In our view, therefore, once the conditions of further proviso of section 194C(3) are satisfied, the liability of the payee to deduct tax at source would cease. The requirement of such payee to furnish details to the income tax authority in the prescribed form within prescribed time would arise later and any infraction in such a requirement would not make the requirement of deduction at source applicable under sub-section (2) of section 1 94C of the Act.In our view, therefore, the Tribunal was perfectly justified in taking the view in the impugned judgment. It may be that failure to comply such requirement by the payee may result into some other adverse consequences if so provided under the Act. However, fulfillment of such requirement cannot be linked to the declaration of tax at source. Any such failure therefore cannot be visualized by adverse consequences provided under section 40(a)(ia) of the Act.
When on the basis of the record it is not disputed that the requirements of further proviso were fulfilled, the assessee was not required to make any deduction at source on the payments made to the sub-contractors. If that be our conclusion, application of section 40(a)(ia) would not arise since, as already noticed, section 40(a)(ia) would apply when there is a requirement of deduction of tax at source and such requirement is either not fulfilled or having deducted tax at source is not deposited within prescribed time.
With respect to the Tribunal’s earlier judgment in case of M/s. Shree Pramukh Transport Co. Ltd., neither side could throw any light whether the Revenue had carried the same in appeal or not. However, we have examined the question independently and come to our own conclusion recorded herein above.
HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL No. 1182 of 2011
COMMISSIONER OF INCOME TAX
Versus
VALIBHAI KHANBHAI MANKAD
Date : 01/10/2012
ORAL ORDER
(Per : HONOURABLE MR.JUSTICE AKIL KURESHI)
1) Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal (hereinafter to be referred to as “the Tribunal”) dated 29th April 2011. Following question has been presented for our consideration:-
“Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs.7,91,02,011/- made under section 40(a)(ia)?”
2) For the assessment year 2006-07, above question arises in the following factual background:-
2.1) The respondent-assessee is engaged in the transport business. He also had other source of income, with which, we are not concerned. During the year under consideration, the assessee made payments of Rs. 11,21,09,788/- to sub contractors-transporters. On such payments, the assessee had not deducted tax at source (hereinafter to be referred to as “TDS”) for a sum of Rs.3,27,75,595/- on the ground that such payments were made to individual transporters, which did not exceed Rs.20,000/- at a time and Rs.50,000/- in the aggregate during the year. He had also not deducted tax at source for payment of Rs.7,91,02,01 1/- on the ground that from the transporters, receiving such payments, form No.15I was obtained and, therefore, no TDS was required to be deducted.
2.2) We are concerned with the payment of Rs.7,91,02,01 1/-. The Assessing Officer disallowed such expenditure under section 40(a)(ia) of the Income Tax Act, 1961 (hereinafter to be referred to as “the Act”) on the ground that the assessee had not furnished form No.1 5J before 30th June 2006 as required under Rule 29D of the Income Tax Rules, 1962 (hereinafter to be referred to as “the Rules”).
