9911796707
TMI Blog2021 (4) TMI 1049X X X X Extracts X X X X X X X X Extracts X X X X ..... This aspect was not challenged by the Revenue, although the Revenue had filed an appeal against the order of the CIT(A). Having accepted the said finding of the CIT(A) and not having filed any appeal, the Revenue cannot now seek to challenge the said finding in the present appeal. In terms of section 2(s) of the ID Act, the definition of a workman is very wide inasmuch as the said definition would cover any person who has the technical knowledge, self skilled in an industry. It cannot be disputed that the Assessee's business is an industry. It also cannot be disputed that the employees of the Assessee are technical persons skilled in software development and, as such, engaged by the Assessee to render services in the industry being run by the Assessee. Thus the software engineer would also come within the purview and ambit of workman under Section 2(s) of the ID Act so long as such a person does not take a supervisory role. The software engineer per se would be a workman; a software engineer rendering supervisory work would not be a workman. In the present case, it is not the case of the Revenue that the persons employed by the Assessee are rendering any supervisory work or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E COURT] has also held similarly, in that if there is a benefit conferred by legislation, the said benefit being legislative's object, there would be a presumption that such a legislation would operate with retrospective effect by giving a purposive construction. Thus the clarificatory amendment of the year 2018 can also be said to apply retrospectively for the benefit of the Assessee even though the Revenue contends that there was no provision in the year 2007 permitting the Assessee to avail the benefit of deduction when the employee works for a period of 300 days in consecutive years. The substantial question No.1 is answered by holding that the software professional/engineer is a workman within the meaning of Section 2(s) of ID Act, so long as such a software professional does not discharge supervisory functions, the benefit of Section 80JJ-AA can be claimed by an employer/assessee even if the employee were not to complete 300 days in a particular assessment year but in the subsequent year so long as there is continuity of employment, the Assessee could continue to claim further benefit in the next two years as provided in under Section 80JJ-AA Accordingly, we answer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SURYANARAYANA, MS. TANMAYEE RAJKUMAR AND MS. MAHIMA GOUD, ADVOCATE OF M/S KING PATRIDGE-PH) JUDGMENT 1. The respondent is in the business of manufacture and export of computer software. It filed returns of income for the Assessment Year 2008-09 on 30.09.2008, declaring an income of ₹ 98,03,41,570/- which was processed on 8.06.2011, determining the total income of the same amount. Returns were taken up for scrutiny after issuance of statutory notice under Section 143(2) on 14.09.2009. 2. The Assessee had claimed deduction of ₹ 7,57,22,069/- under Section 80JJ(AA) of Income Tax Act for the Assessment Year 2008-2009 in respect of employment of new workmen for the said year. In terms thereof, the Assessee could claim a deduction of additional amounts paid to new regular workmen employed in the previous year on the workmen satisfying the definition under Section 2(s) of the Industrial Disputes Act, 1947. 3. The Assessee had also sought for deduction in computing the income chargeable under the head profits and gains of business or profession , as regards the amounts paid towards lease rental on lease finance of cars obtained by the Assessee and had contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal [ITAT] on 27.12.2012, Bengaluru Bench, Bengaluru in IT (TP)A No.169/Bang/2014, so did the Revenue in IT(TP)A No.149/Bang/2014. 8. The Assessee has filed an appeal as regards disallowance in respect of Section 80JJ(AA); the Revenue filed an appeal insofar as finding relating to the aspect of tax deducted at source referred to above. The Tribunal taking into account the decision rendered by it in another matter where it had held that the employees/workmen in the software industry are workmen since they render technical services and not services in the nature of supervisor or managerial character, taking into account the number of workmen added in the previous year, as also the Financial Year [FY] and coming to a conclusion that for the previous FY 2006-07 and new employees who joined FY 2006-07 and continued in employment FY 2007-08 and completed 300 days of work in the said year, the Appellate Tribunal considering that Section 80JJ(AA) was amended by the Finance Act 2018 w.e.f. 1.4.2019 came to a conclusion that the said amendment was a curative and clarificatory amendment, and as such, the continuance of employment in the two financial years for over 300 days was suffi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax? 3. Whether on the facts of the case, the Tribunal's order can be said as perverse in nature as Tribunal failed to appreciate that mentioning of wrong provision of law does not invalidate disallowance if the order passed in sum and substance meets the legal requirements then it is said to be a valid order and appellate authorities has power to either enhance or reduce tax liability? . 