Case Law Details
Section 40 (a) (ia) applies even in respect of amount paid and not merely payable to the contractors and therefore CIT (A) was justified in confirming dis-allowances under section 40 (a) (ia) as the assessee had failed to deduct tax under section 194C
Valibhai Khanbhai Mankad Vs DCIT (ITAT Ahmedabad)
Whether CIT(A) has erred in confirming the dis-allowance of Rs. 7,93,34,193/- u/s 40(a)(ia) on the ground that the assessee has filed Form No. 15J with CIT on 26.02.2009 instead of on or before 30th June, 2006 in as much the there is no failure to deduct tax at source under section 194C since the assessee has received Form No.15-I from the sub-contractors before making payment to them. Held , No“The decision on deductibility of tax on payment made to sub-contractor is to be taken at time when contractor is releasing payments to sub-contractors and it is at that point of time second proviso to section 194C(3)(i) would come into play and when Form No. 15-I are submitted by sub-contractors to contractor, then contractor is not required to deduct tax from such payments, whereas compliance of third proviso can be deferred till 30th June of next financial year.”
The three proviso mentioned in sub-section (3) under 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 other words not only the assessee has to obtain Form No. 15-I from the sub-contractors while making the payment to them but it has also to file Form No. 15J to the Commissioner before 30th June following financial year. In the instant case, other conditions like payment of above Rs. 50,000 was not disputed as the assessee had admitted that payment to each sub-contractor exceeded the sum in one full year. But since according to the assessee, he had obtained Form No. 15-I then second proviso would be applicable, therefore, he was not required to deduct tax. The short question which arose in the instant case was where assessee had obtained Form No. 15-I was the assessee still liable to deduct tax under section 194C. It was to be held that once assessee had obtained Form No. 15-I from the sub-contractors whose contents were not disputed or whose genuineness was not doubted then assessee was not liable to deduct tax from the payments made to sub-contractors. Once assessee was not liable to deduct tax under section 194C then addition under section 40(a)(ia) could not be made.
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