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TMI Blog2021 (5) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... over all other allowance and claims. The assessee s turnover for the Assessment Year 2013-14 which is below one crore rupees, the threshold limit prescribed u/s 44AD of the Act and the assessee had filed the return of income on presumptive basis u/s.44AD of the Act therefore assessee is entitled to take the benefit of the provisions of section 44AD of the Act. In view of the reasons set out above, as also bearing in mind entirety of the case, we are of the considered view that the assessee is entitled to take the benefit of the provisions of section 44AD of the Act. Based on the above factual position narrated above and precedents applicable to the facts, it is abundantly clear that assessee is not liable to deduct TDS under section 40(a)(ia) of the Act, therefore we delete the addition. - Decided in favour of assessee. - ITA No.2126/AHD/2016 - - - Dated:- 16-10-2020 - Shri Pawan Singh, JM And Dr. A. L. Saini, AM For the Assessee : Shri Rasesh Shah- CA For the Respondent : Miss Anupama Singla Sr. DR ORDER PER DR. A. L. SAINI, ACCOUNTANT MEMBER: By way of this appeal, the assessee has challenged correctness of the order dated 10.06.2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acs from Reliance Capital Limited bearing account no. RLLPSUR000195785 RLLPSUR00199531. Assessee had made payment of interest of ₹ 6,91,664/- to Reliance Capital during the year under consideration and debited above amount in profit and loss account. Further, it is also noticed that during the year under consideration assessee had paid total interest of ₹ 3,20,682/- to various unsecured loan parties and paid total job work of ₹ 1,46,718/- as twisting and weaving job work. The Assessing Officer (AO) noticed that assessee failed to make TDS on these interest payments to NBFC, Reliance Capital, various unsecured loan parties and contractor in contravention of the provisions of sections 194A/194C of the I.T. Act 1961. The ld. assessing officer further noticed that turnover of the assessee exceeded the monetary limits specified under clause (a) or clause (b) of section 44AB, during the financial year immediately preceding the financial year in which such interest is credited or paid, therefore the assessee shall be liable to deduct income tax under section 194A/194C of the Act. The assessing officer observed that turnover of the assessee for AY. 2012-13 i.e. immediat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and held that when the presumptive tax rate is applied u/s 44AD of the Act, the said sum equal to 8 % of the total turnover is deemed to be the profit and gains of such business chargeable to tax under the head Profits and gains of business or profession . It only means that the deduction allowable u/s 28 to 43C is deemed to have been already granted to the assessee. This is because the said provision u/s 28 to 43C are provision relating to the computation of business income of the assessee. However, a perusal of the provision of sec. 40(a)(ia) shows that the said provision is a restriction on the allowance of a particular expenditure representing statutory liability unless the same has been fulfilled. Further the control placed by the provision of section 44AD in respect of statutory limitation holds precedence over such allowance. This is because the dues to the crown has no limitation and has precedence over all other allowance and claims. The statutory liabilities are in order even though the assessee income has been offered and assessed under the provision of section 44AD of the Act. Further, at the beginning of the year assessee never knew that his turnover will be less th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 70,161 Interest on Unsecured Loan obtained from Bipin Thakkar HUF 81,000 Interest on Unsecured Loan obtained from two parties. 59,125 Other interest on Unsecured Loan. 3 Job work party 1,47,718 15,038 Jobwork Charges paid to one party for which TDS provisions u/s. 194C is not applicable as the amount paid is below ₹ 30,000/- 1,31,680 Other Jobwork Charges Total Addition 11,59,064 11,59,064 9. Miss Anupama Singla, Learned Departmental Representative for the Revenue, has contended that turnover of the assessee for AY. 2012-13 i.e. immediately preceding Financial Year 2011-12 (AY 2012-13) was at ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even though the income has been offered and assessed under the provision of section 44AD of the Act. Therefore, assessee can not take the shelter of provisions of section 44AD of the Act, as section 44AD of the Act can not override the provisions of section 40(a)(ia) of the Act, even if section 44AD of the Act starts with non-obstante clause. 