UPL Environmental Engineers Ltd., Baroda V. The ACIT.,Range-4, Baroda

ITA 2191/AHD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8470 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 31-07-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ALBINUS TIRKEY
• Keywords: Business income
• Section: 37(1)

Judgement Text

ITA NO. 2191/AHD/2014 UPL ENVIRONMENTAL ENGINEERS LTD VS. ACIT ASSESSMENT YEAR : 2010-11 PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND S S GODARA JM] ITA NO. 2191/AHD/2014 ASSESSMENT YEAR: 2010-11 UPL ENVIRONMENTAL ENGINEERS LTD ....... ......APPELLANT BLOCK NO.1, NEAR BANCO PRODUCTS LTD., VILLAGE : BHAYALI, DIST: BARODA-391 410 [PAN : AADCA 4427 H] VS. ACIT .......................RESPONDENT RANGE-4, BARODA APPEARANCES BY: SN SOPARKAR FOR THE APPELLANT ALBINUS TIRKEY FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : SEPTEMBER 14, 2 017 DATE OF PRONOUNCING THE ORDER : SEPTEMBER 20, 2017 O R D E R PER PRAMOD KUMAR AM: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-III, BARODA DA TED 29.05.2014 PASSED FOR ASSESSMENT YEAR 2010-11. 2. IN GROUND NOS. 1 TO 4, THE ASSESSEE APPELLANT HA S RAISED THE FOLLOWING GRIEVANCES:- 1. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIRM ING DISALLOWANCE MADE BY AO OF RS. 82,72,500/- CONSULTANCY CHARGES PAID TO T HE HOLDING COMPANY TOWARDS USAGE OF FACILITIES LIKE, OFFICE PREMISES, MANPOWER, INFRASTRUCTURE, MARKETING, LIAISON WORK AND EXPENSES INCURRED ON BE HALF OF THE APPELLANT. LD. CIT(A) OUGHT TO HAVE DELETED SUCH DISALLOWANCE BY AO HOLDING IT AS DIVIDEND PAYMENT IN GARB OF REIMBURSEMENT OF EXPENS ES. IT BE SO HELD NOW. 2. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIRM ING DISALLOWANCE MADE BY AO OF RS. 85,41,931/- TOWARDS HELICOPTER RENTAL CHA RGES INCURRED BY THE ITA NO. 2191/AHD/2014 UPL ENVIRONMENTAL ENGINEERS LTD VS. ACIT ASSESSMENT YEAR : 2010-11 PAGE 2 OF 8 HOLDING COMPANY ON BEHALF OF APPELLANT AS PER TERMS OF BOARD RESOLUTION. LD. CIT (A) OUGHT TO HAVE DELETED SUCH DISALLOWANCE OF EXPENSES INCURRED FOR THE PURPOSE OF BUSINESS. IT BE SO HELD NOW. 3. LD. CIT (A) ERRED IN LAW AND ON FACTS IN UPHOLDI NG DISALLOWANCE MADE BY AO OF CONSULTANCY CHARGES AND HELICOPTER RENTAL CHA RGES INVOKING SECTION 40A(2)(B) OF THE ACT WITHOUT BRINGING ANY EVIDENCE OF SUCH PAYMENT BEING EXCESSIVE OR UNREASONABLE ON RECORD. LD. CIT (A) OU GHT TO HAVE DELETED DISALLOWANCE OF EXPENSES NOT PROVED TO BE UNREASONA BLE. IT BE SO HELD NOW. 4. BOTH THE LOWER AUTHORITIES ERRED IN LAW AND ON F ACTS IN NOT APPRECIATING THE SUBMISSIONS THAT NO DISALLOWANCE INVOKING PROVISION S OF SECTION 40A(2)(B) OF THE ACT IS DESERVED TO BE MADE WHEN BOTH THE PAR TIES ARE EXIGIBLE TO LAX ON MAXIMUM MARGINAL, RATE WITHOUT ANY LOSS OF REVEN UE. IT BE SO HELD NOW. 3. