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TMI Blog2014 (4) TMI 1137X X X X Extracts X X X X X X X X Extracts X X X X ..... and profession. (iii) On the facts and in circumstances of the case and in law, the learned CIT(A) erred in confirming the disallowance u/s 40(a)(ia) of the Act, by ignoring the facts that the expenditure added to the income of the appellant have not been debited to Income & Expenditure account of the appellant. (iv) On the facts and in circumstances of the case and in law, the learned CIT(A) erred in confirming the disallowance u/s 40(a)(ia) of the Act, by ignoring the facts that the provisions of Sec. 40(a)(ia) of the Act are applicable in the case of amounts payable & not amounts paid. (v) On the facts and in circumstances of the case and in law, the learned CIT(A) fails to appreciate that the appellant was not required to file return as per the provisions of S. 139(1)(4C) of the Act, the appellant could not be penalized for voluntary act of filing return. (vi) That the appellant craves to leave to add, amend, modify, delete any of the ground of appeal before or at the time of hearing and all the above grounds are without prejudice to each other." 2. The brief facts of the case are that the assessee is a Municipal Committee and during the course of assessment proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said amount may not be added back to the income in contravention to the provision of Section 40(a)(ia) of the Act. 3. After considering the reply of the assessee, the Assessing Officer observed that since there was a contract for supply, erection, testing & commissioning of 13 Mtrs. each Medium High Mast Lighting System containing 4 No. & 6 No. 400 Watt Halide Luminaries alongwith other gadgets according to the specification of the Committee (By using material purchased from such customer). TDS was required to be deducted on the whole of the invoice value and the assessee was failed to do so & thus contravened the provisions of section 40(a)(ia) of Act and accordingly, an amount of Rs. 34,56,791/- was added back to the income of the assessee. 4. Learned DR relied upon the order of the Assessing Officer. 5. We have heard the rival contentions and perused the facts of the case. We concur with the views of learned CIT(A) that the expenditure under consideration was incurred on account of supply, erection, testing & commissioning of lights. M/s Mahaluxmi Enterprises has raised a consolidated bill on account of commissioning, erection of supply of material. The TDS was required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition of Rs. 14,35,040/-made by the A.O. on account of violation of provisions of section 40(a)(ia) of the I.T. Act, 1961. 2. It is prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored. 3. The appellant craves leave to add or amend any grounds of appeal before the appeal is heard and disposed off. 3. The assessee has raised following grounds in its Cross Objection: "1. That on the facts and in the circumstances of the case and in law, the ld. CIT Bathinda erred in giving sanction for filing second appeal as he himself has decided the appeal in favour of the respondent assessee as CIT(A) Bathinda. 2. That on the facts and in the circumstances of the case and in law, the appeal of the revenue is not maintainable as the same was decided by the Ld. CIT(A) on the admission of the AO in his remand report that crushing charges of Binola are the part of the trading/manufacturing account and the CIT(A) has given a clear finding that it would fall u/s 28 which section is not there in section 40(a)(ia) of the Income Tax Act, 1961. This finding of the CIT(A) has not been challenged/disputed by the Revenue. 3. That the payment made by the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t order was held to be erroneous and prejudicial to the interest of the revenue for which the findings are extracted below: "In view of the above mentioned and legal position, it is held that it is a fit case for invoking the provisions of Section 263 of the I.T. Act, 1961, as the assessment framed by the A.O. on 28.02.2007 u/s 143(3) is erroneous in so far as it is prejudicial to the interest of the revenue. Accordingly, the assessment framed by the I.T.O., Ward-II(1), Bathinda on 28.02.2007 u/s 143(3) of the I.T. Act, 1961 is cancelled u/s 263 of the Act and the A.O. is directed to frame fresh assessment, in the light of the observations made by the undersigned in the foregoing paragraph." 