11. Sri.K.V.Aravind, learned Senior Standing Counsel for the Revenue, submits that: 11.1. The deduction under Section 80JJ(AA) would not be available if the workman was employed for a period of less than 300 days during the previous year in terms of Explanation (ii) to Section 80JJ(AA)(2). He, therefore, contends that exemption provisions under the Income Tax Act have to be strictly construed and have to be strictly complied with by the Assessee to claim any benefit. 11.2. Workmen as regards whom the deduction is sought for not having worked for 300 days during the previous year, the Assessee was not eligible to claim for any exemption and/or deduction; 11.3. The Tribunal has grossly erred in relying on the amendment of the year 2019 and has claimed said amendment is appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax, Bangalore, (2010) 194 Taxman 37 (Karnataka) 8. In order to appreciate the rival contentions, it is necessary to bear in mind the admitted facts: The Assessee in an individual deriving income from hiring of vehicles. Under a written agreement the Assessee is providing vehicles to one of its customers, M/s Mahindra Transport Solutions Group. Clause 5 of the written agreement entered into between them stipulates that the provision of services would involve providing vehicles owned by the Assessee or associates of Assessee or agents, for transportation of the Employees of Thomson Corporation (International) Private Limited. The material on record discloses that the Assessee is owning a fleet of vehicles. That is not sufficient to meet their obligations. Therefore, the Assessee hired vehicles from the owners of the vehicles. There is no written agreement entered into between the assessee and such individual owners. It is those vehicles hired in the aforesaid manner which are utilized for performing the contract entered into between the Assessee and its customers. In the absence of any material placed by the Assessee, the only inference that can be drawn from the facts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of law is concerned, the facts are not in dispute. The TDS certificates enclosed with the return amounted to ₹ 1,70,89,004 whereas the receipt disclosed in the income and expenditure account, was ₹ 1,64,06,036. This discrepancy is admitted. The explanation offered is that a portion of the said TDS deductions are claimed in the subsequent year. The amount of ₹ 6,82,968 was received by the asessee in the following year. As rightly pointed out by the authorities, when the Assessee is following the maintenance of books of account on mercantile basis, accounting and reflecting on receipt basis is not proper and therefore, rightly they have upheld the deductions made . 11.8.2. Shree Choudhary Transport Company vs. Income Tax Officer, (2020) 118 taxmann.com 47 (SC) 15.1. The nature of contract entered into by the appellant with the consignor company makes it clear that the appellant was to transport the goods (cement) of the consignor company; and in order to execute this contract, the appellant hired the transport vehicles, namely, the trucks from different operators/owners. The appellant received freight charges from the consignor company, who indeed deducted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the start of the previous year then no deduction will be available under this section in respect of such workers appointed or employed after that date and therefore, this approach of the AO is not correct. 23. In our considered opinion, as per provisions of section 80JJAA as reproduced above, the deduction is allowable for three years including the year in which the employment is provided. Hence, in each of such three years it has to be seen that the workmen was employed for at least 300 days during that previous year and that such work men was not a casual workmen or workmen employed through contract labour. Therefore, if some work men were employed for a period less than 300 days in the previous year then no deduction is allowable in respect of payment of wage to such work men in the present year even if such work men was employed in the preceding year for more than 300 days but in the present year, such work men was not employed for 300 days or more. In this view of the matter, we find no infirmity in the order of the ld.CIT(A) on this issue. 12.1.2. Texas Instrument (India) P. ltd. (Asst. Year 2007-2008) 4.1 According to section 80JJAA, the deduction is available in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial Disputes Act since they do not discharge any supervisory function, he relies on Devinder Singh v. Municipal Council, Sanaur, (2011) 6 SCC 584, more particularly para 13 thereof which is reproduced hereunder: 13. The source of employment, the method of recruitment, the terms and conditions of employment/contract of service, the quantum of wages/pay and the mode of payment are not at all relevant for deciding whether or not a person is a workman within the meaning of Section 2(s) of the Act. It is apposite to observe that the definition of workman also does not make any distinction between full-time and part-time employee or a person appointed on contract basis. There is nothing in the plain language of Section 2(s) from which it can be inferred that only a person employed on a regular basis or a person employed for doing whole-time job is a workman and the one employed on temporary, part-time or contract basis on fixed wages or as a casual employee or for doing duty for fixed hours is not a workman. 