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Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH, AHMEDABAD
Before: SHRI PRADIP KUMAR KEDIA
PER PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
The captioned appeal has been filed at the instance of the assessee against the order of CIT(A) dated 06.10.2016 arising in the Assessment Order dated 09.02.2015 passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 concerning A.Y. 2012-13.
In the captioned appeal the assessee has challenged the action of the CIT(A) in confirming the disallowance of Rs.5,52,562/- under section 40(a)(ia) on the ground that the assessee has not furnished the particulars of all payees/contractors in the prescribed form to the prescribed authority in time.
Briefly stated, the assessee is a dealer in Suiting & Shirting. The assessee in the course of carrying on its business incurred certain freight and transportation charges which includes an amount of Rs.5,52,562/- where it is found by the Assessing Officer that the assessee has failed to deduct tax at source as contemplated under section 194C of the Act. He accordingly invoked provisions of section 40(a)(ia) of the Act and added the aforesaid amount to the total income of the assessee.
ITA No.2959/Ahd/2016 A.Y. 2012-13 Page 2 of 4 4. Aggrieved, assessee preferred appeal before the CIT(A) and submitted that the assessee had filed prescribed Form No.26Q with the prescribed authority as contemplated under Rule 31A of the Income Tax Rules 1962 read with Section 194C of the Income Tax Act 1961. It was contended that in view of the fact that the prescribed information (PAN) was obtained from the contractors and return in Form No.26Q was filed before the prescribed authority, there was no statutory obligation to deduct TDS on payments made towards transportation charges. It was further contended that any delay or defect in filing the return in Form No.26Q has separate consequences as prescribed under the Income Tax Act but that by itself will not compel an assessee to deduct TDS under section 194C of the Act. In the absence of any statutory obligation to deduct TDS, section 40(a)(ia) will not come into play. The CIT(A), however, did not find merit in the plea of the assessee and rejected the appeal of the assessee.
Aggrieved, the assessee preferred appeal before the Tribunal.
We have carefully considered the rival submissions and perused the orders of the authorities below. It is the case of the assessee that disallowance under section 40(a)(ia) is not permissible as necessary information from the contractors for non- deduction were obtained and as a sequel thereto return in the prescribed form was filed before the prescribed authority albeit late. We find that identical issue came up for adjudication in ITO vs. M/s. Globe Cargo Services in ITA No.434/RJT/2011, order dated 01.05.2018, the operative paragraphs of the aforesaid order is self explanatory and, therefore, reproduced hereunder for reference:
“7. On careful consideration of the process of reasoning recorded by the CIT(A), we do not see any fallacy in the conclusion drawn by the First Appellate Authority. It is inter alia observed that the requisite Form No.15-I declaration for non-deduction from the transporters, to whom total payments of Rs.40,73,960/- made, were filed in the course of assessment proceedings. This aspect remains uncontroverted. This ground alone is sufficient for non-applicability of section 40(a)(ia) of the Act. Identical issue came up before the co-ordinate bench of this Tribunal in the case of ACIT vs. Chittoor District Co-operative Central Bank Limited in ITA No.1581 & 1582/Hyd/2014. The relevant operative paragraphs dealing with the legal position on similar facts are reproduced hereunder:- “11. We have also examined the impugned issue from a different perspective, as sought to be canvassed by learned AR. The question is whether S.40a(ia) can be invoked when the requisite forms as prescribed under statute for non-deduction has been obtained from the
ITA No.2959/Ahd/2016 A.Y. 2012-13 Page 3 of 4 deductee although not filed before proper authority. The provisions of section 40(a)(ia) of the Act is reproduced hereunder to examine this aspect of the matter :-
“40. Amounts not deductible Notwithstanding anything to the contrary in Sections 30 to 38, the following mounts 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 – (i) ....... (ii) (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.... (only relevant portion extracted). "
The provision noted above spells out that the amount cannot be allowed as deduction only in the event when tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction has not been paid. In the present case, it is the case of the assessing officer that the assessee was required to deduct tax in terms of the provisions of section 194A. We note that Section 194A is further qualified by section 197A(1A) which is a non-obstante clause. Setionl97A(lA) provides that liability to deduct tax under section 194A ceases when a declaration in writing in duplicate in prescribed form and verified in the prescribed manner. received by a person responsible for paying income to the payee. The remedy towards default for non- furnishing of the declaration to the Commissioner of Income Tax as prescribed has been addressed under section 272A(2)(f) of the Act by imposing suitable penalty thereon, However, once Form No,15G/Form 15H were received by the persons responsible for deducting tax, there is no liability to deduct tax at source in view of section 194A r.w.s. 197 A. Once, it is held that tax is not deductible at source under section 194A on receipt of prescribed form, the mischief provided under section 40(a)(ia) is not attracted. 12. We find that no default can be said to have occurred in terms of the phraseology provided under section 40(a)(ia) of the Act in the facts of the case. Accordingly, we hold that the CIT(A) rightly cancelled the disallowance made by the assessing officer under section 40(a)(ia) of the Act due to mere non-filing of impugned Form No.l5G/15H etc. with the appropriate authority. We have also perused decision of the ITAT in the case of Karwat Steel Traders V/s. ITO (ITA no.68322/Mum/2011 order dated 10.7.2013) relied upon by the CIT(A) in this regard. We find
ITA No.2959/Ahd/2016 A.Y. 2012-13 Page 4 of 4 the facts in the present case are identical to the facts in the case of Karwat Steel Traders wherein the Tribunal has taken a favourable view on the similar facts. Respectfully, following the order of the Co-ordinate Bench of the Tribunal, we hold that TDS is not deductible on receipt of Form No.lSG and accordingly, section 40(a)(ia) of the Act is not applicable in the facts of the case, Thus, assessee succeeds on this score also.” 8. In parity, we find the conclusion drawn by the CIT(A) for non-applicability of provisions of section 40(a)(ia) in the facts of the case are on a sound legal footing ad thus require no interference therewith. We thus endorse the action of the CIT(A) in toto and decline to interfere. We thus do not consider it expedient to examine other line of arguments advanced on behalf of assessee. 9. In the result, appeal of the Revenue is dismissed.”
In view of the uncontroverted fact that requisite return in the prescribed form was ultimately filed albeit belatedly, the assessee could not have deducted TDS on receipt of specific information from the payees/contractors. Therefore, in the absence of any liability to deduct tax at source under section 194C of the Act, provisions of section 40(a)(ia) of the Act does not get triggered. Hence, in parity with the decision of the co-ordinate bench in Globe Cargo Services (supra), we find the action of the Revenue authorities to be unsustainable in law. Consequently, the addition/ disallowance made by the Assessing Officer in terms of section 40(a)(ia) of the Act is directed to be deleted.
In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on this 2nd day of May, 2018. 9.
Sd/- Sd/- (Ms. MADHUMITA ROY) (PRADIP KUMAR KEDIA) Judicial Member Accountant Member Ahmedabad, the 2nd day of May, 2018 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad