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2015 (8) TMI 1155 - ITAT KOLKATA

2015 (8) TMI 1155 - ITAT KOLKATA - TMI - Disallowance u/s 40(a)(ia) - applicability of provision of section 44AD - 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? - Held that:- CIT(A) had called for the copies of the bills and had given a categorical finding that the material portion cannot be bifurcated from the total bill so as to get out of the ambit of th .....

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our of the assessee.

Whether section 40(a)(ia) of the Act, in fact and circumstances of the instant case, are applicable in respect of amounts payable on the date of balance sheet and not on the amounts paid before the end of the previous year does not warrant any deliberation as held in the facts and circumstances of the case, the provisions of section 40(a)(ia) per se are not applicable as the income of the assessee is directed to be determined u/s 44AD on presumptive basis. Accordi .....

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r dated 30.09.2010. 2. The issue to be decided are as to whether (i)the ld. CIT(A) is right in rejecting the claim of the assessee that the income is to be determined in accordance with the provision of section 44AD of the Act; (ii)the ld.CIT(A) is right in invoking the provisions of section 40(a)(ia) of the Act when the taxable income is determined in accordance with the presumptive scheme tax contemplated u/s 44AD of the Act; (iii)the provision of section 40(a)(ia) is to be made applicable in .....

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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 ₹ 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 .....

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e bill was raised for the labour portion. The assessee filed additional evidences before the ld. CIT(A) to support his contention in this regard. Kind attention is invited to page 5 of relevant part of the ld. CIT(A) in this regard. This ground was not accepted by the ld. CIT(A) and according to ld. CIT(A), only composite bill was raised by the assessee and the value of the materials were not separately mentioned in the bill. Moreover, the assessee had claimed the entire amount of the bills as a .....

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e Act and accordingly, the provisions of section 40(a)(ia) of the Act are applicable to the assessee during the previous year 2007-08. (c) that the payment of ₹ 4,71,195/- towards labour charges was made before the end of previous year by the assessee and hence, the provision of section 40(a)(ia) of the Act cannot be invoked. This ground was not accepted by the ld. CIT(A) in view of the decision of the Jurisdictional High Court rendered in the case of CIT vs Crescent Export Syndicate where .....

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plicable to the assessee where the income is determined u/s 44AD of the Act, the provision of section 40(a)(ia) of the act cannot be made applicable. This ground was not accepted by the ld. CIT(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 .....

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R 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 submissions. Ground No.1 is general in nature and hence the same does not require any adjudication. 9. In r .....

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dentical in nature and taken up together herein. The ld. DR did not refute the claim of the assesee in respect of applicability of section 44AD for A.Y.2008-09. For the sake of convenience the provision of section 44AD is reproduced hereunder :- 44AD (1) Notwithstanding anything to the contrary contained in section 28 to 43C, in the case of an assessee engaged in the business of civil construction or supply of labour for civil construction, a sum equal to eight per cent of the gross receipts pai .....

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se of this section, the expression civil construction includes (a) Construction or repair of any building, bridge, dam or other structure or of any canal or road ; (b) The execution of any works contract. The provision of section 44AD of the Act contemplates that the income determined under the presumptive scheme is optional and provides system of rebuttal. A person can claim that his income of the above mentioned business is lower than the specified estimate of income. In such a case, he must p .....

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ision 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 .....

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isions of sections 28 to 43C (including section 40(a)(ia) of the Act) would get telescoped with the presumptive income determined. For this reason, the legislature had provided section 44AD of the Act with a non obstante clause having an over riding effect over other provisions of sections 28 to 43C of the Act. It is pertinent to dwell upon the impact of non obstante clause at this stage. It is well known that the non obstante clause is a legislative device which is usually employed to give over .....

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ante clause in which the legislature wants to give overriding effect to section. it must try to find out to the extent legislature had intended to give one provision over riding effect over another provision. Such intention of the legislature in this behalf is to be gathered from the enacting part of the section. Reliance is placed in this regard on the decision of the Hon ble Apex Court in the case of A.G.Varadarajulu vs State of Tamil Nadu (1998) 146 CPR (SC) 117 at page 123. A clause beginnin .....

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ause or any contract or documents mentioned, the enactment following it will have its operation or that the provision embraced in the non obstante clause would not be impediment for an operation of an enactment. Reliance is placed in this regard on the decision of the Hon ble Apex Court in the case of Chandavarkar Sita Ratna Rao vs Ashalata S.Guram reported in 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 s .....

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ssee. 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 CI .....

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under section 145 on the basis of the books regularly maintained by the assessee. If those books are not correct or complete, the Income-tax Officer may reject those books and estimate the income to the best of his judgment. When such an estimate is made, it is in substitution of the income that is to be computed under section 29. In other words all the deductions which are referred to under section 29 are deemed to have been taken into account while making such an estimate. This will also mean .....

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