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE AB OVE GRIEVANCES ARE COVERED, IN FAVOUR OF THE ASSESSEE, BY THE DECISION DATED 7 TH DECEMBER, 2016 OF THE CO- ORDINATE BENCH IN ASSESSEES OWN CASE FOR THE ASSES SMENT YEARS 2008-09 AND 2009-10 WHEREIN THE TRIBUNAL HAS, INTER ALIA, OBSERVED AS FOLLOWS:- 17. WE FIND THAT HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PWS ENGINEERS LIMITED VS. DCIT (TAX APPEAL NO.209 OF 20 15) HAS, INTER ALIA, OBSERVED AS FOLLOWS :- 6. WE HAVE HEARD LEARNED COUNSEL FOR THE PARTIES. THE QUESTION OF APPLICABILITY OF SECTION40A(2) OF THE ACT TO THE RE STRICTED DISALLOWANCE OF RS.47,90,178/-- IS ALREADY CONCLUDED BY THIS COU RT BY THE SAID ORDER DATED 31.3.2015. WE MAY THEREFORE, PROCEED ON THAT BASIS. DESPITE THIS, THE QUESTION THAT STILL SURVIVES IS WHETHER T HE REVENUE CAN TAX THE SAME INCOME IN THE HANDS OF THE COMPANY ON WHICH TH E DIRECTORS HAD ALREADY PAID THE TAX AT THE SAME RATE AT WHICH THE COMPANY WOULD HAVE BEEN LIABLE TO BE ASSESSED. IN THIS CONTEXT, WE MAY RECALL THAT CONSISTENTLY BEFORE ASSESSING OFFICER, CIT(APPEALS) AND TRIBUNAL, THE ASSESSEE HAD CANVASSED THAT ALL THE FOUR DIRECTORS WHO HAD RECEIVED SUCH REMUNERATION, WERE TAXED IN THE HIGHEST BRACKE T OF 30%; AT THE SAME RATE AT WHICH THE ASSESSEE COMPANY AT THE RELE VANT TIME WAS ASSESSED. IN FACT, THE ASSESSEE HAD DEMONSTRATED BE FORE CIT(APPEALS) THAT THE TAX LIABILITY OF THE COMPANY ON SUCH DISPU TED REMUNERATION AMOUNT WAS EXACTLY THE SAME AS THE TAX THE FOUR DIR ECTORS HAD PAID TO THE REVENUE. TO THESE FACTUAL ASPECTS, EVEN THE REV ENUE HAS, AT NO STAGE RAISED ANY DISPUTE. WE MAY THEREFORE, PROCEED ON THE BASIS THAT THE ELEMENT OF EXCESSIVE REMUNERATION REPRESENTS TH AT INCOME OF THE COMPANY WHICH WAS EVENTUALLY TAXED IN THE HANDS OF THE DIRECTORS AT THE SAME RATE AT WHICH; HAD IT NOT BEEN SO DISTRIBU TED; WOULD HAVE BEEN TAXED IN THE HANDS OF THE COMPANY. IN THAT VIEW OF THE MATTER, THE QUESTION OF REVENUE NEUTRALITY WOULD IMMEDIATELY AR ISE. A CERTAIN INCOME HAS ALREADY BEEN TAXED IN THE HANDS OF THE D IRECTORS. ITA NO. 2191/AHD/2014 UPL ENVIRONMENTAL ENGINEERS LTD VS. ACIT ASSESSMENT YEAR : 2010-11 PAGE 3 OF 8 PERMITTING THE REVENUE TO TAX THE SAME INCOME AGAIN AT THE SAME RATE IN THE HANDS OF THE PRINCIPAL PAYER WOULD AMOUNT TO DOUBLE TAXATION. ONLY ON THIS COUNT, WE ANSWER QUESTION IN FAVOUR OF THE APPELLANT ASSESSEE AND AGAINST REVENUE, ALLOW THE APPEAL AND SET ASIDE THE ORDER OF THE TRIBUNAL. THE TAX APPEAL IS DISPOSED O F ACCORDINGLY. 