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COURT:
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COUNSEL:
DATE: August 7, 2015 (Date of pronouncement)
DATE: August 10, 2015 (Date of publication)
AY: 2009-10
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CITATION:
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 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)

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Posted on by editor
COURT:
CORAM: ,
SECTION(S): ,
GENRE:
CATCH WORDS: ,
COUNSEL:
DATE: May 22, 2015 (Date of pronouncement)
DATE: May 27, 2015 (Date of publication)
AY: 2008-09
FILE: Click here to view full post with file download link
CITATION:
S. 40(a)(ia) second proviso was inserted by FA 2012 to rectify the unintended consequence of disallowance in the hands of the payer even if the payee has paid tax. It is curative and retrospective in operation. Assessee's claim of having obtained declarations u/s 197A from the payees should not be disbelieved without evidence. Assessee is not expected to go into the correctness of the declarations filed by the payees

The second proviso to section 40(a)(ia) of the Act inserted by the Finance Act, 2012 is curative in nature and intended to supply an obvious omission, take care of an unintended consequence and make the section workable. Section 40(a)(ia) without the second proviso resulted in the unintended consequence of disallowance of legitimate business expenditure even in a case where the payee in receipt of the income had paid tax. It has for long been the legal position that if the payee has paid tax on his income, no recovery of any tax can be made from the person who had failed to deduct the income tax at source from such amount

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