALONE SHOULD BE SATISFIED. THUS COMPLIANCE OF THE THREE PROVISOS SHOULD BE CUMULATIVELY DONE AND IF T HERE IS ANY DEFAULT EVEN IN RESPECT OF ONE PROVISO, THE LIABILITY OF TH E ASSESSEE TO DEDUCT THE TAX ON PAYMENT MADE BY IT WILL CONTINUE TO EXIST. O NCE ASSESSEE INTENDS TO SEEK EXEMPTION FROM THE RIGOURS OF PROVISIONS THEN STRICT INTERPRETATION HAS TO BE MADE AND ASSESSEE HAS TO FULFILL ALL THE CONDITIONS LAID DOWN FOR ALLOWING EXEMPTION. IF CONDITION RELATING TO FURNIS HING FORM NO.15J TO THE CIT IS DONE AWAY WITH AND ASSESSEE IS ALLOWED EXEMP TION FROM DEDUCTING THE TAX FROM PAYMENTS BY IT TO SUB-CONTRACTORS THEN CONDITIONS RELATING TO FURNISHING FORM NO.15J TO THE CIT WILL BECOME OTIOS E WHICH CANNOT BE THE INTENTION OF THE LEGISLATURE WHEN THEY INTRODUC ED THIS CONDITION. THE LD. DR FURTHER SUBMITTED THAT THIRD PROVISO TO SECT ION 194C(3) CLEARLY LAYS DOWN BY USING THE WORD SHALL THAT IT IS MANDATORY TO FURNISH PARTICULARS TO THE PRESCRIBED AUTHORITY IN THE PRESCRIBED FORM FOR GAINING EXEMPTION FROM DEDUCTING THE TAX. MERELY OBTAINING FORM NO.15 -I FROM THE SUB- CONTRACTORS IS NOT SUFFICIENT TO GET EXEMPTION FROM DEDUCTING THE TAX FROM ITA NO.2228/AHD/2009 ASST. YEAR 2006-07 7 PAYMENTS MADE TO THEM BUT LIABILITY OF THE ASSESSEE EXTENDS TO FURNISHING FORM NO.15J ALSO WHICH IS A PRESCRIBED FORM TO BE S UBMITTED TO THE CIT WHO IS THE PRESCRIBED AUTHORITY. THE LD. DR ALSO SUBMITTED THAT THERE IS NO WORD LI KE FAILURE USED IN SECTION 40(A)(IA) AND IT REFERS TO ONLY NON-DEDUCTI ON OF TAX AND DISALLOWANCE OF SUCH PAYMENTS. IT DOES NOT REFER TO GENUINENESS OF THE PAYMENT OR OTHERWISE. IN OTHER WORDS THE LD. DR SUB MITTED 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 DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS BUT DID NOT SUBMIT FORM NO.1 5J 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-SECTION (1) O R SUB- SECTION (2) FROM - (I) THE AMOUNT OF ANY SUB0CREDITED OR PAID OR LIKEL Y TO BE CREDITED OR PAID TO THE ACCOUNT OF OR TO THE CONTRACTOR OR SUB-CONTR ACTOR, IF SUCH SUM DOES NOT EXCEED TWENTY THOUSAND RUPEES, PROVIDED THAT WHERE THE AGGREGATE OF THE AMOUNTS OF SUCH SU MS CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE FINANCIAL YEAR EXCEEDS FIFTY THOUSAND RUPEES, THE PERSON RESPONSIBLE FOR P AYMENT SUCH SUMS REFERRED TO IN SUB-SECTION (1) OR AS THE CASE MAY B E SUB-ECTION (2) SHALL BE LIABLE TO DEDUCT INCOME-TAX UNDER THIS SECTION; PROVIDED FURTHER THAT NO DEDUCTION SHALL BE MADE UNDER SUB-SECTION (2) FROM THE AMOUNT OF ANY SUM CREDITED OR PAID OR LIKE LY TO BE CREDITED OR PAID DURING THE PREVIOUS YEAR TO THE ACCOUNT OF THE SUB-CONTRACTOR DURING THE COURSE OF BUSINESS OF PLYING HIRING OR LEASING GOODS CARRIAGES, ON ITA NO.2228/AHD/2009 ASST. YEAR 2006-07 8 PRODUCTION OF A