7. The revision order dated 31.03.2009 has attained finality undisputedly on legality whereas consequential the fresh notice under section 143(2) dated 22.05.2009 was issued and served whereby the proceedings were continued and concluded under section 143(3) of the Act vide order dated 02.10.2009 at an assessed income of Rs. 15,59,270/- with the under-stated findings: "As stated earlier in the foregoing paragraphs, the assessee failed to deduct TDS out of the crushing charges paid to M/s S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aning to the word "contractor', the decision of Jaipur Vidyut Vitran Nigam vs. DCIT, J.C. Bansal, Chief Engineers vs. TRO-2 Ujjain. Section 194C, section 40a(ia) and the words utilized in the Finance Bill 2004 certain opinion of the authors and in consequence thereto the remand report of the A.O. vide letter No.2677 dated 31.03.2010 was called for, for which was prayed for upholding AO's order dated 02.10.2009. Having noticed the aforesaid points raised by the assessee and in the remand report, the ld. CIT(A) allowed the grounds treating the appeal partly allowed through order dated 06.05.2010 at pages 10 & 11 of his order by giving the following findings: 'I have considered the arguments of learned counsel for the appellant and the remand report of the A.O. on this issue as well as the aforesaid judgment of the Hon'ble Supreme Court and hold that the A.O. should have seen the true nature and quality of the receipt and not the head under which it is entered in the accounts books of the appellant during the course of assessment proceedings and should have recasted the Profit and Loss Account and Trading Account, in view of his own admission that the crushing charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly be made in respect of expenditure which is payable and if the expenditure has already been paid, no such disallowance can be made. Thus, section 40(a)(ia) is not applicable where the expenditure is paid. It is applicable only in a cases where the payments are due and outstanding. Therefore, after going through the facts and provisions of Law and respectfully following the judgment of the Hon'ble Bench (discussed (supra)), I agree with the appellant and therefore, hold that provisions are applicable only in respect of the expenditure which remained payable at the end of the year. After perusing the records, I find that as per the Balance sheet at the end of the year, only a sum of Rs. 1649262/- remained payable out of Rs. 86238103/-. Therefore, the maximum disallowance which could be made u/s 40(a)(ia) should be Rs. 1649262/-. The appellant has claimed that out of this most of the amounts payables are on account of goods supplied by the payee, amounting to Rs. 1631597/-, but the appellant has failed to establish that this payable amount is against the purchase of goods. Hence, this plea of the appellant is not accepted. On these facts and in view of the legal position, I su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d sense, as the intention of legislature in enacting these provisions was to levy tax on the amounts coming due from any service rendered on which TDS was not deducted. Keeping in view above facts learned CIT(A) has erred in deleting the addition of Rs. 14,35,040/- made by the A.O. without considering the facts discussed in the assessment order as well as remand report dated 26.04.2010 submitted before him. 11. The Ld. counsel for the assessee has placed on record paper book containing 20 pages dated 23.05.2013 for substantiating the contentions primarily devoted to the grounds of cross objections dated 01.08.2010 addressing to the granting of allowance and upholding the findings of the ld. CIT(A) and additionally a valiant attempt made to buttress the arguments by relying upon the decision of Coordinate Bench in the case of Teja Constructions vs. ACIT (2010) 36 DTR 220 (Hyd. Trib) and N. Ramachandra Reddy, ITA No.1372 of 2007 Coordinate Bench order dated 6th March, 2009 noticed in paragraph 13 of Teja Constructions case whereby no facet of controversy of the assessee has been raised taking through various documents and material facts shifting the burden of proof is on the revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is regard but has not rebutted the said decisions of the hon'ble High Courts mentioned hereinabove. 15. Secondly, regarding reliance placed on the decision of Coordinate Bench of Hyderabad in the case of Teja Constructions vs. ACIT (supra), we are of the view that the arguments have not been concluded to the logical end while the said order with greatest respect of the ITAT is dated 23.10.2009 before the constitutional virus were under challenge as revealed through the judgments being by the Hon'ble High Court of Allahabad in the case of Dey's Medical (U.P.) P Ltd. (supra) which is dated 15.02.2008 and judgment of Hon'ble Madras High Court in the case of Tube Investments of India Vs. ACIT (supra) which is dated 29.09.2009 and decision of ITAT, Special Bench in the case of Merilyn Shipping & Transports dated 29.03.2012 whereby at the time of case disposal before us, we have the benefit of additional judgment of Hon'ble Gujarat high Court in the case of CIT-IV vs. Sikandarkhan N Tunvar and Hon'ble Calcutta High Court in the case of CIT vs. Crescent Export Syndicate (supra). Thus, we are bound to follow the law prevalent at the relevant date and time. Even oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bring