18. IN THE PRESENT CASE, THERE IS NO DISPUTE THAT T HE AMOUNT HAS ALREADY BEEN BROUGHT TO TAX, IN THE HANDS OF THE RECIPIENT, THE SAME RATE OF TAX AS APPLICABLE ON THIS ASSESSEE. LEARNED DEPARTMENTAL REPRESENTATI VE HAS NOT EVEN DISPUTED THIS FUNDAMENTAL FACTUAL ASPECT. IN THIS V IEW OF THE MATTER, AND IN THE LIGHT OF THE LAW LAID DOWN BY HONBLE JURISDICTIONA L HIGH COURT, WE DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWAN CE OF RS.1,25,00,050/-. ...... ...... 34. WE HAVE NOTED THAT SO FAR AS THE 40A(2)(B) DISA LLOWANCE IS CONCERNED, THE ISSUE IS COVERED BY HONBLE JURISDICTIONAL HIGH COU RTS JUDGEMENT IN THE CASE OF PWS ENGINEERS LIMITED (SUPRA) WHICH HAS BEEN DIS CUSSED IN DETAIL IN PARAGRAPH NOS.17 AND 18 OF THIS ORDER. THERE IS NO REASON TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN IN ASSESS EES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 AS THE PAYMENT IS ALSO MADE TO THE SAME ENTITY, THOUGH THERE IS A CHANGE IN THE NAME OF THE COMPANY IN THIS YEAR. AS REGARDS THE GENUINENESS OF THE EXPENDITURE, WE FIND THAT TH ERE IS AN ARRANGEMENT ON RECORD THAT HELICOPTER CHARGES ARE TO BE BORNE EQUA LLY BETWEEN THE ASSESSEE AND TATVA GLOBAL ENVIRONMENTAL LIMITED, AND THAT RE LATED PAYMENTS ARE ACTUALLY MADE TO INDO PACIFIC AVIATION LIMITED. THE DEBIT NOTE AND PAYMENT DETAILS ARE PLACED BEFORE US. THE EXPENDITURE, THER EFORE, CANNOT BE SAID TO BE BOGUS OR FICTITIOUS. THE ONLY ISSUE IS APPORTIONMEN T OF EXPENSES BETWEEN THE ASSESSEE AND TATVA GLOBAL ENVIRONMENTAL LIMITED BUT THEN THAT ISSUE, IN THE LIGHT OF HONBLE JURISDICTIONAL HIGH COURTS JUDGEM ENT IN THE CASE OF PWS ENGINEERS (SUPRA) AND ON THE GIVEN FACTS IS ACADEMI C. AS FOR THE MARKETING AND PROMOTIONAL EXPENSES, WE HAVE NOTED THAT ALL AL ONG SIMILAR PAYMENTS HAVE BEEN ALLOWED AS DEDUCTION IN PART AND NO DISAL LOWANCE UNDER SECTION 37(1) IS RESORTED TO. IN ANY CASE, THERE WAS NO SPE CIFIC REQUISITION ABOUT DETAILS WHICH HAS NOT BEEN COMPLIED WITH AND THE OB SERVATIONS MADE BY THE AUTHORITIES BELOW PROCEED ON VAGUE GENERALITIES. IT HAS ALSO BEEN STATED THAT SINCE THE ASSESSEE HAS MADE PROFITS, SUCH PAYMENTS MAY BE CAMOUFLAGE TO MAKE PAYMENTS OF DEFACTO DIVIDEND WITHOUT PAYMENT O F DIVIDEND DISTRIBUTION TAX. SUCH A SPECULATION IS ALSO DEVOID OF ANY BASIS , AND, AS HELD BY A CO- ORDINATE BENCH IN THE CASE OF ARIHANTAM INFRAPROJEC TS PVT. LTD. VS. JCIT [(2016) 156 ITD 425 (PUNE)], THIS KIND OF A SPECULA TION OR DOUBT CANNOT BE REASON ENOUGH TO DISALLOW THE EXPENDITURE INVOLVING PAYMENT TO HOLDING COMPANY. IN VIEW OF THESE DISCUSSIONS, WE DELETE TH IS DISALLOWANCE AS WELL. 4. RESPECTFULLY FOLLOWING THE VIEWS SO EXPRESSED BY THE CO-ORDINATE BENCH, WE UPHOLD THE GRIEVANCES OF THE ASSESSEE AND DELETE TH E DISALLOWANCES OF ITA NO. 2191/AHD/2014 UPL ENVIRONMENTAL ENGINEERS LTD VS. ACIT ASSESSMENT YEAR : 2010-11 PAGE 4 OF 8 RS.1,68,14,431/- IN RESPECT OF CONSULTANCY CHARGES AND OF RS.85,41,931/- IN RESPECT OF HELICOPTER CHARGES. 