DECLARATION TO THE PERSON CONCERNED PAYING OR CREDITING SUCH SUM IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER AND WITHIN SUCH TIME AS MAY BE PRESCRIBED, IF SUCH SUB-CONTRACTOR IS AN INDIVIDUAL WHO HAS NOT OWNED MORE THAN TWO GOODS CA RRIAGES AT ANY TIME DURING THE PREVIOUS YEAR; PROVIDED ALSO THAT THE PERSON RESPONSIBLE FOR PAYING ANY SUM AS AFORESAID TO THE SUB-CONTRACTOR REFERRED TO IN THE SECOND PROVISO SHALL FURNISH TO THE PRESCRIBED INCOME-TAX AUTHORITY OR T HE PERSON AUTHORISED BY IT SUCH PARTICULARS AS MAY BE PRESCRIBED IN SUCH FORM AND WITHIN SUCH TIME AS MAY BE PRESCRIBED; OR RULE 29-D IN THIS REGARD READS AS UNDER :- 29D (1) THE DECLARATION UNDER THE SECOND PROVISO T O CLAUSE (I) OF SUB-SECTION (3) OF SECTION 194C BY A SUB-CONTRACTOR SHALL BE IN FORM NO.15-I AND SHALL BE VERIFIED IN THE MANNER INDICAT ED THEREIN BY SUCH SUB- CONTRACTOR. (2) THE DECLARATION REFERRED TO IN SUB-RULE (1) MAY BE FURNISHED TO THE CONTRACTOR RESPONSIBLE FOR PAYING OR CREDITING ANY SUM TO THE ACCOUNT OF THE SUB-CONTRACTOR BEFORE THE EVENT OF SUCH SUM BEI NG CREDIT OR PAID TO SUCH SUB-CONTRACTOR. (3) THE PARTICULARS UNDER THE THIRD PROVISO TO CLAU SE (I) OF SUB-SECTION (3) OF SECTION 194C TO BE FURNISHED BY A CONTRACTOR RESPONSIBLE FOR PAYING ANY SUM TO SUCH SUB-CONTRACTOR SHALL BE IN FORM NO. 15J. (4) THE PARTICULARS REFERRED TO IN SUB-RULE (3) SHA LL BE FURNISHED - (I) TO THE COMMISSIONER OF INCOME-TAX, SO DESIGNATED BY THE CHIEF COMMISSIONER OF INCOME-TAX, WITHIN WHOSE AREA OF JU RISDICTION, THE OFFICE OF THE CONTRACTOR REFERRED TO IN SUB-RUL E (3) IS SITUATED; (II) ON OR BEFORE THE 30 TH 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 FRO M PAYMENT MADE TO SUB-CONTRACTORS IF FOLLOWING CONDITIONS ARE FULFILL ED :- ITA NO.2228/AHD/2009 ASST. YEAR 2006-07 9 (1) AMOUNT PAID TO SUB-CONTRACTOR DOES NOT EXCEED R S.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 MANN ER WITHIN SUCH TIME AS MAY BE PRESCRIBED, IF SUCH SUB-CONTRACTOR D OES 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 WITHI N 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 3 RD PROVISO WOULD BE IN FORM NO.15J; (7) FORM NO.15J SHALL BE FURNISHED TO THE COMMISSIO NER OF INCOME-TAX SO DESIGNATED BY THE CHIEF COMMISSIONER OF INCOME-T AX. (8) IT SHALL BE FURNISHED ON OR BEFORE 30 TH JUNE FOLLOWING THE FY. THE THREE PROVISO MENTIONED IN SUB-SECTION (3) UNDE R CLAUSE (I) ARE IN CONTINUITY, AS THEY ARE SEPARATED ONLY BY A COLON ( :) AND NOT BY WORD OR MEANING THEREBY THE CONDITION LAID DOWN IN ALL THE THREE PROVISOS ARE TO BE SATISFIED SIMULTANEOUSLY AND CUMULATIVELY. IN OT HER WORDS NOT ONLY THE ASSESSEE HAS TO OBTAIN FORM NO.15-I FROM THE SUB-CO NTRACTORS WHILE MAKING THE PAYMENT TO THEM BUT IT HAS ALSO TO FILE FORM NO.15J TO THE