within its fold all such persons who are liable to come within the network of taxpayers. Thus, if it is held that the provisions of section 40(a)(ia) are not applicable in respect of those payments which have been paid without making TDS and at the end of the year no amount is outstanding then the very object of identification of payees will get frustrated. (v) The legislative intent of the introduction of section 40(a)(ia) is in the larger perspective of augmenting the very TDS provisions themselves. It is not merely related to the collection of TDS only. (vi) The intention of the legislature is not to tax the payer for its failure to deduct the tax at source. The object of introduction of section 40(a)(i) as well as section 40(a)(ia) is to ensure that one of the modes of recovery as provided in Chapter XVII-B is scrupulously implemented without any default, in order to augment the said mode of recovery. Hon'ble Madras High Court, inter alia, observed at para 69 of its judgment as under:- "With the proviso to section 40(a)(ia) the deduction in the subsequent year by rectifying the default committed in the matter of TDS in the previous year, a defaulting assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chieved by an amendment. This is precisely what was done by the Apex Court in the case of CIT Vs. Kelvinator reported in 2010(2) SCC 723. But the same comparison between the draft and the enacted law is not permissible. Nor can the draft or the bill be used for the purpose of regulating the meaning and purport of the enacted law. It is the finally enacted law which is the will of the legislature. The Learned Tribunal fell into an error in not realizing this aspect of the matter. The Learned Tribunal held "that where language is clear the intention of the legislature is to be gathered from the language used". Having held so, it was not open to seek to interpret the section on the basis of any comparison between the draft and the section actually enacted nor was it open to speculate as to the effect of the so-called representations made by the professional bodies. The Learned Tribunal held that "Section 40(a)(ia) of the Act creates a legal fiction by virtue of which even the genuine and admissible expenses claimed by an assessee under the head "income from business and profession" if the assessee does not deduct TDS on such expenses are disallowed". Having held so was it open ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld amount to supplying the casus omissus and we do not think that it is possible, particularly, in this case. The law of supplying the casus omissus by the courts is extremely clear and settled that though this Court may supply the casus omissus, it would be in the rarest of the rare case and thus supplying of this casus omissus would be extremely necessary due to the inadvertent omission on the part of the legislature. But, that is certainly not the case here". We shall now endeavour to show that no other interpretation is possible. The key words used in Section 40(a)(ia), according to us, are "on which tax is deductible at source under Chapter XVII -B". If the question is "which expenses are sought to be disallowed?" The answer is bound to be "those expenses on which tax is deductible at source under Chapter XVII -B. Once this is realized nothing turns on the basis of the fact that the legislature used the word 'payable' and not 'paid or credited'. Unless any amount is payable, it can neither be paid nor credited. If an amount has neither been paid nor credited, there can be no occasion for claiming any deduction. The language used in the draft was unclear a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his context, we refer that the said arguments by Ld. AR are berefet of merits and substance since the act has to be read as an "integrated code" and not to the choice of the assessee being pick and choose to the provisions of law suiting the requirements of a litigant ands the similar argument has been dealt in the aforesaid judgment of Hon'ble Calcutta high Court in the case of CIT vs. Crescent Export Syndicate (supra) and which findings are while noticing the judgment of Hon'ble Supreme Court in A.S. Krishna vs. State of Madras reported in AIR 1957 SCC 297 (supra). 17. That the said argument is hereby rejected and even the Hon'ble Supreme Court in the case of V.N. Shrikhande (Dr.) vs. Anita Sena Fernandes (2011) 1 SCC 53 at para 22 while noticing the judgment in the case of RBI v. Peerless General Finance & Investment Co. Ltd; (1987) 1SCC 450 at para 33 where it has been held as under: "In RBI vs. Peerless General Finance & Investment Co. Ltd. Chennapa Redyy, J. referred to the rule of contextual interpretation and observed : (SCC p.450 para 33): "33. Interpretation must depend on the text and the context. They are the bases of interpretation. One may well say i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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