14. Whenever an employer challenges the maintainability of industrial dispute on the ground that the employee is not a workman within the meaning of Section 2(s) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct in its reading of Citizen Cooperative Society Ltd. (supra). Clearly, therefore, once section 80P(4) is out of harm's way, all the assessees in the present case are entitled to the benefit of the deduction contained in section 80P(2)(a)(i), notwithstanding that they may also be giving loans to their members which are not related to agriculture. Also, in case it is found that there are instances of loans being given to non-members, profits attributable to such loans obviously cannot be deducted. 12.6.2. Commissioner of Income-tax (Central)- I, New Delhi vs. Vatika Township (P.) Ltd., (2014) 49 taxmann.com 249(SC) 30. A legislation, be it a statutory Act or a statutory Rule or a statutory Notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a series of statements, such as one finds in a work of fiction/non fiction or even in a judgment of a court of law. There is a technique required to draft a legislation as well as to understand a legislation. Former technique is known as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... little later. 33. We would also like to point out, for the sake of completeness, that where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. In Government of India Ors. v. Indian Tobacco Association, the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in the case of Vijay v. State of Maharashtra Ors. It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndertakings which do not continue as small scale industrial undertakings during the relevant period. Needless to say, each assessment year is a different assessment year, except for block assessment 12.7. The calculation of the year would have to be made so as to give effect to the intent of the legislature, merely because the Financial Year is taken to be from 1st April of the year to 31st March of the next year, the same cannot be imported into section 80JJAA. The requirement is for an employee to be employed for a period of 300 days or more continuously. As such, even if there is spillover from one Financial year to the other, the Assessee is required to be given the benefit of the same. In this regard he relies on the following decision: 12.7.1. Commissioner of Income-tax vs. Alom Extrusions Ltd., (2009)185 Taxman 416 (SC) 9. We find no merit in these civil appeals filed by the Department for the following reasons: firstly, as stated above, Section 43- B [main section], which stood inserted by Finance Act, 1983, with effect from 1st April, 1984, expressly commences with a non-obstante clause, the underlying object being to disallow deductions claimed merely by making a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on June 30, 1983. The Income Tax Officer disallowed the deduction claimed by the Assessee which was on account of sales tax collected by the Assessee for the last quarter of the relevant accounting year. The deduction was disallowed under Section 43- B which, as stated above, was inserted with effect from 1st April, 1984. It is also relevant to note that the first proviso which came into force with effect from 1st April, 1988 was not on the statute book when the assessments were made in the case of Allied Motors (P) Limited (supra). However, the Assessee contended that even though the first proviso came to be inserted with effect from 1st April, 1988, it was entitled to the benefit of that proviso because it operated retrospectively from 1st April, 1984, when Section 43-B stood inserted. This is how the question of retrospectivity arose in Allied Motors (P) Limited (supra). This Court, in Allied Motors (P) Limited (supra) held that when a proviso is inserted to remedy unintended consequences and to make the section workable, a proviso which supplies an obvious omission in the section and which proviso is required to be read into the section to give the section a reasonable inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pril, 2004. However, the matter before us involves the principle of construction to be placed on the provisions of Finance Act, 2003. 12.8. He submits that the Tribunal has rightly upheld the said finding, and therefore, the appeal in this regard by the Revenue is required to be dismissed. 13. Heard Sri. K.V. Aravind, learned Senior Panel Counsel for the Revenue and Sri.Percy Pardiwalla, learned Senior Counsel for the respondent. 