5. GROUND NOS. 1 TO 4 ARE THUS ALLOWED. 6. GROUND NO. 5 IS GENERAL IN NATURE AND DOES NOT C ALL FOR ANY ADJUDICATION. 7. IN GROUND NO.6, THE ASSESSEE HAS RAISED THE FOLL OWING GRIEVANCES:- LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE BY AO OF RS.5,15,830/- CLAIMED AS PRIOR PERIOD EXPENSES. LD . CIT(A) OUGHT TO HAVE ALLOWED EXPENSES THOUGH OF PRIOR PERIOD BUT QUANTIF IED ONLY DURING THE YEAR UNDER CONSIDERATION. IT BE SO HELD NOW. 8. LEARNED COUNSEL FOR THE ASSESSEE FAIRLY ACCEPTS THAT THIS ISSUE IS COVERED, AGAINST THE ASSESSEE, BY TRIBUNALS ORDER IN ASSESS EES OWN CASE FOR THE ASSESSMENT YEAR 2008-09. WE, THEREFORE, REJECT THI S GROUND OF APPEAL. 9. GROUND NO.6 IS THUS DISMISSED. 10. IN GROUND NO.7, THE GRIEVANCE RAISED BY THE ASS ESSEE IS AS FOLLOWS:- LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE MADE BY AO OF RS.12,44,184/- INVOKING PROVISIONS OF SECTION 40 (A)(IA) OF THE ACT FOR NON DEDUCTION OF TAX FROM MACHINERY HIRE CHARGES. LD. CIT(A) OUGHT TO HAVE ALLOWED REIMBURSEMENT OF EXPENSES. IT BE SO HELD N OW. 11. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE I SSUE IS NOW COVERED, IN FAVOUR OF THE ASSESSEE IN PRINCIPLE, BY A CO-ORDINATE BENC H DECISION IN THE CASE OF RKP & CO VS. ITO (ITA NO.106/RP/2016; ORDER DATED 24.06.2 016) WHEREIN THE MATTER WAS REMITTED TO THE FILE OF THE ASSESSING OFFICER FOR F ACTUAL VERIFICATION AS TO WHETHER OR NOT THE RECIPIENT HAS DISCHARGED HIS TAX LIABILITY IN RESPECT OF INCOME EMBEDDED IN THESE PAYMENTS, AND, IF SO, DISALLOWANCE WAS TO BE DELETED. WHILE DOING SO, CO- ORDINATE BENCH HAS OBSERVED AS FOLLOWS:- 4. WE FIND THAT HONBLE DELHI HIGH COURT HAS SPECI FICALLY APPROVED THE STAND TAKEN BY A COORDINATE BENCH OF THIS TRIBUNAL, IN TH E CASE OF RAJEEV KUMAR AGARWAL VS ACIT [(2014) 149 ITD 363 (AGRA)], AND UP HELD THE ACTION OF THE TRIBUNAL IN FOLLOWING THE SAME. 9. . NOW THAT THE LEGISLATURE HAS BEEN COMPASSIONATE ENOUGH TO CURE THESE SHORTCOMINGS OF PROVISION, AND THUS OBVIATE THE UNINTENDED HARDSHIPS, SUCH AN AMEN DMENT IN LAW, IN VIEW OF THE WELL SETTLED LEGAL POSITION TO THE EFFE CT THAT A CURATIVE AMENDMENT TO AVOID UNINTENDED CONSEQUENCES IS TO BE TREATED AS ITA NO. 2191/AHD/2014 UPL ENVIRONMENTAL ENGINEERS LTD VS. ACIT ASSESSMENT YEAR : 2010-11 PAGE 5 OF 8 RETROSPECTIVE IN NATURE EVEN THOUGH IT MAY NOT STAT E SO SPECIFICALLY, THE INSERTION OF SECOND PROVISO MUST BE GIVEN RETROSPEC TIVE EFFECT FROM THE POINT OF TIME WHEN THE RELATED LEGAL PROVISION WAS INTRODUCED. IN