COMMISSIONER BEFORE 30 TH JUNE FOLLOWING FY. IN THE PRESENT CASE OTHER CONDITIONS LIKE PAYMENT ABOVE RS.50,000 IS NOT DISP UTED AS ASSESSEE HAS ADMITTED THAT PAYMENT TO EACH SUB-CONTRACTOR EXCEED ED THE SUM IN ONE FULL YEAR. BUT SINCE ACCORDING TO THE ASSESSEE IT H AS OBTAINED FORM NO.15I THEN SECOND PROVISO WOULD BE APPLICABLE, THEREFORE IT IS NOT REQUIRED TO DEDUCT TAX. THE SHORT QUESTION ARISES IS IN A CASE LIKE THIS WHERE ASSESSEE HAS OBTAINED FORM NO.15-I IS WHETHER THE ASSESSEE I S STILL LIABLE TO DEDUCT ITA NO.2228/AHD/2009 ASST. YEAR 2006-07 10 TAX UNDER SECTION 194C. IN OUR CONSIDERED VIEW ONCE ASSESSEE HAS OBTAINED FORM NO.15-I FROM THE SUB-CONTRACTORS WHOS E CONTENTS ARE NOT DISPUTED OR WHOSE GENUINENESS IS NOT DOUBTED THEN A SSESSEE IS NOT LIABLE TO DEDUCT TAX FROM THE PAYMENTS MADE TO SUB-CONTRAC TORS. ONCE ASSESSEE IS NOT LIABLE TO DEDUCT TAX U/S 194C THEN ADDITION U/S 40(A)(IA) CANNOT BE MADE. FOR THE SAKE OF CONVENIENCE WE REPRODUCE SECT ION 40(A)(IA) AS UNDER :- SEC.40 NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTI ONS 30 TO (38) THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMP UTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION - (A) IN THE CASE OF ANY ASSESSEE - (IA) ANY INTEREST, COMMISSION OR BROKERAGE, (RENT, ROYALTY) FEES (OR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTO R BEING RESIDENT FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR F OR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER C HAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, (HAS NOT BEEN PAID,- THE CONDITIONS LAID DOWN U/S 40(A)(IA) FOR MAKING A DDITION IS THAT TAX IS DEDUCTIBLE AT SOURCE AND SUCH TAX HAS NOT BEEN DEDU CTED. IF BOTH THE CONDITIONS ARE SATISFIED THEN SUCH PAYMENT CAN BE D ISALLOWED U/S 40(A)(IA). IN OTHER WORDS WHERE TAX IS NOT DEDUCTIB LE ADDITION U/S 40(A)(IA) CANNOT BE MADE. FROM THIS IT FOLLOWS THAT SECOND PR OVISO TO SECTION 194C(3) (I) ALONE WOULD BE OPERATIVE FOR DECIDING W HETHER TAX IS DEDUCTIBLE OR NOT DEDUCTIBLE. NON-FURNISHING OF FOR M NO.15J TO THE COMMISSIONER IS AN ACT POSTERIOR IN TIME TO PAYMENT S MADE TO SUB- CONTRACTORS. THIS CANNOT BY ITSELF, UNDO THE ELIGI BILITY OF EXEMPTION CREATED BY SECOND PROVISO BY VIRTUE OF WHICH SUB-CO NTRACTORS HAVE SUBMITTED FORM NO.15-I. THE DEDUCTIBILITY OF TAX IS , THEREFORE, CONFINED OR LIMITED TO APPLICABILITY OF SECOND PROVISO ONLY BEC AUSE IT IS AT THAT POINT ITA NO.2228/AHD/2009 ASST. YEAR 2006-07 11 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 DE DUCT THE TAX. CONVERSELY WHERE FORM NO.15-I IS SUBMITTED TO THE A SSESSEE BY THE SUB- CONTRACTORS, THE TAX IS NOT DEDUCTIBLE AND ONCE TAX IS NOT DEDUCTIBLE NO ADDITION U/S 40(A)(IA) CAN BE MADE. FROM THIS IT FO LLOWS THAT THIRD PROVISO TO SECTION 