14. Before answering the substantial questions, related provisions for this matter are extracted hereunder: 80JJAA- As amended by Finance Act 2008 80JJAA. (1) Where the gross total income of an assessee being an Indian Company, includes any profits and gains derived from any industrial undertaking engaged in the manufacture or production of article or thing, there shall, subject to the conditions specified in sub-section (2), be allowed a deduction of an amount equal to thirty per cent of additional wages paid to the new regular workmen employed by the Assessee in the previous year for three assessment years including the Assessment year relevant to the previous year in which such employment is provided. (2) No deduction under sub-sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y way of transfer from any other person or as a result of any business reorganisation; (c) unless the Assessee furnishes alongwith the return of income the report of the accountant, as defined in the Explanation ELOW SUB- SECTION (2) of section 288 giving such particulars in the report as may be prescribed. Explanation.--For the purposes of this section,-- (i) additional employee cost means the total emoluments paid or payable to additional employees employed during the previous year: Provided that in the case of an existing business, the additional employee cost shall be nil, if-- (a) there is no increase in the number of employees from the total number of employees employed as on the last day of the preceding year; (b) emoluments are paid otherwise than by an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account: Provided further that in the first year of a new business, emoluments paid or payable to employees employed during that previous year shall be deemed to be the additional employee cost; (ii) additional employee means an employee who has been employed during the previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to-- (i) one per cent in case of advertising; (ii) in any other case two per cent, where the payment is being made or of such sum as income-tax on income comprised therein. Provided that no individual or a Hindu undivided family shall be liable to deduct income-tax on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family. (2) Any person (being a contractor and not being an individual or a Hindu undivided family) responsible for paying any sum to any resident (hereafter in this section referred to as the sub-contractor) in pursuance of a contract with he sub-contractor for carrying out, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son other than an individual or a Hindu undivided family, Of such sum as income-tax on income comprised therein. (2) Where any sum referred to in sub-section (1) is credited to any account, whether called Suspense account or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. (3) Where any sum is paid or credited for carrying out any work mentioned in sub-clause (e) of Clause (iv) of the Explanation, tax shall be deducted at source-- (i) on the invoice value excluding the value of material, if such value is mentioned separately in the nvoice; or (ii) any sum credited or paid before the 1st day of June, 1972; or (iii) any sum credited or paid before the 1st day of June, 1973, in pursuance of a contract between such contractor and the sub-contractor in relation to any work (including supply of labour for carrying out any work) undertaken by the contractor for the co-operative society. (ii) on the whole of the invoice value, if the value of material is not mentioned separately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inancial year by the aforesaid person to the account of, or to, the payee, does not exceed one hundred and eighty thousand rupees : Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed one crore rupees in case of business or fifty lakh rupees in case of profession during the financial year immediately preceding the financial year in which such income by way of rent is credited or paid, shall be liable to deduct income-tax under this section : Provided also that no deduction shall be made under this section where the income by way of rent is credited or paid to a business trust, being a real estate investment trust, in respect of any real estate asset, referred to in Clause (23FCA) of section 10, owned directly by such business trust. Explanation.--For the purposes of this section,-- (i) rent means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any,-- (a) land; or (b) building (including factory building); or (c) land appur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s employees would not come within the purview of workman under Section 2(s) of the I.D. Act and disallowed the claim, on an appeal filed by the Assessee, the Commissioner, Income-tax (Appeals) CIT(A) accepted the Assessee's contention and held that the Assessee's employee would come within the purview of Section 2(s) of the ID Act. This aspect was not challenged by the Revenue, although the Revenue had filed an appeal against the order of the CIT(A). Having accepted the said finding of the CIT(A) and not having filed any appeal, the Revenue cannot now seek to challenge the said finding in the present appeal. 