VIEW OF THESE DISCUSSIONS, AS ALSO FOR THE DETAILED REASONS SET OUT EARLIER, WE CANNOT SUBSCRIBE TO THE VIEW THAT IT COULD HAVE BEE N AN INTENDED CONSEQUENCE TO PUNISH THE ASSESSEES FOR NON DEDUCT ION OF TAX AT SOURCE BY DECLINING THE DEDUCTION IN RESPECT OF REL ATED PAYMENTS, EVEN WHEN THE CORRESPONDING INCOME IS DULY BROUGHT TO TA X. THAT WILL BE GOING MUCH BEYOND THE OBVIOUS INTENTION OF THE SECT ION. ACCORDINGLY, WE HOLD THAT THE INSERTION OF SECOND PROVISO TO SEC TION 40(A)(IA) IS DECLARATORY AND CURATIVE IN NATURE AND IT HAS RETRO SPECTIVE EFFECT FROM 1ST APRIL, 2005, BEING THE DATE FROM WHICH SUB CLAU SE (IA) OF SECTION 40(A) WAS INSERTED BY THE FINANCE (NO. 2) ACT, 2004 . 10. IN VIEW OF THE ABOVE DISCUSSIONS, WE DEEM IT F IT AND PROPER TO REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN THE LIGHT OF OUR ABOVE OBSERVATIONS AND AFTER CARRY ING OUT NECESSARY VERIFICATIONS REGARDING RELATED PAYMENTS HAVING BEE N TAKEN INTO ACCOUNT BY THE RECIPIENTS IN COMPUTATION OF THEIR I NCOME, REGARDING PAYMENT OF TAXES IN RESPECT OF SUCH INCOME AND REGA RDING FILING OF THE RELATED INCOME TAX RETURNS BY THE RECIPIENTS. WHILE GIVING EFFECT TO THESE DIRECTIONS, THE ASSESSING OFFICER SHALL GIVE DUE AN D FAIR OPPORTUNITY OF HEARING TO THE ASSESSEE, DECIDE THE MATTER IN ACCOR DANCE WITH THE LAW AND BY WAY OF A SPEAKING ORDER. WE ORDER SO 5. IN EFFECT THUS, THEIR LORDSHIPS HAVE A PPROVED THE ACTION OF THE TRIBUNAL IN REMITTING THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO ASCERTAIN WHETHER THE RECIPIENT HAS TA KEN INTO ACCOUNT RELATED PAYMENTS INTO COMPUTATION OF HIS INCOME AND OFFERIN G THE SAME TO TAX, AND, IF SO, DELETE THE DISALLOWANCE UNDER SECTION 40(A)(IA) IN RESPECT OF THE SAME. 6. WHEN, HOWEVER, WE ASKED THE LEARNED DEPARTMENTAL REPRESENTATIVE AS TO WHY WE SHOULD ALSO NOT REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER, WITH THE SAME DIRECTIONS, HE, ALONGWITH HIS SENIOR COLLEAGUE SHRI DARHAN SINGH, WHO HAPPENS TO BE THE CIT(A) AUTHORING THE I MPUGNED ORDER AND WHO WAS ON DUTY AS CIT(DR) BEFORE US, HAD THREE POINTS TO MAKE- FIRST, THAT THERE ARE DECISIONS IN SUPPORT OF THE STAND OF THE ASSESS ING OFFICERS STAND, BY WAY OF HONBLE KERALA HIGH COURTS DECISION IN THE CASE OF THOMAS GEORGE MUTHOOT VS CIT [(2015) 63 TAXMANN.COM 99 (KERALA)]; SECOND, THAT EVEN IF INSERTION OF SECOND PROVISO TO SECTION 40(A)(IA) CA N BE CONSTRUED AS RETROSPECTIVE IN EFFECT, THE CORRESPONDING RULE IN THE INCOME TAX RULES 1962 IS NOT, AND HAS NOT BEEN HELD TO BE, RETROSPECTIVE, AN D THE SECOND PROVISO TO SECTION 40(A)(IA) CANNOT, THEREFORE, BE GIVE RETROS PECTIVE EFFECT; AND, THIRD, THAT THERE IS NO DECISION ON THIS ISSUE BY