194C(3)(1) WHICH REQUIRES THE ASSESSEE T O SUBMIT FORM NO.15J IS ONLY PROCEDURAL FORMALITY AND CANNOT UNDO WHAT H AS BEEN DONE BY SECOND PROVISO. NON-SUBMISSION OF FORM NO.15J TO TH E COMMISSIONER WITHIN THE TIME PRESCRIBED IN RULE 29D CANNOT HAVE ANY EFFECT ON DECIDING AS TO WHETHER TAX WAS DEDUCTIBLE OR NOT DEDUCTIBLE FROM THE PAYMENTS MADE BY THE ASSESSEE TO THE SUB-CONTRACTORS. THIS C AN BE DECIDED UNDER SECOND PROVISO ALONE. EVEN THOUGH THE LEGISLATURE I N THEIR WISDOM HAVE ADDED THIRD PROVISO AS ADDENDA TO THE SECOND PROVIS O BY MENTIONING PROVIDED ALSO MEANING THEREBY THAT LEGISLATURE IN TENDED TO PUT BOTH THE CONDITIONS MENTIONED IN SECOND AND THIRD PROVISO TO GETHER TO BE SATISFIED BY THE ASSESSEE BUT IN EFFECT BOTH THE CONDITIONS C ANNOT BE SATISFIED TOGETHER AS BOTH ARE NOT THE EVENTS TAKING PLACE SI MULTANEOUSLY AT THE SAME TIME. ONE EVENT IS THE SUBMISSION OF FORM NO.1 5-I BY THE SUB- CONTRACTORS TO THE CONTRACTOR AND TAKES PLACE AT TH E TIME OR PRIOR TO THE PAYMENT MADE TO THEM BY THE CONTRACTOR. THE OTHER E VENT IS THE SUBMISSION OF FORM NO.15J BY THE CONTRACTOR TO THE COMMISSIONER OF INCOME-TAX GIVING THE DETAILS CONTAINED IN FORM NO. 15-I. THIS EVENT IN PRACTICE TAKES PLACE AFTER THE CONTRACTOR HAS RELEA SED THE PAYMENT TO THE SUB-CONTRACTOR AFTER RECEIVING FORM NO.15-I. THE UP PER TIME LIMIT FOR SUBMITTING SUCH FORM NO.15J TO THE COMMISSIONER AS LAID DOWN IN THE RULES IS ON OR BEFORE 30 TH JUNE FOLLOWING THE FY. THE TWO EVENTS ARE SPATIALLY KEPT APART BY THE LEGISLATURE THUS GIVING A LATITUDE TO THE ASSESSEE TO SUBMIT FORM NO.15J TO THE COMMISSIONER MUCH AFTER HE RECEIVES FORM NO.15-I FROM THE SUB-CONTRACTORS. APP ARENTLY THE ITA NO.2228/AHD/2009 ASST. YEAR 2006-07 12 LEGISLATURE INTENDED THAT THE CONTRACTOR SHOULD NOT ONLY OBTAIN THE FORM NO.15I FROM THE SUB-CONTRACTORS BUT SHOULD ALSO SUB MIT FORM NO.15J TO THE COMMISSIONER IMMEDIATELY AFTER RELEASING THE PA YMENTS TO THE SUB- CONTRACTORS WITHOUT DEDUCTING THE TAX ON THE STRENG TH OF FORM NO.15-I AND IF BOTH THE CONDITIONS ARE SATISFIED, THEN THE ASSE SSEE MAY NOT BE TREATED AS IN DEFAULT FOR NOT COMPLYING THE PROVISIONS OF SECT ION 194C. THUS SATISFACTION OF THE CONDITIONS IN 2 ND AND THIRD PROVISO OF SECTION 194C(3)(I) MAY BE NECESSARY FOR AN ASSESSEE TO SAVE HIMSELF FROM BEING DECLARED AS AN ASSESSEE IN DEFAULT BUT CONDITIONS L AID DOWN FOR INVOKING SECTION 40(A)(IA) ARE NOT THE SAME AS CUMULATIVE CO NDITIONS MENTIONED IN SECOND AND THIRD PROVISO OF SECTION 194C(3) (I). FO R INVOKING SECTION 40(A)(IA) IT IS TO BE DECIDED WHETHER TAX WAS DEDUC TIBLE OR NOT, IF YES, WHETHER DEDUCTED/PAID OR NOT. WHEN WE LOOK INTO SEC TION 194C(3)(I) FOR THE PURPOSES OF INVOKING 40(A)(IA) WE FIND THAT ONL Y 2 ND PROVISO TO IT IS SUFFICIENT TO DECIDE