11. Let us examine the contention of the assessing officer, as noted by us in above para. Undisputed facts in the assessee`s case are that during the assessment year 2013- 14 under consideration, the return of income was filed by the assessee under section 44AD of the Act, on presumptive taxation basis showing Net profit @ 8.10% of total turnover, which is evident from the return of income filed by the assessee and records available with the assessing officer. The turnover/sales of the assessee for the assessment year 2013-14 is to the tune of ₹ 92,33,844/-, which is below the threshold limit of one crore rupees as prescribed in section 44AD of the Act. The assessing officer was of the view that the assessee cannot take the benefit of provisions of section 44AD of the Act therefore, the assessee was liable to deduct TDS under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction or supply of labour for civil construction, a sum equal to eight per cent of the gross receipts paid or payable to the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum as declared by the assessee in his return of income, shall be deemed to be the profits and gains of such business chargeable to tax under the head profits and gains of business or profession . Provided that nothing contained in this sub-section shall apply in case the aforesaid gross receipts paid or payable exceed an amount of forty lakh rupees. For the purpose 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 produce necessary evidences to prove his case duly support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted in 238 ITR 263 at 674 (Madras Full Bench decision). It is well settled that while dealing with the non obstante 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 beginning with an expression Notwithstanding anything contained in this Act or in some particular act or in any law for the time being in force or in any contract is more often than not appended to a section in the beginning with a view to give the enacting part of the section in case of conflict, over riding effect over the provision of the Act or the contract mentioned in the non obstante clause. It is equivalent to say that in spite of the provision of the case or any other act in the non obstante clause or any contract or documents mentioned, the enactment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have been taken into account while making such an estimate. This will also mean that the embargo placed in section 40 is also taken into account. This decision supports the view that when the assessee cannot claim any expenses after applying the net profit rate, then the AO too cannot make addition after applying the net profit rate. Even if the assessee commits any default under Chapter XVIIB of the Act with regard to the TDS provision, it is only for the TDS officer to take suitable action on the assessee, the doors of the AO are absolutely shut when the income is determined on presumptive basis u/s 44AD of the Act. In view of the aforesaid facts and circumstances, the legal provision of section 44AD of the Act shows an overriding effect over other provisions contained in section 28 to 43C of the Act, I hold that the provisions of section 40(a)(ia) of the Act cannot be invoked in the instant case as the income is directed to be determined on presumptive basis u/s 44AD of the Act. Accordingly, ground Nos.3,5,6 and 7 are allowed in favour of the assessee. The next issue to be decided in this appeal is as to whether section 40(a)(ia) of the Act, in fact and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. For that we rely on the judgement of the Co-ordinate Bench of ITAT Kolkata in the case of ITO v. Mark Construction (2012) 23 taxmann.com 398 (Kol.), wherein it was held as follows:- 6. After hearing the rival submissions and on careful perusal of materials available on record, it is observed that the observations made by ld. CIT(A) in the impugned order which are incorporated in the preceding paragraphs, in our opinion, is in accordance with law. In the case of CIT vs Surendra Paul reported in 242 CTR 61 (P H) the Hon'ble Punjab and Haryana High Court has held that once under the special provision of section 44AD of the IT Act exemption from maintenance of books of accounts have been provided and the presumptive tax at 8% of the gross receipts itself is the basis for determining the taxable income, the assessee was not under obligation to explain individual entry of cash deposits in the bank unless such entries had no nexus with the gross receipts. In the present case though from the details filed by assessee the ld. AO observed that no TDS has been recovered, in our opinion, since assessee has disclosed the profits more than 8% of the gross receipts and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edural law, as well. Therefore, we do not agree with the statement of the assessing officer to the effect that the dues to the crown has no limitation and has precedence over all other allowance and claims. The assessee s turnover for the Assessment Year 2013-14 is to the tune of ₹ 92,33,844/- which is below one crore rupees, the threshold limit prescribed u/s 44AD of the Act and the assessee had filed the return of income on presumptive basis u/s.44AD of the Act therefore assessee is entitled to take the benefit of the provisions of section 44AD of the Act. In view of the reasons set out above, as also bearing in mind entirety of the case, we are of the considered view that the assessee is entitled to take the benefit of the provisions of section 44AD of the Act. Based on the above factual position narrated above and precedents applicable to the facts, it is abundantly clear that assessee is not liable to deduct TDS under section 40(a)(ia) of the Act, therefore we delete the addition of ₹ 11,59,064/-. As we have allowed the assessee`s appeal on legal ground, therefore all other issues on merits of the additions, in the impugned assessment proceedings are rendered aca ..... 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