HONBLE JURISDICTIONAL HIGH COURT AND, AS SUCH, THE STAND OF THE ASSESSING OFFICER CANNOT BE FAULTED. ITA NO. 2191/AHD/2014 UPL ENVIRONMENTAL ENGINEERS LTD VS. ACIT ASSESSMENT YEAR : 2010-11 PAGE 6 OF 8 7. AS FOR HONBLE KERALA HIGH COURTS DECISION IN T HE CASE OF THOMAS GEORGE MUTHOOT (SUPRA), UNDOUBTEDLY, OUTSIDE THE JURISDICT ION OF HONBLE KERALA HIGH COURT AND OUTSIDE THE JURISDICTION OF HONBLE DELHI HIGH COURT- WHICH HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, THERE ARE CONFLICTING DECISIONS ON THE ISSUE OF RESTROSPECTIVITY OF SECOND PROVISO TO SECTION 40(A)(IA). IT IS THUS EVIDENT THAT VIEWS OF THESE TWO HIGH COURTS ARE IN DIRECT CONFLICT WITH EACH OTHER. CLEARLY, THEREFORE, THERE IS NO MEETING GROU ND BETWEEN THESE TWO JUDGMENTS. THE DIFFICULTY ARISES AS TO WHICH OF THE HONBLE NON JURISDICTIONAL HIGH COURT IS TO BE FOLLOWED BY US IN THE PRESENT S ITUATION. IT WILL BE WHOLLY INAPPROPRIATE FOR US TO CHOOSE VIEWS OF ONE OF THE HIGH COURTS BASED ON OUR PERCEPTIONS ABOUT REASONABLENESS OF THE RESPECTIVE VIEWPOINTS, AS SUCH AN EXERCISE WILL DE FACTO AMOUNT TO SITTING IN JUDGMEN T OVER THE VIEWS OF THE HIGH COURTS SOMETHING DIAMETRICALLY OPPOSED TO THE VERY BASIC PRINCIPLES OF HIERARCHICAL JUDICIAL SYSTEM. WE HAVE TO, WITH OUR HIGHEST RESPECT OF BOTH THE HONBLE HIGH COURTS, ADOPT AN OBJECTIVE CRITERION F OR DECIDING AS TO WHICH OF THE HONBLE HIGH COURT SHOULD BE FOLLOWED BY US. WE FIND GUIDANCE FROM THE JUDGMENT OF HONBLE SUPREME COURT IN THE MATTER OF CIT VS. VEGETABLE PRODUCTS LTD. [(1972) 88 ITR 192 (SC)]. HONBLE SUP REME COURT HAS LAID DOWN A PRINCIPLE THAT 'IF TWO REASONABLE CONSTRUCTIONS O F A TAXING PROVISIONS ARE POSSIBLE, THAT CONSTRUCTION WHICH FAVOURS THE ASSES SEE MUST BE ADOPTED'. THIS PRINCIPLE HAS BEEN CONSISTENTLY FOLLOWED BY THE VAR IOUS AUTHORITIES AS ALSO BY THE HONBLE SUPREME COURT ITSELF. IN ANOTHER SUPREM E COURT JUDGMENT, PETRON ENGG. CONSTRUCTION (P) LTD. & ANR. VS. CBDT & ORS. (1988) 75 CTR (SC) 20 : (1989) 175 ITR 523 (SC), IT HAS BEEN REITERATED THA T THE ABOVE PRINCIPLE OF LAW IS WELL ESTABLISHED AND THERE IS NO DOUBT ABOUT THA T. HONBLE SUPREME COURT HAD, HOWEVER, SOME OCCASIONS TO DEVIATE FROM THIS G ENERAL PRINCIPLE OF INTERPRETATION OF TAXING STATUTE WHICH CAN BE CONST RUED AS EXCEPTIONS TO THIS GENERAL RULE. IT HAS BEEN HELD THAT THE RULE OF RES OLVING AMBIGUITIES IN FAVOUR OF TAX-PAYER DOES NOT APPLY TO DEDUCTIONS, EXEMPTIONS AND EXCEPTIONS WHICH ARE ALLOWABLE ONLY WHEN PLAINLY AUTHORISED. THIS EXCEPT ION, LAID DOWN IN LITTMAN VS. BARRON 1952(2) AIR 393 AND FOLLOWED BY APEX COU RT IN MANGALORE CHEMICALS & FERTILIZERS LTD. VS. DY. COMMR. OF CT ( 1992) SUPPL. (1) SCC 21 AND NOVOPAN