WHETHER TAX WAS DEDUCTIBLE OR NOT. THERE IS ANOTHER REASON FOR HOLDING SO. TIME FACTOR INVOLVED FOR COM PLIANCE OF THE CONDITIONS MENTIONED IN TWO PROVISIONS ARE DIFFEREN T. 2 ND 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 30 TH JUNE OF NEXT FY. IN OTHER WORDS THE CONTRACTOR CAN WAIT TO COMPL Y WITH THIRD PROVISO TILL 30 TH JUNE OF NEXT FY AFTER COMPLYING WITH SECOND PROVIS O. HOWEVER, THE DECISION ON DEDUCTIBILITY OF TAX FROM THE PAYME NT MADE TO THE SUB- CONTRACTOR CANNOT BE DEFERRED TILL 30 TH 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 RE LEASING THE PAYMENTS TO THE SUB-CONTRACTORS. IT IS AT THIS POINT OF TIME SE COND 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 D EDUCT TAX FROM SUCH PAYMENTS. ONCE DEDUCTIBILITY OF TAX DEPENDS UPON SU BMISSION OR NON- ITA NO.2228/AHD/2009 ASST. YEAR 2006-07 13 SUBMISSION OF FORM NO.15-I FROM THE SUB-CONTRACTOR TO THE ASSESSEE THEN NON-COMPLIANCE OF THIRD PROVISO BECOMES MERELY TECH NICAL WITHOUT AFFECTING IN SUBSTANCE THE DEDUCTIBILITY OR NON-DED UCTIBILITY OF TAX ON PAYMENTS MADE BY THE ASSESSEE TO THE SUB-CONTRACTOR S. THEREFORE, IN OUR CONSIDERED VIEW NON-COMPLIANCE OF THIRD PROVISO BEC OMES MERELY A TECHNICAL DEFAULT, WHICH EVEN IF, REMAINED NON-COMP LIED WOULD NOT AFFECT THE OPERATION OF SECTION 40(A)(IA). THE LD. DR HAS EMPHASIZED ON THE POINT THAT WORD U SED IN RULE 29D(4) IS SHALL WHICH WOULD MEAN THAT IT IS MANDA TORY TO FURNISH THE FORM NO.15J ON OR BEFORE 30 TH JUNE OF FOLLOWING FY. THERE IS NO DISPUTE WITH THIS PROPOSITION BUT UNFORTUNATELY AS WE HAVE HELD ABOVE NON- COMPLIANCE OF THIRD PROVISO CANNOT HAVE ANY DECIDIN G ROLE IN DETERMINING WHETHER TAX IS TO BE DEDUCTED OR NOT TO BE DEDUCTED FROM THE PAYMENTS MADE TO THE SUB-CONTRACTOR. 9. THEREFORE, OUR VIEW IS IN CONFORMITY WITH THE DE CISION TAKEN BY THE TRIBUNAL, AHMEDABAD BENCH D IN THE CASE OF M/S SHR EE PRAMUKH TRANSPORT CO. (SUPRA) REFERRED TO BY THE LD. AR WHI CH HAS HELD THAT IF ASSESSEE HAS OBTAINED FORM NO.15-I THEN IT IS SUBST ANTIAL COMPLIANCE OF THE PROVISION OF SECTION 194C. 10. AS A RESULT, WE DELETE THE ADDITION BY HOLDING THAT TAX WAS NOT LIABLE TO BE DEDUCTED FROM THE PAYMENTS MADE TO SUB -CONTRACTORS ON ACCOUNT OF THEY SUBMITTING FORM NO.15-I TO THE CONT RACTOR AND THEREFORE, NO ADDITION U/S 40(A)(IA) COULD BE MADE. ITA NO.2228/AHD/2009 ASST. YEAR 2006-07 14 11. AS A RESULT APPEAL FILED BY THE ASSESSEE IS PAR TLY ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 29/04/11. SD/- SD/- (MUKUL KR. SHRAWAT) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBE R AHMEDABAD, DATED : 29/04/11. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 19/4/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 25/4/ 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..