Malineni Babulu (HUF) vs. ITO (ITAT Hyderabad)

DATE: August 7, 2015 (Date of pronouncement)
DATE: August 10, 2015 (Date of publication)
AY: 2009-10
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S. 40(a)(ia)/ 194A/ 197A(1A): If payer obtains declarations in Form 15G/ 15H, tax is not deductible at source. Failure to furnish such declarations to CIT may attract penalty u/s 272A(2)(f). However, disallowance u/s 40(a)(ia) cannot be made

The amount cannot be allowed as deduction only in the event when tax is deductible at source under Chapter-XVIIB and such tax has not been deducted or, after deduction has not been paid. In this case, the assessee was to deduct tax under provisions of section 194A. Section 194A is further qualified by the provisions of section 197A(1A) wherein if a person furnishes a declaration in writing in prescribed Form and verified in the prescribed manner to the effect that tax on his estimated total income is to be included in computing his total income will be nil, there is no need to deduct tax. The assessee has received such Forms as prescribed from those persons to whom interest was paid/being paid and accordingly no deduction of tax was to be made in such cases. The default for non-furnishing of the declarations to the Commissioner of Income-tax as prescribed may result in invoking penalty provisions under section 272A(2)(f), for which separate provision/procedure was prescribed under the Act. However, once Form 15G/ Form 15H was received by the person responsible for deducting tax, there is no liability to deduct tax. Once there is no liability to deduct tax, it cannot be considered that tax is deductible at source under Chapter XVII-B as prescribed under section 40(a)(ia). The provisions of section 40(a)(ia) can only be invoked in a case where tax is deductible at source and such tax has not been deducted or after deduction has not been paid. No such default occurred in this case.

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