INDIA LTD. VS. CCE & C 1994 (73) ELT 76 9 (SC), HAS BEEN SUMMED UP IN THE WORDS OF LORD LOHEN, 'IN CASE OF A MBIGUITY, A TAXING STATUTE SHOULD BE CONSTRUED IN FAVOUR OF A TAX-PAYER DOES N OT APPLY TO A PROVISION GIVING TAX-PAYER RELIEF IN CERTAIN CASES FROM A SEC TION CLEARLY IMPOSING LIABILITY'. THIS EXCEPTION, IN THE PRESENT CASE, HAS NO APPLICA TION. THE RULE OF RESOLVING AMBIGUITY IN FAVOUR OF THE ASSESSEE DOES NOT ALSO A PPLY WHERE THE INTERPRETATION IN FAVOUR OF ASSESSEE WILL HAVE TO T REAT THE PROVISIONS UNCONSTITUTIONAL, AS HELD IN THE MATTER OF STATE OF M.P. VS. DADABHOYS NEW CHIRMIRY PONRI HILL COLLIERY CO. LTD. AIR 1972 (SC) 614. THEREFORE, WHAT FOLLOWS IS THAT IN THE PECULIAR CIRCUMSTANCES OF TH E CASE AND LOOKING TO THE NATURE OF THE PROVISIONS WITH WHICH WE ARE PRESENTL Y CONCERNED, THE VIEW EXPRESSED BY THE HONBLE DELHI HIGH COURT IN THE CA SE OF ANSAL LANDMARK (SUPRA), WHICH IS IN FAVOUR OF ASSESSEE, I S REQUIRED TO BE FOLLOWED BY US. REVENUE DOES NOT, THEREFORE, DERIVE ANY ADVA NTAGE FROM HONBLE KERALA HIGH COURTS DECISION IN THE CASE OF THOMAS GEORGE MUTHOOT (SUPRA). ITA NO. 2191/AHD/2014 UPL ENVIRONMENTAL ENGINEERS LTD VS. ACIT ASSESSMENT YEAR : 2010-11 PAGE 7 OF 8 8. THE SECOND ISSUE IS WITH RESPECT TO TH E SECOND PROVISO TO SECTION 40(A)(IA) BEING HELD TO BE RETROSPECTIVE, WITHOUT C ORRESPONDING ENABLING PROVISION IN THE RULES BEING HELD TO BE RETROSPECTI VE. THAT IS A HYPER TECHNICAL ARGUMENT AND TOO PEDANTIC AN APPROACH. THE SECOND P ROVISO TO SECTION 40(A)(IA) WAS HELD TO BE RETROSPECTIVE IN IN THE CO NTEXT OF FINDING SOLUTION TO THE PROBLEM TO THE TAXPAYER, AND THE MATTER WAS SET ASI DE TO THE FILE OF THE ASSESSING OFFICER WITH CERTAIN DIRECTIONS ABOUT FAC TUAL VERIFICATIONS ON THE RECIPIENT HAVING INCLUDED THE SAME IN THE RECEIPTS BASED ON WHICH TAXABLE INCOME IS COMPUTED, AND THE INCOME HAVING BEEN OFFE RED TO TAX. IT IS THIS ACTION OF THE COORDINATE BENCH THAT WAS UPHELD BY T HE TRIBUNAL AND THE COURSE OF ACTION SO ADOPTED BY THE COORDINATE BENCH APPROV ED BY THEIR LORDSHIPS. IT IS IMPERMISSIBLE TO PICK UP ONE OF THE ASPECTS OF T HE DECISION OF THE JUDICIAL AUTHORITY AND READ THE SAME IN ISOLATION WITH OTHER ASPECTS. THE DECISION IS NOT ON THE RETROSPECTIVITY OF THE PROVISO ALONE, IT S ALSO ON DELETION OF DISALLOWANCE IN THE EVENT OF THE RECIPIENT HAVING T AKEN INTO ACCOUNT THESE RECEIPTS IN THE COMPUTATION OF INCOME. THE JUDGE MA DE LAW IS AS BINDING ON THE AUTHORITIES BELOW AS IS THE LEGISLATED STATUE. THE HYPER TECHNICAL STAND OF THE DEPARTMENTAL REPRESENTATIVES, THEREFORE, DOES N OT MERIT OUR APPROVAL. 