1 IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 13TH DAY OF APRIL, 2015 PRESENT HON'BLE MR. JUSTICE VINEET SARAN AND HON BLE MRS. JUSTICE S.SUJATHA ITA NO.553/2013 BETWEEN 1. COMMISSIONER OF INCOME TAX PARK VIEW BUILDING, NO.284/1, 4TH MAIN, P J EXTENSION, DAVANAGERE-577 002 2. ASSISTANT COMMISSIONER OF INCOME TAX, CIRLCE-1 PARK VIEW BUILDING, NO.284/1, 4TH MAIN, P J EXTENSION, DAVANAGERE-577 002 ... APPELLANTS (BY SRI. K V ARAVIND, ADV., ) AND M/S. SRI MARIKAMBA TRANSPORT COMPANY, C/O JAGANNATHA & CO., VEERABADRESHWARA COMPLEX, VASAVI MAHAL ROAD, CHITRADURGA. ... RESPONDENT (BY SRIYUTHS. SHANKAR & M LAVA, ADVS., ) 2 This ITA is filed Under Sec.260-A of Income Tax Act 1961, arising out of order dated 26/07/2013 passed in ITA No.1062/Bang/2012, for Assessment Year 2009-2010 praying to: 1. Formulate substantial questions of law stated above. 2. Allow appeal and set aside orders passed by ITAT, Bangalore in ITA No.1062/Bang/2012 dated:26/07/2013 confirming order of Appellate Commissioner and confirm order passed by Assistant Commissioner of Income Tax, Circle-1, Davanagere. THIS ITA COMING ON FOR ADMISSION THIS DAY, SUJATHA J. DELIVERED FOLLOWING: JUDGMENT This appeal is filed by revenue challenging order passed by Income Tax Appellate Tribunal, Bangalore Bench B, Bangalore, dated 26.07.2013 for Assessment Year 2009-10. 2. brief facts of case are that assessee has filed return of income for Assessment Year 2009-10 declaring total income of Rs.19,07,890/-. Srutiny assessment was completed under Section 143(3) of Income Tax Act, 1961 (hereinafter referred to as Act for short) on 28.12.2011 by computing total income of Rs.17,82,64,920/- and while doing said assessment, Assessing Officer had added payments made to sub-contractors towards freight charges of Rs.17,63,57,030/- under Section 40(a)(ia) of Act. Aggrieved 3 by same, assessee carried matter in appeal before Commissioner of Income Tax (A), Hubli, which was allowed by Appellate Authority, against which, revenue preferred appeal before ITAT, Bangalore. Tribunal following Judgment of Ahmedabad Bench in case of Valibhai Khanbai Mankad vs- DCIT (OSD) reported in ITA No.2228/Ahd/2009 dated 29.04.2011, dismissed appeal filed by revenue. Aggrieved by same, Revenue is in appeal before this Court under Section 260A of Act. 3. We have heard Sri K.V.Aravind, learned counsel appearing for Revenue as well as Sri A.Shankar, learned counsel appearing for assessee. After hearing parties and perusing records, only question that arises for our consideration is: Whether non-filing of Form No.15-I/J within prescribed time is only technical default or Provisions of Section 40(a)(ia) of Act are attracted? 4 Section 40 (a)(ia) and Section 194C(3) of Act reads thus: Section 40(a)(ia) : Any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to resident, or amounts payable to 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 on or before due date specified in sub-section(1) of Section 139 . Section 194C(3): No deduction shall be made under sub- section(1) or sub-section(2) from (i) amount of any sum credited or paid or likely to be credited or paid to account of or to contractor or sub- contractor, if such sum does not exceed twenty thousand rupees: Provided that where aggregate of amounts of such sums credited or paid or likely to be credited or paid during financial year exceeds fifty thousand rupees, person responsible for paying such sums referred to in sub-s.(1) or as case may be sub-s.(2) shall be liable to deduct income-tax under this section: 5 Provided further that no deduction shall be made under sub-s.(2) from amount of any sum credited or paid or likely to be credited or paid during previous year to account of sub-contractor during course of business of plying, hiring or leasing goods carriages, on production of declaration to person concerned paying or crediting such sum in prescribed form and verified in prescribed manner and within such time as may be prescribed, if such sub-contractor is individual who has not owned more than two goods carriages at any time during previous year: Provided also that person responsible for paying any sum as aforesaid to sub-contractor referred to in second proviso shall furnish to prescribed IT authority or person authorized by it such particulars as may be prescribed in such form and within such time as may be prescribed: or (ii) any sum credited or paid before 1st day of June, 1972; or (iii) any sum credited or paid before 1st day of June, 1973, in pursuance of contract between contractor and co-operative society or in pursuance of contract between such contractor and sub-contractor in relation to any work (including supply of labour for carrying out any work) undertaken by contractor for co-operative society. 6 4. combined reading of these two provisions make it clear that if there is any breach of requirements of Section 194C(3), question of applicability of Section 40(a)(ia) arises. exclusion provided in Sub-Section(3) of Section 194C from liability to deduct tax at source under sub-section(2) would be complete, moment requirements contained therein are satisfied. Once, declaration forms are filed by sub- contractor, liability of assessee to deduct tax on payments made to sub-contractor would not arise. As we have examined, sub-contractors have filed Form No.15I before assessee. Such being case, assessee is not required to deduct tax under Section 194C(3) of Act and to file Form No.15J. It is only technical defect as pointed out by Tribunal in not filing Form No.15J by assessee. This matter was extensively considered by ITAT, Ahmedabad Bench in Valibhai Khandbai Mankad s case (supra) and said Judgment has been upheld by High Court of Gujarat reported in (2013) 216 Taxman 18 (Guj) wherein it is held that once 7 conditions of Section 194C(3) were satisfied, liability of payee to deduct tax at source would cease and accordingly, application of Section 40(a)(ia) would also not arise. Tribunal, placing reliance on judgment of ITAT, Ahmedabad Bench, has dismissed appeal filed by Revenue. We agree with said propositions and hold that filing of Form No.15I/J is only directory and not mandatory. 5. In circumstances, no interference is warranted with well considered order passed by Tribunal. Accordingly, no substantial questions of law arises for our consideration and for forgoing reasons, we dismiss appeal filed by Revenue. Sd/- JUDGE Sd/- JUDGE TL Commissioner of Income-tax, Davanagere / Assistant Commissioner of Income-tax, Circle-1, Davanagere v. Sri Marikamba Transport Company