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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 ..... h payments as per provisions of the Act. The plea of the assessee is that the exemption u/s 10(20) of the act is allowed on such disallowance, is also not sustainable. No benefits in the form of deduction or exemption could be allowed on violating the provisions of the Act. See Mahabir Cotton Traders [2013 (5) TMI 894 - ITAT AMRITSAR] - Decided against assessee. - IT Appeal No. 34/Asr./2014 - - - Dated:- 29-4-2014 - H.S. SIDHU, JUDICIAL MEMBER AND B.P. JAIN, ACCOUNTANT MEMBER For the Petitioner : Joginder Singh For the Respondent : Mahavir Singh ORDER 1. This appeal of the assessee arises from the order of learned CIT(A), Jammu, dated 20.12.2013 passed for the assessment year 2010-11. The assessee has raised the following grounds of appeal:- (i) On the facts and in circumstances of the case and in law, the learned CIT(A) erred in upholding the disallowance of ₹ 34,56,791/- u/s 40(a)(ia) disregarding the facts that the appellant's income is exempted under Section 10(20) of the Income Tax Act, to which provisions of Section 40(a)(ia) do not apply. (ii) On the facts and in circumstances of the case and in law, the learned CIT(A) erred in uph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r by issue of cheque or by any other mode. As per section 194C of the Income Tax Act, 1961 (hereinafter referred to as the Act ), work contract means provisions relating to tax deduction from payment to Contractor/subcontractors are applicable only where contract is either a work contract or a contract for supply of labour for work contract. The expression Work shall also include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer. In the instant case, the assessee had floated a tender supply, erection, testing commissioning of 11 Mtrs 13 Mtrs each High Mast Lights containing 4 No. 6 No. 400 Watt metal Halide Luminaries other allied material alongwith other gadgets the contract was approved in favour of M/s Mahaluxmi Enterprises, Jammu accordingly, as per the specification mentioned in the tender notice, goods were supplied, erected, tested commissioned thereon. But at the time of payment, totaling ₹ 34,56,791/-during the financial year 2009-10 relevant to the assessment year 2010-11 to M/s Mahaluxmi Enterprises, Shop No. 1, Gowshalla Complex, Amphalla, Jammu, no tax w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no expenditure is deductible if the tax has not been deducted on such payments as per provisions of the Act. The plea of the assessee is that the exemption u/s 10(20) of the act is allowed on such disallowance, is also not sustainable. No benefits in the form of deduction or exemption could be allowed on violating the provisions of the Act. Learned counsel for the assessee further argued that since the payments in respect of these expenses have been made during the year under consideration and nothing was payable as on the date of balance sheet, accordingly no disallowance should be made under Section 40(a)(ia) of the Act. He placed reliance on the decision of Special Bench of Visakhapatnam in the case of Merilyn Shipping Transport v. Addl. CIT [2012] 136 ITD 23/20 taxmann.com 244. In this regard, the issues has already been covered against the assessee by the decisions of Mahabir Cotton Traders [IT Appeal No. 326(Asr) of 2010 with C.O. No. 19(Asr) of 2010, dated 30.5.2013. The said decision in the case of Mahabir Cotton Traders (supra) decided by this Bench on 30.05.2013, for the sake of convenience, is reproduced as under: 'This appeal of the Revenue arises from the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artnership firm and doing the business of cotton seed ginning and having taken on rent the factory of M/s. Shri Balaji Oil Mills, Bhucho in accordance with the composite agreement dated 01.09.2004 containing therein fixed rent @ ₹ 45/- per qtl. of the cotton seed to be crushed whereby M/s. Shri Balaji Oil Mills cannot work for any other firm except that of the assessee. Thus, complete possession and enjoyment of the factory was at the disposal of the assessee. 5. The return of income was filed on 26.09.2005 at an income of ₹ 47,770/- wherein the claim of expenses of ₹ 14,61,285/- was made having been paid to M/s. Shri Balaji Oil Mills, Bhucho towards crushing of Binola after having charged the same against the income whereupon tax was not deducted on the said payments. 6. The returned income was processed under section 143(1) of the Act on 22.05.2006 which was subsequently taken up for scrutiny through issuance and service of notice u/s 143(2) of the Act, dated 25.07.2006 and consequently scrutiny assessment was completed on the addition of ₹ 50,200/-, thus determining the total income of the assessee at ₹ 97,980/- through order of the A.O. dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above ₹ 14,61,285/- Total income assessed ₹ 15,59,265/- Or say ₹ 15,59,270/- 8. However, the grievance of the assessee continued, hence order dated 02.10.2009 passed by the A.O. was challenged in appeal before the ld. CIT(A) through various grounds of appeal dated 09.11.2009 reproduced herein below primarily confining to the arguments to the extent allowance is correctly claimed according to the provisions of section 28 of the Act and which provisions only are applicable to the facts and circumstances and nature of the case. 3. That the learned A.O. erred in making an addition of ₹ 1461285/- keeping in view the facts and circumstances of the case. 4. That ₹ 1461285/- was paid for out sourcing job work of crushing of Binola so it is an item falling under manufacturing/trading account. According, the same can not fall under any sections in 30 to 38. Accordingly, the addition of ₹ 1461285/- is liable to be deleted. 