16.3. Section 2(s) of the ID Act is reproduced hereunder for easy reference: workman means any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and for the purposes of any proceeding under this Act in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute, or whose dismissal, dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16.6. In our considered view, the concept of the workman has undergone a drastic change and is no longer restricted to a blue collared person but even extends to white-collared person. A couple of decades ago, an industry would have meant only a factory, but today industry includes software and hardware industry, popularly known as the Information technology industry. Thus the undertaking of the Assessee being an industrial undertaking, the persons employed by the Assessee on this count also would satisfy the requirement of a workman under Section 2(s) of the ID Act. 16.7. Sri. Aravind, learned Senior Panel counsel of the Revenue, has strenuously argued that the period of 300 days in a year would mean 300 days in the financial year alone, not in the calendar year or otherwise. He has submitted that if the period of 300 days is not satisfied, no such deduction could be allowed. 16.8. Admittedly, the provisions concerned, i.e. Section 80JJ-AA, comes under Chapter-VI-A of the IT Act, which deals with deductions in certain income; this deduction is issued and or permitted as an incentive to the Assessee on fulfilling certain criteria as required under the various provisions un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be open for the Revenue to now contend otherwise, more so since the said order has attained finality on account of the Revenue not having filed an appeal. 16.12. It is sought to be contended by Sri. K V Aravind, learned Senior Panel counsel that the fact that such an interpretation could not be given is established by the curative amendment carried out in the year 2018 wherein it is clarified that an assesses whose employee completes 300 days in a second year would also be entitled to a deduction for three years therefrom. Thus he submits that the amendment having been brought into force in the year 2018 the present matter relating to the year 2007-2008, the said curative or clarificatory amendment would not come to the rescue of the Assessee and as such, the finding of the Tribunal in this regard is required to be set aside. 16.13. We are unable to agree with such a submission- the amendment of the year 2018 though claimed curative by Sri. Aravind, we are of the considered opinion that the same is more an explanatory amendment or a clarificatory amendment which clarifies the methodology of applying Section 80JJ-AA of the Act. If the submission of Sri. K.V.Aravind is accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... availing benefit under Section 80JJAA. It is not required that the workman works for entire 300 days in the previous year. 16.18. Hence, in the facts and circumstances of the case, the software engineer being workman having satisfied the period of 300 days, the assessee is entitled to claim deduction under Section 80JJAA. 17. Answer to Question No.2: Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the disallowance made under section 40(a)(i)/(ia) for sum of ₹ 7,87,93,536/- claimed towards finance of cars by holding that assessing authority did not invoke the provisions of section 194I of the Act without observing that for making disallowance under section 40(a)(i)/(ia) of the Act does not require assessing authority to invoke specific provisions relating to TDS and it is sufficient if there is violation of any provision of chapter XVIIB of the Act by way of Non Deduction of tax or Non Payment of tax? Answer to Question Nos. 3: Whether on the facts of the case, the Tribunal's order can be said as perverse in nature as Tribunal failed to appreciate that mentioning of wrong provision of law does not invalida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and such usage is not facilitated in any manner by the leasing company. 17.4. It is in the above conspectus of arguments, substantial questions are to be considered. 17.5. Admittedly, the Assessee had lease financed the vehicles for the use of its employees. The lease financing company did not provide any particular service as a driver or otherwise for the purpose of usage of the car. On the car having been provided, the maintenance of the same was to be carried out by the employee of the Assessee, and the lease financing company had no role to play in the same. The only transaction entered into between the Assessee and the lease financing company was to make payment of the amounts due to the company, and the car would be handed over to the employee through the Assessee. Thus there being no work as such being carried out by the lease financing company nor any service as such being rendered by the said company, we are of the opinion neither Section 194-C, nor 194-I of the Act are applicable. 17.6. The decisions relied upon by Sri. Aravind, learned Senior Panel counsel in Shree Choudhary Transport Company's case and Smt. J.Rama's case (supra) are not applicable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
