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TMI Blog2015 (8) TMI 1155X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of the amounts payable at the end of the previous year. 3. The brief facts of the case are that the assessee is a proprietor of M/s. Holland & Company engaged in the business of job contract and manufacturer of spare parts of electrical goods. The assessee had made a claim before the ld. CIT(A) that he had declared the net profit of Rs. 3,91,293.46 which is more than 10% of the turnover and hence the provision of section 44AD of the Act are applicable to him. The ld. AO found that the assessee had payments/credits to parties for execution of works contract without deduction tax at source to the tune of Rs. 9,74,703/- and accordingly disallowed the said expenditure u/s 40(a)(ia) of the Act. Aggrieved by this, the assessee challenged this issue, among others, before the ld. CIT(A). 4. Before the ld. CIT(A) the assessee sought to assail this disallowance on various grounds :- (a)that certain parties to whom payments were made includes payments made for materials and labour charges. Hence TDS provision, if applicable, can be applicable only on the component of labour charges. The assessee claimed that a sum of Rs. 4,92,000/- represented value of materials purchased by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) because the assessee had not filed its return of income u/s 44AD of the Act and moreover the assessee had duly maintained books of accounts. 5. Shri Anikesh Banerjee, Advocate, the ld. AR appeared on behalf of the assessee and Shri Snehotpal Dutta, JCIT appeared on behalf of the revenue. 6. The ld. AR argued that the case of the assessee squarely falls under the ambit of section 44AD of the Act under sub-section (1) as the turnover of the assessee in A.Y.2008-09 is only Rs. 37,06,013/- and the net profit declared by the assessee is Rs. 3,91,293/- which works out to 10.56% of the turnover. Accordingly, he pleaded that the provisions of section 40(a)(ia) of the Act cannot be invoked when the income is determined u/s 44AD of the Act on presumptive basis. 7. In response to this, the ld. DR argued that the provisions of section 40(a)(ia) of the act operate on total different footing in order to make the assessee's comply with TDS provision and to inculcate timely deduction and remittance of tax at source to the account of the Central Government. Hence, disallowance made by the ld. AO is in order even if the income is determined u/s 44AD of the Act. 8. I have heard the rival submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. In the instant case, the assessee had reported the net profit at 10.56% of its turnover during A.Y.2008-09. Hence, I hold that the claim made by the assessee in his income be determined in accordance with the provision of section 44AD of the Act is in order. Accordingly the ld. AO is directed to accept the taxable income reported by the assessee as income reported u/s 44AD of the Act on presumptive basis. 11. The next issue is to be decided in this appeal is as to whether the provision of section 40(a)(ia) of the Act can be made applicable for the assessee when his income is determined in accordance with the presumptive scheme u/s 44AD of the Act. From the bare reading of section 44AD of the Act, it can be seen that it starts with an "non obstante clause". "Notwithstanding anything to the contrary contained in section 28 to 43C ". This goes to prove that the provisions of section 44AD of the Act overrides all other provisions contained in section 28 to 43C. Admittedly, the provisions of section 40(a)(ia)of the Act falls within this range of sections 28 to 43C of Chapter-XVII B of the I.T.Act. When an income is presumptively taxed u/s 44AD of the Act any further business incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n AIR (1987) (SC) 117 at page 134. The words "shall deemed" or the key words and they are indicative of the legislative intent that the tax shall be chargeable on presumptive income, computed as per subsection (1) of section 44AD of the Act. The very purpose of the very enactment of section 44AD of the Act is to provide hassle free proceedings. Such proceedings are made to complete the assessment provided the conditions laid down in such enactment are fulfilled. The assessment of income under presumptive basis u/s 44AD is similar to the income determined on an estimated basis by the AO after rejecting the books of account of the assessee. Once the books are rejected the doors of the AO are closed for looking after other provisions of the Act which are relevant for determining the business income of the assessee, unless or otherwise specifically provided in the provisions of section 44AD of the Act itself such as allowance of interest and remuneration to partners in the case of a partnership firm. Reliance is placed in this regard on the decision of Hon'ble Andhra Pradesh High Court in the case of Indwell Constructions vs CIT reported in 232 ITR 776 (AP), wherein Lordships had hel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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