5. That items of expenditure which do not fall under sections 30 to 38, cannot fall with the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed were credited or paid in clause 11 of Finance Bill, 2004 at the time of its introducing in the Lok Sabha, but were substituted by the word payable while passing the Finance Bill in to Act. He relied upon the meaning of word 'payable' from the Black's Law Dictionary (5th Edition) as well as the opinion of the learned authors given at page 386/87 of Taxman's Direct Tax Law and Practice (Aug, 2009 edition). He also relied upon the para 9.12 of the case decided by Jaipur Bench of I.T.A.T. in the case of Jaipur Vidyut Vitran Nigam Limited Vs. DCIT (2009) 26 DTR Tribunal Orders and filed its photocopy as well as upon my decision in the case of M/s Kishan Mal Oil Cotton Ginning Factory, Rampuraphul (Appeal No. 187-IT-CIT(A)/BTI/09-10 dated 15.04.2010) decided on the basis of Teja Constructions Vs. ACIT, Hyderabadn 'A' Bench (I.T.A. No. 308/Hyd/2009 dated 23.10.2009 for the Asstt. Year 2005-06) reported at 36 DTR(Hyd) (Tribunal) 220 and relied upon the following finding given by me in that case which are being reproduced below:- I have given due consideration to the facts of the case and the provisions of law in this respect. It is important to note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and report of the A.O on this issue as well as the aforesaid judgment of the Jaipur Bench of I.T.A.T. in the case of M/s Jaipur Vidyut Vitran Nigam Limited Vs. DICT and my own decision in the case of M/s Kishan Mal Oil Cotton Ginning Factory, Rampuraphul (Appeal No. 187-IT-CIT(A)/BTI/09-10 dated 15.04.2010). I agree with the appellant that therefore, hold that provisions are applicable only in respect of the expenditure i.e. crushing charges which remained payable at the end of the year. After perusing records, I find that as per the balance-sheet of the appellant at the end of the year, only a some of ₹ 26245/- remained payable out of ₹ 1461285/-. Therefore, the maximum disallowance which could be made u/s 40(a)(ia) should be ₹ 16245/-. On these facts and legal position I sustain the disallowance of ₹ 26245/- as an expenditure disallowable u/s 40(a)(ia) of the I.T. Act, 1961. The appellant gets a relief of ₹ 1435040/-.' 10. The Revenue being aggrieved with the findings of the ld. CIT(A), challenged the same through the statement of facts and grounds of appeal dated 14.07.2010 which is reproduced for the sake of clarity as under: The wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying for allowing the cross objection and dismissing the appeal of the revenue. 13. In contradiction to the submissions raised by the ld. counsel for the assessee (supra), the Ld. DR Mr. Tarsem Lal raised point-wise rebuttal on various facts of the controversy which chronologically run as namely the constitutional validity of section 40(a)(ia) upheld while payments made without deducting tax at source in the decision in W.T. 186 of 2008 in Dey's Medical (U.P.) Pvt. Ltd. vs. Union of India and others (2009) 316 ITR 445 (All) dated 15.02.2008, Tube Investments of India Ltd. and another vs. ACIT in CWP No.33766 of 2007 and others reported in (2010) 325 ITR 610 (Madras) dated 29,09,2009, CIT-IV vs. Sikandar khan N. Tunvar dated 02.05.2013 in Tax Appeal No.905 of 2012, CIT vs. (Guj), CIT vs. Merilyn Shipping Transports (ITA No.477/Viz/2008 dated 29th March, 2012 (SB) and against the Special Bench decision of the Tribunal finally the decision of Hon'ble Calcutta High Court in the case of CIT vs. Crescent Export Syndicate in ITA No. 20 of 2013 GA 190 of 2013 which notices the decision of Deys' Medical (U.P.) Pvt. Ltd. (supra). 14. We have heard the rival contentions an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alidity of the provisions of section 40(a)(ia) and made various observations:- (i) Hon'ble Madras High Court, inter alia, noted the observations of Hon'ble Supreme Court in the case of A.S. Krishna v. State of Madras AIR 1957 SC 297 which are as under:- 'It would be quite an erroneous approach to the question to view such a statute not as an organic whole, but as a mere collection of sections then disintegrate it into parts, examine under what heads of legislation those parts would severally fall, and by that process determine what portions thereof are inter vires and what are not. Thus, section 40(a)(ia) could not be viewed independently and had to be considered along with other provisions. (ii) The provisions of section 40(a)(ia) were compared with the provisions of