9. AS REGARDS LACK OF GUIDANCE FROM HONB LE JURISDICTIONAL HIGH COURT, THAT CAN NOT BE REASON ENOUGH TO DISREGARD THE DECI SIONS FROM NON- JURISDICTIONAL HIGH COURTS. HONBLE COURTS ABOVE, BEING A HIGHER TIER OF THE JUDICIAL HIERARCHY, BIND THE LOWER FORUMS NOT ONLY IN THE JURISDICTION OF RESPECTIVE HIGH COURTS, BUT UNLESS, THERE IS ANYTHI NG CONTRARY THERETO BY THE JURISDICTIONAL HIGH COURTS, OTHER JURISDICTIONS AS WELL. THERE CANNOT BE ANY DISPUTE ON THE FUNDAMENTAL PROPOSITION THAT IN THE HIERARCHICAL JUDICIAL SYSTEM THAT WE HAVE, BETTER WISDOM OF THE COURT BELOW HAS TO YIELD TO HIGHER WISDOM OF THE COURT ABOVE, AND THEREFORE WE HAVE TO HUMBLY BOW BEFORE THE VIEWS EXPRESSED BY HONBLE COURTS ABOVE. SUCH A HIGH COUR T BEING A NON- JURISDICTIONAL HIGH COURT DOES NOT ALTER THE POSITI ON AS LAID DOWN BY HONBLE BOMBAY HIGH COURT IN THE MATTER OF CIT VS. GODAVARI DEVI SARAF ([1978) 113 ITR 589 (BOM)] AND AS ANALYSED BY A COORDINATE BENC H OF THIS TRIBUNAL IN THE CASE OF ACIT VS AURANGABAD HOLIDAY RESORTS PVT LTD [(2009) 118 ITD 1 (PUNE)]. 10. IN VIEW OF THE ABOVE DISCUSSIONS, AS ALS O BEARING IN MIND ENTIRETY OF THE CASE, WE DEEM IT FIT AND PROPER TO REMIT THE MA TTER TO THE FILE OF THE ASSESSING OFFICER FOR LIMITED VERIFICATION ON THE A SPECT AS TO WHETHER RECIPIENT OF PAYMENT HAS INCLUDED THE SAME IN HIS COMPUTATION OF BUSINESS INCOME OFFERED TO TAX, AND, IF FOUND TO BE SO, DELETE THE DISALLOWANCE IN QUESTION. WITH THESE DIRECTIONS, THE MATTER STANDS RESTORED TO THE FILE OF THE ASSESSING OFFICER. 12. WE SEE NO REASON TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE CO-ORDINATE BENCH. ACCORDINGLY, WE REMIT TH E MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN THE LIG HT OF THE ABOVE OBSERVATIONS. ITA NO. 2191/AHD/2014 UPL ENVIRONMENTAL ENGINEERS LTD VS. ACIT ASSESSMENT YEAR : 2010-11 PAGE 8 OF 8 13. GROUND NO.7 IS THUS ALLOWED FOR STATISTICAL PUR POSES IN THE TERMS INDICATED ABOVE. 14. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON TODAY ON THE 20 TH DAY OF SEPTEMBER, 2017. SD/- SD/- S S GODARA PRA MOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) *BT AHMEDABAD, THE 20 TH DAY OF SEPTEMBER, 2017 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF DICTATION: ........18.09.2017...AS PER FOUR PAGES MANUSCRIPT OF HONBLE AM ATTACHED...... ............... 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 18.09.2017.......... 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S.: .....20.09.2017............... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: ..... 20.09.2017...................... 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : ........ 20.09.2017................. 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: .. 8. DATE OF DESPATCH OF THE ORDER: ......