section 201 of the Income Tax Act and, it was, inter alia, observed that as far as section 201 is concerned that would relate to the amount of tax that could be deducted by way of TDS. However, as far as section 40(a)(ia) is concerned, which would result in the disallowance of whole of the expenditure and thereby the entire sum expended would attract the levy of tax at a prescribed rate with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the substantive provision, the expenditure which is otherwise allowable as a deduction is denied on the ground that the obligation of TDS provisions is violated. The law makes while imposing such a stringent restriction wanted to simultaneously provide scope for the defaulter to gain the deduction by complying with the TDS provision at a later pint of time . Thus, impliedly Hon'ble Madras High Court, has, inter alia, held that the provisions of section 40(a)(ia) will be applicable with respect to entire expenditure. It is true that specific issue regarding 'paid', 'credited' and 'payable' has not been considered but from the judgment it is evident that if assessee's contention is accepted then the very object of incorporation of section 40(a)(ia) would be frustrated. 21. In view of above discussion, we answer the question as under:- The provisions of section 40(a)(ia) of the Income Tax Act, 1961, are applicable not only to the amount which is shown as payable on the date of balance-sheet, but it is applicable to such expenditure, which become payable at any time during the relevant previous year and was actually paid within the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the meaning and purport of Section 40(a)(ia) correctly when it held that in case of omission to deduct tax even the genuine and admissible expenses are to be disallowed. But they sought to remove the rigour of the law by holding that the disallowance shall be restricted to the money which is yet to be paid. What the Tribunal by majority did was to supply the casus omissus which was not permissible and could only have been done by the Supreme Court in an appropriate case. Reference in this regard may be made to the judgment in the case of Bhuwalka Steel Industries vs. Bombay Iron Steel Labour Board reported in 2010 (2) SCC 273. 'Unprotected worker' was finally defined in Section 2 (II) of the Mathadi Act as follows:- 'unprotected worker' means a manual worker who is engaged or to be engaged in any scheduled employment. The contention raised with reference to what was there in the bill was rejected by the Supreme Court by holding as follows:- It must, at this juncture, be noted that in spite of Section 2(11), which included the words but for the provisions of this Act is not adequately protected by legislation for welfare and benefits of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r paid were used only in relation to a contractor or sub-contractor. This differential treatment was not intended. Therefore, the legislature provided that the amounts, on which tax is deductible at source under Chapter XVII-B payable on account of interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services or to a contractor or sub contractor shall not be deducted in computing the income of an assessee in case he has not deduced, or after deduction has not paid within the specified time. The language used by the legislature in the finally enacted law is clear and unambiguous whereas the language used in the bill was ambiguous. A few words are now necessary to deal with the submission of Mr. Bagchi and Ms. Roychowdhuri. There can be no denial that the provision in question is harsh. But that is no ground to read the same in a manner which was not intended by the legislature. This is our answer to the submission of Mr. Bagchi. The submission of Ms. Roychowdhuri that the second proviso sought to become effective from 1st April, 2013 should be held to have already become operative prior to the appointed date cannot also be acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y clause, phrase by phrase and word by word. If a statute is looked at, in the context of its enactment, with the glasses of the statute maker, provided by such context, its scheme, the sections, clauses, phrases and words may take colour and appear different than when the statute is looked at without the glasses provided by the context. With these glasses, we must look at the Act as a whole and discover what each section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation. 18. Further, we shall add that provisions of section 28 are confined to charging of incomes under the head 'Profits and Gains of Business or Profession' and it is most pertinent to refer that the provisions of section 29 refers to the methodology of computing the said charge for covering the provision contained in section 30 to 43D, wherein the said provision u/s 40(a)(ia) is inclusive therein. And it is even otherwise relevant to mention that the provisions of section 40 open with word Notwithstanding anything to the contrary in section 30 to 38 wherein the am ..... X X X X Extracts X X X X X X X X Extracts X X X X
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